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Hutchison China MediTech — WCLC highlights savolitinib combination potential

HUTCHMED (US: HCM)

Last close As at 21/11/2024

31.59

▲ −2.99 (−8.65%)

Market capitalisation

5,463m

More on this equity

Research: Healthcare

Hutchison China MediTech — WCLC highlights savolitinib combination potential

At ASCO, Hutchison China MediTech (HCM) presented detailed Phase III trial results for one of its leading assets, fruquintinib (third-line colorectal cancer). Full data from the China-based FRESCO study demonstrated statistically meaningful improvements in both overall and progression-free survival while reinforcing the safety profile of the drug (no liver toxicity). This is the first full Phase III data readout from HCM and further validates its strategy of creating next-generation selective tyrosine kinase inhibitors (TKIs). HCM’s (together with partner Lilly) NDA to the China FDA has been accepted (Lilly will pay HCM a $4.5m milestone payment) with a launch potentially now in 2018. We maintain our valuation of $2.7bn.

Analyst avatar placeholder

Written by

Healthcare

Hutchison China MediTech

WCLC highlights savolitinib combination potential

Corporate update

Pharma & biotech

19 October 2017

ADR research

Price

US$28.82

Market cap

US$3,502m

ADR/Ord conversion ratio 1:0.5

Net cash ($m) as of 30 June 2017

65.7

ADSs in issue

121.5m

ADS code

HCM

ADS exchange

NASDAQ

Underlying exchange

AIM

Depository

NASDAQ

ADR price performance

52-week high/low

$31.2

$11.5

Business description

Hutchison China MediTech (Chi-Med; HCM) is an innovative China-based biopharmaceutical company targeting the global market for novel, highly selective oral oncology, and immunology drugs. Its established commercial platform business in China is growing ahead of the market.

Next events

AZN decision on savolitinib PIII NSCLC

2017

Fruquintinib China NDA approval and launch

2018

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Hutchison China MediTech is a research client of Edison Investment Research Limited

Data presented at the World Conference on Lung Cancer (WCLC) on combination approaches to treat resistant EGFR-driven non-small cell lung cancer (NSCLC) highlight a widening of the patient population that could be eligible to receive savolitinib in combination with either Tagrisso or Iressa. Partner AZN now has the data set to make a decision on global Phase III trials and evaluate breakthrough therapy designation (BTD) potential in both 2L and 3L EGFR-resistant NSCLC; in our view, data to date supports both. BTD could offer earlier entry into the US market. Furthermore, Phase II data presented on fruquintinib in combination with Iressa (first line EGFRm NSCLC) showed encouraging efficacy and acceptable safety. We place our forecasts and valuation under review as we revisit our peak sales assumptions.

Year
end

Revenue ($m)

Net profit
($m)

EPADS
($)

DPADS
($)

P/E
(x)

Yield
(%)

12/15

178.2

8.0

0.07

0.0

412

N/A

12/16

216.1

11.7

0.10

0.0

288

N/A

12/17e

N/A

N/A

N/A

N/A

N/A

N/A

12/18e

N/A

N/A

N/A

N/A

N/A

N/A

Note: Dividend yield excludes withholding tax. Investors should consult their tax advisor regarding the application of any domestic and foreign tax laws.

Savolitinib: Data in NSCLC demonstrates potential

Combinations of targeted therapies (TKI, monoclonal antibodies and immunotherapies) and chemotherapy is increasingly becoming the best approach to treating the complex and constantly mutating disease that is cancer. Savolitinib has the potential to be utilized across all lines of treatment in all MET-driven patients either as monotherapy or in combination. Data presented at the WCLC demonstrated positive efficacy for savolitinib in combination with Tagrisso or Iressa in EGFR-mutant, T790M +/-, MET-positive patients. Additionally, patients who had been previously treated with a third-generation T790M TKI (Tagrisso refractory) achieved a 33% PR (n=64). The importance of the data presented at WCLC is twofold; it underpins the scientific rationale at HCM in designing highly specific molecules that can be used both as monotherapy and in combinations to treat patients that are refractory to available EGFR therapies thereby opening up new treatment paradigms.

Fruquintinib: Impressive PR observed to date

Data were presented from an ongoing Phase II trial evaluating fruquintinib (VEGFR inhibitor) in combination with Iressa in EGFR-mutant NSCLC patients as first line therapy which supports this unique VEGFR inhibitor’s role in combination therapy. 13/17 patients (76.5%) had a partial response and four had stable disease (23.5%). No patients as of the data cut-off had progressive disease. Overall, an acceptable safety profile was observed.

Valuation: Under review

We place our forecasts and valuation under review.

Savolitinib demonstrates utility in NSCLC

At the recent 18th (2017) WCLC, preliminary data were presented on two separate Phase Ib/II proof-of-concept clinical trials assessing savolitinib in combination with AstraZeneca’s Tagrisso and Iressa for NSCLC patients. The data presented give an important insight into the potential utility of savolitinib in patients who have progressed following treatment with a first- (Iressa) or third- (Tagrisso) generation EGFR inhibitor. Patients treated were EGFR mutation-positive and presented with T790M and/or MET-driven disease, and, in our view, the data highlight savolitinib’s potential for use in second- and third-line MET-amplified, EGFR-mutant patients, irrespective of EGFR inhibitor utilized and T790M status. Secondary resistance mechanisms in cancer patients that have received mutation-targeted medicines are emerging and as such savolitinib’s place in addressing resistance in MET-driven lung cancers is becoming increasingly evident. The importance of the overall data is the potential widening of the NSCLC patient population that could be eligible to receive savolitinib as combination therapy. The safety profile across both the Iressa/savolitinib and Tagrisso/savolitinib combinations was consistent with the known safety profiles for each class of drugs.

Tagrisso and Savolitinib combination looks to US market

The Phase Ib/II TATTON trial is testing the combination of savolitinib and Tagrisso in patients with advanced EGFR-mutant MET-amplified NSCLC. Patients fell into three distinct groups: those who had prior third-generation T790M EGFR TKI treatment; those who had no prior third-generation T790M EGFR TKI treatment but were T790m-positive; and those who had also had no prior third-generation T790M EGFR TKI treatment but were T790m-negative. Sixty-four MET-positive patients were eligible for overall analysis of preliminary anti-tumor activity; of which 47 patients were confirmed centrally and 17 were confirmed locally (at the clinical site). Exhibit 1 highlights the preliminary anti-tumor activity in the savolitinib and Tagrisso group (based on all 64 C-MET positive patients). Patients with centrally confirmed MET-positive disease who had been previously treated with a third-generation T790M TKI had a 28% PR. This compared with 57% who had not been treated with a T790M TKI but were T790M-positive, and 53% who were T790M-negative. There were no complete responses in any of the patient groups, a result that is to be expected in this patient population with this class of drugs.

Exhibit 1: Preliminary anti-tumor activity of the combination of savolitinib and Tagrisso in patients with centrally and locally confirmed MET-positive NSCLC

Source: Ahn M-J, et al. TATTON Phase Ib Expansion Cohort: Osimertinib Plus Savolitinib for Patients with EGFR-mutant MET-amplified NSCLC After Progression on Prior EGFR-TKI. Abstract #8985. Presented at the World Lung Cancer Congress 2017, Yokohama, Japan, 15-18 October 2017.

While these data demonstrate the potential of savolitinib in second- and third-line settings, the expected move of Tagrisso to a first-line treatment following the positive FLAURA data could open up further opportunities for savolitinib as 2L treatment option in Tagrisso refractory patients. Data presented so far by HCM appear to indicate that around 30% of patients are MET-positive after Tagrisso treatment, compared with around 6% who are MET-positive and T790M-positive, and 10% who are MET-positive and T790M-negative after first-line, first-generation EGFR TKI (Iressa/Tarceva) treatment. While the percentage of patients who are MET-positive once Tagrisso is utilized as first-line treatment is unknown at this time, these data suggest that a larger patient population may be addressable by savolitinib once this shift in standard of care is made ie the use of savolitinib (2L and 3L) in Tagrisso resistance patient populations.

Opportunities in Asia in combination with first-generation EGFR inhibitors

We anticipate HCM to move forward with a strategy in Asia for NSCLC that focuses on combinations with first-generation TKI inhibitors such as AstraZeneca’s Iressa and Roche’s Tarceva, which are now off-patent in China. The Phase Ib/II expansion cohort tested a combination of savolitinib and Iressa in EGFR-mutant, MET-amplified NSCLC patients.

Preliminary anti-tumor activity was available in all 51 patients who were treated. 52% (n=12/23) who were T790M-negative, achieved a PR an expected result as Tagrisso (or another T790M targeting compound) was not utilized. As demonstrated in Exhibit 2, many of the responding patients in the T790M-negative arm are still receiving ongoing treatment and have ongoing partial responses.

Exhibit 2: Duration of treatment in MET-amplified, EGFR mutation-positive patients who are treated with a combination of savolitinib and Iressa, N = 51

Source: Hutchison China MediTech reports

As expected response in T790M-positive patients was low, 9% (n=2/23) achieving a PR, we highlight that Iressa was not designed to address this patient subgroup (Tagrisso is now approved for this subgroup of patients). Stable disease at and beyond six weeks was similar in both groups, achieved in 30% (n=7/23) of T790M-negative patients and 39% (n=9/23) of T790M-positive patients. However, deaths occurred at a substantially increased rate in the T790M-positive arm (30% vs 13% in T790M-negative patients).

Fruquintinib

Fruquintinib is an oral small molecule that is a highly selective VEGFR1, VEGFR2 and VEGFR3 inhibitor, which in preclinical trials demonstrated fewer off-target toxicities, allowing higher drug exposure that translates to 24 hours a day VEGFR receptor inhibition. Fruquintinib's unique selectivity (lack of CYP450 inhibition/inducing) is favorable for potential in combination treatment regimens, given that many drugs are metabolized through the cytochrome p450 enzyme pathway.

Data were presented from an ongoing Phase II trial testing fruquintinib (VEGFR inhibitor) in combination with Iressa in EGFR-mutant NSCLC patients which supports this unique VEGFR inhibitor’s role in combination therapy. The trial tested fruquintinib at 4mg or 5mg once daily for three weeks on/one week off in combination with 250mg of Iressa once daily. Seventeen patients were eligible for efficacy evaluation, of which 13 (four PRs not confirmed as of data cut-off) patients (76.5%) had a partial response and four had stable disease (23.5%). No patients as of data cut-off had progressive disease and the median time to response was 56 days. 4mg dosing of Fruquintinib was determined to be the most suitable dose for further investigation as liver enzyme elevation was observed at 5mg. 8/26 (30.8%) patients reported a Grade 3-4 AEs, five of which were increases in alanine transaminase (ALT) as result of damage to the liver. Previously as a monotherapy, fruquintinib (plus best supportive care) in a Phase II trial in third-line NSCLC demonstrated median progression-free survival of 3.81 months vs 1.15 months for placebo (HR=0.275, p<0.001).

Exhibit 3: Financial summary

$000s

2014

2015

2016

December

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

87,329

178,203

216,080

Cost of Sales

(58,849)

(110,777)

(156,328)

Gross Profit

28,480

67,426

59,752

Research and development

(29,914)

(47,368)

(66,871)

Other overheads

(16,825)

(29,829)

(39,578)

EBITDA

 

(16,994)

(7,756)

(44,264)

Operating Profit (before amort. and except.)

 

(18,259)

(9,771)

(46,697)

Intangible Amortization

0

0

0

Operating Profit

(18,259)

(9,771)

(46,697)

Net Interest

(957)

(953)

(1,129)

Exceptionals

0

0

0

Profit Before Tax (norm)

 

(19,957)

(10,540)

(47,356)

Profit Before Tax (reported)

 

(19,957)

(10,540)

(47,356)

Tax

(1,343)

(1,605)

(4,331)

Equity investments, after tax

15,180

22,572

66,244

Profit After Tax (norm)

(6,120)

10,427

14,557

Profit After Tax (reported)

(6,120)

10,427

14,557

Minority

(3,220)

(2,434)

(2,859)

Discontinued operations

2,034

0

0

Net profit (norm)

(9,340)

7,993

11,698

Net profit (reported)

(7,306)

7,993

11,698

Average Number of Shares Outstanding (m)

52.6

54.7

59.7

EPS - normalized (c)

 

(17.8)

14.6

19.6

EPS - normalized and fully diluted (c)

 

(17.8)

14.6

19.5

EPS - (reported) (c)

 

(13.9)

14.6

19.6

Average number of ADS outstanding (m)

105.1

109.3

119.4

Earnings per ADS - normalized ($)

 

(0.09)

0.07

0.10

Earnings per ADS ($)

 

(0.07)

0.07

0.10

BALANCE SHEET

Fixed Assets

 

120,992

140,087

175,057

Intangible Assets

4,096

3,903

3,606

Tangible Assets

7,482

8,507

9,954

Investments

109,414

127,677

161,497

Current Assets

 

89,842

89,675

167,380

Stocks

4,405

9,555

12,822

Debtors

27,924

38,628

49,349

Cash

38,941

31,949

79,431

St investments

12,179

0

24,270

Other

6,393

9,543

1,508

Current Liabilities

 

(75,299)

(81,062)

(95,119)

Creditors

(20,427)

(24,086)

(35,538)

Short term borrowings

(26,282)

(23,077)

(19,957)

Other

(28,590)

(33,899)

(39,624)

Long Term Liabilities

 

(37,584)

(46,415)

(43,258)

Long term borrowings

(26,923)

(26,923)

(26,830)

Other long term liabilities

(10,661)

(19,492)

(16,428)

Net Assets

 

97,951

102,285

204,060

Minority

(17,764)

(18,921)

(19,790)

Shareholder equity

 

80,187

83,364

184,270

CASH FLOW

Operating Cash Flow

 

8,359

(9,385)

(9,569)

Net Interest

0

0

0

Tax

0

0

0

Capex

(3,729)

(3,324)

(4,327)

Acquisitions/disposals

689

0

0

Dividends

(1,179)

(590)

(564)

Equity financing and capital movements

5,860

(1,676)

97,076

Other

(12,179)

12,179

(29,270)

Net Cash Flow

(2,179)

(2,796)

53,346

Opening net debt/(cash and ST investments)

 

4,645

2,085

18,051

Increase/(decrease) in ST investments

12,179

(12,179)

24,270

Other

(7,440)

(991)

(2,651)

Closing net debt/(cash and ST investments)

 

2,085

18,051

(56,914)

Source: Hutchison China MediTech reports, Edison Investment Research. Note: Equity investments after tax include the net profit contribution from JVs.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Research: Investment Companies

Deutsche Beteiligungs — FY17 confirmed as an exceptional year

Deutsche Beteiligungs (DBAG) reported a 22.1% NAV return for the first nine months of FY17, and management guidance is for a further uplift in the final quarter, making it an exceptional year in terms of performance as well as portfolio activity. DBAG’s share price returns have significantly outperformed NAV returns over the last year, and the shares are currently trading at a substantial premium to NAV. In our view, this implies that the market is discounting strong future returns, arguably reflecting recent positive strategic developments that confirm DBAG’s ability to complete transactions successfully across a broader opportunity set.

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