Daily Brief Health Care: Alteogen Inc, Eiken Chemical, Probiotec Ltd, Fortrea Holdings , HealthCare Global Enterprises, Beijing Wantai Biological Phar, Recce Ltd and more

• On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale. 
• The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won. 
• This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.

• The med-tech sector is ripe for consolidation. Smaller players like Hogy Medical (3593 JP) , and Eiken Chemical (4549 JP)  exhibit sub-par growth and lagging valuations
• Activist investors like ValueAct Capital, Dalton and Asset Value have recognized an opportunity for growth and potential M&A
• Both Hogy and Eiken trades at a deep discount to larger domestic peers and stand to benefit the most from any consolidation

• On the 22 December 2023, drugs maker/packager group Probiotec Ltd (PBP AU) entered into a Scheme with Indonesia’s Pyridam Farma (PYFA IJ).
• Pyridam is offering Probiotec shareholders A$3.00/share (in cash, or a 19% premium to the undisturbed price). An interim dividend of A$0.035/share was also added (now gone ex).
• The Scheme Booklet is now out. The Scheme Meeting will be held on the 29th May. The IE says terms are fair. I agree. Trading wide. Gross spread is 4.9%.

• The Probiotec Ltd (PBP AU) IE considers Pyridam Farma (PYFA IJ)’s A$3.00 offer fair and reasonable as it is within its A$2.79-A$3.28 per share valuation range.
• The scheme remains conditional on shareholders’ (Probiotec and Pyridam), FIRB, and OJK approvals. Probiotec can also pay a permitted dividend of up to A$0.04 per share.
• The gross spread of 4.9% (6.3% including dividends) reflects doubts about Pyridam’s funding credibility, as Pyridam’s market cap is 16% of Probiotec’s implied by the offer.

• This is our first report on Fortrea Corporation, a renowned contract research organization (CRO).
• The company reported its fourth quarter 2023 earnings, recording revenue growth of 1.8% year-over-year to $775.4 million.
• CEO Tom Pike praised the company’s transformation over 2023, managing to transition from a division within a larger parent company to a stand-alone entity.

• Despite Q3 being seasonally weak, HealthCare Global Enterprises (“HCG”) reported 11% YoY growth in revenues. Q3FY24 revenue came in at INR 470cr.
• HCG has been focusing on fortifying its clinical talent strength and increasing business promotion. This has been yielding positive result, with Kolkata and Mumbai seeing 57% and 17% YoY growth.
• With the operationalization of four radiation machines now behind us, Q3 saw improved mix of radiation oncology with its growth at 13% YoY vs 11% YoY in overall revenue.

• Beijing Wantai Biological Phar (603392 CH) announced that its net profit for 2023 declined 71–75% YoY to RMB1.20–1.35B mainly due to the market competition.
• China’s HPV vaccine market is highly competitive. Beijing Wantai has no presence in higher valent HPV vaccine segment, which dominates the domestic market.
• Although the company will be one of the early movers in domestically developed nonavalent HPV vaccines, at least three more players will follow soon, thereby making the space more competitive.

Recce Pharmaceuticals recently received A$11.18m as an R&D advance credit through an arrangement with Endpoints Capital for the R&D tax credit rebates that Recce expects to receive for FY23/FY24 and FY25. We believe this non-dilutive source of funding should extend Recce’s operating runway into FY25. Recce is also continuing to advance its intravenous (IV) R327 formulation in its ongoing Phase I/II study in healthy volunteers, having recently started the 20-minute (3,000mg) dosing cohort. We have made minor adjustments to our valuation and we now obtain a risk-adjusted net present value (rNPV) of A$644.4m (or A$3.16/share), versus A$652.6m previously.