20161230-申万宏源研究_香港_-石药集团-01093.HK-巨人崛起_20页_1mb

CSPC Pharmaceutical Group (1093:HK) Summary

Core Content

CSPC Pharmaceutical Group (1093:HK) is a leading Chinese pharmaceutical company that has shown strong performance and growth potential in various therapeutic areas, including neurology, oncology, and generics. The company is actively expanding its market presence and exploring overseas opportunities through product licensing. The report highlights the company's financial performance, growth drivers, and valuation.

Financial Summary

Main Points

• Market Position: CSPC has a strong position in the Chinese pharmaceutical market, particularly in neurology and oncology segments.
• Growth Drivers:
  • NBP Injection: The company's flagship drug, NBP injection, is expected to benefit from the potential inclusion in the National Reimbursement Drug List (NRDL), which could significantly boost its sales.
  • Oncology Drugs: The oncology portfolio, including Duomeisu and Jinyouli, is anticipated to see accelerated growth due to upcoming tender processes.
  • Product Licensing: CSPC has licensed out three products to US pharmaceutical companies, offering potential milestone payments and royalty income.
  • Raw Material Recovery: The price of vitamin C has risen due to stricter environmental regulations, contributing to improved profitability in the raw material segment.
• Valuation and Target Price:
  • The target price has been raised to HK$9.90, implying a 23x PE for 2017.
  • The upside is estimated at 21% from the current price.
• Investment Rating: Maintain "BUY" rating due to strong earnings prospects and growth opportunities.

Key Information

• NBP Injection:
  • Already in seven provincial drug lists.
  • Expected to be included in the NRDL in early 2017.
  • Clinical benefits recognized by experts.
  • Sales growth from 1.4% in 2010 to 4.5% in 9M16.
  • Projected to contribute 29% of total sales by 2018.
• Duomeisu:
  • Second-to-market generic for doxorubicin liposome.
  • Expected to grow at a 30% CAGR in 16-18E.
  • Sales reached HK$253m in 9M16.
• Jinyouli (PEG-rhG-CSF injection):
  • Long-acting G-CSF with limited reimbursement coverage.
  • Expected to grow at a 60% CAGR in 16-18E.
  • Sales reached HK$96m in 9M16.
• Oulaining (Oxiracetam):
  • Sales growth slowed in recent years due to inclusion in adjuvant drug lists.
  • Expected to grow at a 13% CAGR in 16-18E.
• Xuanning (Levamlodipine Maleate):
  • Low-cost drug with a 26% market share in 9M16.
  • Expected to grow at a 14% CAGR in 16-18E.
• Product Licensing:
  • Three products licensed to US companies.
  • Potential milestone payments up to US$282.5m.
  • Royalty income expected upon successful launch in the US and Europe.
• R&D Pipeline:
  • CSPC has a robust R&D pipeline with 170 drugs under development.
  • Includes 15 class 1 new drugs, 110 generics, and 22 drugs applying for US ANDA registration.
  • Expected to launch five blockbuster drugs in the next two years.
  • R&D expenses are forecasted to increase to 3.8% of sales in 2017.

Investment Highlights

• NBP Injection: Expected to benefit from inclusion in the NRDL, which could provide a strong catalyst for growth.
• Oncology Drugs: Duomeisu and Jinyouli are anticipated to grow significantly due to potential tender wins and market expansion.
• Product Licensing: Strategic move to access overseas markets, offering high potential for revenue and market share growth.
• Raw Material Recovery: Vitamin C price increase due to environmental regulations and production issues.
• Valuation: Target price raised to HK$9.90, reflecting improved earnings forecasts and growth potential.

Conclusion

CSPC Pharmaceutical Group is well-positioned for growth in both domestic and international markets. The company's focus on innovation, strategic product licensing, and strong financial performance supports its "BUY" rating. With potential inclusion of NBP in the NRDL and the acceleration of oncology drug tenders, the company is expected to see continued strong sales growth and improved profitability.