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I am not sure what a London listing will do for Hutchmed in the long term. Unfortunately I can't see it delivers any value to the Company once they have a Start Market listing, apart from the fact it leaves a door open for non-HK/China Investors, especially geo-political problems continue and all Chinese Co's are forced off the American Exchanges. I suspect the Company is happy for now and will make the decision at some point when they have to. It's probably a very low priority at the moment.
Amones, Yes, an interesting question and I have no idea what the answer is. But if Christopher Wood is right in his assertion it would appear there will be a wave of delisting in America in coming years. Presumably American investors would then buy in London or Hong Kong so I hope the overall impact is not serious. I note, Jatw, that HCM is a Cayman based company but as its operations are so heavily focused on China one would imagine they would need to comply with Chinese government accounting and listing rules. The Bloomberg "interview" with CH was as you and Davey say wholly reassuring and measured so I have no concerns. I wonder if an American delisting would lead to a proper listing in London?
amones, I have disposed of my adr's some time ago and currently only hold London listed Ordinary shares. On the wider point about Chinese regulatory interference, I am not too concerned simply because the drug market is already very regulated and they operate the NRDL. The tech sector is far less regulated and is something the Chinese govt wanted to do something about. They were also concerned about the education sector and how it was functioning outside of the egalitarian ethos. In the healthcare sector they want home grown and seem very supportive of the industry and clearly have bigger concerns and targets elsewhere.
SS, Thanks for your post. Curious to know the implications of such delisting. If the analyst’s opinions are correct about ADRs delisting, will there be a forced sell-off? In fact, ADRs sp went up during the last trading day at NYSE. Davey, you had posted in the past about your interest in HCM ADRs. Are you feeling concerned about this information?
We have to be v careful in trying to apply US regulations to HCM. HCM is a Cayman registered company. Operationally it is Chinese, but it is not linked to Chinese state bodies.
I thought CH was very measured in his Bloomberg interview and gave reassurance over the market fears about Chinese control of the bio pharma market. I suspect they will use NRDL to reduce margins and favour local producers. In some respects that is no different to NICE approving treatments and negotiating lower prices to pass economic value tests.
This week's Greed & Fear from Christopher Wood focuses on China. He is optimistic and continues to recommend investing in China. However, we have to consider how much longer HCM can maintain its American listing. I assume we are one of the 14 referred to below: "This, of course, is in addition to the existing threat posed to Chinese companies already listed in America in terms of conforming with American accounting regulations, a task it is impossible for them to do without breaking legal requirements in China. On this point, the US Senate passed on 22 June the Accelerating Holding Foreign Companies Responsible Act which requires Chinese ADRs, and other foreign companies, to comply with the Public Company Accounting Oversight Board (PCAOB) audits within two consecutive years instead of three previously. This suggests that all US listed Chinese companies will need to delist in America sooner or later; and relist in Hong Kong and/or China. So far 14 have already done secondary listings in Hong Kong with many more expected to follow."
The Q&A has improved and is the most interesting aspect as the management is forced off script. CH says they have enough cash to do what they want with the pipeline. https://www.fool.com/earnings/call-transcripts/2021/07/28/hutchison-china-meditech-ltd-hcm-q2-2021-earnings/ They will consider in licensing if it is synergistic with their pipeline - I would like this to be aligned with ROW distribution. China regulation trying encourage innovation rather than replication May release systematic resources that help HCM (space for trials and regulatory capacity).
Surprised the rebound was so quick….today’s RNS about the orpathys gastric cancer trial with a 6m survival target timeline shows this trial could be done within a year. It follows a study with good response rates, if this is targeting a subset it should get better results. My guess is they think they will be able to use it as registration study with NDA at the end of 2022.
Davey, it seems the Chinese have found the other way for Hcm to be rated like beigene, innovent, junshi…. This may turn out to be a good time to buy into the HK listings of mainland Biopharmas. May have to make do with HCM.
From Wall Street Breakfast on Seeking Alpha: ""Even when you think China risk is priced, it can get worse," Goldman Sachs wrote in a research note. "The government could come down much harsher than expected penalties for Tencent, they could implement much stricter social insurance programs for delivery drivers/temp employees, they could crack down on other industries viewed as a threat to social cohesion (SFV? Livestreaming? Who knows.)"
While Beijing has tolerated conventional regulations on certain sectors in the past, the government now looks ready to kill whole companies or entire industries. One doesn't have to look far to the recent pulling of Ant Group's (NYSE:BABA) IPO or the DiDi Global (NYSE:DIDI) fiasco that shook the investing world earlier this month. China has pointed to financial risk, antitrust concerns and national security violations, but its acceptance of stockholder pain for long-term social control appears to have some market participants reassessing Xi Jinping's Communist Party."
The Chinese government has been attacking Chinese companies listed in the USA and this is making them "uninvestible" in some eyes. Hitherto the self inflicted wounds on Chinese businesses have been largely reserved for people like Jack Ma seen to be becoming too successful. Let's hope sanity prevails as the whole China model depends on buying people off with materialism.
Not so sure this ‘uncertainty’ can last much longer than a few hours/days. The ramifications of China undermining how capitalist companies make money and survive and grow would be seen as shooting oneself in the foot, the eye and the temple. Rank stupidity on a grand scale. Just my opinion of course. I hope it’s just the press getting everything all wrong as usual. GS
Hang Seng -5%, Hengrui, Innovent, Beigene, Hutchmed all down circa 10%.....big concerns over Chinese Govt regulation, prompted by their interferring into Alibaba, Tencent and big tech. Alibaba Health Tech is down 20%. Hopefully there will be some form of recovery tomorrow for Hutchmed.
MTB paying as little as possible is the point of the National drug reimbursement list….but in return you get access to a large number of patients. They let competing products onto the list to pressure incumbents into dropping prices each year……once on the list the best that can be hoped for is stable pricing… Beijing probably has to do little more than let the pharma cos battle it out to claim good value….plus they know that if they confiscate property rights they will not get the innovation they need.
There were developments in education where it appeared China said companies should not make a profit. Over the past 5 days Innovent, Junshi and Beigene have all lost 17-18% on the HK market. HCM had a spike but has given it up in the same period.
What events happened during weekend? I might have missed it. Would China suppress its own pharmaceutical companies by not paying the correct prices for the medicines they produce? Such a strategy would be against the country's intention of becoming self-sufficient in the pharma sector.
Guess the events over the weekend make you wonder whether China will simply allow domestic Pharma Companies to develop drugs, and thne turn round and tell them how much (little) they are prepared to pay for them. Defo a risk I think.