Strong fruquintinib overseas sales drove top-line beat. HCM delivered a strong FY24 financial performance, marked by a top-line beat fueled by robust fruquintinib sales internationally. Oncology/immunology product revenue grew by 65% YoY to US$272mn, exceeding the previous guidance of 30-50% growth. FRUZAQLA (fruquintinib) generated total overseas sales of US$291mn in its first full year on the market, with US$111mn recognized as HCM’s revenue. In China, oncology/immunology product revenue remained largely flat (+2% YoY). While fruquintinib and surufatinib continued to deliver growth, savolitinib encountered heightened competition. We anticipate continuously strong momentum for FRUZAQLA’s overseas sales, driven by increasing penetration in 3L CRC in the US, expanding US reimbursement coverage, and commercialization in the EU, Japan, and other global markets. We are confident in HCM's 2025 oncology business target of US$350-450mn and project 35% YoY growth in in-market sales for its combined portfolio in FY25E.
　　Sustainable profitability achieved ahead of schedule. Driven by robust FRUZAQLA product revenue, HCM achieved net profit of US$38mn for FY24, surpassing its original target of reaching profitability by 2025. This financial success was bolstered by a 30% YoY reduction in R&D expenses to US$212mn and a 15% YoY decrease in SG&A expenses to US$113mn. With strong sales of fruquintinib from overseas markets, and one-off gain from divesting non-core business of Shanghai Hutchison, we expect the Company to realize net profit of US$340mn in FY25E. HCM's robust cash position of US$836mn at end 2024 provides ample flexibility for potential M&A or in-licensing opportunities.
　　Savolitinib positioned for global commercialization. Savolitinib is on track to become HCM's second globally commercialized product. The SAVANNAH Ph2 trial demonstrated promising results for the oral, chemo-free combination of savolitinib + osimertinib in EGFR-TKI resistant MET+ NSCLC patients, delivering a 55% ORR and an mPFS of 7.5 months (link), with a manageable safety profile (32% Grade≥3 TRAEs). This profile compares favorably to other treatment options in the same setting, such as EGFR/cMET bsAb, PD-1/VEGF bsAb, or TROP2 ADC. Detailed SAVANNAH data will be presented at the upcoming ELCC meeting in Mar. The SAVANNAH trial, along with the nearing completion of enrollment of the Ph3 SAFFRON trial, are expected to support global approval for savolitinib.
　　ATTC platform to be an innovation focus. Leveraging its expertise in targeted therapy and small molecule inhibitors, HCM is developing an innovative Antibody Targeted Therapy Conjugate (ATTC) platform, which distinguishes itself from traditional ADCs by replacing the cytotoxic payload with a targeted small molecule inhibitor. This novel approach offers the potential for reduced toxicity compared to conventional ADCs while maintaining or enhancing efficacy. HCM anticipates the first ATTC drug candidate to enter clinic in 2H25.
　　 Maintain BUY. In parallel with the Company’s conservative FY25 revenue target, we adjust our top line estimate as well and revise our TP from HK$35.61 to HK$34.03 based on DCF valuation (WACC: 13.19%, terminal growth rate: 2.0%).