HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>China biotech companies are “being squeezed” between the negative domestic policies and the dilemma of internationalization. The investment logic of biotech has broken and the valuation forecasts are ineffective.</li>
<li>For CXO, the uncertainties outweigh the certainties.Investors need to be prepared for the possibility of CXO not to return to its peak, because its best time may have been over.</li>
<li>We’re in a very complicated environment. A lot of things come together. Survive first. Seize rebounds after plunge rather than go bottom fishing. You don't know when the bottom is. </li>
</ul>


China biotech companies are “being squeezed” between the negative domestic policies and the dilemma of internationalization. The investment logic of biotech has broken and the valuation forecasts are ineffective.
For CXO, the uncertainties outweigh the certainties.Investors need to be prepared for the possibility of CXO not to return to its peak, because its best time may have been over.
We’re in a very complicated environment. A lot of things come together. Survive first. Seize rebounds after plunge rather than go bottom fishing. You don't know when the bottom is. 


Re-Examine the Outlook and Investment Strategy for China Biotech and CXO

Equity Bottom-Up

<ul>
<li>As one of the few CXOs in the industry that has layout of the whole industry chain, Pharmaron carries many expectations. But it cannot compete with WuXi AppTec so far.</li>
<li>If Pharmaron could make breakthrough either in its CMC services (improving gross profit margin and scale) or the CGT services, the Company’s outlook and valuation logic would improve greatly.</li>
<li>The valuation of Pharmaron should be lower than WuXi AppTec and WuXi Biologics, but higher than Asymchem, Tigermed and Joinn. Considering the macro uncertainties, short-term trades are advised.</li>
</ul>


As one of the few CXOs in the industry that has layout of the whole industry chain, Pharmaron carries many expectations. But it cannot compete with WuXi AppTec so far.
If Pharmaron could make breakthrough either in its CMC services (improving gross profit margin and scale) or the CGT services, the Company’s outlook and valuation logic would improve greatly.
The valuation of Pharmaron should be lower than WuXi AppTec and WuXi Biologics, but higher than Asymchem, Tigermed and Joinn. Considering the macro uncertainties, short-term trades are advised.


Pharmaron Beijing Co Ltd (3759.HK/300759.CH) 2022/2021Q1 Results- Expectations Coexist with Concerns

<ul>
<li>The weak performance of WuXi AppTec's investment business dragged down the overall net profit growth, which could get worse considering the macro uncertainties, leading to the change of valuation logic.</li>
<li>The gross profit margin showed a declining trend, and cost control in the context of inflation becomes urgent. Reduced cash balance, weaker short-term solvency and liquidity should also be noticed.</li>
<li>With majority revenue from overseas markets, external uncertainties (e.g. geopolitical conflict, complex Sino-US relationship, etc.) may be greater than expected. Investors may need to be ready for this.</li>
</ul>


The weak performance of WuXi AppTec's investment business dragged down the overall net profit growth, which could get worse considering the macro uncertainties, leading to the change of valuation logic.
The gross profit margin showed a declining trend, and cost control in the context of inflation becomes urgent. Reduced cash balance, weaker short-term solvency and liquidity should also be noticed.
With majority revenue from overseas markets, external uncertainties (e.g. geopolitical conflict, complex Sino-US relationship, etc.) may be greater than expected. Investors may need to be ready for this.


WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 - Some Points Worth the Attention

Asymchem Laboratories Tianjin / Equity Bottom-Up

<ul>
<li>The three large orders for COVID-19 small molecule drugs are mostly one-off revenues, and after 2022, <a href="https://www.smartkarma.com/entities/asymchem-laboratories" target="_blank" data-smartkarma-citation="entities:35691:1" rel="noopener">Asymchem Laboratories (6821 HK)</a>'s performance could decline from a high base.</li>
<li>In essence, Asymchem mainly relies on cost advantage of large-scale capacity to obtain orders.Without core leading technology in frontier of medicine, Asymchem is difficult to enjoy sustainable industry development dividend.</li>
<li>Overall, Asymchem’s moat is not strong enough, and the certainty of the Company's long-term performance growth is also not high. It could be a short-term trade rather than long-term hold.</li>
</ul>


The three large orders for COVID-19 small molecule drugs are mostly one-off revenues, and after 2022, Asymchem Laboratories (6821 HK)'s performance could decline from a high base.
In essence, Asymchem mainly relies on cost advantage of large-scale capacity to obtain orders.Without core leading technology in frontier of medicine, Asymchem is difficult to enjoy sustainable industry development dividend.
Overall, Asymchem’s moat is not strong enough, and the certainty of the Company's long-term performance growth is also not high. It could be a short-term trade rather than long-term hold.


Asymchem Laboratories (6821.HK/002821.CH) - Concerns on Future Growth Momentum

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine.</li>
<li>Consumer staples and information technology led the outflows of the market.</li>
<li>Stocks we highlighted include Zijin Mining, Nari, Wuxi Apptec, Sungrow, Moutai, Wuliangye, Yangtze Power, East Money</li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine.
Consumer staples and information technology led the outflows of the market.
Stocks we highlighted include Zijin Mining, Nari, Wuxi Apptec, Sungrow, Moutai, Wuliangye, Yangtze Power, East Money


Northbound Flows: Moutai, Wuliangye, Yangtze Power, East Money

China

WuXi AppTec Co., Ltd. manufactures medical products. The Company produces biological agents, antibodies, biological diagnostic reagents, and other products. WuXi AppTec also provides biological analysis, technical study, and other services.

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WuXi AppTec (603259 CH)

Re-Examine the Outlook and Investment Strategy for China Biotech and CXO

The investment logic of China biotech has broken due to dilemma of domestic policy and internationalization risk.CXO couldn't sustain high...

Xinyao (Criss) Wang

Pharmaron Beijing Co Ltd (3759.HK/300759.CH) 2022/2021Q1 Results- Expectations Coexist with Concerns

We analyzed Pharmaron's performance in 2021 & 2022Q1.Expectations coexist with concerns. Its outlook/valuation logic would improve greatly if it...

Xinyao (Criss) Wang

WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 - Some Points Worth the Attention

The poor investment business affected overall net profit growth and could get worse due to macro uncertainties, leading to change of valuation...

Xinyao (Criss) Wang

Asymchem Laboratories (6821.HK/002821.CH) - Concerns on Future Growth Momentum

Despite COVID-19 drug orders, Asymchem's performance could decline afterwards. In essence, it mainly relies on cost advantage of large-scale...

Xinyao (Criss) Wang

Northbound Flows: Moutai, Wuliangye, Yangtze Power, East Money

We highlighted top weekly northbound stock connect outflows from Moutai, Wuliangye, China Yangtze Power, East Money at the back drop of three weeks...

Ke Yan, CFA, FRM

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