Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of October 20th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We have highlighted the flows for Meituan (3690 HK) .</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of October 20th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We have highlighted the flows for Meituan (3690 HK) .


Hong Kong Connect Flows (Oct 20th): Meituan

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

China Resources Sanjiu Medical & Pharma / Equity Bottom-Up

<ul>
<li>For a considerable period of time, the industry has been speculating about when the large-scale VBP of TCM formula granules will officially begin. Now, here it comes. </li>
<li>Primary market and other financing except IPO in European and US biopharma industry shows a significant signal of recovery. However, IPOs remain stagnant. </li>
<li>We analyzed key points about China Resources Sanjiu. Sanjiu is expected to have better performance in 2023 than 2022, but we advise investors to allow a sufficient margin of safety.</li>
</ul>


For a considerable period of time, the industry has been speculating about when the large-scale VBP of TCM formula granules will officially begin. Now, here it comes. 
Primary market and other financing except IPO in European and US biopharma industry shows a significant signal of recovery. However, IPOs remain stagnant. 
We analyzed key points about China Resources Sanjiu. Sanjiu is expected to have better performance in 2023 than 2022, but we advise investors to allow a sufficient margin of safety.


China Healthcare Weekly (Aug.18) - TCM Formula Granules VBP, Global Financing Rebound, CR Sanjiu

Thematic (Sector/Industry)

<ul>
<li>Policies will determine the development direction of the industry, which would then determine the profit model of companies. Companies that align with policy direction would outperform in the coming cycle.</li>
<li>The prosperity of the industry would determine the development trend of companies. For China healthcare, without a significant policy shift, it would be difficult for industry beta to emerge.</li>
<li>Domestic companies cannot achieve successful commercialization/internationalization mainly because they don’t have excellent enough products. It must be innovation that keeps companies alive and then thrive, rather than relying on policy changes.</li>
</ul>


Policies will determine the development direction of the industry, which would then determine the profit model of companies. Companies that align with policy direction would outperform in the coming cycle.
The prosperity of the industry would determine the development trend of companies. For China healthcare, without a significant policy shift, it would be difficult for industry beta to emerge.
Domestic companies cannot achieve successful commercialization/internationalization mainly because they don’t have excellent enough products. It must be innovation that keeps companies alive and then thrive, rather than relying on policy changes.


The Cyclicality of China Healthcare - Policy Environment, the Industry, and Investment Opportunities

China Traditional Chinese Medicine / Equity Bottom-Up

<ul>
<li>China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.</li>
<li>Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry's transformation during this dividend period.</li>
<li>Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.</li>
</ul>


China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.
Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry's transformation during this dividend period.
Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.


China Traditional Chinese Medicine (570.HK) - Looking Forward to a Performance Turnaround in 2023

<ul>
<li>The current policy environment determines that TCM is the core asset of pharmaceuticals, not innovative drugs. We think it is necessary to take a fresh look at TCM industry.</li>
<li>TCM formula granules have more opportunities. Exclusive variety of branded OTC TCM has better outlook. TCM medical services also deserve investors’ attention, because hospitals are the main channels for TCM. </li>
<li>China's pharmaceutical industry has its unique features. We recommend investors to leave a place in the portfolio to invest in TCM companies, which could outperform in the current pharmaceutical environment.</li>
</ul>


The current policy environment determines that TCM is the core asset of pharmaceuticals, not innovative drugs. We think it is necessary to take a fresh look at TCM industry.
TCM formula granules have more opportunities. Exclusive variety of branded OTC TCM has better outlook. TCM medical services also deserve investors’ attention, because hospitals are the main channels for TCM. 
China's pharmaceutical industry has its unique features. We recommend investors to leave a place in the portfolio to invest in TCM companies, which could outperform in the current pharmaceutical environment.


China Traditional Chinese Medicine (TCM) Industry - TCM Is Becoming Indispensable in the Portfolio

Hong Kong

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

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.

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.

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.

Lee's Pharmaceutical Holdings Limited develops, manufactures and sells quality biopharmaceutical products that focus on combating cardiovascular diseases and viral sexually transmitted diseases.

Pak Fah Yeow International Limited, through its subsidiaries, manufactures and sells healthcare and household products under the Hoe Hin brand.  The Company also invests in properties and treasuries.

Bausch Health Companies Inc. discovers and distributes pharmaceutical. The Company develops drugs for unmet medical needs in central nervous system disorders, eye health, and gastrointestinal diseases, as well as contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetic devices. Bausch Health Companies serves customers worldwide.

Shanghai Shyndec Pharmaceutical Co.,Ltd. develops, manufactures and distributes pharmaceuticals. The Company's products include antibiotics, hypertension drugs, diet pills, anti-aging drugs, biological products and medicine preparations.

Shanghai Shyndec Pharmaceutical (600420 CH)

Yifan Pharmaceutical Co.,Ltd. manufactures fine biochemicals. The Company's main products include food additives, pharmaceuticals, fine chemical products, calcium pantothenate, and polymer materials. The Company also offers technology development and transfer, in addition to technical advice and services.

Apeloa Pharmaceutical Co., Ltd. manufactures and markets raw material medicines and preparations, including antitumour, antivirus, anti-infectious, cardiovascular, and other medicines.

Shenzhen Hepalink Pharmaceutical Co., Ltd researches, produces and sells heparin pharmaceuticals products.  The Company's products include heparin sodium active pharmaceutical ingredient.

Tonghua Golden-Horse Pharmaceutical Industry Co., Ltd. develops, manufactures and markets medicines, biochemical preparations, and health care products.

Tonghua Golden Horse Pharmcl Indu (000766 CH)

Chongqing Taiji Industry (Group) Co., Ltd. manufactures and markets medicines, healthcare products, medical packing products, and medical instruments.  The Company also imports and exports Chinese medicine materials and medical packing materials.

Chongqing Taiji Industry (Group) A (600129 CH)

Oneness Biotech Co Ltd develops botanical new drugs and several biological-active new chemical entities that are purified and molecularly modified from these botanical sources.

Jilin Aodong Pharmaceutical Group Co Ltd develops and manufactures traditional Chinese pharmaceuticals and raises deer. The Company's main products  include brain enhancement, blood enrichment, and other medicines. In addition, Jilin Aodong constructs and operates toll roads.

Jilin Aodong Medicine Industry Group Co (000623 CH)

TSUMURA & CO. manufactures and sells pharmaceutical products including Chinese medicines.  The Company also manufactures and sells bathing products, cosmetics, and other healthcare and toiletry products.  Tsumura & Co. sells its products in Japan and overseas markets.

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

China Traditional Chinese Medicine (570 HK)

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China Traditional Chinese Medicine (570 HK)

Hong Kong Connect Flows (Oct 20th): Meituan

We have analyzed southbound Hong Kong connect flows in the past week and have highlighted flows for Meituan ( 3690 HK ).

Ke Yan, CFA, FRM

China Healthcare Weekly (Aug.18) - TCM Formula Granules VBP, Global Financing Rebound, CR Sanjiu

China's first TCM formula granules VBP begins.Primary market financing in global biopharma industry rebound, but IPO remains weak.China Resources...

Xinyao (Criss) Wang

The Cyclicality of China Healthcare - Policy Environment, the Industry, and Investment Opportunities

Without industry beta, China healthcare companies still have opportunity to achieve countercyclical breakthrough.Investors need to be in line with...

Xinyao (Criss) Wang