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.

Equity Capital Markets

<p>Edding Group, a leading integrated pharmaceutical company in China, plans to raise up to USD 200m via a Hong Kong listing.</p><p>In our previous note, we discussed that the company is turning from a distributor of NMC drugs to a pharmaceutical company by acquiring product rights in the past two years. We are of the view that the Vancocin and Ceclor are the selling point of the company as they both have a dominant position in the respective segment and are in growing markets. The company's Vascepa is an interesting CVD product but the competition is intense given that the statin is the main therapy to reduce CV risks and it has many varieties with a competitive market. However, we do not see Mulpleta and EPD 125 attractive. Sales of Mulpleta are very small in Japan and the EDP125 was suspended by Eli Lilly previously given that it failed to demonstrate superiority in Phase II/III clinical trials. We think the management does not possess impressive working experience, though investor backing is strong.</p><p>The strong line-up of pre-IPO investors prompted us to do further research in the company. In this note, we will be looking at the company's financials. We highlight key points from its financials and the contractual arrangement. We also note issues with its related party.</p>

Edding Group, a leading integrated pharmaceutical company in China, plans to raise up to USD 200m via a Hong Kong listing.In our previous note, we discussed that the company is turning from a distributor of NMC drugs to a pharmaceutical company by acquiring product rights in the past two years. We are of the view that the Vancocin and Ceclor are the selling point of the company as they both have a dominant position in the respective segment and are in growing markets. The company's Vascepa is an interesting CVD product but the competition is intense given that the statin is the main therapy to reduce CV risks and it has many varieties with a competitive market. However, we do not see Mulpleta and EPD 125 attractive. Sales of Mulpleta are very small in Japan and the EDP125 was suspended by Eli Lilly previously given that it failed to demonstrate superiority in Phase II/III clinical trials. We think the management does not possess impressive working experience, though investor backing is strong.The strong line-up of pre-IPO investors prompted us to do further research in the company. In this note, we will be looking at the company's financials. We highlight key points from its financials and the contractual arrangement. We also note issues with its related party.

Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Bio-Thera Solutions Ltd / Equity Bottom-Up

<p>In the first quarter of 2021, following the failure of the BAT8001 phase III clinical trial, <a href="https://www.smartkarma.com/entities/bio-thera-solutions-ltd" target="_blank" data-smartkarma-citation="entities:29127:1" rel="noopener">Bio-Thera Solutions Ltd (688177 CH)</a> announced the suspension of R&amp;D of two other projects in the pipeline, BAT8003 and BAT1306. It is estimated that Bio-Thera has invested about RMB340 million in these three projects. Currently, Bio-Thera has only one product (Qletli) on the market. In the financial reports of 2020, the revenue was RMB185 million and Qletli contributed about RMB183 million, almost the entire revenue of the Company. Meanwhile, the net loss in 2020 was RMB513 million, and the Company has been suffering from losses for five consecutive years. So, what's next for Bio-Thera after R&amp;D setbacks and years of losses?</p>

In the first quarter of 2021, following the failure of the BAT8001 phase III clinical trial, Bio-Thera Solutions Ltd (688177 CH) announced the suspension of R&amp;D of two other projects in the pipeline, BAT8003 and BAT1306. It is estimated that Bio-Thera has invested about RMB340 million in these three projects. Currently, Bio-Thera has only one product (Qletli) on the market. In the financial reports of 2020, the revenue was RMB185 million and Qletli contributed about RMB183 million, almost the entire revenue of the Company. Meanwhile, the net loss in 2020 was RMB513 million, and the Company has been suffering from losses for five consecutive years. So, what's next for Bio-Thera after R&amp;D setbacks and years of losses?

Bio-Thera Solutions (688177.CH) - What's Next for Bio-Thera After R&D Setbacks and Years of Losses?

Sciclone Pharmaceuticals / Equity Capital Markets

<p>SciClone Pharma, a pharmaceutical company with a focus on sales of oncology and infectious disease drugs in China, raised HKD 2,039 million (USD 262m) from its global offering and will list on the Hong Kong Stock Exchange on Wed, Mar 3rd.</p>
<p>In our previous note, we discussed that the company has a long history but has a heavy reliance on a single drug Zadaxin which has dubious efficacy as it has not managed to obtain FDA approval for its otherwise approved indication in China. The company tried to expand the indication based on its ability to enhance the immune system to fight against diseases. The company's near-term revenue driver mainly comes from the consolidation of the sales from Pfizer products after the transfer of rights. However, we think the products from both Pfizer and Baxter are not attractive overall. The products from Baxter have been in the market for decades. Quality of the management team is mediocre with a focus on sales experience and not R&amp;D experience. So is the quality of financial investors which are mostly domestic private equity funds.</p>
<p>In this note, we look at the updates since our last note. We were bearish with the deal and with the recent correction in the market, we think there is a chance that the deal goes under water post listing.</p>
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<h2>Our previous coverage on SciClone</h2>
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<p><a href="https://www.smartkarma.com/insights/sciclone-pharma-pre-ipo-rejuvenation-of-old-drugs" target="_blank" rel="noopener">SciClone Pharma (赛生药业) Pre-IPO: Rejuvenation of old drugs</a></p>
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<p><a href="https://www.smartkarma.com/insights/sciclone-pharma-pre-ipo-phip-updates-and-thoughts-on-valuation" target="_blank" rel="noopener">SciClone Pharma (赛生药业) Pre-IPO: PHIP updates and thoughts on valuation</a></p>
</li>
<li dir="ltr" aria-level="1"><a href="https://www.smartkarma.com/insights/sciclone-ipo-a-mediocre-deal" target="_blank" rel="noopener">SciClone (赛生药业) IPO: A Mediocre Deal</a></li>
</ul>
</div>

SciClone Pharma, a pharmaceutical company with a focus on sales of oncology and infectious disease drugs in China, raised HKD 2,039 million (USD 262m) from its global offering and will list on the Hong Kong Stock Exchange on Wed, Mar 3rd.
In our previous note, we discussed that the company has a long history but has a heavy reliance on a single drug Zadaxin which has dubious efficacy as it has not managed to obtain FDA approval for its otherwise approved indication in China. The company tried to expand the indication based on its ability to enhance the immune system to fight against diseases. The company's near-term revenue driver mainly comes from the consolidation of the sales from Pfizer products after the transfer of rights. However, we think the products from both Pfizer and Baxter are not attractive overall. The products from Baxter have been in the market for decades. Quality of the management team is mediocre with a focus on sales experience and not R&amp;D experience. So is the quality of financial investors which are mostly domestic private equity funds.
In this note, we look at the updates since our last note. We were bearish with the deal and with the recent correction in the market, we think there is a chance that the deal goes under water post listing.

Our previous coverage on SciClone




SciClone Pharma (赛生药业) Pre-IPO: Rejuvenation of old drugs


SciClone Pharma (赛生药业) Pre-IPO: PHIP updates and thoughts on valuation

SciClone (赛生药业) IPO: A Mediocre Deal



SciClone (赛生药业) IPO Trading: Bifurcation of Demand

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<div><p><a href="https://www.smartkarma.com/entities/sciclone-pharmaceuticals-holdings-limited" target="_blank" data-smartkarma-citation="entities:17351:1" rel="noopener">Sciclone Pharmaceuticals (6600 HK)</a> is a biopharmaceutical company with an integrated platform for product development and commercialisation of drugs in the oncology and severe infection therapeutic areas. </p></div><div><p>In <a href="https://www.smartkarma.com/insights/sciclone-pharmaceuticals-ipo-initiation-a-hard-sell" target="_blank" data-smartkarma-citation="insights:48114" rel="noopener">SciClone Pharmaceuticals IPO Initiation: A Hard Sell</a>, we stated that SciClone is a less than ideal IPO candidate. Despite efforts at diversification, SciClone is highly dependent on a single product, Zadaxin, which was launched in 1996. The risk to Zadaxin’s sales remains undiminished. The large pre-IPO dividends by existing shareholders in face of these challenges also sends the wrong message to potential IPO investors. Overall, on a fundamental basis, we are inclined to give this IPO a pass. </p></div><div><p>SciClone has launched its Hong Kong IPO at an indicative price range of HK$17.20-18.80 per share to raise net proceeds of HK$1,950.4 million ($252 million), at the mid-point of the price range. The raise is materially below the original target of a $500 million raise. Eleven cornerstone investors will subscribe for $133.7 million of the offer shares (49.65% of the offer shares at the mid-point of the IPO price). The cornerstone investors are largely domestic funds and lack international blue-chip names.</p></div><div><div><div class="content-highlight"><p>Relative valuation suggests that SciClone trades at a material discount to peers at the proposed IPO price range. We think that this discount is warranted due to SciClone's heavy reliance on Zadaxin, which faces ongoing challenges. Consequently, we are inclined to give this IPO a pass as our concerns on the fundamentals more than offset the "cheap" valuation.</p></div></div></div>

Sciclone Pharmaceuticals (6600 HK) is a biopharmaceutical company with an integrated platform for product development and commercialisation of drugs in the oncology and severe infection therapeutic areas. In SciClone Pharmaceuticals IPO Initiation: A Hard Sell, we stated that SciClone is a less than ideal IPO candidate. Despite efforts at diversification, SciClone is highly dependent on a single product, Zadaxin, which was launched in 1996. The risk to Zadaxin’s sales remains undiminished. The large pre-IPO dividends by existing shareholders in face of these challenges also sends the wrong message to potential IPO investors. Overall, on a fundamental basis, we are inclined to give this IPO a pass. SciClone has launched its Hong Kong IPO at an indicative price range of HK$17.20-18.80 per share to raise net proceeds of HK$1,950.4 million ($252 million), at the mid-point of the price range. The raise is materially below the original target of a $500 million raise. Eleven cornerstone investors will subscribe for $133.7 million of the offer shares (49.65% of the offer shares at the mid-point of the IPO price). The cornerstone investors are largely domestic funds and lack international blue-chip names.Relative valuation suggests that SciClone trades at a material discount to peers at the proposed IPO price range. We think that this discount is warranted due to SciClone's heavy reliance on Zadaxin, which faces ongoing challenges. Consequently, we are inclined to give this IPO a pass as our concerns on the fundamentals more than offset the "cheap" valuation.

SciClone Pharmaceuticals IPO: Valuation Insights

<p>On January 29<sup>th</sup>, 2021, <a href="https://www.smartkarma.com/entities/luye-pharma-group-ltd" target="_blank" data-smartkarma-citation="entities:488:1" rel="noopener">Luye Pharma (2186 HK)</a> announced a subscription agreement with Hillhouse NEV, involving HK$1.25 billion of investment from Hillhouse in exchange for issuing of new shares. The subscription price of the new shares was HK$4.28/share, a premium of approximately 10.03% over the closing price of HK$3.89/share on January 29<sup>th</sup>. Once the deals are completed, Hillhouse NEV will have a 15.60% stake in Luye, making it the second largest shareholder of the Company. The news had an immediate boost to share prices. Luye's shares opened sharply higher on Monday (February 1<sup>st</sup>), trading as high as HK$7, up 79.95% from Friday's close of HK$3.89/share. It surged again on Wednesday (February 3<sup>rd</sup>), up 11.3%, and then started to fall back on Thursday. By the end of February 5<sup>th</sup>, Luye's share price was HK$6.19. So, could the magic of Hillhouse last long?</p>

On January 29th, 2021, Luye Pharma (2186 HK) announced a subscription agreement with Hillhouse NEV, involving HK$1.25 billion of investment from Hillhouse in exchange for issuing of new shares. The subscription price of the new shares was HK$4.28/share, a premium of approximately 10.03% over the closing price of HK$3.89/share on January 29th. Once the deals are completed, Hillhouse NEV will have a 15.60% stake in Luye, making it the second largest shareholder of the Company. The news had an immediate boost to share prices. Luye's shares opened sharply higher on Monday (February 1st), trading as high as HK$7, up 79.95% from Friday's close of HK$3.89/share. It surged again on Wednesday (February 3rd), up 11.3%, and then started to fall back on Thursday. By the end of February 5th, Luye's share price was HK$6.19. So, could the magic of Hillhouse last long?

Luye Pharma (2186.HK) - Could the Magic of Hillhouse Last Long?

China

3SBio, Inc. is a biotechnology company located in China. The Company focuses on mammalian cell-based biopharmaceuticals in the biotechnology industry. 3SBio also develops, manufactures and markets biopharmaceutical products globally.

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3SBio Inc (1530 HK)

Bio-Thera Solutions (688177.CH) - What's Next for Bio-Thera After R&D Setbacks and Years of Losses?

The article analyzed the concerns after the suspension of R&D of its three core products, the challenges of its listed product Qletli,and also the...

Xinyao (Criss) Wang

SciClone (赛生药业) IPO Trading: Bifurcation of Demand

We were bearish with the deal and with the recent correction in the market, we think there is a chance that the deal goes under water post listing.

Ke Yan, CFA, FRM

SciClone Pharmaceuticals IPO: Valuation Insights

SciClone has launched its IPO to raise net proceeds of $252m, at the mid-point of the price range. We recommend a pass as our concerns on the...

Arun George

Luye Pharma (2186.HK) - Could the Magic of Hillhouse Last Long?

This article analyzed Luye Pharma after the subscription agreement with Hillhouse in terms of the past performance, insights on recent changes, and...

Xinyao (Criss) Wang

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Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party

The strong line-up of pre-IPO investors prompted us to do further research in the company. In this note, we will be looking at the company's...

Ke Yan, CFA, FRM

Bio-Thera Solutions (688177.CH) - What's Next for Bio-Thera After R&D Setbacks and Years of Losses?

The article analyzed the concerns after the suspension of R&D of its three core products, the challenges of its listed product Qletli,and also the...

Xinyao (Criss) Wang

SciClone (赛生药业) IPO Trading: Bifurcation of Demand

We were bearish with the deal and with the recent correction in the market, we think there is a chance that the deal goes under water post listing.

Ke Yan, CFA, FRM

SciClone Pharmaceuticals IPO: Valuation Insights

SciClone has launched its IPO to raise net proceeds of $252m, at the mid-point of the price range. We recommend a pass as our concerns on the...

Arun George

Luye Pharma (2186.HK) - Could the Magic of Hillhouse Last Long?

This article analyzed Luye Pharma after the subscription agreement with Hillhouse in terms of the past performance, insights on recent changes, and...

Xinyao (Criss) Wang