Healthcare

• Two activist investors are now on the shareholder registry of Eiken Chemical. 
• Eiken has proactively announced a share buyback to return excess cash holdings. 
• Eiken has a quality underlying business which generates solid FCF yield. Expect higher shareholder returns in the future. 

• PB-119 (T2DM) has the fastest R&D progress, but this is a highly competitive market.China’s diabetes drug market is dominated by traditional drugs. It’s not easy for PegBio to break through. 
• Since the future competitive landscape of GLP-1s (obesity) would present a very different situation.If PB-119 fails to have better weight loss effect, it would be eliminated due to fierce competition.
• PegBio’s IPO on SSE STAR Market was rejected. We’re not optimistic about its future commercialization performance. Together with cash-flow issues, we doubt whether PegBio would bring expected returns to investors.

Continued strong sales of Cresemba, Basilea Pharmaceutica’s lead antifungal asset, in the Asia-Pacific region and China, has triggered the receipt of a US$1.25m milestone payment from Pfizer (license partner). This comes on the heels of Basilea’s first sales-related milestone from distribution partner Knight Therapeutics in January for sales in Latin America. We believe these reflect sustained market traction for Cresemba, leading to in-market sales of US$445m in the 12 months ending September 2023 (+22% y-o-y) and c CHF30m in milestone payments in FY23. In December 2023, Cresemba was granted a paediatric label expansion in the US, extending its market exclusivity to September 2027 (EU decision expected Q124). Basilea is also developing a successor to Cresemba: fosmanogepix, a broad-spectrum antifungal therapy (Phase III trials to commence in mid-2024). We anticipate the Prescription Drug User Fee Act (PDUFA) date (3 April 2024) for the company’s second asset, Zevtera, will be the next near-term catalyst, as the US represents a key market.

• HUTCHMED’s 2023 results were in line with expectation. It is gradually becoming a self-sufficient innovative drug enterprise with sufficient cashflow due to upfront/milestone payments of Takeda and increasing product revenue.
• 2024 revenue guidance seems very optimistic, which has to rely on fruquintinib’s global sales performance (or Takeda’s contribution), and also on the timing of approval of fruquintinib’s 2L gastric cancer.
• Starting from 2024, HUTCHMED will enter a period of accelerated growth in product revenue based on major catalysts.Market value of US$1,200 – US$1,800 million is a good place to long. 

• PegBio, a VC-backed biotech company, plans to tap capital markets in Hong Kong. CICC is leading the offering, and an IPO date has yet to be announced.
• The company’s pipeline features promising drug candidates designed for the treatment of type 2 diabetes mellitus (T2DM), obesity, NASH, OIC and congenital hyperinsulinemia. 
• PegBio employs a proprietary technology platform, called HECTOR, and has six drug candidates in the pipeline portfolio. PB-119 is their core product with the purpose to treat T2DM and obesity.

• Since the domestic revenue scale of PD-1 has been much lower-than-expected, the market seems no longer willing to offer GLP-1 weight loss drug high expectations. However, that’s not right. 
• For China healthcare, the emergence of negative domestic policies is a time for reassessment and seeking opportunities, rather than a time of blind pessimism.
• Issuing convertible bonds is clearly a bad decision for Microport, which chose to sacrifice the interests of minority shareholders. Together with weak fundamentals/cashflow pressure, the management needs to take responsibility.

• A Senate committee moved the bill (S.3558) forward that would prohibit pharmaceutical companies from using foreign service providers like WuXi AppTec and its subsidiaries. However, rational voices are still expected.
• Seemingly conflicting proposals are mostly “noise” and disturbances to stock prices. This means in the future, we‘ll see stock prices move sharply again due to latest developments on these bills.
• WuXi AppTec should have “bottom-line thinking” and prepare some “backup solutions”.Investors don’t need to be overly pessimistic, because when global capital flows reverse, no one will mind these bills anymore.

• Pro Medicus Ltd (PME AU) reported record high revenue and net profit in H1FY24. The result was largely driven by a 37% YoY increase in revenue from North America.
• In H1FY24, PME won four key contracts. These contracts have a total contract value of A$200M (at committed minimum exam volumes) with contract terms ranging from 7 to 10 years.
• PME believes H2FY24 will be stronger than H1FY24. Assuming key contracts up for renewal are renewed at same rate, PME sees forward revenue of >A$608M over the next five years.   

• Classys is one of the top beauty medical device companies in Korea. Classys’ main products include Shurink Universe and Volnewmer.
• We have a positive view of Classys (214150 KS). Classys is trading at relatively reasonable valuations, considering the company’s strong growth in sales and profits.
• On 28 February, Classys announced a shareholder return amount of 38 billion won (including share cancellation of about 25 billion won and dividend payout of 13 billion won).

• Jazz Pharmaceuticals reported a strong financial year in 2023, with overall revenues surpassing $3.8 billion.
• This performance was primarily driven by the growth of key products in the company’s portfolio – Xywav, Epidiolex and Rylaze, which collectively accounted for a 27% year-over-year increase in revenue.
• The company’s sleep therapeutic area contributed more than $1.9 billion in annual revenue, indicating a strong demand for its offerings given the high prevalence of sleep related disorders.

• In December 2023, American multinational pharmaceutical company Bristol Myers Squibb has agreed to acquire Karuna Therapeutics for $330 per share in cash, implying a total equity value of $14B.
• The special meeting of Karuna’s shareholders to be held on March 12, 2023, to consider and vote on various proposals necessary to approve upcoming M&A deal.
• I expect the bidding battle among big pharma to acquire Karuna Therapeutics and its valuable pipeline of transformative medicines to treat schizophrenia and psychosis in Alzheimer’s disease.

• As per the Q1 2024 Cooper Companies earnings, the company reported an outstanding start to the fiscal year with record quarterly revenues of $932 million.
• CooperVision rolled in solid growth worldwide, while CooperSurgical recorded its 13th consecutive quarter of double-digit organic growth.
• The firm’s earnings were equally strong, with capacity expansion progressing well and demand remaining healthy globally.

• Viatris Inc.
• reported its Q4 and Full Year 2023 Earnings with strong operational results, showing revenue growth for the third consecutive quarter.
• As Viatris begins 2024, it continues to generate strong free cash flows that provide the flexibility to balance capital return to shareholders and strategic investments for future growth.

• Veeva Systems posted robust results for its Q4 and Fiscal 2024 year during its earnings call.
• Revenues for the quarter totalled $631 million and for the year they were $2.4 billion, both exceeding guidance.
• Non GAAP operating income surpassed expectations too, with $239 million for Q4 and $843 million for the full year.

• Eisai Co Ltd (4523 JP) has come out with ambitious revenue target for Alzheimer’s disease drug Leqembi with new estimates for global eligible patient population and potential indication expansions.
• By FY27, Eisai expects Leqembi can generate revenue of ¥290B (~$2B) worldwide. Leqembi revenue can potentially ballooned to a whopping ¥1.6T (~$10.8B) by FY33, according to the company.
• Through January, Eisai could reach just 2,000 patients in the U.S. versus target of 10K patients by March. The sluggish progress of Leqembi makes Eisai’s target difficult to achieve.

• Due to large patient population and strong clinical demand for new therapies, the future commercialization prospects of effective drugs in the field of schizophrenia would be relatively certain and promising.
• Our forecast on the peak sales of KarXT is about US$10 billion. In other words, at this peak sales level, BMS is able to recover the US$14 billion in cost.
• Karuna’s P/B is much higher than peers. If investors already have Karuna in portfolio, they may consider taking profits in time.But another rally is possible when KarXT is officially approved.

• Bristol Myers Squibb Co (BMY US) is acquiring Karuna Therapeutics Inc (KRTX US) for $330/share in cash for equity value of ~$14B. The transaction is expected to close in 1H24. 
• Karuna’s lead asset, KarXT has FDA action date of September 26, 2024 for the treatment of schizophrenia in adults. KarXT has peak annual sales potential of $6–7B.
• Considering strong clinical efficacy and favorable risk profile of KarXT, the deal seems to be fairly valued. Current market price of Karuna shares of $318.41 represents absolute spread of ~3.6%.

• Agilent Technologies Q1 2024 earnings were decent.
• Mike McMullen, the outgoing President and CEO of Agilent, announced his retirement and new CEO-elect, Padraig McDonnell took charge of the company.
• Agilent reported Q1 revenue of $1.66 billion, which represents a decrease of 6.4% against the same period the previous year.

• Henry Schein’s financial results for the fourth quarter and full year of 2023 demonstrated a robust recovery from a significant cybersecurity incident, showcasing the resilience of their business model and the steadfast loyalty of their customers.
• Notably, Henry Schein reported strong growth in its technology and value-added services businesses, a key strategic focus for the company.
• Global sales of implants and biomaterials also showed significant growth, largely driven by strategic acquisitions that expanded the company’s offering and market presence.

• This is our first report on biopharma major, Intra-Cellular Therapies.
• The company reported solid progress in its Q4 and FY2023 results, marking a year characterized by steady growth across the company.
• Central to the year’s success was the establishment of CAPLYTA as a vital treatment option for bipolar depression and schizophrenia.

• MariMed reported 4Q revenue of $38.9 million, which was exactly in line with our estimate.
• This represents a 0.26% increase Q/Q and an 8.66% improvement Y/Y. Gross margins were 44.47%, a gain of 1.80% sequentially and 0.34% Y/Y.
• Revenue was helped by a full contribution from the Thrive Dispensary in Casey, Illinois and beginning operations at the Mt. Vernon, Illinois manufacturing facility. 

• This is our first report on Penumbra, a global healthcare major.
• The company reported its fourth quarter and annual earnings on its conference call.
• The company made a revenue of USD 284.7 million in Q4, marking a year-over-year increase of 28.7%, while their annual revenues for 2023 reached USD 1,058.5 million, a 25% increase compared to 2022.

• With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
• We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
• The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.

• UMP Healthcare (722 HK) delivered a slow start to FY24, with revenues up 2.3% YoY and profits down 63% YoY, due to sluggish demand in Hong Kong. 
• The company cut dividend for H1 FY24 by 25% to 1.3 HKD cents/share. Net cash on the balance sheet remained healthy at 265 mn HKD representing 64% of market capitalization.
• The company is implementing stringent cost control and we believe that a slow turnaround and a 9-10% dividend yield is very probable at these levels. 

• Pharmaessentia Corp (6446 TT) starts 2024 on a strong note, with revenue for first two months rising 103% YoY to NT$1.1B. The company is expected to become profitable this year.
• China approval of Besremi, which is expected this year, can be a major near-term catalyst. Indication expansion of Besremi in the U.S. is anticipated in next year.
• Pharmaessentia’s revenue is forecast to grow at an average rate of 55% per annum over the next two years. The company’s pipeline is progressing, thereby enhancing visibility beyond Besremi.

• In a recent discussion with a client, one of the questions that was raised was regarding the impact the local investors are having on the corporate governance reforms in Korea.
• The number of local investors in the Korean stock market has jumped in the past few years from 5.3 million in 2017 to 14.4 million in 2022.
• All in all, I think Korea is about 3-5 years behind Japan in various corporate governance reforms. So it has a lot of catching up to do.

• Xunfei Healthcare Technology (XHT HK) is looking to raise around US$200m in its upcoming Hong Kong IPO. The bookrunners on the deal are Huatai International, GF Capital, and CCB International.
• Xunfei Healthcare Technology (Xunfei), a iFlytek (Shenzhen-listed) spin-off, primarily provides solutions covering the full healthcare service cycle, with products and services mainly catered towards major stakeholders in the healthcare industry.
• Backed by its healthcare AI solutions matrix, the firm ranked first in the healthcare AI industry in terms of revenue in China in 2022, according to Frost & Sullivan (F&S).

• Innovent’s 2023 product revenue was RMB5.7 billion. In 2024, product revenue growth would remain strong (e.g. 35% YoY).The main flashpoint for performance is after the approval of mazdutide in 2025.
• Innovent has started paving the way for mazdutide more than a year in advance and building various channels.Normally speaking, mazdutide could get the approval in 25Q2. Its CDMO is Asymchem
• Share price of Innovent was once dragged down by the CXO plunge due to the US Draft Bill, but unlike CXOs, innovative drugs do not involve supply chain security issues.

AFT continues to focus on expanding its product portfolio and broadening its geographical footprint (including increased investments in its affiliates), which we expect to translate into stronger market traction and an increased top-line for AFT over the medium term. The company has updated the market on its international growth efforts, announcing new manufacturing agreements for Maxigesic Rapid and Crystaderm (ahead of their expected launches in the US and Chinese markets, respectively) and partnership expansion with Hikma (its US licensee of Maxigesic IV) to commercialise Combogesic IV in Saudi Arabia, Iraq and Jordan. Concurrently, AFT has made inroads into the UK market through the recent launch of Combogesic tablets and IV.

ORY FY23 results announcement covered an eventful period for the company’s pipeline, capped by the release of top-line data from the Phase IIb PORTICO trial for lead CNS asset vafidemstat. With the focus squarely on the planned end of Phase II (EoP2) meeting with the FDA and anticipated clinical updates on the remaining programmes, we see FY24 as a crucial period for the company, with multiple inflection points. Other key upcoming milestones include results from the FRIDA trial (iadademstat in FLT3+ r/r acute myeloid leukaemia; expected in Q224) and a clinical timeline update from the EVOLUTION trial (vafidemstat in schizophrenia; expected in 2024). Based on the current status of the company’s programmes and improved visibility, we have adjusted our market strategy, launch timelines and valuation across the company’s pipeline, leading to a valuation reset to €11.8/share (€15.1/share previously).

• Although people acknowledged BeiGene’s performance, it still makes us uneasy about a long-standing question: When will BeiGene be profitable?With current cost structure, there’s at least two years left until breakeven. 
• BeiGene’s internationalization only proves decent increase in revenue, but it doesn’t yet verify its profitability.SG&A expense ratio completely deviates from the normal state of Biotech with over US$2 billion sales.
• If BeiGene indeed has a plan to turn loss into profits, besides maintaining a high growth rate in sales, reasonable optimization in cost and expenses is the most basic “sincerity”.

• IHH Healthcare (IHH MK) reports 11% YoY increase in 4Q23 revenue, due to higher patient volumes and revenue intensity across all markets, with all business segments and markets registering growth.
• 4Q23 EBITDA remained flat at RM1.1B and PATMI (excluding extraordinary income) fell 22% YoY.
• The company remains on track to add close to 4,000 beds across all its major markets, including Malaysia, India, Europe, and Hong Kong to its existing 12,000 beds by 2028.

• In the current challenging environment, investors should prioritize pharmaceutical companies with abundant cash flow and Biotech with diversified funding sources, as their safety margin is much higher.
• After the “clamor of consumer upgrading” fades away, we will eventually realize that the so-called pricing power has never belonged to anyone or any enterprise, but always to consumers.
• Hengrui is overvalued. There’re still around RMB5 billion generic drugs yet to enter VBP scope. So, the assumption that all negative effects of VBP have cleared up is not correct.

• In the past few years, a big problem of Taiji is weak performance/low valuation. The main purpose of mixed-ownership reform with CNPGC is to improve operational efficiency and enhance profitability.
• CNPGC made a clear commitment to solve the horizontal competition issue. So, after the privatization of China TCM is completed, it’s worth noting whether it will be merged into Taiji.
• 2024 is expected to see Taiji launch new M&A deals, which would bring a qualitative leap for Taiji. Market value of Taiji is expected to at least double. 

• In the Q4 earnings, Merck & Co.
• reported a strong financial performance, underpinned by a robust demand for their innovative portfolio, including Keytruda, Welireg, and Gardasil, among others.
• The company has embarked on various collaborations further bolstering its product pipeline with a promising line of innovations.

• BioMarin Pharmaceutical recorded a 20% revenue growth in the fourth quarter of 2023 compared to Q4 of 2022.
• The company gained total revenue growth of 15% for the whole of 2023 versus the prior year.
• Non-GAAP earnings per share rose by 48% in Q4 2023, representing a 36% year-over year increase.

• Insulet Corporation reported strong Q4 2023 results, marking its eighth straight year of 20-plus percent revenue growth.
• The company’s automated insulin delivery system, Omnipod 5, played a significant role in its financial success as it generated $1 billion in revenue in 2023.
• The achievement of approximately 425,000 global customers using the Omnipod platform represented a growth of around 25% from the previous year, including almost 250,000 using the Omnipod 5.

• Teleflex Incorporated’s fourth quarter 2023 earnings were decent.
• Firstly, the revenues grew at 2.1% year-over-year, showing the company’s overall financial robustness.
• Additionally, Teleflex saw a stable-to-improving environment for material inflation and supply chains, with continued improvements expected through 2024.

• Celltrion Inc (068270 KS) has reported 12% YoY growth in its core business of biosimilars in 2023. Growth was mainly driven by new portfolios including Remsima SC and Yuflyma.
• Operating profit and operating margin improved slightly YoY, led by an increase in high-margin biosimilar sales. Biosimilar products contributed 67% of total revenue in 2023, up from 57% in 2022.   
• The company is targeting more than 60% global sales growth to KRW3.5 trillion in 2024. Celltrion is eyeing KRW1.6 trillion EBITDA and more than 40% EBITDA margin in 2024.