Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>Cadonilimab (AK104)(PD-1/CTLA-4) achieved 7.1% market share in China's PD-1(L1) market in 2023, up from 3.4% in 2022, ranking it No.4 in revenue market share after Tislelezumab, Keytruda and Sintilimab;</li>
<li>With six days to go, the chance to receives NMPA approval for Gastric Cancer is slim, which means the June 18 price cut is for the existing Cervical Cancer indication;</li>
<li>The big question is the price elasticity following Cadonilimab's inclusion to NDRL. With ~110K new patients each year and only ~2,100 receiving Cadonilimab, we expect a moderate price cut.</li>
</ul>


Cadonilimab (AK104)(PD-1/CTLA-4) achieved 7.1% market share in China's PD-1(L1) market in 2023, up from 3.4% in 2022, ranking it No.4 in revenue market share after Tislelezumab, Keytruda and Sintilimab;
With six days to go, the chance to receives NMPA approval for Gastric Cancer is slim, which means the June 18 price cut is for the existing Cervical Cancer indication;
The big question is the price elasticity following Cadonilimab's inclusion to NDRL. With ~110K new patients each year and only ~2,100 receiving Cadonilimab, we expect a moderate price cut.


What's Behind Akeso's Cadonilimab Price Cut and What's Next?

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Thematic (Sector/Industry)

<ul><li>Kelun-Biotech: Promising Ph2 results of SKB264+A167 in 1L NSCLC.</li><li>SKB264 (Q3W)+A167 (PD-L1)’s 15.4 months of mPFS in 1L NSCLC was much better than the SoC – 9.0 months mPFS of Keytruda+chemo in KEYNOTE189 and 9.7 months mPFS of tislelizumab+chemo in RATIONALE304.</li><li>SKB264’s Ph3 dose of Q2W could deliver even better efficacy, in our view. SKB264+A167 also showed strong potential in PD-L1 negative NSCLC. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Kelun-Biotech: Promising Ph2 results of SKB264+A167 in 1L NSCLC.SKB264 (Q3W)+A167 (PD-L1)’s 15.4 months of mPFS in 1L NSCLC was much better than the SoC – 9.0 months mPFS of Keytruda+chemo in KEYNOTE189 and 9.7 months mPFS of tislelizumab+chemo in RATIONALE304.SKB264’s Ph3 dose of Q2W could deliver even better efficacy, in our view. SKB264+A167 also showed strong potential in PD-L1 negative NSCLC. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Healthcare - Chinese Biopharma Releasing Promising Data at ASCO

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

Shanghai Fosun Pharmaceutical (Group) / Event-Driven

<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

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/sciclone-pharmaceuticals-holdings-limited" target="_blank" data-smartkarma-citation="entities:17351:1" rel="noopener">Sciclone Pharmaceuticals (6600 HK)</a>'s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share offer fair and reasonable. </li>
<li>The key condition is approval by at least 75% of disinterested shareholders (&lt;10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.</li>
<li>This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.</li>
</ul>



Sciclone Pharmaceuticals (6600 HK)'s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share offer fair and reasonable. 
The key condition is approval by at least 75% of disinterested shareholders (&lt;10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.


SciClone Pharma (6600 HK): Scheme Vote on 19 June

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Murakami-San now owns far more in <a href="https://www.smartkarma.com/entities/mitsui-matsushima-co-ltd" target="_blank" data-smartkarma-citation="entities:13569:1" rel="noopener">Mitsui Matsushima (1518 JP)</a> than he can easily get out of other than by corporate action. Murakami-san is not a dumb guy. He knows this.</li>
<li>The unique investigative shareholder register confirms what has been long rumoured about a certain shareholder activist in <a href="https://www.smartkarma.com/entities/l-occitane-international-sa" target="_blank" data-smartkarma-citation="entities:6772:1" rel="noopener">L'Occitane (973 HK)</a>. It is also informative for what isn't present.</li>
<li>
<a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>'s discount to NAV and implied stub widened after Fabricio Bloisi's CEO appointment the previous week. But the sell-down of <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> to buy-back Prosus will continue.</li>
</ul>


Murakami-San now owns far more in Mitsui Matsushima (1518 JP) than he can easily get out of other than by corporate action. Murakami-san is not a dumb guy. He knows this.
The unique investigative shareholder register confirms what has been long rumoured about a certain shareholder activist in L'Occitane (973 HK). It is also informative for what isn't present.

Prosus (PRX NA)'s discount to NAV and implied stub widened after Fabricio Bloisi's CEO appointment the previous week. But the sell-down of Tencent (700 HK) to buy-back Prosus will continue.


Last Week in Event SPACE: Mitsui Matsushima, L'Occitane, Prosus/Tencent, EOFlow

China

Yantai Dongcheng Pharmaceutical Co Ltd is an enterprise group that combines pharmaceutical R&D, production, marketing, and capital operations across the fields of biochemical API, chemical synthetic drugs, and modern Chinese medicine.

Yantai Dongcheng Pharmaceuticl Gp (002675 CH)

Shanghai Junshi Biosciences Co., Ltd. operates as a biopharmaceutical company. The Company develops and sells small molecule drugs, antibody drug conjugates, and other products. Shanghai Junshi Biosciences markets its products worldwide.

3SBio, Inc. is a biotechnology company located in China. The Company focuses on mammalian cell-based biopharmaceuticals in the biotechnology industry. 3SBio also develops, manufactures and markets biopharmaceutical products globally.

Chengzhi Company Limited manufactures and sells household chemical products, biotechnology products, pharmaceuticals, and information technology products. The Company's products include detergents, toothpastes, D-ribose, L-glutamine, Chinese traditional medicines, computer memory devices, and other related products.

Beijing Strong Biotechnologies, Inc. operates in the IVD industry, where they specialize in the manufacturing of clinical chemistry liquid reagents.

Zai Lab Limited operates as a bio-pharmaceutical company. The Company researches and develops therapeutic technology for antibody-based oncology, autoimmune, and infectious diseases treatments. Zai Lab also manufactures drugs in the form of capsules, injections, and liquids. Zai Lab serves patients worldwide.

BGI Genomics Co., Ltd offers researching and testing services. The Company provides deoxyribonucleic acid sequencing, food science, health care researching, cancer prevention, drug discovery, and DNA sequencing. BGI Genomics offers services to medical and scientific research institutions worldwide.

Shanghai Haohai Biological Technology Company Limited manufactures absorbable biomedical materials. The Company targets therapeutic areas such as orthopedics, anti-adhesion and hemostasis, ophthalmology, and wound care and tissue filling.

Shanghai Haohai Biological Technology (6826 HK)

Zhongyuan Union Cell & Gene Engineering Corp Ltd, mainly operates in the stem cell inspection and storage business and other stem cell related business.

Zhongyuan Union Cell & Gene Eng Corp (600645 CH)

Beijing SL Pharmaceutical Co., Ltd. develops, manufactures and markets genetic engineering drugs, biological drugs, chemical drugs and medicine preparations.

BioCryst Pharmaceuticals, Inc. designs, optimizes and develops small-molecule novel pharmaceuticals that block key enzymes involved in infectious diseases, inflammatory diseases & cancer.  The Company has late-stage compounds in development & continues to discover additional compounds & to progress them  to meet the unmet medical needs of patients and physicians.

Dynavax Technologies Corporation discovers, develops, and is seeking to commercialize products based on immunostimulatory sequences.  The Company is developing products to treat and prevent allergies, infectious diseases, and chronic inflammatory diseases using approaches that alter immune system responses in specific ways.

Ligand Pharmaceuticals Incorporated develops drugs which regulate hormone activated intracellular receptors.  These receptors play a role in regulating the genetic processes affecting diseases such as gynecological disorders, certain cancers, as well as cardiovascular, inflammatory, and skin diseases.

Ardelyx, Inc. develops minimally absorbed small molecule drugs. The Company offers pharmaceuticals to correct mineral metabolism imbalance and metabolic disorders by modulating the function of specific transporters, channels, and receptors located on the epithelia of the gastrointestinal tract.

Galapagos NV operates as a clinical stage biotech company. The Company develops and commercializes novel medicines and progressing pipelines in biotech with phase 2 programs, phase 1 programs, pre-clinical, and discovery programs.

Biotest AG is a provider of plasma proteins and biological drugs. The Company has specialized primarily in the areas of clinical immunology, haematology and intensive medicine with a focus on treating diseases of the immune and haematopoietic systems. Biotest AG has production operations mainly in Europe and the US, and sells its products worldwide.

Genus plc provides cattle breeding and agricultural consultancy services.  The Group, through its own domestic production and contracts with breeding companies worldwide, supplies dairy and beef semen used for artificial insemination.  They also provide laboratory services, including soil analysis and pregnancy testing, in addition to a variety of farm consultancy and advisory services.

Hugel, Inc. is a Bio-pharmaceutical company that focuses on developing beauty/cosmetics related products.  The Company's main products include botulinum toxin and fillers.

Kura Oncology, Inc. operates as a clinical stage biopharmaceutical company. The Company focuses on discovery and development of personalized therapeutics for the treatment of tumors and blood cancers. Kura Oncology offers development programs for cancers with high unmet need, including lung, colorectal, thyroid, blood, and pancreatic cancers.

Kiniksa Pharmaceuticals, Ltd. operates as a clinical-stage biopharmaceutical company. The Company focuses on discovering, acquiring, developing, and commercializing therapeutic medicines for patients suffering from debilitating diseases with significant unmet medical need. Kiniksa Pharmaceuticals serves patients worldwide.

Shanghai Henlius Biotech, Inc develops and produces drugs. The Company develops and produces monoclonal antibody biosimilar drugs, bio betters, novel monoclonal antibodys, and other drugs. Shanghai Henlius Biotech throughout China.

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Shanghai Henlius Biotech (2696 HK)

What's Behind Akeso's Cadonilimab Price Cut and What's Next?

Akeso's proposition is to develop BsAb as a universal anti-cancer drug. Its revenue from Cadonilimab in the out-of-hospital market for Cervical...

Blue Lotus Research Institute

Healthcare - Chinese Biopharma Releasing Promising Data at ASCO

SKB264 (Q3W)+A167 (PD-L1)’s 15.4 months of mPFS in 1L NSCLC was much better than the SoC – 9.0 months mPFS of Keytruda+chemo in KEYNOTE189

CMB International

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

SciClone Pharma (6600 HK): Scheme Vote on 19 June

SciClone has received a letter of support from Pentwater Capital Management to vote YES. Pentwater represents 4.64% of out. shares and 8.51% of...

Arun George

Last Week in Event SPACE: Mitsui Matsushima, L'Occitane, Prosus/Tencent, EOFlow

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

What's Behind Akeso's Cadonilimab Price Cut and What's Next?

​Akeso's proposition is to develop BsAb as a universal anti-cancer drug. Its revenue from Cadonilimab in the out-of-hospital market for Cervical...

Blue Lotus Research Institute

Healthcare - Chinese Biopharma Releasing Promising Data at ASCO

SKB264 (Q3W)+A167 (PD-L1)’s 15.4 months of mPFS in 1L NSCLC was much better than the SoC – 9.0 months mPFS of Keytruda+chemo in KEYNOTE189

CMB International

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

SciClone Pharma (6600 HK): Scheme Vote on 19 June

SciClone has received a letter of support from Pentwater Capital Management to vote YES. Pentwater represents 4.64% of out. shares and 8.51% of...

Arun George

Last Week in Event SPACE: Mitsui Matsushima, L'Occitane, Prosus/Tencent, EOFlow

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Akeso's proposition is to develop BsAb as a universal anti-cancer drug. Its revenue from Cadonilimab in the out-of-hospital market for Cervical...

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