Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Capital Markets

Shanghai Henlius Biotech  / Equity Capital Markets

The oncology treatment landscape in China is evolving rapidly as the government has prioritized access to innovative drugs to meet this significant unmet need. In particular, investors considering the <a href="https://www.smartkarma.com/entities/27888" target="_blank" data-smartkarma-citation="entities:27888:1">Shanghai Henlius Biotech (1566213D HK)</a> listing should be aware of the emergence of a drug that potentially is superior to <a href="https://www.smartkarma.com/entities/27906" target="_blank" data-smartkarma-citation="entities:27906:1">Roche Holding AG (ROG SW)</a>'s Herceptin (and Shanghai Henlius' HLX02) for the treatment of patients with HER2-positive breast cancer (and ultimately HER2-positive gastric cancer). While there should be good demand for cheaper alternatives to Herceptin, the availability of a superior alternative potentially shortens the lifecycle of Herceptin biosimilars. China has only recently "modernized" its drug approval and reimbursement, so there is little precedent to rely upon to estimate the speed and magnitude of changes in the market. As brokers rollout forecasts for the company and HLX02, investors should ask if the numbers somehow reflect this risk.We do not have a view of the offering, but tag this Insight as Bearish because we are highlighting a potential risk.

The oncology treatment landscape in China is evolving rapidly as the government has prioritized access to innovative drugs to meet this significant unmet need. In particular, investors considering the Shanghai Henlius Biotech (1566213D HK) listing should be aware of the emergence of a drug that potentially is superior to Roche Holding AG (ROG SW)'s Herceptin (and Shanghai Henlius' HLX02) for the treatment of patients with HER2-positive breast cancer (and ultimately HER2-positive gastric cancer). While there should be good demand for cheaper alternatives to Herceptin, the availability of a superior alternative potentially shortens the lifecycle of Herceptin biosimilars. China has only recently "modernized" its drug approval and reimbursement, so there is little precedent to rely upon to estimate the speed and magnitude of changes in the market. As brokers rollout forecasts for the company and HLX02, investors should ask if the numbers somehow reflect this risk.We do not have a view of the offering, but tag this Insight as Bearish because we are highlighting a potential risk.

Anhui Anke Biotechnology (Group) (300009 CH)

Zhejiang Hisun Pharmaceutical Co, Ltd. (600267 CH)

Shanghai Henlius Biotech

HLX02: Innovation Could Overtake