Healthcare

Given the increased stock market volatility, it’s not surprising that activist investment strategies are a good fit for investors seeking investment strategies that are less correlated with stock market fluctuations.
Japanese companies that have lower valuations, less effective steps to maximize their corporate value, and face many challenges in their governance practices are are well suited to activist investor approach.
Unlike passive investors who have an impact on the overall stock market, activist investors’ purchases will have a limited impact on the overall market, but their presence will be significant.

MicroPort NeuroTech (2172.HK) 22H1 – Advantages Deserve Recognition, but with Overvaluation Risk

Among domestic enterprises, MicroPort NeuroTech (2172 HK)’s product richness takes the lead. With the support of Microport Scientific (853 HK), the production quality system and capacity are relatively more guaranteed.
Fierce competition and centralized procurement are the major challenges, but the rich domestic distribution network and promising internationalization prospects would help NeuroTech find way out.
By reducing the size of the IPO to maintain a good share price, at the expense of stock liquidity, it doesn’t really solve the problem.There’s risk of overvaluation for NeuroTech.

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Oct 04

Daily Brief Health Care: Hanall Biopharma, Shanghai United Imaging Healthcare and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Hanall Biopharma (009420 KS): Clinical Trial Progress of Key Pipeline Assets to Provide Some Upside
Shanghai United Imaging Healthcare (688271.CH) – Overvalued; Stock Price Will Return to Rationality

Hanall Biopharma (009420 KS): Clinical Trial Progress of Key Pipeline Assets to Provide Some Upside

Hanall Biopharma (009420 KS) has two leading pipeline assets, HL161 (batoclimab) and HL036 (tanfanercept), which are being developed by global license partners.
Batoclimab is in phase 3 trial for myasthenia gravis, which causes weakness of voluntary muscles. Tanfanercept is being developed as a treatment for dry eye disease in China and U.S.
Batoclimab and tanfanercept trials are approaching multiple data readouts in near-term. Hanall will be entitled for milestone payments for clinical trial progress of its out-licensed assets.

Shanghai United Imaging Healthcare (688271.CH) – Overvalued; Stock Price Will Return to Rationality

United Imaging’s high valuation is driven by pandemic/policy dividends. After the impact of COVID-19 fades,the market needs new stories to judge a sustainable business model with increasing investment value.
Although in the name of domestic substitution of high-end medical imaging equipment, most of sales still come from middle/low-end products. The real competitiveness in high-end market remains to be seen.
United Imaging’s fundamentals and prospects hardly justify a market value of more than RMB100 billion. It’s expected that the stock price will return to rationality in the future.

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Oct 03

Daily Brief Health Care: AIM Vaccine and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Pre-IPO AIM Vaccine – AIM Is Overvalued, with Uncompetitive Pipeline and Challenging Outlook

Pre-IPO AIM Vaccine – AIM Is Overvalued, with Uncompetitive Pipeline and Challenging Outlook

AIM needs to rely on both human rabies vaccine and HBV vaccine to contribute majority revenue,but the outlook is challenging. Their revenue would decline due to competition and product upgrading.
Most of AIM’s vaccine candidates are in early development stages. There’re many competing candidates in more advanced development stages.The pipeline lacks competitiveness and it’s hard to generate forecasted profits.
Although the issue price is discounted significantly, AIM is still overvalued. Reducing the size of IPO to maintain a good share price doesn’t work. When investors exit,accumulated pressure will explode.

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Oct 01

Daily Brief Health Care: Boryung Pharmaceutical, Medikaloka Hermina and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Boryung Pharmaceutical (003850 KS): Oncology Portfolio Expansion to Accelerate Growth Momentum
Medikaloka Hermina (HEAL IJ) – Forging Ahead Beyond COVID

Boryung Pharmaceutical (003850 KS): Oncology Portfolio Expansion to Accelerate Growth Momentum

Boryung Pharmaceutical (003850 KS) is expanding its oncology portfolio mainly through in-licensing and co-promotion agreement and aims to achieve revenue of KRW217 billion from oncology segment in 2026.
This month, Boryung received approval for in-licensed drug Zepzelca (lurbinectedin), indicated for the treatment of small-cell lung cancer in Korea. The drug has demonstrated high adoption rate in the U.S.
This year, Boryung launched two in-licensed neutropenia drugs and one generic drug for breast cancer. The company plans to launch 18 oncology drugs during 2022–2026, including 10 first generics.

Medikaloka Hermina (HEAL IJ) – Forging Ahead Beyond COVID

By Angus Mackintosh

Medikaloka Hermina (HEAL IJ) is unique in Indonesia for its focus on women and children, which makes it a resilient performer plus more than half its patients are JKN related.
The company booked a strong set of 1H2022 results despite coming off a high COVID base, with Inpatient and outpatient numbers already above pre-pandemic levels.
Astra International now owns over 7% of the company in its first hospital investment and we could see this stake rising further. Valuations are attractive versus Mitra Keluarga.

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Sep 29

Daily Brief Health Care: Eisai Co Ltd, Prodia, Tokyo Stock Exchange Tokyo Price Index Topix, Joinn Laboratories (H), Ryman Healthcare and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Eisai Co (4523 JP): Positive Trial Result For Alzheimer’s Disease Drug- A Step Closer to Approval
Prodia (PRDA IJ) – Injecting Digital Health
Criteria for TOPIX Components and Prime Market Listing Criteria Should Be Discussed Separately
Continuing Deflationary Cycle Will Not Raise Younger Generation’s Desire to Marry and Have Children
Joinn Laboratories (6127.HK) 22H1 – It’s Time to Face Reality Before the Magic of Monkeys Disappears
Ryman Healthcare (RYM NZ): Strong Underlying Growth Story; Current Macro Scenario Limits Upside

Eisai Co (4523 JP): Positive Trial Result For Alzheimer’s Disease Drug- A Step Closer to Approval

Eisai Co Ltd (4523 JP) has announced positive clinical trial results for its Alzheimer’s disease (AD) drug candidate, lecanemab. Lecanemab succeeded in slowing cognitive decline by 27%.
Importantly, the study shows that removal of aggregated amyloid beta in the brain is associated with a slowing of disease in patients, thereby opening innovation pathway for new treatment options.
Eisai aims to file for traditional approval in the U.S. and to submit marketing authorization applications in Japan and Europe by the end of FY23.

Prodia (PRDA IJ) – Injecting Digital Health

By Angus Mackintosh

Prodia (PRDA IJ) remains the leading diagnostics company in Indonesia and was a huge beneficiary of the pandemic and hence has seen a recent slowdown.
The number of tests per visit increased in 1H2022, as customers returned to more routine testing post COVID plus the company is increasingly employing a digital approach to its business.
Prodia is forecast to return to growth over the next two years, with +11% EPS growth forecast for FY2023E and FY2024E, implying a forward PER of 8.6x.

Criteria for TOPIX Components and Prime Market Listing Criteria Should Be Discussed Separately

The ongoing panel discussions also call for increasing TOPIX liquidity as a market need. However, TSE seems to think that it has completed the TOPIX reform for the time being.
TSE appears to be insisting that the criteria for TOPIX stock selection be consistent with the prime market listing criteria of 10 billion Yen in tradable market capitalization.
On the periodic replacement of TOPIX components, TSE isn’t looking at the urgent need of improving liquidity as issue to be addressed after the completion of the staged-weighting-reduction (February 2025).

Continuing Deflationary Cycle Will Not Raise Younger Generation’s Desire to Marry and Have Children

Even couples who have decided to get married are squeezing wedding expenses, indicating that financial reasons are overshadowing the factors that keep young people from getting married.
Real wages have continued to decline over the past 25 years, and real income per household is known to be lower in 2018 than it was in 1980.
The deflationary cycle that has carried out by procuring cheap labor from overseas under the guise of technical intern trainees and women as non-regular workers doesn’t seem to be sustainable.

Joinn Laboratories (6127.HK) 22H1 – It’s Time to Face Reality Before the Magic of Monkeys Disappears

The monkeys have become Joinn Laboratories (H) (6127 HK)’s important profit growth point based on the logic chain of “monkey supply shortage – monkey price rise – Joinn’s performance increase”.
Faced with doubts about the future prosperity of CXO, we don’t think Joinn is immune as a part of this industrial chain. Joinn is hard to achieve the V-shaped rebound.
Valuations are hard to increase by when the industry is very mature.For investment logic, my favorite is the industry beta, followed by industry beta+alpha. The last is low P/E ratio.

Ryman Healthcare (RYM NZ): Strong Underlying Growth Story; Current Macro Scenario Limits Upside

Ryman Healthcare (RYM NZ) has a secular growth story underpinned by ageing population. Australia and New Zealand are projected to have 5.3 million people aged 75 and above by 2062.
Rising interest rate and falling property prices should limit the upside potential of property management companies, like Ryman. New Zealand’s house prices are forecast to sink 9% this year.
Ryman’s site of the Moondah mansion in Mt Eliza, near Melbourne central business district is still under litigation.

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Sep 28

Daily Brief Health Care: Caregen Co Ltd, QT Vascular Ltd, Medlive Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook
10 in 10 with Quantum Healthcare – Transformed for Future-Resiliency
Medlive Technology (2192.HK) 22H1- The Growth Logic/Business Model Is More Scrutinized by the Market

Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook

Caregen Co Ltd (214370 KS) is a niche biotech company, with focus on biomimetic peptide-based cosmeceuticals and medical devices targeting anti-aging industry. The company has a large addressable market opportunity.
Despite the negative impact from the re-spread of COVID-19, Caregen reported 4% y/y growth in total revenue in H1 2022, with operating profit margin expanding 260bps.
Caregen’s COVID-19 nasal spray is in phase 1 trial. FDA has registered Caregen’s health functional food to control blood sugar as a new dietary ingredient (NDI).

10 in 10 with Quantum Healthcare – Transformed for Future-Resiliency

By Geoff Howie

10 in 10 with Quantum Healthcare – Transformed for Future-Resiliency

Medlive Technology (2192.HK) 22H1- The Growth Logic/Business Model Is More Scrutinized by the Market

The improvement of Medlive’s profitability in 22H1 seems more related to the large decreased income tax expense rather than any obvious improvement of main business or any other logic.
The single main business structure and insufficient core competitiveness add uncertainty to the Company’s long-term prospects, which makes it difficult to significantly improve the valuation.
Medlive is under double pressure of “squeezing bubble” in healthcare industry and “the fading of traffic dividend” in Internet industry.Its growth logic/business model will be more scrutinized by the market.

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Sep 27

Daily Brief Health Care: China Shineway Pharmaceutical and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

China Shineway Pharmaceutical (2877HK)-Shineway Is Undervalued, but Downside Risk Is Hard to Control

China Shineway Pharmaceutical (2877HK)-Shineway Is Undervalued, but Downside Risk Is Hard to Control

Shineway showed good performance growth in 22H1, which was mainly driven by outstanding growth of TCM formula granules business. We think such positive momentum would continue in the short term.
The implementation of national standards is actually paving the way for future VBP. Together with increasing competition, Shineway could be difficult to maintain over 70% gross margin in long run.
Shineway is cash rich and is undervalued. Obviously, the unfriendly macro environment provides a buying opportunity, but investors may need to consider the downside risks, which is hard to control.

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Sep 26

Daily Brief Health Care: Pine Care Group, Classys, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…
Classys (214150 KS): Overseas Expansion +Portfolio Enlargement = Consistent & Sustainable Growth
Women Founders Should Be Supported Rather than Goals that Are Less Feasible for Achieving Diversity

Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…

By Travis Lundy

In early Feb2020, the #1 shareholder of HK-based elderly home care provider Pine Care Group (1989 HK) sold a 52% stake at HK$1.647, keeping 14.99%. That triggered an Unconditional MGO.
In Aug2022, much of the shareholder consortium which bought in 2020 agreed to sell 56.15% at HK$0.89/share to local privately-held developer Chinachem. That will trigger another Unconditional MGO.
The business has suffered under covid, but it is not clear why the business would be better now. Revenues will spike when Causeway Bay opens, but…. Sell.

Classys (214150 KS): Overseas Expansion +Portfolio Enlargement = Consistent & Sustainable Growth

Classys (214150 KS), under new management, has announced a treasury stock acquisition program of KRW20 billion through March 2023. As of June 2022, Classys had cash equivalents of KRW68 billion.
Global expansion of Classys’ latest lifting product, Shrink Universe is the near-term growth driver. The product is seeing steady domestic demand, with cumulative sales exceeding 1,000 units.
In August Classys received approval for its new skin care product Volnewmer. The company is expected to start selling Volnewmer in Q3 and initially targeting 100 units for the device.

Women Founders Should Be Supported Rather than Goals that Are Less Feasible for Achieving Diversity

If we want to increase women directors even to growth market companies, we can solve this problem by extending the scope of this comply-or-explain requirement to growth market companies.
It is a fact that companies with top female executives have more women on their boards of directors. It’s required to create support to increase the number of women founders.
Rather than setting targets for the ratio of female managers, which are vague and unworkable, a framework should be created to support female founders.

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Sep 24

Daily Brief Health Care: Pine Care Group, Jenscare Scientific, Wuxi Biologics, Tokyo Stock Exchange Tokyo Price Index Topix, SillaJen Inc, Lepu Scientech Medical Technology (Shanghai) and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Pine Care Group (1989 HK): Chinachem Takeover Offers a Good Exit Opportunity for Investors
Jenscare (健世科技) IPO: Candidate for Shorts
Shanghai/Shenzhen Southbound Connect: Weekly Moves (23 September 2022)
Shareholder Returns Offered by Companies that Do Not Meet Prime Market Listing Criteria Are…..
SillaJen Inc (215600 KS): Baselia Deal Enriches Pipeline; Stock Trading Resumption Decision Soon
Lepu Scientech Medical Technology Pre-IPO Tearsheet

Pine Care Group (1989 HK): Chinachem Takeover Offers a Good Exit Opportunity for Investors

Hong Kong’s leading property developer, Chinachem Group agreed to acquire a 56.15% stake in Pine Care Group (1989 HK) for HKD451.2 million ($57.5 million) from its controlling shareholders.
Post-Acquisition, Chinachem will launch an unconditional mandatory offer for the remaining shares, which it does not hold at HKD0.89 per share, same as the purchase price.
Considering delisting risk, limited upside potential of the shares after a huge run-up, and muted growth outlook of the company, investors should tender their holdings.

Jenscare (健世科技) IPO: Candidate for Shorts

By Ke Yan, CFA, FRM

Jenscare is a China-based medical device company with a focus on structural heart disease. The company launched a deal to raise up to USD 30m via a Hong Kong listing.
In our previous note, we looked at the company’s product lines and provided a brief overview on the company’s valuation.
In this note, we provide an update for the book building. We provide our quick thoughts on the valuation and deal dynamics.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (23 September 2022)

By David Blennerhassett

Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
Overall, the net inflow over the past week was ~US$1.1bn, split (+US$0.8bn) for Shanghai and (+US$0.3bn) for Shenzhen.
The largest inflows were into Wuxi Biologics (2269 HK) and Tencent (700 HK). The largest outflows were in Geely Auto (175 HK) and HKEX (388 HK).

Shareholder Returns Offered by Companies that Do Not Meet Prime Market Listing Criteria Are…..

The current criteria of 10 billion-yen in tradable market capitalization is too small by definition of prime market, “market-cap suitable for institutional investors,” and should be reviewed in near future.
It’s natural that there will be difference in the stock prices of companies that can show results that are in line with their disclosed plans and those that are not.
Simply raising shareholder returns won’t, in theory, positively impact on stock price. Mere increased shareholder returns would be seen as sign that the company reached the end of its rope.

SillaJen Inc (215600 KS): Baselia Deal Enriches Pipeline; Stock Trading Resumption Decision Soon

SillaJen Inc (215600 KS) has developed a differentiated pipeline of oncolytic vaccinia immunotherapy. Its lead drug candidate Pexa-Vec is in phase 2 clinical trial for renal cell carcinoma.
SillaJen has acquired a first-in-class anti-cancer drug candidate BAL0891 from Basilea for upfront payment of $14 million. The company’s cash position is capable to fund the acquisition and R&D expenses.
Korean Stock Exchange is expected to announce its decision on SillaJen stock trading resumption by October 12.

Lepu Scientech Medical Technology Pre-IPO Tearsheet

By Ethan Aw

Lepu Scientech Medical Technology (Shanghai) (LSM HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO. The deal will be run by CICC.
Lepu Scientech Medical Technology (LSMT) is an interventional medical device provider in China for congential heart disease (CHD).
It is the largest manufacturer of CHD occluder products and related procedural accessories in China, according to Frost & Sullivan.

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Sep 22

Daily Brief Health Care: Angelalign Technology, Jupiter Wellness and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Angelalign Technology (6699 HK): 1H22 Profit Drops As Challenging Operating Environment Continued
Jupiter Wellness – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 09/22
Angelalign Technology (6699.HK) 22H1 – Still “Bubble” in Valuation; The Era of High Margin Is Over

Angelalign Technology (6699 HK): 1H22 Profit Drops As Challenging Operating Environment Continued

Angelalign Technology (6699 HK) has reported muted H1 2022 results, which were negatively impacted by the resurgence of the COVID-19 pandemic in China and the corresponding restrictions.
Revenue from core business of clear aligner treatment grew just 3% y/y. However, lower ASP and higher cost of sales, pulled down the gross profit margin by 930bps to 60.2%.
Thus far in H2 2022, China has imposed lockdowns in multiple major cities. With the uncertainty over the duration of COVID, no immediate respite is seen in Angelalign’s business.

Jupiter Wellness – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 09/22

By Baptista Research

This is our first report on Jupiter Wellness and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
With all of these developments, a stock priced at 63 cents appears to be highly affordable and supports our positive outlook.
Overall, we believe that Jupiter has phenomenal growth prospects and is an excellent investment prospect.

Angelalign Technology (6699.HK) 22H1 – Still “Bubble” in Valuation; The Era of High Margin Is Over