In this briefing:
- Jinxin Fertility (锦欣生殖) Pre-IPO: Strong Foothold in Sichuan but Weak Sentiment for Sector
- Amarin–Our Talks With The CEO & An Update on New Trial Data Released at ACC Conference
- ECM Weekly (23 March 2019) – ESR, Sun Car, Ruhnn, CanSino, Frontage, Wuxi Bio, WiseTech,
- Wuxi Biologics Placement – Past Deals Have Done Well but Progressive Returns Are Getting Lower
- Frontage Holding (方达控股) IPO: Updates from 2018 Numbers
1. Jinxin Fertility (锦欣生殖) Pre-IPO: Strong Foothold in Sichuan but Weak Sentiment for Sector
Jinxin Fertility, a leading privately owned assisted reproductive service provider in China and the US, refiled to list in Hong Kong. Per news reports, the company planned to raise up to USD 500 million. In this insight, we will cover the following topics:
- Business lines and its hospitals
- The assisted reproductive service industry
- Key risks
- Shareholders and use of proceeds
- Our early thoughts on valuation
2. Amarin–Our Talks With The CEO & An Update on New Trial Data Released at ACC Conference
- Strong Q1 to Come: We recently had a call with Amarin’s CEO, John Thero, and update our model with quarterly estimates. Q1 should see revenue growth of +55% YoY to $68m, an operating loss of -$30m, and EPS of -$0.09. Consensus is at $66m, -$38m, and -$0.12, respectively.
- ACC Event Leads to Stock Drop: Amarin released “late-breaking” results from its Reduce-It trial at the American College of Cardiology (ACC) conference last Monday. While the data was considered “landmark” by doctors in attendance, the stock has fallen by nearly 14% since the event, showing a clear disconnect between the market and the medical community.
- New Data Upgrades Risk Reduction to 30% & Shows Strong Prevention of CVD Recurrence: The key data at the ACC showed that Vascepa has a 30% relative risk reduction (RRR) rate for total CVD events (initially, it was 25% RRR rate for “major adverse” CVD events). Additionally, it was discovered that Vascepa reduced secondary CVD events by 32%, third events by 31%, and fourth events by 48%. 50% of patients who have experienced a cardiovascular event have a recurrence within one year, while 75% have recurrences within three years.
- New Data Should Fast-Track Label Expansion & Impact Earnings Significantly: Doctors on a panel discussion after Amarin’s presentation at the ACC were dazzled by the data, saying that it will change the way CVD is treated in the US. We got the sense that this should lead to the FDA giving Vascepa “fast-track” (6 months vs regular 10 months) treatment for label expansion, which will surely lead to higher revenues this year and an expanded market henceforth.
- New Prescriptions up 62% YTD: Amarin’s CEO, John Thero, told us he has more talks with doctors about Vascepa these days than he does with investors, which highlights increasing interest in the US medical community over Vascepa and explains the new prescription growth of +62% year-to-date. Successful label expansion by the FDA should widen Vascepa’s addressable market by nearly 20x.
- Our Talks With CEO Point to a Strong Q1: The first quarter is seasonally slow, but our impressions from our talk with CEO John Thero is that the company is most likely outperforming its internal targets for Q1 growth. Amarin assumes 53% sales growth for the full year, but has stated that Q1 should be “seasonally slower”. Weekly prescription data show that Vascepa is growing over 50% in the seasonally slow Q1. Sales should pick up from Q2 and surge in the usual peak season of Q4.
- 2019 Revenues should Reach $500m (+120% YoY): We see 2019 revenues of $503m, with operating profit of $88m (17.5% operating margin) and EPS of $0.23. Consensus sees sales of $363m (guidance is at $350m), with an operating loss of -$58m and EPS of -$0.17.
- Buyout Possibilities Remain High: We continue to see Amarin as one of the most attractive buy-out candidates among big pharma companies in the CVD field. Because Vascepa is a treatment taken in conjunction with statin medication like Lipitor, Pfizer appears like the most likely suitor, although there many others.
- For more details about Amarin, its Reduce-It trial, and potential global sales, please refer to this in-depth report Amarin–2019’s Biggest Buyout Target for Big Pharma
3. ECM Weekly (23 March 2019) – ESR, Sun Car, Ruhnn, CanSino, Frontage, Wuxi Bio, WiseTech,
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Theme of the week: Block trades/Placements + news flow on upcoming IPOs
Starting with placements, the shareholders of Wuxi Biologics (Cayman) Inc (2269 HK) are back on the market again to sell some shares. They been quite consistent with the selling and our team have covered the company the IPO each of the placements. Wisetech Global (WTC AU) and Platinum Asset Management (PTM AU) also had blocks that were sold earlier this week. The former did excceedingly well post-placement, currently more than 10% above its deal price while the latter had struggled as a result of Kerr and his ex-wife selling a portion of their shares in the company.
As for upcoming IPOs, Hong Kong ECM activity is ramping up. Megvii, the Chinese AI startup is looking to list in Hong Kong or US whereas China Feihe (FEIHE HK) is said to be revisit its US$1bn HK IPO. Ke Yan, CFA, FRM has covered the latter in this insight almost two years ago.
We also heard that Frontage had already met investors and Ke Yan, CFA, FRM has provided preliminary thoughts on valuation in:
Mulsanne Group (previously known as Alpha Smart (GXG)), Xinyi Energy Holdings, CMGE Tech, and 360 ludashi (鲁大师) re-filed their draft prospectuses. We have covered Mulsanne and Xinyi Energy in:
- Alpha Smart Pre-IPO – PE Investors Recovered 56% of Their Cost in Two Years but Left It in Debt
- Xinyi Energy (信义能源) IPO: High Dividend Yield but Depreciating Asset
- CMGE Tech (中手游) Pre-IPO Review – Unfortunate Timing
360 ludashi’s previous filing indicated that its IPO deal size will be small (<US$100m). However, the updated financials shown an almost 50% YoY PATMI growth which could put its IPO at a borderline deal size of US$100m if growth maintains at 50%.
In the U.S, Yunji Inc. (YJ US) filed for a US$200m IPO. The company runs a Chinese e-commerce site that uses a social platform to promote its products. We will be writing an early note on the company next week.
In Singapore, Eagle Hospitality REIT is said to have started investor education for its IPO while Lendlease is planning to raise up to US$500m for its retail REIT according to media reports.
In other ASEAN markets, there are also a handful of IPOs to watch out for.
- In Indonesia, Lion Air is said to be targeting US$1bn listing in the third quarter of this year and it is starting to gauge investor interest. MAP Actif has already started pre-marketing its IPO.
- In Thailand, Kerry Express Thailand is said to have hired banks to prepare for a >US$100m IPO.
- In Malaysia, QSR Brands (QSR MY) has started to pre-market for its US$500m IPO. Sumeet Singh had previously written an early note:
Accuracy Rate:
Our overall accuracy rate is 72.3% for IPOs and 64.3% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
- Yunji (the U.S, ~US$200m)
- 360 LuDaShi (Hong Kong, potentially >US$100m)
- CMGE Tech (Hong Kong, re-filed)
- Mulsanne Group – FKA Alpha Smart – AKA GXG (Hong Kong, re-filed)
- Xinyi Energy (Hong Kong, re-filed)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
News on Upcoming IPOs
- Chinese AI start-up Megvii mulls IPO in either Hong Kong or New York to raise US$800m
- Lendlease planning to raise up to US$500m with retail Reit listing on SGX
- Indonesia’s Lion Air Starts Work on $1 Billion IPO
- Chinese Tower Operator Guodong Is Said to Plan Hong Kong IPO
- Feihe International ‘revisits plan for Hong Kong IPO’
- Solar co Xinyi Energy revives Hong Kong IPO plan
This week Analysis on Upcoming IPO
- Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk
- Frontage Holding (方达控股) IPO: Updates from 2018 Numbers
- Sun Car Insurance Agency (盛世大联) IPO: Over Valued Vs P&C Companies
- ESR Cayman Pre-IPO – Earnings and Segment Analysis
- CanSino Biologics (康希诺) IPO: Valuation Attractive, Lilly Asia Doubling Up (Part 4)
- PagerDuty IPO Preview
4. Wuxi Biologics Placement – Past Deals Have Done Well but Progressive Returns Are Getting Lower
Biologics holdings is looking to raise upto US$517m by selling a 4.2% stake in Wuxi Biologics (Cayman) Inc (2269 HK). This will be fourth placement by the company since it listed less than two years ago. Below is a link to our coverage of the listing and the earlier placement:
- Jun 2017 – US$500m: WuXi Biologics IPO Review – An Opportunity to Get Exposure to Biologics in China
- Dec 2017- US$550m: Wuxi Biologics Placement – Selldown Right when Lockup Expires Suggests Eagerness to Offload
- Mar 2018 – US$600m: Wuxi Biologics Placement – In Time for the Next Lock-Up, Returns Will Probably Not Match Prior Ones
- Jun 2018 – US$500m: Wuxi Biologics Placement – Probably Not a Surprise to Sell Again when Lock-Up Expires
Each of the past placement has been of a similar size and has generally done well. The company recently reported results which were ahead of street estimates. The deal scores a marginal positive score on our framework but there is still a lot more selling left once the 90-day lock-up expires.
5. Frontage Holding (方达控股) IPO: Updates from 2018 Numbers
Frontage Holding, a contract research organization subsidiary of A-share listed Hangzhou Tigermed Consulting (300347 CH), re-filed to list on the Hong Kong Stock Exchange recently. We have covered the company’s fundamentals in our previous insight here. In this insight, we will provide an updated analysis based on new data available from the new prospectus, as well as our thoughts on valuation.
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