Chinese Biotech Ascentage Pharma's Valuation Driven By Late-Stage De-Risked Assets: JPMorgan

JPMorgan initiated coverage on Ascentage Pharma Group AAPG, a commercial-stage Chinese biotech company focusing on cancer treatment.

In January, Ascentage Pharma’s American depositary shares started trading after the company closed its U.S. initial public offering of 7.325 million ADS at $17.25 per ADS.

On Wednesday, JP Morgan said the company’s valuation is largely driven by two late-stage assets already de-risked from a data perspective, olverembatinib and lisaftoclax, that are approved or close to approval in China.

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In March, the Center for Drug Evaluation (CDE) of China’s National Medical Products Administration (NMPA) granted a Breakthrough Therapy Designation to olverembatinib in combination with low-intensity chemotherapy for the first-line treatment of newly diagnosed patients with Philadelphia chromosome-positive acute lymphoblastic leukemia.

Analyst Brian Cheng on Wednesday initiated Ascentage Pharma with an Overweight rating and a price target of $27.

Concurrently, the Chinese biotech reported 2024 sales of $134.3 million, up 342% year over year, primarily attributable to an option payment of $100 million received in June 2024 from Takeda Pharmaceutical Co Ltd TAK under the Exclusive Option Agreement.

The initial public offering resulted in net proceeds of $132.5 million, which, together with existing cash and cash equivalents, loan facilities, future sales, and other potential payments, will provide a cash runway through 2027.

JP Morgan analyst Brian Cheng writes that revenue-generating olverembatinib should reach 1.6 billion Chinese Yuan in peak sales by 2030 in China alone.

“With the Takeda partnership (up to $1.2bn biobucks) in place for olver’ and multiple global trials now underway, we believe AAPG is on the path to move onto the world stage. We believe its fundamentals and pipeline story remain disconnected from the current valuation today,” JP Morgan writes.

The analyst says the company’s lead assets are differentiated with encouraging signs of best-in-class potential compared to efficacy data points across multiple indications versus standard care.

Price Action: AAPG stock is up 11.6% at $20.50 on Thursday’s last check.

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