HUTCHMED (China) Limited (HCM) Earnings Call Transcript & Summary

Hey, everyone, good morning, and welcome to Day 2 of BofA Healthcare Conference. Thanks for joining this session with HUTCHMED, [ who may also be known as Hutchison China MediTech Limited ]. My name is Alec Stranahan, and I'm the analyst covering HUTCHMED here at BofA. I'm pleased to be joined by Christian Hogg, Executive Director and CEO of HUTCHMED. Thanks, Christian, for joining us at the conference.

So we're going to jump straight into the fireside since there's much ground to cover. I have a few questions here. [Operator Instructions] Maybe just to start, for those maybe new to the HUTCHMED story, if you can provide a brief [ overview of your 3 assets ] [indiscernible] if you could.

Sure, Alex. You are coming through a bit choppy, but I get the drift of the questions. So for the 3 lead assets we have, we've got the first drug that was approved was fruquintinib or Elunate for third-line colorectal cancer. That's doing well these days. We took back commercial on-the-ground medical detailing, promotions, local marketing, regional marketing from Eli Lilly last October. We've seen the business triple since then. First quarter, we haven't put out full first quarter results, but we've guided that there should be over USD 20 million in in-market sales for the first quarter. That is almost as much as we did as Eli Lilly did in the first 3 quarters of last year. So yes, Elunate is doing well. And as far as the global program for Elunate, we've started a global Phase III in third line colorectal cancer through the FRESCO-2 study. It will complete enrollment late this year and read out mid next year. So that's how we're going to get fruquintinib approved outside of China. Our second drug, surufatinib in neuroendocrine tumors was approved in China late last year. We launched it in January. So we're only 4, 5 months into the commercial launch. We're encouraged by what we're seeing. And we have a team now of closing in on 500 commercial people on the ground in China. And they're doing a good job getting surufatinib going in that. Separately, outside of China on surufatinib, we have now completed submission of our NDA in the U.S. We're waiting for the U.S. FDA to accept it and to make a decision on whether it's priority review or a regular review. But that should come in the next 60 days or so. We just literally completed the NDA submission last week, I believe. So surufatinib is moving well. And then savolitinib is our selective c-MET inhibitor. We are expecting an approval in China next month, probably around the mid to late June. And AstraZeneca is our commercial partner in China. So Astra will launch it in China, likely in July or early August. And it will be the first-in-class selective c-MET inhibitor in China. None of the other MET inhibitors are within sort of 18 to 24 months of approval in China. So we'll be well ahead of everybody in China on a MET TKI. Outside of China, we have a global Phase III set to start in RCC, in papillary renal cell carcinoma. A number of global lung cancer studies are being planned, both the outside of China and inside of China, for registration. And a registration study in MET-driven gastric cancer is set to start in China relatively soon. So we're very active on those first 3 assets, but we have a bunch of life cycle indications underway with PD-1 combos, with surufatinib and fruquintinib. And on top of that, our hematological malignancy assets are now transferring into registration studies. So our PI3K delta, we just started a registration intent study in China in follicular lymphoma and marginal zone lymphoma. We expect several further registration studies to kick off later this year on our PI3K-delta. And our Syk inhibitor, also moving rapidly into a registration study in ITP in China and in various exploratory studies in indolent non-Hodgkin's lymphoma subgroups outside of China. So the 5 assets we have are all moving quite rapidly.

Okay. Great. Yes, definitely a lot going on in the pipeline and also as you sort of turn to commercial for Elunate and surufatinib. But maybe just first on Elunate. We have seen volumes going up quite dramatically in 2020. So I guess, what is sort of your outlook in 2021? And I guess what is sort of driving the growth at this point? Is it taking it over from Lilly? Or is there some year-over-year benefit also coming from the NRDL included in it?

So yes, our kind of guidance on fruquintinib or Elunate in China this year is to look at the first quarter of around $20 million and extrapolate that. I think we'll see sales growing in the next -- well, next couple of quarters. Maybe there'll be a tail off at the end of the year as we renegotiate or NRDL inclusion. Usually, that affects the last month of the year because you've got a price reduction in January probably. So yes, I expect probably somewhere around $80 million this year for Elunate in China. And that compares to around a total of $33.5 million last year. So it's almost tripling it across the year. The -- sorry, the next part of your question?

Yes. I guess what's driving the volume?

What made, sorry, what made the difference. Yes. Well, I mean, Eli Lilly had about 120 to maybe 140 commercial people on the ground marketing Elunate. And we've got 500. And so that's a big difference in terms of coverage and penetration and focus. I mean Lilly is not a bad company. Lilly is a good company, and they have a good commercial presence in China. But I think having Elunate under our direct control and allowing us to focus our big team on it is a good thing. And I think the NRDL didn't play much of a role because we got on the NRDL in January of 2019. And So Lilly had 9 months on the NRDL before they gave the marketing of commercial activities back to us. And so NRDL helps you get hospital listings. That's the trick. Obviously, it provides a lower price for patients on the main medical insurance scheme, but it allows you to go and essentially get on -- in the hospital pharmacies across all of China. But you've got to go to each hospital and you've got to go and negotiate it and do that. And so last year, it was difficult for Lilly because they've just got on the list. It's easier for us now because we've been working on it for some time. So we're getting more hospital listings, and that's leading to a much more prescribing of the drug in those hospitals.

Okay. And maybe on the topic of pricing, surufatinib and savolitinib in China could potentially be up for reimbursement negotiations this year. I think they may be up for renegotiations. So I guess, how are you preparing for this now? And how are you planning to balance price and volume for these other drugs?

Well, I think surufatinib will be -- will end up being probably something quite similar to Elunate in China. Right now, the price is around USD 2,800. We do have some patient access programs that make it more accessible to patients based on sort of the means tested mechanism. I imagine we'll negotiate with the regulatory authorities and agree a sensible price that will allow us to really expand access. So yes, I would expect what you've seen on fruquintinib or Elunate wouldn't be totally different than what you'd see on surufatinib. Savolitinib, I think you have to look at the Tagrisso model in China for what we plan to do on savolitinib. I hope we can get on the NRDL early next year. We'd have to get approval before the end of June in order to do that, and it's going to be tight. I hope we can do it. If we can, then we can get on the NRDL in January or January, February, March, it was this year in China that they kicked in the NRDL for the new entrants. So yes, I hope we can get on that next year. And I think we'll follow the path probably of Tagrisso, which was launched at about USD 7,000 or USD 8,000 a cycle. And then Astra took some pretty meaty reductions to really expand access.

Right. And obviously, Tagrisso is an AstraZeneca drug and savolitinib is also partnered with AstraZeneca. And then they'll be handling the commercial launch in China, so that makes sense. So maybe turning to surufatinib. So the -- congrats on completing the rolling NDA in the U.S. What kind of review time lines are we looking at, at this point? And I guess, how have your interactions been with the FDA so far? And I guess what is your ultimate commercial build-out is going to be in the U.S.?

The review time line is difficult to say. I mean, how long does it take you to read 870,000 pages of documents, right? A long time. But it's a big document. It's a big set of documents that were submitted, an enormous task for us as a company. Only the second Chinese company ever to submit an NDA on its own. BeiGene did it with their BTK inhibitor. Now we've done it with surufatinib. There are -- Legend is working with Janssen to do it and Innovent working with Lilly to do it. And there are a number of others, but they're all working through partners. We did it ourselves. So we completed that last week. Usually, there's 60 days and then -- a window of 60 days and then the FDA will tell you if they accept it formally or if they have questions. They'll also tell you if you got priority review or not. And so under the best case scenario, they accept it before the end of June. They tell us we've got priority review. And if that's the case, there's a chance it could get approved by the end of the year. And we're building our commercial team on that basis, on that best-case scenario basis. If it don't get priority review, then you're talking probably April of next year for an approval. It's about 4 months difference in timing. So yes, that's the kind of the set menu of how long it takes and -- but it all depends on how the U.S. FDA judges the unmet medical need that surufatinib addresses and whether it's a priority or not. I mean we've been granted Fast Track designation in non-pancreatic NET -- sorry, extrapancreatic NET as well as pancreatic NET. So I'd hope that there would be some consistency in that.

Okay. And then I guess another one on pricing, and this is probably more pertinent to suru, but I think it's sort of doing the reverse commute, right, where typically, we see drugs developed in the U.S., making their way ex U.S. But suru was developed in-house in China, and now it's making its way to U.S. But I guess when you think about pricing going from China, where you're pricing to -- in preparation for maybe an NRDL inclusion, how would you think about then launching and its price in the U.S.?

So we've -- yes, we ran 2 big Phase III studies in neuroendocrine tumor patients in China, and they were the basis of the NDA submission. But we also ran multiple bridging studies in the U.S. -- in U.S. and Europe for that matter and now in Japan. So it's really a global development program that we've been running on surufatinib. I think as I've just mentioned, we intend to commercialize surufatinib ourselves in the U.S. And we've had interest from partners who would like to license it from us, but I'm not convinced that they could do in the U.S. any better than we could do on our own. And neuroendocrine tumor is quite narrow, patient population, quite concentrated. Most NET businesses, Novartis is probably the most obvious one. They've got teams on Afinitor, for example, in extrapancreatic NET of around 40 reps. So you're not talking hundreds of reps like you do in China, you're talking about quite a concentrated team. So we're planning to build out a team of about 65 people. The top 10 senior management are already in place. It's being run hard by our Chief Commercial Officer there, is a former Novartis executive with a lot of experience in oncology and NET. So yes, we're building our own team. And yes, obviously, it costs money to build your own team, right? And this is our single product to launch. It will be followed because NET is -- the majority of NET patients are gastrointestinal NET patients. And so building that team, it will have an expertise in the GI cancer field. And with fruquintinib and the FRESCO-2 study following, so maybe 24 months later, you'd see the launch of fruquintinib. And that's in colorectal cancer. So it's -- there's good synergy between surufatinib and fruquintinib in the context of their GI cancer patient population. So yes, we'll build out our team. And the pricing will be at a level that will be higher than China, but it will be to -- set at a level that makes it viable. Seems like we've lost Alex -- Alec. Here we. You're back. You're on mute, Alec. Can't hear you. There you go. You're back.

Okay. Can you hear me?

I can. Yes, yes, we lost you for a while.

Okay. Great. Sorry about that. Okay. Great. So next question, maybe -- so we've talked about Elunate, we've talked about surufatinib. Maybe we can move to savolitinib. I think this is probably the one that most people are focused on, given we could get a first approval on China in the next few weeks. So I guess, what is sort of the preparation being done there with AstraZeneca? And will you guys be ready to basically launch in China immediately following the approval?

We will. And AstraZeneca is one of the biggest lung cancer players in China. The Tagrisso business has been the third-generation EGFR inhibitor and has been on the market now for 4 years or so. And they do -- I think last year was a little bit less than $600 million in sales. They've got a commercial team on Tagrisso that -- of dedicated as well as shared commercial people of around 2,000 people. So savolitinib is going to bolt right into that the lung cancer franchise for Astra. I think we've published before that the patients that become refractory to Tagrisso, around 30% of them, are MET-driven patients. So there's a really meaningful patient population of MET-driven disease in China, probably the biggest globally, actually, of MET-driven patients. We put it at well over 100,000 patients a year incidents. And we're going to be the only MET inhibitor in China. So it's going to be, I think, going to be really important. And we partnered up with the right people. I think that Astra, with 2,000 commercial people on the ground that are going to be handling savolitinib, I think it will be very exciting.

Great. And I believe the SAVANNAH study is now fully enrolled at the 300-milligram dose. So If you could just talk a little bit about the opportunity in addressing the EGF mutated patients as well. And given that it is a combination with Tagrisso, do you think you'll see maybe some bolster utilization in that study through [ savolitinib ].

Well, the SAVANNAH study is the Tagrisso/savolitinib combination in Tagrisso refractory patients. And so you add savo on top of the Tagrisso patient if they failed in Tagrisso and they're MET-positive. So yes, the SAVANNAH study at 300-milligram daily dose duty is fully enrolled. We haven't published any of it yet. We're fully aware of -- in terms of response and duration of response. It -- we've got a lot of history in developing that combination. The TATTON study was an extensive Phase II exploratory study in well over 200 patients. So we know what -- how patients will respond to that combination. We -- in the SAVANNAH study, we're working a number of biomarker strategies to help inform our global Phase III biomarker strategy. And so we've done a lot of biomarker analysis. And whether it's MET gene amplified or overexpression, what are the cutoffs. We have, in our view, all the answers on that, which are hugely proprietary. And so don't ask me what they are. And so we're ready, we're really ready. The last thing we're waiting for, we're actually waiting for 2 things. Number one, we're waiting for the medium PFS for that 300-milligram GD cohort. It's not mature yet, which I guess is a good sign. So we're waiting for that. We're also exploring 300-milligram BID, twice daily dosage. Because what you tend to find is patients in the -- patients that fail in the first line setting on Tagrisso, so they're treated with combo in the second-line setting. Those patients are pretty robust. They're pretty healthy patients and they can do pretty well. But if you get to your patients sort of in the third, fourth, fifth line, after a couple of lines of chemo, those patients are generally, from a genetics -- genetic driver standpoint, and more complex. We've got more things going on. And what we tend to find is you might need a bit more savolitinib to deliver the kind of results you want on those patients. So that's why we're looking at BID as well. But all of that will come together maybe around August, and we'll make -- AstraZeneca and HUTCHMED will make decisions together on what the next step is. But meanwhile, we are starting in October, regardless of the outcome of SAVANNAH, we're starting 2 Phase III studies in China. One in EGFR TKI refractory patients, first-generation, second- and third-generation EGFR TKI refractory patients. So that Phase III kicks off probably late Q3. And then we're also starting a study of the combination in the first-line setting. We believe we have a good idea of how to select patients to give ourselves a pretty broad group of patients to study in that first-line setting so that's what we'll do.

Okay. And I guess last question on savo. Could you maybe speak to the competitive positioning? I mean, it sounds like you may have a bit more room to run it in China. But as you're looking to international expansion, what do you think is going to lend differentiation at savolitinib? Is it the combination partners or maybe the mutant population?

So well, we're ahead -- we're first-in-class in that -- well, if we're approved, we'll be first-in-class in China by probably a couple of years. So that's our advantage there. But you should also look at the study that led to this NDA submission in MET Exon 14 deletion non-small cell lung cancer patients. And if you look at it closely, you'll see that our study, the response rate was somewhere just short of 50%. But in our study, we enrolled intentionally. About 35% of our patients were pulmonary sarcomatoid carcinoma patients, who were generally sort of 80-year-old plus MET-driven PSC patients, very frail patients. And we delivered the sort of the response rate that was equivalent to what tepotinib and capmatinib delivered in their registration studies that included less than 5% PSC patients. So we have a much tougher patient population. I think we feel confident that savo will differentiate itself in terms of its safety profile and its efficacy even in that monotherapy setting over time. Clearly, though, the big advantage for us is the Tagrisso combination. The fact that we've been studying this for 5 years. We -- I think we're really close to figuring it all out. And we're looking forward to initiating that global Phase III, which could be -- get us approved well ahead of everybody else in that combo setting.

Great. And I think you guys are in a pretty unique position in regards to the various PD-1s coming out of China. And this is obviously becoming more [ topical ] for investors here in the U.S. as these have the potential to enter the U.S. market over the next 12 months. So I'd be interested to hear your views on the various PD-1s from BeiGene and even Junshi, is that your rationale for looking at combinations with all of them sort of where you see the market panning out over the next few years.

Well, we'll publish a number of Phase II studies, exploratory studies at ASCO in a few weeks in combination -- surufatinib in combination with the Junshi PD-1 toripalimab and fruquintinib in combination with the Innovent PD-1, which is sintilimab, some pretty interesting data that we'll be presenting for those combinations. Our VGFR inhibitors are really quite uniquely suited to PD-1 combos. But those are more centered in China. So Innovent and Junshi, I know they've got partners that are trying to take them beyond the borders of China, but they're obviously more advanced in China. And so that's fine. That's why we're working with those guys there. But the reason we're partnered with BeiGene is because it's a global sort of ambition that we have, which is to combine our VGFR inhibitors, with tislelizumab and develop them globally. So that's the reason we partnered with a number of these players. And yes, we'll just let the science, let the data speak for itself when we present it at ASCO.

Perfect. And then the last minute or so that we have, I'd love to talk a little bit about the earlier pipeline, which is not so early anymore. I mean, PK, Syk, they're entering late-stage studies. So I guess, what is sort of the -- what's getting you most excited there? And sort of what's the path forward?

I just think, I guess, every CEO would say this, but I just think we have the global best-in-class PI3K delta. We've now got -- and it really rapidly emerging data set. The safety profile is quite different from all the other PI3K deltas. The GI tox is negligible. The liver enzyme elevation is negligible. It's just a really potent asset. And we're seeing a high degree of complete response in a number of non-Hodgkin's lymphoma subgroups, higher complete response than you see in other PI3K deltas. So I think -- and in turn, objective response rate is higher as well. So that's why we've moved rapidly into follicular lymphoma third line, follicular lymphoma in China. We've got a second-line marginal zone lymphoma study We're looking at combos in DLBCL, and we're also continuing to study MCL as well. So we're moving very rapidly on that and now going global with it. We're close to completing our dose escalation study in the U.S. and Europe and are about to expand. I think we'll aggregate the China data, the global data, and probably look to see if we can go faster on that. And then the Syk inhibitor in ITP will start Phase III this year. And we'll start a number of exploratory studies in indolent non-Hodgkin's lymphoma. Our IDH 1/2 dual inhibitor is now in Phase I in Europe and China and the U.S. And we just announced we've got an ERK inhibitor that will be coming soon as well.

Fantastic. Well, we really want to thank you for the comprehensive overview of your business, but I think we'll have to leave it there for today. But thanks for taking the time to participate. Really appreciate it.

Thanks, Alec. Great. Thanks for having me.

All right. Great. Thanks, and then thanks to everyone on the line as well. Take care.