Licensing-out Momentum Remains Intact
The authors are analysts of Shinhan Investment Corp. They can be reached at shawn1225@shinhan.com and jhwon@shinhan.com, respectively. – Ed.
Issuance of convertible preferred shares worth KRW75bn
Alteogen disclosed on December 14 that it will issue convertible preferred shares (CPSs) worth KRW75bn by way of third-party allotment. A special purpose company (SPC) established by the domestic private equity firm SG Private Equity participated in the issuance. The CPSs are offered at KRW155,400 per share with a 10% discount and should be locked up for one year from issuance. Together with the KRW30bn raised from the CPS issue on November 12, total proceeds should amount to KRW105bn. The company plans to utilize the funds in facilities and R&D to produce hyaluronidase that is used in the development of single therapies and its Hybrozyme technology (SC drug delivery platform). We expect to see an inflow of new sales from hyaluronidase upon the completion of a new plant.
Licensing-out momentum intact; focus on subsidiary value
Momentum from Hybrozyme licensing remains intact. Demand for subcutaneous (SC) drug delivery platform is growing steadily from global pharmaceuticals. More licensing-out deals are expected going forward as Alteogen offers non-exclusive licensing for its platform unlike its rival. We also need to pay attention to potential technology transfer for drug pipelines. The company is reportedly in negotiation with a global pharmaceutical firm to reach a technology transfer deal for its Herceptin SC biosimilar candidate. The deal will be different from the two platform licensing-out contracts signed previously. If successful, it will be the first technology transfer for a drug pipeline which is more meaningful in itself than the contract value.
Altos Biologics announced on December 10 that it will raise KRW31bn through rights issue, and that it had acquired the right to the Eylea biosimilar candidate (ALT-L9) from Alteogen. The subsidiary plans to secure a total of KRW60bn in investments by early 2021 for global phase III clinical trials for ALT-L9 and addition of new biosimilar pipelines. Market focus should fall on the value of Altos Biologics considering the rising value of biosimilar companies at home and abroad.
Target price unchanged at KRW200,000; momentum starts to pick up
Our target price for Alteogen is kept unchanged at KRW200,000. We see further room for upward revision of our target price given: 1) technology transfer momentum for the Hybrozyme platform technology and drug pipelines going forward; 2)value of stake in Altos Biologics; and 3) ramp-up of hyaluronidase sales in the mid/long-term with the construction of a manufacturing plant. The proceeds from the CPS issue should help the company to build up much anticipated momentum. We believe now is the time to buy the stock.