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 for holding position as of January 13th.</li>
<li>We estimate the weekly inflows to be US$6,510.6 million, led by financials, consumer staples, information technology sectors, and offset by energy, real estate.</li>
<li>We highlight flows for CATL, Ping An Insurance, Moutai, Wuliangye, Longi Green Energy Technology, Jiangsu Hengrui Medicine.</li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of January 13th.
We estimate the weekly inflows to be US$6,510.6 million, led by financials, consumer staples, information technology sectors, and offset by energy, real estate.
We highlight flows for CATL, Ping An Insurance, Moutai, Wuliangye, Longi Green Energy Technology, Jiangsu Hengrui Medicine.


Northbound Flows (Jan 13th): 1Y High Weekly Inflows

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Shanghai Junshi Biosciences  / Equity Bottom-Up

<ul>
<li>Junshi once generated sales and profits in scale, but lost money again. Its story suddenly changed from cancer drugs to COVID-19. We have lost sight of its development direction.</li>
<li>Junshi's commercialization history has lost its reference value for confirming the outlook. The calculation of peak sales doesn’t make much sense, because they cannot help Junshi turn losses into profits.</li>
<li>The current market value still has too much “bubble”, and COVID-19 drug is a major “interference” to the valuation. We analyzed our thoughts on future valuation by excluding COVID-19 projects.  </li>
</ul>


Junshi once generated sales and profits in scale, but lost money again. Its story suddenly changed from cancer drugs to COVID-19. We have lost sight of its development direction.
Junshi's commercialization history has lost its reference value for confirming the outlook. The calculation of peak sales doesn’t make much sense, because they cannot help Junshi turn losses into profits.
The current market value still has too much “bubble”, and COVID-19 drug is a major “interference” to the valuation. We analyzed our thoughts on future valuation by excluding COVID-19 projects.  


Shanghai Junshi Bioscience (1877.HK/688180.CH)- Junshi Has Changed Its Story from Tumor to COVID-19?

Jiangsu Hengrui Medicine / Equity Bottom-Up

<ul>
<li>There could be some catalyst for Hengrui, such as the NRDL negotiation in early January 2023, the slowing down of the negative impact of VBP and the increasing outpatient volume. </li>
<li>Hengrui's performance low point was in 2022, and it would gradually recover after that. If investors want to invest in Hengrui, 2023 is a good time to take action.</li>
<li>However, Hengrui could be hard to return to its peak. Without the next PD-1 level blockbuster product, it would be difficult for Hengrui to achieve complete performance reversal. </li>
</ul>


There could be some catalyst for Hengrui, such as the NRDL negotiation in early January 2023, the slowing down of the negative impact of VBP and the increasing outpatient volume. 
Hengrui's performance low point was in 2022, and it would gradually recover after that. If investors want to invest in Hengrui, 2023 is a good time to take action.
However, Hengrui could be hard to return to its peak. Without the next PD-1 level blockbuster product, it would be difficult for Hengrui to achieve complete performance reversal. 


Jiangsu Hengrui Medicine (600276.CH) - About The Performance Recovery and the Concerns Behind

Thematic (Sector/Industry)

<ul>
<li>This year's NRDL negotiations could be a turnaround. If the final result really shows a moderate price decline, it will be “a landmark event” for the innovative drug industry.</li>
<li>Starting from 23Q2, with the peak of respiratory disease/COVID-19 outbreak past, the demand for related TCM would weaken. Then, the pullback of TCM would really begin.</li>
<li>Even if biotech initially tells the story of becoming a biopharma to obtain financing, it will not be realized in the end.</li>
</ul>


This year's NRDL negotiations could be a turnaround. If the final result really shows a moderate price decline, it will be “a landmark event” for the innovative drug industry.
Starting from 23Q2, with the peak of respiratory disease/COVID-19 outbreak past, the demand for related TCM would weaken. Then, the pullback of TCM would really begin.
Even if biotech initially tells the story of becoming a biopharma to obtain financing, it will not be realized in the end.


China Healthcare Weekly (Jan.1) - NRDL Negotiation Turnaround, Pullback of TCM, Biotech Sales System

Sichuan Kelun Pharmaceutical / Equity Bottom-Up

<ul>
<li>Merck entered into an agreement with Kelun to develop seven new ADC candidates. Merck will pay an upfront payment of US$175 million, with milestone payments worth up to US$9.3 billion.</li>
<li>It's a strong signal that Merck gives up acquiring Seagen and fully embraces Kelun. Merck may not just simply recognize Kelun’s ADC candidates but is optimistic about its ADC platform/technology.</li>
<li>Chinese pharmaceutical enterprises are becoming more pragmatic and peaceful in licensing cooperation, which has more trend significance for the development of industry than the value of a product or an enterprise. </li>
</ul>


Merck entered into an agreement with Kelun to develop seven new ADC candidates. Merck will pay an upfront payment of US$175 million, with milestone payments worth up to US$9.3 billion.
It's a strong signal that Merck gives up acquiring Seagen and fully embraces Kelun. Merck may not just simply recognize Kelun’s ADC candidates but is optimistic about its ADC platform/technology.
Chinese pharmaceutical enterprises are becoming more pragmatic and peaceful in licensing cooperation, which has more trend significance for the development of industry than the value of a product or an enterprise. 


Merck Puts Eye-Popping $9.3B in ADC Deal with Kelun - The "New Story" Is About to Begin

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.

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Jiangsu Hengrui Medicine (600276 CH)

Northbound Flows (Jan 13th): 1Y High Weekly Inflows

We analyzed northbound Shanghai/Shenzhen connect flows in the past week and highlight flows for CATL, Ping An Insurance, Moutai, Wuliangye, Longi...

Ke Yan, CFA, FRM

Shanghai Junshi Bioscience (1877.HK/688180.CH)- Junshi Has Changed Its Story from Tumor to COVID-19?

After Junshi's story changed from tumor to COVID-19, we've lost sight of its future direction.The pipeline can't help Junshi turn loss into...

Xinyao (Criss) Wang