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).
Companies: Hutchison China Meditech
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.
2020 will be a pivotal year for Hutchison China MediTech (Chi-Med), and surufatinib will play a key part. The potential China launch of this, Chi-Med’s first wholly owned drug, is now expected within the next 12 months. The new drug application (NDA) for surufatinib in epNET (extra-pancreatic neuroendocrine tumours) was accepted by the Chinese regulator in November 2019, and there is the prospect of a second NDA filing for pancreatic NET (pNET) in the coming months. Further news flow is expected with the China Phase IIb/III biliary tract carcinoma (BTC) interim analysis in mid-2020, and initiation of the US/Europe Phase III registration study for NET in a similar timeframe. Reviewing our surufatinib assumptions and updating our model following the c$118m ADS offering lifts our valuation to $5.21bn ($37.73/ADS) or £4.01bn (580p/share).
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.
Hutchison China MediTech (HCM) has announced that Elunate (fruquintinib capsules) have been included in China’s National Reimbursement Drug List (NRDL) by the National Healthcare Security Administration (NHSA). Although expected, this is a huge positive as from 1 January 2020 Elunate will be available in all state-run hospital pharmacies and patients on NHSA insurance schemes will be reimbursed. HCM’s innovative oncology assets are making significant progress in China. It has now submitted the China NDA for surufatinib for treating non-pancreatic NET tumors, a large unmet clinical need. Surufatinib is likely to be the first of HCM’s non-partnered assets to reach the China market (late 2020). We value HCM at $5.7bn.
Fruquintinib (Elunate) has been included in the latest update of the China National Reimbursement Drug List (NRDL). NRDL inclusion will broaden fruquintinib’s availability and accelerate patient access across China. From January 1, 2020, fruquintinib will automatically be available in all staterun hospital pharmacies in China, and patients covered by NHSA (National Healthcare Security Administration) insurance schemes will be reimbursed. Fruquintinib was approved in third-line colorectal cancer (3L CRC) in China in September 2018 and launched in November 2018 by Chi-Med’s partner Eli Lilly. From launch to end-July 2019, the drug generated $8.3m in royalty/ manufacturing revenue for Chi-Med on c$13.1m of in-market China sales.
Hutchison China MediTech (HCM) has announced that Elunate (fruquintinib capsules) have been included in China’s National Reimbursement Drug List (NRDL) by the National Healthcare Security Administration (NHSA). Although expected, this is a huge positive as from 1 January 2020 Elunate will be available in all state-run hospital pharmacies and patients on NHSA insurance schemes will be reimbursed. HCM’s innovative oncology assets are making significant progress in China. It has now submitted the China NDA for surufatinib for treating non-pancreatic NET tumours, a large unmet clinical need. Surufatinib is likely to be the first of HCM’s non-partnered assets to reach the China market (late 2020). We value HCM at $5.7bn.
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Renalytix’s US IPO filing document went live overnight (having previously been filed confidentially). Whilst there are no details on size of offering, but the document is rich with details of the use of proceeds which we encourage UK investors to read. We are doing the same and will update our views in due course. Associated with the US filing document, another release this morning announces the publication of a circular, and outlines details for a new General Meeting on the 13 July 2020 to approve the issue of new shares, as well as board changes if the US IPO goes ahead. Namely, Julian Baines (Non-executive Chair) and Richard Evans (NED and Audit committee Chair) are stepping down from the board, Christopher Mills will assume the role of interim chair whilst a search for a successor is conducted.
Companies: Renalytix AI
Operational Progress – More to come
Companies: Open Orphan
Having taken time to assess the potential impact of COVID-19, IXICO has today provided a trading update for FY20E and an expectation for FY21E revenue growth. Revenues and EBITDA for FY20E are expected to be at least £9.1m and £0.9m respectively. Revenue growth for FY21E is expected to remain at double-digit levels. We view the trading update as a display of confidence in the ability of the company's remote access business model, proprietary technologies, and centralised AI data analytics capabilities to continue to serve its client base. We have re-instated forecasts for IXICO and reinstate our Buy recommendation.
ReNeuron has changed its focus to concentrate on cell therapy for retinal disorders. The Phase I/II has FDA clearance to use a higher dose and a new UK trial site in Oxford has been added. A pivotal study may start in H221. The CTX cell line for stroke will now be out-licensed. Internally, it will be used to produce exosomes, an emerging new area. Preclinical exosome technology might be used for therapeutic delivery to the brain and in vaccination or treatment of SARS-CoV-2 infections. Our indicative value is adjusted to £107m, formerly £197m, pending full FY20 results due in July.
Companies: Reneuron Group
Open Orphan reported statutory full-year results to 31 December 2019, which include Open Orphan DAC and Venn Life Sciences, as well as 12-month proforma results that include the January 2020 hVIVO acquisition. The results show proforma revenues of €27.1m (including €1.4m grant income) and LBITDA before exceptional items of -€10.1m. The FY 2019 results may be less relevant as a guide to future performance of the business, given the various developments that have occurred since, and the potentially transformative opportunities posed by COVID-19, which include an antibody testing service and the development of a COVID-19 challenge model. Post-period cost savings of €7.5m by year-end 2020, and a strong pipeline of work to build H2 2020 revenue should enable the business to reach operational profitability by Q3 2020. We leave forecasts unchanged, but with room for upside depending on uptake of the COVID-19 test, and reiterate our target price of 19p.
Open Orphan (ORPH) is a specialist Contract Research Organisation (CRO) offering pharmaceutical services relating to orphan and emerging therapies, and is pioneer in the testing of vaccines and anti-viral treatments through the use of human viral challenge (HVC) studies. FY19 financial results refl
The announcement announced today highlights the potential breadth of the KidneyIntelX platform, opening up new routes to expand data inputs and test utility, and create opportunities alongside pharmacological therapy as a companion diagnostic. The first agreement with the University of Michigan adds an additional 800 chronic kidney disease (CKD) patients (adding to Mount Sinai’s 1,500 patients and the University of Groningen’s 3,500 patients) to analysis the performance of KidneyIntelX in different settings. This will ultimately carry additional sway with healthcare centres, regulators, and payers. The option to exclusively license a new urinary biomarker, urinary Epithelial Growth Factor (uEGF), shows the potential to add additional biomarkers and body fluids into the platform to further enhance the prognostic performance of KidneyIntelX. We understand there is a relatively immaterial upfront payment to access this new biobank, and a similar immaterial cash payment to gain the biomarker license option with additional milestones and standard tiered royalties payable if exercised. The second data sharing agreement with a major undisclosed pharma partner highlights KidneyIntelX’s potential use as a companion diagnostic (e.g. for SGLT2 inhibitors) and the potential to use the test multiple times to monitor drug response. This builds on work being conducted in Groningen with data expected H2 CY’20. Ultimately, pharmaceutical collaborations could drive additional long-term value creation and may open opportunities for lucrative licensing and M&A deals. At this juncture we make no changes to our forecasts and eagerly await further updates. We reiterate our positive stance on Renalytix.
Today Ergomed held its annual general meeting (AGM). As expected, no new financial details were provided, although the executive chairman released a statement with a general business update. Q120 trading was good with ‘solid overall growth in revenue’ and cash generation ‘remained strong’. In Q220, Ergomed continued to grow the order book across the business and maintained its ‘revenue growth trend’. Its staff successfully adapted to remote working conditions and no employees were made redundant or furloughed. The H120 trading update will be released in July 2020 as usual, but Ergomed stated within its AGM update (June 10) that it is confident the results will be ‘in line with current market expectations’.
Inspiration Healthcare has announced its intention to acquire SLE Limited (SLE), a leading neonatal ventilator designer and manufacturer for consideration of £18.0m. Inspiration Healthcare has conditionally raised £16.5m (gross, ahead of an open offer) via an oversubscribed equity placing to support the acquisition. We believe the acquisition represents a transformation deal, virtually doubling the size of the business and providing significant new revenue growth opportunities. We expect the acquisition, on a 12-month proforma basis to be accretive to adjusted earnings in the near-term and increasingly so in the medium-term. We reiterate our Buy recommendation.
Companies: Inspiration Healthcare Group
Futura Medical confirms the timelines for the regulatory filings for MED3000, its novel erectile dysfunction (ED) treatment, are on track. Dialogues with both the US FDA and European Notified Body have been constructive. The EU Notified Body has begun its review of the supporting documentation and the FDA filing is still expected by end-Q320. There have been no COVID-19 related delays but, in our view, these remain a consideration. We assume the review processes will take a minimum of 12 months in both cases, so have approvals pencilled in for Q421. Commercialisation discussions are expected to start in earnest once the status of the regulatory approvals is known. Our DCF-based model, using conservative assumptions, values Futura Medical at £153.8m, equivalent to 60.9p a share.
Companies: Futura Medical
ReNeuron has announced its 3rd exosome collaboration agreement and has made another step to justifying the strategic shift to exosomes as announced earlier this month. As a reminder ReNeuron’s exosomes are derived from human neural stem cells, and are clinical-grade, scalable and have a natural ability to cross the blood-brain barrier. Exosomes can be used to deliver therapeutics for diseases of the brain. The agreement today is with an undisclosed major US pharmaceutical company, but like the previous exosome agreements (announced in April 2020 and Jan 2019), it is a research evaluation agreement and carries little immediate financial bearing. Nevertheless, proof-ofconcept in specific disease areas expected on the back of agreements could enable lucrative out-licensing agreements. We note there has been a spate of recent and highly rewarding licensing agreements with exosome developer peers - Codiak (with Sarepta and Jazz) and Evox (with Takeda and Eli Lilly). In particular, we note that the Codiak-Sarepta deal was valued at $72.5m in upfront and near-term license payments. We make no changes to our forecasts or valuation analysis at this juncture, but will continue to follow the exosome platform closely. We reiterate our positive stance on ReNeuron.
New York state approval is a pivotal moment for Renalytix. Approval facilitates the launch of KidneyIntelX with launch partner Mount Sinai and progressively derisks the investment hypothesis. Understandably with Mount Sinai in the heart of the NYC Covid-19 health pandemic, testing and first commercial revenues is now set to begin in calendar Q3 2020 (vs Q2 2020) once the integration of KidneyIntelX into the Mount Sinai electronic health record is completed. Renalytix is now licensed to provide KidneyIntelX testing services in 47 states in the US, with the remaining licenses pending in calendar 2020. We have adjusted our forecasts to reflect a full launch in the Mount Sinai system in FY’21 (June yearend) and have upgraded our valuation analysis through unwinding our risk adjustment from 60% to 65%. Our valuation analysis now implies an intrinsic value of 477p/share (previously 459p/share).
We are encouraged by today’s Phase IIa data from the hRPC programme in Retinitis Pigmentosa (RP) and continued clinical meaningful improvement in the treated eye vs. the untreated eye of 8.9 and 8.8 letters at 6 and 12 months, respectively. All patients have now reached 6 months of treatment, although one patient now has reached 18 months and continues to show a highly encouraging 16.0 letter improvement vs. the untreated eye. We believe analysing the 8 patients who had a successful surgical operation, and excluding the two patients who had surgical complications, is the most appropriate dataset. The recovery in eyesight of one of the two patients who had surgical complications is good news, but we exclude from our analysis. Whilst it is possible, we think this recovery is unlikely to be the result of the hRPC therapy. As previously announced, nine additional patients are expected to be recruited into the Phase IIa trial and sufficient data is expected to be available from the trial to seek approval in H2 2021 to commence a single pivotal clinical study in RP. We view today’s results to be supportive of ReNeuron’s investment thesis and the new primary focus on RP. We make no changes to our forecasts or valuation analysis, and look forward to further updates from the hRPC programme.
Omega has conditionally raised £8m alongside an Open Offer up to £3m, to scale manufacturing, expand its lateral flow portfolio of global health tests and exploit the opportunities for COVID-19 testing that arise from its partnerships within the UK. We argue that the Food Intolerance business largely underpins the current valuation, given imminent Chinese approval, with upside derived from VISITECT and COVID-19 opportunities. Modelling the potential impact of a COVID-19 test with any degree of confidence at the moment is not possible; however, we provide a COVID-19 capacity model and a SOTP analysis that points to a valuation that is substantially in excess of the current market capitalisation.
Companies: Omega Diagnostics Group