Sino Biopharm announced to acquire 95.09% shares of LaNova Medicines for a net payment of US$500.9m. Leveraging LaNova’s existing differentiated platforms, SBP can strengthen its oncology portfolio and with multiple assets showing go-global potential, we believe SBP’s guidance of 1-2 license-out deals in 2025 has become more visible. Additionally, we also keep eyes on BD opportunities of SBP’s self-developed assets like PDE3/4 inhibitor, JAL/ROCK inhibitor, HER2 bispecific ADC, etc. Consequently, we have factored potential BD revenue into our forecasts for 2025 and beyond. Regarding drugs sales, we have fine-tuned the 2025 forecasts and believe previously guided double-digit YoY growth in 2025 is achievable, driven by sales ramp-up of biosimilar drugs. Overall, we have lifted our TP to HK$7.7, implying 30x 2026E P/E, and reiterate BUY rating.
　　Key Factors for Rating
　　Wholly acquire LaNova for a net payment of US$500.9m: On 14 July, Sino Biopharm announced that it will acquire 95.09% shares of LaNova Medicines for up to US$950.92m, translating to net payments of c.US$500.9m after excluding LaNova’s c.US$450m cash reserves. The companies jointly hosted a business update conference in Hong Kong on 17 July. Following the close of the deal, LaNova will become a SBP’s indirect wholly-owned subsidiary and its team (58 staff members) will be integrated to SBP.
　　LaNova demonstrates R&D capabilities in ADCs and bispecific antibodies: The acquisition will significantly enhance SBP’s early-stage R&D capabilities in oncology by leveraging LaNova’s existing 4 differentiated platforms, including a targeted antibody discovery platform focusing on multi- transmembrane protein targets like GPCRs, a next-gen ADC platform with pro- drug and dual payload, an immune cell engager platform with conditional immune cell activation hence reducing toxicity, and a TME (tumour micro environment) specific antibody platform. LaNova currently has 8 clinical-stage candidates: 2 in phase III stage (LM-108(CCR8 mAb) and LM-302 (CLDN18.2 ADC), 3 in phase II (LM-101 (SIPRα mAb), LM-305 (GPRC5D ADC) and LM- 324C5 (4-1BB/CEACAM5 bsAb)) and 3 in phase I (LM-168 (CTLA-4 mAb), LM- 299 (PD-1/VEGF bsAb) and LM-2417 (4-1BB /NaPi2b bsAb)). LaNova has out- licensed the global right of LM-305 and LM-299 to AstraZeneca and MSD, respectively . Notably, a US$300m milestone payment from MSD is anticipated upon technology transfer to be completed in 2025.
　　Promising early-stage clinical data of key drug candidates: Regarding assets quality, LaNova’s CCR8 mAb shows promising mPFS data in 2L PC and 2L GC, especially in patients with high CCR8-expressing. And SBP has initiated a phase II clinical study of this molecule in 1L PC. Furthermore, LM-302 demonstrates efficacy in 1L PD-L1 (CPS≥1) CLDN18.2≥25% GC (ORR: 79% and DCR: 100%).
　　Valuation
　　We have factored the potential BD revenue into our forecasts for 2025 and beyond. Regarding drugs sales, we fine-tuned the estimates in 2025 and we believe previously guided double-digit YoY growth for 2025 is achievable driven by sales ramp-up of biosimilar drugs. Overall, we lifted our TP to HK$7.7, implying 30x 2026E P/E (previously 22x 2026E P/E).
　　Key Risks for Rating
　　(i) Slower-than-expected ramp-up of generic pipeline drugs; (ii) intensified competition on core products; and (iii) price cut due to GPO on key generic drugs.