Member Info for Jatw

It seems to me that the ground work is being laid for regulatory approval of this deal….albeit there will be some concessions over bandwidth and network access, including support for potential new MVNOs. The EU seems to be changing its position and even competitors recognise the need to earn a required rate of return which 3 and VOD are failing to do in the UK.

There will be more vested interests claiming the deal is bad…and needs amending to suit them and some will be addressed.

The national security debate is also interesting but is probably more an imagined risk than a real one. The work done to allow E& to be a major Vod shareholder is ultimately more important to strategy…the owner of 3 (CK Hutchison) will be increasingly isolated from the UK venture and there are options for both parties that result in CKH leaving the JV.

We can expect a stage 2 Competition review and a further 6 months…..hopefully the next govt does not try to move the goalposts at the last minute.

Beigene reported yesterday after HK close.

Its sales were nearly doubled to $2.2bn led by $1.1bn in US sales.

It consumed $1.2bn in its operations (this is a third better than 2022) and it gained $0.4bn from returns on its cash/near cash investments leaving it with funding of $3bn at the year end.

While its cash burn is reducing it is still some way from making a profit on its business activities.

Shares were up 5% today.

HCM is likely to show a gain in cash assets over the year due to the Takeda agreement, investment returns will provide an additional benefit……

Getting NDAs submitted in 2024 will pave the way for approvals in 2025, launches and then sales take off in 2026, which is when I suspect HCM will generate profits from its pharma business.

The company website is open to register for Wednesday’s results presentation (12:30 UK), the results are announced shortly before the presentation.

I expect a small IFRS profit and no dividend or buy back…if there is news of shareholder returns it should be a positive surprise for the market….A HK10c/UK 1p dividend would cost about HK$85m /£8m so quite affordable….and maybe in line with the Chinese directions to boost returns/value….a meaningful buy back would probably need to be closer to 5% of shares (40m) and cost more like hk$1bn/£100m which I think could be feasible in 2-3 years time.

I have accepted, but I dont think I get paid unless the deal is declared unconditional…..if they raise the price before then they have to honour the higher price for all.

No certainties here, but the prospect of lower interest rates should mean KKR can raise its offer and still make money.

If certainty is needed, then sell in the market…..the price indicates there is confidence a deal can still be done.

And the % of acceptances seems to have fallen to 30% (unless there was an error in last weeks update).

Looks like KKR may need to sweeten the deal.

Results are in…..a large loss in Q4 resulting from mark to market…..but dividend up to 70c as predicted by others here. Capital position more than 600%. Increased target for shareholder returns of 550-650m up from a 2023 value of 464m.

Sounds like management are pretty bullish about the cash generation from the business.

Drug revenues - have they made any headway in H2 v H1?

Early royalty revenues from Takeda and what they can say about early 24 sales.

How much of the Takeda upfront payment of $400m is recognised in the accounts will determine whether there is an overall profit or not.

Cost run rate (vs what they have in the bank?)

Is there already excess cash (do we think that is 2yrs operating expenditure?) And what do they propose to do with it. (Policy for dividends/guidance)

Pipeline - due dates for the submitted NDAs. What has happened with the Amdiz readout and possible NDA? Any update from Takeda re Fruq for GC. Firming up the delivery timetable for 2024/25.

Investor relations - it would be good if they would commit to providing a quarterly sales update. (Takeda and AZ do it already so we can see some sales data)

FDA has indicated a preference for Overall Survival over Progress Free Survival / durable response rate when considering full approval.

The impact is likely to mean more provisional approvals requiring confirmatory approval studies…..It also takes a lot longer to run the trials to get the OS numbers, this is expected to impact smaller pharma more than big pharma.

https://www.biospace.com/article/how-will-fda-s-pivot-to-overall-survival-affect-cancer-drug-development-/

ISA and reinvest dividends……just buy (if you believe in the company strategy) and hold, timing does not really matter.

BTW I have said this before, the second largest SH is ABDN which is a likely seller….they own 10% and will likely off load this at a discount to the prevailing price this overhang may limit the upside….for this reason I currently prefer AV / MNG. Once ABDN has sold down to 2-3% and if the sales have been well received then my preferences may change.

Possibly depends if you are buying within a tax free shelter….and whether you plan to reinvest the dividend you get by buying early.

The risk is whether to buy before or after the results….the results generate a company specific move in addition to the daily market move, the ex-div move is just the dividend deducted and other daily market movements.

Things I expect to and would like to happen this year:

Expect: Factory operational,

Takeda make significant sales progress in US, Europe and Japan, commences new trials (GC?) and combos with existing Takeda product.

Like:

Partner found to globalise Sovlep.

Inmagene buys out HCM options/HCM acquires Inmagene.

In-license portfolio of oncology drugs/ create a distribution channel (JV?) in China to improve productivity of sales force.

HCM makes a bolt on acquisition with some synergies and some new capabilities for the company..

IPSEN adopts HCM drug as a partner for Taz and commences a global study.

Only 38% on the first count. At the moment no shares acquired.

There must be plenty seeking an uplift in the offer which the rules do allow for - with take over panel approval (not sure why it would be refused?). Another 5 weeks before the final deadline for declaring the bid unconditional. This is where the advisors have to earn their money by assessing whether raising the bid will get it over the line - plenty of hedge funds who just want an extra few %.

Exactly petro…..this company needs cash almost immediately….it cant borrow cash…it has issued convertible debt but it did not secure its future when it was valued around £1bn, it then fell 99% as cash calls became increasingly expensive.

Most BIOs would want 24m cash in the bank and not go under 12m….this is into the low single digit of months cash on hand….my guess is it needs $100m which is a very significant dilution…it may eventually be very valuable.

One of these:

1 The company goes into Chapter 11 when it runs out of cash (default option)

2 A takeover/sale of the business

3 A funding deal (partnership with upfront funding), or dilutive share issue sustains the business

3a - the company then limps on until it fails

3b - the company eventually makes a commercial return

The HK market is closed for 2 days….should be lower volume trades on AIM and NASDAQ, but unlikely to be positive until HK reopens.

There seem to be hopes for a partial recovery in the wider market this year….but that will not be evenly spread….hopefully Takeda will make a lot of sales in the developed markets this year and pay $$$ royalties

I just see this being range bound for a while…..buy below 100, sell at 110. (Obviously NFG will set these bounds lower - each top their own).

The bid is unconditional if/when they get 50%. I think they only pay for the shares if they get there, otherwise the bid could fail…

Once they have 50% they can force a purchase of all shares if they get to a critical mass 90%, but they are not likely to do unless there is a change of heart at the dissenting PE investor and founders that hold 17%…..they can delist once they get to 75% which is likely which will mean it is difficult to sell the shares (more expensive broker fees included).

There are two dates listed for the tender offer, the first is 15 Feb and the second is 24 March.

While I would welcome a higher offer, I dont think one is going to happen, I dont want to hold an unlisted security (it is not permitted in an ISA so that may be another reason to sell).

On the basis that this deal is likely to be the only one available in the medium term and so would like a bid to succeed, I have tendered my holdings via HL which has a deadline of noon on Monday 12th to register acceptance of the offer.

My view would be to definitely accept the offer by 24 March, if it is proceeding.

A good day for once…clearly the forward looking statements are driving this…..

Blooomberg was saying that the interest cuts coming may lead to some dollar weakness which is historically positive for EMs.

FY 31/3/24 - reporting on 9 May may comment on Q1 sales of Fruq

Q1 sales 31 July. (Links to HCM H1 royalty revenues)

Q2 sales 30 October (should show continuing take up in US)

Likely to be our earliest sight of HCM revenue (NB not product sales but royalties and manufacturing fees)

Seems to be $44m US…which is flat on the 22m achieved in H1.

Volume is up so HCM manufacturing fee gives a greater share of revenue to HCM.

Looks like HCM will consolidate $30m

Expecting HCM product revenue to exceed 160m, but not by much, 170m would be a good result…..may get to 200m in 2024 if Elunate GC and Sovlep are launched mid year, Hence they will still be burning cash reserves 24/25.