HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

L'Occitane International S.A. is a global, natural and organic ingredient based cosmetics and well-being products enterprise.  The Company designs, manufactures and markets a wide range of cosmetics and well-being products based on natural and organic ingredients sourced principally from or near Provence.

<ul>
<li>The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.</li>
<li>Deploying China's sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.</li>
<li>For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don't think the current "technical bull market" to be lasting. </li>
</ul>


The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
Deploying China's sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don't think the current "technical bull market" to be lasting. 


L'Occitane (973.HK) Privatization - The Offer Price Is Good Enough

Equity Bottom-Up

WuXi AppTec Co., Ltd. manufactures medical products. The Company produces biological agents, antibodies, biological diagnostic reagents, and other products. WuXi AppTec also provides biological analysis, technical study, and other services.

<ul>
<li>The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.</li>
<li>Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.</li>
<li>WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".</li>
</ul>


The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.
Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.
WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".


WuXi AppTec (2359.HK/603259.CH) - The Pain of 2024 Has Just Begun

Yichang HEC Changjiang Pharma / Event-Driven

YiChang HEC ChangJiang Pharmaceutical Co Ltd develops a variety of drugs.  The Company develops and sells drugs for anti-virus, metabolic diseases, cardiovascular, and more.

<ul>
<li>Sunshine Lake Pharma plans to privatize HEC CJ Pharma in the form of merger by absorption with conditions. After privatization, CJ Pharma will be delisted from the Stock Exchange.</li>
<li>Sunshine Lake Pharma's pipeline has been “disconnected” from the level of domestic biotech in recent years, and is completely lagging behind the average speed of innovative drug development in China.</li>
<li>Due to “outdated” pipeline and lack of prospects, even if CJ Pharma is merged into Sunshine Lake Pharma, valuation performance of the new entity would be disappointing in the future.</li>
</ul>


Sunshine Lake Pharma plans to privatize HEC CJ Pharma in the form of merger by absorption with conditions. After privatization, CJ Pharma will be delisted from the Stock Exchange.
Sunshine Lake Pharma's pipeline has been “disconnected” from the level of domestic biotech in recent years, and is completely lagging behind the average speed of innovative drug development in China.
Due to “outdated” pipeline and lack of prospects, even if CJ Pharma is merged into Sunshine Lake Pharma, valuation performance of the new entity would be disappointing in the future.


HEC CJ Pharma (1558.HK)'s Merger Deal with Sunshine Lake Pharma - Almost No Investment Value

Abbisko Cayman Limited operates as a biopharmaceutical company. The Company dedicated to the discovery and development of innovative and differentiated small molecule incology therapies. Abbisko Cayman provides services in China.

<ul>
<li>Abbisko’s share price has fallen since its IPO.Although Abbisko has been buying back shares and LAV has begun to increase its holdings, none of this would brighten the Company's prospects.</li>
<li>FGFR and CSF-1R are not very likely to generate blockbuster products.Even with the cooperation of MNCs, peak sales of Abbisko’s products could still be low due to “flaws” on targets.</li>
<li>There would be very limited imagination of Abbisko’s future valuation expansion. This may largely explain why stock price continues to decline. Investors're advised to make rational judgments about the Company.</li>
</ul>


Abbisko’s share price has fallen since its IPO.Although Abbisko has been buying back shares and LAV has begun to increase its holdings, none of this would brighten the Company's prospects.
FGFR and CSF-1R are not very likely to generate blockbuster products.Even with the cooperation of MNCs, peak sales of Abbisko’s products could still be low due to “flaws” on targets.
There would be very limited imagination of Abbisko’s future valuation expansion. This may largely explain why stock price continues to decline. Investors're advised to make rational judgments about the Company.


Abbisko Cayman (2256.HK) - The Pipeline Lacks Investment Value, Leading to Valuation Collapse

China National Medicines A / Event-Driven

China National Medicines Corp. Ltd. wholesales and retails chemical material medicines, western medicine preparations, biochemical medicines, biological products, and Chinese traditional medicines.  Through its subsidiaries, the Company also manufactures pharmaceuticals including injections, capsules, tablets, and other related products under the CNCM brand name.

<ul>
<li>The "Entrusted Management Agreement" indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and <a href="https://www.smartkarma.com/entities/shanghai-shyndec-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:1952:1" rel="noopener">Shanghai Shyndec Pharmaceutical</a>. </li>
<li>The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. </li>
<li>Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.</li>
</ul>


The "Entrusted Management Agreement" indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and Shanghai Shyndec Pharmaceutical. 
The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. 
Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.


China National Medicines (600511.CH) - After Restructuring, Performance Growth Is Guaranteed

Over 15 years' experience in both finance and healthcare, covering clinic operations, investment and equity research in both China and overseas.