Daily Brief Health Care: Celltrion Inc, WuXi XDC Cayman Inc, Daiichi Sankyo, WuXi AppTec, Basilea Pharmaceutica Ag and more

• The Appraisal rights exercise period ends on 13 November. If the NPS and other large shareholders exercise their rights in Celltrion Inc (068270 KS), the merger could be in trouble.
• Both stocks are trading close to their exercise price and could be supported due to the companies buying back their shares.
• There will be passive flows from local and global trackers and there does not appear to be pre-positioning. That is likely due to the risk of potential merger cancellation.

• WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.
• In WuXi XDC IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on margins on a downward trend, large customer concentration, high related party transactions and volatile FCF generation.

• Daiichi Sankyo (4568 JP) reported strong H1FY24 results, with double-digit growth in revenue, core operating profit, and net profit, mainly driven by its global mainstay product Enhertu.
• Daiichi Sankyo and Merck entered into a global development and commercialization agreement for three of Daiichi Sankyo’s drug candidates, for a total potential consideration of up to $22 billion.
• Daiichi Sankyo has raised FY24 revenue, core operating profit, and net profit forecast by 7%, 11%, and 17%, respectively. FY24 revenue is expected to grow 21% YoY to ¥1,550 billion.

• 23Q3 results has sounded an alarm for investors. Obviously, the deterioration of financing situations both domestically and internationally has forced WuXi AppTec to readjust projected revenue growth.
• Almost all of the important logic at the moment is negative for CXOs.Revenue growth in TIDES business alone is hard to offset the decline in WuXi AppTec’s other businesses/industry trend.
• After a pullback, investors can bet on the next rebound, but we still recommend taking profits in time, because without persuasive fundamentals, rebound driven by sentiment is difficult to sustain.

Basilea has announced an exclusive evaluation licence and option agreement with South Korea-based iNtRON Biotechnology (KOSDAQ: 048530) for tonabacase, a potential first-class antibacterial of endolysin class. The product candidate could potentially fit well into Basilea’s portfolio of anti-fungal and anti-bacterial products, Cresemba and Zevtera. This announcement follows the recent in-licensing of GR-2397 (an antifungal compound, renamed BAL2062) and aligns with management’s strategic focus to seek anti-fungal and anti-infective synergistic additions to its portfolio. As part of the agreement, Basilea will evaluate tonabacase in a range of preclinical studies which, if favourable, could lead to a licensing agreement for further clinical development, at Basilea’s exclusive discretion and at pre-agreed financial terms. Basilea is making an undisclosed upfront payment to iNtRON and will make an additional payment if it decides to exercise its exclusive option to execute the licence agreement. While the terms of the deal are undisclosed, management maintains that the transaction has no impact on its FY23 financial guidance.