【Company Research】Simcere Pharmaceutical Group (2096 HK) – Transitioning from generic to innovative
- China-based pharmaceutical company with global presence. Simcere Pharmaceutical Group Limited ("Simcere") was listed on the NYSE in 2007, as the first Chinese bio and chemical pharmaceutical company listed on the NYSE, and completed privatization in 2013. Simcere is rapidly transitioning to an innovation and R&D-driven pharmaceutical company, leveraging its leading manufacturing and commercial capabilities.
- Diversified product portfolio. Simcere has established a diversified product portfolio comprising five products for the treatment of oncology diseases, three products for the treatment of central nervous system diseases, five products for the treatment of autoimmune diseases, three products for the treatment of cardiovascular diseases, 16 products for the treatment of bacterial or virus-related infectious diseases and a number of products for the treatment of other diseases. Core products include Endostar (an innovative biological drug for oncology), Iremod (an innovative chemical drug for auto-immune diseases), Bicun (a CNS drug), etc.
- Rich innovative drug pipelines. Simcere has established three R&D centres in Nanjing (the Jiangsu Province), Shanghai and Boston (the US), respectively. Capitalizing on its proven track record of in-house R&D capacity and solid collaboration relationships with leading domestic and international pharmaceutical companies, Simcere has established a comprehensive innovative portfolio with nearly 50 candidates in different stages of development, including small molecule pharmaceuticals, large molecule pharmaceuticals and CAR T-cell therapies, among which over 10 product candidates were at clinical stage, had submitted NDA or had obtained NDA pending market launch.
- Potential blockbusters started commercialization in 2020. Simcere launched two innovative drugs, Orencia (abatacept injection) and Sanbexin (edaravone and dexborneol concentrated solution for injection) in 2H20, both of which are potential blockbusters. Sanbexin was recently added into the NRDL, effective from Mar 2021. In addition, KN035, a potentially first-to-market subcutaneously injectable anti-PD-L1 monoclonal antibody worldwide, filed NDA to the NMPA for treatment of MSI-H solid tumors in Dec 2020.
- Initiate at BUY with TP of HK$13.84. We expect Simcere’s attributable net profit to grow from RMB1,004mn in 2019 to RMB1,453mn in 2022E, representing a CAGR of 13.1%. To factor in the potential contribution from innovative drug pipelines, we use DCF model in valuing the Company. We derive our target price of HK$13.84 based on a 10-year DCF valuation (WACC: 10.4%, terminal growth rate: 2.0%).
