AIM-quoted cancer treatments developer Hutchmed (China) Ltd (LON: HCM) is selling non-core 45% interest in Shanghai Hutchison Pharmaceuticals to GP Health Service Capital and Shanghai Pharmaceuticals Holding. The $608m raised will be reinvested in the drug development pipeline.
Shanghai Hutchison Pharmaceuticals was not consolidated in the results. It manufactures and distributes own-brand prescription medicines. In 2023, net income was $47.4m.
GP Health Service Capital will own 35%, existing joint venture partner Shanghai Pharmaceuticals Holding will increase its stake to 60%. Hutchmed (China) Ltd retains 5% and is guaranteeing GP Health Service Capital minimum net profit growth of at least 5% over three years.
There will be a gain on disposal of $477m, although the final sum is subject to withholding tax. Shareholders have to approve the deal, so it may not be completed until March.
Hutchmed (China) Ltd can concentrate od developing cancer treatments. A new drug application for fruquintinib as part of a combined treatment for gastric cancer in China was withdrawn because the improvement in survival rate was not statistically significant. There have been positive results for a treatment for lung cancer.
A $10m milestone payment is due from Takeda Pharmaceutical relating to the Fruzaqla cancer treatment, which follows a previous payment of $20m.
There was a 43% decline in interim revenues of Hutchmed (China) Ltd to $305.7m because of a sharp fall in R&D income. Product sales were higher. A loss of around $90m is forecast for 2024.
Net cash was $720m at the end of June 2024. The cash outflow in the first half from operations and capital investment was $51.3m. Clinical trials require significant spending, but the additional cash will mean that there will be no requirement for additional funding from investors.
The share price was 235p at the end of 2024, which values Hutchmed (China) Ltd at £2bn. Cavendish was appointed joint broker on New Year’s Eve. The shares are also listed on Nasdaq.