Made in China:Ini.Athenex with Buy;Baidu,BEHL,Pou Sheng;Consumer Day -Key takeaways

Athenex has two oncology assets in clinical stages: an oral chemotherapeutic platform and a Src kinase inhibitor pipeline. The primary value driver, Oraxol, which comes from the chemo platform, is likely to offer a better efficacy/safety profile vs. injectable paclitaxel, with phase 3 data expected in 2018. We believe the company's oral chemo platform is relatively low risk as these chemo agents have already been approved and only the delivery mechanism will be improved. Within the management team, there are four ex-CEOs from listed companies who have strong experience in drug development and capital markets. We initiate coverage with a Buy rating and a price target of USD20.0.

    Baidu at its AI conference unveiled major developments in its AI technology. The company's strategic focus centers on DuerOS and Apollo. Baidu plans to become China's leading open AI platform for developers. The company announced the acquisition of KITT AI in order to enhance its leadership in audio intelligence for its DuerOS. The company sounds willing to pursue further M&A in AI technologies. With AI clearly a major investment area for Baidu long term, yet we have little visibility into short-to-medium term monetization. Recall that Baidu has over 2,000 AI engineers, FY17/18 R&D cost to rise by 22%/29% YoY, versus rev growth of 21%/25%. (Alan Hellawell - 852 2203 6240) .

    BEHL is trading at trough valuation of 6.5x 2018 P/E, at deep discount to peers average of 12x. If taking out the market value of listos, the implied value of the remaining business is even trading at negative valuations. (Continue on next page)