Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.</li>
<li>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.</li>
<li>Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-March 2023.</li>
</ul>


JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-March 2023.


Quiddity Leaderboard JPX-Nikkei 400: End-Mar 2023

Global Healthcare Analyst

Tina Banerjee

Thematic (Sector/Industry)

<ul>
<li>In 2022, JPY depreciated against USD to the lowest level in more than 30 years. This benefitted healthcare companies in Japan, which earn significant portion of revenues from the U.S.</li>
<li>This year, Yen has started reversing its course and began to strengthen. With benefit of favorable Forex gradually fading, investors need to be selective in picking healthcare bets in Japan.</li>
<li>We have discussed about five top picks from Japan healthcare sector. Domestic focused business, favorable industry tailwinds, and COVID recovery are the main investment thesis for the top picks.</li>
</ul>


In 2022, JPY depreciated against USD to the lowest level in more than 30 years. This benefitted healthcare companies in Japan, which earn significant portion of revenues from the U.S.
This year, Yen has started reversing its course and began to strengthen. With benefit of favorable Forex gradually fading, investors need to be selective in picking healthcare bets in Japan.
We have discussed about five top picks from Japan healthcare sector. Domestic focused business, favorable industry tailwinds, and COVID recovery are the main investment thesis for the top picks.


Japan Healthcare: Currency Benefit Seems to Be Fading; Focus Will Be on Underlying Business Strength

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sumitomo-pharma-co" target="_blank" data-smartkarma-citation="entities:1935:1" rel="noopener">Sumitomo Pharma (4506 JP)</a> completed the acquisition of Myovant Sciences. Myovant’s marketed drugs Orgovyx and Myfembree are on strong growth trajectory and have the potential to become blockbuster drugs.</li>
<li>Sumitomo’s flagship drug Latuda lost patent protection in Feb’23 and has already started seeing revenue erosion. For FY23, Sumitomo has guided for Latuda revenue of $1,565 million, down 14% YoY.</li>
<li>Post Latuda, newly added drugs will not be able to fully offset the effect of Latuda revenue loss. the company is not expected to launch in-house new drug before FY25.</li>
</ul>



Sumitomo Pharma (4506 JP) completed the acquisition of Myovant Sciences. Myovant’s marketed drugs Orgovyx and Myfembree are on strong growth trajectory and have the potential to become blockbuster drugs.
Sumitomo’s flagship drug Latuda lost patent protection in Feb’23 and has already started seeing revenue erosion. For FY23, Sumitomo has guided for Latuda revenue of $1,565 million, down 14% YoY.
Post Latuda, newly added drugs will not be able to fully offset the effect of Latuda revenue loss. the company is not expected to launch in-house new drug before FY25.


Sumitomo Pharma (4506 JP): Latuda To Drag Near-Term Performance; New Long-Term Growth Driver Added

<ul>
<li>
<a href="https://www.smartkarma.com/entities/jcr-pharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:20126:1" rel="noopener">Jcr Pharmaceuticals (4552 JP)</a>'s cash cow Growject, recombinant human growth hormone, is reporting decelerating revenue due to insurance price revision. The drug is also facing competition.  </li>
<li>JCR’s latest marketed product Izcargo is on a strong growth trajectory. However, the drug is not big enough to compensate for the revenue loss from Growject.  </li>
<li>The company’s bottom-line is under pressure due to elevated R&amp;D expenses. Cash position has also deteriorated. No near-term product launch is anticipated.  </li>
</ul>



Jcr Pharmaceuticals (4552 JP)'s cash cow Growject, recombinant human growth hormone, is reporting decelerating revenue due to insurance price revision. The drug is also facing competition.  
JCR’s latest marketed product Izcargo is on a strong growth trajectory. However, the drug is not big enough to compensate for the revenue loss from Growject.  
The company’s bottom-line is under pressure due to elevated R&amp;D expenses. Cash position has also deteriorated. No near-term product launch is anticipated.  


Jcr Pharmaceuticals (4552 JP): Mainstay Drug Revenue Declining; High R&D Cost Worsens Profitability

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sawai-group-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:35512:1" rel="noopener">Sawai Group Holdings (4887 JP)</a> is negatively impacted by drug reimbursement pricing in Japan. H1FY23 revenue, operating profit, net profit decreased 1%, 36% y/y, and 29%, y/y, respectively.</li>
<li>Generic pharmaceutical companies are more affected by the drug price revisions than their branded counterparts. In addition, APIs are impacted by increases in the cost of oil and exchange rates.</li>
<li>The sustainability of the U.S. business rebound is still uncertain. We want to watch Sawai from sidelines and wait for full-year FY23 results, FY24 guidance, and NHI pricing decision.</li>
</ul>



Sawai Group Holdings (4887 JP) is negatively impacted by drug reimbursement pricing in Japan. H1FY23 revenue, operating profit, net profit decreased 1%, 36% y/y, and 29%, y/y, respectively.
Generic pharmaceutical companies are more affected by the drug price revisions than their branded counterparts. In addition, APIs are impacted by increases in the cost of oil and exchange rates.
The sustainability of the U.S. business rebound is still uncertain. We want to watch Sawai from sidelines and wait for full-year FY23 results, FY24 guidance, and NHI pricing decision.


Sawai Group Holdings (4887 JP): Continued Price Erosion Is Weakening Earnings Prowess

Japan

Sumitomo Dainippon Pharma Co., Ltd. mainly manufactures and markets pharmaceuticals for human and veterinary use. The Company also produces and sells livestock feeds, food additives, and chemical products, as well as conducts clinical pathology tests for animals. Sumitomo Dainippon Pharma conducts businesses across worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Sumitomo Pharma (4506 JP)

Quiddity Leaderboard JPX-Nikkei 400: End-Mar 2023

I would be LONG MED conviction Potential ADDs and SHORT MED conviction Potential DELs because there is a large disparity between earnings...

Janaghan Jeyakumar, CFA

Japan Healthcare: Currency Benefit Seems to Be Fading; Focus Will Be on Underlying Business Strength

As Yen is recovering from its multi-year lows against Dollar this year, export-oriented healthcare companies are expected to significantly...

Tina Banerjee