HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Innovent Biologics Inc / Equity Bottom-Up

<ul>
<li>The third batch of TCM VBP expansion and successive price reduction will continue to be implemented. The price dominance of exclusive TCM patent medicines may collapse based on this VBP.</li>
<li>Since 2019, the ADC drug market has entered a period of rapid growth, the significance of which is that the good story of ADC CXO is able to continue.</li>
<li>Innovent divested important subsidiary at low price, which apparently "irritated" investors. Valuation of Innovent will move towards traditional enterprise such as CSPC. Time to offload Innovent as investment logic changes.</li>
</ul>


The third batch of TCM VBP expansion and successive price reduction will continue to be implemented. The price dominance of exclusive TCM patent medicines may collapse based on this VBP.
Since 2019, the ADC drug market has entered a period of rapid growth, the significance of which is that the good story of ADC CXO is able to continue.
Innovent divested important subsidiary at low price, which apparently "irritated" investors. Valuation of Innovent will move towards traditional enterprise such as CSPC. Time to offload Innovent as investment logic changes.


China Healthcare Weekly (Nov.3) - TCM VBP Update, ADC CXO's Logic Is Solid, "Ugly Move" Of Innovent

Global Healthcare Analyst

Tina Banerjee

Thematic (Sector/Industry)

<ul>
<li>Eisai Announced that global revenue of Leqembi in Q2FY25 was ¥10B, up 1.6x than Q1FY25. Takeda Pharma announced positive interim results from a Phase 3 study.</li>
<li>Shionogi’s COVID-19 drug was effective in reducing transmission of the disease. JCR Pharmaceuticals initiated first patient dosing in Japan in the Phase I clinical trial of JR-441.</li>
<li>Celltrion signed a contract with a U.S. GPO to list Zymfentra on private insurance formularies, which will expand the drug's coverage to 90%+ of the U.S. health insurance market.</li>
</ul>


Eisai Announced that global revenue of Leqembi in Q2FY25 was ¥10B, up 1.6x than Q1FY25. Takeda Pharma announced positive interim results from a Phase 3 study.
Shionogi’s COVID-19 drug was effective in reducing transmission of the disease. JCR Pharmaceuticals initiated first patient dosing in Japan in the Phase I clinical trial of JR-441.
Celltrion signed a contract with a U.S. GPO to list Zymfentra on private insurance formularies, which will expand the drug's coverage to 90%+ of the U.S. health insurance market.


APAC Healthcare Weekly (Nov 3)- Eisai, Takeda, Shionogi, Astellas Pharma, Celltrion, Wuxi AppTec

<ul>
<li>China healthcare can be mainly divided into the following segments: pharmaceuticals, medical devices, medical services, To B Supply Chain. Investment logic and business characteristics in these fields are completely different.</li>
<li>“High standardization+low dependence on doctors” help pharmaceuticals gain a more favorable commercial value than medical devices in distribution process. Profit margin/cross-regional expansion capability of medical services have always been questioned.</li>
<li>The business characteristics of “To B supply chain” indicate strong cyclical characteristics due to supply rigidity and demand fluctuations, which are easily affected by changes in demand trends.</li>
</ul>


China healthcare can be mainly divided into the following segments: pharmaceuticals, medical devices, medical services, To B Supply Chain. Investment logic and business characteristics in these fields are completely different.
“High standardization+low dependence on doctors” help pharmaceuticals gain a more favorable commercial value than medical devices in distribution process. Profit margin/cross-regional expansion capability of medical services have always been questioned.
The business characteristics of “To B supply chain” indicate strong cyclical characteristics due to supply rigidity and demand fluctuations, which are easily affected by changes in demand trends.


The “Game Rule” of China Healthcare - Pharmaceuticals Vs Medical Devices Vs Medical Services

Equity Capital Markets

Sichuan Biokin Pharmaceutical Co Ltd / Equity Capital Markets

<ul>
<li>Biokin's traditional chemical drug and TCM businesses would continue to shrink and their valuation contribution can be negligible. The collaboration agreement for BL-B01D1 with BMS changes the outlook of Biokin.</li>
<li>The clinical data of BL-B01D1 look good so far, but the R&amp;D failure risk of BL-B01D1 is not low. It is uncertain if BL-B01D1 would finally be druggable.</li>
<li>Biokin is overvalued and there is big bubble in valuation. If BL-B01D1 fails in R&amp;D or its clinical data fail to meet high expectation, Biokin’s market value will plummet.</li>
</ul>


Biokin's traditional chemical drug and TCM businesses would continue to shrink and their valuation contribution can be negligible. The collaboration agreement for BL-B01D1 with BMS changes the outlook of Biokin.
The clinical data of BL-B01D1 look good so far, but the R&amp;D failure risk of BL-B01D1 is not low. It is uncertain if BL-B01D1 would finally be druggable.
Biokin is overvalued and there is big bubble in valuation. If BL-B01D1 fails in R&amp;D or its clinical data fail to meet high expectation, Biokin’s market value will plummet.


Pre-IPO Sichuan Biokin Pharmaceutical - Would Investors Be Willing to Take a Gamble?

Sichuan Kelun Pharmaceutical / Equity Bottom-Up

<ul>
<li>The imagination brought to the market by Kelun’s traditional businesses (infusion business, antibiotics and bulk pharmaceutical chemicals, generic drugs) is not high. So, the only highlight is Kelun-bio’s ADC pipeline.</li>
<li>Considering that Kelun has lost pricing power due to VBP, and both Chuanning and Kelun bio have been spun off and listed independently, Kelun's valuation will not be too high.</li>
<li>Our forecast is net profit attributable to shareholders in 2024-2026 is in the range of RMB3-5 billion. Reasonable market value is RMB30-50 billion. Subsidiary Kelun Bio is a better bet.</li>
</ul>


The imagination brought to the market by Kelun’s traditional businesses (infusion business, antibiotics and bulk pharmaceutical chemicals, generic drugs) is not high. So, the only highlight is Kelun-bio’s ADC pipeline.
Considering that Kelun has lost pricing power due to VBP, and both Chuanning and Kelun bio have been spun off and listed independently, Kelun's valuation will not be too high.
Our forecast is net profit attributable to shareholders in 2024-2026 is in the range of RMB3-5 billion. Reasonable market value is RMB30-50 billion. Subsidiary Kelun Bio is a better bet.


Sichuan Kelun Pharmaceutical (002422.CH) - The Real Breakthrough Point in Valuation Is ADC Pipeline

China

Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. operates biotechnology businesses. The Company develops and provides biological drugs, chemical raw materials, antibody conjugating drugs, innovative drugs, and other products. Kelun Biotech also operates import and export businesses.

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Sichuan Kelun-Biotech Biopharm (6990 HK)

China Healthcare Weekly (Nov.3) - TCM VBP Update, ADC CXO's Logic Is Solid, "Ugly Move" Of Innovent

The 3rd batch of TCM VBP will hit the performance of exclusive TCM varieties.Due to the "ugly move" of Innovent's management, we advise investors...

Xinyao (Criss) Wang

APAC Healthcare Weekly (Nov 3)- Eisai, Takeda, Shionogi, Astellas Pharma, Celltrion, Wuxi AppTec

Large APAC healthcare companies are reporting mixed earnings. Demography will play a key role in ensuring how the overall domestic demand scenario...

Tina Banerjee

The “Game Rule” of China Healthcare - Pharmaceuticals Vs Medical Devices Vs Medical Services

China healthcare has distinct segments with different investment logic/characteristics.The pecking order is drugs>medical device>medical...

Xinyao (Criss) Wang

Pre-IPO Sichuan Biokin Pharmaceutical - Would Investors Be Willing to Take a Gamble?

Biokin's future hinges on collaboration with BMS for BL-B01D1, as traditional business shrink due to VBP/fierce competition.Overvaluation poses...

Xinyao (Criss) Wang

Sichuan Kelun Pharmaceutical (002422.CH) - The Real Breakthrough Point in Valuation Is ADC Pipeline

Kelun's traditional businesses lack imagination, but Kelun-bio's ADC pipeline is a highlight. Valuation may not be high due to lost pricing power...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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China Healthcare Weekly (Nov.3) - TCM VBP Update, ADC CXO's Logic Is Solid, "Ugly Move" Of Innovent

The 3rd batch of TCM VBP will hit the performance of exclusive TCM varieties.Due to the "ugly move" of Innovent's management, we advise investors...

Xinyao (Criss) Wang

APAC Healthcare Weekly (Nov 3)- Eisai, Takeda, Shionogi, Astellas Pharma, Celltrion, Wuxi AppTec

Large APAC healthcare companies are reporting mixed earnings. Demography will play a key role in ensuring how the overall domestic demand scenario...

Tina Banerjee

The “Game Rule” of China Healthcare - Pharmaceuticals Vs Medical Devices Vs Medical Services

​China healthcare has distinct segments with different investment logic/characteristics.The pecking order is drugs>medical device>medical...

Xinyao (Criss) Wang

Pre-IPO Sichuan Biokin Pharmaceutical - Would Investors Be Willing to Take a Gamble?

​Biokin's future hinges on collaboration with BMS for BL-B01D1, as traditional business shrink due to VBP/fierce competition.Overvaluation poses...

Xinyao (Criss) Wang

Sichuan Kelun Pharmaceutical (002422.CH) - The Real Breakthrough Point in Valuation Is ADC Pipeline

​Kelun's traditional businesses lack imagination, but Kelun-bio's ADC pipeline is a highlight. Valuation may not be high due to lost pricing power...

Xinyao (Criss) Wang

China healthcare has distinct segments with different investment logic/characteristics.The pecking order is drugs>medical device>medical...

Biokin's future hinges on collaboration with BMS for BL-B01D1, as traditional business shrink due to VBP/fierce competition.Overvaluation poses...

Kelun's traditional businesses lack imagination, but Kelun-bio's ADC pipeline is a highlight. Valuation may not be high due to lost pricing power...