HUTCHMED (00013): Stock price hits a new low for the year, when will the turning point be reached?

On April 21, the official website of CDE announced that HUTCHMED (00013) had submitted a new indication application for the self-developed acetone sulfoxime tablet (HMPL-523) for the treatment of warm antibody type autoimmune hemolytic anemia patients. As China's first and the world's second high-selective Syk inhibitor sprinting for market approval, the milestone development undoubtedly brings good news for HUTCHMED. However, this good news did not manifest in the secondary market. From April 20 to April 28, HUTCHMED experienced a "seven consecutive decline", dragging the stock price below the BOLL lower line, and then oscillating downwards between the BOLL middle-lower bands. As of May 21, HUTCHMED's stock price had fallen below 19 Hong Kong dollars. Entered a significantly undervalued range On May 20, HUTCHMED's stock price hit a low of 18.57 Hong Kong dollars during trading, corresponding to a market value of 16.193 billion Hong Kong dollars, hitting a new low for the year. Calculated from the closing price of 24.72 Hong Kong dollars on April 17, HUTCHMED's stock price range has dropped by 24.88%. For a company with 10 billion RMB in cash, such market performance is clearly severely undervalued. Reviewing HUTCHMED's 2025 annual report, the company's core oncology/immunology business achieved a total revenue of 286 million US dollars, a 21% decrease year-on-year. This is directly related to the overall decline in sales of the company's three major products in the Chinese market - AYIOTE (-13%), Sutent (-45%), and Erbitux (-36%). Also for this reason, DaHuaXin Zhan, Bank of America Securities, and Lyon and other institutions updated their research on HUTCHMED after the company disclosed its annual report. After various "buy" and "outperform the market" ratings, many institutions chose to lower HUTCHMED's price targets in the Hong Kong and US stock markets. DaHuaXin Zhan lowered HUTCHMED's Hong Kong stock target price from the previous 32.5 Hong Kong dollars to 26 Hong Kong dollars, while Bank of America Securities lowered its US stock target price from 22 US dollars to 21 US dollars. Furthermore, after trading hours on March 9, HUTCHMED also announced that the company would initiate product recalls and market withdrawals, and take measures such as locking up inventory, suspending all sales and shipments. It is worth mentioning that in the announcement, HUTCHMED mentioned that this market withdrawal would not affect the company's financial guidance, and pointed out that sales of this drug in 2025 were 2.5 million US dollars. However, the sharp decline in domestic innovative drug business coupled with the market withdrawal of commercialized products, came as another blow to HUTCHMED, which was already at a valuation low point. Combining the market trend, after the annual report disclosure, HUTCHMED's stock price showed an overall upward trend. In this period of rising stock prices for HUTCHMED, there were important fundamental support and news-driven boosts. Fundamentally, although the 2025 annual report reflected a collective decline in the company's innovative drugs in the domestic market, the company's non-core prescription drug distribution business achieved a revenue of 263 million US dollars in the same period, only a 1% decrease year-on-year, essentially stable; Benefiting from successful listings in 38 countries and expanded medical insurance coverage, the company's core product, Fruquintinib, achieved overseas sales of 366 million US dollars, an increase of 26% year-on-year. In addition, HUTCHMED ended the year with a cash balance of 1.4 billion US dollars, equivalent to 10 billion RMB. In this context, HUTCHMED, with a market value range of 15-17 billion Hong Kong dollars, is clearly in an extremely undervalued range. On the news front, the AACR conference on April 17 was an important reason for the stock price rise of HUTCHMED in the first half of April. It is understood that at this year's AACR conference, HUTCHMED's global first-in-class PI3K/PIKK-EGFR antibody-drug conjugate (ATTC) HMPL-A580 made an appearance and announced preclinical study data, showing strong anti-tumor activity, bystander effect, and excellent drug properties; the company also announced combined therapy data for multiple Savolitinib, continuously expanding the boundaries of gastrointestinal tumor treatment. From the market perspective, April 17 was the turning point for this round of HUTCHMED's rally. Market welcomes another turning point? It was observed that on April 17, HUTCHMED's stock price closed slightly up by 0.90%, showing a "topping M" trend, and the daily trading volume at the time of the formation of the right top was only 4,013,600 shares, significantly lacking in vitality compared to the left top, reflecting a weakening of buying power in the market, indicating that the upward momentum of the stock price is gradually diminishing. On April 20, HUTCHMED's stock price moved away from the upper BOLL line and closed down by 3.24% on that day, initiating a new round of decline. It can be seen that the positive news on the next day did not stop the stock price from falling, and this decline continued for a month until May 21 when the stock price showed signs of recovery from below the BOLL lower line. During this period, the acetone sulfoxime new indication application mentioned above was accepted on April 29 and included in the priority review, but this only led to a slight increase in HUTCHMED's stock price on that day, not further slowing down its decline. At this point, the company's performance fundamentals had clearly diverged from the stock price. Looking at the market performance since April 17, HUTCHMED's stock price has not been performing well, perhaps due to a combination of low market sentiment and pressure from short selling activities. Firstly, the overall risk appetite in the Hong Kong stock market is declining, with the Hang Seng Index and the Hang Seng TECH Index falling by 1.14% and 1.73% respectively, spreading the sell-off sentiment of high-growth stocks with high valuations to HUTCHMED. Insufficient liquidity has exacerbated stock price volatility, with some trading days seeing HUTCHMED's turnover rate as low as 0.02%. Secondly, the company's short selling ratio in the secondary market increased from 9.27% on April 15 to 25.92% on April 21, with short sellers taking advantage of market sentiment to suppress stock prices and profit from covering their positions. The panic selling by retail investors and the absorption by institutional investors have created a game situation, further magnifying the decline. In addition, against the backdrop of recent valuation adjustments in the innovative drug industry, market investors are more inclined to switch to defensive assets. Therefore, even though the new indication application for acetone sulfoxime was given priority review during this period, market sentiment combined with industry policy uncertainty has suppressed the sector's and individual stock's valuation recovery space. However, as liquidity has become the core pricing factor for HUTCHMED beyond fundamental aspects, investors should pay close attention to the turning points in the market. In fact, given the uniqueness of the Hong Kong offshore market, liquidity is much weaker compared to the onshore market. For A-share investors, if all Hong Kong stocks included in the Hong Kong stock connect program are divided based on liquidity strength, they can be simply classified into three categories: the first category consists of Hang Seng Index constituents; the second category includes companies listed in both A and Hong Kong; the third category includes companies only listed in Hong Kong, not in mainland China. For a company like HUTCHMED in the third category, in times of low liquidity in the Hong Kong stock market, there is a greater tendency for serious divergence from the stock price to fundamental aspects, sometimes accompanied by short selling activities by foreign funds. In this scenario, it can be observed that although the overall fundamental trend for HUTCHMED is quite clear, its stock price moves in the opposite direction. This is reflected in the candlestick chart showing a downtrend from April 17 to present. On the other hand, data shows that the Hong Kong stock connect innovative drug ETF (520880) has accumulated net purchases of over 535 million yuan in the past 10 days, reaching a new high of 5.342 billion shares. The implication behind this trend is that although mainstream funds are flowing out of the pharmaceutical sector, smart money is entering the market against the trend at low levels. This signal may be good news for HUTCHMED. With strong fundamental support and severe undervaluation, investors may look forward to turning points in the short term for HUTCHMED.