Smartkarma Daily Briefs

• In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSCEI Index in June 2023.
• Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
• Here are our latest flow expectations based on the current prices.

• Aier’s performance slowed significantly in 2022, with revenue and net profit growth rates at their lowest in nearly a decade.Although performance rebounded in 23Q1, the growth rate lags behind peers.
• In front of increasing competition and difficulty of finding good acquisition targets, Aier’s poor operational capabilities and endogenous growth cannot support rapid growth. The beautiful story has shown obvious cracks.
• Future single-digit growth is inevitable. Aier is significantly overvalued due to problematic long logic. It should be noted that there would be four further holdings reductions for Aier this year.

• The government has started to encourage social capital to run hospitals. By entering the market that haven’t been fully covered by public hospitals, LDP has large development space theoretically.
• The current gross profit margin of LDP isn’t satisfactory. Together with continuous expansion of new hospitals with large investment, LDP could face either continuous loss or very low profit margin.
• China’s high degree of regulation depresses medical service price.The benefit chain of hospitals is complicated.In essence, an industry with low level of terminal payment is hard to generate high profits.

Incannex has released its Q323 cash flow report, providing key operational highlights. Clinical developments during the quarter included a positive interim review of its Phase II Psi-GAD trial (assessing psilocybin for generalized anxiety disorder (GAD)), initiation of the Phase II trial of IHL-675A (for treatment of rheumatoid arthritis (RA)), and continued progression of the BA/BE study for its lead asset IHL-42X (for obstructive sleep apnea). In a new development, Incannex announced the commercial launch of psychedelic-assisted psychotherapy clinics for treatment-resistant depression (TRD) and post-traumatic stress disorder (PTSD), with plans to scale across Australia. Though we have low visibility on the prospects of the clinics currently, if they materialize, they may support the company’s cash inflows in the medium term. With a cash balance of A$37.1m at end-March 2023 and at the current quarterly burn rate (A$4.3m), management has guided that operations are funded into CY25.

• MariMed is a multi-state operator (MSO) in the US cannabis industry. It has a national footprint spanning six states: Illinois, Massachusetts, Maryland, Delaware, Ohio, and Missouri.
• MariMed focuses on limited-license markets and strives to be vertically integrated wherever possible.
• MariMed has a long track record of strong financial performance.

Paradigm has shared its March 2023 quarterly update. In Q323, net cash outflow from operating activities was A$10.3m (A$28.1m for the first nine months of FY23). R&D costs amounted to A$9.0m, attributed to ongoing recruitment and analytical activities for the PARA_OA_008 Phase II clinical trial assessing injectable pentosan polysulfate (iPPS, or Zilosul) as a potentially disease-modifying treatment for knee osteoarthritis (kOA), site operations for Phase II studies in mucopolysaccharidosis (MPS I and MPS VI), and ongoing NDA-enabling non-clinical studies. This expenditure is comparable to the prior quarter (A$13.2m), and we anticipate an increase in burn rate in the near-term to support the company’s active pipeline. With a cash position of A$73.2m at end-Q323 and at the current quarterly burn rate, management estimates that operations remain funded into CY24.

Actinogen’s Q323 update reiterated the company’s focus on advancing its lead asset Xanamem. Patient recruitment in the Phase IIa XanaCIDD study in cognitive impairment (CI) associated with major depressive disorder (MDD) is ongoing, and the company plans to start the Phase IIb portion of the XanaMIA study in Q2 CY23 in the company’s lead indication, Alzheimer’s disease (AD). This study portion is designed to assess Xanamem in a population of patients with mild CI and/or mild AD, who at baseline will have been confirmed as biomarker-positive for progressive AD. We continue to see the results from the XanaCIDD study (expected in late CY23 or early CY24) as the next major clinical data milestone and a potential share price catalyst. We expect the company’s A$12.3m cash balance at 31 March to fund operations into Q4 CY23.

Having completed the required 38 implantations in late 2022, Pixium Vision’s key upcoming clinical milestone is the primary efficacy data, expected in or around year-end 2023, from the PRIMAvera European pivotal study assessing the safety and clinical benefits of the wireless Prima System in patients with geographic atrophy due to age-related macular degeneration (GA-AMD). The company’s FY22 results showed a milder operating loss than expected, coming in at €11.9m, below our €12.5m estimate. Pixium has since taken further steps to curb its cash burn rate, and it now expects its funds on hand (€4.7m gross cash as of 31 March) to last until approximately the end of July, versus its prior guidance of June 2023. It is working actively to raise additional funds and has hired two investment banks to reach potential investors worldwide. We have rolled forward our estimates and given that we expect the company’s focus in 2023 and 2024 will be on preparing the Prima System for EU market approval and launch (which we continue to model in H125), we have pushed back our US commercialisation forecast by one year, to H227. We now obtain a pipeline rNPV valuation of €140.1m (vs €146.3m previously).

AFT Pharmaceuticals has announced that the US FDA has allocated a Prescription Drug User Fee Act (PDUFA) date for Maxigesic IV, an intravenous form of its flagship pain relief medicine. The PDUFA date is expected to be the last step in the FDA review process and has been set for 17 October 2023. It follows submission of additional requested data in April 2023 in response to the complete response letter (CRL) received from the FDA in July 2022 (related to queries about certain extractable and leachable compounds present in Maxigesic IV’s packaging) following the 2021 New Drug Application. The IV formulation is registered in 43 countries and has been launched in more than 19 (including the key markets of Germany, France and Italy), but the US is expected to be a key high-margin market. We note that Maxigesic IV was out-licensed to Hikma Pharmaceuticals in the US in 2021 for up to NZ$18.8m in proceeds.

• Cigna Corporation delivered a mixed performance in the last quarter with below-par revenues but an earnings beat.
• Through a mix of dividends and share repurchases, Cigna returned $9 billion to shareholders.
• Furthermore, in Evernorth Care Services, Cigna enhanced and expanded its care management and care delivery skills portfolio.