Member Info for Jatw

The market practice is to target 30% of ownfunds as debt.

Cash generated in the business is used to invest in supporting new business, finance the business (debt interest and debt repayment) and return excess to shareholders.

PHNX currently has a 35% debt ratio and is planning to get to 30% by the end of 2026 by redeeming £500m debt. The HY presentation addresses the capital and debt plan at a high level. The debt repayment does limit the scope for one off special dividends and buy backs but they are still possible if the business hits its cash generation targets.

Of course the business has historically made regular and sometimes large acquisitions involving cash (which can often then be recovered through consolidation of the funds releasing capital). If they did another large cash deal then the debt ratio could rise, but we would expect it to reduce quite quickly as the acquisition is integrated.

More likely DLG was just fund transactions giving a short term performance boost to customer returns. Maybe they will get a performance related fee out of it.

I thought the HK offer was about HK$50, so down 60%. With hindsight it was a good time to go to market with Healthcare top of mind. There is no need for more fund raising which is a very good thing at current levels.

Innovent is a slightly younger company that raised more money earlier and has managed to become several times larger than HCM through a more diverse product set - some might say unfocused but if all the market cares about is blockbuster drugs the more drugs inyour portfolio the better as long as they can be funded. They are both facing into similar challenges….I would be happy for HCM to fold into Innovent as long as they can obtain a significant premium.

An offer from Aviva is unlikely until DLG is digested, but the businesses have some strengths which are complementary and there would be significant costs that can be extracted from a combined entity. The other consideration is who comes out on top for the CEO jobs. Both sets of Execs have been in place a couple of years probably no itchy feet for a couple of years yet…..best chance for a combination -2028.

Lawsuit issued for £27m to cover regulatory issues on the Wealth Platform.

What will the settlement be?

The IFDL purchase has proven to be a poor one. No sale announced, will there be an orderly wind up soon?

It seems to be accepted that Debt should be around 30% of capital. I dont have an issue with the market deciding this, and so some debt reduction is prudent, however debt yield is significantly lower than the dividend yield so it would seem beneficial from a financing cash flow perspective to do the buy back in preference to debt reduction as long as it does not bump up the price of issuing new debt,

The market will be looking to see how MNG is improving returns from the investment management operations and the effect of trimming the expansion plans of the Wealth Manager. Both largely cost reduction exercises. AUM growth would be welcome!

The FDA has 60 (working?) days to assess whether it will accept the NDA for review. The company has indicated that AZ is expected to submit the application in 2024, so there should be an announcement before the end of March about this.

No need to worry about a lack of news in 2024.

Amones - the MHRA has approved Fruzaqla for marketing in the UK. NICE decides whether it will be offered by the NHS and what price the NHS will pay for it.

The UK position is currently that if you are self funding you can have it prescribed by a private oncologist. But most people will have to wait for it to become available on NHS. If it gets approval then it still has to be funded by local commissioning boards or the central cancer drugs fund. I have seen reference to a report for NHS England that suggested that spending on innovative drugs would benefit more people if were spent on existing services (guess who will have input to that finding - all other disciplines who think they are more important and underfunded). There seems to be unlimited demand for free healthcare and the UK may struggle to pay routinely for drugs like Fruzaqla - it is much easier to to push assisted dying than wade through the paperwork to get a drug to extend life by a couple of years.

Who would have guessed Spain would be first.

Now that one has agreed a price, the other EU markets should do so, each in their own good time….and the UK decision comes at the end of March. The UK second committee meeting should have taken place yesterday….will check if there are notes of that meeting in the New Year.

Shorting shares that are as volatile as this is a highly risky business. My guess is that many of the shorts are offsetting a long on another market (eg Aim where daily volume is much lower and you would struggle to make a decent sized sale. You would have to know positions across all three listings and who is lending stock to be able to start to understand their overall intentions. Unless IR can shed any light on these, I suspect the shorts are something of a red herring.

This is still for the brave / gamblers…..cant be called an investment until it has significantly increased revenues and achieved breakeven. If it gets there, then FWIW confidence will improve and that will stimulate more purchases and it may go up significantly but that is a a very big IF.

Momentum is building in Savolitinib setting the scene for significant revenue increases in 2026 and 2027.

AZ is expected to submit the US NDA from the Savannah trial imminently. This is likely to have a PADUFA date in late 2025 for US launch in early 2026.

HCM has two BTD trials in SACHI and Gastric which can now get fast tracked and are eligible for conditional approval. As the product is already available in China there will be a shortened approval cycle, closer to the 7 months seen with FRUSICA-1. Which should lead to regulatory decisions in H1 26.

Given Savo was considered a large part of the company valuation, this should lift the SP by end 2026.

Patient capital needed here.

If Sovlep has an addressable market of $800m in China, it looks like a fragmented market with few favourite solutions…..getting enough real world experience for more than 20% market share may be a struggle, but that still generates $160m of company revenue and would make it HCMs top China seller…..launch likley in Q2 next year so we will need H2 25 to see what the penetration is beginning to look like and 2026 admission to NDRL will knock the margin, but I think it will be the global market that will excite the market the most…..that would look like start the global phase3 in 2025, apply for NDA in 2026 perhaps 2027 as it could be a long trial get approval in 2027/28 and royalties in 2028/29….it all takes such a long time to work through the system - which may be why the market does not get too excited about clinical advances.

Biopharma are among 6 sectors where China is supportive of in market M&A to create cos with a global impact.

What will this mean for HCM? May depend on CKHH appetite to commit cash to new share issues/debt to finance M&A with HCM as the lead…..if not I would expect someone to offer to take HCM off their hands…..800m cash and an increasing portfolio makes it a candidate for consolidation. But dont hold your breath….

The UK price seems to be well ahead of the US price which is only 14c for two shares which according to my maths means the US price is only about 6p. A arbitrage opportunity if ever I saw one but no doubt there are practical difficulties which allows this gap to exist.

The Eastspring comment I saw was somewhat different….considering selling a 30% stake (ie raising $1bn). The story seems to be one of lacking scale in the AM business…..If only they had not split the largest asset managers out from the Group they could have created solutions with European and US internal support…..I do wonder who was pushing the break up agenda and what they gained as it does not seem to have worked for Pru shareholders.

A decade high today of 160.

I still see gains of 20-30p each year for the next 5 years alongside 20% dividend growth as solvency ratio improves and the transitional measures for technical provisions (TMTP) run down and become less of a constraint on cash returns to shareholders.

Strain is the amount of capital required to support sales of new policies. It is often called New Business Strain. All policies require some capital dependent on the level of risk and the margins built into the pricing.

Typically annuity business requires about 4% (40m per billion of sales), they are now spending 1%, If that were the case across all their 2024 business of 10.5bn that would represent a saving of approx £300m compared to the plan.

The investment in new business comes from the capital released by policies no longer needing capital and the excess capital carried by the business over the regulatory minimum.

They are flagging an increase in their Solvency Capital Ratio of a few percentage points which they will deem excess capital. Their capital management policy allows for reinvestment in the business, dividends and additional returns through share buy backs.

Would E& not be a better and more natural investor in Iraq?….

Vod should pass any network investment or atleast JV with a regional operator.

Also poses a question to Takeda - do they wish to pursue a tie up with Innovent/Lilly for global development….or do they want to trial Fruq + their PD-1 (Opdivo + maybe more recent pipeline product).