Healthcare Sector

In this briefing:

1. Zai Lab Placement: Positive Development Bodes Well for the Deal
2. BBI Life: Privatisation Offer For DNA Synthesizer
3. Zai Lab Offering: Remains an Attractive Opportunity

1. Zai Lab Placement: Positive Development Bodes Well for the Deal

Zai Lab announced a USD 300 million placement after market close. This is the third deal since its IPO in 2017.

In this insight, we will discuss the progress that the company has made since the last placement in May 2019. We think the company has been building a respected track record which should bode well for the deal performance.

2. BBI Life: Privatisation Offer For DNA Synthesizer

Following a brief trading halt, BBI Life Sciences (1035 HK), the biggest supplier of DNA synthesis products in the PRC, announced a privatisation Offer by way of a Scheme from its major shareholder, the Wang Family.

The Offer of $3.50/share is a 16.28% premium to last close, but a 42.45% premium to the average 30-day close prior to the announcement. The Offer price is final.

The Family has received irrevocables totaling 13.85%  of share out in support of the Offer. This reduces the Independent Shareholders voting at the Court Meeting to 29.9% of shares out, therefore the blocking stake for the Scheme resolution vote is 2.99%. No single shareholder has such a blocking stake.

BBI is Cayman incorporated therefore the headcount test applies.

This looks a done deal. Currently trading at a gross/annualised spread of 5.4%/21.3%

3. Zai Lab Offering: Remains an Attractive Opportunity

Zai Lab Ltd (ZLAB US) unveiled plans to raise around $313 million (based on the closing price of $52.14 per ADS) through a primary offering of 5.5 million ADS and a secondary offering of 0.5 million ADS. 

In this briefing:

1. Peijia Medical (沛嘉医疗) Pre-IPO: Reminiscence of Venus Medtech?
2. Glenmark Pharmaceuticals – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics
3. Shimadzu (7701 JP): New Guidance at Risk, Valuations Not Compelling
4. Ascletis Pharma: Reiterate Sell, 29% Downside
5. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)

1. Peijia Medical (沛嘉医疗) Pre-IPO: Reminiscence of Venus Medtech?

Peijia Medical is a leading domestic player in the transcatheter valve therapeutic medical device market and the neurointerventional procedural medical devices.

The company’s core TAVR product TaurusOne will be commercialized soon in 4Q2020. Having said that, the company is three years behind its domestic competitors, including Venus MedTech (2500 HK), Suzhou Jiecheng and Microport Scientific (853 HK). TAVR market is characterized by under-penetration and rapid growth.

The company is also a leading domestic player in the neurointerventional product. We believe its newly launched guide catheter complements its existing guide wire and micro catheter well. The company will benefit from the market growth as well as replacement of international products by its domestic competitors.

The company has a strong founder team with relevant experience in the interventional device market. The CEO and COO have worked in MicroPort Scientific which is a leading interventional medical device company in China. It also attracted a decent line-up of pre-IPO investors. 

2. Glenmark Pharmaceuticals – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics

Glenmark Pharmaceuticals’ Q3/19-20? results were again disappointing. Growth was more sluggish than expected, especially with the sharp slowdown in the US only partly offset by stronger-than-expected sales in India. Furthermore, not all was positive in India, where the consumer care business decelerated significantly, perhaps due to the weak economy. We note that Glenmark has consistently missed guidance in key areas since its USD ’21 bond issuance: revenue growth, profitability and deleveraging, despite a two-decade-long record of growth. Positively, the financial risk profile remains stable, with stable earnings and a small decrease in debt. Liquidity is weak, as the company will face large debt maturities in the next 1.5 years. This would improve if the company is successful in issuing new USD 200 mn Notes to refinance the existing USD 200 mn 2021 Notes (maturing August 2021).

3. Shimadzu (7701 JP): New Guidance at Risk, Valuations Not Compelling

Shimadzu has lowered sales and profit guidance for FY Mar-20, but perhaps not by enough considering 3Q results and the impact of the Coronavirus. In the three months to December, operating profit slipped 0.4% year-on-year on a 2.9% decline in sales.

Sales in China, the company’s second largest market, were down 5.1% in 3Q. Sales in Japan were down 5.5% after a surge in purchases made prior to the increase in the consumption tax last October. Both of these markets, which together account for two-thirds of sales, are likely to be weak in 4Q.

Sales of turbo-molecular pumps to the semiconductor equipment industry have picked up after five weak quarters, but account for only 5% of sales.

The shares have dropped back 14% from their December high, but at 27x management’s EPS guidance for FY Mar-20 and 25x our EPS estimate for FY Mar-21, are still  on the high side of their 5-year valuation ranges. Uncertainty has increased and valuations are not compelling. 

4. Ascletis Pharma: Reiterate Sell, 29% Downside

We have previously discussed the short idea of Ascletis Pharma. Today the stock reacted positively to the news that it received approval from the ethics committee from one of the participating hospitals. In this insight, we will look at the clinical trial that it is working on, and red flags, as well as re-iterate our sell call. We think there will be a downside of 29%. 

Our previous coverage on Ascletis Pharma

• Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial

5. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)

Health Care remains one of our favorite Sector overweights, both globally (ex-US) and in Greater China. We believe WuXi Biologics offers a timely opportunity to take advantage of what we expect are higher prices ahead for this biotechnology growth stock. The fundamental story is easy to see, as the company has delivered top line annual sales growth of over 60% for the past four years coupled with an EPS CAGR of 129% over the past three years (FactSet). Of course, what is most important to us is that the price of the stock is confirming the fundamental story. Buy this breakout, and secondarily buy any pullback toward 97 HK$ base support (if applicable). 

In this briefing:

1. BBI Life: Privatisation Offer For DNA Synthesizer
2. Zai Lab Offering: Remains an Attractive Opportunity

1. BBI Life: Privatisation Offer For DNA Synthesizer

Following a brief trading halt, BBI Life Sciences (1035 HK), the biggest supplier of DNA synthesis products in the PRC, announced a privatisation Offer by way of a Scheme from its major shareholder, the Wang Family.

The Offer of $3.50/share is a 16.28% premium to last close, but a 42.45% premium to the average 30-day close prior to the announcement. The Offer price is final.

The Family has received irrevocables totaling 13.85%  of share out in support of the Offer. This reduces the Independent Shareholders voting at the Court Meeting to 29.9% of shares out, therefore the blocking stake for the Scheme resolution vote is 2.99%. No single shareholder has such a blocking stake.

BBI is Cayman incorporated therefore the headcount test applies.

This looks a done deal. Currently trading at a gross/annualised spread of 5.4%/21.3%

2. Zai Lab Offering: Remains an Attractive Opportunity

Zai Lab Ltd (ZLAB US) unveiled plans to raise around $313 million (based on the closing price of $52.14 per ADS) through a primary offering of 5.5 million ADS and a secondary offering of 0.5 million ADS. 

In this briefing:

1. Glenmark Pharmaceuticals – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics
2. Shimadzu (7701 JP): New Guidance at Risk, Valuations Not Compelling
3. Ascletis Pharma: Reiterate Sell, 29% Downside
4. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)
5. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising

1. Glenmark Pharmaceuticals – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics

Glenmark Pharmaceuticals’ Q3/19-20? results were again disappointing. Growth was more sluggish than expected, especially with the sharp slowdown in the US only partly offset by stronger-than-expected sales in India. Furthermore, not all was positive in India, where the consumer care business decelerated significantly, perhaps due to the weak economy. We note that Glenmark has consistently missed guidance in key areas since its USD ’21 bond issuance: revenue growth, profitability and deleveraging, despite a two-decade-long record of growth. Positively, the financial risk profile remains stable, with stable earnings and a small decrease in debt. Liquidity is weak, as the company will face large debt maturities in the next 1.5 years. This would improve if the company is successful in issuing new USD 200 mn Notes to refinance the existing USD 200 mn 2021 Notes (maturing August 2021).

2. Shimadzu (7701 JP): New Guidance at Risk, Valuations Not Compelling

Shimadzu has lowered sales and profit guidance for FY Mar-20, but perhaps not by enough considering 3Q results and the impact of the Coronavirus. In the three months to December, operating profit slipped 0.4% year-on-year on a 2.9% decline in sales.

Sales in China, the company’s second largest market, were down 5.1% in 3Q. Sales in Japan were down 5.5% after a surge in purchases made prior to the increase in the consumption tax last October. Both of these markets, which together account for two-thirds of sales, are likely to be weak in 4Q.

Sales of turbo-molecular pumps to the semiconductor equipment industry have picked up after five weak quarters, but account for only 5% of sales.

The shares have dropped back 14% from their December high, but at 27x management’s EPS guidance for FY Mar-20 and 25x our EPS estimate for FY Mar-21, are still  on the high side of their 5-year valuation ranges. Uncertainty has increased and valuations are not compelling. 

3. Ascletis Pharma: Reiterate Sell, 29% Downside

We have previously discussed the short idea of Ascletis Pharma. Today the stock reacted positively to the news that it received approval from the ethics committee from one of the participating hospitals. In this insight, we will look at the clinical trial that it is working on, and red flags, as well as re-iterate our sell call. We think there will be a downside of 29%. 

Our previous coverage on Ascletis Pharma

• Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial

4. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)

Health Care remains one of our favorite Sector overweights, both globally (ex-US) and in Greater China. We believe WuXi Biologics offers a timely opportunity to take advantage of what we expect are higher prices ahead for this biotechnology growth stock. The fundamental story is easy to see, as the company has delivered top line annual sales growth of over 60% for the past four years coupled with an EPS CAGR of 129% over the past three years (FactSet). Of course, what is most important to us is that the price of the stock is confirming the fundamental story. Buy this breakout, and secondarily buy any pullback toward 97 HK$ base support (if applicable). 

5. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising

Innovent Biologics is raising USD 270 million to fund its clinical trial and commercialization of Tyvyt (PD-1). We have covered the company’s listing and the previous placement in April 2019 and October 2019. In this insight, we will catch up on the recent newsflow and discuss our views on the deal. 

In this briefing:

1. Shimadzu (7701 JP): New Guidance at Risk, Valuations Not Compelling
2. Ascletis Pharma: Reiterate Sell, 29% Downside
3. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)
4. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising
5. Pine Care (1989 HK): Unconditional MGO

1. Shimadzu (7701 JP): New Guidance at Risk, Valuations Not Compelling

Shimadzu has lowered sales and profit guidance for FY Mar-20, but perhaps not by enough considering 3Q results and the impact of the Coronavirus. In the three months to December, operating profit slipped 0.4% year-on-year on a 2.9% decline in sales.

Sales in China, the company’s second largest market, were down 5.1% in 3Q. Sales in Japan were down 5.5% after a surge in purchases made prior to the increase in the consumption tax last October. Both of these markets, which together account for two-thirds of sales, are likely to be weak in 4Q.

Sales of turbo-molecular pumps to the semiconductor equipment industry have picked up after five weak quarters, but account for only 5% of sales.

The shares have dropped back 14% from their December high, but at 27x management’s EPS guidance for FY Mar-20 and 25x our EPS estimate for FY Mar-21, are still  on the high side of their 5-year valuation ranges. Uncertainty has increased and valuations are not compelling. 

2. Ascletis Pharma: Reiterate Sell, 29% Downside

We have previously discussed the short idea of Ascletis Pharma. Today the stock reacted positively to the news that it received approval from the ethics committee from one of the participating hospitals. In this insight, we will look at the clinical trial that it is working on, and red flags, as well as re-iterate our sell call. We think there will be a downside of 29%. 

Our previous coverage on Ascletis Pharma

• Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial

3. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)

Health Care remains one of our favorite Sector overweights, both globally (ex-US) and in Greater China. We believe WuXi Biologics offers a timely opportunity to take advantage of what we expect are higher prices ahead for this biotechnology growth stock. The fundamental story is easy to see, as the company has delivered top line annual sales growth of over 60% for the past four years coupled with an EPS CAGR of 129% over the past three years (FactSet). Of course, what is most important to us is that the price of the stock is confirming the fundamental story. Buy this breakout, and secondarily buy any pullback toward 97 HK$ base support (if applicable). 

4. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising

Innovent Biologics is raising USD 270 million to fund its clinical trial and commercialization of Tyvyt (PD-1). We have covered the company’s listing and the previous placement in April 2019 and October 2019. In this insight, we will catch up on the recent newsflow and discuss our views on the deal. 

5. Pine Care (1989 HK): Unconditional MGO

On 5th Feb 2020, Hong Kong-based elderly home care provider Pine Care Group Ltd (1989 HK)announced its top shareholder Pine Active Care agreed to sell a stake of 52% at a share price of HKD1.647 to a consortium led by Mr. Tang Yiu Sing, Chairman of Stan Group.

The transaction which valued the company at an enterprise value of HKD2.1bn was executed today and an Unconditional Mandatory Offer was launched by the Acquirer at the same price for the remaining 32.46% of shares outside the Acquirer’s post-deal stake of 52.55% and the 14.99% retained by former top shareholder Pine Active Care.

The Offer Price is more than double the company’s IPO price of HKD0.69 in Dec 2017. That, and the extremely high multiples paid for the Target, lead us to question the Acquirer’s motivations which might possibly include a special interest in the property portfolio of the Target. 

In this briefing:

1. I-Mab (天境生物) IPO Trading: Tiny Float and Undemanding Valuation
2. Sinopharm (国医控股) Placement – Unattractive but Inexpensive
3. Celltrion Merger: Is It for Real This Time? Why Next Year?
4. A Potential Merger of Celltrion, Celltrion Healthcare, & Celltrion Pharma?

1. I-Mab (天境生物) IPO Trading: Tiny Float and Undemanding Valuation

I-Mab (IMAB US) raised USD 104 million at USD 14.0 per ADS, above the mid-point of the IPO price range. I-Mab will start trading today. We have previously covered the IPO in:

• I-Mab (天境生物) Pre-IPO: Strong management and investor backing with differentiated products
• I-Mab (天境生物) IPO: Everest Deal a Valuation Booster

In this insight, we will update on valuation and include a valuation sensitivity table.

If you have not read our 2019 IPO Analytic Series, please have a look:

• Aequitas 2019  IPOs and Placements Performance – Things we got right/wrong and things we plan to do
• 2019 Hong Kong IPO Analytics: Highlight of Brokers’ and Sectors’ Performance
• 2019 Hong Kong IPO Analytics: How Did Insti and Retail Coverage Impact Deal Performance

2. Sinopharm (国医控股) Placement – Unattractive but Inexpensive

Sinopharm Group Co H (1099 HK) is looking to raise about US$539m in its placement. 

Overall, the deal scores negatively on our framework owing to the poor track record and large deal size. Recent results haven’t exactly been stellar either as margins pressure seem to be persisting. However, to be fair, the company is trading at inexpensive valuations.

3. Celltrion Merger: Is It for Real This Time? Why Next Year?

Almost every year, we hear this same old story about the Celltrion merger when we approach the OGM season in March. It has always been Chairman Seo himself who brought the issue to the public. This time, it is no different. Seo appeared at this year’s J.P. Morgan Healthcare Conference in San Francisco and once again said in front of the local reporters that he would give a shot at the merger. But this time, he specifically mentioned a target timeline. He said he would give it a chance sometime next year.

4. A Potential Merger of Celltrion, Celltrion Healthcare, & Celltrion Pharma?

• The Celltrion Group Chairman Seo Jung-Jin made an important announcement at a JP Morgan Conference in San Francisco on January 15th. Chairman Seo mentioned that he would be willing to merge Celltrion Inc (068270 KS), Celltrion Healthcare (091990 KS), and Celltrion Pharm (068760 KS) if this is what the shareholders really want. In terms of timing, this merger could occur as soon as 2021.
• Following this major strategy announcement by the Chairman Seo, all the Celltrion related stocks are up today: Celltrion Inc (068270 KS) (market cap of 22.8 trillion won)– Up 1.1%; Celltrion Healthcare (091990 KS) (market cap of 7.8 trillion won)– Up 3.1%; and Celltrion Pharm (068760 KS) (market cap of 1.4 trillion won) – Up 7.8% (as of 12:15 PM, January 16th).
• Given the fact that one of the consistent issues with the Celltrion related companies has been its accounting, a merger of these three companies should help to clear up the negative perception of a potential accounting fraud. As such, the merger (or even the possibility of a merger) should have a positive impact on these three companies.

In this briefing:

1. Ascletis Pharma: Reiterate Sell, 29% Downside
2. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)
3. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising
4. Pine Care (1989 HK): Unconditional MGO
5. InnoCare Pharma IPO Initiation: Promising Prognosis

1. Ascletis Pharma: Reiterate Sell, 29% Downside

We have previously discussed the short idea of Ascletis Pharma. Today the stock reacted positively to the news that it received approval from the ethics committee from one of the participating hospitals. In this insight, we will look at the clinical trial that it is working on, and red flags, as well as re-iterate our sell call. We think there will be a downside of 29%. 

Our previous coverage on Ascletis Pharma

• Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial

2. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)

Health Care remains one of our favorite Sector overweights, both globally (ex-US) and in Greater China. We believe WuXi Biologics offers a timely opportunity to take advantage of what we expect are higher prices ahead for this biotechnology growth stock. The fundamental story is easy to see, as the company has delivered top line annual sales growth of over 60% for the past four years coupled with an EPS CAGR of 129% over the past three years (FactSet). Of course, what is most important to us is that the price of the stock is confirming the fundamental story. Buy this breakout, and secondarily buy any pullback toward 97 HK$ base support (if applicable). 

3. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising

Innovent Biologics is raising USD 270 million to fund its clinical trial and commercialization of Tyvyt (PD-1). We have covered the company’s listing and the previous placement in April 2019 and October 2019. In this insight, we will catch up on the recent newsflow and discuss our views on the deal. 

4. Pine Care (1989 HK): Unconditional MGO

On 5th Feb 2020, Hong Kong-based elderly home care provider Pine Care Group Ltd (1989 HK)announced its top shareholder Pine Active Care agreed to sell a stake of 52% at a share price of HKD1.647 to a consortium led by Mr. Tang Yiu Sing, Chairman of Stan Group.

The transaction which valued the company at an enterprise value of HKD2.1bn was executed today and an Unconditional Mandatory Offer was launched by the Acquirer at the same price for the remaining 32.46% of shares outside the Acquirer’s post-deal stake of 52.55% and the 14.99% retained by former top shareholder Pine Active Care.

The Offer Price is more than double the company’s IPO price of HKD0.69 in Dec 2017. That, and the extremely high multiples paid for the Target, lead us to question the Acquirer’s motivations which might possibly include a special interest in the property portfolio of the Target. 

5. InnoCare Pharma IPO Initiation: Promising Prognosis

InnoCare Pharma Ltd (1576300D CH) is a pre-revenue biotech company with a focus on research and development, manufacturing and commercialisation of best-in-class and/or first-in-class drugs for the treatment of cancer and autoimmune diseases. InnoCare is backed by Vivo Capital (8.5% shareholder) and GIC (5.7% shareholder). It is seeking to raise $200 million in a Hong Kong IPO. 

In this briefing:

1. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)
2. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising
3. Pine Care (1989 HK): Unconditional MGO
4. InnoCare Pharma IPO Initiation: Promising Prognosis
5. Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial

1. Company Spotlight: Buy WuXi Biologics Inc. (2269-HK)

Health Care remains one of our favorite Sector overweights, both globally (ex-US) and in Greater China. We believe WuXi Biologics offers a timely opportunity to take advantage of what we expect are higher prices ahead for this biotechnology growth stock. The fundamental story is easy to see, as the company has delivered top line annual sales growth of over 60% for the past four years coupled with an EPS CAGR of 129% over the past three years (FactSet). Of course, what is most important to us is that the price of the stock is confirming the fundamental story. Buy this breakout, and secondarily buy any pullback toward 97 HK$ base support (if applicable). 

2. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising

Innovent Biologics is raising USD 270 million to fund its clinical trial and commercialization of Tyvyt (PD-1). We have covered the company’s listing and the previous placement in April 2019 and October 2019. In this insight, we will catch up on the recent newsflow and discuss our views on the deal. 

3. Pine Care (1989 HK): Unconditional MGO

On 5th Feb 2020, Hong Kong-based elderly home care provider Pine Care Group Ltd (1989 HK)announced its top shareholder Pine Active Care agreed to sell a stake of 52% at a share price of HKD1.647 to a consortium led by Mr. Tang Yiu Sing, Chairman of Stan Group.

The transaction which valued the company at an enterprise value of HKD2.1bn was executed today and an Unconditional Mandatory Offer was launched by the Acquirer at the same price for the remaining 32.46% of shares outside the Acquirer’s post-deal stake of 52.55% and the 14.99% retained by former top shareholder Pine Active Care.

The Offer Price is more than double the company’s IPO price of HKD0.69 in Dec 2017. That, and the extremely high multiples paid for the Target, lead us to question the Acquirer’s motivations which might possibly include a special interest in the property portfolio of the Target. 

4. InnoCare Pharma IPO Initiation: Promising Prognosis

InnoCare Pharma Ltd (1576300D CH) is a pre-revenue biotech company with a focus on research and development, manufacturing and commercialisation of best-in-class and/or first-in-class drugs for the treatment of cancer and autoimmune diseases. InnoCare is backed by Vivo Capital (8.5% shareholder) and GIC (5.7% shareholder). It is seeking to raise $200 million in a Hong Kong IPO. 

5. Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial

Ascletis Pharma has been the beneficiary of the Coronavirus as media reports mention that its drug candidates that aim to treat type 1 HIV is being used by hospitals to treat coronavirus. In this insight, we will analyse the possible outcome of the possible clinical trial and our view that recent outperformance is an overreaction, from valuation point of view. 

In this briefing:

1. Sinopharm (国医控股) Placement – Unattractive but Inexpensive
2. Celltrion Merger: Is It for Real This Time? Why Next Year?
3. A Potential Merger of Celltrion, Celltrion Healthcare, & Celltrion Pharma?
4. Jinxin Fertility (锦欣生殖) Placement – A Good Point of Entry

1. Sinopharm (国医控股) Placement – Unattractive but Inexpensive

Sinopharm Group Co H (1099 HK) is looking to raise about US$539m in its placement. 

Overall, the deal scores negatively on our framework owing to the poor track record and large deal size. Recent results haven’t exactly been stellar either as margins pressure seem to be persisting. However, to be fair, the company is trading at inexpensive valuations.

2. Celltrion Merger: Is It for Real This Time? Why Next Year?

Almost every year, we hear this same old story about the Celltrion merger when we approach the OGM season in March. It has always been Chairman Seo himself who brought the issue to the public. This time, it is no different. Seo appeared at this year’s J.P. Morgan Healthcare Conference in San Francisco and once again said in front of the local reporters that he would give a shot at the merger. But this time, he specifically mentioned a target timeline. He said he would give it a chance sometime next year.

3. A Potential Merger of Celltrion, Celltrion Healthcare, & Celltrion Pharma?

• The Celltrion Group Chairman Seo Jung-Jin made an important announcement at a JP Morgan Conference in San Francisco on January 15th. Chairman Seo mentioned that he would be willing to merge Celltrion Inc (068270 KS), Celltrion Healthcare (091990 KS), and Celltrion Pharm (068760 KS) if this is what the shareholders really want. In terms of timing, this merger could occur as soon as 2021.
• Following this major strategy announcement by the Chairman Seo, all the Celltrion related stocks are up today: Celltrion Inc (068270 KS) (market cap of 22.8 trillion won)– Up 1.1%; Celltrion Healthcare (091990 KS) (market cap of 7.8 trillion won)– Up 3.1%; and Celltrion Pharm (068760 KS) (market cap of 1.4 trillion won) – Up 7.8% (as of 12:15 PM, January 16th).
• Given the fact that one of the consistent issues with the Celltrion related companies has been its accounting, a merger of these three companies should help to clear up the negative perception of a potential accounting fraud. As such, the merger (or even the possibility of a merger) should have a positive impact on these three companies.

4. Jinxin Fertility (锦欣生殖) Placement – A Good Point of Entry

Shareholders of Jinxin Fertility Co Ltd (1951 HK) is looking to raise US$92m in an accelerated bookbuild. Ke Yan, CFA, FRM has covered the IPO extensively in:

• Jinxin Fertility (锦欣生殖) Pre-IPO: Strong Foothold in Sichuan but Weak Sentiment for Sector
• Jinxin Fertility (锦欣生殖) IPO – Worth a Look Given the Sector, Existing Shareholders and Cornerstone
• Jinxin Fertility (锦欣生殖) Post-IPO Trading: Fairly Valued
• Jinxin Fertility Lock-Up Expiry Trade: Might Be Worth Doing a Reverse Enquiry 

Overall the deal scores well on our framework mainly owing to the inexpensive valuation relative to peers and good price and earnings momentum.

In this briefing:

1. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising
2. Pine Care (1989 HK): Unconditional MGO
3. InnoCare Pharma IPO Initiation: Promising Prognosis
4. Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial
5. Blue Dot: Li Ka-Shing Backed AI-Powered Startup Warned About Wuhan Virus Before WHO Warning

1. Innovent Biologics Placement: Positive Newsflow Bodes Well for Capital Raising

Innovent Biologics is raising USD 270 million to fund its clinical trial and commercialization of Tyvyt (PD-1). We have covered the company’s listing and the previous placement in April 2019 and October 2019. In this insight, we will catch up on the recent newsflow and discuss our views on the deal. 

2. Pine Care (1989 HK): Unconditional MGO

On 5th Feb 2020, Hong Kong-based elderly home care provider Pine Care Group Ltd (1989 HK)announced its top shareholder Pine Active Care agreed to sell a stake of 52% at a share price of HKD1.647 to a consortium led by Mr. Tang Yiu Sing, Chairman of Stan Group.

The transaction which valued the company at an enterprise value of HKD2.1bn was executed today and an Unconditional Mandatory Offer was launched by the Acquirer at the same price for the remaining 32.46% of shares outside the Acquirer’s post-deal stake of 52.55% and the 14.99% retained by former top shareholder Pine Active Care.

The Offer Price is more than double the company’s IPO price of HKD0.69 in Dec 2017. That, and the extremely high multiples paid for the Target, lead us to question the Acquirer’s motivations which might possibly include a special interest in the property portfolio of the Target. 

3. InnoCare Pharma IPO Initiation: Promising Prognosis

InnoCare Pharma Ltd (1576300D CH) is a pre-revenue biotech company with a focus on research and development, manufacturing and commercialisation of best-in-class and/or first-in-class drugs for the treatment of cancer and autoimmune diseases. InnoCare is backed by Vivo Capital (8.5% shareholder) and GIC (5.7% shareholder). It is seeking to raise $200 million in a Hong Kong IPO. 

4. Ascletis Pharma: Sell the Hype Of (Possible) Coronavirus Clinical Trial

Ascletis Pharma has been the beneficiary of the Coronavirus as media reports mention that its drug candidates that aim to treat type 1 HIV is being used by hospitals to treat coronavirus. In this insight, we will analyse the possible outcome of the possible clinical trial and our view that recent outperformance is an overreaction, from valuation point of view. 

5. Blue Dot: Li Ka-Shing Backed AI-Powered Startup Warned About Wuhan Virus Before WHO Warning

With so much information floating around the world regarding the novel Coronavirus, it pays attention to focus and rely upon the best available information and data sources. One of the best sources of information regarding the novel Coronavirus has been coming from a Toronto startup company called BlueDot. 

BlueDot is a company backed by Li Ka-Shing. BlueDot first alerted about the Wuhan virus on 31 December 2019, several days ahead of the actual US government and WHO warnings. BlueDot uses artificial intelligence (AI) and Big Data to track and predict the global spread of infectious diseases. 

BlueDot has been accurately able to predict the spread of the Wuhan virus prior to WHO which is very impressive. BlueDot has also warned about the spread of the Wuhan virus to other major cities in Asia, including Bangkok, Seoul, Taipei, and Tokyo, which has also been proved correct.