Healthcare

• As discussed in MBK/Unison Capital Korea Do a Deal for Osstem Implant (048260 KS) Thwarting Activist KCGI, at end-Jan, they launched a deal to get a minimum of 15.4%.
• They ended up getting 61.16%. That left 10.6% of shares out in unaffiliated hands. 
• Now they have launched another tender offer to buy the remaining at the same KRW 190k price. There is no minimum. Straight simple risk arb.

• MBK/Unison Capital consortium announced a second tender offer for Osstem Implant (048260 KS) today in order to take the company private. 
• The tender offer price is 190,000 won per share, which is the same price as the first tender offer price.
• The number of shares for the tender offer is 1,654,916, accounting for 10.62% of the outstanding shares.

• CSPC Pharmaceutical Group (1093 HK) reported 11% YoY revenue growth in 2022. The finished drug business maintained steady growth in 2022, with a continued increase in contribution from new products.
• Within the next 5 years, more than 40 innovative drugs are expected to be approved, which will provide continuous momentum for the company’s development.
• In March 2023, CSPC’s COVID-19 mRNA vaccine SYS6006 has become the first independently developed mRNA vaccine product in China that has been granted for emergency use.

• Quest Diagnostics Incorporated is a well-known provider of diagnostic information services.
• The company produced significant double-digit growth in prenatal genetics and pharmaceutical services for sophisticated diagnostics.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Opportunity knocks. In a period of sector upheaval, Numinus remains a steadfast business, with operating profitability in clear line of sight.
• The company is well positioned to benefit from reduced competition.
• Field Trip, Delic clinic closures. On March 15, 2023, Field Trip Health & Wellness announced that it will be closing five clinics located in Chicago, Washington DC, Seattle, San Diego, and Fredericton, the majority of its active nine clinics across North America, to “reduce expenditures and preserve capital”.

• This is our first report on leading diagnostic service provider, Quest Diagnostics Incorporated.
• The company produced significant double-digit growth in prenatal genetics and pharmaceutical services for sophisticated diagnostics.
• Agilent Technologies further signed an agreement with Quest to make the Agilent Resolution ctDx FIRST liquid biopsy next-generation sequencing (NGS) test available to providers and patients across the U.S.

• Zimmer Biomet Holdings is a global medical technology giant.
• The management has been seeing positive comps across 2022 and saw good growth in major joints, with their entire global hip and knee business expanding well.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• This is our first report on the global medical technology behemoth Zimmer Biomet Holdings.
• They observed another quarter of year-over-year growth in major joints, with their entire global hip and knee business expanding by more than 8% and 10% on an ex FX basis.
• We initiate coverage on the stock of Zimmer Biomet Holdings, Inc. with a ‘Hold’ rating.

• In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
• OZ Minerals Ltd (OZL AU) upcoming deletion in April 2023 could cause a couple of intra-review replacements.
• Separately, there could be one more change in the ASX 200 index in the June 2023 review.

• Neuren Pharmaceuticals (NEU AU)‘s lead product Daybue (trofinetide) has obtained FDA approval for the treatment of Rett syndrome in adult and pediatric patients two years of age and older.  
• Daybue is expected to be available in the US in April, 2023. Neuren is eligible to receive royalties on net sales of trofinetide in North America, plus milestone payments.  
• Geography expansion of trofinetide (mainly European approval and launch), label expansion possibility of trofinetide, and Neuren’s pipeline progress can act as potential upside catalysts for the stock.

• AmerisourceBergen is a major pharmaceutical sourcing and distribution services provider in the U.S.
• The company has reasonably strong financials and a dominant position in an oligopolistic market.
• The management believes that the acquisition of PharmaLex will help the company assist pharma and biotech companies.

• DaVita is a well-known healthcare provider within the kidney care space.
• The company entered 2023 with below par revenues though its margin profile continues to be strong.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Australian Clinical Labs (ACL AU) has announced its intention to make an off-market takeover for Healius (HLS AU) offering 0.74 ACL shares for each Healius share.
• The offer represents a nil-premium merger and if successful will result in current Healius (HLS AU) shareholders owning 68% of the merged company.
• The offer is a big discount to longer-term VWAPs. We don’t expect shareholders will tender and Australian Clinical Labs (ACL AU) will need to sweeten the offer.

• Australian Clinical Labs (ACL AU) has launched an all-scrip off-market takeover offer for Healius (HLS AU) at 0.74 ACL shares for each HLS share.
• The offer is saddled with several onerous conditions which disproportionately shift the risk to HLS shareholders. The offer is long-dated as ACCC approval is expected to take six months.
• The lack of premium and unattractive deal metrics suggests a high probability of Board rejection. Nevertheless, ACL’s bid underscores HLS’s beaten-down valuation. Expect improved terms.

• Australian Clinical Labs (ACL AU) has announced a merger proposal for Healius (HLS AU), the completion of which would create Australia’s largest pathology provider.
• ACL is offering 0.74 new shares for each share in Healius. Healius shareholders will hold 68% of the enlarged entity, with ACL shareholders holding 32%.  
• The Offer is conditional on a 90% minimum acceptance condition and regulatory approvals (ACCC and FIRB). Healius’ board is evaluating the Offer. 

• Bionote (377740 KS) was listed on 22nd Dec 2023, when it raised US$73m in its downsized Korean IPO. Its three-month lockup will expire on 21st Mar 23.
• Bionote is an integrated producer of diagnostics test products and biocontent products. Based on its unique recombinant antigen and antibody manufacturing technology, the firm researches and develops diagnostic reagent products.
• Coming up for three-month lockup expiry are the firm’s three pre-IPO investors, together with Gunwoo Ha (ex-CEO). The three pre-IPO investors had earlier trimmed their respective stakes in the IPO.

• Takeda Pharmaceutical (4502 JP)  revealed over the weekend that experimental drug TAK-279 (acquired from Nimbus) for psoriasis is showing positive results suggesting it could become the best of its type.
• On the other hand, Takeda’s dengue vaccine Qdenga has been granted approval in Brazil, a country with high prevalence of dengue.
• Takeda’s top selling drug Entyvio’s exclusivity in the US will end in 2026 and the company continues to see strong progress with its development pipeline and M&A deals.

Newron has released its annual report and provided an operational overview for evenamide as a potential schizophrenia therapy. Positive interim data for the Phase II (study 014/015, in treatment-resistant schizophrenia, TRS) was shared in Q123 with similar results demonstrated in the full/top-line six-week data for all enrolled patients (released on 20 March 2023). The Phase III (study 008A, for patients on antipsychotics but not with TRS) is ongoing; results are expected in H223. Newron is preparing another Phase III (study 003 in TRS), which it plans to initiate in 2023. We believe positive results from these trials would represent the most significant near-term catalysts. At end December 2022, Newron had a total cash and liquid asset position of €22.8m, which we estimate will provide a cash runway into 2024. We value Newron at CHF128.7m or CHF7.2/share (previously CHF113.9m or CHF6.4/share).

Newron Pharmaceuticals has announced positive top-line results from its Phase II trial (study 014) assessing evenamide, a glutamate modulator, as an add-on therapy to antipsychotics in moderate-to-severe treatment resistant schizophrenia (TRS). While detailed data (for the full 161 patient cohort over the six-week treatment period) have not been disclosed, management asserts that the results were similar to the six-week interim safety and efficacy data from the first 100 patients reported in June 2022. Newron intends to begin a potentially pivotal multinational Phase III study (study 003) in TRS patients (expected to start in H223) and, in our view, its initiation represents a future catalyst for investor attention. We anticipate that the 52-week results from the full evenamide extension study (study 015) in Q124, if positive, will further enhance the existing evenamide data package and support future regulatory discussions.

• Akeso achieved outstanding product sales last year, mainly due to off-label prescriptions.It means Akeso has “overdrawn” AK104’s performance on other indications in advance. Sales could significantly slow down over time.
• It is difficult to turn loss into profit by selling drugs alone. As the profits from selling drugs are far lower than R&D expenditures, losses are the norm.
• Akeso is overvalued, but if AK112 is successful in head-to-head trial with Keytruda, Akeso would be a player to compete on international stage. Its valuation would reach a new level.

• SanBio Co Ltd (4592 JP) recorded operating loss of ¥7.9B for FY23, better than guidance of ¥8.1B. For FY24, the company guided for operating loss of ¥4.6B, in-line with consensus.
• SanBio’s cash position improved with cash and cash equivalents of ¥6.7B at the end of FY23, up from ¥4.6B at the end of the previous fiscal year.
• The company aims to obtain approval of its lead candidate SB623 as a treatment for chronic motor deficit from traumatic brain injury during the current fiscal year.

The Competition and Markets Authority (CMA) has finished its Phase 1 investigation and has concluded that it has concerns that the UnitedHealth takeover of EMIS could reduce competition in certain areas. It has given both parties five working days to offer legally binding proposals in lieu of a Phase 2 investigation. EMIS expects to be able to provide a further update on or around 31 March, which is the statutory deadline for the CMA to determine whether these undertakings are acceptable in principle.

• Blue Jet Healthcare Ltd (BJHC IN)  is looking to raise about US$300m in its upcoming India IPO.
• Blue Jet Healthcare (BJH) is a specialty pharmaceutical and healthcare ingredient and intermediate company, offering niche products targeted toward innovator pharmaceutical companies and multinational generic pharmaceutical companies. 
• In this note, we look at the company’s past performance.

• Intellect, a mental health startup based in Singapore, has raised a strategic funding round from IHH Healthcare.
• As part of this round, IHH will work with Intellect to develop digital mental health programs for the group’s patients, corporate clients, and staff.
• Intellect says it has already started rolling out services to Gleneagles Hospital Singapore, which is part of IHH’s network of 82 hospitals in 10 countries.

Oryzon Genomics has announced it has enrolled the first patient in its Phase Ib FRIDA study investigating iadademstat in combination with Astellas’ FDA-approved FLT3 inhibitor gilteritinib to treat FLT3+ relapsed/refractory (r/r) acute myeloid leukaemia (AML) patients. The FRIDA study is central to Oryzon’s overall strategy as management believes the second-line AML setting may represent a potentially quicker route to market for iadademstat, targeting an AML patient population with limited and sub-optimal treatment options. FRIDA will recruit up to 45 patients across 10–15 trial sites in the United States and, in our view, its initiation marks a significant clinical milestone for the company.

• Akeso reported C2H22 total sales, net revenue 41% and 67% above our estimates. Non-IFRS operating loss, however, was in-line with our estimate, thanks to higher OPEX; 
• Given Summit’s US$500mn upfront and up to US$5bn upfront payment for Ivonescimab (PD-1/VEGF) (AK112), we now forecast Akeso to achieve non-IFRS breakeven in C1H23 and all subsequent years;
• We raise TP by 18% to HK$59 and maintain BUY.

• Supermax Corp (SUCB MK) reported first-ever quarterly loss in Q2FY23 due to continued fall in rubber gloves ASP, rising input cost, and weakening of the USD against the local currency.
• The challenging operating environment for glove will persist into 2023. Amid continued weak global demand for gloves, declining ASP, and rising input cost, Supermax will take time to regain profitability.   
• Global demand for rubber gloves is not expected to recover soon. In the foreseeable future, the market will remain weak, competition continue to be intense, and profitability adversely impacted.

• The logic of Duoning’s business layout is that self-produced upstream products reduce the cost and increase customer stickiness, then lock in the purchase of future customers from the source.
• Although lagging behind imported enterprises in product performance, the upstream production cost control is one of the driving forces for the localization of pharmaceutical supply chain. Duoning has growth potential.
• A slow-down or reversal of trend related to life sciences industry growth could have an adverse effect on Duoning’s business. Overseas sanctions and policy risks are also the concerns. 

Actinogen is on track to start US recruitment in Q2 CY23 for the six-month, placebo-controlled Phase IIb portion of the XanaMIA study. The study portion is designed to assess Xanamem in a population of patients with mild cognitive impairment (CI) and/or mild Alzheimer’s disease (AD), who at baseline will have been confirmed as biomarker-positive for progressive AD. We believe market participants will be keen to observe whether this study portion will confirm the positive efficacy findings shown in a subset biomarker analysis from the earlier XanADu study. We expect the next material clinical data milestone for the company over the next 12 months will be the XanaCIDD study results, due in late CY23 or early CY24. This study aims to demonstrate whether Xanamem can show efficacy signals in patients with CI associated with major depressive disorder (MDD). After rolling our model forward and adjusting for forex, we now obtain an rNPV valuation of A$702m (vs A$651m previously).

• Changes to the S&P/ASX indices, VanEck Vectors Rare Earth/Strategic Metals ETF, VanEck Vectors Junior Gold Miners ETF, Vaneck Aus Equal Weight ETF, and other indices will be implemented 17 March.
• There are plenty of stocks with multiple days of ADV to trade. Some pre-positioning would have taken place prior to announcement and positions adjusted in the last couple of weeks.
• There has been a reversal in stock performance over the last few weeks and short interest has moved a lot in some stocks.

• Sumitomo Pharma (4506 JP) completed the acquisition of Myovant Sciences. Myovant’s marketed drugs Orgovyx and Myfembree are on strong growth trajectory and have the potential to become blockbuster drugs.
• Sumitomo’s flagship drug Latuda lost patent protection in Feb’23 and has already started seeing revenue erosion. For FY23, Sumitomo has guided for Latuda revenue of $1,565 million, down 14% YoY.
• Post Latuda, newly added drugs will not be able to fully offset the effect of Latuda revenue loss. the company is not expected to launch in-house new drug before FY25.

• PAGD intends to switch from 2C model to 2B model and to reduce losses ASAP at the expense of revenue scale, so as to prove its profitability to the market. 
• B-End corporate customers with high quality and sufficient budget are limited. Once the growth of B-end corporate customers meets a bottleneck, its performance may face another decline.
• Despite the improving financial performance in 2022, we still think that we need to further observe the effect of strategic transformation and future performance of PAGD before making judgments.

• ADICON Holdings Limited (ADI HK) is looking to raise about US$400m in its upcoming HK IPO. The deal will be run by Morgan Stanley and CICC. 
• Adicon Holdings is one of the top three independent clinical laboratory (ICL) service providers in China in terms of total revenue during the Track Record Period, according to F&S.
• It offers comprehensive testing services primarily to hospitals and health check centers through an integrated network of self-operated laboratories across China. 

SIGA’s FY22 results highlighted underlying revenue diversification and clinical progression during the year. Results were broadly in line with our expectations. Growth was driven by the material uptick in international orders due to the mpox (monkeypox) outbreak ($71m of $77m orders delivered in FY22), supported by orders from the US Department of Defense (DoD) and BARDA for IV TPOXX. Consistent with prior periods, variability in replenishment of government stockpiles is a key consideration in reported revenues and margins. For FY23 and FY24 we estimate replenishment of government stockpiles will continue to remain a pillar, driven by BARDA deliveries for oral ($225m in total over FY23 and FY24 for expiry replenishment) and IV TPOXX. SIGA remains well-capitalized, with net cash of $98.8m at FY22. We adjust our estimates for the Q422 results and near-term operational visibility (introducing a slower international sales ramp-up) resulting in our valuation adjusting to $17.70/share (from $19.64).

Oryzon Genomics has nominated a new central nervous system (CNS) clinical development candidate, ORY-4001, for the treatment of rare CNS disorders including Charcot-Marie-Tooth (CMT) disease and amyotrophic lateral sclerosis (ALS). The decision follows positive data in which ORY 4001 demonstrated both an encouraging selectivity and safety profile as well as efficacy signals, triggering a strong anti-inflammatory response in preclinical in vivo models; the compound also showed positive responses in a validated CMT1A peripheral neuropathy in vivo model, which reliably recapitulates many of the symptoms of this condition in humans. In July 2022, Oryzon collaborated with the CMT Research Foundation, which helped fund the preclinical studies for ORY-4001 in CMT and, in our view, highlights the positive impact Oryzon’s partnerships can have on expediting development. The company now intends to start investigational new drug enabling studies as it progresses ORY-4001 towards clinical trials, the initiation of which would represent a future catalyst for investor attention.

• Several original shareholders reduced their holdings of Mindray, which indicates that the senior executives and major shareholders aren’t optimistic about Mindray’s outlook, putting the Company’s long-term growth under scrutiny.
• Mindray’s performance in overseas markets could be under pressure, which is an uncertain factor to drag down this year’s performance growth. Supply chain issue would hinder Mindray’s breakthrough in high-end fields.
• Performance slowdown could continue if without breakthroughs in new growth points or internationalization. Our forecast on 2023 growth is about 15%-18%. Mindray’s valuation may fall back to 30-35 PE TTM.

• Lutronic Corp (085370 KS) recorded its highest ever revenue and operating profit in 2022, driven by strong performance of overseas business, which contributed 88% of revenue and grew 62% YoY.
• Overall, business has recovered with the reopening of the dermatology clinics and resumption of elective procedures globally. In addition to product sales, sales of consumables and services are steadily increasing.
• Despite stellar performance in 2022, ongoing lawsuit against U.S.-based competitor remains an overhang on Lutronic’s overseas growth aspirations, especially in the U.S.

• This is our first report on major pharmaceutical sourcing and distribution services provider, AmerisourceBergen.
• Among major updates, AmerisourceBergen added PharmaLex to its portfolio of specialty solutions to expand its capabilities.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• This is our first report on Centene Corporation, one of the largest health insurance players in the U.S.
• Centene had a successful year in 2022 and ended it on a positive note with an all-around beat.
• Total revenue grew by $3 billion, driven by strong organic growth in Medicaid, strong growth in Medicare membership, and the acquisition of Magellan.

• This is our first report on major healthcare provider, DaVita.
• DaVita produced an adjusted operating income of $317 million and adjusted profits per share from continuing operations of $1.11 for the fourth quarter, bringing the entire year squarely at the top of the revised target range it provided last quarter.
• During the previous quarter, the international adjusted operating income fell by $15 million.

• Bukwang Pharmaceutical (003000 KS) has reported operating loss of KRW1.2 billion in 2022 due to the increased R&D cost, driven by the clinical progress of JM-010.
• Bukwang’s subsidiary, Contera Pharma, is developing JM-010 as a treatment for dyskinesia in patients with Parkinson’s disease. JM-010 is in phase 2 clinical trial in the U.S. and Europe.
• Bukwang has been aiming to list Contera Pharma to secure funds for clinical research, which has still not materialized. With current low-risk appetite, Contera Pharma IPO may not sail smooth.