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Clinical trials multiply at HCM

China-based pharma group Hutchison China MediTech is still pouring cash into a growing number of clinical trials.
July 28, 2015

Hutchison China MediTech (HCM) wants its investors to view the company in two newly renamed halves. The first - the 'Innovation Platform' - encompasses all research and development (R&D) activity, while the second - known as the 'Commercial Platform' - comprises all of Chi-Med's existing healthcare and consumer products divisions. Chief executive Christian Hogg says it's Chi-Med's goal to retain the commercial rights to as many drugs developed in-house as possible.

IC TIP: Hold at 1,635p

The amount spent on clinical trials continues to ramp up. In the first six months of 2015 the group poured $30m (£19m) into drug development, compared with $22m in the same period last year. That explains why, despite more than doubling group revenues, Chi-Med reported a big drop in half-year profits. And the trend will continue: Mr Hogg concedes the amount spent in the second half "will accelerate".

The company has 17 clinical trials under way and intends to kick off another seven before the year-end. Four of those include phase III trials for oncology drugs fruquintinib and sulfatinib, the former being co-developed with US giant Eli Lilly (US:LLY).

Analysts at Panmure Gordon are reviewing their forecasts, but previously expected pre-tax profits of $23.7m for the full year, giving EPS of 22.9ȼ. That compares with $12.3m and 10.2ȼ for 2014.

HUTCHISON CHINA MEDITECH (HCM)
ORD PRICE:1,635pMARKET VALUE:£871m
TOUCH:1,610-1,660p12-MONTH HIGH:2,003pLOW: 958p
DIVIDEND YIELD:NILPE RATIO:1315
NET ASSET VALUE:185ȼNET DEBT:1.5%

Half-year to 30 JuneTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
201430.37.310.7nil
201565.73.94.3nil
% change+117-47-60-

Ex-div: n/a

Payment: n/a

£1 = $1.56