Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Shenzhen Mindray Bio-Medical Electronics / Event-Driven

<ul>
<li>Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.</li>
<li>Overall, net inflow over the past week was ~US$0.83bn, split between Shanghai (+US$1.16bn) and Shenzhen (-US$0.32bn).</li>
<li>The largest inflows were into <a href="https://www.smartkarma.com/entities/kweichow-moutai-co-ltd-a" target="_blank" data-smartkarma-citation="entities:1553:1" rel="noopener">Kweichow Moutai (600519 CH)</a> and <a href="https://www.smartkarma.com/entities/shenzhen-mindray-bio-medic-a" target="_blank" data-smartkarma-citation="entities:28017:1" rel="noopener">Shenzhen Mindray Bio-Medical (300760 CH)</a>. The largest outflows were in <a href="https://www.smartkarma.com/entities/yunnan-chuangxin-new-material" target="_blank" data-smartkarma-citation="entities:27135:1" rel="noopener">Yunnan Energy New Material (002812 CH)</a> and <a href="https://www.smartkarma.com/entities/byd-co-ltd" target="_blank" data-smartkarma-citation="entities:26048:1" rel="noopener">BYD (002594 CH)</a>.</li>
</ul>


Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net inflow over the past week was ~US$0.83bn, split between Shanghai (+US$1.16bn) and Shenzhen (-US$0.32bn).
The largest inflows were into Kweichow Moutai (600519 CH) and Shenzhen Mindray Bio-Medical (300760 CH). The largest outflows were in Yunnan Energy New Material (002812 CH) and BYD (002594 CH).


Shanghai/​​​​​​​​​​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (25 November 2022)

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>The government issued a central infrastructure investment budget of RMB26.52 billion in healthcare sector for 2022. Related leading domestic manufacturers would maintain relatively stable growth in the next 2-3 years.</li>
<li>Behind the wave of import substitution of endoscopes, the demand for anesthetic drugs would also increase, which are not affected by VBP. We think this market deserves investors’ attention.</li>
<li>Considering the large number of insomniacs, the resulting demand for treatment makes the insomniacs market show a good growth prospect.</li>
</ul>


The government issued a central infrastructure investment budget of RMB26.52 billion in healthcare sector for 2022. Related leading domestic manufacturers would maintain relatively stable growth in the next 2-3 years.
Behind the wave of import substitution of endoscopes, the demand for anesthetic drugs would also increase, which are not affected by VBP. We think this market deserves investors’ attention.
Considering the large number of insomniacs, the resulting demand for treatment makes the insomniacs market show a good growth prospect.


China Healthcare Weekly (Nov.18) - Central Investment Budget, Anesthetic Drugs, Insomniacs Demand

Equity Bottom-Up

<ul>
<li>If excluding the contribution from COVID-19 related products, Pfizer’s performance growth could have been quite pessimistic. In terms of BD, Pfizer is “a big buyer” but the return is questionable. </li>
<li>We haven't seen any blockbuster new products in Pfizer’s pipeline that can make up for the losses caused by VBP/NRDL negotiation in China. Price reduction seems the only way out.</li>
<li>We cannot rule out that Pfizer may lose the China market in the event of further deterioration of Sino-US relations. This is a problem investors need to consider in advance.</li>
</ul>


If excluding the contribution from COVID-19 related products, Pfizer’s performance growth could have been quite pessimistic. In terms of BD, Pfizer is “a big buyer” but the return is questionable. 
We haven't seen any blockbuster new products in Pfizer’s pipeline that can make up for the losses caused by VBP/NRDL negotiation in China. Price reduction seems the only way out.
We cannot rule out that Pfizer may lose the China market in the event of further deterioration of Sino-US relations. This is a problem investors need to consider in advance.


Pfizer Inc (PFE.US) - What if Pfizer Loses the China Market in the Future?

<ul>
<li>After the centralized procurement in Hebei Province included OK lens, products with high gross margin and low market penetration rate seem to be the new trend of centralized procurement.</li>
<li>Although the current valuation of healthcare industry is relatively low compared with historical levels, that comparison is of little significance due to the fast pace of change.</li>
<li>In terms of when domestic biotech companies could achieve break-even, there is some logic actually. Investors can estimate the time for biotechs to achieve profitability.</li>
</ul>


After the centralized procurement in Hebei Province included OK lens, products with high gross margin and low market penetration rate seem to be the new trend of centralized procurement.
Although the current valuation of healthcare industry is relatively low compared with historical levels, that comparison is of little significance due to the fast pace of change.
In terms of when domestic biotech companies could achieve break-even, there is some logic actually. Investors can estimate the time for biotechs to achieve profitability.


China Healthcare Weekly (Oct28)-OK Lens VBP, Time Required for Biotech to Make Profit, World Changes

Sino Biopharmaceutical / Equity Bottom-Up

<ul>
<li>Due to VBP/NRDL negotiation, 2022 is the low point of Hengrui's performance.The question is to what extent would Hengrui recover?Its development model isn’t an advantage since the game rule changes. </li>
<li>Unlike Hengrui, Sino Biopharm hasn’t given up on generics business,which becomes a " performance buffer". Its BD capability/vision is commendable, which would help the company find the next "golden egg".</li>
<li>The stock price trend of the two companies could diverge. Sino Biopharm is more likely to outperform Hengrui in the medium to long term. Long Sino Biopharm, and short Hengrui.</li>
</ul>


Due to VBP/NRDL negotiation, 2022 is the low point of Hengrui's performance.The question is to what extent would Hengrui recover?Its development model isn’t an advantage since the game rule changes. 
Unlike Hengrui, Sino Biopharm hasn’t given up on generics business,which becomes a " performance buffer". Its BD capability/vision is commendable, which would help the company find the next "golden egg".
The stock price trend of the two companies could diverge. Sino Biopharm is more likely to outperform Hengrui in the medium to long term. Long Sino Biopharm, and short Hengrui.


China Healthcare - A Pair Trade: Long Sino Biopharm (1177.HK), Short Hengrui Medicine (600276.CH)

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)

Shanghai/Shenzhen Northbound Connect: Weekly Moves (25 November 2022)

Overall, net inflow over the past week in the HK -Shanghai-Shenzhen Northbound Connect facilities was ~US$0.83bn, split between Shanghai...

David Blennerhassett

China Healthcare Weekly (Nov.18) - Central Investment Budget, Anesthetic Drugs, Insomniacs Demand

New central infrastructure investment budget means stable growth of medical devices; Anesthetic drugs are not affected by VBP, which deserves...

Xinyao (Criss) Wang

Pfizer Inc (PFE.US) - What if Pfizer Loses the China Market in the Future?

Pfizer’s China business faces challenges due to VBP/NRDL negotiation and potential further deterioration of Sino-US relations. Together with...

Xinyao (Criss) Wang

China Healthcare Weekly (Oct28)-OK Lens VBP, Time Required for Biotech to Make Profit, World Changes

OK lens VBP means the goal of VBP is changed to ensure people's livelihood; It’s of little significance to compare with history since the world...

Xinyao (Criss) Wang

China Healthcare - A Pair Trade: Long Sino Biopharm (1177.HK), Short Hengrui Medicine (600276.CH)

Old-fashioned big pharma is a safe place to put assets.Stock price of Sino Biopharm/Hengrui could diverge in the future due to different strategy...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Shanghai/​​​​​​​​​​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (25 November 2022)

Overall, net inflow over the past week in the HK -Shanghai-Shenzhen Northbound Connect facilities was ~US$0.83bn, split between Shanghai...

David Blennerhassett

China Healthcare Weekly (Nov.18) - Central Investment Budget, Anesthetic Drugs, Insomniacs Demand

New central infrastructure investment budget means stable growth of medical devices; Anesthetic drugs are not affected by VBP, which deserves...

Xinyao (Criss) Wang

Pfizer Inc (PFE.US) - What if Pfizer Loses the China Market in the Future?

Pfizer’s China business faces challenges due to VBP/NRDL negotiation and potential further deterioration of Sino-US relations. Together with...

Xinyao (Criss) Wang

China Healthcare Weekly (Oct28)-OK Lens VBP, Time Required for Biotech to Make Profit, World Changes

OK lens VBP means the goal of VBP is changed to ensure people's livelihood; It’s of little significance to compare with history since the world...

Xinyao (Criss) Wang

China Healthcare - A Pair Trade: Long Sino Biopharm (1177.HK), Short Hengrui Medicine (600276.CH)

Old-fashioned big pharma is a safe place to put assets.Stock price of Sino Biopharm/Hengrui could diverge in the future due to different strategy...

Xinyao (Criss) Wang

Shanghai/Shenzhen Northbound Connect: Weekly Moves (25 November 2022)