Healthcare

• Celltrion Inc (068270 KS)’s deletion seems pretty much a foregone conclusion as its average float-adjusted market cap on May 3-19 is way below the next one in line.
• Shinhan Financial (055550 KS) is the one to replace Celltrion based on the numbers so far. There is close to a ₩1T gap with the next one, POSCO (005490 KS).
• In this rebalancing, the flow impact of the addition/deletion is even more significant. So, their share price fluctuations on June 10 will likely be more substantial than last time.

For our next Corporate Webinar, we are glad to welcome Hyphens Pharma International (HYP SP) Chairman and CEO, Mr. Lim See Wah.

In the upcoming webinar, Mr Lim will share a short company presentation, after which he will engage in a fireside chat with Smartkarma Analyst Tina Banerjee. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 7 June 2022, 17:00 SGT.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Dr Reddy Q4FY22 reported revenue growth of 14.8% YoY (vs. our expectations of 8.0% YoY), led by strong performance in geographies such as the US, India, and Emerging Markets. 
• The company is building a global pipeline of biosimilars, developments of NCE for Immuno-oncology, and building up a Neutraceuticals portfolio, vaccines, CDMO, and digital healthcare platforms
• However, high inflation could decrease margins prompting us to reduce TP to Rs 4,500/share.

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• Gland Pharma reported a good set of numbers with revenue for the Q4FY22 growing by 24.3% on a YoY basis. 
• We believe stock trades at rich valuations of PE of 36.2x and 30.4x for FY23E and FY24E respectively
• We, therefore, recommend a HOLD rating on the stock with a target price of Rs 3,300/share.

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• Sumitomo Dainippon Pharma Co (4506 JP)‘s flagship drug Latuda will loss patent protection in the U.S. in 2023. Latuda is already seeing revenue erosion.  
• Sumitomo is expected to reap the benefit of new products launched in the U.S. market in 2020 and 2021. These are expected to gradually become next growth drivers.  
• The company has a rich pipeline and targets to launch at least two new drugs in the U.S. in next two years.  

• The revenue generated from COVID-19 business would not be sustainable in the long term. The lower price of COVID-19 tests, DRGs, centralized procurement and fierce competition would drag down margins.
• ADICON hasn’t established enough advantage and moat to secure its leading position and could be overtaken by competitors.The weak R&D makes ADICON difficult to gain an edge in esoteric tests.
• Considering the fierce competition, lower margins, the decline of COVID-19 business revenue, and poor liquidity and IPO market sentiment in HKEX, the PE could be below 10.

• Medipal Holdings (7459 JP) reported strong revenue growth in pharmaceutical wholesale business, while its cosmetics distribution business reported lower-than-expected revenue in FY22. FY23 operating profit target was set below consensus.
• Lower demand for hygiene-related products in domestic market and lesser foreign tourists arrival in Japan are expected to negatively impact Medipal’s cosmetics distribution business.
• NHI drug price revisions are the biggest challenge in pharmaceutical wholesale business. Medipal’s largest revenue contributing drug, Takecab saw a 15.8% price reduction effective April 1.

• Haohai’s development is fuelled by a series of acquisitions, which help Haohai establish the existing diversified businesses, but we haven’t seen any growth point with high certainty.
• Compared with Bloomage and Imeik, Haohai has no competitive advantage in the field of medical aesthetics. It’s also difficult for Haohai to make a substantial breakthrough without obvious product advantages.
• Although Haohai’s PE/TTM is significantly lower than its peers, due to centralized procurement, Haohai’s valuation could be further lower. Considering the risks, we choose to stay cautious on Haohai.

• With under three weeks until Virtus Health (VRT AU) shareholders vote on CapVest’s Offer, BGH continues to gradually push out the tendering period for its own Offer.
• The outcome of the Scheme Meeting is all but a foregone conclusion assuming BGH sticks to its guns and is not supportive; which then potentially rekindles this competitive bidding situation.
• This insight discusses the constraints BGH needs to adhere to in “truth in takeover” statements. There are still a handful of moving parts to unfold in this transaction.

• Yunkang Group (2325 HK) raised around US$139m in its Hong Kong IPO.
• On its bookbuild, subscription rates were lackluster and market sentiment hasn’t been the greatest.
• Similar recent deals with weak subscription rates had seen subdued listing performances by the end of their respective first weeks.

• Aier’s private placement was approved by the Shenzhen Stock Exchange, but we don’t think it signals a complete policy shift that private medical institutions are welcomed by capital markets.
• The high goodwill impairment risk and medical disputes are great concerns. However, if Aier changes its development mode, its performance growth would probably slow down or becomes uncertain.
• Aier’s Q2 performance could be affected by pandemic/lockdown. Even after continuous corrections, Aier is still overvalued based on current valuation, which has not priced in all the concerns and risks.

• Chugai Pharmaceutical (4519 JP) shares declined 5% since I published initial bearish note on the company in December. I remain bearish on the name.
• Despite a 60% y/y jump in revenue in Q1 2022, the company is still guiding for just 15% y/y revenue growth in 2022. Operating margin has deteriorated in Q1.
• Chugai’s significant dependency on COVID-19 drugs amid declining new infections and hospitalizations globally, remain the major overhang on the growth prospects of the company.

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.

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.

• With Roche’s failure of several clinical trials on TIGIT project tiragolumab, the market’s future expectations on this target have discounted. Investors may need to get prepared in advance.
• Ociperlimab means a lot to BeiGene. If ociperlimab fails, BeiGene would have no big catalyst for a long time. BeiGene’s label of superior global R&D capability + potential BIC doesn’t hold water.
• Without ociperlimab, BeiGene’s valuation could fall back to about RMB60 billion to RMB80 billion. If the valuation is finally in line with Innovent, it would be no surprising.

• Aurobindo Pharma (ARBP IN) has been issued six observations for its oral manufacturing unit by the FDA, which will further impact its business. The company closed its New Jersey facility.
• Aurobindo’s recent acquisition of Veritaz Health for INR1.7 billion does not really fit for the company’s high hope for the domestic formulation business. 
• Aurobindo shares are trading at a forward P/E of 10.9x, which is cheaper than the peers. However, the company is not expected to see multiple expansion in near future.  

• The reason why Sihuan has received more attention from the market mainly lies in the medical aesthetics segment. However, both hyaluronic acid and botulinum toxin are facing challenges.
• Recently, China Resources is rumored to be in talks to privatize Sihuan Pharmaceutical Hldgs (460 HK), but Sihuan denied it.
• Sihuan is undervalued. The reasonable market value should be over RMB20 billion. We recommend investors to follow closely with Sihuan, either for decent upside potential or privatization possibility.

• Celltrion Inc (068270 KS) reported muted Q1 results, with revenue, operating profit, and net profit declining quarter-over-quarter. Its biosimilar products in the EU are facing price competition.
• Celltrion has recalled its COVID-19 rapid antigen test kits in the U.S. in April, which marks its third such recall in less than two months.
• Celltrion shares plunged 15% since I published bearish insight on the company on March 8. Bear thesis of biosimilar competition still holds good for the company.

• Greenhaven Road Capital Partners Fund returned approximately -26.5% net in the first quarter.
• The three big factors that currently appear to be dominating investors’ focus are rising interest rates/inflation, rising oil prices, and war in Ukraine.

• For the first quarter, 1 Main Capital Partners, L.P.
• (the “Fund’s) returned (11.4)% net of fees and expenses, according to the “Fund’s” quarterly results.
• The first quarter of the first year, the fund returned 11.

• Polen Capital is a high-conviction growth investment manager.
• We scour the globe in search of the highest quality, sustainable companies to invest in.
• Aon, Visa, and Mastercard were the top absolute performers during the quarter.

• Polen International Growth Composite Portfolio returned -13.94% gross and -14.17% net of fees, respectively, versus the -5.45% return of the MSCI All Country World ex-USA Index.
• The most significant detractors from performance included ICON, Evolution AB, and Sage Group.

• Sihuan Pharmaceutical (460 HK) has shot down rumours that it is under negotiation with potential investors in respect of privatisation.
• Reportedly SOE China Resources is in talks with Sihuan Pharma’s chairman in a deal valuing the company at US$3bn or a 114% premium to the current price. 
• The logic of a privatisation makes sense. I would not be so quick to dismiss the denial. Plus Sihuan Pharma is very cash-rich.

• Voronoi is trying again to complete its IPO in Korea after lowering its IPO price range by 25% to 40,000 won to 46,000 won.
• The IPO base deal size is from $41 million to $47 million. Expected market cap is from 536 billion won to 616 billion won.
• Voronoi is developing treatments for tumors, degenerative brain diseases, and autoimmune diseases. The total amount of accumulated milestones for three global technology exports is $1.79 billion.

• Polen Capital is a high-conviction growth investment manager.
• Over the first quarter of 2022, Polen Global SMID Company Growth Composite Portfolio returned -22.37% gross and – 22.48% net of fees, respectively, versus the -6.41% return of the MSCI ACWI SMID Capitalization Index.

• Polen Capital is a high-conviction growth investment manager.
• Over the first quarter of 2022, Polen International Small Company Growth Composite Portfolio returned -22.48% gross and – 22.73% net of fees, respectively, versus the -6.

• Mitra Keluarga Karyasehat released 1Q2022 results recently which reflected a changing patient mix with less COVID-related patients and a recovery in its core patient business. 
• Hospital occupancy is rising whilst Mitra Keluarga is also increasing bed numbers but margins have been impacted by changing patient mix but this is a positive long-term trend.
• Mitra Keluarga Karyasehat (MIKA IJ) remains a key proxy for rising healthcare penetration in Indonesia, with valuation attractive from a historical basis. 

• Takeda Pharmaceutical (4502 JP) reported 4QFY03/2022 results yesterday. Reported revenue grew 13.4% YoY to JPY873.3bn (vs consensus JPY825.7bn) while the company reported operating losses of JPY1.7bn.
• Revenue from Top 14 drugs grew 20.3% YoY, while revenue from top-seller Entyvio grew 15.0% YoY during the quarter. Excluding Entyvio, other top 13 drugs grew 23.3% during the period.
• Takeda’s shares moved down 2.0% at the end of yesterday’s trading and down 3% during today’s trade as profit drop disappointed the market.

• Olympus Corp (7733 JP) reported strong double-digit revenue growth in Q4 on continued medical business recovery. Net profit has more than doubled and 40% ahead of consensus.  
• The company has achieved growth to above pre-pandemic level in FY22 and CAGR of >7% over last two years. Operating margin improved significantly to 19.3%.
• Olympus is on track to achieve more than 20% operating margin in FY23. Management projected a record high net profit of ¥154 billion for FY23.

• Torrent Pharmaceuticals (TRP IN) is one of the front-runners in the Indian pharmaceuticals industry mainly having presence in chronic therapeutic segments. India contributes 51% of its total revenue.
• Torrent is consistently outperforming Indian pharmaceutical market by a wide margin, due to its strong exposure to fast-growing and high-margin chronic therapeutic segments, which ensures high recurring revenue.
• Despite the fading windfall from COVID therapeutics, Torrent is well-positioned for double-digit revenue growth, due to its sustained competitive positioning in anchor therapeutic areas of CVS, CNS, GI, and vitamins.

• The fund applies the typical bottom-up concentrated value approach of looking for a discount to intrinsic value to the neglected areas of the market, micro and nano caps.
• As of the end of March 2022, the fund’s holdings were trading at less than 10 times our estimate of earnings for the coming year.

• The revenue brought by COVID-19 business wouldn’t be sustainable,and would decrease in the future. The lower-than-expected performance of the hospital services is hard to be the main driver for growth.
• The performance contribution brought by medical tourism would be limited, just partially offset the decline of COVID-19 related revenue. Accordingly, we lowered our forecast on revenue and earnings in FY2022-FY2023.
• Together with the concerns on China business, we have doubts about RMG’s outlook, which would weigh on bullish sentiment. In such a complicated environment, investors are recommended to play safe.

• Silver Ring Value Partners serves investors in the State of Massachusetts.
• The portfolio’s market value is roughly unchanged thus far in 2022 despite an environment in which both stocks and bonds have begun to experience substantial declines.
• The Company offers portfolio management, financial planning, and trading services.

• We believe the company’s profitability might be hit due to the above factors, prompting us to recommend a HOLD rating on the stock with TP Rs 450/share.
• Aarti Drugs Q4FY22 reported revenue grew 38% YoY which stood above our expectations, led by healthy growth in Chronic therapies, especially in the anti- diabetic segment.
• Domestic revenue grew ~37% on a YoY basis while exports grew by around 50% YoY and API volumes grew 23% on a YoY basis.

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.

• The Mittleman Global Value Equity Fund (MGVEF) declined 13.1% in Q1 2022.
• MIM believes that the businesses in which it has invested retain the features necessary to endure and surmount transitory setbacks.
• The company is an SEC-registered investment adviser that provides discretionary portfolio management to institutional investors.