Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Equity Capital Markets

<ul>
<li>In June of 2024, GRAIL, a market leader in early cancer detection, spun off from Illumina into an independent publicly traded company.</li>
<li>Following the spin-off, Illumina retains up to ~15% ownership interest in GRAIL and continues to fund GRAIL’s operations and R&amp;D with disposal funding of ~$974M.</li>
<li>I view GRAIL as a market leader in the MCED testing market and uniquely positioned to be very effective in detecting some of the most aggressive early-stage cancers.</li>
</ul>


In June of 2024, GRAIL, a market leader in early cancer detection, spun off from Illumina into an independent publicly traded company.
Following the spin-off, Illumina retains up to ~15% ownership interest in GRAIL and continues to fund GRAIL’s operations and R&amp;D with disposal funding of ~$974M.
I view GRAIL as a market leader in the MCED testing market and uniquely positioned to be very effective in detecting some of the most aggressive early-stage cancers.


GRAIL: Detecting Early-Stage Cancers With Galleri Test, A Significant Market Opportunity

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Although UGenix is a genetic technology company focusing on prenatal testing/precision oncology, it was the large-scale COVID-19 testing demand that made UGenix's overall revenue grow rapidly, which, however, is unsustainable.</li>
<li>NIPT market size is far less than expected. The clinical need for NGS has not developed as rigid demand. Restrictions on companion diagnosis pricing indicate market space would be compressed.</li>
<li>The business of both prenatal testing and precision oncology are not easy. Due to uncertain commercialization outlook/profitability and other negative factors, UGenix’s stock price after IPO could underperform.</li>
</ul>


Although UGenix is a genetic technology company focusing on prenatal testing/precision oncology, it was the large-scale COVID-19 testing demand that made UGenix's overall revenue grow rapidly, which, however, is unsustainable.
NIPT market size is far less than expected. The clinical need for NGS has not developed as rigid demand. Restrictions on companion diagnosis pricing indicate market space would be compressed.
The business of both prenatal testing and precision oncology are not easy. Due to uncertain commercialization outlook/profitability and other negative factors, UGenix’s stock price after IPO could underperform.


Pre-IPO UGenix Biotech - Future Growth Potential Is Highly Uncertain

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/genetron-holdings-ltd" target="_blank" data-smartkarma-citation="entities:28435:1" rel="noopener">Genetron Holdings Ltd (GTH US)</a> shareholders will vote on the consortium’s US$4.08 per ADS offer on 21 February. The offer is light in comparison to historical trading ranges.</li>
<li>Completion is conditional on shareholder approval, dissenting shareholders representing less than 15% of outstanding shares and regulatory approvals (NDRC, MoC and SAFE). </li>
<li>Despite the light offer, the completion conditions should be met. At the last close price and end of March completion, the gross and annualised spread is 7.7% and 45.5%, respectively.</li>
</ul>



Genetron Holdings Ltd (GTH US) shareholders will vote on the consortium’s US$4.08 per ADS offer on 21 February. The offer is light in comparison to historical trading ranges.
Completion is conditional on shareholder approval, dissenting shareholders representing less than 15% of outstanding shares and regulatory approvals (NDRC, MoC and SAFE). 
Despite the light offer, the completion conditions should be met. At the last close price and end of March completion, the gross and annualised spread is 7.7% and 45.5%, respectively.


Genetron (GTH US): Wide Spread Ahead of the 21 February Vote

<ul>
<li>The clinical need for NGS hasn't developed as rigid demand due to high cost, difficult operation, high requirements on hospitals/personnel, etc. It takes time for NGS to improve market penetration.</li>
<li>Genecast’s LDT business could face compliance issue.Its in-hospital business has lower gross margin.Increasing R&amp;D expenditure is inevitable since products need to get approval by regulatory authorities, putting pressure on profitability. </li>
<li>Burning Rock is in a leading position in NGS field, but its market value is quite low. We advise investors to be prepared for valuations to fall short of expectations.</li>
</ul>


The clinical need for NGS hasn't developed as rigid demand due to high cost, difficult operation, high requirements on hospitals/personnel, etc. It takes time for NGS to improve market penetration.
Genecast’s LDT business could face compliance issue.Its in-hospital business has lower gross margin.Increasing R&amp;D expenditure is inevitable since products need to get approval by regulatory authorities, putting pressure on profitability. 
Burning Rock is in a leading position in NGS field, but its market value is quite low. We advise investors to be prepared for valuations to fall short of expectations.


Pre-IPO Genecast Group - NGS Still Has Long Way to Go; Valuation Performance Is Worrying

Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/burning-rock-biotech-ltd" target="_blank" data-smartkarma-citation="entities:28970:1" rel="noopener">Burning Rock Biotech (BNR US)</a> has announced Q2 results. Despite the negative impact from COVID-related restrictions in China, revenue increased 3% y/y to RMB130.8 million, driven by pharma R&amp;D service.</li>
<li>Gross margin deteriorated due to unfavorable revenue mix and inventory write down. Even upon this, operating expenses grew 19%, thereby widening net loss to RMB262.1 million.</li>
<li>Encouraged by ongoing business volume recovery, management has reiterated full-year 2022 revenue guidance of approximately RMB620 million, indicating H2 2022 revenue of RMB354 million, which represents 29% y/y growth.    </li>
</ul>



Burning Rock Biotech (BNR US) has announced Q2 results. Despite the negative impact from COVID-related restrictions in China, revenue increased 3% y/y to RMB130.8 million, driven by pharma R&amp;D service.
Gross margin deteriorated due to unfavorable revenue mix and inventory write down. Even upon this, operating expenses grew 19%, thereby widening net loss to RMB262.1 million.
Encouraged by ongoing business volume recovery, management has reiterated full-year 2022 revenue guidance of approximately RMB620 million, indicating H2 2022 revenue of RMB354 million, which represents 29% y/y growth.    


Burning Rock Biotech (BNR US): Despite Q2 Results Missing Consensus Management Reiterated Guidance

China

Burning Rock Biotech Limited operates as a biotech company. The Company discovers and develops diagnositcs solutions for precision medicine in oncology. Burning Rock Biotech serves customers in China.

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