We believe a sum-of-the-parts (SOTP) approach using price-to-sales (P/S) ratios is the most suitable methodology for assessing fair value for the company given Antengene is an R&D-driven company currently without profit. Our approach sums up the company’s pipeline candidates’ estimated probability-weighted peak sales, with possibility percentages based on clinical trial progress. These are then multiplied by relevant target P/S multiples. We then discount back to present value. Our target price of HK$1.6 is the sum of discounted values employing a target PS multiple of 3x (based on a 40% discount to the average P/S ratio of US biotech peers) applied to the commercialization probability-weighted peak sales of each product / candidate. On a per-share basis, this breaks down as: ATG-010 HK$0.5,  HK$0.8 for net cash and HK$0.3 for other candidates. We assign a 3x multiple and discount rate of 16.0% with a separate discount period for each product.

We rate Antengene shares as High Risk given its short trading history (listed November 2020) as well as the company- and sector-specific risk factors. Key risks include a lack of profitability, limited operating history, challenges in moving to revenue generation, R&D failures, regulatory risks, competition, and risks of in-license strategy and agreements.