NEWS WRAP: Hutchmed sells non-core asset to focus on cancer treatment

The drug maker is selling most of its stake in a joint venture with Shanghai Pharmaceuticals for $608 million

By Teri Yu

Hutchmed (China) Ltd. (HCM.US; 0013.HK; HCM.L), the biopharmaceutical company majority owned by CK Hutchison Holdings (0001.HK), announced on Wednesday it has sold down most of its stake in its Shanghai Hutchison Pharmaceuticals Ltd. joint venture to concentrate on its core business of treatments for cancer and immunological diseases.

Hutchmed and Shanghai Pharmaceuticals (2607.HK; 601607.SH) established the 50-50 joint venture in 2001, primarily to make and sell its own-brand prescription medicines in China, focusing mainly on cardiovascular diseases.

Private equity firm GP Health Capital will acquire 35% of the venture from Hutchmed for $473 million, while Shanghai Pharma will pay $135 million to increase its holding by an additional 10%, bringing its total stake to 60%. Hutchmed said it expects to record a gain of $477 million from the transactions, which will leave it with 5% of the venture. The transactions are set to close by March, pending regulatory and shareholder approvals.

Hutchmed shares jumped as much as 12% on Thursday in Hong Kong, the first trading day after the announcement, and were up 6% in afternoon session. But the stock is still down 30% since October, as it comes under pressure after the company reported in July that its revenue fell 43% and its profit plunged 85% in the first half of 2024. Even after the declines, the stock still trades at a relatively high current price-to-earnings (P/E) ratio of 32.

Hutchmed highlighted that the venture is a well-established business that has delivered over $370 million in dividends to the company. In 2023 alone, the venture contributed $47.4 million to Hutchmed’s net income.

The sale is part of Hutchmed’s strategic plan outlined in late 2022, aimed at addressing challenges in the global pharmaceutical environment and focusing on the company’s most promising drug candidates. The plan also reduces funding for some of the company’s international clinical programs and seeks partnerships to further develop these assets.

Hutchmed said it will use proceeds from the divestment to advance its core cancer treatment business, particularly its antibody-targeted therapy conjugates (ATTCs), which combines antibodies with targeted therapeutics and has shown strong anti-tumor activity in pre-clinical research. Hutchmed plans to initiate clinical trials for the first of its ATTCs in the second half of 2025.

“We continue to invest in our prolific in-house R&D platform, including our new ATTC programs that we believe have significant potential impact on the treatment of cancers,” said Hutchmed Chief Scientific Officer and CEO Dr. Su Weiguo. “This divestment brings us additional resources and further focus.”

As part of its shift to expanding globally through partnerships, Hutchmed in early 2023 signed a landmark licensing agreement with Japan’s Takeda Pharmaceutical (4502.T; TAK.US) to further develop its drug fruquintinib outside of China, Hong Kong and Macau. It said the agreement could potentially generate up to $1.13 billion. Fruquintinib is a highly selective and potent inhibitor of vascular endothelial growth factor receptors, suitable for use across various subtypes of metastatic colorectal cancer.

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