Healthcare

• Pyridam Farma (PYFA IJ) is acquiring Probiotec Ltd (PBP AU), a leading contract manufacturer and packer of prescription and OTC pharmaceuticals, complementary medicines, consumer health products, and FMCG.  
• Under the terms of the scheme, Probiotec shareholders will receive cash consideration of A$3.00 per share. This implies an equity value of ~A$251M for Probiotec and enterprise value of ~A$326M.
• The acquisition will add an attractive high-margin revenue stream to Pyridam. Through the acquisition of Probiotec, Pyridam will be capable to reach a wider market, thereby increasing its market share.

• Ministry of Finance and National Health Commission issued new policy strictly prohibiting public hospitals from borrowing to purchase medical equipment, which will change the investment logic of medical device sector.
• “PD-1+ADC” is expected to replace “PD-1+chemotherapy” as the first-line standard therapy. This will be a huge market. So, good story of ADC CDMO (such as WuXi XDC) would continue.
• The inspiration that AstraZeneca’s acquisition of Gracell brings to investors is IPO isn’t the only way for exit.Being acquired is also good, which will become more important in the future.

• Cardinal Health delivered a solid result and managed an all-around beat in the last quarter, exceeding expectations and achieving significant milestones.
• Consolidated enterprise results showcased a 10% increase in total revenue to $54.8 billion, primarily fueled by the Pharma segment.
• Despite flat revenue of $3.8 billion in the Medical segment, the company exceeded expectations in Q1.

• The Cigna Group surpassed Wall Street’s revenue and earnings expectations, maintaining the momentum for a sustained year in 2023.
• The company’s health services and benefits platforms continue to demonstrate strength, aligning with its mission to grow and serve effectively.
• They reported a total revenue of $49 billion and adjusted earnings per share of $6.77.

• Eli Lilly and Company delivered a positive result and managed an all-around beat in the last quarter.
• The company reported a notable 37% increase in revenue compared to the same period in 2022.
• Research and development expenses saw a 34% increase, primarily due to higher development expenses for late-stage assets and increased investments in early-stage research.

• Gilead Sciences, Inc. delivered an all-around beat in the previous quarter, showcasing a 5% increase in the base business compared to the same period in 2022.
• Biktarvy achieved a remarkable 12% growth from the corresponding quarter in 2022.
• The increasing adoption of Trodelvy, a TROP-2-directed ADC, and cutting-edge cell therapies further fueled this upward trajectory.

• Illumina delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• Despite lower revenue, non-GAAP net income surpassed expectations at $52 million or $0.33 per diluted share.
• While Core Illumina sequencing consumables revenue dropped 4% year-over-year, clinical sequencing consumables experienced a 10% growth, mitigating the decline.

• Insulet Corporation managed to exceed analyst expectations in terms of revenue as well as earnings.
• During the quarter, their revenue surpassed expectations, driven by the exceptional success of Omnipod 5, the revolutionary automated insulin delivery system.
• Omnipod 5’s impact was evident in accelerated new customer starts, with a remarkable 45% year-over-year revenue growth in the UK.

• Medtronic plc delivered an all-around beat in the previous quarter, delivering mid-single-digit revenue growth across diverse business segments and global regions.
• Cardiovascular, Neuroscience, and Medical Surgical sectors all contributed to this growth, with Diabetes witnessing an acceleration to high single-digit growth.
• Synergistic businesses, encompassing Aortic, Coronary, Cardiac Surgery, and Endoscopy, achieved mid-single-digit growth, with standout performances in various segments.

• Mettler-Toledo International delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• In the third quarter, they reported sales of $942.5 million, indicating a 5% decline in local currency, while US dollar-based sales dropped by 4%, with currency effects contributing a 1% increase.
• In the Industrial business, sales declined 6% in the quarter due to weak core industrial product sales, particularly in China and the Americas.

• Novo Nordisk A/S delivered a strong result and managed an all-around beat in the last quarter, boasting over 30% organic growth in both the top and bottom lines.
• The quarter witnessed an impressive milestone, with the company reaching 40 million people affected by diabetes.
• Financially, the company achieved a remarkable 33% sales growth and a 37% increase in operating profit at constant exchange rates.

• Prodia (PRDA IJ) remains Indonesia’s relatively undiscovered diagnostics leader, with a strong market position, long-term relationships with the medical community, and an increasingly digital edge through its MyProdia app. 
• The compamy continues to experience a high-base effect from COVID but has seen a dramatic increase in tests per visit as patients become increasingly helath conscious. 
• Prodia (PRDA IJ) is significantly cheaper than its Indian comparables, trading on half the valuation, despite being a high-quality player tapping into a large increasingly health-conscious population.

• Kalbe Farma (KLBF IJ) continued to experience a high post-COVID base effect in 3Q2023, with consumer habits shifting to leisure versus health plus there was a softening of consumer demand.
• The company also experienced higher raw material prices and higher operating expenses which depressed margins but expectations are for a recovery in margins in 4Q2023 and FY2024. 
• Kalbe Farma stands out as Indonesia’s largest pharmaceutical company with strong exposure to consumer health and nutritional products with rising health consciousness amongst Indonesians. Valuations do not reflect impending recovery.

• On December 26, Nihon Kohden (6849 JP) shares jumped ~15% as the company was a beneficiary of the ban on Apple (AAPL US)’s latest smartwatch models.
• Nihon Kohden reported better-than-expected result in H1FY24. The company raised FY24 revenue forecast to ¥221.5B (+7% YoY) from ¥215.0B. The company has also raised FY24 operating and net profit guidance.
• Currently consensus expects 2% YoY revenue growth for the company in FY25. With strong demand for existing products and new launches, the expectation seems to be conservative.  

• Sinopharm’s 23Q1-Q3 results were below expectations. The main reason for weak performance was due to the anti-corruption campaign, which led to profound and rapid changes in fundamentals and policy end.
• In Q4, the impact of anti-corruption would weaken and traditional distribution business would recover.So, 23Q4 performance should be better than Q3, but 23H2 performance would still be worse than 23H1.
• We lowered our forecast for 2023 – Revenue and net profit could achieve single-digit growth. Due to the high base in 23H1, growth in 24H1 could still be under pressure. 

• Concord’s financial performance seems improving on the surface,but a closer look reveals that the sudden explosive revenue increase in 2021 was mainly due to an acquisition, with potential risks behind.
• We’ve doubts about Concord’s endogenous growth capability. If Concord’s hospitals cannot make a profit, then any further expansion is just a beautiful story and cannot bring expected returns to investors. 
• Concord conducted a total of four rounds of financing, with a valuation of approximately RMB7.2 billion. However, based on our analysis, its valuation could be lower than peers.

• Thonburi Healthcare Group (THG TB) has underperformed most of its peers over the last six months. Thus far this year, the company’s financial performance also remained unimpressive.
• Despite a healthy 29% YoY increase in normalized medical services revenue, normalized net profit decreased 8% YoY in 3Q23 as the company experienced significantly higher financial costs.
• Although the company is repaying debts, debt level is still elevated and is expected to remain so in the near-term due to upcoming capex plans.

• In the Chinese pharmaceutical industry, stock selection strategies can be divided into “defensive” and “offensive”. We need to combine the judgment of the cycle to choose a stock picking strategy.
• Domestic innovative pharmaceutical companies have the opportunity to create a high gross-margin incremental market of over RMB1 trillion through successful internationalization, but we pointed out the logical flaw behind.
• We analyzed the key points of Hangzhou Tigermed Consulting (3347 HK). It seems insiders don’t have firm confidence in the prospects, so why should investors rush to buy the bottom?

• Drugs maker/packager group Probiotec Ltd (PBP AU) has entered into a Scheme with Indonesia’s Pyridam Farma (PYFA IJ).
• Pyridam is offering Probiotec shareholders A$3.00/share (in cash, or a 19% premium to the undisturbed price). Interim and final  dividends up to A$0.035/share and A$0.04/share, respectively, may be added.
• It has not been declared final. The Offer has the board’s backing. A Scheme Meeting is expected to be held in May with possible completion in early June 2024.

• Probiotec Ltd (PBP AU) has entered a scheme implementation deed with Pyridam Farma (PYFA IJ) at A$3.00 per share, a 19.0% premium to the undisturbed price (21 December).
• Including potential dividends, the total potential offer price is A$3.075 per share. The scheme requires Probiotec shareholders, Pyridam shareholders, FIRB and Indonesia OJK approvals.
• The offer is attractive and represents an all-time high. At the last close, the gross spread of the base offer and total potential offer is 3.1% and 5.7%, respectively.  

Actinogen Medical has opened the first investigational study site for its Phase IIb XanaMIA trial of lead candidate Xanamem in patients with cognitive impairment (CI) associated with mild-to-moderate Alzheimer’s disease (AD). The study plans to enrol c 220 patients, who will be randomised to take Xanamem 10mg or placebo once daily for 36 weeks. The trial will concentrate on Australian test sites for the first 100 enrolled patients, and initial efficacy and safety results will be analysed when these patients reach 24 weeks of treatment. The results, expected in H1 CY25, could serve as a significant catalyst if data are positive. Nearer term, the next material milestone will be results, expected in Q2 CY24, from Actinogen’s Phase IIa XanaCIDD study in patients with CI and major depressive disorder (MDD). A positive XanaCIDD readout may lead to a share price re rating, and thereby may potentially accelerate the expansion of XanaMIA to US and global clinical study sites.

AFT Pharmaceuticals has bolstered its R&D pipeline with the addition of a new product candidate, HY-090, a locally acting novel molecule, targeting Burning Mouth Syndrome (BMS), a condition with no curative treatments. AFT will be developing the asset in collaboration with Hyloris Pharmaceuticals (existing development partner for Maxigesic IV). While Hyloris will be responsible for product formulation, manufacturing and commercialisation in Europe, AFT will take care of clinical trials and related modalities, as well as commercialisation ex-Europe. The US activities will be co-managed by the two partners. HY-090 is one of two R&D assets that was already in active consideration by AFT and diligence work is ongoing for another three. A robust R&D program has always been a focus area for AFT and we believe an active pipeline will be instrumental in driving growth and increasing the company’s international footprint.

Basilea recently expanded its antifungal and antibacterial product pipeline with three new assets, including the latest addition, fosmanogepix. As a broad-spectrum antifungal (including multidrug-resistant fungi), fosmanogepix has a novel mechanism of action, a key differentiator in the rise of antifungal drug resistance. Two Phase III trials are expected to commence in mid- and late-2024 (in candidemia/invasive candidiasis and invasive mould infections, respectively) and a successful launch has the potential to refill the pipeline as the company’s lead asset Cresemba matures. We update our estimates and valuation to reflect the revised FY23 guidance and incorporate the potential contribution from fosmanogepix. Our overall valuation increases to CHF910.4m or CHF76.0/share (from CHF797.8m or CHF66.6/share previously). In the more immediate term, we view the US New Drug Application (NDA) decision on Zevtera (PDUFA date of 3 April 2024) as the next big catalyst for the company.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Synlab’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial”, but Disclosure is “Weak”. 

• HLB Inc (028300 KS) announced that it has decided to transfer listing from KOSDAQ exchange to KOSPI exchange.
• HLB currently has a market cap of 6.5 trillion won and HLB is likely to be included in KOSPI 200 in 2024. 
• One of the key reasons why the company has a large market cap is due to its Rivoceranib liver cancer drug which is being reviewed by the U.S. FDA. 

• Since the ROE has been hovering around the 9% ceiling, the challenge is that few companies could present future outlook convincing enough to raise expectations of sustainable ROE growth.
• Since stable BPS has higher correlation with TOPIX than EPS, investors trust a company that accumulates cash flow in shareholders’ equity to sustainably increase profits than to temporarily increase profits.
• Since it’s been confirmed that Tobin’s Q of companies with more cash on hand is higher, the stock valuations of companies with higher cash flow margins tend to be higher.

• Emcure Pharmaceuticals has re-submitted DRHP to the SEBI for the second time. The IPO consists of a fresh issue of INR8 billion and an offer-for-sale of up to ~14M shares.
• In the re-submitted DRHP, the company has trimmed the sizes of both the fresh issue and OFS. Emcure originally planned to launch IPO its in 2022.
• Emcure has added latest financial performances in re-filed DRHP.  During H1FY24, revenue from India increased only 3% YoY to INR16.4M, due to lower sales of anti-viral HIV products.

• Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
• We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
• Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.

• Pfizer seems to be the worst-performing large pharma stock of 2023 after it lowered 2024 forecast. The Company continues to grapple with plummeting demand for its COVID products
• The acquisition of Seagen can’t turn things around. Except a few products that are still able to maintain growth, sales of vast majority products that we’re familiar with are declining. 
• The growth engine of Pfizer in post-pandemic era is still uncertain. Even though Pfizer’s share price has fallen sharply, this may still not be the time for bottom fishing.

Recce recently reported that the Australian government has committed to providing up to A$55m in future cash rebates to reimburse upcoming R&D expenditure directed towards the company’s proprietary synthetic anti-infective programmes to June 2025. Notably, this binding agreement with the Australian government’s Department of Industry, Science and Resources (AusIndustry) extends the rebate programme that customarily reimburses 43.5% of eligible R&D expenditures incurred within Australia, to cover the anti-infective R&D activities Recce undertakes anywhere in the world. We view this as key given our expectation that US and global clinical trials will be needed to maximise the commercial potential of Recce’s products, notably lead candidate RECCE® 327 (R327). While our model already assumed the Australian government would reimburse 43.5% of Recce’s overseas R&D costs, there was a minor degree of uncertainty on whether this would be the case. Hence, the signing of this binding commitment with AusIndustry helps de-risk future funding needs for Recce as it advances its anti-infective programmes, notably R327 in sepsis/urosepsis and in complicated urinary tract infection (UTIs).