IMEIK TECHNOLOGY DEVELOPMENT(300896)：ENTERS DISTRIBUTION AGREEMENT WITH HUONS TO STRENGTHEN PRESENCE IN BOTOX MARKET

机构：中金公司
研究员：Zhuonan XU/Junhao FAN/Lulu PENG

What's new
IMEIK Technology Development （IMEIK） announced that it entered into a framework agreement on cooperating in distribution with Huons BioPharma （Huons BP） of Korea. As Huons BP’s sole distributor in China, IMEIK will promote the introduction and registration of botulinum toxin （Botox） products under Huons BP, and have exclusive distribution rights. The agreement increases the number of products that the firms will cooperate in distributing, promising the lowest supply price, and strengthening the exclusivity compared to the previous agreement. We expect this to improve the presence of the firm in the Botox market.
Comments
Entering into distribution framework agreement; strengthening presence in Botox market. IMEIK entered a previous agreement with Huons Co., Ltd. in 2018; Huons BP, the partner in the new agreement, was established in April 2021 by spinning off the Botox division and other biological products of Huons Global. On May 20, IMEIK and Huons BP entered into another framework agreement on distribution, in which Huons BP authorized IMEIK to be its sole distributor in China. IMEIK will have exclusive import and distribution rights of the Botox product "HUTOX" for the next 10 years. IMEIK will also continue promoting registration and introducing of 900 kDa （50U, 100U, and 200U） Botox produced by Huons BP in China. The Botox product is in Phase III clinical trials, and its registration appears to be on track. We expect this in-depth cooperation to consolidate the presence of IMEIK in the Botox category, improve its competitiveness, and strengthen the integration of resources between the two parties.
Strengthening the partnership; numerous highlights in new agreement. The agreement deepens cooperation of the two firms:
1. Distribution: The agreement clarifies that IMEIK is the sole distributor in China （incl. Hong Kong SAR and Macao SAR）， which we believe will effectively avoid the sales of un-approved and knock-off products.
2. Specifications: This agreement expands the indications and specifications of the products distributed from the agreed 900kDa （100U） in 2018 to 900kDa （50U, 100U and 200U）， further consolidating IMEIK’s presence in the Botox category in China.
3. Prices: Huons BP explicitly agrees to provide IMEIK with the lowest global prices.
4. Validity: IMEIK has 10-year exclusive distribution rights for the products starting from National Medical Products Administration （NMPA） approval for the indication and this right will be renewed automatically for a further 10 years upon expiry. We think this agreement extended the duration of cooperation and is highly exclusive.
Upbeat on IMEIK’s medium-to-long-term competitive advantages, promising growth prospects. We think the firm’s short-term earnings have been under pressure since late March due to COVID-19 resurgence. However, we believe aesthetic medical demand has been deferred rather than reduced. We expect the demand to recover significantly once COVID-19 conditions ease. We think the near-term impact does not alter the medium- to long-term competitiveness and growth prospects for IMEIK. The firm’s blockbuster product, Hearty, is ramping up; sales volume of the new product, CureWhite, is increasing; and products in the pipeline such as liraglutide and deoxycholic acid are progressing steadily. We expect the firm’s improved product pipeline to enable it to benefit from the growth of the sector, and bolster its medium- to long-term earnings growth.
Financials and valuation
We maintain our 2022 and 2023 earnings forecasts. The stock is trading at 51x 2023e P/E. We maintain OUTPERFORM and our TP of Rmb660.0, （implying 67x 2023e P/E） offering 32.4% upside.
Risks
Failures in product R&D; intensifying competition; COVID-19 resurgence in China.