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

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In 2020, Southbound trading accounted for 22% of the equity market ADT. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Tencent Holdings Limited (700 HK), Meituan (3690 HK),  as well as outflows from Wuxi Biologics (Cayman) Inc. (2269 HK).

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In 2020, Southbound trading accounted for 22% of the equity market ADT. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Tencent Holdings Limited (700 HK), Meituan (3690 HK),  as well as outflows from Wuxi Biologics (Cayman) Inc. (2269 HK).

Hong Kong Connect Flows: Tencent, Meituan, Wuxi Biologics, Kintor

Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

Kintor Pharmaceutical has a strong pipeline of seven first/best-in-class small molecule and biological therapeutics, with focus on multiple high incidence cancers and other androgen-receptor-related diseases having huge unmet medical needs. The company is set to launch its first product in China in this year, with sales expected to peak in next five years. Kintor also aims to launch at least two more products by the end of 2022. Apart from the base indications, its lead product has shown positive clinical results in COVID-19 trials, demonstrating its potential to become an effective treatment for the COVID-19 among the current therapies. In H1 2021, Kintor’s R&amp;D expenses increased 90% y/y to $42 million. In June, the company completed top-up placing with net proceeds of HKD 1.16 billion ($150 million). As of June 2021, Kintor had a cash balance of $262 million, which is sufficient to support its near-term R&amp;D and capital expenses. Although the stock has gained more than 400% this year, we believe there are more streams left. Following its listing in HKEX in May 2020, the stock was included in Hang Seng Composite Index this year. With the expected approvals for COVID-19, prostate cancer, and breast cancer, Kintor’s lead product has large market potential. The company aims to outlicense select products for rapid global expansions.

Kintor Pharmaceutical has a strong pipeline of seven first/best-in-class small molecule and biological therapeutics, with focus on multiple high incidence cancers and other androgen-receptor-related diseases having huge unmet medical needs. The company is set to launch its first product in China in this year, with sales expected to peak in next five years. Kintor also aims to launch at least two more products by the end of 2022. Apart from the base indications, its lead product has shown positive clinical results in COVID-19 trials, demonstrating its potential to become an effective treatment for the COVID-19 among the current therapies. In H1 2021, Kintor’s R&amp;D expenses increased 90% y/y to $42 million. In June, the company completed top-up placing with net proceeds of HKD 1.16 billion ($150 million). As of June 2021, Kintor had a cash balance of $262 million, which is sufficient to support its near-term R&amp;D and capital expenses. Although the stock has gained more than 400% this year, we believe there are more streams left. Following its listing in HKEX in May 2020, the stock was included in Hang Seng Composite Index this year. With the expected approvals for COVID-19, prostate cancer, and breast cancer, Kintor’s lead product has large market potential. The company aims to outlicense select products for rapid global expansions.   

Kintor Pharmaceutical (9939 HK) – Dual Play on COVID and Solid Tumors

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

Industry viewpoints:<ul>
<li>After all the companies in China healthcare industry released their 2021 interim reports, here are the summary and the enlightenment. </li>
<li>With the continuous advancement of medical reform, the reform of public hospital compensation system is an inevitable trend.</li>
<li>The regulated market represented by the United States is the main destination of export of China's varieties of injection.</li>
</ul>Company news:News about the updated progress on new drugs of <a href="https://www.smartkarma.com/entities/kintor-pharmaceutical" target="_blank" data-smartkarma-citation="entities:28884:1" rel="noopener">Kintor Pharmaceutical (9939 HK)</a>, <a href="https://www.smartkarma.com/entities/luye-pharma-group-ltd" target="_blank" data-smartkarma-citation="entities:488:1" rel="noopener">Luye Pharma (2186 HK)</a>, <a href="https://www.smartkarma.com/entities/brii-biosciences" target="_blank" data-smartkarma-citation="entities:33014:1" rel="noopener">Brii Biosciences (2137 HK)</a> and <a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a>. Market review:Last week, stock price for healthcare sector in A share increased 3.00%, while CSI 300 increased 3.52% over the same period of time.Risk disclosure: Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

Industry viewpoints:
After all the companies in China healthcare industry released their 2021 interim reports, here are the summary and the enlightenment. 
With the continuous advancement of medical reform, the reform of public hospital compensation system is an inevitable trend.
The regulated market represented by the United States is the main destination of export of China's varieties of injection.
Company news:News about the updated progress on new drugs of Kintor Pharmaceutical (9939 HK), Luye Pharma (2186 HK), Brii Biosciences (2137 HK) and Innovent Biologics Inc (1801 HK). Market review:Last week, stock price for healthcare sector in A share increased 3.00%, while CSI 300 increased 3.52% over the same period of time.Risk disclosure: Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

China Healthcare Weekly (Sep10)-2021H1 Results Summary,Hospital Compensation Reform,Injection Export

Equity Capital Markets

Yonghe Medical Group / Equity Capital Markets

Modern fast pace of life and huge work pressure make hair loss anxiety spread to all kinds of groups. As people pay more attention to hair, the awareness of hair health and management is gradually awakening, and hair transplantation is one of the solutions. On June 17, <a href="https://www.smartkarma.com/entities/yonghe-medical-group-co-ltd" target="_blank" data-smartkarma-citation="entities:33521:1" rel="noopener">Yonghe Medical Group (YMG HK)</a> formally submitted its prospectus to the HKEX and planned to be listed on the main board. If everything goes well, Yonghe will be the first listed company in the field of hair transplantation in China. However, despite the promising market potential, there are some concerns of the Company that deserve investors’ attention.

Modern fast pace of life and huge work pressure make hair loss anxiety spread to all kinds of groups. As people pay more attention to hair, the awareness of hair health and management is gradually awakening, and hair transplantation is one of the solutions. On June 17, Yonghe Medical Group (YMG HK) formally submitted its prospectus to the HKEX and planned to be listed on the main board. If everything goes well, Yonghe will be the first listed company in the field of hair transplantation in China. However, despite the promising market potential, there are some concerns of the Company that deserve investors’ attention.

Pre-IPO Yonghe Medical Group - Here Are the Concerns

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the September 2021 review should be made on 13 August and will be effective after the close of trading on 3 September.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.We see 28 potential inclusions to the HSCI at the rebalance and 15 potential deletions, plus another 7 close deletions. Only 10 of the potential deletions will be removed from Southbound Stock Connect buy list since the other deletions are either not a part of Stock Connect currently or have listed A-shares.The inclusions to the HSCI outperformed the deletions at the March rebalance from review cut-off to announcement of the changes before giving by some of the gains to implementation and then some more for the 1 month post the implementation of the changes.

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the September 2021 review should be made on 13 August and will be effective after the close of trading on 3 September.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.We see 28 potential inclusions to the HSCI at the rebalance and 15 potential deletions, plus another 7 close deletions. Only 10 of the potential deletions will be removed from Southbound Stock Connect buy list since the other deletions are either not a part of Stock Connect currently or have listed A-shares.The inclusions to the HSCI outperformed the deletions at the March rebalance from review cut-off to announcement of the changes before giving by some of the gains to implementation and then some more for the 1 month post the implementation of the changes.

HSCI Index Rebalance & Stock Connect: Expected Changes in September

China

Kintor Pharmaceutical Limited develops and markets drugs. The Company produces and sells androgen receptor antagonists, small molecule innovative drugs, and other products. Kintor Pharmaceutical markets its products primarily throughout China with limited overseas.

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Kintor Pharmaceutical (9939 HK)

Hong Kong Connect Flows: Tencent, Meituan, Wuxi Biologics, Kintor

We highlight Hong Kong Connect inflows into Tencent Holdings Limited (700 HK), Meituan (3690 HK), and outflows from Wuxi Biologics (2269 HK).

Ke Yan, CFA, FRM