Healthcare

• There are three main ways for Chinese pharmaceutical companies to enter global markets, but the results are completely different. Investors are advised to make cautious judgments based on different cases. 
• Speed is a crucial factor in the competition for drug development, but there’re precedents in history that late-comers are still able to turn things around, such as GLP-1/weight loss drugs.
• We remain conservative about the future commercialization performance of Bio-Heart’s BRS and Iberis 2nd. However, the product launch is a catalyst for share price, which provides a good short-term trade opportunity.

• Takeda reported FQ4 and full-year FY03/2023 results. Reported revenue increased 9.5% YoY to ¥956.2bn (vs consensus ¥938.6bn) and OP of ¥88.6bn (vs consensus ¥144.5bn) vs an operating loss in 4QFY03/22.
• Full-Year revenue and OP increased 12.8% and 6.4% YoY to ¥4.0trn and ¥490.5bn respectively. While reported revenue beat guidance and consensus, OP fell slightly below these two.
• Takeda Pharmaceutical (4502 JP) ’s FY03/2024E guidance is too conservative as we think that the company has been careful not to disappoint investors if it fails to meet its own target.

• Dr. Reddy’s Laboratories (DRRD IN) announced mixed Q4FY23 result, with revenue beating consensus and net profit missing expectations. Both revenue and net profit grew YoY but declined sequentially.
• North America grew 27% YoY (but declined 17% QoQ) to INR25.3B, driven by new product launches, growing market share in certain existing products, and favorable Fx movement.
• Revenue from India business increased 32% YoY and 14% QoQ to INR12.8B, driven by favorable price variance, new product launches including acquired/in-licensed products, and non-core brand divestments.

• Zai Lab (ZLAB) reported C1Q23 top line in-line with our estimate but operating/net loss much smaller than our estimate due to cut in R&D spending. 
• ZLAB’s narrower losses in C4Q22 and C1Q23, achieved through R&D cut, do demonstrate the viability of the company achieving commercial breakeven by 2023 and full breakeven by 2025. 
• We still think these viabilities have difficulties to achieve and even achieved, hurt the LT value of the company; We raised our TP from US$25 to US$29 but maintain SELL.

• PHC Holdings (6523 JP) announced FY23 result, which is in-line with previously announced downward revised guidance. For FY23, revenue increased 5% to ¥356B, driven by diagnostics and life sciences business.
• Despite an impairment loss of ¥8.7B in Epredia, operating profit grew 145% to ¥20B. FY23 net loss narrowed to ¥3.2B from ¥8.5B in FY22.
• PHC has initiated FY24 guidance and guided for FY24 revenue of ¥355.5B (down 0.3% YoY). The company is expected to turn profitable in FY24, with net profit of ¥15.6B.

• Shineway’s 23Q1 performance growth exceeded expectations, mainly driven by TCM formula granules products and injection products. A surge of COVID infection rate in China since 22Q4 was an important reason. 
• Based on data, revenue proportion of COVID-19 related products is not low. So, related sales growth in following quarters this year would decrease as the dividend period of pandemic ends.  
• As the growth of TCM formula granules is expected to offset the slowdown of COVID-19 TCM products, Shineway’s overall revenue growth would still be strong in 2023. Valuation isn’t cheap.

• ASRT reporting better than expected first quarter results were positively overshadowed by the increase in sales of ROLVEDON at Spectrum Pharmaceuticals (SPPI)
• There had been concerns ROLVEDON sales would not grow fast enough to warrant the valuation ASRT was paying for SPPI. Those concerns were squashed
• ASRT reported first quarter revenue of $42.5 million compared to our estimate of $37.8 million

• MariMed reported first-quarter revenue of $34.4 million, which exceeded our estimate of $32.5 million and consensus of $32.9 million.
• This is a 9.90% Y/Y increase and a 3.91% decline Q/Q. 1Q is typically a seasonally softer quarter for cannabis companies.
• With new stores opening in Massachusetts, Illinois, and Ohio, plus Maryland moving to adult-use sales in July, revenue should ramp up through 2023.

• Shockwave Medical Inc (SWAV US) reported better-than-expected Q1 results, due to continued geography expansion and strong demand of its IVL catheters for the treatment of coronary and peripheral artery diseases.
• Shockwave projects 2023 revenue of $700–720M, which represents 43–47% YoY growth. This compares to previous 2023 revenue guidance of $660–680M.
• According to a new media report, the acquisition talks between Boston Scientific (BSX US) and Shockwave have hit a snag as both the parties could not agree on a price.

• BeiGene (BGNE) reported C1Q23 top line 7% and gross margin 1.5ppt above our estimates, leading to non-GAA operating loss 23% narrower than our estimate. 
• We raise BRUKINSA’s peak year sales from US$5bn to US$5.8bn while cutting Tislelizumab’s peak sales from US$1.5bn to US$1.2bn. 
• With transition to a biopharma complete, BGNE should enjoy a higher multiple; We raised TP from US$219 to US$254 and maintain BUY.

• Boston Scientific Corporation’s first quarter performance exceeded Wall Street expectations across all business units and countries and the company delivered an all-around beat.
• Total company operational sales increased by 15%, while organic sales increased by 14%, exceeding its guidance range of 6% to 8%.
• During the quarter, the company launched its third-generation EXALT-D with improved ergonomic design modifications to improve the physician experience.

• Humana had a healthy start to the year and managed an all-around beat in Q1.
• Total medical expenses in their Medicare Advantage business for the first quarter came in a little bit better than expected.
• Furthermore, the CenterWell portfolio, which consists of primary care, home care, and pharmacy, continues to experience strong growth.

• As of 8 May, we see three potential changes to the iShares China Large-Cap (FXI) (FXI US) at the June rebalance. This is mainly driven by the inclusions.
• There is over 1 day of ADV to trade on all stocks with the largest impact on BeiGene Ltd (6160 HK) at nearly 4 days of ADV.
• Short interest has been increasing on the potential adds as they have run up a lot in the last few months.

• Mankind Pharma  raised around US$527m in its upcoming India IPO.
• MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
• We have looked at various aspects of the deal in our previous note, in this note, we talk about the demand and trading dynamics.

• Alfresa Holdings (2784 JP) revised its consolidated performance forecast for FY23. Revenue, operating profit, and net profit forecast have been raised by 3%, 2%, and 21%, respectively.
• This is attributed to greater-than-expected growth in ethical pharmaceuticals market and the company’s recovery from the bidding nomination suspension from medical institutions stemming from a violation of the Antimonopoly Act.
• In March 2023, Alfresa received a cease and desist order and a surcharge payment order from the Japan Fair Trade Commission (FTC) in relation to violation of the Antimonopoly Act.

• There’s an obvious declining trend in net profit YoY growth.Considering unsatisfactory growth of MI and IVD in 22H2,if it weren’t for the strong growth of PMLS,Mindray’s overall growth could have been “surprising”.
• The current question is whether IVD and MI segments would have high enough growth to offset the potential performance decline of PMLS segment in post-pandemic era. Problems may emerge afterwards.
• There are still some unresolved technical challenges that constrain the development of Mindray. Without good performance in internationalization, there is no incremental market. Thus no reason to maintain high valuation.

• Global Health (Medanta) (MEDANTA IN) raised around US$268m in its India IPO. The stock was listed on 16th Nov 2022, its six-month lockup will expire on 11th May 2023.
• Global Health (GH) is a hospital network that operates under the Medanta brand. The firm currently has five hospitals in operation and one more planned for development.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Thermo Fisher performed reasonably well in Q1 with 6% core organic revenue growth that was above Wall Street expectatis.
• Pandemic-related revenue came in as expected, with $140 million of testing revenue and $180 million of vaccines and therapies revenue.
• Regarding the segment details, the Life Sciences Solutions segment reported a decline in revenue and organic revenue, driven by the moderation in pandemic-related revenue.

• Biogen had a successful first quarter with an all-around beat.
• The company executed the launch of Leqembi, an immediate transformative product in the Alzheimer’s disease therapeutic area.
• Biogen has been experiencing a lot of competition, making it necessary to think about how to grow the business in the future.

• Centene had a successful first quarter, showing continued positive momentum operationally which was demonstrated by its all-around beat.
• The company raised its premium and service revenue forecast by $3.7 billion, with full-year 2023 adjusted EPS guidance at $6.40.
• We give Centene Corporation a ‘Buy’ rating with a revised target price.

• Elevance Health’s first quarter results were solid and the company delivered an all-around beat with a growth of around 15% compared to last year.
• The company had 48.1 million medical members at the end of the first quarter.
• Due to organic growth in Medicaid and Medicare Advantage, dual-eligible special needs plans, and group members, risk-based membership increased by roughly 1 million members year over year.

• 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 – Mankind Pharma (6596876Z IN), Nexus Select Trust (NST IN), Tata Technologies (TATATECH IN), ADICON Holdings Limited (ADI HK), Horizon Construction Development (1887128D HK) IPOs.
• Event-Driven developments – Aag Energy Holdings (2686 HK), Golden Energy & Resources (GER SP), Lian Beng (LBG SP), Penguin International (PBS SP), Estia Health (EHE AU),  Liontown Resources (LTR AU). 

• A significant change in 23Q1 was not just a narrowing of net loss, but a sudden turnaround in sales profit under the rapid revenue growth, which was an important leap.
• BeiGene’s commercialization capabilities largely rely on high expense level that significantly deviating from the industry average, making eventual commercialization success more difficult. BeiGene is an “outlier” even among global peers.
• How to control expenses while ensuring sustained sales growth and long-term competitiveness is an important issue for BeiGene. If no new blockbuster product emerges ultimately, high valuation would not last.

• Tofflon needs to go through a considerable period of adjustment after experiencing the high point of performance. Its “periodicity” is obvious, which means the performance high growth is not sustainable.
• The decline in growth rate of contract liabilities suggests that the future prospects is highly uncertain. Overall margins could continue to drop due to reduction in high margin overseas orders.
• Unless there’s a major catalyst, it’s difficult to see significant valuation boost in short term. Given the current downward trend in performance, valuation may continue to decline in the future.

• Clinuvel Pharmaceuticals (CUV AU) recorded 19% YoY revenue growth in H1FY23, driven by the growth of network of prescriber, treatment demand, and number of prescriptions of Scenesse.  
• In March, Clinuvel announced the test launch of the first dermatocosmetic product Cyacêlle, a polychromatic screen, formulated to protect skin against ultraviolet A & B and high-energy visible lights.
• Clinuvel has published encouraging initial readouts of the DNA repair programs. In March 2023, the company has initiated Prénumbra Instant trial in acute ischemic stroke patients.

• Many people have begun to pay attention to whether there would be a second wave of COVID-19 in China. We think it is necessary to share our views.
• The overvaluation or undervaluation of China’s core assets cannot be explained solely by classic valuation models such as PE/PB/DCF, but rather by considering the deep meaning represented by the companies.
• Lifetech’s future growth space depend more on the performance of pacemakers and IBS, but they are facing different challenges. Therefore, we recommend short-term trade rather than long term hold.

• Prodia booked a softer set of numbers in 1Q2023 but reflected a higher COVID base plus 1Q2023 was impacted by the fasting month but the testing mix was positive.
• The company will significantly increase capex this year with more outlet expansion and more investment into its digital business, which is becoming an increasingly important growth driver. 
• Prodia (PRDA IJ) stands out as the unique diagnostic leader in Indonesia,  which trades at a significant discount to both local healthcare players and Indian diagnostic peers.

• For 2022, SK Biopharmaceuticals Co Ltd (326030 KS) recorded Xcopri U.S. revenue of KRW169B, up 116% YoY. This year, the company expects to secure Xcopri sales of ~KRW300B in U.S.
• Thus far, Xcopri has been launched in 15 countries in Europe. The company expects to launched Xcopri in eight more countries in Europe this year.
• By 2025, SKBP plans to submit sNDA for cenobamate in primary generalized tonic-clonic (PGTC) seizures and pediatric patients, and carisbamate for orphan pediatric epilepsy.

• RemeGen’s C1Q23 top line came in as 31% of our C1H23 estimate while IFRS operating loss came in as 55%. 
• C1Q23 gross margin exceeded our C1H23 estimate by 12ppt, mainly due to restraining in shipment
• We cut our product sales estimates and raise WACC by 1ppt to reflect concentrated risk, leading to TP reduction from US$64 to US$46.

• During 2022, BNC Korea (256840 KS) reported gross profit margin of 48.3%, lower than 51.9% reported in 2021, as increasing competition is leading to price erosion of botulinum toxin products.
• In March 2023, prosecutors have indicted BNC Korea for allegedly selling botulinum toxin injections to exporters without the approval of the MFDS from December 2015 to December 2021.
• With the pandemic on a downward trend for more than a year now, we are skeptical about BNC Korea’s in-licensed COVID-19 drug candidate for a milestone payment of $15M.

Shield Therapeutics reported its FY22 preliminary results and Q123 business update, the key emphasis of which was the growing traction of Accrufer in the US following the December 2022 co-commercialisation deal with Viatris. The FY22 revenue of £4.5m (+194% y-o-y) was driven by Accrufer US sales (£2.9m vs £0.1m in FY21) and underpinned by a material q-o-q growth in prescriptions during FY22 (25,200 vs 2,500 in FY21). Encouragingly, this trend has continued in Q123 (10,500 prescriptions; +12% q-o-q growth) despite initial operational disruptions related to the integration. With the salesforce approaching full strength (total 100 people) by May, we anticipate H223 to be a vital period for sales traction and market coverage. We have updated our FY23–24 pricing and costs estimates for the FY22 results but maintain our long-term Accrufer growth assumptions. Our revised valuation is £388.9m (£403.4m previously).