• Entered strategic cooperation agreement with China Resources Pharmaceutical Commercial Group Co., Ltd (CRPCG).
• CRPCG is a subsidiary of China Resources Pharmaceutical Group (3320 HK, Not Rated), the second largest pharmaceutical manufacturer and one of the three largest drug distributors by revenue in China.
• Company will be able to piggyback on CRPCG’s network for the commercialisation of its products in China.
• No change to forecasts. Maintain BUY and DCF (WACC 10%) TP of S$0.445. Stock catalysts expected from potential out-licensing deals and sixfold increase in production capacity by FY22e.

The news

iX Biopharma has entered into a strategic cooperation framework agreement with CRPCG. iX Biopharma and CRPCG will work together to commericalise iX’s entire specialty pharmaceutical and nutraceutical portfolio in China.

The extent of cooperation for the different products will be decided later but the scope of cooperation will include product registration, manufacturing, distribution and promotions.

What this means

iX’s China presence is currently limited to its licensing agreement for Wafesil™ with Yiling Pharmaceutical (002603 SZ, Not Rated) and online sales of its nutraceutical portfolio on Tmall and JD.com.

The agreement will give iX access to CRPCG’s distribution network covering the entire country.  CRPCG is one of the three largest pharmaceutical distributors by revenue in China. It wholesales its drugs to pharmacies, hospitals and medical institutions and also retails through its own pharmacies.

The broad-based collaboration will give iX Biopharma a strong partner to distribute its products in China, providing an important gateway to the Chinese market. Due to the agreement’s non-exclusivity, iX can continue to look for partnership opportunities to expand its market presence there.

Pending distribution specifics, we have not changed our forecasts.

Recommendation

Maintain BUY with an unchanged DCF TP of S$0.445. We remain confident in the growth prospects of the company. Partnership with one of the leading pharmaceutical groups in the competitive Chinese market is testament to the value iX is able to bring to the industry

Source: Phillip Capital Research - 8 Apr 2021