On July 30, 2019 Hutchison China MediTech Limited ("Chi-Med") (AIM/Nasdaq: HCM) reported its unaudited financial results for the six months ended June 30, 2019 and provides updates on key clinical programs (Press release, Hutchison China MediTech, JUL 30, 2019, View Source [SID1234537891]). Major highlights include:
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Positive surufatinib China Phase III study in non-pancreatic neuroendocrine tumors ("NET")—Interim analysis of SANET-ep study confirmed to have met primary endpoint and the Independent Data Monitoring Committee ("IDMC") recommended the study be un-blinded, a year ahead of schedule. New Drug Application ("NDA") is now being prepared for submission during 2019;
Early progress on Elunate (fruquintinib capsules) with China in-market sales in colorectal cancer ("CRC") of $11.4 million1 (RMB77.1 million) during H1 2019; Discussions in progress for potential inclusion in the China National Reimbursement Drug List ("NRDL") at the next update in Q4 2019;
Potential for first savolitinib NDA targeted for H1 2020—for MET2 Exon 14 deletion non-small cell lung cancer ("NSCLC") in China. Oral presentations of savolitinib data made at scientific conferences in H1 2019 in lung cancer (monotherapy and combination with Tagrisso) and kidney cancer (combination with Imfinzi).
Video webcast presentation at 9:00 a.m. BST and additional conference call at 9:00 a.m. EDT.
"Chi-Med’s business is progressing well on all fronts." said Simon To, Chairman, Chi-Med. "All major clinical readouts in the first half were encouraging, with the stand-out results being surufatinib’s positive Phase III outcome in non-pancreatic NET and savolitinib’s preliminary data in MET Exon 14 deletion NSCLC along with the completion of enrollment of its registration study. We believe these accomplishments have the potential to support Chi-Med’s next two NDA submissions, surufatinib later this year and savolitinib early next year."
"Highly encouraging preliminary data was also reported for the savolitinib / Tagrisso combination in NSCLC, which led to the initiation of a global registration intent trial by AstraZeneca AB (publ) ("AstraZeneca"), the SAVANNAH study, early this year. Also, recently released preliminary data for the savolitinib / Imfinzi combination in kidney cancer is promising."
"Our first approved oncology drug, Elunate, is making progress, with first six-month revenue well ahead, at the same stage, of the five small molecule VEGFR3 inhibitors previously launched by multinational companies in China. In our view, with time and inclusion in the China NRDL, Elunate’s well documented efficacy and safety profile will make it a formidable competitor."
[1] In-market sales figures for Elunate are based on information provided by Eli Lilly and Company ("Lilly");
[2] mesenchymal epithelial transition receptor ("MET");
[3] Vascular endothelial growth factor receptor ("VEGFR");
"Business is as usual for our Commercial Platform, which generated 9% net income growth on a CER4 basis versus same period last year. This income helps significantly to fund our clinical development programs as well as our discovery engine which produced yet another exciting oncology asset, our ninth, with the IND5 submission of our novel IDH 1/2 inhibitor6 HMPL-306."
"Our organization is expanding rapidly, with our New Jersey-based international clinical and regulatory team scaling up to manage global registration studies on surufatinib and fruquintinib and early development on our B-cell malignancy assets. Our in-house oncology commercial team in China is also growing fast, managing medical affairs and getting ready for the potential launch of surufatinib late next year."
"Looking ahead at the next two years, we expect to accelerate our transformation into a fully integrated and globally-facing biopharmaceutical company with capability to discover, develop and launch multiple novel drug innovations aimed at addressing a broad range of unmet medical needs and benefiting a large number of patients."
FINANCIAL HIGHLIGHTS
The items below are selected financial data for the six months ended June 30, 2019. All monetary figures are expressed in U.S. dollars unless otherwise stated. For more details, please refer to "Financial Review", "Operations Review" and "Interim Unaudited Condensed Consolidated Financial Statements" below.
OVERALL GROUP: sufficient resources to reach multiple value inflection points on our pipeline
Group revenue $102.2 million (H1-18: $102.2m).
Net loss attributable to Chi-Med of $45.4 million (H1-18: net loss of $32.7m).
Adjusted Group net cash flows (non-GAAP) was -$63.7 million in H1 2019 including the repayment of a total of $26.9 million in bank loans, leaving the Group with no outstanding bank borrowings. Cash from our Commercial Platform, as well as payments received from our multinational partners, continued to offset a material part of our research and development ("R&D") expenses.
Cash resources of $383.6 million at Group level as of June 30, 2019 (December 31, 2018: $420.3m), including cash, cash equivalents and short-term investments of $237.3 million (December 31, 2018: $301.0m) and unutilized bank facilities of $146.3 million (December 31, 2018: $119.3m).
INNOVATION PLATFORM: increased investment in R&D driven by expansion of our organization, operations and progress on our clinical development pipeline
Consolidated revenue was $12.0 million (H1-18: $13.6m) mainly due to payments from AstraZeneca and Lilly. During H1 2019, following the launch of Elunate in late 2018, we recorded $5.5 million (H1-18: $1.1m) in manufacturing and service fee revenues as well as royalty income from Lilly.
[4] Constant Exchange Rate ("CER"). Certain financial information in this announcement is presented on a constant exchange rate basis, or at CER. These financial measures are not prepared in accordance with U.S. generally accepted accounting principles (GAAP) because they remove the effects of currency movements from our reported results. Please refer to "Use of Non-GAAP Financial Measures and Reconciliation" below for further information relevant to the interpretation of these financial measures and reconciliations of these financial measures to the most comparable GAAP measures;
R&D expenses on an as adjusted (non-GAAP) basis increased to $74.5 million (H1-18: $66.7m), primarily driven by the progress in the development of our eight clinical drug candidates, five of which are either in or about to start development outside China; the ramp-up of our small molecule manufacturing operations in Suzhou; expansion of U.S. and international clinical and regulatory operations; and establishment of our oncology commercial infrastructure in China.
Net loss from our Innovation Platform attributable to Chi-Med of $63.8 million (H1-18: net loss of $52.9m).
COMMERCIAL PLATFORM: solid net income growth on a CER basis due to continued progress in our Prescription Drugs business
Total consolidated sales grew 2% (7% at CER) to $90.2 million (H1-18: $88.6m) mainly due to progress on our Prescription Drugs subsidiary Hutchison Sinopharm7 being partially offset by rationalization of certain low contribution products in the Consumer Health business.
Total sales of non-consolidated joint ventures increased 2% (8% at CER) to $276.9 million (H1-18: $271.7m) driven by solid performance on our leading prescription cardiovascular drug, She Xiang Bao Xin ("SXBX") pill, which grew 9% (15% at CER) to $141.0 million (H1-18: $129.8m).
Total consolidated net income from our Commercial Platform attributable to Chi-Med increased 3% (9% at CER) to $27.7 million (H1-18: $26.9m).
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U.K. Analysts Meeting and Webcast Scheduled Today at 9:00 a.m. BST (4:00 p.m. HKT)—at Citigate Dewe Rogerson, 8th Floor, Holborn Gate, 26 Southampton Buildings, London WC2A 1AN, UK. Investors may participate in the call at +44 20 3003 2666 (800 900 476 toll free in Hong Kong), or access a live video webcast of the call via Chi-Med’s website at www.chi-med.com/investors/event-information/.
U.S. Conference Call Scheduled Today at 9:00 a.m. EDT—to participate in the call from the U.S., please dial 1 866 966 5335.
Additional dial-in numbers are also available at Chi-Med’s website. For both calls please use conference ID "Chi-Med."
OPERATING HIGHLIGHTS
The points below summarize some of Chi-Med’s operating highlights so far this year. For more details, please refer to "Operations Review" below.
SURUFATINIB (HMPL-012 or sulfatinib)—angio-immuno kinase inhibitor of VEGFR 1/2/3, fibroblast growth factor receptor ("FGFR") 1, and colony stimulating factor-1 receptor ("CSF-1R"):
Positive China Phase III in non-pancreatic NET: An interim analysis in June 2019 confirmed that the Phase III non-pancreatic NET (SANET-ep) study met its primary endpoint of progression-free survival ("PFS"). As a result, the IDMC recommended the study be un-blinded, a year ahead of schedule, and preparations are now underway for an NDA submission in late 2019 for this indication in China;
Initiated China Phase II/III in biliary tract cancer ("BTC"): Based on preliminary Phase Ib/IIa data, we initiated a Phase IIb/III registration study in BTC in China in March 2019; and
[7] Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company Limited ("Hutchison Sinopharm").
Initiated PD-1 combination development: Received China IND clearance during early 2019 and initiated a Phase I safety run-in study in China of surufatinib plus Tuoyi, an approved PD-1 monoclonal antibody from Shanghai Junshi Biosciences Co. Ltd. ("Junshi").
FRUQUINTINIB—highly selective tyrosine kinase inhibitor ("TKI") of VEGFR 1/2/3—potential best-in-class in terms of both efficacy and safety:
Early progress on Elunate (fruquintinib capsules) in third-line CRC in China:
$11.4 million (RMB77.1 million) in sales during H1 2019: In-market sales of Elunate to third-parties, as provided by Lilly, in the first full six-month period since its November 25, 2018 launch;
Progress in reimbursement discussion: Elunate was included in the Shanghai provincial reimbursement drug list ("RDL") in June 2019. Discussions now in-progress for potential inclusion in the China NRDL at the next update in early Q4 2019.
Cleared Phase III interim analysis in second-line gastric cancer: In April 2019, we conducted an interim analysis of the FRUTIGA study in China for futility. The analysis evaluated PFS and overall survival ("OS") trends after six months of therapy for the first 100 patients in the study. The IDMC recommended to continue the study without changes; and
Initiated PD-1 combination development: Received China IND clearance in early 2019 and initiated a Phase I study of fruquintinib plus Tyvyt, an approved PD-1 monoclonal antibody from Innovent Biologics (Suzhou) Co. Ltd. ("Innovent"). Phase I development of fruquintinib plus genolimzumab, a PD-1 monoclonal antibody under development by Genor Biopharma Co. Ltd. ("Genor") is also now underway.
SAVOLITINIB—potential first-in-class selective MET inhibitor in late-stage clinical development:
Reached enrollment goal in Phase II registration study—MET Exon 14 deletion NSCLC: Encouraging interim data, for 31 evaluable patients, for the China Phase II registration study in MET Exon 14 deletion NSCLC were presented during the 2019 American Association for Cancer Research (AACR) (Free AACR Whitepaper) ("AACR") Annual Meeting. We have now reached our enrollment goal for this Phase II registration study, and subject to clinical outcome, with potential to be our first NDA submission for savolitinib in early 2020;
AstraZeneca collaboration, leading global position in EGFR-TKI resistant NSCLC:
56% objective response rate ("ORR") and 7.1 months’ median duration of response—in patients with acquired resistance to Iressa or Tarceva driven by MET amplification: Preliminary TATTON Phase Ib/IIa data for the savolitinib/Tagrisso combination regimen were presented at the 2019 AACR (Free AACR Whitepaper) Annual Meeting for a total of 43 evaluable patients who were T790M- and had not previously received a third-generation EGFR inhibitor;
31% ORR and 9.7 months’ median duration of response—in patients with acquired resistance to Tagrisso driven by MET amplification: Preliminary TATTON Phase Ib/IIa data for the savolitinib/Tagrisso combination regimen were also presented at the 2019 AACR (Free AACR Whitepaper) Annual Meeting for a total of 39 evaluable patients who had reported disease progression after receiving a third-generation EGFR inhibitor. The SAVANNAH Phase IIb registration intent study, which is being conducted in North and South America, Europe and Asia in this target patient population, dosed its first patient in early 2019;
Emerging signal for savolitinib/Imfinzi (PD-L1) combination in renal cell carcinoma ("RCC"): Interim results for the papillary RCC ("PRCC") cohort of the CALYPSO Phase II study were presented at the 2019 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Genitourinary Symposium ("ASCO GU") reporting a 27% ORR for all 41 patients and a 32% ORR for the 28 previously untreated patients. The combination was tolerable and associated with durable responses in PRCC.
Further progress in early/proof-of-concept clinical trials and discovery, including:
HMPL-523—potential first-in-class selective Syk inhibitor: A Phase Ib dose expansion study in both China and Australia accelerated enrollment in H1 2019 in multiple sub-types of non-Hodgkin’s lymphoma ("NHL"). We intend to use Phase Ib data to guide registration strategy in China during late 2019; and multiple U.S. / Europe sites are also now open for a Phase I/Ib study with patient screening underway.
HMPL-689—potential best-in-class selective PI3Kd inhibitor: A recommended dose for Phase II study has been selected based on the China Phase I study; U.S. / Europe IND applications cleared; and
IND submission in China for HMPL-306: A novel selective small molecule TKI of isocitrate dehydrogenase ("IDH") 1/2, discovered in-house with IND submitted H1 2019.
Major organizational expansion, including:
Expansion of international clinical and regulatory operations: accelerated expansion of New Jersey team to support development of multiple un-partnered compounds outside of Asia; and
Establishment of China oncology commercial organization: currently numbering about 60 commercial staff, primarily focused on medical affairs and preparation for potential surufatinib launch in late 2020.
POTENTIAL UPCOMING KEY EVENTS
China—H2 2019 Global—H2 2019
Savolitinib—Registration study completion—MET Exon 14 deletion NSCLC (occurred July); HMPL-523 (Syk)—Phase I—Initiate U.S. / E.U. Phase I/Ib in indolent NHL;
Surufatinib—Phase III data (SANET-ep)—presentation at scientific conference;
HMPL-689 (PI3Kd)—Phase I—Initiate U.S. / E.U. Phase I/Ib in indolent NHL;
Surufatinib—NDA submission—in non-pancreatic NET;
Savolitinib—Phase II data (VIKTORY)—gastric cancer data (patient tumor molecular profiling).
Fruquintinib—Phase III data (FALUCA)—submit for presentation in NSCLC at conference;
Fruquintinib—Reimbursement—possible Elunate inclusion in China NRDL in Q4 2019.
Fruquintinib—Phase III interim analysis (FRUTIGA)—2nd interim in gastric cancer; Phase II/III start—initiate U.S. / E.U. study in pancreatic NET;
Surufatinib—Phase III interim analysis (SANET-p)—planned final interim analysis;
Fruquintinib—Phase II/III start—initiate U.S. / E.U. Phase II/III study in metastatic CRC;
Savolitinib—NDA submission—in MET Exon 14 deletion NSCLC;
Savolitinib—Phase II data (CALYPSO)—Imfinzi (PD-L1) combo in RCC;
Surufatinib—Phase Ib/II data—submit for presentation of BTC at conference;
Savolitinib—Phase II registration study (SAVANNAH) interim analysis—in NSCLC;
HMPL-523—Phase II study start—potential registration study indolent NHL.
FINANCIAL GUIDANCE
We are providing the following updated Financial Guidance for the year ending December 31, 2019. Our updated guidance takes into account the weakening of the RMB, which was down 6% against the U.S. dollar during H1 2019 (using the average exchange rate for the period) relative to the same period last year due to global macroeconomic factors. We expect this trend to continue through the balance of 2019, and this depreciation of the RMB has the effect of reducing our R&D expenses in China in U.S. dollar terms.
In addition, we have both expanded and extended existing studies of surufatinib and fruquintinib in the U.S. ahead of upcoming regulatory authority end of Phase II meetings. This will move certain start-up costs of our global Phase II/III registration studies on surufatinib and fruquintinib into 2020.
Use of Non-GAAP Financial Measures—References in this announcement to adjusted R&D expenses, adjusted Group net cash flows and adjusted Group net cash flows excluding financing activities and financial measures reported at CER are based on non-GAAP financial measures. Please see the "Use of Non-GAAP Financial Measures and Reconciliation" below for further information relevant to the interpretation of these financial measures and reconciliations of these financial measures to the most comparable GAAP measures.