Healthcare

• Arrail, the largest dental services provider in China’s premium dental service market has announced the terms for its IPO.
• The company plans to raise net proceeds of approx. HK$590m (US$75.9m) through issuing 46.5m at a price of HK$14.62 per share.
• Cornerstone investors have agreed to purchase approx. US$65m worth of shares and these investors include Abax, Harvest, Hudson Bay, OrbiMed and TVHKL.

• Maintain HOLD rating with a TP of Bt33.50, based on 19.14xPE’22E,which is pegged to -1SD of 3-years trading mean.Despite drastic drop in 22E profit, its strategic location, combined with undemanding 
• Its 4Q21 net profit was at Bt283m (+96%YoY, -42%QoQ), given weak QoQ revenue growth, and margin contraction due to lowered Covid-19 related contribution.
• RJH’s 2021 earnings was at Bt1.01bn, implying +145% YoY, mainly attributed to higher contribution from Covid-related services.

• Opko Health Inc (OPK US)‘s core clinical testing business began to return to pre-pandemic volumes, while COVID-19- testing volume is expected to decline significantly.
• Opko’s pharmaceutical business is expected to clock mid-to-high single-digit growth in 2022, with Rayaldee and Ngenla being launched in the international markets.
• While diagnostic revenue is expected to decline 40% y/y, pharmaceutical business is anticipated to clock mid-to-high single-digit growth in 2022.

• Arrail is a leading premium dental service provider in China. The company launched book building to raise up to USD 87m via a Hong Kong listing.
• In our previous notes, we looked at the company’s background, its operation, its financials, and its expansion plan, and compared its key metrics with peers and provide thoughts on valuation.
• In this note, we provide a quick update for the book building.

• Arrail is the largest dental services provider in China’s premium private dental service market and the third in the overall market in terms of total revenues in 2020.
• The company has filed for an IPO to list on the Hong Kong Stock Exchange and plans to raise about US$86m.
• The group has experienced strong growth despite the impact of COVID-19 and China’s growing private dental market offers large potential for the company to grow.

• For ENT services, the number of patients and scale of ENT field are relatively stable, with growth ceiling.
• Due to the limited doctor resources in Singapore and the intensified multi-party competition faced by Ascent, there may not be exciting future growth potential.
• So, we are conservative about the Company’s outlook if it just operates the business within Singapore or without diversifying its business effectively.

• This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. 
• The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized.
• This week we flag: Invitae, AMC, 2U Inc., and Delek US

• After MNC Pharma and pure-play companies like ERIS, ALKEM has minimal exposure to the international business.
• It has multiple growth drivers over the next 12-18 months, despite a high base in the past 12 months, due to: a revival in Non-COVID therapies and better MR productivity (14% net addition over the past two years), sustained outperformance in Chronic.
• .

• Profit fell short
• Profit more than halved YoY and QoQ
• Highlights from 2QFY22 concall
• Earnings adjustments

TOPG’s 2QFY22 net profit of MYR87.5m was below our and consensus full-year estimates. Management expects margin outlook to stay challenging on rising raw material costs, partially cushioned by better utilisation and efficiency rates. TOPG remains cautious and has scaled back on its expansion plan. It has also put its Hong Kong listing plan on hold for now. We lower our FY22/23/24 earnings forecasts by -40% to -48%. Post earnings adjustments, our TP is lowered to MYR0.91 (on an unchanged 13x CY23 PER). Maintain SELL.

• Arrail is a leading dental service provider in China. The company is looking to raise up to USD100m via a Hong Kong listing.
• In our previous note, we looked at the company’s background, its operation, its financials, and its expansion plan.
• In this note, we compare the key metric with its peer and provide our thoughts on the valuation.

• Fierce competition is an industry-wide phenomena in biosimilar products. Despite being an early mover, Celltrion Inc (068270 KS) is also facing competition for its marketed biosimilars.
• The market share of Celltrion’s key biosimilar product, Remsima is declining. Other marketed and upcoming biosimilars also have multiple existing players.
• With the waning COVID-19 infections in the U.S., demand for Celltrion’s rapid test kits seems uncertain.

• After raising over RMB70 billion,investors have much higher expectation on BeiGene than other biotech/biopharma, because BeiGene is “different”,but the real pressure will come over the next two or three years.
• Will BeiGene become China’s first truly international pharmaceutical company, or be dragged into mediocrity by the failure of key trials or the failure of commercialization to meet the market’s expectations?
• It is attractive if the market value is below US$20 billion. However, considering the Russia-Ukraine war and other potential external uncertainties, we advise investors to keep alert.

• Biocon is a leading biopharma company operating in biologics, contract research (Syngene), small molecules and branded formulations.
• Biosimilar US pipeline: (approvals – Pegfilgrastim, Trastuzumab, Glargine, Adalimumab); filed – Aspart and Bevacizumab
• Target Price and Valuation: We value Biocon at Rs 390 on SOTP basis

• In this insight, we discuss the potential inclusions and deletions in the upcoming MSCI rebalance in May 2022. The next MSCI Korea rebalance will be announced on 12 May 2022.
• We believe that Hyundai Mipo, Hanwha Aerospace, and Daewoo Shipbuilding could increasingly be viewed as potential additions to MSCI Korea rebalance in May. 
• Green Cross Corp, Sk Chemicals Co, and Alteogen could increasingly be viewed as potential deletion candidates in the next MSCI Korea rebalance. 

• Chugai Pharmaceutical (4519 JP) shares declined 2% since we published our bearish note on the company in December. We remain bearish on the name.
• Chugai is betting big on Actemra, Hemlibra, and Ronapreve for achieving 2022 revenue target. However, these have bleak outlook due to competition and uncertainty regarding COVID-19 prevalence globally.
• Chugai does not have any big launches expected this year. Pipeline has less visibility for compensating the revenue loss from the patent expired products.

• At the current stage, the price of IOL that won the bidding in centralized procurement was above Eyebright’s ex-factory price, which means that the profits are still guaranteed. 
• If two core products (IOL & OK lens) are both included in the centralized procurement in the future, Eyebright needs to broaden the product category and find new growth points.
• We analyze the valuation from a different angle.We could not say that the current market value of Eyebright is at the bottom, but is more reasonable compared with last June. 

• Progyny Inc (PGNY US) shares are bouncing off their lows following strong Q4 results and  guidance reiteration. Continued stellar growth amid large and underpenetrated TAM call for strong upside potential. 
• After impacted by Omicron in December, business activity has rapidly recovered to normal levels this year. Management has guided for 50% y/y revenue growth for 2022.
• For 2022, Progyny added 85 new clients, with 1.2 million covered lives, which will be its long-term growth driver. The company is well-positioned for 70% revenue CAGR during 2021–2024.

• Aurobindo Pharma (ARBP IN) shares have corrected more than 40% from peak and are trading at discount to peers. The company’s U.S. business is under pressure, resulting in deteriorating profitability.
• We are not seeing any immediate respite in the U.S. formulation business. Hence, investors can avoid Aurobindo Pharma shares.  
• However, value unlocking through stake sale in injectable business can be a near-term catalyst, resulting in relief rally in the stock.

• BBL (a subsidiary of BIOS) will acquire Viatris’ Biosimilar business to create a vertically integrated company in the Biologics segment.
• With this acquisition, BBL will acquire the commercial infrastructure in developed/emerging markets, rights for all Biosimilar assets (including the in-licensed portfolio), and the option to acquire rights of bAflibercept.
• This also fills BBL’s gap in regulatory development and supply chain management of Biosimilars in the developed market.

• CapVest was clearly prepared. One day after Virtus Health (VRT AU) received a revised non-binding bid from BGH Capital of $7.65/share, CapVest bumped to $7.80 by way of a Scheme.
• An off-market takeover bid with a minimum 50.1% minimum acceptance condition, offering $7.70/shares was also tabled by CapVest. 
• Virtus has pivoted to CapVest and will not engage with BGH as to its A$7.65/share Offer.

• Align Technology (ALGN US) is better investment idea than its Chinese competitor Angelalign Technology (6699 HK), due to its larger global scale of operation, early mover advantage, and cheaper valuation.    
• Align Technology is well-positioned for 20%+ revenue and earnings growth through 2024, driven by large and underpenetrated TAM of 19 million annual ortho starts.
• Align Technology shares are trading at a steep discount to Angelalign Technology shares. Price erosion due to the increasing competition remains the key risks for both the companies.

• We analyzed Suzhou Zelgen Biopharmaceuticals (688266 CH)’s key products(Donafenib, recombinant human thrombin for topical use, Alkotinib, Jaktinib, etc.). They have to face fierce competition, VBP impact and small market size.
• Through Gensun Biopharma, Zelgen has established the ability to develop advanced tumor immunotherapy drugs. Whether it can continue to launch new products is the key to test Zelgen’s R&D system.
• We are cautious about Zelgen because uncertainties led to inaccurate prediction on market size and outlook.Investors can choose to “catch” a rebound, but Zelgen is far from a complete reversal.

• Ray Co (228670 KS) is the 17th company in our Korea Small Cap Gems series. 
• Ray Co is a leading Korean producer of digital X-ray imaging equipment for dental use. The company has attractive sales and profit growth combined with reasonable valuation multiples. 
• Ray Co has been noted as one of the companies that have been invested by Scion Asset Management. 

• Downgrade to HOLD with a TP of Bt3.90,based on 15xPE’22E, which is close to -2SD of its 10-years trailing mean. In our view,the rating does not warrant a premium valuation
• Its 4Q21 net profit figure was at Bt1.8bn, (+615%YoY, +16% QoQ), YoY growth is backed by margin expansion from Covid-related revenue and efficient cost control.
• CHG’s 2021 net profit was at B4.2bn (+380YoY) thanks to solid revenue growth (+116%YoY) and wider margin (+18ppts), helped by Covid-related services.

• New Horizon Health (6606 HK) has made some improvements based on 2021 preliminary financial data. The newly launched UU Tube also enriches the product line. 
• However, the industry is still at the early stage. In front of fierce competition, ColoClear’s bottleneck is obvious. The cheaper products (Pupu Tube, UU Tube) could have more market acceptance. 
• Based on our analysis, our view is that the Company may rebound temporarily, but it is too early for a complete reversal.

• Fertility specialist Virtus Health (VRT AU) has received a revised non-binding takeover bid from BGH Capital of $7.65/share, less any dividends declared by Virtus. It had previously offered $7.10/share.
• BGH also said it would vote its 19.99% stake against CapVest Partners’ cash offer of $7.60/share. 
• Back in CapVest’s court. A $0.05/share higher bid is unlikely to see the UK-based player fold its tent.

• Benefiting from the opportunities brought to the healthcare industry by the COVID-19 pandemic in 2020, Yunkang Group (YK HK) took a ride and ushered in a turning point in performance.
• As the pandemic stabilizes and gets gradually under control, the revenue generated from COVID-19 tests may significantly decrease, which means Yunkang may return to net loss again in the future.
• We currently haven’t seen any new growth point with high certainty. Therefore, we are conservative about Yunkang’s outlook.

• The market has been quite volatile these past couple of months. Unfortunately, it seems like volatility will stay for some time.
• Growth oriented tech stocks got especially hammered. While it might be quite upsetting seeing those red numbers, it is actually a good time for the savvy investor to buy!
• InMode designs, develops, manufactures, and sells minimally invasive aesthetic medical products. Simply speaking, they make and sell robotics for plastic surgery.

• BGH’s revised scheme offer will pay $7.65 per Virtus Health (VRT AU) share, which is 0.7% and 2.0% higher than CapVest’s rival scheme (A$7.60) and off-market takeover offer (A$7.50), respectively.
• BGH (19.99% stake) will vote against the CapVest scheme and will not accept any takeover offer from CapVest. Consequently, CapVest’s best option is an improved off-market takeover bid.
• As CapVest’s offer is marginally below BGH’s revised offer, CapVest retains the potential to lob an improved offer, in our view.

• It’s a volatile market these days! The Omicron variant, interest rate hikes, supply chain disruption, and labor shortage are causing the market to fluctuate wildly
• Healthcare companies provide essential services regardless of economic conditions.
• The screener results were quite satisfactory. AbbVie, Amgen, and Merck. I like all of them!