20210930-招银国际-和黄医药-00013.HK-Promising_clinical_data_presented_at_ESMO_Conference_5页_943kb

CMB International Securities | Equity Research | Company Update Summary

Core Content Overview

This report provides an update on HUTCHMED (13 HK), focusing on its clinical progress and financial performance. It highlights the promising results from recent trials and the potential for future growth, supported by a DCF-based target price and investment ratings.

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Key Clinical Data

• HMPL-689, a PI3Kδ inhibitor, showed encouraging preliminary phase Ib results in relapsed/refractory (r/r) lymphoma patients in China at the 2021 ESMO Conference:
  • 76 evaluable patients at the recommended phase 2 dose (300mg QD), with a median follow-up of 5.6 months.
  • Overall Response Rate (ORR): 53.9%, Complete Response (CR) rate: 11.8%, Clinical Benefit Rate (CBR): 76.3%.
  • Promising activity in Follicular Lymphoma (FL) and Marginal Zone Lymphoma (MZL):
    • FL: ORR of 81.8%, CR of 36.4%, CBR of 90.9%.
    • MZL: ORR of 50.0%, CBR of 100.0%.
  • Good tolerability with low-grade adverse events:
    • Grade≥3 TEAEs: Neutropenia (11.1%), Pneumonia (13.3%), Rash (5.6%).
    • Mild to moderate liver enzyme elevation (Grade1-2).
    • Low incidence of Grade 3 diarrhea (2.2%) and no colitis cases.
  • Breakthrough Therapy Designation (BTD) from NMPA in September 2021 for r/r FL.
  • Registration-intent phase II trial (NCT04849351):
    • FL cohort: Expected enrollment completion in 1H22E.
    • MZL cohort: Expected enrollment completion in 2H22E.

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Financial Performance

Financial Year	Revenue (US$ mn)	YoY Growth (%)	Net Loss (US$ mn)	EPS (US$)	Consensus EPS (US$)
FY19A	205	-4	-106	-0.16	N/A
FY20A	228	11	-126	-0.18	N/A
FY21E	340	49	-220	-0.25	-0.69
FY22E	423	25	-277	-0.32	-0.67
FY23E	561	33	-225	-0.26	-0.22

• Revenue growth is projected to increase significantly from FY19A to FY23E.
• Net loss is expected to decrease in FY23E due to improved operating performance.
• Earnings Per Share (EPS) are expected to show a gradual improvement, with a DCF-based target price of HK$77.74.

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Investment Recommendation

• Maintain BUY:
  • Reasoning: HMPL-689 is viewed as a potential best-in-class PI3Kδ inhibitor.
  • Savolitinib combo with osimertinib shows strong efficacy in EGFR+, MET+ NSCLC patients resistant to first-line osimertinib.
  • Global label expansion is key to unlocking market potential.
  • Target price is based on a 15-year DCF valuation with WACC: 9.07%, terminal growth rate: 4%.

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Shareholding and Performance

• Shareholding structure:
  • CK Hutchison Holdings: 39.19%
  • The Capital Group: 9.14%
  • JP Morgan: 6.91%
  • Free float: 44.75%
• Share performance:
  • 1-month: +0.3%
  • 3-month: +44.3%
  • Relative to market: +3.4% (1-month), +69.6% (3-month)

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Financial Valuation and Ratios

• DCF valuation:
  • Equity value (HK$ mn): 67,175
  • Target price (HK$): 77.74
  • Upside/downside: +34.38%
• Key ratios:
  • Gross margin: Improved from 22% (FY19A) to 44% (FY23E).
  • Net margin: Improved from -52% (FY19A) to -40% (FY23E).
  • ROE: Improved from -33% (FY19A) to -49% (FY23E).
  • ROA: Improved from -19% (FY19A) to -25% (FY23E).
  • Current ratio: Improved from 3 (FY19A) to 5 (FY21E), then to 3 (FY23E).
  • Total debt to asset ratio: Fluctuated from 29% (FY19A) to 48% (FY23E).

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Key Financial Statements

• Income Statement:
  • Gross profit increased from 45 (FY19A) to 248 (FY23E).
  • Operating profit is expected to improve from -146 (FY19A) to -249 (FY23E).
  • Net profit is expected to decrease from -106 (FY19A) to -225 (FY23E).
• Cash Flow Summary:
  • Net cash from operating activities is expected to fluctuate from -81 (FY19A) to -245 (FY23E).
  • Capex is expected to increase from 9 (FY19A) to 10 (FY23E).
• Balance Sheet:
  • Total net assets decreased from 313 (FY19A) to 450 (FY23E).
  • Shareholders' equity is expected to decrease from 313 (FY19A) to 450 (FY23E).

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Risk and Disclaimer

• The report contains investment recommendations and financial projections based on analyst's personal views.
• No compensation is directly related to the views expressed.
• No trading occurred within 30 days prior to the report's release.
• No liability is assumed for any reliance on the report's information.
• The report is intended for institutional investors in the US and not for general public.
• The information is based on publicly available data and is not guaranteed for accuracy or completeness.

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Conclusion

HUTCHMED (13 HK) has shown promising clinical data in key trials, particularly for HMPL-689 and savolitinib. The financial performance is expected to improve over the next few years, with increased revenue and improved margins. The DCF-based target price of HK$77.74 is maintained, and the BUY recommendation is based on strong potential for market expansion and good tolerability of its drug candidates.