Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>The June 2023 index review results for the Hang Seng index can be expected after the close on 12th May 2023.</li>
<li>In <a href="https://www.smartkarma.com/insights/quiddity-leaderboard-for-hang-seng-index-mar-23-healthcare-names-could-dominate" target="_blank" data-smartkarma-citation="insights:94998" rel="noopener">Quiddity Leaderboard for Hang Seng Index Mar 23: Healthcare Names Could Dominate</a>, we expected some healthcare names to be added but there were no index changes in March 2023. </li>
<li>Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for June. </li>
</ul>


The June 2023 index review results for the Hang Seng index can be expected after the close on 12th May 2023.
In Quiddity Leaderboard for Hang Seng Index Mar 23: Healthcare Names Could Dominate, we expected some healthcare names to be added but there were no index changes in March 2023. 
Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for June. 


Quiddity Leaderboard for Hang Seng Index Jun 23: Beigene Looks Interesting

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

Innovent Biologics Inc / Equity Bottom-Up

<ul><li>In FY22, Innovent recorded total revenue of RMB4.56bn, including RMB4.14bn in product sales (+3% YoY).</li><li>According to Eli Lilly, sintilimab sales in FY22 was US$293mn, -30% YoY, mainly impacted by NRDL related price cut, COVID-19 interruptions, and commercial team restructuring early 2022.</li><li>Under IFRS, the gross margin of product sales decreased by 9.9 ppt to 77.5% in FY22, due to the price cut of sintilimab, increased proportion of sales from lower-margin biosimilars, and lower margin booked by collaborated products.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

In FY22, Innovent recorded total revenue of RMB4.56bn, including RMB4.14bn in product sales (+3% YoY).According to Eli Lilly, sintilimab sales in FY22 was US$293mn, -30% YoY, mainly impacted by NRDL related price cut, COVID-19 interruptions, and commercial team restructuring early 2022.Under IFRS, the gross margin of product sales decreased by 9.9 ppt to 77.5% in FY22, due to the price cut of sintilimab, increased proportion of sales from lower-margin biosimilars, and lower margin booked by collaborated products.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Innovent Biologics (1801 HK) – Revenue growth to recover in 2023

China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>Innovent reported C2H22 top line 13% below our estimate and 4.5% below consensus. Operating/net losses missed our expectation slightly, thanks to better gross margin, OPEX cutting and FX gain; </li>
<li>With biosimilars and license-in drugs contributing ~60% of total revenues, Innovent is effectively becoming a channel company. </li>
<li>We acknowledge it has a comprehensive pipeline, but stress that it is only in quantity not in quality; We maintain our SELL rating and cut TP by HK$1 to HK$24.</li>
</ul>


Innovent reported C2H22 top line 13% below our estimate and 4.5% below consensus. Operating/net losses missed our expectation slightly, thanks to better gross margin, OPEX cutting and FX gain; 
With biosimilars and license-in drugs contributing ~60% of total revenues, Innovent is effectively becoming a channel company. 
We acknowledge it has a comprehensive pipeline, but stress that it is only in quantity not in quality; We maintain our SELL rating and cut TP by HK$1 to HK$24.


[Innovent Biologics (1801 HK) Target Price Change]: Biotech Cannot Shun Itself Away from R&D Risks

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Akeso achieved outstanding product sales last year, mainly due to off-label prescriptions.It means Akeso has "overdrawn" AK104's performance on other indications in advance. Sales could significantly slow down over time.</li>
<li>It is difficult to turn loss into profit by selling drugs alone. As the profits from selling drugs are far lower than R&amp;D expenditures, losses are the norm.</li>
<li>Akeso is overvalued, but if AK112 is successful in head-to-head trial with Keytruda, Akeso would be a player to compete on international stage. Its valuation would reach a new level.</li>
</ul>


Akeso achieved outstanding product sales last year, mainly due to off-label prescriptions.It means Akeso has "overdrawn" AK104's performance on other indications in advance. Sales could significantly slow down over time.
It is difficult to turn loss into profit by selling drugs alone. As the profits from selling drugs are far lower than R&amp;D expenditures, losses are the norm.
Akeso is overvalued, but if AK112 is successful in head-to-head trial with Keytruda, Akeso would be a player to compete on international stage. Its valuation would reach a new level.


Akeso Biopharma (9926.HK) - Behind the Outstanding Performance in 2022 and the Potential Challenges

<ul>
<li>There’s no need to imagine that biotech can cover each hospital department/each field comprehensively just like Innovent/BeiGene has done in PD-1 era, which is the dividend of a special era.</li>
<li>When PD-1 sales are gradually approaching the ceiling, the extra or fewer several hundred million yuan of PD-1 sold by Innovent wouldn’t have a fundamental impact on its market value.</li>
<li>IBI362 would be a product at billions level,which means revenue would be doubled. It takes time for Innovent to turn losses into profits,but sales forecast of RMB10 billion is achievable.</li>
</ul>


There’s no need to imagine that biotech can cover each hospital department/each field comprehensively just like Innovent/BeiGene has done in PD-1 era, which is the dividend of a special era.
When PD-1 sales are gradually approaching the ceiling, the extra or fewer several hundred million yuan of PD-1 sold by Innovent wouldn’t have a fundamental impact on its market value.
IBI362 would be a product at billions level,which means revenue would be doubled. It takes time for Innovent to turn losses into profits,but sales forecast of RMB10 billion is achievable.


Innovent Biologics (1801.HK) - Time to Enter the Next Stage After the Dividend of Special Era Ends

China

Innovent Biologics, Inc. operates as a biopharmaceutical company. The Company develops, manufactures, and distributes monoclonal antibody drug candidates for the treatment of oncology, ophthalmology, autoimmune, cardiovascular, and other diseases. Innovent Biologics serves customers in China.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Innovent Biologics Inc (1801 HK)

Quiddity Leaderboard for Hang Seng Index Jun 23: Beigene Looks Interesting

I have presented 24 Names from Healthcare, Consumer Discretionary, Properties, Utilities, and Conglomerates as high-likelihood names. Quiddity's...

Janaghan Jeyakumar, CFA

Innovent Biologics (1801 HK) – Revenue growth to recover in 2023

According to Eli Lilly, sintilimab sales in FY22 was US$293mn, -30% YoY, mainly impacted by NRDL related price cut, COVID-19 interruptions, and...

CMB International

[Innovent Biologics (1801 HK) Target Price Change]: Biotech Cannot Shun Itself Away from R&D Risks

We acknowledge it has a comprehensive pipeline, but stress that it is only in quantity not in quality; We maintain our SELL rating and cut TP by...

Blue Lotus Research Institute

Akeso Biopharma (9926.HK) - Behind the Outstanding Performance in 2022 and the Potential Challenges

Akeso's strong sales were driven by off-label use, and sales growth could significantly slow down over time. Due to high R&D expense, it's hard to...

Xinyao (Criss) Wang

Innovent Biologics (1801.HK) - Time to Enter the Next Stage After the Dividend of Special Era Ends

Innovent successfully caught the biggest/most precious PD-1 opportunity, but its sales are slowing down. We think sales forecast of RMB10 billion...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)