Shenyang-based 3SBio (1530.HK) is a biopharmaceutical pioneer that offers a unique play on China’s rising demand for healthcare.
The company is best known for its rheumatoid arthritis drug YSP, which accounts for 33% of revenues, and TPIAO, a hormone used in the treatment of platelet deficiencies.
While YSP and TPIAO are expected to deliver strong sales growth in coming years, a recent price cut for anemia drug EPIAO and limited R&D upside in the near term could weigh on 3SBio. Jefferies analyst Eugene Huang initiated coverage of the stock today with a hold rating and an HKD11.50 a share target price, which implies 11% upside.
Huang has more on 3SBio’s drugs pipeline:
3SBio’s HER2 (breast cancer) and CD20 (lymphoma) candidates were withdrawn, leaving peers like Fosun potentially to become FTM generics. Besides, we factored in Rmb20/50/110m 17/18/19E sales from Bydureon (exenatide ER, GLP-1, diabetes), which is pending NDA approval. We are concerned there might be a lack of synergy between 3SBio and AstraZeneca’s diabetes team as well as integration risks.
Shares of 3SBio are up 37% this year and trade at 23 times forward earnings, which is in line with its five year average. Analysts surveyed by FactSet expect 3SBio to grow earnings at a 28.3% average annual pace over the next three to five years. While the stock’s scarcity value and long-term growth potential look appealing, investors may want to wait for a better entry point.
April 27, 2017 at 08:44AM
from Isabella Zhong
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