Healthcare

• DT Australia has a long track record as a manufacturer of pharmaceutical drugs, including both active pharmaceutical ingredients (API) and finished drug products at its facilities in Melbourne.
• However, over the past decade it has been squeezed by cheaper overseas manufacturers.
• IDT reported its first operating profit for a decade in FY21, supported by a Covid-related Sterile Readiness government contract to recommission its sterile manufacturing facilities that could be used to manufacture a commercial Covid-19 vaccine, if required.

• Starpharma Holdings (SPL AU) is an emerging biopharma company. The company has commercialized its flagship product Viraleze antiviral nasal spray in March 2021. It is now registered in 30+ countries.
• On June 30, Starpharma announced the relaunch of Viraleze in UK, one-year after its sales were paused temporarily in June 2021, thereby removing a major overhang on the share prices.
• Viraleze has shown strong potential to inactivate a broad spectrum of respiratory/cold viruses, including multiple variants of SARS-CoV-2 and influenza A and B.  

• The weak yen should add several billion to operating profit this fiscal year, helping the company meet or exceed guidance.
• Medical Systems, which were once barely profitable, generated a 9.1% operating margin last year due to growing service revenues and a better product mix.
• The share price should continue to hold up in a declining market.

• Dental Doctor has not established core competitiveness and high moat, and has to invest more on marketing and promotion to attract customers and drive growth.
• The lack of dentists, weak talent and training system as well as high dentist turnover rate would be big concerns for the Company’s long term development, especially for nationwide expansion.
• This industry has not yet entered the profit mode. Most of chain dental services providers are still in the stage of cash-burning expansion. So, we are conservative about the Company’s outlook.

• Max Healthcare Institute (MAXHEALT IN) reported Q4FY22 results in-line with expectations, with 12% revenue and 58% net profit growth. The EBITDA margin improved 70 basis points to 24.8% during Q4FY22.
• Despite the Omicron, the average occupancy for the quarter stood at 68%, partly fueled by the international medical tourism bouncing back to ~90% of the pre-covid levels in March 2022.
• The company plans to add over 2,800 beds in the next five years. For context, it has current bed capacity of 3,400. Capex will be funded through internal accrual.

• Despite regional lockdowns caused by COVID-19 during most part of FY21, Arrail Group (6639 HK) posted 7% y/y growth in revenue, driven by 14% y/y growth in total patient visits.   
• China dental services market is growing at an average 20% per annum. Arrail’s low debt and strong cash position should support its business expansion plans to grab the market opportunity.
• Despite competition, the company is expected to report accelerated double-digit revenue growth in next three years, by leveraging on its market leadership positioning and favorable macro tailwind.

• The combination of FFR and IMR can provide a complete functional evaluation from epicardial arteries to myocardial microcirculation,pushing the precise diagnosis and treatment of coronary disease into a new era.
• Rainmed’s caFFR System and caIMR System have obvious technical and first-mover advantages; The CE certificate also opens up the imagination space of product commercialization (such as developing markets).
• However, the concerns on current sales model, market acceptance, medical insurance coverage, cash flow pressure and market sentiment when IPO should also not be neglected. 

• Giant UnitedHealth offers 1,925p, in cash (implied equity value of £1,243 million, implied EV of £1,185 million). This represents: 6.5x EV/Fwd Revenue, 20.4x EV/Fwd EBITDA and 31.7x Fwd PE (source: I/B/E/S).
• The offer is pitched above peer’s multiples, which coupled with a 49% premium, should be enough to convince any reluctant shareholder to tender.
• Gross spread is 2.9%, quite good for a highly likely deal in the European space (c. 16% estimated annual return assuming settlement takes place on 8 September).

• A bear market bounce is underway after the S&P 500, Nasdaq 100 (QQQ), and Russell 2000 (IWM) found support at their respective downtrend channels, a possibility we discussed last week.
• Still, until the S&P 500, QQQ, and IWM can break above their various downtrends, we remain bearish, and believe investors should be using rallies to reduce overall exposure.
• This 1-week rally has the NDX(QQQ) testing resistance at its falling wedge pattern; a break above $297 would likely mean this bear market bounce has another 2-4 weeks of upside.

• Hogy Medical (3593 JP) is high-quality idea on Japan re-opening, with surgical kit, especially premium kit being the main growth driver of the company.
• With the declining effect of the COVID-19 and resuming elective surgeries in Japan, Hogy expects 5% y/y revenue growth in FY23, driven by an 11% growth in surgical kit products.
• Hogy is expanding marketing initiatives in Southeast Asian countries. The company is enhancing production capacity of premium kit products, with partial operation of the new plant to start in July.

• Arrial’s positioning at high-end private dental chain indicates limited growth space. The large investment in dental professionals drags down overall margins but fails to generate good word-of-mouth and expected returns.
• Public hospitals with NRDL reimbursement and private dental chains with high cost performance would put more pressure on Arrail. Increasing marketing/promotion expenses cannot turn things around but further reduce margins.
• Overall, the high-end strategy cannot bring high-end returns. We are not optimistic about Arrail’s prospects and profitability. The Company may even keep losing money and hard to turn profitable.

• Through perfect partnership system, Gushengtang locks in the scarce TCM physicians, and then quickly establishes/merges offline medical institutions to occupy the market. Such development mode works well so far.
• The challenges are the risks of losing talents to competitors and the weak sales of healthcare products leading to lower profitability. 
• Gushengtang is in an industry that receives government encouragement/preferential policies. The 2022 revenue growth forecast could fall back to about 25% considering the pandemic/lockdown. The EPS could narrowly turn positive.

• After delivering 27% earnings CAGR over FY17-22, GLAND is well-placed to sustain its earnings growth momentum over the next three-to-five years
• It has been enhancing its offerings by adding complex products to its portfolio, scaling the product at the global level, expanding capacity to aid manufacturing, as well as increased backward integration.
• While constraints on availability of certain materials may hinder performance over the near term, GLAND is in good stead for consistent performance over the next three-to-five years.

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• We generally detect an increase in the buying volume of local institutions for stocks moving from Large Cap to Mid Cap ahead of the KOSPI size index rebalancing.
• At the last close, Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, & OCI / Large→Mid: Hanmi Science, KCC, DB Hitek, & KEPCO E&C
• The level of price impact/correlation in the last rebalancing was exceptionally high. This is reason enough for us to consider setting up a preemptive position for this rebalancing event.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• The highest spreads are Sezzle Inc (SZL AU), Link Administration (LNK AU), 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU).
• Lowest gross spreads are Hwa Hong Corp (HWAH SP), AKM Industrial (1639 HK), Irongate Group (IAP AU), Giordano International (709 HK), Uniti Group Ltd (UWL AU), Excelpoint Technology (EXLP SP).

• Lepu Biopharma (2157 HK) has filed NDA for its lead drug candidate pucotenlimab (HX008) for two indications in China, having a combined estimated market opportunity of RMB8 billion by 2030.
• Overcrowded PD-1 mAb drugs market in China, with 10 marketed drugs, may limit the growth potential of pucotenlimab. However, pucotenlimab has better efficacy than existing drugs.
• Lepu’s other core assets are also progressing and the company has sufficient cash to fund its R&D and commercialization initiatives.

• Alfresa Holdings (2784 JP) reported revenue decline in FY21. Apart from market wide negative impact of COVID-19 and drug price revision, suspended qualification for public bidding tenders affected the company.
• In FY22, the company is expected to be back to its growth path with less impact of bidding suspension and increasing focus on high growth areas.
• According to its 2022–2024 mid-term management plan, Alfresa targets to achieve a revenue of ¥2.7 trillion and operating income margin of 1.5% or higher by FY25.

• A webinar hosted by Smartkarma with Siloam International Hospitals revealed strong momentum behind its base-case revenues, with patient numbers, and some positive pricing strategies driving revenues.
• The company also continues to develop its centres of excellence and leading positions in a number of specialisations, which helps to widen catchment areas and increase the complexity of treatments. 
• Siloam continues to expand its hospital portfolio but may look to acquire more brownfield assets in the future plus it is experimenting with a managed services model. Valuations are attractive.

• Green Cross (006280 KS) is expected to receive FDA approval for its immune globulin injection, once the agency conducts onsite inspection of its production facility.
• After suffering in 2021, both blood products and vaccine business are back to double-digit growth path in Q1 2022. The company continues to win export orders for both of these.
• Hunter syndrome and hemophilia treatments are the company’s new growth engines. Green Cross has received approval for its hunter syndrome treatment in China and Japan.  

• The domestic formulation (DF) segment continues on its robust growth path, led by market share gain, favorable price hikes, addition of medical representatives (MRs), and its increased presence particularly in the cardiology segment.
• The exports opportunity is expected to improve with increased product launches in the UK, new launches and market share gain in Russia, and industry outperformance in Africa branded generics market.
• After 18% YoY decline in earnings in FY22, we expect 11% earnings CAGR over FY22- 24, led by 13%/8%/8% sales CAGR in DF, exports formulations, and API, respectively.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

• We remain bearish as long as the YTD downtrends remain intact on the SPX and NDX (QQQ), and as long as the 7.5-month downtrend remains intact on the Russell 2000(IWM).
• There is potential for a bounce given the SPX, QQQ, and IWM are all at downtrend channel supports.
• The continued rise of the U.S. dollar (DXY), 10-yr Treasury yield, and WTI crude oil is what we believe is fueling the bear market in equities.

• The advantages of NeuroTech are mainly reflected in the comprehensive product portfolio and stable product performance, with higher gross margin, stronger cost control ability and first-mover advantage than its peers.
• The major concerns here are the domestic shrinking market size due to the centralized procurement, the fierce market competition and the pain points on its sales model.
• In terms of valuation, our view is that NeuroTech’s valuation could be higher than that of the peers such as Zylox-Tonbridge, HeartCare Medical, Peijia Medical and Sino Medical.

• Disappointingly, the sensitivity and specificity of ResApp Health (RAP AU)‘s cough trial were significantly lower than its March pilot study.
• As such, the Scheme Consideration from Pfizer Inc (PFE US) will be A$0.146/share, which is still a 62.2% premium to the undisturbed price.
• Trading super wide to terms after short-term punters kicked out. 

• Disappointingly, Resapp Health (RAP AU)‘s confirmatory data readout condition was not satisfied, resulting in Pfizer Inc (PFE US)’s lower unconfirmed data offer price of A$0.146 per share.
• The revised SID provides no obvious way for Pfizer to pull its offer. The still material premium to undisturbed price and open shareholder register suggests that the scheme will pass. 
• The scheme meeting will be held in early to mid-August. At the last close of A$0.125, the gross spread to the unconfirmed data offer price of A$0.146 is 16.8%. 

• Just as we analyzed before, things get worse for PAGD. The loss expanded and gross margin declined. The gap between PAGD and its peers (JD Health, Alibaba Health) is widening. 
• PAGD’s Achilles’ heel is its business model/profit model is untenable. The new HMO services system would not help turn things around because China’s national condition is different from the US.
• Being on the wrong track, PAGD’s financial performance is expected to further weaken. We are conservative about PAGD’s outlook. Any brief upwards movement is just dead cat bounce.