As the scheduled PDUFA date for LY3005 approaches in 4Q20E, we expect Luye is nearing a major near-term regulatory catalyst
Co. expects to launch 6 new products in next 12 months, adding growth opportunities to weak prospects of its existing pipelines
We trimmed SOTP-based TP to HKD6.8. Noting current risk/reward (9x/8x 20E/21E PER) remains attractive, maintain BUY
Multiple near-term and long-term catalysts to watch
We expect multiple material regulatory milestones in 4Q20E-2021E, 1) LY3005 (ansofaxine ER) for patients with modest to severe depression nears FDA’s approval decision with a Prescription Drug User Fee Act (PDUFA) date in 4Q20E. In addition, Co. expects to submit LY3005’s NDA in China in mid-2021E, with a potential success in larger indication for patients with anhedonia, sexual dysfunction and cognitive impairment; 2) LY3004 (Risperidone ER microsphere) is expected to receive market approval from NMPA in 4Q20E, and Co. is to submit its market application via the 505(b)(2) pathway in mid-2021E. Mgmt. believes LY3004 has better medication compliance in patients with schizophrenia than current oral drugs; 3) LY01008 (avastin biosimilar) is expected to receive BLA approval by NMPA in 2H21E; 4) Lurbinectedin is expected to file NDA to NMPA for 2L SCLC during 2H21E after completing its bridging study in China. We think those steady progresses reflect Co’s R&D effort coming to fruition.
Lipusu’s risks close to materialize
We expect the upcoming NRDL negotiation results should reduce market concerns over Lipusu’s uncertainty. Our sensitivity analysis shows 50% ASP decline with 30% volume uptake in Lipusu will result in 12% decrease in our FY21E earnings forecast, which implies Co. to trade at 9x 2021 PER, still in lowest quantile of its historical PER band. We reckon the current valuation has well priced in Lipusu’s weakness after stock shed ~20% YTD.
Maintain BUY and SOTP-based TP trimmedtoHKD6.8
We revised down FY20E/21E earnings by 16%/15% to reflect COVID-19 disruption and GPO impacts. We trimmed our SOTP-based TP to HKD6.8 from HKD7.7. The Co. currently trades at 9x/8x FY20E/21E PER, near the bottom of its historical PER band. Maintain BUY on its rich late-stage pipeline coming to fruition and inexpensive valuation.