Member Info for Jatw

Investor Relations have to be careful about what they say and will always be cautious about market sensitive information. Now is the time to give them advance notice of what you would like to see in the next corporate update….content is something they can influence….

Eg I would like to know about the market size for EMC revenue and how they are pricing / going to market the combination therapy. I would also like to know what the Savo 1L cost is when compared to chemo….that would help understand whether they will be successful in 1L.

And what questions you would expect to ask if not addressed in the presentation:

Eg What is the Board’s policy for capital management and liquidity

what is the investment budgeted for the ATTP, 25/26/27/28/29 plus trials of ATTP

What are the Company’s Investment hurdles to approve new drug candidates for Ph2/3 projects.

TBH I suspect they are followers of market practice and if Innovent / Beigene started to pay dividends or do buy backs they would follow…..it seems those companies are more advanced in their thinking - eg they do quarterly sales updates and the innovent announcement about price movement was a first…..maybe they should be targets to start SH returns rather than HCM.

Thursday 30 Jan will see us get the latest update on Fruzaqla sales. (The quarterly sales were $50m, $80m and $75m giving $205m for 9 months).

I hope the US sales will have reversed the Q3 decline which may have been seasonal with fewer hospital appointments over what is late Summer in the US. They should have made some additional sales in Japan, and minimal sales in Europe. Despite being approved for sale for 6m in Europe the national price determinations started in December with Spain recommending use. I would be disappointed with an $80m result, but doubt they will manage to exceed $100m in Q4. Sales should accelerate in 2025 as more markets come on stream. HCM makes a mid teen royalty (all profit) and also gets other fees for manufacturing and other services but these will be less profitable.

Innovent has botched its investor relations……the founder tried to walk off with 20% of the offshore business for peanuts…..(either daylight robbery or the offshore business is valued at very little) anyway after an investor backlash and a 25% fall that deal was dropped,

As a very large fund they regularly take 5% positions but rarely more….they will stay for a while but will be very willing sellers…..but good to have a major long investor onboard.

We all hope 600 will be the bottom, but the negative sentiment around China has been brutal for Pru.

Looking forward to an upbeat trading update in a couple of weeks time…..continued momentum in own brands with an H2 bias for sales…

With the yield of many govt bonds at 30 year highs it is a good time to lock in an income stream (which is why some consider annuities better value than they have been for some time). Interest rates may go slightly higher but are also like to go lower over time (there will be an economic downturn leading to lower rates….you may just have to wait). Inflation will erode their value which I have understood is the reason to hold dividend paying shares which may be able to increase dividends and mitigate inflation.

If you want safety buy an annuity

If you want stability buy some bonds

If you can live with the volatility (say 50% cut in dividend) then buy a diverse group of shares - if you can’t or dont want to be checking the financials of your investments then buy a mixed (bonds and equities) income fund.

But then followed by a 10% fall in the SP…..without further news….

A more positive AUM update with external client outflows down to under $200m, but performance has been tanked by a strengthening USD.

Trump policy is an unknown…..but they suggest Emerging Markets now have considerable value - hopefully the tide will start to turn.

A really good update, the one caveat is the comment about the margin which will be slightly reduced. The market has been increasingly competitive with new entrants so this is not unexpected.

The capital position should be maintained. I am expecting records IFRS profits and a 20% uplift in the dividend.

If history repeats there will be a bump up this week which will fall away before the results lift it again.

Some better news……the new 1L treatment option should expand and extend treatment with Savo and lead to increased sales by AZ. The full effect will not be seen until 2026 when it should be included in the reimbursement schedule.

In the meantime, the Drs will decide where the 1L/2L boundary lies. I expect they will become more amenable to patients leaving 1L with lesser adverse events to quality for 2L reimbursement, this would be optimisation in my view….so we may see uplift of sales during 2025.

Re Amones comment about AZ and HCM. I have felt for some time that AZ has been dragging out approval of Savo. I think they want Tagrisso + Savo to protect T sales from generic competition. There is always the prospect of competitors building better treatments - that is why they spend so much on pipeline development.

All the annuity/life cos have fallen, just is more affected because it is smaller and focused on annuities….Just down 10%, LGEN, PHNX, MNG down 5%.

The reason appears to be the govt treasury auction and the jump in govt interest rates has spooked investors in financials…..why buy a risky yield if the govt will pay 5%+

The question is what will the govt do? Will its fiscal incontinence continue? Probably it will ignore the market and just print more money…and the pound will continue to fall.

On the positive side they did say they expect to announce Savo (EXON14) is confirmed as fully approved in Jan 25 (sounded imminent). Whether it gets advanced to 1st line is still an open assessment.

On the update call, HCM announced there is a shelf life issue with Sovleplenib which requires further work to demonstrate stability of the product. They think this is an industry wide issue impacting many drugs…..and they hope to get Sovlep approved during 2025.

They were upbeat about Savolitinib prospects…..and for their new ATTC platform which they will speak more of at the mid year R&D day.

Nothing particularly wrong with MNG when compared with peers (eg LGEN, PHNX,AV they are all different in their focus but all UK listed life insurance/savings/annuity/asset managers). So I think it is a sector effect rather than company.

The life insurance/savings/annuity parts have all been doing steady business accumulating assets and generating capital from risk underwriting. The capital lite businesses, mainly the Asset Management business is facing into significant cost inflation and fee pressure, they need to grow AUM faster than fee rates and inflation.

When you can get 4% risk free on deposit why take the equity risks with funds so new fund flows have been harder to generate.

Banks can create the additional balance sheet growth (and interest margin) by increasing lending. The Insurers/Asset managers cannot do this and have to accumulate other peoples money to earn their fee.

They now seem to be locked into paying 8-10% dividends and a flat share price. If in a tax wrapper that is still positive for many.

Need care /see evidence of how the SACHI sales might trickle down to HCM.

IF AZ manages to get 50% market share say $500m

That needs apportioning between Tagrisso and Savo.

Say Savo is $200m

Royalty for HCM is $30-40m for China sales.

Many assumptions there….the majority of SACHI benefits flow to AZ.

Cavendish and Trinity Delta both well above £5 valuation…..which we will not see unless there is a bid. However 350-400 has been in reach quite recently, if they can get a partner for Sovlep and generate meaningful China sales for Sovlep and Savo in 2026 I think the SP will be back there (subject to RFK not halving US drug prices!)

I think the SACHI NDA acceptance is the more significant news item but we know there will be no reaction until the decision is known. The Chinese do not give the equivalent of a PDUFA date, but there is no reason to believe it will opine in Q3 (given the breakthrough designation like the recent EMC approval) as Breaskthrough designation allows conditional approval. We should finds out the PDUFA date for the SAFFRON based NDA going to the FDA and I bet there will be some co-ordination as they wont want to explain a different opinion - I am not sure I understand the differences in the target set of patients and it may reflect market differences in 1/2l treatments. .

Disappointingly, they imply all the proceeds are for the pipeline (boo)

Deal announced worth $608m pre tax with a gain of $477m.

Call on Tuesday, EGM required due to the size of the deal……

What will they do with all that extra cash?

I know Cavendish started coverage of HCM in 2024 and was perhaps the most active analyst on their R&D and HY sessions.

This is what Cavendish say about themselves…….Is there something brewing?

‘Cavendish is a trusted advisor to both public and private companies across various industry sectors. We deliver expert services in equity capital markets, M&A, debt advisory, and private growth capital. Our membership of Oaklins, the world’s foremost mid-market mergers and acquisitions advisor, gives us access to 60 offices in 40 countries, ensuring unparalleled global coverage.

We specialise in providing our clients with access to equity, debt, and alternative financing, as well as offering cross-border M&A advice. Our extensive experience, drive, and proactive approach make Cavendish the ideal partner for ambitious companies.’