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The market gyrations are severe….but are they fair? Or are they creating generational buying opportunities?

The main threat to future prospects is probably non trade barriers - will the FDA approve Chinese owned drugs in the future? But this can probably be mitigated by licensing/sale deals to western firms.

The cost of imported drugs may well increase to Takeda - but they will probably move production to a lower tariff environment and increase the price.

Sales in China may be affected by reduced purchasing power - but how many who have the cash will forego treatment and die earlier? Maybe not many.

If there are economic difficulties in China, there are huge cost savings to be gained from mergers.

The bottom may not be now, but my view is that HCM is now for sale at a very significant discount to fair value.

There are many such opportunities.

They all fell, but some did bounce back. Eg Innovent up 0.85%.

Trouble for HCM is that China dont like them either at the moment because of the Panama ports deal by CKHH.

A solid business here, but its parent is caught up in US/Sino problems which are likely to weigh on the SP. No need to buy at these levels as it may get considerably cheaper.

First it was selling its non-China ports business, now it is said to be mulling a listing of its Telco businesses (only a small part is HK based). Those deals may not go ahead, but they perhaps display a realism that the world no longer wants holding companies with disparate operations.

HCM is said to be held as an investment and is not an operating division of HCM. CKHH could make it a wholly owned subsudiary (it has the cash) or it could be traded to curry favour in the mainland. The question is whether any competitor will seize the opportunity of a difficult political period of change for CKHH.

Well someone has lost a lot of $ on their Innovent short position this week, I suspect it is out of date…..If that is HK$ then it is about 3%.

Junshi reported Thursday, as did Innocare (which I hold). Junshi has metrics that seem to be worse than HCM/Innovent.

I like Innocare as it only lost 5% of its cash holding in 2024. Its revenue is growing fast and will make profitability in 2027 (my guess) - but there is little change of them requiring a fund raise.

Good bounce in HK today.

Average rise for Bio-Pharma 5.5%.

HCM slightly out did this rise

Innovent was a big riser at 17% - obv the market liked its results delivered after market on Weds.

I hold Innovent and will write to their IR after the next HY results asking about the prospect of a dividend/buy back with the 2025 results. Once one is paying to SH, they will all start.

I wonder what the US will make of AZ investing $2.5bn in China. I know they got a new investment announced earlier this year but DJT will not like this.

Soriot also saying Europe is falling rapidly behind China - a veiled request for more European subsidies (and tax reductions - eg the NHS drug bill rebate)

AZ has released a press update for the European Lung Cancer Conference this weekend. Tagrisso is the focal point, Savo gets a good write up, but no news of progress with NDA.

AZ CEO has also said that Europe is falling behind China. (Following the major China investments). CEO likely rebuilding relations with China after the legal and regulatory investigations

Innovent reported today. It claims a non-IFRS profit, and a significantly reduced IFRS loss. With strong growth in revenues it will be making good profits in 2025. They have more products than HCM and have raised more money in the past and are valued at 3x HCM. They have about $1bn in cash - showing HCM carries more assets than they really need.

It seems that the fall on results was a little overdone and was a buying opportunity.

Well done to the brave buyers.

Robleo - how do you reconcile your last two posts (why buy at these levels - wait until XD to buy below 200 and hoping to get to 240 by Wednesday).

BTW many UK private investors will be buying within untaxed wrappers (SIPP and ISA) and even here it is better to buy later if the only XD drop is the dividend - the cost is limited to the second trade costs (why would you want to pay double stamp duty? When it is avoidable).

Welcome news of approval (even if conditional) from NMPA.

There will be a stock of 3L + patients they can target although it will be a relatively niche product it will add to the sales tally.

It also indicates that NMPA is dealing with approvals more rapidly - and it may mean that Frusica-2 could be approved in early 26. (3 months to submit NDA, 7 months review = Jan/Feb 26)

Which got wider today…..HK market down 2%, Healthcare down 4%.

HCM was only slightly worse than that average and was not the worst.

Re Alliance news (and other press), I find the press in general either parrots the management line or picks a single number and tries to create a headline for the story without explaining why (eg revenue down when that is based on a one off non recurring item)

Just read the alliance news update - not what I would have pulled out of the results announcement….and we wonder why there are short sellers around

I find it hard to believe that the Chinese are not seeking local M&A to build their own big pharma. There are plenty of well capitalised small to mid sized companies that are undervalued.

An unexpected results day bonus.

The target market size is about 65k new patients pa in China.

This may well lead to second approval for this combination therapy.

What will Takeda want to do with this combination? Or will it pursue another solution for the global market?

The NICE website shows the fruqintinib project with a TBC publication date. I found a trade press article suggesting it was rejected in October on cost grounds and no evidence of better than alternative treatments……

The Scottish process continues and reports in Q2.

My expectations for tomorrow are for no surprises.

We know what the revenues are for Fruzaqla and Orpathys courtesy of Takeda and AZ reporting. China sales by Hutchmed will be broadly flat on H1, overall I expect marketed product consolidated revenue of approx US$250m. The oncology total revenue will depend on the recognition of milestone payments (they deferred more than 100m from the Takeda upfront, but have also qualified for more milestone payments from Tak and AZ). I expect US$100-130m but it could be outside this range, so a total 350-380m. This should get them close to a break even / small profit result.

The most likely positive rabbit they could pull from the hat is pipeline news of AZ and the Savannah NDA submission which should be well advanced, otherwise news could be far off any financial effect or bad news (eg unable to fix Sovleplenib manufacturing issues).

We suspect they have or will have excess reserves, but based on previous statements I am not expecting them to announce any returns to shareholders. If they want to make the market take notice this is where they should announce something.

The announcement is after HK close so we cant take anything from tomorrow’s session.

IF (big if) Putin agrees a ceasefire that is likely to spark a market rally, other than that , I think it will be very boring.

Some expectations for tomorrow:

Costs - reports it met its £200m cost savings and sets new targets for additional savings

Insurance business - steady as she goes strong capital and cash remittances but a write down of impaired wealth assets (platform) affecting IFRS profits

Asset Management - a recovery story with improved flows and higher AUM given market performance. Cost savings drive a fall in cost:income to 70% or slightly lower leading to a strong recovery in AM profitability.

Debt repayment in 2024/early 25 improves SII debt ratio to close to 30% target. (Expects it will meet it with capital generated in 25).

New capital generation target for 25-27.

Dividend - only a small increase (2% like LGEN?) keeping the cash cost similar to 23. A smallish buy back may be possible but they may prefer to hit their debt target first.

Share price movement - I have no idea…..could change by 10% either way depending on the sentiment in the market and the tone of the results announcement (Andrea is a very positive CEO so he will try to give an upbeat assessment).

Meconopsis, I think your measure of growth (in v out) should deduct the interest on the CSM from the out to get a better view of the flow of value. The NB profit is a discounted value so it seems fair to allow the unwind of that discount into the equation of whether the business is growing or not.

10% on one upgrade is unusual…..

I cant see the CMA being particularly onerous….there will be more shopping around requirements….but I really doubt there will be significant divestments needed.

If RBC are correct about Aussie purchases, it will not be long before there is an investigation there….margins sound excessive….and the sellers will be jacking up the asking prices.