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

Okay. We'll continue with the next session. My name is Paul Choi, and I cover the biotechnology sector here at the firm. Our next panel is with HUTCHMED. We're joined to my immediate left, Michael Shi, CMO; and to my far left, David Ng with IR. What we'll do maybe is give Michael and David maybe just a minute or 2 to sort of give a quick overview of HUTCHMED, before we jump into questions, and then we'll go with that.

Sounds good. David?

Yes. So let me do a quick introduction. So we are HUTCHMED. We're a small molecule, innovative drug company based off China. We have already 4 drugs commercialized in China. And of the 4, one of those 4, we actually also get the FDA and the EMA approval and launch already. We have global sales of about $290 million from this product called fruquintinib, which is a VEGFR inhibitor for colorectal cancer. And we do have a second one upcoming. It's currently in a Phase III trial. It's a c-MET inhibitor for lung cancer. We partnered with AstraZeneca. So fully maybe 2 years' time, we will have our second drug being able to go overseas. Apart from this, what we call the bread and butter of our operation, we do have a next technology or next-generation technology platform called ATTC, which I'm sure that Dr. Shi will elaborate into in a while. We have a very strong balance sheet, over $1 billion in cash, profitable last 2 years and we target to remain financially self-sufficient in the upcoming years.

Okay. Great. Thank you for that. Maybe let's start with sort of the big picture. And I guess it's no secret or it's a fairly obvious thing to say that U.S. and China are having a little bit of diplomatic tension here. So -- but this is something that's out of your control as a biotech company. And so maybe to the degree you can quantify it or as you think about it, how does this sort of macro consideration affect you as a company?

So I guess for the overall macro picture, of course, it's very unpredictable. So we can only try to do our best. I think one thing that we decided about 2.5 years ago is for overseas market, we decided to out-license. So while we do have the capability, the scientific and clinical capability to push through to the very last stage before approval, we decided at that time due to what you mentioned, geopolitical risk as well as also the capital market uncertainty that we out-licensed our product. So in retrospect, it was a very good decision in the sense that we do get the upfront payment. At that time, the upfront payment accounted for almost half of our balance sheet. At the same time, we got the mid-double-digit royalty from our partner, Takeda, which have been doing a fantastic job in launching the drug, and we continue to pursue this strategy. So I know people will worry about different things, including tariffs and things like that. But in this instance, we -- the cost that we supply to Takeda is like a very small single digit of the ultimate selling price. So even if tariff is being applied, it's a very, very small number or percentage of the ultimate sales of the product. Now of course, we remain very vigilant of any latest development. But so far, we have to say that the impact has been relatively minimal on our business, and we continue to pursue this out-licensing strategy for the overseas market. Whereas for domestic China, we do everything by ourselves, manufacturing and marketing and clinical development. So this is continuing to be our business model.

Okay. Great. Maybe staying on the topic of Takeda and your partnership there. To your earlier comment, the launch to date of fruquintinib called FRUZAQLA here in the U.S. market has been going pretty well. And so you talked about your earlier partnership with AstraZeneca, but maybe at a high level and a strategic level in terms of markets outside of China, how do you think about continuing to develop partnerships or expanding on your current partnerships going forward here?

I think we continue to -- and we will work -- continue to work hard to attract overseas partnership. And I think the gist of it is we do need to have good product and then good clinical data to support it. So I think definitely in the history that's something that really defined HUTCHMED. We -- our partnership, for example, with AstraZeneca was dropped 13, 14 years ago when the product is just about to enter clinical trial. And the data that you have just seen coming out from this product just like 2 weeks ago from ASCO is very impressive. So I think there's a very strong case for us to secure even more partnership down the road for our future products. And again, like the thing definitely is on the top of our mind is the ATTC program which is about to enter into human trial later this year. This is definitely a program that we will continue to discuss with potential partners, maybe when the data start to come out in the next 2 years. And again, the key thing is that we want to make sure that it's good quality data and good quality products to secure multinational pharmaceutical partner.

Maybe just to add on to David's point, right, FRUZAQLA, it's a very good experience, right? Our partner Takeda has a very strong base in medical commercial setting in the U.S., in EU and Japan, right? So from the product launch perspective, they have a good penetration with the community oncology. Oncologists here in the U.S. and also just the growth in Japan is pretty impressive. So they have a massive experience. So which we don't have the commercial end to accomplish. So it's been very good so far.

Yes. I want to come back to your point, David, in a little bit on the data you presented at ASCO, which I agree was very impressive in the context of the post-TAGRISSO EGFR landscape. But maybe just sticking with FRUZAQLA here in the U.S., you have an approval here for previously traded recurrent CRC, which Takeda is marketing here. But can you maybe talk a little bit about what is in the clinic in terms of potential life cycle management plans for this molecule and just thinking about how you might expand the opportunity set beyond CRC?

So maybe I'll add on to the point because in China, we -- because the earlier development, we have pretty good experience for life cycle indication. So we just got approval for fruquintinib plus sintilimab in the second-line endometrial cancer earlier this year. And also, we have recently announced the top line results for second-line RCC also fruquintinib plus sintilimab versus axitinib and everolimus in the second-line RCC. So we're going to present the data in a later conference and the NDA has been submitted and it has just been accessed by NMPA a few days ago. And for our partnership with Takeda, initially, we focus on some of the indications where we can generate clinical evidence, for example, in CRC, gastric cancer in certain areas. And certainly, our partner Takeda is continue to evaluate the life cycle we have taken the knowledge we have generated in China position fruquintinib FRUZAQLA's life cycle indication globally.

Okay. Great, you touched upon a number of opportunities, Michael, in China, one of which I think the most interesting and the largest probably would be the RCC opportunity just from an incident sort of mathematical basis here. But can you maybe just remind us in terms of the China market right now? Is there a utilization of PD-1 plus TKI combinations? I think typically in the U.S., people think of Opdivo plus nivolumab plus cabozantinib or pembrolizumab plus another agent there? And just kind of what is the landscape like in China for you as -- for your sintilimab plus fruquintinib combination?

Yes. So this is actually the indication if it is approved. It will be the only PD-1 plus VEGF in the second-line setting. So I think the market is actually -- could be very, very good because if you think about the scale, although we haven't presented data yet, but just the Phase II data has been presented at ASCO 2023. We actually show 60% of overall response rate and a pretty long progression-free survival, 16 months in that particular setting. So this is -- we think this is -- unlike CRC, you have several months PFS, but this is actually a very long duration, clearly show fruquintinib has a differentiated safety to combine with other molecule. In the larger context in China, the dominant first-line therapy is still VEGF inhibitor. Although there are some -- you'll see -- start to see the combination of PD-1, VEGF show up in the first-line setting. But we think in the market potential with the unique second-line setting with the only VEGF and PD-1 will have a continued opportunity to penetrate the market.

Okay. Great. Maybe sticking with the performance of ELUNATE in China, fruquintinib in China. Can you maybe talk us a little bit about what's the competitive dynamic like in terms of that particular product there? And how does your relatively recent label expansion in endometrial cancer potentially helped to offset some of the competitive dynamics where I think you guys are first to get that indication?

Yes. So definitely, in China, things get competitive very quickly, as you can imagine. Of course, in the colorectal cancer landscape, our competitors start to have some generic substitutes in China. Now of course, our patent still has a couple of years of runway, but then we start to still feel increasing competition for the colorectal cancer setting. Now having said that, the endometrial cancer new indication is a good add-on to try to resume the growth rate. Now last year, we have -- we are at around single-digit growth rate for fruquintinib in China. And of course, given credit that is already the fifth year, it is on the market. But coming this year, we have endometrial cancer which, of course, has almost 2x the duration of treatment than colorectal cancer. And as Mike had mentioned, the kidney cancer indication that we are now under review, if it gets approved next year, that will be another nice add-on. And then for renal cell carcinoma, it's even longer duration of treatment. So even though the number of patients may not be as large as colorectal cancer, but the duration of treatment probably much more than offset that. And I guess the other thing that a lot of people worry about the Chinese market is the pricing. With the new indication severely discount the price again. We don't think that is the case. I think with the new or the latest trend of the policy, additional indication, there may be still a little bit discount, but it's not going to be that severe. So we think that these 2 new indications can help to sustain the growth of fruquintinib in China in the next 3 to 5 years.

Yes. Even for fruquintinib, it's been on the market for third-line colorectal cancer for a longer time, but it's still generating continued support and evidence, right? And so I think from a physician perspective, getting fruquintinib approved globally also really impressed a lot of these physician treatment patterns because as a single agent, have very good tolerability, duration on treatment. So continue our medical team and our commercial team will be able to continue to keep the dominating market share.

Okay. Maybe just briefly, you also talked about your recent EMA approval there as well. And just kind of -- like what is the utilization, I guess, in Europe then to date? And can you give us a little bit of flavor as to what's been happening there?

Yes. So I think we get first reimbursed in the Spain, right? And in Takeda is really putting effort in the EU to get the reimbursement across country, in U.K., in Germany or so. So the uptake has been strong. And from their producing perspective, getting reimbursement is the focus. And certainly, this is the new molecule coming to the market is certainly with the U.S., Japan approval generated a strong interest. So they still start to increase, yes.

Okay. Great. I want to maybe switch gears a little bit and come back to a subject you brought up earlier, David, which is your recent savolitinib data presented at ASCO. Could you maybe sort of summarize what we saw between the various data sets as there's probably mostly a focus on the Tagrisso progressors, but just maybe summarize for us the data you presented at ASCO and then we can go on from there.

Yes. So SACHI is the Phase III randomized trial across China in the Phase III setting, right? These are the patients who progress on first-line EGFR TKI, including first, second generation and third generation in EGFR TKI. About 35% of patients actually progress on Tagrisso or third-generation EGFR TKI. So this is the all oral combo, savolitinib plus versus chemotherapy in MET amplified patients. So this -- just science perspective, it is a clear driver for EGFR resistance setting, about 1/3 of the patient population have the MET amplification. So we have this combination savol plus osi versus chemotherapy. So at the time, for the first interim analysis, about 66% information fraction achieved, we have randomized 211 patients. We have clearly shown the clinical benefit, right? The IDMC recommend early stop the trial due to efficacy. We have seen very strong clinical data. The PFS for the controlled chemo arm is 4.5 months. Savol plus osi has achieved 8.2 months PFS, which has a ratio 0.34. So it's highly significant with very significant p-value. We believe this is practice changing clinical data clearly show in the MET amplified patients. This is a strong clinical data regardless of the first, second or third-generation EGFR TKI. So we believe this is going to be -- I mean, we already filed the NDA in China under priority review. Hopefully, we can get the approved second part of the year. One, to bring into the context about the global setting, AstraZeneca is running the Phase III SAFFRON trial. And also last -- I mean, ELCC in March, they present the Phase II SAVANNAH trial, which is a similar setting not only include the MET amplification, but also with the MET overexpression patients. They achieved a 7.5 months PFS overall response rate, 55%. So it's highly consistent with SACHI data. This is going to be a very significant development, not only for HUTCHMED in China, but also AZ with the registration trial ongoing. Hopefully, they can develop -- recruit the patient later this year and the top line readout will be sometime next year. That's going to be a significant value driver for this molecule in the global and the China setting.

Yes. I want to go into the SACHI data. The number you gave of 8-something months is the blended average between patients on first- and second-generation TKIs versus third-generation TKIs. And so you actually saw a higher response -- or a better PFS in the patients who were treated with first- and second-generation drugs, if I recall correctly. So it was even better there. And then you mentioned that the SAVANNAH data in terms of the global cohort versus the China-only cohort SACHI is pretty comparable on average. And so I guess, one of the things that stood out to me was the discussions comment at ASCO that this is potentially a new standard of care for this population, as you said, likely practice changing. But we also saw over the weekend some other EGFR treatment experience data from the HARMONi-A study, which was almost briefly discussed during the ASCO panel. It's not exactly the same population. It's not MET amplified or MET overexpressers, but can you maybe help us contextualize, again, what population you guys are looking at versus some of the other EGFR combination studies?

Yes. Thank you, Paul. This is actually a very good question, a very important one because for the savol plus osi combo is the only oral combo and the biomarker selected patient population because amivantamab MARIPOSA-2, HARMONi also, these are unselected patient population. What we observe, I mean, just compare apple-to-apple for the post third line generation -- a third-generation EGFR TKI resistance, that's really representing the global products. We have 1/3 of the patients in the SACHI trial, also fit in that category. What we observed is the PFS in chemo control arm -- remember, these are MET amplified patients with the fresh biopsy of the progression. These patients actually performed very badly because the overall PFS is only 3 months. And in this patient population, savol plus osi achieved 6.9 months PFS. Again, the hazard ratio, it's very significant, 0.32. And also very interest -- to your point, we also observed MARIPOSA-2 to publish their biomarker data in the ASCO -- same ASCO setting, it's very interesting because the control arm for MARIPOSA-2 is very similar to our SACHI third generation EGFR TKI with the PFS 3.1 for the chemo arm, similar to our chemo arm, but the amivantamab plus chemo, the PFS is only 4.4 months which is not that significant. You actually start to wonder, right? Because these are poor prognosis, MET-driven disease. We're actually surprised -- actually amivantamab didn't perform that well for the SACHI data tells us the combo with the EGFR-TKI and the MET inhibitor demonstrate the most significant response in this patient population. So we think moving forward, in a biomarker selected patient population, the MET inhibitor plus EGFR TKI is going to be more efficient, or more efficacious treatment regimen for a patient and this physician to select the treatment.

And maybe just contextualizing against the biospecific HARMONi data that came out over the weekend. We don't have all the details yet, right? But just maybe high-level thoughts there?

Right. So the HARMONi data what they report is the -- they have to achieve PFS benefit, right, similar like the China trial, but the OS is towards the trend, but it really demonstrate the OS benefit. So also contextualize about this treatment for the SACHI trial will be run is actually the patient, once they progress on the chemotherapy, they will allow to cross over the MET TKI. So in the SACHI trial, over 55% of the patient actually cross over to the MET inhibitor. What we observe is also there's an OS trend increase with 5 months over improvement although in most of the patients cross over the EGFR TKI in this MET-driven patient population, we think demonstrate OS benefit is actually -- is not easy, but we actually start to see that separation. At this point, the OS maturity rate is only 40% for SACHI.

So less than half so far?

Yes. So we can continue to follow up on the OS data. On the global set, the SAFFRON trial, which AstraZeneca is running actually will not allow the patient crossover the EGFR - the MET TKI. So we would think in the global setting, there is a high chance they can not only demonstrate PFS, but OS benefit could potentially be also wider than we anticipated in SACHI.

And just to add on that, right? All these other trials are not MET-specific patients, right? So they are all comer. And then for the longest time that we were trying to figure out like for MARIPOSA-1 and 2, which got approved for all comers, how do they perform in MET specifics of group. So we don't know until actually the ASCO data come out at the MET-specific of group perform worse than the MET, you know ...

Onetime.

Yes. So that's a little bit interesting. I mean like we can only speculate maybe because these, like antibodies just can attach on surface of the cell, whereas for us, which is a small molecule, we can find to intracellular receptor, and that may play a role in our efficacy being superior when we do this cross-trial comparison.

Okay. Great ...

We also have seen this, right, from a clinical parties perspective. These patients have very poor prognosis. You almost have to identify the driven disease given the most effective treatment early to give them actually a second chance to see the product post-treatment therapy. So testing MET certainly is important. Well, I think the clinical physicians really realize testing the MET amplification is very important in order to support patients to live the most efficacy treatment at that point.

Maybe just one more on your last point, Michael, I think the presenter at ASCO mentioned that in the China SACHI study that the patients were identified through local FISH, mostly. But just for the global study, SAFFRON, how are patients being identified there? Is there a standard? Is it just based on local practices? How do you harmonize for that and just make sure you're identifying the correct patients?

Yes. So for SAFFRON, it's actually AstraZeneca defined the biomarker selection for the amplification, FISH and also the IHC for MET overexpression with IHC 90-plus patients. So that include even broader patient population compared with SACHI. And we think this is going to be -- I mean, it's actually quite standard. Even in the China development, we actually follow the SAVANNAH -- develop the biomarker selection criteria. So all these centrally test the biomarker in order for patients to be recruited in this trial. Yes.

Okay. Great. Maybe last one is, you talked about data potentially coming in '26. Is that still the case here? And then just sort of thinking about time lines for you and your partner to do global regulatory tilings, Will that also happen in '26 as well?

Yes. So as I mentioned, the recruitment is close to finish. And our partner projection, the SAFFRON readout will be next year. And global filing will soon follow.

Yes. Okay. Great. Maybe turning to other aspects of your pipeline. I've always felt like in the past year or 2, one of your most promising internal assets has been savolitinib, which you've worked on, and you've shown very strong data in ITP, in Chinese patients, and you've also filed on it. Can you maybe just remind us for what you saw in your China-only study? And then just sort of what rough time lines what the NMPA might be for since you filed?

Yes. Right. So we present the ESLIM-1 data at EHA last year was showing very robust durable response rate, which is the primary endpoint, right? Because just to give you a context for fostamtinib, it was the -- another Syk inhibitor, first marketed leading to the approval have overall -- I mean, the durable response rate, 18% but such, ESLIM-1 data, we show a sovleplenib in the second-line setting, ITP observed a durable response rate of 48%, which is really not only compared with the Syk inhibitor, but also different modality of treatment. This has really show very impressive or durable response rate. So we filed for the China NDA and it was under review at NMPA. So during the report review process, we actually observed based on the discussion with the CDE, there's -- we're addressing there's impurity issue. So we actually changed the excipient for this formula and we'll continue testing the stability on the rolling base. We updated the agency about the stability data. So our current projection is going to targeting for the approval later this year.

Okay. So that would potentially be included in the next round of drug pricing considerations, if you make it through -- get a decision in this calendar year ...

June 30 tend to be the usual time. So it will be in the -- next 2026.

Okay. Got it. Okay. And then maybe just broadly speaking, I think this asset has potentially multiple applications as well as probably should be considered for global markets and other opportunities. Just in broad strokes, what sort of your global development plans here?

Yes. So we are continuing to evaluate the global development plan, right? Because as you can see, international development, you have to consider all the other competition. Now the latest observed, Sanofi filed the BTK inhibitor and also the CD38 monoclonal antibody also in the global registration. So we are actually evaluating the treatment landscape about the globin. Certainly, we'll have the thinking about how we can develop this molecule for the global market. Yes.

Okay. Great. Maybe in terms of other considerations for this molecule, you've mentioned in the past, think about follicular lymphoma, where FL as a potential adjacent opportunity here. I think, typically standard of care here in the U.S., European and most major other markets, has been BTK utilization. So can you maybe talk about the pros and cons and sovleplenib versus maybe what I think a standard of care which typically is BTKs here?

Yes. So I think what you mentioned, sovleplenib, we do have a follicular lymphoma development. We do have a pretty good data presented in this setting, right? And as you know, we also have a China right for another molecule, the EZH2 inhibitor in follicular lymphoma, tazemetostat. We actually get it just approved this year. So we are launching the product in a month or so. So in terms of the treatment landscape, tazemetostat is our first push for the hematology product, third-line follicular lymphoma. Also in our collaboration with partnership with Ipsen, we are running a global SYMPHONY-1 trial, tried to move it into the second-line setting. That trial is ongoing combination with R2 globally. So we -- that's also our priority to move it to earlier line, second line follicular lymphoma setting. So for sovleplenib, we are still evaluating that in terms of the treatment landscape, how we're going to develop programs. To your information also, we have another molecule is a BTK inhibitor and we are also generating quite interesting data. We're thinking about how we -- in the hematology space, how we can really fully develop our heme pipeline globally.

Great. From Dr. Su on down, you guys have excelled that working on medicinal chemistry in the small molecule space. But in recent years, you've also talked about other modalities, including ADCs and other mechanisms to some other degree. Can you maybe just at a high level, in the time we have left, talk about sort of what are your other modality efforts at least at this stage and when we might start to see a little bit of clinical data from those programs?

Yes. So earlier this year, we actually announced we are focusing on a new kind of platform. What we call is antibody target therapy conjugate, ATTC. This is the new platform we have developed in this -- really leverage our 20 years of experience in a small molecule. Linking this small molecule to the antibody. And so the first wave of antibody we selected these are clinically validated antibody. We have a function activity in the multiple tumor type, linking with our target therapy because a lot of reports showing the toxin-based ADCs, patients readily develop resistance particularly for patients with a genetic driver mutations. So our approach will have the opportunity to addressing the resistance for the traditional ADCs because the key advantage is really by linking this antibody -- because it's traditional small molecule oral target therapy also have a narrow therapeutic window. So if you want to have a sustained tumor suppression, they need a higher dose and then you see the safety issue. So this approach, the ATTC will allow us to deliver the target therapy precisely into the tumor and have sustained expression. The preclinical data show very robust data, have 1 dose of ATTC has 2 weeks, 3 weeks, sustain the tumor suppression. And also, has the opportunity to combine with other treatment modality, for example, the immunotherapy, target therapy and also chemotherapy because we know a lot of company for this toxin-based ADCs is almost impossible to combine with the other standard of care like a chemotherapy in the earlier line setting. So our ATTC approach really allow us to combine with all these different standard of care in order to move earlier line things. So the approach for us is selecting the target therapy to target with border mutation frequency and also the function mono can cover very broad tumor type and allow us to combine with different therapies to really helping to prevent the disease progression and have a higher chance to win in the earlier line setting. So that's a focus for our company in the next few years. The first few molecule, we already nominated 3 clinical candidates, enabling the GLP tox package study now. So our first ATTC will be in the clinic this year. So we're targeting 2 IND submission this year.

Yes. Okay. Great. We're up on time here. So we'll have to end it on that note. Thanks to Michael and David for joining us here in HUTCHMED.

Thank you for having us.

Thank you.

Thank you.