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1、China Healthcare:Developments andOpportunities aheadResearchReinventedSmartkarma is a globalinvestment research networkthat brings togetherindependent Insight Providers,institutional investors,andcorporate investor relationsprofessionals and management.At Smartkarma,We Do Things DifferentlyWe levera
2、ge the online economy,applying this innovative mindset to capitalmarkets.For a single subscription,Smartkarma users can consume all theresearch they need,just like NetHix enables viewers to watch unlimited hoursof content on its platform.At the same time,we address a growing need fora modern approac
3、h to corporate access.In 2019,we launched CorporateSolutions,which allows company executives and investor relations personnelto connect seamlessly to investors and analysts,all within a single network.In this effort,we work closely with global exchanges such as SingaporeExchange,which became our inv
4、estor,to provide such services to listedcompanies worldwide.Our model ensures that the research on our platform is objective andunbiased,independent and free from conHicts of interest.The platformdetermines appropriate pricing according to the quality and value of eachresearch piece.This helps indep
5、endent Insight Providers monetise theirresearch and incentivises them to produce truly quality,differentiated workthat stands out from the rest of the market.A commitment to quality is alsowhy we carefully vet and select our Insight Providers.Less than 10 percent ofthe independent analysts who apply
6、 are approved as Insight Providers onSmartkarma.We currently have over 100 such curated Insight Providerspublishing on the platform,ranging from one-person operations to teams ofmultiple members around the world.In the following pages,you will be able to see for yourself the result of ourefforts.In
7、the meantime,we will be busy bringing you more excitingdevelopments over the course of the year!2Table of Contents1.Angelalign Technology(6699 HK):1H22 ProGt Drops As Challenging Operating Environment Continued.42.Antengene(6996 HK):First Drug Launched in Crowded Market of China Fails to Allure Inve
8、stors.93.Dingdang Health Technology(9886HK)-Business Model Face Test;Hard to Run the EcosystemSuccessfully.134.Giant Biogene IPO:The Bull Case.165.IRay Technology(688301.CH)-Overvalued;Performance Deceleration Will Lead to ValuationCorrection.253Tina BanerjeeGlobal Healthcare AnalystAngelalign Techn
9、ology|Equity Bottom-UpAngelalign Technology(6699 HK):1H22 Pro?tDrops As ChallengingOperating EnvironmentContinuedBy Tina Banerjee|21 Sep 2022EXECUTIVE SUMMARYAngelalign Technology(6699 HK)has reported muted H1 2022 results,which were negatively impacted by the resurgence of the COVID-19pandemic in C
10、hina and the corresponding restrictions.Revenue from core business of clear aligner treatment grew just 3%y/y.However,lower ASP and higher cost of sales,pulled down the grossproTt margin by 930bps to 60.2%.Thus far in H2 2022,China has imposed lockdowns in multiple majorcities.With the uncertainty o
11、ver the duration of COVID,no immediaterespite is seen in Angelaligns business.DETAILAngelalign Technology(6699 HK),a leading clear aligner treatment solutionprovider in China,reported muted H1 2022 results.The operations of thecompany were negatively impacted by the resurgence of the COVID-19pandemi
12、c in China and the corresponding governmental control andrestrictive measures,the closure of or restriction on clinics and hospitals inrelevant regions and cities,and the weak consumption environment.Muted Revenue GrowthH1 2022 revenue declined 1.8%y/y to RMB570.9 million.Although revenuegenerated f
13、rom core business of clear aligner treatment solutions,hasachieved a year-on-year growth of 2.6%,revenue from intraoral scannerplunged 40%y/y.Angelalign Technology(6699 HK):1H22 ProGt Drops As Challenging Operating Environment ContinuedTina Banerjee4Source:Angelalign H1 2022 interim reportClear alig
14、ner treatment solutions:Revenue from clear aligner treatmentsolutions increased by 2.6%y/y from RMB532.7 million,mainly driven by theincrease in the revenue recognized with the subsequent delivery of clearaligners for the case shipments in prior periods.The number of caseshipments dropped slightly t
15、o 77,200 in H2 2022 from 79,500 in H1 2021 as aresult of the negative impact of the resurgence of the COVID-19 pandemic inmainland China and the corresponding governmental control and restrictivemeasures.Intraoral scanner:Revenue generated from sales of intraoral scannersdecreased by 39.9%y/y to RMB
16、17.2 million,primarily because the operationsof dental hospitals and clinics were impacted due to the resurgence of theCOVID-19 pandemic in H1 2022.Compared to the companys relativelyhigher-priced imported intraoral scanners,the market demand for itsrelatively lower-priced domestic intraoral scanner
17、s became stronger.Deteriorating Pro?tabilityGross prot:Cost of revenue increased 24%y/y to RMB239.5 million,drivenby increased employee beneTt expenses for additional personnel anddepreciation and amortization cost as the new manufacturing facilities ofChuangmei Center were put into use.The companys
18、 Chuangmei Center inWuxi City comprises new manufacturing facilities and a research anddevelopment center with a gross Uoor area of approximately 126,000 squaremeters.Gross proTt decreased 12.2%y/y to RMB331.4 million.Gross proTtmargin declined to 58.0%in H12022 from 66.1%in H1 2021.Gross proTtmargi
19、n for clear aligner treatment solutions decreased to 60.2%in H1 2022from 69.5%in H1 2021,primarily due to(1)a decrease in the average sellingprice of clear aligners,(2)the increased Txed costs in relation to the newmanufacturing facilities,and(3)the increased employee beneTt expenses.Angelalign Tech
20、nology(6699 HK):1H22 ProGt Drops As Challenging Operating Environment ContinuedTina Banerjee5Source:Angelalign H1 2022 interim reportSource:Company disclosuresOperating expenses:In order to maintain leadership amid increasingcompetition,Angelalign is expanding into third-and fourth-tier emergingmark
21、ets of China and overseas markets.The company is increasing itspenetration in lower tier markets.Consequently,selling and marketingexpenses increased32%y/y to RMB127.8 million.R&D expenses increased27%y/y,while administrative expenses decreased 25%y/y.Angelalign Technology(6699 HK):1H22 ProGt Drops
22、As Challenging Operating Environment ContinuedTina Banerjee6Net prot:Net proTt decreased 23.4%y/y to RMB73.3 million.The netproTt margin for H1 2022 was 12.8%,as compared with 16.8%for H1 2021.Financial PositionAs of June 30,2022,the company had cash and cash equivalents ofRMB3,520.0 million,down fr
23、om RMB3,627.0 million as of December 31,2021.The company does not have any outstanding bank loans or otherborrowings.OutlookAngelalign is seeing a gradual market recovery along with the effectivecontrol of the pandemic by the government and the recovery of the dentalservices business.Nevertheless,th
24、e COVID-19 pandemic remains recurrentand there are still risks of potential outbreaks.Should there be an escalationof the spread,China may again take strict emergency measures,includingtravel restrictions,cessations of business operations,including dentalhospitals and clinics,quarantines,work-from-h
25、ome and other alternativeworking arrangements,limitations on social and public gatherings,andlockdowns of cities or regions,which may impact the companys business.The duration of the COVID-19 outbreak is difTcult to assess.Recently,Chinahas lifted weeks lockdown on southwest Chengdu,which was shut d
26、own onSeptember 1.With a population of 21 million,Chengdu is the largestChinese city to shut down since Shanghai imposed a strict two-monthlockdown in April.Several other cities,including Shenzhen and Guiyang insouth China,have all had selective lockdowns and travel restrictions inrecent weeks.In ad
27、dition,a general slowdown in economy or an uncertaineconomic outlook would adversely affect consumer spending habits,whichresult in a decrease in the number of overall orthodontic treatment cases ora reduction in consumers discretionary spending on higher-pricedorthodontic solutions.Affected by the
28、COVID-related lockdown,highunemployment,and faltering property market,consumers discretionaryspending on high-end products is trending downside.In Q2,Chinas GDPgrowth was just 0.4%y/y and consumer spending accounts for more than50%of GDP.Unemployment among people aged 16 to 24 stands at almost19%,af
29、ter hitting a record 20%in July,according to government data.According to the most recent quarterly survey by the Peoples Bank of China(PBOC),almost 60%of people are now inclined to save more,rather thanconsume or invest more,up from 45%three years ago.International luxurybrands and discretionary co
30、nsumption driven companies are also facingsales decline in China.Angelaligns closest competitor Align Technology(ALGN US)also faced similar fate of Uat revenue and sequential decline incase shipment.Although Angelalign shares plunged more than 50%thisyear,no immediate respite is seen.Uncertainty ove
31、r the COVID durationsand resultant lockdown will limit the upside in shares.Consensus expects11%and 42%,y/y revenue and EPS decline in 2022,respectively.However,Angelalign Technology(6699 HK):1H22 ProGt Drops As Challenging Operating Environment ContinuedTina Banerjee7the company remains conTdent in
32、 the long-term growth of Chinas economyand the continuous improvement of household consumption,as well as therapid growth of Chinas digital orthodontics market,which currently has alow penetration rate yet enormous market opportunities.Consensus expectsAngelalign to report more than 25%growth in rev
33、enue and EPS in 2023 and2024.Disclosure&Certi?cationI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insig
34、ht does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any s
35、peciTc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciTed therein.Tina Banerjee(20 Sep 2022)Angelalign Technology(6699 HK):1H22 ProGt Drops As Challenging Operating Environment ContinuedTina Banerjee
36、8Tina BanerjeeGlobal Healthcare AnalystAntengene|Equity Bottom-UpAntengene(6996 HK):First Drug Launched inCrowded Market ofChina Fails to AllureInvestorsBy Tina Banerjee|09 Oct 2022EXECUTIVE SUMMARYOn May 13,Antengene(6996 HK)launched Trst drug,Xpovio in Chinaas fourth-line treatment of relapsed/ref
37、ractory multiple myeloma.Xpovio has also been launched in South Korea,Australia,andSingapore.Xpovio reported revenue of RMB54 million in H1 2022.Antengene hasguided for 2022 revenue of RMB180200 million from Xpovio.Late-Line MM therapy market is small and dominated by blockbusterdrugs and low-cost g
38、eneric versions of erstwhile blockbuster drugs,indicating muted growth potential for Xpovio in its current approvalstatus.DETAILAntengene(6996 HK)is a commercial-stage biopharmaceutical companywith therapeutic focus on hematologic malignancies and solid tumors.Thecompany aims to market its innovativ
39、e drugs in the Asia PaciTc Region andglobally,with its vision being“Treating Patients Beyond Borders”.Sinceinitiating operations in 2017,Antengene has obtained 24 investigationalnew drug(IND)approvals in the U.S.and in Asia,submitted six new drugapplications(NDAs)in multiple Asia PaciTc markets,with
40、 the NDA for itslead asset Xpovio(selinexor/ATG-010)in mainland China,South Korea,Singapore,and Australia approved.Leveraging partnerships as well as in-house drug discovery,Antengene has built a broad and expanding pipeline of15 clinical and pre-clinical assets,of which eight are in-house developed
41、.Antengene(6996 HK):First Drug Launched in Crowded Market of China Fails to Allure InvestorsTina Banerjee9First Drug Launch in ChinaOn May 13,Antengene has launched its exportin 1(XPO1)inhibitor,Xpovio(Selinexor,ATG-010)in Mainland China.In December 2021,ChinasNational Medical Products Administratio
42、n(NMPA)has conditionallyapproved Xpovio in combination with corticosteroid dexamethasone for thetreatment of relapsed/refractory multiple myeloma(r/r MM)patients,whoreceived at least three prior therapies.Selinexor is a Trst-in-class oralsuppressor of XPO1,a protein overly produced by cancer cells t
43、o escape theaction of tumor suppressor proteins.XPO1 works by exporting proteins,including tumor suppressor proteins,out of the cell nucleus,where theyexert their action.By preventing the exit of tumor suppressors from the cellnucleus,the therapy leads to the death of cancer cells while leaving heal
44、thycells unharmed.Selinexor is an in-licensed product and was originallydeveloped by Karyopharm Therapeutics(KPTI US).Xpovio is the worlds Trstselective inhibitor of nuclear export(SINE),and is an essential once totwice-weekly oral treatment choice that could effectively delay diseaseprogression and
45、 increase lifespan of relapsed or refractory multiple myelomapatients.Xpovio reported revenue of RMB54 million in H1 2022,mainly driven bysales generated in China.Antengene has also launched Xpovio in Australiaand Singapore in May 2022 and in South Korea in December 2021.Thecompany aims to launch Xp
46、ovio in Hong Kong and Taiwan by the end of thisyear.Antengene has 190-person commercial team in greater China andAPAC for commercialization of Xpovio.Antengene has guided for 2022revenue of RMB180200 million,representing RMB126146 million revenuefrom Xpovio in H2 2022.During H1 2022,R&D expenses inc
47、reased 33%y/yto RMB179 million,as 19 trials are ongoing in China,Taiwan,Australia andthe U.S.,and Tve registrational trials are ongoing in China.Selling anddistribution expenses jumped 685 times to RMB90 million.Even uponincrease in operating expenses,Antengenes adjusted net loss decreased toRMB126
48、million in H1 2022 from RMB210 million in H1 2021,aided byforeign exchange gain.As at June 30,2022,Antengenes cash and bankbalances were RMB2,151.0 million.Multiple myeloma is the second most common hematologic malignancy andaccounts for approximately 10%of all hematologic malignant cases.According
49、to Antengenes estimates,China has an existing MM patients(prevalence)base of 54.8K,with 21K new MM cases(incidence).MM isincurable and relapses repeatedly and relapsed patients often experienceclonal succession.Current MM market in China is worth of RMB4 billion,growing rapidly at CAGR of 21%,with s
50、hare of innovative drugs increasingquickly.Although China has fewer myeloma drugs approved compared to theU.S.,Xpovio faces competition from blockbuster drugs such as Velcade,Revlimid,Pomalyst,and Darzalex(daratumumab),which dominate theglobal as well as China MM market.The Trst three drugs have alr
51、eady lostpatent protection and their low-cost generic versions are also approved inChina.According to CRIs market research,since daratumumab(marketed asZhaoke in China)entered the Chinese market in 2019 as a single agent forthe treatment of r/r MM,its sales have grown rapidly.The sales ofAntengene(6
52、996 HK):First Drug Launched in Crowded Market of China Fails to Allure InvestorsTina Banerjee10daratumumab increased from around RMB0.5 million in 2019 to aroundRMB24.82 million in 2020,with an annual increase of more than 40 times.In2021,daratumumab won two more approvals in China for second-linetr
53、eatment for MM and newly diagnosed MM patients.Daratumumab madeits entry in 2021 edition of volume-based purchase(VBP)program in Chinaand saw its annual cost reduced from RMB1 million($157,000)to underRMB300,000($47,000)per year under the scheme.Shanghai Henlius Biotechis developing a biosimilar of
54、daratumumab,as single-agent treatment ofpatients with r/r MM,as well as for the treatment of Trst-line,second-line,and above MM patients.Moreover,Xpovio dexamethasone combo have been granted conditionalapproval in China.A conditional approval is granted to a medication whoseimmediate availability fu
55、lTlls an unmet medical need when its preliminarybeneTts are found to outweigh its potential risks.The combos full approvalwill depend on further veriTcation of its clinical beneTts in theconTrmatory BENCH phase 3 clinical trial,which is examining selinexor incombination with bortezomib(brand name:Ve
56、lcade)and low-dosedexamethasone in MM patients as early as Trst relapse.Antengene aims tocomplete patient enrollment for BENCH trial in Q4 2022.Xpovio Performance in the U.S.Karyopharm obtained FDAs accelerated approval on July 3,2019 for Xpovioin combination with low-dose dexamethasone for the trea
57、tment of adultpatients with rrMM who have received at least four prior therapies andwhose disease is refractory to at least two proteasome inhibitors,at leasttwo immunomodulatory agents(IMiDs),and an anti-CD38 mAb.Later,Xpovio got FDA approval as a third-line treatment of relapsed/refractorydiffuse
58、large B-cell lymphoma(rrDLBCL)and as a second-line treatment forMM.During H1 2022,Karyopharm reported Xpovio net revenue of$57 million,up36%y/y.However,the company has lowered 2022 Xpovio net revenueguidance to$120130 million(up 28%y/y at mid-point)from$135145million.ConclusionBoth late line MM and
59、DLBCL(Xpovios existing approved indications)aresmall markets.Real upside will come from its potential label expansion insecond line MM,which has been received in the U.S.in December 2020.Consequently,Xpovio revenue surged 29%y/y to$98 million in 2021 in theU.S.Xpovio,with its current approval for la
60、te line MM therapy in China doesnot have signiTcant growth potential.Antengene needs to go a long way tocreate real value for its shareholders.Antengene(6996 HK):First Drug Launched in Crowded Market of China Fails to Allure InvestorsTina Banerjee11Disclosure&Certi?cationI/We have no position(s)in t
61、he any of securities referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To t
62、he best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We have signed the Insight
63、Provider Agreement and this insight does not violate any of the terms speciTed therein.Tina Banerjee(08 Oct 2022)Antengene(6996 HK):First Drug Launched in Crowded Market of China Fails to Allure InvestorsTina Banerjee12Xinyao(Criss)WangHK/China Healthcare Analyst(ex-Fosun Pharma)Dingdang Health Tech
64、nology Group|Equity Bottom-UpDingdang HealthTechnology(9886HK)-Business Model FaceTest;Hard to Run theEcosystem SuccessfullyBy Xinyao(Criss)Wang|10 Oct 2022EXECUTIVE SUMMARYDingdang has formed a system integrating front-end consultation,self-built pharmacies and back-end distribution.The“heavy asset
65、 model”leads to large liabilities,negative equity balance,cash Uow pressure andpoor proTtability.Dingdang lacks core competitiveness in introducing customer Uow orrapidly expanding user base.Together with Terce competition,the gapbetween the Company and JD Health/Alibaba Health will becomebigger.Its
66、 difTcult to achieve high proTts based on the business model whenbreak-even is barely achieved.Dingdang has it hard to successfully runthrough its ecosystem.Were bearish on the outlook.DETAILDingdang Health Technology Group(9886 HK)released its 2022H1 results.Revenue was RMB1,989.8 million,up 21.1%Y
67、oY,which was mainly driven bythe increase in the revenue from pharmaceutical and healthcare business(up 19.9%YoY).According to the 2022H1 report,the revenue increase wasdue to“growing user base,continuous expansion of our smart pharmacynetwork,growth of the sales orders,and the enrichment of product
68、categories”.In our view,the pandemic/lockdown in China 22H1 could alsobe one reason for increasing sales,which may not be sustainable.Meanwhile,we also noticed that the YoY revenue growth of Dingdang hasobviously slowed down,from 118%in 2019,75%in 2020,to 65%in 2021,and now just 21%in 22H1.As for lo
69、sses,we saw that Dingdangs net lossnarrowed to RMB586 million,which was mainly due to the decrease of fairvalue losses on Tnancial liabilities at FVTPL(down 57.9%in 22H1).Dingdang Health Technology(9886HK)-Business Model Face Test;Hard to Run the Ecosystem SuccessfullyXinyao(Criss)Wang13In recent ye
70、ars,Dingdangs performance has been in a loss state,which isclosely related to its business model.By building its own ofUine pharmaciesto reduce cost of drug supply and its own delivery team,Dingdang improvesthe distribution efTciency.At the same time,the Company launched onlineconsultation and chron
71、ic disease and healthcare management service.So,Dingdang has formed a system integrating front-end consultation,self-builtpharmacy and back-end distribution.However,the disadvantages of thisbusiness model are large investment in assets(for expansion)and slowproTtability.The“heavy asset model”leads t
72、o large liabilities and negativeequity balance(We dont see such situation on JD Health(6618 HK)andAlibaba Health Information Technology(241 HK).Meanwhile,there was a signiTcant gap between Dingdang and JD Health/Alibaba Health in terms of the revenue scale.Because both JD health andAlibaba Health co
73、uld get great support from the large user base accumulatedby their parent company JD.com Inc(ADR)(JD US)and Alibaba Group(9988HK)(e-commerce platforms),it is not surprising that they could achievelarge revenue scale in a relatively short period of time,which also meansthat it could be difTcult for D
74、ingdang to catch up since it does not have suchstrong resources,support and brand reputation.Therefore,Dingdang has toTnd another way.To be more speciTc,for the online direct sales business,Dingdang has self-operated online platforms and third-party platforms such as Meituan(3690HK)and Eleme(O2O pla
75、tforms).Dingdangs dependence on third-partyplatforms has gradually increased(accounting for over 70%of its revenue in22Q1,but below 50%in 2018-2019)and the contribution from self-operatedonline platforms declined.The results are 1)The commissions paid to third-party platforms will increase,thus nega
76、tively affecting proTtability;2)Ifcustomers can buy drugs directly on Meituan and Eleme(even with cheaperprice),why would they install Dingdangs self-operated online platforms?3)When more and more pharmacies that directly compete with Dingdang alsojoin those O2O platforms,Dingdang will face the poss
77、ibility of loss ofcustomers.It is difTcult to maintain the expected customer Uow and revenuegrowth in the long term.The Company would have to spend more onpromotion/marketing,leading to rising user acquisition costs,draggingdown margins.4)Dingdang has to use the logistics system of third-partyplatfo
78、rms,which may have efTciency/quality problems.5)We dont thinkthat Dingdang can narrow the gap with JD Health and Alibaba Health byrelying on third-party platforms to enlarge user base,which is a bigproblem.In terms of ofUine pharmacies,although Dingdang has expanded smartpharmacies rapidly in recent
79、 years,the performance of these ofUinepharmacies cannot be compared with that of traditional ofUine retailpharmacies(such as Yunnan Hongxiang Yixintang Pharmaceutical(002727CH),Laobaixing Pharmacy Chain JSC(603883 CH),Yifeng Pharmacy ChainCo Ltd(603939 CH)and Dashenlin Pharmaceutical Group-A(603233
80、CH),with much lower sales scale.Meanwhile,the market of online pharmacybusiness is actually quite competitive.As these traditional ofUine retailpharmacies as well as other types of players(e.g.Jointown Pharmaceutical A(600998 CH),etc.)also enter this enter online pharmacy business,theDingdang Health
81、 Technology(9886HK)-Business Model Face Test;Hard to Run the Ecosystem SuccessfullyXinyao(Criss)Wang14prospect of Dingdangs performance growth will be more uncertain since thebarriers to the Companys business model are not deep.In other words,Dingdangs future revenue growth could encounter bottlenec
82、ks ascompetitors continue to carve up the market.If this is the case,then thepressure of large liability balance would be more pronounced and when toturn around losses would be less optimistic.In terms of online consultation and chronic disease and healthcaremanagement service,we have already analyz
83、ed the untenable logic in theinsight“Ping An Healthcare and Technology(1833.HK)-Untenable BusinessModel Worsen the Logic and Outlook.Read more:https:/skr.ma/AxgKD”,sowe would not repeat ourselves here.So far,none of Ping An Healthcare andTechnology Company Limited(1833 HK),JD health and Alibaba Heal
84、th hasbeen able to Tnd an effective proTt model based on this business.We do notthink Dingdang will be an exception.Overall,the purchase of drugs is a relatively low frequency demand,and thedrugs that need to be delivered in 28 minutes are not a common scenario ofconsumption.In other words,this core
85、 advantage of Dingdang wouldnt helpit establish high moat.The Company also lacks core competitiveness inintroducing customer Uow or rapidly expanding user base.Meanwhile,Dingdang needs to face the cash Uow pressure caused by the heavy assetmodel.The turning point of proTtability has not been seen in
86、 theperformance.It is difTcult to achieve high proTts based on the currentbusiness model when break-even is barely achieved.All the above are thechallenges for Dingdang to successfully run through its ecosystem.In ourview,we are not optimistic about the Companys prospects.Disclosure&Certi?cationI/We
87、 have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,m
88、aterial information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We
89、have signed the Insight Provider Agreement and this insight does not violate any of the terms speciTed therein.Xinyao(Criss)Wang(09 Oct 2022)Dingdang Health Technology(9886HK)-Business Model Face Test;Hard to Run the Ecosystem SuccessfullyXinyao(Criss)Wang15Arun GeorgeIPOs and Catalysts/EventsGiant
90、Biogene Holding|Equity Capital MarketsGiant Biogene IPO:TheBull CaseBy Arun George|11 Oct 2022EXECUTIVE SUMMARYGiant Biogene Holding(GBH HK),a leading professional skin careproduct manufacturer,has started pre-marketing a US$500 millionHKEx IPO.According to Frost&Sullivan,Biogene was Chinas second-l
91、argestprofessional skin treatment product company by retail sales in 2021.The key elements of the bull case rest on a large and growingaddressable market,regulatory tailwinds,the core brands stellarperformance and high cash generation.DETAILWhat is Giant Biogene?Giant Biogene is a leader in Chinas b
92、ioactive ingredient-based professionalskin treatment product industry.It designs,develops and manufacturesprofessional skin treatment products with recombinant collagen as thecritical bioactive ingredient.It also develops and manufactures rareginsenosides technology-based functional foods.According
93、to Frost&Sullivan,Biogene was the second-largest professionalskin treatment product company by retail sales in China in 2021 and thelargest collagen-based professional skin treatment product company byretail sales in China for the last three consecutive years since 2019.Biogene has a portfolio of 10
94、5 SKUs across eight major brands coveringfunctional skincare,medical dressings and functional foods.The brands areComfy,Collgene,Keyu,Kehen,Kefuping,Leeyen,SKIGIN,and Shengan.Comfy and Collgene are the Uagship brands of recombinant collagen-basedproducts.According to Frost&Sullivan,Collgene and Comf
95、y ranked thirdand fourth best-selling professional skin treatment brands by retail sales inChina in 2021.Giant Biogene IPO:The Bull CaseArun George16Source:PHIPComfy,launched in 2011,is the core brand and accounted for 59.2%ofrevenue and 60.3%of gross proTt in 5M22.Source:PHIP,Global Equity Research
96、A high-growth business helped by ashift to online direct salesBiogene is a high-growth business.Group revenue growth accelerated from24.4%in 2020 to 30.4%in 2021 and a further 48.1%YoY in the 7M22 due tothe professional skin treatment products business.Giant Biogene IPO:The Bull CaseArun George17Sou
97、rce:PHIP,Global Equity ResearchBiogene has a dual-pronged“medical institution+mass consumer”salesstrategy targeting medical institutions and the mass market.Biogene sellsproducts to over 1,000 public hospitals,1,700 private hospitals/clinics and300 pharmacy chain brands across China.The mass market
98、sales network iscarried out through direct sales and distributors.Direct sales primarily include direct-to-customer(DTC)stores on e-commerce and social media platforms,including Tmall,JD.com,Douyin,Xiaohongshu,and Pinduoduo along with sales to e-commerce platformssuch as JD.com and Vipshop,which res
99、ell products to customers throughtheir online retail platforms.The mass market distribution covers individualconsumers,cosmetic store chains and supermarket chains such as Watsons,ATona,The COLORIST,Ole,Hualian Group and Hema Fresh.Biogene has steadily reduced its reliance on distributors by growing
100、 itsonline direct sales.Online direct sales also have comparatively higher grossmargins than ofUine direct sales and distributors.Due to the ongoinginvestment in online marketing efforts,Biogene anticipates that onlinedirect sales will grow further to contribute to overall growth.Giant Biogene IPO:T
101、he Bull CaseArun George18Source:PHIP,Global Equity ResearchLarge addressable markets withBiogene occupying top-three positionsThe two critical addressable markets in China are the medical dressings andfunctional skincare markets.According to Frost&Sullivan,the market sizefor medical dressings in Chi
102、na grew at a CAGR of 40.0%from 2017 to 2021and is expected to further increase from RMB34.7 billion in 2022 to RMB97.9billion in 2027 at a CAGR of 23.1%.The growth is driven by increasingdemand for skin repair.The medical dressing market in China is fragmented,with the top Tveplayers accounting for
103、26.5%of the market share.Biogene is the secondlargest player,with a 9.0%market share measured by retail sales value in2021.The medical dressing market in ChinaSource:PHIPAccording to Frost&Sullivan,the market size for the functional skincaremarket in China grew at a CAGR of 23.4%from 2017 to 2021 an
104、d is expectedto touch RMB211.8 billion in 2027 at a CAGR of 38.8%from 2022 to 2027.Giant Biogene IPO:The Bull CaseArun George19The functional skincare market in China is concentrated with the top Tveplayers accounting for 67.5%of the market share.Biogene is the third largestplayer,with an 11.9%marke
105、t share measured by retail sales value in 2021.The largest player is Yunnan Botanee Bio-Technology(300957 CH).The functional skincare market in ChinaSource:PHIPRegulatory tailwindsThe PRC Medical and Pharmaceutical Industry Standards,RecombinantCollagen,promulgated by the NMPA,became effective in Au
106、gust 2022.TheNMPA has also initiated promulgating technical requirements for collagenas raw materials for cosmetic products to provide more precise and uniTedguidelines on using recombinant collagen in cosmetic products.Biogene was involved in the drafting of the NMPA standards and technicalrequirem
107、ents.Implementing the NMPA requirements would stimulateapplications of recombinant collagen in medical and cosmetic products,butwith tighter regulatory requirements on quality control,testing and rawmaterials.As a leader in recombinant collagen,the regulatory developments wouldhelp Biogene by creati
108、ng technological barriers to entry for new entrants.Biogene is a handful of companies that can meet all the NMPA requirements.The core brands accelerating growthand high gross marginComfy is a dermatology-grade(with products of Class II medical deviceregistration)professional skincare brand designed
109、 to offer skin repair andother skincare solutions.Comfy was the second best-selling brand in themedical dressing market and the fourth best-selling professional skintreatment brand in China in terms of retail sales in 2021,according to Frost&Sullivan.Currently,there are 32 SKUs under Comfy,including
110、 one medicaldressing collection with four products registered as medical devices and fourskincare collections with 28 SKUs targeting mass consumer groups.Giant Biogene IPO:The Bull CaseArun George20The Comfy product portfolioSource:PHIPComfy revenue growth accelerated from 24.4%in 2020 to 30.4%in 20
111、21 anda further 38.9%YoY in 5M22.The acceleration in the growth rates wasprimarily due to the functional skincare product category.Functionalskincare as a percentage of total Comfy revenue increased from 6.1%in 2019to 46.1%in 5M22.In 5M22,the top products were Human-like CollagenDressing(medical dre
112、ssing)and Sodium Hyaluronate Repair Mask(functional skincare).Source:PHIP,Global Equity ResearchComfys high growth rates were primarily due to expansion in direct sales,mainly through online e-commerce platforms.Online e-commerce platformsas a percentage of Comfy revenue rose from 0.0%in 2019 to 10.
113、7%in 5M22.Giant Biogene IPO:The Bull CaseArun George21Source:PHIP,Global Equity ResearchComfys gross margin has remained relatively stable and high over the trackrecord period.The high gross margin has been helped by the shift to thehigher margin direct sales channel.Source:PHIP,Global Equity Resear
114、chHigh FCF generationBiogene is a cash-generative company.The cash generation averaged astellar 105%from 2019 to 2021.Due to the high cash conversion,lowworking cap and declining capex,the FCF margin averaged 52.9%from 2019to 2021.Giant Biogene IPO:The Bull CaseArun George22Source:PHIP,Global Equity
115、 ResearchBiogene is debt free,but the net cash materially declined from RMB7,258.6million in 2021 to RMB1,068.2 million in 5M22.The signiTcant reduction inthe cash position is primarily related to the timing of an RMB6,276.6 millionpayment related to a share redemption agreement.On 14 October 2021,B
116、iogene entered a share redemption agreement withpre-IPO investors and Juzi Holding(an existing shareholder)such thatBiogene redeemed 317,995,065 ordinary shares from Juzi Holding and issued367,995,065 preferred shares to the pre-IPO investors.The shares wereredeemed at RMB19.74 per share compared wi
117、th the RMB20.00 per sharepaid by the pre-IPO investors.Therefore,we do not think there is anynegative read across concerning the signiTcant reduction in cash in 5M22.Source:PHIP,Global Equity ResearchGiant Biogene IPO:The Bull CaseArun George23Disclosure&Certi?cationGlobal Equity Research Ltd is an
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134、m by the FinancialConduct Authority for the provision of investment advice.Residents of the United Kingdom should seek speciTc professional Tnancialand investment advice from a stockbroker,banker,solicitor,accountant or other independent professional adviser authorised pursuant tothe Financial Servi
135、ces and Markets Act 2000.This report is intended only for investors who are professional clients as deTned by theFCA,and may not,therefore,be redistributed to other classes of investors.Analysts CertiTcation The analysts involved in the productionof this document hereby certify that the views expres
136、sed in this document accurately reUect their personal views about the securitiesmentioned herein.The analysts point out that they may buy,sell or already have taken positions in the securities,and related Tnancialinstruments,mentioned in this document.I/We have no position(s)in the any of securities
137、 referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/our kn
138、owledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement a
139、nd this insight does not violate any of the terms speciTed therein.Arun George(11 Oct 2022)Giant Biogene IPO:The Bull CaseArun George24Xinyao(Criss)WangHK/China Healthcare Analyst(ex-Fosun Pharma)iRay Technology|Equity Bottom-UpIRay Technology(688301.CH)-Overvalued;PerformanceDeceleration Will Leadt
140、o Valuation CorrectionBy Xinyao(Criss)Wang|13 Oct 2022EXECUTIVE SUMMARYIRay Masters all the major core technologies.It has a completetechnical system of TFT SENSOR design and invention patents in theTeld of scintillators,setting it apart from domestic peers.The market where iRay is located has slow
141、growth rate and obviousgrowth ceiling.The higher the short-term performance growth of iRay,the faster it would encounter a growth bottleneck.IRay is overvalued.The valuation has already overdrawn theperformance of the next few years.Any deceleration in revenue/proTtin any given year would lead to a
142、signiTcant valuation correction.DETAILIn 2022H1,iRay Technology(688301 CH)s revenue was RMB721 million,up30%YoY.Net proTt was RMB277 million,up 31%YoY.The growth rate of theCompanys performance in the reporting period slowed down compared withthe previous periods.Obviously,the cause of pandemic/lock
143、down in H1cannot be ignored,leading to difTculties and challenges in the supply chain,production and other aspects,and the order revenue of some downstreamcustomers slowed down.Gross proTt margin still maintained at a high level,reaching 58.5%in 2022H1,mainly due to the optimization of productstruct
144、ure and the further increase of the revenue proportion of productswith high gross proTt margin.Our forecast for 2022 is revenue/net proTtgrowth could be about 30%YoY,and net proTt margin could be around35%-40%.IRay Technology(688301.CH)-Overvalued;Performance Deceleration Will Lead to Valuation Corr
145、ectionXinyao(Criss)Wang25The strength of iRay is obvious.The digital X-ray detector is a typical high-tech product with high technical barriers.iRay is one of the few digital X-raydetector manufacturers(no more than 10)in the world that master all themajor core technologies including amorphous Silic
146、on(a-Si)to IGZO(OxideTFT),Uexible substrates and CMOS devices,with the capacity of massproduction.The performance of digital X-ray detector depends largely onthe performance of sensor.Sensor design and manufacturing technology areone of the main core technologies for digital X-ray detectors.Amorphou
147、sSilicon,IGZO and Uexible substrates detectors use TFT(Thin FilmTransistor)SENSOR related technologies,while CMOS detectors use CMOSSENSOR.iRay has a complete technical system of TFT SENSOR design,which is more innovative than most domestic manufacturers who justdirectly purchase standard TFT SENSOR
148、.Meanwhile,scintillators areanother key material of digital X-ray detectors.Common scintillatormaterials include gadolinium oxysulTde and cesium iodide,among whichcesium iodide has better performance.Most manufacturers in the industryalso obtain scintillators through outsourcing,but iRay has a numbe
149、r ofinvention patents in the Teld of scintillator preparation and packaging,realizing the independent production of cesium iodide scintillator Tlms.The rapid growth of iRays performance in recent years is mainly due to:1)The government purchased a large number of mobile DR for pandemicprevention/con
150、trol and emergency reserve,which boost the demand oniRays products;2)The State issued policy to encourage the priorityprocurement of domestic equipment instead of imported products;3)Theconstant penetration of DR system in medical institutions as this marketwas once under-penetrated in China,which b
151、rings developmentopportunities to iRay.However,the Companys rapid growth momentummay be difTcult to sustain.According to iRays 22H1 report,in 2018,the global market size of digital X-ray detectors was about US$2 billion,of which medical products accountedfor about 75%of the market share,and safety i
152、nspection,industrialdetection,veterinary products and others contributed to the rest of themarket.It is estimated that the global market size of digital X-ray detectorswould reach US$2.8 billion by 2024.We could see that the marketwhere iRay is located is not that big,with relatively slow growth rat
153、e andobvious growth ceiling.That is to say,the higher the short-termperformance growth of iRay,the faster it would encounter a growthbottleneck,and then the performance growth would slow down obviously.In terms of policy,the new Tscal discount interest policy to encouragehospitals to purchase medica
154、l equipment has attracted widespreadattention.In our view,this policy would have a certain promoting effect onthe purchase of medical devices and is conducive to the short-term increasein sales volume of related equipment.However,we advise investors to take acritical look at this policy,because 1)As
155、 the procurement demand of publichospitals is planned in advance and the procurement funds come from theirown funds and government appropriations,this policy may have limitedimpact on the purchase intention,but it has a relatively greater incentiveeffect on private hospitals or new hospitals.2)Produ
156、cts like DR are a durablemedical equipment with a long equipment replacement cycle,leading to lowIRay Technology(688301.CH)-Overvalued;Performance Deceleration Will Lead to Valuation CorrectionXinyao(Criss)Wang26procurement frequency.3)Short term policy stimulus will not break theceiling of the mark
157、et size and the bottleneck of long-term growth for iRay asmentioned above still exists.On the other hand,about 40%of iRays products are sold to overseasmarkets such as the US and Europe.In the future,iRay will furtherstrengthen the construction of overseas marketing service network.If theinternation
158、al trade friction or the geopolitical conUicts has a signiTcantimpact on the economic and trade development of some countries,the salesof iRays existing customers would Uuctuate and the business volume of newcustomers would be difTcult to supplement in a timely manner.Meanwhile,iRay does not complet
159、ely get rid of its dependence on imports.The FPGAchips and ARM chips need to be purchased from abroad,and the proportionof overseas procurement exceeds 20%.As the tension between China and theUS escalates,we are not sure whether the US and its allies will restrict thesupply of the Companys core raw
160、materials,as well as other possiblesanctions.Overall,1)we doubt the future growth of iRay due to our concerns on thelimited market size and long-term growth potential.2)We think iRay isovervalued.The current valuation has already overdrawn the performance ofthe next few years.Any deceleration in rev
161、enues and proTts in any givenyear is likely to lead to a signiTcant valuation correction.These two pointscould also help explain why in September 2021,just after the lifting of theban,several major funds released their share reduction plans immediately.After all,high valuations cannot be supported w
162、ithout certainty of growth.Itwould be more reasonable if the PE/TTM could fall back to about 30-40.Meanwhile,the liquidity of SSE STAR Market is relatively not good,andinvestors are also advised to pay attention to circulation market value out ofthe total market value.Disclosure&Certi?cationI/We hav
163、e no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reUects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,mater
164、ial information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciTc opinion on the securities referenced thereinI/We have
165、 signed the Insight Provider Agreement and this insight does not violate any of the terms speciTed therein.Xinyao(Criss)Wang(12 Oct 2022)IRay Technology(688301.CH)-Overvalued;Performance Deceleration Will Lead to Valuation CorrectionXinyao(Criss)Wang27SMARTKARMA RESEARCH:This publication is publishe
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