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.

Equity Capital Markets

Sciclone Pharmaceuticals / Equity Capital Markets

<p>SciClone Pharma, a pharmaceutical company with a focus on sales of oncology and infectious disease drugs in China, raised HKD 2,039 million (USD 262m) from its global offering and will list on the Hong Kong Stock Exchange on Wed, Mar 3rd.</p>
<p>In our previous note, we discussed that the company has a long history but has a heavy reliance on a single drug Zadaxin which has dubious efficacy as it has not managed to obtain FDA approval for its otherwise approved indication in China. The company tried to expand the indication based on its ability to enhance the immune system to fight against diseases. The company's near-term revenue driver mainly comes from the consolidation of the sales from Pfizer products after the transfer of rights. However, we think the products from both Pfizer and Baxter are not attractive overall. The products from Baxter have been in the market for decades. Quality of the management team is mediocre with a focus on sales experience and not R&amp;D experience. So is the quality of financial investors which are mostly domestic private equity funds.</p>
<p>In this note, we look at the updates since our last note. We were bearish with the deal and with the recent correction in the market, we think there is a chance that the deal goes under water post listing.</p>
<div>
<h2>Our previous coverage on SciClone</h2>
</div>
<div>
<ul style="list-style-type: disc;">
<li dir="ltr" aria-level="1">
<p><a href="https://www.smartkarma.com/insights/sciclone-pharma-pre-ipo-rejuvenation-of-old-drugs" target="_blank" rel="noopener">SciClone Pharma (赛生药业) Pre-IPO: Rejuvenation of old drugs</a></p>
</li>
<li dir="ltr" aria-level="1">
<p><a href="https://www.smartkarma.com/insights/sciclone-pharma-pre-ipo-phip-updates-and-thoughts-on-valuation" target="_blank" rel="noopener">SciClone Pharma (赛生药业) Pre-IPO: PHIP updates and thoughts on valuation</a></p>
</li>
<li dir="ltr" aria-level="1"><a href="https://www.smartkarma.com/insights/sciclone-ipo-a-mediocre-deal" target="_blank" rel="noopener">SciClone (赛生药业) IPO: A Mediocre Deal</a></li>
</ul>
</div>

SciClone Pharma, a pharmaceutical company with a focus on sales of oncology and infectious disease drugs in China, raised HKD 2,039 million (USD 262m) from its global offering and will list on the Hong Kong Stock Exchange on Wed, Mar 3rd.
In our previous note, we discussed that the company has a long history but has a heavy reliance on a single drug Zadaxin which has dubious efficacy as it has not managed to obtain FDA approval for its otherwise approved indication in China. The company tried to expand the indication based on its ability to enhance the immune system to fight against diseases. The company's near-term revenue driver mainly comes from the consolidation of the sales from Pfizer products after the transfer of rights. However, we think the products from both Pfizer and Baxter are not attractive overall. The products from Baxter have been in the market for decades. Quality of the management team is mediocre with a focus on sales experience and not R&amp;D experience. So is the quality of financial investors which are mostly domestic private equity funds.
In this note, we look at the updates since our last note. We were bearish with the deal and with the recent correction in the market, we think there is a chance that the deal goes under water post listing.

Our previous coverage on SciClone




SciClone Pharma (赛生药业) Pre-IPO: Rejuvenation of old drugs


SciClone Pharma (赛生药业) Pre-IPO: PHIP updates and thoughts on valuation

SciClone (赛生药业) IPO: A Mediocre Deal



SciClone (赛生药业) IPO Trading: Bifurcation of Demand

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<p><strong>1. Industry viewpoints:</strong></p>
<ul>
<li>There is no doubt that the next step is to include biosimilar drugs in the volume-based purchase (VBP).</li>
<li>With the increasing prevalence of diabetes in China and the improvement of people's living and medical standards, the market size of diabetes drugs in China is expanding year by year.</li>
<li>As the penetration of interventional surgery continues to increase, the market of support devices across all interventional fields has a promising future.</li>
</ul>
<p><strong>2. Company news:</strong></p>
<p style="text-align: start;">News about the new agreements from <a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene Ltd (6160 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>, and <a href="https://www.smartkarma.com/entities/huadong-medicine-co-ltd-a" target="_blank" data-smartkarma-citation="entities:18522:1" rel="noopener">Huadong Medicine Co Ltd A (000963 CH)</a>. </p>
<p><strong>3. Market review:</strong> </p>
<p style="text-align: start;">Last week, stock price for healthcare sector in A share decreased 2.83%, while CSI 300 decreased 0.5% over the same period of time.</p>
<p><strong>4. Risk disclosure:</strong></p>
<p style="text-align: start;">Policy risk, R&amp;D risk, Company risk and COVID-19 risk.</p>

1. Industry viewpoints:

There is no doubt that the next step is to include biosimilar drugs in the volume-based purchase (VBP).
With the increasing prevalence of diabetes in China and the improvement of people's living and medical standards, the market size of diabetes drugs in China is expanding year by year.
As the penetration of interventional surgery continues to increase, the market of support devices across all interventional fields has a promising future.

2. Company news:
News about the new agreements from BeiGene Ltd (6160 HK),Luye Pharma (2186 HK), and Huadong Medicine Co Ltd A (000963 CH). 
3. Market review: 
Last week, stock price for healthcare sector in A share decreased 2.83%, while CSI 300 decreased 0.5% over the same period of time.
4. Risk disclosure:
Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

China Healthcare Weekly (Feb.19) - VBP on Biosimilar Drugs, Poor Performance of Healthcare Sector

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.

<div><p><a href="https://www.smartkarma.com/entities/sciclone-pharmaceuticals-holdings-limited" target="_blank" data-smartkarma-citation="entities:17351:1" rel="noopener">Sciclone Pharmaceuticals (6600 HK)</a> is a biopharmaceutical company with an integrated platform for product development and commercialisation of drugs in the oncology and severe infection therapeutic areas. </p></div><div><p>In <a href="https://www.smartkarma.com/insights/sciclone-pharmaceuticals-ipo-initiation-a-hard-sell" target="_blank" data-smartkarma-citation="insights:48114" rel="noopener">SciClone Pharmaceuticals IPO Initiation: A Hard Sell</a>, we stated that SciClone is a less than ideal IPO candidate. Despite efforts at diversification, SciClone is highly dependent on a single product, Zadaxin, which was launched in 1996. The risk to Zadaxin’s sales remains undiminished. The large pre-IPO dividends by existing shareholders in face of these challenges also sends the wrong message to potential IPO investors. Overall, on a fundamental basis, we are inclined to give this IPO a pass. </p></div><div><p>SciClone has launched its Hong Kong IPO at an indicative price range of HK$17.20-18.80 per share to raise net proceeds of HK$1,950.4 million ($252 million), at the mid-point of the price range. The raise is materially below the original target of a $500 million raise. Eleven cornerstone investors will subscribe for $133.7 million of the offer shares (49.65% of the offer shares at the mid-point of the IPO price). The cornerstone investors are largely domestic funds and lack international blue-chip names.</p></div><div><div><div class="content-highlight"><p>Relative valuation suggests that SciClone trades at a material discount to peers at the proposed IPO price range. We think that this discount is warranted due to SciClone's heavy reliance on Zadaxin, which faces ongoing challenges. Consequently, we are inclined to give this IPO a pass as our concerns on the fundamentals more than offset the "cheap" valuation.</p></div></div></div>

Sciclone Pharmaceuticals (6600 HK) is a biopharmaceutical company with an integrated platform for product development and commercialisation of drugs in the oncology and severe infection therapeutic areas. In SciClone Pharmaceuticals IPO Initiation: A Hard Sell, we stated that SciClone is a less than ideal IPO candidate. Despite efforts at diversification, SciClone is highly dependent on a single product, Zadaxin, which was launched in 1996. The risk to Zadaxin’s sales remains undiminished. The large pre-IPO dividends by existing shareholders in face of these challenges also sends the wrong message to potential IPO investors. Overall, on a fundamental basis, we are inclined to give this IPO a pass. SciClone has launched its Hong Kong IPO at an indicative price range of HK$17.20-18.80 per share to raise net proceeds of HK$1,950.4 million ($252 million), at the mid-point of the price range. The raise is materially below the original target of a $500 million raise. Eleven cornerstone investors will subscribe for $133.7 million of the offer shares (49.65% of the offer shares at the mid-point of the IPO price). The cornerstone investors are largely domestic funds and lack international blue-chip names.Relative valuation suggests that SciClone trades at a material discount to peers at the proposed IPO price range. We think that this discount is warranted due to SciClone's heavy reliance on Zadaxin, which faces ongoing challenges. Consequently, we are inclined to give this IPO a pass as our concerns on the fundamentals more than offset the "cheap" valuation.

SciClone Pharmaceuticals IPO: Valuation Insights

Equity Bottom-Up

Innovent Biologics Inc / Equity Bottom-Up

<p>In recent years, <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> has launched a number of successful products, and the Company's investment value has significantly increased. Innovent leads the domestic counterparts in the layout of biological drugs and adhere to the development of internationally competitive products. The Company also establishes an excellent team to ensure the efficient implementation of the strategy. Meanwhile, Innovent is gradually transforming from a biotech company to a big pharma. With dozens of products in the pipeline, the Company is focusing on mainstream areas and is in the first echelon of clinical progress. In addition, with the rapid increase of sales after the listing of PD-1, its commercialization capability has also been recognized by the market. </p>

In recent years, Innovent Biologics Inc (1801 HK) has launched a number of successful products, and the Company's investment value has significantly increased. Innovent leads the domestic counterparts in the layout of biological drugs and adhere to the development of internationally competitive products. The Company also establishes an excellent team to ensure the efficient implementation of the strategy. Meanwhile, Innovent is gradually transforming from a biotech company to a big pharma. With dozens of products in the pipeline, the Company is focusing on mainstream areas and is in the first echelon of clinical progress. In addition, with the rapid increase of sales after the listing of PD-1, its commercialization capability has also been recognized by the market. 

Innovent Biologics (1801 HK) - Have the Genes to Become a Big Pharma

Betta Pharmaceuticals   / Equity Capital Markets

<p>In the past two years, especially in the year 2020, it seems to be a “fashion” for bio-pharmaceutical companies to list on the HKEX. Against this backdrop, <a href="https://www.smartkarma.com/entities/betta-pharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:25883:1" rel="noopener">Betta Pharmaceuticals (300558 CH)</a> could also not miss this trend. Betta is a leading biopharmaceutical company committed to the R&amp;D of innovative therapies intended to address unmet medical needs including those in lung and other large cancer indications. On February 8<sup>th</sup>, 2021, the Company submitted to the HKEX the application for IPO. </p>

In the past two years, especially in the year 2020, it seems to be a “fashion” for bio-pharmaceutical companies to list on the HKEX. Against this backdrop, Betta Pharmaceuticals (300558 CH) could also not miss this trend. Betta is a leading biopharmaceutical company committed to the R&amp;D of innovative therapies intended to address unmet medical needs including those in lung and other large cancer indications. On February 8th, 2021, the Company submitted to the HKEX the application for IPO. 

Pre-IPO Betta Pharmaceuticals - Insights on Products and Concerns

China

Luye Pharma Group Ltd focuses on the research and development, production, and sales of pharmaceutical drugs for orthopedics, neurology, gastroenterology, and hepatology. The Company also sells active ingredients, R&D results, and patents of new drugs, as well as providing research services on a contractual basis.

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Luye Pharma (2186 HK)

SciClone (赛生药业) IPO Trading: Bifurcation of Demand

We were bearish with the deal and with the recent correction in the market, we think there is a chance that the deal goes under water post listing.

Ke Yan, CFA, FRM

China Healthcare Weekly (Feb.19) - VBP on Biosimilar Drugs, Poor Performance of Healthcare Sector

This article analyzed the new document about VBP for biosimilar drugs, diabetes drugs market, support devices market in interventional fields,...

Xinyao (Criss) Wang

SciClone Pharmaceuticals IPO: Valuation Insights

SciClone has launched its IPO to raise net proceeds of $252m, at the mid-point of the price range. We recommend a pass as our concerns on the...

Arun George

Innovent Biologics (1801 HK) - Have the Genes to Become a Big Pharma

This article mainly analyzed Innovent in terms of its current listed products (Sintilimab, Bevacizumab, Adalimumab and Rituximab), its pipeline,...

Xinyao (Criss) Wang

Pre-IPO Betta Pharmaceuticals - Insights on Products and Concerns

This article analyzed Betta Pharmaceutical in terms of its major products, pipeline, competitive landscape, and also include the concerns on the...

Xinyao (Criss) Wang

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