HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

Shanghai Fosun Pharmaceutical (Group) / Event-Driven

<ul>
<li>Fosun Pharma is just “a platform” and its performance mainly relies on the contributions of subsidiaries. However, such investment-driven business model has led to the current performance difficulties.</li>
<li>Although the motivation/underlying logic for Fosun Pharma to privatize Henlius are solid, we don’t know how this privatization ranks in terms of strategic significance of capital operations within Fosun's system.</li>
<li>If, for example, Fosun Pharma finds more important acquisitions/capital expenditures, the priority of Henlius’ privatization could fall. So, we think if it takes too long, there may be more uncertainties.</li>
</ul>


Fosun Pharma is just “a platform” and its performance mainly relies on the contributions of subsidiaries. However, such investment-driven business model has led to the current performance difficulties.
Although the motivation/underlying logic for Fosun Pharma to privatize Henlius are solid, we don’t know how this privatization ranks in terms of strategic significance of capital operations within Fosun's system.
If, for example, Fosun Pharma finds more important acquisitions/capital expenditures, the priority of Henlius’ privatization could fall. So, we think if it takes too long, there may be more uncertainties.


Shanghai Fosun Pharmaceutical (2196.HK) - Performance Pain Points and Henlius’ Privatization Outlook

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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shanghai-henlius-biotech-inc" target="_blank" data-smartkarma-citation="entities:27888:1" rel="noopener">Shanghai Henlius Biotech (2696 HK)</a>’s IFA opines that <a href="https://www.smartkarma.com/entities/shanghai-fosun-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:8045:1" rel="noopener">Shanghai Fosun Pharmaceutical (Group) (2196 HK)</a>’s HK$24.60 offer is fair and reasonable. The vote is on 22 January. </li>
<li>The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders. </li>
<li>Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.</li>
</ul>



Shanghai Henlius Biotech (2696 HK)’s IFA opines that Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer is fair and reasonable. The vote is on 22 January. 
The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders. 
Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.


Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January

<ul>
<li>The past “infrastructure-driven demand model” in medical devices has become “an updated model”. The future reasonable demand for medical devices may fall back to a quarter of pre anti-corruption levels.</li>
<li>Top innovative pharmaceutical companies worth investing in need to meet certain conditions. Currently, there is still a gap between Chinese pharmaceutical companies and companies like Regeneron in various aspects.</li>
<li>Henlius is of great strategic significance for Fosun Pharma, which actually increases the privatization success rate. Valuation logic of Fosun Pharma should be based on PE/VC firms not traditional pharma.</li>
</ul>


The past “infrastructure-driven demand model” in medical devices has become “an updated model”. The future reasonable demand for medical devices may fall back to a quarter of pre anti-corruption levels.
Top innovative pharmaceutical companies worth investing in need to meet certain conditions. Currently, there is still a gap between Chinese pharmaceutical companies and companies like Regeneron in various aspects.
Henlius is of great strategic significance for Fosun Pharma, which actually increases the privatization success rate. Valuation logic of Fosun Pharma should be based on PE/VC firms not traditional pharma.


China Healthcare Weekly (Sep.8) - Fosun Pharma, Medical Device Outlook, Biotech Investment Criteria

<ul>
<li>It is said that Fosun Pharma plans to privatize Henlius. There’re doubts about how to solve the debt problem/cash flow pressure of Fosun Pharma. A third party could be involved.</li>
<li>Shareholders may not be willing to accept an Offer Price that is significantly below IPO price. It’s also possible that shareholders vote against the privatization. So, there are many uncertainties.</li>
<li>Deal talks are still ongoing. It's difficult to see clearly what's happening under the table. Valuation logic of Fosun Pharma should be more like PE/VC firms not traditional pharmaceutical company.</li>
</ul>


It is said that Fosun Pharma plans to privatize Henlius. There’re doubts about how to solve the debt problem/cash flow pressure of Fosun Pharma. A third party could be involved.
Shareholders may not be willing to accept an Offer Price that is significantly below IPO price. It’s also possible that shareholders vote against the privatization. So, there are many uncertainties.
Deal talks are still ongoing. It's difficult to see clearly what's happening under the table. Valuation logic of Fosun Pharma should be more like PE/VC firms not traditional pharmaceutical company.


Fosun Pharma (2196 HK/600196.CH) To Privatize Henlius (2696.HK) - Things Are Not as Good as Expected

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>After the <a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a> fiasco back in October, Hong Kong M&amp;As have received some welcome Xmas cheer of late.</li>
<li>Small-Cap <a href="https://www.smartkarma.com/entities/cm-hi-tech-cleanroom-limited" target="_blank" data-smartkarma-citation="entities:44057:1" rel="noopener">CM Hi-Tech  (2115 HK)</a> secured reg approvals in record time. Then <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC (906 HK)</a>'s pre-cons were satisfied on 13th December. Now <a href="https://www.smartkarma.com/entities/shanghai-henlius-biotech-inc" target="_blank" data-smartkarma-citation="entities:27888:1" rel="noopener">Shanghai Henlius (2696 HK)</a>'s pre-cons are also fulfilled. </li>
<li>Henlius' spread narrowed after securing NDRC approval on the 22nd Nov; and again after fulfilling pre-cons this week. A 3.1% gross spread is okay. This is done. Get involved.</li>
</ul>


After the China Traditional Chinese Medicine (570 HK) fiasco back in October, Hong Kong M&amp;As have received some welcome Xmas cheer of late.
Small-Cap CM Hi-Tech  (2115 HK) secured reg approvals in record time. Then CPMC (906 HK)'s pre-cons were satisfied on 13th December. Now Shanghai Henlius (2696 HK)'s pre-cons are also fulfilled. 
Henlius' spread narrowed after securing NDRC approval on the 22nd Nov; and again after fulfilling pre-cons this week. A 3.1% gross spread is okay. This is done. Get involved.


Henlius (2696 HK): This Should Trade Tighter. Get Involved

China

Shanghai Fosun Pharmaceutical (Group) Co., Ltd. is a pharmaceutical company. Through its subsidiaries, the Company manufactures genetic medicines, Chinese traditional medicines, diagnostic products, and medical instruments, provides technology, marketing, and advertising services, as well as invests in import and export trading.

Shanghai Fosun Pharmaceutical (Group) (2196 HK)

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Shanghai Fosun Pharmaceutical (Group) (2196 HK)

Shanghai Fosun Pharmaceutical (2196.HK) - Performance Pain Points and Henlius’ Privatization Outlook

Fosun Pharma's investment-driven business model relies heavily on subsidiaries.Privatization of Henlius may face uncertainties if not prioritized...

Xinyao (Criss) Wang

Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January

Key shareholders will be supportive, and this is a done deal. At the last close, the gross/annualised spread for a 15 February payment was 2.9%...

Arun George

China Healthcare Weekly (Sep.8) - Fosun Pharma, Medical Device Outlook, Biotech Investment Criteria

Business model of medical devices is shifting, leading to potential underperformance. There's a gap between Chinese Biotech and top players....

Xinyao (Criss) Wang

Fosun Pharma (2196 HK/600196.CH) To Privatize Henlius (2696.HK) - Things Are Not as Good as Expected

Fosun Pharma's plan to privatize Henlius faces uncertainty due to cash-flow pressure.Shareholders' interests may suffer since Offer Price may not...

Xinyao (Criss) Wang

Henlius (2696 HK): This Should Trade Tighter. Get Involved

A 3.1% gross spread with expected payment around mid-Feb is okay. I'd pay up to HK$24.10/share for a 15% annualised spread. This is done. Get...

David Blennerhassett

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52-week Range

Market Cap (USDm)

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Shanghai Fosun Pharmaceutical (2196.HK) - Performance Pain Points and Henlius’ Privatization Outlook

​Fosun Pharma's investment-driven business model relies heavily on subsidiaries.Privatization of Henlius may face uncertainties if not prioritized...

Xinyao (Criss) Wang

Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January

Key shareholders will be supportive, and this is a done deal. At the last close, the gross/annualised spread for a 15 February payment was 2.9%...

Arun George

China Healthcare Weekly (Sep.8) - Fosun Pharma, Medical Device Outlook, Biotech Investment Criteria

Business model of medical devices is shifting, leading to potential underperformance. There's a gap between Chinese Biotech and top players....

Xinyao (Criss) Wang

Fosun Pharma (2196 HK/600196.CH) To Privatize Henlius (2696.HK) - Things Are Not as Good as Expected

​Fosun Pharma's plan to privatize Henlius faces uncertainty due to cash-flow pressure.Shareholders' interests may suffer since Offer Price may not...

Xinyao (Criss) Wang

Henlius (2696 HK): This Should Trade Tighter. Get Involved

A 3.1% gross spread with expected payment around mid-Feb is okay. I'd pay up to HK$24.10/share for a 15% annualised spread. This is done. Get...

David Blennerhassett

Fosun Pharma's investment-driven business model relies heavily on subsidiaries.Privatization of Henlius may face uncertainties if not prioritized...

Fosun Pharma's plan to privatize Henlius faces uncertainty due to cash-flow pressure.Shareholders' interests may suffer since Offer Price may not...