Daily Brief Health Care: Taisho Pharmaceutical Holdin, Pfizer Inc, Recce Ltd and more

• Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
• We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
• Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.

• Pfizer seems to be the worst-performing large pharma stock of 2023 after it lowered 2024 forecast. The Company continues to grapple with plummeting demand for its COVID products
• The acquisition of Seagen can’t turn things around. Except a few products that are still able to maintain growth, sales of vast majority products that we’re familiar with are declining. 
• The growth engine of Pfizer in post-pandemic era is still uncertain. Even though Pfizer’s share price has fallen sharply, this may still not be the time for bottom fishing.

Recce recently reported that the Australian government has committed to providing up to A$55m in future cash rebates to reimburse upcoming R&D expenditure directed towards the company’s proprietary synthetic anti-infective programmes to June 2025. Notably, this binding agreement with the Australian government’s Department of Industry, Science and Resources (AusIndustry) extends the rebate programme that customarily reimburses 43.5% of eligible R&D expenditures incurred within Australia, to cover the anti-infective R&D activities Recce undertakes anywhere in the world. We view this as key given our expectation that US and global clinical trials will be needed to maximise the commercial potential of Recce’s products, notably lead candidate RECCE® 327 (R327). While our model already assumed the Australian government would reimburse 43.5% of Recce’s overseas R&D costs, there was a minor degree of uncertainty on whether this would be the case. Hence, the signing of this binding commitment with AusIndustry helps de-risk future funding needs for Recce as it advances its anti-infective programmes, notably R327 in sepsis/urosepsis and in complicated urinary tract infection (UTIs).