Edison Issues Re-initiation on Hutchison China MediTech

27 May, 2016, 05:32 ET from Edison Investment Research

LONDON, May 27, 2016 /PRNewswire/ --

Hutchison China MediTech (Chi-Med) (HCM) is an innovative biopharma company focused on the highly lucrative global oncology and immunology markets. HCM has built a substantial pipeline of potential first-in-class or best-in-class tyrosine kinase inhibitor (TKI) drugs, some of which are in development with strategic partners. HCM's profitable Chinese healthcare business continues to benefit from the fast-growing domestic market. We expect progress of the mid-to-late-stage pipeline during 2016-17 (including US and China regulatory filings) to catapult the company into the international spotlight. We re-initiate with a value of $2.3bn, or £25.8 share.

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Our sum-of-the-parts valuation uses an rNPV model for the IP unit and earnings-based multiples for the profitable CP unit. IP is valued at $1,712m; placing CP's 2016e share of net profit on a 22.5x rating gives $657m (722p/share). Adding in net cash and netting out unallocated costs results in a value of $2.3bn (£25.75/share). Approval(s), clinical data and/or deals should increase our risk-adjusted valuation.

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SOURCE Edison Investment Research