Establishing a global operational presence

Hutchison China MediTech 20 August 2018 ADR Update
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Hutchison China MediTech

Establishing a global operational presence

Interim results

Pharma & biotech

20 August 2018

ADR research

 

Price

US$29.7

Market cap

US$4.0bn

ADR/Ord conversion ratio 1:0.5

Net cash (US$m) at 30 June 2018

295.8

ADSs in issue

133.0

ADS code

HCM

ADS exchange

NASDAQ

Underlying exchange

AIM

Depository

NASDAQ

ADR price performance

52-week high/low

$41.1

$23.5

Business description

Hutchison China MediTech (Chi-Med; HCM) is an innovative China-based biopharmaceutical company targeting the global market for novel, highly selective oral oncology, and immunology drugs. Its established China Healthcare business is growing ahead of the market.

Next events

Fruquintinib China NDA approval and launch in CRC

H218

Fruquintinib FALUCA top-line data

Q418

Savolitinib MES data

Late 2018

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

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

Highlights from Hutchison China MediTech’s (HCM) H118 results relate to the substantial pipeline-related newsflow expected in 2018/19, the recent expansion of its US and international operations (which will enable HCM to execute its international R&D and commercialization strategies) plus strong operational and financial performance by the China commercial platform division. Fruquintinib (third-line CRC) remains on track to launch in China by year end (approval decision expected by the CNDA in the next few months). Encouraging Phase II data so far on savolitinib (first-line NSCLC exon14m/deletion) could lead to accelerated approval in China, contingent on final data (expected in 2020) being consistent with data to date. We value HCM at $6.4bn.

Year end

Revenue ($m)

Net profit ($m)

EPADS ($)

DPADS ($)

P/E (x)

Yield (%)

12/16

216.1

11.7

0.10

0.0

297

N/A

12/17

241.2

(26.7)

(0.22)

0.0

N/A

N/A

12/18e

163.6

(71.7)

(0.54)

0.0

N/A

N/A

12/19e

180.1

(92.7)

(0.70)

0.0

N/A

N/A

Note: Dividend yield excludes withholding tax. Investors should consult their tax advisor regarding the application of any domestic and foreign tax laws.

Expansion of US and international operations

HCM has established an office in New Jersey, US and has appointed a US CMO and a Head of International Operations (both individuals are experienced industry veterans). This highlights HCM’s commitment to its global R&D strategy; it has the financial strength ($416.9m in available resources as of 30 June 2018) to initiate its global commercial strategy, which is critical given the late clinical development stage of the R&D pipeline and the necessity to expand its clinical trial programs internationally to maximize economic returns.

Savolitinib potential for accelerated China approval

Highly encouraging data from the ongoing savolitinib Phase II (China) NSCLC- MET exon14 mutation/deletion patients have prompted discussions with the Chinese National Drug Administration (CNDA) on an approval pathway. The agency has indicated that if Phase II data complete with patient ORR in excess of 50%, this Phase II trial should be sufficient for submitting an NDA in this indication.

Financials: Guidance updated, higher R&D expenses

HCM has updated its FY18 net loss guidance to $39-72m (from $19-52m), reflecting $20m higher than anticipated adjusted R&D expenses (non-GAAP) due to the rapid expansion of operations, higher clinical trial costs in China and the impact of employee share incentive schemes. All other guidance is unchanged.

Valuation: $6.4bn or $48.2/ADS

Our increased valuation of $6.4bn or $48.2/ADS (from $6.4bn or $47.9/ADS) results from rolling forward our DCF and updating FX rates, offset by a lower net cash position at 30 June 2018 and higher R&D in 2018 and 2019. We value the Innovation Platform (IP) at $4,780.5m and placing the Commercial Platform’s (CP) 2018e share of net profit on a 20.4x rating gives $848.2m (945p/share).

Global expansion underway

In terms of the international commercial opportunity, we forecast that HCM has the financial strength (see recently published outlook note, Jewels in the crown) to initiate its global commercial strategy given the late clinical stage of the R&D pipeline. At the interim results HCM announced that it has now commenced the operations of Hutchison MediPharma (US), with its new US office in New Jersey, US. HCM has appointed two experienced senior personnel: a US CMO and Head of International Operations. This highlights HCM’s commitment to its global R&D strategy; while the majority of its TKI assets have demonstrated efficacy and tolerability in trials to date, much of these data are limited to Chinese patients. HCM has already commenced the global development program for fruquintinib (US Phase I bridging studies) and sulfatinib (US Phase I/II pancreatic NET and BTC). However, to build on further trials for the range of cancer indications and number of assets in the pipeline, it makes more sense for the international (ex-Asia) clinical, regulatory and commercial strategies to be directed from an international-oriented operation manned by industry veterans (the US CMO is ex Eli Lilly, while the Head of International Operations is ex-Gilead) who are experienced in dealing with the FDA and other international regulatory bodies. We anticipate further key personnel appointments as HCM builds its international team.

Our analysis concludes that much higher economic value resides in the strategy to develop and commercialize its own assets, in particular with respect to fruquintinib (ex-China), sulfatinib, epitinib, and HMPL-523. We believe HCM can start to initiate its global commercial strategy based initially on fruquintinib, but with a view to leveraging the late-stage oncology portfolio given multiple potential drug approvals in 2020/21. We therefore expect HCM to become a major China and international oncology company.

Pipeline update

Exhibit 1 highlights the plethora of clinical and regulatory milestones likely in 2018/19. The next date of importance relates to fruquintinib approval and launch (third-line CRC) in China by year end, marking a major milestone as the company’s first internally developed asset to launch in China. Additionally, HCM’s multi-asset focused R&D strategy means a plethora of late-stage clinical trials initiations and data from ongoing trials are expected in 2018/19.

Exhibit 1: Potential key milestones for 2018/19

Product

Indication

Date

Next news

Savolitinib

Papillary renal cell carcinoma

H218

Molecular epidemiology study (n>200) in papillary renal cell carcinoma data – possible BTD-enabling.

NSCLC

H119

Initiation of a global Phase II/III pivotal study in second-line NSCLC in combination with Tagrisso (randomized, chemo-doublet controlled).

NSCLC

H218

Initiation of a global Phase II/III (single-arm) study evaluating savolitinib combination with Tagrisso in MET+ NSCLC (second line/third line) in third-generation EGFR TKI refractory patients.

Fruquintinib

CRC

H218

China NDA approval (third-line CRC) and launch (contingent on approval).

NSCLC

Q418

China Phase III (FALUCA) top-line data (third-line monotherapy).

Epitinib

NSCLC with brain metastases

H218

Initiate China Phase III first-line EGFRm NSCLC with brain metastases.

Sulfatinib

BTC

H119

Initiate China Phase III study in chemo-refractory biliary tract cancer.

HMPL-523

Cancer

December 2018

Potential presentation of Phase I dose-escalation study data in hematological cancer at ASH in December 2018.

HMPL-689

Cancer

H119

Present Phase I dose-escalation data in Australian healthy volunteers.

Source: Company presentations, Edison Investment Research

Savolitinib NSCLC chance of accelerated approval in China

Savolitinib’s most advanced indications are PRCC and NSCLC, in which two registration studies are underway: the global Phase III MET+ papillary renal cell carcinoma (PRCC) and the Phase II in MET exon14/mutation/deletion NSCLC (China registration intent). Partner AstraZeneca (AZN) plans to initiate two additional registration studies in the NSCLC indication in H218 and H119.

At the interim results, HCM presented a potential scenario of accelerated approval for savolitinib in China for NSCLC MET exon14 mutation/deletion patients. Following encouraging Phase II data so far (unpublished at 40% enrolment) in this single-arm study, HCM held discussions with the China National Drug Administration (CNDA) on an approval pathway for this indication. The agency has indicated that if the Phase II data on completion (likely to report a full dataset 2020) are as compelling as the data so far (ORR in excess of 50% in 50 patients), HCM could submit an NDA on the Phase II data alone.

HCM has provided detail on its development plans for the savolitinib global combination Phase II/III program in conjunction with partner AZN. In conjunction with data presented so far on savolitinib and Tagrisso combination therapy, and the recent approvals for Tagrisso (first-line NSCLC), AZN has prioritized the development of savolitinib in NSCLC. AZN’s Tagrisso received FDA (April 2018) and European approval (June 2018) for first-line therapy in all EGFRm-positive NSCLC on the back of positive data presented at ESMO 2017 (FLAURA), which demonstrated that Tagrisso significantly improved PFS in first-line EGFRm patients compared with Iressa/Tarceva. We expect Tagrisso to change the treatment paradigm and become standard of care for EGFRm-positive NSCLC. AZN reported $760m Tagrisso sales in H118 (+82% CER), reflecting growth in second-line use and an encouraging start of use in the first-line setting. First-generation inhibitors Iressa and Tarceva only target EGFR exon 19 and 21 mutations; the majority of acquired resistance to these inhibitors is through T790M, which Tagrisso can target. After T790M acquired resistance, MET is believed to be one of the next major drivers of resistance, hence savoltininb’s potential utility in second-line and third-line combination use. HCM and AZN are testing whether combinations of savolitinib and Tagrisso/Iressa will be able to effectively inhibit these multiple cancer proliferation pathways following Tagrisso use.

AZN therefore plans to initiate a global, pivotal Phase II/III (single-arm) study in H218 evaluating savolitinib in combination with Tagrisso in MET+ NSCLC (second/third line) in third-generation EGFR TKI (Tagrisso) refractory patients. Furthermore, a global Phase II/III pivotal study in MET+, T790M- second-line NSCLC in combination with Tagrisso is expected to start in H119. The trial design will depend on the outcome of the mature TATTON B data and preliminary TATTON D results, and the outcome of regulatory discussions. We believe combination therapies across multiple cancer indications will continue to widen the eligible patient populations for savolitinib, accounting for the significant upgrades to the numbers in our recent outlook note, Jewels in the crown, published on 31 May 2018.

HCM now anticipates that interim data from the ongoing molecular epidemiology study (MES) in PRCC will be available over the coming months and full data in late 2018. These data, if supportive, could in conjunction with the Phase II data, form part of an accelerated approval from the US FDA under the breakthrough therapy designation for the PRCC indication. MES is a pooled analysis of over 200 historic (global) patient samples in an effort to determine if MET-driven PRCC has worse treatment outcomes/survival than MET-independent PRCC. It will give an understanding of how these patients responded to current standards of care such as Pfizer’s sunitinib and give clarity on progression-free survival (PFS) and overall survival (OS) expected in MET-driven patients.

Fruquintinib third-line CRC potential China launch in 2018

HCM and partner Eli Lilly submitted the NDA for fruquintinib for third-line CRC to the CNDA (formerly known as CFDA) in June 2017 and we anticipate approval and launch of fruquintinib in China in Q418 by Eli Lilly. The Phase III FALUCA (third-line NSCLC) trial in China has fully enrolled 527 patients, and OS maturity and top-line data are expected in Q418. The Phase III FRUTIGA trial (second-line gastric cancer) in combination with paclitaxel should read out interim data in 2019. Positive data could trigger a proof-of concept related milestone payment (~$10m) from partner Eli Lilly if the trial reaches its predefined target.

Global expansion plans for fruquintinib continue; the Phase I US trial is expected to complete later this year. Fruquintinib is an oral small molecule, highly selective VEGFR1, VEGFR2 and VEGFR3 inhibitor that HCM is developing to compete in the ~$18bn VEGFR market, which is dominated by Roche’s Avastin (bevacizumab) a VEGF-A inhibitor, an intravenously administered monoclonal antibody (Roche reported 2017 sales of $6.8bn). There remains a need for a small molecule (oral) VEGFR inhibitor that positively affects PFS and OS with a more tolerable side effect profile than intravenously administered biologic agents such as Avastin. Avastin inhibits VEGF A protein, while fruquintinib targets VEGF receptors. Our view is that fruquintinib’s more tolerable safety profile (as a result of its highly selective inhibition of VEGFR1/2/3 vs competitor products) could enable improved efficacy, particularly when used as combination treatments (e.g. with immunotherapy agents such as PD-L1 inhibitors) and thus drive its utilization in earlier lines of therapy. We highlight recent Roche data published on its Avastin combination with Tecentriq (PD-L1) plus chemotherapy (carboplatin plus paclitaxel) for first-line NSCLC. Interim analysis of the Phase III IMpower150 study reported a significant improvement on survival in the intention-to-treat, wild-type population: median OS = 19.2 versus 14.7 months on the comparator arm of Avastin plus chemotherapy; hazard ratio (HR) = 0.78, 95% CI: 0.64-0.96; p=0.016). The FDA has granted Roche priority review for this combination plus carboplatin plus paclitaxel (chemotherapy) in first-line advanced NSCLC.

In the near term, fruquintinib could be HCM’s first internally developed TKI to launch (in China) for colorectal cancer (CRC). However, its full commercial potential will depend on approval across a range of cancers in China and its relevance in the non-China patient population. Its global development program will be critical in this rapidly moving and competitive space.

Sulfatinib NET China Phase III interim data in 2019

Sulfatinib could be the first of HCM’s wholly owned assets to reach the China market. Two major China Phase III studies: SANET-p (pancreatic neuroendocrine tumors) and SANET-ep (non-pancreatic neuroendocrine tumors) are expected to report interim results in H219 and H119 respectively. Furthermore, following encouraging POC data from the Phase II study in biliary tract cancer (BTC), a Phase III BTC trial in China will initiate in H119; BTC represents a high unmet need due to limited treatment options and a steadily growing patient population. Given the expansion of its international operations, we highlight that the global Phase Ib/II study (NCT02549937) in pancreatic NET and BTC patients started enrolling patients in the US in July 2018.

HMPL-523 preliminary dose-escalation data at ASH 2018

HMPL-523 (SYK inhibitor for oncology and immunology indications), the Australia and China Phase I dose-escalation study, has completed and preliminary dose-escalation data in patients with hematological malignancies will be presented at ASH 2018. HCM is increasing the number of trial sites to support the Phase Ib/II expansion in a range of indolent non-Hodgkin’s lymphoma (NHL) subtypes. Following resubmission of additional data (relating to a metabolite of the product) requested by the US FDA, the HMPL- 523 IND application has been approved and the Phase II POC in a hematological cancer could initiate in late 2018/early 2019.

HMPL-453 AUS Phase I halted

HMPL-453, a novel small molecule PAN FGFR inhibitor 1/2/3, is in Phase I dose escalation studies for advanced solid tumors. HCM has announced the discontinuation of the Australian study due to serious (but not life threatening) FGFR target related toxicities. These toxicities have not been replicated in the China study which is ongoing albeit with additional measures designed to minimize risk to patients. We do not include HMPL-453 in our valuation of HCM.

Valuation: $6.4bn ($48.2/ADS)

Our increased valuation of $6.4bn or $48.2/ADS (from $6.4bn or $47.9/ADS) is a result of rolling forward our DCF and updating FX rates, offset by a lower net cash position at 30 June 2018 and increasing R&D expenses in 2018 and 2019 to reflect the higher cost of clinical trials in China (Exhibit 2). We value the Innovation Platform (IP) at $4,780.5m and placing the Commercial Platform’s (CP) 2018e share of net profit on a 20.4x rating gives $848.2m. Adding in a terminal value of $491.8m and net cash at 30 June 2018 of $295.8m results in a value of $6.4bn.

Exhibit 2: HCM valuation

Product

Indication

Launch

Peak sales ($m)

Value ($m)

Probability

rNPV ($m)

rNPV/ share ($/share)

rNPV/ ADS ($/ADS)

Savolitinib (AZD6094/volitinib)

Papillary renal cell carcinoma

2020 (China) 2021 (ROW)

$64m (China) $267m (ROW)

204.7

75%**

152.6

2.3

1.1

Clear cell carcinoma

2022 (China) 2022 (ROW)

$169m (China) $987m (ROW)

317.6

35%

109.5

1.6

0.8

NSCLC

2021 (China) 2021 (ROW)

$387m (China) $2.5bn (ROW)

831.7

75%

623.8

9.4

4.7

Gastric Ca

2022 (China) 2023 (ROW)

$326m (China) $750m (ROW)

342.0

35%

115.9

1.7

0.9

Pulmonary sarcomatoid ca

2021 (Global)

$476m (Global)

368.1

50%

183.0

2.8

1.4

Fruquintinib

CRC

2018 (China) 2022 (ROW)

$149m (China) $565m (ROW)

784.1

90%

705.7

10.6

5.3

NSCLC

2020 (China) 2021 (ROW)

$334m (China) $721m (ROW)

1,109.8

75%

832.4

12.5

6.3

Gastric Ca

2020 (China) 2022 (ROW)

$292m (China) $392m (ROW)

726.2

75%

544.7

8.2

4.1

Sulfatinib

NET

2021 (China) 2021 (ROW)

$79m (China) $454m (ROW)

852.3

75%

639.2

9.6

4.8

Thyroid ca

2021 (China) 2022 (ROW)

$72m (China) $212m (ROW)

285.9

50%

143.0

2.1

1.1

Biliary tract

2023 (China) 2023 (ROW)

$190m (China) $137m (ROW)

345.3

50%

163.7

2.5

1.2

Epitinib

NSCLC

2021 (China) 2022 (ROW)

$198m (China) $212m (ROW)

532.9

75%

399.7

6.0

3.0

Theliatinib

Esophageal ca

2022 (China) 2022 (ROW)

$328m (China) $129m (ROW)

632.7

10%

63.3

1.0

0.5

HMPL-523

RA

2023 (WW)

$1.6bn (Global)

820.3

10%

82.0

1.2

0.6

Hematological cancers

2023 (WW)

$95m (China) $86m (ROW)

124.4

30%

22.0

0.3

0.2

Valuation of IP only

 

 

 

$8,278.0

 

$4,780.5

$71.87

$35.93

CP

848.2

100%

848.2

12.75

6.38

Net cash at 30 June 2018

295.8

100%

295.8

4.4

2.22

Terminal value

491.8

100%

491.8

7.4

3.70

Valuation

 

 

 

$9,913.8

 

$6,416.3

$96.5

$48.23

Source: Edison Investment Research. Note: *Non-risk adjusted NPV per share assumes 100% probability of success. **Probability reflects likely filing with Phase II data for BTD. Ca = cancer.

Financials: CP robust net income growth

H118 results continue to highlight robust net income growth in the CP division (CP continues to be HCM’s primary profit and cash-generative division in the near term). Consolidated revenue at the group level in H118 declined by 19% to $102.2m (H117: $126.6m) with the IP division contributing $13.6m (reflecting service fees and clinical trial reimbursement costs from partners but no milestone payments compared to $9.5m in H117) and consolidated CP sales contributing $88.6m (H117: $103.9m). The top line reflects changes to the sales model relating to the CNDA two-invoice system roll-out in China; while gross revenue amounts are affected, overall profit contribution from these business activities remain substantially unchanged. Operating income in the CP division grew to $31.0m (+22%) on an adjusted (non-GAAP) basis. Growth drivers include Shanghai Hutchison Pharmaceuticals Limited’s (SHPL) coronary artery disease Prescription Drugs business, service fees on Seroquel and Concor, and the elimination of production capacity constraints on the Consumer Health businesses.

HCM has updated its guidance for the FY18 net loss to $39-72m (from $19-52m), reflecting $20m higher than anticipated adjusted R&D expenses (non-GAAP) due to rapid expansion of operations, higher clinical trial costs in China and the impact of employee share incentive schemes. All other guidance metrics remain unchanged. Importantly the increase in R&D not only reflects the progression of the pipeline, but also highlights changing dynamics in the drug development world in China. Changes to the Hong Kong listing rules led to a flurry of biotech listings this year as well as a hunt for biotech talent in China. Retention of employees through participation in a share incentive scheme is a necessary operating cost.

Net loss at the group level reported a loss of $32.7m in H118 (versus a profit of $1.7m in H117). R&D expenses increased significantly, reflecting investment throughout the portfolio ($60.1m H118 versus $31.6m in H117). S&M expenses declined to $9.4m in H118 (versus $9.7m in H117), while administrative expenses increased to $14.5m (versus $12.0m in H117). We have revised our R&D expenses and now forecast increases to $126.5m and $154.5m in 2018 and 2019 (reported GAAP basis), respectively, reflecting the substantial need for investment in the burgeoning clinical trial programs across the IP division, and the higher costs of China-related R&D as mentioned above. Guidance for adjusted (non-GAAP) R&D expenses stands at $130-140m. The adjusted R&D expenses exclude the impact of the revenue received from external customers to the IP division, which is reinvested into clinical trials.

Guidance for 2018 also reflects variance in net income to include unknown timing of one-time property gains (guidance $0-20m) from Guangzhou land, the timing of which is subject to Guangzhou government policy. We forecast net losses at the group level of $71.7m in 2018 and $92.7m in 2019 (versus 2017 reported loss of $26.7m).

HCM reported a healthy cash position with cash and cash equivalents and short-term investments of $322.5m, and unutilized bank borrowing facilities of $94.4m (at 30 June 2018) at the group level. HCM had $26.7m in bank borrowings at 30 June 2018. In October 2017, HCM raised $301.3m gross ($292.7m net) in new equity capital via a follow-on offering on NASDAQ.

Exhibit 3: Financial summary

US$'000s

 

2016

2017

2018e

2019e

December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

216,080

241,203

163,563

180,105

Cost of Sales

(156,328)

(175,820)

(89,900)

(94,632)

Gross Profit

59,752

65,383

73,663

85,473

Research and development

(66,871)

(75,523)

(126,500)

(154,500)

Other overheads

(39,578)

(43,277)

(45,353)

(51,260)

EBITDA

 

 

(44,264)

(50,692)

(93,690)

(113,909)

Operating Profit (before amort. and except.)

 

 

(46,697)

(53,417)

(98,190)

(120,287)

Intangible Amortization

0

0

0

0

Operating Profit

(46,697)

(53,417)

(98,190)

(120,287)

Net Interest

(1,129)

(235)

(155)

208

Exceptionals

0

0

0

0

Pre-Tax Profit (norm)

 

 

(47,356)

(53,536)

(98,345)

(120,079)

Pre-Tax Profit (reported)

 

 

(47,356)

(53,536)

(98,345)

(120,079)

Tax

(4,331)

(3,080)

(3,000)

(5,004)

Equity investments, after tax

66,244

33,653

34,524

37,390

Profit After Tax (norm)

14,557

(22,963)

(66,821)

(87,692)

Profit After Tax (reported)

14,557

(22,963)

(66,821)

(87,692)

Minority

(2,859)

(3,774)

(4,900)

(5,000)

Discontinued operations

0

0

0

0

Net profit (norm)

11,698

(26,737)

(71,721)

(92,692)

Net profit (reported)

11,698

(26,737)

(71,721)

(92,692)

Average Number of Shares Outstanding (m)

59.7

61.7

66.5

66.5

EPS - normalized (c)

 

 

19.6

(43.3)

(107.8)

(139.4)

EPS - normalized and fully diluted (c)

 

 

19.5

(43.3)

(107.8)

(139.4)

EPS - (reported) (c)

 

 

19.6

(43.3)

(107.8)

(139.4)

Average number of ADS outstanding (m)

119.4

123.4

133.0

133.0

Earnings per ADS - normalized ($)

 

 

0.10

(0.22)

(0.54)

(0.70)

Earnings per ADS ($)

 

 

0.10

(0.22)

(0.54)

(0.70)

BALANCE SHEET

Fixed Assets

 

 

175,057

165,737

177,761

195,774

Intangible Assets

3,606

3,738

3,513

3,194

Tangible Assets

9,954

14,220

21,945

32,886

Investments

161,497

147,779

152,303

159,694

Current Assets

 

 

167,380

432,195

361,301

239,634

Stocks

12,822

11,789

14,000

7,778

Debtors

49,349

53,566

66,659

73,231

Cash

79,431

85,265

59,098

25,081

St investments

24,270

273,031

213,000

125,000

Other

1,508

8,544

8,544

8,544

Current Liabilities

 

 

(95,119)

(104,600)

(115,256)

(101,294)

Creditors

(35,812)

(25,344)

(36,000)

(22,038)

Short term borrowings

(19,957)

(29,987)

(29,987)

(29,987)

Other

(39,350)

(49,269)

(49,269)

(49,269)

Long Term Liabilities

 

 

(43,258)

(8,366)

(8,366)

(8,366)

Long term borrowings

(26,830)

0

0

0

Other long term liabilities

(16,428)

(8,366)

(8,366)

(8,366)

Net Assets

 

 

204,060

484,966

415,440

325,748

Minority

(19,790)

(23,233)

(28,133)

(33,133)

Shareholder equity

 

 

184,270

461,733

387,307

292,615

CASH FLOW

Operating Cash Flow

 

 

(9,569)

(8,943)

(71,493)

(103,017)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(4,327)

(5,019)

(12,000)

(17,000)

Acquisitions/disposals

0

0

0

0

Dividends

(564)

(1,594)

(2,700)

(2,000)

Equity financing and capital movements

97,076

291,737

0

0

Other

(29,270)

(255,761)

60,026

88,000

Net Cash Flow

53,346

20,420

(26,167)

(34,017)

Opening net debt/(cash and ST investments)

 

 

18,051

(56,914)

(328,309)

(242,111)

Increase/(decrease) in ST investments

24,270

248,761

(60,031)

(88,000)

Other

(2,651)

2,214

0

0

Closing net debt/(cash and ST investments)

 

 

(56,914)

(328,309)

(242,111)

(120,094)

Source: Source: Hutchison China MediTech reports, Edison Investment Research. Note: Equity investments after tax include the net profit contribution from JVs.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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