Innovent: New Drug Application for Weight-Loss Medication Earlier Than Expected; Shares Undervalued

No-moat Innovent Biologic's first weight-loss drug Mazdutide was accepted as a new drug application by Chinese regulators on Feb. 7. The NDA is the final step in the regulatory approval process before market commercialization. NDAs have a high rate of regulatory approval. The progress is two quarters ahead of our expectations. If approved, Mazdutide can enter the market by the end of 2024. We view the business update very positively because it gives Innovent a first-mover advantage in the Chinese market for longer without intense competition from next-generation weight-loss drugs in the oral dosage format. Our fair value estimate is unchanged at HKD 43.50 per share as potential approval of Mazdutide is already reflected in our base-case earnings projections. Innovent is currently trading at a 20% discount to our fair value estimate largely due to selloffs in the sector.