UOB KayHian on Genting/Taurx Here's a research report from a broker from Signapre https://www.uobkayhian.com/
TauRx’s Positive Discovery A Potential Wild Card
TauRx’s convincing 24-month Phase 3 clinical trial data for its Alzheimer’s HMTM drug may be the missing puzzle piece for regulatory approval, and could eventually unlock deep value in GENT’s investment. On hindsight, the procedure for HTMTM securing approval and commercial rollout may be lengthy. That said, even without the TauRx factor, GENT trades at a cheap valuation with plenty of re-rating catalysts, Maintain BUY with a higher target price of RM6.13 as we partially impute TauRx’s option value.
TauRx is a wild card for GENT, if commercialisation materialises. If TauRx secures approval from key regulators and its HMTM drugs are commercially rolled out, the group may be re-looking at an IPO. To recall, TauRx was initially eyeing a Nasdaq IPO in 2017 (with a potential valuation of US$15b), according to Wall Street Journal in Dec 15. If so, we acknowledge that GENT’s 20.3% stake in TauRx could be translated to RM3.54/share (e.RM4.50/US$1) or c.71% of its current market cap.
• Downside fairly limited if TauRx remains in limbo or does not work out. Even without the TauRx factor, GENT’s investment merits remain appealing as the group is on track to chart above pre-pandemic earnings dynamic in 2024-25, based on the booming tourism scene and plenty of event catalysts from subsidiaries GENM and GENS. Furthermore, as GENT’s valuations remain significantly below pre-pandemic levels with undervalued financial matrixes, the group may not encounter a steep selldown in a scenario that TauRx disappoints.
- For the US, a New Drug Application (NDA) will be submitted to the Food and Drug Administration (FDA) to review. Normally, the FDA is allotted 10 months to review new drugs, while under priority review, that time is shortened to six months.
- For the UK, we expect TauRx to seek approval via the Innovative Licencing and Access Pathway (ILAP). Recall that in 2022, TauRx received an innovation passport from the UK’s regulatory agency MHRA.The Innovation Passport is the first stage of the Innovative Licensing and Access Pathway (ILAP). After attending an ILAP meeting within 4-6 weeks
of application, opinion will be received within another four weeks.
- For other regions, we understand that TauRx’s subsidiary – Poredeen Limited – has appointed and given ICB Medical the exclusive rights to manage the importation and logistics for the HMTM drugs in Hong Kong and Macau, where qualified prescribing doctors can request HMTM drugs on behalf of eligible patients. However, HMTM drugs are
not commercially sold there yet. Poredeen will also be meeting and submitting data packages to other drug regulators in more territories, including China.
ALUATION/RECOMMENDATION
• As TauRx is approaching a new milestone with potential commercialisation in future, we now impute a 10% option value of TauRx’s initial IPO valuations of US$15b into our target price, which translates into 35 sen/share. We deem this reasonable as TauRx is submitting HMTM for regulatory approval soon.
• Maintain BUY with higher target price of RM6.13 (from RM5.78), which implies 6.5x 2024F EV/EBITDA and 0.7x 2024F P/B. In a blue-sky scenario, target price will be RM9.32 if we fully factor in TauRx’s potential monetisation value.