HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>If excluding the contribution from COVID-19 related products, Pfizer’s performance growth could have been quite pessimistic. In terms of BD, Pfizer is “a big buyer” but the return is questionable. </li>
<li>We haven't seen any blockbuster new products in Pfizer’s pipeline that can make up for the losses caused by VBP/NRDL negotiation in China. Price reduction seems the only way out.</li>
<li>We cannot rule out that Pfizer may lose the China market in the event of further deterioration of Sino-US relations. This is a problem investors need to consider in advance.</li>
</ul>


If excluding the contribution from COVID-19 related products, Pfizer’s performance growth could have been quite pessimistic. In terms of BD, Pfizer is “a big buyer” but the return is questionable. 
We haven't seen any blockbuster new products in Pfizer’s pipeline that can make up for the losses caused by VBP/NRDL negotiation in China. Price reduction seems the only way out.
We cannot rule out that Pfizer may lose the China market in the event of further deterioration of Sino-US relations. This is a problem investors need to consider in advance.


Pfizer Inc (PFE.US) - What if Pfizer Loses the China Market in the Future?

Thematic (Sector/Industry)

<ul>
<li>After the centralized procurement in Hebei Province included OK lens, products with high gross margin and low market penetration rate seem to be the new trend of centralized procurement.</li>
<li>Although the current valuation of healthcare industry is relatively low compared with historical levels, that comparison is of little significance due to the fast pace of change.</li>
<li>In terms of when domestic biotech companies could achieve break-even, there is some logic actually. Investors can estimate the time for biotechs to achieve profitability.</li>
</ul>


After the centralized procurement in Hebei Province included OK lens, products with high gross margin and low market penetration rate seem to be the new trend of centralized procurement.
Although the current valuation of healthcare industry is relatively low compared with historical levels, that comparison is of little significance due to the fast pace of change.
In terms of when domestic biotech companies could achieve break-even, there is some logic actually. Investors can estimate the time for biotechs to achieve profitability.


China Healthcare Weekly (Oct28)-OK Lens VBP, Time Required for Biotech to Make Profit, World Changes

Sino Biopharmaceutical / Equity Bottom-Up

<ul>
<li>Due to VBP/NRDL negotiation, 2022 is the low point of Hengrui's performance.The question is to what extent would Hengrui recover?Its development model isn’t an advantage since the game rule changes. </li>
<li>Unlike Hengrui, Sino Biopharm hasn’t given up on generics business,which becomes a " performance buffer". Its BD capability/vision is commendable, which would help the company find the next "golden egg".</li>
<li>The stock price trend of the two companies could diverge. Sino Biopharm is more likely to outperform Hengrui in the medium to long term. Long Sino Biopharm, and short Hengrui.</li>
</ul>


Due to VBP/NRDL negotiation, 2022 is the low point of Hengrui's performance.The question is to what extent would Hengrui recover?Its development model isn’t an advantage since the game rule changes. 
Unlike Hengrui, Sino Biopharm hasn’t given up on generics business,which becomes a " performance buffer". Its BD capability/vision is commendable, which would help the company find the next "golden egg".
The stock price trend of the two companies could diverge. Sino Biopharm is more likely to outperform Hengrui in the medium to long term. Long Sino Biopharm, and short Hengrui.


China Healthcare - A Pair Trade: Long Sino Biopharm (1177.HK), Short Hengrui Medicine (600276.CH)

Simcere Pharmaceutical Group / Equity Bottom-Up

<ul>
<li>Simcere’s profit was mainly driven by the income of non-recurring items (investment business). Due to unfriendly external environment, investors are recommended to be prepared for further decline in net profit. </li>
<li>The overall quality of Simcere’s pipeline is not high, which would be difficult to bring decent revenue in the next few years. Simcere’s transformation is not as smooth as expected.</li>
<li>In fact, over the years, Simcere's strongest capability lies in the sales rather than R&amp;D. Since the game rule changes, we are bearish on Simcere.</li>
</ul>


Simcere’s profit was mainly driven by the income of non-recurring items (investment business). Due to unfriendly external environment, investors are recommended to be prepared for further decline in net profit. 
The overall quality of Simcere’s pipeline is not high, which would be difficult to bring decent revenue in the next few years. Simcere’s transformation is not as smooth as expected.
In fact, over the years, Simcere's strongest capability lies in the sales rather than R&amp;D. Since the game rule changes, we are bearish on Simcere.


Simcere Pharmaceutical Group (2096.HK) 22H1 - Gloomy Outlook and Risks in Profits

Equity Capital Markets

Beijing Continent Pharmaceuticals / Equity Capital Markets

<ul>
<li>With favorable policies and improved intellectual property protection, investors' attitude towards rare diseases in China has changed significantly and become more interested in this field.</li>
<li>Since no new candidates would be commercialized until 2024, <a href="https://www.smartkarma.com/entities/beijing-continent-pharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:35664:1" rel="noopener">Beijing Continent Pharmaceuticals (CPH HK)</a> could face increasing competition and financial pressure. The breakthrough point is to develop overseas markets.</li>
<li>In terms of valuation, Continent is better than <a href="https://www.smartkarma.com/entities/canbridge-pharmaceuticals-inc" target="_blank" data-smartkarma-citation="entities:33783:1" rel="noopener">CANbridge Pharmaceuticals (1228 HK)</a>, so it is expected to have higher valuation than CANbridge after listing.</li>
</ul>


With favorable policies and improved intellectual property protection, investors' attitude towards rare diseases in China has changed significantly and become more interested in this field.
Since no new candidates would be commercialized until 2024, Beijing Continent Pharmaceuticals (CPH HK) could face increasing competition and financial pressure. The breakthrough point is to develop overseas markets.
In terms of valuation, Continent is better than CANbridge Pharmaceuticals (1228 HK), so it is expected to have higher valuation than CANbridge after listing.


Pre-IPO Beijing Continent Pharmaceuticals - The Orphan Drug Pioneer Needs to Expand Overseas

China

Jiangsu Hengrui Medicine Co., Ltd. develops, manufactures, and markets a variety of medicines and medicine packing materials. The Company's products include anti-tumor medicines, pain-killers, anti-infection medicines, aluminum foil, and other related products.

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Jiangsu Hengrui Medicine (600276 CH)

Pfizer Inc (PFE.US) - What if Pfizer Loses the China Market in the Future?

Pfizer’s China business faces challenges due to VBP/NRDL negotiation and potential further deterioration of Sino-US relations. Together with...

Xinyao (Criss) Wang

China Healthcare Weekly (Oct28)-OK Lens VBP, Time Required for Biotech to Make Profit, World Changes

OK lens VBP means the goal of VBP is changed to ensure people's livelihood; It’s of little significance to compare with history since the world...

Xinyao (Criss) Wang

China Healthcare - A Pair Trade: Long Sino Biopharm (1177.HK), Short Hengrui Medicine (600276.CH)

Old-fashioned big pharma is a safe place to put assets.Stock price of Sino Biopharm/Hengrui could diverge in the future due to different strategy...

Xinyao (Criss) Wang

Simcere Pharmaceutical Group (2096.HK) 22H1 - Gloomy Outlook and Risks in Profits

Simcere’s profit was driven by investment business, which will further decline due to unfriendly macro. The pipeline quality is not high, leading...

Xinyao (Criss) Wang

Pre-IPO Beijing Continent Pharmaceuticals - The Orphan Drug Pioneer Needs to Expand Overseas

Despite promising orphan drug market, with no new drugs commercialized until 2024, Continent will face increasing competition/financial pressure....

Xinyao (Criss) Wang

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