Healthcare

• Terumo Corp (4543 JP) posted highest ever quarterly and YTD revenue and operating profit in Q3FY24. Double-digit growth in C&V and TBCT businesses are the main revenue growth driver.
• During 9MFY24, gross profit margin expanded 50bps YoY to 52%, while operating profit margin improved 40bps to 15.5%. Profitability improvement through price increases and cost reduction is on track.
• Terumo has revised both FY24 revenue and profit upward to reflect continuing positive impacts from yen depreciation. The company is aiming for record high revenue and profit in FY24.

• China Traditional Chinese Medicine (570 HK) (“TCM”) is the traditional Chinese medicine arm of SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), one of the largest healthcare groups in China.
• By my reckoning, TCM has fielded three Offers in the past decade, all from Sinopharm Hongkong, an indirect wholly-owned subsidiary of CNPGC and TCM’s major shareholder.
• TCM was suspended “pursuant to the Code on Takeovers and Mergers” earlier today. The Real McCoy? A no-deal again from CNPGC/Sinopharm? And why didn’t the last Offers complete?

• Agilus Diagnostics Limited (SRLL IN) is looking to raise around US$200m in its upcoming India IPO.
• Agilus Diagnostics Limited (Agilus) is a diagnostic testing service provider.
• In this note, we look at the company’s past performance.

• Demonstrating dependable growth – Q1-3 FY3/2024 results were in line with company guidance, driven by a combination of demand recovery in the Americas, sustained growth for Shofu’s competitive Chemical Products (CAD/CAM resin materials and restorative filling materials), and a forex tailwind – overseas sales made up 57.4% of total sales, indicating stable progress towards the long-term target of 66.0%.
• Shofu’s focus on business investment in R&D, recruitment, and sales activities has resulted in a limited growth profile at the operating profit level for the period (+3.9% YoY), but we believe a boost in sales volume will drive a margin enhancement into Q4 FY3/2024 and beyond.

• Americas and China gaining momentum – the highlight for Q1-3 FY3/2024 was sales growth in North America & Latin America growing 4.1% YoY versus a 4.5% decline in Q1-2 FY3/2024. China also maintained strong momentum with sales growth of 16.5% YoY, and Europe remained steady at 16.8% YoY

• Entero Healthcare Solutions Limited (2294842D IN) is looking to raise US$193m in its India IPO.
• Entero Healthcare Solutions (Entero) is a healthcare products distributor in India.
• In this note, we will look at the RHP updates, undertake a peer comparison, and share our thoughts on valuation.

AFT Pharmaceuticals has announced the launch of Maxigesic IV, an intravenous form of its flagship pain relief prescription medicine, in the US market by licensing partner Hikma, under the brand name Combogesic IV. This is a major milestone given the market size (largest analgesic market, estimated at c US$7bn) and strategic importance in supporting management’s international growth plans. Commercial sales following the launch will trigger a milestone payment of US$6m from Hikma (65:35% split between AFT and partner Hyloris), which will be recorded (c NZ$6m) in FY24, sooner than our estimate of early FY25, and should provide a boost to management’s NZ$22–24m operating profit guidance.

• Stryker Corporation presented impressive financial results during their recent earnings call, driven by a robust demand for both procedures and capital, strong pipeline production, and the easing of macro constraints.
• The company exceeded $20 billion in sales, marking another high-growth year, and reported over 11% sales growth in Q4 and for the full year.
• Margin recovery continued as well, with a 13% compared to the full year of 2022, due to strong sales.

• Thermo Fisher Scientific was able to engage in strong execution and display solid operational discipline in 2023.
• For that year, the company reported a revenue of $42.9 billion, an adjusted operating income of $9.81 billion and adjusted earnings per share of $21.55.
• Thermo Fisher Scientific attributes these achievements to its efforts of delivering differentiated short-term performance while also strengthening its long-term competitive position.

VolitionRx continues to make headway in growing a body of clinical evidence to build Nu.Q® NETs as a potential breakthrough tool in sepsis. These efforts, coupled with its CE mark in Europe, are a strong foundation in rapid and simplified sepsis detection that seeks to address the limitations and complexities of the current standard of care. Sepsis (immune-system triggered organ dysfunction) has a worrisome prevalence, affecting c 50 million per year with a mortality rate of c 20–25%, exceeding the combination of many leading cancers. Further, every hour of delayed treatment increases the chances of mortality of this preventable condition by c 8%. In this note we recap VolitionRx’s recent clinical updates, as we look forward to near-term improvements in early sepsis detection.

• GSK’s performance in 2023 has demonstrated strong growth, with sales and profits excluding COVID solutions rising by double-digit levels.
• Sales increased by 14% to over GBP 30 billion, with adjusted operating profit up by 16% and adjusted EPS up by 22%.
• This strong performance enabled the company to upgrade their guidance for 2023, and they have now announced an increased dividend of 58p per share.

• HCA Healthcare Inc.
• had a robust fourth quarter in 2023, which exceeded expectations across most business dimensions.
• Demand for services remained high across the company’s diverse portfolio.

• Bloomberg reports that Sinopharm is reviving its interest in privatising China Traditional Chinese Medicine (570 HK)/CTCM. Sinopharm has contacted banks about financing and is considering partnering with other investors.
• Sinopharm’s best bet is to partner with Ping An Insurance Group of (601318 CH) and privatise through a scheme. In this scenario, no disinterested shareholder would hold a blocking stake.
• Due to Sinopharm’s previous privatisation attempts, shareholders will be wary of the latest rumour. Nevertheless, the valuation is undemanding compared to peer multiples.

• We once again heard privatization rumor of China TCM, but China TCM denied it at this stage. We still recommend investors to remain vigilant until receive definite official announcement.
• One important background of privatization is the integration of SOE carried out in recent years. We do not rule out the possibility that Taiji Group would drive this privatization.
• It may not be an optimal time for the proposal of privatization by major shareholders. Other shareholders may not want to give up high-quality stocks, which makes privatization challenging.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Hangzhou Tigermed Consulting C (3347 HK), East Buy Holding (1797 HK) and Kingkey Financial (1468 HK).

• Chugai Pharmaceutical (4519 JP) reported 5% YoY decline in core revenue in 2023, due to the decrease in the supply of COVID-19 treatment Ronapreve to the government.
• For 2024, Chugai expects core revenue to decline mainly due to the absence of Ronapreve revenue and decline in Actemra export. However, operating and net profits are expected to increase.
• Hemlibra export and new launches such as Vabysmo, Phesgo, Polivy, and Alecensa are expected to drive long-term growth of the company.

Immix Biopharma has announced a $15m (gross), fully underwritten equity issue. The company will use the proceeds to fund clinical trials for lead CAR-T asset NXC-201, as well as to meet working capital and general corporate needs. Immix had a net cash balance of $19.6m at end September 2023 and we estimate that this capital injection will potentially extend the cash runway to end FY25 or early FY26, past the top-line readouts from its Phase Ib/IIa clinical trials for NXC-201 (NEXICART-1), which, if positive, could pave the way for a partnering deal. We view the release of further rolling data from the trial and first patient dosing in the US (NEXICART-2) across H124 as potentially key upcoming catalysts for the company.

• Novartis offers an agreed €68/share, 89% premium, for MorphoSys AG (MOR US) in a bet that pelabrisib could become a blockbuster to treat myelofibrosis (possibly reaching peak sales of $1.1-1.5 billion).
• Considering that the shares of Morphosys were trading in the low teens in November, I believe that shareholders will be happy to part with the shares.
• Spread (gross/annualised) is 4.65%/18.09% (assuming settlement by 20 May). Novartis believes pelabrisib is definitely worth the risk. Long.

• CMS’s way of in-licensing products has shifted from CSO model to asset-purchase model so as to enhance control on the assets. But the transformation hasn’t been recognized by the market.     
• Despite outstanding fundamentals, CMS’s valuation remains low. Doubts about the Company’s real R&D capabilities/core competitiveness and the negative image due to past financial fraud could be the reasons.
• CMS would encounter performance headwinds in 2023/2024 due to VBP, but revenue/profit growth is expected to pick up in 2025. It’s still a good defensive choice in a bear market.

• Concord Biotech Ltd (658823Z IN) listed in India on 18th Aug 23 after raising US$188m. The IPO had been a 100% secondary selldown with Helix Investment selling its entire stake.
• Concord Biotech (Concord) is an India-based biopharma firm, which develops and manufactures fermentation-based active pharmaceutical ingredients (APIs).
• Coming up for six-month lockup expiry on 7th Feb 24 are the firm’s pre-IPO shareholders, along with a portion of its promoters’ stake.

• Singapore-based health sciences VC firm SPRIM Global Investments has led the US$21 million funding round (equity and debt) of Australian biotech firm Prota Therapeutics.
• The fresh funding will be used to advance the development of Prota’s peanut allergy remission oral therapy, PRT120, which is being prepared for the phase 3 clinical investigation.
• The new investment will advance the chemistry, manufacturing, and controls (CMC), accelerate the path to an investigational new drug application (IND), and expand Prota’s executive management team to bring on board critical expertise in late-stage drug development and commercialisation.

• In the Q2 FY2024 earnings for ResMed, the company registered strong execution across its entire business, reflecting in double-digit top and bottom-line growth.
• The results were primarily driven by double-digit global growth in both devices and its Software as a Service (SaaS) business.
• ResMed is addressing a significant problem considering there are over 2 billion people worldwide suffering from sleep apnea, chronic obstructive pulmonary disease, respiratory insufficiency resulting from neuromuscular disease, or insomnia.

• Based on the latest updates, it’s still uncertain to see a positive turnaround.There’ve been no effective ways to evade.Debate about restricting Chinese biopharmaceuticals has never gone away in US politics.
• Nobody can say with 100% certainty whether the Bill will be passed/how much impact it will have. Until the dust settles, any rebound in share prices is difficult to sustain.
• The market is preparing for the worst-case scenario, but if the final Bill is less stringent than expected, shares of WuXi AppTec and its subsidiaries would rebound.Here’re different bottom-fishing strategies.

• Genetic Design and Manufacturing Corporation (GDMC), a design and manufacturing organisation focusing on next-generation advanced genetic therapies, has secured US$21 million in Series A funding.
• Asian private equity firm Celadon Partners led the round, which also saw participation from WI Harper Group, SEEDS Capital, and NSG Ventures.
• The funds will be used to accelerate novel technology and process efficiency improvements to drive greater manufacturing cost reductions for partners who aim to advance medicines through clinical trials and towards commercialisation.

• If there’s ultimately substantial negative policies in the field of biopharmaceuticals between China and US, APIs will be the segment with the highest risk. But CXO would also be affected.
• Now we have entered the harvest period after the previous peak of financing round in China’s biotech industry, which has become a concentrated “peach picking period” for foreign pharmaceutical enterprises.
• Considering the low market sentiment, we’re cautious on companies with high valuation elasticity before they come up with convincing products. So, we don’t recommend investors rush to bottom-fish CSPC Innovation.

• Intuitive Surgical enjoyed a strong 2023, seeing increasing use of its platforms in hospitals and improvement in system capacity to manage growth.
• Full year growth for procedures was 22%, led by general surgery in the US and diverse growth in international markets such as Germany, France, the UK, and Ireland.
• However, there was a slowdown in growth across bariatric procedures due to the use of GLP-1 drugs for obesity.

Edison Investment Research is terminating coverage on Atlantis Japan Growth Fund (AJG), Paradigm Biopharma (PAR), The European Smaller Companies Trust (ESCT), The Brunner Investment Trust (BUT), Channel Islands Property Fund (CIPF), Sequana Medical (SEQUA), RTW Biotech Opportunities (RTW), Itaconix (ITX), Endeavour Mining (EDV), Riverstone Credit Opportunities Income (RCOI) and Molecure (MOC). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our website.

• Recently Avrobio (AVRO) announced a reverse merger with Tectonic Therapeutic, which was a bit unexpected.
• And disappointing. From what I have read from people more knowledgeable about biotechs, they have some promising treatments in development with pretty impressive insiders.
• But I have no idea how to value this. Net cash will be <$1/share post merger so I am closing this with a small loss at $1.25.

• M3 Inc (2413 JP) reported 3QFY03/2024 results today. Both revenue and OP decreased 1.6% and 7.5% YoY respectively and fell below consensus estimates.
• Medical Platform’s revenues declined YoY while overseas segment’s top line growth has been slowing down raising concerns over m3’s growth prospects.
• Given continued decline in earnings, it seems that m3 will struggle to meet its full-year guidance suggesting there is further downside.

• Li Ge has begun increasing his holdings, but we’re not sure whether this move is really confident about the prospects of WuXi Bio, or another buy low sell high/capital operation.
• The actual situation of WuXi Bio is not necessarily optimistic. Due to geopolitical risks, WuXi Bio has to start striving for more domestic orders. However, price reduction seems inevitable.
• Although WuXi Bio released optimistic expectations for 2024 project number/outlook, there may be another announcement of lower-than-expected performance in the future,which would be a devastating blow to investors’ confidence/management’s credibility.