HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>The renewal results of coronary stent centralized procurement reflected that the government's attitude towards the price reduction in VBP has changed, who tend to correct the excessively low price.</li>
<li>Investors’d better not to have such a misconception that they only attach importance to R&amp;D rather than commercialization. Only if sales ability is verified can enterprises have better valuation premium.</li>
<li>Investors are advised to find the targets that are in “sector resonance” but also has “difference in expectations”. Ecology of innovative drug has changed, such as <a href="https://www.smartkarma.com/entities/remegen-co-ltd-4d320f25-a993-45c0-80da-db6b4e1129f9" target="_blank" data-smartkarma-citation="entities:36086:1" rel="noopener">Remegen (688331 CH).</a>
</li>
</ul>


The renewal results of coronary stent centralized procurement reflected that the government's attitude towards the price reduction in VBP has changed, who tend to correct the excessively low price.
Investors’d better not to have such a misconception that they only attach importance to R&amp;D rather than commercialization. Only if sales ability is verified can enterprises have better valuation premium.
Investors are advised to find the targets that are in “sector resonance” but also has “difference in expectations”. Ecology of innovative drug has changed, such as Remegen (688331 CH).



China Healthcare Weekly (Dec.2)- VBP Correction, Sales Ability Overweigh R&D, Expectation Difference

Equity Capital Markets

<ul>
<li>The NRDL negotiation has completely changed the pricing method and valuation logic of innovative drugs. Based on the 3D Alphamab Simcere Agreements, 3D Medicines would have limited profits from envafolimab.</li>
<li>The majority candidates are based on license-in model. The intention to “pile up” a nice pipeline based on license-in model before IPO is obvious. 3D Medicines’s R&amp;D capability is questionable.</li>
<li>The overall quality and core competitiveness of 3D Medicines are not high. Mr. Market is not friendly to the valuation of companies based on license-in model. </li>
</ul>


The NRDL negotiation has completely changed the pricing method and valuation logic of innovative drugs. Based on the 3D Alphamab Simcere Agreements, 3D Medicines would have limited profits from envafolimab.
The majority candidates are based on license-in model. The intention to “pile up” a nice pipeline based on license-in model before IPO is obvious. 3D Medicines’s R&amp;D capability is questionable.
The overall quality and core competitiveness of 3D Medicines are not high. Mr. Market is not friendly to the valuation of companies based on license-in model. 


Pre-IPO 3D Medicines (3DM HK) - Some Points Worth the Attention; Our Thoughts on Valuation

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>The December rebalance of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI INDEX</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI INDEX</a> and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH INDEX</a> takes place at the close today. One-way flow is estimated at HK$8.4bn.</li>
<li>There are 3 adds for the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI INDEX</a> and 4 adds/ 4 deletes for the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI INDEX</a>. There are float changes for a few stocks as well as capping changes. </li>
<li>There is excess volume on most adds/deletes post announcement and short interest has also picked up significantly.</li>
</ul>


The December rebalance of the HSI INDEX, HSCEI INDEX and HSTECH INDEX takes place at the close today. One-way flow is estimated at HK$8.4bn.
There are 3 adds for the HSI INDEX and 4 adds/ 4 deletes for the HSCEI INDEX. There are float changes for a few stocks as well as capping changes. 
There is excess volume on most adds/deletes post announcement and short interest has also picked up significantly.


Hang Seng Indexes: Rebalances Today; Recent Trading Data

<ul>
<li>The December rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituents at 8%. This will lead to large flows.</li>
<li>The largest inflows will be on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group</a>, <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home</a>, <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology</a>, <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto</a>, <a href="https://www.smartkarma.com/entities/petrochina-co-ltd-h" target="_blank" data-smartkarma-citation="entities:262:1" rel="noopener">PetroChina</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com</a>, <a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services</a> and <a href="https://www.smartkarma.com/entities/tingyi-cayman-islands-holding-corp" target="_blank" data-smartkarma-citation="entities:14016:1" rel="noopener">Tingyi Holding</a>.</li>
<li>The largest outflows will be on <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">SMIC</a>, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase</a>, <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group</a>, <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings</a>, <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology</a>, <a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics</a>, <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile</a>, <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</a> and <a href="https://www.smartkarma.com/entities/industrial-and-commercial-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC</a>.</li>
</ul>


The December rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituents at 8%. This will lead to large flows.
The largest inflows will be on Alibaba Group, Haier Smart Home, Kuaishou Technology, Li Auto, PetroChina, Tencent, JD.com, China Resources Mixc Lifestyle Services and Tingyi Holding.
The largest outflows will be on SMIC, NetEase, AIA Group, HSBC Holdings, China Construction Bank, Alibaba Health Information Technology, Innovent Biologics, China Mobile, Ping An Insurance and ICBC.


HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)

<ul>
<li>Our forecast of the total peak sales of BRUKINSA, tislelizumab and the rest commercialized products is about RMB10 billion, which is not enough for BeiGene to turn losses into profits. </li>
<li>BeiGene has the highest R&amp;D/academic ability among domestic pharmaceutical enterprises,but BeiGene cannot be assessed according to the standards of Chinese pharmaceutical enterprises due to its fundamentally different cost structure/breakeven point.</li>
<li>The current market value has already priced in the success of TIGIT project to some extent. In other words, the upward elasticity may be limited. But BeiGene deserves long-term follow.</li>
</ul>


Our forecast of the total peak sales of BRUKINSA, tislelizumab and the rest commercialized products is about RMB10 billion, which is not enough for BeiGene to turn losses into profits. 
BeiGene has the highest R&amp;D/academic ability among domestic pharmaceutical enterprises,but BeiGene cannot be assessed according to the standards of Chinese pharmaceutical enterprises due to its fundamentally different cost structure/breakeven point.
The current market value has already priced in the success of TIGIT project to some extent. In other words, the upward elasticity may be limited. But BeiGene deserves long-term follow.


BeiGene (6160.HK/BGNE.US) 22Q3 - The Price of Being an “Outlier”

China

Innovent Biologics, Inc. operates as a biopharmaceutical company. The Company develops, manufactures, and distributes monoclonal antibody drug candidates for the treatment of oncology, ophthalmology, autoimmune, cardiovascular, and other diseases. Innovent Biologics serves customers in China.

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Innovent Biologics Inc (1801 HK)

China Healthcare Weekly (Dec.2)- VBP Correction, Sales Ability Overweigh R&D, Expectation Difference

VBP renewal of coronary stents shows the government will correct the underpricing;Only if sales ability is verified can biotech has better...

Xinyao (Criss) Wang

Pre-IPO 3D Medicines (3DM HK) - Some Points Worth the Attention; Our Thoughts on Valuation

The overall quality/core competitiveness of 3D Medicines isn't high. Its pipeline is mainly based on license-in model, which is not favored by Mr....

Xinyao (Criss) Wang

Hang Seng Indexes: Rebalances Today; Recent Trading Data

The December rebalance of the HSI, HSCEI & HSTECH is at the close today. One-way flow is estimated at HK$8.4bn. Volumes and short interest have...

Brian Freitas

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)

The December rebalance of the HSI, HSCEI, HSTECH indices will use today's close prices for capping. The one-way trade across all stocks across the...

Brian Freitas

BeiGene (6160.HK/BGNE.US) 22Q3 - The Price of Being an “Outlier”

Sales of current commercialized products isn't enough for BeiGene to turn loss into profit. BeiGene is fundamentally different from any other China...

Xinyao (Criss) Wang

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