Healthcare

• The real foothold of a pharmaceutical company lies in  “Development” rather than “Research”. After the clinical development has reached the first-class level, what remains is the vision of the leaders.
• For China biotech, we think they would go through four stages- Stage 1 (2015 – 2019), Stage 2 (2019 – present), Stage 3 (2026-2028) and Stage 4 (starting from 2030).
• If without Merck’s deal, Kelun’s profit improvement was mainly due to effective cost control. If Kelun could maintain double-digit revenue growth, with net profit margin around 10%, it’s already good.

• Siloam International Hospitals (SILO IJ) booked a very strong set of 1Q2023 results, despite a seasonally slower period, with all of its ramping-up hospitals now generating positive EBITDA.
• The company saw marked improvement in its patient metric in 1Q2023, both for inpatients and outpatients plus an improving payee mix with more corporate and insurance payments.
• Siloam put through price increases in 1Q2023, which will positively impact the next few quarters. It will also focus more on diagnostics this year as a new area for growth.

• Astellas Pharma (4503 JP) recorded 17% growth in revenue to ¥1,519B in FY23, driven by 24% growth of Xtandi. Core operating profit grew 17% and core net profit increased 18%.
• The company has guided for flat revenue and core operating profit for FY24, mainly due to negative impact of Fx.  
• Astellas expects to obtain FDA approval for fezolinetant for vasomotor symptoms associated with menopause in May 2023. The company will file for marketing approval for zolbetuximab in Q1FY24.

• AstraZeneca achieved mixed results in the last quarter with total revenues surpassing Wall Street expectations but it missed out on meeting the earnings expectations of analysts.
• The company had a total revenue of $44.4 billion in 2022, a 25% increase at CER, while core EPS was $6.66, a 33% increase from 2021 levels.
• Looking ahead to 2023, AstraZeneca remains confident that the strength of its underlying portfolio will allow it to outgrow revenue decreases from its COVID-19 medicines.

• Exact Sciences Corporation delivered strong results in the quarter, with fourth quarter revenue increased by 17%, or 28%, excluding COVID testing, to $553 million.
• The company delivered an all-around beat in the quarter as 10,000 new healthcare professionals ordered Cologuard, bringing the total to over 302,000.
• Besides that, Precision Oncology’s revenue fell 4% to $143 million, excluding the loss of the company’s prostate business and a $2 million forex headwind increase of 1%.

• McKesson Corporation delivered a mixed set of results for the last quarter with revenues below expectations but it did manage an earnings beat.
• Revenues in the Prescription Technology Solutions sector were $1.1 billion, up 9% yearly, due to higher prescription volumes, quicker growth in the company’s third-party logistics business, and higher technology service revenues.
• In the last quarter, McKesson also made significant progress in developing its oncology and biopharma ecosystems.

Immix Biopharma continues to share encouraging data from the Phase Ib/II open-label NEXICART-1 trial. This study is investigating NXC-201, a CAR-T therapy, for the treatment of multiple myeloma (MM) and light chain amyloidosis (ALA). At the European Society for Blood and Marrow Transplantation 49th Annual Meeting in Paris, Immix announced positive results for the 58 patients enrolled so far. An overall response rate (ORR) of 92% was reported for patients with MM, and an ORR of 100% for patients with ALA. The therapy has also continued to show a favorable safety profile, building on a comprehensive data package to support NXC-201 as the first potential outpatient CAR-T therapy, offering significant market differentiation, in our view. Management plans to submit a biologics license application (BLA) for FDA approval in MM once 100 patients have been treated, and in ALA once 30–40 patients have been treated.

• Intuitive Surgical managed an all-around beat in the last quarter with decent revenue and products growth.
• The new capital installs were quite strong, with customers building their Ion and da Vinci system capabilities.
• A capable product portfolio and strong growth in procedures have supported quite a healthy capital placement quarter.

Respiri released its Q323 activity report, updating investors on key highlights during the quarter. The period was marked by continued expansion of the company’s commercial footprint in the US, which included the signing of three additional contracts (taking the total client count to nine) and the appointment of a US-domiciled chief commercial officer to spearhead its growth strategy for the country. In addition, Respiri disclosed that it is in ongoing negotiations with two large insurers and four to six healthcare organisations, indicating a strong sales funnel. With the company recognising its first Centers for Medicare & Medicaid Services (CMS) reimbursement claims during the quarter and an increasing number of patients onboarded (including at Michigan Children’s Hospital and an undisclosed North Carolina-based healthcare organisation in Q123), we see initial validation for the company’s wheezo remote patient monitoring (RPM) model with subsequent traction likely with early patient responses. The period-end cash balance stood at A$0.9m, highlighting the need to raise capital in the near term, pending any material sales-related inflows.

• JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) 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 come in August 2023 based on trading data as of end-April 2023.

• Samsung Biologics (207940 KS) reported year-over-year improvement in sales and operating profit in 1Q23. However, net profit declined 4% YoY due to one-off factor stemming from an acquisition last year.
• The company expects stronger growth in H2 due to revenue contribution of Plant 4 and the launch of Humira biosimilar in the U.S.  
• Based on the strength of CMO business, Samsung Biologics has raised 2023 revenue growth guidance to 15–20% YoY from 10–15% YoY announced in January.

OpGen has announced that Curetis (its German subsidiary) has successfully met the remaining key milestones for Unyvero A30 RQ under the initial R&D collaboration with FIND (a global non-profit alliance for diagnostics), triggering a $0.3m milestone payment to OpGen. This development follows the achievement of certain other key milestones in January 2023. While OpGen is still working on the next set of deliverables under the expanded scope of R&D agreement (April 2023), the successful completion of the feasibility phase indicates Unyvero’s potential adaptability for low- and middle-income countries (LMICs). As a step forward, OpGen will seek to expand the agreement towards clinical studies and subsequent commercialization.

• Kenvue (KVUE US), a wholly owned subsidiary of Johnson & Johnson (JNJ US), is preparing for an IPO of 151M shares. The IPO price is expected to be $20–23/share.  
• Goldman Sachs, J.P. Morgan, and BofA Securities are acting as joint lead bookrunning managers for the IPO. J&J will still own more than 90% of Kenvue’s shares after the IPO.
• In 1Q23, Kenvue’s revenue increased 7% YoY to $3.9B, driven by a 12% YoY revenue growth in self-care OTC products. Adjusted net income increased 3% YoY to $630M.

• ASRT is purchasing Spectrum Pharmaceuticals (SPPI) in an all-stock transaction that adds ROLVEDON to its product portfolio.
• The initial reaction to the deal has been materially negative after ASRT added it would maintain a majority of SPPI’s operating expenses.
• ASRT’s management has been looking for an asset that would help diversify the revenue stream away from Indocin. The purchase of SPPI achieves such a goal

• Dechra is in discussions with EQT and ADIA about a 4,070 cash possible offer (46.6% premium, 22.6x EV/NTM Fwd EBITDA and 32x Fwd P/E). PUSU deadline is 11 May. 
• With the deal multiple at a slight premium (on both EV/Fwd EBITDA and Fwd P/E) over Zoetis, the market leader in animal health, the offer appears to be reasonably priced.
• My base case fair value estimate is 3,568p/share (DCF-based), 12.3% below the offer price. My TP is thus 4,070p. Gross spread is 9.1%, therefore I feel the risk/reward is balanced.

• Baxter International’s fourth quarter performance fell short of the expectations of its management as well as Wall Street.
• Foreign exchange losses and the product mix throughout the quarter were the primary reasons for a rather disappointing result.
• Sales during the fourth quarter were $3.9 billion, increasing 2% operationally, 17% at constant currency, and 11% reported-on-basis.

• InMed is a unique clinical-stage biopharmaceutical company that is engaged in the research and development (R&D) of rare non-psychoactive cannabinoids for therapeutic use.
• The company is stewarded by a strong leadership team led by CEO Eric A. Adams
• InMed’s growing development pipeline is at the forefront of pharmaceutical companies that are harnessing rare cannabinoids for treating a range of disorders with unmet medical needs.

• Teleflex had a mixed quarter with revenues of $758 million that was below Wall Street expectations given a year-over-year fall of 0.5%.
• Despite an unanticipated subcomponent supply chain issue in their Surgical business, their fourth quarter constant currency revenue growth remained steady.
• Teleflex’s Interventional, Surgical, and OEM product categories produced double-digit constant currency year-over-year revenue increase.

• Mankind Pharma (6596876Z IN) is looking to raise up to US$526m in its IPO by selling 40.06m shares at a price range of INR 1026 to INR 1080 per share.
• The company has allocated 12.02m shares to anchor investors at INR 1080/share. That list includes marquee names and the lock-up reduces near-term float.
• The IPO opens on 25 April and will close on 27 April. Shares are expected to start trading on 9 May and there are no near-term index inclusions expected.

• With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX). 
• There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
• Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.

• The SPX made a high of 4169 last week, tagging our 4165-4200 resistance range. We still believe 4165-4200 will cap upside in 2023, with a reach to 4300-4325 also possible.
• Considering limited upside in both scenarios, and with the seasonably weaker “sell in May and go away” period approaching, we continue to recommend higher allocations to defensives
• This includes Utilities (XLU, RYU), Consumer Staples (XLP), Health Care (XLV, PPH), and gold miners (GDX).

• UMP Healthcare (“UMP”) is Hong Kong’s leading private medical service network. Its network spans 1100+ service providers, 1mm+ scheme members, 2000+ contract customers, and over 1.13mm+ annual clinic visits.
• Despite the consistent track record, UMP trades at a 61% discount to its IPO price, 6x PE, and 8% yield with 45% of its market cap in net cash. 
• We see ingredients in place for a multi-year re-rate, backed by HK’s new Healthcare Policy and the company’s strategic tilt towards higher margin service lines supporting future profit growth.

• Excluding COVID-19 projects, some of WuXi AppTec’s conventional CXO business growth rate has declined significantly. So, the fading of COVID-19 dividend period is not the only reason for the performance decline.
• The supply-side reform of innovative drugs is further deepened, and the effect of industry clearing is obvious. So, the “winner-takes-all” logic will be gradually deduced in the future.
• WuXi AppTec’s controlling shareholders seem to “have foreseen something”- They could continue to reduce holdings on rallies in the future. Together with longer-than-expected industry winter, valuation center could further decline.

• The margins of pharmaceutical circulation B2B business is low. If there’s not enough incremental space of terminal customers, the simple B2B trading model is difficult to form a leapfrog growth.
• Based on YSB’s business model, if terminal customers choose to use other platforms like JD Health/Alibaba Health, etc., YSB would face the risk of losing upstream and downstream users.
• So far, we haven’t seen that YSB has established core competitiveness or moat to secure the terminal customers pool, casting doubts on its business model, investment logic and outlook.

• Esco Lifesciences Group (1891571D SP), a profitable lifesciences tool provider with a global presence, is looking to raise $300M in its upcoming HK IPO.  
• The company clocked revenue of S$117M in 2019, which steadily rose to S$155M in 2020 and S$172M in 2021, representing CAGR of 21%, outpacing lifesciences equipment market growth of 10%.
• In May 2021, Esco raised $200M through series-A fund raising with investors holding nearly 24% of the shares. This puts its valuation at around $840M.

• Johnson & Johnson reported strong operational performance in the quarter, demonstrating the power and adaptability of Johnson & Johnson as well as its dedication to enhancing global health outcomes.
• They also anticipate a number of pipeline advances in 2023 that will boost confidence in their Pharmaceutical and MedTech companies.
• Johnson & Johnson remains confident in its ability to generate near-term success, long-term growth, and shareholder value creation in the future.

• IHH Healthcare (IHH MK) reported 11% YoY revenue growth in its core hospital and healthcare business in 4Q22, mainly driven by higher inpatient admissions in most of the hospitals.  
• In November 2022, India’s stock exchange regulator SEBI has advised IHH to proceed with the open offer for Fortis Healthcare (FORH IN) to acquire 26.1% stake after obtaining court permission.
• IHH is cautiously optimistic of robust growth from its core business with the return of local and foreign patients to its hospitals.

• Shockwave Medical Inc (SWAV US) is reportedly drawing takeover interest from Boston Scientific. Shockwave can potentially be one of Boston Scientific’s largest ever acquisitions. Probable pricing still offers upside potential.
• Shockwave has an addressable market opportunity of $8.5 billion. The company has guided for 2023 revenue of $660–680 million, which represents 35–39% YoY growth.
• Addition of Shockwave will bolster Boston Scientific’s cardiovascular portfolio. No official announcement has been made by any of the companies. There is no certainty they will lead to a deal.

• Tigermed’s revenue growth in 2021/2022 would have been pessimistic if it were not for the large COVID-19 orders, which makes us worried about the Company’s future growth in post-COVID era.
• Profit margin could further decline due to increasing labor cost. Highly volatile financial profit would lead to more ugly profit performance. Higher domestic revenue proportion would limit future growth space.
• The year 2022 marked a turning point in Tigermed’s performance. Its subsequent growth shows a downward trend.We think its valuation should be lower than WuXi AppTec, with more downside ahead. 

• Cooper Companies had impressive Q3 results for both its CooperVision and CooperSurgical divisions and managed an all-around beat.
• CooperVision experienced strong and diversified growth in all product categories, with its Daily Silicone hydrogel portfolio and myopia management products leading the way.
• The company’s growth in the myopia management market has been strong, with revenues up 42%, and it remains a market leader with its FDA-approved MiSight product.

• Henry Schein had a successful quarter, generating $3.4 billion in net sales and managing to surpass the revenue expectations of Wall Street.
• The company achieved an operating margin of 7.27%, which is an 18 basis point increase from the prior year’s GAAP operating margin, despite experiencing a decline in sales of PPE and COVID-19-related products due to pricing volatility.
• Although global dental sales declined by 3.1%, with LCI sales down 0.3%, LCI sales growth, except for COVID-19-related products and PPE, was 3.5%.

• Mettler-Toledo experienced robust growth in most product lines and regions during Q3, particularly in the Lab business, resulting in a successful quarter which happened to be an all-around beat.
• While Product Inspection witnessed a 13% increase in sales during the quarter, Food Retail sales decreased by 19%.
• To capture growth and market share in its Lab business, Mettler has accelerated their digital transformation in sales and marketing and sharpened their focus on the most attractive market segments.

• The contribution of innovative drugs cannot offset the generics revenue decline caused by VBP. Without PD-1 level big variety emerging, the pressure of VBP would continue for a long time. 
• Hengrui launched Luzsana to develop global business, seeming to send “a compromise and ambiguous signal” to various complex forces within this traditional pharmaceutical empire. ADC pipeline remains to be seen.
• Hengrui still has many problems that are difficult to solve. Even though there is a rebound, Hengrui’s stock price performance may not deliver excess returns, with lower-than-expected upside elasticity.

• Pharmaceutical companies shouldn’t always emphasize being the first to enter the market, but focus on how to best enter the market and maintain a dominant position as long as possible.
• It’s truly felt that the assets of China’s pharmaceutical companies are accelerating their global recognition. As their internationalization strategy becomes increasingly mature, investors are expected to obtain more benign returns.
• For Pharmaron, financial profit decline was the main reason for profit drop.If deducting fair value change of biological assets, operating profit growth was negative. We remain conservative about its outlook.

• Mankind Pharma (6596876Z IN)‘s IPO is lined up to be open for subscription next week.
• Mankind is one of the largest pharmaceutical formulation player in India. The company is a market leader in condoms, pregnancy test kits, emergency contraceptives category, etc.
• However, when it comes to the balance sheet, there are several aspects that warrant attention. These include acquisitions, asset quality, non-comparable return ratios owing to accounting treatment, etc.

• Dechra Pharmaceuticals (DPH LN) received an offer from the Swedish private equity firm EQT regarding a possible all-cash deal, where Dechra shareholders would receive £40.70 per ordinary share in cash.
• Right after the announcement, Dechra shares surged 33%. The shares are currently trading at £37.66, implying 10% upside potential.
• Without EQT offer, based on current financial performance, Dechra has a bleak outlook. Currently, Dechra has average target price of £39.39, implying a spread of just ~5%.

• Binding exclusivity to acquire or license Deverra Therapeutics’ platform asset 
• CAR-T + GEAR COEP platforms could plug into Deverra platform
• Other key assets – 2x FDA approved PI INDs for CD34+ NK Cells.

• Mankind Pharma (6596876Z IN), a pharmaceutical company, is seeking to raise up to Rs43.3 billion (US$527 million) at Rs1,026-1,080 per share. The public offer runs from 25-27 April.
• We previously discussed the IPO in Mankind Pharma IPO: The Bull Case, Mankind Pharma IPO: The Bear Case and Mankind Pharma IPO: Updates Warrant Caution. 
• Our valuation analysis suggests that Mankind Pharma is fully valued at the IPO price range. Therefore, we are inclined to pass on this IPO. 

• Legend Biotech Corp (LEGN US) shares broke into a new high after a leaked abstract showed Carvykti cuts risk of progression or death by 74% in earlier multiple myeloma therapy.
• Success of Carvykti in earlier lines of MM therapy will lead to rapid intake of the drug and increase the drug’s peak sales opportunity to $5B.
• During 2022, Carvykti generated ~$134M in net trade sales. With label and geography expansion of Carvykti, Legend Biotech shares still have further upside potential.