HUTCHMED (China) Limited has entered into two agreements to divest its 45% equity interest in Shanghai Hutchison Pharmaceuticals Limited (“SHPL”) for approximately US$608 million (RMB4,478 million) in cash, to GP Health Service Capital Co., Ltd and Shanghai Pharmaceuticals Holding Co., Ltd.
Read also – Grab and Nham24 join forces amidst a rapidly growing food and grocery delivery market in Cambodia
HUTCHMED has been exploring opportunities to monetize the underlying value of SHPL, a non-core, non-consolidated joint venture. These transactions would allow HUTCHMED to focus on its core business of discovering, developing and commercializing novel therapies for the treatment of cancers and immunological diseases, including advancing its next-generation antibody-targeted-therapy conjugate programs.
Read also – SRC and Hassana Investment Company Sign MoU
HUTCHMED will host a short update call on Tuesday, January 7, 2025.
SHPL primarily manufactures, sells and distributes its own-brand prescription medicines in China, predominantly for cardiovascular diseases. SHPL is a 50:50 joint venture established between HUTCHMED and Shanghai Pharma in 2001. In 2023, the consolidated net income attributable to HUTCHMED from SHPL was US$47.4 million. HUTCHMED does not consolidate revenue from SHPL.
HUTCHMED plans to invest the proceeds from these transactions to further develop its internal pipeline and drive its core business strategy forward. This pipeline and strategy includes its next-generation antibody drug conjugate (“ADC”) platform, which builds on HUTCHMED’s extensive knowledge from pursuing oncological pathways and proven expertise in small molecule targeted therapeutics. By combining antibodies with targeted therapeutics instead of cytotoxins, these antibody-targeted therapy conjugates (“ATTCs”) offer dual mechanisms for addressing a target. Pre-clinical research has shown robust anti-tumor activity with durable response following a single administration, and stronger anti-tumor activity compared to administration with the individual antibody and targeted therapy components, improving tolerability associated with targeted therapy. HUTCHMED plans to move the first of these ATTCs into clinical trials in the second half of 2025.
“This transaction to divest most of our holding in SHPL is another example of HUTCHMED delivering on the strategy outlined in 2022, accelerating our path to profitability and focusing on core operations. SHPL is a well-established business, having delivered over US$370 million in dividends to HUTCHMED throughout the years, and we are confident that it continues to have promising future growth prospects,” said Dr Dan Eldar, Chairman and Non-executive Director of HUTCHMED. “We are focused on capitalizing on our two decades of deep research into oncogenic drivers of disease and discovering and developing highly optimized therapies, through our unique ATTC platform.”
GP Health Service Capital is a China-based private-equity firm with no prior interest in SHPL. Prior to the transactions, HUTCHMED and Shanghai Pharma each holds a 50% equity interest in SHPL. Under the terms of the agreements, GP Health Service Capital has agreed to acquire a 35% equity interest in SHPL from HUTCHMED for approximately US$473 million in cash, and Shanghai Pharma has agreed to acquire a 10% equity interest from HUTCHMED for approximately US$135 million in cash and will hold a total of 60% equity interest in SHPL after the transactions. Out of its 35%, GP Health Service Capital retains the right to designate a third party investment fund to acquire up to a 10% equity interest in SHPL. HUTCHMED will retain a 5% equity interest in SHPL after the transactions.
HUTCHMED expects to record a gain on disposal of approximately US$477 million before taxation. The actual gain to be recorded is subject to review and audit. The proceeds are subject to deduction of withholding tax, which will be determined before Closing. There will be a three-year transition period in which HUTCHMED will propose the General Manager of SHPL, and will guarantee to GP Health Service Capital a minimum net profit growth of SHPL of at least approximately 5% annually, subject to total compensation not exceeding approximately US$95 million. Further details are contained in the HUTCHMED announcement entitled “Major Transaction in Relation to the Disposal of 45% Equity Interest in Shanghai Hutchison Pharmaceuticals Limited”.
HUTCHMED expects to convene an Extraordinary General Meeting (EGM) for its shareholders to consider and, if thought fit, to approve the transactions. The transactions are expected to close by the end of the first quarter of 2025, conditional upon the satisfaction (or, where applicable, waiver) of certain conditions including approval by HUTCHMED shareholders and regulatory approvals. Closing of both transactions are also conditional upon the simultaneous closing of each other.
Dr Weiguo Su, Chief Executive Officer and Chief Scientific Officer of HUTCHMED, said: “We continue to invest in our prolific in-house R&D platform, including our new ATTC programs that we believe have significant potential impact on the treatment of cancers. This divestment brings us additional resources and further focus.”
“Our continual approach to engineer our own innovative, highly selective drug candidates has delivered several medicines with enhanced selectivity and limited off-target activity, allowing sustained target inhibition and flexibility for use as part of combination therapies. We also gained substantial knowledge of these oncogenic pathways, and the issues involved in addressing them. In contrast to traditional cytotoxin-based ADCs, we believe that our antibody-targeted therapy synergistic approach may also be combinable with immunotherapy- or chemotherapy-based frontline standards of care, could overcome chemotherapy resistance, and could avoid cytotoxin-related toxicities that limit long-term administration. This platform also maximizes on our long history of addressing patients with genetic drivers, who benefit less from traditional ADC therapies.” All transaction-related figures stated in US dollars (US$) are included for illustrative purposes only, and are based on an assumed exchange rate of US$1:RMB7.36. All cash considerations will be denominated in Renminbi (RMB). HUTCHMED is an innovative, commercial‑stage, biopharmaceutical company. It is committed to the discovery and global development and commercialization of targeted therapies and immunotherapies for the treatment of cancer and immunological diseases. Since inception it has focused on bringing drug candidates from in‑house discovery to patients around the world, with its first three medicines marketed in China, the first of which is also approved in the US, Europe and Japan.About HUTCHMED
