REG - Hutchmed China Ltd - Interim Results and Business Updates
01/08/2022 12:15
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RNS Number : 4613U Hutchmed (China) Limited 01 August 2022
HUTCHMED Reports 2022 Interim Results and Provides Business Updates
Oncology/Immunology revenues up 113% to $91.1 million, due to ELUNATE(®),
SULANDA(®) and ORPATHYS(®) growth
First presentation of SAVANNAH data showing 52% response rate and 9.6 month
duration of response in 2L+ post-TAGRISSO(®) NSCLC(1) patients with high
MET(2) levels and no prior chemotherapy
Initiated six new trials thus far in 2022 with a further six starting,
including with five new drug candidates
FRESCO-2 Phase III, our first global multi-regional clinical trial, on track
to read out in August 2022
Company to Host Interim Results Call & Webcast Today at 8 p.m. HKT / 1
p.m. BST / 8 a.m. EDT
Hong Kong, Shanghai & Florham Park, NJ - Monday, August 1, 2022: HUTCHMED
(China) Limited ("HUTCHMED (https://www.hutch-med.com/) ", the "Company" or
"we") (Nasdaq/AIM:HCM; HKEX:13), the innovative, commercial-stage
biopharmaceutical company, today reports its unaudited financial results and
provides updates on key clinical and commercial developments for the six
months ended June 30, 2022.
All amounts are expressed in U.S. dollars unless otherwise stated.
2022 INTERIM Results & Business Updates
"HUTCHMED has continued to make good progress in the last six months," said Mr
Simon To, Chairman of HUTCHMED.
"We have driven revenue growth in our innovative portfolio of marketed drugs.
With ELUNATE® for CRC3 and following last year's successful launches of
ORPATHYS® for MET-driven NSCLC and SULANDA® for epNETs4 and pNETs5, this
will be the first full year of product sales from three novel, in-house
discovered oncology products in China, with strong sales momentum. We have
also significantly expanded our in-house commercial team to drive growth. On
top of this, in June we announced that TAZVERIK® was approved for use in the
Hainan Pilot Zone, bringing the clinical benefits of a fourth product to
patients in China."
"Our experienced clinical team has also made progress in the first half of
this year. We have initiated a number of key early-stage trials and our
later-stage pipeline of on-going studies are also moving at a steady pace,
with promising new data from the SAVANNAH study of savolitinib combined with
osimertinib being presented in more detail in August. We believe that the
achievement of these milestones demonstrates the depth and potential of our
R&D6 pipeline, which is the core of our business and the foundation for
our growth in the years ahead."
"HUTCHMED continues to be well-financed, which positions us well to continue
delivering on our strategic objectives. We are a global biopharmaceutical
company developing high quality, novel oncology and immunology drug candidates
for patients across the world and under the leadership of Dr Weiguo Su, our
new Chief Executive Officer, I have great hope for the future."
Dr Weiguo Su said, "In HUTCHMED, I see a company with exciting science and a
first-in-class or differentiated, best-in-class pipeline of clinical-stage
candidates, each with substantial prospects for additional indications and
combinations, which is exceptional, particularly in the China biopharma
industry."
"After driving our innovation as Head of Research and Chief Scientific Officer
for the last 16 years, I was delighted to become the Chief Executive Officer
earlier this year and am very excited about the next chapter of our growth."
"There are several reasons which underline the opportunity in our future.
These include our expected ongoing growth of ORPATHYS®, SULANDA® and
ELUNATE® revenues in China, and FRESCO-2, our first global, multi-regional
clinical trial, which is due to read out later this month. While receiving a
Complete Response Letter for surufatinib from the U.S. FDA7 earlier this year
and our decision today to withdraw the EMA8 MAA9 are a adisappointment, it has
no impact on our global development strategy. We will continue to leverage our
solid balance sheet, strong commercial capability with extensive China
coverage that generates cash, pipeline of innovative products and world-class
people, as we work towards our goal of being a leading global
biopharmaceutical company."
I. COMMERCIAL OPERATIONS
· Total revenues increased 28% to $202.0 million in the first half
of 2022 (H1-21: $157.4m), driven by commercial progress on our three in-house
developed oncology drugs ELUNATE(®), SULANDA(®) and ORPATHYS(®);
· Oncology/Immunology consolidated revenues were up 113% to $91.1
million (H1-21: $42.9m);
· Continuing expansion of in-house oncology commercial organization
in China, which in the first half of 2022 numbered about 820 personnel (end
2021: ~630) covering around 3,000 oncology hospitals and around 30,000
oncology physicians;
· ELUNATE(®) (fruquintinib) in-market sales(10) in the first half
of 2022 increased 26% to $50.4 million (H1-21: $40.1m), reflecting its
expanding lead in market share, particularly in tier 2 and 3 cities;
· SULANDA(®) (surufatinib) in-market sales in the first half of
2022 of $13.6 million (H1-21: $8.0m), reflecting its first time NRDL(11)
inclusion which started in January 2022;
· ORPATHYS(®) (savolitinib) in-market sales in the first half of
2022 of $23.3 million (H1-21: nil) following its launch in the second half of
2021 through AstraZeneca's extensive oncology commercial organization. Rapid
initial self-pay uptake due to being the first-in-class selective MET
inhibitor in China;
· TAZVERIK(®) (tazemetostat) successfully launched in Hainan
province in China in June 2022; and
· Successful management of commercial operations despite challenges
of pandemic-related lockdowns, particularly in Shanghai in April and May 2022.
$'millions In-market Sales* Consolidated Revenues**
H1 2022 H1 2021 % Change H1 2022 H1 2021 % Change
Unaudited Unaudited
ELUNATE(®) $50.4 $40.1 26% $36.0 $29.8 21%
SULANDA(®) $13.6 $8.0 69% $13.6 $8.0 69%
ORPATHYS(®) $23.3 - - $13.8 - -
TAZVERIK(®) $0.1 - - $0.1 - -
Product Sales $87.4 $48.1 82% $63.5 $37.8 68%
Other R&D services income $12.6 $5.1 149%
Milestone payment $15.0 - -
Total Oncology/Immunology $91.1 $42.9 113%
* = For ELUNATE(®) and ORPATHYS(®), represents total sales to third parties
as provided by Lilly(12) and AstraZeneca, respectively;
** = For ELUNATE(®) and ORPATHYS(®), represents manufacturing fees,
commercial service fees and royalties paid by Lilly and AstraZeneca,
respectively, to HUTCHMED, and sales to other third parties invoiced by
HUTCHMED; for SULANDA(®) and TAZVERIK(®), represents the Company's sales of
the products to third parties.
II. REGULATORY UPDATES
China
· Received Breakthrough Therapy Designation in China for
sovleplenib (HMPL-523) in January 2022 for the treatment of ITP(13);
· Received approval for TAZVERIK(®) in the Hainan Boao Lecheng
International Medical Tourism Pilot Zone in May 2022 for the treatment of
certain patients with epithelioid sarcoma or follicular lymphoma; and
· Received Macau approvals for ELUNATE(®) and SULANDA(®), the
first drugs approved in the territory based on China NMPA(14) approval,
following regulatory updates in Macau.
U.S. and Europe
· Surufatinib U.S. FDA Complete Response Letter was received in
April 2022, after the NDA(15) filing was accepted in June 2021, following Fast
Track and Orphan Drug designations in 2020 and 2019, respectively;
o The letter indicates that a multi-regional clinical trial that
includes subjects more representative of the U.S. population and aligned with
current U.S. medical practice is required; and
o Pandemic-related issues concerning inspection access also
contributed to the FDA action.
· HUTCHMED has decided to withdraw the surufatinib MAA filed with
the EMA, following interactions with EMA reviewers which suggested that
there is a low probability of a positive opinion on the MAA;
o EMA indicated that the SANET studies were not representative of
patients and medical practice in the EU(16); and
o The requisite pre-approval on-site inspections are currently
subject to restrictions in China.
· Discussions on the path forward are ongoing with U.S. and EU
regulators.
III. CLINICAL DEVELOPMENT ACTIVITIES
Savolitinib (ORPATHYS(®) in China), a highly selective oral inhibitor of MET being developed broadly across MET-driven patient populations in lung, gastric and papillary renal cell carcinomas
Major milestones and data presentations for savolitinib in 2022:
· Presentation of the SAVANNAH global Phase II study (NCT03778229)
for the savolitinib plus TAGRISSO(®) combination in NSCLC patients harboring
EGFR(17) mutation and MET amplification or overexpression at WCLC(18) 2022;
o Results showed improved response rates with increasing levels of
MET aberration. Overall results are consistent with TATTON and ORCHARD global
studies, but demonstrate higher response, DoR(19) and PFS(20) among patients
with higher MET levels, particularly among those with no prior chemotherapy;
· Opened enrollment for SAFFRON, a global, pivotal Phase III study
for the savolitinib plus TAGRISSO(®) combination (NCT05261399). Enrolled
patients will have MET levels consistent with the higher MET level patient
groups in SAVANNAH and have had no prior chemotherapy; and
· Presented final Phase II OS(21) in patients with MET exon 14
skipping alteration NSCLC at ELCC(22) 2022 (NCT02897479).
Potential upcoming clinical and regulatory milestones for savolitinib:
· Initiate SOUND, a China Phase II study for the savolitinib plus
IMFINZI(®) combination in EGFR wild-type NSCLC patients with MET alterations
(NCT05374603).
Fruquintinib (ELUNATE(®) in China), a highly selective oral inhibitor of VEGFR(23) 1/2/3 designed to improve kinase selectivity to minimize off-target toxicity and thereby improve tolerability; approved and launched in China
Major milestones and data presentations for fruquintinib in 2022:
· Presented preliminary data from the U.S. Phase Ib monotherapy
study of fruquintinib in patients with refractory metastatic CRC (NCT03251378)
at the 2022 ASCO GI(24) Gastrointestinal Cancers Symposium; and
· Completed enrollment of the FRUTIGA China Phase III registration
study (NCT03223376) in about 700 advanced gastric cancer patients.
Potential upcoming clinical and regulatory milestones for fruquintinib:
· Report top-line results of the global Phase III FRESCO-2
registration trial (NCT04322539) in 691 refractory metastatic CRC patients,
recruited from 14 countries including U.S., EU, Japan and Australia, in August
2022 as the pre-specified number of OS events that triggers the primary
analysis has occurred;
· If FRESCO-2 is positive, HUTCHMED plans to initiate discussions
with regulatory authorities to apply for fruquintinib marketing authorization
with the U.S. FDA, the EMA and the Japanese PMDA(25) in the second half of
2022, with submissions targeted for completion in 2023; and
· Plan to initiate Phase III studies of fruquintinib plus PD-1
inhibitor TYVYT(®) combination in multiple indications in China.
Surufatinib (SULANDA(®) in China), an oral inhibitor of VEGFR, FGFR(26) and CSF-1R(27) designed to inhibit tumor angiogenesis and promote the body's immune response against tumor cells via tumor associated macrophage regulation; approved and launched in China
Major data presentation for surufatinib in 2022:
· Presented a pooled analysis of safety data from the SANET-p and
SANET-ep studies at the 2022 ASCO(28) annual meetings.
Potential upcoming clinical and regulatory milestones for surufatinib:
· Submit for presentation data from the Phase Ib/II global
combination study with tislelizumab at a scientific conference in 2023;
· Submit for presentation further Phase II data for the PD-1
inhibitor TUOYI(®) combination study in China for thyroid cancer, non-small
cell lung cancer and endometrial cancer cohorts at a scientific conference in
2023; and
· Complete bridging study in NET patients in Japan (NCT05077384) in
the first half of 2023 and discuss results with the Japanese PMDA.
Amdizalisib (HMPL-689), an investigative and highly selective oral inhibitor of PI3Kδ(29) designed to address the gastrointestinal and hepatotoxicity associated with currently approved and clinical-stage PI3Kδ inhibitors
Potential upcoming clinical and regulatory milestones for amdizalisib:
· Plan for additional Phase II studies with potential for
registration intent in China in additional relapsed/refractory lymphoma
indications;
· Initiate studies in combination with tazemetostat and other
anti-cancer therapies in China; and
· Complete recruitment of patients for two Phase II studies with
potential for registration in China for the treatment of follicular lymphoma
(with Breakthrough Therapy Designation) around the end of 2022 and marginal
zone lymphoma in the first half of 2023 (NCT04849351).
Sovleplenib (HMPL-523), an investigative and highly selective oral inhibitor of Syk(30), an important component of the Fc receptor and B-cell receptor signaling pathway, for the treatment of hematological malignancies and immune diseases
Potential upcoming clinical milestones for sovleplenib:
· Complete enrollment of the ESLIM-01 Phase III pivotal study in
primary ITP (NCT03951623) in China around year end, with readout in 2023;
· Initiate Phase I study in the U.S. in patients with ITP in 2023;
· Initiate Phase II Proof-of-Concept study in warm AIHA(31) in
China; and
· Initiate exploratory Phase II trial in patients with severe or
critical COVID-19 requiring hospitalization and supplemental oxygen, subject
to COVID-19 outbreak.
Tazemetostat (TAZVERIK(®) in the U.S., Japan and the Hainan Pilot Zone), a first-in-class, oral inhibitor of EZH2 licensed from Epizyme(32) for which HUTCHMED is collaborating to research, develop, manufacture and commercialize in Greater China
Major milestones and data presentations for tazemetostat in 2022:
· Initiated a bridging study in follicular lymphoma patients in
China for conditional registration based on U.S. approvals; and
· Epizyme presented updated data from the Phase Ib portion of the
global SYMPHONY-1 Phase III trial at ASCO (NCT04224493) of tazemetostat
combined with lenalidomide and rituximab (R²) in patients with relapsed or
refractory follicular lymphoma after at least one prior line of therapy.
Potential upcoming clinical and regulatory milestones for tazemetostat:
· Initiate the China portion of the global SYMPHONY-1 Phase III
trial (NCT04224493); and
· Initiate Phase II combination studies with amdizalisib and other
HUTCHMED assets.
HMPL-306, an investigative and highly selective oral inhibitor of IDH1/2(33) designed to address resistance to the currently marketed IDH inhibitors
Potential upcoming clinical and regulatory milestones for HMPL-306:
· Initiate dose expansion portion of the Phase I study in
hematological malignancies in China in early 2023; and
· Initiate indication specific dose expansion cohorts of a Phase I
study in the U.S. and Europe in patients with an IDH1 and/or IDH2 mutation in
mid-2023 (NCT04762602).
HMPL-760, an investigative, highly selective, third-generation oral inhibitor of BTK(34) with improved potency versus first generation BTK inhibitors against both wild type & C481S mutant enzymes
· Initiated China Phase I trial (NCT05190068) in patients with
advanced hematological malignancies in January 2022; and
· Initiating U.S. Phase I trial (NCT05176691) in patients with
advanced hematological malignancies in mid-2022.
HMPL-453, an investigative and highly selective oral inhibitor of FGFR 1/2/3
· Initiated combination studies with other anti-cancer therapies,
including chemotherapies or PD-1 antibodies, in China in January 2022
(NCT05173142).
HMPL-295, an investigative and highly selective oral inhibitor of ERK in the MAPK pathway (35) with the potential to address intrinsic or acquired resistance from upstream mechanisms such as RAS-RAF-MEK
· Continuing to enroll Phase I trial (NCT04908046) in patients with
advanced solid tumors in China.
HMPL-653, an investigative, oral, highly selective, and potent CSF-1R inhibitor designed to target CSF-1R driven tumors as a monotherapy or in combinations
· Initiated Phase I trial in China (NCT05190068) in patients with
advanced malignant solid tumors and tenosynovial giant cell tumors in January
2022.
HMPL-A83, an investigative, differentiated, red blood cell sparing CD47 monoclonal antibody
· Initiated Phase I trial in China (NCT05429008) in patients with
advanced malignant neoplasms in July 2022.
Inmagene collaboration update
· Phase I trial initiated in Australia for IMG-007, an
investigative, OX40 antagonistic monoclonal antibody designed to selectively
shut down OX40+ T cell function, thereby providing a treatment option for
pathological OX40+ T cell-mediated immune diseases such as atopic dermatitis,
in healthy volunteers and patients with severe atopic dermatitis in July 2022
(NCT05353972); and
· Phase I trial initiation imminent in healthy volunteers following
IND(36) clearance in the US for IMG-004, a reversible, non-covalent, highly
selective oral BTK inhibitor designed to target immunological diseases
(NCT05349097).
IV. MANUFACTURING
· Increased production of commercial supplies of ELUNATE(®),
SULANDA(®) and ORPATHYS(®) to meet demand;
· Initiated NDA enabling studies including registration stability
studies and process validation for amdizalisib and sovleplenib; and
· Continued construction of our new flagship Shanghai manufacturing
facility on schedule - this facility is designed to increase our novel drug
product manufacturing capacity by over five-fold. Equipment installation is
planned for late 2022, with Good Manufacturing Practice (GMP) compliance
targeted for late 2023.
V. OTHER VENTURES
Other Ventures include our profitable prescription drug marketing and
distribution platforms
· Other Ventures consolidated revenues fell 3% (-4% at CER(37)) to
$110.9 million (H1-21: $114.5m);
· SHPL(38) non-consolidated joint venture revenues grew by 18% (16%
at CER) to $212.4 million (H1-21: $180.4m); and
· Consolidated net income attributable to HUTCHMED from our Other
Ventures increased by 19% (16% at CER) to $35.4 million (H1-21: $29.8m,
excluding net income attributable to HUTCHMED of $11.5 million contributed
from HBYS(39) which was disposed in September 2021), which primarily
included net income contributed from SHPL of $33.6 million (H1-21: $28.6m).
VI. IMPACT OF COVID-19
COVID-19 had some impact on our research, clinical studies and our commercial
activities in the first half of 2022, particularly with respect to hospital
lockdowns, travel restrictions, and shipping difficulties. Sites in Shanghai
were particularly impacted during April and May. Measures were put in place to
minimize the impact of such restrictions to the extent possible, including
online patient follow-up and the retention of core research teams on-site to
maintain critical activities, with business returning to normal in June. We
will continue to closely monitor the evolving situation.
VII. SUSTAINABILITY
The Group is committed to the long-term sustainability of its businesses and
the communities in which we conduct business. In the first half of 2022, we
published 2021 Sustainability Report
(https://www.hutch-med.com/wp-content/uploads/2022/05/HCM-SusRpt-2021-EN.pdf)
of HUTCHMED, detailing our environmental, social and governance performance of
HUTCHMED during 2021, including our sustainability governance, stakeholder
engagement and materiality analysis, business ethics, environmental
performance, research and development, responsible commercialization, and
human capital management.
Five new sustainability-related policies and statements
(https://www.hutch-med.com/shareholder-information/corporate-governance) -
Sustainability Policy, Environmental Policy, Health and Safety Policy, Human
Rights Policy and Modern Slavery and Human Trafficking Statement - were
published along with the 2021 Sustainability Report, serving to demonstrate
our commitment in sustainability, enriched and more transparent disclosures,
as well as acting as an important gateway to communicate with our stakeholders
in all sustainability matters.
In the second half of 2022, we will continue our efforts in facilitating
discussions regarding relevant sustainability issues and opportunities,
including climate-related issues, and actively looking to set our own
sustainability targets and goals.
VIII. U.S. LISTING
The Holding Foreign Companies Accountable Act, or the Act, was signed into law
in December 2020. It provides that if the U.S. Securities and Exchange
Commission (SEC) determines that a U.S.-listed company has filed audit reports
issued by a registered public accounting firm that has not been subject to
inspection by the Public Company Accounting Oversight Board (PCAOB) for three
consecutive years beginning in 2021, the SEC shall prohibit such company's
shares or ADSs40 from being traded on a national securities exchange or in the
over-the-counter trading market in the U.S.
As had been expected, following its adoption of implementing rules pursuant to
the Act, the SEC named over 150 companies, including HUTCHMED, to its
conclusive list of issuers identified under these rules. Under the current
terms of the Act, the Company's ADSs will be delisted from the Nasdaq Stock
Market in early 2024, unless the Act is amended to exclude the Company or the
PCAOB is able to conduct a full inspection of the Company's auditor during the
required timeframe. In addition, legislation is being considered in the U.S.
to shorten the number of non-inspection years from three years to two. In the
case that such legislation becomes law, it will reduce the time period before
our ADSs could be delisted from the Nasdaq Stock Market and prohibited from
over-the-counter trading in the U.S. from 2024 to 2023.
This has had no impact on the Company's business operations. We continue to
monitor market developments and evaluate all strategic options, with the
appropriate counsel and guidance.
The Company's ADSs, each of which represents five ordinary shares, continue to
trade uninterrupted on the Nasdaq Global Select Market. Its ordinary shares
are also admitted for trading in London on the AIM market, and are primary
listed on HKEX41. The shares listed on HKEX and AIM are fully fungible with
the shares represented by the Company's ADSs.
INTERIM 2022 Financial Results
Cash, Cash Equivalents and Short-Term Investments were $826.2 million as of June 30, 2022 compared to $1,011.7 million as of December 31, 2021.
· Adjusted Group (non-GAAP(42)) net cash flows excluding financing
activities in the first half of 2022 were -$110.9 million (H1-21: -$63.1m)
mainly due to increased spending on Oncology/Immunology R&D and China
commercial operations; and
· Net cash used in financing activities in the first half of 2022
totaled $74.6 million (H1-21: net cash generated from financing activities of
$578.3m) mainly due to the repayments of bank borrowings and purchases of ADSs
by a trustee for the settlement of equity awards.
Revenues for the six months ended June 30, 2022 were $202.0 million compared to $157.4 million in the six months ended June 30, 2021.
· Oncology/Immunology consolidated revenues increased 113% (111% at
CER) to $91.1 million (H1-21: $42.9m) resulting from:
ELUNATE(®) revenues increased 21% to $36.0 million (H1-21: $29.8m) in
manufacturing revenues, promotion and marketing service revenues and
royalties, as our in-house sales team increased in-market sales 26% to $50.4
million (H1-21: $40.1m), as provided by Lilly;
SULANDA(®) revenues increased 69% to $13.6 million (H1-21: $8.0m), after
inclusion on the NRDL starting in January 2022;
ORPATHYS(®) revenues of $13.8 million (H1-21: nil), in manufacturing revenues
and royalties. AstraZeneca reported $23.3 million in-market sales (H1-21: nil)
of ORPATHYS(®) in first half of 2022;
TAZVERIK(®) revenues of $0.1 million following its successful launch in
Hainan in June 2022;
Milestone payment of $15.0 million (H1-21: nil), to us by AstraZeneca, was
triggered in February 2022 upon initiation of start-up activities for SAFFRON;
and
Other R&D services income of $12.6 million (H1-21: $5.1m), which were
primarily fees from AstraZeneca and Lilly for the management of development
activities in China.
· Other Ventures consolidated revenues decreased 3% (-4% at CER) to
$110.9 million (H1-21: $114.5m), mainly due to lower sales of consumer
products. This excludes the strong 18% (16% at CER) growth in non-consolidated
revenues at SHPL of $212.4 million (H1-21: $180.4m).
Net Expenses for the six months ended June 30, 2022 were $364.9 million compared to $259.8 million in the six months ended June 30, 2021.
· Cost of Revenues were $137.3 million (H1-21: $123.2m), the
majority of which were the cost of third-party prescription drug products
marketed through our profitable Other Ventures, as well as costs associated
with ELUNATE(®), including the provision of promotion and marketing services
to Lilly, and the costs for SULANDA(®) and ORPATHYS(®) which commenced
commercial sales in July 2021;
· R&D Expenses were $181.7 million (H1-21: $123.1m), which
increased mainly as a result of an expansion in the active development of our
novel oncology drug candidates. Our international clinical and regulatory
operations in the U.S. and Europe incurred expenses of $83.6 million (H1-21:
$59.3m), while R&D expenses in China were $98.1 million (H1-21: $63.8m);
· SG&A Expenses(43) were $79.8 million (H1-21: $54.8m), which
increased primarily due to higher staff costs and selling expenses to support
rapidly expanding operations. This included the scaling of a national oncology
commercial infrastructure in China and in the U.S.; and
· Other Items generated net income of $33.9 million (H1-21:
$41.3m), which decreased primarily due to a reduction in equity in earnings of
equity investees of $9.4 million after the divestiture of our interest in HBYS
in September 2021.
Net Loss attributable to HUTCHMED for the six months ended June 30, 2022 was $162.9 million compared to $102.4 million in the six months ended June 30, 2021.
· As a result, the net loss attributable to HUTCHMED in the first
half of 2022 was $0.19 per ordinary share / $0.96 per ADS, compared to net
loss attributable to HUTCHMED of $0.14 per ordinary share / $0.70 per ADS in
the six months ended June 30, 2021.
Financial Summary
Condensed Consolidated Balance Sheets Data
(in $'000)
As of June 30, As of December 31,
2022 2021
(Unaudited)
Assets
Cash and cash equivalents and short-term investments 826,200 1,011,700
Accounts receivable 77,078 83,580
Other current assets 118,959 116,796
Property, plant and equipment 44,059 41,275
Investments in equity investees 82,999 76,479
Other non-current assets 45,038 42,831
Total assets 1,194,333 1,372,661
Liabilities and shareholders' equity
Accounts payable 51,005 41,177
Other payables, accruals and advance receipts 233,606 210,839
Bank borrowings 418 26,905
Other liabilities 57,455 54,226
Total liabilities 342,484 333,147
Company's shareholders' equity 799,728 986,893
Non-controlling interests 52,121 52,621
Total liabilities and shareholders' equity 1,194,333 1,372,661
Condensed Consolidated Statements of Operations Data
(Unaudited, in $'000, except share and per share data)
Six Months Ended June 30,
2022 2021
Revenues:
Oncology/Immunology - Marketed Products 63,517 37,795
Oncology/Immunology - R&D 27,552 5,056
Oncology/Immunology consolidated revenues 91,069 42,851
Other Ventures 110,978 114,511
Total revenues 202,047 157,362
Operating expenses:
Costs of revenues (137,318) (123,249)
Research and development expenses (181,741) (123,050)
Selling and general administrative expenses (79,742) (54,797)
Total operating expenses (398,801) (301,096)
(196,754) (143,734)
Other (expense)/income, net (3,882) 3,287
Loss before income taxes and equity in earnings of equity (200,636) (140,447)
investees
Income tax benefit/(expense) 4,215 (1,859)
Equity in earnings of equity investees, net of tax 33,549 42,966
Net loss (162,872) (99,340)
Less: Net loss/(income) attributable to non-controlling interests 11 (3,057)
Net loss attributable to HUTCHMED (162,861) (102,397)
(0.19) (0.14)
Losses per share attributable to HUTCHMED - basic and diluted
(US$ per share)
Number of shares used in per share calculation - basic and diluted 849,283,553 729,239,181
(0.96) (0.70)
Losses per ADS attributable to HUTCHMED - basic and diluted
(US$ per ADS)
Number of ADSs used in per share calculation - basic and diluted 169,856,711 145,847,836
FINANCIAL GUIDANCE
We provide financial guidance for 2022 below reflecting expected revenue
growth of ELUNATE(®), SULANDA(®) and ORPATHYS(®) in China. We believe that
we remain on track to meet the 2022 guidance for Oncology/Immunology revenues
provided in the announcement of our 2021 full year results on March 3, 2022.
H1 2022 2022 Current Adjustments vs. Previous Guidance
Actual
Guidance
Oncology/Immunology consolidated revenues $91.1 million $160 - 190 million nil
Shareholders and investors should note that:
· we do not provide any guarantee that the statements contained in
the financial guidance will materialize or that the financial results
contained therein will be achieved or are likely to be achieved; and
· we have in the past revised our financial guidance and reference
should be made to any announcements published by us regarding any updates to
the financial guidance after the date of publication of this announcement.
Use of Non-GAAP Financial Measures and Reconciliation - References in this
announcement to adjusted Group net cash flows excluding financing activities
and financial measures reported at CER are based on non-GAAP financial
measures. Please see the "Use of Non-GAAP Financial Measures and
Reconciliation" below for further information relevant to the interpretation
of these financial measures and reconciliations of these financial measures to
the most comparable GAAP measures, respectively.
-----
Conference call and audio webcast presentation scheduled today at 8 p.m. HKT /
1 p.m. BST / 8 a.m. EDT - Investors may participate in the call as follows:
+852 3027 6500 (Hong Kong) / +44 20 3194 0569 (U.K.) / +1 646 722 4977
(U.S.), or access a live audio webcast
(https://apac.onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=69FE6258-C528-4E04-B9B3-891921D30A3E)
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 "55793362#."
-----
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 4,900
personnel across all its companies, at the center of which is a team of about
1,800 in oncology/immunology. Since inception it has advanced 13 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, +44 (20) 7886 2500
Panmure Gordon (UK) Limited
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," "best-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, that any approvals which are obtained will be obtained at any
particular time, or that the sales of products marketed or otherwise
commercialized by HUTCHMED and/or its collaboration partners (collectively,
"HUTCHMED's Products") 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 the utilization, market acceptance and commercial success of HUTCHMED's
Products after obtaining regulatory approval; competing drugs and product
candidates that may be superior to, or more cost effective than HUTCHMED's
Products and drug candidates; the impact of studies (whether conducted by
HUTCHMED or others and whether mandated or voluntary) or recommendations and
guidelines from governmental authorities and other third parties on the
commercial success of HUTCHMED's Products and candidates in development; the
ability of HUTCHMED to manufacture and manage supply chains for multiple
products and product candidates; the availability and extent of reimbursement
of HUTCHMED's Products from third-party payers, including private payer
healthcare and insurance programs and government insurance programs; coverage
and reimbursement determinations by such payers and new policies and
procedures adopted by such payers; the costs of developing, producing and
selling HUTCHMED's Products; the ability of HUTCHMED to meet any of its
financial projections or guidance and changes to the assumptions underlying
those projections or guidance; 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 960 scientists and staff (December
31, 2021: ~820), and an in-house oncology commercial organization of about 820
staff (December 31, 2021: ~630).
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 and a fourth, tazemetostat, has been
approved and launched in Hainan Pilot Zone.
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 the first half of 2022, approximately 14,000
(H1-21: approximately 10,000) new patients were treated with ELUNATE(®) in
China resulting in in-market sales of $50.4 million, up 26% versus H1-21
($40.1 million). ELUNATE(®) surpassed regorafenib in prescription numbers for
late stage CRC at the end of 2021 and that lead has continued to grow in the
first half of 2022.
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 manufacturing fees, service fees
and royalties paid to us by Lilly. In the first half of 2022, we consolidated
$36.0 million in revenue for ELUNATE(®), equal to 71.4% of in-market sales.
Following negotiations with the China NHSA(44), 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.
In January 2022, ELUNATE(®) was approved in the Macau Special Administrative
Region, our first drug to be approved in the territory and the first based on
NMPA approval, following the latest update to the Macau provisions on new drug
importation which allow drugs approved in one or more specified jurisdictions
to be authorized for use in Macau.
Surufatinib (SULANDA(®) in China)
SULANDA(®) was launched in China in 2021 for the treatment of all advanced
NETs(45) 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(®).
Despite these access programs, duration of treatment was often affected by the
economic constraints of patients. 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 the first half of
2022 represented approximately 15-20% of the 2021 self-pay price.
As a result of inclusion in the NRDL and our continued marketing activities,
patient access to SULANDA(®), as well as duration of treatment, have been
expanding with total sales in the first half of 2022 increasing by 69% to
$13.6 million (H1-21: $8.0 million). It should be noted that the first half of
2021 in-market sales included normal pipeline fill behind the initial launch
of SULANDA(®) whereas 2022 figures represent consumption sales. In the first
half of 2022, approximately 7,500 new patients were treated with SULANDA(®),
representing approximately 3.8 times the approximately 2,000 new patients in
the first half of 2021. In June 2022, approximately 1,300 continuing patients
were also treated.
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(®).
In April 2022, SULANDA(®) was approved in the Macau Special Administrative
Region.
Savolitinib (ORPATHYS(®) in China)
In late June 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.
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® grew significantly in the first half of 2022. In-market sales
of ORPATHYS® were $23.3 million (H1-21: nil) resulting in our consolidation
of $13.8 million (H1-21: nil) in revenues from manufacturing fees and
royalties in the first half of 2022.
Market understanding of the need for MET testing has improved significantly,
with ORPATHYS®'s brand share more than doubling since the end of 2021 in the
rapidly growing targeted therapy area. In the National Health Commission's
Treatment Guidelines for Primary Lung Cancer 2022 and the China Medical
Association Oncology Committee Lung Cancer Group's China Medical Association
Guideline for Clinical Diagnosis and Treatment of Lung Cancer, ORPATHYS®
was identified as the only targeted therapy recommended for MET exon 14
patients, while similar guideline from CSCO46 also recommended ORPATHYS® as
the standard of care for such patients.
AstraZeneca and HUTCHMED are preparing to begin negotiations with the China
NMPA for potential inclusion in the 2023 NRDL.
ORPATHYS® is the first and only selective MET inhibitor on the market in
China. 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(47) and gastric cancer clinical trials with over 1,500 patients to date,
both as a monotherapy and in combinations.
In February 2022, a $15 million milestone payment from AstraZeneca was
triggered by the initiation of start-up activities for the SAFFRON study. In
total, AstraZeneca has 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 in 2021. Final OS analysis at ELCC 2022 NCT02897479
Savolitinib monotherapy MET exon 14 skipping alterations China III Confirmatory Ongoing since 2021 NCT04923945
Savolitinib + IMFINZI(®) SOUND: MET-driven, EGFR wild type China II Initiating NCT05374603
Savolitinib + TAGRISSO(®) SAVANNAH: 2L/3L EGFRm+(48); TAGRISSO(®) refractory; MET+ Global II Registration-intent Ongoing. Data that supported Phase IIIs at WCLC 2022 NCT03778229
Savolitinib + TAGRISSO(®) SAFFRON: 2L/3L EGFRm+; TAGRISSO(®) refractory; MET+ Global III Enrollment open NCT05261399
Savolitinib + TAGRISSO(®) SACHI: 2L EGFR TKI(49) refractory NSCLC; MET+ China III Ongoing since 2021 NCT05015608
Savolitinib + TAGRISSO(®) SANOVO: Naïve patients with EGFRm & MET+ China III Ongoing since 2021 NCT05009836
Update on MET altered, EGFR wild type NSCLC in China - The June 2021
monotherapy approval by the NMPA was based on positive results from a Phase II
trial conducted in China in patients with NSCLC with MET exon 14 skipping
alterations (NCT02897479). Final OS and subgroup analysis was presented for
this trial at ELCC 2022. The updated results further confirmed the favorable
benefit of savolitinib in these patients and in each subgroup and the
acceptable safety profile. In addition to this trial and the confirmatory
study in this patient population (NCT04923945), the SOUND Phase II trial is an
open-label, interventional, multicenter, exploratory Phase II study to
evaluate savolitinib combined with IMFINZI® in EGFR/ALK/ROS1 wild-type,
locally advanced or metastatic NSCLC patients with MET aberrations
(NCT05374603). The primary endpoint is PFS.
Update on combination therapies in EGFR TKI-resistant NSCLC - MET-aberration
is a major mechanism for acquired resistance to both first/second-generation
EGFR TKIs as well as third-generation EGFR TKIs like TAGRISSO®. Among
patients who experience disease progression post-TAGRISSO® treatment,
approximately 15-50% present with MET aberration. The prevalence of MET
amplification and overexpression may differ depending on the sample type,
detection method and assay cut-off used. Savolitinib has been studied
extensively in these patients in the TATTON and SAVANNAH studies. The
encouraging 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 SAFFRON study is currently open for enrollment.
SAVANNAH (NCT03778229) - This global Phase II study in patients who have
progressed following TAGRISSO® due to MET amplification or overexpression has
three dose cohorts of savolitinib combined with TAGRISSO®. In addition to
continuing TAGRISSO® treatment, patients received savolitinib 300mg QD, 300mg
BID, or 600mg QD. 294 patients are enrolled in the study. We continue to
evaluate the possibility of using the SAVANNAH study as the basis for U.S.
accelerated approval.
The first presentation of results will be at the upcoming 2022 WCLC. These
results are based on an analysis of 193 efficacy evaluable patients who
received savolitinib 300mg once daily plus TAGRISSO® 80mg once daily at data
cut-off date of August 27, 2021. Qualifying MET aberrations are FISH5+50 or
IHC50+51. Importantly, additional analysis using a higher cut-off level of MET
aberration are presented. The higher cut-off levels for MET aberration are
FISH10+52 and/or IHC90+53. The prevalence of this higher cut-off levels of MET
aberration was 34% of patients centrally tested for enrollment in this study
vs. 62% at the lower, qualifying cut-off level.
Results showed a trend toward improved response rates with increasing level of
MET aberration. Across all patients in this analysis, ORR54 was 32% [95% CI:
26-39%], median DoR was 8.3 months [95% CI: 6.9-9.7 months], and median PFS
was 5.3 months [95% CI: 4.2-5.8 months]. These results are consistent with the
TATTON and ORCHARD global studies.
Among the 108 SAVANNAH patients who met the criteria for higher cut-off levels
of MET aberration, ORR was 49% [95% CI: 39-59%], median DoR was 9.3 months
[95% CI: 7.6-10.6 months], and median PFS was 7.1 months [95% CI: 5.3-8.0
months]. Among the 87 patients who did not receive prior chemotherapy, ORR was
52% [95% CI: 41-63%], median DoR was 9.6 months [95% CI: 7.6-14.9 months], and
median PFS was 7.2 months [95% CI: 4.7-9.2 months]. The safety profile of
savolitinib plus TAGRISSO® was consistent with the known profiles of the
combination and each treatment alone.
SAFFRON (NCT05261399) - Findings based on SAVANNAH and the TATTON study
supported the initiation of the SAFFRON global Phase III study in patients
with EGFR-mutated, MET-driven, locally advanced or metastatic NSCLC whose
disease progressed on first- or second-line treatment with TAGRISSO® as the
most recent therapy, with no prior chemotherapy in the metastatic setting
allowed. Patients will be prospectively selected for the higher level of MET
aberration of FISH10+ and/or IHC90+. The SAFFRON study will evaluate the
efficacy and safety of savolitinib in combination with TAGRISSO® compared to
pemetrexed plus platinum doublet-chemotherapy, the current standard-of-care
treatment in this setting. The primary endpoint of the study is PFS.
Two registrational studies are ongoing in China in EGFR mutated NSCLC with MET
aberrations: the SANOVO (NCT05009836) study in treatment naïve patients, and
SACHI (NCT05015608) study in patients whose disease progressed following
treatment with any first-line EGFR TKI.
Savolitinib - Kidney cancer:
MET is a key genetic driver in papillary RCC(55), 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 study 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 since 2021 NCT05043090
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.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Savolitinib 2L+ gastric cancer with MET amplification. two-stage, single-arm study China II registrational Ongoing since 2021 NCT04923932
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 combination
with other agents.
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 HCC56 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-2: metastatic CRC U.S. / Europe / Japan / Aus. III Fully enrolled. Results expected in Aug 2022 NCT04322539
Fruquintinib monotherapy CRC; TN(57) & HR+(58)/Her2-(59) breast cancer U.S. Ib Ongoing; CRC data at ASCO GI 2022 NCT03251378
Fruquintinib + tislelizumab (PD-1) TN breast cancer, endometrial cancer, MSS(60)-CRC U.S. Ib/II Ongoing since 2021 NCT04577963
Fruquintinib monotherapy FRESCO: ≥3L CRC; chemotherapy refractory China III Approved and launched in 2018 NCT02314819
Fruquintinib + paclitaxel FRUTIGA: 2L gastric cancer China III Fully enrolled NCT03223376
Fruquintinib + TYVYT(®) (PD-1) CRC China II Fully enrolled; data at ASCO 2021 NCT04179084
Fruquintinib + TYVYT(®) (PD-1) HCC China Ib/II Fully enrolled; data at CSCO 2021. Ph III in planning NCT03903705
Fruquintinib + TYVYT(®) (PD-1) Endometrial cancer China II registration-intent Ongoing since 2021; Ib data at CSCO 2021 NCT03903705
Fruquintinib + TYVYT(®) (PD-1) RCC China Ib/II Fully enrolled; data at CSCO 2021. Ph III in planning NCT03903705
Fruquintinib + TYVYT(®) (PD-1) Gastrointestinal tumors China Ib/II Fully enrolled NCT03903705
Fruquintinib + TYVYT(®) (PD-1) NSCLC China Ib/II Fully enrolled NCT03903705
Fruquintinib + TYVYT(®) (PD-1) Cervical cancer China Ib/II Fully enrolled NCT03903705
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 patients with refractory metastatic CRC reached its enrollment
goal in December 2021. It recruited 691 patients from approximately 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 August 2022 as
the pre-specified number of OS events that trigger the primary analysis has
accrued. If positive, HUTCHMED would simultaneously initiate plans to apply
for marketing authorization of fruquintinib with 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(61) was
68.3% and the median OS was 10.7 months [95% CI: 6.7-11.7]. In patients who
had not received LONSURF(®) or STIVARGA(®), the DCR was 57.5% and the median
OS was 9.3 months [95% CI: 5.2-NR(62)]. 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,
enrolled approximately 700 patients in July 2022. Its co-primary endpoints are
PFS and OS.
Fruquintinib - Combinations with checkpoint inhibitors:
Advanced endometrial cancer registration-intent cohort of TYVYT(®)
combination (NCT03903705) - 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, data in
this endometrial cancer cohort is encouraging.
As of the data cutoff date of August 31, 2021, 35 patients were enrolled,
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 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.
We have agreed with the NMPA to expand this cohort into a single-arm
registrational Phase II study. The cohort is now targeting to enroll over 130
patients.
We are currently evaluating the merits of and planning further registration
studies based on other cohorts, such as HCC and RCC.
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, advanced endometrial cancer or
MSS-CRC. The safety lead-in phase of the U.S. study has been completed, to be
followed by the dose-expansion phase shortly. The Phase II study in China and
Korea for fruquintinib in combination with tislelizumab 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, we support an investigator
initiated trial program for fruquintinib, and there are about 40 of such
trials ongoing in various solid tumor settings.
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. HUTCHMED 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 NETs U.S. Ib FDA Complete Response Letter April 2022; updated Ib data at ASCO 2021 NCT02549937
Surufatinib monotherapy NETs Europe II MAA withdrawn NCT04579679
Surufatinib monotherapy NETs Japan Bridging Ongoing since 2021. Reg-enabling study NCT05077384
Surufatinib + tislelizumab (PD-1) Solid tumors U.S. / Europe Ib/II Ongoing since 2021 NCT04579757
Surufatinib monotherapy SANET-ep: epNET China III Approved & launched in 2021 NCT02588170
Surufatinib monotherapy SANET-p: pNET China III Approved & launched; pooled analysis at ASCO 2022 NCT02589821
Surufatinib + TUOYI(®) (PD-1) SURTORI-01: 2L NEC(63) China III Ongoing since 2021 NCT05015621
Surufatinib + TUOYI(®) (PD-1) NENs(64) China II Fully enrolled; data at ASCO 2021 & ESMO(65) IO(66) 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) Biliary tract cancer China II Fully enrolled NCT04169672
Surufatinib + TUOYI(®) (PD-1) Gastric cancer China II Fully enrolled; data updated at ESMO IO 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) Thyroid cancer China II Fully enrolled NCT04169672
Surufatinib + TUOYI(®) (PD-1) SCLC(67) China II Fully enrolled; data at ESMO IO 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) Soft tissue sarcoma China II Fully enrolled NCT04169672
Surufatinib + TUOYI(®) (PD-1) Endometrial cancer China II Fully enrolled NCT04169672
Surufatinib + TUOYI(®) (PD-1) Esophageal cancer China II Fully enrolled; data at ESMO IO 2021 NCT04169672
Surufatinib + TUOYI(®) (PD-1) NSCLC China II Fully enrolled NCT04169672
Surufatinib + PD-1/PD-L1 SCLC China II In planning N/A
Surufatinib - monotherapy in NET updates:
U.S. NDA and EMA MAA - Surufatinib received FDA Fast Track Designations in
April 2020 for the treatment of pNETs and epNETs. Orphan Drug Designation for
pNETs was granted in November 2019. In a May 2020 pre-NDA meeting, we reached
an agreement with the FDA that the two positive Phase III studies of
surufatinib in patients with pNETs and epNETs in China, along with the
bridging trial in the U.S. could form the basis to support a U.S. NDA
submission. The FDA accepted the filing of the NDA in June 2021. However, in
April 2022, we received a Complete Response Letter from the FDA regarding the
NDA for surufatinib for the treatment of pNETs and epNETs. FDA determined that
the current data package, based on two positive Phase III trials in China and
one bridging study in the U.S., does not support an approval in the U.S. at
this time.
The FDA evaluated the applicability of the SANET studies data generated in one
country to U.S. patients and U.S. medical practice. The Complete Response
Letter stated that the FDA will require a multiregional clinical trial (MRCT)
that includes subjects more representative of the U.S. patient population and
aligned to current U.S. medical practice. In addition, COVID-19 related issues
concerning inspection scheduling and access contributed to the FDA action.
This action by the FDA is not related to any safety issues with surufatinib.
We also submitted an EMA MAA for surufatinib using the same data package,
which was validated and accepted in July 2021. However, on August 1, 2022,
HUTCHMED informed the EMA of its decision to withdraw the MAA. This decision
was reached following interactions with the EMA which suggested that there is
a low probability of a positive opinion on the MAA. The EMA indicated that the
SANET studies were not representative of patients and medical practice in
Europe. The Company believes that their critiques on aspects of the design and
conduct of the trials are unlikely to be resolved by re-analysis of the
existing data set. Additionally, pre-approval on-site inspections are required
to confirm Good Manufacturing Practice and Good Clinical Practice. Such
inspections are currently subject to restrictions due to COVID-containment
measures and security requirements for foreign visitors in China.
We will continue to work with regulators to explore the feasibility of
conducting a MRCT that would support approval in U.S. and Europe.
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 existing data package. The trial was initiated in
September 2021 and results are expected in the first half of 2023. We plan to
engage with the PMDA when these results are available.
Surufatinib - combination therapy with checkpoint inhibitors:
A Phase II China study (NCT04169672) combining surufatinib with TUOYI® is
enrolling approximately 260 patients in nine solid tumor indications,
including NENs, biliary tract cancer, gastric cancer, thyroid cancer, SCLC,
soft tissue sarcoma, endometrial cancer, esophageal cancer and NSCLC. These
have led to the initiation in September 2021 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 March 2021 we initiated an open-label, Phase Ib/II study of surufatinib in
combination with BeiGene's tislelizumab. This study is ongoing 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 and anaplastic thyroid cancer.
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 program for surufatinib,
with about 50 of such trials 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.
Hematological Malignancies Candidates
HUTCHMED currently has six investigational drug candidates targeting
hematological malig-nan-cies in clinical development. 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 (an 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, supporting feasibility of
development in combination with other medicines. The first of such activities
is in combination with tazemetostat (IND filed in June 2022). In 2021,
registration-intent studies for amdizalisib were initiated and Breakthrough
Therapy Designation was granted for relapse or refractory follicular lymphoma
in China. HUTCHMED currently retains 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 NHL(68), peripheral T-cell lymphomas China Ib Ongoing; expansion data presented at ESMO 2021 NCT03128164
Amdizalisib monotherapy 3L Relapsed/refractory follicular lymphoma China II registration-intent Ongoing: initiated in Apr 2021. Breakthrough Therapy Designation NCT04849351
Amdizalisib monotherapy 2L Relapsed/refractory marginal zone lymphoma China II registration-intent Ongoing: initiated in Apr 2021 NCT04849351
Amdizalisib monotherapy Indolent NHL U.S./ Europe I/Ib Ongoing 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 and is expected to be fully enrolled
around year end for follicular lymphoma cohort and in the first half of 2023
for marginal zone lymphoma cohort.
Sovleplenib (HMPL-523)
Sovleplenib is a novel, selective, oral inhibitor targeting Syk, for the
treatment of hematological malignancies and immune diseases. Syk is a
component in Fc receptor and B-cell receptor signaling pathway.
In 2021, we initiated a Phase III study in China for primary ITP, for which it
has received Breakthrough Therapy Designation, and presented data on both
primary ITP and hematological malignancies at ASH69 2021. HUTCHMED currently
retains 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: ≥ 2L ITP China III Ongoing: initiated in Oct 2021. Breakthrough Therapy Designation NCT05029635
Sovleplenib monotherapy Indolent NHL 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 Warm AIHA China II/III Initiating N/A
Sovleplenib monotherapy Severe hospitalized patients due to COVID-19 China II In planning, China IND approved 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 who have received at least one prior line
of standard therapy. ITP is 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. Enrollment is expected to be completed around the end of
2022.
China Phase II/III in warm AIHA - This is a randomized, double-blind,
placebo-controlled Phase II/III study to evaluate the efficacy, safety,
tolerability, and pharmacokinetics of sovleplenib in the treatment of warm
AIHA. AIHA is the result of destruction of red blood cells due to the
production of antibodies against red blood cells which bind to antigens on the
red blood cell membrane in autoimmune disorders. If the results of the Phase
II stage of the study indicate sufficiently satisfactory efficacy and safety,
the Phase III stage will be initiated. The China IND was approved in July
2022.
China Phase II in COVID-19 - Patients hospitalized with COVID-19 may
experience severe inflammation, becoming at risk of multiple organ failures,
which is the most common cause of death. Syk inhibition has been shown to
reduce severe inflammation in severe and critical patients. This study is a
multicenter, randomized, double-blind, placebo-controlled phase II study. The
target population is adult patients with severe/critical COVID-19 requiring
hospitalization and supplemental oxygen. About 80 patients are planned to be
randomized to receive sovleplenib or placebo combined with standard therapy.
The primary endpoint is all-cause mortality by day 29. The China IND was
approved in June 2022.
Tazemetostat
In August 2021, we entered into a strategic collaboration with Epizyme to
research, develop, manufacture and commercialize tazemetostat in Greater
China, including the mainland, Hong Kong, Macau and Taiwan. Tazemetostat 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.70
We are developing and plan to seek approval for tazemetostat in various
hematological and solid tumors, including epithelioid sarcoma, follicular
lymphoma and potentially other forms of lymphoma 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
tazemetostat in Greater China, including the portion of global trials
conducted there. We are responsible for the research, manufacturing and
commercialization of tazemetostat in Greater China.
The table below shows a summary of the clinical studies for tazemetostat.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
Tazemetostat monotherapy Metastatic or locally advanced epithelioid sarcoma; Hainan N/A - Hainan Pilot Zone Approved & launched N/A
Relapsed/refractory 3L+ follicular lymphoma
Tazemetostat + lenalidomide + rituximab (R²) SYMPHONY-1: 2L follicular lymphoma Global Ib/III Ongoing. PhIb data at ASCO 2022. HUTCHMED is leading China portion of global NCT04224493
Ph III, starting H2 2022
Tazemetostat monotherapy Relapsed/refractory 3L+ follicular lymphoma China II registration-intent (bridging) Ongoing since July 2022 NCT05467943
Tazemetostat combinations Lymphoma sub-types China II In planning N/A
Hainan Pilot Zone - In May 2022, tazemetostat was approved by the Health
Commission and Medical Products Administration of Hainan Province to be used
in the Hainan Boao Lecheng International Medical Tourism Pilot Zone (Hainan
Pilot Zone), under the Clinically Urgently Needed Imported Drugs scheme, for
the treatment of certain patients with epithelioid sarcoma and follicular
lymphoma consistent with the label as approved by the FDA. Launched in 2013
and located in China, the Hainan Pilot Zone is a destination for international
medical tourism and global hub for scientific innovation, welcoming 83,900
medical tourists in 2020, according to official data.
SYMPHONY-1 (NCT04224493) - This is a global, multicenter, randomized,
double-blind, active-controlled, 3-stage, biomarker-enriched, Phase Ib/III
study of tazemetostat 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 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 tazemetostat and R², respectively.
An interim analysis of the Phase Ib portion of the study, based on 44
follicular lymphoma patients as of January 22, 2022, was presented at ASCO
2022. The safety profile of the tazemetostat and R² combination was
consistent with the prescribing information for both tazemetostat and R²,
respectively. Additionally, there was no clear dose response for
treatment-emergent adverse events (TEAEs) or dose modifications. Of 38
evaluable patients, ORR was 95% with 50% complete response rate. Median PFS
and DoR were not yet reached.
In the Phase III portion of the trial, approximately 500 patients are randomly
assigned to receive the recommended Phase III dose of tazemetostat + R² or
placebo + R². The study will also include a maintenance arm with tazemetostat
or placebo following the first year of treatment with tazemetostat + R² or
placebo + R². The first patients were enrolled in May 2022 and we anticipate
the first China patient will enroll in the second half of 2022.
China Phase II bridging study in relapsed/refractory follicular lymphoma
(NCT05467943) - In July 2022, we initiated a multicenter, open-label, Phase II
study to evaluate the efficacy, safety and pharmacokinetics of tazemetostat
for the treatment of patients with relapsed/refractory follicular lymphoma
intended to support conditional registration in China. The primary objective
is to evaluate the efficacy of tazemetostat in patients with EZH2 mutation
(Cohort 1). The secondary objectives are to evaluate the efficacy of
tazemetostat in patients with EZH2 wild-type (Cohort 2) and to evaluate the
safety and the pharmacokinetics of tazemetostat.
China Phase II combination study in relapsed/refractory follicular lymphoma -
This is a multicenter, open-label, Phase II study to evaluate the safety,
tolerability and preliminary anti-tumor efficacy of tazemetostat in
combination with amdizalisib in patients with R/R lymphoma. An IND was
submitted in June 2022.
We intend to initiate other combination studies of tazemetostat with other
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. HUTCHMED currently retains 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: dose expansion in 2023 NCT04272957
HMPL-306 monotherapy Solid tumors including but not limited to gliomas, chondrosarcomas or U.S. I Ongoing since Mar 2021. Dose expansion expected to start in 2023 NCT04762602
cholangiocarcinomas
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 opened in early 2022 will include relapsed or refractory
non-Hodgkin's lymphoma or CLL71 patients with or without a prior regimen
containing a BTK inhibitor. HUTCHMED currently retains all rights to HMPL-760
worldwide.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-760 monotherapy CLL, SLL(72), 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. HUTCHMED currently retains 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(73) 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. HUTCHMED currently retains 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 approximately 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. HUTCHMED currently
retains 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
HMPL-A83
HMPL-A83 is an investigational IgG4-type humanized anti-CD47 monoclonal
antibody that exhibits high affinity for CD47. HMPL-A83 blocks CD47 binding to
Signal regulatory protein (SIRP) α and disrupts the "do not eat me" signal
that cancer cells use to shield themselves from the immune system. HUTCHMED
currently retains all rights to HMPL-A83 worldwide.
In preclinical studies, HMPL-A83 demonstrated a high affinity for CD47 antigen
on tumor cells and strong phagocytosis induction of multiple tumor cells.
HMPL-A83 also demonstrated weak affinity for red blood cells and no induction
of hemagglutination, implying low risk of anemia, a potential event of special
interest. HMPL-A83 has also demonstrated strong anti-tumor activity in
multiple animal models.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-A83 monotherapy Advanced malignant neoplasms China I Ongoing: initiated in July 2022 NCT05429008
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. Under the terms of the
agreement, we granted Inmagene exclusive options to such drug candidates
solely for the treatment of 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 were submitted in 2022.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
IMG-007 (OX40 monoclonal antibody) Healthy volunteers; adults with moderate to severe atopic dermatitis Global I Ongoing: initiated in July 2022 NCT05353972
IMG-004 (BTK inhibitor) Healthy volunteers Global I Initiating in H2 2022 NCT05349097
IMG-007 in atopic dermatitis - This is a novel antagonistic monoclonal
antibody targeting the OX40 receptor. OX40 is a costimulatory receptor member
of the tumor necrosis factor receptor (TNFR) superfamily expressed
predominantly on activated T cells. The ligation of OX40 by its ligand OX40L
leads to enhanced T cell survival, proliferation, and effector functions.
Preclinical research results show that IMG-007 can bind to human OX40 receptor
with high affinity, thereby inhibit the binding of OX40 to OX40L, reducing
OX40L-dependent downstream signaling and cytokine release by OX40+ T cells. By
selectively shutting down OX40+ T cell function, IMG-007 may provide a
treatment option for pathological OX40+ T cell-mediated immune diseases, such
as atopic dermatitis. Atopic dermatitis is a chronic inflammatory skin
condition that is estimated to affect 8-19% of children and 2-5% of adults in
U.S., Europe, and East Asia. The Phase I study in healthy volunteers was
initiated in July 2022 in Australia.
IMG-004 in immunological diseases - This is a non-covalent, reversible small
molecule inhibitor targeting BTK. Designed specifically for inflammatory and
autoimmune diseases that usually require long-term treatment, IMG-004 is
potent, highly selective and brain permeable. BTK is involved in innate and
adaptive immune responses related to certain immune-mediated diseases. Given
the central role of BTK in immunity pathways, BTK inhibitors may offer a
potential therapeutic approach for the treatment of a wide range of
inflammatory and autoimmune diseases. The Phase I study in healthy volunteers
IND has been cleared by the U.S. FDA and enrollment is imminent.
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 the first six months of 2022, our Other Ventures consolidated revenues were
$110.9 million (H1-21: $114.5m), with the decrease mainly due to lower sales
of consumer products to $5.3 million (H1-22: $11.8m). Consolidated net income
attributable to HUTCHMED from our Other Ventures increased by 19% (16% at CER)
to $35.4 million (H1-21: $29.8m, excluding net income attributable to HUTCHMED
of $11.5 million contributed from HBYS which was disposed in September 2021).
Hutchison Sinopharm(74): 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 3% (2% at CER) to $99.3 million in the first half of 2022
(H1-21: $96.2m).
In 2021, the Hong Kong International Arbitration Centre made a final award in
favor of Hutchison Sinopharm against Luye75 in the amount of RMB253.2 million
($38.0 million), plus costs and interest (the "Award"), in connection with the
termination of Hutchison Sinopharm's right to distribute SEROQUEL® in China.
In June 2022, Luye provided a bank guarantee of up to RMB286.0 million to
cover the Award, pending the outcome of an application by Luye to the High
Court of Hong Kong to set aside the Award. On July 26, 2022, Luye's
application to set aside the Award was dismissed by the High Court with costs
awarded in favor of Hutchison Sinopharm and if Luye does not appeal the
dismissal, Hutchison Sinopharm will be seeking to enforce the Award by drawing
down on the bank guarantee.
SHPL: Our own-brand prescription drugs business, operated through our
non-consolidated joint venture SHPL, grew sales by 18% (16% at CER) to $212.4
million (H1-21: $180.4m). This sales growth and favorable product mix led to
an increase of 17% (15% at CER) in net income attributable to HUTCHMED to
$33.6 million (H1-21: $28.6m).
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 about 530 manufacturing staff.
SXBX76 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 April 2022 of 21.5% (2021: 19.6%). Sales
increased by 19% (17% at CER) to $197.9 million in the first half of 2022
(H1-21: $167.0m).
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 this list 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 the first six months of 2022, dividends of $22.7
million (H1-21: $42.1m) were paid from SHPL to the HUTCHMED Group level with
aggregate dividends received by HUTCHMED since inception of over $260 million.
Weiguo Su
Chief Executive Officer and Chief Scientific Officer
August 1, 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 exclude
deposits in and proceeds from short-term investments 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 net cash used in operating activities to Adjusted Group net cash flows excluding financing activities:
$'millions H1 2022 H1 2021
Net cash used in operating activities (89.9) (71.3)
Net cash generated from/(used in) investing activities 259.7 (155.9)
Effect of exchange rate changes on cash and cash equivalents (5.2) 0.7
Excludes: Deposits in short-term investments 578.6 412.9
Excludes: Proceeds from short-term investments (854.1) (249.5)
Adjusted Group net cash flows excluding financing activities (110.9) (63.1)
Reconciliation of GAAP revenues and net income attributable to HUTCHMED to CER:
$'millions (except %) Six Months Ended Change Amount Change %
June 30, 2022 June 30, 2021 Actual CER Exchange effect Actual CER Exchange effect
Consolidated revenues
-Oncology/Immunology 91.1 42.9 48.2 47.7 0.5 113% 111% 2%
-Other Ventures^ 110.9 114.5 (3.6) (4.6) 1.0 -3% -4% 1%
^ Includes:
- Hutchison Sinopharm - prescription drugs 99.3 96.2 3.1 2.1 1.0 3% 2% 1%
Non-consolidated joint venture revenues
- SHPL 212.4 180.4 32.0 29.0 3.0 18% 16% 2%
- SXBX pill 197.9 167.0 30.9 28.1 2.8 19% 17% 2%
Consolidated net income attributable to HUTCHMED 35.4 41.3 (5.9) (6.6) 0.7 -14% -16% 2%
- Other Ventures
- Consolidated entities 1.8 1.2 0.6 0.7 (0.1) 57% 58% -1%
- Equity investees 33.6 40.1 (6.5) (7.3) 0.8 -16% -18% 2%
- SHPL 33.6 28.6 5.0 4.2 0.8 17% 15% 2%
- HBYS (Note) - 11.5 (11.5) (11.5) - -100% -100% -
Excludes net income attributable to HUTCHMED contributed from HBYS
-Other Ventures 35.4 29.8 5.6 4.9 0.7 19% 16% 3%
- Consolidated entities 1.8 1.2 0.6 0.7 (0.1) 57% 58% -1%
- Equity investees 33.6 28.6 5.0 4.2 0.8 17% 15% 2%
- SHPL 33.6 28.6 5.0 4.2 0.8 17% 15% 2%
Note: On September 28, 2021, the Group completed the divestment of HBYS.
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 and 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 $162.9 million for the six months ended June 30, 2022 and net
losses of $102.4 million for the six months ended June 30, 2021.
As of June 30, 2022, we had cash and cash equivalents and short-term
investments of $826.2 million and unutilized bank facilities of $177.8
million. As of June 30, 2022, we had $0.4 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 nil and approximately $8,000 for the six
months ended June 30, 2022 and 2021, 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 $0.2 million
as of June 30, 2022.
In addition, our non-consolidated joint venture, SHPL, held an aggregate of
$58.1 million in cash and cash equivalents and no bank borrowings as of June
30, 2022. 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
Six Months Ended June 30,
2022 2021
(in $'000)
Cash Flow Data:
Net cash used in operating activities (89,859) (71,319)
Net cash generated from/(used in) investing activities 259,706 (155,888)
Net cash (used in)/generated from financing activities (74,638) 578,331
Net increase in cash and cash equivalents 95,209 351,124
Effect of exchange rate changes (5,249) 687
Cash and cash equivalents at beginning of the period 377,542 235,630
Cash and cash equivalents at end of the period 467,502 587,441
Net Cash used in Operating Activities
Net cash used in operating activities was $71.3 million for the six months
ended June 30, 2021, compared to net cash used in operating activities of
$89.9 million for the six months ended June 30, 2022. The net change of $18.6
million was primarily attributable to an increase in net loss of $63.6 million
from $99.3 million for the six months ended June 30, 2021 to $162.9 million
for the six months ended June 30, 2022. The foregoing was partially offset by
an increase in changes of working capital of $46.8 million from $11.0 million
for the six months ended June 30, 2021 to $57.8 million for the six months
ended June 30, 2022.
Net Cash generated from/(used in) Investing Activities
Net cash used in investing activities was $155.9 million for the six months
ended June 30, 2021, compared to net cash generated from investing activities
of $259.7 million for the six months ended June 30, 2022. The net change of
$415.6 million was primarily attributable to short-term investments which had
net deposits of $163.5 million for the six months ended June 30, 2021 as
compared to net withdrawals of $275.5 million for the six months ended June
30, 2022. The net change was partially offset by the deposit received for the
divestment of an equity investee of $15.9 million during the six months ended
June 30, 2021.
Net Cash (used in)/generated from Financing Activities
Net cash generated from financing activities was $578.3 million for the six
months ended June 30, 2021, compared to net cash used in financing activities
of $74.6 million for the six months ended June 30, 2022. The net change of
$652.9 million was mainly attributable to net proceeds from issuances of
shares of $614.9 million primarily from a private placement in April 2021 and
our public offering on the HKEX in June 2021. The net change was also
attributable to an increase in purchases of ADSs of $21.3 million by a trustee
for the settlement of equity awards of the Company which totaled $26.8 million
for the six months ended June 30, 2021 as compared to $48.1 million for the
six months ended June 30, 2022, as well as a net decrease in bank borrowings
of $26.5 million due to a repayment of bank borrowings of $26.9 million partly
offset by proceeds from bank borrowings of $0.4 million during the six months
ended June 30, 2022.
LOAN FACILITIES
In November 2018, our subsidiary renewed a three-year revolving loan facility
with HSBC(77). The facility amount of this loan was HK$234.0 million ($30.0
million) with an interest rate at HIBOR(78) 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 a credit facility arrangement 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. The term loan was drawn in
October 2019 and was repaid in May 2022. The revolving loan facility also
expired in May 2022.
In August 2020, our subsidiary entered into a 24-month revolving credit
facility with Deutsche Bank AG(79) 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 June 30, 2022, 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 ($113.2 million) with an
annual interest rate at the 5-year China Loan Prime Rate less 0.80% (which was
supplemented in June 2022). 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 June
30, 2022, RMB2.8 million ($0.4 million) was drawn from the fixed asset loan
facility.
In May 2022, our subsidiary entered into a 12-month revolving credit facility
with HSBC in the amount of HK$390.0 million ($50.0 million) with an interest
rate at HIBOR plus 0.5% per annum. This revolving facility is guaranteed by
us. As of June 30, 2022, no amount was drawn from the revolving loan facility.
Our non-consolidated joint venture SHPL had no bank borrowings outstanding as
of June 30, 2022.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table sets forth our contractual obligations as of June 30,
2022. 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,
warehouses, 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 418 - - 39 379
Interest on bank borrowings 129 - - 37 92
Purchase obligations 50,336 48,145 2,191 - -
Lease obligations 12,678 5,404 4,891 1,926 457
63,561 53,549 7,082 2,002 928
SHPL
The following table sets forth the contractual obligations of our
non-consolidated joint venture SHPL as of June 30, 2022. 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 2,617 2,617 - - -
Lease obligations 2,630 825 1,569 236 -
5,247 3,442 1,569 236 -
FOREIGN EXCHANGE RISK
A substantial portion 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(80). 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 $0.1
million for the six months ended June 30, 2022.
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 11 to the interim 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 0.05% as of June 30, 2022, a
decrease from 2.6% as of December 31, 2021. The decrease was primarily
attributable to the decrease in interest-bearing loans.
SIGNIFICANT INVESTMENTS HELD
Except for our investment in a non-consolidated joint venture SHPL with a
carrying value of $82.5 million including details below and those as disclosed
in note 7 to the interim financial statements, we did not hold any other
significant investments in the equity of any other companies as of June 30,
2022.
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 our Other Ventures is operated
through SHPL. Dividends received from SHPL for the six months ended June 30,
2022 were $22.7 million.
FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS
Note 11 to the interim financial statements discloses our planned expenditures
on capital assets as of June 30, 2022. 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 six months ended June 30, 2022, we did not have any other material
acquisitions and disposals of subsidiaries, associates and joint ventures.
PLEDGE OF ASSETS
Our 10-year fixed asset loan facility agreement with Bank of China Limited is
secured by the underlying leasehold land and buildings. RMB2.8 million ($0.4
million) was drawn from the fixed asset loan facility as of June 30, 2022.
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 0.2%, 1.5% and 2.5% in 2020, 2021 and the first
half of 2022, 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.
INTERIM DIVIDEND
The Board does not recommend any interim dividend for the six months ended
June 30, 2022.
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. This is aligned with the Company's culture of innovation and high
engagement and empowerment with a high focus on reward and recognition. 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 the objective of the Group.
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 June 30, 2022, the Group employed approximately 2,110 (December 31,
2021: ~1,760) full time staff members. Staff costs during the six months ended
June 30, 2022, including directors' emoluments, totaled $118.9 million (H1-21:
$85.5 million).
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.
SUSTAINABILITY
As an innovative, commercial-stage biopharmaceutical company, HUTCHMED
embraces sustainability at the core of how we operate. Over the past two
decades and on an ongoing basis, we are working hard to contribute to the
enhancement of healthcare systems by continuously providing quality and
accessible drugs. As the world is gradually adapting to the changes and new
normal brought about by the COVID-19 pandemic, it has highlighted the
importance of incorporating sustainability factors into our strategy. HUTCHMED
embarked on our sustainability journey in 2020 by making voluntary disclosures
in our inaugural sustainability report to demonstrate our efforts, and
establishing a board level Sustainability Committee in 2021 to support the
Board of Directors (the "Board") in fulfilling their responsibilities. Our
second sustainability report for 2021, with enhanced disclosures, was
published in 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, we identified the
following priority areas: business ethics; drug research-related topics; drug
development; commercial operations responsibilities; environmental topics; and
people management. Over the course of 2022, we will continue to engage our
stakeholders to identify areas for improvement in these sustainability fronts.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the period from January 1, 2022 to June 30, 2022, neither the Company
nor any of its subsidiaries has purchased, sold or redeemed any of the listed
securities of the Company.
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 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, effective
risk management and internal control systems, stringent disclosure practices,
transparency and accountability as well as effective communication and
engagement with shareholders and other stakeholders. It is, in addition,
committed to continuously enhancing these standards and practices and
inculcating a robust culture of compliance and ethical governance underlying
the business operations and practices across the Group.
The Company has complied throughout the six months ended June 30, 2022 with
all code provisions of the Hong Kong Corporate Governance Code contained in
Appendix 14 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the "Hong Kong Listing Rules").
COMPLIANCE WITH THE SHARE DEALINGS CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Board has adopted the Code on Dealings in Shares which is 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 of 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 six months ended June 30, 2022.
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 $585.2 million from
the offering and the over-allotment option for the purposes and in the amounts
(adjusted on pro rata basis based on the actual net proceeds) as disclosed in
the prospectus issued by the Company dated June 18, 2021 is as below:
Use of Proceeds Percentage of Total Net Proceeds Approximate Amount Actual Usage up to June 30, 2022 Unutilized Net Proceeds as of June 30, 2022 Expected Timeline for Utilization of Proceeds (note)
(%) ($'millions) ($'millions) ($'millions)
Advance our late-stage clinical programs for savolitinib, surufatinib, 50% 292.7 193.3 99.4 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 40.4 18.1 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 49.6 67.5 2023
clinical and regulatory and manufacturing
Fund potential global business development and strategic acquisition 15% 87.8 27.0 60.8 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 29.1 - Fully utilized
general corporate purposes
100% 585.2 339.4 245.8
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.
REVIEW OF INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The interim unaudited condensed consolidated financial statements of the Group
for the six months ended June 30, 2022 have been reviewed by the auditor of
the Company, PricewaterhouseCoopers, in accordance with Hong Kong Standard on
Review Engagements 2410 - "Review of Interim Financial Information Performed
by the Independent Auditor of the Entity" issued by the Hong Kong Institute of
Certified Public Accountants for the Hong Kong filing. The interim unaudited
condensed consolidated financial statements of the Group for the six months
ended June 30, 2022 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 June 30, 2022 and up to the date of this announcement.
PUBLICATION OF INTERIM RESULTS AND INTERIM REPORT
This interim 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
interim report of the Group for the six months ended June 30, 2022 will be
published on the websites of HKEX and the Company, and dispatched to the
Company's shareholders in due course.
REFERENCES AND ABBREVIATIONS
1 NSCLC = Non-small cell lung cancer.
2 MET = Mesenchymal epithelial transition factor.
3 CRC = Colorectal cancer.
4 epNET = extra-pancreatic neuroendocrine tumor.
5 pNET= pancreatic neuroendocrine tumor.
6 R&D = Research and development.
7 FDA = Food and Drug Administration.
8 EMA = European Medicines Agency.
9 MAA = Marketing Authorization Application.
10 In-market sales = total sales to third parties provided by Eli Lilly
(ELUNATE®), AstraZeneca (ORPATHYS®) and HUTCHMED (SULANDA® and TAZVERIK®).
11 NRDL = National Reimbursement Drug List.
12 Lilly = Eli Lilly and Company.
13 ITP = Immune thrombocytopenia purpura.
14 NMPA = National Medical Products Administration.
15 NDA = New Drug Application.
16 EU = European Union.
17 EGFR = Epidermal growth factor receptor.
18 WCLC = World Conference on Lung Cancer.
19 DoR = Duration of response.
20 PFS = Progression-free survival.
21 OS = Overall survival.
22 ELCC = European Lung Cancer Congress.
23 VEGFR = Vascular endothelial growth factor receptor.
24 ASCO GI = ASCO (American Society of Clinical Oncology) Gastrointestinal
Cancers Symposium.
25 PMDA = Pharmaceuticals and Medical Devices Agency.
26 FGFR = Fibroblast growth factor receptor.
27 CSF-1R = Colony-stimulating factor 1 receptor.
28 ASCO = American Society of Clinical Oncology.
29 PI3Kδ = Phosphoinositide 3-kinase delta.
30 Syk = Spleen tyrosine kinase.
31 AIHA = autoimmune hemolytic anemia.
32 Epizyme = Epizyme Inc.
33 IDH = Isocitrate dehydrogenase.
34 BTK = Bruton's tyrosine kinase.
35 MAPK pathway = RAS-RAF-MEK-ERK signaling cascade.
36 IND = Investigational New Drug (application).
37 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.
38 SHPL = Shanghai Hutchison Pharmaceuticals Limited.
39 HBYS = Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company
Limited.
40 ADS = American depositary share.
41 HKEX = The Main Board of The Stock Exchange of Hong Kong Limited.
42 GAAP = Generally Accepted Accounting Principles.
43 SG&A Expenses = selling, general and administrative expenses.
44 NHSA = China National Healthcare Security Administration.
45 NET = Neuroendocrine tumor.
46 CSCO = Chinese Society of Clinical Oncology.
47 PRCC = Papillary renal cell carcinoma.
48 EGFRm+ = Epidermal growth factor receptor mutated.
49 TKI = Tyrosine kinase inhibitor.
50 FISH5+ = MET amplification as detected by FISH with MET copy number ≥ 5
and/or MET: CEP signal ratio ≥ 2.
51 IHC50+ = MET overexpression as detected by IHC with 3+ in ≥ 50% tumor
cells.
52 FISH10+ = MET amplification as detected by FISH with MET copy number ≥
10.
53 IHC90+ = MET overexpression as detected by IHC with 3+ in ≥ 90% tumor
cells.
54 ORR = Objective response rate.
55 RCC = Renal cell carcinoma.
56 HCC = Hepatocellular carcinoma.
57 TN = Triple negative.
58 HR+ = Hormone receptor positive.
59 Her2- = Human epidermal growth factor receptor 2 negative.
60 MSS = Microsatellite Stable.
61 DCR = Disease Control Rate.
62 NR = not reached.
63 NEC = Neuroendocrine carcinoma.
64 NEN = Neuroendocrine neoplasms.
65 ESMO = European Society for Medical Oncology.
66 IO = Immuno-oncology.
67 SCLC = Small cell lung cancer.
68 NHL = Non-Hodgkin's Lymphoma.
69 ASH = American Society of Hematology.
70 TAZVERIK® is a methyltransferase inhibitor indicated for the treatment of:
adults and pediatric patients aged 16 years and older with metastatic or
locally advanced epithelioid sarcoma not eligible for complete resection;
adult patients with relapsed or refractory follicular lymphoma whose tumors
are positive for an EZH2 mutation as detected by an FDA-approved test and who
have received at least two prior systemic therapies; and adult patients with
relapsed or refractory follicular lymphoma who have no satisfactory
alternative treatment options. These indications are approved under
accelerated approval based on overall response rate and duration of response.
Post marketing studies are required to confirm the anticipated clinical
benefit and retain the labeled Accelerated Approval indications. The most
common (≥20%) adverse reactions in patients with epithelioid sarcoma are
pain, fatigue, nausea, decreased appetite, vomiting and constipation. The most
common (≥20%) adverse reactions in patients with follicular lymphoma are
fatigue, upper respiratory tract infection, musculoskeletal pain, nausea and
abdominal pain. View the U.S. Full Prescribing Information at
https://www.epizyme.com/wp-content/uploads/2021/06/TAZVERIK.pdf.
71 CLL = Chronic lymphocytic leukemia.
72 SLL = Small lymphocytic lymphoma.
73 IHCC = Intrahepatic cholangiocarcinoma.
74 Hutchison Sinopharm = Hutchison Whampoa Sinopharm Pharmaceuticals
(Shanghai) Company Limited.
75 Luye = Luye Pharma Hong Kong Ltd.
76 SXBX = She Xiang Bao Xin.
77 HSBC = The Hongkong and Shanghai Banking Corporation Limited.
78 HIBOR = Hong Kong Interbank Offered Rate.
79 Deutsche Bank AG = Deutsche Bank AG, Hong Kong Branch.
80 PBOC = People's Bank of China.
HUTCHMED (CHINA) LIMITED
CONDENSED Consolidated Balance Sheets
(in US$'000, except share data)
June 30, December 31,
Note 2022 2021
(Unaudited)
Assets
Current assets
Cash and cash equivalents 3 467,502 377,542
Short-term investments 3 358,698 634,158
Accounts receivable 4 77,078 83,580
Other receivables, prepayments and deposits 5 73,034 81,041
Inventories 6 45,925 35,755
Total current assets 1,022,237 1,212,076
Property, plant and equipment 44,059 41,275
Investments in equity investees 7 82,999 76,479
Other non-current assets 45,038 42,831
Total assets 1,194,333 1,372,661
Liabilities and shareholders' equity
Current liabilities
Accounts payable 8 51,005 41,177
Other payables, accruals and advance receipts 9 233,606 210,839
Bank borrowings 10 - 26,905
Other current liabilities 37,245 32,737
Total current liabilities 321,856 311,658
Bank borrowings 10 418 -
Other non-current liabilities 20,210 21,489
Total liabilities 342,484 333,147
Commitments and contingencies 11
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000 shares authorized; 864,575,340 12 86,457 86,453
and 864,530,850 shares issued at June 30, 2022 and December 31, 2021
respectively
Additional paid-in capital 1,484,578 1,505,196
Accumulated losses (773,189) (610,328)
Accumulated other comprehensive income 1,882 5,572
Total Company's shareholders' equity 799,728 986,893
Non-controlling interests 52,121 52,621
Total shareholders' equity 851,849 1,039,514
Total liabilities and shareholders' equity 1,194,333 1,372,661
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
CONDENSED Consolidated Statements of Operations
(UNAUDITED, in US$'000, except share and per share data)
Six Months Ended June 30,
Note 2022 2021
Revenues
Goods -third parties 136,932 129,148
-related parties 17(i) 1,638 2,311
Services -commercialization-third parties 21,594 15,030
-collaboration research and development 12,335 4,795
-third parties
-research and development 17(i) 263 261
-related parties
Other collaboration revenue
-royalties-third parties 14,331 5,817
-licensing-third parties 14,954 -
Total revenues 14 202,047 157,362
Operating expenses
Costs of goods-third parties (115,567) (107,511)
Costs of goods-related parties (1,198) (1,673)
Costs of services-commercialization-third parties (20,553) (14,065)
Research and development expenses 16 (181,741) (123,050)
Selling expenses (22,221) (18,007)
Administrative expenses (57,521) (36,790)
Total operating expenses (398,801) (301,096)
(196,754) (143,734)
Other (expense)/income, net (3,882) 3,287
Loss before income taxes and equity in earnings of equity investees (200,636) (140,447)
Income tax benefit/(expense) 18 4,215 (1,859)
Equity in earnings of equity investees, net of tax 7 33,549 42,966
Net loss (162,872) (99,340)
Less: Net loss/(income) attributable to non-controlling interests 11 (3,057)
Net loss attributable to the Company (162,861) (102,397)
Losses per share attributable to the Company-basic and diluted (US$ per share) 19 (0.19) (0.14)
Number of shares used in per share calculation-basic and diluted 19 849,283,553 729,239,181
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
CONDENSED Consolidated Statements of Comprehensive Loss
(UNAUDITED, in US$'000)
Six Months Ended June 30,
2022 2021
Net loss (162,872) (99,340)
Other comprehensive (loss)/income
Foreign currency translation (loss)/gain (4,175) 1,084
Total comprehensive loss (167,047) (98,256)
Less: Comprehensive loss/(income) attributable to 496 (3,285)
non-controlling interests
Total comprehensive loss attributable to the Company (166,551) (101,541)
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
CONDENSED Consolidated Statements of Changes in Shareholders' Equity
(UNAUDITED, in US$'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
Income
Equity
As at January 1, 2021 727,722 72,772 822,458 (415,591) 4,477 484,116 34,833 518,949
Net (loss)/income - - - (102,397) - (102,397) 3,057 (99,340)
Issuance in relation to public offering 104,000 10,400 524,267 - - 534,667 - 534,667
Issuances in relation to private investment in public equity ("PIPE") 16,393 1,639 98,361 - - 100,000 - 100,000
Issuance costs - - (26,952) - - (26,952) - (26,952)
Issuances in relation to share option exercises 400 40 202 - - 242 - 242
Share-based compensation
Share options - - 7,913 - - 7,913 12 7,925
Long-term incentive plan ("LTIP") - - 13,108 - - 13,108 26 13,134
- - 21,021 - - 21,021 38 21,059
LTIP-treasury shares acquired and held by Trustee - - (26,758) - - (26,758) - (26,758)
Dividend declared to a non-controlling shareholder of a subsidiary - - - - - - (9,256) (9,256)
Transfer between reserves - - 8 (8) - - - -
Foreign currency translation adjustments - - - - 856 856 228 1,084
As at June 30, 2021 848,515 84,851 1,412,607 (517,996) 5,333 984,795 28,900 1,013,695
As at January 1, 2022 864,531 86,453 1,505,196 (610,328) 5,572 986,893 52,621 1,039,514
Net loss - - - (162,861) - (162,861) (11) (162,872)
Issuances in relation to share option exercises 44 4 30 - - 34 - 34
Share-based compensation
Share options - - 3,732 - - 3,732 9 3,741
LTIP - - 23,704 - - 23,704 (13) 23,691
- - 27,436 - - 27,436 (4) 27,432
LTIP-treasury shares acquired and held by Trustee - - (48,084) - - (48,084) - (48,084)
Foreign currency translation adjustments - - - - (3,690) (3,690) (485) (4,175)
As at June 30, 2022 864,575 86,457 1,484,578 (773,189) 1,882 799,728 52,121 851,849
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
CONDENSED Consolidated Statements of Cash Flows
(UNAUDITED, in US$'000)
Six Months Ended June 30,
Note 2022 2021
Net cash used in operating activities 21 (89,859) (71,319)
Investing activities
Purchases of property, plant and equipment (15,754) (8,914)
Deposits in short-term investments (578,602) (412,961)
Proceeds from short-term investments 854,062 249,500
Deposit received for divestment of an equity investee - 15,912
Purchase of leasehold land - (355)
Refund of leasehold land deposit - 930
Net cash generated from/(used in) investing activities 259,706 (155,888)
Financing activities
Proceeds from issuances of ordinary shares 34 634,909
Purchases of treasury shares 13(ii) (48,084) (26,758)
Dividend paid to a non-controlling shareholder of a subsidiary 17(iii) - (9,256)
Repayment of loan to a non-controlling shareholder of a subsidiary - (579)
Payment of issuance costs (83) (19,985)
Proceeds from bank borrowing 10 418 -
Repayment of bank borrowing 10 (26,923) -
Net cash (used in)/generated from financing activities (74,638) 578,331
Net increase in cash and cash equivalents 95,209 351,124
Effect of exchange rate changes on cash and cash equivalents (5,249) 687
89,960 351,811
Cash and cash equivalents
Cash and cash equivalents at beginning of period 377,542 235,630
Cash and cash equivalents at end of period 467,502 587,441
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
Notes to the INTERIM UNAUDITED CONDENSED Consolidated Financial Statements
1. Organization and Nature of Business
HUTCHMED (China) 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") 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 June 30, 2022, the Group had accumulated losses of US$773,189,000
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 June 30,
2022, the Group had cash and cash equivalents of US$467,502,000, short-term
investments of US$358,698,000 and unutilized bank borrowing facilities of
US$177,814,000. Short-term investments comprised of bank deposits maturing
over three months.
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. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The interim unaudited condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles in the
United States of America ("U.S. GAAP") for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by U.S. GAAP for complete financial statements. The interim unaudited
condensed consolidated financial statements have been prepared on the same
basis as the annual audited consolidated financial statements. In the opinion
of management, all adjustments, consisting of normal recurring adjustments
necessary for the fair statement of results for the periods presented, have
been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the full year or any
other interim period.
The comparative year-end condensed balance sheet data was derived from the
annual audited consolidated financial statements, but is condensed to the same
degree as the interim condensed balance sheet data.
The interim unaudited condensed consolidated financial statements and related
disclosures have been prepared with the presumption that users have read or
have access to the annual audited consolidated financial statements for the
preceding fiscal year.
The preparation of interim unaudited condensed 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 interim
unaudited condensed consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period.
Recent Accounting Pronouncements
Amendments that have been issued by the Financial Accounting Standards Board
or other standards-setting bodies that do not require adoption until a future
date are not expected to have a material impact on the Group's condensed
consolidated financial statements.
3. Cash and Cash Equivalents and Short-term Investments
June 30, December 31,
2022
2021
(in US$'000)
Cash and Cash Equivalents
Cash at bank and on hand 130,689 104,620
Bank deposits maturing in three months or less 336,813 272,922
467,502 377,542
Short-term Investments
Bank deposits maturing over three months (note) 358,698 634,158
826,200 1,011,700
Note: The maturities for short-term investments ranged from 91 to 97 days and
from 91 to 180 days for the six months ended June 30, 2022 and the year ended
December 31, 2021 respectively.
Certain cash and bank balances denominated in Renminbi ("RMB"), U.S. dollar
("US$") and UK Pound Sterling ("£") were deposited with banks in the PRC. The
conversion of these balances into foreign currencies is subject to the rules
and regulations of foreign exchange control promulgated by the PRC government.
Cash and cash equivalents and short-term investments were denominated in the
following currencies:
June 30, December 31,
2022
2021
(in US$'000)
US$ 712,275 895,935
RMB 86,298 53,455
Hong Kong dollar ("HK$") 26,428 60,535
£ 1,041 1,090
Euro 158 685
826,200 1,011,700
4. Accounts Receivable
Accounts receivable from contracts with customers consisted of the following:
June 30, December 31,
2022
2021
(in US$'000)
Accounts receivable-third parties 75,870 82,434
Accounts receivable-related parties (Note 17(ii)) 1,329 1,166
Allowance for credit losses (121) (20)
Accounts receivable, net 77,078 83,580
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:
June 30, December 31,
2022
2021
(in US$'000)
Not later than 3 months 64,022 78,288
Between 3 months to 6 months 9,259 2,867
Between 6 months to 1 year 1,440 78
Later than 1 year 1,149 1,201
Accounts receivable-third parties 75,870 82,434
Movements on the allowance for credit losses:
2022 2021
(in US$'000)
As at January 1 20 95
Increase in allowance for credit losses 119 21
Decrease in allowance due to subsequent collection (14) (92)
Exchange difference (4) 1
As at June 30 121 25
5. Other Receivables, Prepayments and Deposits
Other receivables, prepayments and deposits consisted of the following:
June 30, December 31,
2022
2021
(in US$'000)
Dividend receivables 46,387 46,387
Prepayments 19,889 14,128
Value-added tax receivables 2,251 16,616
Deposits 1,699 1,255
Amounts due from related parties (Note 17(ii)) 998 1,149
Others 1,810 1,506
73,034 81,041
No allowance for credit losses has been made for other receivables,
prepayments and deposits for the six months ended June 30, 2022 and year ended
December 31, 2021.
6. Inventories
Inventories, net of provision for excess and obsolete inventories, consisted
of the following:
June 30, December 31,
2022
2021
(in US$'000)
Raw materials 21,611 15,837
Finished goods 24,314 19,918
45,925 35,755
7. Investments in Equity Investees
Investments in equity investees consisted of the following:
June 30, December 31,
2022
2021
(in US$'000)
Shanghai Hutchison Pharmaceuticals Limited ("SHPL") 82,538 75,999
Other 461 480
82,999 76,479
The equity investees are private companies and there are no quoted market
prices available for their shares.
Summarized financial information for the significant equity investees SHPL and
Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited
("HBYS") (divested on September 28, 2021), both under Other Ventures segment,
is as follows:
(i) Summarized balance sheets
SHPL
June 30, December 31,
2022
2021
(in US$'000)
Current assets 225,402 190,260
Non-current assets 84,971 91,605
Current liabilities (145,272) (128,993)
Non-current liabilities (6,026) (7,131)
Net assets 159,075 145,741
(ii) Summarized statements of operations
SHPL HBYS
Six Months Ended June 30,
2022 2021 2022 ((note (a))) 2021
(in US$'000)
Revenue 212,413 180,413 - 153,689
Gross profit 165,208 138,979 - 82,251
Interest income 623 751 - 66
Profit before taxation 78,472 67,108 - 33,397
Income tax expense (note (b)) (11,209) (9,764) - (4,807)
Net income (note (c)) 67,263 57,344 - 28,590
Non-controlling interests - - - (14)
Net income attributable to the shareholders of equity investee 67,263 57,344 - 28,576
Notes:
(a) On September 28, 2021, the Group completed the divestment of
HBYS.
(b) The main entity within the SHPL group has been granted the
High and New Technology Enterprise status (the latest renewal of this status
covers the years from 2020 to 2022). The entity was eligible to use a
preferential income tax rate of 15% for the six months ended June 30, 2022 and
2021 on this basis.
(c) Net income is before elimination of unrealized profits on
sales to the Group. The amount eliminated was approximately $80,000 and
$34,000 for the six months ended June 30, 2022 and 2021 respectively.
For the six months ended June 30, 2022 and 2021, other equity investee had net
loss of approximately US$5,000 and net income of approximately US$79,000
respectively.
(iii) Reconciliation of summarized financial information
Reconciliation of the summarized financial information presented to the
carrying amount of investments in equity investees is as follows:
SHPL HBYS
2022 2021 2022 2021
(in US$'000)
Opening net assets after non-controlling interests as at January 1 145,741 152,714 - 119,424
Net income attributable to the shareholders of equity investee 67,263 57,344 - 28,576
Dividends declared (45,385) (84,103) - (46,538)
Other comprehensive (loss)/income (8,544) 820 - 1,388
Closing net assets after non-controlling interests as at June 30 159,075 126,775 - 102,850
Group's share of net assets 79,538 63,387 - 51,425
Goodwill 3,000 3,078 - -
Carrying amount of investments as at June 30 82,538 66,465 - 51,425
SHPL had the following capital commitments:
June 30,
2022
(in US$'000)
Property, plant and equipment
Contracted but not provided for 2,617
8. Accounts Payable
June 30, December 31,
2022
2021
(in US$'000)
Accounts payable-third parties 48,203 39,115
Accounts payable-non-controlling shareholders of subsidiaries (Note 17(iv)) 2,802 2,062
51,005 41,177
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:
June 30, December 31,
2022
2021
(in US$'000)
Not later than 3 months 38,404 35,615
Between 3 months to 6 months 10,380 3,705
Between 6 months to 1 year 834 588
Later than 1 year 1,387 1,269
51,005 41,177
9. Other Payables, Accruals and Advance Receipts
Other payables, accruals and advance receipts consisted of the following:
June 30, December 31,
2022
2021
(in US$'000)
Accrued research and development expenses 149,921 116,134
Accrued salaries and benefits 32,445 41,786
Accrued administrative and other general expenses 17,450 15,836
Accrued selling and marketing expenses 11,370 8,412
Accrued capital expenditures 7,095 11,343
Deposits 2,286 2,111
Amounts due to related parties (Note 17(ii)) 2,062 1,915
Deferred government grants 311 314
Others 10,666 12,988
233,606 210,839
10. Bank Borrowings
Bank borrowings consisted of the following:
June 30, December 31,
2022
2021
(in US$'000)
Current - 26,905
Non-current 418 -
418 26,905
The weighted average interest rate for outstanding bank borrowings for the six
months ended June 30, 2022 and year ended December 31, 2021 was 1.15% per
annum and 1.08% per annum respectively. The carrying amounts of the Group's
outstanding bank borrowings as at June 30, 2022 and December 31, 2021 were
denominated in RMB and HK$ respectively.
(i) 3‑year term loan and revolving loan facilities and 1-year revolving
loan facility
In May 2019, the Group through its subsidiary, entered into a facility
agreement with a bank for the provision of unsecured credit facilities in the
aggregate amount of HK$400,000,000 (US$51,282,000). The 3-year credit
facilities included (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 the Hong Kong Interbank Offered Rate ("HIBOR") plus 0.85%
per annum, and an upfront fee of HK$819,000 (US$105,000) on the term loan.
These credit facilities were guaranteed by the Company. The term loan was
drawn in October 2019 and was repaid in May 2022. The revolving loan facility
also expired in May 2022.
In May 2022, the Group through its subsidiary, entered into a 1-year revolving
loan facility with the bank in the amount of HK$390,000,000 (US$50,000,000)
with an interest rate at HIBOR plus 0.5% per annum. This credit facility is
guaranteed by the Company. As at June 30, 2022, no amount has been drawn from
the revolving loan facility.
(ii) 2‑year revolving loan facility
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 June 30, 2022 and December
31, 2021, 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$113,232,000) with an annual interest rate at the
5-year China Loan Prime Rate less 0.8% (which was supplemented in June 2022)
and interest payments commencing upon completion of the underlying
construction in progress. This credit facility is guaranteed by the immediate
holding company of the subsidiary and secured by the underlying leasehold land
and buildings. As at June 30, 2022 and December 31, 2021, RMB2,790,000
(US$418,000) and nil had been drawn from the fixed asset loan facility.
The Group's bank borrowings are repayable as from the dates indicated as
follows:
June 30, December 31,
2022
2021
(in US$'000)
Not later than 1 year - 26,923
Between 1 to 3 years - -
Between 3 to 4 years 17 -
Between 4 to 5 years 22 -
Later than 5 years 379 -
418 26,923
As at June 30, 2022 and December 31, 2021, the Group had unutilized bank
borrowing facilities of US$177,814,000 and US$157,430,000 respectively.
11. Commitments and Contingencies
The Group had the following capital commitments:
June 30,
2022
(in US$'000)
Property, plant and equipment
Contracted but not provided for 50,336
The Group does not have any other significant commitments or contingencies.
12. Ordinary Shares
As at June 30, 2022, the Company is authorized to issue 1,500,000,000 ordinary
shares.
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.
13. 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 (as amended on April 27,
2020) (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 June 30, 2022, the aggregate number of shares issuable under the
HUTCHMED Share Option Scheme was 48,811,458 ordinary shares and the aggregate
number of shares issuable under the prior share option scheme which expired in
2016 was 660,570 ordinary shares. The Company will issue new shares to satisfy
share option exercises. Additionally, the number of shares authorized but
unissued was 635,424,660 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 Weighted average remaining contractual life Aggregate intrinsic value
(years)
(in US$'000)
exercise price
in US$ per share
Outstanding at January 1, 2021 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
Granted (note) 5,930,820 2.15
Exercised (44,490) 0.75
Cancelled (3,037,980) 5.12
Expired (998,145) 5.71
Outstanding at June 30, 2022 39,040,795 4.44 6.93 3,598
Vested and exercisable at 16,077,770 4.24 4.91 46,491
December 31, 2021
Vested and exercisable at 20,171,800 4.47 5.13 1,356
June 30, 2022
Note: Includes 861,220 share options (represented by 172,244 ADS) granted to
an executive director in May 2022 where the number of share options
exercisable is subject to a performance target based on a market condition
covering the 3-year period from 2022 to 2024 which has been reflected in
estimating the grant date fair value. The grant date fair value of such awards
is US$0.24 per share using the Polynomial model. Vesting of such award will
occur in March 2025.
In estimating the fair value of share options granted, the following
assumptions were used in the Polynomial model for awards granted in the
periods indicated:
Six Months Ended June 30, 2022 Year Ended December 31, 2021
Weighted average grant date fair value of share options (in US$ per share) 0.76 2.24
Significant inputs into the valuation model (weighted average):
Exercise price (in US$ per share) 2.15 5.96
Share price at effective date of grant (in US$ per share) 2.10 5.91
Expected volatility (note (a)) 46.1% 41.1%
Risk-free interest rate (note (b)) 2.85% 1.62%
Contractual life of share options (in years) 10 10
Expected dividend yield (note (c)) 0% 0%
Notes:
(a) The Company calculated its expected volatility with reference to the
historical volatility prior to the issuances of share options.
(b) 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$.
(c) The Company has not declared or paid any dividends and does not
currently expect to do so prior to the exercise of the granted share options,
and therefore uses an expected dividend yield of zero in the Polynomial model.
The Company will issue new shares to satisfy share option exercises. The
following table summarizes the Company's share option exercises:
Six Months Ended June 30,
2022 2021
(in US$'000)
Cash received from share option exercises 34 242
Total intrinsic value of share option exercises 57 2,012
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 condensed consolidated statements
of operations:
Six Months Ended June 30,
2022 2021
(in US$'000)
Research and development expenses 2,795 4,101
Selling and administrative expenses 871 3,749
Cost of revenues 75 75
3,741 7,925
As at June 30, 2022, the total unrecognized compensation cost was
US$17,673,000, and will be recognized on a graded vesting approach over the
weighted average remaining service period of 2.94 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, 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 in 2021 and 2022 under the LTIP are as follows:
Maximum cash amount Covered Performance target
Grant date (in US$ millions) financial years determination date
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)
May 23, 2022 60.4 2022 note (a)
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.
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, 2021 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
Purchased 14,028,465 48,084
Vested (2,466,705) (11,650)
As at June 30, 2022 19,700,935 76,448
For the six months ended June 30, 2022 and 2021, US$8,397,000 and US$2,532,000
of the LTIP awards were forfeited respectively based on the determined or
estimated monetary amount as at the forfeiture date.
The following table presents the share-based compensation expenses recognized
under the LTIP awards:
Six Months Ended June 30,
2022 2021
(in US$'000)
Research and development expenses 7,196 6,725
Selling and administrative expenses 4,228 3,542
Cost of revenues 213 165
11,637 10,432
Recorded with a corresponding credit to:
Liability 3,297 5,814
Additional paid-in capital 8,340 4,618
11,637 10,432
For the six months ended June 30, 2022 and 2021, US$15,351,000 and
US$8,516,000 were reclassified from liability to additional paid-in capital
respectively upon LTIP awards reaching the determination date. As at June 30,
2022 and December 31, 2021, US$782,000 and US$12,836,000 were recorded as
liabilities respectively for LTIP awards prior to the determination date.
As at June 30, 2022, the total unrecognized compensation cost was
approximately US$55,052,000, which considers expected performance targets and
the amounts expected to vest, and will be recognized over the requisite
periods.
14. Revenues
The following table presents disaggregated revenue, with sales of goods
recognized at a point-in-time and provision of services recognized over time:
Six Months Ended June 30, 2022
Oncology/ Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 27,592 - 27,592
Goods-Distribution and Other Products - 110,978 110,978
Services-Commercialization-Marketed Products 21,594 - 21,594
-Collaboration Research and Development 12,335 - 12,335
-Research and Development 263 - 263
Royalties 14,331 - 14,331
Licensing 14,954 - 14,954
91,069 110,978 202,047
Third parties 90,806 109,340 200,146
Related parties (Note 17(i)) 263 1,638 1,901
91,069 110,978 202,047
Six Months Ended June 30, 2021
Oncology/ Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 16,948 - 16,948
Goods-Distribution and Other Products - 114,511 114,511
Services-Commercialization-Marketed Products 15,030 - 15,030
-Collaboration Research and Development 4,795 - 4,795
-Research and Development 261 - 261
Royalties 5,817 - 5,817
42,851 114,511 157,362
Third parties 42,590 112,200 154,790
Related parties (Note 17(i)) 261 2,311 2,572
42,851 114,511 157,362
15. 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 ("Warrant Exercise Price").
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 June 30, 2022, 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 condensed consolidated statements of operations.
In June 2022, Epizyme announced it had entered a definitive merger agreement
under which a third party would acquire all its outstanding shares for an
amount per share less than the Warrant Exercise Price. Consequently, as at
June 30, 2022, there was no fair value attributed to the warrant. For the six
months ended June 30, 2022, a fair value loss of US$2.5 million was recognized
to other expenses in the condensed consolidated statements of operations.
16. Research and Development Expenses
Research and development expenses are summarized as follows:
Six Months Ended June 30,
2022 2021
(in US$'000)
Clinical trial related costs 122,513 72,721
Personnel compensation and related costs 52,738 41,056
Other research and development expenses 6,490 9,273
181,741 123,050
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 six months ended June 30, 2022
and 2021, the Group has incurred research and development expenses of
US$6,818,000 and US$6,146,000 respectively, related to such collaborative
arrangements.
17. Significant Transactions with Related Parties and Non-Controlling Shareholders of Subsidiaries
The Group has the following significant transactions with related parties and
non-controlling shareholders of subsidiaries, which were carried out in the
normal course of business at terms determined and agreed by the relevant
parties:
(i) Transactions with related parties:
Six Months Ended June 30,
2022 2021
(in US$'000)
Sales to:
Indirect subsidiaries of CK Hutchison Holdings Limited ("CK Hutchison") 1,638 2,311
Revenue from research and development services from:
An equity investee 263 261
Purchases from:
Equity investees 2,225 1,954
Rendering of marketing services from:
Indirect subsidiaries of CK Hutchison 77 186
An equity investee 62 -
139 186
Rendering of management services from:
An indirect subsidiary of CK Hutchison 490 485
(ii) Balances with related parties included in:
June 30, December 31,
2022
2021
(in US$'000)
Accounts receivable-related parties
Indirect subsidiaries of CK Hutchison (note (a)) 1,074 1,166
An equity investee (note (a)) 255 -
1,329 1,166
Other receivables, prepayments and deposits
Equity investees (note (a)) 998 1,149
Other payables, accruals and advance receipts
Indirect subsidiaries of CK Hutchison (note (b) and (d)) 2,002 1,915
An equity investee (note (a)) 60 -
2,062 1,915
Other non-current liabilities
An equity investee (note (c)) 591 736
An indirect subsidiary of CK Hutchison (note (d)) 10,013 9,766
10,604 10,502
Notes:
(a) 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.
(b) Amounts due to indirect subsidiaries of CK Hutchison are unsecured,
repayable on demand and interest-bearing if not settled within one month.
(c) Other deferred income represents amounts recognized from granting of
promotion and marketing rights.
(d) As at June 30, 2022 and December 31, 2021, branding liability payable of
approximately US$1,538,000 was included in amounts due to related parties
under other payables, accruals and advance receipts. As at June 30, 2022 and
December 31, 2021, branding liability payable of approximately US$10,013,000
and US$9,766,000 were included in other non-current liabilities.
(iii) Transactions with non‑controlling shareholders of subsidiaries:
Six Months Ended June 30,
2022 2021
(in US$'000)
Sales 17,705 20,144
Purchases 3,442 7,211
Dividend paid - 9,256
(iv) Balances with non‑controlling shareholders of subsidiaries included in:
June 30, December 31,
2022
2021
(in US$'000)
Accounts receivable 5,761 8,436
Accounts payable 2,802 2,062
18. Income Tax Benefit/(Expense)
Six Months Ended June 30,
2022 2021
(in US$'000)
Current tax
HK 80 226
PRC 1,008 2,184
U.S. and others 1,694 231
Total current tax 2,782 2,641
Deferred income tax benefits (6,997) (782)
Income tax (benefit)/expense (4,215) 1,859
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:
Six Months Ended June 30,
2022 2021
(in US$'000)
Loss before income taxes and equity in earnings of equity investees (200,636) (140,447)
Tax calculated at the statutory tax rate of the Company (33,105) (23,174)
Tax effects of:
Different tax rates applicable in different jurisdictions 1,771 3,585
Tax valuation allowance 41,374 28,971
Preferential tax rate difference (67) (253)
Preferential tax deduction and credits (18,169) (11,288)
Expenses not deductible for tax purposes 3,070 3,034
Utilization of previously unrecognized tax losses (1) (864)
Withholding tax on undistributed earnings of PRC entities 1,681 2,360
Income not subject to tax (611) (436)
Others (158) (76)
Income tax (benefit)/expense (4,215) 1,859
19. Losses Per Share
(i) Basic losses per share
Basic losses per share is calculated by dividing the net loss attributable to
the Company by the weighted average number of outstanding ordinary shares in
issue during the period. Treasury shares held by the Trustee are excluded from
the weighted average number of outstanding ordinary shares in issue for
purposes of calculating basic losses per share.
Six Months Ended June 30,
2022 2021
Weighted average number of outstanding ordinary shares in issue 849,283,553 729,239,181
Net loss attributable to the Company (US$'000) (162,861) (102,397)
Losses per share attributable to the Company (US$ per share) (0.19) (0.14)
(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 period.
Dilutive ordinary share equivalents include shares issuable upon the exercise
or settlement of share options and LTIP awards issued by the Company using the
treasury stock method.
For the six months ended June 30, 2022 and 2021, the share options and LTIP
awards 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 six months ended
June 30, 2022 and 2021.
20. 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:
Six Months Ended June 30, 2022
Oncology/Immunology
Marketed Other
R&D Products Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from external customers 27,552 - 27,552 63,517 91,069 110,978 - 202,047
Interest income 376 - 376 - 376 92 1,514 1,982
Equity in earnings of equity investees, net of tax (2) - (2) - (2) 33,551 - 33,549
Segment operating (loss)/profit (92,529) (103,305) (195,834) 9,875 (185,959) 36,142 (16,866) (166,683)
Interest expense - - - - - - (404) (404)
Income tax (expense)/benefit (255) 6,912 6,657 (436) 6,221 (317) (1,689) 4,215
Depreciation/ amortization (3,827) (237) (4,064) - (4,064) (154) (158) (4,376)
Additions to non-current assets (other than financial instruments and deferred 8,947 227 9,174 - 9,174 160 13 9,347
tax assets)
June 30, 2022
Oncology/Immunology
R&D Marketed Products Other
Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 179,102 27,371 206,473 52,424 258,897 221,742 713,694 1,194,333
Property, plant and equipment 41,096 1,852 42,948 - 42,948 639 472 44,059
Right-of-use assets 3,309 3,470 6,779 - 6,779 1,488 1,196 9,463
Leasehold land 12,494 - 12,494 - 12,494 - - 12,494
Goodwill - - - - - 3,259 - 3,259
Other intangible asset - - - - - 122 - 122
Investments in equity investees 461 - 461 - 461 82,538 - 82,999
Six Months Ended June 30, 2021
Oncology/Immunology
Marketed Other
R&D Products Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from external customers 5,056 - 5,056 37,795 42,851 114,511 - 157,362
Interest income 523 2 525 - 525 145 361 1,031
Equity in earnings of equity investees, net of tax 40 - 40 - 40 42,926 - 42,966
Segment operating (loss)/profit (69,961) (62,341) (132,302) 4,707 (127,595) 44,663 (14,307) (97,239)
Interest expense - - - - - - (242) (242)
Income tax (expense)/benefit (109) 1,492 1,383 (571) 812 (265) (2,406) (1,859)
Depreciation/ amortization (3,198) (67) (3,265) - (3,265) (160) (97) (3,522)
Additions to non-current assets (other than financial instruments and deferred 10,183 466 10,649 - 10,649 632 66 11,347
tax assets)
December 31, 2021
Oncology/Immunology
R&D Marketed Products Other
Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'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
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$68,015,000 and US$14,837,000 for the six
months ended June 30, 2022 and 2021 respectively.
There were two customers which accounted for over 10% of the Group's revenue
for the six months ended June 30, 2022: Customer A of US$39,034,000 and
Customer B of US$36,282,000. There were two customers which accounted for over
10% of the Group's revenue for the six months ended June 30, 2021: Customer A
of US$30,981,000 and Customer C of US$20,144,000. Customers A and B are
included in Oncology/Immunology and Customer C is primarily included in Other
Ventures.
Unallocated expenses mainly represent corporate expenses which include
corporate employee benefit expenses and the relevant share-based compensation
expenses. Unallocated assets mainly comprise cash and cash equivalents and
short-term investments.
A reconciliation of segment operating loss to net loss attributable to the
Company is as follows:
Six Months Ended June 30,
2022 2021
(in US$'000)
Segment operating loss (166,683) (97,239)
Interest expense (404) (242)
Income tax benefit/(expense) 4,215 (1,859)
Net loss/(income) attributable to non-controlling interests 11 (3,057)
Net loss attributable to the Company (162,861) (102,397)
21. Note to Condensed Consolidated Statements of Cash Flows
Reconciliation of net loss for the period to net cash used in operating
activities:
Six Months Ended June 30,
2022 2021
(in US$'000)
Net loss (162,872) (99,340)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 4,376 3,522
Share-based compensation expense-share options 3,741 7,925
Share-based compensation expense-LTIP 11,637 10,432
Equity in earnings of equity investees, net of tax (33,549) (42,966)
Dividend received from an equity investee 22,692 42,051
Changes in right-of-use assets 2,221 (1,468)
Fair value loss on warrant 2,452 -
Other adjustments 1,665 (2,464)
Changes in working capital
Accounts receivable 6,397 (10,937)
Other receivables, prepayments and deposits 10,735 (5,368)
Inventories (10,362) (5,669)
Accounts payable 9,828 (3,099)
Other payables, accruals and advance receipts 39,235 33,863
Others 1,945 2,199
Total changes in working capital 57,778 10,989
Net cash used in operating activities (89,859) (71,319)
22. 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 a
decision on costs and interest in December 2021), the Group was awarded an
amount of RMB253.2 million (equivalent to US$38.0 million) with interest of
5.5% per annum from the date of the award until payment and recovery of costs
of approximately US$2.2 million (collectively the "Award"). On June 27, 2022,
Luye provided the Group a bank guarantee of up to RMB286.0 million to cover
the Award amounts, pending the outcome of an application by Luye to the High
Court of Hong Kong to set aside the Award. On July 26, 2022, Luye's
application to set aside the Award was dismissed by the High Court with costs
awarded in favor of the Group and if Luye does not appeal the dismissal, the
Group will be seeking to enforce the Award by drawing down on the bank
guarantee. No Award amounts have been received as at the issuance date of
these condensed consolidated financial statements. Hence no Award amounts have
been recognized and no adjustment has been made to Seroquel-related balances
as at June 30, 2022. Such Seroquel-related balances include accounts
receivable, long-term prepayment, accounts payable and other payables of
US$1.1 million, US$0.6 million, US$0.9 million and US$1.2 million
respectively.
23. Subsequent Events
The Group evaluated subsequent events through August 1, 2022, which is the
date when the interim unaudited condensed consolidated financial statements
were issued.
24. Reconciliation between U.S. GAAP and International Financial Reporting Standards
These interim unaudited condensed consolidated financial statements are
prepared in accordance with U.S. GAAP, which differ in certain respects from
International Financial Reporting Standards ("IFRS"). The effects of material
differences prepared under U.S. GAAP and IFRS are as follows:
(i) Reconciliation of condensed consolidated statements of operations
Six Months Ended June 30, 2022
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Divestment of an equity investee
(note (b)) (note (c))
(in US$'000)
Costs of goods-third parties (115,567) 22 - - (115,545)
Research and development expenses (181,741) 14 - - (181,727)
Selling expenses (22,221) 25 - - (22,196)
Administrative expenses (57,521) 93 - - (57,428)
Total operating expenses (398,801) 154 - - (398,647)
Other (expense)/income, net (3,882) (161) - - (4,043)
Loss before income taxes and equity in earnings of equity investees (200,636) (7) - - (200,643)
Income tax benefit/(expense) 4,215 - - - 4,215
Equity in earnings of equity investees, net of tax 33,549 (9) - - 33,540
Net loss (162,872) (16) - - (162,888)
Less: Net loss/(income) attributable to non-controlling interests 11 (1) - - 10
Net loss attributable to the Company (162,861) (17) - - (162,878)
Six Months Ended June 30, 2021
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Divestment of an equity investee
(note (b)) (note (c))
(in US$'000)
Costs of goods-third parties (107,511) 19 - - (107,492)
Research and development expenses (123,050) 10 - - (123,040)
Selling expenses (18,007) 27 - - (17,980)
Administrative expenses (36,790) 73 724 - (35,993)
Total operating expenses (301,096) 129 724 - (300,243)
Other (expense)/income, net 3,287 (196) - - 3,091
Loss before income taxes and equity in earnings of equity investees (140,447) (67) 724 - (139,790)
Income tax benefit/(expense) (1,859) - - 727 (1,132)
Equity in earnings of equity investees, net of tax 42,966 (3) - (10,003) 32,960
Net loss (99,340) (70) 724 (9,276) (107,962)
Less: Net loss/(income) attributable to non-controlling interests (3,057) 5 - 1,855 (1,197)
Net loss attributable to the Company (102,397) (65) 724 (7,421) (109,159)
(ii) Reconciliation of condensed consolidated balance sheets
June 30, 2022
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Capitalization of rights LTIP classification
(note (b)) (note (d)) (note (e))
(in US$'000)
Investments in equity investees 82,999 (32) - - - 82,967
Other non-current assets 45,038 (257) - 10,833 - 55,614
Total assets 1,194,333 (289) - 10,833 - 1,204,877
Other payables, accruals and advance receipts 233,606 - - - (782) 232,824
Total current liabilities 321,856 - - - (782) 321,074
Total liabilities 342,484 - - - (782) 341,702
Additional paid-in capital 1,484,578 - (697) - 782 1,484,663
Accumulated losses (773,189) (250) 697 11,084 - (761,658)
Accumulated other comprehensive income 1,882 (1) - (278) - 1,603
Total Company's shareholders' equity 799,728 (251) - 10,806 782 811,065
Non-controlling interests 52,121 (38) - 27 - 52,110
Total shareholders' equity 851,849 (289) - 10,833 782 863,175
December 31, 2021
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs Capitalization of rights LTIP classification
(note (b)) (note (d)) (note (e))
(in US$'000)
Investments in equity investees 76,479 (24) - - - 76,455
Other non-current assets 42,831 (257) - 11,296 - 53,870
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
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
condensed 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) Divestment of an equity investee
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 sale and purchase agreement 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 interim unaudited
condensed consolidated statement of operations between equity earnings of
equity investees, net of tax and income tax expense.
(d) 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.
(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.
25. Dividends
No dividend has been paid or declared by the Company for the six months ended
June 30, 2022 and 2021.
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