On August 1, 2022 HUTCHMED (China) Limited ("HUTCHMED", the "Company" or "we") (Nasdaq/AIM:HCM; HKEX:13), the innovative, commercial-stage biopharmaceutical company, reported its unaudited financial results and provides updates on key clinical and commercial developments for the six months ended June 30, 2022 (Press release, Hutchison China MediTech, AUG 1, 2022, View Source [SID1234617203]).
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All amounts are expressed in U.S. dollars unless otherwise stated.
2022 INTERIM Results & Business Updates
"HUTCHMED has continued to make good progress in the last six months," said Mr Simon To, Chairman of HUTCHMED.
"We have driven revenue growth in our innovative portfolio of marketed drugs. With ELUNATE for CRC3 and following last year’s successful launches of ORPATHYS for MET-driven NSCLC and SULANDA for epNETs4 and pNETs5, this will be the first full year of product sales from three novel, in-house discovered oncology products in China, with strong sales momentum. We have also significantly expanded our in-house commercial team to drive growth. On top of this, in June we announced that TAZVERIK was approved for use in the Hainan Pilot Zone, bringing the clinical benefits of a fourth product to patients in China."
"Our experienced clinical team has also made progress in the first half of this year. We have initiated a number of key early-stage trials and our later-stage pipeline of on-going studies are also moving at a steady pace, with promising new data from the SAVANNAH study of savolitinib combined with osimertinib being presented in more detail in August. We believe that the achievement of these milestones demonstrates the depth and potential of our R&D6 pipeline, which is the core of our business and the foundation for our growth in the years ahead."
"HUTCHMED continues to be well-financed, which positions us well to continue delivering on our strategic objectives. We are a global biopharmaceutical company developing high quality, novel oncology and immunology drug candidates for patients across the world and under the leadership of Dr Weiguo Su, our new Chief Executive Officer, I have great hope for the future."
Dr Weiguo Su said, "In HUTCHMED, I see a company with exciting science and a first-in-class or differentiated, best-in-class pipeline of clinical-stage candidates, each with substantial prospects for additional indications and combinations, which is exceptional, particularly in the China biopharma industry."
"After driving our innovation as Head of Research and Chief Scientific Officer for the last 16 years, I was delighted to become the Chief Executive Officer earlier this year and am very excited about the next chapter of our growth."
"There are several reasons which underline the opportunity in our future. These include our expected ongoing growth of ORPATHYS, SULANDA and ELUNATE revenues in China, and FRESCO-2, our first global, multi-regional clinical trial, which is due to read out later this month. While receiving a Complete Response Letter for surufatinib from the U.S. FDA7 earlier this year and our decision today to withdraw the EMA8 MAA9 are a disappointment, it has no impact on our global development strategy. We will continue to leverage our solid balance sheet, strong commercial capability with extensive China coverage that generates cash, pipeline of innovative products and world-class people, as we work towards our goal of being a leading global biopharmaceutical company."
I. COMMERCIAL OPERATIONS
Total revenues increased 28% to $202.0 million in the first half of 2022 (H1-21: $157.4m), driven by commercial progress on our three in-house developed oncology drugs ELUNATE, SULANDA and ORPATHYS;
Oncology/Immunology consolidated revenues were up 113% to $91.1 million (H1-21: $42.9m);
Continuing expansion of in-house oncology commercial organization in China, which in the first half of 2022 numbered about 820 personnel (end 2021: ~630) covering around 3,000 oncology hospitals and around 30,000 oncology physicians;
ELUNATE (fruquintinib) in-market sales10 in the first half of 2022 increased 26% to $50.4 million (H1-21: $40.1m), reflecting its expanding lead in market share, particularly in tier 2 and 3 cities;
SULANDA (surufatinib) in-market sales in the first half of 2022 of $13.6 million (H1-21: $8.0m), reflecting its first time NRDL11 inclusion which started in January 2022;
ORPATHYS (savolitinib) in-market sales in the first half of 2022 of $23.3 million (H1-21: nil) following its launch in the second half of 2021 through AstraZeneca’s extensive oncology commercial organization. Rapid initial self-pay uptake due to being the first-in-class selective MET inhibitor in China;
TAZVERIK (tazemetostat) successfully launched in Hainan province in China in June 2022; and
Successful management of commercial operations despite challenges of pandemic-related lockdowns, particularly in Shanghai in April and May 2022.
* = For ELUNATE and ORPATHYS, represents total sales to third parties as provided by Lilly12 and AstraZeneca, respectively;
** = For ELUNATE and ORPATHYS, represents manufacturing fees, commercial service fees and royalties paid by Lilly and AstraZeneca, respectively, to HUTCHMED, and sales to other third parties invoiced by HUTCHMED; for SULANDA and TAZVERIK, represents the Company’s sales of the products to third parties.
II. REGULATORY UPDATES
China
Received Breakthrough Therapy Designation in China for sovleplenib (HMPL-523) in January 2022 for the treatment of ITP13;
Received approval for TAZVERIK in the Hainan Boao Lecheng International Medical Tourism Pilot Zone in May 2022 for the treatment of certain patients with epithelioid sarcoma or follicular lymphoma; and
Received Macau approvals for ELUNATE and SULANDA, the first drugs approved in the territory based on China NMPA14 approval, following regulatory updates in Macau.
U.S. and Europe
Surufatinib U.S. FDA Complete Response Letter was received in April 2022, after the NDA15 filing was accepted in June 2021, following Fast Track and Orphan Drug designations in 2020 and 2019, respectively;
The letter indicates that a multi-regional clinical trial that includes subjects more representative of the U.S. population and aligned with current U.S. medical practice is required; and
Pandemic-related issues concerning inspection access also contributed to the FDA action.
HUTCHMED has decided to withdraw the surufatinib MAA filed with the EMA, following interactions with EMA reviewers which suggested that there is a low probability of a positive opinion on the MAA;
EMA indicated that the SANET studies were not representative of patients and medical practice in the EU16; and
The requisite pre-approval on-site inspections are currently subject to restrictions in China.
Discussions on the path forward are ongoing with U.S. and EU regulators.
III. CLINICAL DEVELOPMENT ACTIVITIES
Savolitinib (ORPATHYS in China), a highly selective oral inhibitor of MET being developed broadly across MET-driven patient populations in lung, gastric and papillary renal cell carcinomas
Major milestones and data presentations for savolitinib in 2022:
Presentation of the SAVANNAH global Phase II study (NCT03778229) for the savolitinib plus TAGRISSO combination in NSCLC patients harboring EGFR17 mutation and MET amplification or overexpression at WCLC18 2022;
Results showed improved response rates with increasing levels of MET aberration. Overall results are consistent with TATTON and ORCHARD global studies, but demonstrate higher response, DoR19 and PFS20 among patients with higher MET levels, particularly among those with no prior chemotherapy;
Opened enrollment for SAFFRON, a global, pivotal Phase III study for the savolitinib plus TAGRISSO combination (NCT05261399). Enrolled patients will have MET levels consistent with the higher MET level patient groups in SAVANNAH and have had no prior chemotherapy; and
Presented final Phase II OS21 in patients with MET exon 14 skipping alteration NSCLC at ELCC22 2022 (NCT02897479).
Potential upcoming clinical and regulatory milestones for savolitinib:
Initiate SOUND, a China Phase II study for the savolitinib plus IMFINZI combination in EGFR wild-type NSCLC patients with MET alterations (NCT05374603).
Fruquintinib (ELUNATE in China), a highly selective oral inhibitor of VEGFR23 1/2/3 designed to improve kinase selectivity to minimize off-target toxicity and thereby improve tolerability; approved and launched in China
Major milestones and data presentations for fruquintinib in 2022:
Presented preliminary data from the U.S. Phase Ib monotherapy study of fruquintinib in patients with refractory metastatic CRC (NCT03251378) at the 2022 ASCO (Free ASCO Whitepaper) GI24 Gastrointestinal Cancers Symposium; and
Completed enrollment of the FRUTIGA China Phase III registration study (NCT03223376) in about 700 advanced gastric cancer patients.
Potential upcoming clinical and regulatory milestones for fruquintinib:
Report top-line results of the global Phase III FRESCO-2 registration trial (NCT04322539) in 691 refractory metastatic CRC patients, recruited from 14 countries including U.S., EU, Japan and Australia, in August 2022 as the pre-specified number of OS events that triggers the primary analysis has occurred;
If FRESCO-2 is positive, HUTCHMED plans to initiate discussions with regulatory authorities to apply for fruquintinib marketing authorization with the U.S. FDA, the EMA and the Japanese PMDA25 in the second half of 2022, with submissions targeted for completion in 2023; and
Plan to initiate Phase III studies of fruquintinib plus PD-1 inhibitor TYVYT combination in multiple indications in China.
Surufatinib (SULANDA in China), an oral inhibitor of VEGFR, FGFR26 and CSF-1R27 designed to inhibit tumor angiogenesis and promote the body’s immune response against tumor cells via tumor associated macrophage regulation; approved and launched in China
Major data presentation for surufatinib in 2022:
Presented a pooled analysis of safety data from the SANET-p and SANET-ep studies at the 2022 ASCO (Free ASCO Whitepaper)28 annual meetings.
Potential upcoming clinical and regulatory milestones for surufatinib:
Submit for presentation data from the Phase Ib/II global combination study with tislelizumab at a scientific conference in 2023;
Submit for presentation further Phase II data for the PD-1 inhibitor TUOYI combination study in China for thyroid cancer, non-small cell lung cancer and endometrial cancer cohorts at a scientific conference in 2023; and
Complete bridging study in NET patients in Japan (NCT05077384) in the first half of 2023 and discuss results with the Japanese PMDA.
Amdizalisib (HMPL-689), an investigative and highly selective oral inhibitor of PI3Kδ29 designed to address the gastrointestinal and hepatotoxicity associated with currently approved and clinical-stage PI3Kδ inhibitors
Potential upcoming clinical and regulatory milestones for amdizalisib:
Plan for additional Phase II studies with potential for registration intent in China in additional relapsed/refractory lymphoma indications;
Initiate studies in combination with tazemetostat and other anti-cancer therapies in China; and
Complete recruitment of patients for two Phase II studies with potential for registration in China for the treatment of follicular lymphoma (with Breakthrough Therapy Designation) around the end of 2022 and marginal zone lymphoma in the first half of 2023 (NCT04849351).
Sovleplenib (HMPL-523), an investigative and highly selective oral inhibitor of Syk30, an important component of the Fc receptor and B-cell receptor signaling pathway, for the treatment of hematological malignancies and immune diseases
Potential upcoming clinical milestones for sovleplenib:
Complete enrollment of the ESLIM-01 Phase III pivotal study in primary ITP (NCT03951623) in China around year end, with readout in 2023;
Initiate Phase I study in the U.S. in patients with ITP in 2023;
Initiate Phase II Proof-of-Concept study in warm AIHA31 in China; and
Initiate exploratory Phase II trial in patients with severe or critical COVID-19 requiring hospitalization and supplemental oxygen, subject to COVID-19 outbreak.
Tazemetostat (TAZVERIK in the U.S., Japan and the Hainan Pilot Zone), a first-in-class, oral inhibitor of EZH2 licensed from Epizyme32 for which HUTCHMED is collaborating to research, develop, manufacture and commercialize in Greater China
Major milestones and data presentations for tazemetostat in 2022:
Initiated a bridging study in follicular lymphoma patients in China for conditional registration based on U.S. approvals; and
Epizyme presented updated data from the Phase Ib portion of the global SYMPHONY-1 Phase III trial at ASCO (Free ASCO Whitepaper) (NCT04224493) of tazemetostat combined with lenalidomide and rituximab (R²) in patients with relapsed or refractory follicular lymphoma after at least one prior line of therapy.
Potential upcoming clinical and regulatory milestones for tazemetostat:
Initiate the China portion of the global SYMPHONY-1 Phase III trial (NCT04224493); and
Initiate Phase II combination studies with amdizalisib and other HUTCHMED assets.
HMPL-306, an investigative and highly selective oral inhibitor of IDH1/233 designed to address resistance to the currently marketed IDH inhibitors
Potential upcoming clinical and regulatory milestones for HMPL-306:
Initiate dose expansion portion of the Phase I study in hematological malignancies in China in early 2023; and
Initiate indication specific dose expansion cohorts of a Phase I study in the U.S. and Europe in patients with an IDH1 and/or IDH2 mutation in mid-2023 (NCT04762602).
HMPL-760, an investigative, highly selective, third-generation oral inhibitor of BTK34 with improved potency versus first generation BTK inhibitors against both wild type & C481S mutant enzymes
Initiated China Phase I trial (NCT05190068) in patients with advanced hematological malignancies in January 2022; and
Initiating U.S. Phase I trial (NCT05176691) in patients with advanced hematological malignancies in mid-2022.
HMPL-453, an investigative and highly selective oral inhibitor of FGFR 1/2/3
Initiated combination studies with other anti-cancer therapies, including chemotherapies or PD-1 antibodies, in China in January 2022 (NCT05173142).
HMPL-295, an investigative and highly selective oral inhibitor of ERK in the MAPK pathway 35 with the potential to address intrinsic or acquired resistance from upstream mechanisms such as RAS-RAF-MEK
Continuing to enroll Phase I trial (NCT04908046) in patients with advanced solid tumors in China.
HMPL-653, an investigative, oral, highly selective, and potent CSF-1R inhibitor designed to target CSF-1R driven tumors as a monotherapy or in combinations
Initiated Phase I trial in China (NCT05190068) in patients with advanced malignant solid tumors and tenosynovial giant cell tumors in January 2022.
HMPL-A83, an investigative, differentiated, red blood cell sparing CD47 monoclonal antibody
Initiated Phase I trial in China (NCT05429008) in patients with advanced malignant neoplasms in July 2022.
Inmagene collaboration update
Phase I trial initiated in Australia for IMG-007, an investigative, OX40 antagonistic monoclonal antibody designed to selectively shut down OX40+ T cell function, thereby providing a treatment option for pathological OX40+ T cell-mediated immune diseases such as atopic dermatitis, in healthy volunteers and patients with severe atopic dermatitis in July 2022 (NCT05353972); and
Phase I trial initiation imminent in healthy volunteers following IND36 clearance in the US for IMG-004, a reversible, non-covalent, highly selective oral BTK inhibitor designed to target immunological diseases (NCT05349097).
IV. MANUFACTURING
Increased production of commercial supplies of ELUNATE, SULANDA and ORPATHYS to meet demand;
Initiated NDA enabling studies including registration stability studies and process validation for amdizalisib and sovleplenib; and
Continued construction of our new flagship Shanghai manufacturing facility on schedule – this facility is designed to increase our novel drug product manufacturing capacity by over five-fold. Equipment installation is planned for late 2022, with Good Manufacturing Practice (GMP) compliance targeted for late 2023.
V. OTHER VENTURES
Other Ventures include our profitable prescription drug marketing and distribution platforms
Other Ventures consolidated revenues fell 3% (-4% at CER37) to $110.9 million (H1-21: $114.5m);
SHPL38 non-consolidated joint venture revenues grew by 18% (16% at CER) to $212.4 million (H1-21: $180.4m); and
Consolidated net income attributable to HUTCHMED from our Other Ventures increased by 19% (16% at CER) to $35.4 million (H1-21: $29.8m, excluding net income attributable to HUTCHMED of $11.5 million contributed from HBYS39 which was disposed in September 2021), which primarily included net income contributed from SHPL of $33.6 million (H1-21: $28.6m).
VI. IMPACT OF COVID-19
COVID-19 had some impact on our research, clinical studies and our commercial activities in the first half of 2022, particularly with respect to hospital lockdowns, travel restrictions, and shipping difficulties. Sites in Shanghai were particularly impacted during April and May. Measures were put in place to minimize the impact of such restrictions to the extent possible, including online patient follow-up and the retention of core research teams on-site to maintain critical activities, with business returning to normal in June. We will continue to closely monitor the evolving situation.
VII. SUSTAINABILITY
The Group is committed to the long-term sustainability of its businesses and the communities in which we conduct business. In the first half of 2022, we published 2021 Sustainability Report of HUTCHMED, detailing our environmental, social and governance performance of HUTCHMED during 2021, including our sustainability governance, stakeholder engagement and materiality analysis, business ethics, environmental performance, research and development, responsible commercialization, and human capital management.
Five new sustainability-related policies and statements – Sustainability Policy, Environmental Policy, Health and Safety Policy, Human Rights Policy and Modern Slavery and Human Trafficking Statement – were published along with the 2021 Sustainability Report, serving to demonstrate our commitment in sustainability, enriched and more transparent disclosures, as well as acting as an important gateway to communicate with our stakeholders in all sustainability matters.
In the second half of 2022, we will continue our efforts in facilitating discussions regarding relevant sustainability issues and opportunities, including climate-related issues, and actively looking to set our own sustainability targets and goals.
VIII. U.S. LISTING
The Holding Foreign Companies Accountable Act, or the Act, was signed into law in December 2020. It provides that if the U.S. Securities and Exchange Commission (SEC) determines that a U.S.-listed company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (PCAOB) for three consecutive years beginning in 2021, the SEC shall prohibit such company’s shares or ADSs40 from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.
As had been expected, following its adoption of implementing rules pursuant to the Act, the SEC named over 150 companies, including HUTCHMED, to its conclusive list of issuers identified under these rules. Under the current terms of the Act, the Company’s ADSs will be delisted from the Nasdaq Stock Market in early 2024, unless the Act is amended to exclude the Company or the PCAOB is able to conduct a full inspection of the Company’s auditor during the required timeframe. In addition, legislation is being considered in the U.S. to shorten the number of non-inspection years from three years to two. In the case that such legislation becomes law, it will reduce the time period before our ADSs could be delisted from the Nasdaq Stock Market and prohibited from over-the-counter trading in the U.S. from 2024 to 2023.
This has had no impact on the Company’s business operations. We continue to monitor market developments and evaluate all strategic options, with the appropriate counsel and guidance.
The Company’s ADSs, each of which represents five ordinary shares, continue to trade uninterrupted on the Nasdaq Global Select Market. Its ordinary shares are also admitted for trading in London on the AIM market, and are primary listed on HKEX41. The shares listed on HKEX and AIM are fully fungible with the shares represented by the Company’s ADSs.
INTERIM 2022 Financial Results
Cash, Cash Equivalents and Short-Term Investments were $826.2 million as of June 30, 2022 compared to $1,011.7 million as of December 31, 2021.
Adjusted Group (non-GAAP42) net cash flows excluding financing activities in the first half of 2022 were -$110.9 million (H1-21: -$63.1m) mainly due to increased spending on Oncology/Immunology R&D and China commercial operations; and
Net cash used in financing activities in the first half of 2022 totaled $74.6 million (H1-21: net cash generated from financing activities of $578.3m) mainly due to the repayments of bank borrowings and purchases of ADSs by a trustee for the settlement of equity awards.
Revenues for the six months ended June 30, 2022 were $202.0 million compared to $157.4 million in the six months ended June 30, 2021.
Oncology/Immunology consolidated revenues increased 113% (111% at CER) to $91.1 million (H1-21: $42.9m) resulting from:
ELUNATE revenues increased 21% to $36.0 million (H1-21: $29.8m) in manufacturing revenues, promotion and marketing service revenues and royalties, as our in-house sales team increased in-market sales 26% to $50.4 million (H1-21: $40.1m), as provided by Lilly;
SULANDA revenues increased 69% to $13.6 million (H1-21: $8.0m), after inclusion on the NRDL starting in January 2022;
ORPATHYS revenues of $13.8 million (H1-21: nil), in manufacturing revenues and royalties. AstraZeneca reported $23.3 million in-market sales (H1-21: nil) of ORPATHYS in first half of 2022;
TAZVERIK revenues of $0.1 million following its successful launch in Hainan in June 2022;
Milestone payment of $15.0 million (H1-21: nil), to us by AstraZeneca, was triggered in February 2022 upon initiation of start-up activities for SAFFRON; and
Other R&D services income of $12.6 million (H1-21: $5.1m), which were primarily fees from AstraZeneca and Lilly for the management of development activities in China.
Other Ventures consolidated revenues decreased 3% (-4% at CER) to $110.9 million (H1-21: $114.5m), mainly due to lower sales of consumer products. This excludes the strong 18% (16% at CER) growth in non-consolidated revenues at SHPL of $212.4 million (H1-21: $180.4m).
Net Expenses for the six months ended June 30, 2022 were $364.9 million compared to $259.8 million in the six months ended June 30, 2021.
Cost of Revenues were $137.3 million (H1-21: $123.2m), the majority of which were the cost of third-party prescription drug products marketed through our profitable Other Ventures, as well as costs associated with ELUNATE, including the provision of promotion and marketing services to Lilly, and the costs for SULANDA and ORPATHYS which commenced commercial sales in July 2021;
R&D Expenses were $181.7 million (H1-21: $123.1m), which increased mainly as a result of an expansion in the active development of our novel oncology drug candidates. Our international clinical and regulatory operations in the U.S. and Europe incurred expenses of $83.6 million (H1-21: $59.3m), while R&D expenses in China were $98.1 million (H1-21: $63.8m);
SG&A Expenses43 were $79.8 million (H1-21: $54.8m), which increased primarily due to higher staff costs and selling expenses to support rapidly expanding operations. This included the scaling of a national oncology commercial infrastructure in China and in the U.S.; and
Other Items generated net income of $33.9 million (H1-21: $41.3m), which decreased primarily due to a reduction in equity in earnings of equity investees of $9.4 million after the divestiture of our interest in HBYS in September 2021.
Net Loss attributable to HUTCHMED for the six months ended June 30, 2022 was $162.9 million compared to $102.4 million in the six months ended June 30, 2021.
As a result, the net loss attributable to HUTCHMED in the first half of 2022 was $0.19 per ordinary share / $0.96 per ADS, compared to net loss attributable to HUTCHMED of $0.14 per ordinary share / $0.70 per ADS in the six months ended June 30, 2021.
FINANCIAL GUIDANCE
We provide financial guidance for 2022 below reflecting expected revenue growth of ELUNATE, SULANDA and ORPATHYS in China. We believe that we remain on track to meet the 2022 guidance for Oncology/Immunology revenues provided in the announcement of our 2021 full year results on March 3, 2022.
H1 2022
Actual 2022 Current
Guidance Adjustments vs. Previous Guidance
Oncology/Immunology consolidated revenues $91.1 million $160 – 190 million nil
Shareholders and investors should note that:
we do not provide any guarantee that the statements contained in the financial guidance will materialize or that the financial results contained therein will be achieved or are likely to be achieved; and
we have in the past revised our financial guidance and reference should be made to any announcements published by us regarding any updates to the financial guidance after the date of publication of this announcement.
Use of Non-GAAP Financial Measures and Reconciliation – References in this announcement to 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, respectively.
Conference call and audio webcast presentation scheduled today at 8 p.m. HKT / 1 p.m. BST / 8 a.m. EDT – Investors may participate in the call as follows: +852 3027 6500 (Hong Kong) / +44 20 3194 0569 (U.K.) / +1 646 722 4977 (U.S.), or access a live audio webcast of the call via HUTCHMED’s website at www.hutch-med.com/event/.
Additional dial-in numbers are also available at HUTCHMED’s website. Please use participant access code "55793362#."