Daily Brief Health Care: Shulan Health Management, Otsuka Holdings, Neusoft Xikang Healthcare Technology Co Ltd, Respiri Ltd and more

• Shulan Health Management (1807987D CH) is looking to raise around US$150m in its Hong Kong IPO. The deal will be run by CICC, and Citic Securities.
• Shulan Health Management (SHM) is a technology-driven healthcare group in China that integrates healthcare services and medical research and education.
• The firm owned and operated three private general hospitals and provided hospital management services to 14 partner hospitals in China as of March 31, 2023.

• In 1H23, Otsuka Holdings (4578 JP) reported revenue growth of 16% YoY to ¥947.5B, ahead of the guidance of ¥867B, as all operating segments recorded increased revenue.
• In 1H23, revenue from pharmaceutical segment grew 21% YoY to ¥637.9B, mainly driven by the growth of the four global products, which contributed 49% of segment revenue.
• Encouraged by a better-than-expected 1H23 result, Otsuka has raised 2023 guidance. The company has increased revenue, operating profit, and net profit guidance by 6%, 17%, and 19%, respectively.

• Either from business model or investment logic, the key is to increase the revenue proportion of cloud hospital platform services. However, many restrictions have led to difficulties in nationwide expansion.
• Overreliance on government projects and public hospitals makes it difficult to generate high profits. Xikang may continue to suffer loss in the future, and its profitability is worrying. 
• Based on our analysis, it could be difficult for Xikang to achieve good valuation performance in the future. we think its valuation should be lower than that of ClouDr.

Respiri had a very active FY23, including the recent close of the Access Managed Services (Access) acquisition and the signing of several commercial contracts. These represent stepping stones to the company’s commercialisation phase, further supported by a strong client pipeline of ongoing contractual discussions, including with two US-based insurers and three accountable care organisations. As a result, management expects to break even by H2 CY24 (revised from end-CY24). Pro forma cash at 30 June 2023 was A$2.2m, bolstered by the A$3.9m fund raise in August 2023, which we estimate should support operations into Q424. We have adjusted our estimates to reflect FY23 results and Respiri’s recent activities, tempered for timing considerations (client onboarding and patient enrolment). Our valuation adjusts to A$164.6m or A$0.17/share (from A$164.2m or A$0.20/share, previously).