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Running a $5 billion biotechnology company remotely is a daunting prospect at the best of times. Doing so during a pandemic is even more unnerving.
Yet that is exactly what Christian Hogg has had to grapple with since February, when the chief executive of Hutchison China MediTech HCM, +0.08% (Chi-Med) found himself stranded in Hong Kong and unable to travel to mainland China, where the company’s commercial operations are based.
Biotech companies in China were among the first to experience disruptions to their businesses, as manufacturing, logistics and transport were all impacted by the outbreak.
“Factories closed and clinical trials were affected,” Hogg says, recounting the early days of lockdown. “After working with local authorities, we put social distancing and protective equipment in place and reopened our factories in late February.”
By March, clinical trials with patients were back to 70% and by April, back to 95%, as the company conducted clinical trials with patients via videoconferencing or phone.
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The speed at which Chi-Med, was able to resume operations speaks to Hogg’s intimate knowledge of the company. The 55-year-old joined as CEO in 2000 from Procter & Gamble PG, -0.13%, after he was approached by CK Hutchison, the conglomerate controlled by Chinese billionaire Li Ka-shing, for the role.
“At the time, there was no biotech industry in China at all, only state-owned enterprises manufacturing generic drugs,” Hogg recalls. “But between 2005 and 2015 an enormous change took place as Chinese emerging companies started to build out the infrastructure, and research and development and investors started to pile in.”
“The vast majority of biotech companies in China today are not necessarily creating innovation themselves. They are acquiring innovations from the West and licensing drugs from Big Pharma and biotech,” Hogg adds.
Since 2006, Chi-Med has been dual-listed on London’s junior stock market Aim and Nasdaq. Its time as a listed company hasn’t always been a smooth ride.
In October 2019, the company’s Nasdaq-listed shares dropped 6% when CK Hutchison sold 1.3% of the company’s shares, taking its holding to below 50%, after the Hong Kong company said it wanted to deconsolidate Chi-Med’s results from its own.
Chi-Med’s U.S.-listed shares are up 35.5% in the year to date, according to FactSet.
Such hitches haven’t stopped Hogg from pursuing his company’s steadfast mission to become a global oncology business, and revolutionize cancer treatment by creating a portfolio of drugs aimed at preventing the disease from multiple angles through combining different therapies.
“At the end of the day, creating a cancer drug isn’t very difficult—you can get a clever chemist to knock up a molecule,” Hogg explains.
“What is difficult is that within a cell you have 500 proteins and enzymes at work and the drug might hit the target you are going for, but it will also hit a lot of other proteins and enzymes, and what we’ve done over 15 years is focused on creating laser like therapies that hit the right target while reducing toxicity.”
That discipline and focus has started to pay off. So far this year, Chi-Med has been granted three U.S. Food and Drug Administration Fast Track Designations, for fruquintinib in metastatic colorectal cancer, and surufatinib for two forms of advanced neuroendocrine tumors. The submission of a New Drug Application for surufatinib in the U.S. is also planned for later this year.
Two of the company’s cancer drugs have also submitted new drug applications in China, with the aim of launching them at the end of 2020 and early 2021.
“We are encouraged as the company continues to execute on its transition to become an independent, global oncology company, and reiterate our Buy rating,” Goldman Sachs analysts wrote in a recent research note.
Once Chi-Med has proven commercialization success behind the launch of its first three cancer drugs, Hogg says the company will consider an initial public offering in Hong Kong, which could come as soon as next year.
The company postponed plans for an IPO in June 2019 over market uncertainties amid the social protests in the city. At the time, it had hoped to raise up to $500 million from the listing.
“It makes a great deal of sense to list in Hong Kong, but it’s about picking the right time,” Hogg says.
Meanwhile, General Atlantic, the U.S. buyout group, has plugged the gap for fresh equity, investing $100 million in Chi-Med in June, bringing the company’s total cash position to $400 million.
Hogg says the company is burning through around $150 million of cash a year to develop its pipeline of drugs and move clinical trials forward.
Chinese government policy reforms—aimed at creating a world-class domestic pharmaceutical industry, and which include reimbursing for new products and an increase in the pace of new drug approvals-—have also helped Chi-Med’s growth.
“It is critical to get on the reimbursement list to make the drugs affordable,” Hogg says, referring to the list of medicines covered by basic medical insurance schemes.
On Oct. 1, Chi-Med will assume all medical detailing and marketing activities for elunate (fruquintinib capsules) from U.S. drugmaker Eli Lilly LLY, +1.00% across all of China. To handle that, it will boost its commercial team from more than 320 to 400, with plans to add another 100 by the end of 2021.
The move is aimed at making Chi-Med a fully integrated oncology company in China. Hogg’s ambitions go even further, as the company plans to build out its commercial capacity in the U.S. over the next 18 months, creating a team of between 60 to 70 people on the ground.
“We have a $5 billion market cap now. The next stage is for us to get to $20 billion.”
