HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>Some assets in A-share that were considered to have long-term growth but are not anymore. Then the logic of capital's allocation in A-share isn’t based on growth, but on liquidity.</li>
<li>There’s no real separation between local finance and medical insurance fund. So, there could be “surprises” during the promotion of DRGs policy. Then a slump in sentiment and valuations is possible.</li>
<li>For China healthcare, there’re structural opportunities and rebounds this year. We analyzed the possible trajectory of stock price fluctuations in different sectors, and also our top pick.</li>
</ul>


Some assets in A-share that were considered to have long-term growth but are not anymore. Then the logic of capital's allocation in A-share isn’t based on growth, but on liquidity.
There’s no real separation between local finance and medical insurance fund. So, there could be “surprises” during the promotion of DRGs policy. Then a slump in sentiment and valuations is possible.
For China healthcare, there’re structural opportunities and rebounds this year. We analyzed the possible trajectory of stock price fluctuations in different sectors, and also our top pick.


2023H2 China Healthcare Investment Strategy and Top Pick

<ul>
<li>According to the latest requirements of NHSA, the inclusion of biological drugs in VBP is an inevitable trend, and seven varieties could be included in the upcoming 9th national VBP.</li>
<li>When the “noise” of consumption upgrading fades, the so-called product pricing power doesn't belong to enterprises, but would return to consumers themselves.This is what companies/investors need to be aware of. </li>
<li>We hope that investors can rationally see the applications and impacts of ChatGPT in the medical field. Its popularity and adoption may not be as fast as expected.</li>
</ul>


According to the latest requirements of NHSA, the inclusion of biological drugs in VBP is an inevitable trend, and seven varieties could be included in the upcoming 9th national VBP.
When the “noise” of consumption upgrading fades, the so-called product pricing power doesn't belong to enterprises, but would return to consumers themselves.This is what companies/investors need to be aware of. 
We hope that investors can rationally see the applications and impacts of ChatGPT in the medical field. Its popularity and adoption may not be as fast as expected.


China Healthcare Weekly (Jun.16)- 9th National VBP Update, “Noise” of Consumption Upgrading, ChatGPT

Equity Bottom-Up

Clover Biopharmaceuticals / Equity Bottom-Up

<ul>
<li>The General Office of National Health Commission issued a notice on further strengthening the management of clinical medication for children. Pediatric TCM is more popular, with decent growth potential.</li>
<li>Long-Term money choosing to leave A-share isn't due to geopolitical risks. If outlook isn't good, the logic of capital's allocation in A-share isn't based on promising growth, but on liquidity instead.</li>
<li>We analyzed key points of <a href="https://www.smartkarma.com/entities/clover-biopharmaceuticals-ltd" target="_blank" data-smartkarma-citation="entities:33029:1" rel="noopener">Clover Biopharmaceuticals (2197 HK)</a>. The Company has entered a vicious cycle. If Clover is abandoned by the market, it will lead to lack of liquidity.</li>
</ul>


The General Office of National Health Commission issued a notice on further strengthening the management of clinical medication for children. Pediatric TCM is more popular, with decent growth potential.
Long-Term money choosing to leave A-share isn't due to geopolitical risks. If outlook isn't good, the logic of capital's allocation in A-share isn't based on promising growth, but on liquidity instead.
We analyzed key points of Clover Biopharmaceuticals (2197 HK). The Company has entered a vicious cycle. If Clover is abandoned by the market, it will lead to lack of liquidity.


China Healthcare Weekly (Jun.9) - Pediatric TCM New Policy, Long-Term Money Dislikes A-Share, Clover

Aier Eye Hospital Group / Equity Bottom-Up

<ul>
<li>Aier’s performance slowed significantly in 2022, with revenue and net profit growth rates at their lowest in nearly a decade.Although performance rebounded in 23Q1, the growth rate lags behind peers.</li>
<li>In front of increasing competition and difficulty of finding good acquisition targets, Aier’s poor operational capabilities and endogenous growth cannot support rapid growth. The beautiful story has shown obvious cracks.</li>
<li>Future single-digit growth is inevitable. Aier is significantly overvalued due to problematic long logic. It should be noted that there would be four further holdings reductions for Aier this year.</li>
</ul>


Aier’s performance slowed significantly in 2022, with revenue and net profit growth rates at their lowest in nearly a decade.Although performance rebounded in 23Q1, the growth rate lags behind peers.
In front of increasing competition and difficulty of finding good acquisition targets, Aier’s poor operational capabilities and endogenous growth cannot support rapid growth. The beautiful story has shown obvious cracks.
Future single-digit growth is inevitable. Aier is significantly overvalued due to problematic long logic. It should be noted that there would be four further holdings reductions for Aier this year.


Aier Eye Hospital Group (300015.CH) 2022/23Q1 - The Era Belonging to Aier Has Come to an End

Hygeia Healthcare Group / Equity Bottom-Up

<ul>
<li>In 2022, Hygeia maintained stable revenue growth but with lower-than-expected profit performance. We think Hygeia’s profitability would improve gradually in the future as more and more new hospitals become break-even.</li>
<li>Different from Aier/Topchoice, Hygeia’s acquired hospitals would be directly incorporated into the listed company, which means all aspects of consideration would be prudent. This is clearly more beneficial for investors/shareholders.</li>
<li>Hygeia’s business model has proven to be replicable.The implementation of DRG policy has no significant impact on profitability. Hygeia is expected to have higher valuation than Aier/Topchoice in the future.</li>
</ul>


In 2022, Hygeia maintained stable revenue growth but with lower-than-expected profit performance. We think Hygeia’s profitability would improve gradually in the future as more and more new hospitals become break-even.
Different from Aier/Topchoice, Hygeia’s acquired hospitals would be directly incorporated into the listed company, which means all aspects of consideration would be prudent. This is clearly more beneficial for investors/shareholders.
Hygeia’s business model has proven to be replicable.The implementation of DRG policy has no significant impact on profitability. Hygeia is expected to have higher valuation than Aier/Topchoice in the future.


Hygeia Healthcare (6078.HK) - Profits Fell Short of Expectations, but the Outlook Remains Positive

China

Shanghai Pharmaceuticals Holding Co., Ltd. manufactures, retails, and wholesales a variety of pharmaceuticals including biopharmaceuticals, chemical and Chinese traditional medicines, and healthcare products. The Company also invests in new medicine development and provides related services.

Shanghai Pharmaceuticals Holding (2607 HK)

Sinopharm Group Co Ltd is a pharmacy distribution company. The Company also owns several pharmacy enterprise groups in different industries such as logistics, retail stores, pharmaceutical manufacturing, and chemical testing.

Huadong Medicine Co., Ltd. wholesales and retails medicines, pharmaceutical preparations, biological products, and medical instruments.  Through its subsidiaries, the Company also manufactures antibiotic medicines and biochemical products.

WuXi Biologics (Cayman) Inc. is a leading open-access R&D capability and technology platform company serving the pharmaceutical, biotechnology, and medical device industries, with operations in China, U.S., and Iceland.  We provide a broad and integrated portfolio of laboratory and manufacturing services throughout the drug and medical device R&D process.  Our services are designed to help our global partners in shortening the cycle and lowering the cost of drug and medical device R&D through cost-effective and efficient solutions. 

Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. manufactures and sells Chinese patent medicine. The Company also wholesales, retails, imports, and exports Western and Chinese pharmaceutical products and various medical apparatus.

Guangzhou Baiyunshan Pharmaceu (600332 CH)

China National Medicines Corp. Ltd. wholesales and retails chemical material medicines, western medicine preparations, biochemical medicines, biological products, and Chinese traditional medicines.  Through its subsidiaries, the Company also manufactures pharmaceuticals including injections, capsules, tablets, and other related products under the CNCM brand name.

Topchoice Medical Investment Corporation provides dental and oral health care services.

Tibet Rhodiola Pharmaceutical Holding Co. develops, manufactures, and markets Tibet medicines.  The Company's products include Rhodiola capsules, Rhodiola pellets, and other related medicines.

Zhejiang Dian Diagnostics Co., Ltd. provides medical diagnostic solutions, as an outsourcer, to various general hospitals, specialized hospitals, community health service centers (stations), township (county) hospitals, medical centers,  disease prevention and control centers.

Shenzhen Neptunus Bioengineering Co., Ltd. develops, manufactures, and markets biochemical pharmaceuticals, biological products, traditional Chinese medicines, and healthcare products.  Through its subsidiaries, the Company also manufactures food.

Bangkok Dusit Medical Services Public Company Limited operates Bangkok General Hospital. The Hospital specializes in cardiovascular, lung, neurological, eye and genitourinary cancer, as well as physical therapy and medical imaging.

Apollo Hospitals Enterprise Limited owns and operates hospitals in India.  The Company also runs a 24-hour pharmacy network via over 120 outlets across India. Apollo Hospitals also runs clinics and offer managed care and family health plans. The Company has a variety of locations in Chennai, Hyderabad, Delhi, Dubai, Vizag, Bilaspur and Chengannur.

Molina Healthcare Inc. is a managed care organization.  The Company arranges for the delivery of health care services to persons eligible for Medicaid and other programs for low-income families and individuals.  Molina Healthcare has health plans in California, Washington, Utah, and Michigan, as well as primary care clinics located in Northern and Southern California.

Universal Health Services, Inc. is a healthcare management company. The Company operates acute care hospitals, behavioral health centers, and surgery centers. Universal provides services such as general surgery, internal medicine, radiology, and pediatric services throughout the United States and Puerto Rico.

Quest Diagnostics Incorporated provides diagnostic testing, information, and services.  The Company operates a national network of full-service laboratories, rapid response laboratories, and patient service centers.  Quest Diagnostics provides esoteric testing, routine medical testing, drugs of abuse testing, and non-hospital-based anatomicpathology testing.

Laboratory Corporation of America Holdings is a clinical laboratory company that offers clinical laboratory tests used by the medical profession in routine testing, patient diagnosis, and in the monitoring and treatment of disease. The Company develops specialty testing operations, such as oncology testing, HIV genotyping and phenotyping, diagnostic genetics and clinical trials.

Laboratory Corporation of America Holdings (LH US)

Laboratory Corporation of America Holdings

Encompass Health Corporation provides inpatient rehabilitative healthcare services.  The Company operates inpatient rehabilitation hospitals, outpatient and rehabilitation satellites, and home health agencies. Encompass Health provides treatment on both an inpatient and outpatient basis.

Sonic Healthcare Limited is a medical diagnostics company with operations in Australia, New Zealand, and Europe.  The Company provides a comprehensive range of pathology and diagnostic imaging services to medical practitioners, hospitals and their patients along with providing administrative services and facilities to medical practitioners.

Tenet Healthcare Corporation, through its subsidiaries, owns or operates general hospitals and related health care facilities serving communities in the United States.  The Company operates rehabilitation hospitals, specialty hospitals, long-term care facilities, psychiatric facilities, and medical office buildings near its general hospitals, as well as ancillary health care businesses.

Fresenius Medical Care AG & Co. KGaA offers kidney dialysis services and manufactures and distributes equipment and products used in the treatment of dialysis patients. The Company also offers clinical laboratory testing and diagnostic testing services and provides home infusion, respiratory therapy, ultrasound, and echo-cardiography. Fresenius operates worldwide.

Aier Eye Hospital Group Co., Ltd provides ophthalmological services.  The Company's services include ophthalmological diagnosis and treatments.

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Aier Eye Hospital Group (300015 CH)

2023H2 China Healthcare Investment Strategy and Top Pick

There're structural opportunity in China healthcare in 23H2. We advise investors not to miss out.Risks remain, offloading after rebound is...

Xinyao (Criss) Wang

China Healthcare Weekly (Jun.16)- 9th National VBP Update, “Noise” of Consumption Upgrading, ChatGPT

9th national VBP may include biological drugs, which is inevitable trend. Product pricing power will return to consumers themselves as “noise” of...

Xinyao (Criss) Wang