Operations gradually get back on track; product launches drive growth
​In our view, the worst is over for ScinoPharm as its near-term operations are stable, while we expect strong growth momentum driven by product launches, with a rich pipeline in 2H16-2018. 1H16 net profit grew 41% YoY to NT$350 mn, and was largely in line, while 1H16 GM of 44% was significantly stronger vs. 36.5% in 1H15. We reiterate our BUY rating as 1) its near-term operations have stabilized, with GM improving; and 2) new product launches will provide strong momentum (leukemia drug Decitabine is expected to gain approval from the US FDA by end-2016 while five other CMO products will launch in 2016-18); and 3) it has tapped into the formulation market, providing a one-stop shop service to clients, providing long-term momentum. We lower our 2016/17F EPS estimates by 14%/21%, given the F/X impact on sales and higher opex driven by the launch of its injectable facility. We also lower our TP from NT$61.5 to NT$56, based on 45x 2017F EPS (midpoint of its historical P/E range of 35-55x).
ScinoPharm Taiwan, Ltd. is a Taiwan-based company principally engaged in the research and development, manufacture and distribution of bulk drugs. The Company's products include anastrozole, galantamine hydrobromide, azacitidine, gemcitabine hydrochloride, benazepril hydrochloride, granisetron hydrochloride, bimatoprost, irinotecan hydrochloride, letrozole, capecitabine, omeprazole, cladribine, ondansetron hydrochloride, dantrolene sodium, oxandrolone, oecitabine, paclitaxel and desmopressin acetate. The Company provides drug development service, chemical process development service, analytical chemistry service, current good manufacturing practice (cGMP) manufacturing service and other related technical services. The Company distributes its products within domestic market and to overseas markets.
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