Accelerating the design and discovery of novel drugs and materials leveraging quantum physics, AI and robotic automation. Founded by three MIT-trained physicists, QuantumPharm Inc. is a globally leading, quantum physics-based, AI-powered, and robotics-driven, innovative R&D platform in terms of technological advantages, aiming to accelerate the design and discovery of novel drugs and materials. The Company adopts a combination of quantum physics-based first-principles calculation, advanced AI, high- performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions and services to global conglomerates and innovative companies in the pharma and material science industries and beyond.
　　Well-formatted AI-enabled businesses components. Leveraging its advanced technologies, the Company’s business primarily comprises (i) drug discovery solutions providing modular solutions spanning the full spectrum of the drug discovery and research process, and (ii) intelligent automation solutions consisting of solid-state R&D services and automated chemical synthesis services. QuantumPharm expects to have diverse revenue streams, including (i) transaction-based upfront, milestone, contingent payments, and/or royalties from drug discovery collaborations, (ii) transaction-based service fees from drug discovery solutions and solid-state R&D services, and (iii) subscription-based service fees from automated chemical synthesis services.
　　Significant collaborations and investments as endorsements to the Company’s solutions. With significant value to customers and collaborators and synergies within the Company’s ecosystem, QuantumPharm has a suite of elite customers and collaborators. As of 13 May 2024, the Company served more than 100 global biotechnology and pharmaceutical companies and research institutions, including 16 of the top 20 global biotechnology and pharmaceutical companies ranked by revenue in 2022. The Company’s advanced technologies have attracted both private equity and strategic investors, many of which are globally leading investors, such as HongShan, Mirae Asset, Google, Tencent, China Life, and 5Y Capital.
　　Initiate at BUY with TP of HK$7.25. We expect QuantumPharm’s total revenue to reach RMB306mn/ 562mn/ 911mn with attributable net loss of RMB660/ 281mn/ 23mn in FY24E/ 25E/ 26E. We derive our target price of HK$7.25 based on a DCF model (WACC: 9.79%, terminal growth rate: 4.0%).
　　Risks: Risks relating to 1) research and development, 2) commercialization of its solutions and services, and 3) operations.