Hutchmed recently announced the divestment of its 45% stake in SHPL for US$608m, c.15x 2025E P/E. Proceeds from the sale will be used to accelerate global innovation and further the strategic development of its proprietary next-generation ATTC platform. The company expects to initiate first clinical trials for ATTC candidates in 2H25. Regarding late-stage assets, Hutchmed's NDA filing for the savolitinib-osimertinib combo has been accepted by the CDE under priority review. Given its strong efficacy, we anticipate a U.S. NDA filing for savolitinib in 1Q25, marking the company’s second globalisation effort. Additionally, sovleplenib is expected to receive NDA approval in 2025 following the submission of supplementary documents to the CDE. Maintain BUY.
　　Key Factors for Rating
　　Hutchmed has recently announced to divest its 45% interest in Shanghai Hutchison Pharmaceuticals Limited (SHPL) for US$608m (RMB4.5bn), equivalent to c.15x 2025 P/E, which will further strengthen its capital and debt structure and enable it to focus resources on its core business areas. The transaction will bring US$608m (with a market value of c.HK$104bn) in revenue to Hutchmed.
　　Considering the total cash equivalent of profit compensation in the transaction terms, the transaction is expected to make a profit of US$477m, the majority of which is expected to be recorded in 2025E.
　　Proceeds from the SHPL divestment will be directed towards accelerating global innovation and advancing the strategic development of Hutchmed's self- developed next-gen antibody-targeted therapy conjugate (ATTC) platform.
　　Preclinical data shows that ATTCs exhibit robust anti-tumour activity and longer- lasting responses compared to Mab+ targeted therapies. Clinical trials for ATTC candidates are expected to begin in 2H25. The platform’s key advantages include: 1) improved efficacy via synergy between small molecule inhibitors (SMI) and antibodies, overcoming resistance and enabling potential combinations with chemotherapy-based treatments, compared to traditional cytotoxin-based ADCs; 2) enhanced safety, with reduced on-target/off-tumour and off-target toxicity, and less myelosuppression, making it suitable for long- term use; and 3) better pharmacokinetics, addressing challenges in oral bioavailability and reducing drug interaction risks. ATTCs can deliver high- molecular-weight SMIs like PPI and PROTAC, with ongoing research on known and innovative targets, including bispecific antibodies, with a focus on proprietary, competitive, and broadly applicable indications.
　　Hutchmed’s pipeline is progressing smoothly. On 31 December, 2024, the CDE accepted the NDA filing for the combination of savolitinib and osimertinib under priority review. This combination offers advantages over competitors due to its MET expression targeting, oral administration, and lack of chemotherapy. The submission, based on the successful SACHI study, has met its primary endpoint.
　　Given its strong efficacy, we expect the U.S. NDA filing for savolitinib in 1Q25, marking its second major drug globalisation. Other pipeline milestones include: Fruquintinib's NDA submission for 2L RCC in 1Q25, tazemetostat for FL and savolitinib for 1L MET 14 exon NSCLC expected to be approved in 1H25, and sovleplenib for 2L ITP expected to receive NDA approval in 2025 following supplementary submissions to the CDE.
　　Key Risks for Rating
　　1) Delay or failure in clinical trials and registration processes of key assets; 2) intensified competition; and 3) the breakdown of key partnerships.
　　Valuation
　　We reduced our 2025E/26E revenue forecast by 8%/11%, respectively, reflecting delays in key asset registration processes, while maintaining the profitability estimation of Hutchmed from 2025E onwards. We assume 2025E net profit to be US$449m (previously US$51m), factoring in the proceeds of SHPL. We fine-tuned our DCF-based TP from US$27/HK$42 to US$26/HK$41 for HK/ADR shares. n Despite recent weak performance due to delays in the U.S. NDA filing for savolitinib and China NDA approval for Sovleplenib, we believe these impacts are fully reflected in the stock price. Reiterate BUY.