Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>C1Q24 was marked by liquidity crises in innovative drug and medical device, and depressed margin in digital health. We believe this is a buying opportunity;</li>
<li>PD-1 has recovered nicely in C2H23 and exceeded our expectation made for 2023.We forecast 20% YoY growth in 2024.Further,pipeline maturity has led to new drugs in autoimmune and metabolic drugs;</li>
<li>Biosimilar has proven to be part of the solution to deal with low paying ability of Chinese healthcare and denial of access to the high paying US healthcare market. </li>
</ul>


C1Q24 was marked by liquidity crises in innovative drug and medical device, and depressed margin in digital health. We believe this is a buying opportunity;
PD-1 has recovered nicely in C2H23 and exceeded our expectation made for 2023.We forecast 20% YoY growth in 2024.Further,pipeline maturity has led to new drugs in autoimmune and metabolic drugs;
Biosimilar has proven to be part of the solution to deal with low paying ability of Chinese healthcare and denial of access to the high paying US healthcare market. 


[Blue Lotus Healthcare Sector Update]: Bottom-Fishing at the Bottom of the Business Cycle

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>HUTCHMED’s 2023 results were in line with expectation. It is gradually becoming a self-sufficient innovative drug enterprise with sufficient cashflow due to upfront/milestone payments of Takeda and increasing product revenue.</li>
<li>2024 revenue guidance seems very optimistic, which has to rely on fruquintinib’s global sales performance (or Takeda’s contribution), and also on the timing of approval of fruquintinib’s 2L gastric cancer.</li>
<li>Starting from 2024, HUTCHMED will enter a period of accelerated growth in product revenue based on major catalysts.Market value of US$1,200 - US$1,800 million is a good place to long. </li>
</ul>


HUTCHMED’s 2023 results were in line with expectation. It is gradually becoming a self-sufficient innovative drug enterprise with sufficient cashflow due to upfront/milestone payments of Takeda and increasing product revenue.
2024 revenue guidance seems very optimistic, which has to rely on fruquintinib’s global sales performance (or Takeda’s contribution), and also on the timing of approval of fruquintinib’s 2L gastric cancer.
Starting from 2024, HUTCHMED will enter a period of accelerated growth in product revenue based on major catalysts.Market value of US$1,200 - US$1,800 million is a good place to long. 


Hutchmed China Ltd (13.HK/​​HCM.US) - High Growth Is Expected from 2024 to 2026

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Including US$312mn upfront and milestone payments from Takeda, HCM’s consolidated revenues from oncology/immunology reached US$529mn in FY23 (vs US$164mn in FY22), close to the upper limit of its US$450-550mn guidance.</li><li>The in-market product sales increased 28% YoY (35% at CER) to US$214mn in FY23, among which sales of fruquintinib in China increased 15% YoY (22% at CER) to US$108mn, maintaining leadership in patient share (47%) in 3L CRC.</li><li>Fruquintinib recorded US$15mn in sales in the overseas market in 2023 since the launch in Nov. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Including US$312mn upfront and milestone payments from Takeda, HCM’s consolidated revenues from oncology/immunology reached US$529mn in FY23 (vs US$164mn in FY22), close to the upper limit of its US$450-550mn guidance.The in-market product sales increased 28% YoY (35% at CER) to US$214mn in FY23, among which sales of fruquintinib in China increased 15% YoY (22% at CER) to US$108mn, maintaining leadership in patient share (47%) in 3L CRC.Fruquintinib recorded US$15mn in sales in the overseas market in 2023 since the launch in Nov. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Hutchmed (13 HK) – A Fruitful 2024 on the Way

<ul>
<li>HUTCHMED's 2023 results are relatively certain. Fruquintinib had a strong start after obtaining approval in the US, with sales of about US$13-15 million in just more than a month.</li>
<li>Oncology/Immunology consolidated revenue would be in line with management’s performance guidance (US$450 to US$550 million) in 2023. There are promising data readout/NDA submission this year, which would be potential catalysts.</li>
<li>HUTCHMED has sufficient cashflow and does not require external financing. From 2024 to 2026, it will enter a period of accelerated growth in product revenue. Breakeven is achievable in 2025.</li>
</ul>


HUTCHMED's 2023 results are relatively certain. Fruquintinib had a strong start after obtaining approval in the US, with sales of about US$13-15 million in just more than a month.
Oncology/Immunology consolidated revenue would be in line with management’s performance guidance (US$450 to US$550 million) in 2023. There are promising data readout/NDA submission this year, which would be potential catalysts.
HUTCHMED has sufficient cashflow and does not require external financing. From 2024 to 2026, it will enter a period of accelerated growth in product revenue. Breakeven is achievable in 2025.


Hutchmed China Ltd (13.HK/​​HCM.US) - 2023 Results Preview and Catalysts in 2024

<ul>
<li>Since Imbruvica's sales continued to decline and Calquence hadn’t shown much growth in US since 23Q2, either Zanubrutinib gained more market share or the entire BTK inhibitors market is shrinking. </li>
<li>BeiGene's recent sluggish share price could be related to geopolitical conflicts/weak market sentiment.However, innovative drugs don’t involve supply chain security issues. There’s no need for US to sanction China's biotech.</li>
<li>We are relatively optimistic about BeiGene's 23Q4 sales growth. In our view, BeiGene’s reasonable market value is at least about US$18 billion. <a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene (6160 HK)</a> is undervalued.   </li>
</ul>


Since Imbruvica's sales continued to decline and Calquence hadn’t shown much growth in US since 23Q2, either Zanubrutinib gained more market share or the entire BTK inhibitors market is shrinking. 
BeiGene's recent sluggish share price could be related to geopolitical conflicts/weak market sentiment.However, innovative drugs don’t involve supply chain security issues. There’s no need for US to sanction China's biotech.
We are relatively optimistic about BeiGene's 23Q4 sales growth. In our view, BeiGene’s reasonable market value is at least about US$18 billion. BeiGene (6160 HK) is undervalued.   


BeiGene (6160.HK/​BGNE.US/688235.CH) - 2023 Results Preview and Undervaluation Concerns

Hong Kong

Hutchison Whampoa is an investment holding company with diverse global operations in ports and related services, property and hotels, retail, infrastructure, energy, and telecommunications. It operates port and container terminals, develops real estate, and provides mobile telecommunications services. The company is headquartered in Hong Kong and traces its roots back to 1862.

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Hutchison Whampoa (13 HK)

[Blue Lotus Healthcare Sector Update]: Bottom-Fishing at the Bottom of the Business Cycle

Liquidity crises in healthcare innovation present buying opportunity;PD-1 exceeds expectations with 20%YoY growth forecast for 2024;Biosimilars...

Blue Lotus Research Institute

Hutchmed China Ltd (13.HK/HCM.US) - High Growth Is Expected from 2024 to 2026

HUTCHMED will enter a period of accelerated growth in product revenue based on major catalysts in 2024 to 2026. Global sales of fruquintinib will...

Xinyao (Criss) Wang

Hutchmed (13 HK) – A Fruitful 2024 on the Way

Including US$312mn upfront and milestone payments from Takeda, HCM’s consolidated revenues from oncology/immunology reached US$529mn in FY23

CMB International

Hutchmed China Ltd (13.HK/HCM.US) - 2023 Results Preview and Catalysts in 2024

HUTCHMED has entered a harvest period.Product revenue would grow rapidly in the next two years, with promising catalysts head.Together with...

Xinyao (Criss) Wang

BeiGene (6160.HK/BGNE.US/688235.CH) - 2023 Results Preview and Undervaluation Concerns

BeiGene's sluggish share price could be related to geopolitical conflicts/weak market sentiment. But there’s no need for US to sanction China's...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[Blue Lotus Healthcare Sector Update]: Bottom-Fishing at the Bottom of the Business Cycle

​Liquidity crises in healthcare innovation present buying opportunity;PD-1 exceeds expectations with 20%YoY growth forecast for 2024;Biosimilars...

Blue Lotus Research Institute

Hutchmed China Ltd (13.HK/​​HCM.US) - High Growth Is Expected from 2024 to 2026

HUTCHMED will enter a period of accelerated growth in product revenue based on major catalysts in 2024 to 2026. Global sales of fruquintinib will...

Xinyao (Criss) Wang

Hutchmed (13 HK) – A Fruitful 2024 on the Way

Including US$312mn upfront and milestone payments from Takeda, HCM’s consolidated revenues from oncology/immunology reached US$529mn in FY23

CMB International

Hutchmed China Ltd (13.HK/​​HCM.US) - 2023 Results Preview and Catalysts in 2024

HUTCHMED has entered a harvest period.Product revenue would grow rapidly in the next two years, with promising catalysts head.Together with...

Xinyao (Criss) Wang

BeiGene (6160.HK/​BGNE.US/688235.CH) - 2023 Results Preview and Undervaluation Concerns

BeiGene's sluggish share price could be related to geopolitical conflicts/weak market sentiment. But there’s no need for US to sanction China's...

Xinyao (Criss) Wang

Liquidity crises in healthcare innovation present buying opportunity;PD-1 exceeds expectations with 20%YoY growth forecast for 2024;Biosimilars...

Hutchmed China Ltd (13.HK/HCM.US) - High Growth Is Expected from 2024 to 2026

Hutchmed China Ltd (13.HK/HCM.US) - 2023 Results Preview and Catalysts in 2024

BeiGene (6160.HK/BGNE.US/688235.CH) - 2023 Results Preview and Undervaluation Concerns