Co. introduced Hillhouse as the 2nd largest shareholder via new shares placement; sale of existing shares by controlling shareholder
We expect HKD1.25bn net proceeds from the private placement could improve Co.’s B/S and expand its progress in R&D/BD space
We revised up SOTP-based TP to HKD7.0. Maintain BUY on still attractive valuation (11x 21E PER) and improved B/S strength
　　Enhanced B/S and cash position via private placement
　　Under the agreement, Hillhouse NEV is expected to become Co.’s major shareholder with a total of 552mn share （representing 15.6% stake of enlarged share base）， via 1） subscription of 292mn new shares （8.3% stake） at HKD4.28/shr; 2） purchase 260mn （7.3% stake） of existing shares from controlling shareholder. We reckon the HKD1.25bn net proceeds should strengthen Co.’s financial positon and reduce its YE21E net gearing ratio to 25% from 40%. Further, we believe Hillhouse collaboration should help Co. to form a diversified and dedicated institutional shareholder base.
　　Lipusu concern eased; mult. regulatory catalysts in 21E
　　Lipusu has been included in NRDL in Dec 2020 for all three approved indications （i.e. NSCLC, ovarian and breast cancer）。 We reckon the concern on Lipusu is largely eased despite gov’t. keeping the decreased price confidential. We expect a moderate decline of Lipusu sales in FY21E （~5% yoy） given a wider penetration in prior non-reimbursed provinces to partly offsetting the price decrease. Further, we expect multiple regulatory milestones in 2021E, 1） LY01008 （avastin biosimilar） is expected to receive BLA approval by NMPA in mid-21E, which we forecast to deliver RMB80mn sales in FY21E; 2） LY3004 （Risperidone ER microsphere） is expected to nab market approval from FDA by YE21E, and we expect domestic sales to reach RMB40mn in FY21E; 3） LY3005 （ansofaxine ER） for patients with modest to severe depression is expected to receive market approval in 1H21E. We think Co. is well-capitalized to expand these progresses and mitigate the impacts from its legacy portfolio.
　　Maintain BUY and SOTP-based TP revised up to HKD7.0
　　We trimmed FY21E/22E adj. EPS by 7%/9% to reflect the dilution from new share placement. We rolled forward valuation to FY21E basis and raised SOTP-based TP to HKD7.0 from HKD6.8. Maintain BUY on its multiple regulatory milestones in 2021E and improved financial structure.