Member Info for Jatw

With some sites offering part shares a share split is irrelevant.
Why would the company want a lot of small shareholders on its list? More cost, no gain….
Warren Buffet has done ok with Berkshire Hathaway shares over $100k

It is not just pharma anything currently in the development phase and loss making is finding capital hard to come by…..I have said before that a China champion needs to emerge by consolidating a number of smaller players with competing portfolios where capital is currently being expended on very similar products…..pick the best ones and save 100s of millions of dollars. I think CKHH will do this - opting for a smaller stake in a larger operation is a more predictable return which is what they like……I dont know why they have not done so already..

The list of potential NDAs is impressive, 5 or 6 per annum for the next 3 years should be worth a good deal. Of course some may not succeed and then they come with different market opportunities….but proven drugs can be expanded particularly those that are well tolerated as HCMs always appear to be.
There are tie ups between the largest pharma (AZ and Merck, AZ and DaiIchi to name just a couple of single drug deals). I would not be surprised if HCM wants to remain independent that it chooses different partners for each drug or partner by region. The increase in partnerships would make a takeover much harder. The opportunity for a bidder is now while the SP is depressed and the registration study results unknown. As long as the US /China can muddle along there will be a significant increase in value as the NDA come through in 2024-26 and volume sales in 25-27.
We may be in for a 3 year wait

I doubt the PRA will allow capital to be reduced…..they are already looking for new ways to raise capital levels……climate change being one. The long run effect of climate change is not compatible with Solvency II which has a one year view of risks. PRA is already thinking about consulting on the capital framework….For annuity businesses with large credit portfolios they will require haircuts on debt that may be bad for the climate.

With interest rates risen and rising further, we may see excess capital deployed in retiring maturing debt rather than new buy backs….that is still beneficial to shareholders as it reduces the costs of the business, improves the eps and credit rating should they get new investment opportunities.

Looks like p21 on gastric cancer and p27 on strategy that are significantly changed/ new?

What has changed is that CKHH holding has gone from nearly 70% to high 30s%. PE and institutions hold a majority and have flexed their muscles with Board changes and no doubt influencing the strategy review. The have probably told CKHH to stump next time more cash is needed.
The company is currently valued at $2bn at has at a guess 700m in cash plus some real estate and several hundred million of value in JVs existing sales should generate EBITDA of $150m pa meaning the pipeline is valued at a very low multiple. A buyer can get about 1.5bn back by closing the pipeline and selling the JVs. So a considerable Premium is possible if a bidder can be found.
I have confidence CKHH will not sell for less than the HK IPO price.

Two nice upgrades reported today.
While Pharma will be an easy target for pressure to cut prices paid for by public funds, politicians need to be careful what they legislate for. The companies are good at finding ways to exploit loopholes and there could be supply issues if the price is too low.

Davey, I suspect this is a necessary adjustment brought on by realisation that they could run out of money in 2025 if they continue as they are. The cash flow forecasts will be much improved by not spending on an ever increasing programme of products and combinations….they foresaw spending over $300m pa on the pipeline and global trials will be a major cost.

Not so sure about AZ as a good partner…..while Orpathys is beginning to bear fruit it has been a very slow burner…..AZ seems to be working towards Tagrisso / Imfinzi having their useful life extended through combinations….given the US Inflation reduction act allows Medicare to renegotiate high value drug purchases there may be no rush to register Savo in the US….wait until Tagrisso /Imfinzi have price reductions then up the price with Savo. They did not pay enough up front to incentivise investment.

The licensing options will to some extent put HCM in play..if a truly big pharma wants a few of the candidates why not buy them all and sell the ones not needed…..The blood cancer portfolio is one of many that could do with rationalisation to get the best treatments going forward…hopefully they can also consider JVs for similar drugs. 2023 Likely to be an interesting year.

It is now all about who is selected to be their partner(s). The royalties will be pretty similar and they have to wary of competitors that just want to stall a new product or are not committed. Will they allow a new equity investment or will it be a strictly commercial deal?

Sounds to me like they have been told they can’t raise more money in the short term.
Prove in China….outlicence global development to non Chinese sounds like a way of reducing global politics and costs……not sure what this will mean for the US office (closure?)
Potential for upfront licensing fees and royalty streams…..perhaps lower value but lower risk? But then there is no value if you can’t get product approved and marketed so a trade off is necessary if there is no more funding.
If they can save $100m for the next 2years that will buy them an extra year to be self supporting. I think the market will like that in the medium term.

Time to announce a deal is on or off. Talks are said to have been ongoing for a while and a framework agreed for a deal….it seemed just the amount of debt owed to VOD by the combined entity was to be agreed.

https://www.fda.gov/regulatory-information/search-fda-guidance-documents/multiple-endpoints-clinical-trials-guidance-industry

FDA has issued recent guidance for assessing multiple end points…..interesting if HCM will comment on these when the data is presented

You will need to look at each company separately and its components.
Common issues are falling revenues from reducing AUM.
JUP is a pure play asset manager…..it has experienced significant outflows exacerbating market related falls
ABDN has sold down its India business and will no doubt start selling down the 20% it holds in Phoenix soon to provide cash. It’s fund business has not performed well and it has made a £1.5bn acquisition of Interactive Investor and cut its dividend. So you are buying a turnaround/reinvention story.
MNG is asset manager where fund flows have turned positive. It also has the ballast of an insurance company (approx 50% of AUM not going anywhere soon) and wealth management operation to provide capital/cash and the same ABDN reinvention.

It depends what you want when you trim.
The pure plays likely to remain more volatile but easier to take over so may have more upside.
MNG may be steadier with a more reliable income stream.

Undoubtedly A qualifies win.
I feel PFS is what patients want…..it is certainly what I would want and would pay for.

However, intuitively it seems inconsistent to have a significant PFS result with no meaningful change to overall survival. Either something about the population studied or something unanalysed affecting survival…..anyway a large study of 700 patients so I expect a Chinese NDA in coming months.

HK a market likes it….will NASDAQ?

1pencil
I feel the lesson of the last couple of years is to diversify……the hope of one company making it big is addictive, but it is statistically unlikely to be the one we know……positions need to be taken judiciously. Funds will be intrinsically less exciting and engaging but we will not miss the crushing disappointments that individual shares can bring.

Like all addicts I am not sure I can give up on this one….but I know it is probably the right thing to do.

Good earnings result……still amazes me how little the market values the business, but i suppose that is a result of volatile earnings as a result of market movements making it difficult to value..

Quality research and disciplined capital allocation is paying off in rising sales and will feed into dividends.
Although I dare say the politicians will be thinking about ways to tax the companies and shareholders more….although that will result in higher drug charges…and patient detriment.

What will the analysts covering the co make of yesterday?
On the one hand doubling adjusted EBITDA sounds like a good thing if it is funded organically and with some debt…..with a limit of 2x EBITDA that could mean put to £400m borrowed….I think that unlikely in the higher interest rate environment but not borrowing will almost certainly delay the plan.
It seems to me management has painted a huge target on their back that they may fail to deliver organically or might borrow and spend unwisely to achieve.

Then there is the valuation question….double EBITDA and 70% cash generation of that means free cash flow of 140m. I think a lot of the growth is already inthe price….

Used to hold 12%, now around 5%….big seller should creating a better mix of shareholder base. Once Abdn selling is done the buyers will be pushing the SP up.