Broker: UOB Kay Hian
Date of Report: Friday, 08 August 2025

HUTCHMED (China) 2025 Outlook: Robust Earnings, R&D Momentum, and Revenue Rebound Expected

Overview and Investment Summary

HUTCHMED (China) Ltd. (HKEX: 13 HK) is an innovative, commercial-stage biopharmaceutical company focused on the research, development, and commercialization of targeted therapies and immunotherapies for cancer and immunological diseases. Despite a challenging first half of 2025, the company’s robust earnings—boosted by strategic divestments—outperformed estimates, while its pipeline and financial position remain solid. UOB Kay Hian maintains a BUY rating on HUTCHMED, with a revised target price of HK\$32.50, forecasting a 16% potential upside.

Stock Snapshot

• Share Price: HK\$28.02
• Target Price: HK\$32.50 (previously HK\$36.00)
• Upside Potential: +16.0%
• Market Cap: HK\$24,436.6 million (US\$3,113.0 million)
• 52-week Range: HK\$34.8 – HK\$18.36
• Major Shareholder: Hutchison Healthcare (38.1%)

1H25 Financial Highlights: Divestment Drives Earnings Outperformance

HUTCHMED’s first-half 2025 revenue fell short of forecasts, declining by 9.2% year-on-year to US\$277.7 million, primarily due to reduced oncology sales in China. However, reported net profit surged to US\$455.0 million, far surpassing market expectations. This was largely attributed to the gain from divesting a partial equity stake in Shanghai Hutchison Pharmaceuticals. As of end-June 2025, the company’s cash position stood at a robust US\$1.36 billion.

Key Financial Ratios (1H25 vs 1H24)

• Gross Profit Margin: 39.7% (down from 41.1%)
• Selling Expense Ratio: 5.0% (down from 8.9%)
• G&A Expense Ratio: 10.0% (unchanged)
• R&D Expense Ratio: 25.9% (down from 31.2%)
• EBIT Margin: -1.3% (improved from -9.0%)
• Net Margin: 163.8% (up from 8.4%)

2025–2027 Financial Projections

Oncology Revenue Under Pressure, Recovery Expected in 2H25

Revenue from oncology products experienced a substantial decline, primarily due to fierce competition in the Chinese market and stricter regulations on off-label sales. However, international revenue for FRUZAQLA (Fruquintinib ex-China) grew 25% year-on-year, driven by continued penetration into the US metastatic colorectal cancer market and expansion into the EU and Japan. The company has adjusted its oncology revenue target for 2025 downward from US\$350–450 million to US\$270–350 million, mainly reflecting delays in milestone payments and regulatory review setbacks for Sovleplenib in China.

HUTCHMED’s management expects a recovery in oncology sales from the second half of 2025, following team and strategy transitions. The launch of new indications and regulatory approvals—including the NMPA’s conditional approval of TAZVERIK (Tazemetostat) for EGFR-mutated NSCLC with MET amplification—are anticipated to drive product sales growth in the coming quarters.

R&D Pipeline and Near-Term Market Approval Milestones

HUTCHMED is making significant R&D progress across its pipeline:

• Fruquintinib (FRUZAQLA): Continues global expansion, targeting 2L renal cell carcinoma (RCC) in China, with NDA filed in June 2025 and approval anticipated in 2026. Additional global launches are planned.
• ELUNATE + TYVYT: Approved by China’s NMPA for advanced endometrial cancer in December 2024, with further filings for 2L RCC underway.
• Savolitinib: NDA for gastric cancer expected in 2H25; several combination regimens with Osimertinib and Durvalumab are progressing toward approval in China and globally through 2028.
• ATTC Platform: The antibody-targeted therapy conjugate (ATTC) platform presents multiple candidates with enhanced efficacy and safety. The first clinical trial for HMPL-A251 is expected in 2H25, followed by A580 and A831 in 2026. The company is actively pursuing out-licensing opportunities for these assets.

Potential Near-Term Market Approvals

Strategic Initiatives and Growth Outlook

HUTCHMED continues to seek suitable acquisition targets and strategic collaborations to enrich its pipeline and product portfolio. Management aims for 6–7 product launches in China and 2–3 global launches over the next few years. The company’s strong cash position enables it to pursue value-accretive business development and M&A opportunities to sustain long-term growth.

Revised Earnings Estimates and Risks

• Revenue growth estimates for 2025 have been revised down to -15.4% year-on-year (from +8.0%), reflecting heightened competition and delayed milestone income.
• Key risks include: policy uncertainties, intensifying market competition, R&D execution and new product launch delays or failures, geopolitical risks, and risks in business collaborations and M&A.

Valuation and Share Price Catalysts

UOB Kay Hian maintains a BUY rating on HUTCHMED, lowering the target price to HK\$32.50 (US\$20.70/ADS; £308.00/UK). The valuation is based on a discounted cash flow (DCF) model, assuming a 10.5% WACC and a terminal growth rate of 3.5%.

Potential share price catalysts:

• Strong R&D performance and new clinical data
• Robust earnings growth in 2025
• New product launches generating incremental revenue streams
• Potential business development and M&A deals enhancing the pipeline

Comprehensive Financial Summary

Conclusion

Despite short-term revenue setbacks, HUTCHMED’s strong earnings, diversified pipeline, and proactive strategic direction position it for sustained growth. The company’s R&D momentum, upcoming product launches, and ample cash reserves underpin a positive outlook, with multiple catalysts poised to unlock value for shareholders in the coming years.