Healthcare

• Incorporated in 1959, Torrent has a strong presence in domestic and semi-regulated markets and a growing presence in regulated markets.
• Revenues – India including CRAMs (53%), Brazil (8%), US (16%) and Germany (13%)
• Target Price and Valuation: We value Torrent at Rs 3235 i.e. 28x P/E on FY24E EPS of Rs 115.5

• Abbott Laboratories (ABT US) Q4 revenue and adjusted EPS beat consensus. Global COVID-19 testing-related sales were $2.3 billion, ahead of consensus of $1.3 billion.
• Management provided conservative guidance for 2022 COVID-19 testing revenue of $2.5 billion, which is expected to be updated on a quarterly basis.
• Abbott expects its medical devices business on a normal run rate in H2 2022. However, its diabetes care portfolio remained resilient and grew faster than the nearest competitor.

• Cipla is a global pharma company with over 1,500+ products in 65 therapeutic categories, with over 50 dosage forms
• Cipla supplies branded and generic medicines to over 170 countries globally.
• Target Price and Valuation: We value Cipla at Rs 1100 i.e. 24x P/E on FY24E EPS of Rs 44.6 + | 31 NPV for gRevlimid.

Federal Bank: Federal Bank (FB)’s Q3FY22 earnings were broadly in line with our estimates as declining credit costs (64bps) were partially offset by muted reflation in asset yields and lower other income. Asset quality continues to be impressive with negative net slippages, stable credit costs at 64bps, and a steady restructured pool (2.6%). While loan growth witnessed healthy traction (+12% YoY), asset yields continue to be soft, which is likely to reflate only gradually through exercising of pricing power and growth in unsecured retail (credit cards, PL, MFI, etc.).

• For Medbanks, who entered the market from the SMO business and then PBM business, building core competitiveness around this closed loop may be quite challenging.
• The PRS business has growth ceilings; The low margins of PBM and PPS business and the increasing competition make Medbanks difficult to generate solid financial position for future business expansion.
• Therefore, based on the analysis above, we are conservative about this Company’s outlook.

• Sawai Pharmaceutical’s in-house expansion plan, coupled with its recent acquisition of a production facility will enhance annual production capacity by 48% in multiple stages by 2030.
• Capacity expansion will help the company to achieve its aim of market share expansion amid a shortage of generic drug supply in Japan.
• Through H1 FY22, the company has achieved 51% and 58% of full-year’s revenue and core operating profit target for Japan, respectively.

• Gland Pharma reported a good set of numbers with revenue for the Q3FY22 growing by 23.7% on a YoY basis
• The strong growth was majorly driven by robust performance in the emerging markets as well as the India market while core markets reported an encouraging 10.5% growth
• We, therefore, recommend a HOLD rating on the stock with a target price of Rs 3,575/share.

• EC Healthcare (2138 HK)’s Chairman and CEO acquired 543,000 shares at an average price of HKD9.1943 per share, thereby increasing his stake to 61.17% of the issued share capital.
• H1FY22 and preliminary results for Q3FY22 shows continued business recovery. Medical services, which contributes 52.5% of total revenue continue to be the key growth driver.
• In January, EC Healthcare acquired 55% equity interest in Bayley & Jackson Dental Surgeons Limited for HKD129 million. Bayley & Jackson operates seven dental clinics in Hong Kong.

• This is the Second of a series of reports on Ping An Healthcare where we will be discussing the other three segments of the company.
• Health Mall is the largest revenue generator for Ping An Health but the segment is facing tough competition from other online healthcare providers which is negatively impacting its gross margins.
• Similarly, though revenue from Consumer Healthcare biz has seen strong growth, we expect the margins to remain under pressure due to increased focus on corporate customers who generate lower margins.

• Biocon Limited reported revenue growth of 17.5% (est. 8.9%) which is majorly driven by biosimilars (+27.6%, YoY) and generic (+8.3%, YoY) segment
• In generic, the launch of Everolimus and uptake in API has improved sales despite continuous pricing pressure in the US
• Therefore, we recommend a BUY rating with a Target Price of Rs 425, implying an upside of 14% from the CMP.

• Venus MedTech (2500 HK) is taking the lead in TAVR industry, but Peijia Medical (9996 HK) has advantages in development progress of future products. So, the market pattern is not yet determined.
• The high cost of TAVR surgery is the main reason for lower-than-expected sales performance of related companies and low market penetration. The fierce competition would also bring more challenges. 
• A good solution is to enter developing markets with CE mark, which would offer a new commercialization option and also a wider expansion beyond just European and American markets.

• Voronoi (VOR KS) is getting ready to complete its IPO in Korea in March. The IPO offering base deal size is from $84 million to $109 million.
• The company has developed a genotype-directed therapy that is effective for tumors caused by mutations in kinases, and has successfully conducted global technology transfers. 
• The total amount of accumulated milestones for three global technology exports of Voronoi is $1.79 billion (about 2.1 trillion won) which is very impressive.

• OrbusNeich Medical Group focuses on coronary and peripheral interventional instruments, such as balloons and stents used in PCI (coronary)/PTA (peripheral) procedures.
• Comprehensive and innovative product portfolio for endovascular interventional procedures, established global sales network, and robust pipeline are the major strength of OrbusNeich.
• Fierce competition, commoditized nature of the offering, centralized procurement leading to substantial price drop are some of the concerns for the company.

• Beijing Yuanxin Tech (BYT) is looking to raise US$500m in its upcoming Hong Kong IPO.
• As per F&S, the firm is the No. 1 integrated healthcare fulfilment platform in China focusing on prescription drugs
• In this note, we look at the company’s fundamentals and operations and share our thoughts about the IPO.

• Microport NeuroTech is a leading neuro-interventional device company in China. The company is looking to raise up to USD 300m via a Hong Kong listing.
• We look at the company’s key segments and products. We like the company’s comprehensive coverage of neuro-interventional devices.
• Its management team has decent experience as it is a spin-off from Microport. We also highlight the risk of the stock.

• Syngene is a contract research, development and manufacturing organisation catering mainly to global innovator pharma\chemical companies 
• Syngene serves these players, which outsource some or substantial part of their business in the product development life cycle
• Target Price & Valuation: We value Syngene at Rs 710 i.e. 40x FY24E EPS of |17.8

• Biocon mainly operates in biologics (biosimilars), small molecules (generics), branded formulations and contract research (Syngene)
• Robust biosimilar portfolio with partners like Viatris, Sandoz (for future launches), Adagio among others
• Target Price and Valuation: We value Biocon at Rs 410 on SOTP basis

• RC48’s commercialization performance in China market could be lower than expected. The breakthrough point is whether the deal with Seagen can bring any surprise in the global markets.
• Due to large R&D and selling expenses, Remegen Co Ltd (9995 HK) is facing cash flow pressure, indicating that this IPO in SSE STAR market is very important for the Company.
• Let’s see if RemeGen would in-license some unique late-stage candidates or reach new blockbuster license-out deals that surprise us again, both of which would help turn things around.

• Management is not aware of any significant reason for the recent unusual price movement in Austar Lifesciences (6118 HK) shares.
• The company’s strong financial performance in H1 2021 and order book seems to be mostly driven by the COVID-19 vaccine-related demand, which is expected to fade off this year.
• Divestment of its 60% equity interest in Pall-Austar Lifesciences is expected to weaken its competitive positioning in the lifescience tool market in China.

• GSK has rejected Unilever’s approaches (last at £50 billion) but leaked it would be ready to accept an offer around £60 billion (a whopping c. 65% of Unilever’s market capitalisation).
• The deal would be transformational and Unilever’s management see it as the way forward to revive the company’s performance and the share price.
• Ballsy, but doable, with a positive impact on results from FY2024, but negative impact on leverage at 4.9x. I believe that Unilever may make a further approach.

• Maintain HOLD rating, with a TP of Bt21, based on 23xPE’22E,which is close to -1SD of its 10-years trailing average. The 30% drop in share price from its August 21
• Yesterday, the Centre for COVID-19 Situation decided to relax some restrictive measures including a revision to the colour-coded zoning and resuming Test&Go registration for foreign travelers starting from 1 Feb
• Expect 4Q21 earnings at Bt1.3bn (+384%YoY,-54%QoQ), tumble by weak margin due to the Covid cases declined 69%, but partially offset by pent-up demand for core services

• COLL has yet to issue their annual revenue forecast after three consecutive years of providing such guidance, leading us to assume 2022 could be challenging than current consensus estimates imply
• XtampzaER revenue declined in third quarter 2021 with COLL facing difficulty in getting physicians to switch prescriptions. The slowdown in XtampzaER revenue has been the core of our investment thesis 
• COLL has a balance sheet liability of $191.7 million related to rebates, returns, and discounts. This liability has grown faster than revenue

• UK-Based CapVest Partners is offering A$7.60/share, in cash, for Virtus Health (VRT AU), compared to BGH Capital’s bid last month of A$7.10/share. Virtus has granted exclusive due diligence. 
• CapVest’s Offer is non-binding. No doubt due to BGH holding 20% of shares out, CapVest will concurrently run an alternate off-market bid with a 50.1% acceptance condition at A$7.50/share. 
• At a ~5% spread to the indicative Scheme terms, I would look to get involved. 

• ClouDr Group (16897333D CH) (CDG) is looking to raise up to US$500m 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 share our thoughts on the company’s business, financials, and operating metrics.

• Samsung Biologics Co., (207940 KS) has denied its acquisition talk with Biogen Inc (BIIB US). With its current controversies, Biogen does not seem to be an attractive bet.
• The company is poised for strong growth in 2022, driven by its massive capacity expansion plans and portfolio diversification toward high-growth areas like cell & gene therapies and mRNA business.  
• With an increasing order backlog resulting from consistent contract win and expanding customer base, Samsung Biologics has strong revenue visibility.

• Virtus Health (VRT AU) announced an offer from CapVest comprising of A$7.60 per share via a scheme (a 7.0% premium to BGH’s A$7.10 offer) or A$7.50 via an off-market takeover. 
• CapVest’s offer is contingent on exclusivity and cost recovery protections. The Board will recommend a binding offer of at least A$7.60 via a scheme or A$7.50 via an off-market takeover.
• Due to the healthy premium to historical multiples and share prices implied by the CapVest offer, it is likely that BGH will be hesitant to start a bidding war.    

• Shares of Moderna Inc (MRNA US) underperformed and fell ~32% YTD. Investors continued to cut exposure to stocks of COVID vaccine makers, including BioNTech, Novavax, CureVac, among others.
• In August 2021, Moderna announced the first share buyback plan. The company’s Board of Directors has authorized share repurchase for up to $1 billion with an expiry date in 2023. 
• We estimate Moderna may end 2021 with a total of ~$18.5 billion in cash, cash eq., investments and expect the company may boost share buyback in the future.

• Teladoc Health, Inc. (TDOC US), the whole-person virtual care industry leader in scale, clinical breadth, and outcomes, reported 70% revenue CAGR over the last three years.
• The company expects 25% annual expansion in revenue per member, which together with 1–5% per year growth in membership will lead to 25–30% revenue CAGR during 2021–2024.
• Teladoc has a strong growth opportunity amid a large TAM of 298 million total insured lives in the U.S., of which the company has penetrated just 30%.

• According to public news, the recent bribery scandal of Aier Eye Hospital Group (300015 CH) has raised widespread concern. Shenzhen stock Exchange also issued a letter of inquiry.
• The development model based on M&A funds helps rapid expansion, but also leads to profit orientation and large goodwill balance, indicating potential risks.
• The biggest risk is the revolutionary technology/drugs to disrupt the business value of Aier’s medical services. So, Aier could be a short-term trade, but not a long-term hold. 

• The high price of EJiao discouraged consumers, leading to increasing inventory backlog in the distribution channel and reduction in payment collection, which finally resulted in Dong-E-E-Jiao’s net loss in 2019.
• Although the performance has showed a recovery trend since 2020,concerns on raw material shortage, low inventory turnover, single product structure, high selling expense ratio and fierce market competition still remain.
• There is still a long way to go for the Company to get back to peak, so we are conservative about Dong E E Jiaoco Ltd A (000423 CH)’s outlook.