China Watch P268:Near-term catalysts for large cap names

作者: 谈股论金  发布:2019-09-04

On new product approval, we anticipate anlotinib approval within thenext 2-4 weeks, more likely before Chinese New Year as we estimate JCTTmight have passed on-site manufacturing inspection already, the last keyelement of the regulatory process. We also expect nab-paclitaxel approvalin 1H18. On MNC front, we believe nivolumab approval in 1Q18 wouldbe a meaningful catalyst, as the subsequent ramp-up would be watched.

Anticipate stable delivery in 2018; Hengrui/SBP guided growth acceleration.

    We learned that AZN might have generated RMB500m for Tagrisso within9 months after approval in 2017, which effectively made it the mostsuccessful drug launch in China ever.

    We hosted executives from 18 listed companies during the DB conferenceand tour this week. Most executives remain constructive for 2018 and, despitethe stock rally, have not become more bullish or bearish vs. 1H17. Additionaltakeaways: 1) most expect an acceleration of drug approvals and benefits fromNRDL inclusion, although their views on the exact timeline of the latter weremixed; 2) their expectations of the pricing/volume trends after BE were mixed.

    On new drug application, we highlight that 3S Bio is on track to re-fileits Ipterbin in 1H18 (or 1Q18).

    We highlight that only two companies guided a growth acceleration for 2018 vs.

    At current valuation, we anticipate most acquisitions would be accretivewhich investors would welcome. As such, we believe it is more likely thatexisting shareholders would approve Tide deal on Feb 12. Per HKEX rule,the voting result is expected by the end of that day.

    2017 – Hengrui and Sino Biopharm.

    NRDL benefit emerged for 3S Bio already in 4Q17, as Yisaipu andTPIAO exhibited obviously growth acceleration. We expect SBP andCSPC to benefit as well. Also, we remind investors that volume growthacceleration emerged for icotinib in 2Q17 after 54% price cut in May 2016.

    DB proprietary executive survey on the 2018 outlook.

    We are observing increasing interests on both leaders and laggers from globalinvestors, however Asia-based investors are slightly more interested on laggers.

    We conducted our annual survey of executives from 16 listed companies to gaugeviews of key policies and sector catalysts. We highlight the following results: 1)on whether the executives have changed their views on the sector growth outlookin 2018 vs. 1H17, 37% indicated no change. We concur and remind investors thatthe fundamentals have not changed despite the significant stock rally; 2) on thegrowth outlook for the distribution sector, 2 distributor bellwethers voted 7-8%,one expected a high single digit and another said 6-7%, vs. 7.8% growth in 1H17;3) on the timeline of the NRDL benefit on drug growth, the feedback was mixed,with 25% being uncertain; 4) on an acceleration of regulatory approvals in 2018,56% of the executives expected one; 5) on the pricing trend after the BE study,the responses were mixed as well, with 25% anticipating a price erosion and 44%expecting stable prices.

    That being said, we remind investors on the following risks, 1) 4Q17 QTD hospitaldata appear weaker than expected; 2) further delay of regulatory approvals; 3)ongoing Jiangsu PRDL revision would send a signal, as street is closely watchingwhether Lipushu would be excluded. Per JS government document, all drugs thatfailed to enter NRDL after negotiation would be automatically taken out of PRDL.

    DB view: more challenging to identify delta vs. consensus estimates.

    From a valuation perspective, we believe most of the near-term catalysts havebeen reflected for large-cap stocks while new mid/long-term risks are likely toemerge. On fundamentals, while we could still identify meaningful differencesin selective mid/long term growth drivers on a qualitative basis, we see feweropportunities for consensus revisions of 2018 numbers. While it would bechallenging to predict the sustainability of a large-cap stock rally, we now believelaggards may have more chances to outperform. We highlight Jointown andUniversal Medical as our top picks. We also like IHH at this point.

    We will host a teleconference on DB conference takeaways at 9:30am HKT,January 15. Dial-in: +852 3051 2792, conference ID: 4595967, passcode: DBJC18.

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