On November 15, Biotech and Biotech, owned by Li Ka-shing, the "richest man in Hong Kong", announced that they would make strategic changes: 1) prioritize the registration of late-stage pipeline and promote the listing of near-commercialization pipeline, especially the global registration of fuquinitinib; 2) Some early pipelines will not be prioritized for internal development, and some projects will seek external business opportunities; 3) Seek potential external partners to promote commercialization of its drugs outside China.
In the context of the capital winter of biomedicine is still not past, many media regard it as a signal of "no money".
However, from the perspective of the value of Chi-Med itself, this view may be too one-sided. On the contrary, it just reflects that the company is "preparing for a rainy day" and is currently at a key point of commercialization.
Biotech's international and commercial achievements are expected at a time when Biotech is increasingly regarded as an important indicator of its strength.
For the first half of 2022, Chi-Med's total revenue was $202 million, up 28% from $157.4 million in the first half of 2021.
Among them, product sales revenue was mainly contributed by three commercialized innovative pharmaceutical products:
● Sales in the fuquinitinib market were $50.4 million, up 26% from $40.1 million in the first half of last year;
● Sales of solventinib amounted to $13.6 million (covered by medical insurance in January 2022). A 69% increase from $8 million last year;
● Sales of Sevotinib: $23.3 million (starting in the second half of 2021);
All innovative products showed strong growth compared to 2021 revenues ($71 million for fuquinitinib, $11.6 million for solfantinib, and $15.9 million for Sevotinib).
Despite the rapid commercialization progress, it is still difficult for the company to reach break-even in the past two years.
This is because Chi-Med's expenses continue to increase, mainly in research and development. From 2019 to 2021, the company spent $138 million on R&D, $175 million on R&D, and $299 million on R&D, respectively, rising from 76.75% of revenue in 2020 to 84% in 2021.
The market began to worry about Chi-Med's cash flow. Chi-med had $826 million in cash and equivalents in the first half of 2022 and is expected to be able to support it for another two and a half years if it maintains its 2021 R&D intensity.
Chi-med CEO Juan Ho has publicly stated that "our R&D investment will continue to increase in the future, and we hope to achieve break-even by 2025." There is no doubt a time gap between the slogan and the above speculation of running out of cash.
But in fact, the situation of Hutchison Medicine is not as "sinister" as the media makes it out to be.
● Among the current three innovative drugs, the domestic commercialization interest of fuquinitinib is in cooperation with Lilly (Lilly pays 70% of the commercialization sales), the full global interest of solventinib is retained, and the global commercialization interest of Sevotinib is granted to Astrazeneca.
These three drugs are all distributed to overseas clinical, especially fuquinitinib is most likely to be the first to realize the sea, License out is expected to bring huge profits to the company. Sevotinib partnered with Astrazeneca early on, and will be able to recoup more of the milestones and share of post-launch sales in the future, subject to overseas clinical specifications and success. Since sovantinib was rejected by FDA in the early stage, it may take some time for the follow-up phase III clinical supplement.
At the same time, it is worth noting that the three drugs have opened several clinical clinics in China, and several major indications have been in the clinical stage of registration, so the future domestic sales revenue can be verified.
● Chi-Med, with Hong Kong's richest man Li Ka-shing behind it, has an undrawn bank credit line of US $177.8 million in addition to cash equivalents;
● In the past, Chi-Med has completed the listing in three places, which does not rule out the subsequent return to the Science and innovation board to raise capital;
In the future, if fuquinitinib goes to sea smoothly, it will become a probability event that Huang Pharmaceutical achieves break-even ahead of schedule.
