Healthcare

• ClouDr Group (16897333D CH) is looking to raise around US$100m in its upcoming Hong Kong IPO. 
• The firm is a digital chronic condition management solution provider and is market leader in China in terms of the number of SaaS installations in hospitals and pharmacies in 2020.
• In this note, we will discuss ClouDr’s recent PHIP updates. 

• Belite Bio (BLTE US) shares jumped 383% from its IPO price of $6 (announced in late April). Its lead candidate LBS-008 is in clinical trial for currently untreatable eye diseases.
• LBS-008 continues to be well-tolerated. Interim safety and preliminary efficacy data from ongoing two-year phase 2 trial remained positive in Stargardt disease.
• Belite is well-funded to commercialize its pipeline. With the progression of the clinical trial and more data readouts, we believe further stream is left in Belite Bio’s share price.

• Without entering NRDL and public hospital markets, Airdoc’s core product Airdoc-AIFUNDUS would be hard to generate solid performance due to its high pricing but limited value to patients and doctors.
• Due to lockdown/pandemic, we lowered our forecast on revenue growth/gross margin in 2022. As competition intensified, Airdoc’s revenue growth and margin could be significantly reduced in the coming years. 
• The biggest concern for Airdoc is the commercialization prospects. The real turning point for AI medical imaging has not arrived. We are not optimistic that Airdoc will end up profitable. 

• Due to doctors’ poor diagnosis/limited affordability, commercialization prospects of China autoimmune disease market could be much lower than expected. Internationalization is inevitable, but Keymed is lack of cash for MRCT.
• For CM310 and CM326, their total sales in China could be less than RMB2 billion. For CMG901, it is hard to say if Claudin 18.2 (ADC) would finally be successful.
• As long as Keymed can successfully develop either CM310 or CM326 (key premise), even temporarily only commercializing in the domestic market, the Company has the potential to double in valuation.

• 3SBio Inc (1530 HK)‘s core products have dominant market share in their respective therapeutic areas, lending a favorable financial profile to the company to fund its R&D and commercialization efforts.  
• Flagship drug, TPIAO remained resilient to the COVID-19 and clocked a revenue CAGR of 32% during 2016–2021. Low penetration of TPIAO’s targeted indications leaves further room for its growth.
• Haircare product Mandi has high market share of 70%+ and clocked 64% y/y revenue growth in 2021. 3SBio aims to launch Mandi foam, which will further sharpen its competitive edge.

• IMM reported positive headline data from its expanded TACTI-002 part A trial in first line (1L) non small cell lung cancer (NSCLC) at ASCO last week.
• The overall response rate (ORR) among all 114 subjects treated with the efti/Keytruda combo edged higher to 38.6% vs 36.1% in the first 36 at ASCO 2021.
• Consistent with the trends seen in the different PD-L1 tumour biomarker subgroups in the first 36 patients last year, the greatest of the benefit of efti was seen in the PD-L1low (TPS 1-49%) group, and to a lesser extent in PD-L1negative patients.

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• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net inflow over the past week was ~US$3.5bn, split between Shanghai (+US$2.3bn) and Shenzhen (+US$1.2bn).
• The largest inflows were into Inner Mongolia Yili (600887 CH) and Pharmaron Beijing (300759 CH). The largest outflows were in CATL (300750 CH)  (300750 CH) and Qinghai Salt (000792 CH).

• Fledgling Digital Therapy Company Talkspace has seen its shares collapse amidst a string of unfavourable events, including fading pandemic tailwinds, management changes and mounting losses.
• With the company’s valuation declining over 82% since the SPAC merger closing nearly a year ago, Talkspace has emerged as a lucrative acquisition target for larger cash-rich companies to consolidate their business.
• Since the acquisition rumours of Talkspace hit Wall Street last month, shares of the company have surged over 60%.

• Based on the business analysis, Beijing Yuanxin Technology Group Co Ltd (1865453D CH) is more of a traditional offline chain drugstores than a healthcare technology company.
• Yuanxin has been suffering from loss for years. With a gross margin of lower than 10%, it’s going to be tough to turn a profit, leading to concerns on survival. 
• Due to the fierce competition in each of its businesses, homogeneous business model, weak financial position, lack of high moat, policy risks, etc., we are conservative about the Company’s outlook.

• Upgrade to Buy following share price decline
• Smoother transition towards normalcy
• Initiatives to improve operational metrics
• Looking to dispose loss-making assets

• This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
• The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.
• Today we are flagging Repligen, Snap, Dynatrace Inc, Intuitive Surgical

• Pfizer Inc (PFE US) is Offering ResApp Health (RAP AU) shareholders up to A$0.207/share by way of a Scheme. ResApp’s Board unanimously recommends the Offer.
• ResApp is currently trialing a cough-based Covid detection tool. If the study proves satisfactory, Pfizer will outlay A$0.207/share. If not, shareholders get A$0.146/share. Pfizer initially pitched A$0.115/share. 
• The results of the study are due out on the 20 June. 

• M3’s shares have declined 53.2% over the last 12-months to JPY3,566 from JPY7,613 per share. Share price has lost 15% since 4QFY03/2022 earnings in April.
• The company’s Medical Platform business was a key beneficiary of pandemic which saw accelerated transformation in pharma marketing.
• However, with pandemic conditions easing off, m3’s earnings growth has begun to decelerate and we think there is further downside with weakening of core earnings.

• Cellid (299660 KS) is developing a rich pipeline of five cell-based anticancer therapeutic vaccines, for which there are no commercialized competing products at present. BVAC-C is the lead candidate.
• BVAC-C is being developed for cervical, head and neck, anal, and certain other cancers. It is the world’s first-in-class in terms of its complex and powerful anticancer action mechanism.
• Cellid has secured government funding of KRW8.9 billion for its COVID-19 vaccine candidate. The company is accelerating clinical trial of COVID-19 booster dose candidate.

• Ramsay Health Care (RHC AU)‘s gross spread to KKR & Co Inc (KKR US)’s offer (less the interim dividend) of A$87.52 has widened touching an all-time high of 17.0% today.
• Despite the longer-than-expected due diligence, rising rates and market volatility, the evidence suggests that KKR remains committed. The expectation is for a binding proposal by June end.
• At the last close, the risk/reward profile is favourable as the downside due to a deal break (-10% estimated decline) is lower than the upside (+17%) from a binding offer. 

• BGH now has >90% of the voting power in Virtus Health (VRT AU). In a somewhat friendly gesture, BGH has bumped the Offer by A$0.005/share. 
• The increased Offer Price will apply to all shareholders who accept the Offer, including shareholders who have already accepted the Offer. The Offer has been extended to the 27 June.
• A special fully-franked dividend of up to A$0.30/share should now kick in – an announcement is expected shortly. The Offer remains conditional.

• Pfizer Inc (PFE US)’s revised binding proposal will vary based on the results of the clinical validation study of Resapp Health (RAP AU)’s COVID Algorithm (expected around 20 June).
• If the confirmatory data condition is satisfied, the offer is A$0.207 (130.0% premium to undisturbed price). If not satisfied, the offer is A$0.146 (62.2% premium to undisturbed price).
• The offers are within the IE’s valuation range. At the last close, the risk/reward is favourable as the potential upside (A$0.207 offer: +25.5%) exceeds the downside (A$0.146 offer: -11.5%).

• Thomson Medical Group Limited (TMG SP) is a dual play on the re-opening of both Singapore and Malaysia. The company has a 70% stake in Tmc Life Sciences (TMCL MK). 
• The company is seeing strong recovery across all its business segments and is cautiously optimistic of its business prospects in the current financial year.
• The recent pullback in the shares provides a good entry point for long-term investors.  

• Our interpretation of WuXi AppTec’s proposed disposal is that its founder affiliates could be concerned about the Company’s future prospects, so they choose to offload in advance.
• A possible reason for WuXi AppTec to highlight the optimism about its performance and deliver a prosperous outlook/positive signal to the market is to “shield” the implementation of its proposed disposal.
• The risk is out of proportion to the opportunity. We advised investors to catch the rebound and offload rather than hold long term. It’s just temporary rebound not complete reversal.

• ClouDr was the largest digital chronic condition management solution provider in China. The company’ application for a HKEx IPO has been approved and plans to raise proceeds of around US$500m.
• The company is well positioned to benefit from growing demand for digital healthcare marketing and services in China driven by increased health awareness, technological advancements and prevalence of chronic conditions.
• In this insight, we examine the company’s business model, segments and financials.

• Junshi’s fatal flaw is not that it is still suffering loss, or that its founders have no medical background, but that the Company is very short of money.
• Considering the gloomy prospects of etesevimab/VV116, uncertainties in toripalimab and other late-stage candidates, we remain conservative about Junshi’s commercialization outlook. Junshi’s higher valuation than Innovent is not justified.
• Together with unfriendly macro environment, we don’t think heavy investment in R&D/MRCT/commercial development could bring high return as expected.Investors need to be rational about Junshi’s RMB4 billion private placement plan.

• LRT Capital is a fundamental investment hedge fund. We invest only in companies with durable competitive advantages, i.e. “moats.”.
• May’s results for the LRT Economic Moat Strategy were below expectations.
• The effectiveness of our hedging strategy has been limited due to the extremely strong performance of energy and commodity related stocks.
• The wealth of tomorrow will be in the hands of the net buyers of today.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• On the ECM front, Thai Life Insurance (124744Z TB) is premarketing a US$1bn SET listing and GoGoX Holdings (GOGO HK) has won approval for a US$100-150m HKEx IPO.
• On the Event-Driven front, there were developments at China Vast Industrial Urban Development (6166 HK), Suchuang Gas Corp (1430 HK), Link Net (LINK IJ), Atlas Arteria (ALX AU), Ramsay, Crown.

• Asahi Intecc (7747 JP) reported 27% y/y revenue growth during first nine months of FY22. For full-year FY22 and FY23, the company expects 22% and 11% revenue growth, respectively.
• The company targets a consolidated revenue of more than ¥100 billion in FY26 through continued growth in the existing business and introduction of new business.
• Asahi Intecc enjoys dominant market share in PTCA guide wires in major global markets. The company’s direct distribution strategy is further expanding its market share.

• Due to pandemic/lockdown/economic downturn, the case shipments could further decline. Our revenue forecast this year is below 20%, or even below 15%. We also lowered our forecast on profit margins.
• Limited qualified orthodontists in China and challenging internationalization cast doubts on Angelalign’s long term growth prospects. We can’t see high growth potential of Angelalign with certainty.
• Angelalign’s performance in 2022 would be under pressure. Although PE/TTM reached about 73 by the end of June 10 after corrections, it’s still overvalued. The upside potential could be limited.

• Boryung Pharmaceutical (003850 KS) aims to achieve a revenue CAGR of 10.9% during 2022–2026 (from 7.8% in 2017–2021) through a chronic disease-focused prescription drug portfolio.  
• While hypertension and dyslipidemia drugs remain its cash cow, Boryung has identified oncology and CNS as its new growth engine to achieve KRW1 trillion revenue in 2026.
• Driven by a 28% y/y growth in prescription drug revenue, Boryung has reported record high quarterly sales and operating profit in Q1 2022. The company is continuously launching new drugs.

• Tactile Systems Technology I (TCMD US) offers pneumatic compression pump, which has total current addressable market opportunity of $10B+ in the U.S. The company’s annual run rate is ~$200M.
• To penetrate the addressable market deeper, Tactile is aggressively expanding commercial team, which should lay the foundation for long-term sustainable revenue growth and margin expansion.
• With the declining COVID-related headwinds, new product launch, and better commercial execution, Tactile should be well-positioned for accelerated growth trajectory.