Healthcare

• The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Plus there are a couple of changes for the BBIG indices.
• SK Biopharmaceuticals Co Ltd (326030 KS) has overtaken SK Bioscience (302440 KS) on average market cap and there will be large flows on both stocks at the rebalance.

• The S&P 500 is 1% above the 4300-4325 area which we anticipated would cap upside for 2023.
• Our view since our 5/30/23 ETF Pathfinder is that we cannot be bearish if the SPX is above 4050, and we subsequently moved that line-in-the-sand up to 4165-4200 on 6/6/23.
• We are moving that threshold up to 4300, which is short-term support to watch; a break below it could bring selling pressure.

• The pricing of core product Envafolimab doesn’t have an advantage over competitors. Its market opportunities and profit margins are very limited if seen from both production side and sales side.
• 3DMed clearly faces financial pressure, and may not smoothly promote other pipelines. Under current market environment, it’s almost impossible to achieve substantial refinancing. The survival of 3DMed cannot be guaranteed.
• The fundamentals of 3DMed are not strong enough to justify high valuation. Current share price is clearly overvalued.Eventually the market will return to rationality. We recommend investors offload in time.

• Polaris Group (6550 TT) is in a process to file first BLA to the FDA for its lead drug candidate ADI-PEG 20 as a potential treatment of malignant pleural Mesothelioma.
• Although Polaris announced positive top-line result from Phase 2/3 study of ADI-PEG 20, overall survival was shorter than existing FDA-approved treatment, causing a massive sell-off in Polaris shares.
• However, the results are not fully comparable due to the different mechanism of action of the drugs under trial. Future growth prospect is not reflected in current share price performance.

• Just over a quarter of the way through the review period, we see six changes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance.
• There are a few stocks that are close adds at the current time and a move higher can take them into inclusion zone leading to more deletions.
• While there is little to no short interest on the potential inclusions, short interest on the potential deletions ranges from 4.3-12.2 days of ADV and 0.5-3.5% of free float.

• A major reason for investors’ disappointment is that the number of new projects in 23H1 were significantly lower-than-expected. The impact of slowdown in financing activity began to show in 23H1.
• Higher revenue growth of non-COVID projects is needed to achieve the performance guidance target.If the management fail to fulfill the commitment to accelerate business recovery in 23H2,they may lose creditability.
• It’s unlikely to receive AD drugs orders this year. The market would react directly to short-term sentiment. Without big catalysts, it’s difficult for WuXi Bio’s stock price to perform well.

• We held a conference call with the Chief Investment Officer of UMP Healthcare (722 HK), Patrick Cheung, on the 19th of June, 2023. 
• The company continues to forge strategic alliances and collaborations, the latest being Hong Kong Adventist Hospital, in addition to the recent partnerships with Pedder Health/Human Health Holdings (1410 HK).
• The stock represents an excellent opportunity when trading at 6.6x PE FY23E with 44% of the market capitalization in cash and a 7.7% dividend yield on our numbers (50% payout).

• Cooper delivered a solid result and managed an all-around beat in the last quarter.
• CooperSurgical also reported high revenues and achieved ten consecutive quarters of double-digit organic revenue growth, led by their fertility business.
• In addition to the strong financial performance, CooperVision’s new product launches, expanded product ranges, and market-leading flexibility contributed to the positive results.

• Numinus extends collaboration with MAPS. Last week, Numinus announced a partnership with the Multidisciplinary Association for Psychedelic Studies (MAPS) to support psychedelic experiential opportunities for practitioners as part of a clinical study, with permission to use MAPS’ protocol for the study.
• Numinus has submitted a clinical trial application (CTA) to Health Canada, which, if approved, will make the MDMA-AT experiential opportunity for practitioners available only through Numinus.
• This partnership is not the first collaboration between Numinus and MAPS and highlights the strong relationship and trust between the two.

• HUTCHMED developed Fruquintinib has demonstrated positive results in a Phase III FRESCO-2 study which reduced the risk of death by 34% in patients with previously treated metastatic colorectal cancer.
• In addition, Fruquintinib also has been validated and accepted for regulatory review (for marketing authorization) by the European Medicines Agency (EMA) last week.
• In January 2023, Takeda Pharmaceutical (4502 JP) entered into an exclusive licensing agreement with HUTCHMED to further develop and commercialise Fruquintinib outside of Mainland China, Macau and Hong Kong.

• Alteogen Inc (196170 KS)‘s partner has submitted marketing application for Herceptin biosimilar in China. Alteogen will be entitled for royalty after the product is approved and sold in China.  
• In April 2023, Alteogen announced that the company will receive additional milestone of $3 million (~KRW4 billion) from its first ALT-B4 technology transfer partner.
• Alteogen has completed patient recruitment for global phase 3 trial for Eylea biosimilar. Marketing application is expected to be filed in early 2024, with marketing expected to start from 1H25.

• In the past few years, the investment business and M&A of Viva accelerated based on a series of financing tools such as IPO/placement/convertible bonds. Thus, Viva’s scale has grown rapidly.
• Continuous decline in stock price ultimately triggered a “redemption crisis” for Viva’s convertible bonds.Although Viva resolved it by transferring equity in its CRO subsidiary, the prospects are still not optimistic.
• Due to the downturn in innovative drug industry and deterioration of financing environment,whether the high valuation of Viva’s CRO business would be recognized by secondary market is a question mark.

• Celltrion Healthcare (091990 KS) is expected to launch Humira biosimilar, Yuflyma, in the U.S. market in July 2023. Despite heavy competition, as high-concentration citrate-free formulation, Yuflyma has competitive edge.
• In April 2023, Celltrion has launched bevacizumab biosimilar, Vegzelma in the U.S. Vegzelma will be the first product that the company will be directly selling in the U.S.
• Through portfolio expansion, Celltrion increased target market size to $53.7B in 2023 from $20.6B in 2020, representing 161% growth. For 2024, the target market is expected to increase to $91.3B.

• AbbVie’s patent infringement allegations against BeiGene Ltd (6160 HK) is an attempt to obstruct BeiGene through legal means and save Imbruvica’s sales decline in the market. AbbVie came prepared this time.
• BeiGene has a chance to win the lawsuit if without any political factors.But if BeiGene fails to walk away unscathed, any damages/patent royalty would be detrimental to its financial performance/forecast.
• The real key point in determining BeiGene’s future turnaround is not this lawsuit, but the clinical results of TIGIT project. Even with the correction since May, BeiGene is still expensive.

• Viva Biotech Holdings (1873 HK) is raising RMB1.06 billion (~$150 million) through offloading ~24% of its equity interest in Viva Shanghai, the primary entity of the company’s CRO business.
• The consideration implies a revenue ratio and gross profit ratio of 4.90x and 11.04x, respectively. The ratios are at the similar level of the average ratios of other comparable peers.
• Going ahead, Viva Biotech is planning to spin off its CRO business for separate listing in the A-shares market. IPO application is expected to be filed by June 30, 2024.

• There are xx – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Five new deals were discussed this week: Lutronic (085370 KS) tender Offer;Hailan (2278 HK)‘s VGO; Mason (273 HK)‘s Scheme; Tesserent (TNT AU)Scheme, & Kenedix Office (8972 JP)‘s merger. 
• Key updates took place for Toyo Construction (1890 JP), Inner Mongolia Yitai Coal Company Ltd (3948 HK), and HKBN Ltd (1310 HK).

Immix Biopharma has completed its $5.0m at-the-market (ATM) offering program. The funding is as a result of the initial share sales agreement in March 2023 and is anticipated to further support Immix’s pipeline activities with the development of its key assets: the CAR-T treatment, NXC-201, and the tissue-specific therapeutic, IMX-110. We view the ATM offering as a positive, especially in light of the current macro funding environment for biotech companies.

• There has been a big divergence in the share prices of Hanmi Science and Hanmi Pharm in the past two months. 
• This divergence in share price appears to be a bit too excessive and we believe this gap is likely to narrow in the coming weeks.  
• We like a pair trade between going long Hanmi Science and going short on Hanmi Pharm. 

• CSL Ltd (CSL AU) has reduced its profit projection for FY23 due to higher-than-anticipated adverse impact from Fx. The company now expects a Fx headwind of $230–250M from $175M earlier.
• After considering modest recovery of CSL Behring gross margin and generic competition for Ferinject in Europe, CSL expects FY24 NPATA to grow 13–18% to $2.9–3.0B at constant currency.
• All eyes are now on the U.S. launch of the one-time gene therapy Hemgenix for Hemophilia B. CSL expects the first patient to take Hemgenix within the next few weeks.

• M3’s share price dropped around 9% after 4QFY03/2023 earnings, however, it went up by more than 8% since then following the announcement regarding the acquisition of Kantar’s healthcare research businesses.
• Our estimates suggest that new acquisition would not contribute to any meaningful growth in the near term. Despite having large no. of M&A deals, growth rates have started to fall.
• We think there is further downside to M3 Inc (2413 JP) ‘s consensus FY+2 earnings estimates and we would recommend shorting the stock.

• Hanmi Pharmaceutical and Hanmi Science have demonstrated consistent financial performance through aggressive R&D investments, with significant achievements based on internally developed products in 2022.
• The new leadership structure of the company has the potential to improve corporate governance transparency, but there is a need for further shareholder-friendly changes, such as expanding dividend policies.
• Overall, the company’s current status, valuation, and ESG performance trends indicate positive prospects, including transparent management practices, sustained investment in R&D, and plans to enhance dividend policies.

• Paramount Bed Holdings Co Lt (7817 JP) reported all-time high revenue and profit in FY23, driven by increased demand and price revision effect. The company has announced dividend of ¥59/share.
• For FY24, Paramount expects revenue growth of 6% to ¥105B, driven by expanding recurring revenue. Operating and net profits are expected to increase 4% and 6%, YoY, respectively, in FY24.
• Through business expansion and new product launches, the company is on track to achieve mid-term target of revenue of ¥120B and operating income of ¥17B in FY27.

• 2023 would be a low point in performance for Kingmed, with negative YoY growth. But this year is a good time to bottom-fish because non-COVID conventional testing business would rebound.
• Many people think the implementation of DRGs policy would be a big catalyst for future growth of ICL industry, but we’re actually skeptical since the reality could be quite different.
• The different business models of Kingmed and Dian lead to different valuation outlook. Since the current duopoly pattern is difficult to change, we recommend investors focus only on top two ICLs.

For our next Corporate Webinar, we are glad to welcome UMP Healthcare’s  Chief Investment & Project Officer, Patrick Cheung. 

In the upcoming webinar, Patrick will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Sameer Taneja. The Corporate Webinar will include a live Q&A session.

The webinar will be hosted on Monday, 19 June 2023, 17:00 SGT/HKT.

About UMP Healthcare

Founded in 1990, UMP Healthcare is a medical group listed on the main board of the Hong Kong Stock Exchange (stock code 722.HK) and is one of the leading comprehensive healthcare service platforms in the Hong Kong market. We have been committed “To provide comprehensive, diversified and coordinated care for everyone” by creating a network of high-quality and effective medical services for patients, payers, providers and partners.

Along with providing healthcare services that address a wide range of individual needs, UMP closely works with more than 2,000 local and international businesses and insurance organizations to establish and administer corporate healthcare benefit programs for members. The medical service network spans over 1,000 self-owned and affiliated institutions across Hong Kong, Macau, and Mainland China, offering services such as family medicine, specialist consultation, dental care, diagnostic imaging and laboratory testing, preventive medicine and health examination, physical therapy, day surgery, and endoscopy, among others. In 2022, the annual volume of outpatient visits under UMP exceeded 1.1 million.

• SD Biosensor announced a rights offering of nearly 20 million shares (representing 19.1% of outstanding shares) at the expected rights offering price of 15,520 won. 
• Bionote has announced its intentions to purchase up to 260 billion won worth of rights offering of SD Biosensor, representing 84% of rights offering amount of nearly 310 billion won. 
• This is likely to be viewed negatively by both SD Biosensor and Bionote shareholders, but more so by the latter due to the lack of rights offering discount price. 

• If you look up history, Laekna has certain connection with Novartis. However, Novartis seems to have not made much progress in small-molecule targeted oncology therapies in the past few years.
• LAE001 would face fierce competition. Its new mechanism may not be accepted by doctors/patients in front of many mature drug options in the market. LAE002 has high R&D failure risk.
• Since the stock price performance of a number of innovative drug companies based on license-in model in HKEX is unsatisfactory, together with the weak sentiment, we remain conservative about Laekna. 

• SK Bioscience (302440 KS) recorded 5% YoY growth in core vaccine revenue to KRW17B in 1Q23, mainly driven by shingles vaccine, SKY Zoster due to its continued market leadership.
• In May 2023, SK Bioscience received marketing authorization of its COVID-19 vaccine, SKYCovion from the UK MHRA. SKYCovion became the eighth COVID-19 vaccine approved in the UK.
• SK Bioscience targets revenue of KRW220 billion by 2024 mainly through global expansion of existing in-house vaccines and expanding its contract manufacturing business.

• YSB’s business model is closer to that of pharmaceutical distribution enterprises, who could carry out businesses similar to YSB based on huge market share/resource advantages/financial strength. YSB’s moat isn’t high.
• The business structure of “Self-operation Business + Online Marketplace” of YSB could involve certain policy risks. Given the nature of its business, YSB’s profit margin is difficult to improve significantly.
• YSB Inc (YSB HK)’s revenue scale could encounter bottlenecks after reaching a certain stage of growth. The valuation of YSB should be lower than that of traditional pharmaceutical distribution enterprises.

• Ansell Ltd (ANN AU) and Challenger Ltd (CGF AU) will be deleted from the MVIS Australia Equal Weight Index at the close of trading on 16 June.
• One way turnover is 5.9% resulting in a one-way trade of A$107m. Only the two deletions have more than 1 day of ADV to sell from passive trackers.
• With the passive selling between 33-50% of short interest on the deletions, there could be short covering at the close on Friday.

• On 9 June, skin and cosmetic treatment play Lutronic Corp (085370 KS) announced a Tender Offer from Korean PE outfit Hahn & Company.
• After acquiring 19.41% from Lutronic’s CEO at ₩ 36,700, Hahn will launch an Offer for all remaining shares at the same price. 
• This Offer Price is a lifetime high. There is no minimum tendering condition. 

• Nippon Shinyaku (4516 JP)‘s FY24 revenue guidance is 3% below mid-term target, while operating and net profits guidance are 20% and 17% below the target, respectively.  
• Revenue growth of Viltepso is expected to decelerate to 28% in FY24 from 85% in FY23, dragged by the U.S. sales, which contributes 74% of Viltepso revenue.
• Rival Sarepta Therapeutics (SRPT US) is expected to receive FDA approval for its next DMD gene therapy drug this month, leading to a new competition for Viltepso.

• MariMed opened a Thrive Wellness medical dispensary in Tiffin, Ohio. This is its first operational Ohio store, and MariMed now owns or manages 11 dispensaries in five states.
• Tiffin is in Seneca County, which has more than 54,000 residents and is home to almost 5,000 students at Tiffin University.
• MariMed’s dispensary is the only store in the Tiffin area. The closest competitor is 30 minutes away in Fremont, Ohio.