The WHO’s news on the HPV vaccine caused the stock prices of Zhifei Bio and Wantai Bio to plunge

In this article, Pai LI (ESSEC Business School, Global BBA, 2021-2023) shares her insights on the event “The WHO’s news on the HPV vaccine caused the stock prices to plunge”.

The Brief Introduction of the event

On 2022 April 11, the World Health Organization (WHO) announced on its official website that the WHO convened a meeting of the Strategic Expert Group on Immunization (SAGE) from April 4 to 7 to vaccinate one dose of human papillomavirus (HPV) vaccine. The expert group considered that only 1 dose of HPV vaccine can produce the same immune effect as 2-3 doses, and can effectively prevent cervical cancer caused by HPV infection.

As soon as the news came out, the stock prices of HPV vaccine concept stocks Zhifei Bio and Wantai Bio plunged. As of the close, Zhifei Bio fell 14.19%, and Wantai Bio once fell by the limit, and as of the close, it fell 9.46% and approached the limit.

Stock chart of Zhifei Bio and Wantai Bio

Source: Bloomberg.

Explanation of the Market reaction to the Event

The World Health Organization (WHO) website released information saying that from April 4 to April 7, the WHO Strategic Advisory Group of Experts on Immunization (SAGE) held a meeting, referring to the single dose of the HPV vaccine provides reliable protection, comparable to a 2- or 3-dose regimen.

Regarding the impact of the reduction in the number of HPV vaccination doses, at noon on April 14, After the stock market opened on the afternoon of April 14, the decline in the share price of related companies narrowed. As of the close, Zhifei Biological fell 14.19% to 116 yuan per share, with a market value of 185.6 billion yuan; Watson Bio fell 3.08% to 49.11 yuan / stock market value of 78.65 billion yuan; Wantai Bio fell 9.46% to 257.59 yuan / share , with a market value of 156.37 billion yuan.

The stocks of biology may be affected by the decline of three HPV vaccine companies. On April 14, many stocks in the A-share biological vaccine sector fell. For example, CanSino closed down 3.99%, and Kangtai Bio closed down 1.2%.

WHO press release

Source: WHO.

It is important to note that SAGE stated in the minutes of the meeting that it reviewed new evidence on the efficacy of single doses of HPV, and recommended that women aged 9-14 receive 1 or 2 doses, with a single dose providing comparable and high levels of protection. From a public health perspective, is more effective, less resource intensive and easier to implement. Likewise, 1 or 2 doses are also suitable for women between the ages of 15 and 20.

The current HPV vaccine policy in the world is 2 doses for girls aged 9-14 years, 3 doses for girls aged 15 years and above, and 3 doses for immunocompromised people of any age, including people with HIV.

Notably, SAGE emphasizes that more evidence is needed on whether reduced doses provide protection in immunocompromised groups.

The minutes also mentioned that WHO will conduct stakeholder consultations on these important policy changes before revising the position paper on HPV vaccination.

Predictions for the future

Regarding the recommendations of this WHO meeting on HPV vaccine, I believe that this meeting is only providing a recommendation and not implementing it, and that the current vaccination schedule is still dominated by 2-3 doses. In addition, WHO’s recommendations are mainly based on concerns about the slow introduction of HPV vaccine into immunization programs and low overall population coverage, especially in poorer countries, and the core is to address the huge gap between HPV vaccine supply and demand.

Even if the vaccination procedure is changed from three injections to two injections in the future, the improvement of industry penetration rate and accessibility is believed to effectively fill the market, which is expected to bring strong demand for HPV vaccination in relevant third world countries, and the export of Chinese domestic HPV vaccines is expected to accelerate. At the same time, for Merck’s nine-valent HPV vaccine, it is still in a stage of insufficient production capacity. Whether it is a two-shot or three-shot vaccination program, it is still in a stage of short supply. In conclusion, there is no need to worry too much about the impact on the performance of HPV-related companies.

About the author

The article was written in May 2022 by Pai LI (ESSEC Business School, Global BBA, 2021-2023).

My internship experience as a financial research analyst in Tianfeng Securities

In this article, Pai LI (ESSEC Business School, Global BBA, 2021-2023) shares her internship experience as an assistant financial research analyst in Tianfeng Securities which is a Securities Research Institute in China.

The Company

Tianfeng Securities is a global full-license integrated financial securities service provider. Tianfeng Securities Research Institute is a high-end industry research think tank in China. It brings together more than 200 team members to build bridges and links between funds and industry and enhance the ability of financial services to serve the substantial economy.

Tianfeng Research Institute adheres to the “industry-oriented” driving force, creates a unique financial ecological alliance, forming a complete ecological chain that runs through the life cycle of enterprises and industries.

Logo of Tianfeng Securities

Source: Tianfeng Securities.

My Internship

My missions

The department I practiced for was the Securities Research Institute, and the position was financial research assistant. My work mainly consisted of two parts, the daily research work about industry and the related work of writing in-depth research reports about companies.

Daily work includes using a financial database called Wind (like Bloomberg but focused on mainland China) to find industry data, prospectus, company annual reports and other materials, doing market shares calculations, doing valuation models, collecting information for industry research topics, writing new stock purchase proposals, updating internal industry databases, modifying and improve the Powerpoint presentation of roadshow reports, operating social media for publishing weekly reports, comments, and in-depth reports.

In addition to the above routines, I also participated in the writing of the first draft of the Institute’s in-depth reports. At the beginning I wrote some simple company tracking reviews. These short reports were completed by referring to the relevant announcements and materials of the company. Next, I gradually participated in the writing of the in-depth reports. In the process of continuous maturity and improvement of the reports, I learned a lot of research skills.

Writing in-depth reports requires the collection of a large amount of financial and business data, and an overall overall grasp of the structure and context of the company. Not only did I improve my ability to understand the company’s business by collecting information from all parties, but I also learned to build a valuation model to predict the company’s future performance.

Required skills and knowledge

In terms of technical skills, you need to have financial knowledge, frameworks and insights for industry analysis and company analysis, and report writing skills. These professional abilities of mine have been greatly improved during this internship.
In terms of behavior skills, industry researchers need to have logical thinking ability to predict the future direction of companies and industries. In addition, interpersonal communication skills are also very important, through which research results can be presented to the buy-side clients in the best possible state.

What I have learnt

My biggest gain in this internship is that I learned how to write a professional report. I summarize the essential qualities of an extraordinary in-depth report into seven points:

The selection of the company is meaningful.
The core point of view about the company is highlighted.
The discussion about the business of the company is rigorous and logical.
The business and financial data are authentic and credible.
The business charts are clear and detailed.
The text is concise and straightforward.
The exhibit are exciting.

In addition, I also deepened my understanding of the industry of securities firm research. I realized that it is a highly homogenized industry, because the same teams research the same companies, and the companies provide the same type of information (announcements, financial and accounting data). This is an industry that pays great attention to timeliness. When a news comes out, investors expect to see relevant research results immediately, and will be swept away by other reports later. This is an industry with high barriers to entry. When looking for data, well-funded securities companies are equipped with sufficient database access qualifications, while small agencies can only search for free public information. Every year, many finance students try hard to get an internship in industry financial research, but few can get it. Therefore, in the face of such as intense competition, what we need to do is to maximize our core competitive advantages.

Three key financial concepts

Here are 3 useful valuation methods.

P/E Valuation Method

The Price-to-Earnings (P/E) valuation method is based on the price-earnings (P/E) ratio:

Price earnings ratio

EPS comes in two main varieties. TTM is a Wall Street acronym for “trailing 12 months”. This number signals the company’s performance over the past 12 months. The second type of EPS is found in a company’s earnings release, which often provides EPS guidance. This is the company’s best-educated guess of what it expects to earn in the future. These different versions of EPS form the basis of trailing and forward P/E, respectively.

The price-earnings ratio can be used to predict the stock price by the following calculation formula:

Stock price prediction based on the price-earnings ratio

P/B valuation method

The P/B valuation method is based on the price-to-book (P/B) ratio:

Price-book ratio

Generally speaking, stocks with low price-to-book ratios generally have relatively high investment value (in their balance sheet).
The price-to-book ratio can be used to predict the stock price by the following calculation formula:

Stock price prediction based on the price-to-book ratio

The P/B valuation method is suitable for companies with large and relatively stable net assets, such as steel, coal, construction and other traditional companies. However, it is not suitable for enterprises with light assets such as technology Internet and consulting services, which are small in scale and dominated by labor costs. The valuation should be based on the principle of “peer ratio and historical ratio”. Usually, the lower the price-to-book ratio, the safer the investment.

PEG valuation method

The PEG valuation method is based on the price-to-earnings growth (PEG) ratio:

Price-to-earnings growth ratio

In general, the smaller the PEG, the better and safer. But PEG>1 does not mean that the stock is overvalued. It must be measured according to the overall indicators of its peers. If the PEG is greater than 1, but its peers are higher than it, which also means that although the company’s PEG is already higher than 1, its value may also be is underrated.

Useful resources

Tianfeng Securities

Wind Database

About the author

The article was written in May 2022 by Pai LI (ESSEC Business School, Global BBA, 2021-2023).