Healthcare

• Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
• In Rigaku Holdings (268A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on weakening forward growth indicators, China revenue risk, rising cash conversion cycles, mid-tier FCF margin and large post-IPO share overhang. 

• Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
• Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
• In our earlier notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison.

• Shenzhen Mindray Bio-Medical Electronics (300760 CH) reported double-digit growth in revenue and net profit in 1H24.
• In-Vitro diagnostics and medical imaging systems segments drive performance, while patient monitoring and life support lagged.
• International market continues to show strength, while China lingers for now.

• Biokin’s traditional chemical drug and TCM businesses would continue to shrink and their valuation contribution can be negligible. The collaboration agreement for BL-B01D1 with BMS changes the outlook of Biokin.
• The clinical data of BL-B01D1 look good so far, but the R&D failure risk of BL-B01D1 is not low. It is uncertain if BL-B01D1 would finally be druggable.
• Biokin is overvalued and there is big bubble in valuation. If BL-B01D1 fails in R&D or its clinical data fail to meet high expectation, Biokin’s market value will plummet.

• PRGO has resolved 90% of its challenges and is on track to address the remaining issues soon
• Predicted rise in earning power by 2025 could boost estimates and valuation, with potential for $3.5 EPS and $45 price target
• New CEO has shown progress in addressing issues, setting new expectations, and implementing cost-cutting measures, making PRGO an attractive investment opportunity with limited downside risk

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• On October 2, 2024, two travelers in Hamburg, Germany were hospitalized due to displaying symptoms consistent with Marburg virus.
• The two travelers had recently arrived from Rwanda, a country that is currently experiencing an outbreak of the disease, and one of them had reportedly come into contact with someone later confirmed to be infected with Marburg virus.
• Rwanda has had a total of 26 confirmed cases of Marburg virus, with eight deaths.

• EVAX is a clinical stage company that has proprietary AI models designed to more efficiently and more accurately target much-needed treatments.
• The company has two streams of possible revenue: from the treatments themselves and from the licensing of the AI technology.
• The company announced that its Phase 2 trial of its personalized cancer vaccine improved its response rate significantly from Phase I-both improving the chances for FDA approval and validating the AI approach to medicine.

• NurExone (OTC-NRXBF) is a clinical stage biotech company that is developing a breakthrough treatment for spinal cord injuries that has the potential to dramatically improve lives.
• The technology involved also has the potential to more efficiently get other treatments to the needed area.
• The company has conducted preclinical testing that has shown dramatic results and has been awarded an important FDA designation.

• BrainStorm Cell Therapeutics Inc. (Nasdaq: BCLI) develops NurOwn® stem cell therapy for NDDs – BCLI’s first target is ALS (MND/Lou Gehrig’s).
• We have stress tested our valuation vs. current global and market events as well as and BCLI’s reverse stock split (R/S) 30 Sept 2024 (to maintain Nasdaq listing).
• Whilst there are pros and cons – our risk adjusted WACC has increased and NPV reduced, our conservative base case expected dilution assumptions have improved with R/S and Nasdaq compliance and our base case return has risen to 8.5x, up 0.5x.

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In this insight, we take a look at the final rankings for the HSCEI potential ADDs and potential DELs for the index rebal event in December 2024.
• We see two ADDs/DELs – the same names we had in our last insight. At present, we expect US$474mn capping flows one-way but this can change by early-December 2024.

• Dr Lal PathLabs Ltd (DLPL IN) has maintained its 10% revenue growth target for the current financial year, mainly driven by 6–7% growth in patient volume.
• The operating environment is becoming conducive. Competitive intensity in terms of predatory pricing, promotional offer, and cash burning to acquire customers, have come to an end.
• As of Q1FY25, DLPL has net cash position of INR10B. The company is looking for small or mid-sized acquisitions in South and West India and expanding in small towns.

• BioStem Technologies is a leading innovator focused on harnessing the natural properties of perinatal tissue in the development, manufacture, and commercialization of allografts for regenerative therapies.
• The company announced that it was initiating an important clinical trial to study BioREtain in diabetic foot ulcers, which is a condition impacting millions.
• Additionally, the company announced it has filed an important document to further its quest to start trading on the Nasdaq stock exchange.

• IN8Bio is a clinical-stage, oncology-focused biotechnology company using ?d T cells against solid and hematological tumors.
• Its pipeline is built on the DeltEx platform & drug-resistant immunotherapy (DRI) technology which have produced clinical candidates targeting leukemia & GBM.
• INB-100 is evaluating leukemia in a Ph1 study, while INB-200 & INB-400 are Ph1 and Ph2 assets evaluating GBM.

Oryzon Genomics has confirmed the FDA’s alignment with its proposed Phase III programme for vafidemstat in borderline personality disorder (BPD). Notably, the FDA acknowledged agitation and aggression (A/A) as a therapeutic indication and, as such, the State-Trait Anger Expression Inventory 2 (STAXI-2) Trait Anger may be used as a primary endpoint for Phase III (PORTICO-2). We note that vafidemstat showed statistically significant benefit by this measure in the prior Phase IIb PORTICO trial. We view the news as encouraging and believe there is a sizeable opportunity for Oryzon to develop an effective treatment for BPD, for which there are currently no approved drugs. Next steps are to submit a full trial protocol for PORTICO-2 to the FDA (expected within Q125), before a potential trial launch from H225, contingent on regulatory clearance and providing that there are no other delays.

• Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million. 
• In Japan, Rigaku’s XRD (X-ray diffraction) has a high market share of 75%. Around 70% of its revenue is derived from customers outside Japan.   
• The bull case rests on high customer switching costs, peer-leading revenue growth, top-quartile profitability, FCF generation, and low leverage.

• Considering 23H1 high base, it can be understood that 24H1 achieved a low single-digit growth. If excluding gain on disposal of subsidiaries, net profit in 24H1 would have negative growth.
• Mainland China contributed about 90% of total revenue, but an imminent risk is VBP, which will pose a challenge to the pricing autonomy of Tong Ren Tang’s OTC TCM drugs. 
• After absorbing the high base impact of 2023 this year, performance growth would return to double digits in 2025. Tong Ren Tang is undervalued. Reasonable valuation is P/E of 15.

• UMP Healthcare (722 HK) reported a tepid FY24 owing to weak sentiment in HK. Revenues were up 3% YoY; profits were down 27% YoY ( adj profits -34% YoY). 
• The environment in HK is gradually improving, and we believe there is a steady recovery on the horizon for the company.
• The stock trades at 7x FY25 PE and more than 58% of its market cap in net cash, with a yield trending towards 9%. 

AFT Pharmaceuticals has taken another major step in extending its international footprint, with the signing of an exclusive license agreement for Maxigesic IV in China, the second-largest pharma market globally after the US. The agreement has been signed with Xizang Weixinkang Pharmaceutical, a major hospitals injectables focused company, and includes an upfront payment of US$300k along with development and sales-related milestones and royalty payments. Partner Hyloris Pharmaceuticals is entitled to a minority share of the payment, which we believe will be 35%, in line with the deal structure with Hikma in the US. China is a key lever for AFT’s international growth efforts, and we expect Maxigesic IV to be AFT’s second product to be launched in the country, following the anticipated launch of Crystaderm in Q4 CY24.

• AEMD has three sites in Australia that are moving towards near-term patient enrollment.
• In Australia, Royal Adelaide is ready for enrollment and Kinara is expected to be open for enrollment shortly.
• A third site in Sydney has submitted a request to be added to the study.

• Zacks Small-Cap Research Note for SBC Medical Group Holdings (SBC)

• On September 30, 2024, NeuroBo Pharmaceuticals, Inc. (NRBO) announced positive topline results from the single ascending dose (SAD) Part 1 portion of the ongoing Phase 1 clinical trial of DA-1726 for the treatment of obesity.
• The results showed favorable safety, tolerability, and dose-linear pharmacokinetics (PK).
• Based on the strong safety profile of DA-1726, one or more additional cohorts are being added to explore the maximum tolerated dose.

• CytoSorbents is commercializing its E.U. approved CytoSorb blood purification technology to treat life-threatening conditions in the intensive care unit and cardiac surgery.
• First half 2024 product sales improved 12% from last year while product gross margins rose to 75%.
• The company also seeks U.S. and Canadian approval of a second product, DrugSorb-ATR, to reduce perioperative bleeding risk in patients on blood thinners during cardiac surgery.

• HCA Healthcare shared its quarterly financial performance for the second quarter of 2024, emphasizing positive growth across many key areas, amid some challenges inherent in the healthcare industry.
• The company’s earnings per share adjusted saw a significant increase by 28%, rising to $5.50, driven by robust volume growth across its markets and service lines.
• This growth reflects a concerted effort from HCA Healthcare to optimize operations and improve patient outcomes.

• IDEXX Laboratories recently reported its financial results for the second quarter of 2024.
• The company saw organic revenue growth of 7%, driven by a 7% increase in Companion Animal Group (CAG) Diagnostic recurring revenues and a 10% growth in its water business.
• Despite facing macroeconomic and sector-specific challenges, including a 2% decline in U.S. same-store clinical visit growth, IDEXX demonstrated resilience by leveraging solid execution strategies such as high premium instrument placements and gains in veterinary software and diagnostic imaging revenues.

• BrainStorm Cell Therapeutics Inc. (Nasdaq: BCLI) develops NurOwn® stem cell therapy for NDDs – BCLI’s first target is ALS (MND/Lou Gehrig’s).
• BCLI on Friday confirmed its reverse stock split (R/S) to become effective today 30 Sept 2024 (to maintain Nasdaq listing).
• Reverse stock splits are often (though not always) an effective mechanism and often lead to an upwards re-rating as psychological market factors come into play.

Biocon Biologics launched a roadshow last week to market its USD 5NC2 144A/RegS notes offering. The expected issue rating is BB/BB by S&P/Fitch. The proceeds will be used to refinance an outstanding syndicated loan facility obtained for the acquisition of Viatris’ global biosimilars business for USD 3.335 bn in May 2022.

We see fair value for the proposed 5NC2 bonds at 7%.

• On September 30, 2024, MediciNova, Inc. (MNOV) announced that MN-166 (ibudilast) will be evaluated in a National Institutes of Health (NIH) – Neurological Disorders and Stroke (NINDS) sponsored Expanded Access Protocol (EAP) trial that will be supported by a $22 million grant to an academic group.
• The EAP trial will enroll approximately 200 patients with amyotrophic lateral sclerosis (ALS) and will measure MN-166’s effect on neurofilament light, a biomarker for neuron damage.
• MediciNova will provide investigational drug, regulatory support, and safety monitoring support.

• McKesson Corporation reported its earnings for the first quarter of fiscal 2025, showcasing continued growth and strategic progress across various aspects of its diversified healthcare services.
• With a reported revenue of $79.3 billion, the company exhibited a 6% increase year-over-year, and an adjusted earnings per share increase of 8% to $7.88.
• These figures surpassed initial expectations, prompting an upward revision of full-year adjusted earnings per share guidance from $31.25-$32.05 to $31.75-$32.55.

• GSK has reported a strong performance for its second quarter of the year, with a 13% increase in sales to GBP 7.9 billion.
• Highlighting the company’s effective operational execution and a diverse portfolio, GSK’s core operating profit improved by 21% to GBP 2.5 billion, and core earnings per share increased by 17% to 43.4p, all figures adjusted to exclude contributions from COVID solutions.
• This demonstrates GSK’s ability to achieve profitable growth driven by both its longstanding and newly launched products.

• Chemed Corporation, a diversified company primarily engaged through its subsidiaries, VITAS Healthcare Corporation and Roto-Rooter, recently provided updates in their Second Quarter 2024 Earnings Call.
• The overview pulls into focus a mixed performance within its distinct operations.
• Starting with VITAS Healthcare Corporation, there’s a pronounced positive trajectory witnessed in the segment, particularly off the back of the acquisition of Covenant Health.

• Labcorp Holdings Inc. delivered a robust performance in the second quarter of 2024, showcasing a continued upward trajectory in its business operations.
• The company reported impressive figures with revenues totaling $3.2 billion, reflecting a 6% increase compared to the same period in 2023.
• Adjusted earnings per share (EPS) also saw an appreciable rise, reaching $3.94, signifying a 15% increase.

• The medical insurance statistics reflected that medical insurance funds are facing increasing pressure. If income/expenditure maintain average growth rates in recent years, there would be a deficit state in 2024.
• Due to increasing pressure on medical insurance fund, the entire process of innovative drug evaluation/NRDL negotiation this year will be more strictly enforced, but Hansoh (3692 HK) is an exception.
• For Henlius’ privatization, completing Pre-Conditions in 24Q4 looks tight. Considering Chinese New Year holiday, the privatization may not be completed until at least mid-to-late February 2025.The deal will get up.

• Global Health (Medanta) (MEDANTA IN) reported double-digit growth in revenue in Q1FY25, while sluggish developing hospitals was a drag on the margins.
• The company plans to add 1,000–1,500 beds in next 2–3 years, with most of the planned bed addition being at greenfield projects entailing higher capex per bed.
• Medanta does offer synergy as a possible takeover candidate for a leading hospital operator.

• MA Financial (13.43% of shares out) and Alison Hughes (9.94%) said they will reject Genesis A$1.8675/share offer for Pacific Smiles (PSQ AU); therefore the 90% acceptance condition cannot be met.
• Separately, PSQ’s board also rejected terms, as Genesis Offer is below NDC’s A$2.05/share Offer; plus terms are “opportunistic” as they do not account for PSQ’s recent strong financial improvement. 
• What now? Genesis has the flexibility to bump. Expect that to occur. They won’t fold their tent in response to this latest development.

• Mirati Therapeutics reported its second quarter 2023 earnings and had a decent performance.
• During this period, Mirati launched KRAZATI, reflecting a significant milestone as it transitioned to a commercial-stage company under the guidance of then CEO, David Meek.
• However, in a noteworthy change announced during the call, Dr. Chuck Baum has taken on the role of interim CEO, following Meek’s departure.

• Upstream Bio, a biotech company focused on developing therapeutics that address severe asthma, CRSwNP and COPD, will price its IPO in October.
• Upstream Bio has raised ~$400M to date. Their last round was a $200M Series B led by private equity firm Enavate Sciences and Venrock Healthcare Capital Partners.
• My DCF analysis suggests that Upstream Bio’s core U.S. business (ex. COPD) may be worth ~$1.8B. The severe asthma and CRSwNP markets represent a potential $10B+ opportunity.

• Kyowa Kirin Co Ltd (4151 JP) announced top-line results of the Phase 3 trial of rocatinlimab targeting moderate to severe Atopic Dermatitis (eczema), which affects 6.6M patients in the U.S.
• The trial met co-primary endpoints and reached statistically significant differences from placebo for all key secondary endpoints. However, efficacy data was less compelling compared to current standard of care.
• Kyowa Kirin shares nosedived mainly on the concern over competitive strength of rocatinlimab. Amid gloomy outlook, Kyowa Kirin shares will need time to recover.

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

• Growing Player in Medical Aesthetic Market SBC Medical Group Holdings (SBC- NASDAQ), headquartered in Irvine, California, provides end-to-end solutions for aesthetics clinics, including back office support, purchasing, branding and marketing services (see below), that enable clinics to focus on offering their customers high quality treatments and services at affordable rates.
• SBC Medical Group first began operations in 2000 when its founder and largest shareholder, Dr. Yoshiyuki Aikawa, opened the Shonan Beauty Clinic (SBC) in Fujisawa City, Japan.
• SBC subsequently has expanded its footprint as it continues to grow its network and revenue base.

• Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
• Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
• In this note, we will talk about the not so positive aspects of the deal.

• We are initiating coverage of Cadrenal Therapeutics, Inc. (CVKD) with a valuation of $30.00.
• Cadrenal is a clinical stage biopharmaceutical company developing tecarfarin, a novel oral and reversible anticoagulant intended to prevent deaths due to blood clots in patients with rare cardiovascular conditions, including those with left ventricular assist devices (LVADs), end-stage kidney disease (ESKD) with atrial fibrillation (AFib), and mechanical heart valves with difficult to control time in therapeutic range (TTR).
• The company will be meeting with the FDA to discuss the design of a Phase 3 clinical trial of tecarfarin in patients with LVADs. Cadrenal has also been in discussion with Abbott, the maker of the only LVAD for sale in the U.S., regarding the Phase 3 trial, which we anticipate initiating in the first half of 2025.

• EVAX is a clinical stage company that has proprietary AI models designed to more efficiently and more accurately target much-needed treatments.
• The company has two streams of possible revenue: from the treatments themselves and from the licensing of the AI technology.
• The company announced an agreement with MSD to two preclinical vaccines that provides upfront payments and potential substantial revenue in the future.

• On the 18th July, diagnostic imaging provider Capitol Health (CAJ AU) entered a Scheme with Integral Diagnostics (IDX AU). IDX will issue 0.12849 new IDX shares for each Capitol share
• Upon completing the transaction, Integral would hold ~63% in the MergeCo. They key risk is the ACCC signing off. A decision is expected on (or around) the 28th November.  
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 31st October. Expected implementation on the 14th November. The IE says fair & reasonable.

• Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
• Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies. 
• In this note, we will talk about the positive aspects of the deal.

• Rigaku Holdings (268A JP) provides cutting-edge analytical solutions centered on X-ray technology globally. The company is one of the largest players globally in X-ray diffraction instrument market.
• The company has filed for an IPO on the Tokyo Stock Exchange and plans to raise proceeds of around US$900m from the IPO at a potential valuation of US$2bn.
• In this insight, we discuss Rigaku’s business model, key drivers, financials and outlook for the company.

• Clinuvel Pharmaceuticals (CUV AU)’s Scenesse is the only approved erythropoietic protoporphyria (EPP) treatment. Patent protection and orphan drug status solidifies Clinuvel’s market position.
• Clinuvel is expanding Scenesse’s (afamelanotide) use and developing and testing additional products for clinical and photo-cosmetic use. 
• Profitability metrics and growth are solid and cash position strong to support R&D for trials and new product development.

• Varex Imaging Corp (VREX US) reported 10% YoY drop in revenue and a squeeze in profits as well in Q3FY24, driven by weakness in Medical segment business.
• China market softness continues to drag the operating performance of the company. The woes faced in China does not appear to subside quickly in the near foreseeable future.
• The company has guided for Q4FY24 sales and EPS in the range of $190-210M and $0.00-0.15, respectively, representing significant drop from year-ago quarter.

• The Capitol Health (CAJ AU) IE considers Integral Diagnostics (IDX AU)’s merger proposal (0.12849 Integral shares per Capitol share) fair and reasonable. 
• While ACCC informal clearance is an overhang, the evidence suggests that clearance should be secured. The shareholder vote risk is low.
• The offer terms are attractive. At the last close and for the 14 November payment, the gross/annualised spread is 4.7%/37.3%.  

• Green Cross (006280 KS) has gained access to 80% of privately insured members in the U.S. for blood product Alyglo, which has been included in formularies of three major insurers.
• Green Cross targets to generate $50M revenue from Alyglo this year. The target seems to be conservative. The company further aims to sustain annual growth of 50%+, which is achievable.
• The company reported sequential improvement in 2Q24, with 17% QoQ revenue growth and significant improvement in gross margin. Revenue growth of 7–8% is expected during 2024–2026.

• Upstream Bio, a clinical-stage biotech company developing novel therapies for inflammatory and allergic diseases, filed for an IPO in the United States.
• The biotech firm was backed by premier investors, including OrbiMed, Access Industries, Maruho Co., Samsara BioCapital, Omega Funds, and Enavate Sciences, among others.
• I believe that company’s lead compound, verekitug (UPB-101), has a broader commercial opportunity than many investors appreciate.

• Taiwan Veldona human study to start in Sjogren’s.
• Ainos will initiate a Veldona clinical study in Taiwan for primary Sjogren’s syndrome in December 2024.
• This follows the announcement of an oral warts in HIV+ clinical study planned for November 2024. 

• Medicus Pharma Ltd. (TSXV:MDCX) is focused on acquiring or partnering with life-science companies that are developing novel therapeutics for unmet healthcare needs that are already in the clinical trial stage.
• Management plans fast-track these specific therapies through FDA clinical trials toward commercialization.
• The company’s first acquisition was SkinJect, which has a novel, patented transdermal patch for the treatment of BCC.

• The imagination brought to the market by Kelun’s traditional businesses (infusion business, antibiotics and bulk pharmaceutical chemicals, generic drugs) is not high. So, the only highlight is Kelun-bio’s ADC pipeline.
• Considering that Kelun has lost pricing power due to VBP, and both Chuanning and Kelun bio have been spun off and listed independently, Kelun’s valuation will not be too high.
• Our forecast is net profit attributable to shareholders in 2024-2026 is in the range of RMB3-5 billion. Reasonable market value is RMB30-50 billion. Subsidiary Kelun Bio is a better bet.

• On September 13, 2024, ESSA Pharma Inc. (EPIX) announced that updated dose escalation data for the ongoing Phase 1/2 clinical trial of masofaniten (EPI-7386) in combination with enzalutamide (Enz) was presented at the 2024 European Society for Medicinal Oncology (ESMO) Congress.
• With 15.2 months of follow up, neither the median radiographic progression free survival (rPFS) or time to PSA progression (TTPP) have been reached.
• Additionally, since the last trial update at ASCO-GU, one more patient has achieved PSA90, bringing the total to 14/16 (88%).

• AEMD has three sites in Australia that are moving towards near-term patient enrollment.
• In Australia, Royal Adelaide is ready for enrollment and Kinara is expected to be open for enrollment shortly.
• A third site in Sydney has submitted a request to be added to the study.

Basilea has bagged a multi-year agreement with the Biomedical Advanced Research and Development Authority (BARDA), potentially worth US$268m, to advance its anti-infectives franchise. The Other Transaction Agreement (OTA) will include an initial payment of US$29m to support clinical development work for fosmanogepix and BAL2062 as they prepare to enter the next phase of clinical development. The agreement will last up to 12 years and management expects it to cover 60% of its development costs related to the covered programmes over the period. These expected inflows have triggered another guidance upgrade for FY24 (revenue of CHF203m, from CHF196m previously) with a significant uptick in the bottom line on increased deferred taxes (net profit guided to be CHF60m vs CHF42m previously). We have adjusted our estimates to reflect the potential non-dilutive funding from BARDA, with our valuation increasing to CHF95.3/share, from CHF89.7/share previously.

• AEMD has three sites in Australia that are moving towards near-term patient enrollment.
• In Australia, Royal Adelaide is ready for enrollment and Kinara is expected to be open for enrollment shortly.
• A third site in Sydney has submitted a request to be added to the study.