Simcere Pharma (2096 HK)'s Spin-Off and Listing Of Simcere Zaiming

• Pharma play Simcere Pharmaceutical (2096 HK) has announced the spin-off and listing of 83.1%-held Simcere Zaiming on the HKEx.

• There will be a global offering, the details of which are still to be fleshed out. Simcere Pharma is expected to hold >50% in Simcere Zaiming post listing.

• Simcere Zaiming, a biopharmaceutical play focusing on oncology, accounted for ~20% of Simcere Pharma’s revs in 2024, and ~23% of NTA.

The Trade:

• Often, the sum of the parts is larger than the whole. This may still hold here.

• However, given the size of Zaiming - relative to Simcere Pharma - higher market multiples may have a limited impact on the overall valuation. Especially when factoring in a holdco discount.

• My calcs suggest Simcere Pharma is fairly valued versus its historical metrics.

• Simcere Pharma’s share price is down since the announcement. That’s illustrative.

The insight is still labelled bullish as I’m not bearish here. But it’s not a strong conviction.