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

Hello, everyone. Welcome to HUTCHMED 2014 (sic) [ 2024 ] Interim Results Presentation. My name is David, Head of HUTCHMED IR. Our results announcement as well as our presentation slides have already been uploaded to our company homepage as well as the Hong Kong Stock Exchange website. [Operator Instructions] And finally, please read on Page 2 of our presentation slides for the safe harbor statement and disclaimer. The performance and results of operation of the HUTCHMED contained within this presentation are historical in nature and past performance is no guarantee of future results. So without further delay, let me introduce our Chief Executive Officer and Chief Scientific Officer, Dr. Su, to begin our presentation. Okay, Dr. Su?

Thanks, David. Good evening, good morning, everyone. Welcome to HUTCHMED First Half 2024 Results Conference Call. With me today are Johnny Cheng, CFO; George Yuan, Head of Commercial. George joined us a month ago. George is a highly experienced veteran in oncology product sales and marketing. He joined us from Merck, where he had its China commercial operations for the last 7 years with great success. And George will be followed by Mike, who will give a brief update on the pipeline. Next slide, please. Slide #4. Just to give you a quick summary, first half of 2024. We continue to execute on our strategy towards self-sustaining. As a big part of this strategy is globalization. We are launching fruquintinib worldwide with our partner Takeda, and we look forward to filing for approval for our second product, savolitinib in the U.S. later this year with our partner, AstraZeneca. On the pipeline, we continue to file for life cycle indications for the first wave of products. At the same time, the second wave products sovleplenib, tazemetostat NDAs are under review in China, and we expect to launch them in the next 6 to 12 months. Our best-in-class IDH1/2 inhibitor, HMPL-306 entered into Phase III in recurrent and refractory AML. On commercialization, first, an update on FRUZAQLA™ U.S. performance. First half in-market sales reached just over USD 130 million, suggesting strong early uptake. We expect EU and Japan launches later this year. In China, all products experienced a double-digit growth while fighting through fierce competition. Taken together, the combined in-market sales grew 145%, primarily driven by FRUZAQLA™ U.S. sales. So with that, I'll turn it to Johnny Cheng, CFO, to give you more details on the financials. Johnny?

Okay. Dr. Su. So on Page 6, as you all can see, we have made profit of $26 million in the half with revenue of marketed products up 64% at constant exchange rate to $128 million. So oncology consolidated revenue achieved $168 million, on track to meet our full year revenue guidance of $300 million to $400 million. R&D expenditures have reduced to $95 million, mainly due to strategic reorganization of the ex-China team and prioritization of projects. Turning to the next page, Page 7. On the guidance, as highlighted just now, we are on track to meet our full year oncology and immunology revenue guidance of $300 million to $400 million. So we are likely to achieve the high end of the guidance due to the potential additional commercial milestones from Takeda. In addition, we're also likely to receive EU and Japan related milestones in the second half. Moving on to the next page, Page 8. On the balance sheet, as you can see, we continue to maintain a strong cash position of over $800 million. So on the bank borrowings, we have drawn from a low interest-bearing facility, for the construction of our new Shanghai factory. We are getting net positive income as our actual borrowing rate is lower than our interest rate earned on our short-term deposit. Now I will pass to our Head of Commercial, George Yuan. George?

Thanks, Johnny. First, as Dr. Su mentioned, we have a very strong start of fruquintinib in the U.S. This shows you the -- Slide 10 shows you the U.S. results. We see a very strong Q1 and an even stronger Q2. And if you look at the future, we are expecting Japan approval in a very quick fashion. And also we are waiting for EU reimbursement decision. Next slide. And look at the China market for fruquintinib in a very competitive market, we still deliver a double-digit growth. And we are still the market leader in the third-line mCRC. And we believe the mCRC still has room to grow in China. Additionally, we received Hong Kong approval for mCRC third-line. Next, move to the next slide for SULANDA. This is -- we are delivering in the first half of this year, we delivered a very good growth, and we are the #2 brand in the NEN treatment market and also we are gaining market share. If you look at the guideline, we get a multiple endorsement for the treatment in CSCO and CACA guideline. And also, we believe there's a lot of room to grow because this area is still under-diagnosed. And some of the treatments still need to be more rational and afford -- to form the guideline. If you look at the next slide, ORPATHYS®. Our first-in-class MET inhibitor. We see the market become more cloud. The growth of the first half of this year is still strong and the MET 14 testing become a standard of care in the market. We still believe with AstraZeneca's strong platform in lung cancer, we can deliver a much stronger growth in China. Look forward, we are preparing our ITP market growth. If you look at this market, this is our first-in-class launch in China, and we are -- these products pave way for us to move into an acknowledged field and we will sequence our business priority to address the low hanging fruits first then going to a major market after an NDA application. Then if you look at the company, we are preparing the market, we are preparing the products, and we are preparing the organization to prepare the launch. And if you look at the overall China commercial environment, we believe with the current encouragement of China innovation, the market situation becomes more favorable for the innovative medicine. Now let's introduce Mike, our CMO.

Thank you, George. Next slide. Yes, our product pipeline continues to grow and mature. As you can see, we are actually making a lot of progress. We have 6 NDA or supplementary NDA are under review globally, not only for fruquintinib, we have international approval based on the FRESCO-2. We also have the FRUTIGA and also the FRUSICA-1 for additional indication in gastric cancer, in endometrial cancer. More importantly, we also have a new product under review. We have the sovleplenib for the second-line ITP and also a new product, Tazemetostat we licensed from Ipsen also under priority review in China. And additionally, we have the savolitinib also for the confirmatory trial for MET exon 14 under review for first line non-small cell lung cancer. So additional pipeline continues to grow. We are very excited. Later this year our partner, AstraZeneca, based on the SAVANNAH trial, will have the potential to bring the savolitinib into the U.S. NDA submission. And also in the next few years, we continue to advance our pipeline in the registration study. And Dr. Su mentioned about the RAPHAEL study, our new class compound IDH1 and 2 inhibitor HMPL-306 also we initiated the Phase III trial. Next slide. Slide 18, we have presented our second-line gastric cancer for fruquintinib in combination with paclitaxel at the ASCO Plenary early in February and also had updated results at the ASCO Plenary session. We're really pleased that the robust clinical data showing the doubled objective response rate and also the progression-free survival. And also we look at the longest overall survival in the second-line setting has been reported. And this NDA is currently under a CDE review Slide 19, please. And also, we update our FRUSICA trial. And fruquintinib with PD-1 sintilimab in the endometrial cancer reported the results at ASCO that we have seen very robust overall response rate, 35.6% overall response rate and the medium PFS 9.5 months. So this NDA has been accepted under priority review at the CDE. Next slide. Also, the -- our fruquintinib plus sintilimab in the RCC also fully recruited. We are waiting for the events for later this year. if positive, we're going to file additional NDA for fruquintinib in the RCC. Slide 21. And also, we are very excited about our next new product, our first innovative molecule, the SYK inhibitor we reported with our ESLIM phase I -- ESLIM-01 trial in the Phase III at the EHA and also with the simultaneous publication and the Lancet Haematology. And really shown this compound as a very robust, best-in-class molecule in heavily pretreated patients over 75% of the patients pretreated with TPO/TPO-RA also show a very robust durable response rate of 48% and overall response rate of 71%. And this platelet increase is very rapid within -- after a week and also, the side effect profile is very favorable compared with low off-target events and has no thrombolytic events like TPO-RA has. And also internationally, we started the Phase I trial in ITP in U.S., EU and Australia. And also at the EHA, we presented our clinical proof-of-concept trial for warm autoimmune hemolytic anemia and also selected plenary presentation also show very robust 48% durable response rate and overall response rate of 67%. So the Phase III trial has already started enrolling patients. And for international development, we really think this is a great molecule as a best-in-class potential multiple development opportunities, for example, in second-line ITP, in TPO/TPO-RA pretreated patients. And also there are other opportunities in combination with standard of care and also potentially secondary ITP or other autoimmune diseases. Slide 22. We're also excited to see the advancement for savolitinib our MET inhibitor. We have approval in China and also our global partner, AstraZeneca is completing the -- has completed enrollment and with the readout in the second, third-line TAGRISSO combination trial with MET aberrated patients. So the results we're waiting eagerly with the potential for our second international NDA later this year. And also in China, we already submitted the MET Exon14 in the first line and also the -- as a confirmatory trial for full approval, in MET Exon 14 skipping new data patients. And also the -- our second-line EGFR refractory patients with MET amplification, the SACHI study, we're aiming to complete the enrollment later this year. And in addition, our partner and continue to enroll in the other 4 Phase III trials ongoing, 2 led by AstraZeneca and 2 in China. Next slide. And also at the R&D Day, we updated the outside world about we are launching this Phase II/III trial for surufatinib in combination with chemo in first-line pancreatic cancer. This is really based on the high unmet need and also the robust clinical data we have seen from IIT trial in surufatinib plus camrelizumab, the PD-1 inhibitor with S1 and ABRAXANE versus the standard of care, AG. We can see the overall response rate of reaching 50% versus 27%, median PFS 9 months versus 5.8 months and also the long overall survival of 13 months. So this is really exciting data. We really continue to enroll in this Phase II -- II/III trial and further advancing our pipeline in this first-line PDAC. Slide 24. And also, I mentioned that RAPHAEL trial has started enrolling patients. This is our first dual inhibitor, IDH1 and 2 mutated double mutant inhibitor and stressing a high proportion of AML patients and with high unmet need. And we have reported our data, both the China AML trial and also the international trial, we have seen very robust dual CR response. Next slide. As you can see, we reported at the RP2D dose, which is 250-milligram loading dose followed by a 100-milligram dose, we have observed very robust CR and CRH rate in the IDH1 mutated patients. You can see we reached 50%. And in the IDH2 mutated patients, we see 62.5%, which is a really robust result if you're excluding the co-driver mutation with FLT3/KRAS. And also very importantly, we observed very long overall survival, and we have seen the 13 months overall survival in this IDH1, IDH2 mutated patients. So really showing this compound has a best-in-class potential inhibiting both IDH1 and IDH2. So the Phase III RAPHAEL trial is currently ongoing and enrolling patients. We are very excited about this compound. Next, I will turn back to Dr. Su.

Okay. Thanks, Mike. To sum it up, we had a strong first half and we are optimistic about the second half. Our previous target was to achieve profitability by end of 2025. We believe we are well on our way and potentially ahead of the curve. Looking ahead, there are a lot of events on this map, all lined up for 2025, 2026 and beyond. These events, if achieved, will help fuel the growth for years to come. This concludes the presentation, and thank you again for attending the call. The next is going to be Q&A.

[Operator Instructions] So let's first start with the very first question. It will be Alec Stranahan from Bank of America.

Congrats on the progress in the first half. Great to see the FRUZAQLA launch hitting on all cylinders in the U.S. Two questions on SAVANNAH. First, how do you see the data earlier this year at AACR for Savo as potentially reading into what we could see in the full data readout from SAVANNAH later this year? And then who would be leading the U.S. submission for Savo? And is the year-end timing sort of from you guys or from AstraZeneca or both?

So briefly, obviously, AstraZeneca is leading the trial. And -- but for NDA submission, it will be a complete package, including preclinical, early development. So we will be contributing to the package. But operationally, AstraZeneca is leading the whole thing. In terms of data, I'll ask Mike to comment.

Yes. So we have reported our data previously, right, the WCLC and particular MET driven population. We do see a good MET amplified patients with 50% of overall response rate and over 7 months PFS. So certainly, we are quite excited about this molecule and the clinical data. And so we'll expect the readout of course, from AstraZeneca, right, once the data matures later this year. If this is positive or repeat for previous study -- previous result, it's certainly per the agreement with FDA, this will be the NDA submission package AstraZeneca is going to submit.

Great. And maybe one quick one, if I can, just on FRUZAQLA, given you guys are manufacturing for Takeda, what kind of inventory stocking dynamic do you expect is going on? And what kind of inventory levels are you guys shooting for?

So we are obviously helping Takeda on the manufacturing. I think they are catching up on the inventory. In the early going, it was pretty thin. I think now pretty much caught up. At the same time, now we are preparing for the European launch and also the Japan launch as well. So we're basically doing full-time manufacturing for Takeda to support the preparation for launches.

Congrats again on the progress.

So our next question is from Chen Chen of UBS.

So my first question is on fruquintinib. Well, it has very strong sales momentum in the U.S. So any chance for us to raise the sales guidance. And also, can management please elaborate a bit more on its like EU sales strategy. And can you please also like update on the regulatory approval status like in China in second-line gastric cancer. That's my first question. And my second question is on sovleplenib. I want to know like it's China commercial strategy and what is our sales guidance for the first year of commercialization. And also any like BD progress and it would be good if you could also elaborate a bit more like is U.S. and EU clinical trial plan?

While we are happy with the early performance of fruquintinib in the U.S., we -- I mean, Takeda doesn't have any -- at the moment, doesn't have any update on the forecast or guidance. So we'll let you know as soon as we hear from Takeda on that. Regarding Europe, obviously, it was approved in late June, and we've been supporting Takeda in preparation for launch there. And it's going to be country-by-country. Obviously, price negotiation, reimbursement payer is obviously, it's very complicated. So -- but we do expect a potential launch before end of this year in Europe. And I think Japan will -- at the moment, the NDA review is on track as well. Sovleplenib, obviously, BD discussions are ongoing. We continue to engage with potential partners. And at the same time, we just focus on clinical development globally or outside China, as Mike mentioned. The dose optimization study kicked off early this year, and we have multiple centers in the U.S. and in Europe now open and we are just screening patients and enrolling patients at the moment. And I would expect that the business -- the enrollment discussions will continue along with clinical development as we progress through the dose optimization and towards potential registration -- or kick off the registration study. I think that's about clinical development. In terms of China commercialization or China preparation for China launch, a lot of work is going on at the moment. As George already pointed out, we are still working on the marketing strategy and also preparing the organization as well. So work is ongoing. We -- at the moment, we don't have any forecast for next year. I think we'll have to work through the models. And I think a major piece of it will be pricing. At the moment we are not ready to make any decisions on that yet. So when we are ready to share, we'll share with everybody the -- our forecast going forward. So really nothing to share at the moment other than to say we are working very hard to prepare for the launch.

Can you also is let us know the regulatory approval status of fruquintinib in second-line gastric cancer. Can we expect anything in August or September?

So all we can say is that the NDA review is still ongoing, and we don't comment. We actually can't comment on regulatory processes. But maybe, Mike, if you have anything to add, please chime in.

Yes. I think like Dr. Su said, right, the regulatory is ongoing, we cannot comment on it. And although we have prepared, I mean, the updates, right, for additional analysis to CDE, but we anticipate the decision will be Q3 this year.

[Operator Instructions] Next question is from Jefferies, Clara Dong.

This is Clara on for Kelly. Congratulations on all the progress. So just one quick question on fruquintinib. After around 10 months of launch in the U.S., obviously, we've seen really good launch momentum. I wonder have you see any dynamic of fruquintinib being used in earlier lines in colorectal cancer. I'm wondering have you and your partner, Takeda, discussed any opportunity for fruquintinib beyond geographic expansion like what's the appetite like for potential further development?

Obviously, U.S. launch is still young and very early into the launch we don't have any information. Actually, Takeda has not shared with us any information regarding usage in early lines. With regard to clinical development, maybe Mike can share more about data generated in China in earlier lines -- second line, first line as well as maintenance setting. And these are very -- I think there are a lot of strong data there, and we continue to discuss with Takeda, how we position in this particular disease segment. Mike?

Yes. So we have done quite some IIT study in earlier line setting. First, I think reported both at ESMO last year and also ASCO-GI and the ASCO this year, right? They are first-line, [indiscernible] setting combined with gemcitabine, where we actually see very good tolerability and a long PFS1 and PFS2 was reported. And also in the second line setting, there are also multiple IITs really working on the combination with standard of care, including for [indiscernible]. And also that was reported, have pretty good overall response rate and the PFS. So it's certainly the safety for combo does really well, does really reflect fruquintinib is highly specific VEGFR inhibitor and combined with a lot of other therapies, right, PD-1, chemo or so. And also, we see the combination with PD-1 also see quite good survival data. So we are providing all these information to Takeda. And certainly, the Takeda team is [indiscernible] and positioning their development down the road.

Our next question on the line will be Cavendish, Mr. Adam McCarter.

Great presentation and obviously, congratulations on the results. Great to see the news on FRUZAQLA and the momentum it's getting in the U.S. I guess my first question really is, again, just on fruquintinib and the story that's evolving there in gastric cancer. So obviously, I'm not asking the management team to predict the outcome, but I don't know if you could sort of give us an indication of how confident sort of you are in the strength of the data package that's been submitted to the Chinese regulators. And then just sort of a second question just on looking at the cost going forward to the second half of the year. Obviously, we saw the first period. So quite a reduction in the R&D expenses, but just wanted to see understand how to think about that going forward, obviously, with the initiation of the ESLIM-02 and the RAPHAEL Phase III studies into the second half of the year.