Healthcare

• Classys (214150 KS) reported strong performance in 2022, with highest ever revenue and profit, driven by increased sales of equipment and consumables due to increased global awareness of major products.
• Revenue from export recorded a CAGR of 30% during 2017–2022, mainly driven by strong growth in Brazil. Classys launched Shrink Universe in Korea and Ultraformer MPT in global market.
• For 2023, Classys has guided for revenue of KRW170B (+20% YoY), driven by Shrink Universe’s expansion into the global market, full-fledged domestic sales of Volumemers, and increasing volume of consumables.

• Fresenius Medical Care Ag & Co (FME GR) is reporting decelerating organic revenue growth and earnings decline. The company has revised 2022 revenue and earnings guidance twice in last year.  
• Earnings are heavily impacted by the unprecedented US labor market situation constraining capacity and accelerating wage inflation, and worsening macroeconomic environment driving cost inflation and supply chain disruptions.
• For 2022, the company expects low single-digit percentage revenue growth and high teens to mid-twenties percentage decline in net income. CEO has stepped down within two months of taking charge.

Basilea reported strong FY22 results following the successful execution of its strategic realignment to focus on anti-infectives. The top-line beat (c 21% ahead of the top end of guidance) was driven by accelerating global uptake of its marketed assets, primarily Cresemba, which recorded 22% year-on-year growth in royalties (to CHF65m). In combination with the receipt of milestone payments, lower-than-expected operating expenses and the sale of oncology assets, management was able to achieve profitability (FY22 net profit of CHF12.1m) a year earlier than anticipated. As Cresemba peaks, we expect additional support to come from the successful US launch of Zevtera (NDA expected in March/April 2023) and the introduction of novel late pre-clinical/clinical anti-infective assets in Basilea’s development pipeline. Our updated valuation is CHF785m or CHF65.7/share (previously CHF921.7m or CHF77.8/share), reflecting our revised estimates and the recent sale of oncology assets, partially offset by lower net debt (CHF46.7m at end-FY22) following repayment of the 2022 convertibles.

• Cardinal Health, one of the largest wholesalers of the healthcare industry in the U.S., continued its strong performance in the last quarter and managed to deliver an all-around beat.
• Cardinal Health’s total revenue has increased by 13% in the last quarter, and the gross margin increased by 3%, driven by the Pharma segment.
• There was an increasing overall pharmaceutical demand and a strong performance from the Generics programs.

• Gilead had a very strong quarter with solid growth in each of its core franchises and across all geographies led by oncology and HIV.
• In the U.S., Sunlenca received its foremost approval for heavily treatment-experienced adults having multidrug-resistant HIV infection.
• The company continues to add further programs, including its new preclinical candidate to collaborate with lenacapavir for its long-acting HIV treatment programs.

• Shareholders have given SciClone Pharmaceuticals (6600 HK)‘s buyback the go-ahead which will result in the major shareholder holding (upward of) 31.63%, and the freedom to creep.
• As such, a concentrated shareholder register, primarily comprising entities that privatised SciClone in 2017, gets even more concentrated.
• Trading inexpensively ahead of the launch of a new (and approved) drug, SciClone is worth a second look. 

For our next Corporate Webinar we are glad to welcome New Horizon Health’s CFO, Yu Gao.

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

• Since mid-January, spreads have generally tightened across our liquid universe (8 have widened, 10 tightened, 1 at same level).
• Trade recommendations long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken, SSAB Svenska Stal.
• Trade recommendations long prefs / short ords: Carlsberg, Sixt, VW, Danieli, MFE-Media for Europe, Grifols, Atlas Copco, Ericsson.

• Genscript doesn’t equal to CGT CXO or cell therapy company,although these two businesses have attracted a lot of attention. It’s inappropriate to look at Genscript only from these two perspectives.
• Genscript’s strength and core basic business is gene synthesis,which would remain promising growth. We’re also optimistic about Bestzyme. The chaos in CGT field won’t have a material impact on Genscript. 
• Investing a company/stock is essentially investing the people. Although Genscript has its core competence, our concern about this company lies in the management. Short-term trading is more appropriate for Genscript.

Newron Pharmaceuticals has announced positive interim results from the first 100 randomised patients completing one year of treatment (77 out of 100) in the Phase II 014/015 clinical trial (international, open label, rater-blinded study), in which evenamide is an add-on therapy to antipsychotics in moderate to severe treatment-resistant schizophrenia (TRS). The data are consistent with a gradual and sustained pattern of improvement in key efficacy measures compared with results after six weeks and six months of treatment, with the proportion of patients achieving meaningful improvements increasing over time. We view these updated results as particularly encouraging for evenamide as an effective treatment for TRS, and continued justification of Newron’s strategy to expand into this schizophrenia patient population.

OSE has announced that it has received positive recommendations from its ‘type C’ meeting with the FDA for the planned confirmatory Phase III trial design for Tedopi (neoepitope cancer vaccine), as a second-line treatment in advanced or metastatic non-small cell lung cancer (NSCLC) after checkpoint inhibitor failure. This follows similar advice from the European Medicines Agency (EMA). The company will now undertake the pivotal trial as monotherapy (against standard of care) under this protocol, for patients with HLA-A2+ tumours (c 45% of total population). As a reminder, OSE reported positive data from the previous Phase III ATALANTE-1 trial as second/third-line treatment, although enrolment had to be terminated prematurely due to the COVID-19 pandemic.

• We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
• On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
• Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.

• Ryman Healthcare (RYM NZ) aims to raise around US$569m (NZ$903m) via a renounceable entitlement offer. 
• The use of proceeds will be to reset the firm’s capital structure and reduce its gearing.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Pharmaessentia Corp (6446 TT) recorded revenue of NT$232M (+259% YoY) for its sole marketed product Besremi in January 2023. For 2022, Besremi reported revenue of NT$2.9B (+339% YoY).
• Thus far, Besremi received approval in US, EU, Switzerland, Israel, South Korea, Macao, and Taiwan. Besremi is expected to obtain approval in Japan and China in 2Q23 and 1Q24, respectively.
• Besremi is in phase 3 trial for essential thrombocythemia, which is a myeloproliferative neoplasm characterized by an overproduction of platelets in the blood resulting from a genetic mutation.

• Thermo Fisher produced a solid set of results in the fourth quarter, with impressive growth in the low teens for the quarter and mid-teens for the entire year.
• The management saw a decent growth in industrial and produced significant year-over-year growth in the businesses of mass spectrometry, chromatography, and electron microscopy.
• Overall, we give Thermo Fisher a ‘Hold’ rating with a revised target price.

Pixium has terminated its convertible note financing arrangement with the European Select Growth Opportunities Fund (ESGO) without any penalties. The termination is not surprising, given the arrangement required a minimum share price of €0.25 for Pixium to be permitted to issue any additional convertible notes beyond the initial 550 (representing €5.5m; each note had a nominal value of €10,000) that formed part of the first (and only) tranche issued. Pixium’s share price had remained below this minimum price threshold since August 2022 and the company acknowledged in October 2022 that it was not able to draw further tranches. Pixium reiterates that it is funded until the end of Q223 and is exploring various mechanisms to secure its cash flow necessary to pursue its strategic and development objectives.

• Novo Nordisk produced a double-digit operational profit and strong revenue growth, driven by excellent commercial execution in their therapy areas and critical countries.
• They also started the first two Phase trials based on the Dicerna in the siRNA technology platform.
• Besides that, Novo anticipates starting a Phase IIIb trial with Ziltivekimab in the first half of 2023 to treat heart failure with preserved ejection fraction.

• We are optimistic about Sonoscape’s 2022 annual results, which was an important turning year. Due to policy catalyst/China reopening, Sonoscape would maintain high growth in 2023, with relatively high certainty.
• Sonoscape has established a high moat in the field of soft endoscopes. Even if new manufacturers enter this market, they are hard to affect the market pattern in short term.
• Although the current valuation is not cheap, based on our forecast of its business lines, there’s still growth space in valuation. Under positive momentum, this stock can be traded repeatedly.

• This is a special, one-time report on Catalent, a leading contract manufacturer and provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products.
• This report aims to examine the factors that could influence Catalent’s valuation and provide an unbiased assessment of the company’s worth.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. With regards to the upcoming KOSPI 200 rebalance, we like the following long-short trading strategy.
• We would short a basket of potential exclusions from KOSPI 200 rebalance which would include the bottom 5% of KOSPI 200 index (10 stocks).
• We would go long a basket of potential inclusions in KOSPI 200 rebalance which include four stocks including Dentium, Jeju Air, Samyang Foods, and DGB Financial. 

• WuXi AppTec is facing how to keep high growth momentum under the high base of last year’s performance.If there’s no high growth point with certainty,high valuation is hard to sustain.
• The US wouldn’t stop tightening monetary policy until “it’s fully prepared”.Investors need to consider a situation that high interest rate environment is longer than expected,under which CXO remains in trouble.
• Market sentiment towards CXO has changed. We think CXO isn’t suitable for long-term hold but only for short-term trade in 2023. Buying low and selling high is a better strategy.

• Bio-Techne delivered a disappointing result in the last quarter while failing to meet Wall Street expectations in terms of revenues as well as earnings.
• The company also noticed the strongest effects of decreasing biotech spending in Q2 in North America.
• The multiyear growth rates in North America remain in double digits and are consistent with its long-term objectives.

• Humana had a mixed quarter as its revenues were below the analyst consensus estimate but it did manage an earnings beat.
• The company has fully deployed the value-based model in Virginia and North Carolina, covering over 760,000 members or 15% of Humana MA members by year’s end.
• Medicaid business maintained its strong performance despite lower-than-expected medical costs.

• This is a special, one-time report on Jazz Pharmaceuticals, a company that is going through a significant challenge recently after its highest selling drug, Xyrem is on the verge of becoming obsolete with the arrival of Avadel’s Lumryz.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
• We also have a dedicated analysis of the company’s Environmental, Social, and Governance (ESG) risk scores in order to evaluate the sustainability risk.

• Novartis delivered a mixed set of results for the last quarter as it failed to meet the revenue expectations of Wall Street but managed an earnings beat.
• The management continued to invest in the organic business, pursued value-creating bolt-ons, and looked at the full range of M&A opportunities.
• To further extend their opportunities in gene therapy, they acquired PPY, their gene treatment for geographic atrophy in ophthalmology.

• Due to the enormous controversy regarding Chairman Choi Gyu-Ok’s children exchange CB call options for BWs, the Choi family has decided to change and simplify this transaction structure.
• Previously, MBK-Unison decided to acquire the call option on CB that Chairman Choi gave to his children. Under revised contract, MBK-Unison agreed to acquire the convertible bond itself.
• We believe MBK-Unison consortium is getting a relative bargain in this deal and the valuation of Osstem Implant remain attractive (EV/EBITDA of 6.4x and P/E of 11.7x in 2024). 

• For H1FY23 Thomson Medical Group Limited (TMG SP)‘s revenue increased 27% to S$184M. The growth was mainly attributed to the increase in overall patient loads and higher average bill sizes.  
• Despite increase in operating expenses, Thomson Medical reported a 46% YoY increase in operating profit to S$45.2M, leading to 340 basis point improvement in operating profit margin to 24.6%.
• Thomson Medical expects its existing and new business lines to grow and is therefore cautiously optimistic of its business prospects in the current financial year.  

• Shanghai Pharmaceuticals Holding (2607 HK) received approval to produce anticoagulant bivalirudin injection, which is mainly used in PTCA and for patients undergoing PCI.
• In December 2022, SPH received approval for salbutamol sulphate, indicated for the treatment of respiratory diseases including chronic bronchospasm and severe acute asthma attacks unresponsive to traditional treatment.
• SPH signed an exclusive license agreement with Shionogi for import and distribution of Ensitrelvir Fumaric Acid, an anti-viral drug for COVID-19, in mainland China.

• There is limited breakthrough points in the field of small molecule drugs. Except those big varieties, the market space of small-molecular drugs is not optimistic due to small applicable population.
• For KRAS, it just crossed the threshold of druggablility, but the whole pathway hasn’t shown the feeling of being a blockbuster variety, which would dampen the optimism of Jacobio’s valuation.
• Jacobio is among the few biotech under Chapter 18A who really develop drugs seriously. Therefore, despite the challenging outlook, we hoped that Dr. Yinxiang Wang would finally break through.

• MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
• FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
• Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.

• The benefits of assisted reproduction being covered by medical insurance are limited. Its main role is still to delay not fundamentally reverse the decline of China’s birth rate.
• If the valuation collapse occurs collectively in one field, it basically reflects that Miss Market does not hold much hope for this field in the future, such as cell therapy. 
• We mainly analyzed some key points of the companies that investors may be interested in, such as iRay Technology (688301 CH) and Shanghai Medicilon Inc (688202 CH).

• The company carried out some major acquisitions in the year including the $3.7 billion purchase of ChemoCentryx followed by the even bigger, $27.8 billion acquisition of Horizon Therapeutics.
• Their portfolio will also grow due to the addition of Horizon Therapeutics.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Concord Healthcare Group (CHG HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO.
• Concord Healthcare (Concord) is an oncology health platform in China researching and implementing advanced oncology diagnostic and treatment technologies.
• As per Frost and Sullivan (F&S), in 2021, Concord was the market leader among private oncology healthcare groups in China, as measured by cancer treatment empowerment service revenue.

• Abbvie Inc (ABBV US) reported 4Q22 results, with revenue increasing 2% to $15B, mainly driven by Skyrizi and Rinvoq. EPS grew 17% to $3.60, better than consensus and company guidance.
• The company has initiated 2023 EPS guidance at $10.70–11.10, representing a decline of 19–22% YoY, as Humira has started facing competition in the U.S.
• 2023 guidance contemplates the expected headwind from direct biosimilar competition, with the U.S. Humira sales declining ~37%, which is at the lower end of previous erosion projection of 35–55%.

• Alteogen Inc (196170 KS) signed its fourth licensing deal for ALT-B4, a proprietary human recombinant hyaluronidase enzyme, with Sandoz. Given the strong demand more such deals are expected to follow.
• Alteogen is reportedly in talks with global pharmaceutical companies for a technology transfer deal for Herceptin SC biosimilar. If successful, Alteogen will be a re-rating candidate.
• Alteogen has established Altos Biologics to facilitate global phase 3 clinical trials and commercial development of Eylea biosimilar. Altos Biologics aims to be listed on the KOSDAQ in 2024.

Immix Biopharma has announced interim response rate data from its newly formed subsidiary, Nexcella, concerning the BCMA-targeting cell therapy NXC-201 in multiple myeloma and AL amyloidosis. The data, presented at the 5th European CAR T-cell Meeting, shows a 90% overall response rate (ORR) in 29 patients (of 42 total enrolled) treated with NXC-201 at the recommended Phase II dose (RP2D). This result is comparable to approved BCMA-targeting cell therapies. Importantly, cytokine release syndrome was manageable, and no neurotoxicity was observed at the RP2D (800m cells). In our view, NXC-201’s potential main point of differentiation is its favorable safety profile, which we believe the latest data supports. Immix will continue to investigate NXC-201 as the first potential outpatient CAR T-cell therapy. This announcement follows the recent initiation of patient enrolment in a new Phase Ib/IIa clinical trial, investigating the use of Immix’s lead asset, IMX-110, in combination with tislelizumab (BeiGene/Novartis’s anti-PD-1 antibody) for the treatment of advanced solid tumors.

Shield Therapeutics’ FY22 trading update reported FY22 revenues of £8.5m, a material improvement on the £1.5m recorded in FY21 and broadly in line with our estimate of £8.8m. Sharp growth in prescription volumes (25,200 in FY22) continued to drive Accrufer sales in the US (£2.8m), although we note that the number of prescriptions in Q422 (9,324) was slightly lower than previous guidance of 9,700. However, this was offset by better-than-expected European royalty revenues of £1.3m (£0.9m in FY21), translating to a solid £0.5m in Q422 (from £0.14m in Q322). A key highlight of the year was the strategic co-commercialisation of Accrufer in the US with Viatris (previously Mylan), a leading global generic pharmaceutical manufacturer, in December 2022, allowing for broader market coverage and faster ramp-up. We expect benefits from the enlarged salesforce (c 100 from 22 at end FY22) to start showing from Q223. Based on our projections, Shield remains funded to profitability following receipt of a $5m upfront payment from Viatris, and subsequent $10m in incremental funding from AOP Health, and $21.7m from an equity raise.

• MSCI has announced the changes for the February QCIR. For Asia Pacific, there are 20 adds and 14 deletes for the MSCI Standard Index with the most changes in China.
• There are no surprises on the adds or deletes. However, there are a couple of stocks that are surprises on not being added to or deleted from the index.
• The largest impact will be on Ebos Group Ltd (EBO NZ) – though there will be pre-positioning on the stock.

• Last November I highlighted Haw Par Corp (HPAR SP)‘s multi-year trough levels on an implied stub valuation, and on an HPAR/UOB (UOB SP) ratio.
• That trade has panned out well as the ratio steadily increased. But it remains below the 200 MDA.
• A recovery in Tiger Balm sales is expected in Haw Par’s full-year results later this month.  UOB’s financials, and UOL (UOL SP)‘s, are also due out this month.

• Mankind Pharma is looking to raise around US$1bn 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 the company background and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.

• Through continuous M&A/resource integration, Haohai has gradually established its four business segments, but such development strategy hasn’t brought ideal performance, which is disappointing if compared with Bloomage and Imeik.
• The future performance driver of Haohai still lies in the medical aesthetics business, but increasing competition and declining gross margin cast doubts on the outlook and growth potential.
• Shanghai Haohai Biological Technology-A (688366 CH) is overvalued. Due to lack of growth point with high certainty, we are not optimistic about the upside potential of Haohai’s valuation.

• Vertex Pharmaceuticals (VRTX US) reported mixed 4Q22 results. Revenue grew 11% YoY to $2.30B, in-line with expectations. Adjusted EPS surged 25% YoY to $3.76, 7% ahead of consensus.
• Revenue was driven by the strong uptake of Trikafta/Kaftrio in multiple countries internationally and continued performance of Trikafta in the U.S. Trikafta/Kaftrio revenue grew 19% YoY to $2.02B.
• Vertex guided for 2023 revenue of $9.55–9.70B (+7–9%), with the low end matching current consensus. The company aims to launch five new products over the next five years.

• New Ruipeng Pet Group (RPET US) is looking to raise at least US$100m in its upcoming US IPO.
• New Ruipeng Pet Group (Ruipeng) is a pet services platform, primarily offering pet care services, supply chain services and local services, covering the entire lifecycle of pets. 
• In our previous notes, we have looked at the company’s past performance. In this note, we undertake a peer comparison.

• Syngene International Ltd (SYNG IN) provides integrated services from early discovery to commercial supply across all major therapeutic areas and modalities. The company has 400+ active clients.
• To capitalize on the secular industry tailwind, the company has been investing to enhance capacity and capability, which has led to extension of existing client relations and engaging new clients.
• For FY23, the company expects high-teens revenue growth and EBITDA margin of ~30%. Operating leverage is expected to improve from next year onwards, and that should improve the overall profitability.

• Bayer announced a new CEO today. Former Roche executive Anderson will take over the new role in June. 
• Our Target Price for the time being is €78.60, implying 25% upside from the current share price
• The equity story expands across all of Bayer’s three segments. Positive signs in Pharma, Crops Sciences, and Consumer Health are showing, which we believe are misunderstood by the investment community

• The revenue brought by CStone’s differentiated layout of pipeline does not match the R&D investment. CStone needs to in-license more late-stage products, but the Company is not cash rich.
• CStone was incubated by WuXi Bio. Its business model is“VC+IP+CRO”. Cstone doesn’t have independent R&D capability. The increasingly low cost performance of in-licensed products has made the capital “reconsider” .
• Cstone doesn’t have the potential to be a biopharma as it licensed out the key/core candidates. Its future valuation growth would be “discounted”. Corporate governance/instability is also a concern.