EUR 88.49 For Business Accounts Only

Hansoh Pharma Lock-up Expiry - New drugs offset impact of price cut but valuation is fair

Lock-up restriction for Hansoh Pharma's controlling shareholder, pre-IPO investors and cornerstone investors will expire on December 14th. We expect roughly USD 16 billion worth of shares to be eligible for sale. Of these, USD 1.6 billion worth of shares are held by financial investors.

We look at the company's newsflow since listing and discuss its current valuation. We discuss the following drug candidates of the company:
- HS-10296, the third-generation EGFR TKI, that will soon receive NMPA approval
- Flumatinib, the second-generation Bcr-Abl, which has recently been approved by NMPA
- Emend injection generic, the second generic approved after Sino Biopharm’s generic

We also discuss the impact from the latest expanded centralized procurement on its key product Oulanning. We think the sales and market share of Oulanning will be under pressure given the refined rule of centralized procurement that accepts more than one successful bidders.

We also review the company’s valuation. Thanks to the stellar post IPO performance, the company is the largest pharmaceutical companies listed on the Hong Kong Stock Exchange. The valuation multiple is also at the high end amongst peers. Despite a good potential of drug candidates in its pipeline and sales growth of the recently approved drugs, we think the company’s valuation is fair. Given the upcoming sell-down by financial investors, we would short the stock ahead of lock-up expiry, hedge with long trade in Sino Biopharm.