GCIHutchmed: Trinity Delta
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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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