New Novus (300765 CH) acquires 100% of Shiyao Baike's shares: New Novartis (74% indirect shareholding) announced that it will use the issuance of shares plus cash to acquire 100% of the shares in Shiyao Baike (the indirect shareholding of Shiyao Group). The purchase consideration has not yet been determined, and the company is expected to disclose it before and after the annual report. In this transaction, Novus will issue shares to direct shareholders of 100g (i.e. Vitamin Pharmaceutical, Shiyao Enbip, and Shiyao Shanghai) at a price of not less than 20.91 yuan/share (vs. the closing price of 34.82 yuan on the trading day before the announcement), with a cash payment ratio of no more than 10%. At the same time, New Novi also plans to issue shares to no more than 35 specific investors to raise supporting capital. The total amount shall not exceed the consideration for this transaction, the number of shares issued shall not exceed 30% of the total share capital after the transaction is completed, and the issue price shall not be lower than 80% of the average price for the 20 trading days before the pricing benchmark date.

Shiyao Baike focuses on assets - Jin Youli, GLP-1 pipeline: Baike mainly focuses on cutting-edge fields such as long-term protein drugs. The self-developed long-term recombinant human granulocyte stimulating factor injection Jinyouli has grown into one of the pillar products of the Shiyao Group, with a market share of 38% in the 9M23 sample hospitals. In 2023, Baike recorded revenue of 4.7 billion yuan and net profit of 860 million yuan, and we expect to contribute less than 15% to the group. Baig's research pipeline has a very diverse layout of GLP-1 targets, including: 1) the new drug simeglutide (chemical synthesis method) of TG103 and Class 2.2 in clinical phase III; 2) long-acting simeglutide (fluid crystal form), oral simeglutide, and GLP-1 dual-target/three-target drug candidates in pre-clinical development. The company expects that TG103 and chemically synthesized Simei will be submitted for marketing in 2025 and are expected to be officially listed in 2026; among them, TG103's weight loss phase III trial enrollment has been completed, and diabetes phase III enrollment will also be completed soon.

Maintaining the purchase rating and target price of HK$10.0: Although the transaction consideration for this acquisition and the details of the supporting capital raised by New Novi are yet to be determined, considering that CSPC Group will maintain a controlling interest in New Novus and Baike, the impact of the corporate merger under the same control will be limited on the Group's reporting side. We believe that this acquisition marks the Group's determination to explore the value of innovative assets and enhance the company's overall valuation, and the synergy between the various subsidiaries in R&D and commercialization will also be further enhanced. After the acquisition is completed, Jin Youli's sales will provide important financial support for New Novi's R&D, and Group investors will also continue to benefit from cash dividends and valuation increases brought about by the implementation of the subsidiary's innovative value. Management maintains the guidance that group-level revenue growth will return to double digits in 2024.