Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

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<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

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<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

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<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

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Sumitomo has increased its all-cash offer by c. 19% to $27/share, a 50% premium, 4.6x EV/Fwd Revenue and corresponds to an implied equity value of $1.7 billion and EV of $2.9 billion.</li>
<li>The Board of Myovant recommends the offer, which should close in Q1 2023. The market has bought into the deal: USD turnover on 24 October has been $585 million.</li>
<li>As a result of the improved offer, I increase my TP to $27 (vs $22.84 formerly). Gross spread is 0.78% and the estimated annual return is 1.83%.</li>
</ul>


Sumitomo has increased its all-cash offer by c. 19% to $27/share, a 50% premium, 4.6x EV/Fwd Revenue and corresponds to an implied equity value of $1.7 billion and EV of $2.9 billion.
The Board of Myovant recommends the offer, which should close in Q1 2023. The market has bought into the deal: USD turnover on 24 October has been $585 million.
As a result of the improved offer, I increase my TP to $27 (vs $22.84 formerly). Gross spread is 0.78% and the estimated annual return is 1.83%.


Sumitomo/​Myovant: Agreed Minorities Takeout at $27

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<li>
<a href="https://www.smartkarma.com/entities/sumitomo-dainippon-pharma-co" target="_blank" data-smartkarma-citation="entities:1935:1" rel="noopener">Sumitomo Dainippon Pharma Co (4506 JP)</a> offered to acquire <a href="https://www.smartkarma.com/entities/myovant-sciences-ltd" target="_blank" data-smartkarma-citation="entities:36419:1" rel="noopener">Myovant Sciences (MYOV US)</a>, which was rejected due to low valuation. The company is unlikely to revise its offer for Myovant.</li>
<li>As Sumitomo’s in-house drug candidates are still in clinical stages, the company needs Myovant’s already marketed products to maintain its growth momentum post Latuda patent expiry.</li>
<li>Sumitomo is not expected to sell its existing 52% stake in Myovant. This will ensure that Myovant’s marketed products Orgovyx and Myfembree should continue to remain as Sumitomo’s growth drivers.  </li>
</ul>



Sumitomo Dainippon Pharma Co (4506 JP) offered to acquire Myovant Sciences (MYOV US), which was rejected due to low valuation. The company is unlikely to revise its offer for Myovant.
As Sumitomo’s in-house drug candidates are still in clinical stages, the company needs Myovant’s already marketed products to maintain its growth momentum post Latuda patent expiry.
Sumitomo is not expected to sell its existing 52% stake in Myovant. This will ensure that Myovant’s marketed products Orgovyx and Myfembree should continue to remain as Sumitomo’s growth drivers.  


Sumitomo Dainippon Pharma Co (4506 JP): Myovant Is Crucial for Post-Latuda Growth Momentum

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.

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Sumitomo Pharma (4506 JP)