REG - Hutchmed China Ltd - Full Year Results and Business Updates
03/03/2022 12:00
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RNS Number : 5443D Hutchmed (China) Limited 03 March 2022
HUTCHMED Reports 2021 Full Year Results and Provides Business Updates
Oncology/Immunology revenues up 296% to $119.6 million, due to ELUNATE(®)
growth and the 2021 launches of SULANDA(®) and ORPATHYS(®);
Positive SAVANNAH, CALYPSO and VIKTORY studies triggered five registration
studies on ORPATHYS(®) in lung cancer, kidney and gastric cancer during 2021;
Broad late-stage development program - currently enrolling 13 registration
studies on 6 assets - with enrollment on the 691 patient FRESCO-2 global Phase
III of fruquintinib now complete.
Company to Host Annual Results Call & Webcast Today at 9 p.m. HKT / 1 p.m.
GMT / 8 a.m. EST
Hong Kong, Shanghai & Florham Park, NJ - Thursday, March 3, 2022: HUTCHMED
(China) Limited ("HUTCHMED (https://www.hutch-med.com/) ") (Nasdaq/AIM:HCM;
HKEX:13), the innovative, commercial-stage biopharmaceutical company, today
reports its audited financial results for the year ended December 31, 2021 and
provides updates on key clinical and commercial developments since the start
of 2022.
All amounts are expressed in U.S. dollars unless otherwise stated.
2021 FULL YEAR Results & Business Updates
"2021 was an exceptional year for HUTCHMED," said Mr. Simon To, Chairman of
HUTCHMED. "Commercial success on ELUNATE(®) and the launches of SULANDA(®)
and ORPATHYS(®) contributed to an almost four-fold increase in consolidated
oncology/immunology revenues to $119.6 million, with momentum continuing in
2022.
ORPATHYS(®) took a major step forward in 2021 with its first approval and
important, and as yet unpublished, data from the SAVANNAH study in combination
with TAGRISSO(®). We and our partner AstraZeneca(1) initiated four Phase III
studies and one Phase II study, with registration potential, for ORPATHYS(®)
during 2021. These actions have triggered $40 million in milestone payments to
HUTCHMED since mid-2021. A seventh registration study, a global Phase III in
NSCLC(2), the SAFFRON study, is set to initiate in mid-2022.
We are rapidly progressing our plan to expand our oncology assets into global
markets. Led by our team of over 800-personnel in discovery, development and
manufacturing operations, we have an un-equaled fifteen-year track-record of
producing highly quality novel oncology/immunology drug candidates.
Seven of our assets are now being developed outside China. In addition to the
global progress of ORPATHYS(®), surufatinib's U.S. NDA(3) and EU MAA(4) are
in the later stages of regulatory review for advanced NETs; enrollment was
completed for fruquintinib in a fourteen-country global Phase III study, the
FRESCO-2 study, in CRC(5) which reads-out later in 2022; positive and
differentiated POC data was presented for amdizalisib and sovleplenib; and our
FGFR(6), IDH1/2(7), ERK(8), third generation BTK(9) and CSF-1R(10) inhibitors
all made good progress in early development.
With a strong track record in bringing innovative drugs to patients through
rigorous clinical trials, our seasoned clinical team is now enrolling 13
registration studies for six assets with an additional 5 registration studies
set to initiate in 2022. With over $1 billion in cash, and the intention to
divest further non-core assets, we anticipate having sufficient runway to see
our plans through.
Our strategy is to launch a stream of new products in both the China and
global markets over the coming years, helping patients with unmet needs and
creating value for all our stakeholders."
I. COMMERCIAL OPERATIONS
· Total revenues increased 56% to $356.1 million in 2021 (2020:
$228.0m), driven by commercial progress on our three in-house developed
oncology drugs ELUNATE(®), SULANDA(®) and ORPATHYS(®);
· Full year 2021 Oncology/Immunology consolidated revenues of
$119.6 million, up 296% (2020: $30.2m), and in line with 2021 guidance of
$110-130 million;
· Continuing expansion of in-house oncology commercial organization
in China, which at the end of 2021 numbered about 630 personnel (end 2020:
~390) covering over 2,500 oncology hospitals and over 29,000 oncology
physicians;
· ELUNATE(®) (fruquintinib in China) in-market sales(11) increased
111% to $71.0 million (2020: $33.7m), reflecting a full year of HUTCHMED
management of all on-the-ground medical detailing, promotion and local and
regional marketing activities in China;
· SULANDA(®) (surufatinib in China) launched for both
extra-pancreatic NET and pancreatic NET with in-market sales in 2021 of $11.6
million (2020: nil). An encouraging start in the self-pay market and
positioned well for national reimbursement which started in January 2022;
· ORPATHYS(®) (savolitinib in China) launched in mid-2021 through
AstraZeneca's extensive oncology commercial organization, with in-market sales
of $15.9 million (2020: nil). Rapid initial self-pay uptake due to being the
first-in-class selective MET(12) inhibitor in China;
· Successful management of the NRDL(13) process to expand access to
our key products in January 2022. Concluded ELUNATE(®) NRDL renewal and
first time NRDL inclusion of SULANDA(®); and
· U.S. commercial team continued to build for the potential
surufatinib U.S. approval in 2022. The team, more than 30 personnel, is fully
engaged on all aspects of launch readiness including supply chain, market
access, marketing, sales and commercial operations.
(Growth vs. Prior Period) In-market Sales* Consolidated Revenue**
2021 Jan-Feb 2022 2021 Ja
Unaudited n
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eb
20
22
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na
ud
it
ed
ELUNATE(®) $71.0m (111%) $21.6m (51%) $53.5m (168%) $13.5m (33%)
SULANDA(®) $11.6m - $6.0m (21%) $11.6m - $6.0m (21%)
ORPATHYS(®) $15.9m - $7.4m - $11.3m - $4.8m -
Product Sales $98.5m (192%) $35.0m (81%) $76.4m (282%) $24.3m (61%)
Other R&D(14) Service income $18.2m (77%) $3.7m (80%)
Milestone payments $25.0m - $15.0m -
Total Oncology/ Immunology $119.6m (296%) $43.0m (151%)
* = For ELUNATE(®) and ORPATHYS(®), represents total sales to third parties
as provided by Lilly 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(®), represents the
Company's sales of the product to third parties.
II. REGULATORY ACHIEVEMENTS
China
· Received China NMPA(15) NDA approval for ORPATHYS(®)
(savolitinib) as a treatment for patients with MET exon 14 skipping alteration
NSCLC in June 2021, making savolitinib the first-in-class selective MET
inhibitor in China.
· Received second China NMPA NDA approval for SULANDA(®)
(surufatinib) in June 2021 as a treatment for patients with advanced
pancreatic NET;
· A $25 million milestone payment was made to us by AstraZeneca in
July 2021 upon first sale of ORPATHYS(®) in China;
· Received Breakthrough Therapy Designation in China for
amdizalisib (HMPL-689) in September 2021 for the treatment of relapsed or
refractory follicular lymphoma; and
· Received Breakthrough Therapy Designation in China for
sovleplenib (HMPL-523) in January 2022 for the treatment of ITP(16).
United States and Europe
· Surufatinib U.S. FDA(17) NDA process update:
o Completed submission of U.S. FDA NDA for surufatinib, which was accepted
in June 2021, for the treatment of both pancreatic and extra-pancreatic NET;
o U.S. FDA NDA review, as well as the clinical site inspections and
pre-approval inspections of our manufacturing facilities, are ongoing, several
inspections have been completed with others pending subject to COVID-19 travel
restrictions and security requirements for foreign visitors; and
o The PDUFA(18) goal date is April 30, 2022 and mid- and late-cycle review
meetings with the FDA have completed. Timing of completion of the NDA review
is subject to FDA scheduling limitations.
· Surufatinib EMA(19) MAA process update:
o Fully submitted EMA MAA for surufatinib, which was validated and accepted
in July 2021, for the treatment of both pancreatic and non-pancreatic NET; and
o Completed the 120-day assessment, and now entering the later stages of MAA
review.
· Savolitinib: conducted U.S. FDA EOP2(20) meeting for SAVANNAH
study of savolitinib plus TAGRISSO(®) in EGFR(21) TKI(22) refractory NSCLC.
o Continued evaluation of SAVANNAH study for potential accelerated approval
use; and
o Completed clinical trial applications in U.S., EU and Japan for the
SAFFRON study, a global pivotal Phase III study of savolitinib and
TAGRISSO(®) in patients with NSCLC who have progressed following TAGRISSO(®)
treatment due to MET amplification.
III. CLINICAL DEVELOPMENT ACTIVITIES
Savolitinib (ORPATHYS(®)), a highly selective oral inhibitor of MET being developed broadly across MET-driven patient populations in lung and gastric cancer and renal cell carcinoma
Major clinical milestones for savolitinib in 2021:
· Initiated SAMETA, a global Phase III pivotal study of the
savolitinib plus IMFINZI(®) combination in MET-driven, unresectable and
locally advanced or metastatic PRCC in October 2021 (NCT05043090);
· Initiated SANOVO, a pivotal Phase III study in China for the
savolitinib plus TAGRISSO(®) combination in treatment naïve patients with
EGFR mutant NSCLC with MET aberration in September 2021 (NCT05009836);
· Initiated SACHI, a pivotal Phase III study in China for the
savolitinib plus TAGRISSO(®) combination in patients with EGFR mutant NSCLC
who have progressed following EGFR TKI treatment due to MET amplification in
November 2021 (NCT05015608);
· Initiated Phase II study with potential for
registration (NCT04923932) for savolitinib in metastatic gastric cancer with
MET amplification in China in mid-2021;
· Initiated a confirmatory China Phase IIIb post-approval study
(NCT04923945) of savolitinib monotherapy in MET exon 14 skipping alteration
patients in mid-2021; and
· A further $15 million milestone payment, to us by AstraZeneca,
was triggered in February 2022 upon initiation of start-up activities for
SAFFRON.
Major savolitinib clinical data presentations in 2021:
· Presented CALYPSO Phase II study data in MET-driven PRCC patients
(NCT02819596) for savolitinib in combination with IMFINZI(®) at the 2021
ASCO(23) Annual Meeting;
· Published in The Lancet Respiratory Medicine updated data from
the Phase II study in patients with MET exon 14 skipping alteration NSCLC
(NCT02897479); and
· Presented final Phase II data at WCLC(24) 2020 for the TATTON
study (NCT02143466) in NSCLC patients with MET amplification who had
progressed after prior treatment with EGFR inhibitors.
Potential upcoming clinical and regulatory milestones for savolitinib in 2022:
· Submit for presentation the SAVANNAH Phase II study (NCT03778229)
for the savolitinib plus TAGRISSO(®) combination in NSCLC patients harboring
EGFR mutation and MET amplification or overexpression at a scientific
conference in the second half of 2022; and
· Commence enrollment in SAFFRON, a global, pivotal Phase III study
for the savolitinib plus TAGRISSO(®) combination in mid-2022 (NCT05261399).
Surufatinib (SULANDA(®) in China), an oral inhibitor of VEGFR(25), FGFR and CSF-1R 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 clinical milestones for surufatinib in 2021:
· Initiated the SURTORI-01 Phase III trial in NEC(26) patients in
China, the first pivotal study combining SULANDA(®) and TUOYI(®),
Junshi's(27) anti-PD-1 antibody, in September 2021 (NCT05015621);
· Initiated a bridging study in NET patients in Japan in September
2021 (NCT05077384) based on dialogue with the Japanese PMDA(28); and
· Initiated an international Phase Ib/II study of surufatinib
combined with tislelizumab (NCT04579757), BeiGene's(29) PD-1(30) antibody, in
the U.S. and Europe in March 2021.
Major surufatinib clinical data presentations in 2021:
· Presented NEC cohort data from the China Phase II study of
surufatinib plus TUOYI(®) (NCT04169672) at the 2021 ASCO and ESMO IO(31) 2021
annual meetings;
· Presented data from the gastric and gastroesophageal junction
cancers cohort of the China Phase II study of surufatinib plus TUOYI(®)
(NCT04169672) at the 2021 ASCO and ESMO IO 2021 annual meetings;
· Presented data from two additional cohorts of the China Phase II
study of surufatinib plus TUOYI(®) (NCT04169672) at the ESMO IO 2021 for
esophageal and small cell lung cancer;
· Presented updated results from U.S. Phase Ib monotherapy NET
cohorts (NCT02549937) in heavily pretreated patients with NET at the 2021 ASCO
Annual Meeting;
· Presented a subgroup analysis by Ki-67 and baseline CgA(32) of
the Phase III monotherapy study in pancreatic NET (SANET-p) (NCT02589821) at
the 2021 ASCO Annual Meeting; and
· Presented Phase II data for surufatinib monotherapy in BTC(33)
patients (NCT02966821) at the 2021 ASCO Annual Meeting in U.S. patients after
first-line chemotherapy.
Potential upcoming clinical and regulatory milestones for surufatinib in 2022:
· Submit for presentation data from the Phase Ib/II combination
study with tislelizumab at a scientific conference in the second half of
2022;
· Submit for presentation further Phase II data for the TUOYI(®)
combination study for biliary tract, thyroid cancer, non-small cell lung
cancer, endometrial cancer and sarcoma cohorts at a scientific conference in
the second half of 2022, and
· Plan to initiate SURTORI-02, a Phase III study of surufatinib in
combination with TUOYI(®) in esophageal cancer in China in the second half of
2022.
Fruquintinib (ELUNATE(®) in China), a highly selective oral inhibitor of VEGFR 1/2/3 designed to improve kinase selectivity to minimize off-target toxicity and thereby improve tolerability; approved and launched in China
Major clinical milestones for fruquintinib in 2021:
· Completed enrollment in the FRESCO-2 global Phase III
registration study (NCT04322539) in refractory metastatic CRC in late 2021,
with 691 patients recruited in 15 months, across 14 countries including U.S.,
EU, Japan and Australia, ahead of schedule;
· Initiated registration-intent Phase II study in endometrial
cancer for fruquintinib in combination with
TYVYT(®) (NCT03903705) following discussion with the NMPA;
· Initiated a Phase II study in China and Korea for fruquintinib in
combination with tislelizumab (NCT04716634) with advanced or metastatic,
unresectable gastric cancer, CRC or NSCLC;
· Initiated a Phase Ib/II study in the U.S. for fruquintinib in
combination with tislelizumab (NCT04577963) in patients with triple negative
breast or endometrial cancer and metastatic CRC; and
· Completed enrollment in four cohorts of the Phase II study of
fruquintinib combined with TYVYT(®) (NCT03903705), in CRC, endometrial
cancer, HCC(34) and RCC(35) in China.
Major fruquintinib clinical data presentations in 2021:
· Presented preliminary endometrial cancer, HCC and RCC cohorts
data from the Phase Ib/II studies of fruquintinib combined with TYVYT(®) at
CSCO(36) 2021 (NCT03903705);
· Presented preliminary CRC cohorts data from the Phase Ib/II
studies of fruquintinib combined with TYVYT(®) and of fruquintinib combined
with geptanolimab, Genor's(37) PD-1 antibody, at the 2021 ASCO Annual Meeting
(NCT04179084 and NCT03977090, respectively); and
· Presented Phase Ib U.S. monotherapy data in two different cohorts
of patients with refractory metastatic CRC (NCT03251378) at the 2022 ASCO
Gastrointestinal Cancers Symposium.
Potential upcoming clinical and regulatory milestones for fruquintinib in 2022:
· Complete enrollment of the FRUTIGA China Phase III registration
study (NCT03223376) in advanced gastric cancer in 2022, which is expected to
enroll about 700 patients in China;
· Report outcome of the FRESCO-2 trial (NCT04322539) in the second
half of 2022 when the event-driven primary endpoint, OS(38), is reached;
· If FRESCO-2 is positive, HUTCHMED plans to initiate a
simultaneous submission program to apply for fruquintinib marketing
authorization with the U.S. FDA, the EMA and the PMDA; and
· Plan to initiate Phase III studies of fruquintinib plus TYVYT(®)
combination in HCC, RCC and endometrial cancer in China.
Amdizalisib (HMPL-689), an investigative and highly selective oral inhibitor of PI3Kδ(39) designed to address the gastrointestinal and hepatotoxicity associated with currently approved and clinical-stage PI3Kδ inhibitors
Major clinical milestones for amdizalisib in 2021:
· Initiated two Phase II studies with potential for registration in
China for the treatment of patients with follicular lymphoma and patients with
marginal zone lymphoma in April 2021; and
· Initiated dose expansion portion of the Phase I/Ib study in the
U.S. and Europe (NCT03786926) in the second half of 2021 in multiple types of
non-Hodgkin's lymphoma.
Major amdizalisib clinical data presentation in 2021:
· Presented initial dose expansion data at ESMO in September 2021
at the RP2D(40), in patients with multiple types of non-Hodgkin's lymphoma in
China.
Potential upcoming clinical and regulatory milestones for amdizalisib in 2022:
· Initiate additional Phase II studies with potential for
registration intent in China in additional relapsed/refractory non-Hodgkin's
lymphoma indications in the second half of 2022;
· Initiate studies in combination with other anti-cancer therapies
in China in early 2022; and
· Complete recruitment of patients for Phase II studies with
potential for registration intent in China for the treatment of follicular
lymphoma and marginal zone lymphoma in late 2022.
Sovleplenib (HMPL-523), an investigative and highly selective oral inhibitor of Syk(41), an important component of the B-cell receptor signaling pathway, for the treatment of hematological cancers and immune diseases
Major clinical and regulatory milestones for sovleplenib in 2021:
· Initiated the ESLIM-01 Phase III pivotal study in ITP
(NCT03951623) in China in October 2021; and
· Initiated dose expansion portion of the international Phase I
study in the second half of 2021 in multiple non-Hodgkin's lymphoma
indications.
Major sovleplenib clinical data presentations in 2021:
· Presented initial Phase Ib ITP study (NCT03951623) in China at
ASH 2021(42); and
· Presented initial data from the dose escalation portion of the
international Phase I study (NCT03779113) in lymphoma patients in the U.S. and
Europe at ASH 2021.
Potential upcoming clinical milestone for sovleplenib in 2022:
· Complete U.S. IND and initiate Phase I study in the U.S. in
patients with ITP.
Tazemetostat (TAZVERIK(®) in the U.S. and Japan), an inhibitor of EZH2 licensed from Epizyme for which HUTCHMED is collaborating to research, develop, manufacture and commercialize in Greater China
Potential upcoming clinical and regulatory milestones for tazemetostat in 2022:
· Initiate a bridging study in follicular lymphoma in China for
conditional registration based on U.S. approvals;
· Initiate the China portion of the global SYMPHONY-1 Phase III
trial (NCT04224493) of tazemetostat combined with lenalidomide and rituximab
in patients with relapsed or refractory follicular lymphoma after at least one
prior line of therapy;
· Initiate Phase II combination studies with other HUTCHMED assets;
and
· Engage with NMPA on potential path for regulatory approval for
the treatment of patients with epithelioid sarcoma, a rare disease for which
TAZVERIK(®) has FDA approval.
HMPL-453, an investigative and highly selective oral inhibitor of FGFR 1/2/3
· Initiated combination studies with other anti-cancer therapies,
including chemotherapies and/or PD-1 antibodies, in China in January 2022
(NCT05173142).
HMPL-306, an investigative and highly selective oral inhibitor of IDH1/2 designed to address resistance to the currently marketed IDH inhibitors
Major clinical and regulatory milestones for HMPL-306 in 2021:
· Initiated Phase I dose escalation study in China in hematological
malignancies;
· Initiated dose escalation portion of a Phase I study
(NCT04764474) in the U.S. and Europe in patients with hematological
malignancies with an IDH1 and/or IDH2 mutation in early 2021; and
· Initiated dose escalation portion of a Phase I study
(NCT04762602) in the U.S. and Europe in patients with solid tumors with an
IDH1 and/or IDH2 mutation in early 2021.
Potential upcoming clinical and regulatory milestones for HMPL-306 in 2022:
· Submit for presentation data from the dose escalation portion of
the Phase I study (NCT04272957) in China at a scientific conference in
mid-2022; and
· Initiate dose expansion portion of the Phase I study in China in
mid-2022; and
· Initiate dose expansion portion of the Phase I studies in the
U.S. and Europe in mid-2022.
HMPL-295, an investigative and highly selective oral inhibitor of ERK in the MAPK pathway( )(43) with the potential to address intrinsic or acquired resistance from upstream mechanisms such as RAS-RAF-MEK
· Initiated Phase I trial (NCT04908046) in patients with advanced
solid tumors in China in July 2021.
HMPL-760, an investigative, highly selective, third-generation oral inhibitor of BTK with improved potency versus first generation BTK inhibitors against both wild type & C481S mutant enzymes
· Initiated Phase I trials in China (NCT05190068) and the U.S.
(NCT05176691) in patients with advanced hematological malignancies in January
2022.
HMPL-653, an investigative, 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, a differentiated, red blood cell sparing CD47 monoclonal antibody
· Completed IND submission for HMPL-A83 in China in early 2022.
IV. MANUFACTURING
· Commercial scale-up and launches of SULANDA(®) and ORPATHYS(®),
alongside ongoing supply of ELUNATE(®);
· Completed all relevant amdizalisib and sovleplenib manufacturing
process studies, in preparation for potential NDA submissions; and
· Rapid progress in building our new flagship Shanghai
manufacturing facility, designed to increase our novel drug product
manufacturing capacity by over five-fold. Small molecule and large molecule
equipment installation is planned for late 2022, with GMP compliance targeted
for late 2023.
V. OTHER VENTURES
Other Ventures include our profitable prescription drug marketing and
distribution platforms covering about 290 cities and towns in China with
around 2,900 mainly manufacturing and commercial personnel.
· Other Ventures delivered encouraging growth with consolidated
revenues up 20% (13% at CER(44)) to $236.5 million (2020: $197.8m). This does
not include revenues from our non-consolidated joint venture SHPL(45), which
also grew by 20% (12% at CER) to $332.6 million (2020: $276.4m);
· Consolidated net income attributable to HUTCHMED from our Other
Ventures grew by 24% (16% at CER) to $54.4 million (2020: $44.0m), excluding
one-time gains; and
· One-time gains totaled $88.5 million (2020: $28.8m), including
$82.9 million (2020: nil) from the divestment of HBYS(46) and $5.6 million
(2020: $28.8m) from land compensation, before withholding tax.
VI. OTHER CORPORATE DEVELOPMENTS
· Completed listing on the Main Board of HKEX(47), raising net
proceeds of approximately $585 million;
· Completed divestment of interest in HBYS, a non-core and
non-consolidated over-the-counter drug joint venture business for $159.1
million in cash, representing about 22 times HBYS's adjusted net profit
attributable to HUTCHMED equity holders in 2020 with an additional $46.4
million related to declared dividends expected to be collected in 2022;
· Entered into a collaboration with Epizyme in August 2021 to
research, develop, manufacture and commercialize in Greater China its drug
TAZVERIK(®), an EZH2 inhibitor approved by the U.S. FDA for the treatment of
certain patients with epithelioid sarcoma and follicular lymphoma;
· Changed our group company name/corporate identity to HUTCHMED in
April 2021, unifying the names of the majority of our key subsidiaries;
· Announced a strategic partnership with Inmagene(48) in January
2021 to further develop four novel preclinical drug candidates discovered by
HUTCHMED for the potential treatment of multiple immunological diseases; and
· Arbitral award in favor of Hutchison Sinopharm(49) in connection
with the termination of its distribution rights for SEROQUEL(®) in mainland
China by Luye Pharma Hong Kong Ltd. In 2021, the Hong Kong International
Arbitration Centre made a final award in favor of Hutchison Sinopharm against
Luye Pharma Hong Kong Ltd. in the amount of RMB253.2 million ($39.6 million),
plus costs and interest. Payment of the award is expected in 2022.
Potential upcoming corporate developments:
· Divestment of further non-core operations, we continue to look
for opportunities to divest non-core businesses, including SHPL, to better
focus on the development and global commercialization of our innovation-driven
assets; and
· Large molecule advancement, we continue to evaluate opportunities
which might accelerate our capabilities in the large molecule arena.
VII. IMPACT OF COVID-19
COVID-19 did not impact our research, our clinical studies or our commercial
activities in any material manner in 2021. Certain regulatory inspections of
our manufacturing facilities in China by the U.S. FDA have, however, been
postponed due to travel restrictions. We will continue to closely work with
regulators and monitor the evolving situation.
VIII. SUSTAINABILITY
As an innovative, commercial-stage biopharmaceutical company, HUTCHMED
embraces sustainability at the core of how we operate. Over the past two
decades, we worked hard to strengthen healthcare systems by providing quality
and accessible drugs. As the world is gradually adapting to the changes
brought about by COVID-19, the pandemic has highlighted the importance of
building sustainability and environmental, social and governance factors into
business strategy. HUTCHMED has embarked on our sustainability journey in 2020
by publishing our inaugural ESG report to demonstrate our efforts, and
establishing a board level Sustainability Committee in 2021 to support the
Board of Directors in fulfilling their responsibilities. We plan to publish
our second sustainability report for 2021 at the end of May 2022.
Going forward, HUTCHMED will be working with our stakeholders to embrace
sustainable business practices and develop a sustainability strategy that will
help focus our efforts on areas which are most relevant to our business.
Through a materiality assessment exercise for 2021, priority areas include:
Business ethics; Drug research-related topics; Drug development; Commercial
operations responsibilities; Environmental topics; and Management of our
people. Over the course of 2022, we will continue to engage our stakeholders
to identify areas for improvement to building a more sustainable and
responsible future.
FULL YEAR 2021 Financial Results
Cash, Cash Equivalents and Short-Term Investments were $1,011.7 million as of December 31, 2021 compared to $435.2 million as of December 31, 2020.
· Adjusted Group (non-GAAP(50)) net cash flows excluding financing
activities were -$73.5 million (2020: -$78.4m), with the net decrease mainly
due to $159.1 million in proceeds from the divestment of HBYS, which offset
the increasing Oncology/Immunology R&D spending and lower dividends
received from our non-consolidated joint ventures totaling $49.9 million
(2020: $86.7m); and
· Net cash generated from financing activities totaled $650.0
million (2020: $296.4m) mainly resulting from the global offering of shares
and listing on the HKEX in June 2021 and a private placement in April 2021 to
a fund affiliated with Baring Private Equity Asia.
Revenues for the year ended December 31, 2021 were $356.1 million compared to $228.0 million in 2020.
· Oncology/Immunology consolidated revenues increased 296% (287% at
CER) to $119.6 million (2020: $30.2m) resulting from:
ELUNATE(®) revenues increased 168% to $53.5 million (2020: $20.0m) in
manufacturing revenues, promotion and marketing service revenues and
royalties, as our in-house sales team increased in-market sales 111% to $71.0
million (2020: $33.7m), as provided by Lilly(51);
SULANDA(®) sales revenues of $11.6 million since mid-January 2021 launch,
initially approved to treat patients with advanced extra-pancreatic
(non-pancreatic) NET and subsequently also approved to treat patients with
pancreatic NET in June 2021;
ORPATHYS(®) revenue of $36.3 million since mid-July 2021 launch, which
was comprised of a $25.0 million first sale milestone payment and $11.3
million in manufacturing revenues and royalties. AstraZeneca reported $15.9
million in-market sales (2020: nil) of ORPATHYS(®) in 2021; and
Other R&D service fee revenues of $18.2 million (2020: $10.2m), which were
primarily fees from AstraZeneca and Lilly for the management of development
activities in China.
· Other Ventures consolidated revenues increased 20% (13% at CER)
to $236.5 million (2020: $197.8m), mainly due to continued sales growth of
third-party prescription drug products.
Net Expenses for the year ended December 31, 2021 were $550.7 million compared to $353.7 million in 2020.
· Cost of Revenues were $258.2 million (2020: $188.5m), the
majority of which were the cost of third-party prescription drug products
marketed through our profitable Other Ventures, as well as full year costs
associated with ELUNATE(®), including the provision of promotion and
marketing services to Lilly which commenced in October 2020, and the costs for
SULANDA(®) and ORPATHYS(®) which commenced commercial sales in 2021;
· R&D Expenses were $299.1 million (2020: $174.8m), which
increased mainly as a result of an expansion in the active development of
eleven novel oncology drug candidates. Our rapidly scaling international
clinical and regulatory operations in the U.S. and Europe incurred expenses of
$140.1 million (2020: $63.3m), while R&D expenses in China were $159.0
million (2020: $111.5m);
· SG&A Expenses(52) were $127.1 million (2020: $61.3m), which
increased primarily due to higher staff costs and share-based compensation
expense to support rapidly expanding operations. This included the build-up of
a large-scale national oncology commercial infrastructure in China and
commercial launch readiness in the U.S. to support our oncology products; and
· Other Items generated net income of $133.7 million (2020:
$70.9m), which increased primarily due to a one-off gain on the divestment of
HBYS attributable to the Group of $82.9 million (comprised of a gain of $121.3
million offset in part by related taxes of $14.4 million and amounts
attributable to a non-controlling interest of $24.0 million), offset in part
by lower one-time land compensation of $5.6 million (2020: $28.8m) recognized
for HBYS.
Net Loss attributable to HUTCHMED for the year ended December 31, 2021 was $194.6 million compared to $125.7 million in 2020.
· As a result, the net loss attributable to HUTCHMED in 2021 was
$0.25 per ordinary share / $1.23 per ADS(53), compared to net loss
attributable to HUTCHMED of $0.18 per ordinary share / $0.90 per ADS, in
2020.
Financial Summary
Condensed Consolidated Balance Sheet Data
(in $'000)
As of December 31,
2021 2020
Assets
Cash and cash equivalents and short-term investments 1,011,700 435,176
Accounts receivable 83,580 47,870
Other current assets 116,796 47,694
Property, plant and equipment 41,275 24,170
Investments in equity investees 76,479 139,505
Other non-current assets 42,831 29,703
Total assets 1,372,661 724,118
Liabilities and shareholders' equity
Accounts payable 41,177 31,612
Other payables, accruals and advance receipts 210,839 121,283
Bank borrowings 26,905 26,861
Other liabilities 54,226 25,413
Total liabilities 333,147 205,169
Company's shareholders' equity 986,893 484,116
Non-controlling interests 52,621 34,833
Total liabilities and shareholders' equity 1,372,661 724,118
Condensed Consolidated Statement of Operations Data
(in $'000, except share and per share data)
Year Ended December 31,
2021 2020
Revenues:
Oncology/Immunology - Marketed Products 76,429 19,953
Oncology/Immunology - R&D 43,181 10,262
Oncology/Immunology consolidated revenues 119,610 30,215
Other Ventures 236,518 197,761
Total revenues 356,128 227,976
Expenses:
Costs of revenues (258,234) (188,519)
Research and development expenses (299,086) (174,776)
Selling and general administrative expenses (127,125) (61,349)
Total expenses (684,445) (424,644)
(328,317) (196,668)
Loss from Operations
Gain on divestment of an equity investee 121,310 -
Other (expense)/income (8,733) 6,934
Loss before income taxes and equity in earnings of equity investees (215,740) (189,734)
Income tax expense (11,918) (4,829)
Equity in earnings of equity investees, net of tax 60,617 79,046
Net loss (167,041) (115,517)
Less: Net income attributable to non-controlling interests (27,607) (10,213)
Net loss attributable to HUTCHMED (194,648) (125,730)
(0.25) (0.18)
Losses per share attributable to HUTCHMED - basic and diluted (US$ per share)
Number of shares used in per share calculation - basic and diluted 792,684,524 697,931,437
(1.23) (0.90)
Losses per ADS attributable to HUTCHMED - basic and diluted (US$ per ADS)
Number of ADSs used in per share calculation - basic and diluted 158,536,905 139,586,287
All amounts are expressed in U.S. dollars unless otherwise stated.
FINANCIAL GUIDANCE
We provide financial guidance for 2022 below reflecting expected revenue
growth of ELUNATE(®), SULANDA(®) and ORPATHYS(®) in China. We intend to
update guidance to include ex-China consolidated revenues, upon the occurrence
of surufatinib U.S. and EU approval (if granted) and to reflect any
developments in the non-core market out-licensing of our products.
While we are not providing net cash flow guidance for 2022, we do expect an
increase in investment to support global clinical and organizational
expansion. To support our cash needs, we continue to engage in active
discussions regarding the potential divestment of non-core assets, such as
SHPL, as well as evaluate equity capital markets action, such as a potential
future listing on the STAR Market of the Shanghai Stock Exchange.
2021 2022
Actual
Guidance
Oncology/Immunology consolidated revenues $119.6 million $160 - 190 million
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 9 p.m. HKT /
1 p.m. GMT / 8 a.m. EST - 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
(https://apac.onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=3CB27C53-B304-4687-BDBE-D9FC701048C3&LangLocaleID=1033)
of the call via HUTCHMED's website at www.hutch-med.com/event/
(https://www.hutch-med.com/investors/event-information/) .
Additional dial-in numbers are also available at HUTCHMED's website
(https://www.hutch-med.com/investors/event-information/) . Please use
participant access code "19304872#."
-----
FINANCIAL STATEMENTS
HUTCHMED will today file with the U.S. Securities and Exchange Commission its
Annual Report on Form 20-F.
About HUTCHMED
HUTCHMED (Nasdaq/AIM:HCM; HKEX:13) is an innovative, commercial-stage,
biopharmaceutical company. It is committed to the discovery, global
development and commercialization of targeted therapies and immunotherapies
for the treatment of cancer and immunological diseases. It has more than 4,600
personnel across all its companies, at the center of which is a team of over
1,500 in oncology/immunology. Since inception it has advanced 12 cancer drug
candidates from in-house discovery into clinical studies around the world,
with its first three oncology drugs now approved and marketed in China. For
more information, please visit: www.hutch‑med.com
(https://www.hutch-med.com/) or follow us on LinkedIn
(https://www.linkedin.com/company/hutchmed/) .
Contacts
Investor Enquiries
Mark Lee, Senior Vice President +852 2121 8200
Annie Cheng, Vice President +1 (973) 567 3786
Media Enquiries
Americas - Brad Miles, Solebury Trout +1 (917) 570 7340 (Mobile)
bmiles@troutgroup.com
Europe - Ben Atwell / Alex Shaw, FTI Consulting +44 20 3727 1030 / +44 7771 913 902 (Mobile) /
+44 7779 545 055 (Mobile)
HUTCHMED@fticonsulting.com (mailto:hutchmed@fticonsulting.com)
Asia - Zhou Yi, Brunswick +852 9783 6894 (Mobile)
HUTCHMED@brunswickgroup.com
Nominated Advisor
Atholl Tweedie / Freddy Crossley, Panmure Gordon (UK) Limited +44 (20) 7886 2500
References
Unless the context requires otherwise, references in this announcement to the
"Group," the "Company," "HUTCHMED," "HUTCHMED Group," "we," "us," and "our,"
mean HUTCHMED (China) Limited and its consolidated subsidiaries and joint
ventures unless otherwise stated or indicated by context.
Past Performance and Forward-Looking Statements
The performance and results of operations of the Group contained within this
announcement are historical in nature, and past performance is no guarantee of
future results of the Group. This announcement contains forward-looking
statements within the meaning of the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by words like "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates," "pipeline," "could,"
"potential," "first-in-class," "designed to," "objective," "guidance,"
"pursue," or similar terms, or by express or implied discussions regarding
potential drug candidates, potential indications for drug candidates or by
discussions of strategy, plans, expectations or intentions. You should not
place undue reliance on these statements. Such forward-looking statements are
based on the current beliefs and expectations of management regarding future
events, and are subject to significant known and unknown risks and
uncertainties. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those set forth in the forward-looking statements. There can
be no guarantee that any of our drug candidates will be approved for sale in
any market, or that any approvals which are obtained will be obtained at any
particular time, or that any such drug candidates will achieve any particular
revenue or net income levels. In particular, management's expectations could
be affected by, among other things: unexpected regulatory actions or delays or
government regulation generally, including, among others, the risk that
HUTCHMED's ADSs could be barred from trading in the United States as a result
of the Holding Foreign Companies Accountable Act and the rules promulgated
thereunder; the uncertainties inherent in research and development, including
the inability to meet our key study assumptions regarding enrollment rates,
timing and availability of subjects meeting a study's inclusion and exclusion
criteria and funding requirements, changes to clinical protocols, unexpected
adverse events or safety, quality or manufacturing issues; the inability of a
drug candidate to meet the primary or secondary endpoint of a study; the
inability of a drug candidate to obtain regulatory approval in different
jurisdictions or gain commercial acceptance after obtaining regulatory
approval; global trends toward health care cost containment, including ongoing
pricing pressures; uncertainties regarding actual or potential legal
proceedings, including, among others, actual or potential product liability
litigation, litigation and investigations regarding sales and marketing
practices, intellectual property disputes, and government investigations
generally; and general economic and industry conditions, including
uncertainties regarding the effects of the persistently weak economic and
financial environment in many countries, uncertainties regarding future global
exchange rates and uncertainties regarding the impact of the COVID-19
pandemic. For further discussion of these and other risks, see HUTCHMED's
filings with the U.S. Securities and Exchange Commission, on AIM and on HKEX.
HUTCHMED is providing the information in this announcement as of this date and
does not undertake any obligation to update any forward-looking statements as
a result of new information, future events or otherwise.
In addition, this announcement contains statistical data and estimates that
HUTCHMED obtained from industry publications and reports generated by
third-party market research firms. Although HUTCHMED believes that the
publications, reports and surveys are reliable, HUTCHMED has not independently
verified the data and cannot guarantee the accuracy or completeness of such
data. You are cautioned not to give undue weight to this data. Such data
involves risks and uncertainties and are subject to change based on various
factors, including those discussed above.
Inside Information
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 (as it forms part of retained EU law as defined in
the European Union (Withdrawal) Act 2018).
Ends
OPERATIONS REVIEW
Oncology/Immunology
We discover, develop, manufacture and market targeted therapies and
immunotherapies for the treatment of cancer and immunological diseases through
a fully integrated team of approximately 820 scientists and staff (December
31, 2020: >600), and an in-house oncology commercial organization of about
630 staff (December 31, 2020: ~390).
We have advanced 13 oncology drug candidates into clinical trials in China,
with seven also in clinical development in the U.S. and Europe. Our first
three drug candidates, fruquintinib, surufatinib and savolitinib, have all
been approved and launched in China.
MARKETED PRODUCT SALES
Fruquintinib (ELUNATE(®) in China)
ELUNATE(®) is approved for the treatment of third-line metastatic CRC for
which there is an approximate incidence of 83,000 new patients per year in
China. We estimate that in 2021, approximately 22,000 new patients were
treated with ELUNATE(®) in China with resulting in-market sales of $71.0
million, up 111% versus 2020 ($33.7m).
Under the terms of our agreement with Lilly, HUTCHMED manages all
on-the-ground medical detailing, promotion and local and regional marketing
activities for ELUNATE(®) in China. We consolidate as revenues approximately
70-80% of ELUNATE(®) in-market sales from service fees and royalties paid to
us by Lilly. In 2021, we consolidated $53.5 million in revenue for
ELUNATE(®), equal to 75.4% of in-market sales.
Following negotiations with the China National Healthcare Security
Administration ("NHSA"), ELUNATE(®) continues to be included in the NRDL for
a new two-year term starting in January 2022. For this renewal, we agreed to a
discount of 5% relative to the 2021 NRDL price.
During 2021, our medical marketing and affairs teams conducted about 4,800
educational/scientific events for ELUNATE(®) in China. As a result of the
above activities, ELUNATE(®) continues to expand with unaudited in-market
sales in the months of January and February 2022 increasing 51% to $21.6
million (Jan-Feb 2021: $14.3 million). In January 2022, a total of 5,473 new
and continuing patients were treated with ELUNATE(®) representing a 50%
increase as compared to 3,661 in January 2021.
The only other approved and NRDL reimbursed product in third-line CRC in China
is STIVARGA(®). LONSURF(®), a nucleoside metabolic and thymidine
phosphorylase inhibitor, is approved in China for third-line CRC but is not on
the NRDL.
Surufatinib (SULANDA(®) in China)
SULANDA(®) was launched in China in 2021 for the treatment of all advanced
NETs for which there is an approximate incidence of 34,000 new patients per
year in China.
In 2021, SULANDA(®) was sold as a self-pay drug. We used means-tested early
access and patient access programs to help patients afford SULANDA(®), and we
estimate that approximately 4,800 new patients were treated. Despite these
access programs, duration of treatment was often affected by the economic
constraints of patients. As a result, total sales in 2021 were $11.6 million
(2020: nil).
Following negotiations with the China NHSA, SULANDA(®) was included in the
NRDL starting in January 2022 at a 52% discount on our main 50mg dosage form,
relative to the 2021 self-pay price. Under the NRDL, actual out-of-pocket
costs for patients in 2022 represent approximately 15-20% of the 2021 self-pay
price.
During 2021, we introduced SULANDA(®) through a campaign of local, regional
and national launch events involving approximately 12,000 healthcare
professionals. As a result of the above activities, patient access to
SULANDA(®), as well as duration of treatment, are increasing with unaudited
in-market sales for the months of January and February 2022 up 21% to $6.0
million (Jan-Feb 2021: $4.9m). It should be noted that January and February
2021 in-market sales included normal pipeline fill behind the initial launch
of SULANDA(®) whereas January and February 2022 figures represent consumption
sales. In January 2022, a total of 1,497 new and continuing patients were
treated with SULANDA(®) representing an over 7-fold increase as compared to
213 in January 2021.
There are two therapies for advanced NETs approved and NRDL reimbursed in
China: SUTENT(®) for the treatment of pancreatic NET (approximately 10% of
NET), and AFINITOR(®) in broadly the same indication as SULANDA(®).
Savolitinib (ORPATHYS(®))
On June 22, 2021, ORPATHYS(®) became the first-in-class selective MET
inhibitor to be approved in China. Our partner, AstraZeneca, then launched
ORPATHYS(®) in mid-July 2021, less than three weeks after its conditional
approval by the NMPA for patients with MET exon 14 skipping alteration NSCLC.
More than a third of the world's lung cancer patients are in China and, among
those with NSCLC, approximately 2-3% have tumors with MET exon 14 skipping
alterations, representing an approximate incidence of 13,000 new patients per
year in China. Importantly also, MET plays a role in multiple other solid
tumors, with an estimated total incidence of 120,000 new patients per year in
China.
In-market sales of ORPATHYS(®) since its launch in July 2021 were $15.9
million (2020: nil) resulting in our consolidation of $11.3 million (2020:
nil) in revenues from manufacturing fees and royalties. We estimate that
approximately 1,900 patients were treated with ORPATHYS(®) in 2021.
Following negotiations with the China NHSA, AstraZeneca and HUTCHMED declined
inclusion in the 2022 NRDL, a position that will be reassessed for potential
2023 inclusion.
AstraZeneca introduced a patient access program in late 2021 which subsidizes
use of ORPATHYS(®), through progressive disease. As a result, in-market sales
for ORPATHYS(®) have started strongly in 2022 with unaudited in-market sales
in the months of January and February 2022 of $7.4 million (Jan-Feb 2021:
nil).
ORPATHYS(®) is the first and only selective MET inhibitor on the market in
China, however XALKORI(®) is an approved multi-kinase inhibitor of ALK and
ROS1 with modest MET activity. Several selective MET inhibitors are in
development in China, but none are currently expected to reach the market
before 2023.
RESEARCH & DEVELOPMENT
Savolitinib (ORPATHYS(®) in China)
Savolitinib is an oral, potent, and highly selective oral inhibitor of MET. In
global partnership with AstraZeneca, savolitinib has been studied in NSCLC,
PRCC and gastric cancer clinical trials with over 1,500 patients to date, both
as a monotherapy and in combinations.
In July 2021, we received a $25 million first sale milestone from AstraZeneca
upon launch of ORPATHYS(®) in China and in February 2022, a $15 million
milestone from AstraZeneca was triggered by the initiation of start-up
activities for the SAFFRON study. In total, AstraZeneca will have paid
HUTCHMED $85 million of the total $140 million in upfront payments,
development and approvals milestones that are potentially payable under the
2011 license and collaboration agreement.
Savolitinib - Lung cancer:
MET plays an important role in NSCLC. Savolitinib has made significant
development progress in lung cancer, completing NMPA NDA review, gaining
approval and successfully launching as a monotherapy in China. It is also now
in multiple late stage registrational studies as a combination therapy.
The table below shows a summary of the clinical studies for savolitinib in
lung cancer patients.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Savolitinib monotherapy MET exon 14 skipping alterations China II Registration Approved and launched NCT02897479
Savolitinib monotherapy MET exon 14 skipping alterations China III Confirmatory Ongoing NCT04923945
Savolitinib + TAGRISSO(®) SAVANNAH: 2L/3L EGFRm+(54); TAGRISSO(®) refractory; MET+ Global II Registration-intent Ongoing. Data has supported progression into Phase IIIs NCT03778229
Savolitinib + TAGRISSO(®) SAFFRON: 2L/3L EGFRm+; TAGRISSO(®) refractory; MET+ Global III In planning. Intend to initiate in mid-2022 NCT05261399
Savolitinib + TAGRISSO(®) SACHI: 2L EGFR TKI refractory NSCLC; MET+ China III Ongoing NCT05015608
Savolitinib + TAGRISSO(®) SANOVO: Naïve patients with EGFRm & MET+ China III Ongoing NCT05009836
Update on monotherapy in MET altered NSCLC - In June 2021, savolitinib was
approved by the NMPA based on positive results from a Phase II trial conducted
in China in patients with NSCLC with MET exon 14 skipping alterations
(NCT02897479), having demonstrated effective anti-tumor activity based on
ORR(55) and DCR(56). The approval is conditional upon successful completion of
a confirmatory study in this patient population (NCT04923945), which is
expected to enroll approximately 160 patients from approximately 40 sites.
Update on combination therapies in EGFR TKI-resistant NSCLC -
MET-amplification is a major mechanism for acquired resistance to both
first-generation EGFR TKIs as well as third-generation EGFR TKIs like
TAGRISSO(®). As many as 30-40% of EGFR mutation positive NSCLC patients
develop MET amplification driven resistance to EGFR TKIs. Savolitinib has been
studied extensively in these patients in the TATTON and SAVANNAH studies. The
successful results led to the initiation and planning of three Phase III
studies: SACHI and SANOVO were initiated in China in 2021, and the global,
pivotal Phase III study, the SAFFRON study, is planned to commence enrollment
in mid-2022.
SAVANNAH (NCT03778229) - This global, single-arm study in patients who have
progressed following TAGRISSO(®) due to MET amplification or overexpression
has three dose cohorts of savolitinib combined with TAGRISSO(®). We plan to
submit results for presentation at a scientific conference in 2022. In
addition to the planned global Phase III, which will initiate in mid-2022, we
continue to evaluate the possibility of using the SAVANNAH study as the basis
for U.S. accelerated approval.
SACHI (NCT05015608) - In November 2021, we initiated this China Phase III
study of savolitinib in combination with TAGRISSO(®), which is a
multi-center, open-label, randomized, controlled study in patients with
locally advanced or metastatic EGFR mutation-positive NSCLC with MET
amplification after disease progression on EGFR inhibitor therapy. The study
will evaluate savolitinib in combination with TAGRISSO(®), compared to
platinum-based doublet-chemotherapy (pemetrexed plus cisplatin or
carboplatin), the standard-of-care treatment option in this setting. The
primary endpoint of the study is PFS.
SANOVO (NCT05009836) - In September 2021, we initiated this China Phase III
study of savolitinib in combination with TAGRISSO(®) as a first-line
treatment in certain NSCLC patients whose tumors harbor EGFR mutations and
overexpress MET. The Phase III trial is a blinded, randomized, controlled
study in previously untreated patients with locally advanced or metastatic
NSCLC with activating EGFR mutations and MET overexpression. The study will
evaluate TAGRISSO(®) in combination with savolitinib comparing to
TAGRISSO(®) alone, a standard-of-care treatment option for these patients.
The primary endpoint of the study is PFS.
Savolitinib - Kidney cancer:
MET is a key genetic driver in RCC, and emerging evidence suggests that
combining immunotherapies with a MET inhibitor could enhance anti-tumor
activity. PRCC is a subtype of kidney cancer, representing about 15% of
patients, with no treatments approved for patients with tumors that harbor
MET-driven alterations. We have conducted multiple global studies of
savolitinib in PRCC patients, including the SAVOIR monotherapy and CALYPSO
combination therapy global Phase II trials, that both demonstrated highly
encouraging results. These results led to the initiation of a global Phase
III, the SAMETA study, in 2021.
The table below shows a summary of the clinical studies for savolitinib in
kidney cancer patients.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Savolitinib + IMFINZI(®) SAMETA: MET-driven, unresectable and locally advanced or metastatic PRCC Global III Ongoing NCT05043090
Savolitinib + IMFINZI(®) CALYPSO: PRCC U.K./Spain II Data updated at ASCO 2021 NCT02819596
Savolitinib + IMFINZI(®) CALYPSO: Clear cell RCC; VEGFR TKI refractory U.K./Spain II Ongoing NCT02819596
SAMETA (NCT05043090) - In November 2021, we initiated this global Phase III
study of savolitinib in combination with AstraZeneca's PD-L1 inhibitor
IMFINZI(®) in patients with MET-driven advanced PRCC. The Phase III trial is
an open-label, randomized, controlled study in treatment-naïve patients with
MET-driven, unresectable and locally advanced or metastatic PRCC, to evaluate
savolitinib in combination with IMFINZI(®), compared to single agent
IMFINZI(®) or single agent SUTENT(®), an oral multi-kinase inhibitor
considered the standard-of-care treatment option in PRCC. The primary endpoint
of the study is median PFS.
CALYPSO (NCT02819596) - This investigator-initiated open-label Phase I/II
study of savolitinib in combination with IMFINZI(®) is evaluating the
savolitinib/IMFINZI(®) combination in patients with PRCC and clear cell RCC.
Interim results of the PRCC cohort of the CALYPSO study were presented at the
ASCO 2021 and showed encouraging efficacy across all patients, particularly in
MET-driven PRCC patients. Importantly, for patients whose tumors are
MET-driven, ORR was 57%, median PFS was 10.5 months (95% CI: 2.9-15.7) and
median OS was 27.4 months (95% CI: 7.3-NR). Tolerability was consistent with
established single agent safety profiles.
Savolitinib - Gastric cancer:
MET-driven gastric cancer has a very poor prognosis. Multiple Phase II studies
have been conducted in Asia to study savolitinib in MET-driven gastric cancer,
of which approximately 5% of all gastric cancer patients, demonstrated
promising efficacy, including VIKTORY. The VIKTORY study reported a 50% ORR
with savolitinib monotherapy in gastric cancer patients whose tumors harbor
MET amplification.
Phase II with potential for registration intent in 2L+ gastric cancer with MET
amplification (NCT04923932) - In July 2021, we initiated a Phase II
registration-intent study in MET-amplified gastric cancer in China. This is a
two-stage, single-arm study which targets advanced gastric cancer patients who
have failed at least one line of treatment. The primary endpoint is ORR.
Subject to the results of the first stage of this study, we will discuss with
the CDE of NMPA the appropriate approach and necessary criteria for
registration.
Surufatinib (SULANDA(®) in China)
Surufatinib is a novel, oral angio-immuno kinase inhibitor that selectively
inhibits the tyrosine kinase activity associated with VEGFR and FGFR, both
shown to be involved in tumor angiogenesis, and CSF-1R, which plays a key role
in regulating tumor-associated macrophages, promoting the body's immune
response against tumor cells. Surufatinib has been studied in clinical trials
with around 1,200 patients to date, both as a monotherapy and in combinations,
and is approved in China. We currently retain all rights to surufatinib
worldwide.
Initial approvals for surufatinib in China are for the treatment of advanced
NET patients. NETs present in the body's organ system with fragmented
epidemiology. About 58% of NETs originate in the gastrointestinal tract and
pancreas, 27% in the lung or bronchus, and a further 15% in other organs or
unknown origins.
Surufatinib's ability to inhibit angiogenesis, block the accumulation of tumor
associated macrophages and promote infiltration of effector T cells into
tumors could help improve the anti-tumor activity of PD-1 antibodies. Several
combination studies with PD-1 antibodies have shown promising data.
A summary of the clinical studies of surufatinib is shown in the table below.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Surufatinib monotherapy SANET-ep: extra-pancreatic NET China III Approved & launched NCT02588170
Surufatinib monotherapy SANET-p: pancreatic NET China III Approved & launched; subgroup analysis at ASCO 2021 NCT02589821
Surufatinib monotherapy NETs U.S. Ib FDA accepted NDA (June 2021); updated Ib data at ASCO 2021 NCT02549937
Surufatinib monotherapy NETs Europe II EMA accepted MAA (July 2021) NCT04579679
Surufatinib monotherapy NETs Japan Bridging Ongoing. Reg-enabling study. NCT05077384
Surufatinib monotherapy BTC China Ib/IIa Completed; data at ASCO 2021 NCT02966821
Surufatinib + TUOYI(®) (PD-1) SURTORI-01: NEC China III Ongoing NCT05015621
Surufatinib + TUOYI(®) (PD-1) NENs(57) China II Ongoing; data at ASCO 2021 & ESMO IO 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) BTC China II Ongoing NCT04169672
Surufatinib + TUOYI(®) (PD-1) Gastric cancer China II Ongoing; data at ASCO 2021 and updated at ESMO IO 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) Thyroid cancer China II Ongoing NCT04169672
Surufatinib + TUOYI(®) (PD-1) SCLC(58) China II Ongoing; data at ESMO IO 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) Soft tissue sarcoma China II Ongoing NCT04169672
Surufatinib + TUOYI(®) (PD-1) Endometrial cancer China II Ongoing NCT04169672
Surufatinib + TUOYI(®) (PD-1) Esophageal cancer China II Ongoing; data at ESMO IO 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) NSCLC China II Ongoing NCT04169672
Surufatinib + tislelizumab (PD-1) Solid tumors U.S. / Europe Ib/II Ongoing NCT04579757
Surufatinib - monotherapy in NET updates:
Global development of surufatinib in NET: U.S. NDA and EU MAA under review -
The U.S. NDA and EU MAA are supported by data from two positive Phase III
studies of surufatinib in patients with pancreatic and extra-pancreatic NET in
China (SANET-p and SANET-ep both previously reported in The Lancet Oncology,
as mentioned below), and a surufatinib Phase Ib study conducted in U.S. NET
patients (N=107 for safety and N=67 for efficacy).
In June 2021, the U.S. FDA accepted our filing of the NDA for surufatinib for
the treatment of pancreatic and extra-pancreatic (non-pancreatic) NETs.
Surufatinib received fast track designation in April 2020 for the treatment of
pancreatic and extra-pancreatic NET. Orphan Drug Designation for pancreatic
NET was also granted in November 2019. We have also initiated an Expanded
Access Protocol in the U.S. to ensure patients with NET with limited
therapeutic options have access to this treatment. Regulatory clearance of
this protocol has been granted by the U.S. FDA and this program is open for
site activation.
U.S. FDA NDA review, as well as the clinical site inspections and pre-approval
inspections of our manufacturing facilities, are ongoing. The PDUFA goal
date for the FDA's completion of review is April 30, 2022. Timing of
completion of the NDA review is subject to FDA scheduling limitations which
are contingent on COVID-19 travel restrictions and security requirements for
foreign visitors. Remaining inspections must be completed before regulatory
action can be taken.
We have also submitted the EMA MAA for surufatinib, which was validated and
accepted in July 2021, for the treatment of both pancreatic and non-pancreatic
NET. The 120-day assessment has been completed, and we are now entering the
later stages of MAA review. In addition, we initiated a registration-enabling
bridging study in NET patients in Japan in September 2021.
U.S. Phase Ib NET cohorts (NCT02549937) - Updated data from a study in U.S.
patients was presented at ASCO 2021, reinforcing the dosage, efficacy and
safety profile as comparable to the China trials data. At data cut-off,
confirmed response and DCR was observed in 18.8% and 87.5% of pancreatic NET
patients, and 6.3% and 93.8% of extra-pancreatic NET patients, respectively.
Median PFS was 11.5 months in both cohorts (95% CI: 6.5-17.5).
Japan Bridging Study to Support Registration for Advanced NET (NCT05077384) -
Based on dialogue with the Japanese PMDA, it was agreed that the Japanese NDA
would include results from a 34-patient, registration-enabling bridging study
in Japan to complement the registration data package submitted to the U.S. FDA
and the EMA. It was initiated in September 2021.
Surufatinib - combination therapy with checkpoint inhibitor TUOYI(®) updates:
A Phase II China study (NCT04169672) is enrolling approximately 260 patients
in nine solid tumor indications, including NENs, BTC, gastric cancer, thyroid
cancer, SCLC, soft tissue sarcoma, endometrial cancer, esophageal cancer and
NSCLC. In 2021, we presented encouraging preliminary data on several of these
surufatinib-TUOYI(®) combination cohorts at CSCO and ESMO IO. These have led
to the initiation of the first Phase III trial combining surufatinib with a
PD-1 antibody, the SURTORI-01 study in NEC, and we are currently considering
further registration studies in gastric cancer, SCLC and esophageal cancer.
NEC (subset of NENs) cohort - At CSCO 2021, we presented data, with a cutoff
date of July 30, 2021, for all 21 enrolled NEC patients that were efficacy
evaluable. Average duration of treatment was 4.9 months (range 1-19) and
median OS was 10.3 months (95% CI: 9.1-not reached). The median PFS was 4.14
months (95% CI: 1.5-5.5) and median DoR(59) was 4.1 months (95% CI: 3.0-not
reached). The confirmed ORR was 23.8% (95% CI: 8.2-47.2) and DCR was 71.4%
(95% CI: 47.8-88.7).
All patients experienced TRAEs(60), including 9 (42.9%) who experienced grade
3 or above TRAEs. One (4.8%) patient reported treatment-related serious
adverse events. Hyperglycemia (3 patients, 14.3%), hypertension (2 patients,
9.5%) and hypertriglyceridemia (2 patients, 9.5%) were the most commonly (more
than one patient) reported grade 3 or above TRAEs. No TRAEs led to treatment
discontinuation or treatment-related deaths.
SURTORI-01 (NCT05015621) - In September 2021, we initiated this Phase III
study to evaluate the combination compared with FOLFIRI to treat patients with
advanced NEC who have progression of disease or intolerable toxicity after
previous first-line chemotherapy. It is a randomized, controlled, open-label,
multi-center study where approximately 200 patients are expected to be
enrolled. For the study group, all patients will receive study treatment on a
21-day cycle. The primary outcome measure is OS. HUTCHMED is the sponsor and
is responsible for the study's execution. HUTCHMED and Junshi Biosciences are
jointly funding the study.
Surufatinib - combination with checkpoint inhibitor tislelizumab:
In addition to the TUOYI(®) and TYVYT(®) combination studies in China, in
March 2021 we initiated an open-label, Phase Ib/II study of surufatinib in
combination with BeiGene's tislelizumab in the U.S. and Europe, evaluating the
safety, tolerability, pharmacokinetics and efficacy in patients with advanced
solid tumors, including CRC, NET, small cell lung cancer, gastric cancer and
soft tissue sarcoma. The dose finding phase of the study is now complete and
the expansion phase is ongoing (NCT04579757).
Surufatinib - Exploratory development:
In China, we support an Investigator Initiated Trial ("IIT") program for
surufatinib, with about 50 IITs in various solid tumor settings being
conducted for both combination and single agent regimens. These trials
explore and answer important medical questions in addition to our own
company-sponsored clinical trials.
Fruquintinib (ELUNATE(®) in China)
Fruquintinib is a novel, selective, oral inhibitor of VEGFR 1/2/3 kinases that
was designed to improve kinase selectivity to minimize off-target toxicity and
thereby improve tolerability. Fruquintinib has been studied in clinical trials
with about 5,000 patients to date, both as a monotherapy and in combinations.
Aside from its first approved indication of third-line CRC (in China), several
studies of fruquintinib combined with checkpoint inhibitors (including
TYVYT(®), geptanolimab and tislelizumab) have been underway, some of which
presented encouraging data in 2021. Registration-intent studies combined with
chemotherapy (FRUTIGA study in gastric cancer) or checkpoint inhibitors
(TYVYT(®) combo, in endometrial cancer) are ongoing in China, with further
registration studies in HCC and RCC under consideration.
We retain all rights to fruquintinib outside of China and are partnered with
Lilly in China. The table below shows a summary of the clinical studies for
fruquintinib.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Fruquintinib monotherapy FRESCO: ≥3L CRC; chemotherapy refractory China III Approved and launched NCT02314819
Fruquintinib monotherapy FRESCO-2: metastatic CRC U.S. / Europe / Japan / Aus. III Fully enrolled NCT04322539
Fruquintinib monotherapy CRC; TN(61) & HR+(62)/Her2-(63) breast cancer U.S. Ib Ongoing NCT03251378
Fruquintinib + paclitaxel FRUTIGA: 2L gastric cancer China III Ongoing; completed 2(nd) interim analysis NCT03223376
Fruquintinib + TYVYT(®) (PD-1) CRC China II Ongoing; data at ASCO 2021 NCT04179084
Fruquintinib + TYVYT(®) (PD-1) HCC China Ib/II Ongoing; data at CSCO 2021 NCT03903705
Fruquintinib + TYVYT(®) (PD-1) endometrial cancer China II registration-intent Ongoing; Ib data at CSCO 2021 NCT03903705
Fruquintinib + TYVYT(®) (PD-1) RCC China Ib/II Ongoing; data at CSCO 2021 NCT03903705
Fruquintinib + TYVYT(®) (PD-1) Gastrointestinal tumors China Ib/II Ongoing NCT03903705
Fruquintinib + tislelizumab (PD-1) TN breast cancer & endometrial cancer U.S. Ib/II Ongoing NCT04577963
Fruquintinib + tislelizumab (PD-1) Solid tumors Korea / China Ib/II Ongoing NCT04716634
Fruquintinib - CRC updates:
FRESCO-2 (NCT04322539) - This double-blind, placebo-controlled, global Phase
III study in refractory metastatic CRC patients reached its enrollment goal in
December 2021. It recruited 691 patients from over 150 sites in 14 countries
in fifteen months, ahead of schedule. The primary endpoint of the study is OS.
Topline results are expected to be reported in the second half of 2022 when
the event-driven primary endpoint, OS, is mature. If positive, HUTCHMED would
simultaneously initiate plans to apply for marketing authorization of
fruquintinib by the U.S. FDA, which granted Fast Track Designation in 2020,
the EMA and the Japanese PMDA.
U.S. Phase I/Ib CRC cohorts (NCT03251378) - Preliminary efficacy and safety
data of fruquintinib in patients with refractory, metastatic CRC were
presented at ASCO GI in early 2022. In patients who had progressed on all
standard therapies, including LONSURF(®) and/or STIVARGA(®), the DCR was
68.3% and the median duration of treatment was 19.3 weeks. In patients who
had not received LONSURF(®) or STIVARGA(®), the DCR was 57.5% and the median
duration of treatment was 14.1 weeks. The safety profile in both patient
populations was consistent with what has previously been reported.
Fruquintinib - Gastric cancer:
FRUTIGA (NCT03223376) - This randomized, double-blind, Phase III study in
China to evaluate fruquintinib combined with paclitaxel compared with
paclitaxel monotherapy, for second-line treatment of advanced gastric cancer,
is expected to enroll approximately 700 patients. Its co-primary endpoints are
PFS and OS. We expect to complete enrollment of FRUTIGA in 2022.
Fruquintinib - Combinations with checkpoint inhibitors:
Advanced endometrial cancer registration-intent cohort - Platinum-based
systemic chemotherapy is the standard first-line treatment for advanced
endometrial cancer. However, patients who progress following first-line
chemotherapy have limited treatment options, and the prognosis remains poor.
As disclosed at CSCO 2021, as of data cutoff date of August 31, 2021, 35
patients were enrolled (NCT03903705), including 7 treatment-naïve and 28
pretreated patients. Of them, 29 were efficacy evaluable, 4 were
treatment-naïve and 25 were pretreated. All 4 treatment-naïve patients
experienced confirmed tumor response, for ORR of 100% (95% CI: 39.8-100.0),
and median PFS was not reached. Among the 25 pretreated patients, the
confirmed ORR was 32.0% (95% CI: 14.9-53.5), DCR was 92.0% (95% CI: 74.0-99.0)
and the median PFS was 6.9 months (95% CI: 4.1-NR). Among the 19 proficient
mismatch repair (pMMR) patients in the pretreated cohort, the confirmed ORR
was 36.8% (95% CI: 16.3-61.6), DCR was 94.7% (95% CI: 74.0-99.9), median PFS
was 6.9 months (95% CI: 4.1-NR), and the median OS was not reached. Among the
35 enrolled patients, TRAEs of grade 3 or above that occurred in more than 10%
of patients were hypertension (4 patients, 11.4%) and proteinuria (11.4%). 5
(14.3%) patients reported treatment-related serious adverse events.
Following discussion with the NMPA in late 2021, the cohort is now targeting
to enroll over 130 patients to meet the requirements to be a single-arm,
registration-intent Phase II study.
CRC registration strategy for mCRC under discussion - Encouraging preliminary
data disclosed at ASCO 2021 for fruquintinib in combination with two PD-1
inhibitors, TYVYT(®) and geptanolimab, in advanced CRC showed a five-fold
increase in ORR and a doubling of median PFS as compared to the FRESCO study
for fruquintinib as a monotherapy.
In the TYVYT(®) combination study (NCT04179084), 44 patients were enrolled
into the CRC cohort, 22 of whom received the RP2D. ORR was 23% for all
patients and 27% for those who received the RP2D. DCR was 86% for all patients
and 96% for those who received the RP2D. Median PFS was 5.6 months for all
patients, and 6.9 months for those who received the RP2D. Median OS was 11.8
months for all patients.
In the geptanolimab combination study (NCT03977090), for the 15 patients in
the CRC cohort ORR was 26.7% (including 1 patient with unconfirmed PR) and 33%
in the group that received the RP2D. DCR for all evaluable patients was 80%
and median PFS was 7.3 months (95% CI: 1.9-NR). Grade 3 TRAEs occurred in 47%
of patients, and no incidences of grade 4 or 5 TRAEs were observed.
Tislelizumab combinations (NCT04577963 & NCT04716634) - In August 2021,
we initiated an open-label, multi-center, non-randomized Phase Ib/II study in
the U.S. to assess fruquintinib in combination with tislelizumab in patients
with locally advanced triple negative breast cancer or advanced endometrial
cancer. In addition, a Phase II study in China and Korea for fruquintinib in
combination with tislelizumab was initiated and is being led by BeiGene for
the treatment of advanced or metastatic, unresectable gastric cancer, CRC or
NSCLC.
Fruquintinib - Exploratory development:
We are conducting multiple Phase Ib expansion cohorts in the U.S. to explore
fruquintinib in CRC and breast cancer. In China, there are about 40 ongoing
IIT's in various solid tumor settings.
Hematological Malignancies Candidates
HUTCHMED currently has five investigational drug candidates targeting
hematological malig-nan-cies in clinical development, with its sixth expected
to enter clinical development in mid-2022. Amdizalisib (targeting PI3Kδ),
sovleplenib (HMPL-523, targeting Syk) and HMPL-760 (targeting BTK) are being
studied in several trials against B-cell dominant malignancies. In addition to
the three B-cell receptor pathway inhibitors, HUTCHMED is also develop-ing
HMPL-306 (targeting IDH1 and IDH2); tazemetostat (a methyl-trans-ferase
inhibitor of EZH2); and HMPL-A83 (a IND-stage anti-CD47 monoclonal antibody).
Amdizalisib (HMPL-689)
Amdizalisib is a novel, highly selective oral inhibitor targeting the isoform
PI3Kδ, a key component in the B-cell receptor signaling pathway.
Amdizalisib's pharmacokinetic properties have been found to be favorable with
good oral absorption, moderate tissue distribution and low clearance in
preclinical studies. We also expect that amdizalisib will have low risk of
drug accumulation and drug-drug interactions. In 2021, registration-intent
studies for amdizalisib were initiated and Breakthrough Therapy Designation
was granted for relapse or refractory follicular lymphoma in China. We
currently retain all rights to amdizalisib worldwide. The table below shows a
summary of the clinical studies for amdizalisib.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Amdizalisib monotherapy Indolent non-Hodgkin's lymphoma China Ib Ongoing; expansion data presented at ESMO 2021 NCT03128164
PTCL
Amdizalisib monotherapy Relapsed/refractory follicular lymphoma China II registration-intent Ongoing: initiated in Apr 2021. Breakthrough Therapy Designation NCT04849351
Amdizalisib monotherapy Relapsed/refractory marginal zone lymphoma China II registration-intent Ongoing: initiated in Apr 2021 NCT04849351
Amdizalisib monotherapy Indolent non-Hodgkin's lymphoma U.S./ Europe I/Ib Dose expansion initiated in H2 2021 NCT03786926
Phase II registration-intent trial (NCT04849351) - In April 2021, we commenced
a registration-intent, single-arm, open-label Phase II trial in China in
approximately 100 patients with relapsed/refractory follicular lymphoma and
approximately 80 patients with relapsed/refractory marginal zone lymphoma, two
subtypes of non-Hodgkin's lymphoma. The primary endpoint is ORR. The trial is
being conducted in over 35 sites in China.
This initiation is based on the highly promising preliminary results presented
at ESMO 2021 from the Phase Ib expansion study ongoing in China (NCT03128164),
which demonstrated that amdizalisib was well tolerated with single-agent
clinical activity in relapsed/refractory B-cell lymphoma patients.
Sovleplenib (HMPL-523)
Sovleplenib is a novel, selective, oral inhibitor targeting Syk, for the
treatment of hematological cancers and immune diseases. Syk is a component in
B-cell receptor signaling pathway.
In 2021 we initiated Phase III study in China for ITP, for which it has
received Breakthrough Therapy Designation, and presented data on both ITP and
hematological malignancies at ASH 2021. We currently retain all rights to
sovleplenib worldwide. The table below shows a summary of the clinical studies
for sovleplenib.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Sovleplenib monotherapy ESLIM-01: ITP China III Ongoing: initiated in Oct 2021. Breakthrough Therapy Designation NCT05029635
Sovleplenib monotherapy ITP China I/Ib Completed. Data at ASH 2021 NCT03951623
Sovleplenib monotherapy Indolent non-Hodgkin's lymphoma Australia Ib Active, not recruiting NCT02503033
Sovleplenib monotherapy Indolent non-Hodgkin's lymphoma U.S. / Europe I/Ib Ongoing. Prelim. data at ASH 2021 NCT03779113
Sovleplenib monotherapy Multiple sub-types of B-cell malignancies China I/Ib Completed NCT02857998
Sovleplenib monotherapy wAIHA China II In planning N/A
ESLIM-01 (Evaluation of Sovleplenib for immunological diseases-01,
NCT05029635) - In October 2021, we initiated a randomized, double-blinded,
placebo-controlled Phase III trial in China of sovleplenib in approximately
180 adult patients with primary ITP, an autoimmune disorder that can lead to
increased risk of bleeding. The primary endpoint of the study is the durable
response rate. In January 2022, the NMPA granted Breakthrough Therapy
Designation for this indication.
China Phase I/Ib in ITP (NCT03951623) - ESLIM-01 was initiated based on
encouraging data from this Phase Ib study presented at ASH 2021. At data
cutoff, 34 patients received sovleplenib and 11 received placebo. Among 16
patients who received the RP2D of 300mg once daily, 11 (68.8%) experienced
response (defined by at least one incident of platelet count being ≥
50x10⁹/L in the initial 8-week double-blinded phase of the study), compared
to one placebo patient (9.1%). One additional patient at the RP2D experienced
response during the subsequent 16-week open-label phase of the study, and all
four placebo patients that crossed over to receive treatment at RP2D after the
initial 8-week double-blinded phase experienced response. In total, 16 out of
20 patients (80%) experienced response during both phases of the study.
Durable response (defined as platelet count being ≥ 50x10⁹/L in at least 4
out of 6 last scheduled visits) was reported in 8 out of 20 patients (40%) who
received RP2D in both phases of the study.
Safety data were presented for all 41 patients treated by sovleplenib. The
median duration of treatment was 142 days (range: 23-170). No patients
discontinued treatment due to TRAE, and no cases of treatment-related serious
adverse events were reported. There were 30 patients (73%) who experienced
TRAEs, including 3 (7.3%) who experienced grade 3 or above TRAEs, one of whom
received the RP2D. No TRAEs of grade 3 or above occurred in more than one
patient.
Australia/China Phase I/Ib studies in multiple subtypes of B-cell malignancies
(NCT02503033/NCT02857998) - Our Phase I/Ib dose escalation and expansion
studies in Australia and China have now enrolled over 200 patients in a broad
range of hematological cancers and have identified indications of interest for
future development.
U.S./Europe Phase I/Ib in indolent non-Hodgkin's lymphoma (NCT03779113) - We
presented preliminary results from this Phase I study at ASH 2021, which
support progressing sovleplenib into the ongoing dose expansion phase of the
study to evaluate its safety and efficacy in multiple subtypes of B-cell and
T-cell lymphoma at the RP2D of 700mg.
TAZVERIK(®) (tazemetostat)
In August 2021, we entered into a strategic collaboration with Epizyme to
research, develop, manufacture and commercialize TAZVERIK(®) in Greater
China, including mainland China, Hong Kong, Macau and Taiwan. TAZVERIK(®) is
an inhibitor of EZH2 developed by Epizyme that is approved by the U.S. FDA for
the treatment of certain epithelioid sarcoma and follicular lymphoma patients.
It received accelerated approval from the FDA based on ORR and DoR in January
and June 2020 for epithelioid sarcoma and follicular lymphoma, respectively.
Under the terms of the agreement, we are responsible for the development and
commercialization of TAZVERIK(®) in Greater China. Epizyme received a $25
million upfront payment and is eligible to receive up to an additional $110
million in development and regulatory milestone payments, across up to eight
potential indications, and up to an additional $175 million in sales milestone
payments. Epizyme is also eligible to receive tiered royalties of mid -teen to
low-twenties percent based on annual net sales of TAZVERIK(®) in Greater
China. In addition, we received a four-year warrant to acquire up to $65
million of Epizyme shares at $11.50 per share.
We are developing and plan to seek approval for TAZVERIK(®) in various
hematological and solid tumors, including epithelial sarcoma, follicular
lymphoma and diffuse large b-cell lymphoma (DLBCL) in Greater China. We are
participating in Epizyme's SYMPHONY-1 (EZH-302) study, leading it in Greater
China. The parties also intend to conduct additional global studies jointly.
We will generally be responsible for funding all clinical trials of
TAZVERIK(®) in Greater China, including the portion of global trials
conducted there. We are responsible for the research, manufacturing and
commercialization of TAZVERIK(®) in Greater China.
The table below shows a summary of the clinical studies for TAZVERIK(®).
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
TAZVERIK(®) + R² (lenalidomide & rituximab) SYMPHONY-1: 2L follicular lymphoma Global III Ongoing: HUTCHMED is leading China portion of global Ph III NCT04224493
TAZVERIK(®) monotherapy Relapsed/refractory 3L+ follicular lymphoma China II registration-intent (bridging) In planning Pending
TAZVERIK(®) combinations Indolent lymphoma combinations China II In planning N/A
SYMPHONY-1 (NCT04224493) - This is a global, multicenter, randomized,
double-blind, active-controlled, 3-stage, biomarker-enriched, Phase Ib/III
study of TAZVERIK(®) in combination with R² in patients with relapsed or
refractory follicular lymphoma after at least one prior line of therapy.
Epizyme conducted the Phase Ib portion of the study in 2021, which determined
the recommended Phase III dose ("RP3D") and also demonstrated potential
efficacy in second-line follicular lymphoma. The safety profile of the
combination was consistent with the previously reported safety information in
the U.S. prescribing information for both TAZVERIK(®) and R², respectively.
In the Phase III portion of the trial, approximately 500 patients are randomly
assigned to receive the RP3D of TAZVERIK(®) + R² or placebo + R². The study
will also include a maintenance arm with TAZVERIK(®) or placebo following the
first year of treatment with TAZVERIK(®) + R² or placebo + R². We
anticipate the first patient enrollment in H1 2022 in the China Phase III
portion of SYMPHONY-1.
We intend to initiate a bridging study in follicular lymphoma to support China
registration, as well as several combination studies of TAZVERIK(®) with
HUTCHMED assets.
HMPL-306
HMPL-306 is a novel dual-inhibitor of IDH1 and IDH2 enzymes. IDH1 and IDH2
mutations have been implicated as drivers of certain hematological
malignancies, gliomas and solid tumors, particularly among acute myeloid
leukemia patients. We currently retain all rights to HMPL-306 worldwide. The
table below shows a summary of the clinical studies for HMPL-306.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-306 monotherapy Hematological malignancies China I Ongoing: close to establishing the RP2D, dose expansion in mid-2022 NCT04272957
HMPL-306 monotherapy Solid tumors including but not limited to gliomas, chondrosarcomas or U.S. I Ongoing: initiated in Mar 2021 Dose expansion phase is expected to start in NCT04762602
cholangiocarcinomas mid-2022
HMPL-306 monotherapy Hematological malignancies U.S. I Ongoing: initiated in Mar 2021 NCT04764474
HMPL-760
HMPL-760 is an investigational, non-covalent, third-generation BTK inhibitor.
It is a highly potent, selective, and reversible inhibitor with long target
engagement against BTK, including wild-type and C481S-mutated BTK. China and
U.S. Phase I studies initiated in early 2022 will include patients treated
with a prior regimen containing a BTK inhibitor. We currently retain all
rights to HMPL-760 worldwide.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-760 monotherapy CLL, SLL, other NHL China I Ongoing: initiated in Jan 2022 NCT05190068
HMPL-760 monotherapy CLL, SLL, other NHL U.S. I Initiating NCT05176691
HMPL-453
HMPL-453 is a novel, selective, oral inhibitor targeting FGFR 1/2/3. Aberrant
FGFR signaling is associated with tumor growth, promotion of angiogenesis, as
well as resistance to anti-tumor therapies. We currently retain all rights to
HMPL-453 worldwide. The table below shows a summary of the clinical studies
for HMPL-453.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-453 monotherapy 2L Cholangiocarcinoma (IHCC with FGFR fusion) China II Ongoing. ~10-15% of IHCC pts' tumors harbor FGFR2 fusion NCT04353375
HMPL-453 + chemotherapies Multiple China I/II Ongoing: initiated in Jan 2022 NCT05173142
HMPL-453 +TUOYI(®) (PD‑1) Multiple China I/II Ongoing: initiated in Jan 2022 NCT05173142
HMPL-295
HMPL-295 is a novel ERK inhibitor. ERK is a downstream component of the
RAS-RAF-MEK-ERK signaling cascade (MAPK pathway). This is our first of
multiple candidates in discovery targeting the MAPK pathway. A China Phase I
study was initiated in July 2021. We currently retain all rights to HMPL-295
worldwide.
RAS-MAPK pathway is dysregulated in cancer, in which mutations or non-genetic
events hyper-activate the pathway in more than 50% of cancers. RAS and RAF
predict worse clinical prognosis in a wide variety of tumor types, mediate
resistance to targeted therapies, and decrease the response to the approved
standards of care, namely, targeted therapy and immunotherapy. ERK inhibition
has the potential to overcome or avoid the intrinsic or acquired resistance
from the inhibition of RAS, RAF and MEK upstream mechanisms.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-295 monotherapy Solid tumors China I Ongoing: initiated in Jul 2021 NCT04908046
HMPL-653
HMPL-653 is a novel, highly selective, and potent CSF-1R inhibitor designed to
target CSF-1R driven tumors as a monotherapy or in combination with other
drugs. We initiated a China Phase I study in January 2022. We currently retain
all rights to HMPL-653 worldwide.
CSF-1R is usually expressed on the surface of macrophages and can promote
growth and differentiation of macrophages. Studies have shown that blocking
the CSF-1R signaling pathway could effectively modulate the tumor
microenvironment, relieve tumor immunosuppression, and synergize with other
anti-cancer therapies such as immune checkpoint inhibitors to achieve tumor
inhibition. It has been demonstrated in several clinical studies that CSF-1R
inhibitors could treat tenosynovial giant cell tumors, and treat a variety of
malignancies combined with immuno-oncology or other therapeutic agents.
Currently no CSF-1R inhibitor has been approved in China.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-653 monotherapy Solid tumors & tenosynovial giant cell tumors China I Ongoing: initiated in Jan 2022, ~110 patients expected to be enrolled NCT05190068
Immunology Collaboration with Inmagene
In January 2021, we entered into a strategic partnership with Inmagene, a
clinical development stage company with a focus on immunological diseases, to
further develop four novel preclinical drug candidates we discovered for the
potential treatment of multiple immunological diseases. Funded by Inmagene, we
will work together to move the drug candidates towards IND. If successful,
Inmagene will then advance the drug candidates through global clinical
development. INDs for the first two compounds are expected to be submitted in
China in 2022.
OTHER VENTURES
Our Other Ventures include drug marketing and distribution platforms covering
about 290 cities and towns in China with around 2,900 mainly manufacturing and
commercial personnel. Built over the past 20 years, it primarily focuses on
prescription drug and science-based nutrition products through several joint
ventures and subsidiary companies.
In 2021, our Other Ventures delivered encouraging growth with consolidated
revenues up 20% (13% at CER) to $236.5 million (2020: $197.8m). Consolidated
net income attributable to HUTCHMED from our Other Ventures grew by 24% (15%
at CER) to $54.4 million (2020: $44.0m), excluding one-time gains. One-time
gains in 2021 totaled $88.5 million (2020: $28.8m), including $82.9 million
(2020: nil) from the divestment of HBYS and $5.6 million (2020: $28.8m) from
one-time land compensation.
Hutchison Sinopharm: Our prescription drugs commercial services business,
which in addition to providing certain commercial services for our own
products, provides services to third-party pharmaceutical companies in
China, grew sales by 24% (16% at CER) to $204.1 million in 2021 (2020:
$165.1m).
In 2021, the Hong Kong International Arbitration Centre made a final award in
favor of Hutchison Sinopharm against Luye Pharma Hong Kong Ltd. in the amount
of RMB253.2 million ($39.6 million), plus costs and interest, in connection
with the termination of Hutchison Sinopharm's right to distribute SEROQUEL(®)
in China. Payment of the award is expected in 2022.
Hutchison Sinopharm has a dedicated team of about 130 commercial staff focused
on two key areas of operation. First, a team that markets third-party
prescription drug products directly to about 700 public and private hospitals
in the Shanghai region and through a network of about 50 distributors to cover
all other provinces in China. Second, a team that markets HUTCHMED's
science-based maternal and infant supplements through a network of over 32,000
promoters in China.
SHPL: Our own-brand prescription drugs business, operated through our
non-consolidated joint venture SHPL, grew sales by 20% (12% at CER) to $332.6
million (2020: $276.4m). This sales growth and favorable product mix led to an
increase of 33% (24% at CER) in net income attributable to HUTCHMED to $44.7
million (2020: $33.5m).
The SHPL operation is large-scale, with a commercial team of over 2,200 staff
managing the medical detailing and marketing of its products not just in
hospitals in provincial capitals and medium-sized cities, but also in the
majority of county-level hospitals in China. SHPL's Good Manufacturing
Practice-certified factory holds 74 drug product manufacturing licenses and is
operated by over 530 manufacturing staff.
SXBX(64) pill: SHPL's main product is SXBX pill, an oral vasodilator
prescription therapy for coronary artery disease. SXBX pill is the third
largest botanical prescription drug in this indication in China, with a
national market share in January to December 2021 of 19.6% (2020: 18.2%).
Sales increased by 23% (15% at CER) to $307.1 million in 2021 (2020: $250.0m).
SXBX pill is protected by a formulation patent that expires in 2029, but also
retains certain state protection that extends indefinitely, and is one of less
than two dozen proprietary prescription drugs represented on China's National
Essential Medicines List ("NEML"). Inclusion on the NEML means that all
Chinese state-owned health care institutions are required to carry it. SXBX
pill is fully reimbursed in all China.
Dividends: Our share of SHPL's profits are passed to the HUTCHMED Group
through dividend payments. In 2021, dividends of $49.9 million (2020: $36.1m)
were paid from SHPL to the HUTCHMED Group level with aggregate dividends
received by HUTCHMED since inception of over $240 million.
HBYS disposal: In September 2021, we divested our entire indirect interest in
HBYS, a non-core and non-consolidated over-the-counter drug joint venture
business, to GL Capital for $159.1 million in cash and including $46.4 million
expected to be received related to undistributed profits, this represents
about 22 times of HBYS' adjusted 2020 net profit attributable to HUTCHMED
equity holders of $7.7 million(65). The sale of this non-core consumer health
products business resulted in a one-time gain of approximately $82.9 million
attributable to HUTCHMED equity holders.
Christian Hogg
Chief Executive Officer
March 3, 2022
USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATION
In addition to financial information prepared in accordance with U.S. GAAP,
this announcement also contains certain non-GAAP financial measures based on
management's view of performance including:
· Adjusted Group net cash flows excluding financing activities
· CER
Management uses such measures internally for planning and forecasting purposes
and to measure the HUTCHMED Group's overall performance. We believe these
adjusted financial measures provide useful and meaningful information to us
and investors because they enhance investors' understanding of the continuing
operating performance of our business and facilitate the comparison of
performance between past and future periods. These adjusted financial measures
are non-GAAP measures and should be considered in addition to, but not as a
substitute for, the information prepared in accordance with U.S. GAAP. Other
companies may define these measures in different ways.
Adjusted Group net cash flows excluding financing activities: We include the
change in short-term investments for the period to the change in cash and cash
equivalents for the period, and exclude the net cash generated from financing
activities for the period to derive our adjusted Group net cash flows
excluding financing activities. We believe the presentation of adjusted Group
net cash flows excluding financing activities provides useful and meaningful
information about the change in our cash resources excluding those from
financing activities which may present significant period-to-period
differences.
CER: We remove the effects of currency movements from period-to-period
comparisons by retranslating the current period's performance at previous
period's foreign currency exchange rates. Because we have significant
operations in China, the RMB to U.S. dollar exchange rates used for
translation may have a significant effect on our reported results. We believe
the presentation at CER provides useful and meaningful information because it
facilitates period-to-period comparisons of our results and increases the
transparency of our underlying performance.
Reconciliation of GAAP change in cash and cash equivalents and short-term investments to Adjusted Group net cash flows excluding financing activities:
$'millions 2021 2020
Cash and cash equivalents and short-term investments at end of year 1,011.7 435.2
Excludes: Cash and cash equivalents and short-term investments at beginning of (435.2) (217.2)
year
Excludes: Net cash generated from financing activities for the year (650.0) (296.4)
Adjusted Group net cash flows excluding financing activities (73.5) (78.4)
Reconciliation of GAAP revenues and net income attributable to HUTCHMED to CER:
$'millions (except %) Year Ended Change Amount Change %
December 31, 2021 December 31, 2020 Actual CER Exchange effect Actual CER Exchange effect
Consolidated revenues
Oncology/Immunology 119.6 30.2 89.4 86.6 2.8 296% 287% 9%
Other Ventures^ 236.5 197.8 38.7 25.2 13.5 20% 13% 7%
^ Includes:
- Hutchison Sinopharm- prescription drugs 204.1 165.1 39.0 26.2 12.8 24% 16% 8%
Non-consolidated joint venture revenues
- SHPL 332.6 276.4 56.2 34.1 22.1 20% 12% 8%
- SXBX pill 307.1 250.0 57.1 36.5 20.6 23% 15% 8%
Consolidated net income attributable to HUTCHMED - Other Ventures 142.9 72.8 70.1 66.4 3.7 96% 91% 5%
- Consolidated entities 2.6 2.8 (0.2) (0.3) 0.1 -8% -12% 4%
- Equity investees 140.3 70.0 70.3 66.7 3.6 100% 95% 5%
- SHPL 44.7 33.5 11.2 7.9 3.3 33% 24% 9%
- HBYS* 95.6 36.5 59.1 58.8 0.3 162% 161% 1%
Excluding one-time gains
Other Ventures 54.4 44.0 10.4 6.7 3.7 24% 15% 9%
- Consolidated entities 2.6 2.8 (0.2) (0.3) 0.1 -8% -12% 4%
- Equity investees 51.8 41.2 10.6 7.0 3.6 26% 17% 9%
- SHPL 44.7 33.5 11.2 7.9 3.3 33% 24% 9%
- HBYS* 7.1 7.7 (0.6) (0.9) 0.3 -7% -12% 5%
* Period from January 1, 2021 to September 28, 2021. For the year ended
December 31, 2021, one-time gains include gain on divestment of $82.9 million
(2020: nil) and land compensation gain of $5.6 million (2020: $28.8 million),
respectively.
GROUP CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
To date, we have taken a multi-source approach to fund our operations,
including through cash flows generated and dividend payments from our
Oncology/Immunology and Other Ventures operations, service and milestone and
upfront payments from our collaboration partners, bank borrowings, investments
from third parties, proceeds from our listings on various stock exchanges and
follow-on offerings.
Our Oncology/Immunology operations have historically not generated significant
profits or have operated at a net loss, as creating potential global
first-in-class or best-in-class drug candidates requires a significant
investment of resources over a prolonged period of time. As such, we incurred
net losses of $194.6 million for the year ended December 31, 2021 and net
losses of $125.7 million for the year ended December 31, 2020.
As of December 31, 2021, we had cash and cash equivalents and short-term
investments of $1,011.7 million and unutilized bank facilities of $157.4
million. As of December 31, 2021, we had $26.9 million in bank borrowings.
Certain of our subsidiaries and joint ventures, including those registered as
wholly foreign-owned enterprises in China, are required to set aside at least
10.0% of their after-tax profits to their general reserves until such reserves
reach 50.0% of their registered capital. In addition, certain of our joint
ventures are required to allocate certain of their after-tax profits as
determined in accordance with related regulations and their respective
articles of association to the reserve funds, upon approval of the board.
Profit appropriated to the reserve funds for our subsidiaries and joint
ventures incorporated in the PRC was approximately $89,000 and $44,000 for the
years ended December 31, 2021 and 2020, respectively. In addition, as a result
of PRC regulations restricting dividend distributions from such reserve funds
and from a company's registered capital, our PRC subsidiaries are restricted
in their ability to transfer a certain amount of their net assets to us as
cash dividends, loans or advances. This restricted portion amounted to $0.1
million as of December 31, 2021.
In addition, our non-consolidated joint venture, SHPL, held an aggregate of
$50.0 million in cash and cash equivalents and no bank borrowings as of
December 31, 2021. Such cash and cash equivalents are only accessible by us
through dividend payments from the joint venture. The level of dividends
declared by the joint venture is subject to agreement each year between us and
our joint venture partner based on the profitability and working capital needs
of the joint venture.
CASH FLOW
Year Ended December 31,
2021 2020
(in $'000)
Cash Flow Data:
Net cash used in operating activities (204,223) (62,066)
Net cash used in investing activities (306,320) (125,441)
Net cash generated from financing activities 650,028 296,434
Net increase in cash and cash equivalents 139,485 108,927
Effect of exchange rate changes 2,427 5,546
Cash and cash equivalents at beginning of the year 235,630 121,157
Cash and cash equivalents at end of the year 377,542 235,630
Net Cash used in Operating Activities
Net cash used in operating activities was $62.1 million for the year ended
December 31, 2020, compared to net cash used in operating activities of $204.2
million for the year ended December 31, 2021. The net change of $142.1 million
was primarily attributable to higher operating expenses of $259.8 million from
$424.6 million for the year ended December 31, 2020 to $684.4 million for the
year ended December 31, 2021, partially offset by an increase in revenues of
approximately $128.1 million from $228.0 million for the year ended December
31, 2020 to $356.1 million for the year ended December 31, 2021.
Net Cash used in Investing Activities
Net cash used in investing activities was $125.4 million for the year ended
December 31, 2020, compared to net cash used in investing activities of $306.3
million for the year ended December 31, 2021. The net change of $180.9 million
was primarily attributable to an increase in net deposits in short-term
investments of $331.1 million from $103.5 million for the year ended December
31, 2020 to $434.6 million for the year ended December 31, 2021. The net
change was also attributable to the payment of $15.0 million during the year
ended December 31, 2021 to acquire a warrant to purchase Epizyme shares. The
net change was partially offset by the proceeds received from the divestment
of Hutchison Baiyunshan of $159.1 million during the year ended December 31,
2021.
Net Cash generated from Financing Activities
Net cash generated from financing activities was $296.4 million for the year
ended December 31, 2020, compared to net cash generated from financing
activities of $650.0 million for the year ended December 31, 2021. The net
change of $353.6 million was primarily attributable to net proceeds of $685.4
million from a private placement in April 2021 and from our public offering on
the SEHK with over-allotment option exercised in full in June and July 2021,
as compared to net proceeds of $310.0 million from our follow-on offering in
the United States and private placements in 2020. The net change was partially
offset by an increase in purchases of ADSs by our Company for the settlement
of certain equity awards which totaled $12.9 million for the year ended
December 31, 2020 as compared to $27.3 million for the year ended December 31,
2021, as well as an increase in dividends paid to non-controlling shareholders
of subsidiaries which totaled $1.5 million for the year ended December 31,
2020 as compared to $9.9 million for the year ended December 31, 2021.
LOAN FACILITIES
In November 2018, our subsidiary renewed a three-year revolving loan facility
with HSBC(66). The facility amount of this loan was HK$234.0 million ($30.0
million) with an interest rate at HIBOR(67) plus 0.85% per annum. This credit
facility was guaranteed by us and includes certain financial covenant
requirements. The revolving loan facility expired in November 2021.
In May 2019, our subsidiary entered into additional credit facility
arrangements with HSBC for the provision of unsecured credit facilities in the
aggregate amount of HK$400.0 million ($51.3 million). The 3-year credit
facilities include (i) a HK$210.0 million ($26.9 million) term loan facility
and (ii) a HK$190.0 million ($24.4 million) revolving loan facility, both with
an interest rate at HIBOR plus 0.85% per annum. These credit facilities are
guaranteed by us and include certain financial covenant requirements. In
October 2019, we drew down HK$210.0 million ($26.9 million) from the term loan
facility and as of December 31, 2021, no amount was drawn from the revolving
loan facility.
In August 2020, our subsidiary entered into a 24-month revolving credit
facility with Deutsche Bank AG(68) in the amount of HK$117.0 million ($15.0
million) with an interest rate at HIBOR plus 4.5% per annum. This revolving
facility is guaranteed by us and includes certain financial covenant
requirements. As of December 31, 2021, no amount was drawn from the revolving
loan facility.
In October 2021, our subsidiary entered into a 10-year fixed asset loan
facility agreement with Bank of China Limited for the provision of a secured
credit facility in the amount of RMB754.9 million ($118.1 million) with an
annual interest rate at the 5-year China Loan Prime Rate less 0.65%. This
credit facility is guaranteed by another subsidiary of the Group, and secured
by the underlying leasehold land and buildings, and includes certain financial
covenant requirements. As of December 31, 2021, no amount was drawn from the
fixed asset loan facility.
Our non-consolidated joint venture SHPL had no bank borrowings outstanding as
of December 31, 2021.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table sets forth our contractual obligations as of December 31,
2021. Our purchase obligations relate to property, plant and equipment that
are contracted for but not yet paid. Our lease obligations primarily comprise
future aggregate minimum lease payments in respect of various factories,
warehouse, offices and other assets under non-cancellable lease agreements.
Payment Due by Period (in $'000)
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
Bank borrowings 26,923 26,923 - - -
Interest on bank borrowings 104 104 - - -
Purchase obligations 44,204 42,519 1,685 - -
Lease obligations 12,818 5,348 5,316 1,359 795
84,049 74,894 7,001 1,359 795
SHPL
The following table sets forth the contractual obligations of our
non-consolidated joint venture SHPL as of December 31, 2021. SHPL's purchase
obligations comprise capital commitments for property, plant and equipment
contracted for but not yet paid. SHPL's lease obligations primarily comprise
future aggregate minimum lease payments in respect of various offices under
non-cancellable lease agreements.
Payment Due by Period (in $'000)
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
Purchase obligations 155 155 - - -
Lease obligations 3,149 859 1,577 713 -
3,304 1,014 1,577 713 -
FOREIGN EXCHANGE RISK
Most of our revenues and expenses are denominated in renminbi, and our
consolidated financial statements are presented in U.S. dollars. We do not
believe that we currently have any significant direct foreign exchange risk
and have not used any derivative financial instruments to hedge our exposure
to such risk. In general, our exposure to foreign exchange risks is limited.
The value of the renminbi against the U.S. dollar and other currencies may
fluctuate and is affected by, among other things, changes in China's political
and economic conditions. The conversion of renminbi into foreign currencies,
including U.S. dollars, has been based on rates set by the PBOC(69). If we
decide to convert renminbi into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or ADSs or for other business
purposes, appreciation of the U.S. dollar against the renminbi would have a
negative effect on the U.S. dollar amounts available to us. On the other hand,
if we need to convert U.S. dollars into renminbi for business purposes, e.g.
capital expenditures and working capital, appreciation of the renminbi against
the U.S. dollar would have a negative effect on the renminbi amounts we would
receive from the conversion. In addition, for certain cash and bank balances
deposited with banks in the PRC, if we decide to convert them into foreign
currencies, they are subject to the rules and regulations of foreign exchange
control promulgated by the PRC government.
CREDIT RISK
Substantially all of our bank deposits are in major financial institutions,
which we believe are of high credit quality. We limit the amount of credit
exposure to any single financial institution. We make periodic assessments of
the recoverability of trade and other receivables and amounts due from related
parties. Our historical experience in collection of receivables falls within
the recorded allowances, and we believe that we have made adequate provision
for uncollectible receivables.
INTEREST RATE RISK
We have no significant interest-bearing assets except for bank deposits. Our
exposure to changes in interest rates is mainly attributable to our bank
borrowings, which bear interest at floating interest rates and expose us to
cash flow interest rate risk. We have not used any interest rate swaps to
hedge our exposure to interest rate risk. We have performed sensitivity
analysis for the effects on our results for the period from changes in
interest rates on floating rate borrowings. The sensitivity to interest rates
used is based on the market forecasts available at the end of the reporting
period and under the economic environments in which we operate, with other
variables held constant. According to the analysis, the impact on our net loss
of a 1.0% interest rate shift would be a maximum increase/decrease of $0.3
million for the year ended December 31, 2021.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and we do not currently have,
any material off-balance sheet arrangements.
CONTINGENT LIABILITIES
Other than as disclosed in note 16 to the full year financial statements, the
Group does not have any other significant commitments or contingent
liabilities.
GEARING RATIO
The gearing ratio of the Group, which was calculated by dividing total
interest-bearing loans by total equity, was 2.6% as of December 31, 2021, a
decrease from 5.2% as of December 31, 2020. The decrease was primarily
attributable to the increase in equity due to the primary offering of shares
on HKEX.
SIGNIFICANT INVESTMENTS HELD
Except for our investment in a non-consolidated joint venture SHPL with a
carrying value of $76.0 million including details below and those as disclosed
in note 11 to the full year financial statements, we did not hold any other
significant investments in the equity of any other companies as of December
31, 2021.
Place of establishment and operations Nominal Value of Registered Capital Equity Interest Attributable to the Group
Principal activities
(in RMB'000)
PRC 229,000 50% Manufacture and distribution of prescription drug products
Our own-brand prescription drugs business under Other Ventures is operated
through SHPL. Dividends received from SHPL for the year ended December 31,
2021 were $49.9 million.
FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS
Note 16 to the full year financial statements discloses our planned
expenditures on capital assets as of December 31, 2021. At this date there
were no other plans to incur material expenditures on additional investments
or capital assets.
MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
During the year ended December 31, 2021, except for the HBYS disposal as
disclosed in note 23 to the full year financial statements, we did not have
any other material acquisitions and disposals of subsidiaries, associates and
joint ventures.
PLEDGE OF ASSETS
As of December 31, 2021, we did not have any pledge of assets (as of December
31, 2020: nil). Our 10-year fixed asset loan facility agreement with Bank of
China Limited is secured by the underlying leasehold land and buildings;
however, no amount was drawn from the fixed asset loan facility as of December
31, 2021.
INFLATION
In recent years, China has not experienced significant inflation, and thus
inflation has not had a material impact on our results of operations.
According to the National Bureau of Statistics of China, the Consumer Price
Index in China increased by 4.5%, 0.2% and 1.5% in 2019, 2020 and 2021,
respectively. Although we have not been materially affected by inflation in
the past, we can provide no assurance that we will not be affected in the
future by higher rates of inflation in China.
FINAL DIVIDEND
The Board does not recommend any final dividend for the year ended December
31, 2021.
OTHER INFORMATION
CORPORATE STRATEGY
The primary objective of the Company and its subsidiaries (the "Group") is to
become a fully integrated global leader in the discovery, development and
commercialization of targeted therapies and immunotherapies for the treatment
of cancer and immunological diseases. The strategy of the Company is to
leverage the highly specialized expertise of the drug discovery division,
known as the Oncology/Immunology operations, to develop and expand its drug
candidate portfolio for the global market while also building on the
first-mover advantage in the development and launch of novel cancer drugs in
China. The Chairman's Statement and the Operations Review contain discussions
and analyses of the Group's opportunities, performance and the basis on which
the Group generates or preserves value over the longer term and the basis on
which the group will execute its strategy for delivering this objective.
Further information on the sustainability initiatives of the Group and its key
relationships with stakeholders can also be found in the standalone
Sustainability Report of the Group.
HUMAN RESOURCES
As at December 31, 2021, the Group employed approximately 1,760 (2020: ~1,280)
full time staff members. Staff costs during the year ended December 31, 2021,
including directors' emoluments, totaled $180.2 million (2020: $101.0 m).
The Group fully recognizes the importance of high-quality human resources in
sustaining market leadership. Salary and benefits are kept at competitive
levels, while individual performance is rewarded within the general framework
of the salary, bonus and incentive system of the Group, which is reviewed
annually. Employees are provided with a wide range of benefits that include
medical coverage, provident funds and retirement plans, and long-service
awards. The Group stresses the importance of staff development and provides
training programs on an ongoing basis. Employees are also encouraged to play
an active role in community care activities.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") RESPONSIBILITY
The Group is committed to the long-term sustainability of its businesses and
the communities in which it conducts business. The Group supports the
proposition that enterprises should give back to society and bear social
responsibility. It encourages its business units to contribute to the welfare
of the communities in which it operates. Moreover, the Group's business is
anchored to the purpose of serving medical needs of the public and
distributing its drugs to those in need. While advancing breakthroughs with
its novel drugs, the Group ensures every drug product is marketed and
manufactured in a high quality, safe, traceable and affordable manner.
Furthermore, the Group is continually improving its business practices and
employee training in such best practices. It has adopted a proactive approach
to ESG responsibility and has established a Sustainability Committee
comprising four Directors to spearhead the ESG initiatives and activities of
the Group and to enhance the Group's ESG efforts.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from Friday, April 22,
2022 to Wednesday, April 27, 2022, both days inclusive, during which period no
transfer of shares will be effected, to determine shareholders' entitlement to
attend and vote at the 2022 Annual General Meeting (or at any adjournment or
postponement thereof). All share certificates with completed transfer forms,
either overleaf or separately, must be lodged with (a) the Hong Kong Branch
Share Registrar of the Company, Computershare Hong Kong Investor Services
Limited, at Rooms 1712-1716, 17(th) Floor, Hopewell Centre, 183 Queen's Road
East, Wanchai, Hong Kong or (b) the Principal Share Registrar of the Company,
Computershare Investor Services (Jersey) Limited c/o Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY, United
Kingdom, no later than 4:30 pm Hong Kong time on Thursday, April 21, 2022.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the year ended December 31, 2021 (the "Reporting Period"):
(a) on April 14, 2021, the Company issued 16,393,445 ordinary shares to
Pachytene Limited (an investment vehicle wholly-owned by Baring Private Equity
Asia Fund VII) at the price of $30.50 per American depositary share pursuant
to a private placement; and
(b) on June 30, 2021, the Company issued 104,000,000 ordinary shares at the
price of HK$40.10 per ordinary share pursuant to the listing and primary
offering of ordinary shares on the Main Board of HKEX. Following the exercise
of an over-allotment option granted by the Company in the context of that
offering, the Company issued an additional 15,600,000 ordinary shares at the
same price per ordinary share on July 15, 2021. Details of the offering and
the over-allotment option are set out in the prospectus issued by the Company
dated June 18, 2021 (the "Prospectus").
Save as disclosed above, neither the Company nor any of its subsidiaries has
purchased, sold or redeemed any of the listed securities of the Company during
the Reporting Period.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Company strives to attain and maintain high standards of corporate
governance best suited to the needs and interests of the Group as it believes
that an effective corporate governance framework is fundamental to promoting
and safeguarding interests of shareholders and other stakeholders and
enhancing shareholder value. Accordingly, the Company has adopted and applied
corporate governance principles and practices that emphasize a quality board
of Directors (the "Board"), effective risk management and internal control
systems, stringent disclosure practices, transparency and accountability. It
is, in addition, committed to continuously improving these practices and
inculcating an ethical corporate culture.
Prior to the listing on HKEX, the Company has adopted the principles of the UK
Corporate Governance Code ("UK CG Code") applicable to companies listed on the
premium segment of the London Stock Exchange main market, despite its shares
being traded on the AIM market and hence not required to comply with the UK CG
Code. Following the listing of the Company on HKEX on June 30, 2021, the Board
has adopted the Corporate Governance Code ("HK CG Code") as set out in
Appendix 14 to the Rules Governing the Listing of Securities on HKEX in
replacement of the UK CG Code and was in compliance with all code provisions
of the HK CG Code.
COMPLIANCE WITH THE SHARE DEALINGS CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Board has adopted the Code on Dealings in Shares on terms no less exacting
than the required standard set out in the Model Code for Securities
Transactions by Directors of Listed Issuers set out in Appendix 10 to the Hong
Kong Listing Rules as the protocol regulating Directors' dealings in
securities of the Company. In response to specific enquiries made, all
Directors have confirmed their compliance with the required standards set out
in such code regarding their securities transactions throughout their tenure
during the year ended December 31, 2021.
ANNUAL GENERAL MEETING
The Annual General Meeting of HUTCHMED will be held on Wednesday, April 27,
2022. Notice of the 2022 Annual General Meeting will be published and issued
to shareholders in due course.
USE OF NET PROCEEDS
On June 30, 2021, the Company issued 104,000,000 new ordinary shares for total
gross proceeds of approximately $534.7 million from the listing and offering
of the Company's ordinary shares on HKEX.
On July 15, 2021, the over-allotment option was fully exercised and the
Company issued an aggregate of 15,600,000 ordinary shares for total gross
proceeds of approximately $80.2 million.
The intended use of total net proceeds of approximately $585.2 million from
the offering and the over-allotment option for the purposes and in the amounts
(adjusted on pro rata basis based on the actual net proceeds) as disclosed in
the Prospectus is as below:
Use of Proceeds Percentage of Total Net Proceeds Approximate Amount Actual Usage up to December 31, 2021 Unutilized Net Proceeds as of December 31, 2021 Expected Timeline for Utilization of Proceeds (note)
(%) ($'millions) ($'millions) ($'millions)
Advance our late-stage clinical programs for savolitinib, surufatinib, 50% 292.7 99.8 192.9 2023
fruquintinib, amdizalisib and sovleplenib through registration trials and
potential NDA submissions
Support further proof-of-concept studies and fund the continued expansion of 10% 58.5 17.9 40.6 2023
our product portfolio in cancer and immunological diseases through internal
research, including the development cost of early-clinical and
preclinical-stage pipeline drug candidates
Further strengthen our integrated capabilities across commercialization, 20% 117.1 21.9 95.2 2023
clinical and regulatory and manufacturing
Fund potential global business development and strategic acquisition 15% 87.8 25.0 62.8 2023
opportunities to complement our internal research and development activities
and enhance our current drug candidate pipeline
Working capital, expanding internal capabilities globally and in China and 5% 29.1 17.2 11.9 2022
general corporate purposes
100% 585.2 181.8 403.4
Note: There was no change in the intended use of net proceeds as previously
disclosed, and the Company plans to gradually utilize the remaining net
proceeds in accordance with such intended purposes depending on actual market
conditions and business needs, which is expected to be fully utilized by the
end of year 2023.
AUDIT REPORT ON THE ANNUAL FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its subsidiary
companies for the year ended December 31, 2021 have been audited by the
Company's auditor, PricewaterhouseCoopers, in accordance with accounting
principles generally accepted in the U.S. The consolidated financial
statements of the Company and its subsidiary companies for the year ended
December 31, 2021 have also been reviewed by the Audit Committee of the
Company.
IMPORTANT EVENTS AFTER THE REPORTING DATE
Save as disclosed above, no important events affecting the Company occurred
since December 31, 2021 and up to the date of this announcement.
PUBLICATION OF FULL YEAR RESULTS AND ANNUAL REPORT
This full year results announcement is published on the websites of HKEX
(www.hkexnews.hk (https://www.hkexnews.hk/) ), the U.S. Securities and
Exchange Commission (www.sec.gov/edgar (https://www.sec.gov/edgar.shtml) ),
the London Stock Exchange (www.londonstockexchange.com
(https://www.londonstockexchange.com/stock/HCM/hutchmed-china-limited/company-page)
) and the Company (www.hutch (https://www.hutch-med.com/) ‑
(https://www.hutch-med.com/) med.com (https://www.hutch-med.com/) ). The
annual report of the Group for the year ended December 31, 2021 will be
published on the websites of HKEX and the Company, and dispatched to the
Company's shareholders in due course.
REFERENCES & ABBREVIATIONS
1 AstraZeneca = AstraZeneca PLC and its wholly owned subsidiary,
AstraZeneca AB (publ).
2 NSCLC = Non-small cell lung cancer.
3 NDA = New Drug Application.
4 MAA = Marketing Authorisation Application.
5 CRC = Colorectal cancer.
6 FGFR = Fibroblast growth factor receptor.
7 IDH = Isocitrate dehydrogenase.
8 ERK = Extracellular signal-regulated kinase.
9 BTK = Bruton's tyrosine kinase.
10 CSF-1R = Colony stimulating factor-1 receptor.
11 In-market sales = total sales to third parties provided by Eli Lilly
(ELUNATE(®)), AstraZeneca (ORPATHYS(®)) and HUTCHMED (SULANDA(®)).
12 MET = Mesenchymal epithelial transition receptor.
13 NRDL = National Reimbursement Drug List.
14 R&D = Research and development.
15 NMPA = National Medical Products Administration.
16 ITP = Immune thrombocytopenia purpura.
17 FDA = Food and Drug Administration.
18 PDUFA = Prescription Drug User Fee Act.
19 EMA = European Medicines Agency.
20 EOP2 = End of Phase 2.
21 EGFR = Epidermal growth factor receptor.
22 TKI = Tyrosine kinase inhibitor.
23 ASCO = American Society of Clinical Oncology.
24 WCLC = World Conference on Lung Cancer.
25 VEGFR = Vascular endothelial growth factor receptor.
26 NEC = Neuroendocrine carcinoma.
27 Junshi = Shanghai Junshi Biosciences Co., Ltd.
28 PMDA = Japanese Pharmaceuticals and Medical Devices Agency.
29 BeiGene = BeiGene, Ltd.
30 PD-1 = Programmed Cell Death Protein-1.
31 ESMO IO = European Society for Medical Oncology Immuno-Oncology
Congress.
32 CgA = Chromogranin A.
33 BTC = Biliary tract cancer.
34 HCC = Hepatocellular carcinoma.
35 RCC = Renal cell cancer.
36 CSCO = Chinese Society of Clinical Oncology Annual Meeting.
37 Genor = Genor Biopharma Co. Ltd.
38 OS = Overall survival.
39 PI3Kδ = Phosphoinositide 3-kinase delta.
40 RP2D = Recommended Phase II dose.
41 Syk = Spleen tyrosine kinase.
42 ASH 2021 = the 63(rd) ASH Annual Meeting and Exposition in December
2021.
43 MAPK pathway = RAS-RAF-MEK-ERK signaling cascade.
44 We also report changes in performance at constant exchange rate
("CER") which is a non-GAAP measure. 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.
45 SHPL = Shanghai Hutchison Pharmaceuticals Limited.
46 HBYS = Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine
Company Limited.
47 HKEX = The Stock Exchange of Hong Kong Limited.
48 Inmagene = Inmagene Biopharmaceuticals.
49 Hutchison Sinopharm = Hutchison Whampoa Sinopharm Pharmaceuticals
(Shanghai) Company Limited.
50 GAAP = Generally Accepted Accounting Principles.
51 Lilly = Eli Lilly and Company.
52 SG&A Expenses = selling, general and administrative expenses.
53 ADS = American depositary share.
54 EGFRm+ = Epidermal growth factor receptor mutation positive.
55 ORR = Objective response rate.
56 DCR = Disease control rate.
57 NEN = Neuroendocrine neoplasms.
58 SCLC = Small cell lung cancer.
59 DoR = Duration of response.
60 TRAE = Treatment related adverse event.
61 TN = Triple negative.
62 HR+ = Hormone receptor positive.
63 Her2- = Human epidermal growth factor receptor 2 negative.
64 SXBX = She Xiang Bao Xin.
65 HBYS' adjusted net profit attributable to HUTCHMED equity holders
(after 20% non-controlling interest) in 2020 of $7.7 million is a non-GAAP
measure which is 40% of HBYS' 2020 net profit of $91.3 million less $72.0
million gain on land compensation, net of tax
66 HSBC = The Hongkong and Shanghai Banking Corporation Limited.
67 HIBOR = Hong Kong Interbank Offered Rate.
68 Deutsche Bank AG = Deutsche Bank AG, Hong Kong Branch.
69 PBOC = People's Bank of China.
CONSOLIDATED FINANCIAL STATEMENTS
HUTCHMED (CHINA) LIMITED
Consolidated Balance Sheets
(in US$'000, except share data)
December 31,
Note 2021 2020
Assets
Current assets
Cash and cash equivalents 5 377,542 235,630
Short-term investments 5 634,158 199,546
Accounts receivable 6 83,580 47,870
Other receivables, prepayments and deposits 7 81,041 27,928
Inventories 8 35,755 19,766
Total current assets 1,212,076 530,740
Property, plant and equipment 9 41,275 24,170
Right-of-use assets 10 11,879 8,016
Deferred tax assets 25(ii) 9,401 1,515
Investments in equity investees 11 76,479 139,505
Other non-current assets 12 21,551 20,172
Total assets 1,372,661 724,118
Liabilities and shareholders' equity
Current liabilities
Accounts payable 13 41,177 31,612
Other payables, accruals and advance receipts 14 210,839 121,283
Bank borrowings 15 26,905 -
Income tax payable 25(iii) 15,546 1,120
Other current liabilities 17,191 4,382
Total current liabilities 311,658 158,397
Lease liabilities 10 7,161 6,064
Deferred tax liabilities 25(ii) 2,765 5,063
Long-term bank borrowings 15 - 26,861
Other non-current liabilities 11,563 8,784
Total liabilities 333,147 205,169
Commitments and contingencies 16
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000 shares authorized; 864,530,850 17 86,453 72,772
and 727,722,215 shares issued at December 31, 2021 and 2020 respectively
Additional paid-in capital 1,505,196 822,458
Accumulated losses (610,328) (415,591)
Accumulated other comprehensive income 5,572 4,477
Total Company's shareholders' equity 986,893 484,116
Non-controlling interests 52,621 34,833
Total shareholders' equity 1,039,514 518,949
Total liabilities and shareholders' equity 1,372,661 724,118
The accompanying notes are an integral part of these consolidated financial
statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Operations
(in US$'000, except share and per share data)
Year Ended December 31,
Note 2021 2020 2019
Revenues
Goods -third parties 266,199 203,606 175,990
-related parties 24(i) 4,256 5,484 7,637
Services -commercialization-third parties 27,428 3,734 2,584
-collaboration research and development 18,995 9,771 15,532
-third parties
-research and development 24(i) 525 491 494
-related parties
Other collaboration revenue
-royalties-third parties 15,064 4,890 2,653
-licensing-third parties 23,661 - -
Total revenues 19 356,128 227,976 204,890
Operating expenses
Costs of goods-third parties (229,448) (178,828) (152,729)
Costs of goods-related parties (3,114) (3,671) (5,494)
Costs of services-commercialization -third parties (25,672) (6,020) (1,929)
Research and development expenses 21 (299,086) (174,776) (138,190)
Selling expenses (37,827) (11,334) (13,724)
Administrative expenses (89,298) (50,015) (39,210)
Total operating expenses (684,445) (424,644) (351,276)
(328,317) (196,668) (146,386)
Gain on divestment of an equity investee 23 121,310 - -
Other income/(expense)
Interest income 27 2,076 3,236 4,944
Other income 2,426 4,600 1,855
Interest expense 27 (592) (787) (1,030)
Other expense (12,643) (115) (488)
Total other income/(expense) (8,733) 6,934 5,281
Loss before income taxes and equity in earnings of equity investees (215,740) (189,734) (141,105)
Income tax expense 25(i) (11,918) (4,829) (3,274)
Equity in earnings of equity investees, net of tax 11 60,617 79,046 40,700
Net loss (167,041) (115,517) (103,679)
Less: Net income attributable to non-controlling interests (27,607) (10,213) (2,345)
Net loss attributable to the Company (194,648) (125,730) (106,024)
Losses per share attributable to the Company-basic and diluted (US$ per share) 26 (0.25) (0.18) (0.16)
Number of shares used in per share calculation-basic and diluted 26 792,684,524 697,931,437 665,683,145
The accompanying notes are an integral part of these consolidated financial
statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Comprehensive Loss
(in US$'000)
Year Ended December 31,
2021 2020 2019
Net loss (167,041) (115,517) (103,679)
Other comprehensive income/(loss)
Foreign currency translation gain/(loss) 2,964 9,530 (4,331)
Total comprehensive loss (164,077) (105,987) (108,010)
Less: Comprehensive income attributable to non-controlling interests (28,029) (11,413) (1,620)
Total comprehensive loss attributable to the Company (192,106) (117,400) (109,630)
The accompanying notes are an integral part of these consolidated financial
statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Changes in Shareholders' Equity
(in US$'000, except share data in '000)
Ordinary Shares Number Ordinary Shares Value Additional Accumulated Accumulated Total Non- Total Shareholders'
Paid-in
Losses
Other
Company's
controlling
Equity
Capital
Comprehensive
Shareholders'
Interests
(Loss)/Income
Equity
As at January 1, 2019 666,577 66,658 505,585 (183,659) (243) 388,341 23,243 411,584
Net (loss)/income - - - (106,024) - (106,024) 2,345 (103,679)
Issuances in relation to share option exercises 329 33 218 - - 251 - 251
Share-based compensation
Share options - - 7,157 - - 7,157 16 7,173
Long-term incentive plan ("LTIP") - - 2,239 - - 2,239 12 2,251
- - 9,396 - - 9,396 28 9,424
LTIP-treasury shares acquired and held by Trustee - - (346) - - (346) - (346)
Transfer between reserves - - 51 (51) - - - -
Foreign currency translation adjustments - - - - (3,606) (3,606) (725) (4,331)
As at December 31, 2019 666,906 66,691 514,904 (289,734) (3,849) 288,012 24,891 312,903
Net (loss)/income - - - (125,730) - (125,730) 10,213 (115,517)
Issuance in relation to public offering 23,669 2,366 115,975 - - 118,341 - 118,341
Issuances in relation to private investment in public equity ("PIPE") 36,667 3,667 196,333 - - 200,000 - 200,000
Issuance costs - - (8,317) - - (8,317) - (8,317)
Issuances in relation to share option exercises 480 48 545 - - 593 - 593
Share-based compensation
Share options - - 8,727 - - 8,727 10 8,737
LTIP - - 7,203 - - 7,203 16 7,219
- - 15,930 - - 15,930 26 15,956
LTIP-treasury shares acquired and held by Trustee - - (12,904) - - (12,904) - (12,904)
Dividends declared to non-controlling shareholders of subsidiaries - - - - - - (1,462) (1,462)
Purchase of additional interests in a subsidiary of an equity investee - - (52) (83) (4) (139) (35) (174)
(Note 11)
Transfer between reserves - - 44 (44) - - - -
Foreign currency translation adjustments - - - - 8,330 8,330 1,200 9,530
As at December 31, 2020 727,722 72,772 822,458 (415,591) 4,477 484,116 34,833 518,949
Net (loss)/income - - - (194,648) - (194,648) 27,607 (167,041)
Issuance in relation to public offering 119,600 11,960 602,907 - - 614,867 - 614,867
Issuance in relation to PIPE 16,393 1,639 98,361 - - 100,000 - 100,000
Issuance costs - - (29,806) - - (29,806) - (29,806)
Issuances in relation to share option exercises 816 82 2,370 - - 2,452 - 2,452
Share-based compensation
Share options - - 16,339 - - 16,339 26 16,365
LTIP - - 19,808 - - 19,808 70 19,878
- - 36,147 - - 36,147 96 36,243
LTIP-treasury shares acquired and held by Trustee - - (27,309) - - (27,309) - (27,309)
Dividends declared to non-controlling shareholders of subsidiaries - - - - - - (9,894) (9,894)
Transfer between reserves - - 89 (89) - - - -
Divestment of an equity investee - - (21) - (1,447) (1,468) (443) (1,911)
(Note 23)
Foreign currency translation adjustments - - - - 2,542 2,542 422 2,964
As at December 31, 2021 864,531 86,453 1,505,196 (610,328) 5,572 986,893 52,621 1,039,514
The accompanying notes are an integral part of these consolidated financial
statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Cash Flows
(in US$'000)
Year Ended December 31,
Note 2021 2020 2019
Net cash used in operating activities 28 (204,223) (62,066) (80,912)
Investing activities
Purchases of property, plant and equipment (16,401) (7,949) (8,565)
Purchase of leasehold land (355) (11,631) -
Refund/(payment) of leasehold land deposit 12 930 (2,326) -
Deposits in short-term investments (1,355,976) (732,908) (478,140)
Proceeds from short-term investments 921,364 629,373 597,044
Purchase of a warrant 20 (15,000) - -
Proceeds from divestment of an equity investee 23 159,118 - -
Purchase of a subsidiary company - - (8,080)
Cash acquired in purchase of a subsidiary company - - 16,769
Net cash (used in)/generated from investing activities (306,320) (125,441) 119,028
Financing activities
Proceeds from issuances of ordinary shares 717,319 318,934 251
Purchases of treasury shares 18(ii) (27,309) (12,904) (346)
Dividends paid to non-controlling shareholders of subsidiaries (9,894) (1,462) (1,282)
Repayment of loan to a non-controlling shareholder of a subsidiary (579) - -
Proceeds from bank borrowings - - 26,807
Repayment of bank borrowings - - (26,923)
Payment of issuance costs (29,509) (8,134) -
Net cash generated from/(used in) financing activities 650,028 296,434 (1,493)
Net increase in cash and cash equivalents 139,485 108,927 36,623
Effect of exchange rate changes on cash and cash equivalents 2,427 5,546 (1,502)
141,912 114,473 35,121
Cash and cash equivalents
Cash and cash equivalents at beginning of year 235,630 121,157 86,036
Cash and cash equivalents at end of year 377,542 235,630 121,157
Supplemental disclosure for cash flow information
Cash paid for interest 425 815 917
Cash paid for tax, net of refunds 25(iii) 5,014 5,940 3,249
Supplemental disclosure for non-cash activities
Increase in accrued capital expenditures 8,607 298 1,068
Vesting of treasury shares for LTIP 18(ii) 1,450 4,828 944
The accompanying notes are an integral part of these consolidated financial
statements.
HUTCHMED (CHINA) LIMITED
Notes to the Consolidated Financial Statements
1. Organization and Nature of Business
HUTCHMED (China) Limited (formerly known as "Hutchison China MediTech
Limited") (the "Company") and its subsidiaries (together the "Group") are
principally engaged in researching, developing, manufacturing and marketing
pharmaceutical products. The Group and its equity investees have research and
development facilities and manufacturing plants in the People's Republic of
China (the "PRC") and sell their products mainly in the PRC, including Hong
Kong. In addition, the Group has established international operations in the
United States of America (the "U.S.") and Europe.
The Company's ordinary shares are listed on the Main Board of The Stock
Exchange of Hong Kong Limited ("HKEX") (listing completed in June 2021) and
the AIM market of the London Stock Exchange, and its American depositary
shares ("ADS") are traded on the Nasdaq Global Select Market.
Liquidity
As at December 31, 2021, the Group had accumulated losses of US$610,328,000
primarily due to its spending in drug research and development activities. The
Group regularly monitors current and expected liquidity requirements to ensure
that it maintains sufficient cash balances and adequate credit facilities to
meet its liquidity requirements in the short and long term. As at December 31,
2021, the Group had cash and cash equivalents of US$377,542,000, short-term
investments of US$634,158,000 and unutilized bank borrowing facilities of
US$157,430,000. Short-term investments comprised of bank deposits maturing
over three months. The Group's operating plan includes the continued receipt
of dividends from an equity investee. Dividends received for the years ended
December 31, 2021, 2020 and 2019 were US$49,872,000, US$86,708,000 and
US$28,135,000 respectively.
Based on the Group's operating plan, the existing cash and cash equivalents,
short-term investments and unutilized bank borrowing facilities are considered
to be sufficient to meet the cash requirements to fund planned operations and
other commitments for at least the next twelve months (the look-forward period
used).
2. Particulars of Principal Subsidiaries and Equity Investees
Place of Equity interest attributable to the Group
establishment
and operations
Decem
ber
31,
Name 2021 2020 P
r
i
n
c
i
p
a
l
a
c
t
i
v
i
t
i
e
s
Subsidiaries
HUTCHMED Limited (formerly known as "Hutchison MediPharma Limited") PRC 99.75 % 99.75 % Research, development, manufacture and commercialization of pharmaceutical
products
HUTCHMED International Corporation (formerly known as "Hutchison MediPharma U.S. 99.75 % 99.75 % Provision of professional, scientific and technical support services
International Inc.")
Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company Limited PRC 50.87 % 50.87 % Provision of sales, distribution and marketing services to pharmaceutical
("HSPL") manufacturers
Hutchison Hain Organic (Hong Kong) Limited ("HHOHK") (note (a)) Hong Kong 50 % 50 % Wholesale and trading of healthcare and consumer products
Hutchison Healthcare Limited PRC 100 % 100 % Manufacture and distribution of healthcare products
HUTCHMED Science Nutrition Limited (formerly known as "Hutchison Consumer Hong Kong 100 % 100 % Wholesale and trading of healthcare and consumer products
Products Limited")
Equity investees
Shanghai Hutchison Pharmaceuticals Limited ("SHPL") PRC 50 % 50 % Manufacture and distribution of prescription drug products
Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited PRC - % 40 % Manufacture and distribution of over-the-counter drug products
("HBYS") (note (b))
Notes:
(a) HHOHK is regarded as a subsidiary of the Company, as while both its
shareholders have equal representation at the board, in the event of a
deadlock, the Group has a casting vote and is therefore able to unilaterally
control the financial and operating policies of HHOHK.
(b) On September 28, 2021, the Group completed a transaction to sell its
entire investment in HBYS to a third party (Note 23).
3. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements reflect the accounts of the
Company and all of its subsidiaries in which a controlling interest is
maintained. All inter-company balances and transactions have been eliminated
in consolidation. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles in the U.S. ("U.S.
GAAP").
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period.
Foreign Currency Translation
The Company's presentation currency and functional currency is the U.S. dollar
("US$"). The financial statements of its subsidiaries with a functional
currency other than the US$ have been translated into the Company's
presentation currency. All assets and liabilities of the subsidiaries are
translated using year-end exchange rates and revenues and expenses are
translated at average exchange rates for the year. Translation adjustments are
reflected in accumulated other comprehensive (loss)/income in shareholders'
equity.
Net foreign currency exchange gains of US$1,671,000, US$3,265,000 and
US$246,000 were recorded in other income in the consolidated statements of
operations for the years ended December 31, 2021, 2020 and 2019 respectively.
Foreign Currency Risk
The Group's operating transactions and its assets and liabilities in the PRC
are mainly denominated in Renminbi ("RMB"), which is not freely convertible
into foreign currencies. The Group's cash and cash equivalents denominated in
RMB are subject to government controls. The value of the RMB is subject to
fluctuations from central government policy changes and international economic
and political developments that affect the supply and demand of RMB in the
foreign exchange market. In the PRC, certain foreign exchange transactions are
required by law to be transacted only by authorized financial institutions at
exchange rates set by the People's Bank of China (the "PBOC"). Remittances in
currencies other than RMB by the Group in the PRC must be processed through
the PBOC or other PRC foreign exchange regulatory bodies which require certain
supporting documentation in order to complete the remittance.
Allowance for Current Expected Credit Losses and Concentration of Credit Risk
Financial instruments that potentially expose the Group to credit risk consist
primarily of cash and cash equivalents, short-term investments, and financial
assets not carried at fair value including accounts receivable and other
receivables.
The Group recognizes an allowance for current expected credit losses on
financial assets not carried at fair value. Current expected credit losses are
calculated over the expected life of the financial assets on an individual or
a portfolio basis considering information available about the counterparties'
credit situation and collectability of the specific cash flows, including
information about past events, current conditions and future forecasts.
The Group has no significant concentration of credit risk. The Group places
substantially all of its cash and cash equivalents and short-term investments
in major financial institutions, which management believes are of high credit
quality. The Group has a practice to limit the amount of credit exposure to
any particular financial institution. Additionally, the Group has policies in
place to ensure that sales are made to customers with an appropriate credit
history and the Group performs periodic credit evaluations of its customers.
Normally the Group does not require collateral from trade debtors.
Cash and Cash Equivalents
The Group considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Cash and cash
equivalents consist primarily of cash on hand and bank deposits and are stated
at cost, which approximates fair value.
Short-term Investments
Short-term investments include deposits placed with banks with original
maturities of more than three months but less than one year.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect
from customers based on their outstanding invoices. The allowance for credit
losses reflects the Group's current estimate of credit losses expected to be
incurred over the life of the receivables. The Group considers various factors
in establishing, monitoring, and adjusting its allowance for credit losses
including the aging of the accounts and aging trends, the historical level of
charge-offs, and specific exposures related to particular customers. The Group
also monitors other risk factors and forward-looking information, such as
country risk, when determining credit limits for customers and establishing
adequate allowances for credit losses. Accounts receivable are written off
after all reasonable means to collect the full amount (including litigation,
where appropriate) have been exhausted.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is
determined using the weighted average cost method. The cost of finished goods
comprises raw materials, direct labor, other direct costs and related
production overheads (based on normal operating capacity). Net realizable
value is the estimated selling price in the ordinary course of business, less
applicable variable selling expenses. A provision for excess and obsolete
inventory will be made based primarily on forecasts of product demand and
production requirements. The excess balance determined by this analysis
becomes the basis for excess inventory charge and the written-down value of
the inventory becomes its cost. Written-down inventory is not written up if
market conditions improve.
Property, Plant and Equipment
Property, plant and equipment consist of buildings, leasehold improvements,
plant and equipment, furniture and fixtures, other equipment and motor
vehicles. Property, plant and equipment are stated at cost, net of accumulated
depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of the depreciable assets.
Buildings 20 years
Plant and equipment 5-10 years
Furniture and fixtures, other equipment and motor vehicles 4-5 years
Leasehold improvements Shorter of (a) 5 years or (b) remaining term of lease
Additions and improvements that extend the useful life of an asset are
capitalized. Repairs and maintenance costs are expensed as incurred.
Impairment of Long-Lived Assets
The Group evaluates the recoverability of long-lived assets in accordance with
authoritative guidance on accounting for the impairment or disposal of
long-lived assets. The Group evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying value
of these assets may not be recoverable. If indicators of impairment exist, the
first step of the impairment test is performed to assess if the carrying value
of the net assets exceeds the undiscounted cash flows of the assets. If yes,
the second step of the impairment test is performed in order to determine if
the carrying value of the net assets exceeds the fair value. If yes,
impairment is recognized for the excess.
Investments in Equity Investees
Investments in equity investees over which the Group has significant influence
are accounted for using the equity method. The Group evaluates equity method
investments for impairment when events or circumstances suggest that their
carrying amounts may not be recoverable. An impairment charge would be
recognized in earnings for a decline in value that is determined to be
other-than-temporary after assessing the severity and duration of the
impairment and the likelihood of recovery before disposal. The investments are
recorded at fair value only if impairment is recognized.
Leasehold Land
Leasehold land represents fees paid to acquire the right to use the land on
which various plants and buildings are situated for a specified period of time
from the date the respective right was granted and are stated at cost less
accumulated amortization and impairment loss, if any. Amortization is computed
using the straight-line basis over the lease period of 50 years.
Goodwill
Goodwill represents the excess of the purchase price plus fair value of
non-controlling interests over the fair value of identifiable assets and
liabilities acquired. Goodwill is not amortized, but is tested for impairment
at the reporting unit level on at least an annual basis or when an event
occurs or circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying amount. When performing an
evaluation of goodwill impairment, the Group has the option to first assess
qualitative factors, such as significant events and changes to expectations
and activities that may have occurred since the last impairment evaluation, to
determine if it is more likely than not that goodwill might be impaired. If as
a result of the qualitative assessment, that it is more likely than not that
the fair value of the reporting unit is less than its carrying amount, the
quantitative fair value test is performed to determine if the fair value of
the reporting unit exceeds its carrying value.
Other Intangible Assets
Other intangible assets with finite useful lives are carried at cost less
accumulated amortization and impairment loss, if any. Amortization is computed
using the straight-line basis over the estimated useful lives of the assets.
Borrowings
Borrowings are recognized initially at fair value, net of debt issuance costs
incurred. Borrowings are subsequently stated at amortized cost; any difference
between the proceeds (net of debt issuance costs) and the redemption value is
recognized in the consolidated statements of operations over the period of the
borrowings using the effective interest method.
Ordinary Shares
The Company's ordinary shares are stated at par value of US$0.10 per ordinary
share. The difference between the consideration received, net of issuance
cost, and the par value is recorded in additional paid-in capital.
Treasury Shares
The Group accounts for treasury shares under the cost method. The treasury
shares are purchased for the purpose of the LTIP and held by a trustee
appointed by the Group (the "Trustee") prior to vesting.
Share-Based Compensation
Share options
The Group recognizes share-based compensation expense on share options granted
to employees and directors based on their estimated grant date fair value
using the Polynomial model. This Polynomial pricing model uses various inputs
to measure fair value, including the market value of the Company's underlying
ordinary shares at the grant date, contractual terms, estimated volatility,
risk-free interest rates and expected dividend yields. The Group recognizes
share-based compensation expense in the consolidated statements of operations
on a graded vesting basis over the requisite service period, and accounts for
forfeitures as they occur.
Share options are classified as equity-settled awards. Share-based
compensation expense, when recognized, is charged to the consolidated
statements of operations with the corresponding entry to additional paid-in
capital.
LTIP
The Group recognizes the share-based compensation expense on the LTIP awards
based on a fixed or determinable monetary amount on a straight-line basis for
each annual tranche awarded over the requisite period. For LTIP awards with
performance targets, prior to their determination date, the amount of LTIP
awards that is expected to vest takes into consideration the achievement of
the performance conditions and the extent to which the performance conditions
are likely to be met. Performance conditions vary by awards, and may include
targets for shareholder returns, financings, free cash flows, revenues, net
profit after taxes and the achievement of clinical and regulatory milestones.
These LTIP awards are classified as liability-settled awards before the
determination date (i.e. the date when the achievement of any performance
conditions are known), as they settle in a variable number of shares based on
a determinable monetary amount, which is determined upon the actual
achievement of performance targets. As the extent of achievement of the
performance targets is uncertain prior to the determination date, a
probability based on management's assessment of the achievement of the
performance targets has been assigned to calculate the amount to be recognized
as an expense over the requisite period.
After the determination date or if the LTIP awards have no performance
conditions, the LTIP awards are classified as equity-settled awards. If the
performance target is achieved, the Group will pay the determined monetary
amount to the Trustee to purchase ordinary shares of the Company or the
equivalent ADS. Any cumulative compensation expense previously recognized as a
liability will be transferred to additional paid-in capital, as an
equity-settled award. If the performance target is not achieved, no ordinary
shares or ADS of the Company will be purchased and the amount previously
recorded in the liability will be reversed and included in the consolidated
statements of operations.
Defined Contribution Plans
The Group's subsidiaries in the PRC participate in a government-mandated
multi-employer defined contribution plan pursuant to which certain retirement,
medical and other welfare benefits are provided to employees. The relevant
labor regulations require the Group's subsidiaries in the PRC to pay the local
labor and social welfare authority's monthly contributions at a stated
contribution rate based on the monthly basic compensation of qualified
employees. The relevant local labor and social welfare authorities are
responsible for meeting all retirement benefits obligations and the Group's
subsidiaries in the PRC have no further commitments beyond their monthly
contributions. The contributions to the plan are expensed as incurred.
The Group also makes payments to other defined contribution plans for the
benefit of employees employed by subsidiaries outside the PRC. The defined
contribution plans are generally funded by the relevant companies and by
payments from employees.
The Group's contributions to defined contribution plans for the years ended
December 31, 2021, 2020 and 2019 amounted to US$7,181,000, US$2,660,000 and
US$3,479,000 respectively.
Revenue Recognition
Revenue is measured based on consideration specified in a contract with a
customer, and excludes any sales incentives and amounts collected on behalf of
third parties. Taxes assessed by a governmental authority that are both
imposed on and concurrent with a specific revenue-producing transaction, that
are collected by the Group from a customer, are also excluded from revenue.
The Group recognizes revenue when it satisfies a performance obligation by
transferring control over a good, service or license to a customer.
(i) Goods and services
The Group principally generates revenue from (1) sales of goods, which are the
manufacture or purchase and distribution of pharmaceutical products and other
consumer health products, and (2) provision of services, which are the
provision of sales, distribution and marketing services to pharmaceutical
manufacturers. The Group evaluates whether it is the principal or agent for
these contracts. Where the Group obtains control of the goods for
distribution, it is the principal (i.e. recognizes sales of goods on a gross
basis). Where the Group does not obtain control of the goods for distribution,
it is the agent (i.e. recognizes provision of services on a net basis).
Control is primarily evidenced by taking physical possession and inventory
risk of the goods.
Revenue from sales of goods is recognized when the customer takes possession
of the goods. This usually occurs upon completed delivery of the goods to the
customer site. The amount of revenue recognized is adjusted for expected sales
incentives as stipulated in the contract, which are generally issued to
customers as direct discounts at the point-of-sale or indirectly in the form
of rebates. Sales incentives are estimated using the expected value method.
Additionally, sales are generally made with a limited right of return under
certain conditions. Revenues are recorded net of provisions for sales
discounts and returns.
Revenue from provision of services is recognized when the benefits of the
services transfer to the customer over time, which is based on the
proportionate value of services rendered as determined under the terms of the
relevant contract. Additionally, when the amounts that can be invoiced
correspond directly with the value to the customer for performance completed
to date, the Group recognizes revenue from provision of services based on
amounts that can be invoiced to the customer.
Deferred revenue is recognized if consideration is received in advance of
transferring control of the goods or rendering of services. Accounts
receivable is recognized if the Group has an unconditional right to bill the
customer, which is generally when the customer takes possession of the goods
or services are rendered. Payment terms differ by subsidiary and customer, but
generally range from 45 to 180 days from the invoice date.
(ii) License and collaboration contracts
The Group's Oncology/Immunology reportable segment includes revenue generated
from license and collaboration contracts, which generally contain multiple
performance obligations including (1) the license to the commercialization
rights of a drug compound and (2) the research and development services for
each specified treatment indication, which are accounted for separately if
they are distinct, i.e. if a product or service is separately identifiable
from other items in the arrangement and if a customer can benefit from it on
its own or with other resources that are readily available to the customer.
The transaction price generally includes fixed and variable consideration in
the form of upfront payment, research and development cost reimbursements,
contingent milestone payments and sales-based royalties. Contingent milestone
payments are not included in the transaction price until it becomes probable
that a significant reversal of revenue will not occur, which is generally when
the specified milestone is achieved. The allocation of the transaction price
to each performance obligation is based on the relative standalone selling
prices of each performance obligation determined at the inception of the
contract. The Group estimates the standalone selling prices based on the
income approach. Control of the license to the drug compounds transfers at the
inception date of the collaboration agreements and consequently, amounts
allocated to this performance obligation are generally recognized at a point
in time. Conversely, research and development services for each specified
indication are performed over time and amounts allocated to these performance
obligations are generally recognized over time using cost inputs as a measure
of progress. The Group has determined that research and development expenses
provide an appropriate depiction of measure of progress for the research and
development services. Changes to estimated cost inputs may result in a
cumulative catch-up adjustment. Royalty revenues are recognized as future
sales occur as they meet the requirements for the sales-usage based royalty
exception.
Deferred revenue is recognized if allocated consideration is received in
advance of the Group rendering research and development services or earning
royalties on future sales. Accounts receivable is recognized based on the
terms of the contract and when the Group has an unconditional right to bill
the customer, which is generally when research and development services are
rendered.
Research and Development Expenses
Research and development expenses include the following: (i) research and
development costs, which are expensed as incurred; (ii) acquired in-process
research and development ("IPR&D") expenses, which include the initial
costs of externally developed IPR&D projects, acquired directly in a
transaction other than a business combination, that do not have an alternative
future use; and (iii) milestone payment obligations for externally developed
IPR&D projects incurred prior to regulatory approval of the product in the
in-licensed territory, which are accrued when the event requiring payment of
the milestone occurs (milestone payment obligations incurred upon regulatory
approval are recorded as other intangible assets).
Collaborative Arrangements
The Group enters into collaborative arrangements with collaboration partners
that fall under the scope of Accounting Standards Codification ("ASC") 808,
Collaborative Arrangements ("ASC 808"). The Group records all expenditures
for such collaborative arrangements in research and development expenses as
incurred, including payments to third party vendors and reimbursements to
collaboration partners, if any. Reimbursements from collaboration partners are
recorded as reductions to research and development expenses and accrued when
they can be contractually claimed.
Government Grants
Grants from governments are recognized at their fair values. Government grants
that are received in advance are deferred and recognized in the consolidated
statements of operations over the period necessary to match them with the
costs that they are intended to compensate. Government grants in relation to
the achievement of stages of research and development projects are recognized
in the consolidated statements of operations when amounts have been received
and all attached conditions have been met. Non-refundable grants received
without any further obligations or conditions attached are recognized
immediately in the consolidated statements of operations.
Leases
In an operating lease, a lessee obtains control of only the use of the
underlying asset, but not the underlying asset itself. An operating lease is
recognized as a right-of-use asset with a corresponding liability at the date
which the leased asset is available for use by the Group. The Group recognizes
an obligation to make lease payments equal to the present value of the lease
payments over the lease term. The lease terms may include options to extend or
terminate the lease when it is reasonably certain that the Group will exercise
that option.
Lease liabilities include the net present value of the following lease
payments: (i) fixed payments; (ii) variable lease payments that depend on an
index or a rate; and (iii) payments of penalties for terminating the lease if
the lease term reflects the lessee exercising that option, if any. Lease
liabilities exclude the following payments that are generally accounted for
separately: (i) non-lease components, such as maintenance and security service
fees and value added tax, and (ii) any payments that a lessee makes before the
lease commencement date. The lease payments are discounted using the interest
rate implicit in the lease or if that rate cannot be determined, the lessee's
incremental borrowing rate being the rate that the lessee would have to pay to
borrow the funds in its currency and jurisdiction necessary to obtain an asset
of similar value, economic environment and terms and conditions.
An asset representing the right to use the underlying asset during the lease
term is recognized that consists of the initial measurement of the operating
lease liability, any lease payments made to the lessor at or before the
commencement date less any lease incentives received, any initial direct cost
incurred by the Group and any restoration costs.
After commencement of the operating lease, the Group recognizes lease expenses
on a straight-line basis over the lease term. The right-of-use asset is
subsequently measured at cost less accumulated amortization and any impairment
provision. The amortization of the right-of-use asset represents the
difference between the straight-line lease expense and the accretion of
interest on the lease liability each period. The interest amount is used to
accrete the lease liability and to amortize the right-of-use asset. There is
no amount recorded as interest expense.
Payments associated with short-term leases are recognized as lease expenses on
a straight-line basis over the period of the leases.
Subleases of right-of-use assets are accounted for similar to other leases. As
an intermediate lessor, the Group separately accounts for the head-lease and
sublease unless it is relieved of its primary obligation under the head-lease.
Sublease income is recorded on a gross basis separate from the head-lease
expenses. If the total remaining lease cost on the head-lease is more than the
anticipated sublease income for the lease term, this is an indicator that the
carrying amount of the right-of-use asset associated with the head-lease may
not be recoverable, and the right-of-use asset will be assessed for
impairment.
Income Taxes
The Group accounts for income taxes under the liability method. Under the
liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and income tax bases
of assets and liabilities and are measured using the income tax rates that
will be in effect when the differences are expected to reverse. A valuation
allowance is recorded when it is more likely than not that some of the net
deferred income tax asset will not be realized.
The Group accounts for an uncertain tax position in the consolidated financial
statements only if it is more likely than not that the position is sustainable
based on its technical merits and consideration of the relevant tax
authority's widely understood administrative practices and precedents. If the
recognition threshold is met, the Group records the largest amount of tax
benefit that is greater than 50 percent likely to be realized upon ultimate
settlement.
The Group recognizes interest and penalties for income taxes, if any, under
income tax payable on its consolidated balance sheets and under other expenses
in its consolidated statements of operations.
Losses per Share
Basic losses per share is computed by dividing net loss attributable to the
Company by the weighted average number of outstanding ordinary shares in issue
during the year. Weighted average number of outstanding ordinary shares in
issue excludes treasury shares.
Diluted losses per share is computed by dividing net loss attributable to the
Company by the weighted average number of outstanding ordinary shares in issue
and dilutive ordinary share equivalents outstanding during the year. Dilutive
ordinary share equivalents include ordinary shares and treasury shares
issuable upon the exercise or settlement of share-based awards or warrants
issued by the Company using the treasury stock method. The computation of
diluted losses per share does not assume conversion, exercise, or contingent
issuance of securities that would have an anti-dilutive effect.
Segment Reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief executive officer who is the Group's chief
operating decision maker. The chief operating decision maker reviews the
Group's internal reporting in order to assess performance and allocate
resources.
Profit Appropriation and Statutory Reserves
The Group's subsidiaries and equity investees established in the PRC are
required to make appropriations to certain non-distributable reserve funds.
In accordance with the relevant laws and regulations established in the PRC,
the Company's subsidiaries registered as wholly-owned foreign enterprise have
to make appropriations from their after-tax profits (as determined under
generally accepted accounting principles in the PRC ("PRC GAAP")) to reserve
funds including general reserve fund, enterprise expansion fund and staff
bonus and welfare fund. The appropriation to the general reserve fund must be
at least 10% of the after-tax profits calculated in accordance with PRC GAAP.
Appropriation is not required if the general reserve fund has reached 50% of
the registered capital of the company. Appropriations to the enterprise
expansion fund and staff bonus and welfare fund are made at the respective
company's discretion. For the Group's equity investees, the amount of
appropriations to these funds are made at the discretion of their respective
boards.
In addition, Chinese domestic companies must make appropriations from their
after-tax profits as determined under PRC GAAP to non-distributable reserve
funds including statutory surplus fund and discretionary surplus fund. The
appropriation to the statutory surplus fund must be 10% of the after-tax
profits as determined under PRC GAAP. Appropriation is not required if the
statutory surplus fund has reached 50% of the registered capital of the
company. Appropriation to the discretionary surplus fund is made at the
respective company's discretion.
The use of the general reserve fund, enterprise expansion fund, statutory
surplus fund and discretionary surplus fund is restricted to the offsetting of
losses or increases to the registered capital of the respective company. The
staff bonus and welfare fund is a liability in nature and is restricted to
fund payments of special bonus to employees and for the collective welfare of
employees. All these reserves are not permitted to be transferred to the
company as cash dividends, loans or advances, nor can they be distributed
except under liquidation.
4. Fair Value Disclosures
The following table presents the Group's financial instruments by level within
the fair value hierarchy under ASC 820, Fair Value Measurement:
Fair Value Measurement Using
Level 1 Level 2 Level 3 Total
(in US$'000)
As at December 31, 2021
Cash and cash equivalents 377,542 - - 377,542
Short-term investments 634,158 - - 634,158
Warrant (Note 20) - 2,452 - 2,452
As at December 31, 2020
Cash and cash equivalents 235,630 - - 235,630
Short-term investments 199,546 - - 199,546
Accounts receivable, other receivables, accounts payable and other payables
are carried at cost, which approximates fair value due to the short-term
nature of these financial instruments, and are therefore excluded from the
above table. Bank borrowings are floating rate instruments and carried at
amortized cost, which approximates their fair values, and are therefore
excluded from the above table.
5. Cash and Cash Equivalents and Short-term Investments
December 31,
2021 2020
(in US$'000)
Cash and Cash Equivalents
Cash at bank and on hand 104,620 87,828
Bank deposits maturing in three months or less 272,922 147,802
377,542 235,630
Short-term Investments
Bank deposits maturing over three months (note) 634,158 199,546
1,011,700 435,176
Note: The maturities for short-term investment ranged from 91 to 180 days for
the year ended December 31, 2021 and 2020.
Certain cash and bank balances denominated in RMB, US$ and UK Pound Sterling
("£") were deposited with banks in the PRC. The conversion of these balances
into foreign currencies is subject to the rules and regulations of foreign
exchange control promulgated by the PRC government. Cash and cash equivalents
and short-term investments were denominated in the following currencies:
December 31,
2021 2020
(in US$'000)
US$ 895,935 352,162
RMB 53,455 64,870
Hong Kong dollar ("HK$") 60,535 16,880
£ 1,090 954
Euro 685 310
1,011,700 435,176
6. Accounts Receivable
Accounts receivable from contracts with customers consisted of the following:
December 31,
2021 2020
(in US$'000)
Accounts receivable-third parties 82,434 46,743
Accounts receivable-related parties (Note 24(ii)) 1,166 1,222
Allowance for credit losses (20) (95)
Accounts receivable, net 83,580 47,870
Substantially all accounts receivable are denominated in RMB, US$ and HK$ and
are due within one year from the end of the reporting periods. The carrying
values of accounts receivable approximate their fair values due to their
short-term maturities.
An aging analysis for accounts receivable-third parties based on the relevant
invoice dates is as follows:
December 31,
2021 2020
(in US$'000)
Not later than 3 months 78,288 42,434
Between 3 months to 6 months 2,867 3,118
Between 6 months to 1 year 78 23
Later than 1 year 1,201 1,168
Account receivable-third parties 82,434 46,743
Movements on the allowance for credit losses:
2021 2020 2019
(in US$'000)
As at January 1 95 16 41
Increase in allowance for credit losses 16 95 16
Decrease in allowance due to subsequent collection (92) (18) (41)
Exchange difference 1 2 -
As at December 31 20 95 16
7. Other receivables, prepayments and deposits
Other receivables, prepayments and deposits consisted of the following:
December 31,
2021 2020
(in US$'000)
Dividend receivables (Note 23) 46,387 -
Value-added tax receivables 16,616 14,957
Prepayments 14,128 7,038
Deposits 1,255 905
Amounts due from related parties (Note 24(ii)) 1,149 1,142
Leasehold land deposit (Note 12) - 930
Others 1,506 2,956
81,041 27,928
No allowance for credit losses have been made for other receivables,
prepayments and deposits for the year ended December 31, 2021 and 2020.
8. Inventories
Inventories, net of provision for excess and obsolete inventories, consisted
of the following:
December 31,
2021 2020
(in US$'000)
Raw materials 15,837 4,502
Finished goods 19,918 15,264
35,755 19,766
9. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
Buildings Leasehold improvements Plant and equipment Furniture and fixtures, other equipment and motor vehicles Construction in progress Total
(in US$'000)
Cost
As at January 1, 2021 2,372 16,346 5,643 23,040 3,050 50,451
Additions - 452 24 3,189 19,669 23,334
Disposals - (275) (19) (705) - (999)
Transfers - 916 197 1,849 (2,962) -
Exchange differences 60 389 142 584 213 1,388
As at December 31, 2021 2,432 17,828 5,987 27,957 19,970 74,174
Accumulated depreciation
As at January 1, 2021 1,626 8,652 1,747 14,256 - 26,281
Depreciation 120 2,904 574 3,244 - 6,842
Disposals - (223) (18) (688) - (929)
Exchange differences 42 238 49 376 - 705
As at December 31, 2021 1,788 11,571 2,352 17,188 - 32,899
Net book value
As at December 31, 2021 644 6,257 3,635 10,769 19,970 41,275
Buildings Leasehold improvements Plant and equipment Furniture and fixtures, other equipment and motor vehicles Construction in progress Total
(in US$'000)
Cost
As at January 1, 2020 2,212 17,022 4,474 19,571 928 44,207
Additions - 269 59 2,993 4,571 7,892
Disposals - (3,103) (3) (1,846) - (4,952)
Transfers - 1,014 789 913 (2,716) -
Exchange differences 160 1,144 324 1,409 267 3,304
As at December 31, 2020 2,372 16,346 5,643 23,040 3,050 50,451
Accumulated depreciation
As at January 1, 2020 1,406 8,304 1,155 12,487 - 23,352
Depreciation 112 2,701 484 2,646 - 5,943
Disposals - (3,051) (1) (1,815) - (4,867)
Exchange differences 108 698 109 938 - 1,853
As at December 31, 2020 1,626 8,652 1,747 14,256 - 26,281
Net book value
As at December 31, 2020 746 7,694 3,896 8,784 3,050 24,170
10. Leases
Leases consisted of the following:
December 31,
2021 2020
(in US$'000)
Right-of-use assets
Offices (note) 10,605 6,789
Factories 702 945
Warehouse 281 197
Others 291 85
Total right-of-use assets 11,879 8,016
Lease liabilities-current 4,917 2,785
Lease liabilities-non-current 7,161 6,064
Total lease liabilities 12,078 8,849
Note: Includes US$1.4 million right-of-use asset for corporate offices in Hong
Kong that is leased through May 2024 in which the contract has a termination
option with 1-month advance notice. The termination option was not recognized
as part of the right-of-use asset and lease liability as it is uncertain that
the Group will exercise such option.
Lease activities are summarized as follows:
Year Ended December 31,
2021 2020
(in US$'000)
Lease expenses:
Short-term leases with lease terms equal or less than 12 months 106 323
Leases with lease terms greater than 12 months 4,306 3,400
4,412 3,723
Cash paid on lease liabilities 4,954 3,340
Non-cash: Lease liabilities recognized from obtaining right-of-use assets 7,665 3,098
Non-cash: Lease liabilities changed in relation to modifications and (33) 2,259
terminations
Lease contracts are typically within a period of 1 to 8 years. The weighted
average remaining lease term and the weighted average discount rate as at
December 31, 2021 was 3.38 years and 3.33% respectively. The weighted average
remaining lease term and the weighted average discount rate as at December 31,
2020 was 3.72 years and 3.87% respectively.
Future lease payments are as follows:
December 31,
2021
(in US$'000)
Lease payments:
Not later than 1 year 5,216
Between 1 to 2 years 3,376
Between 2 to 3 years 1,882
Between 3 to 4 years 679
Between 4 to 5 years 680
Later than 5 years 795
Total lease payments 12,628
Less: Discount factor (550)
Total lease liabilities 12,078
11. Investments in Equity Investees
Investments in equity investees consisted of the following:
December 31,
2021 2020
(in US$'000)
SHPL 75,999 79,408
HBYS (note) - 59,712
Other 480 385
76,479 139,505
Note: On September 28, 2021, the Group completed a transaction to sell its
entire investment in HBYS to a third party (Note 23). The Group has accounted
for the investment in HBYS under the equity method up to September 28, 2021.
The equity investees are private companies and there are no quoted market
prices available for their shares.
Summarized financial information for the significant equity investees SHPL and
HBYS, both under Other Ventures segment, is as follows:
(i) Summarized balance sheets
SHPL HBYS
December 31,
2021 2020 2021 2020
(in US$'000)
Current assets 190,260 175,965 - 177,888
Non-current assets 91,605 93,361 - 95,731
Current liabilities (128,993) (109,873) - (137,179)
Non-current liabilities (7,131) (6,739) - (16,034)
Net assets 145,741 152,714 - 120,406
Non-controlling interests - - - (982)
145,741 152,714 - 119,424
(ii) Summarized statements of operations
SHPL HBYS((note (a)))
Year Ended December 31,
2021 2020 2019 2021((note (b))) 2020 2019
(in US$'000)
Revenue 332,648 276,354 272,082 209,528 232,368 215,403
Gross profit 255,089 204,191 194,769 111,066 116,804 115,124
Interest income 1,216 975 582 205 271 160
Finance cost - - - - (5) (16)
Profit before taxation 105,325 77,837 72,324 36,715 107,715 22,926
Income tax expense (note (c)) (15,896) (10,833) (11,015) (4,840) (16,494) (3,634)
Net income 89,429 67,004 61,309 31,875 91,221 19,292
Non-controlling interests - - - (36) 62 505
Net income attributable to the shareholders of equity investee 89,429 67,004 61,309 31,839 91,283 19,797
Notes:
(a) In June 2020, HBYS entered into an agreement with the government to
return the land use right for a plot of land in Guangzhou to the government
(the "Land Compensation Agreement") for cash consideration which aggregated to
RMB679.5 million (approximately US$103.1 million). In November 2020, HBYS
completed all material obligations as stipulated in the Land Compensation
Agreement and recognized land compensation of RMB569.2 million (approximately
US$86.1 million). In June 2021, HBYS received a completion confirmation from
the government and became entitled to an additional land compensation bonus of
RMB110.3 million (approximately US$17.0 million). HBYS recorded a gain before
tax of RMB106.8 million (approximately US$16.4 million) after deducting costs
of RMB3.5 million (approximately US$0.6 million).
(b) The summarized statement of operations for HBYS for the year ended
December 31, 2021 includes the period when HBYS was the Group's equity
investee from January 1, 2021 to September 28, 2021, the completion date of
the divestment.
(c) The main entities within each of the SHPL and HBYS groups have been
granted the High and New Technology Enterprise ("HNTE") status (the latest
renewal of this status covers the years from 2020 to 2022). These entities
were eligible to use a preferential income tax rate of 15% for the year ended
December 31, 2021 on this basis.
For the years ended December 31, 2021, 2020 and 2019, other equity investees
had net income of approximately US$41,000, net losses of approximately
US$194,000 and net income of approximately US$294,000 respectively.
(iii) Reconciliation of summarized financial information
Reconciliation of the summarized financial information presented to the
carrying amount of investments in equity investees is as follows:
SHPL HBYS
2021 2020 2019 2021 2020 2019
(in US$'000)
Opening net assets after non-controlling interests as at January 1 152,714 146,759 131,778 119,424 44,541 121,984
Impact of change in accounting policy (ASC 842-Leases) - - (2) - - (19)
Net income attributable to the shareholders of equity investee 89,429 67,004 61,309 31,839 91,283 19,797
Purchase of additional interests in a subsidiary of an equity investee (note) - - - - (347) -
Dividends declared (99,744) (72,179) (41,654) (106,159) (20,756) (93,957)
Other comprehensive income/(loss) 3,342 11,130 (4,672) 1,387 4,703 (3,264)
Closing net assets after non-controlling interests as at December 31 145,741 152,714 146,759 46,491 119,424 44,541
Group's share of net assets 72,871 76,357 73,380 23,246 59,712 22,271
Divestment (Note 23) - - - (23,246) - -
Goodwill 3,128 3,051 2,846 - - -
Carrying amount of investments as at December 31 75,999 79,408 76,226 - 59,712 22,271
Note: During the year ended December 31, 2020, HBYS acquired an additional 30%
interest in a subsidiary and after the acquisition, it became a wholly owned
subsidiary of HBYS.
SHPL had the following capital commitments:
December 31, 2021
(in US$'000)
Property, plant and equipment
Contracted but not provided for 155
12. Other Non-Current Assets
December 31,
2021 2020
(in US$'000)
Leasehold land (note) 13,169 13,121
Goodwill 3,380 3,307
Warrant (Note 20) 2,452 -
Leasehold land deposit (note) 1,436 1,396
Long term prepayment 951 950
Other intangible asset 163 227
Deferred issuance cost - 1,171
21,551 20,172
Note: In December 2020, HUTCHMED Limited acquired a land use right in Shanghai
for consideration of US$12.0 million. In addition, a leasehold land deposit
amounting to US$2.3 million was required to be paid to the government which is
refundable upon reaching specific milestones for the construction of a
manufacturing plant on the land. US$0.9 million was returned in January 2021
(Note 7) and US$1.4 million was included in other non-current assets based on
the expected timing of the specific milestones.
13. Accounts Payable
December 31,
2021 2020
(in US$'000)
Accounts payable-third parties 39,115 26,756
Accounts payable-non-controlling shareholders of subsidiaries (Note 24(iv)) 2,062 4,856
41,177 31,612
Substantially all accounts payable are denominated in RMB and US$ and due
within one year from the end of the reporting period. The carrying values of
accounts payable approximate their fair values due to their short-term
maturities.
An aging analysis based on the relevant invoice dates is as follows:
December 31,
2021 2020
(in US$'000)
Not later than 3 months 35,615 26,270
Between 3 months to 6 months 3,705 3,364
Between 6 months to 1 year 588 782
Later than 1 year 1,269 1,196
41,177 31,612
14. Other Payables, Accruals and Advance Receipts
Other payables, accruals and advance receipts consisted of the following:
December 31,
2021 2020
(in US$'000)
Accrued research and development expenses 116,134 72,697
Accrued salaries and benefits 41,786 21,982
Accrued administrative and other general expenses 15,836 10,319
Accrued capital expenditures 11,343 2,736
Accrued selling and marketing expenses 8,412 5,747
Deposits 2,111 1,408
Amounts due to related parties (Note 24(ii)) 1,915 401
Deferred government grants 314 374
Others 12,988 5,619
210,839 121,283
15. Bank Borrowings
Bank borrowings consisted of the following:
December 31,
2021 2020
(in US$'000)
Current 26,905 -
Non-current - 26,861
The weighted average interest rate for outstanding bank borrowings for the
years ended December 31, 2021 and 2020 was 1.08% per annum and 1.89% per annum
respectively. The carrying amounts of the Group's outstanding bank borrowings
were denominated in HK$.
(i) 3‑year revolving loan facility and 3‑year term loan and revolving
loan facilities
In November 2018, the Group through its subsidiary, renewed a 3-year revolving
loan facility with a bank in the amount of HK$234,000,000 (US$30,000,000) with
an interest rate at the Hong Kong Interbank Offered Rate ("HIBOR") plus 0.85%
per annum. This credit facility is guaranteed by the Company. No amount had
been drawn from the revolving loan facility and it expired in November 2021.
In May 2019, the Group through its subsidiary, entered into a separate
facility agreement with the bank for the provision of additional unsecured
credit facilities in the aggregate amount of HK$400,000,000 (US$51,282,000).
The 3-year credit facilities include (i) a HK$210,000,000 (US$26,923,000) term
loan facility and (ii) a HK$190,000,000 (US$24,359,000) revolving loan
facility, both with an interest rate at HIBOR plus 0.85% per annum, and an
upfront fee of HK$819,000 (US$105,000) on the term loan. These credit
facilities are guaranteed by the Company. The term loan was drawn in October
2019 and is due in May 2022. No amount has been drawn from the revolving loan
facility.
(ii) 2‑year revolving loan facilities
In August 2018, the Group through its subsidiary, entered into two separate
facility agreements with banks for the provision of unsecured credit
facilities in the aggregate amount of HK$507,000,000 (US$65,000,000). The
first credit facility was a HK$351,000,000 (US$45,000,000) revolving loan
facility, with a term of 2 years and an interest rate at HIBOR plus 1.35% per
annum. The second credit facility was a HK$156,000,000 (US$20,000,000)
revolving loan facility, with a term of 2 years and an interest rate at HIBOR
plus 1.35% per annum. These credit facilities were guaranteed by the Company.
No amount has been drawn from either of the revolving loan facilities. Both
loan facilities expired in August 2020.
In August 2020, the Group through its subsidiary, entered into a 2-year
revolving loan facility with a bank in the amount of HK$117,000,000
(US$15,000,000) with an interest rate at HIBOR plus 4.5% per annum. This
credit facility is guaranteed by the Company. As at December 31, 2021 and
2020, no amount has been drawn from the revolving loan facility.
(iii) 10‑year fixed asset loan facility
In October 2021, a subsidiary entered into a 10-year fixed asset loan facility
agreement with a bank for the provision of a secured credit facility in the
amount of RMB754,880,000 (US$118,071,000) with an annual interest rate at the
5-year China Loan Prime Rate less 0.65%. This credit facility is guaranteed by
the immediate holding company of the subsidiary and secured by the
underlying leasehold land and buildings. As at December 31, 2021, no amount
has been drawn from the fixed asset loan facility.
The Group's bank borrowings are repayable as from the dates indicated as
follows:
December 31,
2021 2020
(in US$'000)
Not later than 1 year 26,923 -
Between 1 to 2 years - 26,923
26,923 26,923
As at December 31, 2021 and 2020, the Group had unutilized bank borrowing
facilities of US$157,430,000 and US$69,359,000 respectively.
16. Commitments and Contingencies
The Group had the following capital commitments:
December 31, 2021
(in US$'000)
Property, plant and equipment
Contracted but not provided for 44,204
The Group does not have any other significant commitments or contingencies.
17. Ordinary Shares
As at December 31, 2021, the Company is authorized to issue 1,500,000,000
ordinary shares.
On January 27, 2020, the Company issued 22,000,000 ordinary shares in the form
of 4,400,000 ADS for gross proceeds of US$110.0 million. On February 10, 2020,
the Company issued an additional 1,668,315 ordinary shares in the form of
333,663 ADS for gross proceeds of US$8.3 million. Issuance costs totaled
US$8.0 million.
On July 2, 2020 and July 3, 2020, the Company issued (1) aggregate 20,000,000
ordinary shares and (2) warrants to a third party for gross proceeds of
US$100.0 million through a PIPE. The warrants allowed the third party to
purchase up to 16,666,670 ordinary shares of the Company within 18 months of
the issuance date for an exercise price of US$6.00 per ordinary share, which
have since expired. Issuance costs totaled US$0.2 million.
On November 26, 2020, the Company issued 16,666,670 ordinary shares to a third
party for gross proceeds of US$100.0 million through a PIPE. Issuance costs
totaled US$0.1 million.
On April 14, 2021, the Company issued 16,393,445 ordinary shares to a third
party for gross proceeds of US$100.0 million through a PIPE. Issuance costs
totaled US$0.1 million.
On June 30, 2021 and July 15, 2021, the Company issued an aggregate of
119,600,000 ordinary shares in a public offering on the HKEX with
over-allotment option exercised in full for aggregate gross proceeds of
US$614.9 million. Issuance costs totaled US$29.7 million.
Each ordinary share is entitled to one vote. The holders of ordinary shares
are also entitled to receive dividends whenever funds are legally available
and when declared by the Board of Directors of the Company.
18. Share-based Compensation
(i) Share‑based Compensation of the Company
The Company conditionally adopted a share option scheme on June 4, 2005 (as
amended on March 21, 2007) and such scheme has a term of 10 years. It expired
in 2016 and no further share options can be granted. Another share option
scheme was conditionally adopted on April 24, 2015 (the "Hutchmed Share Option
Scheme"). Pursuant to the Hutchmed Share Option Scheme, the Board of Directors
of the Company may, at its discretion, offer any employees and directors
(including Executive and Non-executive Directors but excluding Independent
Non-executive Directors) of the Company, holding companies of the Company and
any of their subsidiaries or affiliates, and subsidiaries or affiliates of the
Company share options to subscribe for shares of the Company.
As at December 31, 2021, the aggregate number of shares issuable under the
Hutchmed Share Option Scheme was 50,059,198 ordinary shares and the aggregate
number of shares issuable under the prior share option scheme which expired in
2016 was 705,060 ordinary shares. The Company will issue new shares to satisfy
share option exercises. Additionally, the number of shares authorized but
unissued was 635,469,150 ordinary shares.
Share options granted are generally subject to a four-year vesting schedule,
depending on the nature and the purpose of the grant. Share options subject to
the four-year vesting schedule, in general, vest 25% upon the first
anniversary of the vesting commencement date as defined in the grant letter,
and 25% every subsequent year. However, certain share option grants may have a
different vesting schedule as approved by the Board of Directors of the
Company. No outstanding share options will be exercisable or subject to
vesting after the expiry of a maximum of eight to ten years from the date of
grant.
A summary of the Company's share option activity and related information is as
follows:
Number of share options Weighted average exercise price in US$ per share Weighted average remaining contractual life Aggregate intrinsic value
(years)
(in US$'000)
Outstanding at January 1, 2019 18,554,850 4.57 7.35 19,277
Granted 2,315,000 4.12
Exercised (329,000) 0.76
Cancelled (1,012,110) 6.33
Expired (96,180) 6.51
Outstanding at December 31, 2019 19,432,560 4.48 6.67 24,316
Granted 15,437,080 4.66
Exercised (480,780) 1.23
Cancelled (4,486,200) 5.02
Expired (741,670) 6.46
Outstanding at December 31, 2020 29,160,990 4.49 7.21 53,990
Granted 10,174,840 5.96
Exercised (815,190) 3.01
Cancelled (1,287,650) 5.50
Expired (42,400) 5.52
Outstanding at December 31, 2021 37,190,590 4.88 7.04 82,377
Vested and exercisable at December 31, 2020 11,529,280 3.74 4.57 29,433
Vested and exercisable at December 31, 2021 16,077,770 4.24 4.91 46,491
In estimating the fair value of share options granted, the following
assumptions were used in the Polynomial model for awards granted in the
periods indicated:
Year Ended December 31,
2021 2020 2019
Weighted average grant date fair value of share options (in US$ per share) 2.24 1.76 1.33
Significant inputs into the valuation model (weighted average):
Exercise price (in US$ per share) 5.96 4.66 4.12
Share price at effective date of grant (in US$ per share) 5.91 4.66 3.98
Expected volatility (note (a)) 41.1% 42.6% 38.4%
Risk-free interest rate (note (b)) 1.62% 0.59% 0.56%
Contractual life of share options (in years) 10 10 10
Expected dividend yield (note (c)) 0% 0% 0%
Notes:
(a) The Company calculated its expected volatility with reference to the
historical volatility prior to the issuances of share options.
(b) For share options exercisable into ordinary shares, the risk-free
interest rates reference the sovereign yield of the United Kingdom because the
Company's ordinary shares are currently listed on AIM and denominated in £.
For share options exercisable into ADS, the risk-free interest rates reference
the U.S. Treasury yield curves because the Company's ADS are currently listed
on the NASDAQ and denominated in US$.
(c) The Company has not declared or paid any dividends and does not
currently expect to do so prior to the exercise of the granted share options,
and therefore uses an expected dividend yield of zero in the Polynomial model.
The Company will issue new shares to satisfy share option exercises. The
following table summarizes the Company's share option exercises:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Cash received from share option exercises 2,452 593 251
Total intrinsic value of share option exercises 2,999 2,475 1,189
The Group recognizes compensation expense on a graded vesting approach over
the requisite service period. The following table presents share-based
compensation expense included in the Group's consolidated statements of
operations:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Research and development expenses 8,460 4,061 6,634
Selling and administrative expenses 7,783 4,586 539
Cost of revenues 122 90 -
16,365 8,737 7,173
As at December 31, 2021, the total unrecognized compensation cost was
US$23,051,000, and will be recognized on a graded vesting approach over the
weighted average remaining service period of 3.04 years.
(ii) LTIP
The Company grants awards under the LTIP to participating directors and
employees, giving them a conditional right to receive ordinary shares of the
Company or the equivalent ADS (collectively the "Awarded Shares") to be
purchased by the Trustee up to a cash amount. Vesting will depend upon
continued employment of the award holder with the Group and will otherwise be
at the discretion of the Board of Directors of the Company. Additionally, some
awards are subject to change based on annual performance targets prior to
their determination date.
LTIP awards prior to the determination date
Performance targets vary by award, and may include targets for shareholder
returns, financings, free cash flows, revenues, net profit after taxes and the
achievement of clinical and regulatory milestones. As the extent of
achievement of the performance targets is uncertain prior to the determination
date, a probability based on management's assessment on the achievement of the
performance target has been assigned to calculate the amount to be recognized
as an expense over the requisite period with a corresponding entry to
liability.
LTIP awards after the determination date
Upon the determination date, the Company will pay a determined monetary
amount, up to the maximum cash amount based on the actual achievement of the
performance target specified in the award, to the Trustee to purchase the
Awarded Shares. Any cumulative compensation expense previously recognized as a
liability will be transferred to additional paid-in capital, as an
equity-settled award. If the performance target is not achieved, no Awarded
Shares of the Company will be purchased and the amount previously recorded in
the liability will be reversed through share-based compensation expense.
Granted awards under the LTIP are as follows:
Maximum cash amount Covered Performance target
Grant date (in US$ millions) financial years determination date
August 5, 2019 0.7 2019 note (a)
October 10, 2019 0.1 note (b) note (b)
April 20, 2020 5.3 2019 note (d)
April 20, 2020 37.4 2020 note (a)
April 20, 2020 1.9 note (b) note (b)
April 20, 2020 0.2 note (c) note (c)
August 12, 2020 2.1 2020 note (a)
August 12, 2020 0.3 note (b) note (b)
March 26, 2021 57.3 2021 note (a)
September 1, 2021 7.3 2021 note (a)
September 1, 2021 0.5 note (b) note (b)
October 20, 2021 1.7 note (b) note (b)
December 14, 2021 0.1 note (b) note (b)
December 14, 2021 0.1 note (c) note (c)
Notes:
(a) The annual performance target determination date is the date of the
announcement of the Group's annual results for the covered financial year and
vesting occurs two business days after the announcement of the Group's annual
results for the financial year falling two years after the covered financial
year to which the LTIP award relates.
(b) This award does not stipulate performance targets and is subject to a
vesting schedule of 25% on each of the first, second, third and fourth
anniversaries of the date of grant.
(c) This award does not stipulate performance targets and will be vested on
the first anniversary of the date of grant.
(d) This award does not stipulate performance targets and vesting occurs two
business days after the announcement of the Group's annual results for the
financial year falling two years after the covered financial year to which the
LTIP award relates.
The Trustee has been set up solely for the purpose of purchasing and holding
the Awarded Shares during the vesting period on behalf of the Company using
funds provided by the Company. On the determination date, if any, the Company
will determine the cash amount, based on the actual achievement of each annual
performance target, for the Trustee to purchase the Awarded Shares. The
Awarded Shares will then be held by the Trustee until they are vested.
The Trustee's assets include treasury shares and funds for additional treasury
shares, trustee fees and expenses. The number of treasury shares (in the form
of ordinary shares or ADS of the Company) held by the Trustee were as follows:
Number of Cost
treasury shares
(in US$'000)
As at January 1, 2019 1,121,030 6,677
Purchased 60,430 346
Vested (240,150) (944)
As at December 31, 2019 941,310 6,079
Purchased 3,281,920 12,904
Vested (712,555) (4,828)
As at December 31, 2020 3,510,675 14,155
Purchased 4,907,045 27,309
Vested (278,545) (1,450)
As at December 31, 2021 8,139,175 40,014
Based on the estimated achievement of performance conditions for 2021
financial year LTIP awards, the determined monetary amount was US$52,056,000
which is recognized to share-based compensation expense over the requisite
vesting period to March 2024.
For the years ended December 31, 2021, 2020 and 2019, US$6,618,000,
US$7,038,000 and US$262,000 of the LTIP awards were forfeited respectively
based on the determined or estimated monetary amount as at the forfeiture
date.
The following table presents the share-based compensation expenses recognized
under the LTIP awards:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Research and development expenses 16,880 7,252 2,640
Selling and administrative expenses 8,451 3,552 1,779
Cost of revenues 294 101 -
25,625 10,905 4,419
Recorded with a corresponding credit to:
Liability 14,263 7,778 2,694
Additional paid-in capital 11,362 3,127 1,725
25,625 10,905 4,419
For the years ended December 31, 2021, 2020 and 2019, US$8,516,000,
US$4,092,000 and US$526,000 were reclassified from liability to additional
paid-in capital respectively upon LTIP awards reaching the determination date.
As at December 31, 2021 and 2020, US$12,836,000 and US$7,089,000 were recorded
as liabilities respectively for LTIP awards prior to the determination date.
As at December 31, 2021, the total unrecognized compensation cost was
approximately US$53,152,000, which considers expected performance targets and
the amounts expected to vest, and will be recognized over the requisite
periods.
19. Revenues
The following table presents disaggregated revenue, with sales of goods
recognized at a point-in-time and provision of services recognized over time:
Year Ended December 31, 2021
Oncology/Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 33,937 - 33,937
Goods-Distribution - 236,518 236,518
Services-Commercialization-Marketed Products 27,428 - 27,428
-Collaboration Research and Development 18,995 - 18,995
-Research and Development 525 - 525
Royalties 15,064 - 15,064
Licensing 23,661 - 23,661
119,610 236,518 356,128
Third parties 119,085 232,262 351,347
Related parties (Note 24(i)) 525 4,256 4,781
119,610 236,518 356,128
Year Ended December 31, 2020
Oncology/Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 11,329 - 11,329
Goods-Distribution - 197,761 197,761
Services-Commercialization-Marketed Products 3,734 - 3,734
-Collaboration Research and Development 9,771 - 9,771
-Research and Development 491 - 491
Royalties 4,890 - 4,890
30,215 197,761 227,976
Third parties 29,724 192,277 222,001
Related parties (Note 24(i)) 491 5,484 5,975
30,215 197,761 227,976
Year Ended December 31, 2019
Oncology/Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 8,113 - 8,113
Goods-Distribution - 175,514 175,514
Services-Commercialization - 2,584 2,584
-Collaboration Research and Development 15,532 - 15,532
-Research and Development 494 - 494
Royalties 2,653 - 2,653
26,792 178,098 204,890
Third parties 26,298 170,461 196,759
Related parties (Note 24(i)) 494 7,637 8,131
26,792 178,098 204,890
The following table presents liability balances from contracts with customers:
December 31,
2021 2020
(in US$'000)
Deferred revenue
Current-Oncology/Immunology segment (note (a)) 11,078 1,450
Current-Other Ventures segment (note (b)) 1,196 147
12,274 1,597
Non-current-Oncology/Immunology segment (note (a)) 878 484
Total deferred revenue (note (c) and (d)) 13,152 2,081
Notes:
(a) Oncology/Immunology segment deferred revenue relates to invoiced amounts
for royalties which the customer has not yet completed the in-market sale,
unamortized upfront and milestone payments and advance consideration received
for cost reimbursements which are attributed to research and development
services that have not yet been rendered as at the reporting date.
(b) Other Ventures segment deferred revenue relates to payments in advance
from customers for goods that have not been transferred and services that have
not been rendered to the customer as at the reporting date.
(c) Estimated deferred revenue to be recognized over time as from the date
indicated is as follows:
December 31,
2021 2020
(in US$'000)
Not later than 1 year 12,274 1,597
Between 1 to 2 years 476 211
Between 2 to 3 years 255 205
Between 3 to 4 years 147 68
13,152 2,081
(c) As at January 1, 2021, deferred revenue was US$2.1 million, of which
US$0.7 million was recognized during the year ended December 31, 2021.
License and collaboration agreement with Eli Lilly
On October 8, 2013, the Group entered into a licensing, co-development and
commercialization agreement in China with Eli Lilly and Company ("Lilly")
relating to Elunate ("Lilly Agreement"), also known as fruquintinib, a
targeted oncology therapy for the treatment of various types of solid tumors.
Under the terms of the Lilly Agreement, the Group is entitled to receive a
series of payments up to US$86.5 million, including upfront payments and
development and regulatory approval milestones. Development costs after the
first development milestone are shared between the Group and Lilly. Elunate
was successfully commercialized in China in November 2018, and the Group
receives tiered royalties in the range of 15% to 20% on all sales in China.
In December 2018, the Group entered into various amendments to the Lilly
Agreement (the "2018 Amendment"). Under the terms of the 2018 Amendment, the
Group is entitled to determine and conduct future life cycle indications
("LCI") development of Elunate in China beyond the three initial indications
specified in the Lilly Agreement and will be responsible for all associated
development costs. In return, the Group will receive additional regulatory
approval milestones of US$20 million for each LCI approved, for up to three
LCI or US$60 million in aggregate, and will increase tiered royalties to a
range of 15% to 29% on all Elunate sales in China upon the commercial launch
of the first LCI. Additionally, through the 2018 Amendment, Lilly has provided
consent, and freedom to operate, for the Group to enter into joint development
collaborations with certain third-party pharmaceutical companies to explore
combination treatments of Elunate and various immunotherapy agents. The 2018
Amendment also provided the Group rights to promote Elunate in provinces that
represent 30% to 40% of the sales of Elunate in China upon the occurrence of
certain commercial milestones by Lilly. Such rights were further amended
below.
In July 2020, the Group entered into an amendment to the Lilly Agreement (the
"2020 Amendment") relating to the expansion of the Group's role in the
commercialization of Elunate across all of China. Under the terms of the 2020
Amendment, the Group is responsible for providing promotion and marketing
services, including the development and execution of all on-the-ground medical
detailing, promotion and local and regional marketing activities, in return
for service fees on sales of Elunate made by Lilly. In October 2020, the Group
commenced such promotion and marketing services. In addition, development and
regulatory approval milestones for an initial indication under the Lilly
Agreement were increased by US$10 million in lieu of cost reimbursement.
Upfront and cumulative milestone payments according to the Lilly Agreement
received up to December 31, 2021 are summarized as follows:
(in US$'000)
Upfront payment 6,500
Development milestone payments achieved 40,000
The Lilly Agreement has the following performance obligations: (1) the license
for the commercialization rights to Elunate and (2) the research and
development services for the specified indications. The transaction price
includes the upfront payment, research and development cost reimbursements,
milestone payments and sales-based royalties. Milestone payments were not
included in the transaction price until it became probable that a significant
reversal of revenue would not occur, which is generally when the specified
milestone is achieved. The allocation of the transaction price to each
performance obligation was based on the relative standalone selling prices of
each performance obligation determined at the inception of the contract. Based
on this estimation, proportionate amounts of transaction price to be allocated
to the license to Elunate and the research and development services were 90%
and 10% respectively. Control of the license to Elunate transferred at the
inception date of the agreement and consequently, amounts allocated to this
performance obligation were recognized at inception. Conversely, research and
development services for each specified indication are performed over time and
amounts allocated are recognized over time using the prior and estimated
future development costs for Elunate as a measure of progress. Royalties are
recognized as future sales occur as they meet the requirements for the
sales-usage based royalty exception.
The 2018 Amendment is a separate contract as it added distinct research and
development services for the LCIs to the Lilly Agreement. The 2020 Amendment
related to the promotion and marketing services is a separate contract as it
added distinct services to the Lilly Agreement. Such promotion and marketing
services are recognized over time based on amounts that can be invoiced to
Lilly. The 2020 Amendment related to the additional development and regulatory
approval milestone amounts is a modification as it only affected the
transaction price of research and development services for a specific
indication under the Lilly Agreement, and therefore, such additional milestone
amounts will be included in the transaction price accounted under the Lilly
Agreement once the specified milestones are achieved.
Revenue recognized under the Lilly Agreement and subsequent amendments is as
follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Goods-Marketed Products 15,792 11,329 8,113
Services-Commercialization-Marketed Products 27,428 3,734 -
-Collaboration Research and Development 4,491 1,991 4,005
Royalties 10,292 4,890 2,653
58,003 21,944 14,771
License and collaboration agreement with AstraZeneca
On December 21, 2011, the Group and AstraZeneca AB (publ) ("AZ") entered into
a global licensing, co-development, and commercialization agreement for
Orpathys ("AZ Agreement"), also known as savolitinib, a novel targeted
therapy and a highly selective inhibitor of the c-Met receptor tyrosine kinase
for the treatment of cancer. Under the terms of the AZ Agreement, the Group is
entitled to receive a series of payments up to US$140 million, including
upfront payments and development and first-sale milestones. Additionally, the
AZ Agreement contains possible significant future commercial sale milestones.
Development costs for Orpathys in China will be shared between the Group and
AZ, with the Group continuing to lead the development in China. AZ will lead
and pay for the development of Orpathys for the rest of the world. Orpathys
was successfully commercialized in China in July 2021, and the Group receives
fixed royalties of 30% based on all sales in China. Should Orpathys be
successfully commercialized outside China, the Group would receive tiered
royalties from 9% to 13% on all sales outside of China.
In August 2016 (as amended in December 2020), the Group entered into an
amendment to the AZ Agreement whereby the Group shall pay the first
approximately US$50 million of phase III clinical trial costs related to
developing Orpathys for renal cell carcinoma ("RCC"), and remaining costs will
be shared between the Group and AZ. Subject to approval of Orpathys in RCC,
the Group would receive additional tiered royalties on all sales outside of
China, with the incremental royalty rates determined based on actual sharing
of development costs. In November 2021, the Group entered into an additional
amendment which revised the sharing between the Group and AZ of development
costs for Orpathys in China for non-small cell lung cancer, as well as adding
potential development milestones.
Upfront and cumulative milestone payments according to the AZ Agreement
received up to December 31, 2021 are summarized as follows:
(in US$'000)
Upfront payment 20,000
Development milestone payments achieved 25,000
First-sale milestone payment achieved 25,000
The AZ Agreement has the following performance obligations: (1) the license
for the commercialization rights to Orpathys and (2) the research and
development services for the specified indications. The transaction price
includes the upfront payment, research and development cost reimbursements,
milestone payments and sales-based royalties. Milestone payments were not
included in the transaction price until it became probable that a significant
reversal of revenue would not occur, which is generally when the specified
milestone is achieved. The allocation of the transaction price to each
performance obligation was based on the relative standalone selling prices of
each performance obligation determined at the inception of the contract. Based
on this estimation, proportionate amounts of transaction price to be allocated
to the license to Orpathys and the research and development services were 95%
and 5% respectively. Control of the license to Orpathys transferred at the
inception date of the agreement and consequently, amounts allocated to this
performance obligation were recognized at inception. Conversely, research and
development services for each specified indication are performed over time and
amounts allocated are recognized over time using the prior and estimated
future development costs for Orpathys as a measure of progress.
Revenue recognized under the AZ Agreement and subsequent amendments is as
follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Goods-Marketed Products 6,509 - -
Services-Collaboration Research and Development 14,113 7,780 11,527
Royalties 4,772 - -
Licensing 23,661 - -
49,055 7,780 11,527
20. In-Licensing arrangement
On August 7, 2021, the Group and Epizyme, Inc. ("Epizyme") entered into a
license agreement (the "In-license Agreement") for tazemetostat, a novel
inhibitor of EZH2 that is approved by the U.S. Food and Drug Administration
for the treatment of certain patients with epithelioid sarcoma and follicular
lymphoma. The Group will be responsible for the development and
commercialization of tazemetostat in the PRC, Hong Kong, Macau and Taiwan (the
"Territory") and also holds rights to manufacture tazemetostat for the
Territory. The Group also received a 4-year warrant, exercisable up to August
7, 2025, to purchase up to 5,653,000 shares of Epizyme common stock for an
exercise price of US$11.50 per share.
Under the terms of the In-license Agreement and warrant, the Group paid
Epizyme a US$25 million upfront payment and is obligated for a series of
success-based payments up to US$110 million in development and regulatory
milestones and up to US$175 million in sales milestones. Success-based
payments are recognized when the related milestone is achieved. After
tazemetostat is commercialized in the Territory, the Group will incur tiered
royalties based on net sales. As at December 31, 2021, no amounts of
development and regulatory milestones, sales milestones or royalties had been
paid.
The US$25 million upfront payment was first allocated to the warrant for its
initial fair value of US$15 million, and the remainder was allocated to the
rights to tazemetostat which were expensed to research and development expense
as in-process research and development.
The warrant was recorded as a financial asset at fair value with changes to
fair value recognized to the consolidated statements of operations. As at
December 31, 2021, the warrant had not been exercised. For the year ended
December 31, 2021, a fair value loss of US$12.5 million was recognized to
other expenses in the consolidated statements of operations. In estimating the
fair value of the warrant, the following assumptions were used in the Black
Scholes model for the dates indicated:
August 7, December 31,
2021 2021
Fair value of the warrant (in US$'000) 15,000 2,452
Significant inputs into the valuation model:
Exercise price (in US$ per share) 11.50 11.50
Share price (in US$ per share) 6.47 2.50
Expected volatility (note (a)) 74.48% 72.03%
Risk-free interest rate (note (b)) 0.59% 1.05%
Remaining contractual life of the warrant (in years) 4.00 3.60
Expected dividend yield (note (c)) 0% 0%
Notes:
(a) Expected volatility references the historical volatility for the
remaining contractual life of the warrant.
(b) The risk-free interest rates reference the U.S. Treasury yield curves
because Epizyme's common stock is currently listed on the NASDAQ and
denominated in US$.
(c) Epizyme has not declared or paid any dividends and the Group does not
currently expect it to do so within the remaining contractual life of the
warrant.
21. Research and Development Expenses
Research and development expenses are summarized as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Clinical trial related costs 190,051 105,869 87,777
Personnel compensation and related costs 91,639 63,542 46,246
Other research and development expenses 17,396 5,365 4,167
299,086 174,776 138,190
The Group has entered into multiple collaborative arrangements under ASC 808
to evaluate the combination of the Group's drug compounds with the
collaboration partners' drug compounds. For the years ended December 31, 2021,
2020 and 2019, the Group has incurred research and development expenses of
US$18,408,000, US$8,291,000 and US$2,921,000 respectively, related to such
collaborative arrangements.
22. Government Grants
Government grants in the Oncology/Immunology segment are primarily given in
support of R&D activities and are conditional upon i) the Group spending a
predetermined amount, regardless of success or failure of the research and
development projects and/or ii) the achievement of certain stages of research
and development projects being approved by the relevant PRC government
authority. They are refundable to the government if the conditions, if any,
are not met. Government grants in the Other Ventures segment are primarily
given to promote local initiatives. These government grants may be subject to
ongoing reporting and monitoring by the government over the period of the
grant.
Government grants, which are deferred and recognized in the consolidated
statements of operations over the period necessary to match them with the
costs that they are intended to compensate, are recognized in other payable,
accruals and advance receipts (Note 14) and other non-current liabilities. For
the years ended December 31, 2021, 2020 and 2019, the Group received
government grants of US$9,095,000, US$4,724,000 and US$8,742,000 respectively.
Government grants were recognized as reductions in the consolidated statements
of operations as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Research and development expenses 15,515 1,607 6,133
Other income 318 539 780
15,833 2,146 6,913
23. Gain on divestment of an equity investee
In March 2021, the Group entered into a sale and purchase agreement (the
"SPA") with a third party to sell its entire investment in HBYS with closing
subject to regulatory approval in the PRC. On September 28, 2021, the Group
completed the divestment, for cash consideration of US$159.1 million.
On May 13, 2021 and September 23, 2021, HBYS had declared dividends to
shareholders of US$46.5 million and US$59.7 million respectively which were
related to prior year undistributed profits and distributions of a land bonus
payment. Based on the SPA, the Group is entitled to a portion of such
dividends and the third party will settle these amounts, net of taxes, after
HBYS completes the distribution. As at December 31, 2021, US$46.4 million of
dividends receivable, net of taxes, from the third party was recorded in other
receivables (Note 7).
In addition, the Group and Hutchison Whampoa Enterprises Limited, an affiliate
of CK Hutchison Holdings Limited ("CK Hutchison"), entered into a license
agreement on June 15, 2021, conditional upon the completion of the divestment,
to grant a continuing right to use the "Hutchison Whampoa" brand by HBYS, and
the Group agrees to pay HK$12 million (approximately US$1.5 million) per year
with aggregate amounts not to exceed HK$120 million (approximately US$15.4
million). On September 28, 2021, the Group recorded the present value of
future branding liability payments of US$12.7 million. As at December 31,
2021, US$1.5 million and US$9.8 million were included in amounts due to
related parties (Note 24(ii)) and other non-current liabilities respectively.
The gain on divestment of an equity investee was recognized in the
consolidated statements of operations as follows:
Year Ended December 31,
2021
(in US$'000)
Proceeds 159,118
Dividend receivables-third party (Note 7) 46,387
205,505
Less: Group's share of net assets of HBYS (Note 11(iii)) (23,246)
Dividend receivables-HBYS (52,887)
Withholding tax liability on dividend receivables-HBYS 2,644
Branding liability (12,721)
Accumulated other comprehensive income and reserves 1,911
Transaction costs and others 104
Gain on divestment of an equity investee 121,310
Less: Capital gain tax (14,373)
Less: Gain on divestment of an equity investee attributable to non-controlling (24,010)
interests
Gain on divestment of an equity investee attributable to the Group 82,927
24. Significant Transactions with Related Parties and Non-Controlling Shareholders of Subsidiaries
The Group has the following significant transactions with related parties and
non-controlling shareholders of subsidiaries, which were carried out in the
normal course of business at terms determined and agreed by the relevant
parties:
(i) Transactions with related parties:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Sales to:
Indirect subsidiaries of CK Hutchison 4,256 5,484 7,637
Revenue from research and development services from:
An equity investee 525 491 494
Purchases from:
Equity investees 3,770 3,347 2,465
Rendering of marketing services from:
Indirect subsidiaries of CK Hutchison 350 332 430
An equity investee - - 2,682
350 332 3,112
Rendering of management services from:
An indirect subsidiary of CK Hutchison 971 955 931
Entered brand license agreement with:
An indirect subsidiary of CK Hutchison (note (a)) 12,721 - -
(ii) Balances with related parties included in:
December 31,
2021 2020
(in US$'000)
Accounts receivable-related parties
Indirect subsidiaries of CK Hutchison (note (b)) 1,166 1,222
Other receivables, prepayments and deposits
Equity investees (note (b)) 1,149 1,142
Other payables, accruals and advance receipts
Indirect subsidiaries of CK Hutchison (note (c) and (e)) 1,915 401
Other non-current liabilities
An equity investee (note (d)) 736 950
An indirect subsidiary of CK Hutchison (note (e)) 9,766 -
10,502 950
Notes:
(a) The branding rights for HBYS from an indirect subsidiary of CK Hutchison
was recognized in the consolidated statements of operations through the gain
on divestment of an equity investee (Note 23). For the year ended December 31,
2021, actual cash paid was US$1,538,000.
(b) Balances with related parties are unsecured, repayable on demand and
interest-free. The carrying values of balances with related parties
approximate their fair values due to their short-term maturities.
(c) Amounts due to indirect subsidiaries of CK Hutchison are unsecured,
repayable on demand and interest-bearing if not settled within one month.
(d) Other deferred income represents amounts recognized from granting of
promotion and marketing rights.
(e) As at December 31, 2021, branding liability payable of approximately
US$1,538,000 and US$9,766,000 were included in amounts due to related parties
under other payables, accruals and advance receipts and other non-current
liabilities respectively (Note 23).
(iii) Transactions with non‑controlling shareholders of subsidiaries:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Sales 41,974 36,500 27,343
Purchases 10,660 13,936 13,380
Dividends declared 9,894 1,462 -
(iv) Balances with non‑controlling shareholders of subsidiaries included in:
December 31,
2021 2020
(in US$'000)
Accounts receivable 8,436 6,184
Accounts payable 2,062 4,856
Other non-current liabilities
Loan - 579
25. Income Taxes
(i) Income tax expense
Year Ended December 31,
2021 2020 2019
(in US$'000)
Current tax
HK (note (a)) 310 457 321
PRC (note (b) and (c)) 15,909 872 708
U.S. and others (note (d)) 417 219 636
Total current tax 16,636 1,548 1,665
Deferred income tax (benefits)/expense (4,718) 3,281 1,609
Income tax expense 11,918 4,829 3,274
Notes:
(a) The Company, three subsidiaries incorporated in the British Virgin
Islands and its Hong Kong subsidiaries are subject to Hong Kong profits tax.
Under the Hong Kong two-tiered profits tax rates regime, the first HK$2.0
million (US$0.3 million) of assessable profits of qualifying corporations will
be taxed at 8.25%, with the remaining assessable profits taxed at 16.5%. Hong
Kong profits tax has been provided for at the relevant rates on the estimated
assessable profits less estimated available tax losses, if any, of these
entities as applicable.
(b) Taxation in the PRC has been provided for at the applicable rate on the
estimated assessable profits less estimated available tax losses, if any, in
each entity. Under the PRC Enterprise Income Tax Law (the "EIT Law"), the
standard enterprise income tax rate is 25%. In addition, the EIT Law provides
for a preferential tax rate of 15% for companies which qualify as HNTE.
HUTCHMED Limited and its wholly-owned subsidiary HUTCHMED (Suzhou) Limited
(formerly known as "Hutchison MediPharma (Suzhou) Limited") qualify as a HNTE
up to December 31, 2022 and 2023 respectively.
Pursuant to the EIT law, a 10% withholding tax is levied on dividends paid by
PRC companies to their foreign investors. A lower withholding tax rate of 5%
is applicable under the China-HK Tax Arrangement if direct foreign investors
with at least 25% equity interest in the PRC companies are Hong Kong tax
residents, and meet the conditions or requirements pursuant to the relevant
PRC tax regulations regarding beneficial ownership. Since the equity holders
of the equity investees of the Company are Hong Kong incorporated companies
and Hong Kong tax residents, and meet the aforesaid conditions or
requirements, the Company has used 5% to provide for deferred tax liabilities
on retained earnings which are anticipated to be distributed. As at December
31, 2021, 2020 and 2019, the amounts accrued in deferred tax liabilities
relating to withholding tax on dividends were determined on the basis that
100% of the distributable reserves of the equity investees operating in the
PRC will be distributed as dividends.
Pursuant to PRC Bulletin on Issues of Enterprise Income Tax and Indirect
Transfers of Assets by Non-PRC Resident Enterprises, an indirect transfer of a
PRC resident enterprise by a non-PRC resident enterprise, via the transfer of
an offshore intermediate holding company, shall be subject to PRC withholding
tax under certain conditions.
(c) Current tax in the PRC for the year ended December 31, 2021 includes
US$14.4 million arising from the indirect disposal of HBYS (Note 23),
calculated at 10% of the excess of the disposal proceeds over the cost of
acquiring the equity investment in HBYS.
(d) The Company's subsidiary in the U.S. with operations primarily in New
Jersey and New York states is subject to U.S. taxes, primarily federal and
state taxes, which have been provided for at approximately 21% (federal) and
0% to 11.5% (state tax) on the estimated assessable profit over the reporting
years. Certain income receivable by the Company is subject to U.S. withholding
tax of 30%. Two of the Group's subsidiaries are subject to corporate tax in
the UK and EU countries at 19% and 20% to 25%, respectively, on the estimated
assessable profits in relation to their presence in these countries.
The reconciliation of the Group's reported income tax expense to the
theoretical tax amount that would arise using the tax rates of the Company
against the Group's loss before income taxes and equity in earnings of equity
investees is as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Loss before income taxes and equity in earnings of equity investees (215,740) (189,734) (141,105)
Tax calculated at the statutory tax rate of the Company (35,597) (31,306) (23,282)
Tax effects of:
Different tax rates applicable in different jurisdictions 136 4,025 2,027
Tax valuation allowance 63,975 46,321 25,498
Preferential tax rate difference (148) (154) (177)
Preferential tax deduction and credits (29,838) (18,814) (5,444)
Expenses not deductible for tax purposes 8,684 3,476 4,098
Utilization of previously unrecognized tax losses (186) (114) (285)
Withholding tax on undistributed earnings of PRC entities 3,153 3,962 1,894
Others 1,739 (2,567) (1,055)
Income tax expense 11,918 4,829 3,274
(ii) Deferred tax assets and liabilities
The significant components of deferred tax assets and liabilities are as
follows:
December 31,
2021 2020
(in US$'000)
Deferred tax assets
Cumulative tax losses 186,832 117,064
Others 12,269 6,829
Total deferred tax assets 199,101 123,893
Less: Valuation allowance (189,700) (122,378)
Deferred tax assets 9,401 1,515
Deferred tax liabilities
Undistributed earnings from PRC entities 2,720 4,994
Others 45 69
Deferred tax liabilities 2,765 5,063
The movements in deferred tax assets and liabilities are as follows:
2021 2020 2019
(in US$'000)
As at January 1 (3,548) (2,343) (4,256)
Utilization of previously recognized withholding tax on undistributed earnings 5,148 2,323 3,390
(Charged)/Credited to the consolidated statements of operations
Withholding tax on undistributed earnings of PRC entities (3,153) (3,962) (1,894)
Deferred tax on amortization of intangible assets 19 18 18
Deferred tax on temporary differences, tax loss carried forward and research 7,852 663 267
tax credits
Divestment of an equity investee 370 - -
Exchange differences (52) (247) 132
As at December 31 6,636 (3,548) (2,343)
The deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off and when the deferred income taxes relate to the
same fiscal authority.
The cumulative tax losses can be carried forward against future taxable income
and will expire in the following years:
December 31,
2021 2020
(in US$'000)
No expiry date 60,450 53,940
2022 200 195
2023 - -
2024 4,099 3,998
2025 39,321 38,357
2026 52,452 51,034
2027 67,217 66,555
2028 117,376 114,490
2029 191,554 186,844
2030 265,696 259,163
2031 432,278 -
1,230,643 774,576
The Company believes that it is more likely than not that future operations
outside the U.S. will not generate sufficient taxable income to realize the
benefit of the deferred tax assets. Certain of the Company's subsidiaries have
had sustained tax losses, which will expire within five years if not utilized
in the case of PRC subsidiaries (ten years for HNTEs), and which will not be
utilized in the case of Hong Kong subsidiaries as they do not generate taxable
profits. Accordingly, a valuation allowance has been recorded against the
relevant deferred tax assets arising from the tax losses.
A U.S. subsidiary of the Company has approximately US$2.0 million and US$0.6
million U.S. Federal and New Jersey state research tax credits which will
expire between 2039 and 2041 (Federal) and 2026 and 2028 (New Jersey)
respectively, if not utilized.
The table below summarizes changes in the deferred tax valuation allowance:
2021 2020 2019
(in US$'000)
As at January 1 122,378 69,399 49,021
Charged to consolidated statements of operations 63,975 46,321 25,498
Utilization of previously unrecognized tax losses (186) (114) (285)
Write-off of tax losses - - (3,142)
Others (9) - -
Exchange differences 3,542 6,772 (1,693)
As at December 31 189,700 122,378 69,399
As at December 31, 2021, 2020 and 2019, the Group did not have any material
unrecognized uncertain tax positions.
(iii) Income tax payable
2021 2020 2019
(in US$'000)
As at January 1 1,120 1,828 555
Current tax 16,636 1,548 1,665
Withholding tax upon dividend declaration from PRC entities (note (a)) 5,148 2,323 2,581
Tax paid (note (b)) (5,014) (5,940) (2,970)
Reclassification from non-current withholding tax - 812 -
Reclassification to prepaid tax 25 485 -
Divestment of an equity investee (Note 23) (2,644) - -
Exchange difference 275 64 (3)
As at December 31 15,546 1,120 1,828
Notes:
(a) The amount for 2019 excludes a non-current withholding tax of US$0.8
million which is included under other non-current liabilities.
(b) The amount for 2020 is net of the PRC Enterprise Income Tax ("EIT")
refund of US$0.4 million received by HSPL. The amount for 2019 excludes the
PRC EIT of US$0.3 million prepaid by HSPL which is included under other
receivables, prepayments and deposits.
26. Losses Per Share
(i) Basic losses per share
Basic losses per share is calculated by dividing the net loss attributable to
the Company by the weighted average number of outstanding ordinary shares in
issue during the year. Treasury shares held by the Trustee are excluded from
the weighted average number of outstanding ordinary shares in issue for
purposes of calculating basic losses per share.
Year Ended December 31,
2021 2020 2019
Weighted average number of outstanding ordinary shares in issue 792,684,524 697,931,437 665,683,145
Net loss attributable to the Company (US$'000) (194,648) (125,730) (106,024)
Losses per share attributable to the Company (US$ per share) (0.25) (0.18) (0.16)
(ii) Diluted losses per share
Diluted losses per share is calculated by dividing net loss attributable to
the Company by the weighted average number of outstanding ordinary shares in
issue and dilutive ordinary share equivalents outstanding during the year.
Dilutive ordinary share equivalents include shares issuable upon the exercise
or settlement of share options, LTIP awards and warrants issued by the Company
using the treasury stock method.
For the years ended December 31, 2021, 2020 and 2019, the share options, LTIP
awards and warrants issued by the Company were not included in the calculation
of diluted losses per share because of their anti-dilutive effect. Therefore,
diluted losses per share were equal to basic losses per share for the years
ended December 31, 2021, 2020 and 2019.
27. Segment Reporting
The Group's operating segments are as follows:
(i) Oncology/Immunology: focuses on discovering, developing, and
commercializing targeted therapies and immunotherapies for the treatment of
cancer and immunological diseases. Oncology/Immunology is further segregated
into two core business areas:
(a) R&D: comprises research and development activities covering drug
discovery, development, manufacturing and regulatory functions as well as
administrative activities to support research and development operations; and
(b) Marketed Products: comprises the sales, marketing, manufacture and
distribution of drug developed from research and development activities.
(ii) Other Ventures: comprises other commercial businesses which include
the sales, marketing, manufacture and distribution of other prescription drugs
and consumer health products.
The performance of the reportable segments is assessed based on segment
operating (loss)/profit.
The segment information is as follows:
Year Ended December 31, 2021
Oncology/Immunology
Marketed Other
R&D Products Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from external customers 43,181 - 43,181 76,429 119,610 236,518 - 356,128
Interest income 809 3 812 - 812 282 982 2,076
Equity in earnings of equity investees, net of tax 20 - 20 - 20 60,597 - 60,617
Segment operating (loss)/profit (143,876) (159,770) (303,646) 6,178 (297,468) 185,240 (42,303) (154,531)
Interest expense - - - - - - (592) (592)
Income tax credit/(expense) 22 7,160 7,182 (1,320) 5,862 (14,573) (3,207) (11,918)
Net (loss)/income attributable to the Company (143,528) (152,235) (295,763) 4,032 (291,731) 142,890 (45,807) (194,648)
Depreciation/ amortization (6,436) (197) (6,633) - (6,633) (318) (239) (7,190)
Additions to non-current assets (other than financial instruments and deferred 25,295 4,321 29,616 - 29,616 1,056 327 30,999
tax assets)
December 31, 2021
Oncology/Immunology
R&D Marketed Products Other
Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 166,802 19,870 186,672 35,978 222,650 225,898 924,113 1,372,661
Property, plant and equipment 38,049 1,862 39,911 - 39,911 746 618 41,275
Right-of-use assets 4,798 3,768 8,566 - 8,566 1,827 1,486 11,879
Leasehold land 13,169 - 13,169 - 13,169 - - 13,169
Goodwill - - - - - 3,380 - 3,380
Other intangible asset - - - - - 163 - 163
Investments in equity investees 480 - 480 - 480 75,999 - 76,479
Year Ended December 31, 2020
Oncology/Immunology
Marketed Other
R&D Products Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from external customers 10,262 - 10,262 19,953 30,215 197,761 - 227,976
Interest income 461 - 461 - 461 167 2,608 3,236
Equity in earnings of equity investees, net of tax (97) - (97) - (97) 79,143 - 79,046
Segment operating (loss)/profit (119,740) (63,482) (183,222) 7,607 (175,615) 83,888 (18,174) (109,901)
Interest expense - - - - - - (787) (787)
Income tax (expense)/credit (402) 642 240 (167) 73 (824) (4,078) (4,829)
Net (loss)/income attributable to the Company (120,096) (62,683) (182,779) 7,282 (175,497) 72,785 (23,018) (125,730)
Depreciation/ amortization (5,458) (119) (5,577) - (5,577) (292) (192) (6,061)
Additions to non-current assets (other than financial instruments and deferred 22,574 754 23,328 - 23,328 817 1,090 25,235
tax assets)
December 31, 2020
Oncology/Immunology
R&D Marketed Products Other
Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 127,637 9,957 137,594 5,728 143,322 231,234 349,562 724,118
Property, plant and equipment 22,554 454 23,008 - 23,008 688 474 24,170
Right-of-use assets 2,782 1,375 4,157 - 4,157 2,582 1,277 8,016
Leasehold land 13,121 - 13,121 - 13,121 - - 13,121
Goodwill - - - - - 3,307 - 3,307
Other intangible asset - - - - - 227 - 227
Investments in equity investees 385 - 385 - 385 139,120 - 139,505
Year Ended December 31, 2019
Oncology/Immunology
Marketed Other
R&D Products Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from external customers 16,026 - 16,026 10,766 26,792 178,098 - 204,890
Interest income 322 - 322 - 322 109 4,513 4,944
Equity in earnings of equity investees, net of tax 147 - 147 - 147 40,553 - 40,700
Segment operating (loss)/profit (111,518) (21,785) (133,303) 5,887 (127,416) 45,255 (17,214) (99,375)
Interest expense - - - - - - (1,030) (1,030)
Income tax expense (63) (197) (260) - (260) (939) (2,075) (3,274)
Net (loss)/income attributable to the Company (111,308) (21,926) (133,234) 5,872 (127,362) 41,488 (20,150) (106,024)
Depreciation/ amortization (4,448) (62) (4,510) - (4,510) (264) (168) (4,942)
Additions to non-current assets (other than financial instruments and deferred 8,602 1,308 9,910 - 9,910 2,772 148 12,830
tax assets)
Revenue from external customers is after elimination of inter-segment sales.
Sales between segments are carried out at mutually agreed terms. The amount
eliminated attributable to sales between PRC and U.S. and others under
Oncology/Immunology segment was US$46,891,000, US$19,230,000 and US$8,406,000
for the years ended December 31, 2021, 2020, and 2019 respectively.
There were three customers with aggregate revenue of US$147,111,000, which
accounted for over 10% of the Group's revenue for the year ended December 31,
2021. There were two customers with aggregate revenue of US$62,493,000, which
accounted for over 10% of the Group's revenue for the year ended December 31,
2020. There was one customer with revenue of US$27,343,000, which accounted
for over 10% of the Group's revenue for the year ended December 31, 2019.
Unallocated expenses mainly represent corporate expenses which include
corporate employee benefit expenses and the relevant share-based compensation
expenses. Unallocated assets mainly comprise cash and cash equivalents and
short-term investments.
A reconciliation of segment operating loss to net loss is as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Segment operating loss (154,531) (109,901) (99,375)
Interest expense (592) (787) (1,030)
Income tax expense (11,918) (4,829) (3,274)
Net loss (167,041) (115,517) (103,679)
28. Note to Consolidated Statements of Cash Flows
Reconciliation of net loss for the year to net cash used in operating
activities:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Net loss (167,041) (115,517) (103,679)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of finance costs 44 43 195
Depreciation and amortization 7,190 6,061 4,942
Gain from purchase of a subsidiary - - (17)
Loss on disposals of property, plant and equipment 70 85 17
Provision for excess and obsolete inventories (23) 65 316
Provision for credit losses (76) 77 (25)
Share-based compensation expense-share options 16,365 8,737 7,173
Share-based compensation expense-LTIP 25,625 10,905 4,419
Equity in earnings of equity investees, net of tax (60,617) (79,046) (40,700)
Dividends received from SHPL and HBYS 49,872 86,708 28,135
Changes in right-of-use assets (3,727) (2,197) 224
Fair value loss on Warrant 12,548 - -
Gain from disposal of HBYS (121,310) - -
Unrealized currency translation (gain)/loss (2,505) (6,149) 1,679
Changes in income tax balances 6,904 (1,111) 304
Changes in working capital
Accounts receivable (35,634) (4,693) (271)
Other receivables, prepayments and deposits (5,758) (9,602) (2,734)
Inventories (16,002) (3,623) (4,215)
Accounts payable 9,565 7,651 (1,664)
Other payables, accruals and advance receipts 66,224 37,472 25,953
Lease liabilities 3,079 2,258 (101)
Deferred revenue 11,071 (158) (709)
Other (87) (32) (154)
Total changes in working capital 32,458 29,273 16,105
Net cash used in operating activities (204,223) (62,066) (80,912)
29. Litigation
From time to time, the Group may become involved in litigation relating to
claims arising from the ordinary course of business. The Group believes that
there are currently no claims or actions pending against the Group, the
ultimate disposition of which could have a material adverse effect on the
Group's results of operations, financial position or cash flows. However,
litigation is subject to inherent uncertainties and the Group's view of these
matters may change in the future. When an unfavorable outcome occurs, there
exists the possibility of a material adverse impact on the Group's financial
position and results of operations for the periods in which the unfavorable
outcome occurs, and potentially in future periods.
On May 17, 2019, Luye Pharma Hong Kong Ltd. ("Luye") issued a notice to the
Group purporting to terminate a distribution agreement that granted the Group
exclusive commercial rights to Seroquel in the PRC for failure to meet a
pre-specified target. The Group disagrees with this assertion and believes
that Luye have no basis for termination. As a result, the Group commenced
legal proceedings in 2019 in order to seek damages. On October 21, 2021 (and
further updated in December 2021), the Group was awarded an amount of RMB253.2
million (equivalent to US$39.6 million) with interest of 5.5% per annum from
the date of the award until payment and recovery of costs of US$2.2 million
("Award"). Luye is still pursuing further legal proceedings and no Award
amounts have been received as at the issuance date of these consolidated
financial statements. Hence no Award amounts have been recognized and no
adjustment has been made to Seroquel-related balances as at December 31, 2021.
Such Seroquel-related balances include accounts receivable, long-term
prepayment, accounts payable and other payables of US$1.2 million, US$0.7
million, US$1.0 million and US$1.3 million respectively.
30. Restricted Net Assets
Relevant PRC laws and regulations permit payments of dividends by the
Company's subsidiaries in the PRC only out of their retained earnings, if any,
as determined in accordance with PRC accounting standards and regulations. In
addition, the Company's subsidiaries in the PRC are required to make certain
appropriations of net after-tax profits or increases in net assets to the
statutory surplus fund prior to payment of any dividends. In addition,
registered share capital and capital reserve accounts are restricted from
withdrawal in the PRC, up to the amount of net assets held in each subsidiary.
As a result of these and other restrictions under PRC laws and regulations,
the Company's subsidiaries in the PRC are restricted in their ability to
transfer their net assets to the Group in terms of cash dividends, loans or
advances, with restricted portions amounting to US$0.1 million and US$0.2
million as at December 31, 2021 and 2020 respectively, which excludes the
Company's subsidiaries with a shareholders' deficit. Even though the Group
currently does not require any such dividends, loans or advances from the PRC
subsidiaries, for working capital and other funding purposes, the Group may in
the future require additional cash resources from the Company's subsidiaries
in the PRC due to changes in business conditions, to fund future acquisitions
and development, or merely to declare and pay dividends to make distributions
to shareholders.
In addition, the Group has certain investments in equity investees in the PRC,
where the Group's equity in undistributed earnings amounted to US$54.4 million
and US$99.9 million as at December 31, 2021 and 2020 respectively.
30. Additional Information: Company Balance Sheets (Parent Company Only)
December 31,
Note 2021 2020
(in US$'000)
Assets
Current assets
Cash and cash equivalents 979 21
Short-term investments 55,128 -
Other receivables, prepayments and deposits 934 1,120
Total current assets 57,041 1,141
Investments in subsidiaries 972,831 506,150
Deferred issuance costs - 1,171
Total assets 1,029,872 508,462
Liabilities and shareholders' equity
Current liabilities
Other payables, accruals and advance receipts 42,952 24,253
Income tax payable 16 93
Total current liabilities 42,968 24,346
Other non-current liabilities 11 -
Total liabilities 42,979 24,346
Commitments and contingencies 16
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000 shares authorized; 864,530,850 17 86,453 72,772
and 727,722,215 shares issued at December 31, 2021 and 2020 respectively
Additional paid-in capital 1,505,196 822,458
Accumulated losses (610,328) (415,591)
Accumulated other comprehensive income 5,572 4,477
Total Company's shareholders' equity 986,893 484,116
Total liabilities and shareholders' equity 1,029,872 508,462
31. Subsequent Events
The Group evaluated subsequent events through March 3, 2022, which is the date
when the consolidated financial statements were issued.
In February 2022, a US$15 million milestone payment was triggered and
receivable in relation to the initiation of the Phase III study for the
primary indication non-small cell lung cancer pursuant to the AZ Agreement.
32. Dividends
No dividend has been paid or declared by the Company since its incorporation.
33. Directors' Remuneration
Directors' remuneration disclosed pursuant to the Listing Rules, Section
383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of
the Companies (Disclosure of Information about Benefits of Directors)
Regulation, is as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Fees: 883 848 848
Other remuneration
Salaries, allowances and benefits in kind 1,160 1,093 1,001
Pension contributions 93 89 79
Performance related bonuses 2,245 2,005 2,042
Share-based compensation expenses (note) 5,553 3,336 1,911
9,051 6,523 5,033
9,934 7,371 5,881
Note: During the years ended December 31, 2021, 2020 and 2019, certain
directors were granted share options and LTIP awards in respect of their
services to the Group, under the share option schemes and LTIP of the Company,
further details of which are set out in Note 18. The share-based compensation
expenses were recognized in the consolidated statements of operations during
the years ended December 31, 2021, 2020 and 2019.
(i) Independent non-executive directors
The fees paid to independent non-executive directors were as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Paul Carter 117 117 117
Karen Ferrante 103 103 103
Graeme Jack 111 104 104
Tony Mok 99 84 84
430 408 408
The share-based compensation expenses of the independent non-executive
directors were as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Paul Carter 91 73 -
Karen Ferrante 91 73 -
Graeme Jack 91 73 -
Tony Mok 91 73 -
364 292 -
There were no other remunerations payable to independent non-executive
directors during the years ended December 31, 2021, 2020 and 2019.
(ii) Executive directors and non-executive directors
Year Ended December 31, 2021
Fees Salaries, allowances and benefits in kind Pension contributions Performance related bonuses Share-based compensation Total
(in US$'000)
Executive directors
Simon To 85 - - - 92 177
Christian Hogg 77 420 30 1,000 2,246 3,773
Johnny Cheng 72 328 28 410 733 1,571
Wei-guo Su 75 412 35 835 1,934 3,291
309 1,160 93 2,245 5,005 8,812
Non-executive directors
Dan Eldar 70 - - - 92 162
Edith Shih 74 - - - 92 166
144 - - - 184 328
453 1,160 93 2,245 5,189 9,140
Year Ended December 31, 2020
Fees Salaries, allowances and benefits in kind Pension contributions Performance related bonuses Share-based compensation Total
(in US$'000)
Executive directors
Simon To 80 - - - 73 153
Christian Hogg 75 411 30 897 1,012 2,425
Johnny Cheng 70 320 27 372 341 1,130
Wei-guo Su 75 362 32 736 1,472 2,677
300 1,093 89 2,005 2,898 6,385
Non-executive directors
Dan Eldar 70 - - - 73 143
Edith Shih 70 - - - 73 143
140 - - - 146 286
440 1,093 89 2,005 3,044 6,671
Year Ended December 31, 2019
Fees Salaries, allowances and benefits in kind Pension contributions Performance related bonuses Share-based compensation Total
(in US$'000)
Executive directors
Simon To 80 - - - - 80
Christian Hogg 75 401 29 936 399 1,840
Johnny Cheng 70 309 26 365 155 925
Wei-guo Su 75 291 24 741 1,357 2,488
300 1,001 79 2,042 1,911 5,333
Non-executive directors
Dan Eldar 70 - - - - 70
Edith Shih 70 - - - - 70
140 - - - - 140
440 1,001 79 2,042 1,911 5,473
34. Five Highest-Paid Employees
The five highest-paid employees during years ended December 31, 2021, 2020 and
2019 included the following number of directors and non-directors:
Year Ended December 31,
2021 2020 2019
Directors 3 3 3
Non-directors 2 2 2
5 5 5
Details of the remuneration for the years ended December 31, 2021, 2020 and
2019 of the five highest-paid employees who are non-directors (the
"Non-director Individuals") were as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Salaries, allowances and benefits in kind 859 715 643
Pension contributions 52 48 36
Performance related bonuses 802 735 511
Share-based compensation expenses (note) 1,465 1,104 953
3,178 2,602 2,143
Note: During the years ended December 31, 2021, 2020 and 2019, the
Non-director Individuals were granted share options and LTIP awards in respect
of their services to the Group, under the share option schemes and LTIP of the
Company, further details of which are set out in Note 18. The share-based
compensation expenses were recognized in the consolidated statements of
operations during the years ended December 31, 2021, 2020 and 2019.
The number of Non-director Individuals whose remuneration fell within the
following bands is as follows:
Year Ended December 31,
2021 2020 2019
HK$7,500,000 to HK$8,000,000 - - 1
HK$9,000,000 to HK$9,500,000 - - 1
HK$10,000,000 to HK$10,500,000 - 2 -
HK$12,000,000 to HK$12,500,000 1 - -
HK$12,500,000 to HK$13,000,000 1 - -
2 2 2
During the years ended December 31, 2021, 2020 and 2019, no remuneration was
paid by the Group to any directors or Non-director Individuals as an
inducement to join the Group or as compensation for loss of office.
Additionally, none of the directors or Non-director Individuals have waived
any remuneration during the years ended December 31, 2021, 2020 and 2019.
35. Reconciliation between U.S. GAAP and International Financial Reporting Standards
These consolidated financial statements are prepared in accordance with U.S.
GAAP, which differ in certain respects from International Financial Reporting
Standards ("IFRS"). The effects of material differences prepared under U.S.
GAAP and IFRS are as follows:
(i) Reconciliation of consolidated statements of operations
Year Ended December 31, 2021
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Capitalization of rights (note (c)) Divestment of an equity investee (note (d))
(note (b))
(in US$'000)
Costs of goods-third parties (229,448) 40 - - - (229,408)
Research and development expenses (299,086) 23 - 11,111 - (287,952)
Selling expenses (37,827) 53 - - - (37,774)
Administrative expenses (89,298) 161 (163) - - (89,300)
Total operating expenses (684,445) 277 (163) 11,111 - (673,220)
Gain on divestment of an equity investee 121,310 - - - 11,266 132,576
Interest expense (592) (400) - - - (992)
Other expense (12,643) 9 - - - (12,634)
Total other income/(expense) (8,733) (391) - - - (9,124)
Loss before income taxes and equity in earnings of equity investees (215,740) (114) (163) 11,111 11,266 (193,640)
Income tax expense (11,918) - - - 370 (11,548)
Equity in earnings of equity investees, net of tax 60,617 (1) - - (11,636) 48,980
Net loss (167,041) (115) (163) 11,111 - (156,208)
Less: Net income attributable to non-controlling interests (27,607) (2) - (27) - (27,636)
Net loss attributable to the Company (194,648) (117) (163) 11,084 - (183,844)
Year Ended December 31, 2020
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Capitalization of rights (note (c)) Divestment of an equity investee (note (d))
(note (b))
(in US$'000)
Costs of goods-third parties (178,828) 29 - - - (178,799)
Research and development expenses (174,776) 18 - - - (174,758)
Selling expenses (11,334) 51 - - - (11,283)
Administrative expenses (50,015) 132 860 - - (49,023)
Total operating expenses (424,644) 230 860 - - (423,554)
Interest expense (787) (237) - - - (1,024)
Other expense (115) 15 - - - (100)
Total other income/(expense) 6,934 (222) - - - 6,712
Loss before income taxes and equity in earnings of equity investees (189,734) 8 860 - - (188,866)
Equity in earnings of equity investees, net of tax 79,046 4 - - - 79,050
Net loss (115,517) 12 860 - - (114,645)
Less: Net income attributable to non-controlling interests (10,213) 17 - - - (10,196)
Net loss attributable to the Company (125,730) 29 860 - - (124,841)
Year Ended December 31, 2019
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Capitalization of rights (note (c)) Divestment of an equity investee (note (d))
(note (b))
(in US$'000)
Research and development expenses (138,190) 31 - - - (138,159)
Administrative expenses (39,210) 192 - - - (39,018)
Total operating expenses (351,276) 223 - - - (351,053)
Interest expense (1,030) (275) - - - (1,305)
Other expense (488) 92 - - - (396)
Total other income/(expense) 5,281 (183) - - - 5,098
Loss before income taxes and equity in earnings of equity investees (141,105) 40 - - - (141,065)
Equity in earnings of equity investees, net of tax 40,700 (5) - - - 40,695
Net loss (103,679) 35 - - - (103,644)
Less: Net income attributable to non-controlling interests (2,345) 15 - - - (2,330)
Net loss attributable to the Company (106,024) 50 - - - (105,974)
(ii) Reconciliation of consolidated balance sheets
December 31, 2021
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Capitalization of rights Divestment of an equity investee (note (d)) LTIP classification (note (e))
(note (b)) (note (c))
(in US$'000)
Right-of-use assets 11,879 (257) - - - - 11,622
Investments in equity investees 76,479 (24) - - - - 76,455
Other non-current assets 21,551 - - 11,296 - - 32,847
Total assets 1,372,661 (281) - 11,296 - - 1,383,676
Other payables, accruals and advance receipts 210,839 - - - - (12,836) 198,003
Total current liabilities 311,658 - - - - (12,836) 298,822
Total liabilities 333,147 - - - - (12,836) 320,311
Additional paid-in capital 1,505,196 - (697) - - 12,836 1,517,335
Accumulated losses (610,328) (233) 697 11,084 - - (598,780)
Accumulated other comprehensive income 5,572 (7) - 185 - - 5,750
Total Company's shareholders' equity 986,893 (240) - 11,269 - 12,836 1,010,758
Non-controlling interests 52,621 (41) - 27 - - 52,607
Total shareholders' equity 1,039,514 (281) - 11,296 - 12,836 1,063,365
December 31, 2020
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Capitalization of rights Divestment of an equity investee (note (d)) LTIP classification (note (e))
(note (b)) (note (c))
(in US$'000)
Right-of-use assets 8,016 (140) - - - - 7,876
Investments in equity investees 139,505 (22) - - - - 139,483
Other non-current assets 20,172 - 860 - - - 21,032
Total assets 724,118 (162) 860 - - - 724,816
Other payables, accruals and advance receipts 121,283 - - - - (7,089) 114,194
Total current liabilities 158,397 - - - - (7,089) 151,308
Total liabilities 205,169 - - - - (7,089) 198,080
Additional paid-in capital 822,458 - - - - 7,089 829,547
Accumulated losses (415,591) (116) 860 - - - (414,847)
Accumulated other comprehensive income 4,477 (4) - - - - 4,473
Total Company's shareholders' equity 484,116 (120) 860 - - 7,089 491,945
Non-controlling interests 34,833 (42) - - - - 34,791
Total shareholders' equity 518,949 (162) 860 - - 7,089 526,736
Notes:
(a) Lease amortization
Under U.S. GAAP, for operating leases, the amortization of right-of-use assets
and the interest expense element of lease liabilities are recorded together as
lease expenses, which results in a straight-line recognition effect in the
consolidated statements of operations.
Under IFRS, all leases are accounted for like finance leases where
right-of-use assets are generally depreciated on a straight-line basis while
lease liabilities are measured under the effective interest method, which
results in higher expenses at the beginning of the lease term and lower
expenses near the end of the lease term.
(b) Issuance costs
Under U.S. GAAP and IFRS, there are differences in the criteria for
capitalization of issuance costs incurred in the offering of equity
securities.
(c) Capitalization of development and commercial rights
Under U.S. GAAP, the acquired development and commercial rights do not meet
the capitalization criteria as further development is needed as of the
acquisition date and there is no alternative future use. Such rights are
considered as in-process research and development and were expensed to
research and development expense.
Under IFRS, the acquired development and commercial rights were capitalized to
intangible assets. The recognition criterion is always assumed to be met as
the price already reflects the probability that future economic benefits will
flow to the Group.
(d) Divestment of HBYS
Under U.S. GAAP, an equity method investment to be divested that does not
qualify for discontinued operations reporting would not qualify for
held-for-sale classification. The investment in HBYS was not presented as a
discontinued operation or as an asset classified as held-for-sale after the
signing of the SPA in March 2021 and therefore, it was accounted for under the
equity method until closing on September 28, 2021.
Under IFRS, an equity method investment may be classified as held-for-sale
even if the discontinued operations criteria are not met. The investment in
HBYS was not presented as a discontinued operation but was classified as
held-for-sale and therefore equity method accounting was discontinued in March
2021 on the initial classification as held-for-sale. Accordingly, the
reconciliation includes a classification difference in the consolidated
statement of operations between gain on divestment of an equity investee,
equity earnings of equity investees, net of tax and income tax expense.
(e) LTIP classification
Under U.S. GAAP, LTIP awards with performance conditions are classified as
liability-settled awards prior to the determination date as they settle in a
variable number of shares based on a determinable monetary amount, which is
determined upon the actual achievement of performance targets. After the
determination date, the LTIP awards are reclassified as equity-settled awards.
Under IFRS, LTIP awards are classified as equity-settled awards, both prior to
and after the determination date, as they are ultimately settled in ordinary
shares or the equivalent ADS of the Company instead of cash.
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