Markets
Europe
The FTSE-100 finished yesterday's session 3.04% higher at 6,204.00, whilst the FTSE AIM All-Share index closed 1.14% higher at 722.00. In continental Europe, markets ended sharply higher after opinion polls on the UK referendum showed support for the UK remaining in the EU. All sectors ended higher, with banking stocks leading gainers. France’s CAC 40 and Germany’s DAX advanced 3.5% and 3.4%, respectively.
Wall Street
Wall Street ended in the green as a rally in oil prices resulted in gains for energy stocks. Investors await the UK’s vote on staying in the European Union later this week. The S&P 500 rose 0.6%, with the industrial sector gaining the most.
Asia
Equities are trading higher, tracking global markets amid easing Brexit concerns and improvement in oil prices. The Nikkei 225 rose 1.3%, while the Hang Seng was trading 0.7% up at 7:00 am.
Oil
Yesterday, Brent oil prices expanded 3.0% to US$50.65 per barrel, while WTI prices rose 2.9% to US$49.37 per barrel.
Headlines
Eurozone construction output falls for third consecutive month
As per data published by Eurostat, construction output fell 0.2% m-o-m in April, after a 1% drop in March, marking the third successive month of decline. On y-o-y basis, construction output slid 0.4% compared with 0.5% increase in March. Production in building decreased 0.4%, while that in civil engineering rose 0.9%.
Company news
GlaxoSmithKline (LON:GSK, 1,417.0p) - Buy
Yesterday, GlaxoSmithKline (GSK) declared results from the pivotal phase III FULFIL study of the investigational once-daily closed triple combination therapy, fluticasone furoate/umeclidinium/vilanterol in patients with chronic obstructive pulmonary disease (COPD). GSK informed that the study met its two goals, showing statistically significant improvements compared to the twice-daily Symbicort Turbohaler in both lung functions as measured by trough FEV1 along with health-related quality of life as measured by St. George's Respiratory Questionnaire (SGRQ).
Our view: GSK received positive results from the FULFIL study. The results have shown improvements in lung function and health-related quality of life when combining three COPD medicines into a single inhaler compared with the dual therapy of budesonide or formoterol. GSK plans to file for an EU regulatory submission of the closed triple combination therapy for COPD, which is expected by the end of 2016. In addition, the company plans to submit a new drug application for the closed triple therapy for COPD to the US Food and Drug Administration by the end of this year. The closed triple therapy is a combination of three molecules: fluticasone furoate (FF), an inhaled corticosteroid (ICS); umeclidinium (UMEC), an anti-cholinergic; and vilanterol (VI). The therapy provides GSK an opportunity to recapture its leading position in the COPD market, which has been dented by pricing pressure and competition from other products. Meanwhile, GSK is making good progress in other therapy areas such as HIV vaccines, oncology, cardiovascular and immune inflammation. We believe GSK is moving in the right direction, supported by some world-class assets and technology, to deliver long-term growth and generate stable returns for shareholders. Therefore, we maintain a Buy rating on the stock.
Hutchison China Meditech (LON:HCM, 1,985.0p) - Buy
Hutchison China MediTech (‘Chi-Med’), the China-based healthcare group, yesterday announced that its 99.8% owned drug R&D subsidiary, Hutchison MediPharma (‘HMP’), has initiated a global Phase II expansion of the ongoing TATTON trial for its selective c-Met (also known as mesenchymal epithelial transition factor) inhibitor, savolitinib (AZD6094), in epidermal growth factor receptor (‘EGFR’) mutant non-small cell lung cancer (NSCLC’) patients. Following encouraging early data in the TATTON study, the trial of savolitinib will be conducted in combination with Tagrisso (osimertinib/AZD9291) in advanced NSCLC patients who have developed resistance to approved EGFR tyrosine kinase inhibitors (‘TKIs’). Currently there is no approved selective c-Met TKIs for these patients. The initiation of the expanded Phase II study has triggered a US$10m milestone payment from its partner AstraZeneca to HCM, and they will conduct Phase II studies in NSCLC with savolitinib in monotherapy, as well as in combination with either Tagrisso (osimertinib) or Iressa (gefitinib). Savolitinib was developed as a potent and highly selective oral inhibitor specifically designed to address issues observed in the clinic with first-generation c-Met inhibitors, including renal toxicity. Chi-Med’s CEO, Christian Hogg commented “We believe that savolitinib…will address the key genetic drivers of cancer cell proliferation in these very difficult-to-treat NSCLC patients. We are hopeful about proceeding into Phase III in 2017 based on future data from this study." AstraZeneca’s Senior Vice President, Head of Oncology Innovative Medicines, Susan Galbraith commented “We are extremely excited by the data we have seen for savolitinib when used in combination with our EGFR tyrosine kinase inhibitors. We are committed to advancing research to develop a broad range of potential treatment options for patients with lung cancer.”
Our view: Chi-Med continues to make excellent progress across its development pipeline, with yesterday’s news confirming the expanded Phase II trials for savolitinib has now commenced and the triggering of a US$10m milestone payment from its partner, AstraZeneca. This new study follows encouraging early data from studies of savolitinib in combination with Tagrisso. Savolitinib is in clinical development in multiple MET (Aberation of c-Met/HGF)-driven solid tumor indications including NSCLC, kidney, gastric and colorectal cancer. The current development programme for MET-driven NSCLC settings includes; i) Savolitinib in combination with Tagrisso or Iressa in Phase II expansions of ongoing studies in advanced EGFR mutant NSCLC, ii) Savolitinib + Tagrisso combination Phase II study in third-line NSCLC (for patients progressing on T790M-directed therapies), and iii) Savolitinib monotherapy Phase II study in NSCLC. Featuring high selectivity, savolitinib allows for effective target coverage of c-Met, as well as safe and tolerable combinations with other oncology agents. Lung cancer is the most common cancer in the world and presently accounts for around one-third of all cancer deaths, for which Savolitinib has the potential to fulfill major unmet medical needs in c-Met-driven subsets of NSCLC. According to Frost & Sullivan, approximately 1.7 million new patients are diagnosed as such around the world every year. In light of its continuing progress and positive development, while recognising its potential to address major unmet medical needs, Beaufort reiterate Buy rating on its stock. The Group expect to commence Phase III clinical trial in 2017.
Imperial Innovations (LON:IVO, 416.0p) - Hold
Yesterday, Imperial Innovations provided shareholders with a disappointing outcome following clinical trials undertaken by Circassia Pharmaceuticals in which it has a significant investment. Circassia informed the market that it received results from its phase III cat allergy study which, quite remarkably, demonstrated that the placebo employed as trial comparative was seen to be as effective as the experimental allergy treatment itself. In the study, both treatment regimens and placebo greatly, but equally, reduced subjects' combined allergy symptoms and rescue medication-use score from the baseline, indicating that the treatment did not meet the study's primary endpoint. Circassia will now re-consider the impact of the results on its allergy portfolio.
Our view: The update is clearly disappointing news for Imperial, as demonstrated by Circassia’s plunging share price yesterday. The study failed to achieve the desired result, given that both the active treatment and placebo groups were not significantly different. Circassia would now review its full dataset to understand the detailed results and assess whether any other confounding factor affected the outcome, as well as the more general impact on its allergy portfolio. Imperial invested 25.5m in Circassia (9.3% stake), the Group's largest asset with a net fair value of £77.5m (based on market capitalisation of £833.6m), standing at c.22% of Imperial’s total net portfolio value of £355.1m as at 31 January 2016. Following yesterday’s news, Circassia’s share price tumbled over 67% leaving its market capitalisation at just £252m. In light of the growing uncertainty in Imperial’s portfolio company, we downgrade the rating to Hold until greater clarification is provided.