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.
Secure China footprint, three assets launched or filed First China approval for surufatinib (epNET) could come in H220, with the growing China Oncology commercial team preparing for subsequent launch. From October 1, this team will also take over marketing of Elunate (fruquintinib) from China partner Eli Lilly. NDA acceptance is pending in pNET, surufatinib’s second indication. Savolitinib’s first NDA has been accepted and Priority Review status granted in MET ex14m NSCLC. Potential first savolitinib approval and China launch (by AZ) could occur in 2021.
Global toehold becoming more secure A rolling NDA submission for surufatinib in NET will begin late-2020, with the MAA following in 2021. Planning for a late-2021 US launch is underway. Enrolment in the Phase II SAVANNAH study (2L/3L EGFRm+/MET+ NSCLC) of savolitinib + osimertinib should complete early-2021; interim data from the first 50-pts will guide next steps, including the potential registration pathway. Global savolitinib studies are planned in MET ex14m NSCLC and in PRCC. Fruquintinib recently initiated FRESCO-2, a global pivotal trial in CRC.
Well-funded to execute on R&D and commercial plans Chi-Med’s >$400m in available cash resources at end-H120, plus $100m strategic investment by General Atlantic received in July, provides a cash runway through 2021. This is sufficient to support pipeline investment and the further expansion of commercial capabilities in China and Globally. An additional up to $100m investment may be received before January 2022 should General Atlantic exercise warrants associated with its PIPE.
Valuation increased to £5.87/share or $38.17/ADS We update our DCF-based sum-of-the-parts model to reflect clinical and regulatory progress and the impact of the Elunate deal amendment. Our valuation is now £4.17bn (£5.87/share), or $5.42bn ($38.17/ADS), up from £3.61bn (£5.08/share), or $4.69bn ($33.00/ADS).