Adherium — Update 6 October 2016

Adherium — Update 6 October 2016

Adherium

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Written by

Adherium

Commercial roll-out still at pilot stage

FY16 results

Healthcare equipment
& services

6 October 2016

Price

A$0.36

Market cap

A$61m

US$0.76/A$

Net cash (A$m) as at 30 June 2016

27.2

Shares in issue

169.0m

Free float

75%

Code

ADR

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(16.3)

(28.0)

(40.5)

Rel (local)

(16.5)

(30.9)

(44.3)

52-week high/low

A$0.02

A$0.3

Business description

Adherium is a digital health company developing technologies that address suboptimal medication use and remote patient management in chronic diseases. Clinical evidence shows that its Smartinhaler substantially increases adherence and reduces severe exacerbations in asthma.

Next events

Annual report and update on plans

September

Additional major commercialisation agreements

Next 18 months

Analysts

Dennis Hulme

+61 (0)2 9258 1161

Lala Gregorek

+44 (0)20 3681 2527

Adherium is a research client of Edison Investment Research Limited

Adherium’s FY16 sales of A$2.6m were 7% below expectations, likely due to a pause in commercial supply to AstraZeneca (AZN) in H216 as the pharma used inventory purchased in CY15 for initial market testing. The net loss of A$7.9m included A$1.4m of one-off costs. We have amended near-term forecasts to allow for a slower initial roll-out by AZN, but leave peak uptake assumptions unchanged given the large addressable market. We have also trimmed forecast profit margin by 20% for second-generation embedded devices following a potential 2020 launch. This reduces our valuation to A$171m or A$1.01/share (from A$188m or A$1.31/share).

Year
end

Revenue
(A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

03/15

3.1

(1.3)

(1.92)

0.0

N/A

N/A

06/16**

2.9

(6.4)

(5.39)

0.0

N/A

N/A

06/17e

5.7

(10.5)

(6.59)

0.0

N/A

N/A

06/18e

18.7

(4.6)

(2.73)

0.0

N/A

N/A

Note: *Normalised, excluding exceptional items. **15 months to June.

Smartinhaler roll-out still at an early stage

Adherium’s Smartinhaler platform provides reminders and feedback that improve medication adherence in asthma and COPD patients. It entered a 10-year Master Supply and Development Agreement with AZN in July 2015. Commercial supply under the agreement saw 48,000 devices sold in the nine months to December 2015 at an average price of US$25. However, device sales in H216 totalled 8,000 devices at a much higher average of US$96 per device. It appears that AZN purchased sufficient devices in H116 for initial market testing, with the majority of sales in H216 being higher-priced devices for use in clinical trials.

Engagement with AstraZeneca continues to build

While it appears that we had been too optimistic about the speed with which AZN would roll out Smartinhaler devices under its commercial agreement, it is clear that Adherium’s engagement with AZN continues to expand on a number of levels. Recent examples include a commercial pilot programme in Australia announced in August and a clinical study in COPD patients in the US announced in June.

Forecasts adjusted for longer sales cycle

We have trimmed sales forecasts by 21% to A$5.4m in FY17 and our underlying FY18 sales by 18% to A$18.1m. Adherium continues to invest in opening multiple channels to market including hospitals and payors and has completed two major market research projects in preparation for the year ahead. However, large organisations have a long sales cycle so a patient approach is required.

Valuation: Trimmed to A$171m (A$1.01/share)

Our DCF-based valuation has decreased to A$171m or A$1.01/share, from A$188m or A$1.31/share, primarily due to a 20% reduction in assumed profit margins for second-generation devices with embedded Smartinhaler technology, which we expect to launch by 2020. Our forecasts indicate pro forma cash of ~A$35m post the A$8m placement in July should fund operations to break-even point in FY19.

Smartinhaler platform poised for growth

Adherium is a digital health company developing technologies that address suboptimal medication use and remote patient management in chronic diseases. Clinical evidence shows that its Smartinhaler platform substantially increases adherence and reduces exacerbations in adults and children with asthma. Adherium operates a business to business model, selling its devices to international pharmaceutical and medical technology companies, and to healthcare networks, insurers and other payers. Adherium and AstraZeneca (AZN) entered a 10-year commercial product development and supply agreement in July 2015. The initial Product Supply Schedule under the agreement covers Adherium’s Turbu+ (SmartTurbo) devices tailored to AZN’s Turbuhaler dry powder inhaler sold with its Symbicort and Pulmicort drugs outside the US. AZN began market testing the commercial roll-out of the Turbu+ programme in selected countries in the first half of CY16 as part of patient support programmes for asthma and chronic obstructive pulmonary disease (COPD). Adherium listed on the ASX in August 2015, raising A$35m at A$0.50/share, including a US$3m investment by AZN.

Fidelity placement strengthens capacity to accelerate commercialisation

In July 2016 Adherium raised a further A$8m (before costs) through a placement to Fidelity International that was priced at A$0.50 per share, in line with the IPO price. The placement lifted pro forma cash to ~A$35m giving the company additional funds to accelerate its product development and commercialisation programmes across multiple distribution channels alongside its existing AZN relationships.

Business development hires to drive uptake among payers

In the first half of CY16 Adherium appointed two senior vice presidents of business development to lead market expansion in North America and Europe. An important part of the roles will be to build relationships with managed care organisations, healthcare networks, insurers and other payers, and to communicate how improving adherence to asthma and COPD medications results in cost savings for healthcare networks as well as better outcomes for patients.

We see good potential from this side of the business and are encouraged by the resources being put in place to drive growth. However, we recognise that it takes time to establish a presence and build credibility in these markets in order to drive longer-term revenue growth. We forecast sales to managed care organisations, hospitals, insurers and other healthcare networks of A$1m in FY17, growing to A$15m by FY20.

Relationship with AstraZeneca continues to expand

Adherium’s engagement with AZN continues to expand on a number of levels. The two most recent examples are a clinical study in COPD patients in the US announced in June and a commercial pilot programme in Australia announced in August. New Chairman Thomas Lynch has considerable international commercialisation experience which will bolster the commercialisation strategy.

Importantly, the Australian commercial pilot will use fully featured Smartinhalers with data connectivity that will use Adherium’s mobile app and cloud platform, and aims to show how the devices improve medication adherence in asthma and COPD patients. We believe that the data connectivity will appeal to prescribing physicians because for the first time it will give them access to accurate information about patients’ medication usage patterns and enable them to better manage their patients’ health.

While most individual projects remain confidential, Adherium has previously disclosed that collaborations under the AZN agreement include multiple projects across the entire span of operations including product development, regulatory approvals, supply chain and logistics, clinical operations, and product internationalisation, including both embedded and external devices, new and existing inhalers, and major new clinical studies.

While the relationship with AZN continues to strengthen, large pharma companies take a cautious approach to introducing new products, creating a long commercialisation runway which cannot be shortcut.

Financials

FY16 covered the 15 months ended 30 June 2016 as the company transitioned from a 31 March to a 30 June balance date. For convenience we refer to the nine months to 31 December 2015, the period covered by the interim financial report, as H116.

Sales breakdown: Volumes down, prices up in H2

Total sales in FY16 of A$2.6m were 7% below our forecast of A$2.8m. Exhibit 1 shows the sales, number of devices sold and average price per device for FY15 and FY16.

In the nine months to December 2015 Adherium sold 48,000 devices at an average of US$25 each. The average price was much lower than in FY15 because 52% of devices sold in H116 were low-cost, reminder-only devices without data connectivity (not expected to be a significant product line in future periods), and because of the commencement of commercial supply at volume-based pricing.

In H216 (the six months to June 2016) 8,000 devices were sold at a much higher average of US$96 per device. There was no specific commentary in the FY16 accounts relating to the composition of sales in H216, but based on the low volume of devices and high average price we conclude that there were very few if any commercial sales of devices to AZ in the second half of the year, with sales in that period primarily devices for use in clinical trials plus related data subscriptions and support services.

Given the announcement in August that Adherium will supply Smartinhalers for an AstraZeneca Australia commercial pilot programme in 2016, it is clear that commercial supply to AZN will recommence in the current period. However, at this stage of the product roll-out we are uncertain about the volume of devices that AZN will order under the commercial supply agreement in the near term.

Transfer of volume manufacturing operations to an Asian-based contract manufacturer has reduced manufacturing cost per device by 28%, delivering gross profit margins of ~50% despite significantly lower average device selling prices.

Exhibit 1: Smartinhaler sales breakdown

9 months to
Dec 2014

FY15 (12 months to March 2015)

H116 (9 months to Dec 2015

H216 (6 months to June 2016)

FY16 (15 months to June 2016)

Devices sold

28,000

34,000

48,000

8,000

56,000

Sales (A$000s)

2,429

2,907

1,602

1,024

2,626

Gross profit (A$000s)

1,740

2,053

769

521

1,290

Gross profit margin

72%

71%

48%

51%

49%

Average device price (A$)

86.75

85.50

33.38

128.00

46.89

Device price (US$)

78.08

74.39

24.70

96.00

34.70

Source: Edison Investment Research, Adherium company reports

FY16 results and estimate revisions

The FY16 net loss of A$7.9m included A$1.4m of one-off costs, including expenses associated with negotiating the AZN agreements and the ASX listing (~A$0.8m), expensing of capitalised product development costs relating to potentially superseded projects (~A$0.3m) and non-cash expenses relating to convertible notes that were converted into shares at the IPO. Normalised NPAT was a loss of A$6.4m.

Exhibit 2 summarises the main changes to our financial forecasts for FY17. It also includes changes to underlying but previously unpublished FY18 forecasts.

We have reduced forecast sales revenue by 21% in FY17 and reduce by 18% our not previously published FY18 sales due to slower forecast roll-out of Smartinhaler devices under the AZN commercial supply program and lower forecast sales of devices for use in clinical trials. Clinical trials sales are lumpy, being driven by the number of trials of inhaled medications that pharma companies are conducting. FY15 was a particularly strong year as it included two large clinical trials conducted by AZN. We have rebased our forecasts of clinical trial revenue to be A$2m per year (based on annualising the sales in H216), growing at 4% pa, vs our prior assumption of A$3m per year.

Adherium is eligible for reimbursement of 20% of eligible R&D expenditure from the New Zealand government’s Callaghan Innovation programme. Following advice that a number of components of reported R&D expenditure, such as patent costs, do not qualify for reimbursement under this programme we now assume that grants are equal to 10% of total reported R&D spend (previously 20%).

We have modestly increased SG&A expenses by 2% and 9% in FY17 and FY18, respectively. We have maintained our previous forecasts for R&D to more than double in FY17 compared to FY16 as Adherium maintains its objective to accelerate its product development and commercialisation programmes.

Overall, our forecast operating loss for FY17 increases by 8% to A$11.1m.

Exhibit 2: Summary of Adherium FY16 results and main changes to our financial forecasts

A$000s

2016

2016

2017

2017

%

2018

2018

%

Forecast

Reported

Old

New

change

Old

New

change

Sales

2,834

2,626

6,857

5,430

-21%

21,961

18,099

-18%

Total revenue

3,234

2,916

7,257

5,717

-21%

23,161

18,699

-19%

Gross profit

1,432

1,290

3,302

2,621

-21%

10,647

8,853

-17%

Gross margin (%)

50.5%

49.1%

48.2%

48.3%

0.1pp

48.5%

48.9%

0.4pp

Research and development

(2,000)

(2,443)

(6,000)

(6,000)

+0%

(6,000)

(6,000)

+0%

Selling, general and administration

(5,948)

(5,607)

(7,756)

(7,937)

+2%

(7,403)

(8,050)

+9%

EBITDA

(6,116)

(6,470)

(10,055)

(11,029)

+10%

(1,556)

(4,597)

+195%

EBITDA margin (%)

-215.8%

-246.4%

-146.6%

-203.1%

-56.5pp

-7.1%

-25.4%

-18.3pp

Operating profit

(6,168)

(8,066)

(10,298)

(11,091)

+8%

(2,653)

(5,047)

+90%

Operating profit margin (%)

-217.7%

-307.2%

-150.2%

-204.3%

-54.1pp

-12.1%

-27.9%

-15.8pp

Profit before tax (norm)

(6,080)

(6,441)

(9,728)

(10,544)

+8%

(2,382)

(4,619)

+94%

Profit after tax (norm)

(6,080)

(6,441)

(9,728)

(10,544)

+8%

(2,382)

(4,619)

+94%

EPS (c, norm)

(4.76)

(5.39)

(6.78)

(6.59)

-3%

(1.66)

(2.73)

+65%

Closing net debt/(cash)

(27,175)

(27,211)

(12,799)

(21,287)

+66%

(6,916)

(13,051)

+89%

Source: Edison Investment Research, Adherium accounts

Valuation

We reduce our valuation for Adherium to A$171m from A$188m (to A$1.01 per basic share from A$1.31, or to A$0.98/share diluted for the 7.0m options on issue [exercise price 8-67c], from A$1.26). Our valuation is based on a risk-adjusted discounted cash flow model, which includes our estimates of the future costs and revenue streams from sales of Smartinhaler devices and data management services to AZN; to hospitals/managed care, etc, to improve outcomes for asthma patients; and for use in clinical trials.

The main contributor to the 8% fall in NPV is the fact that we have lowered our forecast gross profit on each inhaler that utilises embedded Smartinhaler technology; we expect drug delivery inhalers with embedded Smartinhaler technology to be launched in 2020 and to totally replace sales of clip-on devices to AZN by 2023. We have reduced forecast gross profit on each embedded Smartinhaler from US$2.50 to US$2.00 per device, as we take a more cautious approach to the likely trade-offs in pricing in exchange for the increased uptake when the Smartinhaler technology is embedded within the drug delivery device. Under this revised assumption, annual gross profit per patient for embedded devices is 80% of that for clip-on devices. We continue to assume that the change to embedded devices will see uptake of Smartinhaler technology increase from 30% of Symbicort patients in 2020 to 100% by 2023.

The additional 16m shares issued to Fidelity International in the placement in July sees the value per share decline by 22% compared to the 8% decline in rNPV valuation.

Exhibit 3 shows our forecast assumptions for the four revenue streams and the sum-of-the-parts NPV. Apart from the lower gross profit per embedded device, our other assumptions remain unchanged; key assumptions are highlighted below.

We assume that that the uptake of the clip-on Smartinhaler device reaches 30% of Symbicort users in Europe, Japan and the US by 2020. We further assume a 75% likelihood that in 2020 AZN will launch a version of Symbicort with Adherium’s Smartinhaler technology embedded into the drug delivery device, lifting uptake to 100% of Symbicort users by 2023 and displacing clip-on sales to AZN. Exhibit 3 includes forecast revenues in FY20 and FY23, the years when we forecast peak penetration of clip-on and embedded devices, respectively, to be reached.

We assume that at volume production (eg 1.2m devices in 2020) fully-featured, connected clip-on devices sell at US$25 per device, and earn a 50% GP margin.

We assume that over time Adherium enters agreements with a combination of managed care/pharmacy/hospital and disease management organisations that cover the supply of inhalers to 230,000 (1%) asthma patients in the US, and 115,000 patients outside the US.

We extend our cash flow forecasts for 15 years (to 2031) but do not include any terminal valuation. We assume a long-term exchange rate of US$0.76/A$ and apply a 12.5% discount rate. Under our base case assumptions, we forecast Adherium to become profitable in FY19 and begin paying tax at the NZ corporate tax rate of 28% in FY21.

Exhibit 3: Adherium sum-of-the-parts DCF

 

rNPV (A$m)

rNPV/ share (A$)

FY20e revenue (A$m)

FY23e revenue (A$m)

Assumptions

Supply of Smartinhalers to AstraZeneca in Europe and Japan

105.2

$0.62

38

78

3.85m Symbicort users in Europe and 0.36m in Japan (2015 Symbicort sales of US$1,076m in Europe and US$176m for Japan; based on a price of US$58 in Europe and US$102 [75% higher] in Japan, total 20.2m scripts and 4.2m users at 40% adherence). Smartinhaler price US$25, GP margin 50% from 2019 onwards. Uptake by Symbicort patients reaches 30% by 2020. 75% likelihood embedded inhalers launched in 2020 and lift uptake to 100% by 2023 with GP declining 20% to US$10.00/patient/year (~US$2.00 per script) by 2023 for embedded devices.

Supply of Smartinhalers to AstraZeneca in the US

41.8

$0.25

14

32

1.78m patients in US use Symbicort (8.5m scripts @ 4.8 scripts/patient/year (40% adherence). Smartinhaler pricing as per Europe. 90% likelihood clip-on devices launched in US in 2017 with uptake by Symbicort patients reaching 30% by 2020. 75% likelihood embedded inhalers launched in 2020.

Device supply and services to hospitals, managed care etc

36.2

$0.21

15

19

22.6m asthma patients in the US. Uptake by hospitals, managed care etc reaches 230,000 (1%) of asthma patients in the US and 115,000 in other markets by 2021, buying one Smartinhaler per patient each year at US$25 per unit, plus a subscription fee of US$2 per patient per month (US$49 total per patient/year).

Clinical trials supply & services

5.2

$0.03

2

3

Clinical trial revenue A$2m in FY17 and growing at 4% pa. GP margin 50%.

SG&A, R&D expenses

-38.5

-$0.23

Portfolio total

150.0

$0.89

69

131

FY17e forecast cash

21.3

$0.13

Enterprise total

171.3

$1.01

 

 

Source: Edison Investment Research

At this stage we do not include any revenue from: 1) additional device supply agreements with pharma or med-tech companies; 2) monetising insights from analysis of the data collected; or 3) technology expansion beyond respiratory disease to the management of other chronic diseases.

Sensitivities

Adherium’s business is subject to the usual risks associated with any emerging technology: slower than expected commercialisation timelines, lower rates of adoption, technology leap-frogging, patent litigation, as well as regulatory and commercial risks. While the company is at an early stage of commercialisation, its clinical trials business has a track record of revenue growth and positive gross profit margins. Adherium currently relies on a single Asian-based contract manufacturer for volume production, which increases the risk that it may not be able to guarantee supply of devices. This risk is mitigated by active supply chain management and known alternatives.

The Product Supply Schedule under the agreement with AZN does not yet include a Smartinhaler device suitable for the US market, although our analysis shows that it has a strong incentive to do so. If AZN does not sign up for a device suitable for the US market then that would be downside risk to our valuation. SmartTurbo pricing is unknown and there is no track record of patient uptake rates, so we rely on our own assumptions for these key factors in our valuation.

Exhibit 4 shows the sensitivity of our NPV model to the price at which Adherium sells Smartinhaler devices and the gross profit margins achieved. The NPV ranges from A$0.44/share at US$20 per device and a 30% gross profit margin to A$2.05/share at US$40 per device and a 60% gross profit margin.

Exhibit 4: Sensitivity of NPV (A$/share) to Smartinhaler price and gross profit margin

Smartinhaler gross profit margin

Smartinhaler price

US$20

US$25

US$30

US$35

US$40

30%

0.44

0.58

0.72

0.85

0.98

40%

0.62

0.80

0.98

1.16

1.34

50%

0.80

1.01

1.25

1.47

1.70

60%

0.97

1.24

1.51

1.79

2.05

Source: Edison Investment Research

Exhibit 5: Financial summary

 

A$'000s

2014

2015

2016*

2017e

2018e

Year end 30 June

AASB

AASB

AASB

AASB

AASB

PROFIT & LOSS

Sales

450

2,907

2,626

5,430

18,099

Total Revenue

 

 

592

3,110

2,916

5,717

18,699

Cost of Sales

(307)

(854)

(1,336)

(2,809)

(9,247)

Gross Profit

143

2,053

1,290

2,621

8,853

R&D expenses

(1,216)

(1,343)

(2,443)

(6,000)

(6,000)

SG&A expenses

(1,178)

(2,013)

(5,607)

(7,937)

(8,050)

EBITDA

 

 

(2,109)

(1,100)

(6,470)

(11,029)

(4,597)

Operating Profit (before GW and except.)

 

(2,136)

(1,174)

(6,622)

(11,088)

(5,044)

Intangible Amortisation

0

0

(12)

(3)

(3)

Exceptionals

0

0

(1,432)

0

0

Other

0

0

0

0

0

Operating Profit

(2,136)

(1,174)

(8,066)

(11,091)

(5,047)

Net Interest

72

(81)

181

544

426

Profit Before Tax (norm)

 

 

(2,064)

(1,255)

(6,441)

(10,544)

(4,619)

Profit Before Tax (IFRS)

 

 

(2,064)

(1,255)

(7,885)

(10,547)

(4,621)

Tax benefit

0

0

0

0

0

Profit After Tax (norm)

(2,064)

(1,255)

(6,441)

(10,544)

(4,619)

Profit After Tax (IFRS)

(2,064)

(1,255)

(7,885)

(10,547)

(4,621)

Average Number of Shares Outstanding (m)

65.2

65.2

119.6

160.1

169.0

EPS - normalised (c)

 

 

(3.16)

(1.92)

(5.39)

(6.59)

(2.73)

EPS - FRS 3 (c)

 

 

(3.16)

(0.02)

(0.08)

(0.12)

(0.05)

Dividend per share (A$)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

N/A

356

329

2,266

3,316

Intangible Assets

N/A

190

31

28

25

Tangible Assets

N/A

166

298

2,238

3,291

Investments

N/A

0

0

0

0

Current Assets

 

 

N/A

5,260

28,626

22,993

18,589

Stocks

N/A

969

418

843

2,774

Debtors

N/A

334

948

814

2,715

Cash

N/A

3,468

27,211

21,287

13,051

Other

N/A

489

49

49

49

Current Liabilities

 

 

N/A

(4,599)

(1,498)

(647)

(1,914)

Creditors

N/A

(1,329)

(1,394)

(543)

(1,810)

Short term borrowings

N/A

(1,974)

0

0

0

Other

N/A

(1,296)

(104)

(104)

(104)

Long Term Liabilities

 

 

N/A

0

0

0

0

Long term borrowings

N/A

0

0

0

0

Other long term liabilities

N/A

0

0

0

0

Net Assets

 

 

N/A

1,017

27,457

24,612

19,991

CASH FLOW

Operating Cash Flow

 

 

(2,094)

1

(8,458)

(12,171)

(7,162)

Net Interest

72

22

560

544

426

Tax

0

0

(15)

0

0

Capex

(125)

(252)

(440)

(2,000)

(1,500)

Acquisitions/disposals

0

0

0

0

0

Financing

110

24

31,955

7,702

0

Dividends

0

0

0

0

0

Other funding

(1)

1,599

(43)

0

0

Net Cash Flow

(2,038)

1,394

23,559

(5,924)

(8,236)

Opening net debt/(cash)

 

 

(2,611)

(573)

(1,494)

(27,211)

(21,287)

HP finance leases initiated

0

0

0

0

0

Other

0

(473)

2,158

0

0

Closing net debt/(cash)

 

 

(573)

(1,494)

(27,211)

(21,287)

(13,051)

Source: Edison Investment Research, company accounts. Note: IPO prospectus did not provide FY14 balance sheet. *The company has transitioned from a March year end to a June year end so FY16 encompassed the 15 months ending June 2016.

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Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Adherium 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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Adherium 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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Martin Currie Asia Unconstrained Trust — Update 5 October 2016

Martin Currie Asia Unconstrained Trust

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