China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>ZaiLab and NovoCure (NVCR US, NR) surged on positive readout of Optune’s Phase III on Non-Small-Cell-Lung Cancer (NSCLC), a major indication win after the smaller ones in Glioblastoma and Mesothelioma.</li>
<li>We, however, caution that the readout is largely expected and Optune faces uncertainty in commercialization both globally and in China;</li>
<li>We raise TP to US$35 to reflect possible readouts in other cancer types</li>
</ul>


ZaiLab and NovoCure (NVCR US, NR) surged on positive readout of Optune’s Phase III on Non-Small-Cell-Lung Cancer (NSCLC), a major indication win after the smaller ones in Glioblastoma and Mesothelioma.
We, however, caution that the readout is largely expected and Optune faces uncertainty in commercialization both globally and in China;
We raise TP to US$35 to reflect possible readouts in other cancer types


Zai LAB (ZLAB.US/9688.HK)：TTF Is Not a Done Deal, Both China and Globally

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>China further optimized COVID policy. The main reason to ease the policy at this time could be to release risks in advance so as to recover as soon as possible.</li>
<li>The growth curve of biotech is not linear. We analyzed three situations to help investors better understand “the new story” of Biotech at different stages.</li>
<li>We reviewed the performance of Company listed under HKEX Chapter 18A since this year. We found some interesting points worth the attention.</li>
</ul>


China further optimized COVID policy. The main reason to ease the policy at this time could be to release risks in advance so as to recover as soon as possible.
The growth curve of biotech is not linear. We analyzed three situations to help investors better understand “the new story” of Biotech at different stages.
We reviewed the performance of Company listed under HKEX Chapter 18A since this year. We found some interesting points worth the attention.


China Healthcare Weekly (Dec.9) - COVID Policy Update, Biotech Growth Curve, HKEX Chapter 18A Review

<ul>
<li>Last week, centralized procurement results of orthopedic spinal consumables were released, with an average price reduction of 84%. We analyzed the impact on related companies. </li>
<li>If medical insurance reimbursement standards of Hunan Provincial are followed, there will be few real clinical needs for surgical robots for many hospitals, mainly to meet scientific research needs instead.</li>
<li>Under the appearance of the popularity of CGT CDMO, there are some hidden worries. Investors are recommended to be rational due to the overcapacity issue in the future.</li>
</ul>


Last week, centralized procurement results of orthopedic spinal consumables were released, with an average price reduction of 84%. We analyzed the impact on related companies. 
If medical insurance reimbursement standards of Hunan Provincial are followed, there will be few real clinical needs for surgical robots for many hospitals, mainly to meet scientific research needs instead.
Under the appearance of the popularity of CGT CDMO, there are some hidden worries. Investors are recommended to be rational due to the overcapacity issue in the future.


China Healthcare Weekly (Sep.30) - Orthopedics VBP, CGT CDMO, Surgical Robots, Bottom of HKEX

<ul>
<li>NHSA will set aside a certain market to provide space for innovative medical devices/consumables to explore the market in addition to centralized procurement. However, we tend to be cautiously optimistic.</li>
<li>We think it is important to clarify for investors what constitutes "commercialization success" – That is to generate revenue at scale and stable profitability through the sale of drugs.</li>
<li>All the products that covered by VBP begin to lose logic. Don't be fooled by those positive interpretations. We are bearish on the sectors with downward logic in long cycle. </li>
</ul>


NHSA will set aside a certain market to provide space for innovative medical devices/consumables to explore the market in addition to centralized procurement. However, we tend to be cautiously optimistic.
We think it is important to clarify for investors what constitutes "commercialization success" – That is to generate revenue at scale and stable profitability through the sale of drugs.
All the products that covered by VBP begin to lose logic. Don't be fooled by those positive interpretations. We are bearish on the sectors with downward logic in long cycle. 


China Healthcare Weekly(Sep9)-Innovative Device Policy,Commercial Success Definition,Don't Be Fooled

<ul>
<li>The Statement of Protocol signed between PCAOB and CSRC/MOF is good for China concept stocks in the short term, but it doesn’t mean the risk of delisting is completely eliminated.</li>
<li>From the statements of the two sides, there are still some differences. What the US side emphasizes is "full authority", but China requires "principle of reciprocity" of regulatory cooperation.</li>
<li>It’s difficult to reach final agreement.The trend of China concept stocks delisting from US and relisting on HKEX/A-share would not change. Investors are advised to prepare for Black Swan event.</li>
</ul>


The Statement of Protocol signed between PCAOB and CSRC/MOF is good for China concept stocks in the short term, but it doesn’t mean the risk of delisting is completely eliminated.
From the statements of the two sides, there are still some differences. What the US side emphasizes is "full authority", but China requires "principle of reciprocity" of regulatory cooperation.
It’s difficult to reach final agreement.The trend of China concept stocks delisting from US and relisting on HKEX/A-share would not change. Investors are advised to prepare for Black Swan event.


PCAOB and CSRC‘s Agreement on Audit Terms Could Fail - The Real Test of China ADRs Lies Ahead

China

Zai Lab Limited operates as a bio-pharmaceutical company. The Company researches and develops therapeutic technology for antibody-based oncology, autoimmune, and infectious diseases treatments. Zai Lab also manufactures drugs in the form of capsules, injections, and liquids. Zai Lab serves patients worldwide.

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Zai Lab Ltd (ZLAB US)

Zai LAB (ZLAB.US/9688.HK)：TTF Is Not a Done Deal, Both China and Globally

ZaiLab and NovoCure surged on positive readout of Optune’s Phase III on Non-Small-Cell-Lung Cancer (NSCLC). We, however, caution that Optune faces...

Blue Lotus Research Institute

China Healthcare Weekly (Dec.9) - COVID Policy Update, Biotech Growth Curve, HKEX Chapter 18A Review

China further optimized COVID policy, so as to release risks in advance and recover ASAP. The growth curve of biotech is not linear. We reviewed...

Xinyao (Criss) Wang

China Healthcare Weekly (Sep.30) - Orthopedics VBP, CGT CDMO, Surgical Robots, Bottom of HKEX

Orthopedics VBP result was released,we analyzed the impact on companies; There will be few real clinical needs for surgical robots; There're hidden...

Xinyao (Criss) Wang

China Healthcare Weekly(Sep9)-Innovative Device Policy,Commercial Success Definition,Don't Be Fooled

We recommend cautiously optimistic about new innovative device policy. It's important to clarify what constitutes "commercialization success". All...

Xinyao (Criss) Wang

PCAOB and CSRC‘s Agreement on Audit Terms Could Fail - The Real Test of China ADRs Lies Ahead

China ADRs are only a part of Sino-US game, which shouldn't be looked at alone. It’s hard to reach final agreement. The trend of relisting on HKEX...

Xinyao (Criss) Wang

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