An attractive play on Chinese healthcare
The attraction of Hutchison China Meditech (Chi-Med) is its exquisite exposure to the Chinese healthcare market, which remains one of the most dynamic in the world. China Healthcare is the largest of three operating divisions within Chi-Med and is well placed to exploit these opportunities. However, we believe it is the progress within the MediPharma R&D unit, with five novel small molecules in early clinical trials, that could lead to a re-rating in the near term.
Interim results confirm progress being maintained
H112 reported revenues rose by 25% from $82.3m to $102.9m, driven by a 26% increase in the China Healthcare JV’s sales from $148.5m to $187.0m, with operating profit doubling from $3.6m to $7.2m. Within China Healthcare, Hutchison Baiyunshan (OTC products) sales grew by 25% to $120.5m and Shanghai Hutchison Pharmaceuticals (prescription drugs) increased sales by 30% to $63.4m. China Healthcare’s attributable net profit increased by 12% from $11.0m to $12.3m, while MediPharma’s attributable loss fell from $7.8m to $4.5m, which resulted in a swing in net attributable profit from a $0.7m loss to a $2.5m profit.
R&D pipeline has potential to deliver within 12 months
The MediPharma R&D unit, now a fully integrated drug discovery company, has five novel projects in, or about to enter, Phase I trials. Volitinib, a tumour growth inhibitor, is partnered with AstraZeneca (for a $20m upfront fee and development milestones of up to $120m). We believe news on further similar partnership agreements is likely within the year. Additionally, HMPL-004 for ulcerative colitis is now Phase III ready.
Valuation is supported by China Healthcare alone
Placing China Healthcare on a similar rating to its domestically quoted Chinese peers gives a market cap of over £200m, meaning that MediPharma, Consumer Products, and the cash pile (over $25m) are essentially in for free. A sum-of-theparts valuation (based on conservative assumptions) suggests that a market cap of £250m could be justified, especially if elements of the R&D pipeline are partnered.
To Read the Entire Report Please Click on the pdf File Below.
The attraction of Hutchison China Meditech (Chi-Med) is its exquisite exposure to the Chinese healthcare market, which remains one of the most dynamic in the world. China Healthcare is the largest of three operating divisions within Chi-Med and is well placed to exploit these opportunities. However, we believe it is the progress within the MediPharma R&D unit, with five novel small molecules in early clinical trials, that could lead to a re-rating in the near term.
Interim results confirm progress being maintained
H112 reported revenues rose by 25% from $82.3m to $102.9m, driven by a 26% increase in the China Healthcare JV’s sales from $148.5m to $187.0m, with operating profit doubling from $3.6m to $7.2m. Within China Healthcare, Hutchison Baiyunshan (OTC products) sales grew by 25% to $120.5m and Shanghai Hutchison Pharmaceuticals (prescription drugs) increased sales by 30% to $63.4m. China Healthcare’s attributable net profit increased by 12% from $11.0m to $12.3m, while MediPharma’s attributable loss fell from $7.8m to $4.5m, which resulted in a swing in net attributable profit from a $0.7m loss to a $2.5m profit.
R&D pipeline has potential to deliver within 12 months
The MediPharma R&D unit, now a fully integrated drug discovery company, has five novel projects in, or about to enter, Phase I trials. Volitinib, a tumour growth inhibitor, is partnered with AstraZeneca (for a $20m upfront fee and development milestones of up to $120m). We believe news on further similar partnership agreements is likely within the year. Additionally, HMPL-004 for ulcerative colitis is now Phase III ready.
Valuation is supported by China Healthcare alone
Placing China Healthcare on a similar rating to its domestically quoted Chinese peers gives a market cap of over £200m, meaning that MediPharma, Consumer Products, and the cash pile (over $25m) are essentially in for free. A sum-of-theparts valuation (based on conservative assumptions) suggests that a market cap of £250m could be justified, especially if elements of the R&D pipeline are partnered.
To Read the Entire Report Please Click on the pdf File Below.