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Thankyou Jatw & amones
Yes, maybe a bit too positive at times, I admit I am very very enthusiastic about the Company, its Management Team and their fantastic achievements. It has been frustrating to me that the market seems to either under-value or over-value the company based on events outside the Company's control.
In that context I think all they can do is to keep calm, carry on and deliver for patients and execute their Corporate strategy, which will ultimately deliver for Investors too.
I am surprised some of the more recently appointed Directors haven't made share purchases but hope that will change.
With regards to the AIM listing I suspect the Company sees little advantage to move to a main Listing given the fact NASDAQ and the specialist Biopharma Investors in the U.S. are what matter most. I may be wrong doubt the Company sees any specific benefit in moving off AIM.
As for a HK listing, I was disappointed that didn't happen because it seems to me opening up the Company to a huge pool of Asian Investors would be very beneficial. It is rare to see a company with listings in 2 Countries/continents outside of its own primary operating region.
Given the GA investment, with a possible further $100m to come, and the fact we could become cashflow positive in 2023 or 2024 I am not sure the Company will need to conduct another placing/IPO but I may be wrong on that. I assume that will partly depend on the success of Surufatinib in particular and how quickly we can get a launch in the United States.
Amones
I agree with your sentiment that we need to be thankful for the recent improvement in the SP.
The company is making progress and is much stronger than a couple of years ago.
We need to give up on the highest sp and recognise that was the result of a huge run up and was built on hope. The company has been cautiously expansive under CKHH control, but has not had free reign like Beigene. This has de risked the investment.
There are issues:
Savolitinib has been a slow burner, Elunate ok but lilly has not been fully committed. Surufatinib will be proof that HCM can make it big.
Davey I appreciate your posts and wider insight and positive disposition. (If a bit too positive at times) I and others try to be more sceptical which I hope helps you too.
I think Hcm is an excellent long term buy and hold at these levels.
Davey, I appreciate your posts and research about this company over the last several years. Many times you too have expressed disappointment about the lack of market response to all the great achievements from the research and development side. End of 2017, SP was equal to £5.90. In spite of all the good news coming out since 2017, the SP is sub £4.50.
Agreed, CKHH’s botched placement was a major blow. But, what about other issues? When was the last time we read about the directors buying in big numbers ? Why is it still listed on the ‘not so standard’ AIM? Is it not a matter of concern for all the lon timers? When are we getting moved to the main LSE board? While so many new biotech companies are getting listed at HK exchange, why this company with such credentials is not open to investors from China and HK?
Let’s feel happy about the way SP has risen during last two trading days? Is it GA investing again or some positive news about Surufatinib in USA?
I hope GA will help them with the transition.
I am sure GA will invest the second 100m..will they prefer to underwrite a new placing below $30? Or exercise the warrant and book an instant profit. It is in management and othe SH interest for the warrant to be used.
Hence we can expect management to try to reach $30 in the next 18m. They have a few catalysts for this including
Increasing Elunate sales
Positive momentum in Surufatinib and savolitinib sales during 2021.
The £ price has to absorb the $ exchange rate which has been a drag recently for UK investors.
Amones and Davey
I believe the difference of opinion is one of timing.
In the long run management does care for the reasons set out by Davey. In the short term I believe they do not worry about the SP and that leads them to do the regular advocate fund raising and drop surprises like the 130m factory investment.
Owning factories and sales forces is probably in the long term interests of the company, rather than outsourcing and licensing but it brings additional short term costs and risks if the management are not able to execute these new skill requirements.
The pipeline expansion is a case in point.....the scientists can create new formulations and look for targets....so far they appear disciplined in what they take forward into the expensive testing and proving phases, but They could very easily consume all the product cash flows in new development. Big pharma knows it has to split its income between rewarding investors and innovation. At the moment HCM is about innovation, the transition to rewarding investors could be difficult, management so far has not had to do this.
I would like to see CH present their 10 year plan (I bet he has one)......also how they go about costing the development of new drugs and evaluating their commercial prospects.
"two" reasons even!
amones ". Management does not seem to have any interest in improving shareholder value"
I disagree for to reasons:-
1. Directors and senior management have large tranches if shares, via share options at various prices and also via personal stakes. Why would they have no interest in improving shareholder value when they are shareholders themselves
2. The main reasons the share price is where it is currently is outside the control of the Company i) CKHH botched placing last year when they probably should have done a private off-book placing ii) geopolitical landscape etc
I believe the management of Chi-Med absolutely have a personal and professional interest in improving Shareholder value which will be borne out over the next decade. I firmly believe the market will value the Company at $20bn by 2030.
Both Tacly and Jatw are spot on with their opinions and analysis. Management does not seem to have any interest in improving shareholder value. Sorry to write this. Even during last week’s financial presentation, nothing was mentioned in that respect.
Investors who bought these shares more than 10 years ago, might have some paper profit. But, it is not the case for shares bought for £4-5.
The company doesn’t seem to make any effort to migrate from AIM listing to the main LSE. This minor effort itself can bring a large number of UK institutional investors. In addition, institutional as well as private investors from China (?Hong Kong as well) will be able to invest in HCM through the ‘LSE-SHANGHAI stock market link’. This was discussed on numerous occasions on this board. Last year, I wrote to the company asking if they have looked at this opportunity. The CEO answered back saying the company was very much aware of that new aspect. But, nothing seems to be happening. We keep asking this repeatedly, Why is the company not allowing investors from the second largest economy in the world to invest in a China based company?
Yes, it is a very good company with a fantastic research and development wing and great oncology therapeutic products. But, without any prospects of improvement in shareholder value in the near future, is it wise to buy anymore of these shares? What would happen in case of dilution?
Good post Tacly.
That should make HCM a bargain at the moment, for I am sure it will get an oriental listing at some point.
Expanding on my point about this company thinking long term, it does also need to produce some shareholder value. While I know that licensing surufatinib in the US may reduce overall value, if it came with a material upfront payment, it would show how HCM could become self financing quite quickly....otherwise I fear that management will find endless investment opportunities for new shareholder cash and that Dilution will continue to hold the SP back. Management has shown itself to be flexible and pragmatic, so I hope a self reliance exhibited in the factory decision is not too engrained that other financing options are not fully considered.
Great result from a great company making a great progress. But share price hardly moves! What is going on?
“Markets are never wrong, only opinions are” - Jesse Livermore
Since the markets are never wrong, let’s suppose the opinions about the great HCM are also not wrong, then HCM must be in the wrong markets.
London AIM is regarded as the Wild West, some days only a handful of trades on HCM. Not enough interest. In the US, Chinese companies these days are hardly popular with the constant China-bashing, threats of delisting, decoupling and accusation of intellectual theft. Not enough interest there either.
Trying to sell HCM in these 2 markets is like trying to sell roller skates to seniors from retirement homes; hardly anyone is interested no matter how great your roller skates are.
It only makes sense to list HCM in the HK/Shanghai markets. Chinese investors will be more interested in the many “1st ever..” , “China –only..”, “NDA submission ...” and “Global partnership...” achieved by a Chinese company.
It beggar belief that a 99.9% Chinese company hasn’t got a listing in HK/Shanghai. May be other potential investors also thinking the same?
This is a company with very big ambitions and is thinking strategically.
Indicators:
Starts by selling others products and generating value.
Invests In scientific expertise...proves and then expands into new areas.
China first then ROW, now global for the start.
Builds out Own oncology sales force for China (row?)
Build up and Own manufacturing capability
Smarter funding
Seems to get the bases covered
It would be interesting if CH would talk about the future strategy and the 10 year vision....I would not hold him to it, but it would be an interesting insight into the future.
None of us have a crystal ball, but I would not bet against this company becoming a large global player through largely organic growth.
great set of results, progress seems excellent and the Company is certainly delivering. More land compensation coming and the JV dividends seem to be growing really well. I did listen to the presentation and the Q&A and will post more tomorrow. It seems the market wants to see positive cashflow before a significant uplift, so we may have to wait a bit loner for a re-rate ;o-)
I continue to Buy as always and will be back to my 100,000 shares target by year end as it stands right now.
Questions brought out some interesting developments
Large molecule platform likely to be collaborative rather than acquisition.
New factory is a 100m investment over 3-4 years.
Looking at how to launch surufatinib in US, likely to be via a distribution partner to efficiently cover the settings needed. Played up the simplicity and concentration of sites to cover.
Future developments likely to be global first rather than China first
A further 4 compounds to be in clinical development in 12-18m including first large molecule.
Elunate distribution seems to be about accelerating sales with 3x lilly sales force focused initially on one product and gaining efficiency savings when other products come to market. Sounds like Lilly net profit will be protected, HCM can get upside through a more productive sales force.
CH thought 40% penetration was possible for Elunate ($80m) approx 3x current level.
Food for the analysts to ponder....let’s see what valuation changes they come up with in the next few weeks. Per Yahoo Finance, they have 8 estimates with an ave of $33.99 per ADS.
At first read, the RNS is broadly as expected. Cash burn rates appear lower than expected. Elunate has been prescribed more now it is on the NDRL, I dare say Covid has suppressed demand a little, and price reduction means there is only a modest rise in sales value.
Pipeline is the major feature, what little new information there is provides insight into potential launch dates.
Also Mention of a new manufacturing capability in Shanghai.
Webinar questions likely to be more illuminating.
Interesting to see that this years H1 results will be announced at 07:00 EST / 12:00 BST instead of the previous 07:00 BST. I assume that is to catch the U.S. market prior to its open.