HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<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?

Equity Bottom-Up

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

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

<ul>
<li>Due to huge negative policy impact, the prospects of Kelun’s traditional businesses would be lackluster. However, the deal with MSD has completely changed Kelun's investment logic. </li>
<li>For the two ADC drugs in the deal, there is a great chance for SKB264 to be eventually druggable. Kelun’s ADC technology is also keeping up with the times. </li>
<li>We deep dive the valuation of Kelun. The market's perception of Kelun is still at the level of traditional businesses. The potential of its ADC pipeline hasn’t been priced in.</li>
</ul>


Due to huge negative policy impact, the prospects of Kelun’s traditional businesses would be lackluster. However, the deal with MSD has completely changed Kelun's investment logic. 
For the two ADC drugs in the deal, there is a great chance for SKB264 to be eventually druggable. Kelun’s ADC technology is also keeping up with the times. 
We deep dive the valuation of Kelun. The market's perception of Kelun is still at the level of traditional businesses. The potential of its ADC pipeline hasn’t been priced in.


Sichuan Kelun Pharmaceutical (002422.CH) - The Deal with Merck Brightens the Outlook; A Dark Horse?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hutchison-china-meditech-ltd-7c2c4b58-ca71-4ac4-befb-345e8d0f10ca" target="_blank" data-smartkarma-citation="entities:27342:1" rel="noopener">Hutchison China MediTech Ltd (HCM US)</a> (Hutchmed) didn’t perform well. Its cash holdings could last about two and a half years considering the cash burn rate.</li>
<li>Hutchmed’s three major commercialized products would all face different challenges. Feedbacks from FDA/MAA cast a shadow on the Company's internationalization prospects. </li>
<li>According to the current speed of pharmaceutical innovation, Hutchmed’s R&amp;D efficiency/productivity is not satisfactory. The current pipeline does not have core competitiveness. Bearish on outlook.</li>
</ul>



Hutchison China MediTech Ltd (HCM US) (Hutchmed) didn’t perform well. Its cash holdings could last about two and a half years considering the cash burn rate.
Hutchmed’s three major commercialized products would all face different challenges. Feedbacks from FDA/MAA cast a shadow on the Company's internationalization prospects. 
According to the current speed of pharmaceutical innovation, Hutchmed’s R&amp;D efficiency/productivity is not satisfactory. The current pipeline does not have core competitiveness. Bearish on outlook.


Hutchison China MediTech (HCM.US/13.HK) - The Pain Points Become More Pronounced

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 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

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

Hengrui's low point was in 2022.Performance will gradually recover due to the ease of negative policy impact.But share price's hard to generate...

Xinyao (Criss) Wang

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

After Merck gives up acquiring Seagen and fully embraces Kelun for the 3rd time, Kelun's outlook further brightened. Compared with Akeso/Summit...

Xinyao (Criss) Wang