Full-year guidance cut amid 1H25 miss. HCM’s oncology/immunology
　　product revenue reached US$144mn in 1H25 (-15% YoY), only 36% of our prior full-year estimate. The miss was driven by declines in HCM’s China revenue of key products: fruquintinib (-27%), savolitinib (-32%), and surufatinib (-50%), impacted by regorafenib and TAS-102 generic competition, regorafenib VBP, the launch of new NRDL-listed MET TKIs, and internal sales team transitions.
　　Although fruquintinib's overseas in-market sales grew 25% YoY to US$163mn, HCM recognized US$43mn revenue from fruquintinib, nearly flat YoY. Despite these challenges, mgmt remains optimistic for 2H25, citing fruquintinib’s EMC launch, second-line approval of savolitinib in MET+ EGFRm NSCLC, and the completion of sales team restructuring. Management also noted that sales bottomed in Q1, with growth resuming in Q2. Overall, HCM has lowered its full- year oncology/ immunology revenue target to US$270-350mn from US$350- 450mn. We maintain a conservative view towards the guidance, considering the flat QoQ overseas sales of fruquintinib, and continuous marketing competition in China.
　　Strong cash position to enable strategic flexibility. HCM's robust cash
　　balance of US$1.37bn as of 1H25 offers significant flexibility to pursue strategic growth opportunities, including potential M&A and in-licensing deals. Despite a sales shortfall, HCM delivered a net profit of US$455mn in 1H25, primarily driven by a US$416mn gain from the sale of a 45% equity interest in Shanghai Hutchison. Operating expenses, including R&D and SG&A, were reduced to US$281mn (-16% YoY). Excluding the impact of the equity sale, HCM reported an operating loss of US$4mn in 1H25, vs US$28mn loss in 1H24.
　　Indication expansion drives future growth. Savolitinib is poised to become
　　HCM’s second globally commercial drug, supported by promising data from the SAVANNAH Ph2 trial, which showed a median PFS of 7.5 months for the oral, chemo-free combination with osimertinib in EGFR-TKI resistant MET+ NSCLC.
　　Alongside the ongoing Ph3 SAFFRON trial, which is expected to complete enrollment by end-2025, these results are anticipated to support global regulatory filings. In China, an NDA for gastric cancer is expected by year-end.
　　Meanwhile, fruquintinib gained approval for endometrial cancer in late 2024, and an NDA for renal cell carcinoma was submitted in Jun 2025. For surufatinib, Ph2 data in 1L pancreatic cancer is expected in 2H25, with Ph3 trial ongoing.
　　Additionally, HCM expects to resubmit the NDA of sovleplenib for ITP in China in 1H26, while the Company continues to explore out-licensing opportunities for the asset.
　　ATTC platform emerges as an innovation driver. HCM is positioning its
　　Antibody Targeted Therapy Conjugate (ATTC) platform as a core innovation focus, aiming to differentiate from traditional ADCs by utilizing targeted small molecule inhibitors in place of cytotoxic payloads. HCM plans to advance its first ATTC candidate, HMPL-A251, into clinics in China and the US in 2H25, with additional INDs for other ATTC assets in 2026. HCM also highlighted the potential for out-licensing opportunities related to this novel platform.
Maintain BUY. In light of moderate 1H25 performance and the revised downward guidance, we revise our TP from HK$34.03 to HK$31.39 based on DCF valuation (WACC: 13.19%, terminal growth rate: 2.0%).