Global Healthcare Analyst

Tina Banerjee

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bristol-myers-squibb-co" target="_blank" data-smartkarma-citation="entities:1133:1" rel="noopener">Bristol Myers Squibb Co (BMY US)</a> is acquiring <a href="https://www.smartkarma.com/entities/karuna-therapeutics-inc" target="_blank" data-smartkarma-citation="entities:28720:1" rel="noopener">Karuna Therapeutics Inc (KRTX US)</a> for $330/share in cash for equity value of ~$14B. The transaction is expected to close in 1H24. </li>
<li>Karuna’s lead asset, KarXT has FDA action date of September 26, 2024 for the treatment of schizophrenia in adults. KarXT has peak annual sales potential of $6–7B.</li>
<li>Considering strong clinical efficacy and favorable risk profile of KarXT, the deal seems to be fairly valued. Current market price of Karuna shares of $318.41 represents absolute spread of ~3.6%.</li>
</ul>



Bristol Myers Squibb Co (BMY US) is acquiring Karuna Therapeutics Inc (KRTX US) for $330/share in cash for equity value of ~$14B. The transaction is expected to close in 1H24. 
Karuna’s lead asset, KarXT has FDA action date of September 26, 2024 for the treatment of schizophrenia in adults. KarXT has peak annual sales potential of $6–7B.
Considering strong clinical efficacy and favorable risk profile of KarXT, the deal seems to be fairly valued. Current market price of Karuna shares of $318.41 represents absolute spread of ~3.6%.


Karuna Therapeutics (KRTX US): BMS Acquisition Offers Decent Short-Term Trading Opportunity

Equity Bottom-Up

<ul>
<li>In 1H23, <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP)</a> reported revenue growth of 16% YoY to ¥947.5B, ahead of the guidance of ¥867B, as all operating segments recorded increased revenue.</li>
<li>In 1H23, revenue from pharmaceutical segment grew 21% YoY to ¥637.9B, mainly driven by the growth of the four global products, which contributed 49% of segment revenue.</li>
<li>Encouraged by a better-than-expected 1H23 result, Otsuka has raised 2023 guidance. The company has increased revenue, operating profit, and net profit guidance by 6%, 17%, and 19%, respectively.</li>
</ul>


In 1H23, Otsuka Holdings (4578 JP) reported revenue growth of 16% YoY to ¥947.5B, ahead of the guidance of ¥867B, as all operating segments recorded increased revenue.
In 1H23, revenue from pharmaceutical segment grew 21% YoY to ¥637.9B, mainly driven by the growth of the four global products, which contributed 49% of segment revenue.
Encouraged by a better-than-expected 1H23 result, Otsuka has raised 2023 guidance. The company has increased revenue, operating profit, and net profit guidance by 6%, 17%, and 19%, respectively.


Otsuka Holdings (4578 JP): Strong 1H23 Result Prompts 2023 Guidance Raise; Pipeline Is Advancing

<ul>
<li>
<a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP)</a> has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.</li>
<li>However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.</li>
<li>Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.</li>
</ul>



Otsuka Holdings (4578 JP) has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.
However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.
Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.


Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction

Otsuka has a leadership position in atypical antipsychotic drugs. The company is successfully diversifying its revenue stream in order to mend the hole created by patent expiry of its erstwhile flagship drug Abilify (accounted for ~25% of total revenue). Four global products, including Abilify Maintena, Rexulti, Samsca, and Lonsurf currently contribute more than 30% of total revenue. Better-than-expected revenue from these four global products led to record high business profit in 2020. The performance continued in this year and the company reported 8% y/y revenue growth in H1, leading to 2021 guidance raise. This insight analyses the potential of Otsuka’s global products, which have leading market positioning amid large addressable patient population. Four global products are expected to achieve revenue of ¥480 billion (20% CAGR during 2018–2021) in 2021, two years ahead of schedule, driven by indication and geography expansion. These products should play a crucial role in achieving the medium-term management plan (2019–2023), which calls for average annual revenue growth of 10% or higher to reach revenue of ¥1,700 billion and ROE of 8% of higher in 2023. Otsuka has a rich pipeline of late-stage (phase II/III) programs to compensate for the upcoming patent cliff for its mainstay products.

Otsuka has a leadership position in atypical antipsychotic drugs. The company is successfully diversifying its revenue stream in order to mend the hole created by patent expiry of its erstwhile flagship drug Abilify (accounted for ~25% of total revenue). Four global products, including Abilify Maintena, Rexulti, Samsca, and Lonsurf currently contribute more than 30% of total revenue. Better-than-expected revenue from these four global products led to record high business profit in 2020. The performance continued in this year and the company reported 8% y/y revenue growth in H1, leading to 2021 guidance raise. This insight analyses the potential of Otsuka’s global products, which have leading market positioning amid large addressable patient population. Four global products are expected to achieve revenue of ¥480 billion (20% CAGR during 2018–2021) in 2021, two years ahead of schedule, driven by indication and geography expansion. These products should play a crucial role in achieving the medium-term management plan (2019–2023), which calls for average annual revenue growth of 10% or higher to reach revenue of ¥1,700 billion and ROE of 8% of higher in 2023. Otsuka has a rich pipeline of late-stage (phase II/III) programs to compensate for the upcoming patent cliff for its mainstay products.    

Otsuka Holdings (4578 JP): Well-Diversified Portfolio to Augment Revenue Growth

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on the Communications Sector as we are seeing steady relative strength ranking (RSR) improvements over the last couple of months. At the Group level, we highlight select smid-cap Casinos &amp; Gaming stocks. Finally, India’s S&amp;P BSE SENSEX is breaking out to new all-time highs as RS bullishly inflects, we highlight actionable stocks.

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on the Communications Sector as we are seeing steady relative strength ranking (RSR) improvements over the last couple of months. At the Group level, we highlight select smid-cap Casinos &amp; Gaming stocks. Finally, India’s S&amp;P BSE SENSEX is breaking out to new all-time highs as RS bullishly inflects, we highlight actionable stocks.

Global Strategy: Health Care Outperforming - Overweight; India Breaking Out -Add Exposure

Denmark

H. Lundbeck A/S is an international pharmaceutical company.  The Company researches, manufactures, and sells drugs for the treatment of psychiatric and neurological disorders.  The Company focuses on mood disorders, dementia, anxiety, and sleep disorders.  Lundbeck does research both in-house and in cooperation with research centers.  The Company markets its products worldwide.

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H Lundbeck A/S (LUN DC)

Karuna Therapeutics (KRTX US): BMS Acquisition Offers Decent Short-Term Trading Opportunity

BMS is acquiring Karuna Therapeutics for $330/share in cash, with the deal expected to close in 1H24. Current market price of Karuna shares...

Tina Banerjee

Otsuka Holdings (4578 JP): Strong 1H23 Result Prompts 2023 Guidance Raise; Pipeline Is Advancing

Otsuka reports 16% YoY revenue growth in 1H23, surpassing guidance, driven by four global products. The company raised 2023 revenue, op. profit,...

Tina Banerjee

Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction

Otsuka has raised H1FY23 revenue guidance. However, profits will be negatively impacted by one-off charges. Guidance raise and new product line-up...

Tina Banerjee

Otsuka Holdings (4578 JP): Well-Diversified Portfolio to Augment Revenue Growth

Otsuka's diversified portfolio is well-positioned to achieve at least 10% average annual revenue growth. Rich pipeline should compensate for the...

Tina Banerjee

Global Strategy: Health Care Outperforming - Overweight; India Breaking Out -Add Exposure

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on...

Vermilion Research

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Karuna Therapeutics (KRTX US): BMS Acquisition Offers Decent Short-Term Trading Opportunity

​BMS is acquiring Karuna Therapeutics for $330/share in cash, with the deal expected to close in 1H24. Current market price of Karuna shares...

Tina Banerjee

Otsuka Holdings (4578 JP): Strong 1H23 Result Prompts 2023 Guidance Raise; Pipeline Is Advancing

​Otsuka reports 16% YoY revenue growth in 1H23, surpassing guidance, driven by four global products. The company raised 2023 revenue, op. profit,...

Tina Banerjee

Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction

Otsuka has raised H1FY23 revenue guidance. However, profits will be negatively impacted by one-off charges. Guidance raise and new product line-up...

Tina Banerjee

Otsuka Holdings (4578 JP): Well-Diversified Portfolio to Augment Revenue Growth

Otsuka's diversified portfolio is well-positioned to achieve at least 10% average annual revenue growth. Rich pipeline should compensate for the...

Tina Banerjee

Global Strategy: Health Care Outperforming - Overweight; India Breaking Out -Add Exposure

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on...

Vermilion Research

BMS is acquiring Karuna Therapeutics for $330/share in cash, with the deal expected to close in 1H24. Current market price of Karuna shares...

Otsuka reports 16% YoY revenue growth in 1H23, surpassing guidance, driven by four global products. The company raised 2023 revenue, op. profit,...