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(Bloomberg) -- Biopharmaceutical firm Hutchmed China Ltd., backed by Hong Kong billionaire Li Ka-shing, saw its shares rally on Thursday morning after announcing it will divest shares in a joint venture for about $608 million to sharpen focus on its core business of developing novel cancer therapies.
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Hutchmed, whose biggest shareholder is Li’s flagship conglomerate CK Hutchison Holdings Ltd., will sell a combined 45% interest in Shanghai Hutchison Pharmaceuticals Ltd. to Chinese companies GP Health Service Capital Co. and Shanghai Pharmaceuticals Holding Co., according to stock exchange filings Wednesday.
Shares jumped as much as 12% Thursday morning, the most since March 13, before paring gains.
Shanghai Pharma, which already owns 50% of shares in the target company, will hold 60% interest in the target company after the transaction, according to the filings. Hutchmed is required to pay compensation to the buyers if the target company doesn’t meet certain profit thresholds.
Facing a challenging capital market, Hutchmed has sought to balance investments in innovative technologies with its stated goal of becoming profitable in 2025. With three internally-discovered medicines marketed in China, it is building on momentum around Fruzaqla, its first cancer drug that broke into developed markets like the US, Europe and Japan via a partnership with Japanese pharmaceutical giant Takeda Pharmaceutical Co.
Fruzaqla, which treats colorectal cancer, delivered $203 million in net sales in the first nine months of 2024, triggering a $20 million milestone payment to Hutchmed in October.
Shanghai Hutchison Pharmaceuticals was established in 2001 to manufacture and sell branded prescription drugs, predominantly for cardiovascular diseases.
Hutchmed expects to record a gain of about $477 million before tax from the deal, which will be reinvested into developing its core businesses including targeted therapies for treating cancer and immunological diseases, the company said in its statement.
Like many other Chinese drugmakers, Hutchmed is developing antibody-drug conjugates, a powerful and selective type of cancer treatment that global leaders from AstraZeneca Plc to Pfizer Inc have bet heavily on. The gold rush has led to a cadre of biopharma companies sourcing assets from China, the latest being Roche’s licensing deal with Innovent Biologics Inc.