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Hutchmed: Trinity Delta

10:56, 3rd April 2024

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HUTCHMED (HCM) Follow | HCM
 

Executing consistently on the road to breakeven

Please find attached our HUTCHMED Outlook report with updated forecasts following FY23 financial results, and which outlines strategic delivery and upcoming catalysts for its pipeline of innovative oncology/immunology drugs.

Symbol       HCM / HCM.L / 0013.HK (NASDAQ / AIM London / SEHK) 

Price           $16.72 ($2.85bn) / 268p (£2.29bn) / HK$26.80 (HK$22.88bn)

Date           3 April 2024

China commercial execution, the prospect of further approvals and launches globally and in China, plus a strong balance sheet means HUTCHMED is well positioned to achieve its goal of sustainable profitability from FY25. Having made significant progress during FY23, most notably with the FDA approval and US launch of first global product Fruzaqla (fruquintinib) in November 2023 (impressively generating $15.1m of in-market sales), its FY24 outlook is for continuing strong product revenue growth across its portfolio, coupled with lower expenses. The company is guiding to Oncology/Immunology consolidated revenues of $300-$400m, driven by targeted 30-50% growth in marketed product sales and royalties. In addition, the current pipeline, which now includes 15+ ongoing registration/registration-intent studies, could also yield several near-term regulatory filings. Our valuation is increased c 1% to $5.81bn/£4.84bn/HK$45.35bn, or $33.36/ADS and 556p/HK$52.05 per share.

  • Follow-on indications and new compounds approaching inflection points Several HUTCHMED pipeline assets could reach the market by 2025. These include other global fruquintinib launches by Takeda (Europe and Japan regulatory decisions in advanced mCRC are anticipated in 2024); fruquintinib indication expansion in China (2L gastric cancer and 2L endometrial cancer filed; potential 2025 filing for 2L renal cell carcinoma); potential China approval of the first immunology asset sovleplenib in 2L immune thrombocytopenia (under Priority Review in China), which is generating increasing investor interest; and potential for global savolitinib filings by partner Astra-Zeneca in Tagrisso-refractory NSCLC around end-2024.
  • FY24 guidance includes sizeable product revenue growth HUTCHMED’s FY24 Oncology/Immunology revenue guidance of $300m-400m is underpinned by a 30-50% revenue growth target from sales and royalties generated by its marketed products. Growing in-market sales in China, and especially the US, will be driven by market share gains, plus potential launches of marketed drugs in new indications, or new geographies, and launches of new products. This revenue growth together with remarkable control of costs (ahead of our expectations) are the principal contributors to HUTCHMED’s future profitability, firmly positioning the company on the path to sustainable profits from 2025.
  • Valuation of $33.36/ADS or 556p/HK$52.05 per share Updating our sum-of-the parts valuation following FY23 results (which includes a detailed pipeline rNPV) leads to a HUTCHMED valuation of $5.81bn/£4.84bn/HK$45.35bn, or $33.36/ADS and 556p/HK$52.05 per share. Further value should be unlocked with clinical, regulatory, and commercial execution in China and globally.

Read or download the full report here....

Analysts 

Philippa Gardner pgardner@trinitydelta.org
Lala Gregorek lgregorek@trinitydelta.org
Franc Gregori fgregori@trinitydelta.org

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The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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