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

Good day, and thank you for standing by. Welcome to HUTCHMED 2023 Full Year Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to pass the call over to your first speaker today, Mr. Mark Lee, Senior Vice President, Corporate Management and Communications of HUTCHMED.

Thank you, Desmond. Welcome, everybody. Good morning, good afternoon and good evening. Just a brief message as usual. The performance results and the operations of HUTCHMED are historic in nature and past performance is no guarantee of the future. We've got forward-looking statements, which mean within the meaning of the safe harbor provisions of the U.S. SEC. This presentation is for investors only. And information on pharmaceuticals are not intended as advertising or medical advice. This presentation contains statistical and other third-party data which we have not independently verified. So we can't guarantee on their accuracy. Nothing in this presentation constitutes an offer for sale of shares. No representation warranty is implied on this information. And anything in this presentation should be read in conjunction with HUTCHMED's results for the year ended December 31, 2023. So with that, I'd like to hand over to Dr. Wei-Guo Su, our CEO and Chief Scientific Officer. Wei-Guo?

Okay. Thank you very much, Mark. Good evening. Good morning. Welcome again to HUTCHMED 2023 annual results presentation. 2023 was an exceptional year for HUTCHMED. We focus on fruquintinib global registration and launch with our partner, Takeda, while continuing to execute on our strategy towards profitability. This is a year where we made significant progress. The pipeline progresses significantly, not more significant than the U.S. approval of fruquintinib for advanced CRC, a historic milestone for HUTCHMED. Financially, we ended 2023 with a very strong cash position, thanks to the Takeda partnership and also strong growth from our China commercial operations. Next slide, Slide #4. Let me quickly introduce the agenda today. So Johnny Cheng, our CFO, will go through the financial results for the full year 2023, followed by commercial update. Mr. Chen Hong is not available today and Johnny will cover for him. And next step will be Dr. Wu, who will be giving a manufacturing update, particularly on our new facility and also our global supply strategy, followed by Michael Shi, who will be giving an update on our late-stage pipeline and I will wrap it up and followed by Q&A. And for the Q&A, the full team will be available. So now for details of all the updates, let me invite our CFO, Johnny, for financial results. Johnny?

Thank you, Dr. Su. And can we turn to Page 6? So we have a strong cash position at end of last year with over $880 million cash, contributed by $400 million of upfront payment from Takeda. So for which we have recognized $280 million with the remaining $120 million to be recognized over the course of the next 3 years. Can we move to the next page, please? Page 7. So our operating performance, we have -- regarding the top-line, we have doubled the total revenue from last year to over $830 million. So oncology consolidated revenue was around $530 million, which met the high end of our guidance. As to the bottom line, we made a sizable profit of over $100 million contributed by restructuring of our U.S. commercial operation, prioritizing R&D investments and tightly controlling operating expenses. Moving on to the next page, our 2024 oncology guidance. Page 8. So our 2024 oncology guidance is $300 million to $400 million, driven by 30% to 50% growth target for marketed product revenue. This guidance is in line with our 2023 product revenue growth of 39%. Moving on to the next page, Page 9, a quick update on the sales of our FRUZAQLA in U.S. Takeda achieved a $15 million in-market sales in the last 7 weeks of '23 after FDA approval. So we are now waiting for approval from EU and Japan, targeted some time later this year. As shown in the bar chart below, besides the U.S. there is a significant unmet medical need in EU and Japan for CRC patients. Okay. So we move on to the commercial on Page 11. So China commercial environment. Just to give you a quick update, a number of new policies have been issued recently to support greater access to innovative medicines. So for example, accelerating the review process for breakthrough designated drugs and simplifying the NRDL renewal process. On the right-hand side of the chart, you can see we have scaled up our commercial presence, deepening hospital penetration, also expanding pharmacy coverage. Turning to the next page, Page 12, for ELUNATE performance. We have continued to grow our business and achieved over $100 million in market sales in 2023. On the right-hand side, as you can see, we have further expanded our market share over STIVARGA. Moving on to SULANDA, next page, Page 13. We were able to maintain strong growth for this product, achieving 43% growth versus last year. On the right-hand side of the chart -- actually, we should be on Page 13. On the right-hand side of Page 13, as you can see, we are widening our lead over Sutent and Afinitor in terms of market share. Moving on to ORPATHYS. Page 14. This is a product commercialized by AstraZeneca and was admitted to NRDL in March '23. They have overall achieved a 19% growth despite a 38% price reduction after NRDL inclusion. So looking forward, based on strong clinical results from the confirmatory study, we may have a potential label expansion to first-line later this year, which could drive stronger sales growth. I will now pass on to Dr. Wu to give you an update on our manufacturing operation. Dr. Wu?

Thank you, Johnny. Let's go to Slide #16. As you will hear throughout today's presentation, what we are typically trying to do is to; one, increase number of products in the market in different indications; and two, try to expand into other markets. So our manufacturing strategy is trying to support this goal for the company. So in the last year 2023, we've been focusing on expanding our capacity for both China and the global market. The first thing we would like to update you is our Shanghai facility, and we have completed the facility construction and qualification. So now we're in a very good position to leverage this brand new facility, which will give us 5x more capacity. And we intend to have clinical supply made here this year. And also, we're doing work to enable us to commercial supplies from this facility to be ready in 2025. Another area we've been focusing on is to establish a global supply chain. As you know, we have our fourth product launched in the U.S. And so we have done well in this regard with our API CMO in China qualified for the U.S. market. For the drug product, we actually have 2 sites qualified. Our Suzhou site, it's our own facility, which we passed the pre-approval inspection by the FDA that was qualified. We also qualified a site in Switzerland as CMO that will supply a drug to the U.S. market. As we gain approval for the EU and Japan, this supply chain will also be ready for making supplies for those markets. And last, I want to mention that in this new Shanghai facility, we have installed a solar panel so we could reduce our electricity usage and also reduce the emission, and that's always a part of our ongoing efforts. Thank you. And now I would like to introduce Dr. Shi, who is going to tell you about our pipeline. Mike?

Thank you, Dr. Wu. And Slide 18, please. Our clinical program continues to grow and mature and cover broad spectrum of hematology and oncology product. And here, the slides showing the 15-plus ongoing registration for the 7 leading product globally. And just to highlight a few key milestones. And in addition, fruquintinib approval in the U.S. last year and the EU filing and the Japan NDA submission, we also make a tremendous advancement in the life cycle indication, fruquintinib NDA for second-line gastric cancer accepted for review in China and also the pivotal Phase II for our second-line endometrial cancer and Phase III renal cancer in combination with sintilimab also completed recruitment. And we expect an NDA filing early for 2024 for EMC and top-line results for the RCC in the end of 2024. And also for savolitinib, an exon 14 non-small cell lung cancer confirmatory trial Phase III already achieved a positive result and we expect the NDA filing early '24 and including the new label expansion in the first-line setting. And also our partner, AstraZeneca, also had a pivotal global Phase II trial, SAVANNAH, completed recruitment and also the potential U.S. filing around the end of 2024. And also, we are very pleased that sovleplenib, our novel Syk inhibitor and for the primary immune thrombocytopenia, the ESLIM-01 trial also achieved positive Phase III and the NDA acceptance and granted a priority review in China. So it will be also achieved a positive Phase II readout for sovleplenib in another autoimmune indication, warm autoimmune hemolytic anemia and the Phase III will start in Q1 this year. And the other product, the bridging study for tazemetostat, our in-licensed product from Ipsen, will have the readout and potential filing later this year. And also multiple life cycle indications launched product and the late-stage asset in registration trial expected to readout and file NDAs for 2025 and '26 in the timeframe, so paving the way for accelerated growth in 2025 and beyond. And I also want to provide an update for another hematology product, amdizalisib, our PI3K inhibitor. And in view of the changing regulatory environment, we are currently valuing the clinical development plan and the regulatory path before designing regulatory strategy for indication. Let's move to Slide 19. And also, I want to highlight the fruquintinib China second-line gastric cancer trial. And this has been -- let's go to Slide 19, please. I don't see the advancement. So gastric cancer is expanding globally and newly diagnosis case over 1 million and China is really accounting for 44% of global new cases. And treatment option is very limited in the second-line gastric setting, representing an urgent and manned medical need. So the FRUTIGA trial is designed to treat the fruquintinib in combination with paclitaxel in this second-line gastric cancer. So we could have passed 700 patients, and this -- we're hoping to expand the new indication. So Slide 20 highlights some of the top-line results for FRUTIGA. And trial results was selected for ASCO Plenary presentation. Slide 20, please. Fruquintinib plus paclitaxel almost doubled the progression-free survival and from 2.7 months to 5.6 months, hazard ratio of 0.6 with a p-value less than 0.0001. And the Kaplan-Meier curve show an early separation in favor of fruquintinib plus paclitaxel group and also maintain over the duration of the study. And this improvement of PFS is not only statistically significant, but also clinically better meaningful. And next slide, Slide 21. And for overall survival, the other dual-primary endpoint, we see fruquintinib plus paclitaxel prolong OS from 8.4 to 9.6 months, absolutely improvement of 1.2 months. However, the OS did not reach statistical significance. And so we observed there is an imbalance between the 2 treatment groups with 20% more patients in the placebo group receiving subsequent therapy compared to fruquintinib group. So the OS result could be confounded by these subsequent therapies. Next slide, Slide 22. Further analysis were conducted to examine the OS in patient received and did not receive subsequent anti-tumor therapy. And the results here support the OS benefit in addition fruquintinib to paclitaxel. The OS was improved regardless of whether the patient received subsequent anti-tumor therapy or not. Although the patient without the subsequent therapy, we do see a statistically improvement of OS. This is a pre-planned analysis. Moving on to the next slide, Slide 23. So the 23 present a promising second-line treatment offer in gastric cancer. So the Slide 23 shows to put the FRUTIGA data into perspective with another approved therapy second-line treatment option in China with ramucirumab plus paclitaxel. This is a cross-draw comparison, showing the RAINBOW-Asia study, which is a large study of over 400 patients. So you can see the fruquintinib clearly show a more robust improvement of the overall response rate and the PFS and also numerically better OS improvement. Slide 24. Okay. So I also mentioned about the other fruquintinib life cycle indication development. We received the breakthrough designation in China for a combination with sintilimab, Slide 24. Yes, so in the endometrial cancer. The EMC indices on mortality are really projected to grow in China and the patients who are progressed on first-line therapy remains very high unmet medical need. So we have completed the single-arm FRUSICA registration Phase II trial study and the regulatory filing expected early 2024. Slide 25, please. Increased mortality rate in RCC in China also outpaced the other [ developed nation ] and the second-line treatment options remain very limited. So we have completed second-line RCC FRUSICA registration trial. And this is a Phase III trial versus axitinib or everolimus in second-line setting. So we completed enrollment last year. And hopefully, the favorable results from this trial could potentially lead to regulatory filing late 2024. Next slide, Slide 26. The Phase II trial fruquintinib plus sintilimab, a POC study in RCC was published in the ASCO 2023. The results are highly encouraging with ORR about 60% and the medium PFS almost 16 months. So the POC result is highly favorable compared with other IL plus VEGF therapy in RCC. And we anticipate the top-line results later this year for FRUSICA-2 Phase III trial and the subsequent NDA filing in 2025. Next slide, Slide 27. And our second wave molecule are advancing rapidly in the late-stage development and sovleplenib, which is a highly differentiated our Syk inhibitor with a breakthrough designation in the immune thrombocytopenia in China. And the current treatment target either TREG or B-cell pathway for producing autoantibody or stimulate the megakaryocyte to produce more platelets. Syk offers a dual mechanism by targeting both B-cells to inhibit autoantibody production and also prevent the macrophage to destroy the platelet. So we have completed the China Phase III ESLIM-01 in the second-line plus ITP patients. It met the primary and secondary endpoint. NDA is accepted by NMPA this last month and the priority review for breakthrough destination. So we are very -- also cleared the U.S. IND for our Phase Ib/II trial and in the start-up stage for global development. Next slide, Slide 28. So 28 is IQVIA report on the China ITP treatment landscape. We believe sovleplenib not only can compete in the currently treated ITP patients, about 250,000 patients. And also, they can potentially help the patients who lost follow-up primarily due to no other effective treatment. Slide 29, please. We are particularly encouraged by our Phase I/II trial, demonstrated a robust overall response rate of 80% overall response and the durable response rate of 40% in relapsed/refractory ITP patients. The high response rate are on par with the current widely used second-line treatment option, which is TPO-RA. Despite in our trial, the sovleplenib trials had even more heavily pre-treated patients and with 75% of patients who also failed the prior TPO-RA treatment. And compared with the other approved product, Tavalisse, which is a Syk inhibitor, you can see only the 18% durable response and 40% overall sponsor. So clearly, sovleplenib has the best-in-class potential in the ITP indication. Next slide, Slide 30. And we also achieved a positive Phase II. Yes, the ITP Phase III ESLIM already completed and we submitted NDA is under priority review. Hopefully, we can see the approval later this year. Okay. Next slide, Slide 31. And similarly, like ITP and sovleplenib also currently in development in another autoimmune indication, warm autoimmune hemolytic anemia, serve the same mechanism by preventing the red blood cell engulfed by the macrophages and also prevent the autoantibody production from B-cells. So this unique dual mechanism can also be a potential treatment option for the ITP patients -- for the AIHA patients. And so the targets already got achieved and we are starting the Phase III shortly. Okay. Slide 32. And also I want to mention the other product. There are 7 registration trials for the MET inhibitors, savolitinib and currently enrolling, they are led by our partner AstraZeneca globally for 3 trial and HUTCHMED leading the other 4 indications, including newly initiated Phase III gastric cancer in the second-line setting. Next slide, Slide 33. And we have presented our first-line MET Exon 14 data in non-small cell lung cancer with MET Exon 14 skipping mutation. It showed a deep and durable response for 60% overall response rate and the updated data will be presented at an oral presentation next month at the ELCC in Prague. Next slide, Slide 34, please. And also updating you about the progress of savolitinib global development and global pivotal SAVANNAH trial has completed the enrollment. And despite some of the new data readout like MARIPOSA, TL05 and ORIENT-31, we believe savolitinib plus TAGRISSO represented oral-only chemo-free option for biomarkers like the MET-positive patients in EGFR mutation who progressed on TAGRISSO. And the anticipated U.S. NDA filing around late this year by our partner AstraZeneca. And it will be a huge catalyst for HUTCHMED after securing the U.S. approval in the RCC. So we are bringing our second in-house developed novel medicine closer to global approval. Okay. So just to recap our R&D progress, and we have a deep and broad portfolio in oncology, hematology and also recent advancement in autoimmune disease. So I'm very proud of our R&D team and the global partners remain focused and executed very well for the past year and a multiple near-term global development catalysts for 2024 and to 2025. So I will turn the stage to Dr. Wei-Guo Su, our CEO and CSO. Wei-Guo?

Okay. Thank you very much, Mike. Let's go to Slide #36. So 2023 was an extraordinary year. We made a lot of progress in 2023, both in R&D, the progress in the pipeline as well as commercialization in China. We managed a great robust growth in China commercial. But obviously, we are most proud of fruquintinib approval in the U.S., our first approval outside China, a big step towards our vision of bringing our innovative medicines to global patients. 2024 and beyond, obviously, we have a lot to look forward to on our way to profitability hopefully by 2025. We will focus on near-term and mid-term launches of new products and new indications in China. We are obviously very excited about sovleplenib for ITP. ITP represents a major unmet medical need in China, as Mike pointed out. Almost half of the patients after they try everything, they remain -- their medical need remain unmet. And obviously, the second indication, wAIHA, now in registration trial for sovleplenib as well. All at the same time, we expect the approval of fruquintinib in Europe and Japan as well as the NDA submission potentially in the U.S. for our second drug savolitinib with our partner, AstraZeneca. So this is again a major progress for savolitinib. And these regulatory activities will ensure a steady flow of new approvals and accelerate our revenue and profit growth in years to come. We are confident about our goal of becoming self-sustaining by 2025 and well positioned for accelerated growth beyond 2025. So next slide, just to wrap up, Slide #37. Again, we are really focused on execution of our strategy towards self-sustaining 2025 and look at our product portfolio and new product approvals outside China, for instance, savolitinib for lung cancer and also sovleplenib moving outside China for clinical development as well. So we are extremely excited about the near-term and longer term for that matter, future for HUTCHMED. And with that, I would like to thank you for your attention and close the presentation and we'll be open for Q&A. Thank you.

[Operator Instructions] Our first question comes from the line of Louise Chen from Cantor.

Congratulations on all the progress. So first question I wanted to ask you is what you've learned from the U.S. launch of FRUZAQLA? And how can you apply that to the rest of your global expansion initiatives? Second question I wanted to ask, I know you went over a lot of this in the presentation, but just to distill it down for investors. You do have a very large and productive pipeline, so what are the key readouts and events that you think we should really focus on? Maybe if you could pick 2 or 3.

Okay. Louise, maybe I'll do a quick response and I can ask Mike to chime in. So FRUZAQLA launch, I think Takeda is a great partner and they prepared well. And we work together very well through NDA submission, both NDA submission in the U.S. and MAA in Europe as well as Japan submission. So we work together extremely well and we also prepared the launch extremely well as well. Given in the U.S. the approval came ahead of our original expectation because it was granted priority review and approved only even less than 6 months, but Takeda really prepared well and we work together very well as well. So for instance, we had drug product all mapped out and we were ready to go as soon as we received the approval. The first prescription was written within a couple of days basically and NCCN guideline inclusion within 1 week. So clearly, Takeda was ready to go, the launch team, and we were waiting for the approval. So I think it kind of demonstrates the power of partnership, if you will. And going forward, in EU and Japan, we'll be doing the same. And for our second product, savolitinib, obviously, our focus now is on NDA submission behind SAVANNAH. Obviously, we have so much data to support and submit. So we'll be working very closely with AstraZeneca on savolitinib. We believe it's a great drug. With regard to pipeline, we continue to actually prioritize our portfolio and make sure that we invest on the highest value projects. So behind the 3 approved products, we believe sovleplenib can be a very important product. Not only it's going to be the first immunology product, but it represents a very different -- entirely different indication, talking about chronic disease and a major unmet medical need. Almost half of the patients, they stop trying because nothing works for them. Behind sovleplenib, we have additional compound -- we moved into several compounds, we actually moved into registration studies, including our IDH1/2 inhibitor for AML and also potentially solid tumors as well and more targeted therapies in the pipeline as well. But these are really for future registration and launches. So we'll be actually really focused on sovleplenib in China this year and also global development. We have a meeting scheduled with FDA to discuss the registration path and the plan. So really important for sovleplenib. So I think we believe it is going to be a major product for us. Mike, do you have anything else to add on?

Yes. I think just add on to Dr. Su mentioned, right, sovleplenib clearly represented a major novel mechanism for the ITP and other autoimmune disease. So it's just we're going to present our Phase III data in an upcoming conference and publications. So hopefully, that will put a very strong path forward for the development plan. And then also to add on the FRUZAQLA product launch, I think the HUTCHMED team and Takeda team actually worked very well together. We actually planned the drug supply ahead of the time. We are really hoping we can really launch in October timeframe, just to get that to the patients, right, to prescription. So the product launch preparation went very well. The add on to the NCCN guideline in a week time. And also, I think Takeda is really having a strong Japan presence. So if we are doing alone, I don't think that we can actually submit Japan that soon. So I think that's really a good collaboration with our global partner. And we hope that savolitinib going to repeat for our next molecule to reach the global patients.

Next question comes from the line of Alec Stranahan from Bank of America.

Congrats on the progress in '23. 3 quick ones from me on sovleplenib. I guess, first, what is your go-to-market strategy for sovleplenib if it's approved? Would you be able to handle the launch leveraging your current sales force in China or would you need maybe a separate commercial arm given it's a new indication for you? Second question. How big of a contributor do you see this in your current 2024 oncology revenue guidance or could this be maybe additional to that? And then just lastly, I know you said in your press release that you plan to initiate clinical development outside of China for sovleplenib in 2024. Would the plan be to partner for these studies? And I guess, ultimate commercialization ex-China?

Okay. Thanks, Alec, for the question. Sovleplenib commercial launch, obviously, we already started to prepare. We have the infrastructure in place. We obviously need to build a special team to support it. So that's the current plan in China. Obviously, we can leverage the -- our commercial infrastructure in China. We do need a special team to support marketing and also sales as well. So that's the plan. And we are -- we obviously have time to prepare. With regard to revenue contribution to 2024 in our forecast, it's almost -- it's nothing basically. We expect it to be approved towards the end of the year. So contribution should come actually in 2025. '24, we'll probably just get going as soon as it's approved, but that will be towards -- really towards the end of the year. Your last question about U.S. development or ex-China development and partnerships. So as I mentioned, we have a meeting scheduled with the FDA shortly and we'll discuss the development -- our development plan and seek endorsement from FDA. Once that's clarified and we'll get going very quickly. Partnership discussion, these discussions are ongoing as always. And I think once we publish the data, very soon actually, it could be some time mid-year this year at a major conference. Also, at the same time, we'll publish the proof-of-concept data for the second indication, the wAIHA, all very strong data. So I think it will attract more potential partners. So the plan is to just kind of -- we're already engaged, but we will continue to engage with potential partners. And I expect once we have clarified the development pathway outside China and also the data is published, we'll probably intensify the discussion.

Our next question comes from the line of Paul Choi of Goldman Sachs.

Congratulations on all the progress. My first question is on savolitinib and with regard to the SANOVO study, which you expect to I believe complete later this year. Just in terms of the incremental opportunity in terms of the frontline population, can you maybe just expand on how many patients are currently actively treated in China with available MET inhibitors? And just kind of how you think about the commercial opportunity there for the first-line opportunity? And then I have a follow-up question.

Yes. So Paul, at the moment, savolitinib is approved for second-line and above non-small cell lung cancer with Exon 14 mutation or skipping mutations. So that's the label. Obviously, given the extent of its efficacy comparing to chemo or I/O as well as now we already published the first-line data, I would not be surprised there could be some usage into the first-line. But all in all, I think it's been at the moment mostly second-line patients. The population in first-line, we think -- we believe it should be much bigger. And that you have combined to better clinical -- even better clinical benefit for these patients. So we believe it will translate into a significant opportunity.

Okay, great. And then as a follow-up question, maybe turning to -- back to sovleplenib for a minute and ITP. As you think about sort of different standards of care in markets and regions outside of China, how are you thinking about potentially coordination on a placebo arm or whether the studies will require an active comparator arm just to harmonize requirements, let's say, between the U.S., Europe and other geographies? Just maybe some high level thoughts on whether an active comparator would be required versus placebo-controlled trial would be great?

Yes. Again, for this specific question, we don't have a lot to offer at the moment, Paul. We'll be in discussion with the FDA very shortly. And once we have it clarified, we'll let you know. Actually we'll announce once we are into clinical development in the U.S.

Our next question comes from Kelly Shi from Jefferies.

This is Clara on for Kelly. Congrats on the progress. So maybe just a quick question on ITP. So once the global study will be initiated, how should we think about the cost change on R&D in general? And also for warm autoimmune hemolytic anemia, how large is the market in China? And like what do you need to see for this indication to initiate maybe future global development?

Okay. Thank you for the question. Well, ITP, it's at the moment -- anyways you can see the market or the treatment has been dominated by TPO or TPO-RA, but a lot of patients -- there are a lot of other treatment options, but not necessarily approved, some of those are just off-label usages. So we believe sovleplenib represents a novel mechanism of action. Patients, there are a lot of patients that they don't -- they probably already tried everything. And typically, somewhere between 8 to 10 years of various treatments and then they -- if nothing works for them, they just gave up or they just lost to follow-up. So it represents a big unmet medical need. So I think ITP is a very specific disease. So how we're going to deal with -- target the patients globally outside China. How big is the study. So we like to understand the same -- particularly as you say, the impact on our R&D spending. So until we have clarity, until we align on the development plan with FDA, it's hard to estimate. And obviously, a lot to do with the study design, the line of prior therapies, for instance, the sample size and so forth. We also -- behind the FRESCO and FRESCO-2, we would at least share the data with the U.S. FDA on FRESCO-2 -- sorry, on ESLIM-01 study in China, hope that can serve as part of the core registration studies. So whether this can reduce the sample size for this upcoming study outside China or how we think about this. So it all depends on this discussion with FDA and alignment with the FDA. Until then, we think it would be manageable in terms of the cost. Certainly, if we line-up a partner, then it should be less of -- it will be much less material on the cost. The warm autoimmune hemolytic anemia, which is actually a very rare disease. It's even more rare than ITP. However, it has almost no treatment today. So it represents a very rare disease with an even stronger unmet medical need. So we believe this mechanism should target this disease very well and sovleplenib has generated very strong proof-of-concept data. We're already into the Phase III in China. And likely, we could do the same outside China once we align with the U.S. FDA on ITP, when a dose optimization completes, it could be an option.

Next question comes from the line of Mike Mitchell from Panmure Gordon.

Great performance for the period. Just one focused question and one broader question, if that's okay. And the focus question on fruquintinib. I'm just thinking, of course, we have the submission in with the China regulator for gastric cancer. But in terms of ex-China development on gastric, what should we anticipate in terms of the appetite for potential further development? I'm just thinking about the overall survival endpoint and the standard of care reference used in the FRUTIGA study. So just thinking what else you might need to do to [ orate ] the product for other markets or is that just not on the agenda at present?

The short answer is not relevant for outside China in the second-line setting. You just mentioned the standard of care difference for instance. As a matter of fact, at the ASCO Plenary, there was a panel of experts on the call and kind of concluded great data could be a treatment option for patients in need. However, the data will not support outside China registration. Separate study needs to be done because of the standard of care difference and patient difference as well. So yes, the same study will not support global registration. However, we continue to believe fruquintinib has a role in gastric cancer, whether in combination with chemo, such as paclitaxel or in combination with I/O PD-1, for instance, we actually published a very strong data in combination with PD-1 as well. So in gastric cancer outside China, we think there is a role for fruquintinib, how we design the study, which line to target. We are still assessing this opportunity.

Okay. Got it. No, that's really helpful. And then just on a more broad question. I know there will be a little bit of give and take with the recognition of Takeda payments in the P&L, but I'm just thinking about the balance sheet strength and how R&D tracks from here in light of the lower R&D spend versus last year? There was obviously a shift pre and post the new strategy in terms of how hard you wanted to push on R&D investments. But is this still going to be a story of managing it within a range or is there an opportunity to fine-tune, perhaps accelerate internal investment from this point onwards?

Yes, good question. So as I mentioned earlier, we will be very careful on spending, very prudent on spending and we actually routinely now do portfolio prioritization, looking at every compound, every indication very carefully to make sure -- just to make sure that we invest the highest value project possible. So we don't see any expansion or any increase of R&D costs this year.

We have no questions at this time. Allow me to hand the call back to management for closing remarks.

Okay. Yes, thank you all very much for attending the call. And we'll be happy to be further engaged through email or any other communication channels or if you have any questions, let us know. Thank you.

That concludes today's conference call. Thank you for your participation. You may now disconnect.