Hutchmed announced 2024 revenue of US$630m (-25% YoY) and net profit of US$38m (-63% YoY), in line with our expectation. Sales of key product fruquintinib (Fruzaqla) in overseas market reached US$291m (+1,825% YoY). Its R&D expenses reached US$212m (-30% YoY) in 2024, with R&D expenses ratio of 34%. Its selling expenses reached US$49m (-9% YoY), with selling expenses ratio of 7.7% in 2024. As the end of 2024, the company has cash of c.US$836m on hand. With the disposal of 45% equity interest of SHPL at the total consideration of US$608m, the company has a total cash balance of c.US$1.4bn.
　　Considering the SHPL disposal and R&D investments, we increase our EPS forecast from US$0.04 to US$0.45 in 25E, lower from US$0.14 to US$0.09 in 26E and forecast US$0.13 in 27E. Based on the DCF model, we lower our target price from HK$35.4 to HK$34.8. With 35% upside, we maintain our BUY rating.
　　Fast sales ramp-up of fruquintinib in overseas market. The total in-market sales of Hutchmed reached US$501m (+135% YoY), mainly driven by the sales ramp-up of fruquintinib in overseas market. Fruquintinib (Fruzaqla) received FDA’s approval in November 2023, becoming the first and only highly selective inhibitor targeting all three VEGF receptor kinases approved in the US for the treatment of previously treated mCRC.
　　Now, fruquintinib has been launched in over 12 countries. Sales of fruquintinib (Fruzaqla) reached US$291m (+1,825% YoY) in ex-China market in 2024. We expect the further sales ramp up of fruquintinib in overseas markets, with the rising penetration rate, especially in the US, EU and Japan. In terms of the China market, sales of fruquintinib (Elunate) grew 7% YoY to $115m. In addition, fruquintinib has been approved by the NMPA for the treatment of 2L EMC (combo with PD-1), becoming its approved second indication. Meanwhile, fruquintinib’s combo with PD-1 for the treatment of 2L RCC has reached the primary endpoint, which is expected to become fruquintinib’s third indication. We expect these new indications to drive the growth of fruquintinib in the domestic market.
　　Multiple studies of savolitinib ongoing. In 2021, savolitinib received conditional approval from the NMPA for the treatment of patients with locally advanced or metastatic METex14 NSCLC. Based on the phase IIIb confirmatory study, the company received the full approval of savolitinib for the first- and second-line treatment for METex14 NSCLC from the NMPA in January of 2025. In addition, the NDA of SACHl study for the 2L TKI-refractory NSCLC with MET amplification has been accepted by the NMPA in end of 2024. Meanwhile, Hutchmed expects to have the data readout of global phase II SAVANNAH study in 2025 ELCC.
　　Upcoming catalysts and development of next-generation technology platform. The upcoming catalyst in the next 12 months include: 1) fruquintinib’s NMPA NDA filing for RCC,2) savolitinib’s NMPA approval for SACHI study and data readout of savolitinib’s SAVANNAH study, 3) surufatinib’s Phase ll data readout for PDAC, 4) tazemetostat’s NMPA approval, 5) sovleplenib’s NMPA approval. In addition, the company expects its Antibody-Targeted Therapy Conjugate (ATTC) platform to have the first product entering clinical stage in 2H25E.
　　Maintain BUY. Considering the SHPL disposal and R&D investments, we increase our EPS forecast from US$0.04 to US$0.45 in 25E, lower from US$0.14 to US$0.09 in 26E and forecast US$0.13 in 27E. Based on the DCF model, we lower our target price from HK$35.4 to HK$34.8. With 35% upside, we maintain our BUY rating.
　　Risks: Lower-than-expected overseas commercialisation of key products. Intensified industry competition leading to lower-than-expected price of commercialised products.
　　Delayed R&D progress of core pipeline products.