HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

China National Medicines A / Event-Driven

<ul>
<li>The "Entrusted Management Agreement" indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and <a href="https://www.smartkarma.com/entities/shanghai-shyndec-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:1952:1" rel="noopener">Shanghai Shyndec Pharmaceutical</a>. </li>
<li>The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. </li>
<li>Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.</li>
</ul>


The "Entrusted Management Agreement" indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and Shanghai Shyndec Pharmaceutical. 
The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. 
Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.


China National Medicines (600511.CH) - After Restructuring, Performance Growth Is Guaranteed

China Traditional Chinese Medicine / Event-Driven

<ul>
<li>Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM's target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.</li>
<li>At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the "confusion".</li>
<li>According to regulatory requirements, it's expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.</li>
</ul>


Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM's target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the "confusion".
According to regulatory requirements, it's expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.


China TCM (570.HK) Update - Despite Doubts, This Privatization Seems “Mandatory”

Equity Bottom-Up

Shanghai Shyndec Pharmaceutical / Equity Bottom-Up

<ul>
<li>China plans to issue ultra long-term special treasury bond (about RMB1 trillion) to promote large-scale medical equipment renewal, which is expected to boost domestic demand in medical device sector. </li>
<li>Various regions (e.g. Beijing, Hainan, Guangzhou, Zhuhai) have issued separate supporting policies for innovative drug industry. It may be too early to completely lose hope of Chinese innovative drugs.</li>
<li>There is “horizontal competition” issue between Taiji and <a href="https://www.smartkarma.com/entities/shanghai-shyndec-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:1952:1" rel="noopener">Shanghai Shyndec Pharmaceutical (600420 CH)</a>, which is the underlying logic for potential spin-offs and integrations within Taiji and China TCM before 2025.</li>
</ul>


China plans to issue ultra long-term special treasury bond (about RMB1 trillion) to promote large-scale medical equipment renewal, which is expected to boost domestic demand in medical device sector. 
Various regions (e.g. Beijing, Hainan, Guangzhou, Zhuhai) have issued separate supporting policies for innovative drug industry. It may be too early to completely lose hope of Chinese innovative drugs.
There is “horizontal competition” issue between Taiji and Shanghai Shyndec Pharmaceutical (600420 CH), which is the underlying logic for potential spin-offs and integrations within Taiji and China TCM before 2025.


China Healthcare Weekly (Apr14)- Shanghai Shyndec Pharma,Innovative Drug Policy,Ultra Long-Term Bond

Shanghai Pharmaceuticals Holding / Equity Bottom-Up

<ul>
<li>The majority revenue of Shanghai Pharmaceuticals comes from pharmaceutical distribution business, but the pharmaceutical manufacturing business has much higher gross margin,which drives up the overall profit margin of the Company.</li>
<li>Due to VBP, profit margin is under pressure. Weak demand for COVID-19 vaccines, decreasing long-term profitability and concerns on synergistic effect of cooperation with Yunnan Baiyao cast doubt on outlook.</li>
<li>Compared with peers, the valuation of Shanghai Pharmaceuticals doesn’t show decent upside potential. High valuation expectations cannot be supported due to industry trend. Its share prices could underperform.</li>
</ul>


The majority revenue of Shanghai Pharmaceuticals comes from pharmaceutical distribution business, but the pharmaceutical manufacturing business has much higher gross margin,which drives up the overall profit margin of the Company.
Due to VBP, profit margin is under pressure. Weak demand for COVID-19 vaccines, decreasing long-term profitability and concerns on synergistic effect of cooperation with Yunnan Baiyao cast doubt on outlook.
Compared with peers, the valuation of Shanghai Pharmaceuticals doesn’t show decent upside potential. High valuation expectations cannot be supported due to industry trend. Its share prices could underperform.


Shanghai Pharmaceuticals (2607.HK)- Low Profitability Is Big Problem; Share Price Would Underperform

Thematic (Sector/Industry)

<ul>
<li>There could be investment opportunities for influenza vaccines due to supply-demand mismatch this year, but there is no long-term logic in this industry.</li>
<li>The NRDL adjustment in 2022 has been officially launched. We need to point out a change in favor of the primary drugs (or original drugs).</li>
<li>CXO's prosperity may have problems in the next few years. The point is that it is difficult to predict how long this “low momentum” would last if it comes.</li>
</ul>


There could be investment opportunities for influenza vaccines due to supply-demand mismatch this year, but there is no long-term logic in this industry.
The NRDL adjustment in 2022 has been officially launched. We need to point out a change in favor of the primary drugs (or original drugs).
CXO's prosperity may have problems in the next few years. The point is that it is difficult to predict how long this “low momentum” would last if it comes.


China Healthcare Weekly (July.8)- CXO Outlook, 2022 NRDL Adjustment, Logic of Influenza Vaccine

China

Topchoice Medical Investment Corporation provides dental and oral health care services.

Tibet Rhodiola Pharmaceutical Holding Co. develops, manufactures, and markets Tibet medicines.  The Company's products include Rhodiola capsules, Rhodiola pellets, and other related medicines.

Zhejiang Dian Diagnostics Co., Ltd. provides medical diagnostic solutions, as an outsourcer, to various general hospitals, specialized hospitals, community health service centers (stations), township (county) hospitals, medical centers,  disease prevention and control centers.

Shanghai Pharmaceuticals Holding Co., Ltd. manufactures, retails, and wholesales a variety of pharmaceuticals including biopharmaceuticals, chemical and Chinese traditional medicines, and healthcare products. The Company also invests in new medicine development and provides related services.

Shanghai Pharmaceuticals Holding (2607 HK)

Shenzhen Neptunus Bioengineering Co., Ltd. develops, manufactures, and markets biochemical pharmaceuticals, biological products, traditional Chinese medicines, and healthcare products.  Through its subsidiaries, the Company also manufactures food.

Searainbow Holding Corp., produces chemical fibers and other textile products. The company, through its subsidiaries, also provides medical e-commerce and on-line games.

WuXi Biologics (Cayman) Inc. is a leading open-access R&D capability and technology platform company serving the pharmaceutical, biotechnology, and medical device industries, with operations in China, U.S., and Iceland.  We provide a broad and integrated portfolio of laboratory and manufacturing services throughout the drug and medical device R&D process.  Our services are designed to help our global partners in shortening the cycle and lowering the cost of drug and medical device R&D through cost-effective and efficient solutions. 

Guangxi Liuzhou Pharmaceutical Co. Ltd. manufactures pharmaceuticals. The Company researches, develops, produces, processes, and distributes capsules, granules, tablets, pills, plasters, and raw material medicines.

Jinxin Fertility Group Limited provides assisted reproductive services. The Company offers vitro fertilization services, embryo transfer services, management services, and other services. Jinxin Fertility Group also provides ancillary medical services.

Nanjing Pharmaceutical Co. Ltd. distributes a broad range of drugs. The Company also manufactures medicines,medical apparatus, chemical reagents, and glassware.

Mitra Keluarga Karyasehat Tbk PT engages in hospital management and business services. The Company operates hospitals located in the Greater Jakarta Area, Surabaya and Tegal.

Alfresa Holdings Corporation is a holding company established through the merger of Azwell Inc. and Fukujin Co., Ltd.  The Company's subsidiaries mainly wholesale and manufacture medical related products including medicines, reagents, and medical tools and equipment.

SUZUKEN CO., LTD., a subsidiary of Medca Japan, wholesales and manufactures pharmaceutical products mainly to hospitals and practitioners.  The Company also provides medical equipment such as electro-cardiogram and blood pressure measurement.  Suzuken provides construction and repair works to hospitals and maintains patients' clinical records through information systems services.

Amedisys, Inc. is a multi-regional provider of alternate-site health care services.  The Company offers home health care nursing, home infusion therapy, and ambulatory surgery centers.  Amedisys operates offices within a network of subsidiaries in the southern and southeastern United States.

MEDIPAL HOLDINGS CORPORATION manufactures and sells medical tools and equipment, nursing equipment, and wholesales pharmaceuticals.

Surgery Partners, Inc. operates as a healthcare services company. The Company owns and manages surgical facilities, physician-partnered hospitals, diagnostic laboratory, as well as offers anesthesia, pharmacy, ancillary, and optical services throughout the United States.

Dr. Lal PathLabs Limited operates clinical laboratories. The Company offers medical diagnostic, cardiology, radiology, pathology and imaging, health checkup, blood test, and customer care services. Dr. Lal PathLabs conducts its business in India.

Narayana Hrudayalaya Limited operates a network of hospitals. The Company offers cardiac surgery, cardiology, diabetes and endocrinology, gastroenterology, general surgery, neuroscience, facial surgery, nephrology, obstetrics and gynecology, orthopedics, oncology, pediatrics, transplant, and urology services. Narayana Hrudayalaya serves patients worldwide.

Progyny, Inc. operates as a fertility benefits management company in the US with its headquarters in New York City. The Company offers patients a benefits solution with education and guidance from a Patient Care Advocate and access to a network of fertility specialists. Progyny also aims to reduce healthcare costs for employers through their operations.

PT Siloam International Hospitals Tbk owns and operates hospitals. The Company offers a comprehensive range of specialist medical services including laboratory services, radiology, imaging and complex surgical procedures. Siloam International operates its hospitals throughout Indonesia.

China National Medicines Corp. Ltd. wholesales and retails chemical material medicines, western medicine preparations, biochemical medicines, biological products, and Chinese traditional medicines.  Through its subsidiaries, the Company also manufactures pharmaceuticals including injections, capsules, tablets, and other related products under the CNCM brand name.

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China National Medicines A (600511 CH)

China National Medicines (600511.CH) - After Restructuring, Performance Growth Is Guaranteed

Horizontal competition issue will be solved within 3 years. The restructuring will increase the business concentration/scale/competitiveness of...

Xinyao (Criss) Wang

China TCM (570.HK) Update - Despite Doubts, This Privatization Seems “Mandatory”

Some investors have concerns that the privatization may fail, but China TCM's privatization seems "mandatory", which will lead to spin-off...

Xinyao (Criss) Wang

China Healthcare Weekly (Apr14)- Shanghai Shyndec Pharma,Innovative Drug Policy,Ultra Long-Term Bond

China will issue special treasury bonds for healthcare.New policy boosts hope for innovative drugs.Horizontal competition in Taiji and Shanghai...

Xinyao (Criss) Wang

China Healthcare Weekly (July.8)- CXO Outlook, 2022 NRDL Adjustment, Logic of Influenza Vaccine

CXO's prosperity may have problems in the next few years. We analyzed the logic. There is no long-term logic for influenza vaccine. A change in...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China National Medicines (600511.CH) - After Restructuring, Performance Growth Is Guaranteed

Horizontal competition issue will be solved within 3 years. The restructuring will increase the business concentration/scale/competitiveness of...

Xinyao (Criss) Wang

China TCM (570.HK) Update - Despite Doubts, This Privatization Seems “Mandatory”

Some investors have concerns that the privatization may fail, but ​China TCM's privatization seems "mandatory", which will lead to spin-off...

Xinyao (Criss) Wang

China Healthcare Weekly (Apr14)- Shanghai Shyndec Pharma,Innovative Drug Policy,Ultra Long-Term Bond

​China will issue special treasury bonds for healthcare.New policy boosts hope for innovative drugs.Horizontal competition in Taiji and Shanghai...

Xinyao (Criss) Wang

Shanghai Pharmaceuticals (2607.HK)- Low Profitability Is Big Problem; Share Price Would Underperform

Due to VBP, Shanghai Pharmaceuticals will face low margin. Weak COVID vaccine demand/uncertain synergistic effect of cooperation with Yunnan Baiyao...

Xinyao (Criss) Wang

China Healthcare Weekly (July.8)- CXO Outlook, 2022 NRDL Adjustment, Logic of Influenza Vaccine

CXO's prosperity may have problems in the next few years. We analyzed the logic. There is no long-term logic for influenza vaccine. A change in...

Xinyao (Criss) Wang

Some investors have concerns that the privatization may fail, but China TCM's privatization seems "mandatory", which will lead to spin-off...

China will issue special treasury bonds for healthcare.New policy boosts hope for innovative drugs.Horizontal competition in Taiji and Shanghai...