【Company Research】Kintor Pharmaceutical (9939 HK) – Specializing in AR-related innovative therapies

Strong capabilities in AR-related diseases. Kintor Phamarceutical Limited (Kintor) is a clinical-stage novel drug developer in China focused on the proprietary R&D of potential first-in-class and best-in-class drugs for cancers and other androgen receptor-related (AR-related) diseases. Its leading drug candidate, Proxalutamide, is a potential best-in-class drug undergoing phase III clinical trials in China and phase II clinical trials in the US for metastatic castration-resistant prostate cancer (mCRPC). Kintor has four clinical-stage drug candidates, including Proxalutamide (GT0918, 普克鲁胺) in phase III trials, Pyrilutamide (KX-826, 福瑞他恩) and ALK-1 (GT90001) in phase II trials, and Detorsertib (GT0486, 迪拓賽替) in phase I trials. Kintor also has one IND-stage drug candidate, GT1708F, as well as several pre-clinical drug candidates.

Kintor’s portfolio of drug candidates addresses major cancer types and other AR-related diseases with large market potential. According to the Frost & Sullivan (F&S) Report, prostate cancer was the second fastest growing cancer among major cancer types in China in terms of the growth rate of new cases from 2014 to 2018, and breast cancer was the most common type of cancer in women globally in 2018. Meanwhile, the population of male patients aged 30 to 70 with androgenetic alopecia, an AR-related disease, reached over 92.8mn in China and 31.1mn in the US in 2018, respectively, according to F&S.

Drug sales to start from 2021E. The most advanced drug is Proxalutamide which we believe will be approved by NMPA in 2021E. We also forecast Pyrilutamide and ALK-1 to receive NMPA’s approvals in 2022E and 2024E, respectively. To factor in the risks in drug development, we apply different probability of success (PoS) to our sales forecasts and expect risk-adjusted revenue of RMB104mn/ RMB382mn/ RMB1,006mn in FY2021E/22E/23E. We forecast net losses of RMB405mn / RMB312mn / RMB91mn in FY20E/21E/22E and expect RMB213mn net profit in 2023E.

Initiate at BUY. We expect Kintor to commercialize the first product, Proxalutamide in 2021E and its future cash flows will rely on the successful commercialization of pipeline drugs. Therefore, we use DCF method to value the Company and we derive TP of HK$27.6 based on 10-year risk-adjusted DCF model (WACC: 11.8%, terminal growth rate: 2.0%).