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CMB International Global Markets | Equity Research | Company Update PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR AND .hk China Healthcare Sector Jill Wu, CFA (852) 3900 0842 .hk Andy Wang (852) 3657 6288 .hk Mkt. Cap. (US$ mn) 1,515 Avg. 3mths t/o (US$ mn) 22.01 52W High/Low (US$) 85.40/12.00 Total Issued Shares (mn) 80 Source: Bloomberg Shareholding Structure Hillhouse Capital 8.99% GIC 5.89% Tasly Pharma 5.44% Founder 5.40% Genexine 4.62% Rowe Price 4.17% Others 65.49% Source: Bloomberg, Wind Share performance Absolute Relative 1-mth -23.3% -27.0% 3-mth -60.4% -56.9% 6-mth -73.9% -73.8% Source: Bloomberg 12-mth price performance Source: Bloomberg Auditor: PWC Web-site: i- Related report: 1. A significantly undervalued biotech company with solid pipeline assets 26 Jan 2022 2. Appointment of a globally renowned oncologist to lead the R&D organization 22 Dec 2021 3. Strategic cooperation with Jumpcan accelerates commercialization for long-acting rhGH 30 Nov 2021 4. Promising clinical results of lemzoparlimab in NHL 8 Nov 2021 31 Mar 2022 BUY (Maintain) Target Price US$103.60 (Previous TP US$103.60) Up/Downside +446.70% Current Price US$18.95 1 I-Mab recorded RMB88.0mn revenue in 2021, mainly from licensing and collaboration revenue from AbbVie and CSPC. R&D expenses were RMB1.2bn in 2021 as compared to RMB984.7mn in 2020. Administrative expenses were RMB899.9mn (+123% YoY), primarily due to the team expansion for the preparation of product commercialization. Net loss in 2021 was RMB2.3bn (including RMB621.9mn share-based compensation expense). I-Mab had a strong cash position of RMB4.3bn as of end-2021. Considering upcoming milestone payments and potential out-license opportunities, I-Mab has sufficient cash balance to support future R&D activities. Encouraging results of lemzoparlimab (CD47) for 1L MDS. In a phase 2 trial (NCT04202003), 70+ patients with newly diagnosed MDS or AML have been dosed with lemzoparlimab at 30 mg/kg in combo with AZA. An interim analysis of 22 MDS patients who had a median treatment duration 4months demonstrated encouraging preliminary results with ORR and CR rates comparable to that of magrolimab. In a previous study, magrolimab recorded 91% ORR and 42% CR in 33 MDS patients (link). I-Mab expects to present the detailed results in 2H22. With comparable efficacy to magrolimab and better safety profile, we expect lemzoparlimab to become an FIC & BIC CD47 antibody. I-Mab is planning to start a registrational trial in MDS this year. Multiple assets to be ready for commercialization in the next three years. For the 7 assets in phase 2/3 trials, I-Mab expects to complete three near-term BLA filings and product launches during 2023-2025 in China, including felzartamab (CD38), eftansomatropin alfa (long-acting growth hormone), and potentially lemzoparlimab (CD47). With a new local manufacturing plan for felzartamab, I-Mab aims to file NDA for felzartamab for treatment of 3L MM in 2022. Additionally, the Company is in negotiation to in-license a pre-BLA product in the hematologic malignancy space, aiming to further expand its hematologic product portfolio. As for the manufacturing facilities, the Phase One facility with 6,000L capacity in Hangzhou will become operational in around Jun 2022, and the construction of the Phase Two facility (32,000L) may be completed by 2024. Uliledlimab (CD73) to release key results in mid-2022. A phase 2 basket trial of uliledlimab (CD73) in combo with toripalimab (NCT04322006) in solid tumor patients is ongoing in China. I-Mab expects to release the preliminary data from this study at the 2022 ASCO meeting, which could be a catalyst for the license-out deal of uliledlimab. Maintain BUY. To alleviate the US delisting risks, I-Mab has accelerated its listing process in HKEx, and plans to hire an accounting firm subject to inspection by the PCAOB to perform the audit from 2022. We maintain our DCF-based TP unchanged at US$103.60 (WACC: 9.4%, terminal growth rate: 4.0%). Earnings Summary (YE 31 Dec) FY20A FY21A FY22E FY23E FY24E Revenue (RMB mn) 1,543 88 794 1,270 2,040 Net profit (RMB mn) 471 (2,332) (1,198) (774) (187) EPS (RMB per ADS) 8.07 (30.69) (14.99) (9.68) (2.34) Consensus EPS (RMB per ADS) N/A N/A (8.91) (9.00) (8.94) R&D expenses (RMB mn) (985) (1,213) (1,000) (1,000) (1,000) Admin expenses (RMB mn) (402) (900) (700) (735) (772) Capex (RMB mn) (8) (100) (100) (100) (100) Source: Company data, Bloomberg, CMBIGM estimates I-Mab BioPharma (IMAB US) Lemzoparlimab showed encouraging data on MDS 31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 2 Figure 1: Risk-adjusted DCF valuation DCF Valuation (in RMB mn) 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E EBIT (1,198) (774) (187) 1,443 2,349 3,717 4,349 5,078 5,688 6,608 6,758 7,158 7,210 7,616 Tax rate 0% 0% 0% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% EBIT*(1-tax rate) (1,198) (774) (187) 1,227 1,997 3,159 3,696 4,316 4,835 5,617 5,744 6,084 6,128 6,474 + D&A 34 49 61 70 77 82 86 89 92 94 95 96 97 98 - Change in working capital (533) (35) (102) (796) (375) (311) (256) (189) (156) (142) (122) (106) (91) (27) - Capex (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) FCFF (1,797) (860) (328) 401 1,599 2,831 3,426 4,116 4,671 5,469 5,618 5,974 6,035 6,445 Terminal value 122,997 FCF + Terminal value (1,797) (860) (328) 401 1,599 2,831 3,426 4,116 4,671 5,469 5,618 5,974 6,035 129,442 PV of enterprise (RMB mn) 50,978 Net debt (RMB mn) (1,645) Equity value (RMB mn) 52,622 Equity value (US$ mn) 8,280 No. of ADS 79,924,675 DCF per share (US$) 103.60 Terminal growth rate 4.0% WACC 9.4% Cost of Equity 12.0% Cost of Debt 4.0% Equity Beta 0.86 Risk Free Rate 3.0% Market Risk Premium 10.5% Target Debt to Asset ratio 30.0% Effective Corporate Tax Rate 15.0% Source: CMBIGM estimates Figure 2: Sensitivity analysis (US$) WACC 8.4% 8.9% 9.4% 9.9% 10.4% Terminal growth rate 5.0% 162.66 138.45 119.78 104.97 92.95 4.5% 146.44 126.61 110.88 98.12 87.58 4.0% 133.86 117.15 103.60 92.42 83.04 3.5% 123.82 109.43 97.55 87.60 79.15 3.0% 115.63 103.01 92.44 83.47 75.78 Source: Company data, CMBIGM estimates Figure 3: CMBIGM estimates vs consensus CMBIGM Consensus Diff (%) RMB mn FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E Revenue 794 1,270 2,040 923 1,018 1,717 -13.94% 24.68% 18.83% Gross Profit 794 1,247 1,961 891 931 1,509 -10.82% 34.02% 29.94% Operating Profit (1,206) (775) (185) (1,071) (1,088) (997) N/A N/A N/A Net profit (1,198) (774) (187) (967) (1,125) (1,128) N/A N/A N/A EPS (RMB) (14.99) (9.68) (2.34) (8.91) (9.00) (8.94) N/A N/A N/A Gross Margin 100.00% 98.25% 96.12% 96.50% 91.41% 87.91% +3.50 ppt +6.85 ppt +8.22 ppt Source: Company data, Bloomberg, CMBIGM estimates 31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 3 Financial Statements Income statement Cash flow summary YE Dec 31 (RMB mn) FY20A FY21A FY22E FY23E FY24E YE 31 Dec (RMB mn) FY20A FY21E FY22E FY23E FY24E Revenue 1,543 88 794 1,270 2,040 Profit before tax 471 (2,335) (1,198) (774) (187) Cost of sales 0 (46) 0 (22) (79) Depreciation and amortization, etc. 22 14 34 49 61 Gross profit 1,543 42 794 1,247 1,961 Change in working capital (241) 328 (533) (35) (102) Tax paid 0 3 0 0 0 Administrative expenses (402) (900) (700) (735) (772) Others 182 976 0 0 0 R&D expenses (985) (1,213) (1,000) (1,000) (1,000) Net cash from operating activities 434 (1,014) (1,697) (760) (228) Selling expenses 0 0 0 (87) (274) Other gains/losses 304 (285) (300) (200) (100) Capex (8) (100) (100) (100) (100) Operating profit 460 (2,356) (1,206) (775) (185) Net proceeds from disposal of short-term investments 12 0 0 0 0 Other investing activities (206) 0 0 0 0 Finance costs, net 23 21 8 1 (2) Net cash from investing activities (202) (100) (100) (100) (100) Pre-tax profit 483 (2,335) (1,198) (774) (187) Net proceeds from shares issued 3,518 0 0 0 0 Income tax (12) 3 0 0 0 Net bank borrowing (50) 0 0 0 0 Minority interests and others 0 0 0 0 0 Proceeds from issuance of convertible promissory notes 0 0 0 0 0 Attributable net profit (Net loss) 471 (2,332) (1,198) (774) (187) Other financing activities (28) 0 0 0 0 Net cash from financing activities 3,440 0 0 0 0 FX changes (107) (121) 0 0 0 Net change in cash 3,672 (1,114) (1,797) (860) (328) Cash at the beginning of the year 1,193 4,759 3,524 1,726 866 Cash at the end of the year 4,759 3,524 1,726 866 539 Balance sheet Key ratios YE 31 Dec (RMB mn) FY20A FY21A FY22E FY23E FY24E YE 31 Dec FY20A FY21A FY22E FY23E FY24E Non-current assets 990 848 914 965 1,004 Profit & loss ratios (%) PP&E 25 46 112 163 202 Gross margin 100 100 85 86 87 Operating lease right of use assets 15 113 113 113 113 EBITDA margin N/A N/A N/A N/A N/A Intangible assets 120 120 120 120 120 Net margin N/A N/A N/A N/A N/A Goodwill 163 163 163 163 163 Effective tax rate (%) 3 N/A N/A N/A N/A Other non-current assets 667 407 407 407 407 Current assets 5,344 4,782 2,924 2,110 1,912 Balance sheet ratios Inventories 0 27 0 7 26 Current ratio (x) 9 8 95 51 27 Trade and bills receivables 130 33 0 39 150 Trade receivables turnover days N/A 90 90 90 90 Prepayments, other receivables 195 191 191 191 191 Trade payables turnover days N/A 180 180 180 180 Other financial assets 259 1,007 1,007 1,007 1,007 Total debt to asset ratio (%) 11 19 12 15 17 Cash and bank balances 4,759 3,524 1,726 866 539 Current liabilities 576 624 31 42 70 Returns (%) Short-term borrowings 0 0 0 0 0 ROE 8 (51) (35) (30) (8) Advance from customers 0 0 0 0 0 ROA 7 (41) (31) (25) (6) Other payables and accruals 561 593 0 11 39 Operating lease liabilities, current 8 31 31 31 31 Per share data Other current liabilities 8 0 0 0 0 EPS (RMB) 8.07 (30.69) (14.99) (9.68) (2.34) DPS (RMB) 0 0 0 0 0 Non-current liabilities 131 418 418 418 418 BVPS (RMB) 96.47 60.40 42.41 32.73 30.40 Convertible promissory notes 0 0 0 0 0 Onshore convertible loans 6 82 82 82 82 Other non-current liabilities 125 336 336 336 336 Total net assets 5,627 4,588 3,390 2,616 2,429 Minority interest 0 0 0 0 0 Shareholders equity 5,627 4,588 3,390 2,616 2,429 Source: Company data, CMBIGM estimates 31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 4 Disclosures & Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM Ratings BUY : Stock with potential return of over 15% over next 12 months HOLD : Stock with potential return of +15% to -10% over next 12 months SELL : Stock with potential loss of over 10% over next 12 months NOT RATED : Stock is not rated by CMBIGM OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months CMB International Global Markets Limited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800 CMB International Global Markets Limited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly owned subsidiary of China Merchants Bank) Important Disclosures There are risks involved in transacting in any securities. 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