Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ono-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:8979:1" rel="noopener">Ono Pharmaceutical (4528 JP)</a> is reporting decelerating revenue from its flagship drug, Opdivo. During H1FY25, domestic revenue from Opdivo decreased 17% YoY to ¥62.6B.</li>
<li>Opdivo will start to lose patent protection starting from 2028. Prolific commercialization of these new drugs will remain crucial for Ono riding the patent cliff successfully.</li>
<li>Ono shares plunged 36% over the last one year to trade at attractive valuation. In absence of any near-term growth catalyst, the shares are not expected to see much upside.</li>
</ul>



Ono Pharmaceutical (4528 JP) is reporting decelerating revenue from its flagship drug, Opdivo. During H1FY25, domestic revenue from Opdivo decreased 17% YoY to ¥62.6B.
Opdivo will start to lose patent protection starting from 2028. Prolific commercialization of these new drugs will remain crucial for Ono riding the patent cliff successfully.
Ono shares plunged 36% over the last one year to trade at attractive valuation. In absence of any near-term growth catalyst, the shares are not expected to see much upside.


Ono Pharmaceutical (4528 JP): Struggle Continues with Opdivo; Competition and Price Cuts Loom Large

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ono-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:8979:1" rel="noopener">Ono Pharmaceutical (4528 JP)</a> is acquiring <a href="https://www.smartkarma.com/entities/deciphera-pharmaceuticals-inc" target="_blank" data-smartkarma-citation="entities:26289:1" rel="noopener">Deciphera Pharmaceuticals (DCPH US)</a> for $25.60/share in cash through a tender offer. The total equity value of the acquisition is approximately $2.4B.</li>
<li>Ono is expected to reap the benefit of Deciphera acquisition earliest from FY27. In the short-run, the company’s major problem of loss of revenue will not be addressed.</li>
<li>Ono needs to stretch its balance sheet to fund Deciphera acquisition. The acquisition will be earnings dilutive for Ono. Pricey valuation of the deal is another deterrent.</li>
</ul>



Ono Pharmaceutical (4528 JP) is acquiring Deciphera Pharmaceuticals (DCPH US) for $25.60/share in cash through a tender offer. The total equity value of the acquisition is approximately $2.4B.
Ono is expected to reap the benefit of Deciphera acquisition earliest from FY27. In the short-run, the company’s major problem of loss of revenue will not be addressed.
Ono needs to stretch its balance sheet to fund Deciphera acquisition. The acquisition will be earnings dilutive for Ono. Pricey valuation of the deal is another deterrent.


Ono Pharmaceutical (4528 JP): Deciphera Acquisition Will Not Bring Immediate Respite

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>Currently, 9 stocks could be deleted from global passive portfolios in February. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.</li>
<li>There has been a buildup on shorts on few stocks with minimal positioning in the other stocks. That could change once the calendar ticks over to 2025.</li>
<li>
<a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a> is a potential inclusion to the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> in March and this deletion could provide liquidity to enter a position ahead of that announcement.</li>
</ul>


Currently, 9 stocks could be deleted from global passive portfolios in February. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
There has been a buildup on shorts on few stocks with minimal positioning in the other stocks. That could change once the calendar ticks over to 2025.

Kokusai Electric (6525 JP) is a potential inclusion to the Nikkei 225 (NKY INDEX) in March and this deletion could provide liquidity to enter a position ahead of that announcement.


Japan: Potential Passive Selling in February

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kaken-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:18819:1" rel="noopener">Kaken Pharmaceutical (4521 JP)</a> reported 42% YoY jump in revenue during H1FY25 on one-time upfront payment, while operating profit also witnessed hefty growth of 255% YoY.</li>
<li>Top selling products are impacted by NHI drug price revision and increasing competition. The company has reiterated FY25 guidance. Profitability is expected to deteriorate sequentially in H2.</li>
<li>The respite from one time receipt will not compensate for the revenue loss from the negative impact from NHI drug price revision and generic competition for top selling products.</li>
</ul>



Kaken Pharmaceutical (4521 JP) reported 42% YoY jump in revenue during H1FY25 on one-time upfront payment, while operating profit also witnessed hefty growth of 255% YoY.
Top selling products are impacted by NHI drug price revision and increasing competition. The company has reiterated FY25 guidance. Profitability is expected to deteriorate sequentially in H2.
The respite from one time receipt will not compensate for the revenue loss from the negative impact from NHI drug price revision and generic competition for top selling products.


Kaken Pharmaceutical (4521 JP): One-Off Payment Boosts H1FY25 Revenue; Headed for Another Bleak H2

<ul>
<li>During H1FY25, <a href="https://www.smartkarma.com/entities/eisai-co-ltd" target="_blank" data-smartkarma-citation="entities:21001:1" rel="noopener">Eisai Co Ltd (4523 JP)</a> reported 3% YoY growth in revenue, driven by mainstay drugs. However, operating profit declined 11% YoY and net profit decreased 6% YoY.</li>
<li>Although Eisai kept its FY25 total revenue guidance unchanged, it has reduced Leqembi FY25 revenue guidance by ¥14B to ¥42.5B due to lower revenue expectation from Americas.</li>
<li>Leqembi is expected to be approved in Europe for a narrower set of patients. Next year, the drug will face competition in the U.S.</li>
</ul>


During H1FY25, Eisai Co Ltd (4523 JP) reported 3% YoY growth in revenue, driven by mainstay drugs. However, operating profit declined 11% YoY and net profit decreased 6% YoY.
Although Eisai kept its FY25 total revenue guidance unchanged, it has reduced Leqembi FY25 revenue guidance by ¥14B to ¥42.5B due to lower revenue expectation from Americas.
Leqembi is expected to be approved in Europe for a narrower set of patients. Next year, the drug will face competition in the U.S.


Eisai Co Ltd (4523 JP): Mixed H1FY25 Performance; Guidance Reaffirmed; Leqembi Struggle Continues

Japan

ONO PHARMACEUTICAL CO., LTD. manufactures and sells pharmaceuticals.  The Company mainly researches and develops prescription drugs.

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Ono Pharmaceutical (4528 JP)