HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Asymchem Laboratories Tianjin / Equity Bottom-Up

<ul>
<li>Results of 9th national VBP was released. The average price reduction was 58% and the maximum price reduction was over 90%. <a href="https://www.smartkarma.com/entities/jiangsu-hengrui-medicine-co-ltd" target="_blank" data-smartkarma-citation="entities:14128:1" rel="noopener">Hengrui (600276 CH)</a>'s challenge in VBP has just begun.</li>
<li>The whole CXO sector is more like a cyclical industry than a high-barrier industry. There’re still some pressures/risks have not been fully released. Its future may be darker than before.</li>
<li>Asymchem’s stock price performance follows the entire CXO sector. Whether Asymchem can obtain large Tirzepatide orders and provide investors with high certainty of outlook is the key for valuation reversal.</li>
</ul>


Results of 9th national VBP was released. The average price reduction was 58% and the maximum price reduction was over 90%. Hengrui (600276 CH)'s challenge in VBP has just begun.
The whole CXO sector is more like a cyclical industry than a high-barrier industry. There’re still some pressures/risks have not been fully released. Its future may be darker than before.
Asymchem’s stock price performance follows the entire CXO sector. Whether Asymchem can obtain large Tirzepatide orders and provide investors with high certainty of outlook is the key for valuation reversal.


China Healthcare Weekly (Nov.10) - 9th National VBP, Cyclicity of CXO Sector, Asymchem, Hengrui

Thematic (Sector/Industry)

<ul>
<li>Globalization and innovation are two core paths for companies’ development, but with completely different effects.Instead of rushing to go global, it’s better to calm down to focus on R&amp;D first.</li>
<li>Many domestic companies choose Me-Too strategy, which is considered a “shortcut”. However, Me-Too strategy is not always successful. We analyzed different scenarios to help investors better distinguish valuable Me-Too strategies.</li>
<li>There could be a potential short-term correction in healthcare sector. Since trading opportunities remain, rebound would come next, but stock-picking would not be the same as in the past.</li>
</ul>


Globalization and innovation are two core paths for companies’ development, but with completely different effects.Instead of rushing to go global, it’s better to calm down to focus on R&amp;D first.
Many domestic companies choose Me-Too strategy, which is considered a “shortcut”. However, Me-Too strategy is not always successful. We analyzed different scenarios to help investors better distinguish valuable Me-Too strategies.
There could be a potential short-term correction in healthcare sector. Since trading opportunities remain, rebound would come next, but stock-picking would not be the same as in the past.


China Healthcare Weekly (Nov.3)-Share Price Correction,Valuable Shortcut,Globalization Vs Innovation

Global Healthcare Analyst

Tina Banerjee

Dr. Reddy's Laboratories / Equity Bottom-Up

<ul>
<li>Global generics revenue increased 9% YoY to INR61 billion, mainly driven by double-digit growth in North America and Europe generic businesses, partly offset by muted growth in domestic market.</li>
<li>Revenue from North America generics increased 13% y/y to INR31.7 billion, driven by growing momentum in core portfolio, Mayne integration, and favorable Fx. Pricing environment remains stable.</li>
<li>Despite increase in SG&amp;A and R&amp;D expenses, EBITDA grew 13% YoY to INR 21.8 billion. Net profit increased 33% YoY to INR14.8 billion. Both EBITDA and net profit topped estimates.</li>
</ul>


Global generics revenue increased 9% YoY to INR61 billion, mainly driven by double-digit growth in North America and Europe generic businesses, partly offset by muted growth in domestic market.
Revenue from North America generics increased 13% y/y to INR31.7 billion, driven by growing momentum in core portfolio, Mayne integration, and favorable Fx. Pricing environment remains stable.
Despite increase in SG&amp;A and R&amp;D expenses, EBITDA grew 13% YoY to INR 21.8 billion. Net profit increased 33% YoY to INR14.8 billion. Both EBITDA and net profit topped estimates.


Dr. Reddy's Laboratories (DRRD IN): Highest Ever Sales and Profit in Q2; Good Show in Key Markets

Hansoh Pharmaceutical Group  / Equity Bottom-Up

<ul>
<li>The early-stage clinical data of Hansoh’s B7-H4 ADC showed good potential, thus attracting GSK's attention. This would allow GSK to re-enhance the layout of ADC pipelines after its previous setbacks.</li>
<li>However, if future clinical data fail to meet expectation, GSK could return the product to Hansoh. After all, US$85 million upfront is more likely to test the waters for GSK.</li>
<li>Hansoh is already one step ahead of Hengrui in terms of internationalization. This short-term catalyst would no doubt help lift share prices, but the logic behind the rebound is shaky.</li>
</ul>


The early-stage clinical data of Hansoh’s B7-H4 ADC showed good potential, thus attracting GSK's attention. This would allow GSK to re-enhance the layout of ADC pipelines after its previous setbacks.
However, if future clinical data fail to meet expectation, GSK could return the product to Hansoh. After all, US$85 million upfront is more likely to test the waters for GSK.
Hansoh is already one step ahead of Hengrui in terms of internationalization. This short-term catalyst would no doubt help lift share prices, but the logic behind the rebound is shaky.


GSK Inks Eye-Popping $2B-Plus Pact for Hansoh’s ADC - Is The "New Story" About to Begin?

<ul>
<li>2023 is a crucial year for Zai Lab.It’s the first time for Zai Lab to demonstrate the profitability of license-in model.If it fails, investors would lose confidence in the company.</li>
<li>There is little correlation between the four commercialized products, which makes commercialization difficult and leads to low efficiency/high costs for sales team. So, breakeven could be more distant than expected.</li>
<li>Zai Lab's current pipelines are hard to make money. There are concerns whether its business model is sustainable in the long term. As its valuation lacks an “anchor”, risk is high.</li>
</ul>


2023 is a crucial year for Zai Lab.It’s the first time for Zai Lab to demonstrate the profitability of license-in model.If it fails, investors would lose confidence in the company.
There is little correlation between the four commercialized products, which makes commercialization difficult and leads to low efficiency/high costs for sales team. So, breakeven could be more distant than expected.
Zai Lab's current pipelines are hard to make money. There are concerns whether its business model is sustainable in the long term. As its valuation lacks an “anchor”, risk is high.


Zai Lab (9688.HK/ZLAB.US) 2022/2023Q1 - The True Colors and the Risks Behind

China

Jiangsu Hengrui Medicine Co., Ltd. develops, manufactures, and markets a variety of medicines and medicine packing materials. The Company's products include anti-tumor medicines, pain-killers, anti-infection medicines, aluminum foil, and other related products.

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Jiangsu Hengrui Medicine (600276 CH)

China Healthcare Weekly (Nov.10) - 9th National VBP, Cyclicity of CXO Sector, Asymchem, Hengrui

Results of 9th national VBP were tragic. Hengrui hasn't escaped. CXO's industry prosperity has continued downward pressure. Asymchem still follows...

Xinyao (Criss) Wang

Dr. Reddy's Laboratories (DRRD IN): Highest Ever Sales and Profit in Q2; Good Show in Key Markets

Revenue increased 9% YoY to INR69B, beating street’s expectation of INRINR68, driven by double-digit growth North America and Europe. Net profit...

Tina Banerjee

GSK Inks Eye-Popping $2B-Plus Pact for Hansoh’s ADC - Is The "New Story" About to Begin?

GSK-Hansoh's ADC deal surprised many people.But if future clinical data fail to meet expectation,GSK could return the product to Hansoh.Current...

Xinyao (Criss) Wang

Zai Lab (9688.HK/ZLAB.US) 2022/2023Q1 - The True Colors and the Risks Behind

In the insight, we analyzed major investment logic flaws of Zai Lab. As we expected, the company's performance is not ideal. The license-in model...

Xinyao (Criss) Wang

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52-week Range

Market Cap (USDm)

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China Healthcare Weekly (Nov.10) - 9th National VBP, Cyclicity of CXO Sector, Asymchem, Hengrui

Results of 9th national VBP were tragic. Hengrui hasn't escaped. CXO's industry prosperity has continued downward pressure. Asymchem still follows...

Xinyao (Criss) Wang

China Healthcare Weekly (Nov.3)-Share Price Correction,Valuable Shortcut,Globalization Vs Innovation

Success of globalization ultimately relies on strong innovative capabilities. Here's how to distinguish valuable shortcuts - Me-Too strategy....

Xinyao (Criss) Wang

Dr. Reddy's Laboratories (DRRD IN): Highest Ever Sales and Profit in Q2; Good Show in Key Markets

Revenue increased 9% YoY to INR69B, beating street’s expectation of INRINR68, driven by double-digit growth North America and Europe. Net profit...

Tina Banerjee

GSK Inks Eye-Popping $2B-Plus Pact for Hansoh’s ADC - Is The "New Story" About to Begin?

GSK-Hansoh's ADC deal surprised many people.But if future clinical data fail to meet expectation,GSK could return the product to Hansoh.Current...

Xinyao (Criss) Wang

Zai Lab (9688.HK/ZLAB.US) 2022/2023Q1 - The True Colors and the Risks Behind

In the insight, we analyzed major investment logic flaws of Zai Lab. As we expected, the company's performance is not ideal. The license-in model...

Xinyao (Criss) Wang