Hutchison China MediTech (HCM) has announced positive data that key late-stage asset surufatinib met the primary endpoint of PFS in non-pancreatic at the Phase III interim analysis. This translates to an earlier than expected China NDA submission (H219) and the potential launch of HCM’s first un-partnered asset (early 2021). In China, partner Lilly has launched Elunate (fruquintinib) capsules. Early sales look promising and its potential inclusion on the China NRDL later this year will be definitive to the China opportunity. However, failure of fruquintinib monotherapy in third-line NSCLC and the changes in strategy to savolitinib in RCC has negatively affected our valuation. We forecast two further product launches on the horizon in 2021/2022 (China launch of fruquintinib in gastric cancer and global launch of savolitinib in NSCLC). HHHL has completed a secondary offering of ADSs, which has reduced its holding to 51.15% (from 60.2% previously). We see this as a significant positive for HCM as it increases the free float, potentially leading to better liquidity. We value HCM at $5.6bn ($42.23/ADS) vs $6.5bn previously.
Elunate is now being commercialized in China (third-line CRC) by partner Eli Lilly (Lilly), a major inflection point for HCM and validation of its R&D philosophy. The positive interim readout of surufatinib (met primary endpoint of PFS) in the SANETep Phase III trial in non-pancreatic NET (trial was able to be stopped early) is of huge importance and these data will support a China NDA submission in late 2019. The years 2021/2022 are pivotal; partner AstraZeneca (AZN) could launch savolitinib in China for NSCLC (MET exon 14) and could become HCM’s first asset to launch internationally (2022) in combination with Tagrisso for NSCLC.
HCM has accelerated global (ex-China) development of its wholly owned assets (fruquintinib, surufatinib, HMPL-523 and HMPL-689). Ongoing advances and thus changes in treatment paradigms in many oncology indications mean that combination therapy is the best approach to treat resistant cancers. With this in mind, HCM has announced four new PD-1 collaborations for fruquintinib and surufatinib. HCM/AZN are focusing savolitinib’s ex-China strategy on its use in combination with Tagrisso in MET-driven NSCLC, a blockbuster opportunity.
We value HCM at $5.6bn ($42.23/ADS) vs $6.5bn previously. Our revised valuation takes into account the success of the SANET-ep Phase III trial, failure of fruquintinib monotherapy in third-line NSCLC and the changes in strategy to savolitinib in RCC. We have additionally adjusted our product timelines to include combination strategies across the portfolio and revisited our R&D and S&M costs.