Edison issues ADR update on Hutchison China MediTech (HCM)
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Edison issues ADR update on Hutchison China MediTech (HCM)

Monday, August 10, 2020 9:10 AM
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LONDON, UK / ACCESSWIRE / August 10, 2020 / Hutchison China MediTech (NASDAQ:HCM) continues to move swiftly towards its goal of globalization of its innovative oncology assets and building a fully integrated oncology business in China. Regarding the latter, the amended deal terms with Eli Lilly on fruquintinib is a huge positive, which will enable HCM to fully leverage its existing China oncology sales and marketing infrastructure across two assets: Elunate for CRC and surufatinib for NET. The recently reported interim results highlight further progress made since our recent outlook note. HCM is well funded (~$500m in available cash resources includes $119m unused debt facilities) as it accelerates the global development of its unpartnered assets and expands its China and global commercial outreach. Beyond 2024 we expect sustainable profitability and margin expansion. We value HCM at $6.69bn.

We value HCM at $6.69bn ($47.05/ADS) vs $6.3bn ($44.49/ADS) previously. The main driver of the uplift is the impact of Elunate deal terms to capture 70-80% of product value vs the prior 15-25% royalties on sales. Our valuation reflects net cash of $254m at end June 2020 plus ~$100m proceeds from the post-period private investment in public equity (PIPE) from General Atlantic. For full details, see our outlook note Eye of the tiger.

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SOURCE: Edison Investment Research Limited

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