Healthcare

• Specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK) has been a perennial takeover target. And now we have an Offer.
• Wu Zhen Tao, NED and Chairman of Lansen, has made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.   
• This looks done. Get involved if small-cap illiquid arbs are your thing. 

• Alnylam Pharmaceuticals, Inc. delivered a disappointing set of results as it was unable to meet the revenue earnings expectations of Wall Street.
• In Q2, the overall net product revenues increased 43% year over year across all products.
• The TTR brand generated $224 million in global net product revenues for ONPATTRO and AMVUTTRA, a 46% increase from the second quarter of 2022 and a 9% rise from the first quarter.

• Beijing Chunlizhengda Medical Instruments didn’t perform well in 23H1. Obviously, the Company did not anticipate sufficiently the negative impact of centralized procurement on performance. Comparatively, AK Medical’s situation is better.
• The anti-corruption campaign has led to a marked drop in hospital outpatient visits and surgeries. Therefore, Chunlizhengda’s Q3 performance may not be optimistic, resulting in a lower-than-expected 2023 full-year performance.
• We think both revenue and net profit of Chunlizhengda would have negative YoY growth in 2023. The Company has fallen behind its competitor in R&D capabilities and high-end product lines. 

• SD Biosensor (137310 KS) is reporting significant decline in revenue due to the fading demand of COVID-19 tests. 2Q23 revenue declined 80% YoY and 11% QoQ to KRW162.6B.
• SD Biosensor reported operating loss of KRW97.8B and KRW76.4B in 1Q23 and 2Q23, respectively, leading to 1H23 operating loss of KRW174.2B, compared with an operating profit of KRW348B in 1H22.
• SD Biosensor is on track to launch next-generation ultra-small continuous blood glucose meter (CGMS) in Korea in 2024. Thus far, Korea has approved four CGMS, including one locally-developed.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Costa Group Holdings (CGC AU), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), JSR.
• Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Pacific Current (PAC AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP). 

• The National Health Commission and The People’s Daily made “mild” statements about anti-corruption in China healthcare, bringing investors “new hope”. However, there could be a “misconception” regarding the anti-corruption movement. 
• There was news that some type 2 vaccines could be converted to type 1 vaccines. Even though some vaccines will be affected by this policy, others will not.
• Kangtai’s had strong 23H1 net profit, but it has little investment value due to lack of core R&D strength.Kangtai’s vaccines face the risk of being included in national immunization program.

• CSL Ltd (CSL AU) expects strong growth in immunoglobulin franchise to continue following record plasma collections. Optimizing plasma collection costs, improving yields, and new products launches should support margin recovery.
• In June 2023, first patient has received Hemgenix in the U.S. With global annual peak sales estimate of $2.4B in 2030, Hemgenix is a compelling opportunity for CSL.
• CSL Seqirus is anticipated to deliver another strong year driven by demand for its differentiated products. The company began influenza vaccine shipment across the U.S. for 2023–24 influenza season.

• CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
• In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
• Our latest estimates show that the combined one-way flow for CSI 300 and CSI 500 could be around US$2.8bn.

• Considering the progress of the legislative process at this juncture, the effective date could be as early as the end of this year or, at the latest, early next year.
• Ilooda (164060 KS) will likely become the first case. A tender offer at ₩11,000 (a 30% premium to the current price) per share for 14%+1 share may greet us.
• There is sufficient value in monitoring the interaction between the offer structure and stock price movement in the context of the first application of a mandatory tender offer in Korea.

• Therapeutic attributes of CBC highlighted in white paper. InMed Pharmaceuticals’ commercial subsidiary BayMedica released a white paper, which collates a curated collection of scientific research on the physiological and potential therapeutic effects of cannabichromene (CBC).

• CBC is BayMedica’s lead product sold to the health & wellness sector.

• CBC demonstrates potent anti-inflammatory effects. Since the discovery of the endocannabinoid system (ES) in 1988, there has been mounting research into the interaction of cannabinoids with ES receptors, which regulate critical human functions, such as temperature, appetite, blood sugar, sleep, memory, emotional processing, pain, and inflammatory and immune responses. 

• Insulet Corporation exceeded analyst expectations in terms of revenue as well as earnings.
• The company’s revenue for the second quarter surpassed its projections, growing by 33% overall at Omnipod, including 41% in the United States.
• During the second quarter, Insulet made significant progress in its clinical and innovation programs.

• West Pharmaceutical Services delivered mixed results for the previous quarter, with revenues below the analyst consensus.
• Sales price increases provided $43.1 million or 5.6 percentage points of growth in the quarter.
• The base Proprietary goods business expanded by the mid-teens and was the main driver of the second quarter achievement.

• SK Bioscience (302440 KS) resumed flu vaccine shipment for 2023–24 flu season. The company temporarily stopped the production of flu vaccine to focus on the supply of COVID-19 vaccine.
• In August 2023, SK Bioscience has entered joint development agreement with Australia-based privately held biotechnology company Vaxxas to develop a second-generation needle-free patch delivery of typhoid conjugate vaccine.
• The company’s successful phase 2 clinical trial for first-in-class pneumococcal conjugate vaccine (PCV20+) in pediatric market is a step toward entry to the premium vaccine market.

• Our estimations for 2023 annual revenue range around $157 million and for 2024 around $205 million.
• The com- pany’s annual revenue reached $134.03 million in 2022 compared to $45.60 million in 2021, posting an increase by 194%.
• Aurinia’s gross profit for 2022 was $128 million, increased by 188% compared to $45 million for the corresponding period of 2021.

OSE has announced that the results from its Phase III trial (ATALANTE-1) for Tedopi have been published in Annals of Oncology. While the study results were first presented in September 2021, the company’s share price rose sharply following the publication announcement, highlighting significant interest in the company’s lead cancer vaccine. The results from this trial were encouraging, showing a 41% reduction in the risk of death in the Tedopi arm versus standard of care (SoC) chemotherapy. After discussions with regulators (FDA and EMA), OSE is preparing for a follow-on confirmatory pivotal Phase III trial, which we expect to commence in early 2024.

• Shulan Health Management (1807987D CH) is looking to raise around US$150m in its Hong Kong IPO. The deal will be run by CICC, and Citic Securities.
• Shulan Health Management (SHM) is a technology-driven healthcare group in China that integrates healthcare services and medical research and education.
• The firm owned and operated three private general hospitals and provided hospital management services to 14 partner hospitals in China as of March 31, 2023.

• In 1H23, Otsuka Holdings (4578 JP) reported revenue growth of 16% YoY to ¥947.5B, ahead of the guidance of ¥867B, as all operating segments recorded increased revenue.
• In 1H23, revenue from pharmaceutical segment grew 21% YoY to ¥637.9B, mainly driven by the growth of the four global products, which contributed 49% of segment revenue.
• Encouraged by a better-than-expected 1H23 result, Otsuka has raised 2023 guidance. The company has increased revenue, operating profit, and net profit guidance by 6%, 17%, and 19%, respectively.

• Either from business model or investment logic, the key is to increase the revenue proportion of cloud hospital platform services. However, many restrictions have led to difficulties in nationwide expansion.
• Overreliance on government projects and public hospitals makes it difficult to generate high profits. Xikang may continue to suffer loss in the future, and its profitability is worrying. 
• Based on our analysis, it could be difficult for Xikang to achieve good valuation performance in the future. we think its valuation should be lower than that of ClouDr.

Respiri had a very active FY23, including the recent close of the Access Managed Services (Access) acquisition and the signing of several commercial contracts. These represent stepping stones to the company’s commercialisation phase, further supported by a strong client pipeline of ongoing contractual discussions, including with two US-based insurers and three accountable care organisations. As a result, management expects to break even by H2 CY24 (revised from end-CY24). Pro forma cash at 30 June 2023 was A$2.2m, bolstered by the A$3.9m fund raise in August 2023, which we estimate should support operations into Q424. We have adjusted our estimates to reflect FY23 results and Respiri’s recent activities, tempered for timing considerations (client onboarding and patient enrolment). Our valuation adjusts to A$164.6m or A$0.17/share (from A$164.2m or A$0.20/share, previously).

• Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
• Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
• Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

• Innovent is actually not short of money, so the Placing this time looks “strange”.If Innovent is unable to deliver performance that matches expectations, investors would reconsider its future financing needs.
• Innovent is undergoing important transition from quantitative change to qualitative change as turning losses into profits is within reach. So, the “concept validation” of Innovent’s business model has been completed.
• Innovent decides to place the shares at this moment reflects that its stock price is already high. Based on our forecast, there could be limited upside room for share price.  

• Acotec’s revenue streams became more diversified in 23H1. New product launch in the next 1-2 years would further relieve the dependence on DCB products, leading to healthier revenue structure.
• Acotec disclosed details of its collaboration with Boston Scientific.If the caps are fully implemented, revenue growth of Acotec will be impressive. Acotec has the ability to resist centralized procurement risks.
• Concerns include how much negative impact anti-corruption campaign will have on Acotec’s performance in 23H2, and to what extent the deal with Boston Scientific would be implemented?

• The Cooper Companies delivered a positive result and managed an all-around beat in the last quarter.
• The company surpassed revenue estimates, generating significant quarterly revenues of $930 million, driven by strong sustained organic growth.
• CooperVision reported $630 million in revenue, up 13% organically, while CooperSurgical reported $300 million in revenue, up 9% organically.

• Innovent Biologics Inc (1801 HK) (IB) aims to raise around US$313m for R&D and marketing.
• The company has undertaken a number of deals in the past, with the overall results being mixed.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Classys (214150 KS) reported solid performance in 2Q23, with revenue and operating profit growing 40% and 52%, YoY, respectively, mainly driven by consumables sales in both domestic and overseas markets.  
• Despite increase in advertising and R&D expenses, operating profit margin expanded 370 basis points to 50.4%. Net profit increased 34% YoY to KRW18.6 billion.
• With 1H23 revenue of KRW84.9 billion, Classys is on track to meet 2023 revenue guidance of KRW170 billion, representing year-over-year increase of 20%.

• Aspira Women’s Health announced it has named Jody Berry, Ph.D as its new Chief Scientific Officer.
• Dr. Ryan Phan, who stepped down from the position, remains as an advisor through the end of the year to help with the transition and provide scientific and operational advice related to ongoing product development programs.
• Dr. Berry is a recognized international expert in immunoassay development, antibody technology, and infectious diseases.

• Mindray’s 23H1 results were in line with expectations. The high growth in Q2 has given us more confidence in the “complementarity of performance” between different business lines of the company.
• Mindray is right to acquire DiaSys,but Mindray should disclose the impact of M&A on financial statements.When investors understand how to “quantify” M&As, positive news would be reflected in stock price.
• The anti-corruption campaign and foreign capital outflows have weighed on Mindray’s share prices. Based on our analysis, the decline offers a good buying opportunity and share price will rebound afterwards.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Doosan Robotics (454910 KS), ARM Holdings (1822695D US), VNG (VinaGame) (VNG US), Integral Corporation (5842 JP) IPOs and Aquila Acquisition Corporation (7836 HK) de-SPAC.
• Event-Driven developments – JMDC (4483 JP), Intage Holdings (4326 JP), Mason Group Holdings (273 HK), Liontown Resources (LTR AU), Newcrest Mining (NCM AU), Orecorp Ltd (ORR AU). 

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Costa Group Holdings (CGC AU), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), Origin Energy (ORG AU). 
• Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Liontown Resources (LTR AU), T&K Toka Co Ltd (4636 JP), Itochu Techno Solutions (4739 JP). 

• Weigao’s 23H1 performance was unsatisfactory. 2023 full-year performance may continue to be under pressure because Weigao needs some time to digest the negative impact of centralized procurement on orthopaedic business.
• Weigao has hired advisers to find potential buyers for Argon. if Argon is ultimately sold, then the long-term prospects of Weigao’s interventional business and internationalization need to be reassessed.
• The unsatisfactory share price performance is related to Weigao’s business model – spin-off subsidiaries and IPO separately. There could be rebounds, but it is still possible for Weigao to underperform.

• Veeva Systems managed to exceed the revenue expectations as well as the earnings expectations of Wall Street, with a total revenue of $590 million and a non-GAAP operating income of $212 million.
• The Veeva team has made some truly impressive accomplishments as they develop the next generation of CRM.
• Nearly 25% of their revenue comes from Veeva CRM and their add-ons.

• The appraisal right prices of Celltrion Inc (068270 KS) is 150,813 won (2.2% higher than current price) and Celltrion Healthcare (091990 KS) is 67,251 won (1.9% higher than current price).
• Celltrion Inc has mentioned that the merger could be cancelled if the total amount of appraisal share purchase amount exceeds 1 trillion won. 
• Although some investors are likely to exercise their appraisal rights in this merger, we would attach a higher probability of this merger getting completed (80-90%+). 

• In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
• Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed. 
• The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here. 

• Eubiologics (206650 KS) recorded 24% YoY revenue growth to KRW31B in 1H23, due to strong export demand of oral cholera vaccine. Operating profit jumped 6x, while net profit surged 3x.
• In May 2023, Eubiologics and its partner have launched Euvichol-Plus in India. With a huge unmet need, Euvichol, an effective cholera vaccine is expected to see strong uptrend in India.
• Eubiologics has signed a technology transfer agreement with DEK Vaccines to enable the domestic production and supply of the cholera vaccine in Ghana. This opens additional revenue stream for Eubiologics.

EMIS reported H123 revenue and adjusted operating profit in line with board expectations. Revenue grew 2% year-on-year and adjusted operating profit was 7% higher, with an adjusted operating margin of 26.9% (+120bp y-o-y). The company closed H123 with net cash of £48.5m. Assuming the takeover of EMIS is not effective prior to 7 October, on 23 October the company will pay an interim dividend of 21.3p to shareholders on the register on 6 October.

• The 9th national VBP has begun. We analyzed the major big varieties with sales over RMB1 billion included in this VBP and the impact on related domestic pharmaceutical companies. 
• “Concept validation” of the business model of Chinese Biotech companies has been completed. Even under enormous pressure of medical insurance fee control policy, drug sales remain a reliable profit model.
• Medlive’s weak share price performance has a reason. The significant profitability increase in 23H1 wasn’t from the improvement of main business. Its business model needs time to be further validated.

SIGA Technologies has announced the appointment of Dr Jay K Varma as executive vice president and chief medical officer, while he remains a director on the board. Leveraging his prior leadership roles managing COVID-19 and other infectious diseases, Dr Varma will have practical insights that could aid SIGA’s efforts in raising awareness of infectious diseases and could enhance the company’s global procurement and treatment strategies. We believe Dr Varma’s appointment could support efforts for generating new procurement contracts.