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Chi-Med bolsters commercial team

The bio-pharma group has eight drug candidates in play
March 4, 2020

Full-year numbers for Hutchison China Meditech (HCM) remain of secondary importance to clinical development. The bio-pharma group closed out 2019 with $17.6m (£13.5m) in sales linked to its Elunate (colorectal cancer) product, with the prospect of multiple global registration studies this year, and the further development of eight clinical drug candidates, five of which are globally focused. Clinical development comes at a cost, with eventual returns uncertain or long-dated. So, the net loss from the innovation platform attributable to Chi-Med was up by over a quarter year on year to $133m.

IC TIP: Buy at 380p

By contrast, the group’s commercial platform delivered an 11 per cent increase in constant-currency sales to $189m, largely due to progress on its prescription Drugs subsidiary Hutchison Sinopharm.

No prizes for guessing what has been worrying shareholders. The group said that although the Covid-19 outbreak has yet to impact manufacturing in China, it does pose some potential problems due to restricted movement. As things stand, the financial impact should not be material, but it remains a fluid situation, so it would be unwise to make any definitive assumptions until normal commercial activity resumes in China.

Bloomberg consensus forecasts are for a cash loss of $188m through to December, with an adjusted earnings loss of 45¢ a share, narrowing to a $172m loss and negative 22.7¢ in 2021.

HUTCHISON CHINA MEDITECH (HCM) 
ORD PRICE:380pMARKET VALUE:£2.62bn
TOUCH:362-380p12-MONTH HIGH:479pLOW: 261p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:42¢NET CASH:£283m*
Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2015178-10.5-64.0nil
2016216-47.4-20.0nil
2017241-53.5-43.0nil
2018214-86.7-11.0nil
2019205-141-16.0nil
% change-4---
Ex-div:-   
Payment:-   
£1=$1.30. *Includes short-term investments of $96m, investments in equity investees of $98.9m and lease liabilities of $6.2m.