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

Good day, and thank you for standing by. Welcome to the HUTCHMED Licensing to Takeda Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Mark Lee. Please go ahead.

Thank you, Nadia. And welcome, everybody. Good morning, good afternoon and good evening, and we're excited to talk to you today about this partnership we have with Takeda for fruquintinib development and commercialization outside of China. Today, we'll have a few -- because with us, of course, Dr. Weiguo Su, our Chief Executive Officer and Chief Scientific Officer; Mr. Johnny Cheng, our Chief Financial Officer; Dr. Karen Atkin, our Chief Operating Officer; and Dr. Michael Shi, our Head of R&D and Chief Medical Officer. We also have for questions and answers, Pallavi Garg, the Head of Global Oncology Products and Pipeline Strategy for Takeda. We're honored to have with us as well today. So without further due, I will hand over to Dr. Su to go through a few slides that you should be able to download and view from our website. Weiguo?

Okay. Thanks, Mark. Good morning, good evening, everyone. Welcome to the conference call. A few hours ago, HUTCHMED announced the collaboration with Takeda on fruquintinib development and commercialization outside China. This collaboration is all about bringing fruquintinib to patients globally and advancing our clinical development opportunities to maximize value fruquintinib. Let's go to Slide #5 -- 4, I'm sorry. And obviously, as you are all aware of, this is the pipeline chart of HUTCHMED and fruquintinib on top. And today, what we just announced is a partnership with Takeda for fruquintinib outside China. And let's go to Slide #5. This slide is basically a brief intro. Fruquintinib is an oral kinase inhibitor targeting VEGFR1, 2 and 3 and is highly selective against other kinases. In clinical studies, fruquintinib has demonstrated a favorable safety profile will reduce off-target toxicities, allowing it to be combined with other anticancer therapies, including chemotherapies, targeted therapies and IOs. Based on the strong clinical results, from the FRESCO trial, fruquintinib was approved in China in 2018 for third-line and above metastatic colorectal cancer. Slide #6, some brief information on CRC. colorectal cancer is the third most common cancer in the world, with over 935,000 deaths in 2020. While progress has been made for tumors with actionable gene alterations such as BRAF mutations or MSI high, dMMR, treatment options are very limited for late-stage patients. Go to Slide #7. In China, fruquintinib was approved in 2018 based on the FRESCO results, and it is now included in the NRDL for reimbursement and has become the patient share leader in China over regorafenib, and we expect a strong growth for fruquintinib to continue. Slide #8. As I'm alluded to earlier, and it's all about bringing fruquintinib to patients globally. And in China, as I just introduced, it's doing extremely well. And behind the CRC, there are multiple registration studies ongoing to cover additional tumor types. And also, we completed a global Phase III registrational study in MRCT, which also demonstrated robust clinical benefit for late-stage CRC patients. And now we will be partnering with Takeda to rapidly bring it to patients ex-China and a continued clinical development for additional indications to maximize the value for fruquintinib. Takeda is a global pharma with a very large footprint and very strong in oncology. Slide 9, Page 9. The data we presented -- the FRESCO-2 data we presented at ESMO demonstrated significant clinical value of fruquintinib for patients with late-stage metastatic CRC. And this study was carried out in over 150 sites in 14 countries. The survival benefit was highly significant with a very good safety profile, and these results were highly consistent with the FRESCO results in Chinese patients. Slide #10, just for benchmarking. Obviously, these are not head-to-head studies. Fruquintinib produced a very strong clinical benefit in heavily pretreated patients and in FRESCO-2 study as well as FRESCO study and across all efficacy endpoints, including overall survival, progression-free survival and disease control rate. And in the bottom here, looking at the safety profile, it is also quite favorable. In the FRESCO-2 side, for instance, the discontinuation rate of fruquintinib is similar to placebo and a grade 3 or above TEAEs are very similar as well comparing to placebo, suggesting fruquintinib is highly tolerated or very well tolerated in these late-stage patients and also clinical benefit in terms of efficacy is very robust. Now Slide #11. Talking about financials. And this collaboration with Takeda, as we just announced consisted of upfront payment $400 million and milestones include development, regulatory and commercial totals -- totaled $730 million and with Takeda royalties consistent with assets of this stage, which is NDA stage. And this collaboration will help accelerate HUTCHMED strategy or vision about bringing our innovative medicines to patients worldwide and also validates our high confidence in the future success and the commercial opportunity of fruquintinib and also accelerates and broadens development and potential commercialization of fruquintinib globally. And of course, these financials will add additional resources to advance our own and other pipeline products. Page 12, some more details on the collaboration, not including future development, manufacturing and sales and marketing, covering all territories except for China, Hong Kong and Macau, regulatory filings for the late-stage metastatic CRC will be led by HUTCHMED and expect to be completed over the course of this year. Takeda is now initiating launch readiness and it will be responsible for all commercial activities as well as further clinical development and for additional indications. Slide #13 is -- in a nutshell, we think Takeda is the right partner for HUTCHMED, the 2 companies are very complementary and have shared values and ambitions for fruquintinib. Slide # -- next slide, #14. Takeda, obviously, is a global pharma with $30 billion in sales or revenues in 2021 and a large presence in global major markets. Next slide. So for oncology, Takeda has oncology hubs in 10 countries, R&D center in Cambridge, Massachusetts, and oncology manufacturing in 5 countries. So Slide # -- Page 15, on Page 16. Well, Takeda is very strong in oncology, covering both solid tumors and hematologic malignancies with a strong track record in successful launches of new products, such as EXKIVITY and also ALUNBRIG. In CRC, Takeda is also a strong leader in Japan with Vectibix, an EGFR antibodies for earlier lines of CRC. Slide #17. The fruquintinib in addition to CRC is being developed in China for many other tumor types, including gastric, endometrial and renal cell carcinoma. And multiple registration studies are ongoing and expected NDA filings if studies are positive or listed here on this slide, and then we look to capitalize on the Exon efficacy and safety profile of fruquintinib. Finally, HUTCHMED, we believe, is well positioned to deliver on our vision about bringing our innovative medicines to patients worldwide with 10-plus NDAs in the next 3 years and a strong commercial organization in China. This collaboration with Takeda will help accelerate our strategy globally. So I think we'll now move to Q&A.

[Operator Instructions] Now we're going to take our first question. And the question comes from the line of Louise Chen from Cantor.

Congratulations on the deal. So I have a few questions for you. First one I wanted to ask you is, how do you think about the peak sales potential for fruquintinib in the U.S., Europe and Japan, I guess you must have some idea in order to reach the deal that you did. And then Secondly, where do you think it would fit into the treatment paradigm in these major markets, for example, like the U.S., if it's approved, where do you expect it coming into play? And then the last one I wanted to ask you is, what did you like about Takeda's capabilities and infrastructure in these major global markets that drove you to sign a deal with them?

Okay. Thanks for the question. Maybe I'll do this -- your last question first, and I'll ask Pallavi to chime in on the peak sales and so forth. So as I kind of went through in my presentation, we think Takeda is the right partner for fruquintinib. Obviously, Takeda is a global pharma with a very large footprint. And obviously, they are also very strong in oncology, particularly their recent success in new product launches, really demonstrate their ability to launch new medicines in various markets. And finally, Takeda is also very strong in CRC, which will be our first indication for fruquintinib outside China. And they've been leading the sales of Vectibix in Japan by far the best-selling EGFR inhibitor for earlier lines of CRC. So taken together, I think the other thing is -- really important is that throughout the discussions, we have talked to quite a few potential partners. Takeda stood out as clearly, we have share the values and passion and ambition. So I think it's really important. And the team chemistry is very, very important for the success of this collaboration. So with regard to the sales forecast, obviously, now CRC being the first indication, we think CRC, as I mentioned, is the third most common cancer globally and treatment options are very limited for late-stage patients. There's clearly a strong unmet medical need. Takeda is going to mobilize our resources to support the launch. And we think it's a very significant commercial opportunity. Behind CRC, the first indication, we are also evaluating to initiate additional clinical development programs for life cycle indications. So I'll probably now ask Pallavi to chime in here. Pallavi?

Thank you. Thank you, Weiguo. Very excited to chime in here. We are very excited to be partnering with HUTCHMED on fruquintinib. In the United States, in Japan, in Europe, the world over, as Weiguo mentioned, tremendous unmet need, particularly for the later line all-comers patient population because this is a very high incident tumor type where while advancements have happened in the last several years, many of those advancements are able to benefit a small patient groups of less than 50% -- 15% where the disease is biomarker-driven. So fruquintinib was a very uniquely exciting for us because of the potential to benefit patients in the refractory setting, in the all-comer patient population regardless of biomarker type. I'll build on our commercial capabilities here at Takeda. We have very solid presence in oncology, in heme as well as solid tumors and state-of-the-art launch capabilities. In particular, one of the things that we have built recently and will be leveraging for the successful launch for fruquintinib is a hybrid commercialization models across the world. And these include not just sort of your traditional face-to-face personnel selling, but also very state-of-the-art data and digital-driven next-best actions, which will ensure that we get to the patients who need these medicines as quickly as possible and have a very successful launch. I will not be specifically commenting on the peak sales potential at this point. But as you can see, there is tremendous unmet need. And because of that we were convinced that this partnership was the right partnership for us at Takeda to enable that we move forward in partnership with HUTCHMED with a purpose of curing cancer and improving lives of patients. Thank you.

Louise, have you finished with your questions?

That's it.

Now we will take our next question. And the next question comes from the line of Alec Stranahan from Bank of America.

Congrats from me as well on the deal. Two questions from us. First, just on manufacturing. Could you remind us, I guess, where the clinical drug supply would came from for the international studies? And it wasn't totally clear from the slide would HUTCHMED still be producing the commercial product? Or would this be transferred over to Takeda and how would that process sort of look? And second question, just on label expansions. Is there a desire maybe? Obviously, you're focused on advanced colorectal cancer currently, but would there be a desire to move fruquintinib to earlier lines in CRC. And I guess, what would just sort of be the gating around what you need to see from the China studies there are -- initiating those at the global scale.

Yes. Thanks, Alex, for the question. So yes, currently, the clinical supply of fruquintinib is manufactured at our plant in Suzhou in China. And we plan to work together with Takeda going forward on the manufacturing and the supply, will be probably a combination of our [ Suzhou ] plan and also plan outside China as well. So yes, we'll be working together on this very closely with Takeda. With regard to additional clinical development, yes, earlier lines of CRC definitely very interesting to us. And obviously, now whether this is going to be -- globally in combination with various anticancer therapies, including chemo and [ an ] IOs . So we are currently looking at the data generated in China evaluating opportunities to look at CRC as a whole in different settings. Other tumor types, again, we have multiple trials in combination with PD-1 ongoing in China, a few already in Phase III registration studies. And we'll be able to leverage both POC and also registration study data to kind of inform us other directions going forward.

Now we're going to take our next question. And the next question comes from the line of Mike Mitchell from Panmure Gordon.

Congratulations on the deal. I just wanted to understand a little bit more about the respective responsibility on the ex-China development of fruquintinib at this point and your exposure on costs at this stage. So the regulatory process, I'm thinking that's obviously still underway in the region outside of China, although it's most advanced in the U.S. but they've also incurred that major costs on fruquintinib given that FRESCO-2 is behind us. I'm still thinking about ex-China. So what are the costs will you incur on fruquintinib ex-China from now? And in aggregate, how much investment are you targeting for ongoing China development of fruquintinib?

Okay. Thanks for the question. Well, obviously, Takeda will cover all the clinical and regulatory costs going forward. We'll be working together on the clinical development side in terms of indication selection, operation but Takeda will be covering all of the costs. As a matter of fact, we anticipate we will be transferring everything to Takeda. But given we have deep insight into the product, but also we have ongoing studies in China that will be generating data. So we'll be working together with the clinical and regulatory team from Takeda.