报告名称：Hengrui Medicine(600276)Access China conference highlights 2016
报告类型：点评报告
报告日期：2016-01-13
研究机构：德意志银行
股票名称：恒瑞医药
股票代码：600276
页数：9
简介：Innovation and export remain as the best risk management tactics
The company believes that price erosion for this round of tender would be atleast 10%, and secondary price negotiation would exert additional pressure.However, new drugs that are launched after 2013 can penetrate new provincesthrough the tenders. Management also suggested that the tender guidelinesare generally less hawkish in the wealthier provinces, including Jiangsu andShandong. Innovation and the export business will continue to be the key riskmitigation strategy.
Updates on Apatinib and the export business
With almost RMB300m sales in 2015 for Apatinib, management guided 100%sales growth for 2016. As for the export business, the revenue generated in2H15 would be similar to 1H15. Additionally, Cyclophosphamide achieved 40%market share in 2015 and the target for 2016 is 50% in US, suggesting 25%growth. However, management does not expect significant contribution fromthis drug in the EU market. As for Sevoflurane in the US, sales have alreadystarted after the approval in Nov 2015. The company targets a 20% marketshare for this drug, which has a market size of USD200-300m in the US.
Slight delays for pipeline products
Management remains confident to launch 19K in 2016 after a slight delay dueto minor issues during the onsite manufacturing inspection. For Retagliptin andFamitinib, product launches are expected in 2017 and 2018, respectively.Additionally, the phase 3 study for the indication expansion for Apatinib inNSCLC is expected to be completed in 2017 at the earliest. Additionally, thephase 1 clinical trial in the US for Pyrotinib has begun while the phase 2 studyis ongoing in China. We highlight that the company has 31 pipeline productspending for manufacturing approval, according to the announcement on theShanghai Stock Exchange in late Dec 2015. The company withdrew 13applications out of a total of 21 listed on the self inspection list issued by theCFDA. However, management does not expect a significant increase in R&Dspending.
Maintaining target price of RMB60; risks
We believe current weakness represents an excellent buying opportunity. Ourprice target of RMB60 is based on 42x 2016E EPS of RMB1.4. We believe 42xis justified as A-share peers are trading at 30x with 23% EPS growth in 2017vs. the 32% we model for Hengrui). Key risks: delays in product launches,uncertainties in export, pricing pressure, and competition

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