Member Info for Jatw

Ave case size for Just is £50m…..
The big boys are doing 500m-1bn in single deals which is cost effective for them.
The bulk purchase annuity market is going to be huge while interest rates stay high - as schemes are much closer to being able to fully fund complete buy outs of their liabilities which is the aim of the sponsoring organisation.
Currently there are not enough people to assess the risks and price deals….which is driving salaries for actuaries with BPA experience higher….Just should be able to grow sales rapidly and become significantly bigger…..
That will contribute to a large Contractual Service Margin under IFRS17 which reflects expected future profits - release of these will be slow and steady so Just profits will be lower in 2023 (LGEN suggested it would lose 20-25% of profits under the new standard), but there should be a large source of value to compensate…..valuation methods will have to reflect this so there will be a focus on multiple vs CSM (should be more than 100% as future growth will be expected).

It is good news, although the money is quite small, it is one of those enabling funds as the pharma with CKD interests will be pouring money into these sites to determine the biomarkers they can target. A new drug can take many hundreds of millions of £,$,Eur to develop….but this does put RENX at the heart of the analysis and recommendation for treating patients….so has to be good…and 5 years funding shows it is a long term issue that needs addressing..but we knew that already.

Very positive vote of confidence from HK.31.5 HKD.
I expect volume will be better next week as the holiday period completes….
Trinity Delta has commented on the deal but will only update their valuation after the FY results which are v early March.

I wonder what the PE guys next move is? They need to get Surufatinib moving again globally….and I think Sov will be important in China as it has a large target market…AZ is in no hurry with Savo…as it seems to be a way of extending other product shelf life in the US.

I suspect that margins have taken a hit given the bulk market is more competitive than retail.
Also Just is a large user of reinsurance - which reduces capital requirements and new business strain.
The PRA has the 100% reinsured market in its sights in case a reinsurer does fail and leave firms like Just scrambling to find the capital required previously provided by the reinsurer.
Nevertheless - an excellent set of sales numbers from Just and good expectations of future profits….no word yet of IFRS 17 impact….

Will it be 30HKD?
HK has some catch up to do with global markets….and volum e fell away before CNY. So i expect better volume…but it is anyone’s guess whether the Takeda deal will go down well.

I have been bitten by FDA non approvals in the past for pharmaceuticals but am not familiar with their medical devices approvals process…..do they just keep accepting additional evidence of efficacy or is there a time bound response that can be a rejection and start again?

Will this be dead in the water if there is a negative outcome?

Trading update likely next week.
I wonder what inflation is doing to their business? In theory the meters business is index linked so should be increasing billings significantly and matching increasing labour and equipment costs….i expect there will be cost increases to the battery storage business at some point but power security still seems to be an issue sp maybe pricing power is with SMS…..

Will be one of Fitzpatricks last interviews as CEO….new man due in soon….and looking forward to what he has to say at the HY once he has got his feet under the table…

The move from London to HK for the primary listing will take time…..my guess is when more than half the shareholdings are registered and traded in HK/SNG….

Heading up in my opinion.

The trade press seem to think Takeda paid a lot (fierce pharma and others)….but it is easy to criticise….T pays too much, H sells too cheaply only if everyone is happy can the deal be done.

This works for Hutchmed now…..with some milestone payments to come (associated with Regulatory Approvals and then sales), future costs on new indications shared…..and then presumably a teens % of net sales to follow….

The future for Hutchmed is clearer as a China discovery platform and China distributor with outbound and inbound licensing of products…..the best of breed solution for each candidate (AZ, Lilly then Takeda, IPSEN) may work for a few more but could become unwieldy if partners begin to see conflicts of interest creeping in……then you could see divestments / buy outs taking place….

Thursday will be interesting….when HK and Chinese investors get to express their opinions of the deal.

They know it is large……and they know the Japanese market which according to one of the slides is larger than the US. So maybe they are the natural partner for this drug.

To my mind this is a huge de-risking of HCM as an investment….the cash injection will give it three years of $300m investment and that is before the margin it makes on sales in China. I now consider it unlikely that it will need to make a fund raising exercise at a discounted price. Of course there may be a deal it wants to fund or it may just want a STAR listing at some point in the future, but there is unlikely to be an existential cash crunch.
I would expect a sum of the parts valuation to be lower because some value will pass to Takeda, but I would then expect the SP to be much closer to this more realistic and safer valuation. The next Trinity Delta and other analyst assessments will make interesting reading.

Now they need to find a global partner for Surufatinib…..maybe Takeda can help them present the validity of the Japan bridging study.

Listened to the conference call….they have spoken to many potential partners, but there is not much detail beyond what is in the RNS / slide deck….but the marketing approvals are unlikely to come until H2 24….so they have time to develop their commercialisation plans and for any further joint development of Fruquintinib to create proof of concept evidence.
Weiguo did say they expect Elunate to gain further market share…so they must have had good H2 sales in China.
CFO said with the cash they expect to have cash levels around the beginning of 2022….we have to wait for the results for further details but it seems the cash is earmarked to support pipeline development.

Per the last reported sales, Fruquintinib had a CRC market share in China of 43%. While I am not sure how that is measured, it is an impressive % that is possibly approaching a peak given the competitor market share has barely moved from 30% pre/post HCM launch……so investment in broadening the indications and partnerships to increase effectiveness are still required.

A surprising day to release such news…..as it coincides with the first of three holidays for the HK market….but no doubt this is excellent as it immediately funds 15-18m of pipeline runway, eliminates a large element of cost and reduces the risk around marketing……or provides funding to licence in a drug….I dont expect management to pay a dividend or buyback shares for several years.
Next on the block is surufatinib….ex-China.

Why would QLT redeem £200m paying 4.x% that have 5 years to run and then issue £200m 10yr debt at 8.625%……surely better to raise money in 5 years time unless the old ones are no longer suitable capital?

HK low volume
AIM low volume
Nasdaq down quite a lot but low volume.

Suspect the low volume is likely to continue for a couple of weeks…….dont worry about a fall over this period as it could well bounce back once CNY is over.

Next CEO asset management is an ex AXA colleague of Andrea Rossi.
I expect investment and growth in the Asset Management side of the business…….The insurance / wealth side has received the M&A attention over the last few years (platform, 2x advisor business and a 20% stake in Moneyfarm). ResponsAbility was added to the Asset side….I expect more will follow…

History says AML is going to go lose a shed load of cash……but its owners have deep pockets so it may not go bust…..but it could go private at a cheap valuation having funded a new range….

I doubt they will pay down debt, as they would likely prefer to spend the cash on additional business(es). However they can look forward to a re-rating if and it is a big IF they can deliver against these targets…….maybe there is a way back to 90p? At which point a lot of existing holders may take a break even opportunity to sell.

The fund flows turned positive in the H1 results, with recent market gains this could see a useful uplift in AUM (boosting future prospects)……the annuity portfolio will also be doing well with liabilities discounted at higher rates, continuing excess mortality offset by credit downgrades / losses although it seems rare for actual losses to arise when the bonds are held to maturity. Last chance to book some one off gains before they get lost in the contract service margin under IFRS17.

Jefferies raises price target to 1900.
Seems a bit of a stretch…separately I see SDR has got approval for a new fund venture in China….looking forward to hearing Pru gets control of its Chinese ventures.