HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<ul>
<li>There is a certain connection between Sunho and Genscript. So, Sunho has a typical style of "CXO switching to biotech" – That is to do whatever is popular.</li>
<li>For core products, IAP0971 and IAE0972 just completed phase I trials, still with high R&amp;D failure risks. IAH0968 is difficult to become a blockbuster variety due to strong competing products.</li>
<li>As investors’re already rational about investing in unprofitable Biotech. The companies without commercialized products and with uncertain outlook may not be favored by the market. Therefore, high valuation is unreasonable.</li>
</ul>


There is a certain connection between Sunho and Genscript. So, Sunho has a typical style of "CXO switching to biotech" – That is to do whatever is popular.
For core products, IAP0971 and IAE0972 just completed phase I trials, still with high R&amp;D failure risks. IAH0968 is difficult to become a blockbuster variety due to strong competing products.
As investors’re already rational about investing in unprofitable Biotech. The companies without commercialized products and with uncertain outlook may not be favored by the market. Therefore, high valuation is unreasonable.


Pre-IPO Sunho Biologics (SHB HK) - High Valuations Can Be Hard to Come By

Equity Bottom-Up

Jiangsu Hengrui Medicine / Equity Bottom-Up

<ul>
<li>Hengrui’s performance recovery in 23H1 (especially 23Q2) was due to the low base last year caused by pandemic/lockdown. Increasing innovative drugs revenue proportion also reduced the negative impact of VBP.</li>
<li>People think the turning point of Hengrui's performance has arrived, but we hold different opinions.Some big varieties haven’t entered VBP. It would take some time to achieve breakthrough in internationalization.</li>
<li>The negative impact of 23H2 anti-corruption hasn’t been reflected in interim report.Even if Hengrui’s performance growth could be back to 20-25% YoY in 2025/2026, over 60 PE/TTM is already expensive. </li>
</ul>


Hengrui’s performance recovery in 23H1 (especially 23Q2) was due to the low base last year caused by pandemic/lockdown. Increasing innovative drugs revenue proportion also reduced the negative impact of VBP.
People think the turning point of Hengrui's performance has arrived, but we hold different opinions.Some big varieties haven’t entered VBP. It would take some time to achieve breakthrough in internationalization.
The negative impact of 23H2 anti-corruption hasn’t been reflected in interim report.Even if Hengrui’s performance growth could be back to 20-25% YoY in 2025/2026, over 60 PE/TTM is already expensive. 


Jiangsu Hengrui Medicine (600276.CH) 23H1 - Has the Turning Point of Performance Really Arrived?

Thematic (Sector/Industry)

<ul>
<li>The anti-corruption campaign has significantly accelerated since the beginning of this year. After Central Commission for Discipline Inspection has been involved, the anti-corruption efforts in pharmaceutical/device sectors would be unprecedented.</li>
<li>The main targets are leaders of hospitals/governments. The impact of anti-corruption on companies is indirect. As long as senior management are not investigated/arrested, the impact on stock price isn’t significant.</li>
<li>However, investors not only need to consider the problem of sales growth slowing down in the context of anti-corruption, but also consider whether companies is engaging in financial fraud. </li>
</ul>


The anti-corruption campaign has significantly accelerated since the beginning of this year. After Central Commission for Discipline Inspection has been involved, the anti-corruption efforts in pharmaceutical/device sectors would be unprecedented.
The main targets are leaders of hospitals/governments. The impact of anti-corruption on companies is indirect. As long as senior management are not investigated/arrested, the impact on stock price isn’t significant.
However, investors not only need to consider the problem of sales growth slowing down in the context of anti-corruption, but also consider whether companies is engaging in financial fraud. 


Anti-Corruption in China Healthcare – the Impact and the Outlook

<ul>
<li>Vancocin/Ceclor/FPN are currently the “cash cow” for Edding, but they’re facing the challenges of generics, VBP and increasing competition. Their current market leading position may be lost in the future.</li>
<li>Edding seeks business transformation as its CSO model doesn’t work under domestic negative policies. But peak sales of three innovative drugs Vascepa/Mulpleta/EDP 125 may not reach the level of Vancocin/Ceclor.</li>
<li>Edding’s core advantage still lies in sales capabilities. Its R&amp;D capabilities have always been questioned. It’s unsure whether the market would give high valuation to a company without core competitiveness.</li>
</ul>


Vancocin/Ceclor/FPN are currently the “cash cow” for Edding, but they’re facing the challenges of generics, VBP and increasing competition. Their current market leading position may be lost in the future.
Edding seeks business transformation as its CSO model doesn’t work under domestic negative policies. But peak sales of three innovative drugs Vascepa/Mulpleta/EDP 125 may not reach the level of Vancocin/Ceclor.
Edding’s core advantage still lies in sales capabilities. Its R&amp;D capabilities have always been questioned. It’s unsure whether the market would give high valuation to a company without core competitiveness.


Pre-IPO Edding Group - CSO Model Is Hard to Sustain, but Business Transformation Faces Challenges

<ul>
<li>In the absence of significant decline in total pharmaceutical expenditure,the most simple logic tells us if some companies/varieties suffer loss in VBP, it inevitably means other companies benefit from it. </li>
<li>For innovative drugs, imported drugs have clear advantage over domestic drugs in both absolute and relative increments. But leading MNCs have been more impacted by VBP in recent years.</li>
<li>In this hundreds-of-billion-level payment transfer process, companies are actually competing to provide real clinical value, which is the key to fill the gap caused by VBP and restore companies’ growth.</li>
</ul>


In the absence of significant decline in total pharmaceutical expenditure,the most simple logic tells us if some companies/varieties suffer loss in VBP, it inevitably means other companies benefit from it. 
For innovative drugs, imported drugs have clear advantage over domestic drugs in both absolute and relative increments. But leading MNCs have been more impacted by VBP in recent years.
In this hundreds-of-billion-level payment transfer process, companies are actually competing to provide real clinical value, which is the key to fill the gap caused by VBP and restore companies’ growth.


China's VBP Policy for Pharmaceuticals – Misunderstandings, Real Impacts, and Outlook

China

Jiangsu Hengrui Medicine Co., Ltd. develops, manufactures, and markets a variety of medicines and medicine packing materials. The Company's products include anti-tumor medicines, pain-killers, anti-infection medicines, aluminum foil, and other related products.

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

Jiangsu Hengrui Medicine (600276 CH)

Pre-IPO Sunho Biologics (SHB HK) - High Valuations Can Be Hard to Come By

Sunho does not have any drugs at NDA/BLA stage or commercialized products. Its outlook is highly uncertain due to challenging clinical trials...

Xinyao (Criss) Wang