On April 21, the CDE website announced that HUTCHMED (00013) had submitted a new drug application for its self-developed drug, acetaminophen solpib tablets (HMPL-523), for treating patients with warm antibody autoimmune hemolytic anemia. As China's first and the world's second highly selective Syk inhibitor to sprint towards market approval, this R&D milestone is undoubtedly positive news for HUTCHMED. However, this positive development was not reflected in the secondary market. From April 20 to April 28, HUTCHMED recorded a "seven consecutive declines," dragging its stock price to the lower Bollinger Band, followed by a volatile downtrend between the middle and lower bands. As of May 21, HUTCHMED's stock price had fallen below HKD 19.
**Significantly Undervalued Territory** During trading on May 20, HUTCHMED's stock price touched a low of HKD 18.57, corresponding to a market capitalization of HKD 16.193 billion, marking a new low for the year. Calculating from the closing price of HKD 24.72 on April 17, the stock has declined by approximately 24.88% over this period. For a company holding RMB 10 billion in cash, such a market valuation appears severely undervalued.
Reviewing HUTCHMED's 2025 annual report, the company's core oncology/immunology business generated combined revenue of USD 286 million, representing a year-on-year decrease of 21%. This decline is directly linked to the overall drop in domestic market sales of its three major products: Elunate (-13%), Sulanda (-45%), and Surufatinib (-36%). Following the earnings release, institutions such as DBS Vickers, Bank of America Securities, and CLSA updated their research, and after various "Buy" and "Outperform" ratings, several chose to lower their target prices for HUTCHMED's Hong Kong and US-listed shares. DBS Vickers reduced its Hong Kong stock target price from HKD 32.5 to HKD 26, while Bank of America Securities lowered its US stock target price from USD 22 to USD 21.
Furthermore, after the market closed on March 9, HUTCHMED announced it would initiate a product withdrawal and recall, implementing measures including inventory lockdown and a complete suspension of sales and shipments. Notably, the announcement stated this withdrawal would not affect the company's financial guidance and indicated the drug's 2025 sales were USD 2.5 million. However, the combination of a significant drop in domestic innovative drug business and the withdrawal of a commercialized product, for HUTCHMED already in a valuation trough at the time, seemed more like the culmination of negative news. From a market perspective, HUTCHMED's stock price trended upward overall after the annual report disclosure.
During this period of rising share prices, HUTCHMED had important fundamental support and positive news catalysts. Fundamentally, while the 2025 annual report reflected a collective decline in performance for its innovative drugs in the domestic market, the company's non-core prescription drug distribution business generated revenue of USD 263 million, down only 1% year-on-year, remaining essentially stable. Benefiting from successful launches in 38 countries and expanded medical insurance coverage, overseas sales of the core product fruquintinib reached USD 366 million during the period, a 26% year-on-year increase. Additionally, HUTCHMED's year-end cash balance was as high as USD 1.4 billion, equivalent to approximately RMB 10 billion. Against this backdrop, HUTCHMED, with a market cap in the HKD 15-17 billion range, clearly entered a zone of extreme undervaluation.
On the news front, the AACR conference on April 17 was a key reason for the stock's rise in the first half of April. At this year's AACR, HUTCHMED presented preclinical data for HMPL-A580, a global first-in-class PI3Kδ/PIKfyve-EGFR antibody-targeted drug conjugate (ADC) from its innovative pipeline, demonstrating potent anti-tumor activity, a bystander effect, and favorable druggability. The company also concurrently released multiple datasets on combination therapies involving surufatinib, continuously expanding the boundaries of gastrointestinal cancer treatment. From a chart perspective, April 17 marked the turning point for this round of HUTCHMED's upward movement.
**Approaching Another Market Inflection Point?** It was observed that on April 17, HUTCHMED's stock price closed slightly up 0.90%, forming an "M-top" pattern. The daily trading volume during the formation of the right peak was only 4.0136 million shares, significantly less active compared to the left peak, reflecting a weakening of buying power in the market and signaling a gradual dissipation of upward momentum. On April 20, HUTCHMED's stock price moved downward away from the upper Bollinger Band, closing down 3.24% that day, initiating a new round of decline. It can be seen that the subsequent positive news the next day did not halt the stock's decline; this downtrend persisted for a month until May 21, when signs of stabilization appeared as the stock price moved away from the lower Bollinger Band. During this period, the new indication application for solpib mentioned above was accepted and granted priority review status on April 29, but this only resulted in a minor uptick for HUTCHMED's stock that day, failing to further slow its descent. At this point, a clear divergence had formed between the company's fundamental performance and its stock price.
Judging from the market performance since April 17, HUTCHMED's poor stock performance may be attributed to the dual impact of subdued market sentiment and on-exchange short-selling pressure. Firstly, overall risk appetite in the Hong Kong market declined, with the Hang Seng Index and Hang Seng Tech Index falling 1.14% and 1.73% respectively over the same period. The selling sentiment towards high-valuation growth stocks spread to HUTCHMED. Insufficient liquidity exacerbated stock price volatility, as evidenced by HUTCHMED's turnover rate dropping to as low as 0.02% on some trading days during the period. Secondly, the company's short-selling ratio in the secondary market climbed from 9.27% on April 15 to 25.92% on April 21, with short-sellers leveraging market sentiment to depress the stock price and cover positions for profit. A tug-of-war between panic selling by retail investors and buying by major funds further amplified the decline. Additionally, against the backdrop of recent valuation adjustments in the innovative drug sector, on-exchange investors have shown a greater inclination towards defensive assets. Therefore, despite the priority review granted for the company's new drug application for solpib during this interval, combined market risk aversion and industry policy uncertainties have suppressed valuation recovery potential for the sector and individual stocks.
However, precisely because liquidity has currently surpassed fundamentals as the core pricing factor for HUTCHMED, investors should pay closer attention to judging potential turning points. In fact, given the unique characteristics of Hong Kong's offshore market, liquidity is significantly weaker compared to onshore markets. For A-share investors analyzing Hong Kong stocks eligible for Stock Connect, a simple categorization based on liquidity strength yields three types: first, constituents of major Hang Seng indices; second, companies dual-listed in both A and H shares; third, companies listed only in Hong Kong, not in A-shares. For a third-category company like HUTCHMED, when overall Hong Kong market liquidity is insufficient, a severe divergence between fundamentals and stock price is particularly prone to occur, sometimes accompanied by short-selling operations by some foreign investors. In such situations, it can be observed that while HUTCHMED's overall fundamental inflection point towards improvement is quite clear, the stock price and fundamentals move in opposite directions. On the daily chart, this manifests as the downtrend observed since April 17.
On the other hand, data shows that the Hong Kong Stock Connect Innovative Pharmaceuticals ETF (520880) saw cumulative net subscriptions exceeding RMB 535 million over the past 10 days, with its share count rising to a new high of 5.342 billion units. This trend implies that while mainstream capital is flowing out of the pharmaceutical sector, some smart money is building positions against the trend at low levels. This signal might be good news for HUTCHMED. With fundamental support and severe undervaluation, the potential short-term turning point for HUTCHMED warrants investor anticipation.
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