Trinity Delta Lighthouse: Hutchison China MediTech
Trinity Delta view: Chi-Med’s April 2019 announcement emphasised two key objectives: (1) a Hong Kong listing and global raise, and (2) the reduction in CK Hutchison’s shareholding to below 50%. Today’s announcements indicate that the second of these objectives has been achieved just ahead of end-H119.The closing of the secondary placement should improve Chi-Med’s liquidity and, while it may have been assumed that these events would occur in tandem, the decoupling of the two objectives should facilitate a more straightforward IPO process as it will now only be associated with a primary offering of shares.
The timing of the SEHK IPO and size and structure of the offering - neither of which have been disclosed - are of clear interest to investors. Based on expected cash burn, we assume a potential offering of $200-250m to provide new capital to support pipeline investment. The IPO should enhance Chi-Med’s access to capital, broaden its shareholder base, further raise its profile in its home market, and, like the offering, improve liquidity.
Ahead of the IPO/raise, Chi-Med remains well-funded. We continue to anticipate various clinical, regulatory, and commercial catalysts in 2019 and 2020 that will unlock further shareholder value. Our current Chi-Med valuation of $5.14bn ($38.55/ADS) or £3.95bn (£5.93/share) is a pre-money valuation pending the proposed Hong Kong IPO and global placement.
CK Hutchison Holdings is an investment holding group based in Hong Kong. Co.'s businesses encompass such diverse areas as property development and investment, real estate agency and estate management, hotels, telecommunications and e-commerce, finance and investments, retail, ports and related services, energy, infrastructure projects and materials, media, and biotechnology. Co.'s core business are organized along four segments: Property (sales, leasing, property management and development); Hutchison Whampoa (ports, property and hotel, retail, infrastructure, energy and telecommunications); Life Sciences (health and agriculture related products) and Other Investments.
Hutchison China MediTech is engaged in researching, developing, manufacturing and selling pharmaceuticals and healthcare products. Co. has research and development facilities and manufacturing plants in Shanghai and Guangzhou in the People's Republic of China and sells its products mainly in the PRC and Hong Kong. Co. operates two operating segments. The Innovation Platform focuses on discovering and developing therapeutics in oncology and autoimmune diseases, and the provision of research and development services. The Commercial Platform involves the manufacture, marketing and distribution of prescription and over the counter pharmaceuticals as well as consumer health products.
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