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

Welcome, everyone. Thank you for joining HUTCHMED 2026 Interim Results Announcement and Presentation. Before we start, I would just like to go over the safe harbor statement and disclaimer on Page 2. The performance and results of operation of HUTCHMED Group contained within this presentation are historical in nature, and past performance is no guarantee of future results. Next, I would like to invite our acting CEO and CFO, Johnny Cheng, to start the opening. Johnny?

Okay. Thank you, David, and welcome, everyone, again, joining our interim results webcast tonight. Together with me, we have our Deputy CFO, Lorenso Chiu; also our George Yuan, Head of Commercial; and also our Dr. Dai, Head of Discovery and Global Portfolio Management. All of us will be sharing with you our first half results and outlook. So on Page 4, as you can all see, we have achieved a lot in the first half. China product sales have very strong results, especially ELUNATE and SULANDA, which grew by over 40%. FRUZAQLA global in-market sales were strong. Ex-U.S. markets were up 70% after rapid geographic expansion. On the bottom left, we have received 2 approved label expansions, fruquintinib for RCC and savolitinib for GC. In addition, we have 3 NDAs in China under priority review. On the top right, our next wave of innovation focuses on ATTCs. We have 2 first-in-class assets which have entered the Phase I clinical trials. A third asset, HMPL-A830, has cleared its IND and will be entering the clinic in the second half. At the same time, the global SAFFRON study and the China SANOVO study will have their data readouts in the second half. I will now hand it over to Lorenso Chiu, our Deputy CFO, to discuss our financial results.

Thank you, Johnny. On Slide #6, I'd like to give more details of our financials for the first half of 2026. First of all, our oncology revenue was $162 million, including $121 million products revenue. This represent an about 23% growth over the first half of 2025. Johnny already mentioned our China product sales have shown a very good performance in the first half. I'd like to highlight that ex-China demand for FRUZAQLA continues to grow as well, achieving an overall 40% growth in in-market sales. With this first half result, our full year guidance remains in the range of $330 million to $450 million. Altogether with other ventures revenue, the total group revenue amounted to $278 million. Next, please. On R&D expenses, which amounted to $79 million for the first half, compared to $72 million for the first half of 2025. The increase reflects on one thing, we initiate the global Phase I trials of our ATTC assets, including 251 and 580. In addition, we increased our investments in our discovery capabilities, including our talents and AI. On the bottom line, we continue to be profitable with net income of $16 million. It is important to note in last years, we have included a $416 million SHPL divestment gain, and also the share of the post divestments, about $21 million. With this strong operating results and cash flows, we continue to have a very good cash reserve of $1.4 billion. Now I'd like to hand over to Mr. George, our Head of Commercials, to give an update of our China commercial.

Thanks, Lorenso. As Johnny mentioned, global geographic expansion continue to drive our FRUZAQLA growth. If we look at the first half, we see a 70% growth in the geography outside the U.S., which is very strong. And also, if you look at the Q2, the growth rate actually accelerate to 27%. And also, we still believe that there still has opportunity to get more country get launched and also go into the reimbursement. Takeda already confirmed the fiscal year guidance of a 25% growth. Next slides. If we look at China, our -- we have a very robust growth for ELUNATE. We are in a highly competitive market. If we look at the first half, we are growth at 41%, and the current NRDL renewal bring us a continuous growth opportunity with the second-line EMC included. And also, we synchronized our mCRC reimbursement scope with our label. The NRDL renewal actually provide us a unique opportunity for future growth, and also, we keep our price flat. Second-line RCC get approval in May '26, and also, this provides us another opportunity to apply for NRDL this year. And in -- from based on IQVIA hospital audit and our ATU study, ELUNATE continue to be a market leader in third-line mCRC. Next slides. Beyond FRUZAQLA and ELUNATE, we also have a strong performance on ORPATHYS and SULANDA. ORPATHYS, we have -- we are target to include such indication in this year NRDL, renew by end of this year, and also, we get approval third-line MET-amplified GC. In the coming months, we are looking at SAFFRON and SANOVO readout. For SULANDA, we have strong growth in first half based on the highly recommend by CSCO guideline for the NET. And also, the CSCO guideline change the recommendation about the SSA. The SSA, dose escalation will not be recommend after progression-free -- after the disease progression. And also, this growth is a result our focused strategy -- focus on top-tier city and the top hospitals. Next slides. Looking to the future, sovleplenib, our Syk inhibitor, will bring us into the hematology immunology fields. This is the first-in-class medicine, and it can help patients to transform their treatment in both ITP and wAIHA. If we look at the ITP in China, we have 360,000 patients, and the current treatment, TPO, steroids, still cannot meet the medical needs of those patients. And with this product, we provide a very unique value for those patients for long-term, stable, predictable disease control. Also for wAIHA, which is a relatively small indication, but it's under critical needs for new medicine. We will be the first target therapy after 30 years in the field. And we will significantly reduce blood infusion for those patients. Now, I will hand over to our R&D, Dr. Dai.

Thank you, George. Now, let's transition into our R&D updates. Over the next few slides, I'll share how our late-stage clinical programs are progressing toward key commercial approvals and how our innovative platform is unlocking brand-new opportunities to address major unmet medical needs. Next slide, please. Looking at our recent achievements, we've hit several critical milestones across both solid tumors and hematology. Our novel ATTC platforms represent a huge strategic growth driver for us globally. The early biological profiles of ATTCs gives us high confidence in their ability to target major solid tumors and differentiate from other ATTC products. We've officially taken the first 2 ATTCs into the clinic, A251 and A580, initiating global Phase I trials. The third ATTC, A830, recently cleared the IND in both the U.S. and in China. We secured approval for fruquintinib in renal cell carcinoma in June 2026. This is another important approval for fruquintinib after CRC and in EMC. With surufatinib, we have kept momentum strong with our Phase III trial in first-line PDAC fully on track, addressing an aggressive cancer type with very few viable options. Savolitinib, our second inhibitor, is making rapid progress on lung cancer autoimmune indications. The NDAs for ITP and wAIHA are currently under priority review. These mark huge steps towards establishing a new, highly effective standard of care in these conditions. The pivotal Phase III data of ESLIM-02 was recently presented at EHA this year. Savolitinib expanded its commercial footprint with the third-line gastric cancer approval. This is the fourth regulatory approval for savolitinib after previous lung cancer approvals. And 760, our potent PI3K/BTK inhibitor, successfully initiated its Phase III trial in second-line DLBCL. And fanregratinib reached a pivotal moment with its NDA acceptance for FGFR positive intrahepatic cholangiocarcinoma. The data was featured at ESMO GI this year. Together, these achievements reflect a highly efficient R&D engine, strengthening our commercial presence today while laying the foundation for our global ATTC platform tomorrow. Next slide. Let's dive a bit deeper into our individual core assets, starting with savolitinib, our second potential global commercial product. Savolitinib targets lung cancer driven by MET alterations, which remains an area of significant unmet medical need. We are fast approaching several important milestones. In the second half of this year, we expect data readouts from 2 key studies, SAFFRON on a global scale and SANOVO in China. SAFFRON is our global registration Phase III trial. It targets second-line patients with EGFR mutant nonsmall cell lung cancer who developed MET amplification or overexpression after progressing on TAGRISSO. Currently, these patients are on heavy chemotherapy. SAFFRON directly compares our oral combination of savolitinib plus TAGRISSO against double chemotherapy. When approved, this trial will replace chemotherapy with an oral target option and opening access to major markets like the U.S. and Europe. SANOVO targets the first-line setting. We know that a significant subset of lung cancer patients present with coexisting EGFR mutations and MET overexpression right at initial diagnosis. SANOVO evaluates combining savolitinib with TAGRISSO directly upfront versus TAGRISSO alone. By attacking both targets from day 1, our goal is to deliver deeper response and prevent resistance from emerging. And together with our proven Phase III SACHI data, which showed a dramatic hazard ratio of 0.32 in PFS over chemotherapy, these upcoming readouts from SAFFRON and SANOVO position savolitinib to capture leadership across the entire treatment paradigm in MET-driven lung cancer. Next slide. This slide highlights sovleplenib, which is spearheading our next wave of hematology and autoimmune products. wAIHA is a deliberating disease where red blood cells are destroyed prematurely, leaving patients severely anemic and often they rely on high-dose steroids and frequent blood transfusions. In our Phase III ESLIM-02 study presented at EHA, sovleplenib achieved a 66% durable response rate compared to 15% in the placebo group. Patients on sovleplenib reached target hemoglobin levels in a median of 3.1 weeks, twice as fast as the placebo. Substantial drop in rescue therapy and transfusion, only 16% of sovleplenib patients require rescue therapy, compared to 54% on the placebo. And furthermore, red blood cells transfusions were significantly reduced to just 11% versus 43% in the control group, allowing the patients to taper or completely discontinue their baseline steroids. When you compare this to the emerging peer options like nipocalimab, sovleplenib shows a clear competitive efficacy advantage, delivering a much higher durable response rate, without forcing patients to stay on a chronic high risk immunosuppressants. We are eager to bring sovleplenib to a patient population that hasn't seen a new target therapy option in 30 years, and currently, the NDA is under priority review. In ITP, what sets sovleplenib apart from standard of care agents like TPOs and TPO-RAs is exceptional efficacy without associated thrombotic complication warnings found on their peer labels. In ITP, sovleplenib achieved a striking durable response rate compared to placebo, even though 75% of the enrolled patients had failed prior TPO therapies. ESLIM-01 study is also under priority review in China. Next slide. Turning to Slide 17, let's look at 760, our highly potent selective and reversible BTK inhibitor characterized by long target engagement. Currently, this is the only BTK inhibitor in late-stage clinical development targeting the second-line DLBCL all comers. Our Phase II study showed encouraging response rate, PFS, and safety profile. Our Phase III registration study in China is actively ongoing, comparing 760 in combination with R-GemOx against the placebo plus R-GemOx, with primary endpoints of PFS and OS. And we expect to complete enrollment by the end of 2027. Next slide, please. Here, I want to highlight our novel ATTC platform, starting with A251. ADCs, like in HER2, have transformed HER2-positive cancer treatment, generating billions in revenue. However, acquired resistance to DXd, the cytotoxic payload used in HER2, remains a major clinical hurdle as patients inevitably progress. The DXd induced in resistant model on the bottom show that in HER2 loses potency almost completely, shifting the curve far to the right. In the same resistant cell model, because A251 utilizes completely distinct mechanisms targeting the PI3K and PIKK signaling pathways rather than DNA-damaging toxins. Its killing activity in DXd-resistant cells, shown in the green curve, remains identical to DXd-sensitive parent cells, shown in the blue curve. Next slide. And beyond treating drug-resistant tumors, A251 has strong potential as a frontline treatment, as shown in this gynecological cancer and GI cancer xenograft models. Combining A251 with the first-line standard of care yields significant tumor volume reduction compared to either therapy alone. And crucially, this synergistic effect does not come at the cost of added toxicity, proving A251 can safely be combined, which is what we aim to achieve with ATTCs in the first place, which is better efficacy and better safety. Our clinical strategy is twofold. A monotherapy track for a fast-to-market approach in late-line setting, and a combination track targeting frontline indications. And our extensive pre-clinical data supports the A251 development strategy. The clinical trial is on track at dose escalation stage. Next slide. Our second ATTC asset is 580, which pairs the same payload with an EGFR targeting antibody. Blockbuster drugs like TAGRISSO treat EGFR mutant nonsmall cell lung cancer, but resistance eventually develops. In a nonsmall cell lung cancer model carrying the challenging EGFR exon 19 deletion and the resistant mutation, third generation TKIs like TAGRISSO completely lose control of tumor growth, as shown by the red curve. 580, represented by the blue curve, achieved profound and sustained tumor regression as a single agent. This highlights its enormous potential for lung cancer patients. Next slide. Then by combining 580 with an EGFR inhibitor, we can simultaneously shut down primary receptor signaling and the downstream escape pathways. The pre-clinical data reflects a highly significant synergistic anti-tumor efficacy, supporting our long-term plan to move this asset into frontline cancer regimens. This global asset entered Phase I trial earlier this year. The trial is going very well, recruiting patients from China sites and the U.S. sites in parallel. Next slide. What makes our ATTC platform so unique is the payload itself. Historically, the industry has struggled with PAM pathways, pan-PI3K or dual PI3K [ employs ] small molecules were simply too toxic to be delivered systemically, resulting in severe side effects like hyperglycemia or mucositis. Single node inhibitors were safer, but their efficacy was limited. Our innovation was to design a highly selective payload that harvests multiple key nodes along both the PI3K and PIKK pathways with very high affinity, and then tether it to an antibody. This ensures the payload is delivered inside the tumor cells, maximizing intracellular kinase inhibition while sparing healthy tissues from systemic toxicities. The kinase tree on the right illustrates this high selectivity of the payload. Next slide. The ATTC approach opens up massive opportunities. The PAM pathway is the single most frequently altered pathway across all solid tumors. It plays a dominant role in breast cancer, lung cancer, gastric and ovarian cancers. By effectively targeting this pathway with our ATTC technology, we can potentially reach millions of patients across a wide range of cancer types. Next slide. With A251 and 580 currently in global trials, 830 entering the clinic soon, and more candidates behind them, our pipeline is well-positioned to deliver a sustained growth for years to come. Thank you. And I'll give it back to Johnny.

Thank you, Dr. Dai. A quick highlight on our outlook. So on the innovation side, as mentioned by Dr. Dai, multiple ATTC programs are progressing well, and we believe around this time next year, there should be a total of 5 programs already in clinics. More importantly, our efforts in AI will be transforming and accelerating further discovery and development in our innovation platform. On the commercial side, we expect FRUZAQLA's sales growth to continue. We anticipate it will reach its next sales milestone in the near-term. Regarding our hematology portfolio, our commercial team is preparing for the launch of our immunology assets, which is anticipated to commence next year. And finally, we are continuing to engage many multinational companies on collaboration discussion regarding our ATTC program. I will now pass it back to David to begin our Q&A session.

[Operator Instructions] The first question comes from Matthew of CLSA.

This is Matthew from CLSA. I have 3 questions. First is regarding the collaboration opportunities for the ATTC programs, 2 in clinic and 1 about to be in clinic. So could you elaborate more on the kind of progress, because I think that there's been some expectation of the maybe early-stage collaboration before. So, yes, can you comment on that? And second one is regarding your HMPL-760, the BTK inhibitor. Yes, as you mentioned, you have got initiate the Phase III trial for DLBCL in China. And may I understand how is this drug different from other BTK inhibitors, and why would you choose the DLBCL to proceed for Phase III, as there are no other BTK inhibitors approved for these indications, including the covalent ones and also the noncovalent ones are non-approved? And the third question is regarding on the financial side. I know that the Other Ventures is a low-margin distribution business, but may I still have some color on why in the first half is on a constant exchange rate basis declined by almost 20%? Okay, those are my questions.

Thank you, Matthew. So I will invite Dr. Dai to answer the second question, and Lorenso to answer the last question. And the first question regarding the collaboration opportunity, basically, we are continuing, and we have active multinational companies engaging in discussion with us on, not just one program, but multiple ATTC program. As you know that our programs are still at the very early stage, so different expectation in terms of timeline and information to be provided from our side to the collaborate potential partners. They have kind of different requirements. So all I can say right now it is we are in active discussions with multiple parties, and the discussions are progressing well. When I think the discussions is coming to a close to mature and is disclosable items, then we will be making an announcement to the public. Maybe Dr. Dai, you can answer the question number 2 regarding the 760 BTK.

Sure, Johnny. So, yes, we are -- we have actually started Phase III study, with 760. It is a combination of 760 plus R-GemOx versus R-GemOx. We pick DLBCL, obviously, because it's the largest lymphoma subtype, accounting for about 40% of lymphoma. And no other BTK inhibitors has been approved for this particular subtype of lymphoma. So it represents a huge unmet medical need and good market potential. And with our 760, it's reversible BTK inhibitor, and in earlier clinical study, it demonstrated a very good selectivity and safety profile. And we actually had a Phase II study validating its efficacy in the second-line setting. It is the same study design, and we achieved a very impressive overall response rate and the CR rate, and a very favorable safety profile to encourage us to go into the Phase III study. So it is a very exciting opportunity for 760, and we hope to achieve the enrollment completion as fast as we can.

Johnny, I will answer question 3. As for the Other Ventures, I think you are right to point out that our Other Ventures is a low margin business, which is not our focus. We are putting our focus on our major oncology revenues. As you can see, the growth is there. And that is the reason that there was some decline in the Other Ventures business. But I don't think we need to look into too much about behind this, because, as you said, it is low margin and it is not our core.

Maybe I just supplement that. I think as highlighted by Lorenso, this is not our core business. And it is basically, it is a logistic distribution business. The reason there has been some decline is because of the volume-based procurement list has actually in China have been expanded. So some of the previously -- our customers in the logistic distribution side have actually affected by the volume-based procurement, in terms of their selling price and so forth. So that services business is not what we focus because of the -- basically because of the high working capital requirement for this business. So as a way to manage this business, we try to just maintain this line of business to help to gain insights into the commercial channel in Shanghai. So I think that the drop, it doesn't actually affect the bottom line. It doesn't affect in terms of the entire business operation of HUTCHMED.

So the next question is from Chen Chen of UBS.

So my first question is on sovleplenib. So this candidate is expected to receive approval next year. Could you please elaborate on your commercial preparation strategy in China, including pricing, well, marketing access, and NRDL, and your sales force? In addition, what are your overseas R&D plans and priorities for this asset? My second question is on ATTC. So what is the expected timeline for clinical data readout from your candidate 1 and 2?

Thank you. So may I ask George to answer the first question and Dr. Dai do the second question?

Yes. Thanks, Chen Chen. For sovleplenib launch preparation, we are focused on few areas. One is -- first thing is market access, value proposition. We need to make sure this product's going to the NRDL, and we expect this product to get approval maybe in the first half this year and -- next year and qualify for the NRDL negotiation. One of the challenges is how can we position us very well to achieve affordable and realistic price in this disease. One of the understanding is, we will do a kind of [ HUR ] data based on our clinical trial. On the other side, we also would like to work with a patient group, with opinion leaders, to understand the pain points of the current treatment and try to make sure we really leverage those patient insights to make sure the government understand there's a main needs and there's a quality of life, a kind of compromising for those patients who receive other treatments. So this will help us to leverage the future. On the other side, we definitely will do the guideline, we do the KTL, as well as a physician education program, also a patient advocacy group as well. And if you look at the current setup for the launch, we have already built up a dedicated hematology team with a lot of experienced people in the hematology side. We are starting to work with our partners to understand the market potential, try to figure out what's our first wave target hospitals, territories, and the resource deployment.

Okay. I'll get the second question. So the first and second ATTC assets are both in the middle of Phase I dose escalation. The trials are moving very fast. Enrollment has been going strong in the U.S. and in China sites. Investigators are very excited about the novel mechanisms and the differentiation. They understand the rationale, and they are enthusiastic about the new mechanism of the ATTCs. So we will find the right time to disclose the clinical data sometime in 2027.

The next question comes from Paul Choi of Goldman Sachs.

Can you hear me?

Yes, we can.

I want to talk a little bit about first ask on sovleplenib as you sort of look at the warm autoimmune hemolytic anemia landscape, and just sort of the other products or candidates that are in that category, how do you think about potential developments and planning for a global trial outside of China? Just sort of any additional thoughts on what aspects or differentiation are needed there? And then I had a follow-up question.

Dr. Dai? Yes.

Of course.

George here.