TIDMHCM
RNS Number : 1756R
Hutchison China Meditech Limited
04 March 2021
Hutchison China MediTech Limited Reports 2020 Full Year Results
and Provides Business Updates and Evolves Corporate Identity
Company to Host Annual Results Call & Webcast Today at 1
p.m. GMT / 8 a.m. EST / 9 p.m. HKT
Hong Kong, Shanghai & Florham Park, NJ--Thursday, March 4,
2021: Hutchison China MediTech Limited ("HUTCHMED") (Nasdaq/AIM:
HCM), an innovation-driven, commercial-stage biopharmaceutical
company, today reports its audited financial results for the year
ended December 31, 2020 and provides updates on key clinical and
commercial developments. The Company also intends to seek
shareholders' approval to change its name to HUTCHMED (China)
Limited at its forthcoming Annual General Meeting. For more
information on the new corporate name, see 2020 Full Year Results
& Business Updates-VI. Evolution of Our Corporate Identity
.
2020 full year results & Business updates
"At the heart of HUTCHMED lies a prolific in-house novel drug
discovery and development engine that has produced ten
clinical-stage drug candidates and a further seven late-stage
preclinical assets in oncology and immunology over the past fifteen
years." said Mr. Simon To, Chairman of HUTCHMED. "Our aim is to
bring these internally discovered and developed innovations to
patients the world-over."
"To support this strategic objective, we have built an oncology
and immunology operation with around 1,200 personnel based mainly
in our two core markets, China and the U.S. In China, supported by
a robust manufacturing infrastructure, our commercial team is now
delivering impressive sales results on our first two oncology
drugs, ELUNATE(R) in metastatic colorectal cancer and the recently
launched SULANDA(R) in neuroendocrine tumors. A New Drug
Application was also submitted mid-last year for savolitinib in
lung cancer and, subject to approval, it will be our third approved
oncology drug and the first-in-class selective MET inhibitor on the
market in China."
"Outside China, our fast expanding international organization,
led mainly from the U.S., is developing five un-partnered oncology
drug candidates. In 2020, it achieved three U.S. Food and Drug
Administration fast track designations and initiated the rolling
submission of surufatinib, our first U.S. New Drug Application
filing."
"Over the next three years, we will continue to grow our R&D
and commercial organizations globally to support the anticipated
launch of our oncology drugs in China, the U.S. and Europe."
I. COMMERCIAL OPERATIONS
-- Full year 2021 Oncology/Immunology consolidated revenues
guidance $110-130 million (2020 actual: $30.2m) with in-house
oncology commercial organization in China now expanded to over 420
personnel (end 2019: about 90) covering over 2,300 oncology
hospitals and over 20,000 oncology physicians;
-- ELUNATE(R) (fruquintinib) in-market sales increased 91% to
$33.7 million(1) (2019: $17.6m), as provided by Lilly(2) , during
2020 as a result of inclusion in the 2020 China NRDL(3) ;
-- Accelerating sales growth on ELUNATE(R) since Q4 2020 when
HUTCHMED assumed responsibility for all on-the-ground medical
detailing, promotion and local and regional marketing activities in
China;
(Growth vs. Prior Period) Lilly Sales Team HUTCHMED Sales Team
--------------------------------
2020 Q1-Q3 2020 Q4 2020 Jan-Feb 2021*
-------------------------------------------------- ------------- ---------------- ---------------- --------------
ELUNATE (R) In-market Sales ** $33.7m (+91%) $23.5m (+37%) $10.2m (+2,051%) $14.3m (+116%)
ELUNATE (R) Revenues consolidated by HUTCHMED *** $20.0m (+85%) $12.8m (+53%) $7.2m (+192%) $10.2m (+269%)
-------------------------------------------------- ------------- ---------------- ---------------- --------------
* = Unaudited; ** = Represents total sales to third parties as
provided by Lilly; *** = Represents manufacturing fees, commercial
service fees and royalties paid by Lilly to HUTCHMED, and sales to
other third parties invoiced by HUTCHMED.
-- Launched SULANDA(R) (surufatinib) as a treatment for patients
with advanced non-pancreatic NET(4) in China in mid-January 2021
within three weeks of approval. Unaudited sales of SULANDA(R) in
January-February 2021, in its first two months on the market, were
$4.9 million; and
-- Established our U.S. commercial organization with the
recruitment of senior leadership team based in New Jersey to
prepare launch readiness for the potential surufatinib U.S.
approval in late 2021 or early 2022.
II. REGULATORY ACHIEVEMENTS
China
-- Received China approval for SULANDA(R) from the China NMPA(5)
as a treatment for patients with advanced non-pancreatic NET in
December 2020;
-- Submitted a China NDA(6) for savolitinib as a treatment for
patients with MET(7) Exon 14 skipping alteration NSCLC(8) . The NDA
was accepted in May 2020. Priority Review status was granted in
July 2020 and review is underway;
-- Submitted a second China NDA for SULANDA(R) as a treatment
for patients with advanced pancreatic NET. The NDA was accepted in
September 2020 and review is underway; and
-- IND(9) cleared for HMPL-295 , a novel ERK(10) inhibitor in
the MAPK pathway(11) , in late 2020.
United States & Europe
-- Initiated surufatinib U.S. FDA(12) rolling submission of a
NDA for the treatment of both pancreatic and non-pancreatic NET in
December 2020;
-- Secured U.S. FDA Fast Track Designations for surufatinib for
the treatment of both pancreatic and non-pancreatic NET in April
2020;
-- Received scientific advice from the EMA(13) CHMP(14) for
surufatinib for the treatment of both pancreatic and non-pancreatic
NET with no MAA(15) filing issues identified;
-- Secured U.S. FDA Fast Track Designation for fruquintinib for
the treatment of advanced CRC(16) in June 2020; and
-- Cleared two U.S. FDA INDs for HMPL-306 in late 2020, in
hematological malignancies and solid tumors.
III. CLINICAL DEVELOPMENT ACTIVITIES
Surufatinib (SULANDA (R) in China), a small molecule inhibitor
of VEGFR(17) , FGFR(18) and CSF-1R(19) designed to inhibit tumor
angiogenesis and promote the body's immune response against tumor
cells via tumor associated macrophage regulation; approved and
launched in China
-- Presented Phase III study in pancreatic NET (SANET-p)
(NCT02589821) at the ESMO(20) Congress 2020 and published
simultaneously in The Lancet Oncology. The study met all primary
and secondary endpoints and supported NMPA NDA submission;
-- Presented preliminary data of U.S. Phase Ib NET cohorts
(NCT02549937) at the ASCO(21) Conference 2020 in heavily pretreated
patients with pancreatic or non-pancreatic NET, demonstrating
encouraging efficacy in patients refractory or intolerant to
AFINITOR(R) and SUTENT(R) ;
-- Presented pharmacokinetic and safety data of U.S. Phase Ib
NET cohorts (NCT02549937) at the AACR(22) Conference 2020 ,
demonstrating similar profiles of surufatinib between Chinese and
U.S. patients; and
-- Presented Phase I dose-finding study for surufatinib plus
TUOYI(R) , Junshi's(23) anti-PD-1(24) antibody, (NCT04169672) at
the AACR Conference 2020. Data demonstrated that surufatinib plus
TUOYI(R) were well tolerated with encouraging antitumor activity in
patients with advanced solid tumors. In January 2020, we initiated
a Phase II study in nine solid tumor indications in China.
Potential upcoming clinical and regulatory milestones for
Surufatinib:
-- Complete the U.S. FDA rolling NDA submission for the
treatment of both pancreatic and non-pancreatic NET in the first
half of 2021;
-- Initiate a Phase Ib/II study of surufatinib in combination with tislelizumab (NCT04579757), BeiGene's(25) PD-1 antibody, in the U.S. in the first half of 2021;
-- Submit the EU MAA for the treatment of both pancreatic and non-pancreatic NET in mid-2021;
-- Present Phase II data for the SULANDA(R) plus TUOYI(R)
combination in select indications in mid-2021;
-- Receive China approval for patients with advanced pancreatic
NET which may occur as early as the second half of 2021; and
-- Initiate Phase III pivotal studies for the SULANDA(R) plus
TUOYI(R) combination in select indications in the second half of
2021 and beyond.
Fruquintinib (ELUNATE (R) in China), a highly selective small
molecule inhibitor of VEGFR 1/2/3 designed to improve kinase
selectivity to minimize off-target toxicity and thereby improve
tolerability; approved and launched in China
-- Initiated a global Phase III registration study
(NCT04322539), the FRESCO-2 study, in refractory metastatic CRC.
FRESCO-2 is expected to enroll over 680 patients from over 150
sites in 14 countries. The first patient was dosed in September
2020 in the U.S.;
-- Presented preliminary data of U.S. Phase I/Ib colorectal
cancer cohorts (NCT03251378) at the ESMO Congress 2020 in heavily
pretreated metastatic CRC patients, demonstrating encouraging
efficacy and tolerability in patients refractory or intolerant to
STIVARGA(R) and LONSURF(R) ;
-- Completed second planned interim data review for a Phase III
registration study (NCT03223376), the FRUTIGA study, in advanced
gastric cancer. Based on preset criteria the IDMC(26) and Joint
Steering Committees recommended that the trial continue with a
sample size increase to 700 patients; and
-- Initiated a Phase II study for fruquintinib in combination
with TYVYT(R) , Innovent's(27) PD-1 antibody, in four solid tumor
indications (NCT03903705) in Q4 2020.
Potential upcoming clinical and regulatory milestones for
Fruquintinib:
-- Initiate a Phase Ib/II study in the U.S. for fruquintinib in
combination with tislelizumab (NCT04577963) in patients with
advanced, refractory triple negative breast cancer in the first
half of 2021;
-- Present Phase Ib U.S. expansion data in metastatic CRC (NCT03251378) in mid-2021;
-- Present preliminary Phase Ib data for fruquintinib plus
TYVYT(R) (NCT04179084) and fruquintinib plus geptanolimab
(NCT03977090) in CRC in mid-2021;
-- Initiate pivotal studies for the ELUNATE(R) plus anti-PD-1
antibody combination in select indications in the second half of
2021;
-- Complete enrollment of the FRESCO-2 study (NCT04322539) in
refractory metastatic CRC in late-2021; and
-- Complete enrollment of the FRUTIGA study (NCT03223376) in
advanced gastric cancer in late-2021;
Savolitinib , a highly selective small molecule inhibitor of MET
being developed broadly across MET-driven patient populations in
lung and gastric cancer and renal cell carcinoma
-- Presented Phase II registration study (NCT02897479) for
savolitinib in MET Exon 14 skipping mutation patients at the ASCO
Conference 2020 which met study endpoints and supported NMPA NDA
submission;
-- Presented Phase II data for the CALYPSO study (NCT02819596)
for savolitinib in combination with IMFINZI(R) , AstraZeneca's(28)
PD-L1(29) antibody, in PRCC(30) patients at the ASCO GU(31)
Conference 2020 demonstrating encouraging synergy in efficacy and
tolerability in line with single agent safety profiles;
-- Presented Phase III data for the SAVOIR study (NCT03091192)
for savolitinib in MET positive PRCC patients at the ASCO
Conference 2020 showing a clear trend to superiority in efficacy
and tolerability versus
SUTENT(R) in first 60 patient data; and
-- Presented final Phase II data for TATTON (NCT02143466) at
WCLC(32) 2020, a global exploratory study in NSCLC aiming to
recruit patients with MET amplification who had progressed after
prior treatment with EGFR(33) inhibitors. TATTON clearly confirmed
the importance of the savolitinib plus TAGRISSO(R) combination.
Potential upcoming clinical and regulatory milestones for
Savolitinib:
-- Potential receipt of approval in China for the treatment of
patients with MET Exon 14 skipping alteration NSCLC which may occur
as early as Q2 2021, enabling a $25 million first sale milestone
payment from AstraZeneca. If approved, savolitinib would be the
first-in-class selective MET inhibitor in China;
-- Initiate global Phase III pivotal studies for the savolitinib
plus IMFINZI(R) combination in MET positive PRCC in mid-2021;
-- Initiate Phase II study with potential for registration
intent for savolitinib in metastatic gastric cancer in China in
mid-2021;
-- Conclude the SAVANNAH Phase II study (NCT03778229) for the
savolitinib plus TAGRISSO(R) combination in NSCLC patients
harboring EGFR mutation and MET amplification or overexpression.
SAVANNAH will inform final regulatory, biomarker and dose regimen
strategy for global Phase III development in the second half of
2021; and
-- Initiate two further pivotal Phase III studies in China in
NSCLC patients in the second half of 2021.
HMPL-689, an investigative and highly selective small molecule
inhibitor of PI3K(34) designed to address the gastrointestinal and
hepatotoxicity associated with currently approved and
clinical-stage PI3K inhibitors
-- Presented Phase I dose escalation data (NCT03128164) for HMPL-689 in patients in China with relapsed/refractory lymphoma at the ASH(35) Annual Meeting 2020 demonstrating encouraging efficacy and tolerability profile.
Potential upcoming clinical and regulatory milestones for
HMPL-689:
-- Complete Phase Ib expansion study (NCT03128164) and present
interim data in the second half of 2021;
-- Initiate Phase II studies with potential for registration intent in China in multiple relapsed/refractory non-Hodgkin's lymphoma indications during 2021;
-- Complete Phase I dose escalation in the U.S. and Europe
(NCT03786926) in Q2 2021 and initiate Phase Ib expansion studies in
multiple non-Hodgkin's lymphoma indications; and
-- Complete U.S. FDA regulatory discussions in the second half
of 2021 followed by the initiation of registration intent studies
in indolent non-Hodgkin's lymphoma by the end of 2021.
HMPL-523, an investigative and highly selective small molecule
inhibitor of Syk(36) , an important component of the B-cell
receptor signaling pathway, for the treatment of hematological
cancers and immune disease
-- Completed enrollment of Phase I dose escalation study
(NCT03779113) in the U.S. and Europe; and
-- Completed enrollment of Phase I/Ib study (NCT03951623) in China of HMPL-523 in ITP(37) .
Potential upcoming clinical and regulatory milestones for
HMPL-523:
-- Initiate a Phase III study in ITP in China in the second half of 2021.
HMPL-453, an investigative and highly selective small molecule
inhibitor of FGFR 1/2/3
-- Initiated a Phase II study (NCT04353375) in China in patients
with advanced IHCC(38) with FGFR2(39) fusion that had failed at
least one line of systemic therapy.
HMPL-306, an investigative and highly selective small molecule
inhibitor of IDH1/2(40) designed to address resistance to the
currently marketed IDH inhibitors
-- Initiated a Phase I dose escalation study (NCT04272957) in
China in patients with relapsed or refractory hematological
malignancies with an IDH1 and/or IDH2 mutation.
Potential upcoming clinical and regulatory milestones for
HMPL-306:
-- Initiate a Phase I dose escalation study in the U.S. in
patients with relapsed or refractory hematological malignancies
with an IDH1 and/or IDH2 mutation in the first half of 2021;
and
-- Initiate a Phase I dose escalation study in the U.S. in
patients with solid tumors with an IDH1 and/or IDH2 mutation in the
first half of 2021.
HMPL-295, an investigative and highly selective small molecule
inhibitor of ERK in the MAPK pathway with the potential to address
intrinsic or acquired resistance from upstream mechanisms such as
RAS-RAF-MEK.
Potential upcoming clinical and regulatory milestones for
HMPL-295:
-- Initiate a Phase I study in China in mid-2021
Discovery , our in-house scientific team has been responsible
for the discovery of all ten of our clinical drug candidates
including our two approved oncology drugs ELUNATE (R) and SULANDA
(R)
Potential upcoming discovery milestones:
-- IND-enabling toxicity studies are underway for three
additional in-house discovered oncology drug candidates , two small
molecules and one antibody. If the outcomes of these studies are as
we anticipate, we will follow with IND submissions during 2021.
IV. MANUFACTURING OPERATIONS
-- Received surufatinib update to drug manufacturing license at
our Suzhou manufacturing facility, following the NMPA approval in
December 2020; and
-- Broke ground in December 2020 on our $130 million new
Shanghai manufacturing facility designed to support a five-fold
increase in small molecule drug product manufacturing capacity
relative to our existing Suzhou facilities. We plan also that in
the future the Shanghai facility will also establish scale
biologics manufacturing capability.
V. OTHER CORPORATE DEVELOPMENTS
-- Announced a clinical collaboration agreement with BeiGene in
May 2020 to evaluate combining surufatinib and fruquintinib with
BeiGene's anti-PD-1 antibody tislelizumab, for the treatment of
various solid tumor cancers, in the U.S., Europe, China and
Australia;
-- Announced a land compensation agreement in June 2020 with the
Guangzhou government for the return of the remaining 34-year
land-use rights on an unused plot of land under our HBYS(41) joint
venture in consideration for cash compensation of up to
approximately $100 million; and
-- Announced a strategic partnership with Inmagene(42) in
January 2021 to further develop four novel preclinical drug
candidates discovered by HUTCHMED for the potential treatment of
multiple immunological diseases.
VI. EVOLUTION OF OUR CORPORATE IDENTITY
Today we announce the consolidation of the two corporate
identities that we have used since our inception. Hutchison China
MediTech, or Chi-Med, has been used as our group identity, while
Hutchison MediPharma has been the identity of our novel drug
R&D(43) operations under which our oncology products have been
developed and are now being marketed. We believe now is the right
time to consolidate to a single and ubiquitous corporate identity
that captures the history and brand equity we have built over the
past twenty years.
Therefore, we have chosen to rename ourselves HUTCHMED. The
brand HUTCHMED will immediately replace Chi-Med as our abbreviated
name. We plan to formally change our group company name at our
Annual General Meeting in April 2021, and the names of our key
subsidiary companies over the balance of 2021. Our ticker symbol,
HCM, will remain unchanged on the Nasdaq Global Select Market and
the AIM market of the London Stock Exchange. We have also changed
our website to www.hutch-med.com. The information required pursuant
to AIM Rule 26 may be found at this address.
VII. IMPACT OF COVID-19
The COVID-19 outbreak initially posed some challenges to our
operations in 2020 resulting from restrictions in travel. Our teams
adapted quickly and were able to minimize the effect across our
businesses. We will continue to closely monitor the evolving
situation.
Full Year 2020 Financial Results
Change in Segment Reporting:
As a consequence of our recent commercialization of both
ELUNATE(R) and SULANDA (R) and the possible approval and launch of
savolitinib during 2021, we have decided to change the manner in
which we report segment results in our financial statements.
Effective from the year ended December 31, 2020, we will report two
segments, (1) Oncology/Immunology, covering all activities related
to oncology/immunology including sales, marketing, manufacturing
and research and development with respect to our drugs and drug
candidates; and (2) Other Ventures, which includes all other
HUTCHMED businesses. We have retrospectively revised prior period
segment information to conform to current period presentation in
the financial information contained in this announcement.
Cash, Cash Equivalents and Short-Term Investments were $435.2
million as of December 31, 2020 compared to $217.2 million as of
December 31, 2019.
-- Adjusted Group (non-GAAP(44) ) net cash flows excluding
financing activities were -$78.4 million (2019: -$82.3m) mainly due
to Oncology/Immunology R&D spending and partially offset by
dividends received from our non-consolidated joint ventures
totaling $86.7 million (2019: $28.1m); and
-- Net cash generated from financing activities in 2020 totaled
$296.4 million (2019: -$1.5m) mainly resulting from a Nasdaq
follow-on offering in January 2020 and two private placements to
General Atlantic(45) and CPP Investments(46) completed in July and
November 2020 respectively.
Revenues for the year ended December 31, 2020 was $228.0 million
compared to $204.9 million in 2019.
-- Oncology/Immunology consolidated revenues were $ 30.2 million
(2019 : $26.8m) comprised of $20.0 million (2019: $10.8m) in
manufacturing revenues, promotion and marketing service revenues
and royalties from the commercial sale of ELUNATE (R) ; and $10.2
million (2019: $16.0m) in research and development service fee
revenues primarily from AstraZeneca and Lilly ; and
-- Other Ventures consolidated revenues increased 11% (11% at
CER(47) ) to $197.8 million (2019: $178.1m) mainly due to continued
sales growth of third-party prescription drug products .
Net Expenses for the year ended December 31, 2020 were $353.7
million compared to $310.9 million in 2019.
-- Cost of Sales were $188.5 million (2019: $160.2m), the
majority of which was the cost of third-party prescription drug
products marketed through our profitable Other Ventures;
-- R&D Expenses were $174.8 million (2019: $138.2m) mainly
as a result of an expansion in the development of our ten novel
oncology drug candidates. With six now in global development, our
rapidly scaling international clinical and regulatory operations in
the U.S. and Europe incurred expenses of $63.3 million (2019:
$21.7m) while R&D expense in China was stable at $111.5 million
(2019: $116.5m);
-- SG&A(48) Expenses were $61.3 million (2019: $52.9m)
primarily due to increases in staff costs and share-based
compensation to support expanding operations. This included the
build-up of a large-scale national oncology commercial
infrastructure in China to support the launch of SULANDA(R) and the
assumption of commercial responsibility on ELUNATE(R) ; and
-- Other Items(49) generated net income of $70.9 million (2019:
$40.4m) resulting primarily from an increase in our share of equity
in the earnings from equity investees under our Other Ventures in
China which delivered solid underlying net income growth of 7% (9%
at CER) in 2020 and also benefited from a one-time land
compensation gain of $28.8 million (2019: nil).
Net Loss attributable to HUTCHMED for the year ended December
31, 2020 was $125.7 million compared to $106.0 million in 2019.
-- As a result, the net loss attributable to HUTCHMED in 2020
was $0.18 per ordinary share / $0.90 per ADS(50) compared to net
loss attributable to HUTCHMED of $0.16 per ordinary share / $0.80
per ADS, in 2019.
Financial Summary
Condensed Consolidated Balance Sheet Data
(in $'000)
As of December 31,
--------------------
2020 2019
--------- ---------
Assets
Cash and cash equivalents and short term investments 435,176 217,168
Accounts receivable 47,870 43,254
Other current assets 47,694 56,600
Property, plant and equipment 24,170 20,855
Investments in equity investees 139,505 98,944
Other non-current assets 29,703 28,301
--------- ---------
Total assets 724,118 465,122
========= =========
Liabilities and shareholders' equity
Accounts payable 31,612 23,961
Other payables, accruals and advance receipts 120,882 81,624
Long-term bank borrowings 26,861 26,818
Other liabilities 25,814 19,816
--------- ---------
Total liabilities 205,169 152,219
Total Company's shareholders' equity 484,116 288,012
Non-controlling interests 34,833 24,891
--------- ---------
Total liabilities and shareholders' equity 724,118 465,122
========= =========
Condensed Consolidated Statement of Operations Data
(in $'000, except share and per share data)
Year Ended December 31,
-------------------------
2020 2019
------------ -----------
Revenues:
Oncology/Immunology - Marketed Products 19,953 10,766
Oncology/Immunology - R&D 10,262 16,026
------------ -----------
Oncology/Immunology consolidated revenues 30,215 26,792
Other Ventures 197,761 178,098
------------ -----------
Total revenues 227,976 204,890
============ ===========
Expenses:
Costs of revenues (188,519) (160,152)
Research and development expenses (174,776) (138,190)
Selling and general administrative expenses (61,349) (52,934)
Total expenses (424,644) (351,276)
------------ -----------
Loss from Operations (196,668) (146,386)
Other income 6,934 5,281
------------ -----------
Loss before income taxes and equity in earnings of equity investees (189,734) (141,105)
Income tax expense (4,829) (3,274)
Equity in earnings of equity investees, net of tax 79,046 40,700
------------ -----------
Net loss (115,517) (103,679)
Less: Net income attributable to non-controlling interests (10,213) (2,345)
------------ -----------
Net loss attributable to HUTCHMED (125,730) (106,024)
============ ===========
Losses per share attributable to HUTCHMED - basic and diluted (0.18) (0.16)
Number of shares used in per share calculation - basic and diluted 697,931,437 665,683,145
Losses per ADS attributable to HUTCHMED - basic and diluted (0.90) (0.80)
Number of ADSs used in per share calculation - basic and diluted 139,586,287 133,136,629
All amounts are expressed in U.S. dollar currency unless
otherwise stated.
FINANCIAL GUIDANCE
We provide select Financial Guidance for 2021 below reflecting
expected commercial progress on ELUNATE(R) and SULANDA(R) as well
as the potential launch of savolitinib in mid-2021. While we do not
provide net cash flow guidance for 2021, we do expect an increase
in investment to support the many new potential registration
studies we plan this year as well as the continued expansion of our
organization in China, the U.S. and Europe.
To support our growth plans, we continue to actively evaluate
non-core assets divestment opportunities as well as monitor market
conditions for seeking further listings on other stock exchanges
such as Hong Kong and Shanghai.
2020 2021
Actual Guidance
------------------------------------------ ------------- ------------------
Oncology/Immunology consolidated revenues $30.2 million $110 - 130 million
------------------------------------------ ------------- ------------------
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 measure s. 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, r espectively.
-----
Conference Call and Audio Webcast Presentation Scheduled Today
at 1 p.m. GMT / 8 a.m. EST / 9 p.m. HKT - Investors may participate
in the call as follows: +44 20 3194 0569 (U.K.) / +1 646 722 4977
(U.S.) / +852 3027 6500 (Hong Kong), or access a live audio webcast
of the call via HUTCHMED's website at www.hutch-med.com/event/.
Additional dial-in numbers are also available at HUTCHMED's
website. Please use participant access code " 38028560# ."
-----
FINANCIAL STATEMENTS
HUTCHMED will today file with the U.S. Securities and Exchange
Commission its Annual Report on Form 20-F.
ANNUAL GENERAL MEETING
The Annual General Meeting of HUTCHMED will be held on
Wednesday, April 28, 2021. Notice of the 2021 Annual General
Meeting will be published and issued to shareholders in due
course.
About HUTCHMED
HUTCHMED (Nasdaq/AIM: HCM) is an innovative, commercial-stage,
biopharmaceutical company committed, over the past twenty years, to
the discovery and global development of targeted therapies and
immunotherapies for the treatment of cancer and immunological
diseases. It has advanced ten cancer drug candidates from discovery
into clinical studies around the world and has an extensive
commercial infrastructure in its home market of China. For more
information, please visit: www.hutch-med.com.
CONTACTS
Investor Enquiries
Mark Lee, Senior Vice President +852 2121 8200
Annie Cheng, Vice President +1 (973) 567 3786
Media Enquiries
Americas - Brad Miles, Solebury Trout +1 (917) 570 7340 (Mobile)
bmiles@troutgroup.com
Europe - Ben Atwell / Alex Shaw, FTI Consulting +44 20 3727 1030 / +44 7771 913 902 (Mobile) / +44 7779
545 055 (Mobile)
HUTCHMED@fticonsulting.com
Asia - Joseph Chi Lo / Zhou Yi, Brunswick +852 9850 5033 (Mobile), jlo@brunswickgroup.com /
+852 9783 6894 (Mobile), yzhou@brunswickgroup.com
Nominated Advisor
Freddy Crossley / Atholl Tweedie, Panmure Gordon (UK)
Limited +44 (20) 7886 2500
References
Unless the context requires otherwise, references in this
announcement to the "Group," the "Company," "HUTCHMED, " "HUTCHMED
Group," "we," "us," and "our," mean Hutchison China MediTech
Limited and its consolidated subsidiaries and joint ventures unless
otherwise stated or indicated by context.
Past Performance and Forward-Looking Statements
The performance and results of operations of the Group contained
within this announcement are historical in nature, and past
performance is no guarantee of future results of the Group. This
announcement contains forward-looking statements within the meaning
of the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can
be identified by words like "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates," "pipeline,"
"could," "potential, " "first-in-class," "designed to,"
"objective," "guidance," "pursue," or similar terms, or by express
or implied discussions regarding potential drug candidates,
potential indications for drug candidates or by discussions of
strategy, plans, expectations or intentions. You should not place
undue reliance on these statements. Such forward-looking statements
are based on the current beliefs and expectations of management
regarding future events, and are subject to significant known and
unknown risks and uncertainties. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those set
forth in the forward-looking statements. There can be no guarantee
that any of our drug candidates will be approved for sale in any
market, or that any approvals which are obtained will be obtained
at any particular time, or that any such drug candidates will
achieve any particular revenue or net income levels. In particular,
management's expectations could be affected by, among other things:
unexpected regulatory actions or delays or government regulation
generally; the uncertainties inherent in research and development,
including the inability to me e t 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 impact of the COVID-19 pandemic or other health crises
in China or globally; the inability of a drug candidate to obtain
regulatory approval in different jurisdictions or gain commercial
acceptance after obtaining regulatory approval; global trends
toward health care cost containment, including ongoing pricing
pressures; uncertainties regarding actual or potential legal
proceedings, including, among others, actual or potential product
liability litigation, litigation and investigations regarding sales
and marketing practices, intellectual property disputes, and
government investigations generally; and general economic and
industry conditions, including uncertainties regarding the effects
of the persistently weak economic and financial environment in many
countries and uncertainties regarding future global exchange rates.
For further discussion of these and other risks, see HUTCHMED's
filings with the U.S. Securities and Exchange Commission and on
AIM. HUTCHMED is providing the information in this announcement as
of this date and does not undertake any obligation to update any
forward-looking statements as a result of new information, future
events or otherwise.
In addition, this announcement contains statistical data and
estimates that HUTCHMED obtained from industry publications and
reports generated by third-party market research firms . Although
HUTCHMED believes that the publications, reports and surveys are
reliable, HUTCHMED has not independently verified the data and
cannot guarantee the accuracy or completeness of such data. You are
cautioned not to give undue weight to this data. Such data involves
risks and uncertainties and are subject to change based on various
factors, including those discussed above.
Inside Information
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
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 over 600 scientists and
staff (December 31, 2019: 500), and an in-house oncology commercial
organization of over 420 staff (December 31, 2019: 90).
Currently, we have nine self-discovered oncology drug candidates
in clinical trials in China, with six also in clinical development
in the U.S. and Europe. Our first two drug candidates, fruquintinib
and surufatinib, have been approved and launched by our commercial
organization in China.
MARKETED PRODUCT SALES
Fruquintinib (ELUNATE(R) in China )
ELUNATE(R) was first commercially launched in China, marketed by
our partner Lilly, starting in November 2018 for the treatment of
advanced CRC. Since launch, Lilly deployed a dedicated team of
about 140 oncology commercial personnel to market ELUNATE(R) in
China. In January 2020, ELUNATE(R) was included in the NRDL thereby
broadening access by advanced CRC patients in China.
In July 2020, we reached an agreement with Lilly for HUTCHMED to
take over development and execution of all on-the-ground medical
detailing, promotion and local and regional marketing activities
for ELUNATE(R) in China. Under the terms of the new agreement,
HUTCHMED and Lilly will share gross profits linked to sales target
performance. Subject to meeting pre-agreed sales targets, Lilly
will pay HUTCHMED an estimated total of 70% to 80% of ELUNATE(R)
sales in the form of royalties, manufacturing costs and service
payments.
Since taking on these commercial responsibilities in Q4 2020,
HUTCHMED has deployed its dedicated team of over 420 oncology
commercial personnel to market ELUNATE(R) with sales now increasing
rapidly.
(Growth vs. Prior Period) Lilly Sales Team HUTCHMED Sales Team
--------------------------------
2020 Q1-Q3 2020 Q4 2020 Jan-Feb 2021*
-------------------------------------------------- ------------- ---------------- ---------------- --------------
ELUNATE (R) In-market Sales ** $33.7m (+91%) $23.5m (+37%) $10.2m (+2,051%) $14.3m (+116%)
ELUNATE (R) Revenues consolidated by HUTCHMED *** $20.0m (+85%) $12.8m (+53%) $7.2m (+192%) $10.2m (+269%)
-------------------------------------------------- ------------- ---------------- ---------------- --------------
* = Unaudited; ** = Represents total sales to third parties as
provided by Lilly; *** = Represents manufacturing fees, commercial
service fees and royalties paid by Lilly to HUTCHMED, and sales to
other third parties invoiced by HUTCHMED.
In 2020, we estimate that ELUNATE(R) achieved approximately 15%
penetration (patient share), based on our estimation of the size of
the advanced CRC market in China, which would equate to
approximately 8,400 patients receiving an average of 4.7 months of
treatment (IQVIA).
Driven by inclusion in the NRDL, we are now rapidly expanding
hospital pharmacy listings, one of the most important factors
affecting broad-scale adoption of ELUNATE(R) in China. In Q4 2020,
we increased hospital listings by over 40% to approximately 280 and
target to double this level of listings in 2021. Our oncology
commercial team currently covers over 2,300 oncology hospitals in
China, with ELUNATE(R) prescriptions in hospitals without an
in-house pharmacy listing being filled in external retail
pharmacies.
We believe that the efficacy and safety benefits of ELUNATE(R) ,
combined with our deep commercial presence and execution, will
position us well to significantly increase our market share in
advanced CRC in China in the future.
Surufatinib (SULANDA(R) in China )
SULANDA(R) was first commercially launched in China in
mid-January 2021 for the treatment of advanced non-pancreatic NET.
In China, there were an estimated 67,600 newly diagnosed NET
patients in 2018, of which an estimated 60% were diagnosed with
advanced NETs. Considering the current incidence to prevalence
ratio, there may be more than 300,000 patients living with the
disease in China.
More than half of NET patients harbor tumors in the
gastrointestinal tract. As such, there exists major overlap between
the oncology physicians and hospitals in China that treat advanced
CRC with ELUNATE(R) and advanced gastrointestinal NETs with
SULANDA(R) . We expect that this synergy will enable us to
effectively utilize our full oncology commercial organization to
market both products.
In January-February 2021, the first two months on the market,
the total unaudited sales of SULANDA(R) were $4.9 million.
A number of factors have contributed to the promising start for
SULANDA(R) such as, (1) a larger and dedicated oncology commercial
team covering over 300 cities in China; (2) extensive pre- and
post-launch marketing programs to raise awareness among the over
20,000 oncology physicians in China; and (3) a pricing strategy
aimed at maximizing patient access to SULANDA(R) .
Our aim is to have SULANDA(R) included in the 2022 NRDL. Until
then we are implementing a broad-scale, means tested, patient
access program which could materially reduce out-of-pocket costs
for patients. We expect the average duration of treatment for
SULANDA(R) for NET patients could be similar to the 9.2 months
median PFS(51) in non-pancreatic NET. Competition in the advanced
non-pancreatic NET market in China is limited with SULANDA(R)
providing a unique mechanism of action against the disease.
With the initiation of rolling NDA submissions to the U.S. FDA
for surufatinib in December 2020, we have begun to establish a U.S.
oncology commercial organization with the recruitment of a senior
leadership team based in New Jersey in preparation for a potential
surufatinib U.S. launch in late 2021 or early 2022.
RESEARCH & DEVELOPMENT
savolitinib
Savolitinib is an oral, potent, and highly selective small
molecule inhibitor of MET. In global partnership with AstraZeneca,
savolitinib has been studied in NSCLC, PRCC and gastric cancer in
over 1,100 patients to date, both as a monotherapy and in
combinations.
Savolitinib - Lung cancer:
MET plays an important role in NSCLC. The table below shows a
summary of the clinical studies for savolitinib in lung cancer
patients.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
============== ========================= ====== ====================== ============ ===========
Savolitinib MET Exon 14 skipping China II Registration NDA accepted NCT02897479
alteration (May 2020)
============== ========================= ====== ====================== ============ ===========
Savolitinib SAVANNAH: 2L/3L Global II Registration-intent Ongoing NCT03778229
+ TAGRISSO(R) EGFRm+(52) ; TAGRISSO(R)
refractory; MET+
============== ========================= ====== ====================== ============ ===========
Savolitinib 2L/3L EGFRm+; TAGRISSO(R) Global III In planning N/A
+ TAGRISSO(R) refractory; MET+
============== ========================= ====== ====================== ============ ===========
Savolitinib 2L EGFR TKI(53) China III In planning N/A
+ TAGRISSO(R) refractory NSCLC;
MET+
============== ========================= ====== ====================== ============ ===========
Savolitinib Naïve patients China III In planning N/A
+ TAGRISSO(R) with EGFRm & MET+
============== ========================= ====== ====================== ============ ===========
NDA accepted in MET Exon 14 skipping alterations NSCLC
(NCT02897479) - An estimated 2-3% of NSCLC patients have MET Exon
14 skipping alterations, which lead to poor prognosis. In late
2019, we completed a 70-patient Phase II registration study that
was the basis for NDA, which was accepted by the China NMPA in May
2020. Priority review status was granted in July 2020 and, subject
to approval, launch is expected in mid-2021.
Results of the Phase II study were presented at ASCO in June
2020 and showed that as of the March 31, 2020 data cut-off, ORR(54)
was 49.2% and DCR(55) was 93.4% in 61 efficacy evaluable patients.
Median DoR(56) was 9.6 months (95% CI(57) 5.5-NR(58) ) with
maturity of 40%. Median PFS was 6.9 months (95% CI 4.2-19.3) with
maturity of 50%. Median OS was 14.0 months (95% CI: 9.7-NR) with
maturity of 46%. Clinical data demonstrated an acceptable safety
profile with a low AE(59) related discontinuations rate of
14.3%.
EGFR TKI-resistance in NSCLC - MET-amplification is a major
mechanism for acquired resistance to both first-generation EGFR
TKIs, such as IRESSA(R) and TARCEVA(R) , as well as
third-generation EGFR TKIs like TAGRISSO(R) . As many as 30% of
EGFR mutation positive NSCLC patients develop MET amplification
driven resistance to EGFR TKIs. Savolitinib has been studied
extensively in these patients in the TATTON and SAVANNAH
studies.
SAVANNAH Phase II study of combination with TAGRISSO (R) in
patients who have progressed following TAGRISSO(R) due to MET
amplification or overexpression (NCT03778229) - The SAVANNAH study
is a global single-arm, open-label study. SAVANNAH followed the
successful TATTON study, a Phase Ib/II expansion study of
savolitinib in combination with TAGRISSO(R) in over 220 EGFR
mutation positive TKI refractory NSCLC patients, with final
analysis presented at the virtual 2020 WCLC.
The SAVANNAH study has now fully enrolled the savolitinib 300mg
QD(60) cohort, and is currently enrolling two additional cohorts of
savolitinib 300mg BID(61) and 600mg QD. The SAVANNAH study will
also determine optimal design of the planned global Phase III study
regarding optimal biomarker strategy and dosage regimen. Enrollment
is expected to complete in mid-2021 and planning for the global
Phase III study is now underway.
In-Planning - China Phase III study of combination with TAGRISSO
(R) in 2L EGFR TKI refractory, MET amplified NSCLC patients - We
intend to initiate a Phase III study in China targeting EGFR TKI
refractory second-line NSCLC patient in the second half of
2021.
In-Planning - China Phase III study of combination with TAGRISSO
(R) in EGFR mutant and MET positive NSCLC patients - We intend to
initiate a Phase III study in China targeting treatment naïve
patients who are both EGFR mutation and MET positive in the second
half of 2021.
Savolitinib - Kidney cancer:
MET is a clear genetic driver in RCC(62) . The table below shows
a summary of the clinical studies for savolitinib in kidney cancer
patients.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
============= ========================== ========== ===== ================= ===========
Savolitinib MET-driven, unresectable Global III In planning N/A
+ IMFINZI(R) and locally advanced
or metastatic PRCC
============= ========================== ========== ===== ================= ===========
Savolitinib CALYPSO: PRCC U.K./Spain II Interim data ASCO NCT02819596
+ IMFINZI(R) GU 2020
============= ========================== ========== ===== ================= ===========
Savolitinib CALYPSO: Clear cell U.K./Spain II Ongoing NCT02819596
+ IMFINZI(R) RCC; VEGFR TKI refractory
============= ========================== ========== ===== ================= ===========
MET+ PRCC - PRCC is the most common of the non-clear cell RCC,
representing approximately 14% of kidney cancer. Approximately
400,000 new cases of kidney cancer were diagnosed globally in 2018,
equating to about 56,500 cases of PRCC, with approximately 40%
harboring MET driven disease. No targeted therapies have been
approved specifically for PRCC.
SAVOIR Phase III in MET-positive PRCC (NCT03091192) - In late
2018, the SAVOIR study, a global Phase III study of savolitinib
monotherapy compared with SUTENT(R) (sunitinib) in patients with
MET-driven PRCC, was stopped early with 60 patients randomized at
the time, due to confounding data from a separate, external,
retrospective molecular epidemiology study.
Results from the 60 randomized patients (33 savolitinib, 27
sunitinib) were promising and data was presented at ASCO in May
2020. In terms of OS, savolitinib patients had not reached median
OS at data cut-off, compared to 13.2 months for sunitinib patients
(HR(63) 0.51; 95% CI: 0.21-1.17; p=0.110). Median PFS was 7.0
months for savolitinib patients, compared to 5.6 for sunitinib
patients (HR 0.71; 95% CI 0.37-1.36; p=0.313). Responses were
observed in 27% and 7% of savolitinib and sunitinib patients,
respectively. This difference did not reach statistical
significance due to the small sample size. In terms of safety,
Grade >= 3 AEs were reported in 42% of savolitinib patients
versus 81% of sunitinib patients, with AEs leading to dose
modification in 30% and 74% of savolitinib and sunitinib patients,
respectively.
Savolitinib and Immunotherapy Combinations - Evidence is
emerging demonstrating that MET plays an important role in the
tumor microenvironment, leading to reduced anti-tumor activity of
immune cells in many solid tumors. Therefore, combining
immunotherapies with a MET inhibitor is hypothesized to enhance
anti-tumor activity.
CALYPSO Phase II in combination with IMFINZI(R) PD-L1 inhibitor
in RCC (NCT02819596) - The CALYPSO study is an investigator
initiated open-label Phase I/II study of savolitinib in combination
with IMFINZI(R) . The study is evaluating the safety and efficacy
of the savolitinib/IMFINZI(R) combination in patients with PRCC and
clear cell RCC at sites in the U.K. and Spain.
CALYPSO PRCC cohort - Interim data for the PRCC cohort of the
CALYPSO Phase II study were presented at ASCO GU 2020 reporting an
ORR of 27%, median PFS of 4.9 months (95% CI: 2.5, 12.0) and median
OS of 12.3 months (95% CI: 5.8, 21.3). Tolerability was in line
with established single agent safety profiles.
In-Planning - Phase III in combination with IMFINZI(R) PD-L1
inhibitor in MET-driven, unresectable and locally advanced or
metastatic PRCC - Based on the encouraging results of the SAVOIR
and CALYPSO studies, we intend to initiate a global Phase III,
open-label, randomized, controlled study of savolitinib plus
IMFINZI(R) versus sunitinib monotherapy versus IMFINZI(R)
monotherapy in patients with MET-driven, unresectable and locally
advanced or metastatic PRCC. The study is expected to begin
enrollment by mid-2021.
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 patients. The VIKTORY study is an
investigator initiated Phase II umbrella study in gastric cancer in
South Korea in which a total of 715 patients were successfully
sequenced into 10 molecular-driven patient groups. Patients with
MET amplification (25/715, or 3.5% of patients) were treated with
savolitinib monotherapy, reporting an ORR of 50% (10/20, 95% CI:
28.0, 71.9), meeting pre-specified 6-week PFS rates and warranting
further study.
In-Planning - China Phase II study with potential for
registration intent in 2L+ gastric cancer with MET amplification -
In mid-2021, we intend to initiate a Phase II registration-intent
study in MET-amplified gastric cancer in China. This is a
two-stage, single-arm study which targets advanced gastric cancer
patients who have failed at least one line of treatment. The
primary endpoint is ORR. Subject to the results of the first-stage
of this study we will discuss with the CDE(64) of NMPA the
appropriate approach and necessary criteria for registration.
Surufatinib
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 over 900 patients to date,
both as a monotherapy and in combinations, and is approved in
China.
We currently retain all rights to surufatinib worldwide. A
summary of the clinical studies of surufatinib is shown in the
table below.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
======================= ======================== ========= ======= ====================== ===========
Surufatinib monotherapy SANET-ep: Non-pancreatic China III Approved and launched NCT02588170
NET
======================= ======================== ========= ======= ====================== ===========
Surufatinib monotherapy SANET-p: Pancreatic China III Met primary endpoint; NCT02589821
NET NDA accepted (Sept
2020)
======================= ======================== ========= ======= ====================== ===========
Surufatinib monotherapy NETs U.S. Ib NDA rolling submission NCT02549937
initiated; est.
complete H1 2021
======================= ======================== ========= ======= ====================== ===========
Surufatinib monotherapy NETs Europe Ib Expect to file N/A
MAA in mid-2021
======================= ======================== ========= ======= ====================== ===========
Surufatinib monotherapy BTC(65) and soft U.S. Ib Ongoing NCT02549937
tissue sarcoma
======================= ======================== ========= ======= ====================== ===========
Surufatinib monotherapy Chemotherapy refractory China IIb/III Ongoing NCT03873532
BTC
======================= ======================== ========= ======= ====================== ===========
Surufatinib + NENs(66) China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + BTC China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + Gastric cancer China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + Thyroid cancer China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + SCLC(67) China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + Soft tissue sarcoma China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + Endometrial cancer China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + Esophageal cancer China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + NSCLC China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + Solid tumors China I Ongoing NCT04427774
TYVYT(R) (PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib + Solid tumors U.S. Ib/II In planning NCT04579757
tislelizumab / Europe
(PD-1)
======================= ======================== ========= ======= ====================== ===========
Surufatinib - NET:
NETs present in the body's organ system with fragmented
epidemiology. About 55-75% of NETs originate in the GI(68) tract
and pancreas, 25-30% in the lung or bronchus, and a further 10-20%
in other organs or unknown origins.
Global development of surufatinib in NET - In June 2020, we held
a pre-NDA meeting with the U.S. FDA for the treatment of patients
with advanced NET and reached an agreement that the completed
SANET-ep (non-pancreatic NET) and SANET-p (pancreatic NET) studies,
along with existing data from surufatinib in U.S. non-pancreatic
and pancreatic NET patients, could form the basis to support a U.S.
NDA submission. The FDA granted Fast Track Designations for our
pancreatic and non-pancreatic NET development programs in April
2020, following Orphan Drug Designation for pancreatic NET in
November 2019.
In December 2020, we initiated the filing of a NDA to the U.S.
FDA - the first portion of a rolling submission for surufatinib for
the treatment of pancreatic and non-pancreatic NET. We plan to
complete the NDA submission in the first half of 2021, which would
be our first NDA in the U.S. Filing acceptance of the NDA is
subject to FDA review of the complete application.
We also plan to file a MAA to the EMA in mid-2021, based on
scientific advice from the EMA's CHMP(69) .
U.S. Phase Ib NET cohorts (NCT02549937) - At ASCO 2020,
preliminary data presented from the two NET cohorts in the ongoing
U.S. Phase Ib trial for surufatinib demonstrated efficacy
comparable to China data in heavily pretreated patients, including
AFINITOR (R) and SUTENT (R) , with pancreatic or non-pancreatic
NETs. The safety profile was also consistent with the larger pool
of surufatinib safety data. As of April 21, 2020, 16 patients with
pancreatic NET were treated for a median of 7.1 months (range
2.0-17.5) and 16 patients with non-pancreatic NET were treated for
a median of 4.9 months (range of 1.0-10.2). All 32 patients have
pretreated progressive NETs (median prior lines of treatment: 3;
range 1-8). Confirmed response was observed in 18.8% of pancreatic
NET patients; all remaining patients had stable disease (including
1 unconfirmed response), for a DCR of 100%. In the non-pancreatic
NET cohort all patients had stable disease (including 1 unconfirmed
response).
Pharmacokinetic and safety data from these cohorts was presented
at AACR 2020, demonstrating similar profiles of surufatinib between
Chinese and U.S. patients, meaning that race had minimal effect on
exposure.
Surufatinib in SANET-ep (NCT02588170) - In December 2020,
surufatinib was granted approval for drug registration by the NMPA
for the treatment of non-pancreatic NET. The approval was based on
results from the SANET-ep study, a Phase III trial in patients with
advanced non-pancreatic NET conducted in China. The study met the
pre-defined primary endpoint of PFS at a preplanned interim
analysis. The results of this trial were highlighted in an oral
presentation at the 2019 ESMO Congress and published in The Lancet
Oncology in September 2020. Median PFS for patients treated with
surufatinib was 9.2 months, compared to 3.8 months for patients in
the placebo group (HR 0.334; 95% CI: 0.223-0.499; p<0.0001).
Surufatinib had an acceptable safety profile, with the most common
treatment-related adverse events of grade 3 or worse being
hypertension (36% of surufatinib patients vs. 13% of placebo
patients), proteinuria (19% vs. 0%) and anemia (5% vs. 3%).
Phase III study of surufatinib in SANET-p (NCT02589821) - The
SANET-p study is a pivotal Phase III study in patients with low- or
intermediate-grade, advanced pancreatic NET in China. In early 2020
it was terminated early as the pre-defined primary endpoint of PFS
was met at a preplanned interim analysis, leading to a second NDA
accepted by the NMPA in September 2020. The results of this study
were presented at the ESMO Virtual Congress 2020 and published
simultaneously in The Lancet Oncology.
Median PFS was 10.9 months for patients treated with
surufatinib, as compared to 3.7 months for patients in the placebo
group (HR 0.491; 95% CI: 0.319-0.755; p=0.0011). ORRs were 19.2%
for the efficacy evaluable patients in the surufatinib group versus
1.9% for the placebo group, with a DCR of 80.8% versus 66.0%,
respectively. Most patients in the trial had Grade 2 disease with
heavy tumor burden, including liver metastasis and multiple organ
involvement. Efficacy was also supported by BIIRC(70) assessment,
with a median PFS of 13.9 months for surufatinib as compared to 4.6
months for placebo (HR 0.339; 95% CI 0.209-0.549; p<0.0001). The
safety profile of surufatinib was manageable and consistent with
observations in prior studies. Treatment was well tolerated for
most patients, with discontinuation rates as a result of treatment
emergent adverse events of 10.6% in the surufatinib group as
compared to 6.8% in the placebo group.
The positive SANET-ep and SANET-p Phase III studies now position
surufatinib to potentially be approved in the full spectrum of
advanced-NET disease in China. We believe that no other approved
targeted therapy can address and treat all subtypes of NETs.
Surufatinib - BTC:
Phase IIb/III study of surufatinib monotherapy in second line
BTC (NCT03873532) - In March 2019, based on preliminary Phase
Ib/IIa data, we initiated a registration-intent Phase IIb/III study
comparing surufatinib with capecitabine in patients with
unresectable or metastatic BTC whose disease progressed on
first-line chemotherapy. The primary endpoint is OS. Enrollment for
the BTC monotherapy Phase II portion (80 patients) was completed in
2020, and we expect to conduct an interim analysis for futility in
2021 when OS data are mature. The interim analysis and assessment
of the current treatment landscape in BTC will inform our further
development strategy.
Surufatinib - Combinations with Checkpoint Inhibitors:
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.
In late 2018, we entered into a global collaboration with Junshi
to evaluate the combination of surufatinib with TUOYI(R) . We have
completed a Phase I dose-finding study and presented the data at
the AACR Conference in April 2020. The data showed that surufatinib
plus TUOYI (R) were well tolerated with no unexpected safety
signals observed. At the RP2D(71) , a DCR of 100% and ORR of 63.6%
were reported for 11 efficacy evaluable patients, with 2
unconfirmed PRs(72) . Surufatinib plus TUOYI (R) showed encouraging
antitumor activity in patients with advanced solid tumors. A Phase
II China study is rapidly enrolling patients in nine solid tumor
indications, including NENs, BTC, gastric cancer, thyroid cancer,
SCLC, soft tissue sarcoma, endometrial cancer, esophageal cancer
and NSCLC.
In the first half of 2021, we expect to start an open-label
Phase Ib/II study in the U.S. of surufatinib in combination with
tislelizumab evaluating the safety, tolerability, pharmacokinetics
and efficacy in patients with advanced solid tumors, including CRC,
NET, SCLC, gastric cancer and soft tissue sarcoma.
In addition, we have expanded our collaboration with Innovent
and, in July 2020, started a Phase I study in China to evaluate the
safety and efficacy of TYVYT(R) in combination with
surufatinib.
Surufatinib - Exploratory development:
We are now conducting multiple Phase Ib expansion cohorts in the
U.S. to explore surufatinib use in BTC and soft tissue sarcoma. In
China, we intend to initiate multiple exploratory studies, both as
a single agent, and in combinations, to evaluate efficacy of
surufatinib. We are also supporting dozens of
investigator-initiated studies in various tumor settings.
Fruquintinib
Fruquintinib is a novel, selective, oral inhibitor of VEGFR
1/2/3 kinases that was designed to improve kinase selectivity to
minimize off-target toxicity and thereby improve tolerability.
Fruquintinib has been studied in over 2,200 patients to date, both
as a monotherapy and in combinations.
We retain all rights to fruquintinib outside of China and are
partnered with Lilly in China. The table below shows a summary of
the clinical studies for fruquintinib.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
=========================== ==================== ========= ===== ================== ===========
Fruquintinib monotherapy FRESCO: >= 3L China III Approved and NCT02314819
CRC; chemotherapy launched
refractory
=========================== ==================== ========= ===== ================== ===========
Fruquintinib monotherapy FRESCO-2: metastatic U.S. III Ongoing NCT04322539
CRC / Europe
/ Japan
=========================== ==================== ========= ===== ================== ===========
Fruquintinib monotherapy CRC; TN(73) & U.S. Ib Ongoing NCT03251378
HR+(74) /Her2(75)
- breast cancer
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + paclitaxel FRUTIGA: 2L gastric China III Ongoing; Completed NCT03223376
cancer 2(nd) interim
analysis
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + TYVYT(R) CRC China II Ongoing NCT04179084
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + TYVYT(R) HCC(76) China Ib/II Ongoing NCT03903705
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + TYVYT(R) Endometrial cancer China Ib/II Ongoing NCT03903705
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + TYVYT(R) RCC China Ib/II Ongoing NCT03903705
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + TYVYT(R) GI tumors China Ib/II Ongoing NCT03903705
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + tislelizumab TN breast cancer U.S. Ib/II In planning NCT04577963
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + tislelizumab Solid tumors TBD Ib/II In planning NCT04716634
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + geptanolimab CRC China Ib Ongoing NCT03977090
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib + geptanolimab NSCLC China Ib Ongoing NCT03976856
(PD-1)
=========================== ==================== ========= ===== ================== ===========
Fruquintinib - CRC:
Fruquintinib capsules, sold under the brand name ELUNATE(R) ,
are approved in China for metastatic CRC patients.
Global development of fruquintinib in metastatic CRC - In June
2020, the U.S. FDA granted Fast Track Designation for the
development of fruquintinib, for the treatment of patients with
metastatic CRC who have been previously treated with
fluoropyrimidine-, oxaliplatin-, and irinotecan-based chemotherapy,
a VEGF biological therapy, and, if RAS wild-type, an anti-EGFR
therapy.
In July 2020, we initiated a global Phase III registration
study, known as the FRESCO-2 study, in refractory metastatic CRC
which is expected to enroll over 680 patients from approximately
150 sites in 14 countries. The first patient was dosed in September
2020 in the U.S. and enrollment is targeted to complete in late
2021.
The U.S. FDA, EMA and Japanese PMDA(77) have all acknowledged
the totality of the fruquintinib clinical data, including the
FRESCO-2 study (if positive), the prior positive Phase III FRESCO
study demonstrating improvement in overall survival that led to
fruquintinib approval for metastatic CRC in China in 2018, and
additional completed and ongoing supporting studies in metastatic
CRC, could potentially support an NDA for the treatment of patients
with metastatic CRC in the third-line setting.
Encouraging preliminary results of the U.S. Phase I/Ib study
were presented at ESMO Congress 2020. As of the data cut-off in
August 2020, fruquintinib was generally well-tolerated with
preliminary evidence of anti-tumor activity in patients with
heavily penetrated refractory metastatic CRC. Among 34 total
patients, 16 received prior LONSURF(R) treatment, 8 received
STIVARGA(R) treatment and 10 received both LONSURF(R) and
STIVARGA(R) treatments. The median duration of fruquintinib
treatment was 19.1 weeks, higher than 12.0 weeks of prior
LONSURF(R) treatment and 9.2 weeks of prior STIVARGA(R) treatment
among patients in this trial. DCR in 31 evaluable patients was
80.6%. The safety profile was consistent with that seen in the
FRESCO study.
Fruquintinib - Gastric Cancer:
Phase III study of fruquintinib in combination with paclitaxel
in gastric cancer (second-line) (NCT03223376) -The FRUTIGA study is
a randomized, double-blind, Phase III study in China to evaluate
the efficacy and safety of fruquintinib combined with paclitaxel
compared with paclitaxel monotherapy, at a 1:1 ratio, for
second-line treatment of advanced gastric cancer. The FRUTIGA study
primary endpoint is OS.
In June 2020, the IDMC of the FRUTIGA study completed a second
planned interim data review and, based on the preset criteria, the
IDMC and Joint Steering Committees recommended that the trial
continue with a sample size increase to 700 patients. We expect to
complete enrollment of FRUTIGA around the year end of 2021.
Fruquintinib - Combinations with Checkpoint Inhibitors:
Phase Ib/II dose expansion study in China of fruquintinib plus
TYVYT(R) is underway in different tumor types, including HCC,
endometrial cancer, RCC and GI tumors. Moreover, Phase Ib studies
of fruquintinib plus geptanolimab, Genor's(78) anti-PD-1 antibody,
in second-line CRC and NSCLC are also underway.
In the first half of 2021, we expect to start an open-label,
multi-center, non-randomized, Phase Ib/II study in the U.S. to
assess the safety and efficacy of fruquintinib in combination with
tislelizumab in patients with advanced, refractory triple negative
breast cancer. Another Phase II study is being planned to assess
the efficacy and safety of the combination in patients with
advanced or metastatic, unresectable gastric cancer and CRC.
Fruquintinib - Exploratory development:
We are conducting multiple Phase Ib expansion cohorts in the
U.S. to explore fruquintinib in CRC and breast cancer. In China, we
are currently supporting dozens of investigator-initiated studies
in various solid tumor settings.
HMPL-689
HMPL-689 is a novel, selective oral inhibitor targeting the
isoform PI3K , a component in the B-cell receptor signaling
pathway. HMPL-689's pharmacokinetic properties are favorable with
good oral absorption, moderate tissue distribution and low
clearance in preclinical studies, we therefore anticipate low risk
of drug accumulation and drug-to-drug interaction. We currently
retain all rights to HMPL-689 worldwide. The table below shows a
summary of the clinical studies for HMPL-689.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
==================== ====================== ========= ====================== =========== ===========
HMPL-689 monotherapy Healthy volunteers Australia I Completed NCT02631642
==================== ====================== ========= ====================== =========== ===========
HMPL-689 monotherapy Indolent non-Hodgkin's U.S./ I/Ib Ongoing NCT03786926
lymphoma Europe
==================== ====================== ========= ====================== =========== ===========
HMPL-689 monotherapy Indolent non-Hodgkin's U.S./ II registration-intent In planning N/A
lymphoma Europe
==================== ====================== ========= ====================== =========== ===========
HMPL-689 monotherapy Indolent non-Hodgkin's China Ib Ongoing NCT03128164
lymphoma
==================== ====================== ========= ====================== =========== ===========
HMPL-689 monotherapy Indolent non-Hodgkin's China II registration-intent In planning N/A
lymphoma
==================== ====================== ========= ====================== =========== ===========
In December 2020, we presented preliminary results from a Phase
I dose escalation study of HMPL-689 in Chinese patients with
relapsed/refractory lymphoma at the ASH Annual Meeting. A total of
56 patients were enrolled resulting in an ORR of 51.9% (27/52) and
complete response rate of 21.2% (11/52) in efficacy evaluable
patients. The median DOR was 9.2 months (3.9-NR). One patient with
follicular lymphoma who achieved complete response (per post hoc
independent radiologic review) was on treatment for over 19 months.
In the nine efficacy evaluable patients treated with the RP2D of
30mg QD orally in Chinese patients, efficacy was encouraging with
an ORR of 100% (4/4) in follicular lymphoma, 100% in marginal zone
lymphoma (2/2) and 67% (2/3) in diffuse large B cell lymphoma.
HMPL-689 was well tolerated at the RP2D exhibiting
dose-proportional pharmacokinetics and a manageable toxicity
profile. The most common Grade >= 3 non-hematologic TEAEs(79)
were pneumonia and hypertension. Grade >= 3 hematologic TEAEs
were neutropenia, and no Grade 5 TEAEs were reported.
The Phase Ib dose expansion study in China is ongoing in
multiple sub-categories of indolent non-Hodgkin's lymphoma. Based
on the encouraging preliminary results, we are now planning
registration studies in select indolent non-Hodgkin's lymphoma in
China, which are anticipated to start in mid-2021.
Furthermore, we have initiated a Phase I/Ib study in the U.S.
and Europe, with patient enrollment underway. Dose escalation is
near complete and we expect to be able to engage with regulatory
authorities in mid-2021 to align potential registration pathway
with a target to initiate registration studies in 2021.
HMPL-523
HMPL-523 is a novel, selective, oral inhibitor targeting Syk,
for the treatment of hematological cancers and immune diseases. Syk
is a component in B-cell receptor signaling pathway. We currently
retain all rights to HMPL-523 worldwide. The table below shows a
summary of the clinical studies for HMPL-523.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
==================== ====================== ========= ===== =========== ===========
HMPL-523 monotherapy ITP China I/Ib Ongoing NCT03951623
==================== ====================== ========= ===== =========== ===========
HMPL-523 monotherapy Indolent non-Hodgkin's Australia Ib Active, not NCT02503033
lymphoma recruiting
==================== ====================== ========= ===== =========== ===========
HMPL-523 monotherapy Indolent non-Hodgkin's U.S. I/Ib Ongoing NCT03779113
lymphoma / Europe
==================== ====================== ========= ===== =========== ===========
HMPL-523 monotherapy Multiple sub-types of China I/Ib Enrollment NCT02857998
B-cell malignancies completed
==================== ====================== ========= ===== =========== ===========
Phase I/Ib dose escalation study of HMPL-523 in patients with
ITP (NCT03951623) - In mid-2019, we started a Phase I study of
HMPL-523 for the treatment of ITP, an autoimmune disorder
characterized by low platelet count and an increased bleeding risk.
Dose escalation is near complete with planning and preparation for
a Phase III trial in China now underway.
Phase I/Ib study of HMPL-523 in indolent non-Hodgkin's lymphoma
(NCT03779113) - We have now initiated a Phase I/Ib study in the
U.S. and Europe. Patient enrollment is underway in 11 sites,
multiple dose cohorts have been completed already and we are close
to establishing our Phase II dose.
Phase I/Ib studies of HMPL-523 in indolent non-Hodgkin's
lymphoma and multiple subtypes of B-cell malignancies
(NCT02503033/NCT02857998) - Our Phase I/Ib dose escalation and
expansion studies in Australia and China have now enrolled over 200
patients in a broad range of hematological cancers and have
identified indications of interest for future development.
HMPL-453
HMPL-453 is a novel, selective, oral inhibitor targeting FGFR
1/2/3. Aberrant FGFR signaling is associated with tumor growth,
promotion of angiogenesis, as well as resistance to anti-tumor
therapies. We currently retain all rights to HMPL-453 worldwide.
The table below shows a summary of the clinical studies for
HMPL-453.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
==================== =================== ===== ===== =========== ===========
HMPL-453 monotherapy Cholangiocarcinoma China II Ongoing NCT04353375
(IHCC)
==================== =================== ===== ===== =========== ===========
In September 2020, we initiated a Phase II, single-arm,
multi-center, open-label study, evaluating the efficacy, safety and
pharmacokinetics of HMPL-453 in patients with advanced IHCC with
FGFR2 fusion that had failed at least one line of systemic therapy.
IHCC is a cancer that develops within the bile ducts, the second
most common primary hepatic malignancy after HCC. Approximately
10-15% of IHCC patients have tumors that harbor FGFR2 fusion.
HMPL-306
HMPL-306 is a novel small molecule dual-inhibitor of enzymes
IDH1 and IDH2. IDH1 and IDH2 mutations have been implicated as
drivers of certain hematological malignancies, gliomas and solid
tumors, particularly among acute myeloid leukemia patients. We
currently retain all rights to HMPL-306 worldwide. The table below
shows a summary of the clinical studies for HMPL-306.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
==================== =================== ===== ===== =========== =============
HMPL-306 monotherapy Hematological China I Ongoing NCT04272957
malignancies
==================== =================== ===== ===== =========== =============
HMPL-306 monotherapy Solid tumors & U.S. I In planning NCT04762602 /
hematological NCT04764474
malignancies
==================== =================== ===== ===== =========== =============
In July 2020, we initiated our Phase I development in China.
This is a multi-center study to evaluate the safety,
pharmacokinetics, pharmacodynamics and efficacy of HMPL-306 in
patients of relapsed or refractory hematological malignancies with
an IDH1 and/or IDH2 mutation. Multiple sites have been initiated
and we anticipate to be able to establish the Phase II dose during
2021.
In the U.S., IND applications for solid tumors and hematologic
malignancies were cleared in October 2020. We expect to initiate
Phase I development in the U.S. during the first half of 2021.
HMPL-295
HMPL-295, a novel ERK inhibitor, is our 10(th) in-house
discovered small molecule oncology drug candidate. 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.
RAS and RAF mutations are present in almost 50% of human
cancers, predict worse clinical prognosis in a wide variety of
tumor types, mediate resistance to targeted therapies, and decrease
the response to standard of care, target therapy and immunotherapy.
On the MAPK pathway, KRAS inhibitors are under clinical evaluation,
and acquired resistance develops for RAF/MEK targeted therapies.
ERK inhibition has the potential to overcome or avoid the intrinsic
or acquired resistance from upstream mechanisms.
We currently retain all rights to HMPL-295 worldwide. Planning
for the Phase I study in China is now underway and set to start in
mid-2021.
DISCOVERY RESEARCH & PRECLINICAL DEVELOPMENT
We strive to create differentiated novel oncology and immunology
treatments with global potential. These include furthering both
small molecule and monoclonal antibody therapies which address
aberrant genetic drivers; cancer cell metabolism; modulate tumor
immune microenvironment; and target immune cell checkpoints. We
design drug candidates with profiles that enable them to be used in
innovative combinations with other therapy, such as chemotherapy,
immunotherapy and other targeted therapy in order to attack disease
simultaneously through multiple modalities and pathways. We believe
that this approach can significantly improve treatment outcomes for
patients.
In addition to the ten clinical-stage assets, we have three more
novel oncology drug candidates in late-preclinical stage, including
HMPL-653 (targeting solid tumors), HMPL-A83 (targeting solid tumors
and hematological malignancies) and HMPL-760 (targeting
hematological malignancies). We retain all worldwide rights to
these assets and are targeting dual U.S. and China IND submissions
during 2021.
NEW MANUFACTURING FACILITY IN SHANGHAI
In December 2020, we held a ground-breaking ceremony in
Zhangjiang Hi-Tech Park, Shanghai, commencing construction of a
large-scale manufacturing plant for innovative drugs. The $130
million Shanghai factory will be our largest manufacturing
facility, with production capacity estimated to be five times that
of our manufacturing plant in Suzhou. The Shanghai factory site
spans approximately 28,700 square meters. Constructed in two
phases, the buildings will have a total floorplan of almost 55,000
square meters. The first phase will be primarily for small molecule
production, with production capacity expected to be able to produce
250 million tablets and capsules per year, five-fold the capacity
of our current Suzhou facility. The second phase will include
expansion into large molecule production.
The current Suzhou site is a GMP(80) -certified production
facility, supplying drug candidates for clinical trials and the
commercialization of ELUNATE(R) and SULANDA(R) . We plan to
continue to invest resources in the Suzhou facility, expanding the
production team in phases.
IMMUNOLOGY COLLABORATION WITH INMAGENE
In January 2021, we entered into a strategic partnership with
Inmagene, a clinical development stage company with a focus on
immunological diseases, to further develop four novel preclinical
drug candidates discovered by us for the potential treatment of
multiple immunological diseases. Funded by Inmagene, we will work
together to move the drug candidates towards IND. If successful,
Inmagene will then advance the drug candidates through global
clinical development.
OTHER VENTURES
Our Other Ventures include drug marketing and distribution
platforms covering about 320 cities and towns in China with around
4,800 mainly manufacturing and commercial personnel. Built over the
past 20 years, it primarily focuses on prescription drug and
consumer health products through several joint ventures and
subsidiary companies.
In 2020, our Other Ventures delivered encouraging growth with
consolidated revenues up 11% (11% at CER) to $197.8 million (2019:
$178.1m). Consolidated net income attributable to HUTCHMED from our
Other Ventures increased by 75% (77% at CER) to $72.8 million
(2019: $41.5m), and excluding the one-time gain of $28.8 million in
2020 (2019: nil) from land compensation, net income attributable to
HUTCHMED grew by 6% (8% at CER) to $44.0 million (2019:
$41.5m).
SHPL(81) : Our own-brand prescription drugs business, operated
through our non-consolidated joint venture SHPL grew sales by 2%
(3% at CER) to $276.4 million (2019: $272.1m). This sales growth
and favorable product mix led to an increase of 9% (12% at CER) in
net income attributable to HUTCHMED to $33.5 million (2019:
$30.7m).
The SHPL operation is large-scale, with a commercial team of
about 2,2 00 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 GMP-certified factory holds 74 drug
product manufacturing licenses and is operated by over 530
manufacturing staff .
SXBX(82) pill : SHPL's main product is SXBX pill, an oral
vasodilator prescription therapy for coronary artery disease. SXBX
pill is the third largest botanical prescription drug in this
indication in China, with a national market share in 2020 of 18.2%
(2019: 18.0%) . Sales increased by 4% (6% at CER) to $250.0 million
in 2020 (2019: $239.5m).
SXBX pill is protected by a formulation patent that expires in
202 9 and is one of less than two dozen proprietary prescription
drugs represented on China's National Essential Medicines List,
which means that all Chinese state-owned health care institutions
are required to carry it. SXBX pill is fully reimbursed in all
China .
Hutchison Sinopharm(83) : 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 and sales grew by 15%
(15% at CER) to $165.1 million (2019: $143.7m) in 2020.
Hutchison Sinopharm has a dedicated team of over 120 commercial
staff focused on two key areas of operation. First, a team that
markets third-party prescription drug products directly to over 500
public and private hospitals in the Shanghai region and through a
network of over 40 distributors to cover all other provinces in
China. Second, a team that markets HUTCHMED's science-based infant
nutrition products through a network over 29,000 promoters in
China.
HBYS: Our own-brand OTC(84) drugs business, operated through our
non-consolidated joint venture HBYS grew sales 8% (8% at CER) to
$232.4 million (2019: $215.4m), mainly as a result of a 30%
increase in sales of Banlangen, an anti-viral product, in 2020 due
to COVID-19. This growth combined with the land compensation
detailed below led to an increase of 361% (361% at CER) in net
income attributable to HUTCHMED to $36.5 million (2019: $7.9m)
including a one-time land compensation gain of $28.8 million (2019:
nil) .
HBYS' Bai Yun Shan brand is a market-leading, household name,
known by the majority of Chinese consumers with 185 drug product
licenses . In addition to about 1,000 manufacturing staff in
Guangdong and Anhui, HBYS has a co mmercial team of about 900
commercial staff that cove r the national retail pharmacy channel
in China .
HBYS property update: In June 2020, we entered into an agreement
with the Guangzhou government for the return of HBYS's remaining 34
years' land-use rights on its 30,000 square meters unused site in
Guangzhou in return for cash compensation of up to approximately
$100 million. In 2020, HBYS received about $40 million and is
expected to receive about $43 million in 2021. In addition, subject
to the Guangzhou government's confirmation of completion of the
remaining administrative procedures before June 2021, HBYS will be
further entitled to receive about $17 million in compensation. The
land return had no impact on HBYS manufacturing operations, which
continue to be conducted at larger sites in Guangzhou and Bozhou,
Anhui province.
Other Ventures dividends: The profits of our various Other
Ventures businesses are passed to the HUTCHMED Group through
dividend payments primarily from our non-consolidated joint
ventures, SHPL and HBYS. In 2020, dividends of $86.7 million (2019:
$28.1m) were paid from these joint ventures to the HUTCHMED Group
level with aggregate dividends received since inception of over
$300 million.
Christian Hogg
Chief Executive Officer
March 4, 2021
REFERENCES AND ABBREVIATIONS
1 Sales of Elunate(R) to third parties invoiced by Lilly were
$32.7 million (2019: $17.6m) & invoiced by HUTCHMED were $1.0
million (2019: nil).
2 Lilly = Eli Lilly and Company
3 NRDL = National Reimbursement Drug List
4 NET = Neuroendocrine tumors
5 NMPA = National Medical Products Administration
6 NDA = New Drug Application
7 MET = Mesenchymal epithelial transition receptor
8 NSCLC = Non-small cell lung cancer
9 IND = Investigational new drug application
10 ERK = Extracellular signal-regulated kinase
11 MAPK pathway = RAS-RAF-MEK-ERK signaling cascade
12 FDA = Food and Drug Administration
13 EMA = European Medicines Agency
14 CHMP = Committee for Medicinal Products for Human Use
15 MAA = Marketing Authorisation Application
16 CRC = Colorectal cancer
17 VEGFR = Vascular endothelial growth factor receptor
18 FGFR = Fibroblast growth factor receptor
19 CSF-1R = Colony stimulating factor-1 receptor
20 ESMO = European Society for Medical Oncology Annual
Congress
21 ASCO = American Society of Clinical Oncology Annual
Meeting
22 AACR = American Association of Cancer Research Annual
Meeting
23 Junshi = Shanghai Junshi Biosciences Co. Ltd.
24 PD-1 = Programmed Cell Death Protein-1
25 BeiGene = BeiGene Ltd.
26 IDMC = Independent data monitoring committee
27 Innovent = Innovent Biologics, Inc.
28 AstraZeneca = AstraZeneca AB (publ)
29 PD-L1 = Programmed death-ligand 1
30 PRCC = Papillary renal cell carcinoma
31 ASCO GU = American Society of Clinical Oncology Genitourinary
Symposium
32 WCLC = World Conference on Lung Cancer
33 EGFR = Epidermal growth factor receptor
34 PI3K = Phosphoinositide 3-kinase delta
35 ASH = American Society of Hematology Annual Meeting
36 Syk = Spleen tyrosine kinase
37 ITP = Immune thrombocytopenia purpura
38 IHCC = Intrahepatic cholangiocarcinoma
39 FGFR2 = Fibroblast growth factor receptor 2
40 IDH1/2 = Isocitrate dehydrogenase 1/2
41 HBYS = Hutchison Whampoa Guangzhou Baiyunshan Chinese
Medicine Company Limited
42 Inmagene = Inmagene Biopharmaceuticals Co. Ltd.
43 R&D = Research and development
44 GAAP = Generally Accepted Accounting Principles
45 General Atlantic = General Atlantic Singapore HCM Pte.
Ltd
46 CPP Investments = Canada Pension Plan Investment Board
47 We also report changes in performance at constant exchange
rate ("CER") which is a non-GAAP measure. Please refer to "Use of
Non-GAAP Financial Measures and Reconciliation" below for further
information relevant to the interpretation of these financial
measures and reconciliations of these financial measures to the
most comparable GAAP measures.
48 SG&A = Selling, general and administrative
49 Other items = includes other income, income tax expense,
equity in earnings of equity investees, net of tax and net income
attributable to non-controlling interests
50 ADS = American depositary share
51 PFS = Progression-free survival
52 EGFRm = Epidermal growth factor receptor mutation
53 EGFR TKI = Epidermal growth factor receptor tyrosine kinase
inhibitor
54 ORR = Objective response rate
55 DCR = Disease control rate
56 DoR = Duration of response
57 CI = Confidence interval
58 NR = Not reached
59 AE = Adverse event
60 QD = Once daily dose
61 BID = Twice daily dose
62 RCC = Renal cell cancer
63 HR = Hazard ratio
64 CDE = Center for Drug Evaluation
65 BTC = Biliary tract cancer
66 NENs = Neuroendocrine neoplasms
67 SCLC = Small cell lung cancer
68 GI = Gastrointestinal
69 CHMP = Committee for Medicinal Products for Human Use
70 BIIRC = Blinded Independent Image Review Committee
71 RP2D = Recommended Phase II Dose
72 PR = Partial Response
73 TN = Triple-negative
74 HR+ = Hormone receptor-positive
75 Her2 = Human epidermal growth factor receptor 2
76 HCC = Hepatocellular carcinoma
77 PMDA = Pharmaceuticals and Medical Devices Agency
78 Genor = Genor Biopharma Co. Ltd.
79 TEAEs = Treatment emergent adverse events
80 GMP = Good Manufacturing Practice
81 SHPL = Shanghai Hutchison Pharmaceuticals Limited
82 SXBX = She Xiang Bao Xin
83 Hutchison Sinopharm = Hutchison Whampoa Sinopharm
Pharmaceuticals (Shanghai) Company Limited
84 OTC = Over-the-counter
USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATION
In addition to financial information prepared in accordance with
U.S. GAAP, this announcement also contains certain non-GAAP
financial measures based on management's view of performance
including:
-- Adjusted Group net cash flows excluding financing activities
-- CER
Management uses such measures internally for planning and
forecasting purposes and to measure the HUTCHMED Group's overall
performance. We believe these adjusted financial measures provide
useful and meaningful information to us and investors because they
enhance investors' understanding of the continuing operating
performance of our business and facilitate the comparison of
performance between past and future periods. These adjusted
financial measures are non-GAAP measures and should be considered
in addition to, but not as a substitute for, the information
prepared in accordance with U.S. GAAP. Other companies may define
these measures in different ways.
Adjusted Group net cash flows excluding financing activities: We
include the change in short-term investments for the period to the
change in cash and cash equivalents for the period, and exclude the
net cash (generated from)/used in 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
year-to-year comparisons by retranslating the current year's
performance at previous year'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
year-to-year comparisons of our results and increases the
transparency of our underlying performance.
Reconciliation of GAAP change in cash and cash equivalents and
short-term investments to Adjusted Group net cash flows excluding
financing activities:
$'millions 2020 2019
----------------------------------------------------------------- ------- -------
Cash and cash equivalents and short-term investments
at end of year 435.2 217.2
Excludes: Cash and cash equivalents and short-term
investments at
beginning of year (217.2) (301.0)
Excludes: Net cash (generated from)/used in financing
activities for the year (296.4) 1.5
------------------------------------------------------------------ ------- -------
Adjusted Group net cash flows excluding financing
activities (78.4) (82.3)
------------------------------------------------------------------ ------- -------
Reconciliation of GAAP revenues, net income attributable to
HUTCHMED from Other Ventures to CER:
$'millions (except
%) Year Ended Change Amount Change %
------------------------ -------------------- ------------------------ -----------------------
December December Exchange Exchange
31, 2020 31, 2019 Actual CER effect Actual CER effect
------------------------ --------- --------- ------ ------ -------- ------ ----- --------
Consolidated revenues
Other Ventures^ 197.8 178.1 19.7 20.5 (0.8) 11% 11% 0%
^ Includes:
- Hutchison Sinopharm
-
prescription drugs 165.1 143.7 21.4 22.1 (0.7) 15% 15% 0%
Non-consolidated
joint venture revenues 508.8 487.5 21.3 25.9 (4.6) 4% 5% -1%
- SHPL 276.4 272.1 4.3 7.6 (3.3) 2% 3% -1%
- HBYS 232.4 215.4 17.0 18.3 (1.3) 8% 8% 0%
Consolidated net
income attributable
to HUTCHMED
Other Ventures 72.8 41.5 31.3 32.2 (0.9) 75% 77% -2%
- Consolidated
entities 2.8 2.9 (0.1) (0.1) - -5% -5% 0%
- Equity investees 70.0 38.6 31.4 32.3 (0.9) 82% 84% -2%
- SHPL 33.5 30.7 2.8 3.7 (0.9) 9% 12% -3%
- HBYS 36.5 7.9 28.6 28.6 - 361% 361% 0%
Excluding one-time
HBYS land compensation
gain
Other Ventures 44.0 41.5 2.5 3.3 (0.8) 6% 8% -2%
- Consolidated
entities 2.8 2.9 (0.1) (0.1) - -5% -5% 0%
- Equity investees 41.2 38.6 2.6 3.4 (0.8) 7% 9% -2%
- SHPL 33.5 30.7 2.8 3.7 (0.9) 9% 12% -3%
- HBYS 7.7 7.9 (0.2) (0.3) 0.1 -2% -3% 1%
Land compensation
gain
- HBYS 28.8 - 28.8 28.8 - - - -
Revenue of Key Product
of SHPL
- SXBX pill 250.0 239.5 10.5 13.7 (3.2) 4% 6% -2%
CONSOLIDATED FINANCIAL STATEMENTS
Hutchison China MediTech Limited
Consolidated Balance Sheets
(in US$'000, except share data)
December 31,
----------------------
Note 2020 2019
-------- ---------- ----------
Assets
Current assets
Cash and cash equivalents 5 235,630 121,157
Short-term investments 6 199,546 96,011
Accounts receivable-third parties 7 46,648 41,410
Accounts receivable-related parties 23(ii) 1,222 1,844
Other receivables, prepayments and deposits 8 26,786 15,769
Amounts due from related parties 23(ii) 1,142 24,623
Inventories 9 19,766 16,208
----------
Total current assets 530,740 317,022
Property, plant and equipment 10 24,170 20,855
Right-of-use assets 11 8,016 5,516
Deferred tax assets 24(ii) 1,515 815
Investments in equity investees 12 139,505 98,944
Amount due from a related party 23(ii) - 16,190
Other non-current assets 13 20,172 5,780
---------- ----------
Total assets 724,118 465,122
========== ==========
Liabilities and shareholders' equity
Current liabilities
Accounts payable 14 31,612 23,961
Other payables, accruals and advance receipts 15 120,882 81,624
Lease liabilities 11 2,785 3,216
Income tax payable 24(iii) 1,120 1,828
Deferred revenue 20 1,597 2,106
Amounts due to a related party 23(ii) 401 366
---------- ----------
Total current liabilities 158,397 113,101
Lease liabilities 11 6,064 3,049
Deferred tax liabilities 24(ii) 5,063 3,158
Long-term bank borrowings 16 26,861 26,818
Deferred revenue 20 484 133
Other non-current liabilities 8,300 5,960
---------- ----------
Total liabilities 205,169 152,219
Commitments and contingencies 17
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000 shares authorized;
727,722,215 and 666,906,450
shares issued at December 31, 2020 and 2019 respectively 18 72,772 66,691
Additional paid-in capital 822,458 514,904
Accumulated losses (415,591) (289,734)
Accumulated other comprehensive income/(loss) 4,477 (3,849)
---------- ----------
Total Company's shareholders' equity 484,116 288,012
Non-controlling interests 34,833 24,891
---------- ----------
Total shareholders' equity 518,949 312,903
---------- ----------
Total liabilities and shareholders' equity 724,118 465,122
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
Hutchison China MediTech Limited
Consolidated Statements of Operations
(in US$'000, except share and per share data)
Year Ended December 31,
----------------------------------------
Note 2020 2019 2018
------ ------------ ------------ ------------
Revenues
Goods -third parties 203,606 175,990 156,234
* related parties 23(i) 5,484 7,637 8,306
Services -commercialization-third parties 3,734 2,584 11,660
* collaboration research and development -third parties 9,771 15,532 17,681
* research and development-related parties 23(i) 491 494 7,832
Other collaboration revenue
-royalties-third parties 4,890 2,653 261
* licensing-third parties - - 12,135
Total revenues 20 227,976 204,890 214,109
------------ ------------ ------------
Operating expenses
Costs of goods-third parties (178,828) (152,729) (129,346)
Costs of goods-related parties (3,671) (5,494) (5,978)
Costs of services-commercialization -third parties (6,020) (1,929) (8,620)
Research and development expenses 21 (174,776) (138,190) (114,161)
Selling expenses (11,334) (13,724) (17,736)
Administrative expenses (50,015) (39,210) (30,909)
------------ ------------ ------------
Total operating expenses (424,644) (351,276) (306,750)
------------ ------------ ------------
(196,668) (146,386) (92,641)
Other income/(expense)
Interest income 26 3,236 4,944 5,978
Other income 4,600 1,855 1,798
Interest expense 26 (787) (1,030) (1,009)
Other expense (115) (488) (781)
------------ ------------ ------------
Total other income/(expense) 6,934 5,281 5,986
------------ ------------ ------------
Loss before income taxes and equity in earnings of equity investees (189,734) (141,105) (86,655)
Income tax expense 24(i) (4,829) (3,274) (3,964)
Equity in earnings of equity investees, net of tax 12 79,046 40,700 19,333
------------ ------------ ------------
Net loss (115,517) (103,679) (71,286)
Less: Net income attributable to non-controlling interests (10,213) (2,345) (3,519)
------------ ------------ ------------
Net loss attributable to the Company (125,730) (106,024) (74,805)
============ ============ ============
Losses per share attributable to the Company-basic and diluted (US$ per
share) 25 (0.18) (0.16) (0.11)
Number of shares used in per share calculation-basic and diluted 25 697,931,437 665,683,145 664,263,820
The accompanying notes are an integral part of these
consolidated financial statements.
Hutchison China MediTech Limited
Consolidated Statements of Comprehensive Loss
(in US$'000)
Year Ended December 31,
---------------------------------
2020 2019 2018
---------- ---------- ---------
Net loss (115,517) (103,679) (71,286)
Other comprehensive income/(loss)
Foreign currency translation gain/(loss) 9,530 (4,331) (6,626)
---------- ---------- ---------
Total comprehensive loss (105,987) (108,010) (77,912)
Less: Comprehensive income attributable to non-controlling interests (11,413) (1,620) (2,566)
---------- ---------- ---------
Total comprehensive loss attributable to the Company (117,400) (109,630) (80,478)
========== ========== =========
The accompanying notes are an integral part of these
consolidated financial statements.
Hutchison China MediTech Limited
Consolidated Statements of Changes in Shareholders' Equity
(in US$'000, except share data in '000)
Accumulated Total
Ordinary Ordinary Additional Other Company's Non- Total
Shares Shares Paid-in Accumulated Comprehensive Shareholders' controlling Shareholders'
Number Value Capital Losses Income/(Loss) Equity Interests Equity
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at January 1,
2018 664,470 66,447 496,960 (108,184) 5,430 460,653 23,230 483,883
Net
(loss)/income - - - (74,805) - (74,805) 3,519 (71,286)
Issuances in
relation
to share option
exercises 2,107 211 2,952 - - 3,163 - 3,163
Share-based
compensation
Share options - - 7,885 - - 7,885 18 7,903
Long-term
incentive
plan ("LTIP") - - 3,224 - - 3,224 9 3,233
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
- - 11,109 - - 11,109 27 11,136
LTIP-treasury
shares
acquired and
held
by Trustee - - (5,451) - - (5,451) - (5,451)
Dividend
declared
to a
non-controlling
shareholder of
a
subsidiary - - - - - - (2,564) (2,564)
Transfer between
reserves - - 15 (15) - - - -
Foreign currency
translation
adjustments - - - - (5,673) (5,673) (953) (6,626)
As at December
31,
2018 666,577 66,658 505,585 (183,004) (243) 388,996 23,259 412,255
========= ========= =========== ============ ============== ============== ============ ==============
Impact of change
in accounting
policy
(Note 3) - - - (655) - (655) (16) (671)
-------------- -------------- ------------ --------------
As at January 1,
2019 666,577 66,658 505,585 (183,659) (243) 388,341 23,243 411,584
Net
(loss)/income - - - (106,024) - (106,024) 2,345 (103,679)
Issuances in
relation
to share option
exercises 329 33 218 - - 251 - 251
Share-based
compensation
Share options - - 7,157 - - 7,157 16 7,173
LTIP - - 2,239 - - 2,239 12 2,251
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
- - 9,396 - - 9,396 28 9,424
LTIP-treasury
shares
acquired and
held
by Trustee - - (346) - - (346) - (346)
Transfer between
reserves - - 51 (51) - - - -
Foreign currency
translation
adjustments - - - - (3,606) (3,606) (725) (4,331)
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at December
31
, 2019 666,906 66,691 514,904 (289,734) (3,849) 288,012 24,891 312,903
========= ========= =========== ============ ============== ============== ============ ==============
Net
(loss)/income - - - (125,730) - (125,730) 10,213 (115,517)
Issuance in
relation
to public
offering 23,669 2,366 115,975 - - 118,341 - 118,341
Issuances in
relation
to private
investment
in public
equity
("PIPE") 36,667 3,667 196,333 - - 200,000 - 200,000
Issuance costs - - (8,317) - - (8,317) - (8,317)
Issuances in
relation
to share option
exercises 480 48 545 - - 593 - 593
Share-based
compensation
Share options - - 8,727 - - 8,727 10 8,737
LTIP - - 7,203 - - 7,203 16 7,219
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
- - 15,930 - - 15,930 26 15,956
LTIP-treasury
shares
acquired and
held
by Trustee - - (12,904) - - (12,904) - (12,904)
Dividends
declared
to
non-controlling
shareholders of
subsidiaries - - - - - - (1,462) (1,462)
Purchase of
additional
interests in a
subsidiary
of an equity
investee
(Note 12) - - (52) (83) (4) (139) (35) (174)
Transfer between
reserves - - 44 (44) - - - -
Foreign currency
translation
adjustments - - - - 8,330 8,330 1,200 9,530
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at December
31,
2020 727,722 72,772 822,458 (415,591) 4,477 484,116 34,833 518,949
========= ========= =========== ============ ============== ============== ============ ==============
The accompanying notes are an integral part of these
consolidated financial statements.
Hutchison China MediTech Limited
Consolidated Statements of Cash Flows
(in US$'000)
Year Ended December 31,
Note 2020 2019 2018
-------- ---------- ---------- ----------
Net cash used in operating activities 27 (62,066) (80,912) (32,847)
---------- ---------- ----------
Investing activities
Purchases of property, plant and equipment (7,949) (8,565) (6,364)
Purchase of leasehold land 13 (11,631) - -
Payment on leasehold land deposit 13 (2,326) - -
Deposits in short-term investments (732,908) (478,140) (903,551)
Proceeds from short-term investments 629,373 597,044 961,667
Purchase of a subsidiary company - (8,080) -
Cash acquired in purchase of a subsidiary company - 16,769 -
Investment in an equity investee - - (8,000)
----------
Net cash (used in)/generated from investing activities (125,441) 119,028 43,752
---------- ---------- ----------
Financing activities
Proceeds from issuance of ordinary shares 318,934 251 3,868
Purchases of treasury shares 19(ii) (12,904) (346) (5,451)
Dividends paid to non-controlling shareholders of subsidiaries (1,462) (1,282) (1,282)
Repayment of loan to a non-controlling shareholder of a
subsidiary - - (1,550)
Proceeds from bank borrowings - 26,807 26,923
Repayment of bank borrowings - (26,923) (30,000)
Payment of issuance costs (8,134) - (739)
---------- ---------- ----------
Net cash generated from/(used in) financing activities 296,434 (1,493) (8,231)
---------- ---------- ----------
Net increase in cash and cash equivalents 108,927 36,623 2,674
Effect of exchange rate changes on cash and cash equivalents 5,546 (1,502) (1,903)
---------- ---------- ----------
114,473 35,121 771
Cash and cash equivalents
Cash and cash equivalents at beginning of year 121,157 86,036 85,265
---------- ---------- ----------
Cash and cash equivalents at end of year 235,630 121,157 86,036
========== ========== ==========
Supplemental disclosure for cash flow information
Cash paid for interest 815 917 979
Cash paid for tax, net of refunds 24(iii) 5,940 3,249 3,752
Supplemental disclosure for non-cash activities
(Decrease)/increase in accruals made for purchases of property,
plant and equipment (57) 1,068 138
Accrual made for purchase of leasehold land 13 355 - -
Vesting of treasury shares for LTIP 19(ii) 4,828 944 731
The accompanying notes are an integral part of these
consolidated financial statements.
Hutchison China MediTech Limited
Notes to the Consolidated Financial Statements
1. Organization and Nature of Business
Hutchison China MediTech Limited (the "Company") and its
subsidiaries (together the "Group") are principally engaged in
researching, developing, manufacturing and marketing pharmaceutical
products. The Group and its equity investees have research and
development facilities and manufacturing plants in the People's
Republic of China (the "PRC") and sell their products mainly in the
PRC, including Hong Kong. In addition, the Group has established
international operations in the United States of America (the
"U.S.") and Europe.
The Company was incorporated in the Cayman Islands on December
18, 2000 as an exempted company with limited liability under the
Companies Law (2000 Revision), Chapter 22 of the Cayman Islands.
The address of its registered office is P.O. Box 309, Ugland House,
Grand Cayman, KY1-1104, Cayman Islands.
The Company's ordinary shares are listed on the AIM market of
the London Stock Exchange, and its American depositary shares
("ADS"), each representing five ordinary shares, are traded on the
Nasdaq Global Select Market.
Liquidity
As at December 31, 2020, the Group had accumulated losses of US$
415,591,000 primarily due to its spending in drug research and
development activities. The Group regularly monitors current and
expected liquidity requirements to ensure that it maintains
sufficient cash balances and adequate credit facilities to meet its
liquidity requirements in the short and long term. As at December
31, 2020, the Group had cash and cash equivalents of
US$235,630,000, short-term investments of US$199,546,000 and
unutilized bank borrowing facilities of US$69,359,000. Short-term
investments comprised of bank deposits maturing over three months.
The Group's operating plan includes the continued receipt of
dividends from certain of its equity investees. Dividends received
from equity investees for the years ended December 31, 2020, 2019
and 2018 were US$86,708,000, US$28,135,000 and US$35,218,000
respectively.
Based on the Group's operating plan, the existing cash and cash
equivalents, short-term investments and unutilized bank borrowing
facilities are considered to be sufficient to meet the cash
requirements to fund planned operations and other commitments for
at least the next twelve months (the look-forward period used), and
it is appropriate for the Group to prepare the consolidated
financial statements on a going concern basis.
2. Particulars of Principal Subsidiaries and Equity
Investees
Equity interest attributable to the Group
--------------- -------------------------------------------------
December 31,
Place of
establishment
Name and operations 2020 2019 Principal activities
---------------------- --------------- ----------------------- ---------------------- ----------------------
Subsidiaries
Hutchison MediPharma PRC 99.75 % 99.75 % Research, development,
Limited ("HMPL") manufacture and
commercialization of
pharmaceutical
products
Hutchison MediPharma U.S. 99.75 % 99.75 % Provision of
International Inc. professional,
scientific and
technical support
services
Hutchison Whampoa PRC 50.87 % 50.87 % Provision of sales,
Sinopharm distribution and
Pharmaceuticals marketing services to
(Shanghai) Company pharmaceutical
Limited ("HSPL") manufacturers
Hutchison Hain Organic Hong Kong 50 % 50 % Wholesale and trading
(Hong Kong) Limited of healthcare and
("HHOL") (note (a)) consumer products
Hutchison Healthcare PRC 100 % 100 % Manufacture and
Limited distribution of
healthcare products
Hutchison Consumer Hong Kong 100 % 100 % Wholesale and trading
Products Limited of healthcare and
consumer products
Equity investees
Shanghai Hutchison PRC 50 % 50 % Manufacture and
Pharmaceuticals distribution of
Limited ("SHPL") prescription drug
products
Hutchison Whampoa PRC 40 % 40 % Manufacture and
Guangzhou Baiyunshan distribution of
Chinese Medicine over-the-counter drug
Company Limited products
("HBYS") (note (b))
Notes:
(a) HHOL is regarded as a subsidiary of the Company, as while
both its shareholders have equal representation at the board, in
the event of a deadlock, the Group has a casting vote and is
therefore able to unilaterally control the financial and operating
policies of HHOL.
(b) The 50% equity interest in HBYS is held by an 80% owned
subsidiary of the Group. The effective equity interest of the Group
in HBYS is therefore 40% for the years presented.
3. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements reflect the
accounts of the Company and all of its subsidiaries in which a
controlling interest is maintained. Investments in equity investees
over which the Group has significant influence are accounted for
using the equity method. All inter-company balances and
transactions have been eliminated in consolidation. The
consolidated financial statements have been prepared in conformity
with generally accepted accounting principles in U.S. ("U.S.
GAAP").
Use of Estimates
The preparation of consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period.
Foreign Currency Translation
The Company's presentation currency is the U.S. dollar ("US$").
The financial statements of the Company and its subsidiaries with a
functional currency other than the US$ have been translated into
the Company's presentation currency. All assets and liabilities of
the subsidiaries are translated using year-end exchange rates and
revenues and expenses are translated at average exchange rates for
the year. Translation adjustments are reflected in accumulated
other comprehensive (loss)/income in shareholders' equity.
Net foreign currency exchange gains of US$3,265,000 and
US$246,000 and net foreign exchanges losses of US$233,000 were
recorded in other income and other expense in the consolidated
statements of operations for the years ended December 31, 2020,
2019 and 2018 respectively.
Cash and Cash Equivalents
The Group considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Cash and cash equivalents consist primarily of cash on hand and
bank deposits and are stated at cost, which approximates fair
value.
Short-term Investments
Short-term investments include deposits placed with banks with
original maturities of more than three months but less than one
year.
Concentration of Credit Risk
Financial instruments that potentially expose the Group to
concentrations of credit risk consist primarily of cash and cash
equivalents, short-term investments, accounts receivable, other
receivables and amounts due from related parties.
The Group places substantially all of its cash and cash
equivalents and short-term investments in major financial
institutions, which management believes are of high credit quality.
The Group has a practice to limit the amount of credit exposure to
any particular financial institution.
The Group has no significant concentration of credit risk. The
Group has policies in place to ensure that sales are made to
customers with an appropriate credit history and the Group performs
periodic credit evaluations of its customers. Normally the Group
does not require collateral from trade debtors.
Foreign Currency Risk
The Group's operating transactions and its assets and
liabilities in the PRC are mainly denominated in Renminbi ("RMB"),
which is not freely convertible into foreign currencies. The
Group's cash and cash equivalents denominated in RMB are subject to
government controls. The value of the RMB is subject to
fluctuations from central government policy changes and
international economic and political developments that affect the
supply and demand of RMB in the foreign exchange market. In the
PRC, certain foreign exchange transactions are required by law to
be transacted only by authorized financial institutions at exchange
rates set by the People's Bank of China (the "PBOC"). Remittances
in currencies other than RMB by the Group in the PRC must be
processed through the PBOC or other PRC foreign exchange regulatory
bodies which require certain supporting documentation in order to
complete the remittance.
Accounts Receivable
Accounts receivable are stated at the amount management expects
to collect from customers based on their outstanding invoices. The
allowance for credit losses reflects the Group's current estimate
of credit losses expected to be incurred over the life of the
receivables. The Group considers various factors in establishing,
monitoring, and adjusting its allowance for credit losses including
the aging of the accounts and aging trends, the historical level of
charge-offs, and specific exposures related to particular
customers. The Group also monitors other risk factors and
forward-looking information, such as country risk, when determining
credit limits for customers and establishing adequate allowances
for credit losses. Accounts receivable are written off after all
reasonable means to collect the full amount (including litigation,
where appropriate) have been exhausted.
Inventories
Inventories are stated at the lower of cost or net realizable
value. Cost is determined using the weighted average cost method.
The cost of finished goods comprises raw materials, direct labor,
other direct costs and related production overheads (based on
normal operating capacity). Net realizable value is the estimated
selling price in the ordinary course of business, less applicable
variable selling expenses. A provision for excess and obsolete
inventory will be made based primarily on forecasts of product
demand and production requirements. The excess balance determined
by this analysis becomes the basis for excess inventory charge and
the written-down value of the inventory becomes its cost.
Written-down inventory is not written up if market conditions
improve.
Property, Plant and Equipment
Property, plant and equipment consist of buildings, leasehold
improvements, plant and equipment, furniture and fixtures, other
equipment and motor vehicles. Property, plant and equipment are
stated at cost, net of accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful
lives of the depreciable assets.
Buildings 20 years
Plant and equipment 5-10 years
Furniture and fixtures, other equipment
and motor vehicles 4-5 years
Leasehold improvements Shorter of (a) 5 years or (b) remaining
term of lease
Additions and improvements that extend the useful life of an
asset are capitalized. Repairs and maintenance costs are expensed
as incurred.
Impairment of Long-Lived Assets
The Group evaluates the recoverability of long-lived assets in
accordance with authoritative guidance on accounting for the
impairment or disposal of long-lived assets. The Group evaluates
long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of these assets may
not be recoverable. If indicators of impairment exist, the first
step of the impairment test is performed to assess if the carrying
value of the net assets exceeds the undiscounted cash flows of the
assets. If yes, the second step of the impairment test is performed
in order to determine if the carrying value of the net assets
exceeds the fair value. If yes, impairment is recognized for the
excess.
Leasehold Land
Leasehold land represents fees paid to acquire the right to use
the land on which various plants and buildings are situated for a
specified period of time from the date the respective right was
granted and are stated at cost less accumulated amortization and
impairment loss, if any. Amortization is computed using the
straight-line basis over the lease period of 50 years.
Goodwill
Goodwill represents the excess of the purchase price plus fair
value of non-controlling interests over the fair value of
identifiable assets and liabilities acquired. Goodwill is not
amortized, but is tested for impairment at the reporting unit level
on at least an annual basis or when an event occurs or
circumstances change that would more likely than not reduce the
fair value of a reporting unit below its carrying amount. When
performing an evaluation of goodwill impairment, the Group has the
option to first assess qualitative factors, such as significant
events and changes to expectations and activities that may have
occurred since the last impairment evaluation, to determine if it
is more likely than not that goodwill might be impaired. If as a
result of the qualitative assessment, that it is more likely than
not that the fair value of the reporting unit is less than its
carrying amount, the quantitative fair value test is performed to
determine if the fair value of the reporting unit exceeds its
carrying value.
Other Intangible Assets
Other intangible assets with finite useful lives are carried at
cost less accumulated amortization and impairment loss, if any.
Amortization is computed using the straight-line basis over the
estimated useful lives of the assets.
Borrowings
Borrowings are recognized initially at fair value, net of debt
issuance costs incurred. Borrowings are subsequently stated at
amortized cost; any difference between the proceeds (net of debt
issuance costs) and the redemption value is recognized in the
consolidated statements of operations over the period of the
borrowings using the effective interest method.
Ordinary Shares
The Company's ordinary shares are stated at par value of US$0.10
per ordinary share. The difference between the consideration
received, net of issuance cost, and the par value is recorded in
additional paid-in capital.
Treasury Shares
The Group accounts for treasury shares under the cost method.
The treasury shares are purchased for the purpose of the LTIP and
held by a trustee appointed by the Group (the "Trustee") prior to
vesting.
Share-Based Compensation
Share options
The Group recognizes share-based compensation expense on share
options granted to employees and directors based on their estimated
grant date fair value using the Polynomial model. This Polynomial
pricing model uses various inputs to measure fair value, including
estimated market value of the Company's underlying ordinary shares
at the grant date, contractual terms, estimated volatility,
risk-free interest rates and expected dividend yields. The Group
recognizes share-based compensation expense in the consolidated
statements of operations on a graded vesting basis over the
requisite service period, and accounts for forfeitures as they
occur.
Share options are classified as equity-settled awards.
Share-based compensation expense, when recognized, is charged to
the consolidated statements of operations with the corresponding
entry to additional paid-in capital.
LTIP
The Group recognizes the share-based compensation expense on the
LTIP awards based on a fixed or determinable monetary amount on a
straight-line basis for each annual tranche awarded over the
requisite period. For LTIP awards with performance targets, prior
to their determination date, the amount of LTIP awards that is
expected to vest takes into consideration the achievement of the
performance conditions and the extent to which the performance
conditions are likely to be met. Performance conditions vary by
awards, including targets for shareholder returns, free cash flows,
revenues, net profit after taxes and/or the achievement of clinical
and regulatory milestones.
These LTIP awards are classified as liability-settled awards
before the determination date (i.e. the date when the achievement
of any performance conditions are known), as they settle in a
variable number of shares based on a determinable monetary amount,
which is determined upon the actual achievement of performance
targets. As the extent of achievement of the performance targets is
uncertain prior to the determination date, a probability based on
management's assessment of the achievement of the performance
targets has been assigned to calculate the amount to be recognized
as an expense over the requisite period.
After the determination date or if the LTIP awards have no
performance conditions, the LTIP awards are classified as
equity-settled awards. If the performance target is achieved, the
Group will pay the determined monetary amount to the Trustee to
purchase ordinary shares of the Company or the equivalent ADS. Any
cumulative compensation expense previously recognized as a
liability will be transferred to additional paid-in capital, as an
equity-settled award. If the performance target is not achieved, no
ordinary shares or ADS of the Company will be purchased and the
amount previously recorded in the liability will be reversed and
included in the consolidated statements of operations.
Defined Contribution Plans
The Group's subsidiaries in the PRC participate in a
government-mandated multi-employer defined contribution plan
pursuant to which certain retirement, medical and other welfare
benefits are provided to employees. The relevant labor regulations
require the Group's subsidiaries in the PRC to pay the local labor
and social welfare authority's monthly contributions at a stated
contribution rate based on the monthly basic compensation of
qualified employees. The relevant local labor and social welfare
authorities are responsible for meeting all retirement benefits
obligations and the Group's subsidiaries in the PRC have no further
commitments beyond their monthly contributions. The contributions
to the plan are expensed as incurred.
The Group also makes payments to other defined contribution
plans for the benefit of employees employed by subsidiaries outside
the PRC. The defined contribution plans are generally funded by the
relevant companies and by payments from employees.
The Group's contributions to defined contribution plans for the
years ended December 31, 2020, 2019 and 2018 amounted to
US$2,660,000, US$3,479,000 and US$2,878,000 respectively.
Revenue Recognition
Revenue is measured based on consideration specified in a
contract with a customer, and excludes any sales incentives and
amounts collected on behalf of third parties. Taxes assessed by a
governmental authority that are both imposed on and concurrent with
a specific revenue-producing transaction, that are collected by the
Group from a customer, are also excluded from revenue. The Group
recognizes revenue when it satisfies a performance obligation by
transferring control over a good, service or license to a
customer.
Nature of goods and services
The following is a description of principal activities,
separated by reportable segments, from which the Company generates
its revenue:
(i) Oncology/Immunology
The Oncology/Immunology reportable segment principally generates
revenue from license and collaboration contracts as well as
revenues related to the sale of Marketed Products developed from
Oncology/Immunology (which was represented under
Oncology/Immunology in these consolidated financial statements;
refer to Note 26). The license and collaboration contracts
generally contain multiple performance obligations including (1)
the license to the commercialization rights of a drug compound and
(2) the research and development services for each specified
treatment indication, which are accounted for separately if they
are distinct, i.e. if a product or service is separately
identifiable from other items in the arrangement and if a customer
can benefit from it on its own or with other resources that are
readily available to the customer.
The transaction price generally includes fixed and variable
consideration in the form of upfront payment, research and
development cost reimbursements, contingent milestone payments and
sales-based royalties. Contingent milestone payments are not
included in the transaction price until it becomes probable that a
significant reversal of revenue will not occur, which is generally
when the specified milestone is achieved. The allocation of the
transaction price to each performance obligation is based on the
relative standalone selling prices of each performance obligation
determined at the inception of the contract. The Group estimates
the standalone selling prices based on the income approach. Control
of the license to the drug compounds transfers at the inception
date of the collaboration agreements and consequently, amounts
allocated to this performance obligation are generally recognized
at a point in time. Conversely, research and development services
for each specified indication are performed over time and amounts
allocated to these performance obligations are generally recognized
over time using cost inputs as a measure of progress. The Group has
determined that research and development expenses provide an
appropriate depiction of measure of progress for the research and
development services. Changes to estimated cost inputs may result
in a cumulative catch-up adjustment. Royalty revenues are
recognized as future sales occur as they meet the requirements for
the sales-usage based royalty exception.
Deferred revenue is recognized if allocated consideration is
received in advance of the Group rendering research and development
services. Accounts receivable is recognized based on the terms of
the contract and when the Group has an unconditional right to bill
the customer, which is generally when research and development
services are rendered.
Revenue recognition from the sales of goods and provision of
services for Marketed Products developed from Oncology/Immunology
follows revenue recognition policies in Other Ventures below.
(ii) Other Ventures
The Other Ventures reportable segment principally generates
revenue from (1) sales of goods, which are the manufacture or
purchase and distribution of pharmaceutical products and other
consumer health products, and (2) provision of services, which are
the provision of sales, distribution and marketing services to
pharmaceutical manufacturers. The Group evaluates whether it is the
principal or agent for these contracts. Where the Group obtains
control of the goods for distribution, it is the principal (i.e.
recognizes sales of goods on a gross basis). Where the Group does
not obtain control of the goods for distribution, it is the agent
(i.e. recognizes provision of services on a net basis). Control is
primarily evidenced by taking physical possession and inventory
risk of the goods.
Revenue from sales of goods is recognized when the customer
takes possession of the goods. This usually occurs upon completed
delivery of the goods to the customer site. The amount of revenue
recognized is adjusted for expected sales incentives as stipulated
in the contract, which are generally issued to customers as direct
discounts at the point-of-sale or indirectly in the form of
rebates. Sales incentives are estimated using the expected value
method. Additionally, sales are generally made with a limited right
of return under certain conditions. Revenues are recorded net of
provisions for sales discounts and returns.
Revenue from provision of services is recognized when the
benefits of the services transfer to the customer over time, which
is based on the proportionate value of services rendered as
determined under the terms of the relevant contract. Additionally,
when the amounts that can be invoiced correspond directly with the
value to the customer for performance completed to date, the Group
recognizes revenue from provision of services based on amounts that
can be invoiced to the customer.
Deferred revenue is recognized if consideration is received in
advance of transferring control of the goods or rendering of
services. Accounts receivable is recognized if the Group has an
unconditional right to bill the customer, which is generally when
the customer takes possession of the goods or services are
rendered. Payment terms differ by subsidiary and customer, but
generally range from 45 to 180 days from the invoice date.
Research and Development Expenses
Research and development costs are expensed as incurred.
Collaborative Arrangements
The Group enters into collaborative arrangements with
collaboration partners that fall under the scope of Accounting
Standards Codification ("ASC") 808, Collaborative Arrangements
("ASC 808"). The Group records all expenditures for such
collaborative arrangements in research and development expenses as
incurred, including payments to third party vendors and
reimbursements to collaboration partners, if any. Reimbursements
from collaboration partners are recorded as reductions to research
and development expenses and accrued when they can be contractually
claimed.
Government Grants
Grants from governments are recognized at their fair values.
Government grants that are received in advance are deferred and
recognized in the consolidated statements of operations over the
period necessary to match them with the costs that they are
intended to compensate. Government grants in relation to the
achievement of stages of research and development projects are
recognized in the consolidated statements of operations when
amounts have been received and all attached conditions have been
met. Non-refundable grants received without any further obligations
or conditions attached are recognized immediately in the
consolidated statements of operations.
Leases
Summary of impact of applying ASC 842
The Group applied ASC 842 to its various leases at the date of
initial application of January 1, 2019. As a result, the Group has
changed its accounting policy for leases as detailed below. The
core principle of ASC 842 is that a lessee should recognize the
assets and liabilities that arise from leases. Therefore, the Group
recognizes in the consolidated balance sheets liabilities to make
lease payments (the lease liabilities) and right-of-use assets
representing its right to use the underlying assets for their lease
terms. The Group applied ASC 842 using the optional transition
method by recognizing the cumulative effect as an adjustment to
opening accumulated losses as at January 1, 2019. The comparative
information prior to January 1, 2019 has not been adjusted and
continues to be reported under ASC 840, Leases ("ASC 840").
The Group assessed lease agreements as at January 1, 2019 under
ASC 842, except for short-term leases. The Group elected the
short-term lease exception for leases with a term of 12 months or
less and recognizes lease expenses for such leases on a
straight-line basis over the lease term and does not recognize
right-of-use assets or lease liabilities accordingly. As a result
of this assessment, the Group recorded an aggregate US$0.7 million
in additional lease expenses as a cumulative adjustment to opening
accumulated losses upon adoption. Additionally, the Group
recognized right-of-use assets and lease liabilities of US$5.7
million and US$6.4 million respectively as at January 1, 2019.
The lease liabilities were measured at the present value of the
remaining lease payments, discounted using the lessees' incremental
borrowing rate as at January 1, 2019. The Group's weighted average
incremental borrowing rate applied on January 1, 2019 was 3.97% per
annum.
A reconciliation of the Group's reported operating lease
commitments as at December 31, 2018 and the Group's lease
liabilities recognized upon adoption of ASC 842 as at January 1,
2019 is as follows:
(in US$'000)
Operating lease commitments as at December 31, 2018 (note
(a)) 8,835
Less: Leases not commenced as at January 1, 2019 (3,676)
Less: Short-term leases (5)
Add: Adjustment as a result of the treatment for a termination
option (note (b)) 1,409
Less: Discount under the lessees' incremental borrowing
rate as at January 1, 2019 (206)
-------------
Lease liabilities recognized as at January 1, 2019 6,357
=============
Notes:
(a) Future aggregate minimum payments under non-cancellable
operating leases under ASC 840 were as follows:
December 31,
2018
-------------
(in US$'000)
Not later than 1 year 3,026
Between 1 to 2 years 2,735
Between 2 to 3 years 1,056
Between 3 to 4 years 882
Between 4 to 5 years 810
Later than 5 years 326
-------------
Total minimum lease payments 8,835
=============
(b) The Group leases its corporate offices in Hong Kong through
a support service agreement with an indirect subsidiary of CK
Hutchison Holdings Limited ("CK Hutchison"), which is the Company's
indirect major shareholder. The support service agreement may be
terminated by giving 3-month advance notice; therefore, there was
no lease commitment beyond the 3-month advance notice period as at
December 31, 2018. This termination option is not considered
probable of exercise for the purposes of applying ASC 842.
The Group recognized right-of-use assets as at January 1, 2019
measured at their carrying amounts as if ASC 842 had been applied
since their commencement dates, but discounted using the lessees'
incremental borrowing rate as at January 1, 2019.
Recognized right-of-use assets upon adoption were as
follows:
(in US$'000)
Offices 4,877
Factories 383
Others 487
-------------
5,747
=============
There were no adjustments to net cash generated from/(used in)
operating activities, investing activities or financing activities
in the consolidated statement of cash flows.
In applying ASC 842 for the first time, the Group has used the
following practical expedients permitted by the standard: (i) no
reassessment of whether any expired or existing contracts are or
contain leases; (ii) no reassessment of the lease classification
for any expired or existing leases; (iii) the exclusion of initial
direct costs for the measurement of the right-of-use assets at the
date of initial application; and (iv) the use of hindsight in
determining the lease term where the contract contains options to
extend or terminate the lease.
Updated accounting policy-ASC 842
In an operating lease, a lessee obtains control of only the use
of the underlying asset, but not the underlying asset itself. An
operating lease is recognized as a right-of-use asset with a
corresponding liability at the date which the leased asset is
available for use by the Group. The Group recognizes an obligation
to make lease payments equal to the present value of the lease
payments over the lease term. The lease terms may include options
to extend or terminate the lease when it is reasonably certain that
the Group will exercise that option.
Lease liabilities include the net present value of the following
lease payments: (i) fixed payments; (ii) variable lease payments;
and (iii) payments of penalties for terminating the lease if the
lease term reflects the lessee exercising that option, if any.
Lease liabilities exclude the following payments that are generally
accounted for separately: (i) non-lease components, such as
maintenance and security service fees and value added tax, and (ii)
any payments that a lessee makes before the lease commencement
date. The lease payments are discounted using the interest rate
implicit in the lease or if that rate cannot be determined, the
lessee's incremental borrowing rate being the rate that the lessee
would have to pay to borrow the funds in its currency and
jurisdiction necessary to obtain an asset of similar value,
economic environment and terms and conditions.
An asset representing the right to use the underlying asset
during the lease term is recognized that consists of the initial
measurement of the operating lease liability, any lease payments
made to the lessor at or before the commencement date less any
lease incentives received, any initial direct cost incurred by the
Group and any restoration costs.
After commencement of the operating lease, the Group recognizes
lease expenses on a straight-line basis over the lease term. The
right-of-use asset is subsequently measured at cost less
accumulated amortization and any impairment provision. The
amortization of the right-of-use asset represents the difference
between the straight-line lease expense and the accretion of
interest on the lease liability each period. The interest amount is
used to accrete the lease liability and to amortize the
right-of-use asset. There is no amount recorded as interest
expense.
Payments associated with short-term leases are recognized as
lease expenses on a straight-line basis over the period of the
leases.
Subleases of right-of-use assets are accounted for similar to
other leases. As an intermediate lessor, the Group separately
accounts for the head-lease and sublease unless it is relieved of
its primary obligation under the head-lease. Sublease income is
recorded on a gross basis separate from the head-lease expenses. If
the total remaining lease cost on the head-lease is more than the
anticipated sublease income for the lease term, this is an
indicator that the carrying amount of the right-of-use asset
associated with the head-lease may not be recoverable, and the
right-of-use asset will be assessed for impairment.
Prior accounting policy-ASC 840
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
consolidated statements of operations on a straight-line basis over
the period of the leases.
Total operating lease rentals for factories and offices for the
year ended December 31, 2018 amounted to US$3,759,000. Sublease
rentals for the year ended December 31, 2018 amounted to
US$254,000.
Income Taxes
The Group accounts for income taxes under the liability method.
Under the liability method, deferred income tax assets and
liabilities are determined based on the differences between the
financial reporting and income tax bases of assets and liabilities
and are measured using the income tax rates that will be in effect
when the differences are expected to reverse. A valuation allowance
is recorded when it is more likely than not that some of the net
deferred income tax asset will not be realized.
The Group accounts for an uncertain tax position in the
consolidated financial statements only if it is more likely than
not that the position is sustainable based on its technical merits
and consideration of the relevant tax authority's widely understood
administrative practices and precedents. If the recognition
threshold is met, the Group records the largest amount of tax
benefit that is greater than 50 percent likely to be realized upon
ultimate settlement.
The Group recognizes interest and penalties for income taxes, if
any, under income tax payable on its consolidated balance sheets
and under other expenses in its consolidated statements of
operations.
Losses Per Share
Basic losses per share is computed by dividing net loss
attributable to the Company by the weighted average number of
outstanding ordinary shares in issue during the year. Weighted
average number of outstanding ordinary shares in issue excludes
treasury shares.
Diluted losses per share is computed by dividing net loss
attributable to the Company by the weighted average number of
outstanding ordinary shares in issue and dilutive ordinary share
equivalents outstanding during the year. Dilutive ordinary share
equivalents include ordinary shares and treasury shares issuable
upon the exercise or settlement of share-based awards or warrants
issued by the Company using the treasury stock method. The
computation of diluted losses per share does not assume conversion,
exercise, or contingent issuance of securities that would have an
anti-dilutive effect.
Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief executive officer who is
the Group's chief operating decision maker. The chief operating
decision maker reviews the Group's internal reporting in order to
assess performance and allocate resources and determined that the
Group's reportable segments are as disclosed in Note 26.
Profit Appropriation and Statutory Reserves
The Group's subsidiaries and equity investees established in the
PRC are required to make appropriations to certain
non-distributable reserve funds.
In accordance with the relevant laws and regulations established
in the PRC, the Company's subsidiaries registered as wholly-owned
foreign enterprise have to make appropriations from their after-tax
profits (as determined under generally accepted accounting
principles in the PRC ("PRC GAAP")) to reserve funds including
general reserve fund, enterprise expansion fund and staff bonus and
welfare fund. The appropriation to the general reserve fund must be
at least 10% of the after-tax profits calculated in accordance with
PRC GAAP. Appropriation is not required if the general reserve fund
has reached 50% of the registered capital of the company.
Appropriations to the enterprise expansion fund and staff bonus and
welfare fund are made at the respective company's discretion. For
the Group's equity investees, the amount of appropriations to these
funds are made at the discretion of their respective boards.
In addition, Chinese domestic companies must make appropriations
from their after-tax profits as determined under PRC GAAP to
non-distributable reserve funds including statutory surplus fund
and discretionary surplus fund. The appropriation to the statutory
surplus fund must be 10% of the after-tax profits as determined
under PRC GAAP. Appropriation is not required if the statutory
surplus fund has reached 50% of the registered capital of the
company. Appropriation to the discretionary surplus fund is made at
the respective company's discretion.
The use of the general reserve fund, enterprise expansion fund,
statutory surplus fund and discretionary surplus fund is restricted
to the offsetting of losses or increases to the registered capital
of the respective company. The staff bonus and welfare fund is a
liability in nature and is restricted to fund payments of special
bonus to employees and for the collective welfare of employees. All
these reserves are not permitted to be transferred to the company
as cash dividends, loans or advances, nor can they be distributed
except under liquidation.
Recent Accounting Pronouncements
The Group has adopted ASU 2016-13 Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments ("ASU 2016-13") on January 1, 2020, which replaced the
incurred loss methodology with an expected loss methodology that
was referred to as the current expected credit loss ("CECL")
methodology. The measurement of expected credit losses under the
CECL methodology was applicable to financial assets measured at
amortized cost, including cash and cash equivalents, short-term
investments, accounts receivable and other receivables. The
adoption of ASU 2016-13 did not have a material impact on the
Group's consolidated financial statements.
The Group has adopted ASU 2017-04 - Goodwill and Other (Topic
350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04")
on January 1, 2020, which eliminated step two from the goodwill
impairment test and instead requires an entity to recognize an
impairment charge for the amount by which the carrying value
exceeds the reporting unit's fair value, limited to the total
amount of goodwill allocated to that reporting unit. The Group
applied ASU 2017-04 prospectively and the adoption did not have a
material impact on the Group's consolidated financial
statements.
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 consolidated financial
statements.
4. Fair Value Disclosures
The following table presents the Group's financial instruments
by level within the fair value hierarchy under ASC 820, Fair Value
Measurement:
Fair Value Measurement Using
Level Level Level
1 2 3 Total
--------- ------ ------ --------
(in US$'000)
As at December 31, 2020
Cash and cash equivalents 235,630 - - 235,630
Short-term investments 199,546 - - 199,546
========= ====== ========
As at December 31, 2019
Cash and cash equivalents 121,157 - - 121,157
Short-term investments 96,011 - - 96,011
========= ====== ====== ========
Accounts receivable, other receivables, amounts due from related
parties, accounts payable, other payables and amounts due to
related parties are carried at cost, which approximates fair value
due to the short-term nature of these financial instruments, and
are therefore excluded from the above table. Bank borrowings are
floating rate instruments and carried at amortized cost, which
approximates their fair values, and are therefore excluded from the
above table.
5. Cash and Cash Equivalents
December 31,
2020 2019
-------- --------
(in US$'000)
Cash at bank and on hand (note (a)) 87,828 85,990
Bank deposits maturing in three months or
less (note (a)) 147,802 35,167
-------- --------
235,630 121,157
======== ========
Denominated in:
US$ (note (b)) 164,201 84,911
RMB (note (b)) 64,258 27,768
UK Pound Sterling ("GBP") (note (b)) 954 335
Hong Kong dollar ("HK$") 5,907 8,143
Euro 310 -
-------- --------
235,630 121,157
======== ========
Notes:
(a) The weighted average effective interest rate on bank
deposits for the years ended December 31, 2020 and 2019 was 1.12%
per annum and 2.15% per annum respectively.
(b) Certain cash and bank balances denominated in RMB, US$ and
GBP 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.
6. Short-term Investments
December 31,
-----------------
2020 2019
-------- -------
(in US$'000)
Bank deposits maturing over three months
(note)
Denominated in:
US$ 187,961 73,986
RMB 612 -
HK$ 10,973 22,025
-------- -------
199,546 96,011
======== =======
Note: The weighted average effective interest rate on bank
deposits for the years ended December 31, 2020 and 2019 was 1.06%
per annum and 2.65% per annum respectively (with maturities ranging
from 91 to 180 days and 91 to 129 days respectively).
7. Accounts Receivable-Third Parties
Accounts receivable from contracts with customers, net of
allowance for credit losses, consisted of the following:
December 31,
----------------
2020 2019
------- -------
(in US$'000)
Accounts receivable, gross 46,743 41,426
Allowance for credit losses (95) (16)
------- -------
Accounts receivable, net 46,648 41,410
======= =======
Substantially all accounts receivable are denominated in RMB,
US$ 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.
Movements on the allowance for credit losses:
2020 2019 2018
----- ----- ------
(in US$'000)
As at January 1 16 41 258
Increase in allowance for credit losses 95 16 21
Decrease in allowance due to subsequent
collection (18) (41) (223)
Write-off - - (1)
Exchange difference 2 - (14)
----- ----- ------
As at December 31 95 16 41
===== ===== ======
8. Other receivables, prepayments and deposits
Other receivables, prepayments and deposits consisted of the
following:
December 31,
----------------
2020 2019
------- -------
(in US$'000)
Prepayments 7,038 3,767
Purchase rebates 191 173
Leasehold land deposit (Note 13) 930 -
Deposits 905 898
Value-added tax receivables 14,957 8,760
Interest receivables 283 537
Others 2,482 1,634
------- -------
26,786 15,769
======= =======
9. Inventories
Inventories, net of provision for excess and obsolete
inventories, consisted of the following:
December 31,
----------------
2020 2019
------- -------
(in US$'000)
Raw materials 4,502 2,274
Finished goods 15,264 13,934
------- -------
19,766 16,208
======= =======
10. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
Furniture
and fixtures,
other equipment
Leasehold Plant and and motor Construction
Buildings improvements equipment vehicles in progress Total
--------- ------------- ---------- ---------------- ------------ -------
(in US$'000)
Cost
As at January 1,
2020 2,212 17,022 4,474 19,571 928 44,207
Additions - 269 59 2,993 4,571 7,892
Disposals - (3,103) (3) (1,846) - (4,952)
Transfers - 1,014 789 913 (2,716) -
Exchange differences 160 1,144 324 1,409 267 3,304
--------- ------------- ---------- ---------------- ------------ -------
As at December
31, 2020 2,372 16,346 5,643 23,040 3,050 50,451
--------- ------------- ---------- ---------------- ------------ -------
Accumulated depreciation
As at January 1,
2020 1,406 8,304 1,155 12,487 - 23,352
Depreciation 112 2,701 484 2,646 - 5,943
Disposals - (3,051) (1) (1,815) - (4,867)
Exchange differences 108 698 109 938 - 1,853
--------- ------------- ---------- ---------------- ------------ -------
As at December
31, 2020 1,626 8,652 1,747 14,256 - 26,281
--------- ------------- ---------- ---------------- ------------ -------
Net book value
As at December
31, 2020 746 7,694 3,896 8,784 3,050 24,170
========= ============= ========== ================ ============ =======
Furniture
and fixtures,
other equipment
Leasehold Plant and and motor Construction
Buildings improvements equipment vehicles in progress Total
--------- ------------- ---------- ---------------- ------------ -------
(in US$'000)
Cost
As at January 1,
2019 2,272 13,684 3,218 16,643 625 36,442
Additions - 587 247 3,470 5,329 9,633
Disposals - - - (812) - (812)
Transfers - 3,103 1,096 755 (4,954) -
Exchange differences (60) (352) (87) (485) (72) (1,056)
--------- ------------- ---------- ---------------- ------------ -------
As at December
31, 2019 2,212 17,022 4,474 19,571 928 44,207
--------- ------------- ---------- ---------------- ------------ -------
Accumulated depreciation
As at January 1,
2019 1,330 6,244 782 11,470 - 19,826
Depreciation 114 2,270 402 2,058 - 4,844
Disposals - - - (720) - (720)
Exchange differences (38) (210) (29) (321) - (598)
--------- ------------- ---------- ---------------- ------------ -------
As at December
31, 2019 1,406 8,304 1,155 12,487 - 23,352
--------- ------------- ---------- ---------------- ------------ -------
Net book value
As at December
31, 2019 806 8,718 3,319 7,084 928 20,855
========= ============= ========== ================ ============ =======
Depreciation for the year ended December 31, 2018 was
US$3,486,000.
11. Leases
Leases consisted of the following:
December 31,
---------------
2020 2019
------- ------
(in US$'000)
Right-of-use assets
Offices (note) 6,789 5,281
Factories 945 112
Warehouse 197 -
Others 85 123
------- ------
Total right-of-use assets 8,016 5,516
======= ======
Lease liabilities-current 2,785 3,216
Lease liabilities-non-current 6,064 3,049
------- ------
Total lease liabilities 8,849 6,265
======= ======
Note: Includes US$2.0 million right-of-use asset for corporate
offices in Hong Kong that is leased through May 2024 in which the
contract has a termination option with 3-month advance notice. The
termination option was not recognized as part of the right-of-use
asset and lease liability as it was uncertain that the Group will
exercise such option.
Lease activities are summarized as follows:
Year Ended December 31,
--------------------------
2020 2019
------------ ------------
(in US$'000)
Lease expenses:
Short-term leases with lease terms equal or
less than 12 months 323 311
Leases with lease terms greater than 12 months
(note) 3,400 3,702
------------ ------------
3,723 4,013
============ ============
Sublease rental income - 61
============ ============
Cash paid on lease liabilities 3,340 3,886
============ ============
Non-cash: Lease liabilities recognized from
obtaining right-of-use assets 3,098 3,197
============ ============
Non-cash: Lease liabilities changed in relation
to modifications 2,259 744
============ ============
Note: Lease expenses for the year ended December 31, 2019
includes US$0.3 million in accelerated amortization on a
right-of-use asset for retail space in the United Kingdom leased
through May 2022. The Group had subleased the retail space through
May 2022 to a third-party and in December 2019, the sublease was
discontinued and the Group recorded accelerated amortization after
determining that additional sublease rental income was
uncertain.
Lease contracts are typically within a period of 1 to 8 years.
The weighted average remaining lease term and the weighted average
discount rate as at December 31, 2020 was 3.72 years and 3.87%
respectively. The weighted average remaining lease term and the
weighted average discount rate as at December 31, 2019 was 2.80
years and 4.10% respectively.
Future lease payments are as follows:
December
31,
2020
-------------
(in US$'000)
Lease payments:
Not later than 1 year 3,059
Between 1 to 2 years 2,429
Between 2 to 3 years 2,222
Between 3 to 4 years 1,046
Between 4 to 5 years 216
Later than 5 years 484
-------------
Total lease payments (note) 9,456
Less: Discount factor (607)
-------------
Total lease liabilities 8,849
=============
Note: Excludes future lease payments on a lease not commenced as
at December 31, 2020 in the aggregate amount of US$2.9 million.
12. Investments in Equity Investees
Investments in equity investees consisted of the following:
December 31,
-----------------
2020 2019
-------- -------
(in US$'000)
HBYS 59,712 22,271
SHPL 79,408 76,226
Other 385 447
-------- -------
139,505 98,944
======== =======
Particulars regarding the principal equity investees are
disclosed in Note 2. The equity investees are private companies and
there are no quoted market prices available for their shares.
Summarized financial information for the significant equity
investees HBYS and SHPL, both under Other Ventures segment, is as
follows:
(i) Summarized balance sheets
HBYS SHPL
-------------------- -------------------
December 31,
-----------------------------------------
2020 2019 2020 2019
--------- --------- --------- --------
(in US$'000)
Current assets 177,888 124,704 175,965 141,268
Non-current assets 95,731 95,096 93,361 91,098
Current liabilities (137,179) (124,051) (109,873) (79,533)
Non-current liabilities (16,034) (48,690) (6,739) (6,074)
--------- --------- --------- --------
Net assets 120, 406 47,059 152,714 146,759
Non-controlling interests (9 82 ) (2,518) - -
--------- --------- --------- --------
119,424 44,541 152,714 146,759
========= ========= ========= ========
(ii) Summarized statements of operations
HBYS(note a) SHPL
-------------------------- ---------------------------
Year Ended December 31,
-------------------------------------------------------
2020 2019 2018 2020 2019 2018
-------- ------- ------- -------- -------- -------
(in US$'000)
Revenue 232,368 215,403 215,838 276,354 272,082 275,649
======== ======= ======= ======== ======== =======
Gross profit 116,804 115,124 113,137 204,191 194,769 192,939
======== ======= ======= ======== ======== =======
Interest income 271 160 81 975 582 673
======== ======= ======= ======== ======== =======
Finance cost (5) (16) (152) - - -
======== ======= ======= ======== ======== =======
Profit before taxation 107,715 22,926 20,703 77,837 72,324 69,138
Income tax expense (note
(b)) (16,494) (3,634) (4,227) (10,833) (11,015) (9,371)
-------- ------- ------- -------- -------- -------
Net income 91,221 19,292 16,476 67,004 61,309 59,767
Non-controlling interests 62 505 384 - - -
-------- ------- ------- -------- -------- -------
Net income attributable
to the shareholders
of equity investee 91,283 19,797 16,860 67,004 61,309 59,767
======== ======= ======= ======== ======== =======
Notes:
(a) In June 2020, HBYS entered into an agreement with the
government to return the land use right for a plot of land in
Guangzhou to the government for cash consideration of up to
RMB683.0 million (approximately US$101.2 million) (the "Land
Compensation Agreement"). In November 2020, HBYS completed all
material obligations as stipulated in the Land Compensation
Agreement including the deregistration of the land use right
certificate. Therefore, HBYS has recorded the return of leasehold
land to the government for RMB569.2 million (approximately US$86 .1
million), resulting in a gain of RMB559.7 million (approximately
US$8 4.7 million) after deducting costs of RMB1.7 million
(approximately US$0.3 million) to HBYS or RMB475.7 million, net of
tax (approximately US$72.0 million). The remaining RMB11 3.8
million (approximately US$ 17.4 million) of cash consideration is
conditional upon the receipt of a completion confirmation from the
government within 12 months from the date of the Land Compensation
Agreement and therefore has not been recognized as at December 31,
2020.
(b) The main entities within each of the HBYS and SHPL groups
have been granted the High and New Technology Enterprise ("HNTE")
status (the latest renewal of this status covers the years from
2020 to 2022). These entities were eligible to use a preferential
income tax rate of 15% for the year ended December 31, 2020 on this
basis.
For the years ended December 31, 2020 and 2019, other equity
investees had net losses of approximately US$194,000 and net income
of approximately US$294,000 respectively. For the year ended
December 31, 2018, other equity investees had net losses of
approximately US$37,962,000, primarily from Nutrition Science
Partners Limited ("NSPL") which incurred research and development
expenses and recorded an impairment provision of US$30,000,000 on
its intangible assets. In December 2019, the Group acquired the
remaining 50% shareholding in NSPL from the equity investee partner
and, after the acquisition, it became a subsidiary.
(iii) Reconciliation of summarized financial information
Reconciliation of the summarized financial information presented
to the carrying amount of investments in equity investees is as
follows:
HBYS SHPL
--------------------------- ----------------------------
2020 2019 2018 2020 2019 2018
-------- -------- ------- -------- -------- --------
(in US$'000)
Opening net assets after non-controlling
interests as at January 1 44,541 121,984 110,616 146,759 131,778 132,731
Impact of change in accounting policy (ASC
842-Leases) - (19) - - (2) -
Net income attributable to the shareholders of
equity investee 91,283 19,797 16,860 67,004 61,309 59,767
Purchase of additional interests in a
subsidiary of an equity investee (note) (347) - - - - -
Dividends declared (20,756) (93,957) - (72,179) (41,654) (54,923)
Other comprehensive income/(loss) 4,703 (3,264) (5,492) 11,130 (4,672) (5,797)
-------- -------- ------- -------- -------- --------
Closing net assets after non-controlling
interests as at December 31 119,424 44,541 121,984 152,71 4 146,759 131,778
======== ======== ======= ======== ======== ========
Group's share of net assets 59,7 12 22,271 60,992 76,357 73,380 65,889
Goodwill - - - 3,051 2,846 2,923
-------- -------- ------- -------- -------- --------
Carrying amount of investments as at December
31 59,7 12 22,271 60,992 79,408 76,226 68,812
======== ======== ======= ======== ======== ========
Note: During the year ended December 31, 2020, HBYS acquired an
additional 30% interest in a subsidiary and after the acquisition,
it became a wholly owned subsidiary of HBYS.
The equity investees had the following capital commitments:
December 31,
2020
-------------
(in US$'000)
Property, plant and equipment
Contracted but not provided for 2,535
=============
13. Other Non-Current Assets
December 31,
---------------
2020 2019
------- ------
(in US$'000)
Leasehold land (note) 13,121 1,110
Goodwill 3,307 3,112
Leasehold land deposit (note) 1,396 -
Long term prepayment 950 1,103
Other intangible asset 227 275
Deferred issuance cost 1,171 180
------- ------
20,172 5,780
======= ======
Note: In December 2020, HMPL acquired a land use right in
Shanghai for consideration of US$12.0 million. In addition, a
leasehold land deposit amounting to US$2.3 million was required to
be paid to the government which is refundable upon reaching
specific milestones for the construction of a manufacturing plant
on the land. US$0.9 million was included in other receivables,
prepayments and deposits (Note 8) and US$1.4 million was included
in other non-current assets based on the expected timing of the
specific milestones.
14. Accounts Payable
December 31,
----------------
2020 2019
------- -------
(in US$'000)
Accounts payable-third parties 26,756 19,598
Accounts payable-non-controlling shareholder s of subsidiar ies (Note 23(iv)) 4,856 4,363
------- -------
31,612 23,961
======= =======
Substantially all accounts payable are denominated in RMB and
US$ and due within one year from the end of the reporting period.
The carrying values of accounts payable approximate their fair
values due to their short-term maturities.
15. Other Payables, Accruals and Advance Receipts
Other payables, accruals and advance receipts consisted of the
following:
December 31,
-----------------
2020 2019
-------- -------
(in US$'000)
Accrued salaries and benefits 21,982 13,258
Accrued research and development expenses 72,697 48,531
Accrued selling and marketing expenses 5,747 3,337
Accrued administrative and other general expenses 10,319 8,411
Deferred government grants 374 445
Deposits 1,408 1,778
Others 8,355 5,864
-------- -------
120,882 81,624
======== =======
16. Bank Borrowings
Bank borrowings consisted of the following:
December 31,
----------------
2020 2019
------- -------
(in US$'000)
Non-current 26,861 26,818
======= =======
The weighted average interest rate for outstanding bank
borrowings for the years ended December 31, 2020 and 2019 was 1.89%
per annum and 3.30% per annum respectively. The carrying amounts of
the Group's bank borrowings were denominated in HK$.
(i) 3--year revolving loan facility and 3--year term loan and revolving loan facilities
In November 2018, the Group through its subsidiary, renewed a
3-year revolving loan facility with a bank in the amount of
HK$234,000,000 (US$30,000,000) with an interest rate at the Hong
Kong Interbank Offered Rate ("HIBOR") plus 0.85% per annum. This
credit facility is guaranteed by the Company. As at December 31,
2020 and 2019, no amount has been drawn from the revolving loan
facility.
In May 2019, the Group through its subsidiary, entered into a
separate facility agreement with the bank for the provision of
additional unsecured credit facilities in the aggregate amount of
HK$400,000,000 (US$51,282,000). The 3-year credit facilities
include (i) a HK$210,000,000 (US$26,923,000) term loan facility and
(ii) a HK$190,000,000 (US$24,359,000) revolving loan facility, both
with an interest rate at HIBOR plus 0.85% per annum, and an upfront
fee of HK$819,000 (US$105,000) on the term loan. These credit
facilities are guaranteed by the Company. The term loan was drawn
in October 2019 and is due in May 2022. As at December 31, 2020 and
2019, no amount has been drawn from the revolving loan
facility.
(ii) 2--year revolving loan facilities
In August 2018, the Group through its subsidiary, entered into
two separate facility agreements with banks for the provision of
unsecured credit facilities in the aggregate amount of
HK$507,000,000 (US$65,000,000). The first credit facility was a
HK$351,000,000 (US$45,000,000) revolving loan facility, with a term
of 2 years and an interest rate at HIBOR plus 1.35% per annum. The
second credit facility was a HK$156,000,000 (US$20,000,000)
revolving loan facility, with a term of 2 years and an interest
rate at HIBOR plus 1.35% per annum. These credit facilities were
guaranteed by the Company. No amount has been drawn from either of
the revolving loan facilities. Both loan facilities expired in
August 2020.
In August 2020, the Group through its subsidiary, entered into a
2-year revolving loan facility with a bank in the amount of
HK$117,000,000 (US$15,000,000) with an interest rate at HIBOR plus
4.5% per annum. This credit facility is guaranteed by the Company.
As at December 31, 2020, no amount has been drawn from the
revolving loan facility.
(iii) 3--year term loan and 18-month revolving loan
facilities
In November 2017, the Group through its subsidiary, entered into
facility agreements with a bank for the provision of unsecured
credit facilities in the aggregate amount of HK$400,000,000
(US$51,282,000). The credit facilities included (i) a
HK$210,000,000 (US$26,923,000) 3-year term loan facility and (ii) a
HK$190,000,000 (US$24,359,000) 18-month revolving loan facility.
The term loan bore interest at HIBOR plus 1.50% per annum and an
upfront fee of HK$1,575,000 (US$202,000). The revolving loan
facility bore interest at HIBOR plus 1.25% per annum. These credit
facilities were guaranteed by the Company. The term loan was drawn
in May 2018 and was fully repaid in June 2019. The revolving loan
facility expired in May 2019.
The Group's bank borrowings are repayable as from the dates
indicated as follows:
December 31,
----------------
2020 2019
------- -------
(in US$'000)
Not later than 1 year - -
Between 1 to 2 years 26,923 -
Between 2 to 3 years - 26,923
------- -------
26,923 26,923
======= =======
As at December 31, 2020 and 2019, the Group had unutilized bank
borrowing facilities of HK$541,000,000 (US$69,359,000) and
HK$931,000,000 (US$119,359,000) respectively.
17. Commitments and Contingencies
The Group had the following capital commitments:
December 31,
2020
-------------
(in US$'000)
Property, plant and equipment
Contracted but not provided for 5,053
=============
The Group does not have any other significant commitments or
contingencies.
18. Ordinary Shares
As at December 31, 2020, the Company is authorized to issue
1,500,000,000 ordinary shares.
On January 27, 2020, the Company issued 22,000,000 ordinary
shares in the form of 4,400,000 ADS for gross proceeds of US$110.0
million. On February 10, 2020, the Company issued an additional
1,668,315 ordinary shares in the form of 333,663 ADS for gross
proceeds of US$8.3 million. Issuance costs totaled US$8.0
million.
On July 2, 2020 and July 3, 2020, the Company issued (1)
aggregate 20,000,000 ordinary shares and (2) warrants to a third
party for gross proceeds of US$100.0 million through a PIPE . The
warrants allow the third party to purchase up to 16,666,670
ordinary shares of the Company within 18 months of the issuance
date for an exercise price of US$6.00 per ordinary share, or an
additional US$100.0 million if fully exercised. As the warrants
qualify for equity classification, all gross proceeds were recorded
to equity. Issuance costs totaled US$0.2 million.
On November 26, 2020, the Company issued 16,666,670 ordinary
shares to a third party for gross proceeds of US$100.0 million
through a PIPE . Issuance costs totaled US$0.1 million.
Each ordinary share is entitled to one vote. The holders of
ordinary shares are also entitled to receive dividends whenever
funds are legally available and when declared by the Board of
Directors of the Company.
19. Share-based Compensation
(i) Share--based Compensation of the Company
The Company conditionally adopted a share option scheme on June
4, 2005 (as amended on March 21, 2007) and such scheme has a term
of 10 years. It expired in 2016 and no further share options can be
granted. Another share option scheme was conditionally adopted on
April 24, 2015 (the "HCML Share Option Scheme"). Pursuant to the
HCML 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.
Pursuant to a resolution passed in the Annual General Meeting on
April 27, 2020, the scheme limit of the HCML Share Option Scheme
was refreshed to 34,528,738 ordinary shares, representing 5% of the
total issued shares on such date.
As at December 31, 2020, the aggregate number of shares issuable
under the HCML Share Option Scheme was 50,663,268 ordinary shares
and the aggregate number of shares issuable under the prior share
option scheme which expired in 2016 was 1,116,180 ordinary shares.
The Company will issue new shares to satisfy share option
exercises. Additionally, the number of shares authorized but
unissued was 772,277,785 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:
Weighted average
Weighted average remaining Aggregate intrinsic
Number of share exercise price in contractual life value
options GBP per share (years) (in GBP'000)
--------------------- -------------------- --------------------- ---------------------
Outstanding at
January 1, 2018 11,264,120 1.77 6.29 43,158
Granted 10,606,260 4.69
Exercised (2,107,080) 1.40
Cancelled (1,208,450) 4.30
---------------------
Outstanding at
December 31, 2018 18,554,850 3.31 7.35 15,158
=====================
Granted 2,315,000 3.18
Exercised (329,000) 0.61
Cancelled (1,012,110) 4.61
Expired (96,180) 4.65
---------------------
Outstanding at
December 31, 2019 19,432,560 3.27 6.67 18,668
=====================
Granted 15,437,080 3.71
Exercised (480,780) 0.96
Cancelled (4,486,200) 3.85
Expired (741,670) 4.62
---------------------
Outstanding at
December 31, 2020 29,160,990 3.40 7.21 35,654
=====================
Vested and
exercisable at
December 31, 2019 10,139,170 2.39 4.89 16,654
Vested and
exercisable at
December 31, 2020 11,529,280 2.73 4.57 21,864
In estimating the fair value of share options granted, the
following assumptions were used in the Polynomial model for awards
granted in the periods indicated:
Year Ended December 31,
----------------------------
2020 2019 2018
-------- -------- --------
Weighted average grant date fair value of share options (in GBP per share) 1.40 1.07 1.67
Significant inputs into the valuation model (weighted average):
Exercise price (in GBP per share) 3.71 3.18 4.69
Share price at effective date of grant (in GBP per share) 3.71 3.07 4.66
Expected volatility (note (a)) 42.6% 38.4% 37.6%
Risk-free interest rate (note (b)) 0.59% 0.56% 1.46%
Contractual life of share options (in years) 10 10 10
Expected dividend yield (note (c)) 0% 0% 0%
Notes:
(a) The Company calculated its expected volatility with
reference to the historical volatility prior to the issuances of
share options.
(b) For share options exercisable into ordinary shares, the
risk-free interest rates reference the sovereign yield of the
United Kingdom because the Company's ordinary shares are currently
listed on AIM and denominated in GBP. For share options exercisable
into ADS, the risk-free interest rates reference the U.S. Treasury
yield curves because the Company's ADS are currently listed on the
NASDAQ and denominated in US$.
(c) The Company has not declared or paid any dividends and does
not currently expect to do so in the foreseeable future, and
therefore uses an expected dividend yield of zero in the Polynomial
model.
The Company will issue new shares to satisfy share option
exercises. The following table summarizes the Company's share
option exercises:
Year Ended December 31,
----------------------------
2020 2019 2018
-------- -------- --------
(in US$'000)
Cash received from share option exercises 593 251 3,868
Total intrinsic value of share option exercises 2,475 1,189 9,394
The Group recognizes compensation expense on a graded vesting
approach over the requisite service period. The following table
presents share-based compensation expense included in the Group's
consolidated statements of operations:
Year Ended December 31,
----------------------------
2020 2019 2018
-------- -------- --------
(in US$'000)
Research and development expenses 4,061 6,634 7,280
Selling and administrative expenses 4,586 539 623
Cost of goods 90 - -
-------- -------- --------
8,737 7,173 7,903
======== ======== ========
As at December 31, 2020, the total unrecognized compensation
cost was US$19,350,000, and will be recognized on a graded vesting
approach over the weighted average remaining service period of 3.23
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, free cash flows, revenues, net profit after
taxes and the achievement of clinical and regulatory milestones. As
the extent of achievement of the performance targets is uncertain
prior to the determination date, a probability based on
management's assessment on the achievement of the performance
target has been assigned to calculate the amount to be recognized
as an expense over the requisite period with a corresponding entry
to liability.
LTIP awards after the determination date
Upon the determination date, the Company will pay a determined
monetary amount, up to the maximum cash amount based on the actual
achievement of the performance target specified in the award, to
the Trustee to purchase the Awarded Shares. Any cumulative
compensation expense previously recognized as a liability will be
transferred to additional paid-in capital, as an equity-settled
award. If the performance target is not achieved, no Awarded Shares
of the Company will be purchased and the amount previously recorded
in the liability will be reversed through share-based compensation
expense.
Granted awards under the LTIP are as follows:
Maximum cash amount per annum Covered Performance target
Grant date (in US$ millions) financial years determination date
------------------ ------------------------------ ---------------- -------------------
August 6, 2018 0.1 2018-2019 note (a)
December 14, 2018 1.5 2019 note (a)
August 5, 2019 0.7 2019 note (a)
October 10, 2019 0.1 note (b) note (b)
April 20, 2020 5.3 2019 note (d)
April 20, 2020 37.4 2020 note (a)
April 20, 2020 1.9 note (b) note (b)
April 20, 2020 0.2 note (c) note (c)
August 12, 2020 2.1 2020 note (a)
August 12, 2020 0.3 note (b) note (b)
Notes:
(a) The annual performance target determination date is the date
of the announcement of the Group's annual results for the covered
financial year and vesting occurs two business days after the
announcement of the Group's annual results for the financial year
falling two years after the covered financial year to which the
LTIP award relates.
(b) This award does not stipulate performance targets and is
subject to a vesting schedule of 25% on each of the first, second,
third and fourth anniversaries of the date of grant.
(c) This award does not stipulate performance targets and will
be vested on the first anniversary of the date of grant.
(d) This award does not stipulate performance targets and
vesting occurs two business days after the announcement of the
Group's annual results for the financial year falling two years
after the covered financial year to which the LTIP award
relates.
The Trustee has been set up solely for the purpose of purchasing
and holding the Awarded Shares during the vesting period on behalf
of the Company using funds provided by the Company. On the
determination date, if any, the Company will determine the cash
amount, based on the actual achievement of each annual performance
target, for the Trustee to purchase the Awarded Shares. The Awarded
Shares will then be held by the Trustee until they are vested.
The Trustee's assets include treasury shares and funds for
additional treasury shares, trustee fees and expenses. The number
of treasury shares (in the form of ordinary shares or ADS of the
Company) held by the Trustee were as follows:
Number of
treasury Cost
shares (in US$'000)
---------- --------------
As at January 1, 2018 559,775 1,957
Purchased 795,005 5,451
Vested (233,750) (731)
As at December 31, 2018 1,121,030 6,677
Purchased 60,430 346
Vested (240,150) (944)
---------- --------------
As at December 31, 2019 941,310 6,079
Purchased 3,281,920 12,904
Vested (712,555) (4,828)
---------- --------------
As at December 31, 2020 3,510,675 14,155
========== ==============
Based on the estimated achievement of performance conditions for
2020 financial year LTIP awards, the determined monetary amount was
US$30,355,000 which is recognized to share-based compensation
expense over the requisite vesting period to March 2023.
For the years ended December 31, 2020, 2019 and 2018,
US$7,038,000, US$262,000 and US$692,000 of the LTIP awards were
forfeited respectively.
The following table presents the share-based compensation
expenses recognized under the LTIP awards:
Year Ended December 31,
----------------------------
2020 2019 2018
--------- -------- -------
(in US$'000)
Research and development expenses 7,252 2,640 1,000
Selling and administrative expenses 3,552 1,779 1,227
Cost of goods 101 - -
--------- -------- -------
10,905 4,419 2,227
========= ======== =======
Recorded with a corresponding credit to:
Liability 7,778 2,694 764
Additional paid-in capital 3,127 1,725 1,463
--------- -------- -------
10,905 4,419 2,227
========= ======== =======
For the years ended December 31, 2020, 2019 and 2018,
US$4,092,000, US$526,000 and US$1,770,000 were reclassified from
liability to additional paid-in capital respectively upon LTIP
awards reaching the determination date. As at December 31, 2020 and
2019, US$7,089,000 and US$3,403,000 were recorded as liabilities
respectively for LTIP awards prior to the determination date.
As at December 31, 2020, the total unrecognized compensation
cost was approximately US$28,623,000, which considers expected
performance targets and the amount expected to vest, and will be
recognized over the requisite periods.
20. Revenues
The following table presents disaggregated revenue, with sales
of goods recognized at a point-in-time and provision of services
recognized over time:
Year Ended December 31, 2020
-----------------------------------------------
Oncology/Immunology Other Ventures Total
-------------------- --------------- --------
(in US$'000)
Goods-Marketed Products (note
(a)) 11,329 - 11,329
Goods-Distribution - 197,761 197,761
Services-Commercialization-Marketed
Products 3,734 - 3,734
-Collaboration Research and Development 9,771 - 9,771
-Research and Development 491 - 491
Royalties (note (a)) 4,890 - 4,890
-------------------- --------------- --------
30,215 197,761 227,976
==================== =============== ========
Third parties 29,724 192,277 222,001
Related parties (Note 23 (i)) 491 5,484 5,975
-------------------- --------------- --------
30,215 197,761 227,976
==================== =============== ========
Year Ended December 31, 2019
-----------------------------------------------
Oncology/Immunology Other Ventures Total
-------------------- --------------- --------
(in US$'000)
Goods-Marketed Products (note
(a)) 8,113 - 8,113
Goods-Distribution - 175,514 175,514
Services-Commercialization - 2,584 2,584
-Collaboration Research and Development 15,532 - 15,532
-Research and Development 494 - 494
Royalties (note (a)) 2,653 - 2,653
-------------------- --------------- --------
26,792 178,098 204,890
==================== =============== ========
Third parties 26,298 170,461 196,759
Related parties (Note 23(i)) 494 7,637 8,131
-------------------- --------------- --------
26,792 178,098 204,890
==================== =============== ========
Year Ended December 31, 2018
-----------------------------------------------
Oncology/Immunology Other Ventures Total
-------------------- --------------- --------
(in US$'000)
Goods-Marketed Products (note
(a)) 3,324 - 3,324
Goods-Distribution - 161,216 161,216
Services-Commercialization - 11,660 11,660
-Collaboration Research and Development 17,681 - 17,681
-Research and Development 7,832 - 7,832
Royalties (note (a)) 261 - 261
Licenses (note (b)) 12,135 - 12,135
-------------------- --------------- --------
41,233 172,876 214,109
==================== =============== ========
Third parties 33,401 164,570 197,971
Related parties (Note 23(i)) 7,832 8,306 16,138
-------------------- --------------- --------
41,233 172,876 214,109
==================== =============== ========
Notes:
(a) Goods-Marketed Products and royalties relate to revenue from
an oncology drug developed by the Oncology/Immunology segment and
launched into the market. It was represented under the
Oncology/Immunology segment to align with a change to the segment
reporting. Refer to Note 26.
(b) Relates to the proportionate amount of milestone payment
allocated to the license to the commercialization rights of an
oncology drug compound transferred at the inception date of the
relevant license and collaboration contract. During the year ended
December 31, 2018, the Group received a milestone of US$13.5
million, of which US$12.1 million was allocated to licenses and
US$1.4 million was allocated to services.
The following table presents liability balances from contracts
with customers:
December 31,
--------------
2020 2019
------ ------
(in US$'000)
Deferred revenue
Current-Oncology/Immunology segment (note ( a) ) 1,450 1,753
Current-Other Ventures segment (note (b)) 147 353
1,597 2,106
====== ======
Non-current-Oncology/Immunology segment (note (a)) 484 133
------ ------
Total deferred revenue (note (c) and (d)) 2,081 2,239
====== ======
Notes:
(a) Oncology/Immunology segment deferred revenue relates to the
unamortized upfront and milestone payments and advance
consideration received for cost reimbursements, which are
attributed to research and development services that have not yet
been rendered as at the reporting date.
(b) Other Ventures segment deferred revenue relates to payments
in advance from customers for goods that have not been transferred
and services that have not been rendered to the customer as at the
reporting date.
(c) Estimated deferred revenue to be recognized over time as
from the date indicated is as follows:
December 31,
---------------
2020 2019
------- ------
(in US$'000)
Not later than 1 year 1,597 2,106
Between 1 to 2 years 211 133
Between 2 to 3 years 205 -
Between 3 to 4 years 68 -
2,081 2,239
======= ======
(d) As at January 1, 2020, deferred revenue was US$2.2 million,
of which US$0.9 million was recognized during the year ended
December 31, 2020.
License and collaboration agreement with Eli Lilly
On October 8, 2013, the Group entered into a licensing,
co-development and commercialization agreement in China with Eli
Lilly and Company ("Lilly") relating to Elunate ("Lilly
Agreement"), also known as fruquintinib, a targeted oncology
therapy for the treatment of various types of solid tumors. Under
the terms of the Lilly Agreement, the Group is entitled to receive
a series of payments up to US$86.5 million, including upfront
payments and development and regulatory approval milestones.
Development costs after the first development milestone are shared
between the Group and Lilly. Elunate was successfully
commercialized in China in November 2018, and the Group receives
tiered royalties in the range of 15% to 20% on all sales in
China.
In December 2018, the Group entered into various amendments to
the Lilly Agreement (the "2018 Amendment"). Under the terms of the
2018 Amendment, the Group is entitled to determine and conduct
future life cycle indications ("LCI") development of Elunate in
China beyond the three initial indications specified in the Lilly
Agreement and will be responsible for all associated development
costs. In return, the Group will receive additional regulatory
approval milestones of US$20 million for each LCI approved, for up
to three LCI or US$60 million in aggregate, and will increase
tiered royalties to a range of 15% to 29% on all Elunate sales in
China upon the commercial launch of the first LCI. Additionally,
through the 2018 Amendment, Lilly has provided consent, and freedom
to operate, for the Group to enter into joint development
collaborations with certain third-party pharmaceutical companies to
explore combination treatments of Elunate and various immunotherapy
agents. The 2018 Amendment also provided the Group rights to
promote Elunate in provinces that represent 30% to 40% of the sales
of Elunate in China upon the occurrence of certain commercial
milestones by Lilly. Such rights were further amended below.
In July 2020, the Group entered an amendment to the Lilly
Agreement (the "2020 Amendment") relating to the expansion of the
Group's role in the commercialization of Elunate across all of
China. Under the terms of the 2020 Amendment, the Group is
responsible for providing promotion and marketing services,
including the development and execution of all on-the-ground
medical detailing, promotion and local and regional marketing
activities, in return for service fees on sales of Elunate made by
Lilly. In October 2020, the Group commenced such promotion and
marketing services. In addition, development and regulatory
approval milestones for an initial indication under the Lilly
Agreement were increased by US$10 million in lieu of cost
reimbursement.
Upfront and cumulative milestone payments according to the Lilly
Agreement received up to December 31, 2020 are summarized as
follows:
(in US$'000)
Upfront payment 6,500
Development milestone payments achieved 40,000
============
Under ASC 606, the Group identified the following performance
obligations under the Lilly Agreement: (1) the license for the
commercialization rights to Elunate and (2) the research and
development services for the specified indications. The transaction
price includes the upfront payment, research and development cost
reimbursements, milestone payments and sales-based royalties.
Milestone payments were not included in the transaction price until
it became probable that a significant reversal of revenue would not
occur, which is generally when the specified milestone is achieved.
The allocation of the transaction price to each performance
obligation was based on the relative standalone selling prices of
each performance obligation determined at the inception of the
contract. Based on this estimation, proportionate amounts of
transaction price to be allocated to the license to Elunate and the
research and development services were 90% and 10% respectively.
Control of the license to Elunate transferred at the inception date
of the agreement and consequently, amounts allocated to this
performance obligation were recognized at inception. Conversely,
research and development services for each specified indication are
performed over time and amounts allocated are recognized over time
using the prior and estimated future development costs for Elunate
as a measure of progress. Royalties are recognized as future sales
occur as they meet the requirements for the sales-usage based
royalty exception.
The 2018 Amendment is a separate contract under ASC 606 as it
added distinct research and development services for the LCIs to
the Lilly Agreement. As at December 31, 2020, no LCI regulatory
approval milestones were achieved. The 2020 Amendment related to
the promotion and marketing services is a separate contract under
ASC 606 as it added distinct services to the Lilly Agreement. Such
promotion and marketing services are recognized over time based on
amounts that can be invoiced to Lilly. The 2020 Amendment related
to the additional development and regulatory approval milestone
amounts is a modification under ASC 606 as it only affected the
transaction price of research and development services for a
specific indication under the Lilly Agreement, and therefore, such
additional milestone amounts will be included in the transaction
price accounted under the Lilly Agreement once the specified
milestones are achieved. As at December 31, 2020, no additional
development and regulatory approval milestone amounts were
achieved.
Revenue recognized under the Lilly Agreement by transaction
price type is as follows:
Year Ended December 31,
----------------------------
2020 2019 2018
--------- -------- -------
(in US$'000)
Research and development cost reimbursements 1,876 3,910 9,309
Amortization of the upfront payment 83 88 122
Recognition and amortization of the milestone payments (note) 32 7 13,849
Royalties 4,890 2,653 261
Goods-Marketed Products 11,329 8,113 3,324
Promotion and marketing services 3,734 - -
--------- -------- -------
21,944 14,771 26,865
Note: During the years ended December 31, 2020 and 2019, no
milestones were achieved. During the year ended December 31, 2018,
the Group achieved milestones in relation to the acceptance and
approval respectively, of a new drug application by the National
Medical Products Administration of China for Elunate as a treatment
of patients with advanced colorectal cancer.
License and collaboration agreement with AstraZeneca
On December 21, 2011, the Group and AstraZeneca AB (publ) ("AZ")
entered into a global licensing, co-development, and
commercialization agreement for savolitinib ("AZ Agreement"), a
novel targeted therapy and a highly selective inhibitor of the
c-Met receptor tyrosine kinase for the treatment of cancer. Under
the terms of the AZ Agreement, the Group is entitled to receive a
series of payments up to US$140 million, including upfront payments
and development and first-sale milestones. Additionally, the AZ
Agreement contains possible significant future commercial sale
milestones. Should savolitinib be successfully commercialized
outside China, the Group would receive tiered royalties from 9% to
13% on all sales outside of China. Should savolitinib be
successfully commercialized in China, the Group would receive fixed
royalties of 30% based on all sales in China. Development costs for
savolitinib in China will be shared between the Group and AZ, with
the Group continuing to lead the development in China. AZ will lead
and pay for the development of savolitinib for the rest of the
world.
In August 2016 (as amended in December 2020), the Group entered
into an amendment to the AZ Agreement whereby the Group shall pay
the first approximately US$50 million of phase III clinical trial
costs related to developing savolitinib for renal cell carcinoma
("RCC"), and remaining costs will be shared between the Group and
AZ. Subject to approval of savolitinib in RCC, the Group would
receive additional tiered royalties on all sales outside of China,
with the incremental royalty rates determined based on actual
sharing of development costs.
Upfront and cumulative milestone payments according to the AZ
Agreement received up to December 31, 2020 are summarized as
follows:
(in US$'000)
Upfront payment 20,000
Development milestone payments achieved 25,000
Under ASC 606, the Group identified the following performance
obligations under the AZ Agreement: (1) the license for the
commercialization rights to savolitinib and (2) the research and
development services for the specified indications. The transaction
price includes the upfront payment, research and development cost
reimbursements, milestone payments and sales-based royalties.
Milestone payments were not included in the transaction price until
it became probable that a significant reversal of revenue would not
occur, which is generally when the specified milestone is achieved.
The allocation of the transaction price to each performance
obligation was based on the relative standalone selling prices of
each performance obligation determined at the inception of the
contract. Based on this estimation, proportionate amounts of
transaction price to be allocated to the license to savolitinib and
the research and development services were 95% and 5% respectively.
Control of the license to savolitinib transferred at the inception
date of the agreement and consequently, amounts allocated to this
performance obligation were recognized at inception. Conversely,
research and development services for each specified indication are
performed over time and amounts allocated are recognized over time
using the prior and estimated future development costs for
savolitinib as a measure of progress.
Revenue recognized under the AZ Agreement by transaction price
type is as follows:
Year Ended December 31,
----------------------------
2020 2019 2018
-------- --------- -------
(in US$'000)
Research and development cost reimbursements 8,289 10,883 5,876
Amortization of the upfront payment (note (a)) (330) 302 273
Recognition and amortization of the milestone payments (note (a) and (b)) (179) 342 387
-------- --------- -------
7,780 11,527 6,536
======== ========= =======
Notes:
(a) During the year ended December 31, 2020, estimated costs
inputs used for the measure of progress was adjusted to reflect the
additional estimated development costs for phase III clinical trial
costs for RCC.
(b) During the years ended December 31, 2020, 2019 and 2018, no
milestones were achieved.
21. Research and Development Expenses
Research and development expenses are summarized as follows:
Year Ended December 31,
----------------------------
2020 2019 2018
-------- -------- --------
(in US$'000)
Clinical trial related costs 105,869 87,777 73,693
Personnel compensation and related costs 63,542 46,246 35,340
Other research and development expenses 5,365 4,167 5,128
-------- -------- --------
174,776 138,190 114,161
======== ======== ========
The Group has entered into multiple collaborative arrangements
under ASC 808 to evaluate the combination of the Group's drug
compounds with the collaboration partners' drug compounds. For the
years ended December 31, 2020, 2019 and 2018, the Group has
incurred research and development expenses of US$8,291,000,
US$2,921,000 and nil respectively, related to such collaborative
arrangements.
22. Government Grants
Government grants in the Oncology/Immunology segment are
primarily given in support of R&D activities and are
conditional upon i) the Group spending a predetermined amount,
regardless of success or failure of the research and development
projects and/or ii) the achievement of certain stages of research
and development projects being approved by the relevant PRC
government authority. They are refundable to the government if the
conditions, if any, are not met. Government grants in the Other
Ventures segment are primarily given to promote local initiatives.
These government grants may be subject to ongoing reporting and
monitoring by the government over the period of the grant.
Government grants, which are deferred and recognized in the
consolidated statements of operations over the period necessary to
match them with the costs that they are intended to compensate, are
recognized in other payable, accruals and advance receipts (Note
15) and other non-current liabilities. For the years ended December
31, 2020, 2019 and 2018, the Group received government grants of
US$4,724,000, US$8,742,000 and US$1,798,000 respectively.
The government grants were recognized in the consolidated
statements of operations as follows:
Year Ended December 31,
----------------------------
2020 2019 2018
-------- -------- --------
(in US$'000)
Research and development expenses 1,607 6,133 1,422
Other income 539 780 573
2,146 6,913 1,995
23. Significant Transactions with Related Parties and
Non-Controlling Shareholders of Subsidiaries
The Group has the following significant transactions with
related parties and non-controlling shareholders of subsidiaries,
which were carried out in the normal course of business at terms
determined and agreed by the relevant parties:
(i) Transactions with related parties:
Year Ended December 31,
2020 2019 2018
(in US$'000)
Sales to:
Indirect subsidiaries of CK Hutchison 5,484 7,637 8,306
Revenue from research and development services from:
An equity investee 491 494 7,832
Purchases from:
Equity investees 3,347 2,465 2,827
Rendering of marketing services from:
Indirect subsidiaries of CK Hutchison 332 430 546
An equity investee - 2,682 12,703
332 3,112 13,249
Rendering of management service s from:
An indirect subsidiary of CK Hutchison 955 931 922
(ii) Balances with related parties included in:
December 31,
--------------
2020 2019
------
(in US$'000)
Accounts receivable-related parties
Indirect subsidiaries of CK Hutchison (note (a)) 1,222 1,844
Amounts due from related parties
Equity investees (note (a) and (b)) 1,142 24,623
====== ======
Amount due from a related party
An equity investee (note (b)) - 16,190
====== ======
Amounts due to a related party
An indirect subsidiary of CK Hutchison (note (c)) 401 366
====== ======
Other deferred income
An equity investee (note (d)) 950 1,103
====== ======
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 December 31, 2020 and 2019, the Group had dividend
receivables from an equity investee of nil and US$39,671,000
respectively.
(c) Amounts due to an indirect subsidiary of CK Hutchison are
unsecured, repayable on demand and interest-bearing if not settled
within one month.
(d) Other deferred income represents amounts recognized from
granting of promotion and marketing rights.
(iii) Transactions with non--controlling shareholders of
subsidiaries:
Year Ended December 31,
2020 2019 2018
(in US$'000)
Sales 36,500 27,343 19,981
Purchases 13,936 13,380 15,568
Interest expense - - 62
Dividends declared 1,462 - 2,564
(iv) Balances with non--controlling shareholders of subsidiaries
included in:
December 31,
2020 2019
(in US$'000)
Accounts receivable 6,184 5,228
Accounts payable 4,856 4,363
Other non-current liabilities
Loan 579 579
24. Income Taxes
(i) Income tax expense
Year Ended December 31,
----------------------------
2020 2019 2018
--------- -------- -------
(in US$'000)
Current tax
HK (note (a)) 457 321 436
PRC (note (b)) 872 708 1,293
U.S. and others (note (c)) 219 636 235
--------- -------- -------
Total current tax 1,548 1,665 1,964
Deferred income tax 3 ,281 1,609 2,000
--------- -------- -------
Income tax expense 4 ,829 3,274 3,964
Notes:
(a) The Company, three subsidiaries incorporated in the British
Virgin Islands and its Hong Kong subsidiaries are subject to Hong
Kong profits tax. In March 2018, the Hong Kong two-tiered profits
tax rates regime was signed into law under which the first HK$2.0
million (US$0.3 million) of assessable profits of qualifying
corporations will be taxed at 8.25%, with the remaining assessable
profits taxed at 16.5%. Hong Kong profits tax has been provided for
at the relevant rates on the estimated assessable profits less
estimated available tax losses, if any, of these entities as
applicable.
(b) Taxation in the PRC has been provided for at the applicable
rate on the estimated assessable profits less estimated available
tax losses, if any, in each entity. Under the PRC Enterprise Income
Tax Law (the "EIT Law"), the standard enterprise income tax rate is
25%. In addition, the EIT Law provides for a preferential tax rate
of 15% for companies which qualify as HNTE. HMPL and its
wholly-owned subsidiary Hutchison MediPharma (Suzhou) Limited
qualify as a HNTE up to December 31, 2022 and 2020
respectively.
Pursuant to the EIT law, a 10% withholding tax is levied on
dividends paid by PRC companies to their foreign investors. A lower
withholding tax rate of 5% is applicable under the China-HK Tax
Arrangement if direct foreign investors with at least 25% equity
interest in the PRC companies are Hong Kong tax residents, and meet
the conditions or requirements pursuant to the relevant PRC tax
regulations regarding beneficial ownership. Since the equity
holders of the equity investees of the Company are Hong Kong
incorporated companies and Hong Kong tax residents, and meet the
aforesaid conditions or requirements, the Company has used 5% to
provide for deferred tax liabilities on retained earnings which are
anticipated to be distributed. As at December 31 , 2020, 2019 and
2018, the amounts accrued in deferred tax liabilities relating to
withholding tax on dividends were determined on the basis that 100%
of the distributable reserves of the equity investees operating in
the PRC will be distributed as dividends.
(c) The Company's subsidiary in the U.S. with operations in New
Jersey and New York states is subject to U.S. taxes, primarily
federal and state taxes, which have been provided for at
approximately 21% (federal) and 9% to 16.55% (state tax) on the
estimated assessable profit over the reporting years. Certain
income receivable by the Company is subject to U.S. withholding tax
of 30%. One of the Group's subsidiaries is subject to corporate tax
in EU countries at 19% or 20% on the estimated assessable profits
in relation to its permanent establishment in these countries in
2020 and/or 2019.
The reconciliation of the Group's reported income tax expense to
the theoretical tax amount that would arise using the tax rates of
the Company against the Group's loss before income taxes and equity
in earnings of equity investees is as follows:
Year Ended December 31,
2020 2019 2018
(in US$'000)
Loss before income taxes and equity in earnings of equity investees (189,734) (141,105) (86,655)
Tax calculated at the statutory tax rate of the Company (31,306) (23,282) (14,298)
Tax effects of:
Different tax rates available in different jurisdictions 4,025 2,027 1,349
Tax valuation allowance 46,321 25,498 19,414
Preferential tax rate difference (154) (177) -
Preferential tax deduction and credits (18,814) (5,444) (5,800)
Expenses not deductible for tax purposes 3,476 4,098 1,902
Utilization of previously unrecognized tax losses (114) (285) (329)
Withholding tax on undistributed earnings of PRC entities 3,962 1,894 1,983
Others (2,567) (1,055) (257)
Income tax expense 4,829 3,274 3,964
(ii) Deferred tax assets and liabilities
The significant components of deferred tax assets and
liabilities are as follows:
December 31,
2020 2019
(in US$'000)
Deferred tax assets
Tax losses 117 ,064 68,481
Others 6,829 1,733
Total deferred tax assets 123,893 70,214
Less: Valuation allowance (122,378) (69,399)
Deferred tax assets 1,515 815
Deferred tax liabilities
Undistributed earnings from PRC entities 4,994 3,081
Others 69 77
Deferred tax liabilities 5,063 3,158
The movements in deferred tax assets and liabilities are as
follows:
2020 2019 2018
(in US$'000)
As at January 1 (2,343) (4,256) (3,819)
Utilization of previously recognized withholding tax on undistributed earnings 2,323 3,390 1,373
(Charged)/Credited to the consolidated statements of operations
Withholding tax on undistributed earnings of PRC entities (3,962) (1,894) (1,983)
Deferred tax on amortization of intangible assets 18 18 19
Deferred tax on provision for assets 663 267 (36)
Exchange differences (247) 132 190
As at December 31 (3,548) (2,343) (4,256)
The deferred tax assets and liabilities are offset when there is
a legally enforceable right to set off and when the deferred income
taxes relate to the same fiscal authority.
The tax losses can be carried forward against future taxable
income and will expire in the following years:
December 31,
2020 2019
(in US$'000)
No expiry date 53,940 40,897
2022 195 182
2023 - -
2024 3,998 3,716
2025 38,357 35,648
2026 51,034 47,661
2027 66,555 62,794
2028 114,490 106,793
2029 186,844 154,454
2030 259,163 -
774,576 452,145
The Company believes that it is more likely than not that future
operations will not generate sufficient taxable income to realize
the benefit of the deferred tax assets. The Company's subsidiaries
have had sustained tax losses, which will expire within five years
if not utilized in the case of PRC subsidiaries (ten years for
HNTEs), and which will not be utilized in the case of Hong Kong
subsidiaries as they do not generate taxable profits. Accordingly,
a valuation allowance has been recorded against the relevant
deferred tax assets arising from the tax losses.
The table below summarizes changes in the deferred tax valuation
allowance:
2020 2019 2018
(in US$'000)
As at January 1 69,399 49,021 31,662
Charged to consolidated statements of operations 46,321 25,498 19,414
Utilization of previously unrecognized tax losses (114) (285) (329)
Write-off of tax losses - (3,142) -
Others - - (105)
Exchange differences 6,772 (1,693) (1,621)
As at December 31 122,378 69,399 49,021
As at December 31, 2020 and 2019, the Group did not have any
material unrecognized uncertain tax positions.
(iii) Income tax payable
2020 2019 2018
(in US$'000)
As at January 1 1,828 555 979
Current tax 1,548 1,665 1,964
Withholding tax upon dividend declaration from PRC entities (note (a)) 2,323 2,581 1,373
Tax paid (note (b)) (5,940) (2,970) (3,752)
Reclassification from non-current withholding tax 812 - -
Reclassification to prepaid tax 485 - -
Exchange difference 64 (3) (9)
As at December 31 1,120 1,828 555
Notes:
(a) The amount for 2019 excludes a non-current withholding tax
of US$0.8 million which is included under other non-current
liabilities.
(b) The amount for 2020 is net of the PRC Enterprise Income Tax
("EIT") refund of US$0.4 million received by HSPL. The amount for
2019 excludes the PRC EIT of US$0.3 million prepaid by HSPL which
is included under other receivables, prepayments and deposits.
25. Losses Per Share
(i) Basic losses per share
Basic losses per share is calculated by dividing the net loss
attributable to the Company by the weighted average number of
outstanding ordinary shares in issue during the year. Treasury
shares held by the Trustee are excluded from the weighted average
number of outstanding ordinary shares in issue for purposes of
calculating basic losses per share.
Year Ended December 31,
2020 2019 2018
Weighted average number of outstanding ordinary shares in issue 697,931,437 665,683,145 664,263,820
Net loss attributable to the Company (US$'000) (125,730) (106,024) (74,805)
Losses per share attributable to the Company (US$ per share) (0.18) (0.16) (0.11)
(ii) Diluted losses per share
Diluted losses per share is calculated by dividing net loss
attributable to the Company by the weighted average number of
outstanding ordinary shares in issue and dilutive ordinary share
equivalents outstanding during the year. Dilutive ordinary share
equivalents include shares issuable upon the exercise or settlement
of share option, LTIP awards and warrants issued by the Company
using the treasury stock method.
For the years ended December 31, 2020, 2019 and 2018, the share
options, LTIP awards and warrants issued by the Company were not
included in the calculation of diluted losses per share because of
their anti-dilutive effect. Therefore, diluted losses per share
were equal to basic losses per share for the years ended December
31, 2020, 2019 and 2018.
26. Segment Reporting
The Group's operating segments are as follows:
(i) Oncology/Immunology: focuses on discovering, developing, and
commercializing targeted therapies and immunotherapies for the
treatment of cancer and immunological diseases. Oncology/Immunology
is further segregated into two core business areas:
(a) R&D: comprises research and development activities
covering drug discovery, development, manufacturing and regulatory
functions as well as administrative activities to support research
and development operations; and
(b) Marketed Products: comprises the sales, marketing,
manufacture and distribution of drug developed from research and
development activities.
(ii) Other Ventures: comprises other commercial businesses which
include the sales, marketing, manufacture and distribution of other
prescription drugs and over-the-counter pharmaceuticals as well as
consumer health products.
The performance of the reportable segments is assessed based on
segment operating (loss)/profit.
In the second half of 2020, the Group (1) renamed the Innovation
Platform to Oncology/Immunology segment and Commercial Platform to
Other Ventures segment; and began (2) separately presenting R&D
activities in the U.S. and other locations under
Oncology/Immunology segment, (3) including the results from
manufacturing and commercializing Elunate under Marketed Products
in Oncology/Immunology segment, and (4) aggregating the remaining
commercial businesses under Other Ventures segment with Hong Kong
included within the PRC. These changes are consistent with the
chief operating decision maker's view of the business. The segment
information below as at and for the years ended December 31, 2019
and 2018 have been revised so that all segment disclosures are
comparable.
The segment information is as follows:
Year Ended December 31, 2020
Oncology/Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from
external
customers 10,262 - 10,262 19,953 30,215 197,761 - 227,976
Interest income 461 - 461 - 461 167 2,608 3,236
Equity in
earnings
of equity
investees,
net of tax (97) - (97) - (97) 79,143 - 79,046
Segment operating
(loss)/profit (119,740) (63,482) (183,222) 7,607 (175,615) 83,888 (18,174) ( 109,901)
Interest expense - - - - - - 787 787
Income tax
expense/(credit) 402 (642) (240) 167 (73) 824 4,078 4,829
Net (loss)/income
attributable (182, (125,
to the Company (120,096) (62,683) 779 ) 7,282 (175,497) 72,785 (23,018) 730)
Depreciation/
amortization 5,458 119 5,577 - 5,577 292 192 6,061
Additions to
non-current
assets (other
than financial
instruments
and deferred
tax assets) 22,574 754 23,328 - 23,328 817 1,090 25,235
December 31, 2020
Oncology/Immunology
Marketed Other
R&D Products Ventures
U.S.
PRC and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 127,637 9,957 137,594 5,728 143,322 231,234 349,562 724,118
Property, plant
and equipment 22,554 454 23,008 - 23,008 688 474 24,170
Right-of-use
assets 2,782 1,375 4,157 - 4,157 2,582 1,277 8,016
Leasehold land 13,121 - 13,121 - 13,121 - - 13,121
Goodwill - - - - - 3,307 - 3,307
Other intangible
asset - - - - - 227 - 227
Investments
in equity
investees 385 - 385 - 385 139,120 - 139,505
Year Ended December 31, 2019
Oncology/Immunology
Marketed Other
R&D Products Ventures
U.S.
PRC and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from
external
customers 16,026 - 16,026 10,766 26,792 178,098 - 204,890
Interest
income 322 - 322 - 322 109 4,513 4,944
Equity in
earnings
of equity
investees,
net of tax 147 - 147 - 147 40,553 - 40,700
Segment
operating
(loss)/profit (111,518) (21,785) (133,303) 5,887 (127,416) 45,255 (17,214) (99,375)
Interest
expense - - - - - - 1,030 1,030
Income tax
expense 63 197 260 - 260 939 2,075 3,274
Net
(loss)/income
attributable
to the
Company (111,308) (21,926) (133,234) 5,872 (127,362) 41,488 (20,150) (106,024)
Depreciation/
amortization 4,448 62 4,510 - 4,510 264 168 4,942
Additions to
non-current
assets (other
than
financial
instruments
and deferred
tax assets) 8,602 1,308 9,910 - 9,910 2,772 148 12,830
December 31, 2019
Oncology/Immunology
Marketed Other
R&D Products Ventures
U.S.
PRC and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 93,332 4,452 97,784 813 98,597 170,891 195,634 465,122
Property, plant
and equipment 18,907 515 19,422 - 19,422 789 644 20,855
Right-of-use
assets 1,584 861 2,445 - 2,445 2,466 605 5,516
Leasehold land 1,110 - 1,110 - 1,110 - - 1,110
Goodwill - - - - - 3,112 - 3,112
Other intangible
asset - - - - - 275 - 275
Investments
in equity
investees 447 - 447 - 447 98,497 - 98,944
Year Ended December 31, 2018
Oncology/Immunology
Marketed Other
R&D Products Ventures
U.S.
PRC and Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from
external
customers 37,648 - 37,648 3,585 41,233 172,876 - 214,109
Interest income 119 - 119 - 119 141 5,718 5,978
Equity in
earnings
of equity
investees,
net of tax (18,981) - (18,981) - (18,981) 38,314 - 19,333
Segment
operating
(loss)/profit (99,992) (4,602) (104,594) 2,008 (102,586) 46,990 (10,717) (66,313)
Interest expense - - - - - 62 947 1,009
Income tax
expense 39 42 81 - 81 1,662 2,221 3,964
Net
(loss)/income
attributable
to the Company (99,783) (4,632) (104,415) 2,003 (102,412) 41,372 (13,765) (74,805)
Depreciation/
amortization 3,326 8 3,334 - 3,334 195 61 3,590
Additions to
non-current
assets (other
than financial
instruments
and deferred
tax assets) 5,133 65 5,198 - 5,198 584 720 6,502
Revenue from external customers is after elimination of
inter-segment sales. Sales between segments are carried out at
mutually agreed terms. The amount eliminated attributable to sales
between Oncology/Immunology segment and Other Ventures segment was
US$17,059,000, US$3,354,000 and nil for the years ended December
31, 2020, 2019 and 2018 respectively.
There were two customers under Other Ventures segment (with
aggregate revenue of US$62,493,000), which accounted for over 10%
of the Group's revenue for the year ended December 31, 2020. There
was one customer, under Other Ventures segment (with revenue of
US$27,343,000), which accounted for over 10% of the Group's revenue
for the year ended December 31, 2019. There was one customer, under
Oncology/Immunology segment (with revenue of US$26,865,000), which
accounted for over 10% of the Group's revenue for the year ended
December 31, 2018.
Unallocated expenses mainly represent corporate expenses which
include corporate employee benefit expenses and the relevant
share-based compensation expenses. Unallocated assets mainly
comprise cash and cash equivalents and short-term investments.
A reconciliation of segment operating loss to net loss is as
follows:
Year Ended December 31,
2020 2019 2018
(in US$'000)
Segment operating loss (109,901) (99,375) (66,313)
Interest expense (787) (1,030) (1,009)
Income tax expense (4,829) (3,274) (3,964)
Net loss (115,517) (103,679) (71,286)
27. Note to Consolidated Statements of Cash Flows
Reconciliation of net loss for the year to net cash used in
operating activities:
Year Ended December 31,
2020 2019 2018
(in US$'000)
Net loss (115,517) (103,679) (71,286)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of finance costs 43 195 76
Depreciation and amortization 6,061 4,942 3,590
Gain from purchase of a subsidiary - (17) -
Loss on retirement of property, plant and equipment 85 17 33
Provision for excess and obsolete inventories 65 316 37
Provision for credit losses 77 (25) (202)
Share-based compensation expense-share options 8,737 7,173 7,903
Share-based compensation expense-LTIP 10,905 4,419 2,227
Equity in earnings of equity investees, net of tax (79,046) (40,700) (19,333)
Dividends received from SHPL and HBYS 86,708 28,135 35,218
Changes in right-of-use assets (2,197) 224 -
Unrealized currency translation (gain)/loss (6,149) 1,679 1,515
Changes in income tax balances (1,111) 304 212
Changes in working capital
Accounts receivable-third parties (5,315) (1,209) (1,564)
Accounts receivable-related parties 622 938 1,078
Other receivables, prepayments and deposits (9,602) (2,452) (2,385)
Amounts due from related parties - (282) 27
Inventories (3,623) (4,215) (557)
Long-term prepayment 153 253 292
Accounts payable 7,651 (1,664) 1,260
Other payables, accruals and advance receipts 37,437 26,019 16,286
Lease liabilities 2,258 (101) -
Deferred revenue (158) (709) (239)
Amounts due to related parties 35 (66) (6,589)
Other (185) (407) (446)
Total changes in working capital 29,273 16,105 7,163
Net cash used in operating activities (62,066) (80,912) (32,847)
28. Litigation
From time to time, the Group may become involved in litigation
relating to claims arising from the ordinary course of business.
The Group believes that there are currently no claims or actions
pending against the Group, the ultimate disposition of which could
have a material adverse effect on the Group's results of
operations, financial position or cash flows. However, litigation
is subject to inherent uncertainties and the Group's view of these
matters may change in the future. When an unfavorable outcome
occurs, there exists the possibility of a material adverse impact
on the Group's financial position and results of operations for the
periods in which the unfavorable outcome occurs, and potentially in
future periods.
On May 17, 2019, Luye Pharma Hong Kong Ltd. ("Luye") issued a
notice to the Group purporting to terminate a distribution
agreement that granted the Group exclusive commercial rights to
Seroquel in the PRC for failure to meet a pre-specified target. The
Group disagrees with this assertion and believes that Luye have no
basis for termination. As a result, the Group commenced legal
proceedings in 2019 in order to seek damages. As at December 31,
2020, the legal proceedings are still in progress. Accordingly, no
adjustment has been made to Seroquel-related balances as at
December 31, 2020, including accounts receivable, long-term
prepayment, accounts payable and other payables of US$1.2 million,
US$1.0 million, US$0.9 million and US$1.2 million respectively.
29. Restricted Net Assets
Relevant PRC laws and regulations permit payments of dividends
by the Company's subsidiaries in the PRC only out of their retained
earnings, if any, as determined in accordance with PRC accounting
standards and regulations. In addition, the Company's subsidiaries
in the PRC are required to make certain appropriations of net
after-tax profits or increases in net assets to the statutory
surplus fund prior to payment of any dividends. In addition,
registered share capital and capital reserve accounts are
restricted from withdrawal in the PRC, up to the amount of net
assets held in each subsidiary. As a result of these and other
restrictions under PRC laws and regulations, the Company's
subsidiaries in the PRC are restricted in their ability to transfer
their net assets to the Group in terms of cash dividends, loans or
advances, with restricted portions amounting to US$0.2 million and
US$0.3 million as at December 31, 2020 and 2019 respectively, which
excludes the Company's subsidiaries with a shareholders' deficit.
Even though the Group currently does not require any such
dividends, loans or advances from the PRC subsidiaries, for working
capital and other funding purposes, the Group may in the future
require additional cash resources from the Company's subsidiaries
in the PRC due to changes in business conditions, to fund future
acquisitions and development, or merely to declare and pay
dividends to make distributions to shareholders.
In addition, the Group has certain investments in equity
investees in the PRC, where the Group's equity in undistributed
earnings amounted to US$99.9 million and US$61.6 million as at
December 31, 2020 and 2019 respectively.
30. Subsequent Events
The Group evaluated subsequent events through March 4, 2021,
which is the date when the consolidated financial statements were
issued.
In January 2021, the Group entered into a contract with a third
party contractor for approximately US$46.8 million in connection
with the construction of a factory in Shanghai.
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END
FR GCGDXGDGDGBS
(END) Dow Jones Newswires
March 04, 2021 07:00 ET (12:00 GMT)
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