HUTCHMED (00013) disclosed its 2025 annual report performance on March 5, showing a remarkable 1111.03% year-on-year increase in profit attributable to shareholders. Following the announcement, institutions such as UOB Kay Hian, Bank of America Securities, and CLSA updated their research reports. Despite issuing "Buy" and "Outperform" ratings, several institutions lowered their target prices for HUTCHMED's Hong Kong and U.S. shares. UOB Kay Hian reduced its target price for the Hong Kong stock from HK$32.5 to HK$26, while Bank of America Securities cut its target for the U.S. shares from $22 to $21.
In the secondary market, HUTCHMED's Hong Kong stock price experienced a significant surge during the trading session on the day after the annual report release. According to observations, stimulated by the 11-fold net profit growth, HUTCHMED's stock price rose sharply within the first hour of trading on March 6, reaching a maximum increase of 10.16% and touching HK$23.20. However, the gains were not sustained, and the stock eventually closed up by 5.32%. When the Hong Kong market opened on Monday, March 9, affected by broader market volatility, HUTCHMED's stock price declined significantly in early trading, with a maximum drop of 2.98%. It then quickly rebounded and fluctuated slightly around the baseline. Compared to the Hang Seng Healthcare Index, which remained underwater throughout the day with a maximum decline of over 5%, the annual report provided relatively clear short-term support for HUTCHMED.
Can innovative drugs support the valuation? According to the financial report, of HUTCHMED's US$457 million net profit for the period, US$416 million came from the gain on the disposal of a 45% equity interest in Shanghai Hutchison Pharmaceuticals. Early last year, HUTCHMED announced plans to sell a 35% stake in Shanghai Hutchison Pharmaceuticals to GP Capital for a total consideration of RMB 3.483 billion, and a 10% stake to Shanghai Pharmaceuticals for RMB 995 million, resulting in a total transaction value of RMB 4.478 billion (US$608 million). After the transaction, HUTCHMED retained only a 5% stake in Shanghai Hutchison Pharmaceuticals. This deal directly contributed to HUTCHMED recording a net profit of US$455 million in its 2025 interim report, a 16.6-fold increase year-on-year. This was also the key reason for the 11-fold surge in annual net profit.
However, the stock price performance following this annual report differed markedly from the reaction after the 2025 interim report. On August 8 last year, the day after the interim report disclosure, HUTCHMED's stock price plummeted, remaining near its lows throughout the day and closing down 15.99%. The trading volume for the day reached 70.287 million shares, setting a record high since its listing, while the turnover rate surged from 0.69% the previous day to 8.06%, indicating intensified market divergence and clear panic sentiment. In contrast, the stock price showed some gains after this annual report and demonstrated resilience during broader market fluctuations.
The differing stock performances may be related to developments in HUTCHMED's innovative drug business. Following the sale of its cash-generating traditional Chinese medicine business, it is a market consensus that innovative drugs must drive HUTCHMED's future growth. The decline in domestic sales of its three major drugs in the first half of last year may have been a factor contributing to the post-interim report panic. In H1 last year, revenue from ELUNATE® (fruquintinib) fell to US$43 million (down 29% YoY); revenue from SULANDA® (surufatinib) dropped to US$12.7 million (down 50% YoY); and revenue from ORPATHYS® (savolitinib) decreased to US$15.2 million (down 41% YoY). The 2025 annual report showed that core oncology/immunology business revenue was US$286 million, down 21% year-on-year. While domestic sales of the three core products declined in 2025, the overall decrease was slightly less severe than in H1.
Regarding overseas business, driven by partner Takeda, fruquintinib's overseas sales reached US$163 million in H1 last year, up 25% year-on-year. For the full year 2025, overseas sales of fruquintinib achieved US$366 million, a 26% increase, with approvals secured in 38 countries. Compared to the revenue decline caused by domestic competition, the market's greater concern after the H1 interim report was potentially slower-than-expected uptake of the overseas-focused products, led by fruquintinib. Driven by Takeda, fruquintinib began commercial rollout in key regions outside the U.S., such as Japan and Europe, in the second half of 2024. Given that Japan is Takeda's home market, after the initial access phase in Q3 2024, the market had high expectations for its growth in 2025. Sales data from H1 and H2 2025 indicate that fruquintinib's steady growth met prior market expectations.
When will valuation upside emerge? Looking back at HUTCHMED's stock price trend over the past two years, investors may note that despite a maximum price swing of nearly 70%, the closing price of HK$22.12 on March 9 this year was only 1.9% different from the closing price on December 31, 2024. In other words, HUTCHMED has been trapped within a valuation range of approximately HK$19-20 billion for nearly two years. The persistent stock price weakness may stem from a transition period in its core valuation logic: the positive impact of fruquintinib's overseas expansion has already been priced in, while the previously promoted new growth driver—the ATTC platform—has yet to materialize.
In terms of emerging pipelines, on September 10 last year, HUTCHMED's clinical trial application for HMPL-A251 injection was accepted by the NMPA. On October 31, the company highlighted HMPL-A251 during its R&D Day presentation. Evidently, while its core commercial products lack near-term catalysts, HUTCHMED is shifting market attention to its antibody-targeted therapy conjugates. It is understood that HMPL-A251 is the first candidate drug from HUTCHMED's ATTC platform. By combining selective PI3K/PIKK inhibition with precise HER2-targeted therapy, it aims to leverage synergistic effects between HER2 targeting and PAM pathway inhibition, potentially overcoming limitations of traditional toxin-based antibody-drug conjugates and single-agent PAM inhibitors. At a previous international conference, HUTCHMED presented preclinical data for HMPL-A251, showing that its PI3K/PIKK inhibitor payload exhibited potent, highly selective, and broad anti-tumor activity across 130 tumor cell lines in vitro.
Judging by pipeline progression speed, just two months after the preclinical data release in October last year, a global Phase I/IIa clinical trial for HMPL-A251 was initiated simultaneously in China and the U.S. In March this year, HUTCHMED's second ATTC drug, HMPL-A580 (targeting EGFR), entered the clinical stage, while the third, HMPL-A830, is planned to commence Phase I trials by the end of this year. The number and speed of pipeline candidates reflect HUTCHMED's commitment to the ATTC platform. However, it is undeniable that ATTC drugs, still in early-stage clinical trials, have limited near-term catalytic effect on the stock price.
Simultaneously, the withdrawal of an existing product may become a negative factor affecting HUTCHMED's valuation. It was reported that on March 9, Ipsen announced a voluntary global withdrawal of all indications for the anticancer drug tazemetostat. As a key asset for which HUTCHMED had invested heavily to secure Greater China rights, the withdrawal of tazemetostat undoubtedly impacts the company's innovative drug pipeline布局 in China. After market hours on March 9, HUTCHMED issued an announcement stating it would initiate product withdrawal and recall, implement inventory lockdown, and suspend all sales and shipments. Notably, the announcement mentioned that the withdrawal would not affect the company's financial guidance and pointed out that the drug's 2025 sales were US$2.5 million. However, HUTCHMED had paid an upfront fee of US$25 million and committed to total milestone payments of up to US$285 million to acquire the development and commercialization rights for tazemetostat in Greater China back in 2021. After four years, the drug was approved in mainland China only on March 18 last year and included in a commercial insurance innovative drug directory last December. Essentially, tazemetostat faltered just as it was beginning its commercial rollout in China.
Against this backdrop, as we move into 2026, with one-time asset sales no longer available to bolster profits, the key question for investors considering whether to 'place their bets' on HUTCHMED will be how the company can leverage its existing innovative drug business to unlock valuation growth potential.
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