CMB International has issued a research report reiterating its "Buy" rating on SBP GROUP (01177), maintaining a discounted cash flow (DCF) target price of HK$8.70, based on a weighted average cost of capital (WACC) of 9.98% and a terminal growth rate of 2.0%.

To account for the licensing agreement with AstraZeneca (AZ), the firm has raised its growth forecasts for the company's 2026 performance. It now projects revenue growth for 2026E/27E/28E at 17.8%/4.0%/9.2% year-on-year (non-business development revenue: 10.5%/10.0%/9.2%), with adjusted net profit attributable to shareholders growing 13.3%/1.0%/10.6% year-on-year.

Key Insights from the Report

SBP GROUP has announced an agreement to license its PDE3/4 inhibitor, TQC3721, to AstraZeneca for an upfront payment of US$200 million. AZ will obtain exclusive rights for the development, production, and commercialization of the product outside China, along with global rights for certain specific development programs.

This marks the company's second licensing deal with a multinational pharmaceutical corporation (MNC) this year, following the US$135 million upfront licensing of rovafocestat to Sanofi in February. These successive global out-licensing agreements strongly demonstrate SBP GROUP's internal R&D and innovation capabilities, and the firm anticipates such licensing deals will become a regular occurrence for the company.

Successful Partnership with a Respiratory Leader

The PDE3/4 inhibitor, which is the second most advanced globally, has been partnered with the leading company in the global respiratory disease field. SBP GROUP will receive a US$200 million upfront payment from AZ, potential milestone payments of up to US$1.7 billion, and tiered royalties that could reach a double-digit percentage.

TQC3721 is currently in Phase 3 clinical trials in China for COPD, ranking second globally and first in China in terms of development progress. Furthermore, the more commercially promising dry powder inhaler formulation is also advancing rapidly, with its Phase 2 trial in China already completed, also placing it second globally.

AZ is the pharmaceutical company with the highest respiratory disease revenue globally, with its respiratory/immunology segment generating total revenue of US$8.87 billion in 2025 (the majority from respiratory drugs). It currently boasts a portfolio of over 15 respiratory products, including four blockbusters with annual sales exceeding US$1 billion each (e.g., budesonide/formoterol with 2025 sales of US$2.89 billion), demonstrating strong R&D and commercial capabilities.

AZ's current respiratory pipeline lacks an inhaled drug targeting the PDE3/4 pathway. Its existing core products, including biologics and inhaled formulations, could complement a PDE3/4 inhibitor, and leveraging AZ's comprehensive global R&D and commercial network would enable optimal value realization.

Global Best-in-Class Potential for TQC3721

At the European Respiratory Society 2025 Congress, SBP GROUP presented Phase II clinical results for TQC3721. In 240 subjects with moderate-to-severe COPD treated for four weeks, the peak FEV1 (forced expiratory volume in one second) in the 3mg/6mg dose groups was 100ml/147ml higher than the placebo group, respectively. In the LAMA and LABA/LAMA subgroups, the peak FEV1 in the 6mg group was 239ml/109ml higher than placebo.

Notably, in the TQC3721 trial, 20% of subjects used LAMA or LABA (Group A), 70% used LABA and LAMA concurrently (Group B), and 10% used triple therapy with LABA, LAMA, and ICS (Group E). In cross-study comparison, the clinical trial for competitor ensifentrine only enrolled Group A patients. TQC3721 covers a broader patient population and demonstrated superior FEV1 improvement and SGRQ scores compared to ensifentrine.

Further MNC Recognition for Domestic Commercial Strength

Simultaneously, SBP GROUP has entered a collaboration with GSK, securing the commercialization rights for two of GSK's major respiratory drugs (fluticasone furoate/umeclidinium/vilanterol and umeclidinium/vilanterol dry powder inhalers) in mainland China.

This represents the second collaboration between the two parties since licensing the hepatitis B drug bepirovirsen from GSK in May, underscoring MNCs' recognition of SBP GROUP's commercial capabilities.