Healthcare

Companies are presumably allocating cash to shareholder returns rather than investing in growth. Lack of investment in growth may lead to slower profit growth, which leads to lower valuations.
There is concern that management may be hesitant to take risks. Since no shareholder hates shareholder returns, they may be easily diverted to share repurchases that don’t require risk-taking decision.
Although the expected share repurchase will limit the risk of sharp decline in the stock prices, modest growth investments are likely to prevent the expansion of multiples.

Terumo Corp (4543 JP): H1FY23 Results Reflect Continued Recovery from the Pandemic

Terumo Corp (4543 JP) recorded double-digit revenue growth in H1FY23, with record-high Q2 revenue exceeding ¥200 billion. All three businesses of Terumo reported growth during H1FY23.
Cardiac and vascular segment remained the key growth driver and grew 21%, driven by a 24% y/y growth in overseas revenue amid the recovery and growth of medical demand.
Inflation and normalization of sales and marketing activities impacted the profitability of the company. To improve profitability Terumo has taken further price increase in second half.

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Dec 14

Daily Brief Health Care: Acotec Scientific Holdings, Intuitive Surgical, GlaxoSmithKline PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Acotec Scientific Holdings (6669.HK) – Logic Behind Boston Scientific’s Partial Offer and the Impact
Intuitive Surgical Inc.: Initiation of Coverage – Recent Approvals & Other Drivers
GlaxoSmithKline ADR: Initiation of Coverage – Business Strategy & Other Drivers

Acotec Scientific Holdings (6669.HK) – Logic Behind Boston Scientific’s Partial Offer and the Impact

Boston Scientific angles for majority stake with US$523 million for Acotec Scientific Holdings (6669HK), which is the largest acquisition of a Chinese medical device company by a MNC since 2014.
Completion of the Partial Offer would further strengthen Boston Scientific’s presence in China and create the potential for commercialization of Acotec products globally. It’s a win-win deal for both sides.
Companies listed in HKEX don’t have to seek valuation within HKEX system. If they can find “new anchor points”, they’ll have higher valuation.Chapter 18A companies’ future stock prices would diverge.

Intuitive Surgical Inc.: Initiation of Coverage – Recent Approvals & Other Drivers

This is our first report on Intuitive Surgical, one of the largest players in robotic surgery offerings across the globe.
Korean growth remained steady, while Japanese procedure growth quickened compared to Q2.
We initiate coverage on the stock of Intuitive Surgical with a ‘Hold’ rating.

GlaxoSmithKline ADR: Initiation of Coverage – Business Strategy & Other Drivers

This is our first report on GlaxoSmithKline (GSK), one of the largest pharmaceutical companies in the world.
The company is making a significant performance in both operating performance and R&D productivity.
GSK continued disciplined cost control by prioritizing investments in the growth for supporting launches in Vaccines and Specialty Medicines, namely Shingrix.

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Dec 13

Daily Brief Health Care: Acotec Scientific Holdings, Bionote, Akeso Biopharma Inc, Humana Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Acotec Scientific Holdings: Boston Scientific’s Partial Offer
Acotec Scientific (6669 HK)’s Partial Offer of HK$20 from Boston Scientific
Bionote: IPO Price Reduced Significantly & Bookbuilding Results
Akeso Biopharma (9926.HK) – Behind the Deal with Summit: A Snake Swallows an Elephant?
Humana Inc.: Initiation of Coverage – Expansion Of CenterWell & Other Drivers
Is Effective Reform Only Possible After Future Problems with High-Risk Companies?

Acotec Scientific Holdings: Boston Scientific’s Partial Offer

By David Blennerhassett

Acotec Scientific Holdings (6669 HK), a Chinese medical technology company, has announced a Partial Offer from Boston Scientific (BSX US).
The Offer Price for up to 65% of shares out is HK20/share, a 31.6% premium to last close, but below last year’s IPO price of HK$23.80/share.
Irrevocables who intend to tender a total of up to 60.14% of shares out. This includes the CEO and the key pre-IPO investor.

Acotec Scientific (6669 HK)’s Partial Offer of HK$20 from Boston Scientific

By Arun George

Acotec Scientific Holdings (6669 HK) disclosed a partial offer from Boston Scientific (BSX US) to acquire a maximum of 203.7 million shares at HK$20 per share.
The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders. Irrevocables represent a minimum of 55.14% of outstanding shares.
Despite the recent share price pop on the back of FDA approval for Vericor, the partial offer represents an all-time share price high. Therefore, the offer will be declared unconditional.

Bionote: IPO Price Reduced Significantly & Bookbuilding Results

By Douglas Kim

Bionote slashed its IPO price to 9,000 won, which is 50% lower than the low end of the previous IPO valuation range.
Our base case valuation has been revised down to 12,741 won per share in target price, which is 41% higher than the IPO price of 9,000 won.
The company is expected to have more than 615 billion in net cash post the IPO, which is expected to represent nearly 65% of its market cap!

Akeso Biopharma (9926.HK) – Behind the Deal with Summit: A Snake Swallows an Elephant?

Akeso Biopharma Inc (9926 HK) and Summit Therapeutics entered into a collaborative and licensing agreement for AK112, which has set a new record for China’s innovative drug license-out cooperation.
While the market remained positive about the transaction, there are also doubts. We deep dive the potential logic of the deal.
We recommended investors not to neglect “the nature of the deal” and “the real motivation” behind. It’s also important to see whether the subsequent operations can make some achievements overseas.

Humana Inc.: Initiation of Coverage – Expansion Of CenterWell & Other Drivers

This is our first report on Humana, a leading player in the medical insurance space in the U.S.
The company’s third quarter results were reasonably strong as it met Wall Street’s revenue expectations while managing an earnings beat.
In addition to improving plan offers for their larger membership, the management strengthened their consumer segment strategy.

Is Effective Reform Only Possible After Future Problems with High-Risk Companies?

Large audit firms focus on more profitable business and improving the profitability of their audit services. Consequently, high-risk firms that have been withdrawn from large firms flow to small-and-medium-sized firms.
“Enhancement of governance, including third-party evaluation function” is crucial to ensure that the audit firm has system to oversee and objectively determine the appropriateness of audit process and audit opinion.
Smaller audit firms will comply with the guidelines just for show, but only when future problems with high-risk firms arise will effective reforms be made in accordance with the guidelines.

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Dec 12

Daily Brief Health Care: China Traditional Chinese Medicine, Tokyo Stock Exchange Tokyo Price Index Topix, Parkway Life REIT and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

China Traditional Chinese Medicine (570.HK) – The Privatization Rumor and the Outlook
How Much Progress Has Been Made in Understanding the Concept of Shareholder Capitalism Since 1990s?
REIT Watch – Healthcare S-Reits capture Japan opportunities with expanding footprint

China Traditional Chinese Medicine (570.HK) – The Privatization Rumor and the Outlook

China TCM’s privatization rumor led to large fluctuation of its share price last week. Since there have been related rumors twice, this may not be completely over yet.
China TCM’s performance may not rebound quickly due to short-term challenges in concentrated TCM granules business.
However, the decline in the revenue side could be a temporary phenomenon. After a difficult period, if the Company’s business could recover as expected, share price would rebound.

How Much Progress Has Been Made in Understanding the Concept of Shareholder Capitalism Since 1990s?

Looking back at the genesis of the scandals that are still recurring, the cause has always been lack of awareness of legal compliance. When cross-shareholdings were prevalent, shareholders were underestimated.
How widespread has the understanding of the concept of shareholder capitalism, including the cost of capital, become? The starting point is that management must comply with legal compliance.
The problem is that the statutory auditors had the authority to function even though independent directors didn’t exist. Diversity is important to create a board of directors that can dissent.

REIT Watch – Healthcare S-Reits capture Japan opportunities with expanding footprint

By Geoff Howie

Healthcare S-REITs capture Japan opportunities with expanding footprint Both ParkwayLife Reit (37.1 per cent of its asset value) and First Reit (22.8 per cent of its assets under management) have significant exposure to Japan nursing homes and healthcare-related properties through recent acquisitions.
First Reit now has 14 out of its 32 Asian healthcare assets in Japan nursing homes which are operated by five independent and experienced nursing home operators.

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Dec 11

Daily Brief Health Care: Acotec Scientific Holdings, China Traditional Chinese Medicine and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Acotec Scientific Holdings (6669 HK): Base Business, Geography Expansion, New Launch to Drive Growth
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Xingda, Nitro, Chip Eng Seng, Traditional Chinese Medicine
Acotec Scientific Holdings (6669.HK) – A Game Changer with Solid Long-Term Logic

Acotec Scientific Holdings (6669 HK): Base Business, Geography Expansion, New Launch to Drive Growth

Acotec Scientific Holdings (6669 HK) is an early-mover in peripheral drug coated balloon market in China and holds a dominant 85%+ market share.
On November 7, Acotec received its first FDA approval for Vericor, a peripheral support catheter designed to enhance access to peripheral vessels.
Acotec started 2022 on a strong note, with revenue increasing 25% y/y in H1 2022 due to increasing adoption of the company’s product in Chinese hospitals.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Xingda, Nitro, Chip Eng Seng, Traditional Chinese Medicine

By David Blennerhassett

There are 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma: Xingda International (1899 HK)‘s partial MBO.
Key updates took place for: Nitro Software Ltd (NTO AU) , Chip Eng Seng Corp (CHIP SP) and China Traditional Chinese Medicine (570 HK).

Acotec Scientific Holdings (6669.HK) – A Game Changer with Solid Long-Term Logic

The peripheral vascular interventional device market in China is mainly dominated by foreign companies, but leading domestic company such as Acotec is the one to break the current market pattern.
With more products getting CE/FDA approval in the future, Acotec Scientific Holdings (6669 HK) is able to enter more overseas markets. Acotec’s globalization process will diversify the revenue stream.
Acotec has turned loss into profit by relying on product revenue. The Company has entered a new stage of innovation and harvest. We think Acotec has solid long term logic.

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Dec 10

Daily Brief Health Care: 21Vianet Group and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Quick Idea’s

Quick Idea’s

By Turtles all the way down

111, inc (YI) has run up to $3.25. For a spread of only about 11%.
Which is not all that attractive since there is no definitive agreement signed. So I am closing it with a quick 13% gain here.
These Chinese merger situations sometimes randomly spike up, and I think it is wise to trade around them when upside isn’t as juicy anymore.

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Dec 09

Daily Brief Health Care: Medbanks Network Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Pre-IPO Medbanks Network Technology – PHIP Updates: The Business Model Has yet to Be Verified

Pre-IPO Medbanks Network Technology – PHIP Updates: The Business Model Has yet to Be Verified

Specialty Pharmacy Business is the main revenue contributor,but it’s hard for Medbanks to achieve breakeven or turn loss into profits by relying on this business due to its low margin.
Physician Research Assistance and Health Insurance Services have higher margin, but they have to face different challenges based on our analysis. They are hard to turn things around.
In fact, Medbanks does not control the core resources or establish high barriers in front of competition. Whether its ecological story would finally work still needs time to verify.

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Dec 08

Daily Brief Health Care: OrbusNeich Medical Group, Clover Biopharmaceuticals and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Pre-IPO OrbusNeich Medical Group: Large Global Exposure Protects from Negative Price Effect in China
Clover Biopharmaceuticals (2197.HK) Placement – A Good Bet

Pre-IPO OrbusNeich Medical Group: Large Global Exposure Protects from Negative Price Effect in China

OrbusNeich Medical Group (NEICHZ HK) is among the top six players in PCI balloon markets in terms of sales volume in multiple countries including China, Japan, the U.S., and Europe.
OrbusNeich earns ~60% of revenue from Europe, Japan, and the U.S. The company’s high exposure to international markets safeguards it from the low prices commanded by China’s centralized procurement system.
With diversified product portfolio, robust inhouse production facilities, established global sales network, rich pipeline enabling continuous launching of new products, and growing market demand, OrbusNeich is well-positioned for strong growth.

Clover Biopharmaceuticals (2197.HK) Placement – A Good Bet

Clover is placing 128 million shares, raising an estimated HK$500.5 million in net proceeds, which was released right after Clover’s lead COVID-19 vaccine was included for emergency use in China.
The COVID-19 vaccine would be the only hope for Clover in the short term. There could be big upside potential in share price if this vaccine could be successfully commercialized.
After Clover successfully develops a vaccine and goes through the whole commercialization process, it won’t be at the same level as those enterprises with no commercial products on the market.

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Dec 07

Daily Brief Health Care: Qingdao Haier Biomedical Co., Ltd.-A, Shanghai Chicmax Cosmetic, Yuhan Corp, Mettler Toledo International Inc, Tokyo Stock Exchange Tokyo Price Index Topix, Cooper Cos and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

STAR50 Index Rebalance Preview: Another Five Potential Changes in March
Pre-IPO Shanghai Chicmax Cosmetic – PHIP Updates: Declining Performance and Challenging Outlook
Yuhan Corp (000100 KS): Progress of Anti-Cancer Drug Leclaza Is the Main Growth Engine
Mettler-Toledo International Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
Mettler-Toledo International Inc.: Initiation of Coverage – Business Strategy & Other Drivers
The Cooper Companies Inc.: Initiation of Coverage – Business Strategy & Key Drivers
Not Which KPI Is Better, but What Is Shared Between Investors and Managers to Achieve the Same Goal
The Cooper Companies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

STAR50 Index Rebalance Preview: Another Five Potential Changes in March

By Brian Freitas

Nearly 85% of the way through the review period, we see 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
Given the significantly higher market cap of the inclusions using a 6-month minimum listing history, we expect the index committee will continue to use the shorter listing history requirement.
With 5 changes a side, one-way turnover is estimated at 5.15% and will result in a one-way trade of CNY 3,994m. Impact on some deletions is quite high.

Pre-IPO Shanghai Chicmax Cosmetic – PHIP Updates: Declining Performance and Challenging Outlook

According to the PHIP, Chicmax’s performance growth showed a downward trend. Due to consumption downgrade and weak economic situation, the Company’s short-term performance could continue to be under pressure.
If the top three brands fail to performance well, Chicmax has no other blockbuster brands to make up for it afterwards. We have concerns on Chicmax’s competitiveness in the industry.
If the total retail sales of consumer goods don’t maintain well, the probability of endogenous growth problems is high, which would finally be reflected in the decline of share price.

Yuhan Corp (000100 KS): Progress of Anti-Cancer Drug Leclaza Is the Main Growth Engine

Yuhan Corp (000100 KS) has launched in-house developed drug Lazertinib in the domestic under the brand name Leclaza in July 2021 as a second-line treatment for NSCLC in Korea.
Going forward, Yuhan aims to place Leclaza as the first-line treatment for NSCLC patients. Leclaza is in late-stage global trial for global approval as a combined or monotherapy for NSCLC.
In September, Yuhan has acquired a 60% stake in microbiome developer AtoGen for KRW 10B. This acquisition will enable Yuhan to strengthen its probiotics business and development of microbiome treatments.

Mettler-Toledo International Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Mettler-Toledo is one of the biggest players in the precision instruments and services domain across the world.
The management recognizes that the global supply chain continues to pose risks, but their ability to meet customer demands should remain a competitive advantage.
Mettler-Toledo should keep investing in brand-new products that will lay the groundwork for expansion in the future.

Mettler-Toledo International Inc.: Initiation of Coverage – Business Strategy & Other Drivers

This is our first report on Mettler-Toledo, one of the largest manufacturers and suppliers of precision instruments and services across the globe.
The company delivered an outstanding result in the last quarter, with sales increasing by $985.8 million, a 10% local currency gain, surpassing Wall Street expectations.
They recognize that the global supply chain continues to pose risks, but their ability to meet customer demands should remain a competitive advantage.

The Cooper Companies Inc.: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on Cooper Companies, one of the largest producers of contact lenses in the world.
Daily silicones are still the primary factor in the contact lens industry’s growth.
We initiate coverage on the stock of The Cooper Companies with a ‘Hold’ rating.

Not Which KPI Is Better, but What Is Shared Between Investors and Managers to Achieve the Same Goal

There is a gap between investors, who seek KPIs that reflect future cash flows and cost of capital to determine the prospects for corporate value, and the company.
Many companies aren’t able to manage investment and return by business, and under such conditions it is difficult to show future investments and growth prospects in a mid-term business plan.
Metrical’s analysis shows that simply increasing shareholder returns isn’t sufficient to raise market capitalization; growth policy and capital allocation policy must be systematically established as part of management policy.

The Cooper Companies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Cooper Companies Inc is one of the largest manufacturers of contact lenses across the globe.
Daily silicones are still the primary factor in the contact lens industry’s growth.
They also have the widest portfolio on the market with MyDay and clariti, which are available on various spheres, toric, and multifocal lenses.

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Dec 06

Daily Brief Health Care: Sichuan Kelun Pharmaceutical, Baxter International and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Sichuan Kelun Pharmaceutical (002422.CH) – The Deal with Merck Brightens the Outlook; A Dark Horse?
Baxter International Inc.: Initiation of Coverage – Recent FDA Approvals & Other Drivers
Baxter International Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Sichuan Kelun Pharmaceutical (002422.CH) – The Deal with Merck Brightens the Outlook; A Dark Horse?

Due to huge negative policy impact, the prospects of Kelun’s traditional businesses would be lackluster. However, the deal with MSD has completely changed Kelun’s investment logic.
For the two ADC drugs in the deal, there is a great chance for SKB264 to be eventually druggable. Kelun’s ADC technology is also keeping up with the times.
We deep dive the valuation of Kelun. The market’s perception of Kelun is still at the level of traditional businesses. The potential of its ADC pipeline hasn’t been priced in.

Baxter International Inc.: Initiation of Coverage – Recent FDA Approvals & Other Drivers

This is our first report on Baxter International, one of the largest players in the domain of dialysis therapies and other healthcare products.
The overall demand for products across the Baxter and traditional Hillrom portfolios continues to be strong.
We initiate coverage on the stock of Baxter International with a ‘Buy’ rating.

Baxter International Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report