2020 insights into a breakout year

Hutchison China MediTech 30 January 2020 Update
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Hutchison China MediTech

2020 insights into a breakout year

2020 insights

Pharma & biotech

30 January 2020

Price

381p

Market cap

£2,625m

$1.30/£

Net cash ($m) and short-term investments at end 2019 plus $105m net raise

267.9

Shares in issue

688.9m

Free float

49%

Code

HCM

Primary exchange

AIM/Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.3)

25.6

14.6

Rel (local)

0.9

21.6

3.8

52-week high/low

476.00p

272.00p

Business description

Hutchison China MediTech is an innovative China-based biopharmaceutical company targeting the global market for novel, highly selective oral oncology and immunology drugs. Its established commercial platform business continues to expand its outreach.

Next events

FY19 results

3 March 2020

Surufatinib start global PIII NET trials

H120

China NDA file for savolitinib in NSCLC Exon 14 deletion

H120

Analyst

Dr Susie Jana

+44 (0)20 3077 5700

Hutchison China MediTech is a research client of Edison Investment Research Limited

2019 has been a landmark year and we expect momentum to accelerate as Hutchison China MediTech (HCM) continues on its path to become a global biotech with a marketed portfolio of innovation-led oncology drugs. Achievements in 2019 include the addition of Elunate on China’s exclusive NRDL list and surufatinib’s China NDA submission following impressive data in NET. 2020–21 are pivotal years. Surufatinib should become the second asset to launch in China, partner AZN could launch savolitinib in China for NSCLC (MET Exon 14) in 2021 and, importantly, this drug could be the first of HCM’s innovation assets to launch globally in 2022 (for c-Met positive NSCLC in combination with Tagrisso, a blockbuster opportunity). We think recent underperformance is unjustified given the emerging strength of its broad, late-stage innovation pipeline and the opportunity for long-term growth and enhanced economic returns.

Year end

Revenue (US$m)

Net profit*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

241.2

(26.7)

(4.3)

0.0

N/A

N/A

12/18

214.1

(74.8)

(11.3)

0.0

N/A

N/A

12/19e

182.9

(119.7)

(17.4)

0.0

N/A

N/A

12/20e

194.6

(187.3)

(27.2)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Powerhouse of innovation expands globally

HCM has accelerated global (ex-China) development of its wholly owned assets (fruquintinib, surufatinib, HMPL-523 and HMPL-689). The recent capital raise of $110m (gross proceeds) provides additional funding flexibility as R&D is set to increase to support global registration studies. HCM has three registration trials ongoing; six programmes are expected to progress into registration-enabling trials (three global, three China). We expect further investment internationally ahead of potential asset launches globally from 2024 onwards. Long-term economic value resides in HCM’s ability to commercialise its basket of oncology products.

2020 vision of China opportunities

Elunate is being commercialised in China (third-line CRC) by partner Eli Lilly, a major inflection point for HCM and validation of its R&D philosophy. Its inclusion on China’s NRDL means it is available in all state-run hospital pharmacies and patients on NHSA insurance schemes will be reimbursed (albeit it at a lower price). Surufatinib’s efficacy in NET has been substantiated by the early cessation of both Phase III trials (SANET-ep in June 2019 and SANET-p in January 2020) as the drug met the PFS endpoint ahead of expectations. HCM has filed an NDA in China for ep-NET, and this could be its first unpartnered asset to market (late 2020).

Valuation: $6.0bn or £6.74/share

We value HCM at $6.0bn (£6.74/share) vs $5.7bn (£7.01/share) previously. Our product forecasts remain unchanged. We increase our R&D expenses for 2020 to reflect progression of the global trials. Our valuation reflects forecast net cash of $163m at end December 2019 plus $105m net proceeds from the January 2020 capital raise, and we roll forward our model and update for FX.

Swiftly moving towards global commercialisation

HCM’s recent share price underperformance provides an opportunity to revisit the investment case. We believe the long-term investment case is solid, with multiple near-term catalysts on the horizon. With HCM’s financial strength and its drive to retain the economic value of its assets, the next steps for the company are to commercialise its own assets firstly in China then internationally (outside of current partnerships). The launch of Elunate in China with partner Eli Lilly and subsequent inclusion on China’s exclusive National Reimbursement Drug List (NRDL) are significant milestones, giving us confidence in the company’s ability to execute on its R&D philosophy of building first- or best-in-class molecules with lower toxicity profiles to enable combination-based strategies for the treatment of cancers. We expect the next approvals in China to be for surufatinib NET, savolitinib in NSCLC MET Exon 14 deletion (NDA to be filed in Q220) and fruquintinib line extension in gastric cancer (Phase III FRUTIGA interim analysis mid-2020).

HCM is accelerating its operations as it transitions into a global biotech. Importantly, clinical and regulatory teams are now fully operational in the US and EU. HCM’s first global approval (we forecast launch in 2022) in the US/EU could be for a savolitinib combination with AstraZeneca’s (AZN) Tagrisso in MET+ EGFRm NSCLC. Exhibit 1 highlights the plethora of clinical and regulatory catalysts ahead. 2020–22 are thus pivotal years as HCM expands its global clinical trial programmes and invests in growing its international infrastructure to leverage on the potential for multiple asset launches from 2024 onwards.

Exhibit 1: 2020 catalysts

Product

Indication

Date

Next news

Global (ex-China)

Savolitinib

PRCC

H120

Data: Interim Phase II data (CALYPSO) for savolitinib in combination with Imfinzi in RCC

H120

Data: Early Phase III data (SAVOIR) savolitinib monotherapy, possible data presentation at ASCO

NSCLC

Mid-2020

Data: Interim Phase II data (SAVANNAH) for savolitinib in combination with Tagrisso in second/
third-line NSCLC

NSCLC/RCC/GC

H220

Potentially announce plans for further US Phase II/III studies in NSCLC/ RCC/Gastric cancer

Fruquintinib
(Elunate)

CRC

H120

Initiation of a US/EU Phase II/III pivotal trial in third/fourth-line CRC*

Solid tumours

H120

Initiation of Phase I/Ib PD-1 US combination trial

Surufatinib

Pancreatic NET (pNET)

H120

Initiation of pivotal Phase II/III PD-1 trial in pNET*

NET

H120

Initiation of Phase III (US/EU)

HMPL-523

Hem malignancies

H220

Phase I expansion studies (subjective to supportive data)

HMPL-689

Hem malignancies

H220

Phase I expansion studies (subjective to supportive data)

China

Savolitinib

NSCLC

H120

Data from Phase II and NDA submission for first-line NSCLC* (MET exon 14 patients)

NSCLC

H220

Initiation of Phase III study 2L NSCLC in combination with Iressa

Fruquintinib
(Elunate)

Gastric cancer

H120

Data: Second interim analysis from Phase III study (FRUTIGA) for fruquintinib in combination with Taxol for second-line gastric cancer Interim data 2L FRUTIGA

Surufatinib

Non-pancreatic NET

H220

Approval and launch: NDA filed H219

Pancreatic NET

H120

NDA filing: Phase III interim data (SANET-p) presented and trial stopped early due to efficacy

Biliary tract cancer (BTC)

H120

Data: Phase III interim data for second-line BTC

HMPL-523

Indolent NHL

2020

Initiation of a registration study, subject to supportive data

HMPL-689

Indolent NHL

2020

Initiation of a registration study, subject to supportive data

HMPL-306

Solid tumours

2020

Novel target IDH1/2 inhibitor Phase I initiation

Source: HCM presentations, Edison Investment Research. Note: *Subject to regulatory interaction.

2020 vision for the year ahead

Exhibit 1 highlights HCM’s global and China development plans across its burgeoning pipeline, which includes clinical trial readouts, trial initiations, NDA submissions and potential approvals. We summarise below the recent developments and what to expect in 2020–22 for each late-stage asset. Savolitinib’s, surufatinib’s and fruquintinib’s Phase III programmes (in combination and as monotherapies) across multiple cancer indications will define the eligible patient populations for these compounds. HCM now has a total of eight clinical-stage assets and a number of second-generation immunotherapy compounds moving towards entering the clinic in China and internationally

Elunate China NRDL inclusion is key to driving volumes

Elunate is now being commercialised in China (third-line colorectal cancer, CRC) by partner Eli Lilly. The early sales trajectory is notable (H119 implied in-market sales of $11.4m), but the most interesting opportunity relates to its inclusion on China’s NRDL, effective from 1 January 2020. Elunate is required to be available in all state-run hospital pharmacies and patients on NHSA insurance schemes will be reimbursed (albeit it at a lower price). Elunate was the first innovative China developed oncology asset to be approved in its domestic market. Multiple clinical trials are ongoing and positive data could support line extension strategies. The next development focus is on Phase III gastric cancer (FRUTIGA), for which approval could occur in 2022. FRUTIGA is a combination trial (second line) evaluating fruquintinib and established chemotherapy agent Taxol (paclitaxel) for the treatment of advanced gastric cancer patients (n>500) who have progressed after first-line standard chemotherapy (5-fluorouracil and platinum doublets). If the FRUTIGA Taxol combination data are positive, this would enable fruquintinib use in earlier lines of gastric cancer. The second interim analysis by the Independent Data Monitoring Committee (IDMC) is expected in mid-2020. International development plans include an FDA end of Phase II meeting (H120); the US Phase Ib/II CRC trial initiated in 2019 has completed enrolment and the US/Europe Phase III registration trial is expected to initiate in mid-2020.

Combination studies are key to establishing targeted therapies in many oncology settings given the rapid rise of the PD-1/PD-L1 class of therapeutics to treat a broad range of cancers regardless of PD 1 status. For fruquintinib, HCM has a global partnership with Innovent Biologics and its PD-1 inhibitor sintilimab (IBI308) and a China-focused collaboration with Genor BioPharma and its PD-1 inhibitor genolimzumab (GB226). These trials are currently in dose-finding/safety run-in studies in China and/or globally. Importantly, HCM retains the full development and commercial rights to fruquintinib outside China (assuming regulatory approvals are achieved). Exhibit 2 highlights the status of fruquintinib clinical trials in a broad range of oncology indications.

Exhibit 2: Fruquintinib clinical trials

Treatment

Indication

Sites

Trial

Notes

Fruquintinib MT

Third-line CRC (chemotherapy refractory)

China

Phase III

FRESCO

Approved and launched

Fruquintinib MT

Third-line/fourth-line CRC (Stivarga/Lonsurf refractory/intolerant)

US/EU

Phase III

US/EU registration study in planning

Fruquintinib and Taxol

Second-line gastric cancer

China

Phase III

FRUTIGA

Second interim data 2020

Fruquintinib MT

Third-line NSCLC (chemotherapy refractory)

China

Phase III

FALUCA

Did not meet median OS (primary endpoint), all secondary endpoints met

Fruquintinib and Iressa

NSCLC first-line (EGFRm+)

China

Phase II

NCT02976116

Completed enrolment. Data presented at ESMO Asia in November 2019.

Fruquintinib and genolimzumab (PD-1)

Solid tumours

China

Phase I

Ongoing

Fruquintinib and Tyvyt (PD-1)

Solid tumours

China

Phase I

Ongoing

Source: Edison Investment Research, Hutchison China MediTech. Note: MT: monotherapy.

Surufatinib NETs an unmet need

Surufatinib could be the first of HCM’s unpartnered assets to reach the China market in 2020. The China NDA was accepted in November 2019, based on data from Phase III SANET-ep for advanced non-pancreatic neuroendocrine tumours (NET), and priority review was granted in December. Surufatinib’s China Phase III programme consists of two studies evaluating the drug (vs placebo) in pancreatic NET (SANET-p, planned n=195) and non-pancreatic NET (SANET-ep, actual n=198), thus covering all NET patient types. In June 2019, HCM announced that the independent data monitoring committee had recommended stopping the Phase III SANET-ep non-pancreatic NET trial early following positive interim data. This was based on the trial meeting its primary endpoint of PFS and the trial was unblinded a year ahead of schedule. Subsequently, on the basis of these data, HCM filed the China NDA in October 2019. More recently, proof of surufatinib’s unequalled utility across the breadth of NET tumours was supported by the early cessation of the pancreatic NET (SANET-p) trial as surufatinib met its primary endpoint of PFS earlier than expected. We expect data from SANET-p to be submitted to the China regulatory body and this could potentially lead to a broader label encompassing all NET; Surufatinib could be the first universal drug to treat NET in all patients regardless of tumour subtype. We forecast launch in China in late 2020. Ahead of potential launch, HCM expects to have 300–350 reps in place, making up the China oncology commercial team.

Following encouraging POC data from the Phase II study in biliary tract cancer (BTC), HCM recently initiated a pivotal open-label Phase IIb/III BTC trial (NCT03873532) in China, with the first patient dosed in March 2019. BTC represents a high unmet need due to limited treatment options and an increasing patient population. HCM is developing the drug internationally: the global Phase Ib/II study (NCT02549937) in pancreatic NET (second-line in Sutent/Afinitor refractory cancer) and BTC started enrolling US patients in July 2018. Surufatinib’s global registration trial is at the planning stage, with US and Europe Phase III trials estimated to start in H220. The FDA has granted orphan drug designation for the pancreatic NET indication. HCM recently initiated a Phase II study, NCT04169672, in patients with advanced tumours in combination with Shanghai Junshi Biosciences’ PD-1 inhibitor Tuoyi (toripalimab), which was recently approved in China for melanoma.

Exhibit 3: Surufatinib clinical development

Treatment

Indication

Sites

Trial

Notes

Surufatinib MT

Pancreatic NET

China

Phase III

SANET-p

Positive interim analysis in January 2020 will support an NDA submission in early 2020

Surufatinib MT

Extra-pancreatic NET

China

Phase III

SANET-ep

Met primary endpoint of PFS. NDA accepted in November 2019

Surufatinib MT

Biliary tract cancer (chemotherapy refractory)

China

Phase IIb/III

NCT03873532

First patient dosed 22 March 2019

Surufatinib MT

Pancreatic NET (second-line; Sutent/Afinitor refractory)

Biliary tract cancer (chemotherapy refractory), ep-NET and soft tissue sarcoma

US

Phase Ib

NCT02549937

US/EU registration study in planning

Surufatinib

+ Tuoyi (PD-1)

Solid tumours

China

Phase II

NCT04169672

Trial enrolling patients

Surufatinib

+ Tuoyi (PD-1)

Solid tumours

US

Phase I

Safety run-in in planning

Source: Edison Investment Research, Hutchison China MediTech. Note: NET = neuroendocrine tumours, MT = monotherapy.

Savolitinib China debut on the cards in 2021

An estimated 2–3% of newly diagnosed NSCLC patients have a specific mutation known as MET Exon 14 skipping (Exon 14 of the MET gene is not functioning or deleted) leading to c-MET over expression. In China, HCM estimates this to be >10,000 patients. Primary data from the Phase II have demonstrated efficacy in these hard-to-treat patients, and although the patient size is relatively small, this indication could be savolitinib’s first China NDA submission in Q220 and its first monotherapy indication in the region (launch in 2021). In the longer term in China, we believe a savolitinib plus Tagrisso combination will expand use in other subsets of NSCLC. In the field of lung cancer, AZN’s Tagrisso is raising the bar as it moves into the first-line setting in EGFR mutation-positive NSCLC (median OS of 38.6 months Tagrisso vs 31.8 months on Iressa/Tarceva FLAURA first-line treatment study), reporting sales of $2.3bn in the first nine months of 2019, its second full year on the market. The implication here is that savolitinib’s largest opportunity could be in combination with Tagrisso in EGFRm MET+ NSCLC patients, as MET mutations are the biggest driver in Tagrisso resistance. The savolitinib/Tagrisso combination could rewrite the second-line/third-line treatment paradigm and our forecast peak sales could be conservative. Following the encouraging data from the TATTON study, in December 2018, AZN and HCM initiated the global registration study SAVANNAH for Tagrisso-refractory NSCLC patients (enrolment is expected to complete by end 2020). This specific subset of patients has an unmet medical need and, although we forecast a 2022 launch, breakthrough therapy designation could lead to earlier approval and launch. Interim data are expected in mid-2020 and the strength of the data will determine whether a larger Phase III is required as part of the US regulatory submission package, although it could be sufficient for an NDA filing.

Successful commercialisation of savolitinib in kidney cancer (both ccRCC and PRCC) now hinges on SAVOIR data and CALYPSO, an investigator-sponsored Phase II study combining savolitinib with AZN’s PD-L1 inhibitor Imfinzi (durvalumab). In clear cell renal cell carcinoma (ccRCC) PD-(L)1 immune checkpoint inhibitors are revolutionising the treatment landscape. The combination of MET inhibition with PD-(L)1 inhibition could have utility in this space, as underlined by the promising preliminary data from CALYPSO presented at ASCO GU 2019. HCM has indicated that renal cancer regulatory plans will be determined post data presentation at ASCO 2020.

Exhibit 4: Savolitinib key clinical trials

Treatment

Indication

Sites

Trial

Notes

Savolitinib

+Tagrisso

NSCLC (2/3L EGFRm (TKI refractory; MET+)

Global

Phase Ib/II

TATTON

Completed, interim data presented at AACR 2019 and ESMO Asia 2019

Savolitinib

+Tagrisso

NSCLC (2/3L EGFRm (Tagrisso refractory; MET+)

Global

Phase II

SAVANNAH

Initiated December 2018

Savolitinib MT

NSCLC (1L MET Exon 14 skipping)

China

Phase II

NCT02897479

Enrolment completed

Savolitinib MT

Papillary RCC (MET+)

Global

Phase III

SAVOIR

Suspended due to MES study and CALYPSO study. Data on the preliminary cohort to be submitted for presentation at ASCO

Savolitinib

+Imfinzi

Papillary RCC

UK/Spain

Phase II

CALYPSO

Interim data presented at ASCO GU 2019, primary completion expected

Savolitinib

+Imfinzi

Clear cell RCC (VEGFR TKI refractory)

UK/Spain

Phase II

CALYPSO

Investigator-sponsored study; data expected early-2020

Savolitinib MT

Gastric cancer (MET amplification)

South Korea

Phase II

VIKTORY

Completed, data published H219

Savolitinib MT

Metastatic castration-resistant prostate cancer (mCRPC)

Canada

Phase II

CCTG 1234B

Investigator-sponsored study, primary completion end-2020

Source: Edison Investment Research, Hutchison China MediTech. Note: MT = monotherapy.

Global development of HMPL-523 and HMPL-689

Longevity for R&D-driven biopharmaceutical companies is dependent on having a pipeline of innovative assets that span both indications and development phases. HCM’s strategy to date has focused on developing best-in-class kinase inhibitors that target solid cancers. The next wave of internally developed assets, HMPL-523 (Syk inhibitor) and HMPL-689 (PI3Kδ inhibitor), are kinase inhibitors, which have a clinical focus for various haematological (blood) cancers and autoimmune conditions. Concurrent global and Chinese clinical programmes are ongoing as outlined below and, importantly, both are moving rapidly towards global registration studies.

HMPL-523 targets Syk, an enzyme believed to be involved in a diverse range of biological functions including autoimmune disorders and haematological malignancies. HCM believes that HMPL-523 is a potential best-in-class molecule and potentially first-in-class for haematological malignancies, and we anticipate that launch in China in 2023 is feasible. Phase Ib dose expansion is ongoing in separate Chinese and Australian studies and will be used to guide a Chinese Phase II/III registration study, which is planned to start in 2020. Following recent IND approval, an EU/US Phase I/Ib clinical study for HMPL-523 has started in advanced relapsed or refractory lymphoma (NCT03779113). Outside oncology, HMPL-523 is in a Phase I study in patients with immune thrombocytopenia (ITP) in China (NCT03951623).

HMPL-689 is in a Phase I dose escalation study in Chinese patients with haematological malignancies, with top-line data expected in H120. Recent IND approval has enabled the start of a parallel US/EU Phase I/Ib study in patients with indolent non-Hodgkin lymphoma (NHL).

Valuation

We value HCM at $6.0bn (£6.74/share) vs $5.7bn (£7.01/share) previously. Our product forecasts remain unchanged. Our valuation reflects forecast net cash of $163m at end December 2019 plus $105m net proceeds from the January 2020 capital raise, and we roll forward our model and update for FX. We use a risk-adjusted net present value (NPV) method to discount future cash flows for the innovation platform (savolitinib, fruquintinib, surufatinib, epitinib, HMPL-523 and HMPL-689, valuation of $4,359.9m). We use earnings-based multiples for HCM’s commercial platform (subsidiaries and JVs). Applying a 20.4x multiple to our forecast 2019 net attributable profit (equity in earnings of equity investees, net of tax) for the JVs of $39.2m yields a valuation of $800.4m (Exhibit 5). Our SOTP valuation does not include HCM’s early phase assets HMPL-453 (FGFR inhibitor), HMPL-306 (IDH1/2 inhibitor) or HMPL-309 (EGFR WT) or its discovery platform.

Exhibit 5: HCM SOTP valuation

Product

Indication

Launch/peak

Peak sales

Value
($m)

Probability

rNPV
($m)

rNPV/share ($/share)

rNPV/
share (£)

rNPV/ADS ($/ADS)

NPV per share (£)

Savolitinib

PRCC

2024/28 (China)

$64m (China)

95.0

50%

53.6

0.08

0.06

0.39

0.11

2022/26 (ROW)

$267m (ROW)

81.3

75%

58.8

0.09

0.07

0.43

0.09

ccRCC

2025/29 (China)

$169m (China)

98.4

35%

31.0

0.04

0.03

0.22

0.11

2023/27 (ROW)

$658m (ROW)

102.7

35%

35.9

0.05

0.04

0.26

0.11

NSCLC

2022/26 (China)

$387m (China)

275.0

75%

205.4

0.30

0.23

1.49

0.31

2022/26 (ROW)

$1.7bn (ROW)

387.8

75%

290.9

0.42

0.32

2.11

0.43

Gastric Ca

2023/27 (China)

$326m (China)

153.4

35%

51.3

0.07

0.06

0.37

0.17

2024/28 (ROW)

$757m (ROW)

140.1

35%

49.0

0.07

0.05

0.36

0.16

Fruquintinib

CRC

2018/22 (China)

$199m (China)

102.8

100%

102.8

0.15

0.11

0.75

0.11

2023/27 (ROW)

$565m (ROW)

1,257.0

75%

940.1

1.36

1.05

6.82

1.40

NSCLC

2025/29 (China)

$393m (China)

91.6

50%

40.7

0.06

0.05

0.30

0.10

2025/29 (ROW)

$721 (ROW)

845.3

50%

402.3

0.58

0.45

2.92

0.94

Gastric Ca

2021/25 (China)

$340m (China)

181.6

75%

135.6

0.20

0.15

0.98

0.20

2025/29 (ROW)

$392m (ROW)

510.1

50%

245.5

0.36

0.27

1.78

0.57

Surufatinib

NET

2020/25 (China)

$169m (China)

433.5

90%

390.1

0.57

0.44

2.83

0.48

2024/28 (ROW)

$454m (ROW)

692.9

50%

334.3

0.49

0.37

2.43

0.77

BTC

2022/26 (China)

$187m (China)

426.3

75%

319.1

0.46

0.36

2.32

0.48

2024/28 (ROW)

$143m (ROW)

190.5

50%

89.6

0.13

0.10

0.65

0.21

Epitinib

Glioblastoma

2023/27 (China)

$42m (China)

146.3

30%

42.2

0.06

0.05

0.31

0.16

HMPL-523

Haematological cancers

2023/27 (China)

$143m (China)

302.7

30%

86.4

0.13

0.10

0.63

0.34

2025/29 (ROW)

$584m (ROW)

834.6

30%

238.9

0.35

0.27

1.73

0.93

HMPL-689

Haematological cancers

2024/28 (China)

$102m (China)

167.4

30%

44.6

0.06

0.05

0.32

0.19

2025/29 (ROW)

$468m (ROW)

617.9

30%

171.8

0.25

0.19

1.25

0.69

Commercial Platform

800.4

100%

800.4

1.16

0.89

5.81

0.89

Unallocated costs

(414.2)

100%

(414.2)

(0.60)

(0.46)

(3.01)

(0.46)

Est net cash Dec 2019*

268.0

100%

268.0

0.39

0.30

1.95

0.30

Terminal Value

1,022.3

100%

1,022.3

1.48

1.14

7.42

1.14

Valuation

 

 

 

$9,810.7

$6,036.3

$8.8

£6.74

$43.81

£10.95

Valuation of IP only

 

 

$6,514.4

$4,359.9

$6.33

£4.87

$31.64

£7.27

Source: Edison Investment Research. Note: *Plus $105m net proceeds from January 2020 capital raise. Non-risk adjusted NPV per share assumes 100% probability of success. FX rate = $1.30/£. Number of shares outstanding = 688.9m.

Exhibit 6: Financial summary

USD'000s

 

2017

2018

2019e

2020e

December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

241,203

214,109

182,885

194,589

Cost of Sales

(175,820)

(143,944)

(136,135)

(141,020)

Gross Profit

65,383

70,165

46,749

53,569

Research and development

(75,523)

(114,161)

(146,500)

(219,000)

Other overheads

(43,277)

(48,645)

(51,604)

(53,401)

EBITDA

 

 

(50,692)

(88,975)

(146,714)

(213,366)

Operating Profit (before amort. and except.)

 

 

(53,417)

(92,641)

(151,355)

(218,832)

Intangible Amortisation

0

0

0

0

Operating Profit

(53,417)

(92,641)

(151,355)

(218,832)

Net Interest

(235)

4,969

2,459

930

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(53,536)

(86,655)

(148,897)

(217,902)

Profit Before Tax (reported)

 

 

(53,536)

(86,655)

(148,897)

(217,902)

Tax

(3,080)

(3,964)

(5,004)

(5,200)

Equity investments, after tax

33,653

19,333

39,233

40,813

Profit After Tax (norm)

(22,963)

(71,286)

(114,667)

(182,289)

Profit After Tax (reported)

(22,963)

(71,286)

(114,667)

(182,289)

Minority

(3,774)

(3,519)

(5,000)

(5,000)

Discontinued operations

0

0

0

0

Net profit (norm)

(26,737)

(74,805)

(119,667)

(187,289)

Net profit (reported)

(26,737)

(74,805)

(119,667)

(187,289)

Average Number of Shares Outstanding (m)

617.2

664.3

688.9

688.9

EPS - normalised (c)

 

 

(4.3)

(11.3)

(17.4)

(27.2)

EPS - normalised and fully diluted (c)

 

 

(4.3)

(11.3)

(17.4)

(27.2)

EPS - (reported) (c)

 

 

(4.3)

(11.3)

(17.4)

(27.2)

Average number of ADS outstanding (m)

123.4

132.9

137.8

137.8

Earnings per ADS - normalised ($)

 

 

(0.02)

(0.06)

(0.09)

(0.14)

Earnings per ADS ($)

 

 

(0.02)

(0.06)

(0.09)

(0.14)

BALANCE SHEET

Fixed Assets

 

 

165,737

161,577

176,169

192,947

Intangible Assets

3,738

3,533

3,301

3,028

Tangible Assets

14,220

16,616

22,207

27,014

Investments

147,779

141,428

150,661

162,905

Current Assets

 

 

432,195

370,541

257,853

155,665

Stocks

11,789

12,309

11,189

11,591

Debtors

53,566

56,392

56,000

29,855

Cash

85,265

86,036

64,775

113,330

St investments

273,031

214,915

125,000

0

Other

8,544

889

889

889

Current Liabilities

 

 

(104,600)

(85,479)

(104,056)

(97,935)

Creditors

(25,344)

(26,180)

(44,757)

(38,636)

Short term borrowings

(29,987)

0

0

0

Other

(49,269)

(59,299)

(59,299)

(59,299)

Long Term Liabilities

 

 

(8,366)

(34,384)

(34,384)

(34,384)

Long term borrowings

0

(26,739)

(26,739)

(26,739)

Other long term liabilities

(8,366)

(7,645)

(7,645)

(7,645)

Net Assets

 

 

484,966

412,255

295,583

216,293

Minority

(23,233)

(23,259)

(28,259)

(33,259)

Shareholder equity

 

 

461,733

388,996

267,324

183,034

CASH FLOW

Operating Cash Flow

 

 

(8,943)

(32,847)

(99,171)

(169,445)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(5,019)

(6,364)

(10,000)

(10,000)

Acquisitions/disposals

0

0

0

0

Dividends

(1,594)

(1,282)

(2,000)

(2,000)

Equity financing and capital movements

291,737

(2,322)

0

105,000

Other

(255,761)

50,116

89,910

125,000

Net Cash Flow

20,420

7,301

(21,261)

48,555

Opening net debt/(cash)

 

 

(56,914)

(328,309)

(274,212)

(163,036)

Increase/(decrease) in ST investments

248,761

(58,116)

(89,915)

(125,000)

Other

2,214

(3,282)

0

0

Closing net debt/(cash)

 

 

(328,309)

(274,212)

(163,036)

(86,591)

Source: Company accounts, Edison Investment research


General disclaimer and copyright

This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison, in consideration of a fee payable by Hutchison China MediTech. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison, in consideration of a fee payable by Hutchison China MediTech. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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