Henlius reported 1H20 revenue of RMB110.4mn mainly driven by RMB95.8mn attributable revenue from Hanlikang (HLX01) sales in 1H20, given the profit sharing arrangements with Fosun Pharma. Meanwhile, Henlius recorded RMB448.0m net loss in 1H20, compared to RMB316.9mn 1H19, mainly due to the increase in R&D spending.
- HLX01 sales to pick up thanks to the release of capacity bottleneck. In Apr 2020, Henlius received NMPA’s approvals for the addition of 2,000L drug substance production scale, 2,000L production equipment, and the addition of the specification of 500mg/50ml/vial on the basis of the original specification of 100mg/10ml/vial. The Company’s total commercial production capacity has increased to 20,000L. Thanks to the release of capacity bottleneck, attributable sales of HLX01 rose to RMB95.8mn in 1H20. We expect HLX01 to deliver RMB343mn attributable revenue in 2020E.
- HLX02 to fast penetrate into hospital channels. In Jul 2020, HLX02 (EU trade name: Zercepac) was officially approved in EU, and in Aug 2020, HLX02 was approved by the NMPA in China, becoming the first domestic Herceptin biosimilar approved in both EU and China. With 20,000L commercialization-ready capacity (shared with HLX01), we expect HLX02 to deliver RMB155mn revenue in 2020E and RMB710mn in 2021E.
- Expanding innovative drug pipelines. Henlius has developed rich bio-innovative pipelines with 30 clinical trials in progress, including nine Phase 3 trials. Core innovative pipelines include HLX10 (PD-1, Ph 3), HLX07 (EGFR biobetter, Ph 1b/2), HLX22 (HER2 innovative, Ph 1), HLX55 (c-MET innovative, Ph 1), HLX56 (DR4 innovative, Ph 1). Henlius also established state-of-the-art bi-specific antibody development platform with three bi-specific antibody candidates in pre-clinical phase. The Company actively involves in development of anti-COVID-19 drugs with two candidates in pre-clinical phase, including HLX71 (S1 protein), and HLX70 (S1 protein).
- Raise TP from HK$57.21 to HK$60.61 to reflect sales ramp up of HLX01 and HLX02, as well as new product launch in coming years. We expect risk-adjusted revenue to be RMB571m in FY20E and RMB1,595m in FY21E. TP of HK$60.61 was based on 11-year risk-adjusted DCF valuation (WACC: 10.03%, terminal growth rate: 3.0%).
