On 30 Sep 2020, the Company announced that Dr. Scott Shi-Kau Liu has tendered his resignation from the position as an executive director and the CEO of the Company due to a change in personal business priorities. And Mr. Wenjie Zhang was appointed as the CEO of Henlius to keep innovating in operation management models and implementing the global strategy.
- A thoughtful arrangement. Dr. Liu will continue to serve the Company as a head of the strategic advisory committee of the Company, focusing on the directions of the Company’s R&D works, the formulation of the Company’s strategies, and the team construction and development of the Company. Mr. Zhang has more than 25 years of commercial operation and management experience in the pharmaceutical industry. Since Mr. Zhang joined Henlius, he has been responsible for the operation management, focusing on building the innovative commercial operation mode and creating an international strategic layout, and successfully promotes the commercialization of HLX02 (trastuzumab biosimilar).
- License and supply arrangement with Accord for HLX02. The Company has recently entered into a binding term sheet with Accord Healthcare Inc. to grant a license to Accord to develop and commercialize HLX02 trastuzumab injection (EU trade name: Zercepac) in the US and Canada. According to the agreement, relevant milestone payments from Accord US to Henlius include: upfront payment of US$27mn, regulatory milestone payments of no more than US$13mn and commercial sales milestone payments of US$25mn for every US$500mn of cumulative net sales. Henlius will also be eligible to receive a tiered royalty from 18% to 50% of future net profit of HLX02. With this collaboration, the commercialisation footprint of HLX02 has the potential to cover most of the global mainstream markets of biologics, in our view. A higher tiered royalty (18%-50% vs 15%-26.5%) in this agreement than last collaboration with Accord in EU reflects the HLX02’s validated quality and efficacy, which may lead to higher-than-expected revenue of HLX02 from overseas.
- Clinical trial of neutralizing antibody HLX70 approved by FDA. The Company’s subsidiary, Hengenix Biotech, Inc, has received a “study may proceed” letter from the US FDA to approve the clinical trial for anti-S1 fully human monoclonal neutralising antibody HLX70 for COVID-19. Pre-clinical data has demonstrated that HLX70 can significantly inhibit SARS-CoV-2 virus infection and has good safety profile. As no COVID-19 antibody drug was approved to market globally yet, we think, HLX70 may become one of the first waves of neutralizing antibody approved.
- Maintain BUY with unchanged TP of HK$60.61. We expect risk-adjusted revenue to be RMB571m in FY20E and RMB1,595m in FY21E. TP of HK$60.61 is based on 11-year risk-adjusted DCF valuation (WACC: 10.0%, terminal growth rate: 3.0%).
