Member Info for Jatw

Takeda will now be dealing with NICE about agreeing the pricing and that this represents value for money. The additional life is approx 3months, so NICE will expect the 9m of treatment to cost less than £7500 more than the standard of care being superceded .

The drug can also be made available via the Cancer Drug Fund which requires individual approval to spend the fixed fund on the patient. This will have lower volume but potentially a higher price.

The NICE assessment should be completed within 90 days of the marketing application (so mid December). Given the dominant position of the NHS in UK cancer treatment Takeda will be wanting the full approval for use by the NHS.

Similar price negotiations will be happening across all the EU markets with heavy state involvement (all?). Hence there will be few EU sales this year and will build during 2025.

It will be interesting to see what the real life experience is and whether doctors are quick to identify when Fruq is appropriate extending the 9m average survival seen in the trials.

In addition to the US, EU and JP it appears these approvals have also led to approval in Switzerland, Canada and UK during August/Sept.

I assume that Takeda will pursue other higher value (if not volume) markets where they can leverage the FRESCO work and other approvals.

A HK$1/10p/13c dividend would cost about HK$850m / £85m/ US$110m.

It looks to me that they have US$500m more than they need to run the business, so this would be affordable and expected to be covered by earnings from 2026.

They could also squeeze the market with a buy back which may benefit the SP more.

That is before considering more risky M&A.

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Amones - I have had a couple of recent exchanges with HCM IR via email. I wanted to know if they would give us a quarterly sales update and I gave them a question for the HY results about their capital position. They did put my question and they also said they would consider a quarterly sales update (I am not too bothered about Q3 24, but I think Q1 25 will be worthwhile).

We have to recognise there are restrictions on what they can tell investors outside RNS/set piece events…..but I think if you suggest information you would like to see in the next presentations / questions that need to be answered in future there is a good chance it will be forthcoming when they can.

Inflows resulting from increased advice need who would have thought it.

2024 will turn out to be a good year for QLT

The RNS does not comment on whether there will be an NDA based on these results….presumably the sharing of the results with the regulators will drive the decision. They have the backstop of the SAFFRON test vs platinum chemo. It will be an AZ decision on whether to progress a 2024 NDA, but I cant help feel that another non-progression will heap pressure on HCM.

On a more positive note, there are 4 China reviews ongoing due for decisions before mid 2025. Hopefully they can improve the success rate.

They need some growth in AUM…..maybe that is why they are a leading sponsor at HMGs investment forum (there will be lots of private debt issued to finance the infrastructure).

1pencil, i have a couple of paras for my letter to ckhh for your comment.

there are two areas where i believe ckhh oversight/influence would be beneficial:

1 i am concerned that there is an unusually high failure rate of new drug applications after apparently successful trials and management does not identify these issues, wasting resources on fruitless regulatory engagement. while there may be different reasons behind the rejection of surufatinib in the us, its associated withdrawal from the japanese and eu processes, amdizalisib withdrawal in china and most recently the withdrawal of the supplementary new drug application for fru*****inib in gastric cancer, it is concerning that the success rate after phase 3 trials is around 50%. i hope ckhh ensures hutchmed understands the reasons for these setbacks and is learning from them.

2 hutchmed has a strong balance sheet and it seems likely that it will not need to raise further equity to support the existing business. indeed, it appears that it may have upwards of us$500m in cash/near cash resources when it is consistently profitable. at the hy results presentation, i submitted a question enquiring about how the company was thinking of deploying its surplus capital. the ceo suggested that further expansion of the pipeline should be expected, i suspect his background as the chief scientific officer leads to this preference. also it may be that the board is yet to consider whether there should be a dividend or share buy back, but these questions will only get louder. as the main shareholder, balance sheet management is an area where influence can be used to enhance shareholder value. allocating resources between investible projects (the hutchmed skill) and shareholder returns (the ckhh interest) requires careful consideration. i hope ckhh is an active shareholder overseeing the strategy, business plans (including balance sheet management) and management capabilities to protect and develope the value of hutchmed,

We dont know if HCM will update the market with Q3 sales and 9m figures, but we do know Takeda will report its HY numbers (6m to 30/9) on 31 Oct and AZN Q3/9m sales on 12 Nov.

I am expecting US sales of Fruzaqla to be approaching a steady state, but there should be further growth on the Q2 number. I think $90m will be a good performance and if they reach $100m they are doing very well. I doubt they will have made many sales in the EU due to govt price negotiations that dominate cancer treatments. The remainder of the year I would expect US sales to flatten out and for EU/JPN sales to commence in greater volume.

I dont expect the sales of Orpathys or Sulanda to change much as they have no new catalyst events. Tazverik sales are limited to one area. I expect HCM will recognise significantly more of the Takeda upfront fee now that EU and JP approvals have been achieved. 2024 could even be the second year of making an IFRS profit!

Well today was really close $99.8

Maybe soon (meaningless I know - but fun nevertheless)

But who would do M&A with MNG?

Well the new CFO or Schroders was the M&G COO before moving to be COO of SDR - so she knows the MNG business well. SDR was said to be interested back in 2020.

I dont think a hostile cash bid will take place, but a merger that is predominantly share based is possible.

Rossi will have another year before thinking of an exit or a larger job, so 2025 is a possible year for a deal.

Tweedie Brown LLP - has 5% - which looks like a tradeable position.

Stake building for a bid by someone?

Next results set for November 6 (day after US presidential election)

- volatility expected due to election

- no dividend change expected

Will we see $100?

And there we have a 20% gain for many HK biotechs in a week without any company specific news.

It makes me wonder why on earth I hold any individual companies if they all rise/fall together so much…..Thinking of selling and buying a specific tracker such as HK:3069. A HK Biotech index ETF.

I was expecting more of a bounce given the China market movements have been seismic in the last few sessions…..surely this will generate some inflows….

Mikodx

You are right, a portfolio can only sustain a very low percentage of pre-revenue companies. They are built on hope. I had one a few years ago that reported its drug passed its phase 3 trial. When the FDA rejected their drug it emerged that it had failed before and they had not gathered sufficient data to overcome known objections. They were never worth much more than $50m, but RENX was worth £1.2bn at one point which is incredible given what we have experienced.

If you want some exposure to pre-revenue companies then invest in a portfolio operator like III or IPO (there will probably be better ones in the US, but those are the ones I recognise on the london market). These portfolios get hit hard by interest rate changes and liquidity could hurt (which is why Woodford failed), but they should not be total failures.

Like you I am just going to let my RENX holding languish at the bottom of my portfolio -it will remind me of the perils of companies like this and it might spark back to life if sales are better than forecast (they do look to be very low compared to the market) - but then maybe Drs dont want to invest their time in a new tool if it could disappear. I would not be surprised to see sales grow very rapidly once there is confidence it will be around for a longer time period.

But will it be sustained or is this just a flash in the pan from China?

US does not look particularly convinced and halved the gain from HK.

There were high volumes across all three listings today at 1.5-2x the 3m ave volume.

Hopefully HK gives it another push on 1 October.

JamesO

I dont doubt your personal contacts and your recent experience of investing in Pru, I was trying to highlight the structural issues afflicting. Pru rather than AIA/PingAn.The numbers are that the UK market has not advanced relative to other western markets for the last decade and arguably longer, China has been reduced in many weightings since covid and the threat of increasing US sanctions which also apply to western asset managers generally. HK has bounced during september but was down by 50% from its pre-pandemic highs.

As you say sentiment can change rapidly - and I very much hope we will see Pru bounce back strongly as China improves.

The quoted HK$ share price performance for 1 yr:

Pru -12.5

AIA +10

Ping An +12

This might lead one to believe Pru might catch up.

I suspect the difference is ownership and primary listing location. Pru is primarily a western owned business and is still known for its London base. The other two are seen as more Asian and owned more locally than Pru…..It will take along time (or a take over) for Pru to get an Asian dominant shareholder base. The London Market is not liked by international investors and China is not liked in London, so a double whammy. It was not ever thus and may not continue to be in the future.

HCM is up 8% but this is some way behind others that have posted 10% plus

(But much better than Innovent +2%).