Daily Brief Health Care: Dentium Co Ltd, New Ruipeng Pet Group, Takeda Pharmaceutical, China Shineway Pharmaceutical, Aft Pharmaceuticals, Paradigm Biopharmaceuticals and more

• We believe Dentium is an attractive stock to own right now. It has an excellent combination of strong growth in sales and profits and discounted valuations.
• Driven by its strong share price appreciation in the past year, Dentium now has become a strong candidate for a potential inclusion in KOSPI 200 index in 2023.
• There is a growing probability that Dentium could be targeted by corporate activists to pressure the company to cancel treasury shares and provide higher dividends. 

• New Ruipeng Pet Group (RPET US) is looking to raise at least US$100m in its upcoming US IPO. 
• New Ruipeng Pet Group (Ruipeng) is a pet services platform, primarily offering pet care services, supply chain services and local services, covering the entire lifecycle of pets.
• In this note, we will talk about the positive aspects of the deal.

• Takeda Pharmaceutical (4502 JP)  reported 3QFY03/2023 results today. Reported revenue increased 11.2% YoY to JPY1,096.6bn (vs consensus JPY996bn) while OP increased 26.2% YoY to JPY147bn (vs consensus JPY180.1).
• The drop in OP vs consensus was mainly due to the depreciation of the Yen, nevertheless, OPM improved 30bps to 13.4% during the quarter.
• Takeda has not revised full-year forecast, however, we think the company will easily beat its own guidance as it pushes forward with its development pipeline further aided by M&A.

• Shineway released good turnover data in 22Q1-Q3. Due to large market demand for COVID-related TCM, 22Q4 performance would remain strong growth momentum, leading to positive outlook of 2022 annual report.
• With the peak of respiratory disease outbreak past and COVID-19 also begins to be under control, demand for related TCM would weaken. Accordingly, the pullback of share price could begin.
• Strong performance of Shineway’s share price may not be sustainable in long term. Shineway is no longer cheap at current valuation. While short-term catalysts remain, future upside may become limited. 

AFT Pharmaceuticals continues to strengthen its R&D pipeline with the announced in-licensing agreement with Latitude Pharmaceuticals (a US-based contract research organisation) to develop antibiotic eye drops to treat serious eye infections. The formulation is already approved to treat bacterial infections, including those caused by the antibiotic-resistant MRSA bacteria. The IP relates to an aqueous stable formulation of this treatment. Eye care is a key focus for AFT (contributing over 20% of the group’s revenue, per our estimate) and we expect this new asset to complement the existing portfolio. AFT plans to launch around 65 new products in Australasia before 2025 and a robust R&D pipeline will be key to delivering this. The development programme will be covered by AFT’s budgeted R&D expenditure of c NZ$12m per year for FY23 and FY24.

Cash flow figures from Paradigm Biopharmaceuticals’ latest update show that it remains funded past key near-term inflection points. In Q223, management reported a net cash outflow from operating activities of A$7.8m (A$17.8m for the first six months of FY23), including an A$7.4m R&D tax incentive rebate, and no capital expenditure. R&D expenditure increased 54% q-o-q to A$13.2m, corresponding with ongoing recruitment and site identification for the pivotal PARA_OA_002 Phase III trial of iPPS in knee osteoarthritis and an increase in other clinical activities. With cash of A$83.9m at end Q223 and at the current quarterly burn rate (adjusted for the non-recurring R&D tax incentive, A$15.2m), management estimates that operations are funded into 2024 (5.5 quarters), past important clinical milestones in Paradigm’s osteoarthritis programme in 2023.