Our target price of HK$32 is derived from a price-to-sales (PS) based sum-of-the-parts (SOTP) valuation methodology, which is the sum of discounted values of 4x commercialization probability-weighted peak sales of each product / candidate. We assign a discount rate of 9.7% with separate discount period for each product.

We rate Junshi shares as High Risk given the shares’ short trading history as well as the risk factors cited below. Key risks that could prevent the shares from reaching our target price include: short operating history; drug commercialization delays or failures; challenges in commercial manufacturing or sales execution; competition on PD1/PD-L1 drugs including pricing pressures in the China market; R&D risks and uncertainties; any failures to obtain needed regulatory approvals; lack of historical profitability; risk of losing key personnel.