Data from China Phase III SANET-p study of surufatinib in pancreatic neuroendocrine tumours (pNET) was presented at the European Society of Medical Oncology (ESMO) 2020 virtual meeting. SANET-p was terminated early (January 2020) having already met its progression-free survival (PFS) primary endpoint at the planned interim analysis. At ESMO this was revealed to be an investigator assessed PFS of 10.9 months for surufatinib vs 3.7 months for placebo (hazard ratio = 0.49, p=0.0011). The China NDA for pNET, surufatinib’s second indication, has been accepted for review with a 2021 approval decision anticipated. First China approval, in extra-pancreatic NET (epNET), is expected this year. Surufatinib will be Hutchison China MediTech’s (Chi-Med’s) first unpartnered oncology drug launch in China, and likely also in the US as NDA filing should start by end-2020. Our valuation is £5.87/share or $38.17/ADS.
Companies: Hutchison China MediTech Ltd.
Hutchison China MediTech (Chi-Med) continues to gather momentum as its pipeline gets closer to unlocking its potential. Increased visibility for the three lead assets with multiple catalysts in the next 6 to 18 months suggest significant upside potential. In China, Chi-Med is leveraging its established base to build a fully integrated oncology business, with its c 320-strong China Oncology commercial team set to take over Elunate marketing from October and execute its first unpartnered China launch in Q420 assuming surufatinib approval. A ninth drug candidate discovered in-house (HMPL-306) has entered the clinic in China, while five assets are in development for global markets. The first FDA submission (surufatinib) should start before year-end, with fruquintinib and savolitinib in or approaching global registration trials. Our updated valuation is £5.87/share or $38.17/ADS.
Hutchison China MediTech (HCM) is on the brink of global launches of two assets from its internally developed oncology portfolio. In 2022 we expect US launches of surufatinib (broad NET indication) two years earlier than forecast as well as savolitinib (NSCLC). Recently the FDA granted fast-track designation to fruquintinib in mCRC and we forecast global launch in 2023. In China, HCM has laid the foundations to capitalize on the slew of additional novel oncology drugs (expected by end 2021). HCM is well funded (following the recent $100m equity investment from General Atlantic, plus warrants granted for an additional $100m in 18 months) as it accelerates the global development of its unpartnered assets and expands its global commercial outreach. Beyond 2024 we expect sustainable profitability and margin expansion. Our increased valuation is $6.3bn.
Companies: Hutchison China Meditech
Hutchison China MediTech (HCM) is on the brink of global launches of two assets from its internally developed oncology portfolio. In 2022 we expect US launches of surufatinib (broad NET indication) two years earlier than forecast as well as savolitinib (NSCLC). Recently the FDA granted fast-track designation to fruquintinib in mCRC and we forecast global launch in 2023. In China, HCM has laid the foundations to capitalise on the slew of additional novel oncology drugs (expected by end 2021). HCM is well funded (following the recent $100m equity investment from General Atlantic, plus warrants granted for an additional $100m in 18 months) as it accelerates the global development of its unpartnered assets and expands its global commercial outreach. Beyond 2024 we expect sustainable profitability and margin expansion. Our increased valuation is $6.3bn.
General Atlantic, a global growth equity investor, has invested $100m in Hutchison China MediTech (Chi-Med) via a private placement. The new shares, in the form of 4.0m ADS (each equivalent to 5 ordinary shares) are priced at $25.00 per ADS, a 10.4% premium to the prior 30 day volume weighted average price. The fund raise could increase to $200m as it includes a warrant, valid for 18 months, to purchase an additional $100m of ADS at a price of $30.00 (a 32.5% premium to the prior average price).
Hutchison China MediTech (Chi-Med) presented savolitinib and surufatinib data at the American Society of Clinical Oncology (ASCO) 2020 virtual meeting which highlight recent clinical and regulatory progress. Encouraging, albeit limited, data from the SAVOIR trial has contributed to resumption of development plans for savolitinib in papillary renal cell carcinoma (PRCC). Separately Chi-Med announced that its third NDA submission, the China NDA for savolitinib in non-small cell lung cancer with MET exon 14 skipping mutations (MET ex14m NSCLC) has been accepted for review. The company also announced its intention to start a rolling US NDA submission for surufatinib in neuroendocrine tumours (NET) in late-2020 following a positive preNDA meeting with the FDA. Our Chi-Med valuation is £5.08/share or $32.99/ADS.
Data from early stage surufatinib trials was presented at the American Academy of Cancer Research (AACR) 2020 virtual meeting. Preliminary Phase I data of surufatinib in combination with PD-1 inhibitor toripalimab indicated the combination was safe, well-tolerated, and had encouraging anti-tumour activity. In the 29/30 evaluable patients (April 10, 2020 cut off) the overall response rate (ORR) was 34.5% (one complete response, nine partial responses) with a disease control rate (DCR) of 79.3%. For patients with neuroendocrine neoplasms (NEN, n=21), ORR was 33.3% (one CR, five PR, one unconfirmed PR) and DCR, 80.9%. Separately, a second presentation highlighted similar safety/toxicity and PK profiles between Chinese and US patients in the respective Phase I/II surufatinib monotherapy studies. Subject to regulatory approval, in H220 Hutchison China MediTech (Chi-Med) intends to both launch surufatinib monotherapy in its first indication in China and to embark on global pivotal trials. Ahead of these catalysts, our valuation is £5.08/share or $32.99/ADS.
Notwithstanding the COVID-19 pandemic challenges, Hutchison China MediTech (HCM) remains on track for potential approval and launches of two additional assets (surufatinib and savolitinib) in China in 2020/21. HCM is actively engaging with regulators (including the China NMPA and US FDA) with regards to trial initiations and NDA submissions as it continues on its trajectory to a global innovative oncology company. Furthermore, given the broader pipeline progression, it has a high level of visibility on data submission to regulators and international scientific conferences this year, including ASCO, AACR and ESMO. Importantly, with the China COVID-19 experience under its belt, HCM is positioned to capitalize on its experience of conducting business in a COVID-19 environment. We expect 2022/23 to benefit from global drug launches providing continued pipeline progression.
Notwithstanding the COVID-19 pandemic challenges, Hutchison China MediTech (HCM) remains on track for potential approval and launches of two additional assets (surufatinib and savolitinib) in China in 2020/21. HCM is actively engaging with regulators (including the China NMPA and US FDA) with regards to trial initiations and NDA submissions as it continues on its trajectory to a global innovative oncology company. Furthermore, given the broader pipeline progression, it has a high level of visibility on data submission to regulators and international scientific conferences this year, including ASCO, AACR and ESMO. Importantly, with the China COVID-19 experience under its belt, HCM is positioned to capitalise on its experience of conducting business in a COVID-19 environment. We expect 2022/23 to benefit from global drug launches providing continued pipeline progression.
2020 is set to be the breakthrough year as Hutchison China MediTech (‘Chi-Med’) consolidates its position as a world-class innovator and developer of best-/first-inclass small molecule tyrosine kinase inhibitors (TKIs). The company’s phenomenal journey since inception twenty years ago means it is well-positioned to capitalise on its recent progress. Chi-Med has exploited its early-mover advantage in China to build a broad and innovative TKI pipeline and a credible domestic commercial presence, which provides the foundation for the future commercialisation of its China Oncology pipeline. It is preparing for a first in-house China launch in H220 and filing of two further China NDAs in 2020. Alongside, Chi-Med has established a US clinical and regulatory presence which is supporting imminent Global Innovation pivotal trial initiations and should clarify timing of first US/EU filing in the near-term. Ahead of these important catalysts, we value Chi-Med at £5.08/share or $32.99/ADS.
Hutchison China MediTech (Chi-Med) is, in our view, better positioned than many biopharma companies to weather the potential impact of the COVID-19 pandemic. Chi-Med’s response to operational challenges posed by restrictions on movement has limited the disruption to its China Commercial business, and recent completion of key China Phase III studies coupled with adjustments to ensure protocol compliance in ongoing trials means China Oncology remains broadly on track. As China was the first country to be materially affected by COVID-19, the experience gained there provides Chi-Med with valuable practical knowledge that can be applied to Global Innovation. While there is less visibility on COVID-19 repercussions for Chi-Med’s US/Europe clinical plans, fortunate phasing of clinical and regulatory activities in China suggests the latter will proceed to plan. Our Chi-Med valuation is £5.08/share or $32.99/ADS.
Companies: SRT BEG TUNG HCM BLU SO4 DDDD GFIN ECSC AGL
Hutchison China MediTech’s (HCM’s) investment case is focused on evolution into a global R&D and commercial-stage biopharma company with a marketed portfolio of innovation-led oncology drugs. 2020 is a golden year as HCM moves towards multiple domestic drug launches and is progressing key assets into registration studies globally. We expect surufatinib (NET) and savolitinib (exon 14 deletion NSCLC) China launches in 2020 and 2021, respectively, following in the footsteps of Elunate (thirdline CRC), which is establishing its presence by its inclusion on the National Reimbursement Drug List. HCM is investing in its oncology commercial presence in China and its global clinical and regulatory capabilities (in the US, Europe and Japan). 2022 and 2023 should benefit from global drug launches providing continued pipeline progression. We value HCM at $5.9bn.
Hutchison China MediTech’s (HCM’s) investment case is focused on evolution into a global R&D and commercial-stage biopharma company with a marketed portfolio of innovation-led oncology drugs. 2020 is a golden year as HCM moves towards multiple domestic drug launches and is progressing key assets into registration studies globally. We expect surufatinib (NET) and savolitinib (exon 14 deletion NSCLC) China launches in 2020 and 2021, respectively, following in the footsteps of Elunate (third-line CRC), which is establishing its presence by its inclusion on the National Reimbursement Drug List. HCM is investing in its oncology commercial presence in China and its global clinical and regulatory capabilities (in the US, Europe and Japan). 2022 and 2023 should benefit from global drug launches providing continued pipeline progression. We value HCM at $5.9bn.
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Venture Life Group has reported on a very strong H1/20A period. Revenues were up 80% with operational leverage delivering c100% growth in gross profit and +350% adjusted EBITDA growth. Performance was supported by the acquisition of PharmaSource, strong sales to China, sales of new brand, DISINPLUS, and the group's ability to maintain production at its Italian manufacturing facility. With this report we have introduced FY21E forecasts, expecting the company to maintain its growth momentum and deliver 10% revenue growth. Venture Life is delivering a strong performance, we maintain our Buy recommendation.
Companies: Venture Life Group Plc
Yourgene continues to progress across all areas of the business, with core trading on track. Demand has been increasing for Yourgene’s Covid-19 testing services, and is expected to reach 10k/month from early October onwards. This would equate to a £3.0m boost to revenues in the year to Mar-21 and we upgrade forecasts accordingly, with outer year estimates unchanged for now. We view this as a base level of demand, with scope for further upgrades if demand continues to increase and/or lasts beyond March. Our underlying estimates for the core are unchanged.
Companies: Yourgene Health Plc
Alliance Pharma’s H1 interims are relatively robust, with trading conforming to recent commentary. Whilst there has been an impact in some areas of the business in H1 (Prescription Medicine) as expected per the trading update in July, the rest of the business particularly Kelo-cote, has proved very resilient and highlights the defensive nature of the business, and underlying adj. PBT (excl. amortisation and impairment charges) was solid in H1 2020 at £16.3m (+7% YoY). We anticipate some push and pulls in H2 2020 but net we anticipate a better performance as demand recovers, and the Board have reiterated that full year results are expected to be in line with market expectations. The reinstatement of an interim dividend of 0.536p signals confidence in this. We have used today’s announcement to reinstate our forecasts, which are broadly in line with guidance and consensus. Our new FY’20 forecasts are c.10% below our previous estimates prior to the Covid-19 pandemic with YoY revenue and adj. EBITDA growth rates of -6.5% and -10.1%. We forecast a return to growth in FY’21 and have used the opportunity to introduce our FY’22 numbers looking for ‘see-through’ revenue of £153.2m and adj. EBITDA of £41.5m. Our main ongoing concern is that growth is highly dependent on Kelo-cote, a situation that has been augmented during the Covid-19 pandemic, and the Group needs to turn once again to deal-making to supplement organic growth to grow the portfolio. On our revised estimates, our new DCF/Peer group multiple derived target price is 91p/share and we move from Hold to Buy.
Companies: Alliance Pharma Plc
IXICO has been selected as the image collection and analysis partner for the Bio-Hermes trial, co-ordinated by the Global Alzheimer's Platform Foundation (GAP). The trial, aiming to assess Alzheimer's Disease (AD) biomarkers, will see IXICO analyse the brain scans of 1,000 patients with early stage AD. While participation will deliver revenues to IXICO in subsequent years, we believe the enhanced profile amongst the trial participants and GAP industry partners will deliver significant ‘intangible' benefits to the company. We maintain our Buy recommendation.
Companies: IXICO Plc
Yourgene has announced it has appointed IBL-America as a non-exclusive distributor for its range of PCR-based reproductive health and oncology products, including the DPYD assay which tests whether cancer patients are at risk from the administration of a common chemotherapy agent. These will be initially sold into the Research Use Only market in the US. As such, initial revenues are likely to be modest, but will act as an important test bed for establishing potential demand in the clinical setting. If the reception is positive, products will be submitted for FDA registration, potentially unlocking a £30m addressable market opportunity. We make no change to our forecasts, but view this another positive step to generating meaningful revenues in the world’s largest market, which remains a largely greenfield opportunity for Yourgene.
Interim results to 30 June 2020 showed a 38% increase in revenues, despite COVID-related disruption to clinical trials, illustrating the clear commercial focus that has been brought to bear on its range of digital technologies and solutions. Together with an 18% reduction in operating expenses, adjusted LBITDA and pre-tax loss improved by £1.3m to -£0.29m and -£0.36m, respectively. Period-end cash was £1.96m, with cash burn falling £1.1m to £0.2m in the period. Break-even in Q4 2020 is still anticipated. The contracted order book increased 35% to c.£10m at 31 August (vs. 30 June 2020), providing increased visibility of revenues in H2 and FY 2021 (c.108% and 57% of current forecasts, respectively). Due to the changing working patterns that are emerging as a result of the COVID pandemic, we believe that Cambridge Cognition is well positioned to be a long-term beneficiary of the trend of running virtual trials. We leave forecasts unchanged, but in light of the strong order book and potential for future upgrades, we raise target to 80p, which implies a 2021 EV/sales multiple of 3.4x.
Companies: Cambridge Cognition Holdings Plc
SDI reported full-year results to 30 April that were slightly ahead (+2%) of the trading update issued by the company on 23 April with net debt of £4.0m comparing favourably to our forecast of £4.3m. Underlying organic growth of 3.7% organic growth, despite the COVID-19 disruption in Q4, was supplemented by growth from acquisitions in FY 2019 and FY 2020. Adjusted pre-tax profit rose 44% to £4.3m with adjusted EPS up 21% to 3.4p. Net debt at 30 April was £4.0m. With evidence of trading activity normalising and the positive outlook statement, indicating adjusted pre-tax profit to be at least as good as FY 2019, we reinstate forecasts. We re-introduce a target price of 100p, which implies the stock trading on FY 2021 P/E of 27.5x falling to 24.6x in FY 2022 – in line with its peer group (e.g. Judges Scientific which trades on 33.8x, falling to 27.5x for slightly lower growth) and underpinned by a FY 2020 free cashflow yield of 3.2%.
Companies: SDI Group Plc
Tiziana Life Sciences PLC (LON:TILS, NASDAQ:TLSA) has expanded the range of indications — which include severe inflammatory and autoimmune diseases — of its lead therapy fully human anti-CD3 monoclonal antibody Foralumab, signing a new collaboration in Brazil to develop the nasal formulation of For
Companies: Tiziana Life Sciences Plc
Cambridge Cognition reported encouraging interim results to June, with revenues up +39% to £3.0m and the Pre-Tax Loss sharply reduced to £0.4m. The company has made strong progress on its commercialisation strategy this year and, having announced £4.9m of contract wins in H1, a major win for a schizophrenia trial has since increased this to £8.4m. Although CV19 led to some contracted clinical trials being delayed in H1, this has been offset by new contract wins and going forwards we see a structural shift to virtual clinical trials which plays to CamCog's strength in remote clinical testing. We raise our FY20 revenue forecast to £6.3m (was £6.2m), which we view as conservative given the sales contracted for 2H20, though we are mindful of possible delays due to CV19. We continue to model a FY20 loss of -£0.7m, with CamCog moving into profit in Q4. We forecast the group to be profitable for FY21 and believe profits can build materially given the tailwind of 17-20% industry growth. We retain our Buy recommendation and raise our target price to 80p (was 75p).
Allergy Therapeutics reported full-year 2020 results that were marginally ahead of expectations, driven by lower overhead costs (COVID-related) and lower R&D. This underpinned 25% growth in pre-R&D EBIT to £14.2m on 7% CER revenue growth and continued, albeit smaller, market share gains. Year-end net cash was £33.2m, providing the company with the financial resources to execute on current research programmes. The outlook remains characterised by the start of the Phase III Grass MATA MPL trial in US/Europe, enhanced by a broadening pipeline of opportunities and continued commercial traction in core European markets. We have made small upward adjustments to our forecasts and raise our target price to 45p, which is underpinned by the current commercial operations, with potential upside in Grass MATA MPL in the US (c.21p on risk-adjusted DCF), Polyvac peanut vaccine and the recently broadened VLP technology licence.
Companies: Allergy Therapeutics Plc
CVS had what we regard as a good FY20 – showing excellent progress during the first 8 months, highlighting a keen focus on the core business, and then recovering strongly as lockdown conditions eased. This reflects very favourably on the new exec team and the underlying resilience / attractions of the veterinary sector. Pleasingly positive momentum has continued into Q1-21 with LFL sales growth of 3.9% (8.0% comp) and an improved EBITDA margin. In the current climate the veterinary sector has attractive defensive growth qualities, with CVS very well positioned to both protect earnings and take advantage of a positive environment for acquisitions. Ongoing CV19 uncertainty means guidance remains suspended but the broad thrust of today’s results underpin the premium rating.
Companies: CVS Group Plc
Shield Therapeutics’ (STX’s) interim results highlight the progress made year to date. Re-analysis of the Feraccru/Accrufer AEGIS-H2H data show it is a credible alternative to IV iron therapy for iron deficiency anaemia (IDA) in the long term. With the product out-licensed in China to partner ASK Pharm, all eyes remain on the announcement of a US commercial partner (expected this year). Royalties received from H120 sales of the product (UK and Germany) by partner Norgine are slowly building, but pricing and reimbursement discussions resuming in Europe could lead to ongoing rollouts in key countries (France, Spain and Italy) in 2021. STX’s cash runway extends into Q121, an upfront licensing payment from a US deal would ameliorate the need for further capital. We value Shield at £379.1m.
Companies: Shield Therapeutics Plc
Allergy Therapeutics delivered a solid 6% revenue growth for FY20 to £78.2m, from £73.7m, despite COVID-19 impacts taking a 2% toll. The well-established European commercial platform produced operating profit before R&D of £14.2m, from £11.3m, with R&D spend of £9.0m, from £13.2m. Pollinex Quattro Grass is set to start a pilot Phase III study before initiating full registration trials. The promising VLP-based peanut vaccine reported highly encouraging preclinical data which, if maintained, could be transformational for future prospects. The fruits of the development portfolio are expected to enable the market entry into the commercially attractive US. Cash resources of £37.0m are ample to fund near-term requirements. We initiate coverage with a £325m (51p a share) valuation.
Verona Pharma is delisting and cancelling its Ordinary shares from trading on AIM. It is consolidating trading on the NASDAQ market where it will retain its listing of American Depositary Shares (ADSs) under the ticker symbol VRNA. No general meeting is required to complete the AIM Delisting, which is expected to occur market close 29 October 2020. Each ADS represents eight Ordinary shares and are denominated in $. As per the company’s website, there are three options available now for VRP Ordinary shareholders: 1) convert the Ordinary shares into ADSs tradable on NASDAQ, if completed prior to the AIM delisting shareholders will not incur any charges; 2) hold their Ordinary shares, although they will no longer be publicly tradable, and to trade Ordinary shares would require the conversion into ADSs which after the delisting will incur charges; or 3) to sell their AIM-quoted Ordinary shares prior to AIM delisting.
Companies: Verona Pharma Plc
While disruption was significant in H1, Warpaint still made a small profit and generated cash. Crucially, even with some ongoing weakness in markets like the US, trading has recently bounced back to pre-CV19 budgeted levels. This is a function of the brand and range development work, and broadening distribution in the UK (Tesco/Wilko). It also highlights the appeal of its value-for-money on-trend brands. Improved visibility around the full year outcome has led to PBT guidance being reinstated for FY20, and dividends being proposed. This is likely to be well received by the market.
Companies: Warpaint London Plc