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Guess what else happened in July 21
https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp
To put it another way, over three years the index has lost nearly 70% of its value.
This looks to be a new web site by HK bourse, many of the feature are 'coming soon' it would be good to know how the index weightings are calculated, especially as Hutchmed is at the top.
Index Index Level Return (%)
Hang Seng Healthcare Index 2,405.52 -67.69%
If you click the 5 year graph, then bring up HCM on Yahoo and the the same, the two high peaks of around $43/44 were in July 21- exactly matching the high peak on chart below of almost 8,000 for HK healthcare index - its now risen (slightly) to 2,400.
https://www.hsi.com.hk/eng/indexes/all-indexes/hshci
This chart really highlights the impact of higher rates, at one point the Healthcare index out performed HK by some margin only to drop back.
https://www.hsi.com.hk/static/uploads/contents/en/dl_centre/factsheets/hshcie.pdf
In my view interest rates has been the single most dominating factor, over and above political issues, HFCAA and so on..
Drug revenues - have they made any headway in H2 v H1?
Early royalty revenues from Takeda and what they can say about early 24 sales.
How much of the Takeda upfront payment of $400m is recognised in the accounts will determine whether there is an overall profit or not.
Cost run rate (vs what they have in the bank?)
Is there already excess cash (do we think that is 2yrs operating expenditure?) And what do they propose to do with it. (Policy for dividends/guidance)
Pipeline - due dates for the submitted NDAs. What has happened with the Amdiz readout and possible NDA? Any update from Takeda re Fruq for GC. Firming up the delivery timetable for 2024/25.
Investor relations - it would be good if they would commit to providing a quarterly sales update. (Takeda and AZ do it already so we can see some sales data)
In terms of what maybe driving these movers up/down, the above index seems to have good correlation to Hutchmed, scroll to bottom for list of constituents.
The 3 month chart has certainly come off the bottom and could be benefitting from ETF buying mentioned in earlier posts below.
https://www.hsi.com.hk/eng/indexes/all-indexes/hshci
FDA has indicated a preference for Overall Survival over Progress Free Survival / durable response rate when considering full approval.
The impact is likely to mean more provisional approvals requiring confirmatory approval studies…..It also takes a lot longer to run the trials to get the OS numbers, this is expected to impact smaller pharma more than big pharma.
https://www.biospace.com/article/how-will-fda-s-pivot-to-overall-survival-affect-cancer-drug-development-/
Things I expect to and would like to happen this year:
Expect: Factory operational,
Takeda make significant sales progress in US, Europe and Japan, commences new trials (GC?) and combos with existing Takeda product.
Like:
Partner found to globalise Sovlep.
Inmagene buys out HCM options/HCM acquires Inmagene.
In-license portfolio of oncology drugs/ create a distribution channel (JV?) in China to improve productivity of sales force.
HCM makes a bolt on acquisition with some synergies and some new capabilities for the company..
IPSEN adopts HCM drug as a partner for Taz and commences a global study.
The HK market is closed for 2 days….should be lower volume trades on AIM and NASDAQ, but unlikely to be positive until HK reopens.
There seem to be hopes for a partial recovery in the wider market this year….but that will not be evenly spread….hopefully Takeda will make a lot of sales in the developed markets this year and pay $$$ royalties
Healthcare services will be a main area of focus for HarbourVest’s China investments this year, as the country’s ageing population and growing household income drive demand for “more premium and better healthcare services”, including outpatient treatment and elective surgeries.
https://www.scmp.com/business/banking-finance/article/3251567/china-drive-private-market-opportunities-asia-healthcare-consumption-offer-pickings-harbourvest
Bit early to assess fully, but drop in HCM shorts by 12% or so..
https://www.sfc.hk/en/Regulatory-functions/Market/Short-position-reporting/Aggregated-reportable-short-positions-of-specified-shares
The quote from Takeda in their Q3 to 31/12/23 presentation was;
"Strong uptake following U.S. FDA approval in November 2023 for metastatic
colorectal cancer (mCRC) patients previously treated with certain anti-cancer
medicines, with new patient starts exceeding expectations"
Sounds promising
FY 31/3/24 - reporting on 9 May may comment on Q1 sales of Fruq
Q1 sales 31 July. (Links to HCM H1 royalty revenues)
Q2 sales 30 October (should show continuing take up in US)
Likely to be our earliest sight of HCM revenue (NB not product sales but royalties and manufacturing fees)
Seems to be $44m US…which is flat on the 22m achieved in H1.
Volume is up so HCM manufacturing fee gives a greater share of revenue to HCM.
Looks like HCM will consolidate $30m
Expecting HCM product revenue to exceed 160m, but not by much, 170m would be a good result…..may get to 200m in 2024 if Elunate GC and Sovlep are launched mid year, Hence they will still be burning cash reserves 24/25.
HCM at the end of H1 had $850m in cash and growing, R & D is on the decline, plenty for incremental purchases over 12-24 months.
Checking the register with the public info shows no change in major holders for sometime, buying back 5% would take some time and may not be successful due to illiquidity and/or rising share price
Alibaba has just announced a further increase up to 2027
'Alibaba said the $25 billion increase is added to its share repurchase program through the end of March 2027, bringing the total available under the plan to $35.3 billion.'
A 5% buy back would cost around HK$1bn or £100m/ $130m.
I just dont see the Board doing it on current revenue visibility - there is too much uncertainty to be sure of being cash positive from drug sales. Of course if they land an international partner for Sovlep, then a large upfront payment may change the picture somewhat.
As for M&A, CKHH will need to be persuaded of the merits….a deep pocketed Western pharma can easily afford HCM even with a 100% premium….local offers may be more share based with lower premium…there are significant cost savings to be realised with overlapping programs with Innovent / Beigene etc but we dont know whether there are change of control terms in the licenced products that could strip product value out of any deal…it is complicated when potential M&A partners have competing licensing arrangements..
I think there is probably a moral obligation as Hutchmed is HK based and listed, not to mention a large proportion of its sale and development originate in China.
HCM is listed in HK which will mean at least some exposure to these initiatives via the ETF purchases, don't think they are done yet..
https://www.cnbc.com/2024/02/07/china-appoints-markets-veteran-wu-qing-as-new-chairman-of-securities-regulator.html
Cash flow is strong with enough capital reserves to support a modest (see SFOR) share buy back, free float is only around 20% so 5% should be more than enough imo.
That’s is correct. We agree, this company is not going to give any dividend for, at least, another couple of years.
What about Mergers and acquisitions? It is also mentioned in the circular. Jatw, what is your opinion regarding lack of ‘interests’ , so far, from other major companies? Market capital is less than $ 2.5B as per today’s data.
Mr To is CKHH’s man…..he will get his orders…..difficult for the Board to do anything that CKHH does not want.
HCM itself is too small and not yet listed in the mainland so will not be on the radar of the chinese financial market regulator…..the same cannot be said for China legacy pharma, esp those with CCP owners.
BTW when do you think HCM will be making sufficient profits to enable significant returns to Shareholders? I cant see this until 2026/27. The 2024 NDAs should lead to marketing approvals during 2025 and first full year of sales in 2026…..so that is my earliest timeframe for determining excess capital.
Its going t be very difficult for the board to just ignore these requests, not only are they coming from shareholders but government regulators too.
Copy and link article to board, more the merrier imo.
Thank you both for posting this here .
“The regulator also urged listed companies to bolster their value through share buybacks, stock purchases by major shareholders, regular dividend payouts and merges and acquisitions…”
Precisely, what we have been shouting from this messaging platform for many days!
With the right incentives in place, owners and executives should be aiming to advance share prices…..when the regulator has to remind companies of this, there must be great concern about popular discontent in the CCP.
I don’t think the HCM board is in a position to declare it has excess assets to do a buy back yet..although that is quite a likely outcome in 2026/27…..but it might see short term opportunities to buy mainland operations…..the regulatory door would appear to be open to this…and if you dont pay much premium over the hard assets acquired there is limited risk..
This is the official line, have the Hutchmed board seen this?, if so what measures are being taken in response?
"The regulator also urged listed companies to bolster their value through share buybacks, stock purchases by major shareholders, regular dividend payouts and merges and acquisitions."
https://www.reuters.com/markets/asia/china-regulator-unveils-more-curbs-short-selling-2024-02-06/#:~:text=BEIJING%2FSHANGHAI%2C%20Feb%206%20(,efforts%20to%20curb%20short-selling.
Now we have some analysis of the Frutiga results, Takeda will need to decide whether to progress to a global study…..If they do, they will need to consider the design and end points, The PFS data looks strong, with OS harder to determine. From a patient perspective PFS may be just as significant as OS
how long it will take to hear their decision?
Central Huijin said it has expanded its purchases of exchanged-traded funds linked to the country’s onshore stock markets to safeguard market stability.
China’s securities regulator has made several statements over the past few days aimed at stabilizing the market including warning against “malicious” short-selling.
https://www.cnbc.com/2024/02/06/chinas-tools-for-propping-up-its-stock-market-warnings-liquidity-boost.html