Drug development is all about pushing boundaries, and that is the case at Hutchison China Meditech, or Chi-Med, as it is known. The Shanghai-based pharmaceuticals company, whose biggest shareholder is Li Ka-shing’s CK Hutchison Group, is on the verge of launching the first mainstream drug developed in China from design to production.
Fruquintinib, a potential treatment for various cancers, has been in development for about a decade.
The drug passed a major milestone in March when Chi-Med unveiled positive phase III trial results for patients with advanced colorectal cancer, which was presented at the American Society of Clinical Oncology’s annual gathering in Chicago last week.
Yesterday, as expected, Chi-Med submitted its application to market the drug to the China Food and Drug Administration, triggering a $4.5 million milestone payment from Eli Lilly, the US pharmaceutical group and Chi-Med’s partner on the drug. The regulatory process takes about 12 months but there are hopes Chi-Med will secure it sooner, given the attention that the drug has received and its significance to the international standing of China’s pharmaceutical industry.
If Chi-Med launches the drug next year, as the market is forecasting, the opportunity is significant.
Colorectal is the second most common cancer type in China, with about 380,0000 new cases a year, according to the national central cancer registry. Analysts at Stifel are pencilling in sales of $300 million to $400 million a year in China.
The company also has a marketing and distribution platform which sells prescription and over-the-counter medicines and provides a launch pad to take its drug pipeline to market.
Globally there are about 1.4 million new cases a year and the price would probably be higher in the US, where Chi-Med is also carrying out clinical trials and is targeting phase III results in a couple of years.
Chi-Med has retained the sole rights to fruquintinib outside of China, meaning the prize is bigger.
As well as its listing on Aim, Chi-Med launched a dual listing on the US Nasdaq exchange last year.
With eight drug candidates in 30 clinical trials, including savolitinib, a cancer treatment being developed with Astrazeneca, the bulls have been grabbing the stock by the horns. Shares have rallied about 60 per cent over the past 12 months and remain close to March’s peak.
MY ADVICE Buy
WHY Shares have eased off record highs, but the pipeline is slowly delivering
Arden Partners
Arden Partners, one of a handful of listed small-cap brokers, is the latest to display the squeeze on the industry.
The City stockbroker posted a deeper fall into the red, with a loss before tax of £1.3 million in the six months to April 30, up from a £700,000 loss the year before on revenues of £2.9 million, compared with £2.7 million in 2016.
The lacklustre results were blamed on what management called “extremely limited” delivery of the pipeline of corporate work which fell “well short” of internal budgets.
Arden yesterday completed an oversubscribed fundraising to bolster its balance sheet, placing 12.75 million new shares at 40p each, a small premium to its share price on Friday and representing almost 40 per cent of its enlarged share capital.
Luke Johnson, the serial entrepreneur behind Patisserie Valerie, bought about 10 per cent.
Arden said it was working on corporate mandates, covering mergers and acquisitions, IPOs and secondary fundraisings, although getting them across the line is “subject to market conditions”.
The broker has appointed Donald Brown from Royal Bank of Canada as chief executive and has been shaking up its equities trading team.
MY ADVICE Avoid
WHY Needs to deliver after a disappointing first half
Motorpoint Group
Since floating at 200p a share in May 2016, Motorpoint’s journey on the stock market has been bumpy. A profit warning just five months after its IPO severely dented investor confidence.
The flotation in May last year of Motorpoint Group, which sponsors arenas in Cardiff and Nottingham, allowed David Shelton, who helped launch the business in 1998, and other management to sell £100 million worth of shares in the business.
Motorpoint has since sought to get back on track, yesterday posting pre-tax profit, before exceptional items, of £15.7 million for the year to end of March, down from £18.2 million in 2016. The exceptional costs were £4 million related to its IPO. Overheads also increased as it invested in new sites. Profits were well down on pre-profit warning forecasts but came in slightly above management’s revised guidance.
Significantly, Motorpoint says trading at the beginning of its new financial year is in line with expectations, continuing the momentum enjoyed in its fourth quarter, and that although the general election fallout could hit consumer confidence it was yet to see any evidence.
Motorpoint’s confidence is reflected in it proposing a maiden total dividend of 4¼p a share, a yield of 2.9 per cent, according to Shore Capital. The shares have recovered some lost ground since the profit warning but trade on a 2018 price earnings multiple of about 8.9 times.
MY ADVICE Hold
WHY Shares remain below the IPO price and the company is bullish on a quick recovery despite political uncertainty
And finally . . .
Toscafund, the investor founded by Martin Hughes, dubbed “the rottweiler” in market circles, has emerged with a 5.2 per cent stake in Petrofac, the oil services company mired in a Serious Fraud Office investigation over links to Unaoil, itself the subject of inquiries over allegations that it paid bribes on behalf of its clients.
Toscafund has a reputation for taking activist stakes in stocks, including attempts to merge HSS with its rival Speedy Hire. With shares in Petrofac down sharply, Toscafund’s stake is one to watch.
