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

Good morning, everyone. I'm Paul Choi, and I cover the U.S. biotechnology sector here at Goldman Sachs, and it's our pleasure to welcome you those are here and online to our conference. Before we begin, we are required to make certain disclosures in public appearances about Goldman Sachs' relationship with the companies that we discuss. Disclosures relate to investment banking relationships, compensation received or 1% or more ownership. We are prepared to read aloud disclosures for any issuer during the sessions upon your request. However, these disclosures are available in our most recent reports available to U.S. clients on our firm's portal. In addition, updates to these disclosures are available by ticker on the firm's public website at https://www.gs.com/research/hedge.html. Goldman Sachs agrees to host this conference on the basis that no third-party speaker will provide confidential or material nonpublic information. In addition, by attending this conference, you provide Goldman Sachs the right to record and redistribute the conference information. The views of third-party speakers do not necessarily reflect those of Goldman Sachs. Okay. So with that, it's my pleasure to welcome Dr. Wei-Guo Su of HUTCHMED. He's generously come in from overseas to join us here at the conference. We're also joined by Annie Cheng in the audience here from the U.S. side. And what we'll do is -- prepared Q/A with the team. And if the audience has any questions or if you want to send questions to us, please feel free to e-mail us, and we'll be happy to read them allowed anonymously.

So if we could maybe begin with some -- maybe some high-level thoughts on HUTCHMED. There's a lot going on with your company these days. Can you maybe give us the 2 or 3 things that you as a management think that investors should be most focused on as they think about the near-term story for your company, let's say, over the next 12 to 18 months?

Yes, happy to, Paul. HUTCHMED is basically executing in all fronts. On the pipeline, we are focused on basically the late-stage compounds moving through registrations and also on mid-stage compounds, now also -- we call second wave, also reaching registration as well as preparation for NDA filings. And at the same time, progressing our early-stage compounds. Now we call it third wave into registration studies later this year, actually one that already being a pivotal study. So I think of particular interest perhaps to investors, our ex-China effort to move fruquintinib into registration, savolitinib, hopefully, will soon follow as well. As you all know, we announced fruquintinib in the U.S. NDA filing and just granted priority review for the colorectal cancer based on FRESCO-2 results. And we're very -- we are working also very hard on Europe submission and Japan submission as well for fruquintinib. Savolitinib finally, hopefully -- we are enrolling very fast in the SAVANNAH study, which is a registration intent study, we hope to, together with AstraZeneca, complete enrollment fairly soon and file next year in U.S, So a major effort outside China and to maximize the value, both clinical value and economic value of all compounds. What we're also doing with these late-stage compounds is really executing on the very robust life cycle programs for this compound. As you also know, we filed a second-line gastric NDA in China for fruquintinib. And we also have 2 additional registration studies ongoing in China, expect to file in the next year or 2 for these additional indications. And this will hopefully guide us ex-China development for these compounds as well. Same for savolitinib, multiple programs. Now these 2 programs, savo and also fruquintinib happened to be partnered up with AstraZeneca and also Takeda for fruquintinib. So we have to work with our partners very closely on this. So the second wave of compound, our Syk inhibitor savolitinib, we expect to file later this year, towards the end of this year. We are awaiting the data to mature and to read out sometime in August, our first Phase III registration study of savolitinib in ITP. We also have a second registration study in anemia, which is progressing very, very nicely as well. This will be followed by our gastric delta inhibitor, which we believe is highly differentiated with a very favorable safety profile. We expect to file its first indication in China for third-line follicular. And this is a second indication in second-line marginal zone lymphoma follow sometime. And our EZH2 inhibitor also in lymphoma, it's currently in a pivotal bridging study in China. We expect to complete enrollment this year and file sometime next year as well. So there's a lot going on. We have a life cycle as well, first wave and also initial NDAs for our second wave. And then our third wave actually consist of 4 compounds, covering both solid tumors and hematologic malignancies progressing into registration studies and this will be positioned for future.

That's great. Maybe we can start with the commercial side of things and your domestic business in China, you were able to increase guidance already this year and which is relative to the street end. Can you maybe provide a high-level characterization of how the sort of post-COVID environment in China is from a commercial perspective? And what are the trends or dynamics that you think investors may not be aware of there?

Well, we actually -- during our annual results call in March, I believe, end of March, we provided guidance for 2023. And that's based on end of the year 2022 results and our expectations of our product performance in China. Obviously, you all know that first quarter, China was hit by a major outbreak of COVID, but now it's over. So at the moment, the way things are progressing, we are highly confident that we will be able to deliver the guidance this year. And basically, China commercial continues to grow very robustly. This year, in particular, savolitinib was now included on the NRDL as well, although a bit late started March 1. But still, we are seeing a major effect on that -- on the product performance in China. So we believe all 3 products will perform very well this year. Most importantly, I think with all these NDAs -- NDA submissions we have lined up in the next maybe 6 to 18 months for all these compounds, plus our potential introduction of compound ex-China, fruquintinib potentially end of this year. So we expect our international income or revenues will kick in towards the end of the year and certainly into next year. So we expect the China -- the commercial anyways, the revenues and inc profits accelerate even based on the rapid growth in China even pass it.

Okay. Great. Congratulations on the fruquintinib NDA with priority review. With respect to the filing, now that it's been affected, and you have priority review, what are sort of the intermediate steps that are left between now and your November PDUFA for you to complete the review process?

Yes. Very good question. Basically, prior to review is a 6-month time frame and everything, all the activities are compressed into 6 months. So we've been really working very closely with the review teams at the agency, and they have constant flow of questions, and we always respond as quickly as we can. But in addition to the review related interactions, we have to also complete inspections, clinical inspections as well as manufacturing sidings. So these are expected to happen in the next couple of months.

So those are the sort of remaining items -- primary items on the checklist, clinical trial, site inspections plus manufacturing and validation of commercial supply and so forth?

Right. Right.

Okay. Great. With regard to the review, since you've been granted priority review, one of the interesting trends in the last year or so has been questions about foreign-developed drugs and representation, I guess, 4 for fruquintinib. Would you expect an ADCOM possibly to happen here given you are a foreign sponsor? Or how do you think about that given that you have priority review?

Yes. So that's an interesting question, Paul. But I would actually characterize FRESCO-2 as a global trial rather than China trial. FRESCO is a China trial. But FRESCO-2 is actually a global trial with 150 sites across U.S., Europe and Japan, Australia. So it really meet submission criteria for U.S. FDA. Whether the agency request an ODAC or a panel discussion, it's obviously up to the agency. We have not been notified to date.

Okay. So you have not been notified at least of any current expectation for an ADCOM at this point of time?

Right.

Okay. Great. Maybe turning to the commercial outlook for CRC here. How would you characterize the current treatment practice and sort of the market options and market sizing currently? And then as you think about what you and your partners might do to help foster adoption of fruquintinib down the road here in the U.S. market. Can you maybe characterize what some of your high-level plans are there?

Yes. So CRC is a major tumor type that ranks in the top 3 across different regions in the world. And also, the recent progress on IOs has not made a major impact on CRC. So there's a clear, very strong unmet medical needs, particularly in a refractory setting. So we are working very closely with our partner to -- we've had a lot of interaction, a lot of meetings in terms of preparation for launch and strategic positioning for the product. And we believe fruquintinib -- the data that has demonstrated so far in various trials, clearly indicated it's a very active drug as a monotherapy. So we believe it will provide a very much needed treatment option for these patients. Longer term, we think at the ASCO this year, we already presented multiple studies, most of them in vascular initiated studies, looking at fruquintinib -- use of fruquintinib in different settings in combination with IO, treating in combo or treating in sequence, a very interesting level of difference perhaps because of the anti-angiogenesis activity by fruquintinib primes the tumor vasculature allowing better infiltration of cytotoxic T cells, for instance enhancing clinical activity further. But also multiple posters were presented at ASCO looking at fruquintinib activity in combination with chemos in second line, even in first line with chemo and IO. So in CRC, we think fruquintinib is proven very active and well tolerated. It can be combined with chemo IO, and we believe, it can be used in the future. Obviously, additional studies are required to confirm these activities. We believe it will play a major role -- will have a major impact on CRC patients across it.

That's really interesting. I know you said a lot of these studies were investigator sponsored, but is there 1 or 2 that stand out in your mind, whether it's from a sequencing perspective or from a combination perspective that looks most promising that you would think about it as a potential company-sponsored study down the road, maybe in the frontline population as you mentioned?

Yes. I think -- I mean, clearly, this data while still emerging and early, we believe if confirmed, fruquintinib in various settings can provide additional clinical benefit to patients. AIO, well we have sponsored a proof of concept study in combination with sintilimab in China. We demonstrated basically PFS almost doubled and OS significantly extended. And we are evaluating its potential to actually sponsor a potential registration study. However, multiple -- not just one, multiple IITs or investigator initiated trials, looking at usage of IO in sequence. This is based on the hypothesis that at the refractory or late stage, these tumor vasculatures are very, very leaky now and preventing cytotoxic T-cell infiltration effectively into the tumor. So these investigators explore actually treat patients with fruquintinib as monotherapy in that line, that's what is approved for in China. And at progress, when patients progress, they add IO on top of fruquintinib. And these patients start to benefit again. And this extends basically PFS much longer than when you add IO from the beginning, basically. So perhaps the -- it is effect of anti-angiogenesis fruquintinib. At the same time, it normalizes to some extent, the tumor vasculature allowing much about it more effective T-cell infiltration tumor.

Very good. Speaking of your commercial partner, Takeda, you late last year announced a strategic shift of reprioritization, which ultimately led to this partnership as well. Can you maybe first remind us of the mechanics of your upfront arrangement with Takeda, how it's structured? And then obviously, your first focus on this PDUFA that's coming up here in November for the U.S. But could you maybe comment on how you think about future development with your partner in markets outside of the U.S. and outside of China?

Yes. So we believe Takeda is the right partner for fruquintinib. They are very strong -- they have a very strong global presence commercially and oncology is their priority. And fruquintinib will be a very important product for them. So we are working very closely with them. And -- with regard to the payment -- we already announced that we have received $400 million upfront and the remaining will be basically a milestone payment, both regulatory milestones, but also commercial milestone in the future. So that's how the deal was structured. And in terms of future development, we are evaluating several indications. We already alluded to a potential additional usage or different usage in CRC, whether it's IO combo or chemo combo into earlier lines, for instance. But in addition to CRC, we believe the data generated in China so far, then the studies we sponsored, clearly indicate potentials in gastric non-small cell lung and so forth.

Okay. And then in terms of you and your partner advancing in Europe and other geographies?

Yes. So obviously, Takeda has the rights to fruquintinib outside China. So they will be leading all the studies globally, including U.S., Europe and Japan and other markets as well. So all the future development will be led by Takeda.

Okay. Great. Switching to other parts of the pipeline and maybe savolitinib. Can you maybe talk a little bit about where you are with the various development opportunities there, maybe starting with lung and your partner there? And then -- as a follow-up question in the EGFR space, how did the most recent updated ADAURA data make you think about the opportunity for savolitinib and TAGRISSO in this EGFR MET population.

Yes. So savolitinib -- there are a lot of things going on -- a lot going on with savolitinib. In China, it was approved for the Exon 14 skipping non-small cell lung cancer. So we are the sponsor in China, and we are conducting multiple registration studies, expanding its usage in different settings. So we completed enrollment for the confirmatory study in China. We expect to file maybe later this year or early next year. This will expand fruquintinib into first line. A second study is in second-line EGFR TKI refractory amplified non-small cell lung cancer. So this study is enrolling. We had -- the COVID outbreak had some effect on the enrollment, but now we are working very hard to bring them back on track. So we think we can file probably towards end of next year. And we also have a study in first-line carcinoma. This is targeting patients with EGFR mutation, but also that overexpression. So that is activated in these patients. So adding savolitinib upfront, hopefully can extend the progression-free survivors for these patients. So with regard to ADAURA and there are other studies as well. So we think it clearly demonstrates there is a strong unmet medical need in second-line setting when patients progress on EGFR TKI. At the moment, double chemo is the standard of care. In China, there is now a PD-1-plus the EGFR-plus double chemo, which is pretty heavy and not a lot of patients can tolerate. ADAURA basically, TAGRISSO plus chemo, maintaining EGFR inhibition. That is another incremental added benefit to these patients. But all these on nonselected patient population. And I really hope that they have -- in the future, they can publish whether this treatment can -- how this treatment can benefit net amplified patient population. What we think is that the study we are doing, specifically adding a MET inhibitor on top of MET amplified patient population. We think this is a biomarker selective patient population. And these patients will have confirmed activity with the combination. And they have all the data to rely on basically -- and on top of that, all other treatment options, potentially if approved, will be very complex with chemo involved, both these will have chemo as the base and just not very, very convenient in terms of compliance, but also patient tolerability with a long-term chemo treatment.

Okay. Okay. Great. Can you maybe speak specifically to the SAVANNAH trial and as well as your prior TETON trial. How you think this is going to inform thinking about your potential registration path there going forward for savolitinib, particularly with regard to the U.S. and ex-China markets on that opportunity.

Yes. And I think this is a very -- it's a very complex situation. But starting from the TETON study and then followed by SAVANNAH study. So we clearly demonstrate for these patients, about 1/3 of patients progress on EGFR TKI, these patients have met amplification. And we -- and these studies demonstrated TAGRISSO in combination with savolitinib will provide very good clinical benefit to these patients. But what we have done in the early part of SAVANNAH, it's all about dose optimization. As you know, we did -- we compared the 600-milligram QD versus 300-milligram BID. So we determined the 300-milligram b.i.d. is better tolerated, but also provides very good targeted coverage. The other thing is biomarker selection, the cutoff. So the SAVANNAH -- early part of the SAVANNAH is we also explored FISH IHC at different cutoffs. So we determined IHC 90% for the 3 plus and for the FISH, gene copy number is greater than 10. So these are really important criteria for patient selection. And based on that -- based on the data we had, we are aligned with the U.S. FDA for the potential accelerated approval pathway. And that's why late last year, maybe third quarter last year, we converted SAVANNAH into a pivotal study for U.S. It's been enrolling for the last 9 months. We expect that this pivotal portion of the study will complete enrollment fairly soon after the PFS follow-up, we'll be able to by next year in the U.S. But globally, we are in parallel now conducting a Phase III registration study. This study will serve as a confirmatory study to SAVANNAH in the U.S. following potentially conditions.

Your SAFFRON study.

That's the SAFFRON study. But also will support global registration.

That's great. So this could potentially represent next year your second U.S. NDA filing or for your second drug, which would be potentially the fourth drug -- China developed drug to be approved in the U.S. after fruquintinib, that's great. Maybe turning to other aspects of the pipeline briefly for surufatinib and the opportunity in the Japan market. Can you maybe update us on your regulatory interactions there and talk about potential partnering in ex-Asia markets for surufatinib.

Yes. Happy to. So surufatinib, obviously, we all know U.S. FDA recommended an MRCT in representative patient population to support registration in the U.S. So we are actually planning for that. But Japan is obviously Asian comparing to China population is very similar. So we are in a pre-alignment with the MDA that a bridging study could potentially support registration in Japan, including the 2 Phase III studies that we completed in China. So that bridging study is -- data is maturing, and we expect to share the data with the agency with MDA later this year. And if the data supports and they still think that the patient population as we discussed previously, the China, through China pivotal sites can support registration in Japan, then we will prepare to file in Japan. So that -- before that can happen, we need to -- we expect to have a pre-NDA meeting, what they call pre-NDA consultation -- that should happen likely later this year, likely fourth quarter.

And the bridging study data is something you would present at a medical meeting possibly or top line? How do you think about it, sharing that with the market?

Yes, definitely will be presented at a scientific conference.

Okay. Great. switching maybe to your hematology pipeline, and you mentioned earlier, an initial focus on follicular lymphoma and marginal zone lymphoma there. Can you maybe talk about the development strategy there? And I think people are probably more familiar with these diseases primarily with the BTK space. But maybe you can talk about how you guys potentially fit into these indications and your commercial strategy going forward there?

So I think that our R&D strategy, both in solid tumors and in heme is still about selecting targets ultimately will best cover the space. So at the moment, we already have 6 compounds in clinic and with potentially 3 more to come -- so in the lymphoma, we have all Syk inhibitor, PS3 delta, we have EZH2. We actually have an internal program EZH1 to do inhibitor as well. All these are targeted for various subtypes of lymphoma. And we also have a CD47 monoclonal antibody as well. So we think of the space, the targets we have, relatively diverse and will cover lymphoma quite well. In leukemia, we have an IDH1 and 2 inhibitor which covers 1 and 2 together about 25%, 30% of leukemia, AML and also MDS. We have a second program, which is about to -- which at the moment is R&D staging and will be perhaps in clinic towards very end of this year. It's a menin inhibitor, highly differentiated, very potent, very selective and with a very good safety profile. Menin covers about, again, 1/3 of AML. So -- and with also in the future potential to combine with CD47 as well. So we think in leukemia, we are getting there now with this target therapies. And in multiple myeloma, we have -- we have also a couple of targets, including an ADC, which will be our first ADC being multiple myeloma.

I think people forget that you're expanding beyond small molecules right into multiple modalities here.

Yes. I talked about CD47, but also we now have -- we are also working on bispecifics. We're working on ADCs. So this will be a part of our pipeline.

Yes. I'm going to make you answer a difficult question here is. If you have early-stage plant asset that you had to pick that you're most excited about, if you had to pick one, what would you maybe comment on for investors?

Yes. I think it's hard to pick just a single compound. As I mentioned, we are more of a pipeline approach, trying to cover all the space. But going forward, I think our investment in MAP kinase pathway, for instance, we have an ALK inhibitor in the clinic, which is doing quite well. We actually saw some data from Erasca at ASCO looking encouraging. But I think all companies is also demonstrating very good activity in Phase I. We have a SHIP2 inhibitor, which is going to clinic any moment, basically looking for patients already, very well tolerated, highly potent SHIP inhibitor. We also have 2 additional targets along the pathway, including RAS. So we all believe RAS-RAF pathway ultimately will require combinations, upstream or downstream. So now we have a SHIP upstream, ALK 1 and 2 downstream and also something in the middle, multiple targets. So I think, we will be emerging as a major partner in this pathway.

Okay. Great. Thank you for that. I think we're coming up on time here. So we'll end it on that note. My thanks to Wei-Guo Su and HUTCHMED for joining us today.

Okay. Thank you very much.