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.
As of 1 January 2020, Elunate is available in all state-run hospital pharmacies in China and patients on NHSA insurance schemes will be reimbursed. Eli Lilly reported Elunate sales of $6.6m in January-February 2020 vs $17.6m in FY19. We expect accelerated sales growth in 2020 and beyond. Surufatinib’s China NDA has been accepted for non-pancreatic NET (potential approval and launch late 2020) and following positive data from SANET-p, the NDA for pancreatic NET will be filed in Q320. Surufatinib could be the first unpartnered asset to market; long-term economic value resides in HCM’s ability to commercialize its basket of oncology products. HCM is on track to file the first ever NDA for savolitinib (exon 14 deletion NSCLC) in China within the next few months (launch 2021).
HCM has eight oncology assets in development and is accelerating the global (exChina) development of its unpartnered assets (fruquintinib, surufatinib, HMPL-523 and HMPL-689). Global registration studies are planned for this year for fruquintinib in 3/4L CRC and surufatinib in NET (the US FDA has granted Orphan Drug Designation for pancreatic NET). Savolitinib could be the first of HCM’s innovation assets to launch globally in 2022 (for MET-positive EGFR refractory NSCLC in combination with Tagrisso, a blockbuster opportunity) through partner AZN.
We value HCM at $5.9bn ($42.57/ADS) vs $6.0bn ($43.81/ADS) previously. Our product forecasts remain unchanged but we increase our R&D expenses for 2020 to reflect progression of the global trials. Our valuation includes net cash of $190m at end December 2019 plus $110m net proceeds from the January 2020 capital raise.