HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<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

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

<ul>
<li>Kelun-Biotech, a China-based integrated innovative biopharmaceutical company, plans to raise up to US$400m via a Hong Kong listing.</li>
<li>In our previous note, we examined the company's two core products, namely SKB264, a TROP2-ADC, and A166, a HER2-ADC.</li>
<li>In this note, we will provide a valuation for the company's key products.</li>
</ul>


Kelun-Biotech, a China-based integrated innovative biopharmaceutical company, plans to raise up to US$400m via a Hong Kong listing.
In our previous note, we examined the company's two core products, namely SKB264, a TROP2-ADC, and A166, a HER2-ADC.
In this note, we will provide a valuation for the company's key products.


Kelun-Biotech (科伦博泰) Pre-IPO: Thoughts on Valuation

Equity Bottom-Up

<ul>
<li>The 9th national VBP is drawing near. As all drugs under national/provincial VBP are scheduled to be executed before 2025/12/31, there should be new policies in 2026 and beyond.</li>
<li>The capabilities of Chinese pharmaceutical companies in ADC field have at least stepped onto a platform to compete with international giants, which is clearly more progressive than during PD-1 era.</li>
<li>We analyzed key points of Ovctek. Its investment logic has changed and centralized procurement will break investors' expectations for Ovctek’s future performance growth. Valuation may continue to be under pressure.</li>
</ul>


The 9th national VBP is drawing near. As all drugs under national/provincial VBP are scheduled to be executed before 2025/12/31, there should be new policies in 2026 and beyond.
The capabilities of Chinese pharmaceutical companies in ADC field have at least stepped onto a platform to compete with international giants, which is clearly more progressive than during PD-1 era.
We analyzed key points of Ovctek. Its investment logic has changed and centralized procurement will break investors' expectations for Ovctek’s future performance growth. Valuation may continue to be under pressure.


China Healthcare Weekly (May.26)- 9th National VBP, China's Strength in ADC Field, Ovctek, Eyebright

Sichuan Kelun Pharmaceutical / Equity Bottom-Up

<ul>
<li>The real foothold of a pharmaceutical company lies in  “Development” rather than “Research”. After the clinical development has reached the first-class level, what remains is the vision of the leaders.</li>
<li>For China biotech, we think they would go through four stages- Stage 1 (2015 – 2019), Stage 2 (2019 - present), Stage 3 (2026-2028) and Stage 4 (starting from 2030).</li>
<li>If without Merck’s deal, Kelun’s profit improvement was mainly due to effective cost control. If Kelun could maintain double-digit revenue growth, with net profit margin around 10%, it’s already good.</li>
</ul>


The real foothold of a pharmaceutical company lies in  “Development” rather than “Research”. After the clinical development has reached the first-class level, what remains is the vision of the leaders.
For China biotech, we think they would go through four stages- Stage 1 (2015 – 2019), Stage 2 (2019 - present), Stage 3 (2026-2028) and Stage 4 (starting from 2030).
If without Merck’s deal, Kelun’s profit improvement was mainly due to effective cost control. If Kelun could maintain double-digit revenue growth, with net profit margin around 10%, it’s already good.


China Healthcare Weekly (Apr.28) - Four Stages of China Biotech, The Real Foothold of R&D, Kelun

<ul>
<li>Kelun-Biotech did not get widespread attention until it reached three license and collaboration agreements with Merck, with upfront and milestone payments totaling up to US$11.8 billion.</li>
<li>The remaining products have limited investment value. After Kelun-Biotech out-licensed all of its valuable core assets in pipeline, it could mainly remain at the stage of biotech in the future.</li>
<li>The original core R&amp;D team members have left, which means the "root of Kelun-Biotech is broken”. The lack of sustainable follow-up R&amp;D capability would have negative impact on valuation performance.  </li>
</ul>


Kelun-Biotech did not get widespread attention until it reached three license and collaboration agreements with Merck, with upfront and milestone payments totaling up to US$11.8 billion.
The remaining products have limited investment value. After Kelun-Biotech out-licensed all of its valuable core assets in pipeline, it could mainly remain at the stage of biotech in the future.
The original core R&amp;D team members have left, which means the "root of Kelun-Biotech is broken”. The lack of sustainable follow-up R&amp;D capability would have negative impact on valuation performance.  


Pre-IPO Kelun Biotech - Debut Is the Peak, and Then It Wanes?

China

Sichuan Kelun Pharmaceutical Co., Ltd. manufactures pharmaceutical products. The Company's products include large infusion products, tablets, capsules, antibiotic injection, lyophilized powder for injection, and traditional Chinese medicine.

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Sichuan Kelun Pharmaceutical (002422 CH)

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

As once a leading CSO company in China, Edding’s core advantage still lies in sales capabilities. But changes in domestic policy/business...

Xinyao (Criss) Wang

Kelun-Biotech (科伦博泰) Pre-IPO: Thoughts on Valuation

Kelun Biotech is raising up to US$400m to list in Hong Kong. In this note we provide valuation for its core products, SKB264 and A166.

Ke Yan, CFA, FRM

China Healthcare Weekly (May.26)- 9th National VBP, China's Strength in ADC Field, Ovctek, Eyebright

The 9th national VBP is coming, but policy could change from 2026.We see positive factors in the performance of Chinese company in ADC field, who...

Xinyao (Criss) Wang

China Healthcare Weekly (Apr.28) - Four Stages of China Biotech, The Real Foothold of R&D, Kelun

The real foothold of pharmaceutical company is “Development” rather than “Research”. China biotech will go through four stages: 2015-2019, 2019...

Xinyao (Criss) Wang

Pre-IPO Kelun Biotech - Debut Is the Peak, and Then It Wanes?

After out-licensing all valuable core assets to Merck, Kelun-Biotech's remaining pipeline has limited value. As core R&D team have left, the lack...

Xinyao (Criss) Wang

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