Healthcare

• KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
• The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
• We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.

• YSB would be added to KraneShares CSI China Internet ETF.Cornerstone investors could opt to cash out directly,taking advantage of improved liquidity, which means even they’re not optimistic about YSB’s prospects.
• YSB’s profit margin is disappointing. It would be hard for YSB to deliver decent profits in the end. This business does not make money. YSB is also short of money.
• Since going public, YSB’s share price has been on a rollercoaster, which has deviated from the fundamentals, but it should be pointed out eventually stock prices will return to fundamentals.

• Santen Pharmaceutical (4536 JP) reported double-digit growth in revenue and core operating profit, and triple-digit growth in net profit in H1FY24. Overseas business grew 30% and remained the main driver.
• Santen raised FY24 guidance for the second time due to the stronger-than-expected sales from overseas markets, reviewed impact of generics in Japan, and continued progress in company-wide cost optimizations.
• Recently, the company has received European Commission approval for a new ophthalmic drug for lowering of intraocular pressure (IOP) in open-angle glaucoma and ocular hypertension.

• The “minimum majority of outside directors” is an eye catcher, but it does’t affect most companies because the 1/3 outside director ratio applies if a nominating committee is in place.
• Since companies with majority of independent directors are 12.1% in prime market, the objective becomes to achieve the minimum requirement (1/3 INEDs), and few companies engage in further improving practices.
• Companies with over 50% independent director have extremely superior market values in capitalization, ROE, ROA, and Tobin’s Q. Therefore, the acceleration of increasing independent director ratios should be seriously implemented.

• The sales scale of drugs for autoimmune diseases in China is much lower than that in overseas markets. So, internationalization is inevitable for companies in this industry.
• Qyuns’s candidates have to face fierce competition, with no advantage in R&D progress.Since Qyuns mainly do clinical trials in China, its future valuation is hard to have big expansion potential.
• Many investors may still “live in the illusion” for China biotech. We think Qyuns would not finally transform into a biopharma. Its valuation should be lower than Keymed.

• Kaken Pharmaceutical (4521 JP) reported 2% YoY decline in revenue H1FY24, while operating profit decreased 33% YoY. Top selling products are impacted by NHI drug price revision and increasing competition.
• The company has reiterated FY24 guidance of flat revenue, 5% YoY decline in operating profit, and 23% YoY growth in net profit. Profitability is expected to deteriorate in H2.
• Kaken is not expected to see any immediate respite as the small contribution from the new products will not compensate for the revenue loss from its top selling products.

• Some investors are disappointed with 23Q3 performance, but we think Dong-E-E-Jiao is getting back on track. The de-stocking has achieved great results and pressure on distribution channels has been alleviated.
• Since Dong-E-E-Jiao’s contract liabilities hit a record high, we are optimistic about the performance in 23Q4 and 24Q1. China Resources could further improve Dong-E-E-Jiao’s dividend rate, making it more attractive.
• Since Dong-E-E-Jiao’s performance is continuously improving, valuation still has room to grow. A significant increase in valuation in the short term depends on whether there would be M&A deal emerges.

• Aspira Women’s Health made two reimbursement announcements this week.
• On November 27, Aspira announced that the Centers for Medicare and Medicaid Services (CMS) approved the crosswalk of the fee to be paid to the company for OvaWatch to the fee paid historically for Ova1.
• Aspira will be reimbursed at a rate of $897 for all OvaWatch and Ova1 tests processed for Medicare patients meeting applicable coverage requirements beginning on January 1, 2024. 

• The real value of Sinocelltech Group (688520 CH)’s pipeline will be greatly discounted because in the current context of fierce homogeneous competition, the commercialization performance of latecomers will be bleak.
• Through frequent capital operations, in two and a half years, valuation of Sinocelltech was successfully raised by nearly 300 times. However, the Company’s owner’s equity is negative, with delisting risk. 
• The SSE STAR Market has been full of bubble if compared with HKEX. Sinocelltech has been severely overvalued. We think the reasonable market value of Sinocelltech is around RMB15-20 billion.

• Dentium (145720 KS) earns more than 50% of its total revenue from China. The company’s revenue from China reported a CAGR of 32% during 2018–2022.
• Despite concern over China slowdown and lower ASP due to VBP, in 3Q23, Dentium reported 12% YoY revenue growth in China, similar growth rate reported in 2Q23, driven by volume.
• Economic slowdown is lingering over the global as well as Chinese dental implant sector, especially the premium brands. Dentium is positioned at the upper price portion within the value segment.  

• Since there’s little opposition to the argument that quarterly securities reports should no longer be mandatory, securities reports in 1Q/3Q are almost identical content to the disclosures to TSE.
• To ensure the reliability of the financial statements submitted to TSE, which are replacing current statutory documents, the requirement of review by auditor could be a solution to the problem.
• In this review, the addition of the cash flow statement and segment information in 1Q and 3Q financial statements is very useful and a step forward.

AFT Pharmaceuticals reported solid H124 top-line growth, driven by strong momentum in the Asian and international markets. H124 revenues of NZ$83.6m grew 27.2% from H123, bolstered by 171.4% and 47.8% y o y growth in international and Asian markets. Although margins came in softer than expected (operating margin of 3.9% vs 5.3% in H123) with increased upfront launch, marketing and R&D spending, particularly in the domestic ANZ markets, management expects margins to recover in H2 as the business scales in these newly launched markets. Given the H1 run rate and seasonality (H2-weighted business model), we raise our top-line estimates for FY24 and FY25 but temper near-term operating profit expectations, in line with management’s FY24 operating profit guidance of NZ$22–24m. Longer term, we anticipate a lift from the recent FDA approval of Maxigesic IV. As a result of these adjustments, our valuation resets to NZ$723m or NZ$6.90/share, up from NZ$644m or NZ$6.14/share previously.

Oryzon has secured funding of up to €45m through a revised convertible bond financing agreement with Nice & Green, a Switzerland-based institutional investor, which is anticipated to extend Oryzon’s cash runway to end-FY25. The new agreement supplants the previous €20m convertible bond agreement with Nice & Green, out of which €8m was pending withdrawal. We consider this announcement to be a critical development, especially in light of the overall macroeconomic environment. Management is expected to share top-line readouts from its lead asset (Phase IIb PORTICO trial in patients with borderline personality disorder) in Q124.

• MariMed closed a $58.7 million secured credit facility with a US chartered bank on November 17, 2023.
• The refinancing will result in a $4.7 million reduction to principal and interest expense in the first 12 months and $3.5 million annually for the next four years.
• MariMed estimates its new weighted average cost of debt is now about 8%, down from more than 11% previously.

OSE Immunotherapeutics (OSE) has announced a collaboration with GenDx for the development and validation of a companion diagnostic screening test to support its upcoming Phase III trial for Tedopi, an oncology vaccine for non-small cell lung cancer (NSCLC) in the second-line setting. The simple blood sample and next-generation sequencing test is intended to identify HLA-A*02 positive NSCLC patients who are more likely to respond to Tedopi epitopes. As GenDx is a leading molecular diagnostics company with experience in the human leukocyte antigen (HLA) field, the development of this companion diagnostic test should accelerate the enrolment of eligible patients. OSE’s registrational pivotal clinical trial is to commence in 2024.

• There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
• The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
• Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.

• It is the upfront payment rather than the total or subsequent milestone payments that indicates the gold content of license-out collaborations. We analyzed our criteria.
• Investors actually don’t need to worry too much about the NRDL negotiation results, because the NRDL price of domestic innovative drugs has become relatively stable. There are basically three levels.
• We analyzed key points about China Resources Sanju. Considering the impact of anti-corruption in 23Q3 and the weak performance of TCM formula granules business, 23H2 performance could be under pressure. 

• From 2020 to 2022, Yan Palace has spent RMB831 million on advertising and promotion, while total net profit of the Company during the same period was only about RMB500 million.
• OneNest is the main product with the highest gross margin, which is driven by price increase strategy.However, raising price may not work. Revenue growth in 2023H2/2024 could further slow down.
• The question is are investors really satisfied with such low-margin business for a company with strong consumption attributes? Valuation of Yan Palace should be lower than Dong E E Jiao.

• As expected, the index committee has used a 6-month minimum listing history and that results in one change to the SSE STAR50 (STAR50 INDEX) in December.
• Sichuan Biokin Pharmaceutical (688506 CH) will replace Ninebot (689009 CH) in the index at the close on 8 December.
• One way turnover is estimated at 2.18% and will result in a one-way trade of CNY 3,065m. Sichuan Biokin Pharmaceutical (688506 CH) has moved up and there will be pre-positioning.

• The carryback of pension obligations and expenses resulting from higher bond yields is a factor in the increase in operating profit.
• While this’ll lead to higher EPS, which should lead to higher dividends and more room for stock price appreciation, there’s concern that inflating the B/S will lead to stagnant ROE.
• In addition, since FY3/2024 profits will be boosted by pension financing factors unrelated to the core business, lower profit growth rate in FY3/2025 will put pressure on the stock price.

• Classys (214150 KS) reported solid performance in 3Q23, with revenue and operating profit growing 45% and 41%, YoY, respectively, mainly driven by export in devices and domestic sales of consumables.  
• Despite being an offseason, Q3 2023 witnessed increase in both the number of countries selling the new product Ultraformer MPT and the monthly average domestic sales of Volnewmer.
• Continued improvement in equipment sale and increasing consumables contribution should drive growth in 2024. Entry into the U.S. and China will be the key for re-rating of the stock.   

• Just past the 22-year anniversary of the deal-break from a previous takeover involving the large OTC drug firm, Taisho Pharmaceutical Holdin (4581 JP) announced an MBO Takeover for the company.
• Set at a 55.5% premium, it is not particularly surprising as a deal. The family is rolling in their interests. It looks like estate planning. The Board supports and recommends. 
• Unfortunately, like many recent MBOs, this one is light at 0.85 book where net cash, securities, and net receivables and inventory make up 68% of the takeover price. 

• Taisho Pharmaceutical Holdin (4581 JP) has recommended an MBO tender offer of JPY8,620 per share, a 55.5% premium to the undisturbed (24 November). 
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
• Irrevocables represent a 40.31% ownership ratio. The minimum acceptance condition requires a 44% minority acceptance rate. The offer is attractive vs. historical and peer multiples.

• New Horizon reported a strong 1H2023 results. Company has upgraded its ’23 sales guidance.
• The company will continue to deliver strong sales growth despite recent anti-corruption movement in China.
• We believe that the evidence presented by the recent short-selling report is not sound. We believe the impact is over. 

• There are 17 inclusions and 17 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 14 December.
• While most of the inclusions were expected, there are many differences on the deletes. Trading the strategy becomes tougher with the short sell ban in place.
• The adds have started to outperform the deletes over the last month and there could be more movement over the next 3 weeks to implementation.

• Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
• Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
• Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms. 

• Carenet Inc (2150 JP) is a “medical contents” provider. It acts as a distributor of information to doctors and medical practitioners over the internet, and also consults with pharmaceutical companies.
• On Wednesday, they announced that they were going to move from TSE Growth to TSE Prime as of 29 November.
• At ¥31bn market capand this may turn people off, but it may be a treat for some. There is a reason why there are some big holders.

• In 3Q23, Bumrungrad Hospital Pub Co (BH TB) reported 18% YoY revenue growth to THB6.8 billion, driven by 27% and 20% YoY growth in Thai and expat patients revenue, respectively.
• Revenue from international patients grew 16% YoY, driven by Middle-east and China, which grew 31% and 21%, YoY, respectively. EBITDA, PAT, and their respective margins reached record high in 3Q23.
• Due to heavy revenue exposure in Middle-east, the ongoing tension in the region is acting as a setback. Bumrungrad shares tumbled ~15% over the last one month.

• The same problem underlies the fact that women are more likely to be part-time/ non-regular workers, as well as the lower percentage of management positions and shorter length of service.
• Setting targets and implementing measures for % of female managerial positions is important, since the higher ratio will narrow the gender wage gap, but this alone is not sufficient.
• It’s necessary to ensure that women have the same position in workplace even if they leave the workforce, and to change social systems and people’s mindset to support child care.

• Medtronic Plc (MDT US) reported Q2FY24 revenue of $8B, representing 5% organic growth, topping guidance of 4.0–4.5%. Cardiovascular, neuroscience, and medical surgical grew mid-single-digit with diabetes accelerating to high-single-digit.
• The company now expects FY24 organic revenue growth of 4.75% versus the prior 4.5%. Medtronic raised FY24 adjusted EPS guidance to $5.13–5.19 from $5.08–5.16 earlier.
• In November, the company has received FDA approval for innovative renal denervation device for the treatment of hypertension, which should open a multi-billion-dollar market opportunity.

• After COVID-19, China healthcare has been under pressure for a long time. High interest rate environment is unfriendly to companies, but the current situation is not entirely devoid of opportunities.
• GLP-1s has reignited investors’ interest in this industry, which will be long-term opportunity and bring alpha. With rich domestic/overseas catalysts ahead, related share price performance is worth looking forward to.
• Among the domestic GLP-1s companies, Innovent is our top pick. The “concept validation” of Innovent’s business model has been completed. A qualitative change in the Company is coming soon.  

The FDA has accepted Immix’s Investigational New Drug (IND) application for lead CAR-T asset NXC-201. In our view, this decision from the FDA represents encouraging progress for Immix in delivering, potentially, the first outpatient CAR-T therapy, provided the data continue to be supportive. This regulatory decision enables Immix to start dosing patients with amyloid light chain amyloidosis (ALA) in the US as part of the NEXICART Phase Ib/IIa clinical trial, which has previously been operating in Israel. Further, management has communicated that the favourable tolerability profile of the therapy to date could warrant a potential expansion into autoimmune indications; we await additional updates on this front. NXC-201 has demonstrated a desirable safety and efficacy profile in 72 patients with ALA or multiple myeloma (MM) to date, potentially supporting NXC-201 as the first outpatient CAR-T therapy.

• Legend Biotech Corp (LEGN US) has reported mixed 3Q23 result, with revenue missing and EPS beating consensus. For 3Q23, partner Janssen reported Carvykti worldwide revenue of $152M, up 30% QoQ.
• Legend entered an exclusive, global license agreement with Novartis, which grants Novartis the rights to develop, manufacture, and commercialize LB2102 and other potential CAR-T therapies for upfront payment of $100M.
• The company is expanding manufacturing capacity for Carvykti. As of September 30, 2023, Legend has cash balance of $1.4B, which should provide a runway through 2025.  

• Asahi Intecc (7747 JP) is poised for multi-year growth through strong market demand for its technically superior guidewires, market leadership positioning, new product launches, and direct marketing initiatives.
• In FY24, Asahi Intecc aims to achieve revenue of ¥100B (+11% YoY), a significant milestone. The company targets revenue of ¥110B and an operating profit margin of 23–25% in FY26.
• Asahi Intecc is expected to be a continued beneficiary of global procedure volume recovery. The company is likely to achieve its medium-term business plan ahead of schedule.

• Since the list of companies disclosing information based on TSE’s request only shows “whether they disclosed,” more companies will disclose the information in their corporate governance reports by December anyway.
• Good practices published by TSE will provide hints for companies to improve their future disclosures. Investors will also be more likely to demand improvements from companies based on good practices.
• The next step after disclosing the cost of capital is whether companies can disclose measures to fill gap between cost of capital and actual return and to raise return further.

• With the review period complete, BeiGene (6160 HK) could replace Anhui Conch Cement (914 HK) in the iShares China Large-Cap (FXI) (FXI US) in December.
• There will be over 2 days of ADV to buy in BeiGene (6160 HK) and nearly 2 days of ADV to sell in Anhui Conch Cement (914 HK). 
• Short interest has been increasing in BeiGene (6160 HK) and dropping in Anhui Conch Cement (914 HK) over the last few months.

• Hygeia’s asset-heavy model leads to a situation of expense “front-loading” and profit “back-loading”.Management’s attitude towards profit is “thought-provoking”.It’s best for investors not to have high hope for Hygeia’s profit margin.
• Hygeia can maintain 30%+ growth in short term, but revenue growth could fall to 15-20% in the future due to lack of high-quality M&A targets and uncertainties brought by anti-corruption.
• Revenue forecast is about RMB4 billion in 2023 and RMB5-5.5 billion in 2024. P/E of 30-40 is reasonable range at this stage, which would drop afterwards. Current valuation is expensive. 

• Back on the 20 March, Australian Clinical Labs (ACL AU) announced a merger proposal for Healius (HLS AU), the completion of which would create Australia’s largest pathology provider.
• In its Target Statement on the 4 May, Healius’ board unanimously recommended that Healius shareholders reject the Offer. A forthcoming ACCC decision may also conclude a merger is verboten. 
• Now Healius has announced a “capital restructure reset” via issuing new shares at $1.20/share, a hefty 34.6% discount to last close. This breaches a number of prescribed occurrences. 

Newron is a Swiss Stock Exchange SIX-listed (NWRN) biopharmaceutical company focused on developing novel medicines for diseases of the central nervous system. The company’s marketed product, Xadago (or safinamide), is an add-on therapy to levodopa for the management of Parkinson’s disease, and continues to drive top-line revenues.