Morgan Stanley: Sunshine Pipeline's net present value is supported, bullish view on HEC CJ PHARM (01558) up to HK$13.8

Recently, Wall Street giant Morgan Stanley released a research report stating that Sunshine (the parent company) will license the rights to FGF21/GLP-1 outside of China to Apollo Therapeutics, with a transaction value of approximately $938 million (without adjusting for the probability of success). This provides strong support for the expected net present value (NPV) of Sunshine's pipeline. Morgan Stanley rated HEC CJ PHARM (01558) as "hold" in this report, with a target stock price of HK$13.8. Morgan Stanley stated that HEC CJ PHARM is being delisted and merged with its parent company Sunshine Pharma, while Sunshine is seeking a listing on the Hong Kong stock market for the merged entity. Sunshine announced that HEC88473 (APL-18881) - a dual receptor agonist of FGF21/GLP-1 - has been licensed for use outside of the Chinese market to Apollo Therapeutics based in the UK. Morgan Stanley mentioned that Sunshine will receive up to $12 million in upfront payments from Apollo Therapeutics, as well as up to $926 million in development milestone payments. In addition, according to Morgan Stanley's investigation on ClinicalTrials.gov, a Phase 2 multicenter study in China is currently recruiting type 2 diabetes patients who are taking metformin or undergoing diet and exercise therapy, with dulaglutide as the active control (reference). Morgan Stanley stated that for at least 10 years from the first commercial sales model in areas outside of China, HEC CJ PHARM will receive a "low double-digit" level of royalty fees from Apollo's net sales. Morgan Stanley mentioned in the report that if successfully executed, the merged entity will have access to HEC Pharma's extensive sales team in China and Sunshine's wide-ranging research and development channels.