HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Jiangsu Hengrui Medicine / Equity Bottom-Up

<ul>
<li>In the current challenging environment, investors should prioritize pharmaceutical companies with abundant cash flow and Biotech with diversified funding sources, as their safety margin is much higher.</li>
<li>After the “clamor of consumer upgrading” fades away, we will eventually realize that the so-called pricing power has never belonged to anyone or any enterprise, but always to consumers.</li>
<li>Hengrui is overvalued. There’re still around RMB5 billion generic drugs yet to enter VBP scope. So, the assumption that all negative effects of VBP have cleared up is not correct.</li>
</ul>


In the current challenging environment, investors should prioritize pharmaceutical companies with abundant cash flow and Biotech with diversified funding sources, as their safety margin is much higher.
After the “clamor of consumer upgrading” fades away, we will eventually realize that the so-called pricing power has never belonged to anyone or any enterprise, but always to consumers.
Hengrui is overvalued. There’re still around RMB5 billion generic drugs yet to enter VBP scope. So, the assumption that all negative effects of VBP have cleared up is not correct.


China Healthcare Weekly (Mar.1) - Prioritize Big Pharma, Real Ownership of Pricing Power, Hengrui

Equity Capital Markets

<ul>
<li>Among core/key products, TY-302 and TY-2136b have to face fierce competition, with R&amp;D progress lagging behind competing products.TY-9591 for brain metastases from NSCLC could be a breakthrough point for TYK.</li>
<li>There would be a long time for the first product to generate revenue, but TYK is cash shortage.So, the survival risk is high. Such companies are less attractive to investors.</li>
<li>Valuation of TYK after six rounds of financing was RMB3.08 billion. However, considering the weak sentiment and concerns on pipeline, valuation of TYK after IPO could fall below this level.</li>
</ul>


Among core/key products, TY-302 and TY-2136b have to face fierce competition, with R&amp;D progress lagging behind competing products.TY-9591 for brain metastases from NSCLC could be a breakthrough point for TYK.
There would be a long time for the first product to generate revenue, but TYK is cash shortage.So, the survival risk is high. Such companies are less attractive to investors.
Valuation of TYK after six rounds of financing was RMB3.08 billion. However, considering the weak sentiment and concerns on pipeline, valuation of TYK after IPO could fall below this level.


Pre-IPO TYK Medicines - Survival Risk Is Imminent, with Limited Highlights in the Pipeline

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

China Traditional Chinese Medicine / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a> announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.</li>
<li>The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final. </li>
<li>
<a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn. </li>
</ul>



China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final. 

Ping An Insurance (H) (2318 HK), which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn. 


China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60

<ul>
<li>Bloomberg reports that Sinopharm is reviving its interest in privatising <a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a>/CTCM. Sinopharm has contacted banks about financing and is considering partnering with other investors.</li>
<li>Sinopharm’s best bet is to partner with <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-c2975d60-47cd-4246-a7a6-25297586242b" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group of (601318 CH)</a> and privatise through a scheme. In this scenario, no disinterested shareholder would hold a blocking stake.</li>
<li>Due to Sinopharm's previous privatisation attempts, shareholders will be wary of the latest rumour. Nevertheless, the valuation is undemanding compared to peer multiples.</li>
</ul>


Bloomberg reports that Sinopharm is reviving its interest in privatising China Traditional Chinese Medicine (570 HK)/CTCM. Sinopharm has contacted banks about financing and is considering partnering with other investors.
Sinopharm’s best bet is to partner with Ping An Insurance Group of (601318 CH) and privatise through a scheme. In this scenario, no disinterested shareholder would hold a blocking stake.
Due to Sinopharm's previous privatisation attempts, shareholders will be wary of the latest rumour. Nevertheless, the valuation is undemanding compared to peer multiples.


China Traditional Chinese Med (570 HK): Third Time's the Charm as Sinopharm Revives Its Interest?

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis, still. </li>
<li>SOUTHBOUND saw HK$6.8bn of net OUT-flows in the week to 12 Jan 2024. Total flows were HK$118bn.</li>
<li>SOUTHBOUND saw large net selling of ETFs (unwinding Week 1) and large net buying of high-div SOEs like CNOOC, China Mobile/Telecom/Unicom, and coal names.</li>
</ul>


SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis, still. 
SOUTHBOUND saw HK$6.8bn of net OUT-flows in the week to 12 Jan 2024. Total flows were HK$118bn.
SOUTHBOUND saw large net selling of ETFs (unwinding Week 1) and large net buying of high-div SOEs like CNOOC, China Mobile/Telecom/Unicom, and coal names.


HK Connect SOUTHBOUND Flows (To 12 Jan 2024); High Div SOEs Still the Biggest Buys

Hong Kong

Hutchison China MediTech Limited develops, manufactures, and sells pharmaceutical products. The Company offers drugs for oncology and autoimmune diseases treatment. Hutchison China MediTech markets its products globally.

Hutchison China MediTech Ltd develops, manufactures, and sells pharmaceutical products. The Company offers drugs for oncology and autoimmune diseases treatment. Hutchison China MediTech markets its products globally.

China Traditional Chinese Medicine Co. Limited, through its subsidiaries, manufactures and sells medicine and pharmaceutical products in China.

China Traditional Chinese Medicine (570 HK)

SSY Group Limited researches, develops, manufactures, and sells a wide range of pharmaceutical products.  The Company sells non PVC soft bags, PP plastic bottles, and glass bottle infusions.

The United Laboratories International Holdings Limited produces and distributes pharmaceutical products. The Company's products include finished products, APIs, intermediates, and capsules.

The United Laboratories International Holdings Limited (3933 HK)

The United Laboratories International Holdings Limited

Beijing Tong Ren Tang Chinese Medicine Co. Ltd. is a Chinese medicine manufacturer. The Company mainly develops and produces health products, including patent medicines and health-care products.

Beijing Tong Ren Tang Chinese Medicine (3613 HK)

YiChang HEC ChangJiang Pharmaceutical Co Ltd develops a variety of drugs.  The Company develops and sells drugs for anti-virus, metabolic diseases, cardiovascular, and more.

Dawnrays Pharmaceutical (Holdings) Limited, through its subsidiaries, develops, manufactures, and sells non-patented chemical medicines including cephalosporins in sterile bulk medicine and powder for injection forms, their intermediate pharmaceuticals and system specific medicines.  The Group produces a series of cephalosporins with various therapeutic uses.

Dawnrays Pharmaceutical (Holdings) (2348 HK)

Jacobson Pharma Corporation Limited manufactures pharmaceuticals. The Company researches, produces, and sells a variety of generic and proprietary Chinese medicines around the world.

Genscript Biotech Corp is biotech service company. The Company provides life science services and products and pre-clinical drug development services.

Changchun High & New Technology Industry (Group) Inc. is an investment holding company.  Through its subsidiaries, the Company manufactures biopharmaceuticals and Chinese traditional medicines, constructs infrastructure facilities, manufactures electrolytic condensers, and develops and manages real estate.

ROHTO PHARMACEUTICAL CO., LTD. manufactures and markets pharmaceuticals and cosmetics products.  The Company's products include eyewash, bath soaps, gastrointestinal medicine, and hand cream.  Rohto Pharmaceutical also has a license agreement with its subsidiary, Mentholatum (US) to sell their brand products.  The Company also manufactures contact lenses and health foods.

Sichuan Kelun Pharmaceutical Co., Ltd. manufactures pharmaceutical products. The Company's products include large infusion products, tablets, capsules, antibiotic injection, lyophilized powder for injection, and traditional Chinese medicine.

China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. manufactures and markets medicines, healthcare products, and medical instruments.  Through its subsidiaries, the Company also operates in pharmaceutical trading, printing, food manufacturing, real estate development, and provides medical services.

China Resources Sanjiu Medical & Pharma (000999 CH)

Intra-Cellular Therapies Inc. researches and develops biopharmaceutical drugs. The Company engages in the research and development of small molecule drugs to treat neuropsychiatric and neurological diseases and other disorders of the central nervous system. Intra-Cellular Therapies offers its products to the medical industry.

Dong-E-E-Jiao Co., Ltd. primarily manufactures and sells traditional Chinese medicine, health care products, health foods, and bio-medicine. The company also engages in gelatin products manufacturing.

Glaxosmithkline Pharmaceuticals Ltd. manufactures and distributes a wide variety of pharmaceutical drugs, veterinary products and laboratory chemicals. The Company's products include "Phexin" capsules, "Betnesol" tablets and injections, "Becoride" asthma treatment, "Betnovate" ointment, "Cetzine" antihistamine, "Zucox" and "Rizap" anti-tuberculosis products.

Glaxosmithkline Pharmaceuticals (GLXO IN)

ONO PHARMACEUTICAL CO., LTD. manufactures and sells pharmaceuticals.  The Company mainly researches and develops prescription drugs.

Abbott India Limited manufactures a wide range of pharmaceutical and medical products, agrochemicals, and animal health products. The Company's medical and pharmaceutical products include insulin injections, anti-dysentery drugs, vitamin preparations, penicillin preparations, sulfonamide tablets, and a variety of household remedies.

Glenmark Pharmaceuticals Ltd., is a pharmaceutical company. The Company develops generic drugs for inflammation, metabolic disorders, and pain.

Sino Biopharmaceutical Limited, through its subsidiaries, researches, develops, produces, and sells biopharmaceutical products for the medical treatment of ophthalmia, as well as modernized Chinese medicine and chemical medicine for the treatment of hepatitis.

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Sino Biopharmaceutical (1177 HK)

China Healthcare Weekly (Mar.1) - Prioritize Big Pharma, Real Ownership of Pricing Power, Hengrui

Investors should prioritize pharmaceutical companies with abundant cashflow/diversified funding sources.Pricing power has never belonged to any...

Xinyao (Criss) Wang

Pre-IPO TYK Medicines - Survival Risk Is Imminent, with Limited Highlights in the Pipeline

Except TY-9591 for brain metastases from NSCLC, the rest pipeline has little highlight but with fierce competition.As a biotech with no...

Xinyao (Criss) Wang

China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60

The offer is attractive to historical trading ranges and peer multiples. Ping An, which holds a blocking stake, will be supportive. This looks like...

Arun George

China Traditional Chinese Med (570 HK): Third Time's the Charm as Sinopharm Revives Its Interest?

Due to Sinopharm's previous privatisation attempts, shareholders will be wary of the latest rumour. Nevertheless, the valuation is undemanding...

Arun George

HK Connect SOUTHBOUND Flows (To 12 Jan 2024); High Div SOEs Still the Biggest Buys

SOUTHBOUND saw large net buying of High-Div SOEs. Again. Many weeks in a row now and in terms of % of volume, the mobile phone cos rank high. ETFs...

Travis Lundy

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