Hutchison China MediTech

ASCO GU: promising PRCC data for savo/durva combo

Update | 20 February 2019

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Preliminary CALYPSO study presented at ASCO GU evidenced encouraging efficacy signals for the savolitinib and durvalumab combination in an all-comers papillary renal cell carcinoma (PRCC) population. CALYPSO is an exploratory single arm Phase I/II trial sponsored by Queen Mary University of London, which enrolled both treatment-naïve and previously treated PRCC patients. Hutchison China MediTech (Chi-Med) and partner AstraZeneca are currently reviewing their strategy for savolitinib development in kidney cancer; CALYPSO data will contribute to this, although more mature data is awaited. Chi-Med will present FY18 results and a pipeline update on March 11th. We value Chi-Med at £51.52/share or $33.49/ADS.

Year-end: December 31201620172018E2019E
Sales (US$m)216.1241.2174.6177.2
Adj. PBT (US$m)(47.4)(53.5)(104.4)(169.7)
Net Income (US$m)14.6(23.0)(74.8)(136.4)
EPS (US$)0.20(0.43)(1.19)(2.12)
Cash (US$m)103.7358.3296.6165.8
Adj. EBITDA (US$m)21.9(17.2)(70.9)(133.0)
Source: Trinity Delta Note: Adjusted PBT excludes exceptionals, Cash includes short-term investments, Adjusted EBITDA includes equity in earnings of equity investees.
  • An exploratory Phase I/II study  CALYPSO enrolled 42 PRCC patients; 38 were dosed with savolitinib (600mg QD) and durvalumab (1500g Q4W) after a 4-week savolitinib run-in. For the 41 patients assessed, ORR (overall response rate) was 27% (11/41), with median PFS (progression-free survival) of 5.3 months. In the first-line setting (n=28), ORR was 32% (9/28) and PFS 12.0 months. Tolerability, in line with expectations, indicates the drugs are combinable. OS data is not yet mature.
  • Potential for MET and PD-1/PD-L1 combination  PRCC has poor prognosis and no approved targeted therapies. Standard of care is drugs indicated for clear cell RCC, or inclusion in clinical trials. Emergence of acquired resistance to VEGFR tyrosine kinase inhibitors (TKIs)/mTOR inhibitors has increased interest in combination approaches in RCC, particularly in combining immuno-oncology agents with TKIs. Savolitinib is well-positioned given its specificity and relatively benign side-effect profile vs other TKIs, and the hypothesised synergy between MET and PD-1/PD-L1. To provide context, ORR of single-agent pembrolizumab was 25.4% in the 1L PRCC part of cohort B of the KEYNOTE427 Phase II. Differences in patient characteristics (eg first-line vs all comers) means this is not directly comparable with CALYPSO.
  • CALYPSO data to contribute to PRCC strategy  Savolitinib’s strategy in kidney cancer is under review by Chi-Med and AstraZeneca (announced December 2018 and detailed in our February initiation). Initial early findings from CALYPSO, coupled to more mature data on durability of response, PFS and OS (overall survival) will help inform the decision. NSCLC remains the priority indication for savolitinib.
  • We maintain our £51.52/share or $33.49/ADS valuation   We apply a DCF-based sum-of-the-parts approach to valuing Chi-Med, which includes a detailed rNPV model of the clinical pipeline. Our current valuation is £3.4bn/$4.5bn equivalent to £51.52/share or $33.49/ADS. The depth of the development portfolio means a steady stream of share price catalysts are expected over the next 12-18 months.

Update

20 February 2019

Price (UK share)
(US ADS)
3,950p
$24.95
Market Cap
 
£2.63bn
$3.31bn
Enterprise Value
 
£2.42bn
$3.04bn
Shares in issue (shares)
(ADS)
66.7m
133.3m
12-month range
 
3,180p-5,668p
$20.83-$39.68
Free float32%
Primary exchange
 
AIM
NASDAQ
SectorHealthcare
Company Code
 
HCM.L
HCM
Corporate clientYes

Company description

Hutchison China MediTech is a Hong Kong headquartered biopharma with an established Commercial Platform in China, and a diverse pipeline of first-in-class/best-in-class selective oral tyrosine kinase inhibitors (Innovation Platform). Its pipeline, discovered in-house, is in development for the China and global oncology markets.

Analysts

Franc Gregori
fgregori@trinitydelta.org
+44 (0) 20 3637 5041

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Exhibit 1: Summary of financials
Source: Company, Trinity Delta  Note: Adjusted numbers exclude exceptionals

 

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