Member Info for Jatw

NB In a revenue forecast, Trinity Delta estimated only $100m of Takeda sales….if that is accurate my 30-50 range could be very optimistic!…but 100m is only 8.5m per month.

I am expecting a pattern more like this for the monthly sales (excluding stock transactions)(first two in 2023)

5,10,15,20,25 (Q1 sales of 60m) (this would be a very strong performance)

3,6,9,12,15 (36m)

2.5,5,7.5.10.12.5 (30m) (this is my lower estimate)

Q1 results were up 30% (adjusted operating profit).

Statutory earnings of nearly $10/share…..shares rose in the after market to $75.

Strong capital position and delivery of $172m to shareholders (1/3 divi, ⅔ BB) sounds well on course to meet their 2024 returns target.

Takeda reported 15m sales in the Nov/Dec period. There may have been some stocking of the pharmacy chain within that rather than actual paying patients, but they should be adding customers who will on average be under going treatment for sometime, so there should be compounding of sales increases going on .

I am guessing somewhere between $30m (the run rate from 2023) and $50m (adding $5m in new patients monthly) for in-market sales….Lets see.

HCM gets a mid teens royalty and manufacturing fees (in 2023, HCM got $5m manufacturing and $2m royalty on 15m sales. ….I assume most of the profit will come through royalty and the product costs dont come with much markup.

The new corporate presentation has only changed the summary of registration studies slide as far as I can tell. Amdiz has been removed (Ph 3 trials needed so beyond the timescale, but also may be deprioritised). 453 has been added/confirmed.

I doubt anyone here is holding for a dividend.

Buying new product and extending brands is the name of this game. Pay cash, take on debt, bring the debt down. Repeat.

No doubt Pru will be using these MS services heavily.

Two HK announcements this week:

29/4 Innovent produced an overall Q1 sales number and YOY comparator +60%.

Innocare has announced a Board meeting to release its Q1 performance is on13/5.

This is the response to my recent email to IR (I was surprised to get a reply). As they acknowledge competitors starting to do quarterly sales reporting I think this will be considered and will come in due course…..probably best once new revenue streams start kicking in and start Q1 25.

Sorry for slow reply.

Thank you for your strong and long support of Hutchmed.

Some of our peers start to do quarterly updates as their portfolio of products and scale of operation expand.

We will seriously and carefully consider your suggestion.

In the meantime, please do realize the reporting formats may differ between our partners and ourselves.

Our revenue also comprises different components, including royalties, manufacturing,...

So, our case may be slightly different from peers who do their own manufacturing, marketing and distribution, capturing 100% of product profits.

Please continue to support us and feel free to send us comments.

Pru may be the worst of these 1yr losses, but not by much

AIA -32%

Ping An -36%

Pru -40%

The market sentiment is poor for Asian investment companies due to China (economy, trade relations with US and political concerns re Russia and Taiwan).

Arguably the prospects were over sold years ago, have corrected and now are undervalued.

Pru update is a mixed bag,,,APE up 7%, NBP flat.

Some markets well ahead (Malaysia), others substantially down (Vietnam, Indonesia, China), HK flat against strong comparative figures.

HK market has marked Pru down slightly, but little volume there, anyone’s guess where London will go.

Pru has promised a capital management update by the HY results (clearly caught off guard by AIA announcement yesterday).

AIA announced a new capital management policy.

75% of net free surplus generated will be returned to SH each year.

Based on 2023 this would have resulted in USD 2.3bn dividend and 0.6bn buy back.

They also have a capital surplus of 200% of the required minimum. Using this metric they added $2bn to their 2024 buy back.

I doubt that Pru will respond immediately with changes of its own….but the comparator for capital is set out. At present Pru is a stingy dividend payer (about half the yield of AIA) and does not operate a buy back programme. If they can increase the shareholder returns, the SP may respond more favourably.

I have delved a little more into the EU processes for delivering new drugs to patients.

It seems that many markets have a state system that controls the price of the drugs reimbursed by the state. These are largely unco-ordinated although some reference the prices paid in other countries in price setting. They have a benchmark of added value and don’t reimburse new drugs unless they add value above the cost / benefit of existing treatments.

Germany seems to be the first market that drugs should be launched in as they have a one year period before the state price is set.

All of this makes me think that Takeda will require 2-3 years to establish full volume sales across the EU, although some of the less restricted markets can be up and running quite quickly.

We should be more concerned about the ground rent bill as that is likely a straight loss without any security to fall back on….

Exposure to utilities is £1.772bn per the accounts (supplementary information about credit risk).

A lesson learned from the banking crisis and the Euro crisis is to be diversified and better secured….actual credit losses have been very low over the last decade, far greater than the capital held against the credit risk….While there may be some credit rating adjustments which require more capital to be allocated to credit I dont expect this will be material from the industry perspective.

AIA up 7%, Pru up 4% on Monday 29/4

Pru market update on Tuesday, could be well received,

It seems HK takes a different view…going back to 310p today in London.

Mt Sinai has been a main research centre, core investor and has an inside track on any approaches for the Company.

If they were not investing, the company would have little credibility.

Hopefully sales are going to rocket soon.

Press releases for £670m of DB transfer business have been made so far this year (source company press room).

The UK MHRA can approve marketing of drugs that already have an EC MAA in 3 months from EC approval….it then takes NICE a while to approve use in the NHS ( a year and then 3 months for funding to be made available)….so the majority of the UK isn’t getting Fruq* until 2026 atleast…maybe Takeda wont even bother with the UK market.

Only the shareholders in this company could think that a positive CHMP opinion is a reason to sell!

The EC now considers the opinion, and has up to 67 working days to confirm the marketing authorisation. So in 3 months time Takeda should be able to start selling Fruq* across the EU and a few other territories. The number of new cases across the EU is 3x the USA market. The centres involved in FRESCO-2 will be ready to roll at the end of July. There should be a decent volume of EU sales in 2024.

Looking again at the sales of Orpathys, Q1 23 was a weak period in the run up to NRDL inclusion. The AZ 43% rise is not that different to the YOY sales increase between 2022 and 2023 reported by HCM, so it is more of a continuation of the sales levels seen in H2.

HCM captured about 5/8ths of the sales last year in royalty and manufacturing fees. Continuing Yuan weakness against the USD may not mean there is much difference in the overall run rate in the HY results and the royalty will continue. The AZ pipeline does indicate there are several data read outs due this year, those will not kick in until 2026 as they will spend 2025 in the review process.

Takeda reports on 9 May and will give a full 3month sales figure for Fruq*in the US. This is the more significant revenue to watch in the short term..

I wrote to the ir email encouraging a quarterly revenue update…..I think it is important they demonstrate they are on track for the pharma revenue this year. Even more important next year they may want to demonstrate the effects of 2024 product approvals on revenues. It is the year they hope/expect to be sustainably cash positive from the Pharma business.