I'm a vested Biosensors fan and had been longing this counter since 0.55

However, I am more a chart analysis and look for all the signs of trend and indicators to decide my moves rather than hear rumours which always make me lose money.

Candlesticks analysis just shown the classic kicker from the uptrend to a reversal at about 1.23.  I've checked with my dealer and it also shows the big boys are exiting this counter.  I suspect these are the same group which enter at the $0.80-1.00 region and spike the recent price surges.

My advice is dun risk it becos chart and technical analysis dun lie and is the most reliable indication of price movements.  Should let it cool down to its natural state before getting vested again.  I dun see this counter going anywhere higher anytime soon.

If you dare to short, its a better call than longing this now.  Happy trading.

Amongst other information an interesting table was provided in the Nomura Analysis (below) that showed various financial metrics for comparable companies.  They list MicroPort and Lepu Medical both traded in Hong Kong as BIG peers. 

Much as one analyzes real estate looking to price per square foot as an objective metric: one looks at P.E. ratio as an objective metric for equities.  In real estate one looks at other data such as location, view, layout and finishes: in business one also looks at management, execution, sales & profit growth, depth of product line, proprietary technology and clinical efficacy.

On all the above metrics BIG is comparable to Microport and Lepu - But BIG is far superior to MicroPort and Lepu in the case of proprietary technology and proven clinical efficacy.

BIG is significantly underpriced based on P.E. ratio metric -  an indicative price target of S$2.34 using a simple average P.E. (2010 forecast) would place it on comparable footing.  This is something that WILL be noticed by institutional investors.



 

Biosensors International BIG SP

HEALTH CARE & PHARMACEUTICALS | SINGAPORE

Jit Soon Lim, CFA +65 6433 6969 jitsoon.lim@nomura.com

Yuan Yiu Tsai +65 6433 6964 yuanyiu.tsai@nomura.com

Another strong quarter

�� Strong momentum of BioMatrix / Nobori platform

BIG’s strong 2Q results reaffirm the market share momentum of

BioMatrix (+63% y-y / +19% q-q) and Nobori (+87% y-y / +10% q-q) in

an overall flattish DES market. According to management, BioMatrix /

Nobori have a combined market share of >15% in key CE markets.

We expect the strong momentum to continue; with the potential delay

of JNJ’s NEVO launch in the EU, the platform will retain its

technological edge as the only limus-eluting stent with a

biodegradable polymer.

�� Revenue guidance unchanged; 2H profit > 1H profit

Management reaffirmed its FY11F core revenue guidance of US$135-

145mn and continues to guide for a stronger 2H, driven by the clinical

results presented at the TCT conference. We have raised our FY11-

13F EPS by 13-19% to reflect a stronger-than-expected royalty

contribution from Terumo (not part of guidance), better gross margins

and lower operating expenses with the closure of its US operations.

�� A strategic focus on China with new co-CEO

JWMS CEO Dr Jack Wang has been appointed co-CEO of BIG, in

charge of its China strategy. With reference to the potential launch of

BioMatrix in China upon SFDA approval, Dr Wang opines that the two

companies (BIG and JWMS) will be complementary, although we note

that plans are preliminary at this stage.

�� BUY: revised PT of S$1.50 suggests 23% upside

We raise our PT to S$1.50 (implied FY12F P/E of 20x), which chiefly

reflects a more valuable DES franchise underpinned by BIG’s recent

acquisitions (CardioMind, AXXESS), the proven results of

BioFreedom, and BioMatrix’s extended technological lead. BUY.

Key financials & valuations

31 Mar (US$mn) FY10 FY11F FY12F FY13F

Revenue 116.2 148.4 190.5 232.5

Reported net profit 31.4 39.3 69.9 99.9

Normalised net profit 31.4 48.7 69.9 99.9

Normalised EPS (US$) 0.029 0.046 0.065 0.093

Norm. EPS growth (%) na 55.0 43.5 42.9

Norm. P/E (x) 33.4 23.2 16.2 11.3

EV/EBITDA (x) 26.3 17.7 12.1 8.0

Price/book (x) 6.4 5.5 4.0 2.8

Dividend yield (%) 0.0 0.0 0.0 0.0

ROE (%) 25.3 23.9 31.9 32.9

Net debt/equity (%) net cash net cash net cash net cash

Earnings revisions

Previous norm. net profit 40.8 62.0 85.0

Change from previous (%) 19.2 12.7 17.5

Previous norm. EPS (US$) 0.038 0.058 0.080

Source: Company, Nomura estimates

Share price relative to MSCI Singapore

1m 3m 6m

22.0 50.6 60.5

24.7 58.1 74.3

17.5 43.0 48.0

Easy

Source: Company, Nomura estimates

Mark et cap (US$mn) 1,145

Fidelity

Stock borrowability

5.4

Major shareholders (%)

Hony Capital 29.4

Price

Rel MSCI Singapore

(S$)

Closing price on 9 Nov S$1.22

Price target S$1.50

(from S$1.20)

Upside/downside 23.0%

Difference from consensus 22.0%

FY12F net profit (US$mn) 69.9

Difference from consensus na

Source: Nomura

Nomura vs consensus

We believe consensus has not

recognised the potential of Terumo’s

accelerating royalties to BIG.

Maintained

BUY

�� Action

BIG reported a strong set of 2Q FY11 results, boosted by continued market share

gains by BioMatrix and Nobori, with normalised net profit exceeding our forecast by

20%. We revise our EPS forecast by +13-19% over FY11-13F and raise our PT to

S$1.50. Reiterate BUY – the appointment of JWMS CEO Jack Wang as co-CEO of

BIG is a key positive, with the group seeking to establish a platform in China.

�� Catalysts

Continued momentum in its forthcoming results, the potential value-unlocking of its

50% stake in domestic drug-eluting stent (DES) manufacturer in China, JWMS, and

Japanese approval of Terumo’s Nobori, whose technology is licensed from BIG.

Anchor themes

The US$5bn DES industry is one of the most profitable segments in the medical

technology space, with market share changes driven by innovation. Start-ups like

Biosensors, with its leading-edge technology, could be M&A targets for incumbents.

NOMURA S INGAPORE L I M ITED

Biosensors International Jit Soon Lim, CFA / Yuan Yiu Tsai

Nomura 2 9 November 2010

2Q FY11 results review

Another strong quarter

Exhibit 1. Biosensors 2Q FY11 results

FYE Mar (US$mn) 4Q10 1Q11 2Q11 (% y-y) (% q-q) Remarks

Revenue

Critical care 3.0 3.0 3.1 1.6 0.8

Other int. cardiology 9.3 8.7 8.4 (8.8) (3.1) Decreased catheter sales to JWMS on production planning (seasonal)

DES 12.8 17.6 20.9 63.4 18.7 Strong market share gains in existing markets, and new launch in

Taiwan

Licensing & royalties 2.2 3.6 4.0 86.9 10.4 Strong growth from low base as Terumo’s Nobori gains traction27.2 33.0 36.5 33.9 10.4

Gross profit

Critical care 1.4 1.2 1.1 (23.5) (7.6)

Interventional cardiology

(DES + other)

15.5 20.2 23.6 51.8 16.719.1 25.0 28.7 50.2 14.6

IC margin (%)

driven by higher volume

Licensing & royalties 2.2 3.6 4.0 86.9 10.467.5 72.7 76.0 Strong margin with a higher mix of DES sales and operating efficiency

JV contribution (JWMS) 3.7 5.2 4.6 26.3 (11.3) +36% y-y sales, net margin at 46%

Net profit

(ex-exceptional)

6.4 9.9 11.2 73.5 12.7

expectations given management’s guidance of stronger 2H1H FY11 net profit met 52% of original FY11 forecast, exceeds

Source: Company data, Nomura research

Key takeaways from the conference call

��

markets in this quarter, contributing to strong revenue growth. On average, it has

exceeded management’s target of 10% unit share and is approaching 15%. The

BioMatrix / Nobori DES platform has a combined market share of >15% in the

major CE markets (mainly in EU).Market share update: Management guided that BioMatrix gained share in most

��

opinion leaders on a large-scale clinical trial for BioFreedom and continues to guide

for the possibility of an increase in R&D expense in 2H FY11. On its recent

acquisition of Devax’s AXXESS stent, management said that it is currently setting

up the production line in Singapore; thus a launch will not be immediate.Updates on BioFreedom / launch of AXXESS: BIG is still in discussions with key

��

Capital's entry as a major shareholder, Biosensors announced on 9 November a

series of boardroom changes with the appointment of two representatives from the

fund. In addition, Dr Jack Wang has been appointed co-CEO of Biosensors and will

focus on BIG’s operations and China strategy, while Jeff Jump will continue to lead

the company’s strategy outside China. Dr Wang opines that both BIG and JWMS

will be complementary in China, perhaps one acting as a sales/marketing platform

and the other as a manufacturing base, although we note that plans are preliminary

at this stage.Appointment of Dr Jack Wang as co-CEO in charge of China. Following Hony

��

Mr Kevin Sayer (based in the US) has resigned as CFO, but will remain as a

consultant to ensure a smooth transition. BIG is currently in search of a new CFO.Resignation of CFO Kevin Sayer. With the closure of BIG’s operations in the US,

We view this as a transformative

event, which bodes well for

Biosensors as Dr Wang was

instrumental in establishing

JWMS.

Biosensors International Jit Soon Lim, CFA / Yuan Yiu Tsai

Nomura 3 9 November 2010

Revised PT of S$1.50 suggests 23% potential upside

On BIG’s strong 1H11 results, we are raising our FY11-13F EPS by 13-19%. Key

changes include: i) a 13-30% increase in Terumo royalties in FY11-13F, to reflect the

stronger-than-expected Nobori sales outside Japan; and ii) a US$3.5mn reduction in

G&A expenses from FY12F with the closure of BIG’s US operations.

We are raising our PT to S$1.50 (from S$1.20) chiefly to reflect a more valuable DES

franchise underpinned by BIG’s recent acquisitions (CardioMind, AXXESS), the proven

results of BioFreedom and BioMatrix’s longer shelf-life arising from the potential delay

in JNJ’s EU launch of NEVO (see page 4). Our revised PT implies a FY12F (Mar-end)

P/E of 19.9x, which is still at a discount to its HK-listed peer MicroPort (Exhibit 3). Our

sum-of-the-parts methodology is unchanged.

Exhibit 2. SOTP valuation; risks to our PT

(US$mn) Nomura comment

DES franchise 587 DCF of BioMatrix over 6 years (WACC:9.7%), terminal value at 12x P/E (previously 9.2x) of trough earnings of

BioMatrix to reflect BIG’s recent acquisitions (CardioMind, AXXESS) and proven results of BioFreedom

Base business 125 DCF (WACC: 9.7%, terminal value: 0%)

JWMS 477 22x FY11/12F P/E (rolling 12-month forward)

PV of Terumo royalties 145 DCF value (WACC: 9.7%) over five-year licensing agreement

Net cash/(debt) 30 End-FY11F

Total (US$mn) 1,364

Total (S$mn) 1,773

Diluted # of shares

(‘000)

1,206 Assuming full dilution of outstanding options and warrants

Price target

(S$/share)

1.50

Implied FY11F P/E 28.6x

Implied FY12F P/E 19.9x

Rounded off from 1.47

Key risks to PT:

1) Weakness in euro, ASP pressure worldwide

2) Execution amid strong competition. Notwithstanding our positive view, BIG is still a small independent DES

company, which will continue to see competition from dominant competitors and face execution issues per most

small start-ups.

Source: Nomura estimates

Exhibit 3. Regional DES valuation

Price Mkt Cap EPS P/E (x) P/BV (x) ROE (%)

Company Ticker Rating (LC) (US$mn) CAGR (%) 10F 11F 10F 11F 10F 11F

China

MicroPort 853 HK NR 8.11 1,509 19 31.7 28.2 4.8 4.2 17.1 15.3

Lepu Medical (A) 30003 CH NR 28.90 3,520 36 57.6 41.9 11.9 9.9 21.2 25.4

Singapore

Biosensors* BIG SP BUY 1.22 1,145 42 23.2 16.2 5.5 4.0 23.9 31.9

Note: * FYE March 2011/12F corresponds to FY10-11F; pricing as of 9 November 2010

Source: Bloomberg estimates for not rated stocks, Nomura estimates for Nomura coverage

Biosensors International Jit Soon Lim, CFA / Yuan Yiu Tsai

Nomura 4 9 November 2010

Macro view

Key takeaways from global players

We highlight the following key takeaways from 3Q10 results of global medtech

players — Johnson and Johnson (JNJ), Boston Scientific (BSX) and Abbott (ABT). All

are not rated:

��

ASP decline.

down 1% both on a reported and constant currency basis y-y. Worldwide volume

growth of 10%, driven by both PCI volume and a 3ppt increase in DES penetration,

was offset by average ASP decline of 10%. BSX continues to forecast a flat market

going forward, with increases in volume and penetration rate offset by ASP

declines.Worldwide DES market worth US$992mn in 3Q10, volume increase offset byBSX estimates the worldwide DES market in 3Q to be US$992mn,

Exhibit 4. Global DES market in 3Q10

Value (y-y %) Volume ASP PCI volume vs. DES penetration

Worldwide US$992mn (-1%) +10% -10% Unit volume growth driven by both

PCI volume and 3ppt increase in

DES penetration

US US$437mn (-3%) +4% -7% -1% decline in PCI volume offset by

3ppt increase in DES penetration

OUS

(outside of US)

US$554mn (+2%) +14% -12~14% +9% increase in PCI volume

boosted by 4 ppt increase in DES

penetration

Source: Boston Scientific

��

the downside in reimbursement driven by government bodies, BSX opines that the

rapid pace at which physicians are becoming employees of hospitals outside the

US has drastically changed the decision-making process for medical device

purchase.OUS ASP decline driven by reimbursement and hospital dynamics. Besides

��

its launch in 1Q, the Xience/Promus platform quickly gained shares in Japan and

has continued to strengthen its leadership position with >70% market share in 3Q

(up from 51% in 1Q).Japan: Xience/Promus platform strengthens lead with >70% share. Following

��

that the competitive dynamics in the US DES market are less intense now, given

the stricter regulatory programmes (high entry barrier to new players) and the

technical issues faced by its competitors.US: high entry barrier with stricter regulatory environment. BSX’s CEO stated

��

new clinical trial EVOLVE for its next-generation everolimus-eluting Synergy stent,

which has a biodegradable polymer. On the other hand, JNJ has suspended

enrolment in NEVO II clinical trials as it is facing issues with the balloon catheter.

NEVO, its biodegradable polymer DES, was submitted for CE Mark at end-1Q10

and JNJ is “evaluating the impact of this delay” on its European launch, according

to its management.Biodegradable polymer pipeline: Synergy, NEVO (delayed). BSX has initiated a

��

of its 45-patient ABSORB trial for its next-generation biodegradable stent BVS,

which demonstrated strong results, in its view. ABT is looking at a European launch

by 2013. BSX views biodegradable stents as a “niche play” as they take two to

three years to disburse, with the major effect on dual anti-platelet therapy (DAPT)

requirement.Biodegradable stent: ABT’s BVS. ABT recently published the nine-month results