Healthcare

• Taisho Pharmaceutical Holdin (4581 JP)’s MBO JPY8,620 offer closes on 15 January. Since announcing the offer, the shares have traded above terms for 21 out of the 30 trading days.
• Japan Catalyst has called the offer’s P/B of 0.85x too low. While shares trading above terms does not guarantee that the tender fails, it does increase the risk of failure.
• The offeror has no compelling reason to bump as other activists have not publicly supported Japan Catalyst, the high 55.5% premium to undisturbed price and an achievable minority acceptance rate. 

Shield Therapeutics has appointed Santosh Shanbhag as chief financial officer (CFO) and member of the executive leadership team. Mr. Shanbhag was previously the CFO of Nasdaq-listed Akili, which he helped grow and take public. Before Akili, he held senior finance positions at Vertex Pharmaceuticals, where he worked on business and corporate development and helped secure reimbursement for novel drugs in key international markets. We expect Shield to leverage Mr. Shanbhag’s US healthcare experience, which should support the company in optimising pricing and expand payor coverage for Accrufer.

• Six+ weeks ago, the founding family which controls a 33% stake in cash-rich Taisho Pharmaceutical Holdin (4581 JP) announced a Tender Offer MBO to buy out minorities.
• ¥8,620/Share is 0.85x PBR but the takeover is at 0.72x operating assets with net debt at zero That’s low – comps are 2+x book and twice the EV/EBITDA ratio.
• But the scourge that is cross-holding investors blindly following management means they have 61-63% before this gets started, and only one small firm has voiced an objection.

• Pro-Dex specializes in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets. 
• Pro-dex has patented adaptive torque-limiting software and proprietary sealing solutions which appeals to their customers, primarily medical device distributors
• They also manufacture and sell rotary air motors to a wide range of industries.

• After 23H1 results were released, we have seen some positive business progress in internationalization. There has been no obvious negative news about performance. Acotec’s future prospects are still relatively optimistic.
• Contrary to solid fundamentals, Acotec’s stock price continues to decline. The sluggish stock price performance is not directly related to fundamentals, but rather to poor liquidity and unsatisfactory capital inflows.
• Stock price hasn’t bottomed yet, so investors’re not advised to rush to buy the dip.For market value management, Acotec’s management need to invest more energy/time to maximize shareholder value/investors’ returns.

Oryzon Genomics has announced top-line results for the Phase IIb trial (PORTICO) assessing vafidemstat in borderline personality disorder (BPD), and while the primary endpoints (Borderline Personality Disorder Checklist (BPDCL) and Clinical Global Impression – Severity Agitation/ Aggression (CGI-S A/A)) did not reach statistical significance, vafidemstat was favoured over placebo in all efficacy measures, with nominal statistical significance in two key secondary endpoints (Borderline Evaluation of Severity (BEST) and State-Trait Anger Expression Inventory 2 (STAXI-2) Trait Anger). Further, the drug was found to be safe and well-tolerated, consistent with prior studies. Management plans to conduct a detailed analysis of the trial data across the coming months and intends to request an end-of-Phase II (EoP2) meeting with the FDA in early Q224 to discuss a potential registrational Phase III programme. There are currently no approved drugs for this indication and hence gold-standard endpoints are yet to be established. We therefore believe that there is still a significant opportunity for Oryzon in this space, however, further clinical progression will be heavily reliant on the EoP2 meeting request and outcome.

• Following last week’s pullback, a consistent theme we are seeing is that many broad market indexes and Sector ETFs are holding above (and bouncing at) major base supports.
• As long as these base supports continue to hold, it tells us this is likely just a normal pullback within the overall bullish trend.
• Important supports that we need to see hold in order to remain bullish include 4600 on the S&P 500 and 14,400 on the Nasdaq Composite.

• IVF Hospital’s profitability and growth momentum look good at this stage, but the Company is still in early stage of development, with obvious gap with leading players in the industry.
• IVF penetration rate in China is not high and the rate of improvement is slow. With public hospitals accounting for over 90% market share, IVF Hospital’s growth space is limited.
• Licensing is a big barrier for development, slowing down the pace of nationwide expansion. The “good story” should be based on internationalization, which is actually the weakness of IVF Hospital.

• Through November 2023, Bora Pharmaceuticals (6472 TT) reported revenue of NT$13.2B, up 50% YoY. Going ahead, we are upbeat on both CDMO and pharmaceutical businesses of the company.
• Bora’s foray into branded pharmaceutical market in U.S. should add a new revenue driver and improve margins. Generic portfolio should benefit from new launches amid better pricing environment.
• Through the first nine months of 2023, Bora has added 13 new customers and 28 new products to its CDMO business. Both the numbers are way above full-year 2023 forecast.

• Aspira Women’s Health hosted an R&D Day and discussed updates on its non-invasive diagnostic platforms for ovarian cancer and endometriosis.
• CEO Nicole Sandford led the discussion, and was joined by Chief Scientific Officer Dr. Jody Berry, PhD, and one of Aspira’s medical advisors and research partners, Dr. Kevin Elias, MD.
• Aspira also discussed the domestic market potential for both ovarian cancer and endometriosis products, which it estimates is more than $1.5 billion.

Edison Investment Research is terminating coverage on Kinarus Therapeutics (KNRS), Numis Corporation (NUM), EMIS Group (EMIS), Pixium Vision (PIX) and Treatt (TET). 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 website

Edison Investment Research is terminating coverage on Kinarus Therapeutics (KNRS), Numis Corporation (NUM), EMIS Group (EMIS), Pixium Vision (PIX) and Treatt (TET). 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 website

• With a few weeks to go in the review period, CGN Power (1816 HK) and Yankuang Energy Group (1171 HK) could be added to the ETF in March.
• China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK) are potential deletions while there is another stock close to deletion zone.
• There are a lot of shorts on Yankuang Energy in terms of days of ADV and as a percentage of float while short interest on the other stocks is lower.

• Riding on multiple export contracts, Caregen Co Ltd (214370 KS) was confident of achieving KRW60–100B revenue from ProGsterol in 2023. However, during 9M23, ProGsterol clocked revenue of KRW8.5B.
• ProGsterol should rebound in this year, with the resumption of registration process in each country. Direct entry in the U.S. should be the strong catalyst for ProGsterol revenue this year.
• Caregen is developing an eye drop for wet macular degeneration. This is in phase 1 trial. The compay is preparing for phase 2 trial for COVID-19 nasal spray in Israel.

• Innovent has launched head-to-head phase III clinical trial of Mazdutide and Semaglutide. If the challenge is successful, it will have milestone significance. Domestic sales of Mazdutide will look very promising.
• Innovent received negative news on CEACAM5 ADC/KRAS G12C.When independent R&D cannot be relied upon, Innovent has to seek new sources of growth to make up for the remaining sales gap.
• There’s nothing wrong with Innovent’s development strategy by balancing both success rate and efficiency, although Innovent is hard to become a leader in cutting-edge R&D. We remain optimistic on Innovent.

• WuXi XDC remains our top pick in China healthcare. We’re optimistic about its share price performance. Cansino is stronger than imagined, and we recommend investors to be patient with it.
• The future competitive landscape of GLP-1s would present very different situation from traditional drugs. Innovent’s Mazdutide could be a “dark horse” if the head-to-head trial against Semaglutide is successful.
• For GLP-1s, it will be difficult to shake the first-mover position of the first two giants (Semaglutide and Tirzepatide) unless latecomers are able to show higher marginal benefits.

• Stay long in HS Holdings (8699 JP).But beware. It is possible that there is a slightly uncomfortable outcome. 
• Celltrion Pharm (068760 KS) is up 37% since the Celltrion Inc (068270 KS)/Celltrion Healthcare (091990 KS) merger completed; and Inc is up 22%. That’s A LOT of expectation baked in. 
• NEW NISA details are cute, but governance and corporate buybacks matter more. If better education induces a swing from cash/deposits to risky assets, much of that will happen outside NISA.

• A double dose of stubs this week as Hanmi Science (008930 KS) comes up “cheap” on my monitor.
• Preceding my comments on Hanmi are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Newron has announced positive 12-month data from its Phase II extension trial (study 015) assessing evenamide in 161 patients with treatment-resistant schizophrenia (TRS). The results demonstrate desirable safety and tolerability, as well as durable efficacy of evenamide, showing statistically significant improvements (p-value <0.001) in all key efficacy measures (PANSS, CGI-S and LOF) versus baseline. We believe the results are favourable for Newron’s TRS programme and bolster the company’s plans to launch a potentially pivotal Phase III trial, which management expects to commence in Q224. We note that the company is also gearing up to share results from the Phase III trial (study 008A) for patients with poorly managed schizophrenia in March 2024, which could represent another significant catalyst for investor attention.

• Cloudbreak Pharma, a China-based clinical-stage biotechnology company, plans to raise up to US$200m via a Hong Kong listing.
• In this note, we examine the company’s core products, namely CBT-001 and CBT-009, for pterygium and juvenile myopia respectively.
• We are seeing a lack of convincing sustainable innovation from the company. Pre-IPO investors and management are mediocre.

• Alteogen Inc (196170 KS)‘s first proprietary recombinant human hyaluronidase liquid product, Tergase (ALT-BB4) is currently under approval process in Korea and is expected to receive approval in early 2024.  
• Tergase is a stand-alone hyaluronidase product that can be used for the treatment of various medical conditions, such as pain relief, edema treatment, and hyaluronic acid filler removal.
• Compared to commercially available animal-derived hyaluronidase products in the market, Tergase is a highly purified product of high-quality with very few impurities and an excellent side effect profile.

• After biopharmaceuticals developer and producer Celltrion Inc (068270 KS) recently completed its merger with Celltrion Healthcare (091990 KS), Celltrion Pharm (068760 KS) came (more) into focus.
• Pharma is now up ~37% since Inc and Healthcare merged.
• That’s quite a lot of expectation baked in.  Probably too much.

• First of all, happy new year to all my readers! May 2024 bring market beating returns for everyone.
• Again I managed to underperform my blog stock picks by concentrating in the wrong stocks.
• Although I still ended up over 20% for the year, it was disappointing considering I was getting close to 30% in July.

• The essential difference between QuantumPharm and InSilico in terms of business models is that InSilico is an end-to-end generative AI-driven biotech but QuantumPharm is more of a platform-based service provider.
• It’s difficult for QuantumPharm to achieve significant increase in revenue scale in short time,because the service fee amount is usually not large, and it takes time to accumulate order volume.
• If there is no substantial performance contribution, these good stories would not bring about a sustained leap in valuation. QuantumPharm’s valuation in last funding round before IPO is too expensive. 

• As the saying goes, “sector rotation is the lifeblood of a bull market.” That appears to be exactly what is going on as we kick off 2024.
• Leadership areas that have significantly outperformed since the October 2023 lows are starting to pull back rather hard — and on above average volume (XLK, SMH, IGV, ARKK, IPO, BITQ)
• Other Sectors are picking up the slack, namely Health Care (XLV), Staples (XLP), Utilities (XLU), Energy (XLE), Financials (XLF), and Real Estate (XLRE). Shift exposure toward value and defensives

• Yichang HEC Changjiang Pharma (1558 HK) is set to benefit from the recent upsurge in respiratory illness in China. The company commands ~90% share of anti-flu drug market in China.
• In 1H23, HEC Pharma’s revenue jumped 148% YoY to RMB3.2B, mainly due to spiking flu cases in China. A strong flu season in 4Q23, should boost H2 performance.
• Despite a 43% rally in HEC Pharma share price over the last six months, the shares are trading at forward P/E of just 4.8x.

• We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
• We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• WuXi XDC looks like “an outlier” among domestic CXOs – Its share price has performed well so far. As a niche player, WuXi XDC’s short-term performance growth is relatively guaranteed.
• We analyzed the valuation of WuXi XDC Cayman (2268 HK) under different scenarios. How much upside WuXi XDC’s valuation would have depends on the future real market size of ADCs.
• We’re conservative about whether we could have a US$50 billion ADC market. The “lucky” part for WuXi XDC is the current ADC market brings “a safe window period” for investors.

• Eisai Co Ltd (4523 JP) shares corrected more than 60% from highs over the disappointment from Alzheimer’s disease drug Leqembi. During H1FY24, Leqembi reported revenue of just ¥400M ($3M).
• With approximately 40% revenue contribution, anti-cancer drug Lenvima is the top selling drug of Eisai. In the U.S., Lenvima patent protection will start to expire in US in October 2025.
• In December, Eisai has submitted a marketing authorization application in Japan for tasurgratinib for biliary tract cancer. If approved, tasurgratinob will be a late entrant in a crowded market.