In today’s briefing:
- WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors
- CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650
- WuXi XDC IPO Valuation Analysis: Premium Multiples Reflect 100%+ Top-Line Growth
- The Problem Is that Companies that Don’t Want to Do Discloser in English Are Listed on Prime Market
- Remegen (9995.HK/688331.CH) – The Survival Problem Is Becoming Imminent
- Shofu (7979 JP) – Competitive Advantage Driving Predictability in Earnings Growth
- Ono Pharmaceutical (4528 JP): Record H1 Earnings; Forxiga Is Flying High; FY24 Guidance Updated
WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors
- WuXi XDC Cayman (1877628D HK) is looking to raise US$470m in its Hong Kong IPO.
- WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
- In this note, we will look at the deal dynamics and share our final thoughts on valuation.
CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650
- CMIC Holdings (2309 JP) has recommended an MBO tender offer of JPY2,650 per share, a 55.9% premium to the undisturbed price (7 November).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 41.29% ownership ratio.
- Irrevocables to accept represent a 23.29% ownership ratio. While the offer is light vs. peer multiples, the minimum acceptance condition requires a 35.1% minority acceptance rate, which is doable.
WuXi XDC IPO Valuation Analysis: Premium Multiples Reflect 100%+ Top-Line Growth
- WuXi XDC set terms for an upcoming IPO: the fast-growing CRDMO offers 178.4M shares at the price range of HK$19.90-HK$20.60, implying a market cap of ~HK$23.9B (~$3B) at the midpoint.
- Cornerstone investors agreed to subscribe and buy ~116M shares, assuming the IPO price of HK$20.25 at the midpoint. WuXi XDC shares will begin trading on Friday, November 17.
- My PT of HK$25.57 implies a ~26% upside to the IPO price at the midpoint. WuXi XDC’s premium multiples reflect 100%+ top-line growth and the company’s leadership position.
The Problem Is that Companies that Don’t Want to Do Discloser in English Are Listed on Prime Market
- Companies disclosing in English increased to 97.2% in 2023 prime market. However, only 15% of overseas investors responded “satisfied,” indicating a continuing mismatch between disclosure content and investor needs.
- TSE will prioritize the documents according to whether disclosure requires immediacy, and divide companies into mandatory companies and effort companies according to the size and foreign ownership of a company.
- However, disclosure in English of lower priority documents would be more difficult. Separating companies would allow the prime market to include companies that don’t need to interact with global investors.
Remegen (9995.HK/688331.CH) – The Survival Problem Is Becoming Imminent
- Although RemeGen’s 23Q1-Q3 sales was better-than-expected, the Company is difficult to achieve management’s performance guidance for 2023. Since RemeGen’s commercialization logic has “undeniable flaws”, net loss would be further widened.
- Cash balance of RemeGen was just RMB600 million by 23Q3, which is not enough to cover its high R&D/SG&A expenses. If RemeGen cannot secure sufficient financing timely, risks are significant.
- The current valuation and investors’ expectations for RemeGen largely rely on the potential license-out deal of RC18. However, we remain caution until RC18 has sufficient evidence to win head-to-head trial.
Shofu (7979 JP) – Competitive Advantage Driving Predictability in Earnings Growth
- Q1-2 FY3/2024 results were in line with upwardly-revised company guidance, with gross margins reaching 60.4% and a record-high quarterly level of 61.0% for Q2 FY3/2024.
- This was driven by overseas growth for Shofu’s competitive Chemical Products (CAD/CAM resin materials and restorative filling materials) and a forex tailwind, with overseas sales making up 57.6% of total sales.
- We have raised our earnings estimates for FY3/2024 and beyond to reflect Shofu continuing to gain market share overseas, and the resultant improvement in the sales mix
Ono Pharmaceutical (4528 JP): Record H1 Earnings; Forxiga Is Flying High; FY24 Guidance Updated
- Ono Pharmaceutical (4528 JP) reported double-digit growth in revenue, operating profit, and net profit in H1FY24. Opdivo recorded revenue of ¥75B (+7% YoY). Forxiga revenue jumped 36% YoY to ¥36B.
- Encouraged by strong performance of Forxiga and receipt of lump-sum income associated with the patent litigation settlement, Ono has raised FY24 guidance by mid-to-high single-digit percentage across all the parameters.
- The company aims to overcome Opdivo patent cliff and accelerate growth by launching multiple products in the U.S. and Europe with large addressable markets.
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