Hong Kong listing number 13 is a potent symbol

Update | 6 July 2021

Share this note

HUTCHMED has successfully raised c US$537m (or HK$4.17bn) through its Hong Kong IPO and global offering. The new funds enable management to execute their ambitious near- and medium-term growth plans. As well as progressing the second and third wave of innovative programmes through clinical trials, the proceeds will be used to bolster the China Oncology commercial organisation and further develop the equivalent global infrastructure. A sister note detailing the recent clinical data for the key late-stage assets is published alongside this note. We upgrade our valuation to US$8.84bn (US$52.12 per ADS), £6.8bn and HK$69.0bn (802p or HK$81.30 per share) to reflect the raise and recent clinical news.

Year-end: December 31201920202021E2022E
Revenues (US$m)204.9228.0328.9 456.5
Adj. PBT (US$m)(141.1)(189.7)(338.7)(363.4)
Net Income (US$m)(103.7)(115.5)(313.1)(334.9)
Earnings per ADS (US$)(0.80)(0.90)(1.98)(1.94)
Cash (US$m)217.2435.21,014 670.4
Adj. EBITDA (US$m)(100.7)(111.6)(308.5)(330.3)
Source: Trinity Delta Note: Adjusted PBT excludes exceptionals, Cash includes short-term investments, Adjusted EBITDA includes equity in earnings of equity investees. *2021E cash includes $100m from assumed warrant exercise
  • HK IPO and global offer boosts coffers   HUTCHMED has raised HK$4.17bn net (cUS$537m) through issuance of 104m new shares priced at HK$40.10 per share, equivalent to 370p per share or US$25.82 per ADS (each ADS = 5 shares). Shares began trading on the SEHK Main Board on 30 June, with the number 13 (a portent of life and growth in China). An over-allotment option of up to an additional 15.6m new shares at the offer price will be exercisable from that date. Cornerstone investors (The Carlyle Group, Canada Pension Plan, General Atlantic, HBM Healthcare Investments, and CICC) subscribed for HK$2.535bn. Pro forma cash stands at US$1.2bn (FY20 cash, Baring PE PIPE, and new funds).
  • Funding for a new chapter now in place   HUTCHMED is entering the critical new phase where investment in clinical trials must be supplemented with increased spending on commercial, regulatory, and manufacturing infrastructure. The company’s high-quality production and regulatory capabilities are largely governed by international standards, notably the FDA. Commercially its focus markets are China and the US, with future partnerships intended to deliver marketing plans outside of these regions. Market traction with China Oncology, followed by similar success in global markets, should see HUTCHMED recognised as a highly rated emergent global oncology specialist.
  • New US$52.12 per ADS or 802p/HK$81.30 per share valuation   We update our DCF/ SOTP valuation to reflect the impact of the Hong Kong IPO and global offering, recent China approvals of surufatinib (expanded approval in pNET) and savolitinib (new approval in NSCLC MET ex14m), and a review of our pipeline rNPV assumptions following the pre-ASCO R&D Update. Our HUTCHMED valuation is now US$8.84bn (US$52.12 per ADS), £6.8bn (802p per share), or HK$69.0bn (HK$81.20 per share) vs US$6.37bn (US$42.80 per ADS), £4.90bn (658p per share) previously. Further value should be unlocked with clinical, regulatory, and commercial execution and by planned pipeline expansion.


6 July 2021

Price (US ADS)
(UK share)
(HK share)
Market Cap
Enterprise Value
Shares in issue (ADS)
12-month range
Free float60.8%
Primary exchange
Company Code
Corporate clientYes

Company description

HUTCHMED is a Hong Kong headquartered biopharma focused on discovering, developing and commercializing innovative targeted therapeutics and immunotherapies to treat cancer and autoimmune diseases. It has a diverse pipeline of first-in-class/best-in-class selective oral TKIs in development for the China and global markets..


Franc Gregori
+44 (0) 20 3637 5041

Lala Gregorek
+44 (0) 20 3637 5043

HUTCHMED: Heading to the next level

HUTCHMED’s Hong Kong IPO and global offer have secured substantial funds (HK$4.17bn / US$537m / £413m) that will expedite the company’s clinical and commercial plans as it completes its transition from a China-based R&D-focussed biopharma to a fully integrated commercial-stage global biopharmaceutical company. Recent China approvals of surufatinib (in a second indication, pNET) and savolitinib (also the first in any global market, for NSCLC MET ex14m) mean that HUTCHMED will shortly have three marketed drugs in China: two sold by the dedicated China Oncology commercial team, with partner AstraZeneca responsible for savolitinib. Subject to regulatory approvals, the first global registration of surufatinib (30 April 2022 PDUFA goal date) and fruquintinib (2023) could come within 24 months. Execution of commercial plans is key for HUTCHMED; the commercial infrastructure and CMC are being established and expanded to support this. Alongside, by end-2021 HUTCHMED expects to have ten new registration trials underway, with seven assets in global development.

HK IPO and global offer structure

HUTCHMED has raised HK$4.17bn gross / HK$3.95m net (c US$537m gross / US$509m net) through its IPO on the Hong Kong Stock Exchange (SEHK: 13) and global offer. 104m new shares were issued priced at HK$40.10 per share (equivalent to 370p/share or US$25.82/ADS). The pricing, an 11% discount to the maximum offer price, was based on investor demand and was in line with the closing price of NASDAQ ADS and AIM shares on AIM on 22 June 2021.

In the IPO/offer announcement, HUTCHMED indicated that it was provisionally directing 13m shares (12.5%) to the HK IPO and 91m (87.5%) for the global offer. The HK shares will be fully fungible with the shares represented by the NASDAQ ADSs (each ADS is equivalent to five shares) and AIM shares. The new number of shares and ADS outstanding is 848.5m and 169.7m respectively.

New shares began trading on the SEHK Main Board on 30 June, on which date an over-allotment option became exercisable. The over-allotment is priced at the same level and relates to an additional 15.6m new shares (a maximum of 15% of the offer), which if allotted in full would raise a further HK$625.5m (US$81.0m).

The offering was supported by a group of new and existing cornerstone investors which subscribed for the equivalent of HK$2.535bn (c US$325m). Cornerstone investors included The Carlyle Group, Canada Pension Plan, General Atlantic, HBM Healthcare Investments, and CICC. Several of these strategic investors have, over the past 12 months, invested in HUTCHMED via PIPEs; with General Atlantic (which also holds $100m in warrants: June 2020 Lighthouse) and Canada Pension Plan (November 2020 Lighthouse) both investing $100m each, as did Baring Private Equity Asia most recently (April 2021 Lighthouse).

Use of proceeds

The new monies raised boost HUTCHMED’s pro forma cash balance to c $1.2bn, which will fund the company’s ambitious plans to progress more rapidly its broad clinical pipeline though development, regulatory review, and onto the market. HUTCHMED’s investments to date have been focussed and disciplined, prioritising clinical development of the first wave of its discovery programmes. However, with a growing late-stage clinical pipeline – including lifecycle indications and PD-1 combinations – and increasingly global commercial operations, the company is at the point where the scale of investment will need to increase materially. Exhibit 1 and 2 detail the upcoming clinical and regulatory news flow in China and global markets respectively.

Exhibit 1: Clinical and regulatory milestones in China
Source: HUTCHMED     Note: Bold = regulatory progress or new data; subject to * = acceptance by scientific conference, ** = regulatory interaction, *** = supportive data
Exhibit 2: Clinical and regulatory milestones in US, EU, Japan
Source: HUTCHMED     Note: Bold = regulatory progress or new data; subject to * = acceptance by scientific conference, ** = regulatory interaction, *** = supportive data

In addition to general corporate purposes, funds have been earmarked for:

  • Advancing late-stage clinical programmes

HUTCHMED’s in-house discovery platform has generated ten tyrosine kinase inhibitors (TKIs) that have progressed into the clinic: both as monotherapy and in combinations, including in China and globally. Sulanda (surufatinib), Elunate (fruquintinib), and Orpathys (savolitinib) form the first product wave, which have either been filed with the FDA (surufatinib in advanced neuroendocrine tumours, NET), are in global pivotal studies (fruquintinib in the FRESCO-2 trial in ≥3L metastatic colorectal cancer, mCRC) or will be embarking on these in the near future (savolitinib + osimertinib in ≥2L Tagrisso-refractory non-small cell lung cancer, NSCLC, with MET amplification). We highlight that all three products have secured their first approvals in China as monotherapies for epNET/pNET, 3L mCRC, and MET ex14m NSCLC respectively.

These assets are also being developed as combination therapies, with checkpoint inhibitor combinations some of the most exciting prospects. Early data presented at ASCO 2021 for surufatinib and fruquintinib combinations with various PD-1 inhibitors (including with toripalimab, sintilimab, and geptanolimab) supports further evaluation in several solid tumour types and nascent plans for registration studies. CALYPSO data for the savolitinib and Imfinzi (durvalumab) combination in metastatic papillary renal cell carcinoma (PRCC), also presented at ASCO 2021, provides compelling rationale for progressing into the global SAMETA Phase III study in MET-driven PRCC which should dose the first patient in Q321.

Surufatinib is wholly-owned by HUTCHMED, and while fruquintinib is subject to a China collaboration with Eli Lilly, a July 2020 deal amendment provided HUTCHMED with more control over lifecycle management plans. AstraZeneca holds a global licence to savolitinib under which HUTCHMED contributes 25% of China R&D costs as well as a proportion of the costs of global PRCC development. The extensive commercial opportunities for these first-in-class or best-in-class assets merits substantial further R&D investment in the coming years.

  • Developing the next waves of earlier stage compounds

The next wave of assets is progressing through proof-of-concept trials into potential registration-enabling studies, and these assets include HUTCHMED’s first haem-oncology programmes: HMPL-689 (PI3Kδ inhibitor) and HMPL-523 (Syk inhibitor). Unlike the first wave, the intention is that global and China development plans will proceed in tandem, especially where the standard of care is consistent between regions. By end-2021 HUTCHMED expects to have seven assets in ex-China development; consequently, there is likely to be a considerable ramp up in the quantum of global R&D spend from less than $10m in 2018 to more than an expected fifteen-fold increase this year.

HUTCHMED has several earlier clinical and preclinical programmes, with three currently in or about to embark on proof-of-concept studies, and three new INDs expected to be filed by year-end. This means that within the next six months, the company could have a pipeline of 13 clinical assets, with the fund raise providing additional resources to support this pipeline (albeit with the caveat that investment will be success-based and thus depend on the clinical attrition rate)

  • Strengthening the Global and China commercial infrastructure

FY21 financial guidance includes an expectation that the Oncology/Immunology commercial operations will generate revenues of US$110m-US$130m, with an update on Elunate and Sulanda China sales due at H121 interims on July 28. HUTCHMED’s China Oncology commercial operations were established in mid-2020 and now stand at >500 employees covering 325 cities, >2.5k hospitals, and >20k physicians. Plans are on track to expand to c 900 employees by end-2023 (with sales force productivity of US$400k pa) to support future product launches.

In the US, HUTCHMED is approaching the potential approval of its first product – Sulanda in advanced NETs. The NDA filing for advanced NETs has been accepted by the FDA and a 30 April 2022 PDUFA decision date assigned. MAA filing in the EU is imminent. The FDA PDUFA date will influence the timing of the build out of the US field force. US senior management leading key functional areas is already in place.

  • Bolstering the clinical and regulatory functions

With a stream of pipeline assets entering and progressing through the clinic, and more programmes approaching registration studies (especially for the global market), HUTCHMED is taking the necessary steps to strengthen its clinical and regulatory capabilities. Its current >120-strong integrated expert team at its China and New Jersey, US sites has a central role in coordinating the parallel global and China clinical trial programmes and maintaining close working relationships with respective regulators, particularly in China, the US, Europe, and Japan. The ability to use China clinical packages coupled with data from US bridging studies for FDA NDA filings for certain programmes will draw on the expertise of the China and US-based teams.

  • Increasing manufacturing capacities to reflect expected demand

HUTCHMED is building out fully integrated clinical, regulatory, and commercial operations in China and the US, although its discovery and manufacturing capabilities will remain China-based. It has a long-term production and supply chain strategy, which stresses the importance of having an appropriate structure in place to address the chemistry, manufacturing, and controls (CMC) aspects across the R&D, regulatory, and commercial value chain. This is especially important given the number of NDAs across the industry that have been delayed or not received approval on account of CMC issues. HUTCHMED currently has c 200 CMC staff, and its manufacturing footprint includes a GMP-certified facility in Suzhou (built to produce Elunate and Sulanda) and the more recent construction of a facility in Shanghai. The Shanghai plant is associated with a US$130m capex investment over five years and is intended to fulfil growing China and global production demand as well as provide future flexibility to add additional capacity for large molecule production.

  • Potential global business development and strategic M&A

HUTCHMED is unique among China biopharma companies as a global-focused drug discovery and development company which exports domestic innovation, rather than the more common business model of in-licencing assets for the China market. However, opportunities for in-licensing synergistic targeted oncology assets are now emerging which could leverage the China Oncology commercial infrastructure to accelerate growth. No guidance has been provided for likely timelines although the target profiles could include assets that are marketed or close to approval which could complement existing assets or the current commercial footprint or could form the basis of innovative combinations with HUTCHMED pipeline assets.

Valuation and Financials

We value HUTCHMED using a sum-of-the-parts methodology, with an rNPV model for the development portfolio and early-stage marketed products and an earnings-based multiple for the established Other Ventures commercial platforms. Updating our comprehensive model for the raise as well as recent China approvals – Sulanda (surufatinib) in pNET and Orpathys (savolitinib) in NSCLC MET ex14m – and a review of our pipeline rNPV assumptions following the May R&D update generates a valuation uplift to US$8.84bn (equivalent to $52.12 per ADS), £6.8bn (802p per share), or HK$69.0bn (HK$81.30 per share).

A breakdown by business line is shown in Exhibit 3. The Oncology/Immunology platform accounts for 77% of the company valuation, Other Ventures (the wholly owned and JV operations in China) for 9%, with pro forma net cash (FY20 + HBYS divestment proceeds + Baring PE Asia PIPE + HK IPO/global offer) representing the 14% balance.

Exhibit 3: HUTCHMED valuation summary
Source: Trinity Delta   Note: 12.5% discount rate for development stage products and 10% for commercial products; taxation at 20%; FX rates of 1.3 USD:GBP and 7.8 USD:HKD

We also present the relative contributions of the various Oncology/Immunology portfolio assets in Exhibit 4. HUTCHMED’s most valuable asset is surufatinib (Sulanda) which comprises 41% of the value of the Oncology/Immunology portfolio and 32% of the company valuation. The next most valuable assets are fruquintinib (Elunate, 30% and 24%, respectively) and savolitinib (Orpathys, 18% and 14%). At present the earlier-stage clinical assets collectively represent 10% and 8%, but we expect these to unlock significant additional value as they progress through clinical development (subject to positive results).

Exhibit 4: HUTCHMED Oncology/Immunology portfolio valuation summary
Source: Trinity Delta   Note: 12.5% discount rate for development stage products and 10% for commercial products; taxation at 20%; FX rates of 1.3 USD:GBP and 7.8 USD:HKD

The c US$1.2bn of pro forma funds provides a comfortable level of funding to cover two to three years of cash burn. We expect R&D spend of US$342m for FY21 with this figure growing with the increasing number of later-stage trials that will be underway in FY22 and FY23. Rising Oncology/Immunology revenues (FY21 guidance of US$110m-US$130m) as new products are launched, reimbursement improves, and existing products become more established, are expected to offset HUTCHMED R&D investment.  

Exhibit 5 illustrates the intended investment break down of the HK$3.95bn (c US$506m) net proceeds. At this stage we have made no adjustments to our financial forecasts (presented in Exhibit 6); however, we expect to revisit our estimates following release of H121 results later in the summer.

Exhibit 5: HUTCHMED use of proceeds
Source: HUTCHMED  Note: FX rate of 7.8 USD:HKD


Exhibit 6: Summary of financials
Source: Company, Trinity Delta  Note: Adjusted PBT excludes exceptionals, Cash includes short-term investments, Adjusted EBITDA includes equity in earnings of equity investees. *2021E cash includes assumed warrant exercise.


Trinity Delta Research Limited (“TDRL”; firm reference number: 725161), which trades as Trinity Delta, is an appointed representative of Equity Development Limited (“ED”). The contents of this report, which has been prepared by and is the sole responsibility of TDRL, have been reviewed, but not independently verified, by ED which is authorised and regulated by the FCA, and whose reference number is 185325.

ED is acting for TDRL and not for any other person and will not be responsible for providing the protections provided to clients of TDRL nor for advising any other person in connection with the contents of this report and, except to the extent required by applicable law, including the rules of the FCA, owes no duty of care to any other such person. No reliance may be placed on ED for advice or recommendations with respect to the contents of this report and, to the extent it may do so under applicable law, ED makes no representation or warranty to the persons reading this report with regards to the information contained in it.

In the preparation of this report TDRL has used publicly available sources and taken reasonable efforts to ensure that the facts stated herein are clear, fair and not misleading, but make no guarantee or warranty as to the accuracy or completeness of the information or opinions contained herein, nor to provide updates should fresh information become available or opinions change.

Any person who is not a relevant person under section of Section 21(2) of the Financial Services & Markets Act 2000 of the United Kingdom should not act or rely on this document or any of its contents. Research on its client companies produced by TDRL is normally commissioned and paid for by those companies themselves (‘issuer financed research’) and as such is not deemed to be independent, as defined by the FCA, but is ‘objective’ in that the authors are stating their own opinions. The report should be considered a marketing communication for purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. TDRL does not hold any positions in any of the companies mentioned in the report, although directors, employees or consultants of TDRL may hold positions in the companies mentioned. TDRL does impose restrictions on personal dealings. TDRL might also provide services to companies mentioned or solicit business from them.

This report is being provided to relevant persons to provide background information about the subject matter of the note. This document does not constitute, nor form part of, and should not be construed as, any offer for sale or purchase of (or solicitation of, or invitation to make any offer to buy or sell) any Securities (which may rise and fall in value). Nor shall it, or any part of it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. The information that we provide is not intended to be, and should not in any manner whatsoever be, construed as personalised advice. Self-certification by investors can be completed free of charge at TDRL, its affiliates, officers, directors and employees, and ED will not be liable for any loss or damage arising from any use of this document, to the maximum extent that the law permits.

Copyright 2021 Trinity Delta Research Limited. All rights reserved.