REG - Hutchmed China Ltd - Interim Results and Business Updates
31/07/2023 12:00
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RNS Number : 7545H Hutchmed (China) Limited 31 July 2023
HUTCHMED Reports 2023 Interim Results and Provides Business Updates
Strong execution on strategic direction, delivering near-term value while
charting a path for growth, exemplified by global partnership with Takeda
Revenue grew 164% (173% CER) to US$533 million, with net income to HUTCHMED of
US$169 million (which include US$259 million of the upfront recognized from
Takeda)
Company to Host Interim Results Call & Webcast Today at 8 p.m. HKT / 1
p.m. BST / 8 a.m. EDT
Company to host a Capital Markets Day in Q4 this year
Hong Kong, Shanghai & Florham Park, NJ - Monday, July 31, 2023: 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 for
the six months ended June 30, 2023 and provides updates on key clinical and
commercial developments.
All amounts are expressed in U.S. dollars unless otherwise stated.
Strategic: clinical, financial, and regulatory progress demonstrates strong delivery on the strategy
· Focusing on driving near-term value creation and establishing a
self-sustaining business over the long term, with the goal of bringing
innovative medicines to patients around the world.
· Significant progress towards bringing medicines to patients
outside China through global partnerships: closed fruquintinib license
agreement with Takeda(( 1 (#_edn1) )) in March, which can potentially bring
in up to $1.13 billion in payments including $400 million upfront payment
received, plus royalties on net sales.
Product & pipeline: fruquintinib advancing to global launches, with continued progress across portfolio
· NDA(( 2 (#_edn2) )) for fruquintinib granted priority review by
the U.S. FDA(( 3 (#_edn3) )), with a PDUFA(( 4 (#_edn4) )) goal date of
November 30, 2023. Takeda preparing for fruquintinib launches worldwide with
MAA(( 5 (#_edn5) )) validated by the EMA(( 6 (#_edn6) )) in June and the
Japan NDA submission planned this year. Global regulatory filings supported by
results from FRESCO-2, recently published in The Lancet, and data from FRESCO.
· Fruquintinib NDA for second-line gastric cancer accepted in
China, where fruquintinib is available and reimbursed under the brand name
ELUNATE(®) for the treatment of metastatic CRC(( 7 (#_edn7) )); Breakthrough
Therapy Designation in endometrial cancer.
· All three HUTCHMED medicines marketed in China now included in
the NRDL(( 8 (#_edn8) )).
· Registration study readouts expected in the second half for two
potential new medicines in China, sovleplenib and amdizalisib. New
registration studies initiated for savolitinib in gastric cancer and
HMPL‑453 for IHCC(( 9 (#_edn9) )); over 15 registration studies ongoing,
across seven drug candidates.
· Productive discovery research continues, with another novel drug
candidate in clinical development (SHP2(( 10 (#_edn10) )) inhibitor
HMPL-415).
Financial: HUTCHMED remains on track to become self-sustaining in 2025
· Total revenues up 164% (173% at CER(( 11 (#_edn11) ))) to $532.9
million for the first half of 2023, with Oncology/Immunology consolidated
revenues up 294% (301% at CER) to $359.2 million.
· Strategy has allowed HUTCHMED to conserve cash and significantly
reduce costs, with a substantial cash balance of $856.2 million on June 30,
2023 including $400 million received from Takeda.
· $258.7 million of the Takeda upfront payment recognized as
revenue in the first half of 2023, resulting in net income of $168.6 million;
we expect to recognize approximately $280 million of this payment for the full
year.
· R&D(( 12 (#_edn12) )) expenses decreased primarily due to
our portfolio optimization efforts, while the reduction in SG&A
expenses(( 13 (#_edn13) )) was mainly due to decreased administrative
expenses after restructuring our U.S. operations.
2023 Interim Results & Business Updates
Mr Simon To, Executive Chairman of HUTCHMED, said, "The first half of 2023 has
been successful for HUTCHMED. In late 2022, we announced our pipeline
prioritization plan and intention to seek global partners to bring our
medicines to help patients outside of China. Six months later, this strategy
is already delivering significant results to our operations. We are
successfully navigating the current challenging capital markets, while making
significant progress towards our goal of becoming a self-sustaining, truly
global biopharma company. Crucially, it means that we are well positioned to
reach more patients than ever with our medicines."
"In March, we closed a licensing deal for fruquintinib with Takeda and we are
confident that they have the commitment, expertise, and commercial
infrastructure to successfully roll out this innovative medicine to patients
across the globe. The FDA Priority Review PDUFA date for fruquintinib is now
set for November 30 this year, reflecting its potential to deliver significant
improvement over currently available treatments."
Dr Weiguo Su, Chief Executive Officer and Chief Scientific Officer of
HUTCHMED, said, "With the sharpening of our goals and priorities, we now have
more resources to advance our assets and drive near-term value, and we are
pleased to report on the important progress made so far this year. We have
over 15 registration/registration-intent studies ongoing with seven drug
candidates. Alongside this, our team has presented data at a number of leading
medical conferences, including AACR(( 14 (#_edn14) )), ASCO(( 15 (#_edn15)
)), ASCO GI(( 16 (#_edn16) )), EHA(( 17 (#_edn17) )) and ICML(( 18
(#_edn18) )), showcasing the productivity of our world class R&D engine.
Furthermore, commercial performance has remained strong this year, with robust
sales growth of our in-house developed oncology products in China. All three
marketed medicines are now included on the NRDL, in line with our commitment
to patient access. Moreover, our strategy means we are in a strong financial
position as we look to continue developing our clinical programs. We started
the second half of 2023 with $856 million in cash resources, including the
$400 million received from Takeda."
"HUTCHMED is now well placed for further successful product launches and life
cycle extensions. In particular, we look forward to continuing the positive
momentum with fruquintinib regulatory reviews around the world, and readouts
from our registration studies for sovleplenib and amdizalisib later this year.
As the last six months have shown, HUTCHMED clearly has the right strategy,
leadership team, and vision to become a truly global biopharma, and I am
confident that HUTCHMED will continue to deliver on this potential."
I. COMMERCIAL OPERATIONS
Total revenues increased 164% (173% at CER) to $532.9 million in the first
half of 2023 (H1-22: $202.0m), driven by Oncology/Immunology partnering, its
strong commercial progress in China, and growth in third-party distribution
sales.
Oncology/Immunology consolidated revenues were up 294% (301% at CER) to $359.2
million (H1-22: $91.1m); driven by recognition of $258.7 million in partnering
revenue for the upfront payment from Takeda, and our strong product sales
growth resulting from in-market sales(( 19 (#_edn19) )) up 16% (25% at CER)
to $101.3 million (H1‑22: $87.4m);
· ELUNATE(®) (fruquintinib) in-market sales in the first half of
2023 increased 12% (20% at CER) to $56.3 million (H1-22: $50.4m), reflecting
its continued lead in market share;
· SULANDA(®) (surufatinib) in-market sales in the first half of
2023 increased 66% (79% at CER) to $22.6 million (H1-22: $13.6m), reflecting
the build-up in patients on treatment over 18 months on the NRDL;
· ORPATHYS(®) (savolitinib) in-market sales in the first half of
2023 decreased 5% (increased 2% at CER) to $22.0 million (H1-22: $23.3m).
Sales in the first quarter were impacted by customary channel fluctuations
ahead of its NRDL inclusion on March 1, subsequently followed by an increase
in sales volume, with the second quarter of 2023 up 84% compared to the second
quarter of 2022;
· R&D services income up 62% (66% at CER) to $20.4 million
(H1-22: $12.6m), now also including fees from our new partner Takeda for the
management of regulatory activities;
· Takeda upfront payment of $400.0 million received, of which
$250.1 million (62%) attributable to the license was recognized immediately.
The remaining balance will be recognized when ongoing services and performance
obligations are completed. Up to June 2023, we have recognized an aggregate of
$258.7 million to revenue and expect around $280 million by year end; and
· Successful management of commercial operations to expand coverage
of oncology hospitals and physicians despite challenges of pandemic-related
disruptions around the start of the year.
$'millions In-market Sales* Consolidated Revenues**
H1 2023 H1 2022 %Δ (CER) H1 2023 H1 2022 %Δ (CER)
Unaudited Unaudited
ELUNATE(®) $56.3 $50.4 +12% (+20%) $42.0 $36.0 +16% (+25%)
SULANDA(®) $22.6 $13.6 +66% (+79%) $22.6 $13.6 +66% (+79%)
ORPATHYS(®) $22.0 $23.3 -5% (+2%) $15.1 $13.8 +10% (+17%)
TAZVERIK(®) $0.4 $0.1 +560% (+583%) $0.4 $0.1 +560% (+583%)
Products Sales $101.3 $87.4 +16% (+25%) $80.1 $63.5 +26% (+35%)
Other R&D services income $20.4 $12.6 +62% (+66%)
Upfront and milestone income $258.7 $15.0
Total Oncology/Immunology $359.2 $91.1 +294% (+301%)
Other Ventures $173.7 $110.9 +57% (+67%)
Total revenues $532.9 $202.0 +164% (+173%)
* = For ELUNATE(®) and ORPATHYS(®), represents total sales to third
parties as provided by Lilly(( 20 (#_edn20) )) and AstraZeneca, respectively;
and their sales to other third parties as invoiced by HUTCHMED.
** = For ELUNATE(®), represents manufacturing fees, commercial service
fees and royalties paid by Lilly, to HUTCHMED, and sales to other third
parties invoiced by HUTCHMED; for ORPATHYS(®) represents manufacturing fees
and royalties paid by AstraZeneca 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
· NDA accepted in China in second-line gastric cancer for
fruquintinib in combination with paclitaxel in April 2023;
· Designated Breakthrough Therapy in China for fruquintinib in
combination with sintilimab in July 2023 for the treatment of advanced
endometrial cancer;
· Consulted with NMPA(( 21 (#_edn21) )) on the registration study
plan of HMPL-453 for IHCC in March 2023;
· Consulted with NMPA on registration study plan of savolitinib for
gastric cancer in March 2023; and
· Received Macau approvals for tazemetostat and savolitinib in
March 2023.
Ex-China
· Fruquintinib submission to U.S. FDA accepted in May 2023 and
granted Priority Review for previously treated metastatic CRC. The PDUFA goal
date assigned by the FDA is November 30, 2023;
· Fruquintinib submission to the EMA was validated in June 2023;
· Fruquintinib submission to the Japanese PMDA(( 22 (#_edn22) ))
expected to be completed in 2023;
· Savolitinib, in combination with TAGRISSO(®), designated a U.S.
FDA Fast Track program in January 2023 for the treatment of patients with
NSCLC(( 23 (#_edn23) )) with MET(( 24 (#_edn24) )) overexpression and/or
amplification, and who have had disease progression during or following prior
TAGRISSO(®); and
· Following dialogue with the PMDA regarding surufatinib, we have
decided not to file a Japanese NDA on the basis of the clinical trial data
available.
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
· Aligned with FDA and enrolling the pivotal Phase II study
SAVANNAH for potential accelerated approval of the TAGRISSO(®) combination
for NSCLC MET patients following progression on TAGRISSO(®) (NCT03778229);
· Completed enrollment of the confirmatory China Phase IIIb study
in MET exon 14 skipping alteration NSCLC in both first-line and second-line
and above patients (NCT04923945);
· After consultation with NMPA, initiated the registration stage of
a China Phase II study in second-line gastric cancer patients with MET
amplification (NCT04923932); and
· Continued enrolling five other registration studies, including
SAFFRON, the global, pivotal Phase III study of the TAGRISSO(®) combination
supporting SAVANNAH (NCT05261399); SACHI, a pivotal Phase III study of the
TAGRISSO(®) combination in China for NSCLC patients with MET amplification
following progression on EGFR(( 25 (#_edn25) )) inhibitor treatment
(NCT05015608); SANOVO, a pivotal Phase III study of the TAGRISSO(®)
combination in China in first-line NSCLC patients harboring EGFR mutation and
MET overexpression (NCT05009836); and SAMETA, a global Phase III study in
MET-driven PRCC(( 26 (#_edn26) )) (NCT05043090).
Potential upcoming clinical and regulatory milestones for savolitinib:
· Complete enrollment of SAVANNAH pivotal Phase II study in 2023;
· Complete enrollment of SOUND, a China Phase II study of the
IMFINZI(®) combination in EGFR wild-type NSCLC patients with MET alterations
(NCT05374603) around year end 2023; and
· Complete recruitment of SACHI, a pivotal Phase III study of the
TAGRISSO(®) combination in China for NSCLC patients with MET amplification
following progression on EGFR inhibitor treatment (NCT05015608) in mid-2024.
Fruquintinib (ELUNATE(®) in China), a highly selective oral inhibitor of VEGFR((
27 (#_edn27)
)) 1/2/3 designed to improve kinase selectivity to minimize off-target toxicity and thereby improve tolerability
· Completed recruitment of the endometrial cancer cohort of a China
Phase II study of fruquintinib in combination with PD-1(( 28 (#_edn28) ))
inhibitor sintilimab in July 2023 for potential registration (NCT03903705);
· Published in peer-reviewed journal The Lancet positive results of
the global Phase III FRESCO-2 registration trial (NCT04322539) in previously
treated metastatic CRC patients in June 2023; and
· Updated results from the clear cell RCC(( 29 (#_edn29) )) cohort
of a China Phase II study of fruquintinib in combination with PD-1 inhibitor
sintilimab at ASCO 2023, these results led to the Phase II/III trial
(NCT05522231).
Potential upcoming clinical and regulatory milestones for fruquintinib:
· Complete NDA submission to the Japanese PMDA in 2023;
· Submit FRUTIGA results for presentation at a scientific
conference (NCT03223376);
· Consult with NMPA on the results of the ongoing endometrial
cancer sintilimab combination Phase II study, which may lead to NDA submission
in the first half of 2024; and
· Complete enrollment of China Phase II/III study of combination
with PD-1 inhibitor sintilimab in clear cell RCC (NCT05522231) around year end
2023.
Surufatinib (SULANDA(®) in China), an oral inhibitor of VEGFR, FGFR((
30 (#_edn30)
)) and CSF-1R((
31 (#_edn31)
)) designed to inhibit tumor angiogenesis and promote immune response against tumor cells via tumor associated macrophage regulation
· Reported data from the Phase Ib/II China toripalimab combination
study at the 2023 AACR and ASCO annual meetings (NCT04169672).
Sovleplenib (HMPL-523), an investigative and highly selective oral inhibitor of Syk((
32 (#_edn32)
)), an important component of the Fc receptor and B-cell receptor signaling pathway
· Completed enrollment of a Phase II Proof-of-Concept study in warm
AIHA(( 33 (#_edn33) )) in China (NCT05535933).
Potential upcoming clinical milestones for sovleplenib:
· Report top-line results from ESLIM-01 China Phase III in primary
ITP(( 34 (#_edn34) )) (NCT03951623) in 2023;
· Decide whether to proceed into Phase I in ITP in US depending on
the outcome of China Phase III; and
· Decide whether to proceed into Phase III in warm AIHA in China or
continue dose escalation, depending on the outcome of an upcoming analysis of
a Phase II Proof-of-Concept study in warm AIHA.
Amdizalisib (HMPL-689), an investigative and highly selective oral inhibitor of PI3Kδ((
35 (#_edn35)
)) designed to address the gastrointestinal and hepatotoxicity associated with currently approved and clinical-stage PI3Kδ inhibitors
· Completed recruitment of patients for China registration Phase II
study for the treatment of follicular lymphoma (with Breakthrough Therapy
Designation) in February 2023 (NCT04849351); and
· Initiated combination trial with tazemetostat in China in
February 2023 (NCT05713110).
Potential upcoming clinical and regulatory milestones for amdizalisib:
· Report top-line results from the China registration Phase II
study for the treatment of follicular lymphoma in late 2023.
Tazemetostat (TAZVERIK(®) in Macau and the Hainan Pilot Zone), a first-in-class, oral inhibitor of EZH2 licensed from Ipsen((
36 (#_edn36)
)) subsidiary Epizyme((
37 (#_edn37)
)) in China
· Approved and launched in the Macau Special Administrative Region
in March 2023.
Potential upcoming clinical and regulatory milestones for tazemetostat:
· Complete recruitment of a China bridging study in follicular
lymphoma for conditional registration based on U.S. approvals in H2 2023
(NCT05467943).
HMPL-453, a novel, highly selective and potent inhibitor targeting FGFR 1, 2 and 3
· Reported human data for the first time at the 2023 ASCO annual
meeting; and
· After consultation with NMPA, initiated the registration phase of
the ongoing Phase II trial for IHCC patients with FGFR 2 fusion (NCT04353375).
Earlier stage investigational drug candidates
In addition to the seven drug candidates being developed in over 15
registration studies above, HUTCHMED is developing six further oncology
candidates in early-stage clinical trials. These are HMPL-306, a highly
selective oral inhibitor of IDH1/2(( 38 (#_edn38) )) designed to address
resistance to currently marketed IDH inhibitors; HMPL-760, a highly selective,
third-generation oral inhibitor of BTK(( 39 (#_edn39) )) with improved
potency versus first generation BTK inhibitors against both wild type &
C481S mutant enzymes; HMPL-295, a highly selective oral inhibitor of ERK(( 40
(#_edn40) )) in the MAPK pathway(( 41 (#_edn41) )) with the potential to
address intrinsic or acquired resistance from upstream mechanisms such as
RAS-RAF-MEK; HMPL-653, an oral, highly selective, and potent CSF-1R inhibitor
designed to target CSF-1R driven tumors as a monotherapy or in combinations;
HMPL-A83, a differentiated, red blood cell sparing anti-CD47 antibody; and
HMPL-415, a novel SHP2 allosteric inhibitor that entered clinical trials in
July 2023.
Subject to data and consultation with the CDE(( 42 (#_edn42) )), several of
these earlier stage drug candidates have potential to move into registration
trials in the next 12 months.
IV. COLLABORATION UPDATES
Closed Exclusive Worldwide License to Takeda for Fruquintinib Outside China
· Takeda is responsible for development, manufacturing and
commercialization in all indications and territories outside of mainland
China, Hong Kong and Macau; and
· HUTCHMED is eligible to receive up to $1.13 billion, including
the $400 million upfront received in April 2023, and up to $730 million in
additional potential payments relating to regulatory, development and
commercial sales milestones, as well as royalties on net sales.
Further clinical progress by Inmagene with two candidates discovered by HUTCHMED
· Inmagene initiating a global, Phase II trial in adults with
moderate-to-severe atopic dermatitis with IMG-007, an anti-OX40 antibody. It
was safe and well-tolerated in the completed Phase I study with no reports of
pyrexia or chills, which are common adverse events of rocatinlimab, another
anti-OX40 treatment.
· Inmagene completed a Phase I study with IMG-004, a reversible,
non-covalent, highly selective oral BTK inhibitor designed to target
immunological diseases. IMG-004 was safe and well-tolerated in this
single-ascending-dose study, with a long half-life and sustained
pharmacodynamic effects that are well above others in its class.
V. OTHER VENTURES
Other Ventures include our profitable prescription drug marketing and distribution platforms
· Other Ventures consolidated revenues increased by 57% (67% at
CER) to $173.7 million (H1-22: $110.9m);
· SHPL(( 43 (#_edn43) )) non-consolidated joint venture revenues
increased by 11% (19% at CER) to $235.3 million (H1-22: $212.4m);
· Consolidated net income attributable to HUTCHMED from our Other
Ventures increased by 5% (12% at CER) to $37.2 million (H1-22: $35.4m), which
was primarily due to the net income contributed from SHPL of $35.1 million
(H1-22: $33.6m); and
· We are exploring opportunities to monetize the underlying value
of our SHPL joint venture including various divestment and equity capital
market alternatives.
VI. IMPACT OF COVID-19
While restrictive measures related to COVID-19 were gradually lifted in China
starting from December 2022, COVꞮD-19 had some impact on our research,
clinical studies and our commercial activities in the first months of 2023.
Measures were put in place to reduce the impact and, in the second quarter of
2023, these activities normalized.
VII. SUSTAINABILITY
At HUTCHMED, we are committed to a progressive journey as we continue to grow.
This includes embedding sustainability into all aspects of our operations and
creating long-term value for our stakeholders, including our staff, our
communities and our shareholders. In April 2023, we published our 2022
Sustainability Report
(https://www.hutch-med.com/wp-content/uploads/2023/04/HCM-SusRpt-2022.pdf)
alongside our 2022 Annual Report
(https://www.hutch-med.com/wp-content/uploads/2023/04/2022-Annual-Report-1.pdf)
. This year we continue to make progress in line with the commitments and
outcomes outlined in the report, including achieving satisfactory progress to
date towards the 11 short- to long-term sustainability goals and targets and
following the recommended disclosure framework of the Task Force on
Climate-related Financial Disclosures (TCFD) in line with the risks
assessment. In the second half of 2023, we continue enhancing our climate
risks action by conducting scope 3 emissions screening, introducing a digital
data collection platform, and further strengthening our sustainability-related
disclosures.
Financial Highlights
Foreign exchange impact: The RMB depreciated against the U.S. dollar on
average by approximately 7% during the six months ended June 30, 2023, which
has impacted our consolidated financial results as highlighted below.
Cash, Cash Equivalents and Short-Term Investments were $856.2 million as of June 30, 2023 compared to $631.0 million as of December 31, 2022.
· Adjusted Group (non-GAAP(( 44 (#_edn44) ))) net cash flows
excluding financing activities in the first half of 2023 were $219.3 million
(H1-22: -$110.9m) mainly due to receipt of a $400 million payment from Takeda;
and
· Net cash generated from financing activities in the first half of
2023 totaled $5.8 million mainly due to the proceeds of bank borrowings
(H1-22: net cash used in financing activities of $74.6m mainly due to the
repayment of bank borrowings and purchases of ADSs(( 45 (#_edn45) )) by a
trustee for the settlement of equity awards).
Revenues for the six months ended June 30, 2023 were $532.9 million compared to $202.0 million in the six months ended June 30, 2022.
· Oncology/Immunology consolidated revenues increased 294% (301% at
CER) to $359.2 million (H1‑22: $91.1m) resulting from:
§ ELUNATE(®) revenues increased 16% (25% at CER) to $42.0 million (H1-22:
$36.0m) due to continued market share gain, comprising of manufacturing
revenues, promotion and marketing service revenues and royalties;
§ SULANDA(®) revenues increased 66% (79% at CER) to $22.6 million (H1-22:
$13.6m) from our continuing marketing activities, increasing patient access
after inclusion on the NRDL in January 2022 and long duration of treatment;
§ ORPATHYS(®) revenues increased 10% (17% at CER) to $15.1 million (H1-22:
$13.8m) after inclusion in the NRDL effective from March 2023 and comprises of
manufacturing revenues and royalties;
§ TAZVERIK(®) revenues were $0.4 million (H1-22: $0.1m) from further sales
in the Hainan Pilot Zone;
§ Partnering revenue of $258.7 million was the first half recognized portion
of the $400 million upfront payment from Takeda; and
§ Other R&D services income of $20.4 million (H1-22: $12.6m), primarily
related to fees from AstraZeneca, Lilly and Takeda for the management of
development and regulatory activities.
· Other Ventures consolidated revenues increased 57% (67% at CER)
to $173.7 million (H1-22: $110.9m), mainly due to higher sales of prescription
drugs. This excludes 11% (19% at CER) growth in non-consolidated revenues at
SHPL of $235.3 million (H1-22: $212.4m).
Net Expenses for the six months ended June 30, 2023 were $364.3 million compared to $364.9 million for the six months ended June 30, 2022.
· Costs of Revenues increased by 52% to $208.3 million (H1-22:
$137.3m), of which cost of revenues from our Other Ventures increased by 63%
to $164.8 million (H1-22: $101.0m) due to the increasing sales of third-party
prescription drug products, and cost of revenues from Oncology/Immunology
increased by 20% to $43.5 million (H1-22: $36.3m) due to the increasing sales
of ELUNATE(®), SULANDA(®) and ORPATHYS(®);
· R&D Expenses reduced 20% to $144.6 million (H1-22: $181.7m),
mainly as a result of the strategic prioritization of our pipeline. Our
international clinical and regulatory operations in the U.S. and Europe
incurred expenses of $55.6 million (H1-22: $83.6m), while R&D expenses in
China were $89.0 million (H1‑22: $98.1m);
· SG&A Expenses were $68.3 million (H1-22: $79.8m), which
decreased primarily due to the restructuring of our U.S. Oncology/Immunology
commercial operations at the end of 2022 while our China commercial
infrastructure was able to support further revenue growth; and
· Other Items generated net income of $56.9 million (H1-22:
$33.9m), which increased primarily due to higher interest income earned after
receiving the $400 million Takeda upfront payment in April 2023 and foreign
currency exchange gains.
Net Income attributable to HUTCHMED for the six months ended June 30, 2023 was $168.6 million (which include $258.7 million of the upfront payment recognized from Takeda) compared to Net Loss attributable to HUTCHMED of $162.9 million for the six months ended June 30, 2022.
· The net income attributable to HUTCHMED for the six months ended
June 30, 2023 was $0.20 per ordinary share / $1.00 per ADS, compared to net
loss attributable to HUTCHMED of $0.19 per ordinary share / $0.96 per ADS for
the six months ended June 30, 2022.
Financial Summary
Condensed Consolidated Balance Sheets Data
(in $'000)
As of June 30, As of December 31, 2022
2023
(Unaudited)
Assets
Cash and cash equivalents and short-term investments 856,168 630,996
Accounts receivable 129,203 97,988
Other current assets 105,114 110,904
Property, plant and equipment 96,829 75,947
Investments in equity investees 37,740 73,777
Other non-current assets 72,443 39,833
Total assets 1,297,497 1,029,445
Liabilities and shareholders' equity
Accounts payable 54,575 71,115
Other payables, accruals and advance receipts 227,212 264,621
Deferred revenue 149,440 13,537
Bank borrowings 40,147 18,104
Other liabilities 26,106 25,198
Total liabilities 497,480 392,575
Company's shareholders' equity 782,039 610,367
Non-controlling interests 17,978 26,503
Total liabilities and shareholders' equity 1,297,497 1,029,445
Condensed Consolidated Statements of Operations Data
(Unaudited, in $'000, except share and per share data)
Six Months Ended June 30
2023 2022
Revenues:
Oncology/Immunology - Marketed Products 80,149 63,517
Oncology/Immunology - R&D 279,034 27,552
Oncology/Immunology consolidated revenues 359,183 91,069
Other Ventures 173,691 110,978
Total revenues 532,874 202,047
Operating expenses:
Costs of revenues (208,324) (137,318)
Research and development expenses (144,633) (181,741)
Selling and general administrative expenses (68,263) (79,742)
Total operating expenses (421,220) (398,801)
111,654 (196,754)
Other income/(expense), net 25,434 (3,882)
Income/(loss) before income taxes and equity in earnings of equity investees 137,088 (200,636)
Income tax (expense)/benefit (2,730) 4,215
Equity in earnings of equity investees, net of tax 35,110 33,549
Net income/(loss) 169,468 (162,872)
Less: Net (income)/loss attributable to non-controlling interests (917) 11
Net income/(loss) attributable to HUTCHMED 168,551 (162,861)
Earnings/(losses) per share attributable to HUTCHMED (US$ per share)
- basic 0.20 (0.19)
- diluted 0.19 (0.19)
Number of shares used in per share calculation
- basic 846,928,863 849,283,553
- diluted 866,990,610 849,283,553
Earnings/(losses) per ADS attributable to HUTCHMED (US$ per ADS)
- basic 1.00 (0.96)
- diluted 0.97 (0.96)
Number of ADSs used in per share calculation
- basic 169,385,773 169,856,711
- diluted 173,398,122 169,856,711
FINANCIAL GUIDANCE
Following the closing of the license with Takeda and having received from them
the upfront payment of $400 million, we currently expect to recognize
approximately $280 million in 2023.
We provide financial guidance for Oncology/Immunology consolidated revenues,
reflecting expected revenue growth of our oncology products in China; R&D
services income from our partners AstraZeneca, Lilly and Takeda; potential
milestone payments on fruquintinib U.S. regulatory approval; and the
above-mentioned recognition of the upfront payment from Takeda. We believe
that we remain on track to meet the 2023 guidance provided in the announcement
of our 2022 full year results on February 28, 2023.
H1 2022 Actual H1 2023 FY 2022 FY 2023 Adjustments vs. Previous Guidance
Actual
Actual
Guidance
Oncology/Immunology consolidated revenues $91.1 $359.2 $163.8 $450 - $550 Nil
million
million
million
million
Shareholders and investors should note that:
· we do not provide any guarantee that the statements contained in
the financial guidance will materialize or that the financial results
contained therein will be achieved or are likely to be achieved; and
· we have in the past revised our financial guidance and reference
should be made to any announcements published by us regarding any updates to
the financial guidance after the date of publication of this announcement.
---
Use of Non-GAAP Financial Measures and Reconciliation - References in this
announcement to adjusted Group net cash flows excluding financing activities
and financial measures reported at CER are based on non-GAAP financial
measures. Please see the "Use of Non-GAAP Financial Measures and
Reconciliation" below for further information relevant to the interpretation
of these financial measures and reconciliations of these financial measures to
the most comparable GAAP measures, respectively.
Conference call and audio webcast presentation scheduled today at
8 p.m. HKT / 1 p.m. BST / 8 a.m. EDT. After registering, investors may
access a live audio webcast of the call via HUTCHMED's website at
www.hutch-med.com/event/
(https://www.hutch-med.com/investors/event-information/) .
Participants who wish to join the call by telephone and ask a question must
register
(https://register.vevent.com/register/BI92b04927463f4f29b7b4fa51f395d040) .
Upon registration, each participant will be provided with dial-in numbers and
a unique PIN.
HUTCHMED intends to host a Capital Markets Day in the fourth quarter of this
year to further update the market on its progress following the strategy
change, and to showcase the exciting pipeline of drug candidates.
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 approximately
5,000 personnel across all its companies, at the center of which is a team of
about 1,800 in oncology/immunology. Since inception, HUTCHMED has focused on
bringing cancer drug candidates from in-house discovery to patients around the
world, with its first three oncology medicines 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) 306-4490
Media Enquiries
Americas - Brad Miles, Solebury Strategic Communications +1 (917) 570 7340 (Mobile) / bmiles@soleburystrat.com
(mailto:bmiles@soleburystrat.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
(mailto:HUTCHMED@brunswickgroup.com)
Nominated Advisor
Atholl Tweedie / Freddy Crossley / Daphne Zhang, +44 (20) 7886 2500
Panmure Gordon
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 subsidiaries 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 products and drug
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 drug candidates in development;
the ability of HUTCHMED to manufacture and manage supply chains for multiple
products and drug 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; 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 COVID-19. 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(( 46 (#_edn46) )). 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 (E.U.) No 596/2014 (as it forms part of retained E.U. 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 900 scientists and staff (December
31, 2022: ~960), and an in-house oncology commercial organization of over 900
staff (December 31, 2022: ~870).
We have 13 oncology drug candidates in clinical trials in China, with four
also in active clinical development in the U.S. and Europe. Our three
medicines, fruquintinib, surufatinib and savolitinib, have all been approved
and launched in China and the fourth, tazemetostat, has been approved and
launched in Hainan Pilot Zone and Macau, and submitted for registration in
Hong Kong.
MARKETED PRODUCT SALES
Despite some initial challenges in the first quarter of the year due to the
impact of COVID-19 in China, in-market sales of HUTCHMED's novel oncology
products continued to grow at 16% (25% at CER) to $101.3 million (H1‑22:
$87.4m) in the first half of 2023.
Fruquintinib (ELUNATE(®) in China)
ELUNATE(®) is approved for the treatment of third-line metastatic CRC for
which there is an approximate incidence of 105,000 new patients per year in
China. We estimate that in the first half of 2023, approximately 17,000 (H1
2022: approximately 14,000) new patients were treated with ELUNATE(®) in
China, despite some challenges in the first quarter of the year due to the
impact of COVID-19. ELUNATE(®) surpassed regorafenib in prescription numbers
for late-stage CRC at the end of 2021, and that lead grew to an approximately
47% market share at the end of June 2023. This resulted in in-market sales of
$56.3 million, up 12% (20% at CER) versus the first half of 2022 ($50.4
million).
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 2023, we consolidated
$42.0 million in revenue for ELUNATE(®), equal to 75% of in-market sales. Our
commercial team continues to be highly active, celebrating ELUNATE(®)'s fifth
year since it was approved and adding a further 112 (+17%) new hospital
pharmacy listings in the first half of 2023.
ELUNATE(®) continues to be included in the NRDL in 2023. Negotiations with
the China NHSA(( 47 (#_edn47) )) to renew its inclusion beyond 2023 are
expected to take place in the second half of this year. The new NHSA NRDL
price determination scheme was published in July 2023, indicating medicines
that already have reimbursement coverage will go through a simplified
renewal/renegotiation process with limited further price discount,
particularly for products that have been reimbursed for at least four years,
such as ELUNATE(®).
Outside of China, fruquintinib will be marketed by our partner Takeda. In the
U.S., commercial preparations are ongoing by Takeda to be ready for launch
once U.S. approval is granted.
Surufatinib (SULANDA(®) in China)
SULANDA(®) was launched in China in 2021 for the treatment of all advanced
NETs(( 48 (#_edn48) )) for which there is an approximate incidence of 34,000
new patients per year in China. In the first half of 2023, approximately
12,000 new patients were treated with SULANDA(®), compared to the
approximately 12,000 new patients in 2022. The two older therapies for
advanced NETs approved and NRDL reimbursed in China, SUTENT(®) and
AFINITOR(®), were approved in 2012 and 2014, respectively. In the first
quarter of 2023, SULANDA(®) had the leading share of the market at
approximately 17%, compared to SUTENT and AFINITOR at 13% and 11%,
respectively.
Sales growth in 2022 was strong, being the first year in which SULANDA(®) had
been listed on the NRDL. As a result of our continued marketing activities,
increasing patient access to SULANDA(®) and its long duration of treatment,
total sales in the first half of 2023 accelerated, growing by 66% (79% at CER)
to $22.6 million (H1-22: $13.6 million). Our commercial team added a further
103 (+19%) new hospital pharmacy listings in the first half of 2023.
Savolitinib (ORPATHYS(®) in China)
ORPATHYS(®) is the first-in-class selective MET inhibitor to be approved in
China, launched and marketed by our partner, AstraZeneca for patients with MET
exon 14 skipping alteration NSCLC. More than a third of the world's lung
cancer patients are in China. Among those with NSCLC globally, approximately
2-3% have tumors with MET exon 14 skipping alterations.
In 2021, 2022 and the first two months of 2023, ORPATHYS(®) was sold as a
self-pay drug. Following negotiations with the China NHSA in January 2023,
ORPATHYS(®) has been included in the updated NRDL since March 1, 2023 at a
38% discount relative to the self-pay price, broadening patient access to this
medicine. Sales during the first half of 2023 were impacted by customary
channel fluctuations following the announcement (in January 2023) and
implementation of the NRDL listing (in March 2023), with increased volume in
the latter part of the first half of 2023. In-market sales for ORPATHYS(®)
fell 5% (increased 2% at CER) in the first half of 2023 to $22.0 million
(H1-22: $23.3m) resulting in our consolidation of $15.1 million (H1-22:
$13.8m) in revenues from manufacturing fees and royalties. Sales in the second
quarter of 2023 were substantially higher than in the second quarter of 2022
before NRDL listing, increasing 84% by volume.
Market understanding of the need for MET testing has improved significantly,
with approximately half of new advanced/relapsed NSCLC patients in China being
tested. 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 a similar guideline from
CSCO(( 49 (#_edn49) )) also recommended ORPATHYS(®) as the standard of care
for such patients. As MET testing awareness and access increases, more
patients are expected to be prescribed a selective MET inhibitor.
ORPATHYS(®) is the first selective MET inhibitor on the market in China,
representing the majority MET TKI(( 50 (#_edn50) )) sales. Several selective
MET inhibitors are in development in China, but only one is currently expected
to be eligible to enter NRDL negotiations in late 2023.
In March 2023, ORPATHYS(®) was approved in the Macau Special Administrative
Region.
Tazemetostat (TAZVERIK(®) in Hainan and Macau, China; the U.S. and Japan)
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. Tazemetostat was included in the 2022 CSCO
guidelines for epithelioid sarcoma. 10 epithelioid sarcoma patients began
treatment in the first half of 2023 (H1-22: none). Tazemetostat is included in
2023 CSCO guideline for follicular lymphoma.
In March 2023, tazemetostat was approved in the Macau Special Administrative
Region. A market authorization application has been under review in Hong Kong
since December 2022.
RESEARCH & DEVELOPMENT
Our strategy is aimed at accelerating our path to profitability and
establishing a long-term sustainable business, by prioritizing late-stage and
registrational studies in China and partnering outside of China. Selected
out-licensing opportunity candidates, particularly outside of China, include
sovleplenib, surufatinib and HMPL-306. HUTCHMED intends to continue to run
early phase development programs for selected drug candidates in U.S., E.U.
and Japan where we believe we can differentiate from a global perspective.
Below is a summary update of the clinical trial progress of our
investigational drug candidates. For more details about each trial, please
refer to our 2022 Annual Report published in April 2023 and recent scientific
publications.
Savolitinib (ORPATHYS(®) in China)
Savolitinib is an oral, potent, and highly selective oral inhibitor of MET. In
global partnership with AstraZeneca, savolitinib is being studied in NSCLC,
PRCC and gastric cancer clinical trials with about 2,000 patients to date,
both as a monotherapy and in combinations. AstraZeneca has paid HUTCHMED $85
million of the total $140 million in upfront payments, development and
approvals milestones that are potentially payable under the relevant license
and collaboration agreement.
Savolitinib - Lung cancer:
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 + TAGRISSO(®) SAVANNAH: 2L/3L EGFRm+(( 51 (#_edn51) )); 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 Ongoing since 2022 NCT05261399
Savolitinib + TAGRISSO(®) SACHI: 2L EGFR TKI refractory NSCLC; MET+ China III Ongoing since 2021 NCT05015608
Savolitinib + TAGRISSO(®) SANOVO: Naïve patients with EGFRm & MET+ China III Ongoing since 2021 NCT05009836
Savolitinib monotherapy MET exon 14 skipping alterations China II Registration Approved & launched in 2021; Final OS(( 52 (#_edn52) )) analysis at ELCC NCT02897479
2022
Savolitinib monotherapy MET exon 14 skipping alterations China III Confirmatory Fully enrolled in H1 2023 NCT04923945
Savolitinib + IMFINZI(®) SOUND: MET-driven, EGFR wild type China II Ongoing since 2022 NCT05374603
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 (NCT02143466) and SAVANNAH
(NCT03778229) 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.
The SAVANNAH global Phase II study, in patients who have progressed following
TAGRISSO(®) due to MET amplification or overexpression, is expected to
complete recruitment in the second half of 2023. In January 2023, the U.S. FDA
designated as a Fast Track development program the investigation of
savolitinib for use in combination with TAGRISSO(®) for the treatment of
patients with locally advanced or metastatic NSCLC whose tumors have MET
overexpression and/or amplification, as detected by an FDA-approved test, and
who have had disease progression during or following prior TAGRISSO(®). We
continue to evaluate the possibility of using the SAVANNAH study as the basis
for U.S. accelerated approval.
The SAFFRON study, which will evaluate the efficacy and safety of savolitinib
in combination with TAGRISSO(®) compared to pemetrexed plus platinum
doublet-chemotherapy, has now activated a majority of the approximately 250
sites in over 20 countries planned for the study, although enrollment of
SAVANNAH is being prioritized until it is fully enrolled.
Two registrational studies are ongoing in China in EGFR mutated NSCLC with MET
aberrations: the SANOVO study in treatment naïve patients, and SACHI study in
patients whose disease progressed following treatment with any first-line EGFR
TKI. Both trials are expected to complete enrollment in 2024.
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). A confirmatory study in this patient population
fully enrolled in H1 2023 (NCT04923945). Results from the first-line cohort of
this study are accepted for disclosure by WCLC.
Savolitinib - Kidney cancer:
MET is a key genetic driver in papillary RCC, and emerging evidence suggests
that combining immunotherapies with a MET inhibitor could enhance anti-tumor
activity. PRCC is a subtype of kidney cancer, representing about 15% of
patients, with no treatments approved for patients with tumors that harbor
MET-driven alterations. Savolitinib has been studied in multiple global
studies 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. Over 140 sites in over 20 countries are
enrolling patients.
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(( 53 (#_edn53) )) 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 registration-intent ~65 patient registration cohort enrolling since March 2023 NCT04923932
Preliminary efficacy and safety data from an interim analysis of 20 patients
in a Phase II trial of savolitinib monotherapy in patients with MET-amplified
advanced or metastatic gastroesophageal junction adeno-carcinomas or gastric
cancer was reported at AACR 2023, showing promising efficacy in patients with
MET-amplified diseases, particularly in patients with high MET gene copy
number. Confirmed ORR by independent review was 45%, or 50% in the 16 patients
with high MET gene copy number. Duration of response rate at 4-months was
85.7%. The most common grade 3 or above TRAEs (more than 5%) were decreased
platelet count, hypersensitivity, anemia, neutropenia and abnormal hepatic
function. The BID regimen is being investigated to further evaluate the
efficacy and safety of savolitinib in MET high patients. Following
consultation with the NMPA with this data, a patient registration cohort began
enrolling in March 2023.
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 efficacy and tolerability. Fruquintinib has been studied in
clinical trials with about 5,500 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), studies
of fruquintinib combined with various checkpoint inhibitors (including
TYVYT(®) and tislelizumab) are underway. Registration-intent studies combined
with chemotherapy (FRUTIGA study in gastric cancer) or checkpoint inhibitors
(TYVYT(®) combo, in endometrial cancer and RCC) are ongoing in China.
We are partnered with Lilly in China and with Takeda outside of 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 U.S. PDUFA date Nov 30, 2023, EMA MAA validated in Jun 2023; Japan filing in NCT04322539
2023; Results published in The Lancet; further data presented at ASCO GI,
JSMO(( 54 (#_edn54) )) & ASCO 2023
Fruquintinib monotherapy CRC; TN(( 55 (#_edn55) )) & HR+(( 56 (#_edn56) ))/Her2-(( 57 (#_edn57) U.S. I/Ib CRC data at ASCO GI 2022; results supported the initiation of the FRESCO-2 NCT03251378
)) breast cancer
Fruquintinib + tislelizumab (PD-1) MSS(( 58 (#_edn58) ))-CRC U.S. Ib/II Ongoing since 2021; Fully enrolled; Follow-up ongoing; Conference submission NCT04577963
pending completion of follow-up
Fruquintinib monotherapy FRESCO: ≥ 3L CRC; chemotherapy refractory China III Approved & launched in 2018 NCT02314819
Fruquintinib + paclitaxel FRUTIGA: 2L gastric cancer China III Supplemental NDA accepted by NMPA in Apr 2023 NCT03223376
Fruquintinib + TYVYT(®) (PD-1) CRC China II Data published in European Journal of Cancer NCT04179084
Fruquintinib + TYVYT(®) (PD-1) Endometrial cancer China II registration-intent Fully enrolled; if positive, NDA filing H1 2024; Ib data at CSCO 2021 NCT03903705
Fruquintinib + TYVYT(®) (PD-1) RCC China Ib/II Fully enrolled; Updated data at ASCO 2023 NCT03903705
Fruquintinib + TYVYT(®) (PD-1) RCC China II/III Ongoing since 2022 NCT05522231
Fruquintinib + TYVYT(®) (PD-1) Gastrointestinal tumors, NSCLC, cervical cancer China Ib/II Fully enrolled NCT03903705
Fruquintinib + tislelizumab (PD-1) CRC Korea / China Ib/II Fully enrolled NCT04716634
Fruquintinib - CRC updates:
FRESCO-2 (NCT04322539) - Positive results from this double-blind,
placebo-controlled, global Phase III study in 691 patients with refractory
metastatic CRC were presented at ESMO 2022 and subsequently published in The
Lancet. The study demonstrated that treatment with fruquintinib resulted in a
statistically significant and clinically meaningful increase in OS and the key
secondary endpoint of PFS(( 59 (#_edn59) )) compared to treatment with
placebo. The safety profile of fruquintinib in FRESCO-2 was consistent with
previously reported fruquintinib studies.
Further analyses presented at ASCO GI and ASCO 2023 added to the understanding
of fruquintinib efficacy and safety. At ASCO GI, results showed that
health-related quality of life was not negatively impacted by treatment with
fruquintinib.
ASCO presentations showed that in subgroup analyses by prior lines of
therapies up to six or more and by prior treatment with approved agents,
fruquintinib improved OS and PFS for all subgroups and prior therapies,
consistent with those of the overall study population. A separate study showed
that during the study adverse events of special interest led to low rates of
dose reduction (13.6% for patients who received fruquintinib vs 0.9% for
patients who received placebo) and dose discontinuation (8.3% for patients who
received fruquintinib vs 6.1% for patients who received placebo).
Outcomes from the Japanese cohort was presented at JSMO 2023. Fruquintinib
treatment led to results for Japanese patients in the study consistent with
the overall study population.
Filing of a rolling submission of an NDA was accepted by the FDA in May 2023
for priority review, with PDUFA date of November 30, 2023. MAA filing to the
EMA was validated in June 2023. NDA filing to the PMDA is expected to follow
in 2023.
China Phase IV (NCT04005066) - Results presented at ASCO 2023 from a
prospective, 3,005-patient study to evaluate the safety of fruquintinib in
real-world clinical practice in China are consistent with the fruquintinib
safety profile observed in existing clinical studies, with no new or
significant safety signals identified.
Fruquintinib - Gastric cancer updates:
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. The trial met the PFS endpoint at a statistically and clinically
meaningful level. The OS endpoint was not statistically significant per the
pre-specified statistical plan, although there was an improvement in median
OS. Fruquintinib also demonstrated a statistically significant improvement in
secondary endpoints including ORR, DCR(( 60 (#_edn60) )) and DoR(( 61
(#_edn61) )). The safety profile of fruquintinib in FRUTIGA was consistent
with previously reported studies. In April 2023, the NDA in China was accepted
for review by the NMPA. Full detailed results are subject to ongoing analysis
and are expected to be disclosed at an upcoming scientific meeting.
Fruquintinib - Combinations with checkpoint inhibitors updates:
Advanced endometrial cancer registration-intent cohort of TYVYT(®)
combination (NCT03903705) - Platinum-based systemic chemotherapy is the
standard first-line treatment for advanced endometrial cancer in China.
However, patients who progress following first-line therapy have limited
treatment options, and the prognosis remains poor. Initially presented at CSCO
2021, data in this endometrial cancer cohort is encouraging.
We agreed with the NMPA to expand this cohort into a single-arm registrational
Phase II study. In July 2023, the cohort fully enrolled and was granted
Breakthrough Therapy Designation. Favorable results from this trial could lead
to a regulatory approval application to the NMPA in this treatment setting in
2024.
Advanced metastatic clear-cell renal cell carcinoma (NCT05522231) - In
first-line clear-cell RCC, clinical benefits have been demonstrated for the
combination of antiangiogenic therapy and immunotherapy. However, there is
limited evidence on the benefits of this combination in the second-line
setting. Phase II (NCT03903705) data disclosed at ASCO 2023 showed encouraging
anti-tumor efficacy and durability in these patients. PFS results from this
exploratory study of the fruquintinib and sintilimab combination in metastatic
clear-cell RCC were reported. At data cut-off on November 30, 2022, median PFS
was 15.9 months in 20 previously treated patients. No new safety signals were
observed.
A Phase II/III trial of fruquintinib in combination with TYVYT(®) as
second-line treatment for locally advanced or metastatic RCC was initiated in
October 2022. The study is a randomized, open-label, active-controlled study
to evaluate the efficacy and safety of fruquintinib in combination with
TYVYT(®) versus axitinib or everolimus monotherapy for the second-line
treatment of advanced RCC. The primary endpoint is PFS. Approximately 260
patients will be enrolled in the study.
Fruquintinib - Exploratory development:
In China, we support an investigator initiated trial program for fruquintinib,
and there are over 50 of such trials ongoing in various solid tumor settings.
A number of investigator-initiated trials were presented at ASCO 2023,
including initial results of a Phase II study of fruquintinib in combination
with investigator's choice of chemotherapy in second-line metastatic CRC with
microsatellite stable (MSS) phenotype, as well as fruquintinib monotherapy for
the treatment of biliary tract cancer and soft tissue sarcoma.
Fruquintinib - Partnership with Takeda:
In January 2023, HUTCHMED entered into an exclusive worldwide license to
develop and commercialize fruquintinib in all indications and territories
outside of mainland China, Hong Kong and Macau, where it is marketed and will
continue to be marketed by HUTCHMED in partnership with Lilly. Subject to the
terms of the agreement, HUTCHMED will be eligible to receive up to $1.13
billion, including $400 million which was received in April 2023 on closing of
the agreement, and up to $730 million in additional potential payments
relating to regulatory, development and commercial sales milestones, as well
as royalties on net sales.
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 1,800 patients to date, both as a monotherapy and in combinations,
and is approved in China. HUTCHMED currently retains all rights to surufatinib
worldwide.
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 Japan Bridging Ongoing since 2021 NCT05077384
Surufatinib monotherapy SANET-ep: epNET(( 62 (#_edn62) )) China III Approved; Launched in 2021 NCT02588170
Surufatinib monotherapy SANET-p: pNET(( 63 (#_edn63) )) China III Approved; Launched in 2021 NCT02589821
Surufatinib + TUOYI(®) (PD-1) SURTORI-01: 2L NEC(( 64 (#_edn64) )) China III Ongoing since 2021 NCT05015621
Surufatinib + TUOYI(®) (PD-1) NENs(( 65 (#_edn65) )), GC, ESCC, SCLC(( 66 (#_edn66) )), NSCLC, EMC, TC, China II Fully enrolled; Data at AACR 2023 & ASCO 2023 NCT04169672
STS, BTC
Surufatinib + TUOYI(®) (PD-1) SCLC China II Ongoing since 2022 NCT05509699
Surufatinib - Monotherapy in NET updates:
Ex-China regulatory discussions - 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. While discussions in 2020
suggested that two positive Phase III studies of surufatinib in patients with
pNETs and epNETs in China, could form the basis to support a U.S. NDA
submission, this was ultimately not accepted. A new multi-regional clinical
trial (MRCT) would be required to move forward with this program in the U.S.,
Europe and Japan. Following dialogue with the Japanese PMDA, we have decided
not to file a Japanese NDA on the basis of the clinical trial data available
at this time.
Surufatinib - Combination therapy with checkpoint inhibitors:
A Phase II China study (NCT04169672) combining surufatinib with TUOYI(®)
enrolled patients in nine solid tumor types, 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 a Phase II study in SCLC in 2022.
We reported the results from the advanced thyroid cancer and endometrial
cancer cohorts at ASCO 2023. Amongst efficacy evaluable radioactive
iodine-refractory differentiated thyroid cancer patients, median PFS was 10.9
months and median OS was not reached (median follow-up duration was 22.1
months). Amongst efficacy evaluable endometrial cancer patients, median PFS
was 5.4 months and 12-month OS rate was 71.0% (median follow-up duration was
16.8 months). In both cohorts, the combination showed a tolerable safety
profile. Additionally, results from the NSCLC cohort were presented at AACR
2023 demonstrating promising anti-tumor activity in first-line setting for
advanced PD-L1 positive NSCLC patients with manageable toxicity.
Surufatinib - Exploratory development:
In China, we support an investigator-initiated trial program for surufatinib,
with over 80 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. A number of investigator initiated trials were presented at
ASCO 2023 for surufatinib in combination with other agents, including with
chemotherapy as well as with camrelizumab (an anti-PD-1 antibody) plus
different chemotherapy regimens in various solid types including pancreatic
adenocarcinoma and NSCLC.
Hematological Malignancies Candidates
HUTCHMED currently has six investigational drug candidates targeting
hematological malig-nan-cies in clinical development. Sovleplenib (HMPL-523,
targeting Syk), amdizalisib (HMPL-689, targeting PI3Kδ), 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).
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. Sovleplenib
has been studied in clinical trials with around 500 patients to date.
In December 2022, we completed recruitment of a Phase III study in China for
primary ITP, for which it has received Breakthrough Therapy Designation, and
presented proof of concept data on both primary ITP and hematological
malignancies at ASH(( 67 (#_edn67) )) 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 Fully enrolled; Topline results expected in H2 2023; Breakthrough Therapy NCT05029635
Designation
Sovleplenib monotherapy Indolent NHL(( 68 (#_edn68) )) U.S. / Europe I/Ib Ongoing; Prelim. Data at ASH 2021 NCT03779113
Sovleplenib monotherapy Warm AIHA China II/III Phase II fully enrolled; Phase III decision in 2023 pending Phase II results NCT05535933
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 188 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 was completed in December 2022 and we expect to
release topline results in the second half of 2023.
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 first patient was enrolled in
September 2022. The enrollment of Phase II part of the study was completed in
mid-2023, and the results will lead to a decision on whether to initiate Phase
III.
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 drugs. The first of such activities is
in combination with tazemetostat. Amdizalisib has been studied in clinical
trials with around 400 patients to date. 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, peripheral T-cell lymphomas China Ib Ongoing; Updated data presented at ICML 2023 NCT03128164
Amdizalisib monotherapy 3L Relapsed/refractory follicular lymphoma China II registration-intent Fully enrolled; Breakthrough Therapy Designation NCT04849351
Amdizalisib monotherapy 2L Relapsed/refractory marginal zone lymphoma China II registration-intent Ongoing since Apr 2021 NCT04849351
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, has fully enrolled the follicular
lymphoma cohort and the marginal zone lymphoma cohort enrollment is ongoing.
Phase Ib expansion study in relapsed/refractory lymphoma (NCT03128164) - This
is a open‑label study to evaluate the safety, tolerability, pharmacokinetics
and preliminary efficacy of amdizalisib in relapsed and/or refractory
non-Hodgkin lymphoma patients. Updated safety data in all patients at
recommended Phase II dose (RP2D), as well as updated efficacy data from the
follicular lymphoma, marginal zone lymphoma, mantle cell lymphoma and
peripheral T cell lymphoma cohorts were reported at ICML in June 2023. At
median follow-up duration of 22.1 months, median DoR and PFS were not reached
for the 26 efficacy evaluable patients in the follicular lymphoma cohort. PFS
and DoR from the marginal zone lymphoma cohort were presented for the first
time, at median follow-up duration of 20.3 months. Median DoR was not reached
and median PFS was 26.8 months for the 16 efficacy evaluable patients in this
cohort. Amdizalisib showed an acceptable safety profile and promising
anti-tumor activity in relapsed/refractory lymphoma.
Tazemetostat
In August 2021, we entered into a strategic collaboration with Epizyme, a
subsidiary of Ipsen, 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 Ipsen 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. Tazemetostat has been studied in clinical
trials with around 1,200 patients to date.
We are developing and plan to seek approval for tazemetostat in various
hematological and solid tumors in China. We are participating in Ipsen's
SYMPHONY-1 (EZH-302) study, leading it in China. We are generally responsible
for funding all clinical trials of tazemetostat in China, including the
portion of global trials conducted there. Separately, we are conducting a
China bridging study in follicular lymphoma for potential conditional
registration based on its U.S. approvals. We also initiated a Phase II study
in combination with our PI3Kδ inhibitor amdizalisib in patients with relapsed
or refractory lymphoma in February 2023. We are responsible for the research,
manufacturing and commercialization of tazemetostat in China. Tazemetostat was
approved in China Hainan Pilot Zone in 2022 and the Macau Special
Administrative Region in 2023.
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; Relapsed/refractory 3L+ Hainan, Macau N/A - Hainan Pilot Zone, Macau Approved; Launched in 2022 and 2023, respectively N/A
follicular lymphoma
Tazemetostat + lenalidomide + rituximab (R²) SYMPHONY-1: 2L follicular lymphoma Global Ib/III Ongoing; PhIb data at ASH 2022; China portion of global Ph III started H2 2022 NCT04224493
Tazemetostat monotherapy Relapsed/refractory 3L+ follicular lymphoma China II registration-intent (bridging) Ongoing since July 2022; EZH2-wildtype cohort fully enrolled; EZH2-mutant NCT05467943
cohort enrolling
Tazemetostat + amdizalisib Lymphoma sub-types China II Ongoing since Feb 2023 NCT05713110
China Phase II combination study in relapsed/refractory follicular lymphoma
(NCT05713110) - This is an open-label, Phase II study in approximately 140
patients to evaluate the safety, tolerability and preliminary anti-tumor
efficacy of tazemetostat in combination with amdizalisib in patients with R/R
lymphoma. The first patient was dosed in February 2023.
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. Approximately 10-15% of IHCC
patients have tumors harboring FGFR2 fusion. 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 with FGFR fusion) China II Ongoing since 2020; Registration cohort enrolling since March 2023 NCT04353375
HMPL-453 + chemotherapies Multiple China I/II Ongoing since 2022 NCT05173142
HMPL-453 +TUOYI(®) (PD‑1) Multiple China I/II Ongoing since 2022 NCT05173142
China Phase II in IHCC (NCT04353375) - This is an open-label, single-arm Phase
II study to evaluate the efficacy and safety of HMPL-453 in the treatment of
patients with advanced IHCC harboring FGFR2 fusions/rearrangements after at
least one line of systemic treatment failure or intolerance. Results from 25
patients treated with two different dosing regimens were presented at the ASCO
2023 annual meeting, supporting the choice of a recommended Phase II dose.
After consultation with the CDE, a monotherapy registration trial design was
agreed, and the first patient was enrolled in March 2023.
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 since 2020; RP2D determined; Dose escalation data at EHA 2023 NCT04272957
HMPL-306 monotherapy Solid tumors including but not limited to gliomas, chondrosarcomas or U.S. I Ongoing since 2021 NCT04762602
cholangiocarcinomas
HMPL-306 monotherapy Hematological malignancies U.S. I Ongoing since 2021 NCT04764474
China Phase I in hematological malignancies (NCT04272957) - This is a
two-phase, open-label Phase I study to evaluate the safety, pharmacokinetics,
pharmacodynamics and efficacy of HMPL‑306 in patients of relapsed or
refractory hematological malignancies harboring IDH1 and/or IDH2 mutations.
The dose escalation phase of the study is completed. The first-in-human
dose-escalation phase data was presented at EHA Annual Meeting in June 2023.
Based on the pharmacodynamic, pharmacokinetic and preliminary clinical
findings, a recommended Phase II dose was nominated for the dose expansion
phase of the study.
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 Phase
I studies opened in early 2022 will include relapsed or refractory B-cell
non-Hodgkin's lymphoma or CLL(( 69 (#_edn69) )) 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(( 70 (#_edn70) )), other B-NHL China I Ongoing since Jan 2022 NCT05190068
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, followed by
HMPL-415 targeting SHP2. A China Phase I study was initiated in July 2021 for
HMPL-295. 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 up to 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 since 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 in combinations. 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 since Jan 2022; ~110 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. In
preclinical studies, HMPL‑A83 demonstrated a high affinity for CD47 antigen
on tumor cells and strong phagocytosis induction of multiple tumor cells, as
well as 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. HUTCHMED currently retains all rights to HMPL-A83
worldwide.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-A83 monotherapy Advanced malignant neoplasms China I Ongoing since July 2022 NCT05429008
HMPL-415
HMPL-415 is a novel SHP2 allosteric inhibitor. A China Phase I study was
initiated in July 2023. HUTCHMED currently retains all rights to HMPL-415
worldwide.
SHP2 is a non-receptor protein tyrosine phosphatase ubiquitously expressed
mainly in the cytoplasm of several tissues. SHP2 modulates diverse cell
signaling events that control metabolism, cell growth, differentiation, cell
migration, transcription and oncogenic transformation. It interacts with
diverse molecules in the cell, and regulates key signaling events including
RAS/ERK, PI3K/AKT, JAK/STAT and PD-1 pathways downstream of several receptor
tyrosine kinases (RTKs) upon stimulation by growth factors and cytokines. This
is the second of multiple candidates to have emerged from our discovery
research that targets this pathway, the first being HMPL-295. Dysregulation of
SHP2 expression or activity causes many developmental diseases, and
hematological and solid tumors.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
HMPL-415 monotherapy Solid tumors China I Ongoing since 2023 NCT05886374
Immunology Collaboration with Inmagene
We have a strategic partnership with Inmagene, a clinical development stage
company with a focus on immunological diseases, to further develop novel
preclinical drug candidates we discovered for the potential treatment of
multiple immunological diseases. Funded by Inmagene, we worked together to
move two drug candidates towards clinical trials. Inmagene advanced the drug
candidates through global clinical development.
Treatment Name, Line, Patient Focus Sites Phase Status/Plan NCT #
IMG-007 (OX40 antibody) Adults with moderate to severe atopic dermatitis Global II Open for enrollment in July 2023 Pending
IMG-007 (OX40 antibody) Adult healthy volunteers Australia I Single ascending dose completed NCT05353972
IMG-004 (BTK inhibitor) Adult healthy volunteers Global I Single ascending dose completed 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. A global, proof-of-concept trial in adult
patients with moderate-to-severe atopic dermatitis is open for enrollment.
This follows a Phase I single ascending dose study in healthy volunteers that
demonstrated that IMG-007, up to 600 mg, was safe and well-tolerated, with no
reports of pyrexia or chills, which were common adverse events of
rocatinlimab, another OX40 antibody treatment. At projected therapeutic dose
levels, IMG-007 also demonstrated a mean terminal half-life of 31-37 days. The
long half-life combined with a potentially improved safety profile supports
IMG-007's best-in-class potential as an OX40 targeted therapy.
IMG-004 in immunological diseases - This is a small molecule inhibitor that
binds to BTK in a non-covalent, reversible manner. Designed specifically for
inflammatory and autoimmune diseases that usually require long-term treatment,
IMG-004 is potent, highly selective and brain permeable. A Phase I single
ascending dose study in healthy volunteers in the U.S., initiated in August
2022, has recently completed. It showed that IMG‑004 was safe and
well-tolerated with a long half-life and sustained pharmacodynamic effects,
supporting further clinical development. Results will be submitted to an
upcoming medical conference.
MANUFACTURING
We continue to use contract manufacturing organizations in China to produce
our clinical and commercial API(( 71 (#_edn71) )) supplies. For manufacturing
drug products, we currently use a combination of contract manufacturers and
our internal manufacturing facility.
We have a drug product facility in Suzhou which manufactures both clinical and
commercial supplies for some of our products. We have also completed
construction of a new drug product facility in Pudong, Shanghai, which will
increase our novel drug product manufacturing capacity by over five times. The
qualification of the Shanghai facility and its equipment is underway and is
expected to be completed in the second half of 2023. The clinical
manufacturing and technology transfer for some of our commercial products is
expected to start in the next few months. This is in line with our previously
outlined expectations of manufacturing clinical supplies from the new facility
starting in 2023 and commercial supplies around 2025, after the necessary
regulatory filings and approvals.
We completed technology transfer for the API and drug product of amdizalisib
and sovleplenib into the selected commercial manufacturing facilities in
preparation for potential NDA filings. Process validation for these products
(both API and drug product) are now complete.
We completed the NDA enabling work related to manufacturing for the global
launch of fruquintinib at the commercial manufacturing sites. Process
validation for API of this product was completed last year, and process
validation for drug product at our Suzhou facility was completed earlier this
year. A second drug product facility in Switzerland is also planned to be
qualified in the second half of 2023, in anticipation for a potential European
approval.
OTHER VENTURES
Our Other Ventures include drug marketing and distribution platforms covering
about 290 cities and towns in China with over 3,000 mainly manufacturing and
commercial personnel. Built over the past 20 years, it primarily focuses on
prescription drugs and science-based nutrition products through several joint
ventures and subsidiary companies.
In the first six months of 2023, our Other Ventures delivered encouraging
growth with consolidated revenues up 57% (67% at CER) to $173.7 million
(H1-22: $110.9m). Consolidated net income attributable to HUTCHMED from our
Other Ventures increased by 5% (12% at CER) to $37.2 million (H1-22: $35.4m).
Hutchison Sinopharm(( 72 (#_edn72) )): 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 68% (79% at CER) to $166.7 million in the
first half of 2023 (H1-22: $99.3m).
In 2021, the Hong Kong International Arbitration Centre made a final award in
favor of Hutchison Sinopharm against Luye(( 73 (#_edn73) )) in the amount of
RMB253.2 million ($35.4 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. On June 6, 2023, an appeal
hearing filed by Luye was heard by the Court of Appeal in Hong Kong and
judgement is awaited.
SHPL: Our own-brand prescription drugs business, operated through our
non-consolidated joint venture SHPL, grew sales by 11% (19% at CER) to $235.3
million (H1-22: $212.4m). This sales growth and favorable product mix led to
an increase of 5% (12% at CER) in net income attributable to HUTCHMED to $35.1
million (H1-22: $33.6m).
The SHPL operation is large-scale, with a commercial team of about 2,300 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 550 manufacturing staff.
SXBX(( 74 (#_edn74) )) pill: SHPL's main product is SXBX pill, an oral
vasodilator prescription therapy for coronary artery disease. SXBX pill is the
second largest botanical prescription drug in this indication in China, with a
national market share in the first five months of 2023 of 22.2% (first four
months of 2022: 21.5%). Sales increased by 8% (16% at CER) to $214.5 million
in the first half of 2023 (H1-22: $197.9m).
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 of China.
We continue to explore divestment and equity capital market opportunities to
monetize our investment in SHPL.
Dividends: Our share of SHPL's profits are passed to the HUTCHMED Group
through dividend payments. In the first six months of 2023, dividends of $14.6
million (H1-22: $22.7m) were paid from SHPL to the HUTCHMED Group level with
aggregate dividends received by HUTCHMED since inception of over $300 million.
Weiguo Su
Chief Executive Officer and Chief Scientific Officer
July 31, 2023
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 generated from/(used in) operating activities to Adjusted Group net cash flows excluding financing activities:
$'millions H1 2023 H1 2022
Net cash generated from/(used in) operating activities 226.4 (89.9)
Net cash (used in)/generated from investing activities (316.0) 259.7
Effect of exchange rate changes on cash and cash equivalents (6.6) (5.2)
Excludes: Deposits in short-term investments 835.1 578.6
Excludes: Proceeds from short-term investments (519.6) (854.1)
Adjusted Group net cash flows excluding financing activities 219.3 (110.9)
Reconciliation of GAAP revenues and net income attributable to HUTCHMED to CER:
$'millions (except %) Six Months Ended Change Amount Change %
June 30, 2023 June 30, 2022 Actual CER Exchange effect Actual CER Exchange effect
Consolidated revenues 532.9 202.0 330.9 348.9 (18.0) 164% 173% -9%
- Oncology/Immunology* 359.2 91.1 268.1 274.4 (6.3) 294% 301% -7%
* Includes:
- Products Sales 80.1 63.5 16.6 22.4 (5.8) 26% 35% -9%
- ELUNATE(®) 42.0 36.0 6.0 9.1 (3.1) 16% 25% -9%
- SULANDA(®) 22.6 13.6 9.0 10.7 (1.7) 66% 79% -13%
- ORPATHYS(®) 15.1 13.8 1.3 2.3 (1.0) 10% 17% -7%
- TAZVERIK(®) 0.4 0.1 0.3 0.3 - 560% 583% -23%
- Other R&D services income 20.4 12.6 7.8 8.3 (0.5) 62% 66% -4%
- Other Ventures^ 173.7 110.9 62.8 74.5 (11.7) 57% 67% -10%
^ Includes:
- Hutchison Sinopharm - prescription drugs 166.7 99.3 67.4 78.8 (11.4) 68% 79% -11%
Non-consolidated joint venture revenues
- SHPL 235.3 212.4 22.9 39.0 (16.1) 11% 19% -8%
- SXBX pill 214.5 197.9 16.6 32.0 (15.4) 8% 16% -8%
Consolidated net income attributable to HUTCHMED - Other Ventures 37.2 35.4 1.8 4.2 (2.4) 5% 12% -7%
- Consolidated entities 2.1 1.8 0.3 0.4 (0.1) 11% 19% -8%
- Equity investees 35.1 33.6 1.5 3.8 (2.3) 5% 12% -7%
- SHPL
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.
Primarily due to a recognition of $258.7 million in partnering revenue from
the upfront payment from Takeda, commercial progress achieved on our three
in-house developed oncology medicines in China, as well as growth in our
third-party distribution sales, we generated a net income of $168.6 million
for the six months ended June 30, 2023 (H1-22: net loss of $162.9m).
As of June 30, 2023, we had cash and cash equivalents and short-term
investments of $856.2 million and unutilized bank facilities of $65.3 million.
As of June 30, 2023, we had $40.1 million in bank borrowings.
Certain of our subsidiaries and joint ventures, including those registered as
wholly foreign-owned enterprises in China, are required to set aside at least
10.0% of their after-tax profits to their general reserves until such reserves
reach 50.0% of their registered capital. In addition, certain of our joint
ventures are required to allocate certain of their after-tax profits as
determined in accordance with related regulations and their respective
articles of association to the reserve funds, upon approval of the board.
Profit appropriated to the reserve funds for our subsidiaries and joint
ventures incorporated in the PRC was approximately $127,000 and nil for the
six months ended June 30, 2023 and 2022, respectively. In addition, as a
result of PRC regulations restricting dividend distributions from such reserve
funds and from a company's registered capital, our PRC subsidiaries are
restricted in their ability to transfer a certain amount of their net assets
to us as cash dividends, loans or advances. This restricted portion amounted
to $0.1 million as of June 30, 2023.
In addition, our non-consolidated joint venture, SHPL, held an aggregate of
$43.6 million in cash and cash equivalents and no bank borrowings as of June
30, 2023. 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,
2023 2022
(in $'000)
Cash Flow Data:
Net cash generated from/(used in) operating activities 226,403 (89,859)
Net cash (used in)/generated from investing activities (315,957) 259,706
Net cash generated from/(used in) financing activities 5,830 (74,638)
Net (decrease)/increase in cash and cash equivalents (83,724) 95,209
Effect of exchange rate changes (6,558) (5,249)
Cash and cash equivalents at beginning of the period 313,278 377,542
Cash and cash equivalents at end of the period 222,996 467,502
Net Cash generated from/(used in) Operating Activities
Net cash used in operating activities was $89.9 million for the six months
ended June 30, 2022, compared to net cash generated from operating activities
of $226.4 million for the six months ended June 30, 2023. The net change of
$316.3 million was primarily attributable to the net loss attributable to
HUTCHMED of $162.9 million for the six months ended June 30, 2022 compared to
net income attributable to HUTCHMED of $168.6 million for the six months ended
June 30, 2023 (which included $258.7 million in upfront income recognized from
Takeda).
Net Cash (used in)/generated from Investing Activities
Net cash generated from investing activities was $259.7 million for the six
months ended June 30, 2022, compared to net cash used in investing activities
of $316.0 million for the six months ended June 30, 2023. The net change of
$575.7 million was primarily attributable to short-term investments which had
net withdrawals of $275.5 million for the six months ended June 30, 2022 as
compared to net deposits of $315.5 million for the six months ended June 30,
2023. The net change was partially offset by a dividend of $23.9 million
received from divestment of a former equity investee during the six months
ended June 30, 2023.
Net Cash generated from/(used in) Financing Activities
Net cash used in financing activities was $74.6 million for the six months
ended June 30, 2022, compared to net cash generated from financing activities
of $5.8 million for the six months ended June 30, 2023. The net change of
$80.4 million was mainly attributable to bank borrowings which had a net
repayment of $26.5 million during the six months ended June 30, 2022 as
compared to net proceeds of $22.9 million during the six months ended June 30,
2023. The net change was also attributable to a decrease in purchases of ADSs
of $39.0 million by a trustee for the settlement of equity awards of the
Company which totaled $48.1 million for the six months ended June 30, 2022 as
compared to $9.1 million for the six months ended June 30, 2023, partly offset
by dividends paid to non-controlling shareholders of subsidiaries of $9.1
million for the six months ended June 30, 2023 while there was no such
dividend payment for the six months ended June 30, 2022.
LOAN FACILITIES
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 ($105.5 million) with an
annual interest rate at the 5-year China Loan Prime Rate less 0.8% (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, 2023, RMB287.3 million ($40.1 million) was utilized from the fixed asset
loan facility.
In May 2022, our subsidiary entered into a 12-month revolving loan facility
with HSBC in the amount of HK$390.0 million ($50.0 million) with an interest
rate at HIBOR(( 75 (#_edn75) )) plus 0.5% per annum. This revolving facility
is guaranteed by us. The revolving loan facility expired in May 2023.
Our non-consolidated joint venture SHPL had no bank borrowings outstanding as
of June 30, 2023.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table sets forth our contractual obligations as of June 30,
2023. 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 40,147 - 1,596 4,786 33,765
Interest on bank borrowings 9,231 1,365 2,716 2,508 2,642
Purchase obligations 5,039 4,687 352 - -
Lease obligations 11,648 5,325 4,676 1,647 -
66,065 11,377 9,340 8,941 36,407
SHPL
The following table sets forth the contractual obligations of our
non-consolidated joint venture SHPL as of June 30, 2023. 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 1,168 1,168 - - -
Lease obligations 1,771 832 939 - -
2,939 2,000 939 - -
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. While 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, any significant fluctuation in the value
of renminbi may adversely affect our cash flows, results of operations and
financial condition in the future.
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(( 76
(#_edn76) )). 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 results
of a 1.0% interest rate shift would be nil for the six months ended June 30,
2023 because the entire interest expenses incurred for the six months ended
June 30, 2023 were associated with our outstanding fixed asset loan and were
capitalized when the underlying property, plant and equipment were under
construction.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the years 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 5.0% as of June 30, 2023, an
increase from 2.8% as of December 31, 2022. The increase was primarily
attributable to the increase in interest-bearing loans.
SIGNIFICANT INVESTMENTS HELD
Except for our investment in a non-consolidated joint venture SHPL with a
carrying value of $37.7 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,
2023.
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,
2023 were $14.6 million.
FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS
Note 11 discloses our capital commitment as of June 30, 2023. We are building
a new drug product facility in Shanghai, China, and will make additional
investments in capital assets accordingly.
MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
During the six months ended June 30, 2023, 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. RMB287.3 million
($40.1 million) was utilized from the fixed asset loan facility as of June 30,
2023.
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 1.5%, 1.8% and flat in 2021, 2022 and the first
half of 2023, 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, 2023.
OTHER INFORMATION
CORPORATE STRATEGY
The primary objective of the Company is to be a 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, the Oncology/Immunology operations, to develop and expand the drug
candidate portfolio of the Group for the global market, building on the
first-mover advantage in the development and launch of novel cancer medicines
in China, and engaging partners for late-stage development and
commercialization outside China. This strategy is aligned with the Company's
culture of innovation and high engagement and empowerment with a strong 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 its
objectives. The Group also focuses on sustainability and delivering business
solutions to support the transition to a low-carbon economy.
HUMAN RESOURCES
As at June 30, 2023, the Group employed approximately 1,990 (June 30, 2022:
~2,110) full time staff members. Staff costs during the six months ended June
30, 2023, including directors' emoluments, totaled $104.0 million (H1-22:
$118.9 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
The key sustainability mission of the Group is to create long-term value for
all stakeholders by aligning its sustainability objectives to the strategic
development of its businesses. The Board of Directors ("the Board") has the
overall responsibility to ensure that sustainability issues are integrated
into the strategy and long-term development of the Group. It provides
oversight of the sustainability performance of the Group through closely
monitoring key sustainability matters and performance indicators, along with
trends, risks, and opportunities that may impact the business development of
the Group. Supported by the Sustainability Committee, senior management, and
the Sustainability Working Group, the Board oversees the management approach
to sustainability matters and the formulation of sustainability strategies.
A standalone Sustainability Report of the Company for 2022 was published
alongside the 2022 Annual Report in April 2023 and included further
information on the Group's sustainability initiatives and their performances.
It further discussed the abovementioned sustainability mission and strategies,
management approach, progress, material quantitative data, as well as policies
and key initiatives of the Group. Over the course of 2023, the Group continues
to engage its stakeholders to identify areas for improvement in these
sustainability fronts.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the period from January 1, 2023 to June 30, 2023, 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 Company and its
subsidiaries 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, 2023 with
all applicable code provisions of the Hong Kong Corporate Governance Code
contained in Appendix 14 of the Rules Governing the Listing of Securities on
HKEX (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 that they have complied with the required standards
set out in such code regarding their securities transactions throughout their
tenure during the six months ended June 30, 2023.
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 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 $585.2 million from
the offering and the over-allotment option for the purposes and in the amounts
(adjusted on pro rata basis based on the actual net proceeds) as disclosed in
the prospectus of the Company dated June 18, 2021 is as below:
Use of Proceeds Percentage of Total Net Proceeds Approximate Amount Actual Usage up to June 30, 2023 Unutilized Net Proceeds as of June 30, 2023 Expected Timeline for Utilization of Proceeds (note)
(%) ($'millions) ($'millions) ($'millions)
Advance our late-stage clinical programs for savolitinib, surufatinib, 50% 292.7 292.7 - Fully utilized
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 58.5 - Fully utilized
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% 117.1 102.8 14.3 2023
clinical and regulatory and manufacturing
Fund potential global business development and strategic acquisition 15% 87.8 68.8 19.0 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% 585.2 551.9 33.3
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 substantially 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, 2023 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, 2023 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, 2023 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.londonstockex-change.com
(http://www.londonstockexchange.com) ) 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, 2023 will be published on the websites of HKEX and the
Company, and dispatched to the Company's shareholders in due course.
INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HUTCHMED (CHINA) LIMITED
Condensed Consolidated Balance Sheets
(in US$'000, except share data)
June 30, December 31,
Note 2023 2022
Assets (Unaudited)
Current assets
Cash and cash equivalents 3 222,996 313,278
Short-term investments 3 633,172 317,718
Accounts receivable 4 129,203 97,988
Other receivables, prepayments and deposits 5 29,280 53,216
Amount due from a related party 15(ii) 21,959 998
Inventories 6 53,875 56,690
Total current assets 1,090,485 839,888
Property, plant and equipment 96,829 75,947
Investments in equity investees 7 37,740 73,777
Amount due from a related party, non-current portion 15(ii) 32,896 -
Other non-current assets 39,547 39,833
Total assets 1,297,497 1,029,445
Liabilities and shareholders' equity
Current liabilities
Accounts payable 8 54,575 71,115
Other payables, accruals and advance receipts 9 227,212 264,621
Deferred revenue 13 52,264 13,347
Other current liabilities 6,812 4,820
Total current liabilities 340,863 353,903
Long-term bank borrowings 10 40,147 18,104
Deferred revenue, non-current portion 13 97,176 190
Other non-current liabilities 19,294 20,378
Total liabilities 497,480 392,575
Commitments and contingencies 11
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000 shares authorized; 866,161,450 86,616 86,478
and 864,775,340 shares issued at June 30, 2023 and December 31, 2022
respectively
Additional paid-in capital 1,506,280 1,497,273
Accumulated losses (803,057) (971,481)
Accumulated other comprehensive loss (7,800) (1,903)
Total Company's shareholders' equity 782,039 610,367
Non-controlling interests 17,978 26,503
Total shareholders' equity 800,017 636,870
Total liabilities and shareholders' equity 1,297,497 1,029,445
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
Condensed Consolidated Statements of Operations
(UNAUDITED, IN US$'000, EXCEPT SHARE AND PER SHARE DATA)
Six Months Ended June 30,
Note 2023 2022
Revenues
Goods -third parties 209,247 136,932
-related parties 15(i) 4,252 1,638
Services -commercialization-third parties 25,359 21,594
-collaboration research and development 28,718 12,335
-third parties
-research and development-related party 15(i) 246 263
Other collaboration revenue
-royalties-third parties 14,982 14,331
-licensing-third parties 250,070 14,954
Total revenues 13 532,874 202,047
Operating expenses
Costs of goods-third parties (182,380) (115,567)
Costs of goods-related parties (2,536) (1,198)
Costs of services-commercialization -third parties (23,408) (20,553)
Research and development expenses 14 (144,633) (181,741)
Selling expenses (26,423) (22,221)
Administrative expenses (41,840) (57,521)
Total operating expenses (421,220) (398,801)
111,654 (196,754)
Other income/(expense), net 25,434 (3,882)
Income/(loss) before income taxes and equity in earnings of equity investees 137,088 (200,636)
Income tax (expense)/benefit 16 (2,730) 4,215
Equity in earnings of equity investees, net of tax 7 35,110 33,549
Net income/(loss) 169,468 (162,872)
Less: Net (income)/loss attributable to non-controlling interests (917) 11
Net income/(loss) attributable to the Company 168,551 (162,861)
Earnings/(losses) per share attributable to the Company (US$ per share)
-basic 17 0.20 (0.19)
-diluted 17 0.19 (0.19)
Number of shares used in per share calculation
-basic 17 846,928,863 849,283,553
-diluted 17 866,990,610 849,283,553
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
Condensed Consolidated Statements of Comprehensive Income/(Loss)
(UNAUDITED, in US$'000)
Six Months Ended June 30,
2023 2022
Net income/(loss) 169,468 (162,872)
Other comprehensive loss
Foreign currency translation loss (6,245) (4,175)
Total comprehensive income/(loss) 163,223 (167,047)
Less: Comprehensive (income)/loss attributable to non-controlling interests (573) 496
Total comprehensive income/(loss) attributable to the Company 162,650 (166,551)
The accompanying notes are an integral part of these interim unaudited
condensed consolidated financial statements.
HUTCHMED (CHINA) LIMITED
Condensed Consolidated Statements of Changes in Shareholders' Equity
(UNAUDITED, in US$'000, except share data in '000)
Ordinary Shares Number Ordinary Shares Value Additional Accumulated Losses Accumulated Other Comprehensive Income/(Loss) Total Company's Shareholders' Equity Non-controlling Interests Total Shareholders' Equity
Paid-in
Capital
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
Long-term incentive plan ("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
As at January 1, 2023 864,775 86,478 1,497,273 (971,481) (1,903) 610,367 26,503 636,870
Net income - - - 168,551 - 168,551 917 169,468
Issuances in relation to share option exercises 1,386 138 920 - - 1,058 - 1,058
Share-based compensation
Share options - - 3,236 - - 3,236 3 3,239
LTIP - - 13,844 - - 13,844 (33) 13,811
- - 17,080 - - 17,080 (30) 17,050
LTIP-treasury shares acquired and held by Trustee - - (9,071) - - (9,071) - (9,071)
Dividends declared to non-controlling shareholders of subsidiaries - - - - - - (9,068) (9,068)
Transfer between reserves - - 127 (127) - - - -
Divestment of an equity investee - - (49) - 4 (45) - (45)
Foreign currency translation adjustments - - - - (5,901) (5,901) (344) (6,245)
As at June 30, 2023 866,161 86,616 1,506,280 (803,057) (7,800) 782,039 17,978 800,017
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 2023 2022
Net cash generated from/(used in) operating activities 19 226,403 (89,859)
Investing activities
Purchases of property, plant and equipment (24,359) (15,754)
Deposits in short-term investments (835,092) (578,602)
Proceeds from short-term investments 519,638 854,062
Dividend received from divestment of Hutchison Whampoa Guangzhou Baiyunshan 23,856 -
Chinese Medicine Company Limited
Net cash (used in)/ generated from investing activities (315,957) 259,706
Financing activities
Proceeds from issuances of ordinary shares 1,058 34
Purchases of treasury shares 12(ii) (9,071) (48,084)
Dividends paid to non-controlling shareholders of subsidiaries 15(iii) (9,068) -
Proceeds from bank borrowings 22,911 418
Repayment of bank borrowings - (26,923)
Payment of issuance costs - (83)
Net cash generated from/(used in) financing activities 5,830 (74,638)
Net (decrease)/increase in cash and cash equivalents (83,724) 95,209
Effect of exchange rate changes on cash and cash equivalents (6,558) (5,249)
(90,282) 89,960
Cash and cash equivalents
Cash and cash equivalents at beginning of period 313,278 377,542
Cash and cash equivalents at end of period 222,996 467,502
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 investee 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 and Macau. 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 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, 2023, the Group had accumulated losses of US$803,057,000
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,
2023, the Group had cash and cash equivalents of US$222,996,000, short-term
investments of US$633,172,000 and unutilized bank borrowing facilities of
US$65,343,000. 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 from the issuance date
of the interim unaudited condensed consolidated financial statements (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,
2023 2022
(in US$'000)
Cash and Cash Equivalents
Cash at bank and on hand 71,244 178,326
Bank deposits maturing in three months or less 151,752 134,952
222,996 313,278
Short-term Investments
Bank deposits maturing over three months (note) 633,172 317,718
856,168 630,996
Note: The maturities for short-term investments ranged from 91 to 187 days and
91 to 99 days for the six months ended June 30, 2023 and the year ended
December 31, 2022 respectively.
Certain cash and bank balances denominated in Renminbi ("RMB"), U.S. dollar
("US$") and UK Pound Sterling ("£") were deposited with banks in the PRC. The
conversion of these balances into foreign currencies is subject to the rules
and regulations of foreign exchange control promulgated by the PRC government.
Cash and cash equivalents and short-term investments were denominated in the
following currencies:
June 30, December 31,
2023 2022
(in US$'000)
US$ 822,603 533,173
RMB 21,933 79,319
Hong Kong dollar ("HK$") 9,872 16,721
£ 1,417 1,370
Others 343 413
856,168 630,996
4. Accounts Receivable
Accounts receivable from contracts with customers consisted of the following:
June 30, December 31,
2023 2022
(in US$'000)
Accounts receivable-third parties 127,180 94,531
Accounts receivable-related parties (Note 15(ii)) 2,212 3,517
Allowance for credit losses (189) (60)
Accounts receivable, net 129,203 97,988
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,
2023 2022
(in US$'000)
Not later than 3 months 109,809 84,007
Between 3 months to 6 months 14,073 7,478
Between 6 months to 1 year 2,088 1,947
Later than 1 year 1,210 1,099
Accounts receivable-third parties 127,180 94,531
Movements on the allowance for credit losses:
2023 2022
(in US$'000)
As at January 1 60 20
Increase in allowance for credit losses 150 119
Decrease in allowance due to subsequent collection (17) (14)
Exchange difference (4) (4)
As at June 30 189 121
5. Other Receivables, Prepayments and Deposits
Other receivables, prepayments and deposits consisted of the following:
June 30, December 31,
2023 2022
(in US$'000)
Prepayments 12,053 22,329
Value-added tax receivables 7,046 1,491
Interest receivables 5,379 807
Dividend receivables 2,527 26,246
Deposits 1,205 1,214
Others 1,070 1,129
29,280 53,216
No allowance for credit losses has been made for other receivables,
prepayments and deposits for the six months ended June 30, 2023 and year ended
December 31, 2022.
6. Inventories
Inventories, net of provision for excess and obsolete inventories, consisted
of the following:
June 30, December 31,
2023 2022
(in US$'000)
Raw materials 27,231 27,392
Finished goods 26,644 29,298
53,875 56,690
7. Investments in Equity Investees
Investments in equity investees consisted of the following:
June 30, December 31,
2023 2022
(in US$'000)
Shanghai Hutchison Pharmaceuticals Limited ("SHPL") 37,740 73,461
Other (note) - 316
37,740 73,777
Note: On April 13, 2023, the Group completed a transaction to sell its entire
investment in a former equity investee to a third party.
The equity investees are private companies and there are no quoted market
prices available for their shares.
Summarized financial information for the equity investee, SHPL, is as follows:
(i) Summarized balance sheets
June 30, December 31,
2023 2022
(in US$'000)
Current assets 228,185 214,267
Non-current assets 74,950 80,062
Current liabilities (163,222) (147,952)
Non-current liabilities (69,791) (4,944)
Net assets 70,122 141,433
(ii) Summarized statements of operations
Six Months Ended June 30,
2023 2022
(in US$'000)
Revenue 235,271 212,413
Gross profit 175,750 165,208
Interest income 438 623
Finance cost (note (a)) (1,022) -
Income before taxation 84,064 78,472
Income tax expense (note (b)) (13,840) (11,209)
Net income (note (c)) 70,224 67,263
Notes:
(a) On January 31, 2023, SHPL declared dividends of US$146,974,000. Finance
cost is from the accretion of the US$3,654,000 discount recorded on the
dividends payable.
(b) The main entity within SHPL group has been granted the High and New
Technology Enterprise ("HNTE") status (the latest renewal of this status
covered the years from 2020 to 2022). This entity was eligible to use a
preferential income tax rate of 15% for the year ended December 31, 2022 on
this basis. The entity is in the process of applying to renew the HNTE status
for another three years. Management considers that the renewal of HNTE status
will be granted and the preferential income tax rate of 15% continues to be
applicable for the six months ended June 30, 2023.
(c) Net income is before elimination of unrealized profits on transactions
with the Group. The amounts eliminated were approximately US$2,000 and
US$80,000 for the six months ended June 30, 2023 and 2022 respectively.
(iii) Reconciliation of summarized financial information
Reconciliation of the summarized financial information presented to the
carrying amount of investment in SHPL is as follows:
2023 2022
(in US$'000)
Opening net assets as at January 1 141,433 145,741
Net income 70,224 67,263
Dividends declared (146,974) (45,385)
Discount on dividends payable 3,654 -
Other comprehensive income/(loss) 1,785 (8,544)
Closing net assets as at June 30 70,122 159,075
Group's share of net assets 35,061 79,538
Goodwill 2,795 3,000
Elimination of unrealized profits on sales to SHPL (116) -
Carrying amount of investments as at June 30 37,740 82,538
SHPL had the following capital commitments:
June 30, 2023
(in US$'000)
Property, plant and equipment
Contracted but not provided for 1,168
8. Accounts Payable
June 30, December 31,
2023 2022
(in US$'000)
Accounts payable 54,575 71,115
Substantially all accounts payable are denominated in RMB, EUR 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,
2023 2022
(in US$'000)
Not later than 3 months 48,284 60,553
Between 3 months to 6 months 2,765 7,216
Between 6 months to 1 year 2,346 2,137
Later than 1 year 1,180 1,209
54,575 71,115
9. Other Payables, Accruals and Advance Receipts
Other payables, accruals and advance receipts consisted of the following:
June 30, December 31,
2023 2022
(in US$'000)
Accrued research and development expenses 140,158 156,134
Accrued salaries and benefits 27,225 42,442
Accrued capital expenditures 21,429 21,390
Accrued administrative and other general expenses 14,090 14,491
Accrued selling and marketing expenses 10,448 11,564
Deposits 3,172 3,616
Amounts due to related parties (Note 15(ii)) 1,957 2,101
Deferred government grants 689 673
Others 8,044 12,210
227,212 264,621
10. Bank Borrowings
Bank borrowings consisted of the following:
June 30, December 31,
2023 2022
(in US$'000)
Non-current 40,147 18,104
The weighted average interest rate for outstanding bank borrowings for the six
months ended June 30, 2023 and year ended December 31, 2022 was 3.51% per
annum and 1.73% per annum respectively. The carrying amounts of the Group's
outstanding bank borrowings as at June 30, 2023 and December 31, 2022 were
denominated in RMB.
(i) 1-year revolving loan facility
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 Hong Kong Interbank Offered Rate plus 0.5% per
annum. This credit facility was guaranteed by the Company and expired in May
2023.
(ii) 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$105,490,000) 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, 2023 and December 31, 2022, RMB287,287,000
(US$40,147,000) and RMB126,083,000 (US$18,104,000) were utilized from the
fixed asset loan facility respectively, of which RMB4,708,000 (US$658,000) and
RMB769,000 (US$110,000) were related to capitalized interest respectively.
The Group's bank borrowings are repayable as from the dates indicated as
follows:
June 30, December 31,
2023 2022
(in US$'000)
Between 1 to 3 years 1,596 360
Between 3 to 4 years 2,127 839
Between 4 to 5 years 2,659 1,079
Later than 5 years 33,765 15,826
40,147 18,104
As at June 30, 2023, the Group had unutilized bank borrowing facilities of
US$65,343,000.
11. Commitments and Contingencies
The Group had the following capital commitments:
June 30, 2023
(in US$'000)
Property, plant and equipment
Contracted but not provided for 5,039
The Group does not have any other significant commitments or contingencies.
12. 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, 2023, the aggregate number of shares issuable under the
Hutchmed Share Option Scheme was 47,044,598 ordinary shares and the aggregate
number of shares issuable under the prior share option scheme which expired in
2016 was 211,320 ordinary shares. The Company will issue new shares to satisfy
share option exercises. Additionally, the number of shares authorized but
unissued was 633,838,550 ordinary shares.
Share options granted are generally subject to a four-year vesting schedule,
depending on the nature and the purpose of the grant. Share options subject to
the four-year vesting schedule, in general, vest 25% upon the first
anniversary of the vesting commencement date as defined in the grant letter,
and 25% every subsequent year. However, certain share option grants may have a
different vesting schedule as approved by the Board of Directors of the
Company. No outstanding share options will be exercisable or subject to
vesting after the expiry of a maximum of eight to ten years from the date of
grant.
A summary of the Company's share option activity and related information is as
follows:
Number of share options Weighted average exercise price in US$ per share Weighted average remaining contractual life (years) Aggregate intrinsic value
(in US$'000)
Outstanding at January 1, 2022 37,190,590 4.88 7.04 82,377
Granted (note) 7,680,820 2.26
Exercised (244,490) 1.98
Cancelled (3,849,905) 5.19
Expired (1,255,620) 5.66
Outstanding at December 31, 2022 39,521,395 4.34 6.55 11,525
Granted 1,221,900 2.50
Exercised (1,386,110) 1.92
Cancelled (2,742,340) 4.68
Expired (1,893,370) 5.55
Outstanding at June 30, 2023 34,721,475 4.27 6.21 1,541
Vested and exercisable at December 31, 2022 21,113,285 4.57 4.80 6,288
Vested and exercisable at June 30, 2023 21,976,870 4.58 4.97 591
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$0.24 per share using the Polynomial model. Vesting of such award will
occur in March 2025 if the performance target based on a market condition is
met.
In estimating the fair value of share options granted, the following
assumptions were used in the Polynomial model for awards granted in the
periods indicated:
Six Months Ended June 30, 2023 Year Ended December 31, 2022
Weighted average grant date fair value of share options (in US$ per share) 1.14 0.85
Significant inputs into the valuation model (weighted average):
Exercise price (in US$ per share) 2.50 2.26
Share price at effective date of grant (in US$ per share) 2.50 2.22
Expected volatility (note (a)) 53.3% 46.7%
Risk-free interest rate (note (b)) 3.69% 2.98%
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$.
(c) The Company has not declared or paid any dividends and does not
currently expect to do so prior to the exercise of the granted share options,
and therefore uses an expected dividend yield of zero in the Polynomial model.
The Company will issue new shares to satisfy share option exercises. The
following table summarizes the Company's share option exercises:
Six Months Ended June 30,
2023 2022
(in US$'000)
Cash received from share option exercises 1,058 34
Total intrinsic value of share option exercises 1,898 57
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,
2023 2022
(in US$'000)
Research and development expenses 1,664 2,795
Selling and administrative expenses 1,522 871
Cost of revenues 53 75
3,239 3,741
As at June 30 2023, the total unrecognized compensation cost was US$8,107,000,
and will be recognized on a graded vesting approach over the weighted average
remaining service period of 2.50 years.
(ii) LTIP
The Company grants awards under the LTIP to participating directors and
employees, giving them a conditional right to receive ordinary shares of the
Company or the equivalent ADS (collectively the "Awarded Shares") to be
purchased by the Trustee up to a cash amount. Vesting will depend upon
continued employment of the award holder with the Group and will otherwise be
at the discretion of the Board of Directors of the Company. Additionally, some
awards are subject to change based on annual performance targets prior to
their determination date.
LTIP awards prior to the determination date
Performance targets vary by award, and may include targets for shareholder
returns, financings, revenues, net income/(loss) after taxes and the
achievement of clinical and regulatory, business development and manufacturing
milestones. As the extent of achievement of the performance targets is
uncertain prior to the determination date, a probability based on management's
assessment on the achievement of the performance target has been assigned to
calculate the amount to be recognized as an expense over the requisite period
with a corresponding entry to liability.
LTIP awards after the determination date
Upon the determination date, the Company will pay a determined monetary
amount, up to the maximum cash amount based on the actual achievement of the
performance target specified in the award, to the Trustee to purchase the
Awarded Shares. Any cumulative compensation expense previously recognized as a
liability will be transferred to additional paid-in capital. Based on the
actual achievement of performance target, the amount previously recorded in
the liability will be adjusted through share-based compensation expense.
Granted awards in 2022 and 2023 under the LTIP are as follows:
Grant date Maximum cash amount (in US$ millions) Covered financial years Performance target determination date
May 23, 2022 60.4 2022 note (a)
September 13, 2022 3.8 2022 note (a)
September 13, 2022 1.7 note (b) note (b)
June 5, 2023 54.9 2023 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.
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 ordinary
share equivalent) held by the Trustee were as follows:
Number of treasury shares Cost
(in US$'000)
As at January 1, 2022 8,139,175 40,014
Purchased 14,028,465 48,084
Vested (2,566,265) (12,034)
As at December 31, 2022 19,601,375 76,064
Purchased 2,725,515 9,071
Vested (4,480,895) (17,267)
As at June 30, 2023 17,845,995 67,868
For the six months ended June 30, 2023 and 2022, US$5,041,000 and US$8,397,000
of the LTIP awards were forfeited respectively based on the determined or
estimated monetary amount as at the forfeiture date.
The following table presents the share-based compensation expenses recognized
under the LTIP awards:
Six Months Ended June 30,
2023 2022
(in US$'000)
Research and development expenses 5,700 7,196
Selling and administrative expenses 4,614 4,228
Cost of revenues 237 213
10,551 11,637
Recorded with a corresponding credit to:
Liability 1,303 3,297
Additional paid-in capital 9,248 8,340
10,551 11,637
For the six months ended June 30, 2023 and 2022, US$4,563,000 and
US$15,351,000 were reclassified from liability to additional paid-in capital
respectively upon LTIP awards reaching the determination date. As at June 30,
2023 and December 31, 2022, US$441,000 and US$3,701,000 were recorded as
liabilities respectively for LTIP awards prior to the determination date.
As at June 30, 2023, the total unrecognized compensation cost was
approximately US$38,153,000, which considers expected performance targets and
the amounts expected to vest, and will be recognized over the requisite
periods.
13. Revenues
The following table presents revenue disaggregated by type:
Six Months Ended June 30, 2023
Oncology/Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 39,808 - 39,808
Goods-Distribution - 173,691 173,691
Services-Commercialization-Marketed Products 25,359 - 25,359
-Collaboration Research and Development 28,718 - 28,718
-Research and Development 246 - 246
Royalties 14,982 - 14,982
Licensing 250,070 - 250,070
359,183 173,691 532,874
Third parties 358,937 169,439 528,376
Related parties (Note 15(i)) 246 4,252 4,498
359,183 173,691 532,874
Six Months Ended June 30, 2022
Oncology/Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 27,592 - 27,592
Goods-Distribution - 110,978 110,978
Services-Commercialization-Marketed Products 21,594 - 21,594
-Collaboration Research and Development 12,335 - 12,335
-Research and Development 263 - 263
Royalties 14,331 - 14,331
Licensing 14,954 - 14,954
91,069 110,978 202,047
Third parties 90,806 109,340 200,146
Related parties (Note 15(i)) 263 1,638 1,901
91,069 110,978 202,047
The following table presents liability balances from contracts with customers:
June 30, December 31,
2023 2022
(in US$'000)
Deferred revenue
Current-Oncology/Immunology segment (note (a)) 51,232 11,817
Current-Other Ventures segment (note (b)) 1,032 1,530
52,264 13,347
Non-current-Oncology/Immunology segment (note (a)) 97,176 190
Total deferred revenue (note (c) and (d)) 149,440 13,537
Notes:
(a) Oncology/Immunology segment deferred revenue relates to invoiced amounts
for unamortized upfront and milestone payments, royalties where the customer
has not yet completed the in-market sale and advance consideration received
for cost reimbursements which are attributed to research and development
services that have not yet been rendered as at the reporting date.
(b) Other Ventures segment deferred revenue relates to payments in advance
from customers for goods that have not been transferred and services that have
not been rendered to the customer as at the reporting date.
(c) Estimated deferred revenue to be recognized over time as from the date
indicated is as follows:
June 30, December 31,
2023 2022
(in US$'000)
Not later than 1 year 52,264 13,347
Between 1 to 2 years 33,756 150
Between 2 to 3 years 36,355 40
Between 3 to 4 years 20,292 -
Later than 4 years 6,773 -
149,440 13,537
(d) As at January 1, 2023, deferred revenue was US$13.5 million, of which
US$8.5 million was recognized during the six months ended June 30, 2023.
License and collaboration agreement with Takeda Pharmaceutical
On January 23, 2023, the Group and Takeda Pharmaceuticals International AG
entered into an exclusive out-licensing agreement (the "Takeda Agreement") to
further the global development, commercialization and manufacturing of
Fruquintinib in territories outside of Mainland China, Hong Kong and Macau
(the "Territory"). Under the terms of the Takeda Agreement, the Group is
entitled to receive a series of payments up to US$1.13 billion, including
upfront, regulatory, development and commercial sales milestone payments, plus
royalties on net sales in the Territory. During the six months ended June 30,
2023, the Group has received $400 million upfront payment.
The Takeda Agreement has the following material performance obligations: (1)
the licenses for the development and commercialization of Fruquintinib in the
Territory and the manufacture of Fruquintinib for use in the Territory, (2)
services for research and development of ongoing clinical trials, regulatory
submissions and manufacturing technology transfer and (3) manufacturing
supply.
The transaction price for these performance obligations includes the upfront
payment, service cost reimbursements, milestone payments and sales-based
royalties. Milestone payments were not included in the transaction price until
it becomes probable that a significant reversal of revenue would not occur,
which is generally when the criteria to receive the milestone are achieved.
Manufacturing sales are variable consideration and were not included in the
transaction price at inception as regulatory approval had not been achieved.
The allocation of the transaction price to each performance obligation was
based on the relative standalone selling price of each performance obligation
determined at the inception of the contract. Based on this estimation,
proportionate amounts of transaction price to be allocated to the licenses,
and other performance obligations were 62% and 38% respectively.
Control of the licenses to Fruquintinib was transferred at the inception date
of the agreement and consequently, amounts allocated to this performance
obligation were recognized at inception. Conversely, services are performed
over the term of the Takeda Agreement and amounts allocated are recognized
over time using a percentage-of-completion method and manufacturing supply is
recognized at a point in time when the control of the goods is transferred.
Royalties are recognized as future sales occur as they meet the requirements
for the sales-usage based royalty exception.
Revenue recognized under the Takeda Agreement is as follows:
Six Months Ended June 30, 2023
(in US$'000)
Licensing-from upfront payment 250,070
Services-collaboration research and development-from deferred upfront payment 8,615
Services-collaboration research and development-cost reimbursements 10,372
269,057
14. Research and Development Expenses
Research and development expenses are summarized as follows:
Six Months Ended June 30,
2023 2022
(in US$'000)
Clinical trial related costs 94,909 122,513
Personnel compensation and related costs 45,410 52,738
Other research and development expenses 4,314 6,490
144,633 181,741
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, 2023
and 2022, the Group has incurred research and development expenses of
US$8,067,000 and US$6,818,000 respectively, related to such collaborative
arrangements.
15. Significant Transactions with Related Parties and Non-Controlling Shareholders of Subsidiaries
The Group has the following significant transactions with related parties and
non-controlling shareholders of subsidiaries, which were carried out in the
normal course of business at terms determined and agreed by the relevant
parties:
(i) Transactions with related parties:
Six Months Ended June 30,
2023 2022
(in US$'000)
Sales to:
Indirect subsidiaries of CK Hutchison Holdings Limited ("CK Hutchison") 1,008 1,638
An equity investee 3,244 -
4,252 1,638
Revenue from research and development services from:
An equity investee 246 263
Purchases from:
An equity investee 1,911 2,225
Rendering of marketing services from:
Indirect subsidiaries of CK Hutchison 59 77
An equity investee - 62
59 139
Rendering of management services from:
An indirect subsidiary of CK Hutchison 498 490
(ii) Balances with related parties included in:
June 30, December 31,
2023 2022
(in US$'000)
Accounts receivable-related parties
Indirect subsidiaries of CK Hutchison (note (a)) 773 1,319
An equity investee (note (a)) 1,439 2,198
2,212 3,517
Amount due from a related party
An equity investee (note (a) and (b)) 21,959 998
Amount due from a related party, non-current portion
An equity investee (note (b)) 32,896 -
Other payables, accruals and advance receipts
Indirect subsidiaries of CK Hutchison (note (c) and (e)) 1,884 1,953
An equity investee (note (a) and (d)) 73 148
1,957 2,101
Other non-current liabilities
An equity investee (note (d)) 592 755
An indirect subsidiary of CK Hutchison (note (e)) 8,940 8,716
9,532 9,471
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) As at June 30, 2023, dividends receivable within one year of
US$20,961,000 was included in amount due from a related party. US$32,896,000
of dividends receivable beyond one year was included in amount due from a
related party, non-current portion.
(c) Amounts due to indirect subsidiaries of CK Hutchison are unsecured,
repayable on demand and interest-bearing if not settled within one month.
(d) Other deferred income represents amounts recognized from granting of
commercial, promotion and marketing rights.
(e) As at June 30, 2023 and December 31, 2022, a branding liability payable
of US$1,538,000 was included in amounts due to related parties under other
payables, accruals and advance receipts. As at June 30, 2023 and December 31,
2022, US$8,940,000 and US$8,716,000 of the branding liability payable was
included in other non-current liabilities.
(iii) Transactions with non‑controlling shareholders of subsidiaries:
Six Months Ended June 30,
2023 2022
(in US$'000)
Sales 35,933 17,705
Purchases 3,199 3,442
Dividends paid 9,068 -
(iv) Balances with non‑controlling shareholders of subsidiaries included in:
June 30, December 31,
2023 2022
(in US$'000)
Accounts receivable 11,848 11,139
Accounts payable 1,652 2,922
16. Income Tax (Expense)/Benefit
Six Months Ended June 30,
2023 2022
(in US$'000)
Current tax
HK 6 80
PRC 976 1,008
U.S. and others 52 1,694
Total current tax 1,034 2,782
Deferred income tax expense/(benefit) 1,696 (6,997)
Income tax expense/(benefit) 2,730 (4,215)
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 income/(loss) before income taxes and equity in earnings
of equity investees is as follows:
Six Months Ended June 30,
2023 2022
(in US$'000)
Income/(loss) before income taxes and equity in earnings of equity investees 137,088 (200,636)
Tax calculated at the statutory tax rate of the Company 22,620 (33,105)
Tax effects of:
Different tax rates applicable in different jurisdictions (1,423) 1,771
Tax valuation allowance (2,898) 41,374
Preferential tax rate difference (39) (67)
Preferential tax deduction and credits (17,735) (18,169)
Expenses not deductible for tax purposes 2,829 3,070
Utilization of previously unrecognized tax losses (39) (1)
Withholding tax on undistributed earnings of PRC entities 1,755 1,681
Income not subject to tax (2,478) (611)
Others 138 (158)
Income tax expense/(benefit) 2,730 (4,215)
17. Earnings/(Losses) Per Share
(i) Basic earnings/(losses) per share
Basic earnings/(losses) per share is calculated by dividing the net
income/(loss) attributable to the Company by the weighted average number of
outstanding ordinary shares in issue during the period. Treasury shares held
by the Trustee are excluded from the weighted average number of outstanding
ordinary shares in issue for purposes of calculating basic earnings/(losses)
per share.
Six Months Ended June 30,
2023 2022
Weighted average number of outstanding ordinary shares in issue 846,928,863 849,283,553
Net income/(loss) attributable to the Company (US$'000) 168,551 (162,861)
Basic earnings/(losses) per share attributable to the Company 0.20 (0.19)
(US$ per share)
(ii) Diluted earnings/(losses) per share
Diluted earnings/(losses) per share is calculated by dividing net
income/(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.
Six Months Ended June 30,
2023 2022
Weighted average number of outstanding ordinary shares in issue 846,928,863 849,283,553
Effect of share options and LTIP awards (note) 20,061,747 -
Weighted average number of outstanding ordinary shares in issue and dilutive 866,990,610 849,283,553
ordinary share equivalents outstanding
Net income/(loss) attributable to the Company (US$'000) 168,551 (162,861)
Diluted earnings/(losses) per share attributable to the Company 0.19 (0.19)
(US$ per share)
Note: For the six months ended June 30, 2022, 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.
18. 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 drugs developed from research and development activities
including out-licensed marketed products.
(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 net
income/(loss) attributable to the Company.
The segment information is as follows:
Six Months Ended June 30, 2023
Oncology/Immunology
Marketed Other
R&D Products Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from external customers 9,977 269,057 279,034 80,149 359,183 173,691 - 532,874
Interest income 438 1 439 - 439 238 15,198 15,875
Interest expense - - - - - - (224) (224)
Equity in earnings of equity investees, net of tax - - - - - 35,110 - 35,110
Income tax (expense)/benefit (86) (7) (93) 107 14 (939) (1,805) (2,730)
Net (loss)/income attributable to the Company (83,628) 205,010 121,382 12,971 134,353 37,180 (2,982) 168,551
Depreciation/ amortization (3,263) (250) (3,513) - (3,513) (165) (134) (3,812)
Additions to non-current assets (other than financial instruments and deferred 30,296 110 30,406 - 30,406 243 15 30,664
tax assets)
June 30, 2023
Oncology/Immunology
R&D Marketed Products Other Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 152,736 33,995 186,731 64,260 250,991 170,366 876,140 1,297,497
Property, plant and equipment 93,840 1,940 95,780 - 95,780 826 223 96,829
Right-of-use assets 4,887 2,867 7,754 - 7,754 838 600 9,192
Leasehold land 11,387 - 11,387 - 11,387 - - 11,387
Goodwill - - - - - 3,064 - 3,064
Other intangible asset - - - - - 52 - 52
Investments in equity investees - - - - - 37,740 - 37,740
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$'000)
Revenue from external customers 27,552 - 27,552 63,517 91,069 110,978 - 202,047
Interest income 376 - 376 - 376 92 1,514 1,982
Interest expense - - - - - - (404) (404)
Equity in earnings of equity investees, net of tax (2) - (2) - (2) 33,551 - 33,549
Income tax (expense)/benefit (255) 6,912 6,657 (436) 6,221 (317) (1,689) 4,215
Net (loss)/income attributable to the Company (92,645) (96,156) (188,801) 9,006 (179,795) 35,423 (18,489) (162,861)
Depreciation/ amortization (3,827) (237) (4,064) - (4,064) (154) (158) (4,376)
Additions to non-current assets (other than financial instruments and deferred 8,947 227 9,174 - 9,174 160 13 9,347
tax assets)
December 31, 2022
Oncology/Immunology
R&D Marketed Products Other Ventures
PRC U.S. and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 221,337 30,281 251,618 45,984 297,602 235,500 496,343 1,029,445
Property, plant and equipment 72,775 2,103 74,878 - 74,878 735 334 75,947
Right-of-use assets 3,350 3,167 6,517 - 6,517 1,308 897 8,722
Leasehold land 11,830 - 11,830 - 11,830 - - 11,830
Goodwill - - - - - 3,137 - 3,137
Other intangible asset - - - - - 85 - 85
Investments in equity investees 316 - 316 - 316 73,461 - 73,777
Revenue from external customers is after elimination of inter-segment sales.
Sales between segments are carried out at mutually agreed terms. The amounts
eliminated attributable to sales between PRC and U.S. and others under
Oncology/Immunology segment were US$17,303,000 and US$68,015,000 for the six
months ended June 30, 2023 and 2022 respectively.
A summary of customers who accounted for over 10% of the Group's revenue for
the six months ended June 30, 2023 and 2022 is as follows:
Six Months Ended June 30,
2023 2022
(in US$'000)
Customer A 269,057 -
Customer B (note) 39,034
Customer C (note) 36,282
Note: Customer did not account for over 10% of the Group's revenue during the
six months ended June 30, 2023.
Customer A, B and C are included in Oncology/Immunology.
Unallocated expenses mainly represent corporate expenses which include
corporate administrative costs, corporate employee benefit expenses and the
relevant share-based compensation expenses, net of interest income.
Unallocated assets mainly comprise cash and cash equivalents and short-term
investments.
19. Note to Condensed Consolidated Statements of Cash Flows
Reconciliation of net income/(loss) for the period to net cash generated
from/(used in) operating activities:
Six Months Ended June 30,
2023 2022
(in US$'000)
Net income/(loss) 169,468 (162,872)
Adjustments to reconcile net income/(loss) to net cash generated from/(used
in) operating activities
Depreciation and amortization 3,812 4,376
Share-based compensation expense-share options 3,239 3,741
Share-based compensation expense-LTIP 10,551 11,637
Equity in earnings of equity investees, net of tax (35,110) (33,549)
Dividend received from SHPL 14,615 22,692
Changes in right-of-use assets (720) 2,221
Fair value losses on warrant - 2,452
Other adjustments (78) 1,665
Changes in working capital
Accounts receivable (31,348) 6,397
Other receivables, prepayments and deposits (2,296) 10,585
Amount due from a related party - 150
Inventories 2,815 (10,362)
Accounts payable (16,540) 9,828
Other payables, accruals and advance receipts (34,188) 39,235
Deferred revenue 142,003 3,120
Others 180 (1,175)
Total changes in working capital 60,626 57,778
Net cash generated from/(used in) operating activities 226,403 (89,859)
20. 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 financial position, results of operations 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, results of operations or cash flows 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$35.4 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. On October 7, 2022, Luye filed a Notice of
Appeal to the Court of Appeal regarding the dismissal and the notice was
accepted on November 8, 2022. On June 6, 2023, a Court of Appeal hearing was
held and a judgement is expected but yet to be received. The legal proceedings
are ongoing and as no Award amounts have been received as at the issuance date
of these condensed consolidated financial statements, no Award amounts have
been recognized and no adjustment has been made to Seroquel-related balances
as at June 30, 2023. Such Seroquel-related balances include accounts
receivable, long-term prepayment, accounts payable and other payables of
US$1.1 million, US$0.3 million, US$0.9 million and US$1.1 million
respectively.
21. Subsequent Events
The Group evaluated subsequent events through July 31, 2023, which is the date
when the interim unaudited condensed consolidated financial statements were
issued.
22. Reconciliation between U.S. GAAP and International Financial Reporting Standards
These interim unaudited condensed consolidated financial statements are
prepared in accordance with U.S. GAAP, which differ in certain respects from
International Financial Reporting Standards ("IFRS"). The effects of material
differences prepared under U.S. GAAP and IFRS are as follows:
(i) Reconciliation of condensed consolidated statements of operations
Six Months Ended June 30, 2023
Amounts as IFRS adjustment Amounts under IFRS
reported
under U.S. GAAP
Lease amortization (note (a))
(in US$'000)
Costs of goods-third parties (182,380) 34 (182,346)
Research and development expenses (144,633) 18 (144,615)
Selling expenses (26,423) 23 (26,400)
Administrative expenses (41,840) 80 (41,760)
Total operating expenses (421,220) 155 (421,065)
Other income/(expense), net 25,434 (163) 25,271
Income/(loss) before income taxes and equity in earnings of equity investees 137,088 (8) 137,080
Equity in earnings of equity investees, net of tax 35,110 (2) 35,108
Net income/(loss) 169,468 (10) 169,458
Less: Net (income)/loss attributable to non-controlling interests (917) (8) (925)
Net income/(loss) attributable to the Company 168,551 (18) 168,533
Six Months Ended June 30, 2022
Amounts as IFRS adjustment Amounts under IFRS
reported
under U.S. GAAP
Lease amortization (note (a))
(in US$'000)
Costs of goods-third parties (115,567) 22 (115,545)
Research and development expenses (181,741) 14 (181,727)
Selling expenses (22,221) 25 (22,196)
Administrative expenses (57,521) 93 (57,428)
Total operating expenses (398,801) 154 (398,647)
Other income/(expense), net (3,882) (161) (4,043)
Income/(loss) before income taxes and equity in earnings of equity investees (200,636) (7) (200,643)
Equity in earnings of equity investees, net of tax 33,549 (9) 33,540
Net income/(loss) (162,872) (16) (162,888)
Less: Net (income)/loss attributable to non-controlling interests 11 (1) 10
Net income/(loss) attributable to the Company (162,861) (17) (162,878)
(ii) Reconciliation of condensed consolidated balance sheets
June 30, 2023
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs (note (b)) Capitalization of rights (note (c)) LTIP classification (note (d))
(in US$'000)
Investments in equity investees 37,740 (38) - - - 37,702
Other non-current assets 39,547 (236) - 15,093 - 54,404
Total assets 1,297,497 (274) - 15,093 - 1,312,316
Other payables, accruals and advance receipts 227,212 - - - (441) 226,771
Total current liabilities 340,863 - - - (441) 340,422
Total liabilities 497,480 - - - (441) 497,039
Additional paid-in capital 1,506,280 - (697) - 441 1,506,024
Accumulated losses (803,057) (263) 697 16,084 - (786,539)
Accumulated other comprehensive loss (7,800) 13 - (1,016) - (8,803)
Total Company's shareholders' equity 782,039 (250) - 15,068 441 797,298
Non-controlling interests 17,978 (24) - 25 - 17,979
Total shareholders' equity 800,017 (274) - 15,093 441 815,277
December 31, 2022
Amounts as reported under U.S. GAAP IFRS adjustments Amounts under IFRS
Lease amortization (note (a)) Issuance costs (note (b)) Capitalization of rights (note (c)) LTIP classification (note (d))
(in US$'000)
Investments in equity investees 73,777 (37) - - - 73,740
Other non-current assets 39,833 (233) - 15,370 - 54,970
Total assets 1,029,445 (270) - 15,370 - 1,044,545
Other payables, accruals and advance receipts 264,621 - - - (3,701) 260,920
Total current liabilities 353,903 - - - (3,701) 350,202
Total liabilities 392,575 - - - (3,701) 388,874
Additional paid-in capital 1,497,273 - (697) - 3,701 1,500,277
Accumulated losses (971,481) (246) 697 16,084 - (954,946)
Accumulated other comprehensive loss (1,903) 8 - (739) - (2,634)
Total Company's shareholders' equity 610,367 (238) - 15,345 3,701 629,175
Non-controlling interests 26,503 (32) - 25 - 26,496
Total shareholders' equity 636,870 (270) - 15,370 3,701 655,671
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) Capitalization of development and commercial rights
Under U.S. GAAP, the acquired development and commercial rights do not meet
the capitalization criteria as further development is needed as of the
acquisition date and there is no alternative future use. Such rights are
considered as in-process research and development and were expensed to
research and development expense.
Under IFRS, the acquired development and commercial rights were capitalized to
intangible assets. The recognition criterion is always assumed to be met as
the price already reflects the probability that future economic benefits will
flow to the Group.
(d) 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.
23. Dividends
No dividend has been declared or paid by the Company for the six months ended
June 30, 2023 and 2022.
(( 1 )) Takeda = Takeda Pharmaceuticals International AG.
(( 2 )) NDA = New Drug Application.
(( 3 )) FDA = Food and Drug Administration.
(( 4 )) PDUFA = U.S. Prescription Drug User Fee Act.
(( 5 )) MAA = Marketing Authorization Application.
(( 6 )) EMA = European Medicines Agency.
(( 7 )) CRC = Colorectal cancer.
(( 8 )) NRDL = National Reimbursement Drug List.
(( 9 )) IHCC = Intrahepatic cholangiocarcinoma.
(( 10 )) SHP2 = Src homology-2 domain-containing protein tyrosine
phosphatase-2.
(( 11 )) CER = Constant exchange rate. We also report changes in performance
at 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.
(( 12 )) R&D = Research and development.
(( 13 )) SG&A expenses = Selling, general and administrative expenses.
(( 14 )) AACR = American Association for Cancer Research.
(( 15 )) ASCO = American Society of Clinical Oncology.
(( 16 )) ASCO GI = ASCO (American Society of Clinical Oncology)
Gastrointestinal Cancers Symposium.
(( 17 )) EHA = European Hematology Association.
(( 18 )) ICML = International Conference on Malignant Lymphoma.
(( 19 )) In-market sales = total sales to third parties provided by Eli Lilly
(ELUNATE(®)), AstraZeneca (ORPATHYS(®)) and HUTCHMED (ELUNATE(®),
SULANDA(®), ORPATHYS(®) and TAZVERIK(®)).
(( 20 )) Lilly = Eli Lilly and Company.
(( 21 )) NMPA = National Medical Products Administration.
(( 22 )) PMDA = Pharmaceuticals and Medical Devices Agency.
(( 23 )) NSCLC = Non-small cell lung cancer.
(( 24 )) MET = Mesenchymal epithelial transition factor.
(( 25 )) EGFR = Epidermal growth factor receptor.
(( 26 )) PRCC = Papillary renal cell carcinoma.
(( 27 )) VEGFR = Vascular endothelial growth factor receptor.
(( 28 )) PD-1 = Programmed cell death protein-1.
(( 29 )) RCC = Renal cell carcinoma.
(( 30 )) FGFR = Fibroblast growth factor receptor.
(( 31 )) CSF-1R = Colony-stimulating factor 1 receptor.
(( 32 )) Syk = Spleen tyrosine kinase.
(( 33 )) AIHA = Autoimmune hemolytic anemia.
(( 34 )) ITP = Immune thrombocytopenia purpura.
(( 35 )) PI3Kδ = Phosphoinositide 3-kinase delta.
(( 36 )) Ipsen = Ipsen SA, parent of Epizyme Inc.
(( 37 )) Epizyme = Epizyme Inc., a wholly owned subsidiary of Ipsen SA.
(( 38 )) IDH = Isocitrate dehydrogenase.
(( 39 )) BTK = Bruton's tyrosine kinase.
(( 40 )) ERK = Extracellular signal-regulated kinase.
(( 41 )) MAPK pathway = RAS-RAF-MEK-ERK signaling cascade.
(( 42 )) CDE = Center for Drug Evaluation.
(( 43 )) SHPL = Shanghai Hutchison Pharmaceuticals Limited.
(( 44 )) GAAP = Generally Accepted Accounting Principles.
(( 45 )) ADS = American depositary share.
(( 46 )) HKEX = The Main Board of The Stock Exchange of Hong Kong Limited.
(( 47 )) NHSA = China National Healthcare Security Administration.
(( 48 )) NET = Neuroendocrine tumor.
(( 49 )) CSCO = Chinese Society of Clinical Oncology.
(( 50 )) TKI = Tyrosine kinase inhibitor.
(( 51 )) EGFRm+ = Epidermal growth factor receptor mutated.
(( 52 )) OS = Overall survival.
(( 53 )) ORR = Objective response rate.
(( 54 )) JSMO = Japanese Society of Medical Oncology.
(( 55 )) TN = Triple negative.
(( 56 )) HR+ = Hormone receptor positive.
(( 57 )) Her2- = Human epidermal growth factor receptor 2 negative.
(( 58 )) MSS = Microsatellite stable.
(( 59 )) PFS = Progression free survival.
(( 60 )) DCR = Disease control rate.
(( 61 )) DoR = Duration of response.
(( 62 )) epNET = extra-pancreatic neuroendocrine tumor.
(( 63 )) pNET= pancreatic neuroendocrine tumor.
(( 64 )) NEC = Neuroendocrine carcinoma.
(( 65 )) NEN = Neuroendocrine neoplasms.
(( 66 )) SCLC = Small cell lung cancer.
(( 67 )) ASH = American Society of Hematology.
(( 68 )) NHL = Non-Hodgkin's lymphoma.
(( 69 )) CLL = Chronic lymphocytic leukemia.
(( 70 )) SLL = Small lymphocytic lymphoma.
(( 71 )) API = Active pharmaceutical ingredient.
(( 72 )) Hutchison Sinopharm = Hutchison Whampoa Sinopharm Pharmaceuticals
(Shanghai) Company Limited.
(( 73 )) Luye = Luye Pharma Hong Kong Ltd.
(( 74 )) SXBX = She Xiang Bao Xin.
(( 75 )) HIBOR = Hong Kong Interbank Offered Rate.
(( 76 )) PBOC = People's Bank of China.
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