In today’s briefing:
- Zhifei Biological Products (300122.CH) – More Downside Ahead, with Untenable Logic in HPV Vaccine
- Shinpoong Pharmaceutical (019170 KS): Late Entry in COVID Drug Market; Legal Overhang Still Persists
- Human Capital Investment Is Also Necessary to Remind Valuations of Growth-Based Corporate Value
Zhifei Biological Products (300122.CH) – More Downside Ahead, with Untenable Logic in HPV Vaccine
- Due to the lack of competitiveness, Zhifei’s self-developed products cannot contribute solid performance to make up for the shrinking revenue of HPV vaccines when more competing products gradually launched.
- The real potential of HPV vaccine market in China is not as big as imagined. So, the companies involved have the problem of inflated market values.
- Due to low demand of COVID-19 vaccine/negative impact of pandemic on HPV vaccination, Zhifei’s revenue YoY growth could be 10%-20%; Net profit YoY growth could be negative in 2022.
Shinpoong Pharmaceutical (019170 KS): Late Entry in COVID Drug Market; Legal Overhang Still Persists
- Shinpoong Pharmaceutical (019170 KS) is re-purposing its existing anti-malarial drug Pyramax as an oral treatment for the COVID-19. The company is conducting phase 3 study in six countries, including Korea.
- South Korean oral COVID-19 treatment market is currently dominated by Paxlovid. Other domestic companies are also in race to develop homegrown oral COVID-19 drugs, thereby creating a crowded market.
- With declining cases and hospitalizations, Pyramax has muted growth prospect as a treatment for COVID-19. Shinpoong is reporting operating loss due to accelerated R&D expenditures.
Human Capital Investment Is Also Necessary to Remind Valuations of Growth-Based Corporate Value
- Human investment, the engine of medium-to-long-term growth, was burden for companies without high profit margins, and it wasn’t of much interest to investors seeking stock price returns from short-term perspective.
- Today, where people are required to do jobs that machines and robots cannot do and to think about mechanisms for making them work, investing in people is becoming more important.
- The fact that investors have focused more on short-term earnings volatility indicates that they have failed to assume growth-based corporate value in valuations. Growth investing is essential to raising valuations.
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