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There is an arrogance among the SJP “partners” that they are the best and earn the most.

There is a reason for that…..and that is not providing value for money (some will, but many have been raking in the fees as money for old rope.

It is going to be a painful adjustment….for many,,and all those who have copied their business model (which happens because they are apparently successful)…

I am sure there will be a dead cat bounce early next week, but the question marks will remain as the new CEO will kitchen sink all the issues…expect a horror set of results next time

There does seem to be more than a whiff of panic around this share now…..

It has not changed its charging structures fundamentally for a long time and has seemed to ignore certain regulatory changes (eg cant charge more than 1% exit charge on a pension…..but they think it is ok to call it an early withdrawal charge of up to 5%).

SJP partners have done well out of their rich clients (as have others)…..a 1% annual charge for no change to the portfolio / confirming investments remain appropriate does not really deliver value for money for most clients.

CEO is going, CFO and CRO/CCO will surely be next…..Fitzpatrick needs to change course quickly and that will mean upsetting the partners and shareholders…….(shareholders have already taken a beating).

Denfos- possibly heading to 150….the AUM update is another 8% loss, the majority of which is outflows rather than market related…..until that corner is turned I dont see much upside…..there will be a point at which the dominant shareholder wants to protect their net worth by selling…..maybe that will come sooner than later but it will be a fire sale and not much of a premium if any.

HCM certainly has momentum behind it…..but china pharma recent performance has been selective- last 6m

HCM+13%

Innovent +10%

Beigene -23%

Junshi -38%

The continued doldrums for Beigene perhaps presents a rotation opportunity once the gains in HCM and Innovent start to level off. Davey has previously told us Beigene is more expensive on various metrics…although part of that must be the relative maturity of the company and where it is in launching its pipeline.

Or…they team up with Novo Dordisk to sell testing alongside Ozempic/Wegovy.

They announced positive results for CKD from taking their appetite suppression drug.

It did say it was not progressing with the submission in Japan but it gave no details as to why.

It would be a brave regulator that accepts a small bridge when it was not accepted by US / EU so my guess would be the regulator indicated they would not accept it…..but it may also be the case that the results were below expectations…..

Having said it was MCRT ready, and strongly pressed the partner model for global work, that it has been difficult to get a partner signed up to help take it forward….but if they dont take it forward I would have doubts about the longevity of the China earnings as competition will not be far away.

The october update is now available,,,,,TBH I struggled to find much change.

They are still maintaining Amdiz could be submitted as NDA this year, but given no read out at yet and we are 2 months past the Sovlep readout with no NDA filed it is looking less and less likely.

The other item we could do with an update on is the global approach for Surufatinib……it is 18m on from the CRL and there is no news….earlier this year it was described as ph3 ready. Some possible explanations are 1 they are in negotiation with a partner and will announce the trial and partnership together, 2 the combination of suru + Tori is far superior and they will take that to the global stage once the China trial completes. 3 a competitor is about to knock out suru with a much better product. 4 they have deprioritised global suru and are not pursuing it.

As predicted/hoped for by 1pencil we seem to have a consolidation around 270p.

While other HK stocks experienced some recent declines HCM did not….the bio pharma market in HK now seems to be advancing, so hopeful of further gains ahead of the PDUFA date….the main catalysts for 2024 lie in China approvals and Takeda global sales….

Hardly a surprise it would fall once Rishi announced raising the legal age to smoke every year…this business has along time to change, but if they include VAPES then eventually the distributors will all be criminals.

That is the sort of premium that makes for a knock out bid - not out of line with historic bids for developmental companies…..once it is clear they have something novel that is likely to work…

A Takeda drug for NSCLC has been voluntarily withdrawn in the US after its confirmatory Ph3 trial unexpectedly failed…..With some NDAs expected soon from Ph II studies, we should expect more confirmatory trials for HCMs second wave portfolio.

J&J has published a trial result that pitted its treatment against Tagrisso and they say it has been successful in some respects.

The main risk for any treatment is that a better one comes along…..I have long thought that AZ is holding back Savolitinib to be able to extend Tagrisso’s market with a combination therapy….I wonder if this news from JNJ will accelerate the need to bring Savolitinib to market outside China?

It has rushed up to and exceeded 270….

Another day in HK where it outperformed peers (Beigene, Junshi, Innovent all down 3% or more). A low volume session generally and for Biotech in particular.

There is a clear price catalyst for HCM with the PDUFA date now 2 months away. Once that is past, some drift back may set in.

Funding in some form is desperately needed…..regulatory process to issue new shares being put in place….plus they say looking at less dilutive options.

Funding news is the next pricing catalyst….

The small fall in HK this morning was still a relative outperformance by, HCM.

About 9 weeks until the PDUFA day.

While the science may be compelling there are many other potential issues that could cause delay.

I think I recall that a Swiss plant is going to be used for manufacture, which would reduce the risk associated with delays caused by on site inspections in China.

More damage to credibility…

Time for a change

The actual movement on the day may well be negative…..depending on how many short term traders are looking to book a profit after running the price up…. buy the rumour and sell the fact. …..it is entirely possible that today’s price already reflects the expected approval…but we suspect the price of this share is somewhat detached from prospects.

JPM has today issued a raft of new price targets for insurers. It mostly moved its target in the direction of the SP……Just was an exception where it raised the target when they were already ahead…..the recent weakness in the SP has been disappointing but these recent raises in target prices point towards a potential for a change in sentiment……

Anyone like to offer a guess for the share price the day after the PDUFA decision?

I’ll start:

Approved - 325p (I think we will see the recent upward trend continue as approval unlocks further value)

Not approved 150p (I consider this unlikely given the priority review and the medical experts commentary and it would shock the market)

It is a perverse situation that good results strengthen the regulators hand, and poor results mean the recent share price collapse has accounted for a profit warning.

FWIW I expect the Board will say soothing things about the CMA review, but it is only when the results arrive that there will be a change in the SP.

It is a large ish operation and it takes a lot to move the dial…..which means it is relatively stable.

New management is restructuring and aiming for growth - new asset flows coming from retail clients rather than institutional which is improving margin.

Capital generation going well and dividend is well funded….nothing to worry about.

Some movement on bulk purchase annuities not in the figures yet….and early days in this market..

Hopefully this will raise the trading range but I dont expect a leap upwards.