HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>Due to increasing competition/price reduction/overcapacity issue, outlook of domestic vaccine companies isn't optimistic, which has been reflected in 24Q1 results. However, there’s also a "special one" that deserves investors' attention.</li>
<li>The status of medical insurance funds is improving rather than deteriorating, but we’re currently in the first half of the decade with the highest pressure on medical insurance.</li>
<li>As the H.R.8333 proposal faced obstacles in the process of being included in NDAA, WuXi AppTec/WuXi Bio’s shares once rebounded.We remain conservative as situation is not as simple as imagined.</li>
</ul>


Due to increasing competition/price reduction/overcapacity issue, outlook of domestic vaccine companies isn't optimistic, which has been reflected in 24Q1 results. However, there’s also a "special one" that deserves investors' attention.
The status of medical insurance funds is improving rather than deteriorating, but we’re currently in the first half of the decade with the highest pressure on medical insurance.
As the H.R.8333 proposal faced obstacles in the process of being included in NDAA, WuXi AppTec/WuXi Bio’s shares once rebounded.We remain conservative as situation is not as simple as imagined.


China Healthcare Weekly (Jun16)-WuXi Get A "Reprieve", Vaccine Company in Trouble, Insurance Surplus

<ul>
<li>The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.</li>
<li>Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.</li>
<li>WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".</li>
</ul>


The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.
Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.
WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".


WuXi AppTec (2359.HK/603259.CH) - The Pain of 2024 Has Just Begun

<ul>
<li>In 24Q1, the innovative drug projects and medical device projects ranked top two in domestic investment and financing deals, but investment in the field of AI cooled down.</li>
<li>For biotech that located in China and only for China markets, it’s hard for them to generate good returns. It is recommended not to spend too much time on them.</li>
<li>As the US House Committee advances the BIOSECURE Act to restrict WuXi AppTec/WuXi Bio last week, we listed some points worth the attention at this stage.This is far from over.</li>
</ul>


In 24Q1, the innovative drug projects and medical device projects ranked top two in domestic investment and financing deals, but investment in the field of AI cooled down.
For biotech that located in China and only for China markets, it’s hard for them to generate good returns. It is recommended not to spend too much time on them.
As the US House Committee advances the BIOSECURE Act to restrict WuXi AppTec/WuXi Bio last week, we listed some points worth the attention at this stage.This is far from over.


China Healthcare Weekly (May.19)- Decoupling Deadline with WuXi,Biotech Classification,Deals Cooling

<ul>
<li>WuXi AppTec’s 2023 results were disappointing. The decline in performance in 23H2 was quite severe. 2024 performance guidance could be meaningless because the biggest concern now is the geopolitical conflicts.</li>
<li>If the bill is passed, valuation logic would completely change - not based on DCF/PE, but on PB, market value falling below RMB100 billion. We cannot rule out another privatisation.</li>
<li>We hope that WuXi AppTec can prepare contingency plans for the worst-case scenario that may occur, rather than simply denying or mitigating the impact of BIOSECURE Act on the Company</li>
</ul>


WuXi AppTec’s 2023 results were disappointing. The decline in performance in 23H2 was quite severe. 2024 performance guidance could be meaningless because the biggest concern now is the geopolitical conflicts.
If the bill is passed, valuation logic would completely change - not based on DCF/PE, but on PB, market value falling below RMB100 billion. We cannot rule out another privatisation.
We hope that WuXi AppTec can prepare contingency plans for the worst-case scenario that may occur, rather than simply denying or mitigating the impact of BIOSECURE Act on the Company


WuXi AppTec (2359.HK/603259.CH) 2023 Results - Time to Prepare for the Worst

<ul>
<li>A Senate committee moved the bill (S.3558) forward that would prohibit pharmaceutical companies from using foreign service providers like WuXi AppTec and its subsidiaries. However, rational voices are still expected.</li>
<li>Seemingly conflicting proposals are mostly “noise” and disturbances to stock prices. This means in the future, we‘ll see stock prices move sharply again due to latest developments on these bills.</li>
<li>WuXi AppTec should have "bottom-line thinking" and prepare some "backup solutions".Investors don’t need to be overly pessimistic, because when global capital flows reverse, no one will mind these bills anymore.</li>
</ul>


A Senate committee moved the bill (S.3558) forward that would prohibit pharmaceutical companies from using foreign service providers like WuXi AppTec and its subsidiaries. However, rational voices are still expected.
Seemingly conflicting proposals are mostly “noise” and disturbances to stock prices. This means in the future, we‘ll see stock prices move sharply again due to latest developments on these bills.
WuXi AppTec should have "bottom-line thinking" and prepare some "backup solutions".Investors don’t need to be overly pessimistic, because when global capital flows reverse, no one will mind these bills anymore.


WuXi AppTec (2359.HK/603259.CH) - Updates About the BIOSECURE Act and the Outlook

China

WuXi AppTec Co., Ltd. manufactures medical products. The Company produces biological agents, antibodies, biological diagnostic reagents, and other products. WuXi AppTec also provides biological analysis, technical study, and other services.

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WuXi AppTec (2359 HK)

China Healthcare Weekly (Jun16)-WuXi Get A "Reprieve", Vaccine Company in Trouble, Insurance Surplus

Outlook for domestic vaccine companies is bleak, but one standout. Medical insurance status is improving. WuXi AppTec/WuXi Bio shares rebounded as...

Xinyao (Criss) Wang