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

Hello, everybody. My name is Jason Gerberry, I'm one of the biotech analysts at BofA, and I'm pleased to kicking off BofA's first Precision Oncology Day Event. And we've assembled here for a collection of companies doing some of the more relevant clinical research in the field of precision oncology, and we've assembled a couple of expert panels to discuss relevant sector topics. So hopefully, you can join our lung cancer panel as well as our VC panel. And just to start things off, I just wanted to thank all of our participants in today's event for contributing. And I think what should be a pretty fruitful set of discussions. And before we head it off to our first company fireside, I just wanted to say a few words as to why we view precision oncology as an interesting area from an investor perspective. First, despite a difficult market backdrop, particularly for biotech companies, we see the field of precision oncology is interesting given we have an accommodative regulatory backdrop, a number of targets that have yet to be drugged or where we think treatment approaches can still be optimized. And it's cancer, right? So there's always going to be unmet need for better medicines. And I just wanted to share a few important stats from our recently published Precision Oncology primer. We've had 8 precision oncology M&A deals over the [indiscernible] over $1 billion over the last 6 years, which we think serves as an important external validation for valuation of these companies, 13 novel targets with an approved drug over the last 10 years. And we've seen next -- or NGS sequencing, really transformed the field with screening rates over 50%. So a lot of good things happening in the space. Some of the challenges in the category in our view, really twofold. There's been a few underwhelming commercial launches of drugs in their lead indications of [indiscernible]. This has created some investor perception that perhaps the field might be migrating to niche-year commercial opportunities. And the risk profile, like any attractive market, we think, obviously, some of the initial targets have been picked over. And this -- what we noticed or observe is the pipeline is migrating to some riskier, perhaps less validated targets or perhaps these are less clear drivers of the malignancy. We believe these growing pains probably apparent in the KRAS story, which really got an investor's radar in 2019 at the ASCO medical meeting when Amgen presented its first few patients of data for sotorasib. And while the G12C mutation occurs at a pretty high rate in certain tumors, the monotherapy efficacy has ultimately represented less of an improvement from what we've seen with other targeted approaches. So we, like a number of investors really look forward to future updates around KRAS combination as a potential strategy to unlock value, whether that be breakthroughs with KRAS plus IO or combination targeted agents. Commercially, we did mention KRAS and RET is some potentially underperforming investor expectations on launches. Perhaps a common threat here with these launches is community oncologist adoption and recognition of genomic sequencing data. And despite the perception of rising NGS usage, we've seen some statistics that less than half of lung cancer patients got and NGS in the community setting based on some data from myeloma consortium. So clearly, there are some challenges and some things to work through. Lastly, I just want to mention from a regulatory perspective, this has always been one of the tailwinds in Central to advancing precision oncology medicines in an expedited manner to date. We've seen 35 precision medicines, garner accelerated approval, which from an investor standpoint means more cost-effective pathway to getting to a value inflecting catalyst. And while there have been a lot of rumblings about the FDA's project optimist, and the potential implications for industry, we've yet to really see any tangible indications of a less accommodative FDA. So against that backdrop, we think that there remains interesting opportunities in precision oncology. And with that, I'm going to end my prepared remarks and turn it over to Alec, who has our first fireside.

Great. Well, thanks. Thanks, Jason, for the introduction. Hey, everyone. Good morning, and welcome to the BofA Precision Oncology Conference. We're going to kick it off first with our first session with HUTCHMED. My name is Alec Stranahan. I'm a Vice President and Senior Biotech Analyst here at BofA. And I'm pleased to be joined today by Dr. Weiguo Su, Executive Director, Chief Executive Officer and Chief Scientific Officer of HUTCHMED. Weiguo, thanks for joining us today.

Yes. Thank you very much, Alec. Good morning, everyone. I'm Weiguo Su, CEO and CSO of HUTCHMED. HUTCHMED is headquartered in Hong Kong, but with operations in China and U.S. So our focus is oncology and immunology. And today, we have 12 compounds in clinical trials and both China and globally. So in China, we have 3 compounds now approved and launched and doing well and helping patients. We just reported through printing of FRESCO-2 global MRCT. We plan to submit fairly soon. So look forward to the discussion today.

Perfect. Great. Thanks, Weiguo. So now we'll jump into the fireside. I have a few questions here, but for those dialed into the webcast, to log a question, simply submit it via the Veracast platform. and I'll read it off. So Weiguo, maybe just to start on fruquintinib, since this is maybe the most topical given data at ESMO. Can you just talk a little bit about what we saw from FRESCO-2. Where was the study conducted? What was the outcome? Maybe if it was actively controlled? And how does this stack up versus the standard of care?

Yes. So FRESCO-2 -- so remember, we had a FRESCO, the original FRESCO study in China in late-stage metastatic colorectal cancer patients. That study, obviously, was highly positive and supportive registration in China. However, we -- when we discussed with the regulatory agencies, we also realized there is some discrepancy between Chinese patients and global patients. Both in terms of biology, but also clinical practice in terms of prior use -- prior treatment with anti-VEGF antibodies. And so in order to support fruquintinib registration globally, we decided to run a global multicountry, multiregional clinical trials, this trial named FRESCO-2. The study design was relatively similar to the original FRESCO study. It's -- but the patient population in terms of patients, they have -- all these patients have already failed available therapies, including first line, second line and also third line, either TAS-102 or regorafenib or both. So we are studying a patient population that basically has no additional therapies for them. So, this study, we recruited 691 patients and randomized in a 2:1 ratio to receive fruquintinib or placebo or best supportive care. So -- because at that point, patients already failed all available therapies. So it was a comparison between fruquintinib versus best supportive of care. And we had -- this study was conducted in 14 countries and including North America, Europe and Japan, Australia and a total of 154 study centers. And we were able to enroll all 691 patients in 18, 19 months, even through the peak of the pandemic. So indicating or suggesting a very strong unmet medical need in the patient population.

Right.

Study just read out and we reported at the ESMO a couple of weeks ago.

Right. Maybe we can just dive into the data a little bit more. So I think you showed FRESCO-2 maybe a 2-month PFS benefit both the 3-month OS benefit, which is relatively in line with FRESCO and given the advanced nature of the patients in the study, it's obviously a significant improvement in survival. Could you maybe just speak to what the physician feedback has been on FRESCO-2 results, particularly on the primary endpoint?

Yes, definitely. So as you know, these are very late-stage patients, they already failed all other therapies. And so we are really happy to see the clinical efficacy and very consistent with FRESCO study. Even though the FRESCO-2 patients, they are a lot more heavily pretreated and yet fruquintinib demonstrated consistent efficacy. At the ESMO there was -- after the presentation, there was a discussion session and a lot of interactions with the physicians. Afterwards a lot of posts on Twitter and we noticed overwhelming positive reaction to FRESCO-2 study. And obviously, for patients considering current third-line therapies, TAS-102 and regorafenib, the PFS around 2 months or below 2 months and OS benefit is only about 1.5 months in that range. So -- is the data from FRESCO-2 really represent a big step up for patients. So we are very positive and physicians reacted very, very positively, and all talking about really clinical practice changing for these patients and also for physicians.

Right.Right. And given that it's in oral therapy, right, the treatment burden may be negligible for these patients. So that's another positive. I did mention that the FRESCO and FRESCO-2 studies, the data looks pretty comparable, obviously, different patient populations. So from an international registration perspective, how do you feel about this randomized MRCT study from a regulatory perspective, given your experience now post surufatinib and given the data that you now have from 2 large pivotal studies.

Yes. I mean -- so for the U.S. FDA, we had multiple communications and interactions with them given the strong unmet medical need in late-stage colorectal cancer, even at third line setting because as I just mentioned, right, these patients are receiving -- currently receiving TAS-102 and regorafenib and the clinical benefit is really modest. PFS extension only a few -- a couple of weeks. An OS extension around 1.5 months in that range, give and take. So this FRESCO-2 data, coupled with FRESCO data generated in China, clearly, indicated fruquintinib is a very active, clinically active in this patient setting. And so we publicly communicated as well upon discussion with the U.S. FDA, we are exploring, combining FRESCO and FRESCO-2. The 2 pivotal studies to potentially support a third-line setting label. So this is based on the previous discussion with the agency, and we have a formal pre-NDA meeting with them in a couple of weeks, and then we'll confirm the strategy and I think it would be good for patients with another potential treatment options. Outside the U.S., we expect to have similar discussions with EMA and also Japan, PMDA regarding the registration strategy. But regardless, the data really speaks for itself. And I think we'll be talking to key organizations, including ASCO, ESMO potentially NCCN, potentially to include fruquintinib in the treatment guidelines as a potential treatment option for these patients.

That makes sense. So it sounds like NDA on the horizon. I guess what is -- what's your path to market strategy in the U.S., given an approval of fruquitinib could be your first U.S. launch? What are sort of your plans around establishing the sales team and what you see to co-promote or partner in other geographies?

Right. So this is our first opportunity. And so currently, we are thinking either to establish a global partnership with a global pharma with a global footprint that can help launch fruquintinib into various markets very quickly. And so we've been actually in discussions with multiple potential partners. We will continue to -- continue the discussion in coming weeks. In the U.S., obviously, we would be interested in some kind of participation either co-promotion or co-development. Certainly, we have a lot plans for additional indications. And these indications -- these clinical trials will continue. So I think our focus is to look for a global partner.

Okay. Okay. Maybe switching back to China since that's -- the launch has been ongoing there for almost 2 years, I believe, at this point, maybe more than that. I guess, what has sentiment been from prescribers regarding fruquintinib in China? And how has uptake been so far?

Yes. So as you know, right, so in China, we have a third line or above label, and it's in a category with other 2 therapies, TAS-102 and regorafenib. So the FRESCO-2 data really provided further support that this -- this fruquintinib should be made available to patients as early as possible given the magnitude of the clinical benefit. I know it's difficult to compare across different studies. But just for benchmarking, as we're just talking about, both in terms of level of PFS extension and OS extension, really very positive or favorable fruquintinib and should be made available to patients as early as possible. It's very positive in China. Yes. For the Chinese market.

Great. And last question on fruquintinib. Just in terms of next steps, right, in its development, third-line CRC, the first stop. Could you move to earlier lines? And I guess what's sort of your thinking around potential combination either in CRC or elsewhere?

Yes. So we -- I think the life cycle management indications will be focused on combinations. In combination with chemotherapy, we have a Phase III study ongoing in China in combination with paclitaxel in second-line gastro cancer, which is about to actually read out. We expect the top line results before end of the year. In CRC, so we already published the data -- proof-of-concept data, very strong data actually frequency to be in combination with PD-1 in third line and above colorectal cancer. The data was really, really compelling. I think you're talking about PFS now close to 7 months rather than -- almost double, right, and OS is even more exciting. So yes, we are looking to move it into a global Phase III study in combination with PD-1 and that's in our plan. And this over here is really about how we can further benefit patients so it can further improve efficacy for these patients. So this is a big step up from currently all the monotherapies or combination therapies, typically PFS in a 3-point-some months range and OS as well. So relatively speaking, still more but what we are seeing here in combination with -- when combined with PD-1 we're seeing a big jump. Now earlier lines, clearly, we see this particular combo has potential in first line for patients who are not suitable for chemo. For instance, they can offer a chemo-free therapy for, let's say, elderly patients or patients who are not fit enough to receive chemo or intensive chemo. We're also interested in even a little bit earlier to adjuvant setting. So there will be some more exploratory study to confirm our hypothesis and we clearly see opportunities in early lines of colorectal as patients.

Got it. Got it. That's great. Maybe shifting gears now to savolitinib. This is your most recently approved drug in China. But the expansion efforts are well underway, 7 registrational studies, 3 global, 4 in China. Maybe we could just speak to the TAGRISSO combo that -- the global study SAVANNAH, what's the rationale behind going for a combo first in terms of your global expansion in monotherapy?

Yes. Alec, the -- as you know, savolitinib we're in partnership with AstraZeneca, right? So TAGRISSO is the star product, a very big product. And also the study population as we publish at WCLC, TAGRISSO now is in first line. And -- the issue is that about 30 -- almost 1/3, 30-some percent in our interim study when we publish upon our analysis with 34% of patients failed TAGRISSO due to MET amplification. This is actually a high level of, let's call it a MET activation. We actually can include both amplification and overexpression. So it's a big patient population. And these patients tend to develop resistance to TAGRISSO early on unlike additional mutations or other forms of resistance. These patients can be -- come off early on and can be identified very easily by either IHC or FISH diagnostic. So the data we published or disclosed at WCLC, very strong and represent a potential for breakthrough therapy destination and accelerated approval in the U.S. So now this study has been converted into a registration study. And then we are enrolling patients based on our now defined biomarker cutoffs and we plan to engage with the U.S. FDA and discuss potential for accelerated approval for the SAVANNAH study. Why combo -- we are also obviously interested in [indiscernible] as well. We looked at Exon 14, which now already approved in China. But there are also capmatinib and tepotinib, but they are also approved now, U.S., Japan and -- so -- but what we're looking at is that we believe there are other opportunities for monotherapy in different tumor types, and we will -- we plan to -- together with AstraZeneca to initiate registration studies as a monotherapy for savolitinib globally.

Great. That makes sense. And we actually performed an analysis that we published this morning on the EGFR inhibitor market. And TAGRISSO is head and shoulders in the lead above the other approved EGFR. Definitely pay us to partner with the best in terms of driving market uptake, if it were to be approved. You alluded to the SAVANNAH study and how that's reading through to some of your other studies. Maybe you could just talk about the data we saw at WCLC and sort of what your read through to maybe SAFFRON is from that?