Healthcare

• Sawai Group Holdings (4887 JP) reported muted FY23 result, with all parameters missing guidance. Miss was due to the lower-than-expected performance in Japan, which contributed 82% of revenue.
• Sawai’s U.S. business revenue increased 22% YoY to ¥36.6B, beating guidance of ¥32.2B. The U.S. business is now back to profitability by reporting higher-than-expected operating profit of ¥930M.
• Sawai guided for 8% revenue growth in FY24. Core operating income is projected to decline due to the soaring raw material and energy prices and an increase in upfront costs.

• Back on the 25 May, healthcare company Medtronic Plc (MDT US) announced it had entered into a set of definitive agreements to acquire EOFlow (294090 KS).
• Via a three-step process – SPAs, issuance of new shares, and a Tender Offer – Medtronic will seek majority control, together with a view to delisting EOFlow.
• Completion is expected in 4Q23. Regulatory approvals –  domestic and foreign – form part of the conditions. Trading wide to terms. 

• DWTI announced that out-license partner Dutch Ophthalmic Research Center (International) B.V. (DORC) has submitted a new drug application for approval of DW1002 to the National Medical Products Administration (NMPA) of China for the indication of ILM staining in vitreoretinal surgery (May 30 local time).
• No milestone will be received as a result of this transaction, and there will be no change to the forecast of financial results for the fiscal year ending December 31, 2023.
• DWTI granted an exclusive sublicense for DW-1002 for all regions worldwide outside Japan to DORC, which has been manufacturing and selling the product in Europe and other countries since September 2010.

• The last quarter was successful for Alnylam Pharmaceuticals, with solid growth in total product sales, mainly driven by the ongoing launch of AMVUTTRA, which delivered a 48% increase compared to the same quarter last year.
• Their TTR franchise showed strong performance with solid net product revenues and patient growth, driven by the ongoing launch of AMVUTTRA.
• We give Alnylam Pharmaceuticals a ‘Buy’ rating with a revised target price.

Incannex, an Australian-based biotech, has several active studies investigating cannabinoid combinations for a range of conditions, but is also focused on assessing psilocybin for the treatment of generalized anxiety disorder (GAD). In the psychedelics space, Incannex’s ongoing Phase II trial (Psi-GAD) received an encouraging interim review in March 2023, and we see the completion of the study in Q4 CY23 as a significant catalyst. Incannex has also recently announced developments in its psychedelic clinics business through its subsidiary Clarion Clinics Group. In this note, we provide an overview of psychedelics as therapeutics, the GAD market, and Incannex’s position in the emerging field of psychedelic-based therapies. Our valuation for Incannex stands at US$750.7m or US$11.83 per ADR (vs US$745.8m or US$11.75 per ADR previously).

• It was a successful first quarter for Mettler-Toledo International, with solid sales and profit growth and an all-around beat.
• Sales growth was broad-based across various markets, driven by effective market identification and attractive growth opportunities.
• Strong execution on margin initiatives and cost control resulted in solid earnings growth despite significant currency headwinds.

• It was a successful Q3 2023 for Cardinal Health, with a solid overall performance and an all-around beat.
• The Pharma business demonstrated resilience and growth, benefiting from its critical role in the pharmaceutical supply chain and a solid customer base.
• Cardinal Health is working towards to inflation mitigation and growth initiatives to achieve its target of at least $650 million in segment profit by fiscal 2025.

• We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in June 2023, among which 6 are in KOSPI and 39 are in KOSDAQ.
• These 45 stocks on average could be subject to further selling pressures in June and could underperform relative to the market. 
• Among these 45 stocks, the top five market cap stocks include Won Tech, Voronoi, Zinus, Bionote, and NanoTIM.

• Mitra Keluarga (MIKA IJ) recently booked 1Q2023, where headlines did not reflect the true recovery of the core business given COVID was still a factor boosting last year’s revenues. 
• Non-COVID inpatient and outpatient volumes were up by +19% YoY reflecting the strength of the recovery as the environment normalizes but occupancy rates still have a significant upside.
• Mitra Keluarga has started to put foot-to-pedal in terms of expanding new hospitals and increasing capacity at existing hospitals combined with increased efficiencies. Valuations are attractive versus history.

• Amili, a Singapore-based gut microbiome company, has raised an undisclosed sum from East Ventures in a new funding round.
• The fresh funds will be used for its expansion to Indonesia, focusing on addressing gut health issues specific to the local context.
• Amili’s current offerings include gut microbiome sequencing services for healthcare professionals and probiotic formulations tailored to Asian consumers. Microbiome sequencing is a method for studying bacteria to fuel research on disease protection.

• According to “Ophthalmology Drugs Global Market Report 2021: COVID 19 Impact and Recovery to 2030” issued by the Business Research Company in Feb-2021, the global ophthalmology drugs market is expected to grow from $22.03 billion in 2020 to $32.64 billion in 2025 (+8.2% CAGR).
• M&A in this segment has become active in recent years, with global eye care leader Alcon (SIX/NYSE:ALC) acquiring DWTI’s closest rival in the US, Aerie Pharmaceuticals, Inc. in Nov-2022, adding Rhopressa® (similar to DWTI’s GLANATEC®) among others, and Aerie’s development pipeline.
• Over time with progress in execution of the development pipeline, and as part of growth strategy to diversify revenue streams, DWTI’s basic business model of drug discovery and early out-licensing has evolved to include 1) from 2015, in-licensing of later stage development products, 2) from 2018, collaborative drug creation applying DWTI’s technical expertise to assist in joint R&D of products of other firms, and 3) from 2018, extending development of original in-house products beyond early out-licensing as far as proof of concept (PoC) through Phase IIb.

• The biggest expectation on CARsgen is to break through solid tumor technology (from zero to one).However, it depends on the choices of doctors/patients to see how much clinical benefits would be.
• The investment value of CARsgen has been transferred from R&D progress of pipeline to its future commercialization outlook/market potential, which however, are the major concerns that investors have for CARsgen.
• Due to “practical obstacles” in the application of CAR-T therapy, CARsgen’s commercialization prospects are still vague. Share price could remain weak, but its valuation should be higher than JW Therapeutics. 

• MicroPort CRM got into CRM device field with global layout mainly through M&A. However, revenue growth in the past three years was unsatisfactory and losses were increasing year by year.
• The situation where Boston Scientific/Medtronic/Abbott dominate CRM device overseas markets wouldn’t change. Although China market has big potential theoretically, the actual space remains to be seen due to various challenges.
• This IPO application could be aimed at achieving the terms of redemption agreement. Even MicroPort CRM is not in good shape, it is still better than Microport’s other listed subsidiaries.  

• In this insight, we provide the details of Medtronic’s M&A and tender offer for Eoflow. 
• Currently, Eoflow is trading at 28,050 won which is 6.5% lower than the tender offer price of 30,000 won.
• Eoflow’s share price is currently comfortably below 30,000 won and we believe this deal has 95-98%+ probability of getting completed within the current M&A framework.

• The JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted (capped) market-value-weighted index composed of 400 constituents.
• A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
• Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to be announced in early August 2023 based on trading data as of end-May 2023.

• Medtronic Plc (MDT US) reported 6% YoY revenue growth to $8.5B, ahead of expectations, driven by procedure volume recovery, supply improvements, and innovative product introductions.
• Medtronic intends to acquire Korea-based Eoflow (294090 KS), manufacturer of a tubeless, wearable, full-disposable insulin delivery device, for $738M. The transaction is expected to close in 2H23.  
• Medtronic guided for FY24 adjusted EPS of $5.00–5.10, including ~6% unfavorable impact from Fx. The company forecasts 4.0–4.5% organic revenue growth in FY24, accelerating from 2.1% in FY23.

EMIS reported FY22 results that were in line with management expectations. Revenue increased 4% y-o-y, adjusted operating profit increased 10% and adjusted EPS grew 10%. The company closed the year with net cash of £45.9m, reduced from the prior year due to several bolt-on acquisitions in the year. A final dividend of 21.1p was declared for a full year dividend of 38.7p.

• It’s crucial to note that margin balances from CFDs will also be disclosed through each brokerage’s Home Trading System (HTS), providing insight into the risk of margin call-triggered covering trades.
• It has been challenging to discern which are being targeted for illegal trading operations using CFDs. The disclosure of CFD margin balances can be an indicator to address this issue.
• This may lead to a short-term selling spiral on suspected stocks, where illegal trading forces rush to liquidate their positions, and additional selling pressure targeting such activities exacerbates the situation.

• Jeisys Medical (287410 KS) recorded 15% YoY revenue growth in 1Q23, mainly driven by a 25% YoY growth in consumables due to the increasing number of aesthetic procedures globally.
• As of 1Q23, cumulative sales of two major devices of Jeisys, LinearFirm/LinearZ and Potenza reached 3,411 and 2,431 units, respectively. Expanding installed base should further drive consumables revenue growth.
• Jeisys has launched a new device in domestic market and Japan in current quarter. The company aims to accelerate growth momentum through entry in to new market, including China.

• The “horror story” of Keymed yesterday alerted us. The delay in submission of marketing application for CM310 should have been known by Keymed long ago, indicating shortcomings in information disclosure/expectation management.
• The earliest time CM310 would be launched is 2024. This means that CM310 may miss out next year’s NRDL negotiations and be in a passive position in competition with dupilumab.
• We still maintain our view on Keymed’s valuation for the time being. If there is “black swan event”, we may need to adjust valuation as the competitive landscape could change.

• Sun Pharmaceutical Industries (SUNP IN) recorded 14% YoY revenue growth in Q4FY23, driven by 21% growth in U.S. formulation business. Adjusted net profit for Q4FY23 was INR21.6B, up 36% YoY.
• Global specialty business continues to maintain strong momentum. Adjusted for milestone received, global specialty contributed 18% of Q4FY23 overall sales and grew 28% YoY to $244M.
• Sun Pharma has proposed to acquire the remaining stake in Taro Pharmaceutical for a purchase price of $38 per share in cash. Management expects high single-digit revenue growth in FY24.

• New Horizon Health (NHH) achieved high performance growth last year. However, we recommend investors take a calm and objective view of NHH’s current high growth rate if they see the real story.
• NHH’s dual attributes of medical+consumption means large growth potential/strong profitability. Thus, the real expectation for NHH is not just about achieving breakeven, but more about how to achieve high profitablity.
• If market education level falls short of expectations in the future, it’s difficult for NHH to achieve expected scale/profit margin. There would be greater valuation downward risk at that time.

• The 9th national VBP is drawing near. As all drugs under national/provincial VBP are scheduled to be executed before 2025/12/31, there should be new policies in 2026 and beyond.
• The capabilities of Chinese pharmaceutical companies in ADC field have at least stepped onto a platform to compete with international giants, which is clearly more progressive than during PD-1 era.
• We analyzed key points of Ovctek. Its investment logic has changed and centralized procurement will break investors’ expectations for Ovctek’s future performance growth. Valuation may continue to be under pressure.

• The likelihood of the merger review not being approved appears to be low. Additionally, the purchase of only 3.8M additional shares is required, leading to a negligible cancellation risk.
• It is particularly noteworthy that the offering price of ₩30,000, targeting minority shareholders, may be adjusted upward depending on future share price increases.
• While there is a potential allocation risk, as Medtronic aims to delist the company, they are unlikely to lower the target quantity in the tender offer to a risky level.

• Jiangxi Rimag Group (JIR HK), a China-based medical imaging center operator and provider of Rimag cloud services, filed for a Hong Kong IPO.
• Jiangxi Rimag Group (JIR HK) was backed by Goldman Sachs, leading VC firms in Asia, Baidu Inc., JD Health, and American healthcare investment firm OrbiMed. 
• China’s medical imaging industry is experiencing a remarkable transformation, driven by rapid technological advancements, evolving healthcare needs, and supportive government policies.

• Classys (214150 KS) reported solid performance in 1Q23, with double-digit revenue growth, driven by expansion of domestic consumables sales for Shrink Universe and growth in overseas device and consumables sales.
• Operating profit increased 19% YoY to KRW 19.9 billion, leading to 380 basis point margin expansion to 51%. Net profit increased 46% YoY to KRW 18.8 billion.
• Classys continues to strengthen its competitiveness through product line and geography expansion. The company has reiterated 2023 revenue guidance of KRW170 billion, representing year-over-year increase of 20%.

• ResMed delivered a strong set of financial results in the last quarter and managed an all-around beat.
• While they are still addressing some supply chain challenges with the AirSense 11 platform, they are on track to meet the global demand for connected CPAP and APAP devices by the end of 2023.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• DexCom had a strong quarter and managed an all-around beat with strong organic revenue growth of 19% compared to last year.
• The company’s momentum in global CGM adoption remains high, driven by the growing recognition of the unique experience DexCom provides.
• The launch of their G7 system has been met with enthusiasm, supported by a successful Super Bowl commercial that generated significant engagement and awareness.

• Eli Lilly is off to a mixed start in 2023, with volume-driven revenue growth led by its incretin portfolio, Verzenio and Jardiance.
• The new product category delivered $574 million in sales, while the new product and growth product categories together contributed 20 percentage points to volume increase.
• We give Eli Lilly and Company a ‘Hold’ rating with a revised target price.

• The last quarter proved to be yet another successful period for IQVIA as they delivered an all-around beat.
• With an 11% organic growth in revenue, IQVIA demonstrated the strength and diversification of their short- and long-cycle businesses, enabling them to navigate the macroeconomic dynamics effectively.
• The demand environment for the industry remained robust, with global clinical trial activity showing resilience and positive prospects for their commercial business.

• Merck & Co. made a strong start to the year, with an all-around beat and a good underlying performance across its major growth pillars.
• Excluding the impact of LAGEVRIO and foreign exchange, the company produced 15% underlying growth.
• In the United States, KEYTRUDA increased in all major tumor types and continues to gain popularity in earlier-stage malignancies.

• AbbVie delivered a decent result in the first quarter of the year with revenues above Wall Street expectations and earnings in line with the analyst consensus.
• Skyrizi and Rinvoq continued to perform well in the first quarter and are still on track to produce more than $11 billion in combined sales this year.
• Growth rates for both products in the first quarter are in line with the company’s estimation for the entire year.

• Aspira Women’s Health (AWH) hosted an Investor Day on May 23, which focused on its OvaWatchSM and EndoCheckTM diagnostic tools.
• Two clinicians, Dr. Kevin Elias of Harvard Medical School, and Dr. Tamika Sea of Piedmont Henry Hospital in Atlanta, spoke to investors about their experience with AWH’s diagnostic technology.
• OvaWatch, currently on the market, is a very important tool in monitoring and determining suspicious adnexal masses (indeterminate masses that show up on pelvic ultrasound scans).

• CRISPR Therapeutics AG (CRSP US) completed regulatory submissions for exa-cel in the U.S., EU, and UK, positioning exa-cel to potentially become the first approved CRISPR-based therapy in the world.
• According to Evaluate Pharma, if approved, exa-cel’s revenue is expected to be $1B+ in 2028, with expected market share of 20% in sickle cell and 36% in beta thalassemia.
• As of March 31, 2023, CRISPR has cash, cash equivalents, and marketable securities of $1,889.5M, which is sufficient to fund its operating expenses for ~3 years.

• The last quarter proved to be a strong one for Edwards Lifesciences and its results exceeded market expectations in terms of revenues as well as earnings.
• While Japan faced lingering COVID impacts, strong growth was observed in the U.S., Europe, and the rest of the world.
• With a positive outlook, a strong pipeline, a raised sales expectation for the full year, and a commitment to innovation and clinical outcomes, the Edwards Lifesciences management intends to capitalize on the opportunities in the cardiovascular healthcare market.

• It was a mixed quarter for Gilead Sciences as the company’s revenues were above Wall Street expectations but it missed out on the earnings front.
• On the expense side, R&D expenses came in higher than anticipated, reflecting the company’s commitment to investing in research and development.
• We give Gilead Sciences, Inc. a ‘Hold’ rating with a revised target price.

• Bristol Myers had a mixed start to 2023 with below par revenues but its earnings exceeded analyst expectations as the management continues to accelerate the renewal of its portfolio and execute its strategy.
• During the quarter, the company’s new product portfolio and in-line brands grew.
• Revenue from its new product portfolio more than doubled as compared to the previous year.

• Majority of Cutia’s products are based on license-in/distribution agreements. Cutia’s independent R&D capability has yet to be proven. Stock prices of companies that completely rely on license-in are unsatisfactory.
• Cutia’s pipelines have unique characteristics. So, the requirements on team’s ability are comprehensive. Purely medical background of Cutia’s team could be a “hindrance” and may fail to commercialize them well.
• There is a real need in the fields Cutia is focusing on, so the story is compelling. However, with limited commercialized products, it’s difficult to prove anything at current stage.

OSE Immunotherapeutics has announced its FY22 results, providing financial and operational updates as the company continues to advance its key clinical assets. A confirmatory and potentially pivotal Phase III study is planned for Tedopi, OSE’s lead cancer vaccine candidate, which we expect to be initiated by end-FY23/early-FY24, and this would mark a significant clinical milestone, in our view. Additional upcoming catalysts for investor attention include readouts in Q423 for OSE-127, being investigated in a Phase II study in ulcerative colitis (UC). OSE-127 had previously been subject to a two-step licensing option granted to Servier. However, following negative readouts from a Phase II Servier-sponsored trial in primary Sjögren’s syndrome (SS), OSE and Servier have mutually decided to terminate the option license agreement. We value OSE at €280.8m or €15.2 per share, with Tedopi as the primary contributor to this valuation, for which we expect commercialisation in 2028.

• Bio-Techne had a weak quarter, with revenues below market expectations.
• Its revenue growth was not up to the mark despite the key drivers being physician uptake, utilization of its ExoDx prostate test, and increased demand for its cell therapy workflow solutions.
• Their Exosome Diagnostics business remained extremely strong in the quarter due to a better marketing message, a stronger commercial team, and the recently modified Medicare LCD, which generated significant test volume and revenue growth.

• MicroPort Cardiac Rhythm Management (1813053D CH) is looking to raise about US$200m in its upcoming HK IPO. The deal will be run by Goldman Sachs and CICC.
• Microport Cardiac Rhythm Management (MCRM) is a R&D-driven, commercial-stage medical technology company specializing in active implantable medical devices for cardiac rhythm management (CRM). 
• Its operations are dedicated to the design, development and commercialization of products and solutions to treat and manage arrhythmias and heart failure. 

AFT Pharmaceuticals reported another strong fiscal year, capping off three consecutive years of double-digit top-line growth. FY23 revenues of NZ$156.6m grew 20.2% year-on-year. As expected, top-line growth was H2 weighted, with a c 38% sequential improvement in H223 over H123 attributed primarily to new launches in Australia (revenue up c 61% over H123 in the region). Margins, however, were affected by lower licensing income and higher product launch marketing spend (operating margin of 12.6% vs 15.6% in FY22). We expect management to achieve the stated revenue target of NZ$200m in FY25, supported by higher marketing spends that will put some pressure on margins in the near term (FY24 operating profit guidance of NZ$22–24m). Management also announced a maiden dividend of 1.1c/share (payable in July 2023), although the payout (c 11%) is lower than the initial target of 20–30%. Accordingly, our valuation adjusts to NZ$644m or NZ$6.14/share from NZ$6.34/share previously.

• Lutronic Corp and Jeisys Medical have considerably lower DTV in comparison to their float shares. It is highly probable that they have artificially increased their float shares.
• Coincidentally, these two stocks are the ones that have experienced the most dramatic increase in borrow balance after the result announcement.
• These two stocks are being targeted for short-selling from a post-event perspective because the market believes they will exhibit abnormal passive (price) impact due to their inflated float shares.

• Due to the surging cholera cases globally, demand for cholera vaccines for public market continues to grow. According to GAVI, shortage of cholera vaccine is likely to continue through 2025.
• To respond to surging vaccine demand, Eubiologics (206650 KS) plans to increase its production capacity from the current 33M doses per year to a maximum of 90M doses in 2027.
• Eubiologics, in partnership with TechInvention is launching Euvichol-Plus in India. India is among the top cholera-endemic countries, with an estimated incidence rate of 1.64 per 1,000 people.

In a strategic push of its US commercialisation strategy, Respiri has announced the proposed acquisition of Access Managed Services, its US remote patient monitoring (RPM) and chronic care management partner, for a cash consideration of up to US$3m (A$4.5m). We expect the acquisition to afford Respiri greater oversight of operations and sales and marketing efforts, potentially reducing sales cycles and expediting patient onboarding. The acquisition will also result in the RPM recurring revenue increasing to US$70–100 from US$10–20 per patient, although we note Respiri will cease to recognise revenue from device sales and operating expenses will likely trend higher. Management now guides for break-even to be achieved at 9,000 patients (by end CY24) vs 30,000–40,000 patients previously. The acquisition will be funded by a A$6.5m capital raise, including A$4.5m in convertible notes and a A$2m equity offer. We will update our model and estimates following the fund-raise and deal closure.

Following recent updates regarding Immix’s CAR-T therapy (NXC-201) and Q123 results, we have adjusted our financial estimates. Quarterly R&D expenses of $1.3m were lower than expected, largely due to lower clinical development costs. Roughly 48% of these expenses were related to quarterly payments made to the licensors of Nexcella’s (Immix’s majority-owned, 94%, subsidiary) CAR-T therapy, NXC-201. Based on the quarterly R&D spend run rate, we have revised our FY23 R&D expenses to $6.1m, down from $11.7m previously. The resulting operating loss of $10.9m is down from $15.8m previously. Immix ended the quarter with a net-cash position of $11.5m and raised a further $2.5m post quarter end through the company’s ATM facility, which we anticipate will provide an operating cash runway into Q224, a slight extension from Q423 previously. Our valuation of Immix has been adjusted due to the higher pro-forma cash position of $14m, rolling our model forward and our revised R&D estimates. We value Immix at $83.3m or $5.5 per share (previously $77.1m or $5.5/share).

• Jupiter Life Line Hospitals (0372574D IN) is looking to raise about US$135m in its upcoming India IPO. The deal will be run by ICICI Securities, Edelweiss Financial Services and JM Financial.
• Jupiter Life Line Hospitals (JLLH) is among the key multi-specialty tertiary and quaternary healthcare providers in the Mumbai Metropolitan Area (MMR) and western region of India, according to CRISIL. 
• Its hospitals function on an ‘all-hub-no-spoke’ model with each hospital being a full-service hospital, operating independently and offering services such as diagnostics to surgery and rehabilitation.

• It was a mixed first quarter for Amgen, with unit volume growth across global markets driving a 2% year-over-year increase in product sales.
• Despite some challenges, such as net price decline and inventory declines, the company achieved sustainable sales on 10 of its brands.
• The company’s priority products, including Repatha, EVENITY, KYPROLIS, and TEZSPIRE, experienced robust volume growth.

• Angelalign’s business model is easily challenged by lower priced similar competing products. Once Angelalign’s products lose price advantage, it would lead to a rapid decline in overall sales performance. 
• Performance growth could still be under pressure this year due to unsatisfactory demand.The potential price war, further price reduction and increasing selling/marketing expenses would put more pressure on profit margin.
• Angelalign hasn’t accumulated enough data size due to few overseas customers, which could lead to product quality issues and slow internationalization progress. There is downside risk due to overvaluation.