20160919-信达国际控股-三生制药-01530.HK-Domestic_biotech_leader__poised_for_continued_growth_27页_673kb

3SBio Summary

Core Content

3SBio is a leading biotechnology company in China, focused on oncology, nephrology, and autoimmune diseases. The company was listed on the Hong Kong Stock Exchange in 2015 and has a strong presence in the biopharmaceutical market with three core products: TPIAO (rhTPO), EPIAO (rhEPO), and Yisaipu (Enbrel biosimilar). These products are expected to drive continued growth and contribute significantly to the company's revenue.

Main Products and Their Indications

• TPIAO (特比澳): A recombinant human thrombopoietin (rhTPO) used for chemotherapy-induced thrombocytopenia (CIT) and immune thrombocytopenia (ITP). It is the only rhTPO product in the PRC market.
• EPIAO (益比奥): A recombinant human erythropoietin (rhEPO) used for anemia associated with chronic kidney disease (CKD), chemotherapy-induced anemia (CIA), and reduction of allogeneic blood transfusion in surgery patients. It is the only rhEPO product approved for all three indications in China.
• Yisaipu (益赛普): A follow-on biosimilar of Pfizer's Enbrel, a TNF inhibitor used for rheumatoid arthritis (RA), plaque psoriasis, and ankylosing spondylitis (AS). It is the first-to-market drug in China for RA treatment.

Key Information

Sales and Growth Projections

• TPIAO: Sales increased from RMB605mn in FY15 to RMB405mn in 1H16. Expected 3-year CAGR of 30%, with FY18E sales at RMB1.3bn.
• EPIAO: Sales increased from RMB251mn in FY10 to RMB684mn in FY15. Expected 3-year CAGR of 8%, with FY18E sales at RMB0.9bn.
• Yisaipu: Sales increased from RMB847mn in FY15 to RMB446mn in 1H16. Expected 3-year CAGR of 15%, with FY18E sales at RMB1.3bn.

Market Position and Strategy

• TPIAO is the only rhTPO product in China and has a market share of ~41% for CIT and ~10% for ITP.
• EPIAO is the dominant rhEPO product in China, with ~44% market share. It is complemented by SEPO (acquired in 2014) to target lower-tier markets.
• Yisaipu holds a dominant market share of ~65% in the TNF inhibitor market in China, with a 50%+ discount compared to the originator product.

Competitive Landscape

• TPIAO faces no direct competition in China due to its exclusivity, with minimal pricing pressure.
• EPIAO competes with several other rhEPO products, but its superior quality and additional indications help maintain a strong market position.
• Yisaipu benefits from a favorable competitive landscape, with domestic products accounting for ~85% of the market and low penetration of TNF inhibitors.

Strategic Milestones

• Established in 1993, 3SBio has expanded through several acquisitions, including Sciprogen (2014), Zhejiang Wansheng (2015), and Guojian (2016).
• The company has a dual brand strategy with EPIAO and SEPO to capture different segments of the market.
• 3SBio is developing long-acting rhEPO products (NuPIAO and PEG-EPO) to target pre-dialysis patients.

Revenue and Profit Trends

• Revenue grew from RMB1,131mn in FY14A to RMB4,136mn in FY18E.
• Operating profit increased from RMB343mn in FY14A to RMB1,259mn in FY18E.
• Net profit rose from RMB292mn in FY14A to RMB1,104mn in FY18E.

Market and Patient Trends

• Chronic kidney disease (CKD) is a growing problem in China, with an estimated 120mn patients in 2012 and expected to grow to 0.67mn dialysis patients by 2018E.
• The prevalence of RA in China is ~0.32% to 0.36%, or 4.5mn to 5.0mn patients.
• Biologics are gaining traction in China, with market share increasing from 11% in 2008 to 19% in 2013.

Key Growth Drivers

• High patient demand and low penetration: All three core products have significant growth potential due to low market penetration and a large patient base.
• Exclusivity and pricing advantage: TPIAO's exclusivity leads to minimal pricing pressure, while Yisaipu's cost advantage allows for strong market share.
• Complementary product offerings: IV iron sucrose and Sparin support CKD disease management, enhancing the value proposition of EPIAO.
• Pipeline development: The company is developing long-acting rhEPO products to expand its therapeutic reach.
• Insurance coverage expansion: Increased insurance coverage and provincial reimbursement lists are expected to drive sales growth for all core products.

Conclusion

3SBio is a strong domestic biotech leader with a clear growth strategy and a diverse portfolio of products. The company's focus on oncology, nephrology, and autoimmune diseases, combined with its exclusive products and complementary offerings, positions it well for continued growth. The market for TPO, EPO, and TNF inhibitors is expanding rapidly in China, driven by increasing patient numbers, improved physician awareness, and enhanced insurance coverage. The company's in-house sales team and strategic acquisitions further support its market leadership and growth potential.