Member Info for Jatw

Q1 and Q2 have been strong, there is no reason to believe Q3 will not be…..so this announcement is an opportunity to focus on the underlying business performance rather than regulatory issues.

The 6 November version has been updated to reflect the Q3 sales reported by Takeda, the milestone payment and regulatory approvals obtained.

The Savo slide was updated for the October statement of results and a definitive view that the NDA will be submitted this year.

I did not notice other changes.

Amones

Interesting information about Surufatinib US trials. They will also need to consider how the NET landscape is moving on. I suspect it may need a combination treatment to make it worthwhile or PDAC work is successful and attracts a global partner followed by label expansion.

I think the company does need to make some effort to reward shareholders. I think there is a problem with market perception of a buy back, in that it implies that is the best use of the money. I think I would prefer them to start M&A in mixed shares/cash deals - they need to be bigger to reduce unit costs.

The AOP reported continues to grow (as it should do with the sales increasing). The US GAAP results were very negative with reinsurance and economics driving down that particular value.

The overall capital/financial position has to be able to support significant economic losses, and so the SP will not trade near the $149 value.

However, if the trump bump does not turn into an AI bubble deflationary recession then the financial sector in the US looks strong.

Mr Buffett has a lot of cash on Berkshires balance sheet…..JXN would be the equivalent of a canapé…given the cash generation of the business it is perhaps surprising that no large insurer has come for JXN…..I would expect a few to run the ruler over then soon, although I think we should all be very happy with the 4x the demerger value that has been delivered in the few years since demerger.

Only a small operation in the US….the ex-Pru US operation JXN jumped 13.5% today.

JXN is now 4.5x the demerge price. MNG is about 10% down…..no contest as to which has proven to be better…..operate in a growing economy.

This deal is an exit for CKHH

Vod will inherit 3 and combined they will do better than apart, but it will remain a competitive market. They will not lag the other two that were formed by mega mergers.

Schrdr is looking more like Abdn by the year.

A quandary for the controlling family…..getting bigger through M&A probably means losing control, eg could not afford M&G without a significant equity component……and selling looks like failure.

I put NICE and fruqintinib into google and it took me to the project page which shows NICE has a key committee meeting in early December and is planning to issue final determinations on 25 March,

There is a tab going to project documents and within these there are some interesting public meeting slides which set out some of the considerations of the assessment, They seem to be leaning to 4L rather than a 3L treatment…..lots of new acronyms and terminology for those that are interested…..otherwise wait for the end of March.

Amones

There is a footnote on slide 30 of the company presentation about the PDAC treatment planned for Surufatinib.

It implies the NASCA study was published at ASCO GI in 2024.

The results appear positive, obviously it will take some time for the proper trials to be performed and they are not on the approval submission runway slide so hope ware only at this stage.

Malt thanks for sharing the Lilly numbers for China Elunate sales, I had not though to look there.

HCM might as well give us a quarterly sales update

Fruq reported by Lilly and Takeda

Orpathys by Astra

That only leaves Sulanda (stable) and Tazverik (negligible).

We can use previous share of revenue to identify what HCM will be getting.

Looks like their barn door of 3-400m revenue will be met

90 + 90 for Fruq

50 sulanda

25 orpathys

Commercial milestone 20 gives 275 and they have 130 to recognise from the initial $400m licence fee (which they may wish to spread over 24 and 25.

Acquisition looks a decent fit

Cash generative so still some headroom for another deal in a few months

Pre budget sales for CGT management have now passed

IHT still has 50% benefit, which will prevent some sales.

I doubt they will tell us, but it would be helpful to know what other commercial milestones exist and their value…..but I guess commercially sensitive.

It seems that HCM has confirmed Q3 Takeda sales of $73m. It would be interesting to know why there was a drop between Q2 and Q3……I wonder if it something as simple as Drs taking more holidays and therefore performing fewer consultations in the summer?

We will have to wait for the next quarter sales to know if this is peak US sales….but I doubt it.

The HK market has marked down quite a few biotechs by 4% or more today (Innovent and Beigene from those I follow).

Down 1.5HK$ but not alone

Amones, i would ignore the sales from 2023 for any comparison

The HY result reported sales of 130m of market sales by Takeda, HCM reported 42m (about 40%).

The 3 quarters sales by Takeda are 50m, 80m and again 75-80m depending on the exchange rate used.

The China market penetration is 47% in 3L. It seems the US is focusing on 4L+ at the moment with only 20% of 3L. Guidelines may be different between US and China, but there is potential to grow the 3L in US in the medium term, the 4L represents the stock of treated patients where Fruq is perhaps the only additional treatment remaining, but clinicians may apply to 3L patients with familiarity.

This will extrapolate to around $300m US sales in 2024 and if the HCM revenue continues at 40% will generate $120m of revenue.

The royalty would be around $45m and there would be some manufacturing profit meaning a profit from this part of the business of around $60m

Plenty of upside for 2025 and beyond as other markets are entered.

Takeda reported sales of JPY 23.1bn for its half year reporting and made the following comment in its presentation about Fruzaqla

Exceeding expectations with significant uptake in U.S.

• Now one of the most prescribed therapies in

4L+ mCRC (29% share1)

• Continue to see strong uptake in 3L (10% share1)

TBH the sales in Q2 of 11.2bn were down slightly on Q1, largely explained by the exchange rate which fell from 160 to 145 in Q2. That implies a flat level of sales rather than strong growth. But the penetration rates do have upside potential.

I have assumed no EU sales in the period. TAK is silent on this but does talk about reimbursement pricing discussions being ongoing and expected to resolve across 2024/25.

For anyone wondering about the IHT status of HCM, it does not qualify as it is listed overseas.

There may be an investor panic on Wednesday if the budget cancels the IHT advantage of some AIM shares and no doubt HCM will take part in any down movement, but the effect should be limited. More important is the Takeda sales numbers on Thursday.

The JPY has weakened by about 7% over the last 3m.

Which will inflate the Takeda JPY results next Thursday, using 150Y=1USD, 100m of US sales will become Y15bn.

Flat sales of $80m would equate to Y12bn.

Hoping for $100m and still growing.

Consolidation would appear inevitable….and I dont think China regulators would want US and EU big pharma to be the consolidators, they will want a handful of large local players that can be managed easily and directed by the state if necessary.

There are already quite a few Chinese commercial pharma and many more pre-commercial operations (as HCM was a few years ago. However they often have a dominant founding shareholder) and are well funded, so they dont need to raise additional funds to keep operating - these may be the stumbling block to consolidation, but it is also an opportunity.

Imagine HCM with $500m spare capital were to merge with another operator that also had $500m spare capital……They may have to do an all share merger, but then they can use $500m to pay dividends/do a buy back to generate SH returns. There will be cash operating savings from rationalising the pipeline, sales, manufacturing and general expenditure that can quickly be cycled into profits and shareholder returns. Hence I believe consolidation M&A will generate value for both sets of shareholders.

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CKI has a large regulated capital base with predictable returns. The regulatory resets could become more problematic particularly in the UK which is a focus for the Group.

UK power networks (SE electricity distribution)

Wales & West and Northern Gas Networks (Gas distribution)

Northumbrian Water…..

The predictable returns should mean this trades with interest rates…..its shares have risen quite strongly recently, but I would expect some further gains as interest rates drop in 2025. There is no chance of a takeover as CKHH owns more than 70%, so a defensive investment.