TIDMHCM
RNS Number : 7652G
Hutchmed (China) Limited
28 July 2021
HUTCHMED Reports 2021 Interim Results and Provides Business
Updates
ELUNATE(R) in-market sales(1) rose 186%, reflecting impact of
in-house sales force
Received 1(st) approval in China for ORPATHYS(R) and 2(nd)
approval in China for SULANDA(R)
U.S. and E.U. applications for surufatinib both accepted
Raised $615m(2) gross proceeds from additional listing on
HKEX(3)
Company to Host Interim Results Call & Webcast Today at 8
p.m. HKT / 1 p.m. BST / 8 a.m. EDT
Hong Kong, Shanghai & Florham Park, NJ - Wednesday, July 28,
2021: HUTCHMED (China) Limited ("HUTCHMED") (Nasdaq/AIM:HCM;
HKEX:13), the innovative, commercial-stage biopharmaceutical
company, today reports its unaudited financial results for the six
months ended June 30, 2021 and provides updates on key clinical and
commercial developments since the start of the year.
All amounts are expressed in U.S. dollar currency unless
otherwise stated.
2021 Interim Results & Business Updates
"HUTCHMED's progress has been truly exceptional," said Mr. Simon
To, Chairman of HUTCHMED. "Our novel drug discovery and development
engine keeps powering ahead. Not only have we secured our third and
fourth oncology drug NDA(4) approvals in China, but also our first
U.S. FDA(5) and EMA(6) applications for market approval have been
accepted."
"Ten registrational studies are set to start this year on our
five lead global assets. These are based on exciting data from
proof-of-concept studies of both monotherapies and
immunotherapy/TKI(7) combinations. In addition, our early-stage
portfolio is also progressing with our IDH1/2(8) , ERK(9) and third
generation BTK(10) inhibitors all starting development this
year."
"In parallel, our commercial oncology operations are rapidly
progressing."
"In China, our oncology team is now about 540 people on the
ground marketing ELUNATE(R) and SULANDA(R) , recording in-market
sales(11) of $48.1 million in the first half of 2021. In the U.S.,
our oncology commercial team is building to support potential
launches of surufatinib in 2022 and fruquintinib in 2023. On
ORPATHYS(R) , our partner AstraZeneca(12) will leverage its great
commercial capabilities in lung cancer to market this important
first-in-class drug."
"On the corporate-level we took several important steps during
the first half to support our global plans. We changed our name to
HUTCHMED, consolidating several legacy group and operating names
into a single ubiquitous global corporate identity. We also built a
balance of about $1.2 billion in cash and resources through our
homecoming IPO(13) on HKEX as well as through divestment of our
non-core OTC(14) drug business."
"Over the next three years, we will continue to rapidly build
our global R&D(15) and commercial organizations, supporting the
anticipated global launches of our oncology drugs."
I. COMMERCIAL OPERATIONS
-- Total revenues increased 47% to $157.4 million in the first half of 2021 (H1-20: $106.8m);
-- Oncology/Immunology consolidated revenues increased 161% to
$42.9 million (H1-20: $16.4m). Our China oncology commercial
organization expanded to about 540 personnel (end 2020: 390)
covering over 2,500 oncology hospitals and over 29,000 oncology
physicians;
-- ELUNATE(R) (fruquintinib in China) in-market sales increased
186% to $40.1 million (H1-20: $14.0m), reflecting enhanced
detailing, promotion and local & regional marketing in China
through our organization;
-- SULANDA(R) (surufatinib in China) launched for both
extra-pancreatic NET(16) (mid-January 2021) and pancreatic NET
(June 2021), with sales of $8.0 million (H1-20: nil);
-- ORPATHYS(R) (savolitinib) launched in July 2021, just three
weeks after approval, through AstraZeneca's extensive,
market-leading oncology commercial organization . HUTCHMED will
receive a fixed royalty of 30% on all sales in China; and
-- U.S. commercial organization continued to build for the
potential surufatinib U.S. approval in the first half of 2022. The
team is fully engaged on all aspects of launch readiness including
supply chain, market access, marketing, sales and commercial
operations.
II. REGULATORY ACHIEVEMENTS
China
-- Received China NMPA(17) NDA approval for ORPATHYS(R)
(savolitinib) as a treatment for patients with MET(18) exon 14
skipping alteration NSCLC(19) in June 2021, making savolitinib the
first-in-class selective MET inhibitor in China; and
-- Received second China NMPA NDA approval for SULANDA(R) in
June 2021 as a treatment for patients with advanced pancreatic
NET.
United States & Europe
-- Completed submission of U.S. FDA NDA for surufatinib, which
was accepted in June 2021, for the treatment of both pancreatic and
extra-pancreatic NET. The assigned PDUFA(20) goal date is April 30,
2022; and
-- Fully submitted EMA MAA(21) for surufatinib, which was
validated and accepted in July 2021 , for the treatment of both
pancreatic and non-pancreatic NET.
III. CLINICAL DEVELOPMENT ACTIVITIES
Surufatinib (SULANDA(R) in China), a small molecule inhibitor of
VEGFR(22) , FGFR(23) and CSF- 1R(24) 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
-- Initiated an international Phase Ib/II study of surufatinib
combined with tislelizumab (NCT04579757), BeiGene's(25) PD-1(26)
antibody, in the U.S. and Europe, in March 2021;
-- Presented NEC(27) cohort preliminary data from the China
Phase II study of surufatinib plus TUOYI(R) , Junshi's(28)
anti-PD-1 antibody, (NCT04169672) at the 2021 ASCO(29) Annual
Meeting. The combination demonstrated good preliminary efficacy and
manageable tolerability. There are currently no standard
second-line treatments available to NEC patients;
-- Presented preliminary data from the gastric and
gastroesophageal junction cancers cohort of the China Phase II
study of surufatinib plus TUOYI(R) (NCT04169672) at the 2021 ASCO
Annual Meeting, which also demonstrated good preliminary efficacy
and manageable tolerability in this patient population.
Registration design for gastric cancer is under discussion;
-- Completed enrollment of a further four China Phase II cohorts
for surufatinib plus TUOYI (R) (NCT04169672) including biliary
tract, esophageal, small cell lung cancers and sarcoma, with
further thyroid, NSCLC and endometrial cancer cohorts continuing to
enroll;
-- Presented updated results from U.S. Phase Ib monotherapy NET
cohorts (NCT02549937) at the 2021 ASCO Annual Meeting. In heavily
pretreated patients with NET, surufatinib demonstrated encouraging
efficacy in patients refractory or intolerant to AFINITOR(R) and
SUTENT(R) , with a manageable safety profile consistent with the
completed Phase III trials SANET -- p and SANET -- ep;
-- Presented a subgroup analysis by Ki-67 and baseline CgA(30)
of the Phase III monotherapy study in pancreatic NET (SANET-p)
(NCT02589821) at the 2021 ASCO Annual Meeting. SANET-p had shown
that surufatinib demonstrated statistically significant and
clinically meaningful improvement in PFS(31) , and this exploratory
analysis showed that surufatinib demonstrated benefit irrespective
of Ki-67 expression levels or baseline CgA; and
-- Presented Phase II data for surufatinib monotherapy in
BTC(32) patients (NCT02966821) at the 2021 ASCO Annual Meeting in
U.S. patients after first-line chemotherapy. This data highlights
surufatinib's potential in BTC. Emerging data from our Phase II
cohort of the surufatinib combination plus TUOYI(R) , however,
means we will prioritize development of the combination over the
monotherapy.
Potential upcoming clinical and regulatory milestones for
surufatinib:
-- Initiate the first Phase III pivotal study for the SULANDA(R)
plus TUOYI(R) combination in late 2021, in NEC patients in
China;
-- Submit for presentation further Phase II data for the
SULANDA(R) plus TUOYI(R) combination in select indications in the
second half of 2021, such as potentially biliary tract, esophageal,
small cell lung cancers and sarcoma and updated NET/NEC cohort
data; and
-- Initiate pivotal study in NET patients in Japan in late 2021 .
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
-- Completed enrollment in four cohorts of the Phase II study of
fruquintinib combined with TYVYT(R) (NCT03903705), Innovent's(33)
PD-1 antibody - in CRC(34) , HCC(35) , endometrial cancer and
RCC(36) . Also initiated additional cohorts in gastric cancer,
cervical cancer and NSCLC;
-- Presented preliminary CRC cohorts data from the Phase Ib/II
studies of fruquintinib combined with TYVYT(R) and of fruquintinib
combined with geptanolimab , Genor's(37) PD-1 antibody, at the 2021
ASCO Annual Meeting (NCT04179084 and NCT03977090, respectively).
Both combination studies showed encouraging, durable benefit in
advanced CRC patients with manageable safety profiles. A
registration strategy for CRC is under discussion, as well as for
additional indications; and
-- Initiated a Phase II study in China and Korea for
fruquintinib in combination with tislelizumab (NCT04716634, led by
BeiGene) with advanced or metastatic, unresectable gastric cancer,
CRC or NSCLC.
Potential upcoming clinical and regulatory milestones for
fruquintinib:
-- Submit Phase Ib U.S. monotherapy expansion data in metastatic
CRC (NCT03251378) in the second half of 2021 for publication in
early 2022;
-- Submit for presentation additional cohorts' data from the
studies of fruquintinib combined with an anti-PD-1 antibody in the
second half of 2021, such as HCC, endometrial cancer and RCC;
-- 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 second
half of 2021;
-- Initiate a registrational study in China of fruquintinib
combined with an anti-PD-1 antibody in endometrial cancer patients,
in the second half of 2021, the first of several potential pivotal
studies with this combination;
-- Complete enrollment of the FRESCO-2 global Phase III
registration study (NCT04322539) in refractory metastatic CRC in
late 2021, which is expected to enroll over 680 patients from over
150 sites in 14 countries; and
-- Complete enrollment of the FRUTIGA China Phase III
registration study (NCT03223376) in advanced gastric cancer in late
2021, which is expected to enroll approximately 700 patients from
approximately 35 sites in China.
Savolitinib (ORPATHYS(R) ) , 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 CALYPSO Phase II study data in MET-driven patients
(NCT02819596) for savolitinib in combination with IMFINZI(R) ,
AstraZeneca's PD-L1(38) antibody at the 2021 ASCO Annual Meeting.
In MET-driven PRCC(39) patients, the combination demonstrated
encouraging synergy in efficacy and tolerability in line with
single agent safety profiles;
-- Published in The Lancet Respiratory Medicine updated data
from the Phase II study (NCT02897479), which were the results
reviewed by the NMPA when it approved savolitinib for the treatment
of patients with MET exon 14 skipping alteration NSCLC;
-- Presented final Phase II data for TATTON (NCT02143466) at
WCLC(40) 2020 (held in January 2021), a global exploratory study in
NSCLC aiming to recruit patients with MET amplification who had
progressed after prior treatment with EGFR(41) inhibitors. TATTON
clearly confirmed the importance of the savolitinib plus
TAGRISSO(R) combination; and
-- Initiated Phase II study with potential for registration
(NCT04923932) for savolitinib in metastatic gastric cancer in China
in mid-2021.
Potential upcoming clinical and regulatory milestones for
savolitinib:
-- Initiate a confirmatory China Phase IIIb post-approval study
(NCT04923945) of savolitinib monotherapy in MET exon 14 skipping
alteration patients in mid-2021 following its market launch, which
is expected to enroll approximately 160 patients from approximately
40 sites;
-- Initiate SAMETA, a global Phase III pivotal study of the
savolitinib plus IMFINZI(R) combination in MET-driven, unresectable
and locally advanced or metastatic PRCC, based on the encouraging
results of SAVOIR and CALYPSO studies, in the second half of
2021;
-- Initiate SANOVO, a pivotal Phase III study in China for the
savolitinib plus TAGRISSO(R) combination in treatment naïve
patients with EGFR mutant positive NSCLC with MET aberration in the
second half of 2021;
-- Initiate SACHI, a pivotal Phase III study in China for the
savolitinib plus TAGRISSO(R) combination in patients with NSCLC who
have progressed following EGFR TKI treatment due to MET
amplification in the second half of 2021; and
-- 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 the initiation of global Phase III development in late
2021.
HMPL-689, an investigative and highly selective small molecule
inhibitor of PI3K(42) designed to address the gastrointestinal and
hepatotoxicity associated with currently approved and
clinical-stage PI3K inhibitors
-- Initiated Phase II studies with potential for registration
intent in China for the treatment of patients with follicular
lymphoma and patients with marginal zone lymphoma in April
2021.
Potential upcoming clinical and regulatory milestones for
HMPL-689:
-- Complete Phase Ib dose expansion study (NCT03128164) and
submit interim data for presentation in the second half of 2021.
Over 95 patients have enrolled at the RP2D(43) in six non-Hodgkin's
lymphoma sub-type cohorts;
-- Complete Phase I dose escalation in the U.S. and Europe
(NCT03786926) in mid-2021 and initiate Phase Ib expansion studies
in multiple non-Hodgkin's lymphoma indications;
-- 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;
-- Initiate additional Phase II studies with potential for
registration intent in China in additional relapsed/refractory
non-Hodgkin's lymphoma indications in late 2021 or early 2022;
and
-- Initiate studies in combination with other anti-cancer therapies in China in early 2022.
HMPL-523, an investigative and highly selective small molecule
inhibitor of Syk(44) , an important component of the B-cell
receptor signaling pathway, for the treatment of hematological
cancers and immune disease
-- Completed Phase Ib ITP(45) dose expansion study (NCT03951623)
in China with all patients having completed eight weeks
treatment.
Potential upcoming clinical and regulatory milestones for
HMPL-523:
-- Initiate dose expansion of the Phase I study (NCT03779113) in
the U.S. and Europe, following completion of dose escalation, in
the second half of 2021;
-- Initiate a Phase III study in ITP in China in late 2021,
after engagement with the CDE(46) ;
-- Initiate a Phase II study in AIHA(47) in China in late 2021; and
-- Submit for presentation Phase Ib study preliminary data in
ITP (NCT03951623) in late 2021.
HMPL-453, an investigative and highly selective small molecule
inhibitor of FGFR 1/2/3
Potential upcoming clinical and regulatory milestones for
HMPL-453:
-- Initiate studies in combination with other anti-cancer
therapies in China in late 2021 or early 2022, based on the
response to the late June 2021 submission of an IND(48) to the
NMPA.
HMPL-306, an investigative and highly selective small molecule
inhibitor of IDH1/2 designed to address resistance to the currently
marketed IDH inhibitors
-- Initiated dose escalation portion of a Phase I study
(NCT04764474) 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
-- Initiated dose escalation portion of a Phase I study
(NCT04762602) in the U.S. in patients with solid tumors with an
IDH1 and/or IDH2 mutation in the first half of 2021.
Potential upcoming clinical and regulatory milestones for
HMPL-306:
-- Initiate dose expansion portion of the Phase I studies in
China and the U.S. (NCT04272957, NCT04762602 and NCT04764474) in
patients with relapsed or refractory hematological malignancies or
solid tumors with an IDH1 and/or IDH2 mutation, after full
enrollment of the dose escalation cohorts in late 2021 or early
2022.
HMPL-295, an investigative and highly selective small molecule
inhibitor of ERK in the MAPK pathway (49) with the potential to
address intrinsic or acquired resistance from upstream mechanisms
such as RAS-RAF-MEK
-- Initiated Phase I trial (NCT04908046) in patients with
advanced solid tumors in China in July 2021.
HMPL-760, an investigative, highly selective, third-generation
small molecule inhibitor of BTK with improved potency versus first
generation BTK inhibitors against both wild type & C481S mutant
enzymes
Potential upcoming clinical and regulatory milestones for
HMPL-760:
-- Initiate Phase I trial in the U.S. in patients with advanced
hematological malignancies in late 2021,
based on the IND submission in late June 2021 to the U.S. FDA to begin clinical trials ; and
-- Initiate Phase I trial in China in patients with advanced
hematological malignancies in late 2021 or
early 2022, based on the IND submission in late June 2021 to the China NMPA.
Discovery , our in-house scientific team has been responsible
for the discovery of all eleven of our clinical drug candidates
including our three approved oncology drugs ELUNATE(R) , SULANDA(R)
and ORPATHYS(R)
-- Completed preclinical IND-enabling activities and submitted
two INDs for HMPL-760 to the U.S. FDA and China NMPA.
Potential upcoming discovery milestones:
-- IND-enabling toxicity studies are underway for two additional
in-house discovered oncology drug candidates , a potent and
selective small molecule CSF-1R inhibitor (HMPL-653) and a CD47
antibody (HMPL-A83). If the outcomes of these studies are positive,
we will follow with IND submissions in China and the U.S. in late
2021 and early 2022.
IV. MANUFACTURING
-- Rapid progress being made in building our new flagship
Shanghai manufacturing facility , since breaking ground in December
2020. This facility is designed to increase our novel drug product
manufacturing capacity by over five-fold and is on-track to
commence production in 2024. In the first half of 2021 we obtained
all necessary approvals and permits; completed vendor selection
process for both the primary construction and specific equipment;
completed site preparation and pilings; and initiated construction
of the central utility building.
V. OTHER CORPORATE DEVELOPMENTS
-- Completed listing of ordinary shares and primary offering of
119,600,000 new ordinary shares(50) on the Main Board of HKEX (the
"Global Offering"), raising net proceeds of approximately $585
million, to advance our late-stage clinical programs as well as our
pipeline of clinical-stage and preclinical drug candidates, further
strengthening our oncology commercialization, clinical, regulatory
and manufacturing capabilities and enabling funding of potential
global business development and strategic acquisition opportunities
and for general corporate purposes;
-- Announced a divestment agreement to sell our entire indirect
interest in HBYS(51) , a non-core and non-consolidated
over-the-counter drug joint venture business, to GL Capital(52)
with the aggregate amount attributable to HUTCHMED of approximately
$169 million in cash. This cash amount represents about 22 times
HBYS's adjusted net profit attributable to HUTCHMED equity holders
of $7.7 million in 2020(53) . The transaction is subject to
regulatory approval in China and is expected to close in the second
half of 2021;
-- Changed our group company name to HUTCHMED in April 2021, and
the names of several of our key subsidiaries. All remaining key
subsidiaries' names will change over the balance of 2021; and
-- Announced a strategic partnership with Inmagene(54) in
January 2021 to further develop four novel preclinical drug
candidates discovered by HUTCHMED for the potential treatment of
multiple immunological diseases.
VI. IMPACT OF COVID-19
COVID-19 has not impacted our clinical studies in any material
manner to date in 2021. We will continue to closely monitor the
evolving situation.
Interim 2021 Financial Results
Cash, Cash Equivalents and Short-Term Investments were $950.4
million as of June 30, 2021 compared to $435.2 million as of
December 31, 2020.
-- Adjusted Group (non-GAAP(55) ) net cash flows excluding
financing activities in H1 2021 were -$63.1 million (H1-20:
-$32.5m) mainly due to Oncology/Immunology R&D spending and
partially offset by dividends received from our non-consolidated
joint ventures totaling $42.1 million (H1-20: $35.3m); and
-- Net cash generated from financing activities in H1 2021
totaled $578.3 million (H1-20: $96.3m) mainly resulting from the
Global Offering in June 2021 and a private placement in April 2021
to a fund affiliated with BPEA(56) .
-- Not included above is a further approximately $250 million
from: $77 million in net proceeds in July 2021 from the exercise of
the over-allotment option of the Global Offering; the $25 million
milestone payment from AstraZeneca triggered by first commercial
sales of ORPATHYS(R) in July 2021; and the approximately $150
million in remaining net proceeds receivable under our agreed
divestment of HBYS to GL Capital.
Revenues for the six months ended June 30, 2021 were $157.4
million compared to $106.8 million in the six months ended June 30,
2020.
-- Oncology/Immunology consolidated revenues increased 161%
(152% at CER(57) ) to $42.9 million (H1-20: $16.4m) comprised
of:
ELUNATE(R) revenues increased 244% to $29.8 million (H1-20:
$8.6m) in manufacturing revenues, promotion and marketing service
revenues and royalties, as our in-house sales team increased
in-market sales 186% to $40.1 million (H1- 20: $14.0m), as provided
by Lilly(58) ;
SULANDA(R) sales revenues of $8.0 million since mid-January
launch, initially to treat patients with advanced extra-pancreatic
(non-pancreatic) NET, then also to treat patients with pancreatic
NET in June 2021; and
R&D service fee revenues of $5.1 million (H1-20: $7.8m)
primarily from AstraZeneca and Lilly .
ORPATHYS(R) $25 million payment and fixed royalty of 30% on all
China sales from AstraZeneca not included , as the milestone
payment was recently triggered by its first sales in China in July
2021. AstraZeneca has launched ORPATHYS(R) across China through its
extensive, market-leading oncology commercial organization.
-- Other Ventures consolidated revenues increased 27% (18% at
CER) to $114.5 million (H1-20: $90.4m) mainly due to continued
sales growth of third-party prescription drug products .
Net Expenses for the six months ended June 30, 2021 were $259.8
million compared to $156.5 million in the six months ended June 30,
2020.
-- Cost of Revenues were $123.2 million (H1-20: $83.6m), the
majority of which were the cost of third-party prescription drug
products marketed through our profitable Other Ventures, as well as
costs associated with promotion and marketing services to Lilly
which commenced in October 2020;
-- R&D Expenses were $123.1 million (H1-20: $74.0m) mainly
as a result of an expansion in the development of our eleven 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 $59.3 million (H1-20:
$19.9m) while R&D expenses in China were $63.8 million (H1-20:
$54.1m);
-- SG&A(59) Expenses were $54.8 million (H1-20: $27.4m)
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 our oncology products; and
-- Other Items(60) generated net income of $41.3 million (H1-20:
$28.5m) 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 19% (9%
at CER) in the first half of 2021 and also benefited from a
one-time land compensation of $5.1 million (H1-20: nil).
Net Loss attributable to HUTCHMED for the six months ended June
30, 2021 was $102.4 million compared to $49.7 million in the six
months ended June 30, 2020.
-- As a result, the net loss attributable to HUTCHMED in the
first half of 2021 was $0.14 per ordinary share / $0.70 per ADS(61)
compared to net loss attributable to HUTCHMED of $0.07 per ordinary
share / $0.35 per ADS, in the six months ended June 30, 2020.
Financial Summary
Condensed Consolidated Balance Sheet Data
(in $'000)
As of June 30, As of December 31,
-------------- ------------------
2021 2020
-------------- ------------------
(Unaudited)
Assets
Cash and cash equivalents and short-term investments 950,448 435,176
Accounts receivable 58,878 47,870
Other current assets 81,848 47,694
Property, plant and equipment 29,168 24,170
Investments in equity investees 118,316 139,505
Other non-current assets 34,231 29,703
-------------- ------------------
Total assets 1,272,889 724,118
============== ==================
Liabilities and shareholders' equity
Accounts payable 28,513 31,612
Other payables, accruals and advance receipts 181,610 120,882
Bank borrowings 26,883 26,861
Other liabilities 22,188 25,814
-------------- ------------------
Total liabilities 259,194 205,169
Total Company's shareholders' equity 984,795 484,116
Non-controlling interests 28,900 34,833
-------------- ------------------
Total liabilities and shareholders' equity 1,272,889 724,118
============== ==================
Condensed Consolidated Statement of Operations Data
(Unaudited, in $'000, except share and per share data)
Six Months Ended June 30,
---------------------------
2021 2020
------------- ------------
Revenues:
Oncology/Immunology - Marketed Products 37,795 8,645
Oncology/Immunology - R&D 5,056 7,747
------------- ------------
Oncology/Immunology consolidated revenues 42,851 16,392
Other Ventures 114,511 90,373
------------- ------------
Total revenues 157,362 106,765
============= ============
Expenses:
Costs of revenues (123,249) (83,572)
Research and development expenses (123,050) (73,974)
Selling and general administrative expenses (54,797) (27,384)
Total expenses (301,096) (184,930)
------------- ------------
Loss from Operations (143,734) (78,165)
Other income 3,287 1,585
------------- ------------
Loss before income taxes and equity in earnings of equity investees (140,447) (76,580)
Income tax expense (1,859) (2,032)
Equity in earnings of equity investees, net of tax 42,966 30,366
------------- ------------
Net loss (99,340) (48,246)
Less: Net income attributable to non-controlling interests (3,057) (1,448)
------------- ------------
Net loss attributable to HUTCHMED (102,397) (49,694)
============= ============
Losses per share attributable to HUTCHMED - basic and diluted (0.14) (0.07)
Number of shares used in per share calculation - basic and diluted 729,239,181 685,285,841
Losses per ADS attributable to HUTCHMED - basic and diluted (0.70) (0.35)
Number of ADSs used in per share calculation - basic and diluted 145,847,836 137,057,168
All amounts are expressed in U.S. dollar currency unless
otherwise stated.
FINANCIAL GUIDANCE
During the first half of 2021, we performed as expected with
commercial progress on ELUNATE(R) , SULANDA(R) and now ORPATHYS(R)
. While results are encouraging, we leave guidance unchanged.
H1 2021 2021 Current Adjustments vs.
Actual Guidance Previous Guidance
------------------------------------------ ------------- ------------------ ------------------
Oncology/Immunology consolidated revenues $42.9 million $110 - 130 million nil
------------------------------------------ ------------- ------------------ ------------------
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 8 p.m. HKT / 1 p.m. BST / 8 a.m. EDT - Investors may participate
in the call as follows: +852 3027 6500 (Hong Kong) / +44 20 3194
0569 (U.K.) / +1 646 722 4977 (U.S.), or access a live audio
webcast of the call via HUTCHMED's website at
www.hutch-med.com/event/.
Additional dial-in numbers are also available at HUTCHMED's
website. Please use participant access code " 45675713# ."
About HUTCHMED
HUTCHMED (Nasdaq/AIM:HCM; HKEX:13) is an innovative,
commercial-stage, biopharmaceutical company. It is committed to the
discovery and global development & commercialization of
targeted therapies and immunotherapies for the treatment of cancer
and immunological diseases. A dedicated organization of over 1,300
personnel. has advanced eleven cancer drug candidates from in-house
discovery into clinical studies around the world, with its first
three oncology drugs now approved and launched. For more
information, please visit: www.hutch--med.com or follow us on
LinkedIn.
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 - Zhou Yi, Brunswick +852 9783 6894 (Mobile)
HUTCHMED@brunswickgroup.com
Nominated Advisor
Atholl Tweedie / Freddy Crossley, Panmure Gordon (UK)
Limited +44 (20) 7886 2500
References
Unless the context requires otherwise, references in this
announcement to the "Group," the "Company," "HUTCHMED, " "HUTCHMED
Group," "we," "us," and "our," mean HUTCHMED (China) Limited and
its consolidated subsidiaries and joint ventures unless otherwise
stated or indicated by context.
Past Performance and Forward-Looking Statements
The performance and results of operations of the Group contained
within this announcement are historical in nature, and past
performance is no guarantee of future results of the Group. This
announcement contains forward-looking statements within the meaning
of the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can
be identified by words like "will," "expects, " "anticipates,"
"future," "intends," "plans," "believes," "estimates," "pipeline,"
"could," "potential," "first-in-class," "designed to," "objective,"
"guidance," "pursue," or similar terms, or by express or implied
discussions regarding potential drug candidates, potential
indications for drug candidates or by discussions of strategy,
plans, expectations or intentions. You should not place undue
reliance on these statements. Such forward-looking statements are
based on the current beliefs and expectations of management
regarding future events, and are subject to significant known and
unknown risks and uncertainties. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those set
forth in the forward-looking statements. There can be no guarantee
that any of our drug candidates will be approved for sale in any
market, or that any approvals which are obtained will be obtained
at any particular time, or that any such drug candidates will
achieve any particular revenue or net income levels. In particular,
management's expectations could be affected by, among other things:
unexpected regulatory actions or delays or government regulation
generally; 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 inability of a drug candidate to obtain regulatory
approval in different jurisdictions or gain commercial acceptance
after obtaining regulatory approval; global trends toward health
care cost containment, including ongoing pricing pressures;
uncertainties regarding actual or potential legal proceedings,
including, among others, actual or potential product liability
litigation, litigation and investigations regarding sales and
marketing practices, intellectual property disputes, and government
investigations generally; and general economic and industry
conditions, including uncertainties regarding the effects of the
persistently weak economic and financial environment in many
countries, uncertainties regarding future global exchange rates and
uncertainties regarding the impact of the COVID-19 pandemic. For
further discussion of these and other risks, see HUTCHMED's filings
with the U.S. Securities and Exchange Commission, on AIM and on
HKEX. HUTCHMED is providing the information in this announcement as
of this date and does not undertake any obligation to update any
forward-looking statements as a result of new information, future
events or otherwise.
In addition, this announcement contains statistical data and
estimates that HUTCHMED obtained from industry publications and
reports generated by third-party market research firms . Although
HUTCHMED believes that the publications, reports and surveys are
reliable, HUTCHMED has not independently verified the data and
cannot guarantee the accuracy or completeness of such data. You are
cautioned not to give undue weight to this data. Such data involves
risks and uncertainties and are subject to change based on various
factors, including those discussed above.
Inside Information
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 (as it forms part of
retained EU law as defined in the European Union (Withdrawal) Act
2018).
Ends
OPERATIONS REVIEW
Oncology/Immunology
We discover, develop, manufacture and market targeted therapies
and immunotherapies for the treatment of cancer and immunological
diseases through a fully integrated team of approximately 720
scientists and staff (December 31, 2020: >600), and an in-house
oncology commercial organization of about 540 staff (December 31,
2020: 390).
Currently, we have eleven self-discovered oncology drug
candidates in clinical trials in China, with six also in clinical
development in the U.S. and Europe. Our first three drug
candidates, fruquintinib, surufatinib and savolitinib, have all
been approved and launched in China.
MARKETED PRODUCT SALES
Fruquintinib (ELUNATE(R) in China )
In the first half of 2021, ELUNATE(R) in-market sales increased
186% to $40.1 million (H1-20: $14.0m), as provided by Lilly.
ELUNATE(R) revenues consolidated by HUTCHMED increased 244% to
$29.8 million (H1-20: $8.6m).
HUTCHMED took over development and execution responsibilities
for all on-the-ground medical detailing, promotion and local and
regional marketing activities for ELUNATE(R) in China from Lilly in
October 2020. We estimate, for our approved indication in
third-line metastatic CRC, there is an approximate incidence of
83,000 new patients per year in China.
During the first half of 2021, we conducted about 5,000
educational/scientific events involving approximately 70,000
healthcare professionals ("HCPs"). We increased medical sales
coverage to over 2,500 cancer hospitals and secured hospital
pharmacy listings for ELUNATE(R) in over 400 hospitals, in both
cases more than double the level of October 2020 when HUTCHMED took
over from Lilly. We estimate that during the first half of 2021
approximately 9,000 patients were treated with ELUNATE(R) .
We have confirmed a total of about 20 investigator-initiated
studies, which target to explore ELUNATE(R) use in CRC, gastric
cancer, NSCLC, pancreatic cancer, and several other indications. We
believe that these studies combined with our promotion and
marketing activities are rapidly raising awareness of ELUNATE(R) in
China.
Surufatinib (SULANDA(R) in China )
SULANDA(R) was first launched for the treatment of advanced NETs
for tumors originating outside of the pancreas in mid-January 2021
and for those originating in the pancreas in late June 2021. Total
sales in the first half of 2021 were $8.0 million (H1-20: nil).
During the first half of 2021, we introduced SULANDA(R) through
a campaign of local, regional and national launch events involving
approximately 12,000 HCPs. We have utilized means-tested early
access and patient access programs to enable SULANDA(R) use by over
2,000 patients during the first half of 2021. We estimate, there is
an approximate incidence of 34,000 new advanced NET patients per
year in China.
We view this initial progress as encouraging and, over the
balance of 2021, we expect to decide our long term pricing strategy
for SULANDA(R) either by submitting for inclusion in the 2022 NRDL
or by continuing to price at current levels and expanding our early
access and patient access programs.
We have also confirmed a total of over 30 investigator-initiated
studies in a broad range of exploratory solid tumor indications all
of which are expected to gradually expand awareness of SULANDA(R)
in China.
Savolitinib (ORPATHYS(R) )
On June 22, 2021, ORPATHYS(R) became the first-in-class
selective MET inhibitor to be approved in China. Our partner,
AstraZeneca, then launched ORPATHYS(R) in mid-July 2021, less than
three weeks after its conditional approval by the NMPA for patients
with MET exon 14 skipping alteration NSCLC.
More than a third of the world's lung cancer patients are in
China and, among those with NSCLC, approximately 2-3% have tumors
with MET exon 14 skipping alterations, representing an approximate
incidence of 13,000 new patients per year in China. Importantly
also, MET plays a role in multiple other solid tumors, with an
estimated total incidence of 120,000 new patients per year in
China.
In the second half of 2021, HUTCHMED will begin to consolidate
revenues from ORPATHYS(R) , starting with a $25 million
non-creditable and non-refundable first sale milestone payment from
AstraZeneca and then ongoing manufacturing fees in addition to
royalties of 30% of ORPATHYS(R) sales in China.
As a result of its approval prior to the mid-2021 cut off,
ORPATHYS(R) will be eligible for potential inclusion in the 2022
NDRL, subject to negotiation and agreement with the relevant
regulatory authorities.
RESEARCH & DEVELOPMENT
Savolitinib (ORPATHYS(R) )
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
about 1,200 clinical trial 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 Focus Sites Phase Status/Plan NCT #
============== ========================= ====== ====================== ===================== ===========
Savolitinib MET exon 14 skipping China II Registration Approved and launched NCT02897479
monotherapy alteration
============== ========================= ====== ====================== ===================== ===========
Savolitinib SAVANNAH: 2L/3L Global II Registration-intent Ongoing. Data support NCT03778229
+ TAGRISSO(R) EGFRm+(62) ; TAGRISSO(R) progressing into
refractory; MET+ Phase III, expected
in H2 2021
============== ========================= ====== ====================== ===================== ===========
Savolitinib 2L/3L EGFRm+; TAGRISSO(R) Global III In planning. N/A
+ TAGRISSO(R) refractory; MET+ Intend to initiate
in H2 2021
============== ========================= ====== ====================== ===================== ===========
Savolitinib SACHI: 2L EGFR TKI China III In planning. N/A
+ TAGRISSO(R) refractory NSCLC; Intend to initiate
MET+ in H2 2021
============== ========================= ====== ====================== ===================== ===========
Savolitinib SANOVO: Naïve China III In planning. N/A
+ TAGRISSO(R) patients with EGFRm Intend to initiate
& MET+ in H2 2021
============== ========================= ====== ====================== ===================== ===========
NMPA NDA Approval in MET exon 14 skipping alterations NSCLC
(NCT02897479) - In June 2021, savolitinib was approved by the NMPA
based on positive results from a Phase II trial conducted in China
in patients with NSCLC with MET exon 14 skipping alterations,
including patients with the more aggressive pulmonary sarcomatoid
carcinoma subtype. Savolitinib demonstrated effective anti-tumor
activity based on an independent review of ORR and DCR. The
approval is conditional upon successful completion of a
confirmatory study in this patient population (NCT04923945), which
is expected to enroll approximately 160 patients from approximately
40 sites. In July 2021, the first commercial sales in China
occurred.
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 that has now fully
enrolled the savolitinib 300mg QD(63) cohort, and is currently
enrolling two additional cohorts of savolitinib 300mg BID(64) and
600mg QD. The study will also determine optimal design of the
planned global Phase III study regarding optimal biomarker strategy
and dosage regimen. Enrollment is expected to be completed in
mid-2021 and planning for the global Phase III study is now
underway.
In-Planning - SACHI 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 patients in the
second half of 2021.
In-Planning - SANOVO 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 aberrant in the
second half of 2021.
Savolitinib - Kidney cancer:
MET is a clear genetic driver in RCC. 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 SAMETA: MET-driven, Global III In planning. N/A
+ IMFINZI(R) unresectable and locally Expected to begin
advanced or metastatic enrollment in
PRCC H2 2021
============= ========================== ========== ===== ================== ===========
Savolitinib CALYPSO: PRCC U.K./Spain II Data update at NCT02819596
+ IMFINZI(R) ASCO 2021
============= ========================== ========== ===== ================== ===========
Savolitinib CALYPSO: Clear cell U.K./Spain II Ongoing NCT02819596
+ IMFINZI(R) RCC; VEGFR TKI refractory
============= ========================== ========== ===== ================== ===========
Savolitinib and Immunotherapy Combinations - Evidence is
emerging which demonstrates 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 results of the PRCC cohort of the
CALYPSO study were most recently presented at the ASCO 2021 and
showed encouraging efficacy across all patients, particularly in
MET-driven PRCC patients, where the combination demonstrated
encouraging synergy in efficacy and tolerability in line with
single agent safety profiles. In patients regardless of PD-L1 or
MET status, ORR was 29%, while median PFS was 4.9 months (95% CI:
2.5-10.0) and median OS was 14.1 months (95% CI: 7.3-30.7).
Importantly, for patients whose tumors are MET-driven, ORR was 57%,
median PFS was 10.5 months (95% CI: 2.9-15.7) and median OS was
27.4 months (95% CI: 7.3-NR). Tolerability was consistent with
established single agent safety profiles.
In-Planning - SAMETA 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
(NCT03091192) 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 the second half of 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, demonstrating promising
efficacy.
China Phase II study with potential for registration intent in
2L+ gastric cancer with MET amplification (NCT04923932) - In July
2021, we initiated a Phase II registration-intent study in
MET-amplified gastric cancer in China. This is a two-stage,
single-arm study which targets advanced gastric cancer patients who
have failed at least one line of treatment. The primary endpoint is
ORR. Subject to the results of the first stage of this study, we
will discuss with the CDE of NMPA the appropriate approach and
necessary criteria for registration.
Surufatinib (SULANDA(R) in China)
Surufatinib is a novel, oral angio-immuno kinase inhibitor that
selectively inhibits the tyrosine kinase activity associated with
VEGFR and FGFR, both shown to be involved in tumor angiogenesis,
and CSF-1R, which plays a key role in regulating tumor-associated
macrophages, promoting the body's immune response against tumor
cells. Surufatinib has been studied in over 950 clinical trial
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, Sites Phase Status/Plan NCT #
Patient Focus
======================= ========================== ========= ====== ========================= ===========
Surufatinib monotherapy SANET-ep: extra-pancreatic China III Approved & launched NCT02588170
NET
======================= ========================== ========= ====== ========================= ===========
Surufatinib monotherapy SANET-p: pancreatic China III Approved & launched; NCT02589821
NET subgroup analysis at
ASCO 2021
======================= ========================== ========= ====== ========================= ===========
Surufatinib monotherapy NETs U.S. Ib FDA accepted NDA (July NCT02549937
2021); updated Ib data
at ASCO 2021
======================= ========================== ========= ====== ========================= ===========
Surufatinib monotherapy NETs Europe Ib EMA accepted MAA (July N/A
2021)
======================= ========================== ========= ====== ========================= ===========
Surufatinib monotherapy BTC & soft tissue U.S. Ib Ongoing NCT02549937
sarcoma
======================= ========================== ========= ====== ========================= ===========
Surufatinib monotherapy BTC China IIb Completed. Priority NCT03873532
for PD-1 combo for
future BTC development
======================= ========================== ========= ====== ========================= ===========
Surufatinib monotherapy BTC China Ib/IIa Completed; data presented NCT02966821
at ASCO 2021
======================= ========================== ========= ====== ========================= ===========
Surufatinib + NENs(65) China II Ongoing; data at ASCO NCT04169672
TUOYI(R) (PD-1) 2021
======================= ========================== ========= ====== ========================= ===========
Surufatinib + BTC China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ========================== ========= ====== ========================= ===========
Surufatinib + Gastric cancer China II Ongoing; data at ASCO NCT04169672
TUOYI(R) (PD-1) 2021
======================= ========================== ========= ====== ========================= ===========
Surufatinib + Thyroid cancer China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ========================== ========= ====== ========================= ===========
Surufatinib + SCLC(66) China II Ongoing NCT04169672
TUOYI(R) (PD-1)
======================= ========================== ========= ====== ========================= ===========
Surufatinib + Soft tissue China II Ongoing NCT04169672
TUOYI(R) (PD-1) sarcoma
======================= ========================== ========= ====== ========================= ===========
Surufatinib + Endometrial China II Ongoing NCT04169672
TUOYI(R) (PD-1) cancer
======================= ========================== ========= ====== ========================= ===========
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 Ongoing NCT04579757
tislelizumab / Europe
(PD-1)
======================= ========================== ========= ====== ========================= ===========
Surufatinib - NET:
NETs present in the body's organ system with fragmented
epidemiology. About 65-75% of NETs originate in the GI(67) tract
and pancreas, 25-35% in the lung or bronchus, and a further 20-30%
in other organs or unknown origins.
Global development of surufatinib in NET: U.S. NDA and E.U. MAA
under review - In June 2021, the U.S. FDA accepted our filing of
the NDA for surufatinib for the treatment of pancreatic and
extra-pancreatic (non-pancreatic) NETs. The PDUFA goal date
assigned by the FDA for this NDA is April 30, 2022. Surufatinib
received fast track designation in April 2020 for the treatment of
pancreatic and extra-pancreatic NET. Orphan Drug Designation for
pancreatic NET was also granted in November 2019.
The NDA is supported by data from two positive Phase III studies
of surufatinib in patients with pancreatic and extra-pancreatic NET
in China (SANET-p and SANET-ep both previously reported in The
Lancet Oncology, as mentioned below), and a surufatinib study
conducted in the U.S. We have initiated an Expanded Access Protocol
in the U.S. to ensure patients with NET with limited therapeutic
options have access to this treatment. Regulatory clearance of this
protocol has been granted by the FDA and this program is open for
site activation.
We have also submitted the EMA MAA for surufatinib, which was
validated and accepted in July 2021, for the treatment of both
pancreatic and non-pancreatic NET. In addition, we are planning to
initiate a pivotal study in NET patients in Japan in late 2021.
U.S. Phase Ib NET cohorts (NCT02549937) - Updated data from a
multi-center, open-label, Phase Ib clinical study to evaluate the
safety, tolerability and pharmacokinetics of surufatinib in U.S.
patients was presented at ASCO 2021, reinforcing the dosage,
efficacy and safety profile as comparable to the China trials data.
At data cut-off, in 32 patients treated between two and 23 months,
confirmed response and DCR was observed in 18.8% and 87.5% of
pancreatic NET patients, and 6.3% and 93.8% of extra-pancreatic NET
patients, respectively. Median PFS was 11.5 months for patients in
both cohorts (95% CI: 6.5-17.5).
Surufatinib approved and launched in extra-pancreatic NET
(SANET-ep, NCT02588170) - Surufatinib was launched in mid-January
2021 after being granted approval by the NMPA for the treatment of
extra-pancreatic (non-pancreatic) NET based on results from the
SANET-ep study, a Phase III trial in patients with advanced
extra-pancreatic NET conducted in China.
Surufatinib approved and launched in pancreatic NET (SANET-p,
NCT02589821) - In June 2021, surufatinib was granted additional
approval by the NMPA for the treatment of advanced pancreatic NETs,
based on results from the SANET-p study, a Phase III pivotal study
in patients with advanced pancreatic NETs conducted in China.
At ASCO 2021, we presented a subgroup analysis of SANET-p on the
relationship of Ki-67 and baseline CgA on efficacy outcomes.
SANET-p had showed that surufatinib demonstrated a statistically
significant and clinically meaningful improvement in PFS, and this
exploratory analysis showed that surufatinib demonstrated benefit
irrespective of Ki-67 expression levels or baseline CgA. Median PFS
was statistically longer in the surufatinib arm versus that in the
placebo arm in subgroups of Ki-67 5-10% (11.0 vs 3.7 months), Ki-67
> 10% (11.1 vs 2.8 months) and CgA > 2 × ULN (11.0 vs 3.7
months).
Surufatinib - BTC:
Phase Ib/IIa study of surufatinib monotherapy in second-line BTC
(NCT02966821) - We presented data at ASCO 2021, which highlighted
surufatinib's potential in BTC. For a total of 39 BTC patients,
16-week PFS rate was 46.33% (95% CI: 24.4--65.7), with median PFS
of 3.7 months and median OS of 6.9 months. The top three Grade 3 or
higher TRAEs(68) included blood bilirubin increased (20.5%),
hypertension (17.9%), and proteinuria (12.8%).
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 Phase IIb/III study comparing
surufatinib monotherapy with capecitabine in patients with
unresectable or metastatic BTC. Enrollment for the Phase IIb
portion (80 patients) of this study was completed in late 2020.
Based on the emerging data from our Phase II cohort of the
surufatinib combination plus TUOYI(R) in BTC (NCT04169672), we are
now prioritizing the combination over surufatinib monotherapy for
further development.
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.
TUOYI(R) combinations (NCT04169672) - In a Phase I dose-finding
study presented at the 2020 AACR Conference, data showed that
surufatinib plus TUOYI(R) were well tolerated with no unexpected
safety signals observed, with encouraging antitumor activity in
patients with advanced solid tumors, particularly in severe
settings such as grade 3 NET patients or NEC patients for whom no
therapies have been approved. A Phase II China study is enrolling
patients in nine solid tumor indications, including NENs, BTC,
gastric cancer, thyroid cancer, SCLC, soft tissue sarcoma,
endometrial cancer, esophageal cancer and NSCLC.
At ASCO 2021, encouraging preliminary data were disclosed for
the surufatinib and TUOYI(R) combination in the NEC and gastric
cancer cohorts.
For the 20 patients in the NEC cohort who received an average of
5 cycles of treatments and are efficacy evaluable, ORR was 20%
while DCR was 70%. Median PFS was 3.9 months (95% CI: 1.3-NR).
Grade 3 or higher TRAEs occurred in 33% of patients. We are
preparing to initiate a Phase III study in second-line or above
NEC.
Median duration of treatment for the gastric cancer cohort was 3
months, with 15 efficacy evaluable patients at the time of the
analysis. For these 15 patients, confirmed ORR was 13% and an
additional 20% of patients had unconfirmed response. DCR was 73%
and median PFS was 3.7 months (95% CI: 1.4-NR). Grade 3 or higher
TRAEs occurred in 14% of patients. Registration design for gastric
cancer is under discussion.
Tislelizumab combinations (NCT04579757) - In addition to the
TUOYI(R) and TYVYT(R) combination studies in China, in March 2021
we dosed the first patient in an open-label, Phase Ib/II study of
surufatinib in combination with BeiGene's tislelizumab in the U.S.
and Europe, evaluating the safety, tolerability, pharmacokinetics
and efficacy in patients with advanced solid tumors, including CRC,
NET, small cell lung cancer, gastric cancer and soft tissue
sarcoma.
Surufatinib - Exploratory development:
We are conducting multiple Phase Ib expansion cohorts in the
U.S. to explore the use of surufatinib 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
the efficacy of surufatinib. We are also supporting dozens of
investigator-initiated studies in various tumor settings.
Fruquintinib (ELUNATE(R) in China)
Fruquintinib is a novel, selective, oral inhibitor of VEGFR
1/2/3 kinases that was designed to improve kinase selectivity to
minimize off-target toxicity and thereby improve tolerability.
Fruquintinib has been studied in over 2,800 clinical trial 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. Enrollment NCT04322539
CRC Europe target to complete
/ Japan in late 2021
=========================== ==================== ======== ===== =================== ===========
Fruquintinib monotherapy CRC; TN(69) & U.S. Ib Ongoing NCT03251378
HR+(70) /Her2(71)
- breast cancer
=========================== ==================== ======== ===== =================== ===========
Fruquintinib + paclitaxel FRUTIGA: 2L gastric China III Ongoing; completed NCT03223376
cancer 2(nd) interim
analysis
=========================== ==================== ======== ===== =================== ===========
Fruquintinib + TYVYT(R) CRC China II Ongoing; presented NCT04179084
(PD-1) data at ASCO
2021
=========================== ==================== ======== ===== =================== ===========
Fruquintinib + TYVYT(R) HCC 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 Initiating NCT04577963
(PD-1)
=========================== ==================== ======== ===== =================== ===========
Fruquintinib + tislelizumab Solid tumors Korea / Ib/II Ongoing NCT04716634
(PD-1) China
=========================== ==================== ======== ===== =================== ===========
Fruquintinib + geptanolimab CRC China Ib Ongoing; presented NCT03977090
(PD-1) data at ASCO
2021
=========================== ==================== ======== ===== =================== ===========
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.
FRESCO-2 Phase III global registration study in metastatic CRC
(NCT04322539) - In the second half of 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 over 150 sites in 14 countries. Enrollment is
targeted to be completed in late 2021.
Fruquintinib - Gastric cancer:
FRUTIGA 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, for
second-line treatment of advanced gastric cancer. The FRUTIGA study
is expected to enroll approximately 700 patients, with co-primary
endpoints of PFS and OS. We expect to complete enrollment of
FRUTIGA around the 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 anti-PD-1 antibody, in
second-line CRC and NSCLC are also underway.
At ASCO 2021, encouraging preliminary data were disclosed for
fruquintinib in combination with two PD-1 inhibitors, TYVYT(R) and
geptanolimab, in advanced CRC. Both preliminary data sets showed a
five-fold increase in ORR and a doubling of mPFS as compared to the
FRESCO study for fruquintinib monotherapy.
TYVYT(R) combination s (NCT03903705) - In the TYVYT(R) and
fruquintinib combination study, 44 patients were enrolled into the
CRC cohort, 22 of whom received the RP2D. ORR was 23% for all
patients and 27% for those who received the RP2D. DCR was 86% for
all patients and 96% for those who received the RP2D. Median PFS
was 5.6 months for all patients, and 6.9 months for those who
received the RP2D. Median OS was 11.8 months for all patients. A
registration strategy for mCRC is under discussion.
Registration strategies for additional indications such as
endometrial, liver and renal cancer are in various stages of being
formulated. Three new cohorts are being added to the study.
Geptanolimab combination in CRC (NCT03977090) - For the 15
patients in the CRC cohort of the fruquintinib and geptanolimab
Phase Ib study, ORR was 26.7% (including 1 patient with unconfirmed
PR) and 33% in the group that received the RP2D (3mg/kg of
geptanolimab every 2 weeks, 4mg of fruquintinib once daily for 3
weeks on, 1 week off). DCR for all evaluable patients was 80% and
median PFS was 7.3 months (95% CI: 1.9-NR). Grade 3 TRAEs occurred
in 47% of patients, and no incidences of grade 4 or 5 TRAEs were
observed.
Tislelizumab combinations (NCT04577963 & NCT04716634) : - In
the second half of 2021, we plan to initiate 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, to be followed by a further study in additional
solid tumor types. In addition, a Phase II study in China and Korea
for fruquintinib in combination with tislelizumab was initiated and
being led by BeiGene, for the treatment of advanced or metastatic,
unresectable gastric cancer, CRC or NSCLC.
Fruquintinib - Exploratory development:
We are conducting multiple Phase Ib expansion cohorts in the
U.S. to explore fruquintinib in CRC and breast cancer. In China,
there are about 20 investigator-initiated studies in various solid
tumor settings being conducted.
HMPL-689
HMPL-689 is a novel, highly selective oral inhibitor targeting
the isoform PI3K , a key component in the B-cell receptor signaling
pathway. HMPL-689's pharmacokinetic properties have been found to
be favorable with good oral absorption, moderate tissue
distribution and low clearance in preclinical studies. We also
expect that HMPL-689 will have 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 Indolent non-Hodgkin's lymphoma China Ib Ongoing NCT03128164
monotherapy
============ ===================================== ======= ====================== =================== ===========
HMPL-689 Relapsed/refractory follicular China II registration-intent Ongoing NCT04849351
monotherapy lymphoma and marginal zone lymphoma
============ ===================================== ======= ====================== =================== ===========
HMPL-689 Indolent non-Hodgkin's U.S./ I/Ib Ongoing. To support NCT03786926
monotherapy lymphoma Europe U.S. regulatory
interaction in
H2 2021
============ ===================================== ======= ====================== =================== ===========
HMPL-689 Indolent non-Hodgkin's U.S./ II registration-intent In planning N/A
monotherapy lymphoma Europe
============ ===================================== ======= ====================== =================== ===========
Phase II registration-intent trial in follicular lymphoma and
marginal zone lymphoma (NCT04849351) : In April 2021, we commenced
a registration-intent Phase II trial in China in patients with
relapsed or refractory follicular lymphoma and marginal zone
lymphoma, two subtypes of non-Hodgkin's lymphoma. The multi-center,
single-arm, open-label study is to evaluate the efficacy and safety
of HMPL-689 once a day oral monotherapy in approximately 100
patients with relapsed/refractory follicular lymphoma and
approximately 80 patients with relapsed/refractory marginal zone
lymphoma. The primary endpoint is ORR, with secondary endpoints
including CR(72) rate, PFS, time to response and duration of
response. The trial is being conducted in over 35 sites in
China.
The initiation of the Phase II trial is based on the highly
promising preliminary results from the Phase Ib expansion study
ongoing in China (NCT03128164), which has shown thus far that
HMPL-689 was well tolerated, exhibiting dose-proportional
pharmacokinetics, and single-agent clinical activity in
relapsed/refractory B-cell lymphoma patients.
Global development of HMPL-689 (NCT03786926) : 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 engage
with regulatory authorities in the second half of 2021 to discuss
potential registration pathways.
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 Completed. Supports NCT03951623
initiation of Phase
III in H2 2021
==================== ======================= ========= ===== ====================== ===========
HMPL-523 monotherapy Indolent non-Hodgkin's Australia Ib Active, not recruiting NCT02503033
lymphoma
==================== ======================= ========= ===== ====================== ===========
HMPL-523 monotherapy Indolent non-Hodgkin's U.S. I/Ib Ongoing NCT03779113
lymphoma / Europe
==================== ======================= ========= ===== ====================== ===========
HMPL-523 monotherapy Multiple sub-types China I/Ib Enrollment completed NCT02857998
of B-cell malignancies
==================== ======================= ========= ===== ====================== ===========
HMPL-523 monotherapy AIHA China II In planning N/A
==================== ======================= ========= ===== ====================== ===========
Phase I/Ib dose escalation study of HMPL-523 in patients with
ITP (NCT03951623) - In mid-2019, we initiated a Phase I study in
patients with ITP, an autoimmune disorder characterized by low
platelet count and an increased bleeding risk. Both dose escalation
and dose expansion stages are now complete, with planning and
preparation for a Phase III trial in China now underway. We plan to
submit the results of the Phase Ib study for presentation in late
2021.
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.
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 and we will soon
establish our RP2D.
Phase II dose escalation study of HMPL-523 in patients with AIHA
(in planning) - following the encouraging data seen in our Phase Ib
study in the autoimmune disorder ITP, we intend to initiate a Phase
II study in patients with AIHA, another autoimmune disorder.
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)
===================== =================== ===== ===== =================== ===========
HMPL-453 combinations Multiple China I IND submitted (June N/A
2021)
===================== =================== ===== ===== =================== ===========
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 who 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.
We submitted a new IND to the NMPA in late June 2021, with the
intention to initiate studies in combination with other anti-cancer
therapies in China in late 2021 or early 2022.
HMPL-306
HMPL-306 is a novel small molecule dual-inhibitor of enzymes
IDH1 and IDH2 enzymes. IDH1 and IDH2 mutations have been implicated
as drivers of certain hematological malignancies, gliomas and solid
tumors, particularly among acute myeloid leukemia patients. We
currently retain all rights to HMPL-306 worldwide. The table below
shows a summary of the clinical studies for HMPL-306.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
==================== ========================== ===== ===== =========== ===========
HMPL-306 monotherapy Hematological malignancies China I Ongoing NCT04272957
==================== ========================== ===== ===== =========== ===========
HMPL-306 monotherapy Solid tumors U.S. I Ongoing NCT04762602
==================== ========================== ===== ===== =========== ===========
HMPL-306 monotherapy Hematological malignancies U.S. I Ongoing NCT04764474
==================== ========================== ===== ===== =========== ===========
Our Phase I study in China has been initiated at multiple sites
and we anticipate establishing the RP2D during 2021.
In March 2021, we initiated our Phase I development in the U.S.
and Europe. These two trials are multi-center studies to evaluate
the safety, tolerability, pharmacokinetics, pharmacodynamics and
preliminary efficacy of HMPL-306, in either solid tumors, including
but not limited to gliomas, chondrosarcomas or cholangiocarcinomas;
or in IDHm+ hematological malignancies. Dose escalation in both
trials is expected to be completed in the second half of 2021, to
be followed by the start of the expansion phase.
HMPL-295
HMPL-295 is a novel ERK inhibitor. ERK is a downstream component
of the RAS-RAF-MEK-ERK signaling cascade (MAPK pathway). This is
our first of multiple candidates in discovery targeting the MAPK
pathway.
RAS-MAPK pathway is dysregulated in human diseases, particularly
cancer, in which mutations or non-genetic events hyper-activate the
pathway in more than 50% of cancers. Activating mutations in RAS
genes occur in more than 30% of cancers. RAS and RAF predict worse
clinical prognosis in a wide variety of tumor types, mediate
resistance to targeted therapies, and decrease the response to the
approved standards of care, namely, targeted therapy and
immunotherapy. In 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
such as these.
We currently retain all rights to HMPL-295 worldwide. The table
below shows a summary of the clinical studies for HMPL-295.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
==================== =================== ===== ===== =========== ===========
HMPL-295 monotherapy Solid tumors China Ib/II Ongoing NCT04908046
==================== =================== ===== ===== =========== ===========
The clinical trial is to evaluate safety, tolerability,
pharmacokinetics and preliminary efficacy of HMPL-295, and to
determine the maximum tolerated dose and RP2D in patients with
advanced malignant solid tumors. Following the initial dose
escalation stage, additional patients will be enrolled at the RP2D
to further evaluate its safety and the preliminary efficacy of
HMPL-295. The first patient was dosed in July 2021.
HMPL-760
HMPL-760 is a novel third-generation BTK inhibitor and our
eleventh in-house discovered small molecule oncology drug
candidate. It is a reversible, non-covalent inhibitor of BTK
designed to act against both the wild type and C481S mutant
enzymes, a key resistance mechanism for first-generation BTK
inhibitors such as IMBRUVICA(R) . We currently retain all rights to
HMPL-760 worldwide.
We submitted IND applications with both the U.S. FDA and China
NMPA in late June 2021 and the U.S. IND is allowed to proceed. We
plan to initiate Phase I trials in patients with advanced solid
tumors in late 2021 or early 2022.
Discovery Research & Preclinical Development
We strive to create differentiated novel oncology and immunology
treatments with global potential. These include furthering both
small molecule and biologic therapies which address aberrant
genetic drivers and cancer cell metabolism, modulate tumor immune
microenvironment and target immune cell checkpoints. In addition to
our eleven clinical-stage assets, we have two more novel oncology
drug candidates in preclinical stage. HMPL--653 is a potent and
selective CSF-1R inhibitor designed to target CSF-1R driven tumors
and potentially solid tumors in an adjuvant setting. HMPL-A83 is an
anti-CD47 monoclonal antibody with unique epitope and high
affinity, which has demonstrated a very high efficacy in animal
tumor models and much reduced effect on red blood cells compared to
other such antibodies. HMPL-A83 may have potential for combinations
with other HUTCHMED assets such as HMPL-689 or HMPL-760. We retain
all global rights to these pre-clinical drug candidates and are
targeting dual U.S. and China IND submissions for some of them
during 2021.
Beyond these clinical and preclinical stage candidates, we
continue to conduct research into discovering new types of drug
candidates, including among others, small molecules addressing
cancer-related apoptosis, cell signaling, epigenetics and protein
translation; biologic drug candidates including bispecific
antibodies; and novel technologies including antibody-drug
conjugates and heterobifunctional small molecules.
Immunology Collaboration with Inmagene
In January 2021, we entered into a strategic partnership with
Inmagene, a clinical development stage company with a focus on
immunological diseases, to further develop four novel preclinical
drug candidates we discovered for the potential treatment of
multiple immunological diseases. Funded by Inmagene, we will work
together to move the drug candidates towards IND. If successful,
Inmagene will then advance the drug candidates through global
clinical development.
OTHER VENTURES
Our Other Ventures include drug marketing and distribution
platforms covering about 320 cities and towns in China with around
4,700 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 the first six months of 2021, our Other Ventures delivered
encouraging growth with consolidated revenues up 27% (18% at CER)
to $114.5 million (H1-20: $90.4m). Consolidated net income
attributable to HUTCHMED from our Other Ventures increased by 17%
(8% at CER) to $35.7 million (H1-20: $30.4m), excluding one-time
land compensation of $5.6 million before withholding tax (H1-20:
nil).
SHPL(73) : Our own-brand prescription drugs business, operated
through our non-consolidated joint venture SHPL grew sales by 20%
(10% at CER) to $180.4 million (H1-20: $150.7m). This sales growth
and favorable product mix led to an increase of 19% (10% at CER) in
net income attributable to HUTCHMED to $28.6 million (H1-20:
$24.0m).
The SHPL operation is large-scale, with a commercial team of
over 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 Good Manufacturing Practice-certified
factory holds 74 drug product manufacturing licenses and is
operated by over 510 manufacturing staff .
SXBX(74) pill : SHPL's main product is SXBX pill, an oral
vasodilator prescription therapy for coronary artery disease. SXBX
pill is the third largest botanical prescription drug in this
indication in China, with a national market share in January to
April 2021 of 19.6% (2020: 18.2%) . Sales increased by 22% (12% at
CER) to $167.0 million during the first half of 2021 (H1-20:
$137.0m).
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(75) : 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 29%
(19% at CER) to $96.2 million in the first half of 2021 (H1-20:
$74.4m).
Hutchison Sinopharm has a dedicated team of about 130 commercial
staff focused on two key areas of operation. First, a team that
markets third-party prescription drug products directly to over 540
public and private hospitals in the Shanghai region and through a
network of about 50 distributors to cover all other provinces in
China. Second, a team that markets HUTCHMED's science-based infant
nutrition products through a network of over 30,000 promoters in
China.
HBYS: Our own-brand OTC drugs business, operated through our
non-consolidated joint venture HBYS grew sales 24% (14% at CER) to
$153.7 million (H1-20: $124.1m), mainly as a result of a resumption
of distribution channels after COVID-19. This growth combined with
the land compensation led to an increase of 127% (118% at CER) in
net income attributable to HUTCHMED to $11.5 million (H1-20:
$5.0m).
HBYS disposal: In March 2021, we entered into an agreement with
GL Capital to sell our entire investment in HBYS for an aggregate
consideration of approximately $169 million. The divestment of our
effective 40% share in this non-core business, valued at about 22
times of HBYS' adjusted 2020 net profit attributable to HUTCHMED
equity holders of $7.7 million(53) . A deposit of approximately
$15.9 million paid upon the signing of the agreement will be
credited against the proceeds due on completion of the disposal.
The disposal is subject to regulatory approval in China and is
expected to be completed in the second half of 2021. The sale of
this non-core consumer health products business will enable us to
focus our resources on our Oncology/Immunology novel therapies.
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 the first six months of 2021, dividends
of $42.1 million (H1-20: $35.3m) were paid from these joint
ventures to the HUTCHMED Group level with aggregate dividends
received since inception of over $350 million.
Christian Hogg
Chief Executive Officer
July 28, 2021
USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATION
In addition to financial information prepared in accordance with
U.S. GAAP, this announcement also contains certain non-GAAP
financial measures based on management's view of performance
including:
-- Adjusted Group net cash flows excluding financing activities
-- CER
Management uses such measures internally for planning and
forecasting purposes and to measure the HUTCHMED Group's overall
performance. We believe these adjusted financial measures provide
useful and meaningful information to us and investors because they
enhance investors' understanding of the continuing operating
performance of our business and facilitate the comparison of
performance between past and future periods. These adjusted
financial measures are non-GAAP measures and should be considered
in addition to, but not as a substitute for, the information
prepared in accordance with U.S. GAAP. Other companies may define
these measures in different ways.
Adjusted Group net cash flows excluding financing activities: We
include the change in short-term investments for the period to the
change in cash and cash equivalents for the period, and exclude the
net cash generated from financing activities for the period to
derive our adjusted Group net cash flows excluding financing
activities. We believe the presentation of adjusted Group net cash
flows excluding financing activities provides useful and meaningful
information about the change in our cash resources excluding those
from financing activities which may present significant
period-to-period differences.
CER: We remove the effects of currency movements from
period-to-period comparisons by retranslating the current period's
performance at previous period's foreign currency exchange rates.
Because we have significant operations in China, the RMB to U.S.
dollar exchange rates used for translation may have a significant
effect on our reported results. We believe the presentation at CER
provides useful and meaningful information because it facilitates
period-to-period comparisons of our results and increases the
transparency of our underlying performance.
Reconciliation of GAAP change in cash and cash equivalents and
short-term investments to Adjusted Group net cash flows excluding
financing activities:
$'millions H1 2021 H1 2020
---------------------------------------------------------- ------- -------
Cash and cash equivalents and short-term investments
at end of period 950.4 281.0
Excludes: Cash and cash equivalents and short-term
investments at beginning of period (435.2) (217.2)
Excludes: Net cash generated from financing activities
for the period (578.3) (96.3)
----------------------------------------------------------- ------- -------
Adjusted Group net cash flows excluding financing
activities (63.1) (32.5)
----------------------------------------------------------- ------- -------
Reconciliation of GAAP revenues, net income attributable to
HUTCHMED CER:
$'millions (except
%) Six Months Ended Change Amount Change %
----------------------------- ------------------ ------------------------ ------------------------
June 30, June 30, Exch-ange Exch-ange
2021 2020 Actual CER effect Actual CER effect
----------------------------- -------- -------- ------ ----- --------- ------ ----- ---------
Consolidated revenues
Oncology/Immunology 42.9 16.4 26.5 24.9 1.6 161% 152% 9%
Other Ventures^ 114.5 90.4 24.1 16.0 8.1 27% 18% 9%
^ Includes:
- Hutchison Sinopharm
- prescription
drugs 96.2 74.4 21.8 14.2 7.6 29% 19% 10%
Non-consolidated
joint venture revenues 334.1 274.8 59.3 32.7 26.6 22% 12% 10%
- SHPL 180.4 150.7 29.7 15.3 14.4 20% 10% 10%
- HBYS 153.7 124.1 29.6 17.4 12.2 24% 14% 10%
Consolidated net
income attributable
to HUTCHMED
Other Ventures 41.3 30.4 10.9 8.0 2.9 36% 27% 9%
- Consolidated entities 1.2 1.4 (0.2) (0.3) 0.1 -15% -18% 3%
- Equity investees 40.1 29.0 11.1 8.3 2.8 38% 29% 9%
- SHPL 28.6 24.0 4.6 2.4 2.2 19% 10% 9%
- HBYS 11.5 5.0 6.5 5.9 0.6 127% 118% 9%
Excluding one-time
HBYS land compensation
gain
Other Ventures 35.7 30.4 5.3 2.4 2.9 17% 8% 9%
* Consolidated entities 1.2 1.4 (0.2) (0.3) 0.1 -15% -18% 3%
* Equity investees 34.5 29.0 5.5 2.7 2.8 19% 9% 10%
- SHPL 28.6 24.0 4.6 2.4 2.2 19% 10% 9%
- HBYS 5.9 5.0 0.9 0.3 0.6 15% 6% 9%
Land compensation
gain
- HBYS 5.6 - 5.6 5.6 - - - -
Revenue of Key Product
of SHPL
- SXBX pill 167.0 137.0 30.0 16.5 13.5 22% 12% 10%
GROUP CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
To date, we have taken a multi-source approach to fund our
operations, including through cash flows generated and dividend
payments from our Oncology/Immunology and Other Ventures
operations, service and milestone and upfront payments from our
collaboration partners, bank borrowings, investments from third
parties, proceeds from our listings on various stock exchanges and
follow-on offerings.
Our Oncology/Immunology operations have historically not
generated significant profits or have operated at a net loss, as
creating potential global first-in-class or best-in-class drug
candidates requires a significant investment of resources over a
prolonged period of time. As such, we incurred net losses of $102.4
million for the six months ended June 30, 2021 and net losses of
$49.7 million for the six months ended June 30, 2020.
As of June 30, 2021, we had cash and cash equivalents and
short-term investments of $950.4 million and unutilized bank
facilities of $69.4 million. As of June 30, 2021, we had $26.9
million in bank loans. On July 15, 2021, we received total gross
proceeds of approximately $80.2 million from the full exercise of
the over-allotment option of the Global Offering.
Certain of our subsidiaries and non-consolidated joint ventures,
including those registered as wholly foreign-owned enterprises in
China, are required to set aside at least 10.0% of their after-tax
profits to their general reserves until such reserves reach 50.0%
of their registered capital. There is no fixed percentage of
after-tax profit required to be set aside for the general reserves
for our PRC joint ventures. Profit appropriated to the reserve
funds for our subsidiaries and non-consolidated joint ventures
incorporated in the PRC was approximately $8,000 and $17,000 for
the six months ended June 30, 2021 and 2020, respectively. In
addition, as a result of PRC regulations restricting dividend
distributions from such reserve funds and from a company's
registered capital, our PRC subsidiaries are restricted in their
ability to transfer a certain amount of their net assets to us as
cash dividends, loans or advances. This restricted portion amounted
to $0.2 million as of June 30, 2021.
In addition, our non-consolidated joint ventures held an
aggregate of $133.8 million in cash and cash equivalents and no
bank borrowings as of June 30, 2021. These cash and cash
equivalents are only accessible by us through dividend payments
from these joint ventures. The level of dividends declared by these
joint ventures is subject to agreement each year between us and our
joint venture partners based on the profitability and working
capital needs of the joint ventures.
CASH FLOW
Six Months Ended June 30,
---------------------------
2021 2020
------------- ------------
(in $'000)
Cash Flow Data:
Net cash used in operating activities (71,319) (28,376)
Net cash used in investing activities (155,888) (139,121)
Net cash generated from financing activities 578,331 96,343
------------- ------------
Net increase/(decrease) in cash and cash equivalents 351,124 (71,154)
Effect of exchange rate changes 687 (63)
Cash and cash equivalents at beginning of the period 235,630 121,157
------------- ------------
Cash and cash equivalents at end of the period 587,441 49,940
============= ============
Net Cash used in Operating Activities
Net cash used in operating activities was $28.4 million for the
six months ended June 30, 2020, compared to net cash used in
operating activities of $71.3 million for the six months ended June
30, 2021. The net change of $42.9 million was primarily
attributable to an increase in research and development expenses of
$49.1 million from $74.0 million for the six months ended June 30,
2020 to $123.1 million for the six months ended June 30, 2021.
Net Cash used in Investing Activities
Net cash used in investing activities was $139.1 million for the
six months ended June 30, 2020, compared to net cash used in
investing activities of $155.9 million for the six months ended
June 30, 2021. The net change of $16.8 million was primarily
attributable to an increase in net deposits in short-term
investments of $28.4 million from $135.1 million for the six months
ended June 30, 2020 to $163.5 million for the six months ended June
30, 2021. The net change was offset by our receipt of a $15.9
million deposit in March 2021 in connection with our planned
divestment of HBYS.
Net Cash generated from Financing Activities
Net cash generated from financing activities was $96.3 million
for the six months ended June 30, 2020, compared to net cash
generated from financing activities of $578.3 million for the six
months ended June 30, 2021. The net change of $482.0 million was
primarily attributable to total net proceeds of $614.9 million from
the Global Offering in June 2021 and private placement in April
2021 as compared to $110.5 million from follow-on offering in the
United States in January and February 2020. This net change was
offset by purchases of treasury shares of $26.8 million for the six
months ended June 30, 2021 as compared to $12.9 million for the six
months ended June 30, 2020 and dividends paid to a non-controlling
shareholder of a subsidiary of $9.3 million for the six months
ended June 30, 2021 as compared to $1.2 million for the six months
ended June 30, 2020.
LOAN FACILITIES
In November 2018, our subsidiary renewed a three-year revolving
loan facility with HSBC(76) . The facility amount of this loan is
HK$234.0 million ($30.0 million) with an interest rate at HIBOR(77)
plus 0.85% per annum. This credit facility is guaranteed by us and
includes certain financial covenant requirements. No amount was
drawn from this loan facility as of June 30, 2021.
In May 2019, our subsidiary entered into additional credit
facility arrangements with HSBC for the provision of unsecured
credit facilities in the aggregate amount of HK$400.0 million
($51.3 million). The 3-year credit facilities include (i) a
HK$210.0 million ($26.9 million) term loan facility and (ii) a
HK$190.0 million ($24.4 million) revolving loan facility, both with
an interest rate at HIBOR plus 0.85% per annum. These credit
facilities are guaranteed by us and include certain financial
covenant requirements.
In October 2019, we drew down HK$210.0 million ($26.9 million)
from the term loan facility and as of June 30, 2021, no amount was
drawn from the revolving loan facility.
In August 2020, our subsidiary entered into a 24-month revolving
credit facility with Deutsche Bank AG(78) in the amount of HK$117.0
million ($15.0 million) with an interest rate at HIBOR plus 4.5%
per annum. This revolving facility is guaranteed by us and includes
certain financial covenant requirements. As of June 30, 2021, no
amount was drawn from the revolving loan facility.
Our non-consolidated joint ventures SHPL and HBYS had no bank
borrowings outstanding as of June 30, 2021.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table sets forth our contractual obligations as of
June 30, 2021. Our purchase obligations relate to property, plant
and equipment that are contracted for but not yet paid. Our lease
obligations primarily comprise future aggregate minimum lease
payments in respect of various factories, warehouse, offices and
other assets under non-cancellable lease agreements.
Payment Due by Period (in $'000)
-----------------------------------------------------------------
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
------ ---------------- --------- --------- -----------------
Bank borrowings 26,923 26,923 - - -
Interest on bank borrowings 226 226 - - -
Purchase obligations 44,793 37,870 5,433 1,490 -
Lease obligations 10,351 4,150 5,250 577 374
------ ---------------- --------- --------- -----------------
82,293 69,169 10,683 2,067 374
====== ================ ========= ========= =================
SHPL
The following table sets forth the contractual obligations of
our non-consolidated joint venture SHPL as of June 30, 2021. SHPL's
purchase obligations comprise capital commitments for property,
plant and equipment contracted for but not yet paid. SHPL's lease
obligations primarily comprise future aggregate minimum lease
payments in respect of various offices under non-cancellable lease
agreements.
Payment Due by Period (in $'000)
----------------------------------------------------------------
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
----- ---------------- --------- --------- -----------------
Purchase obligations 1,061 1,061 - - -
Lease obligations 3,092 652 1,503 937 -
----- ---------------- --------- --------- -----------------
4,153 1,713 1,503 937 -
===== ================ ========= ========= =================
HBYS
The following table sets forth the contractual obligations of
our non-consolidated joint venture HBYS as of June 30, 2021. HBYS'
purchase obligations comprise capital commitments for property,
plant and equipment contracted for but not yet paid. HBYS' lease
obligations primarily comprise future aggregate minimum lease
payments in respect of various warehouses under non-cancellable
lease agreements.
Payment Due by Period (in $'000)
------------------------------------------------------------------
Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
----- ---------------- --------- --------- -----------------
Purchase obligations 1,593 1,593 - - -
Lease obligations 614 577 37 - -
----- ---------------- --------- --------- -----------------
2,207 2,170 37 - -
===== ================ ========= ========= =================
FOREIGN EXCHANGE RISK
Most of our revenues and expenses are denominated in renminbi,
and our consolidated financial statements are presented in U.S.
dollars. We do not believe that we currently have any significant
direct foreign exchange risk and have not used any derivative
financial instruments to hedge our exposure to such risk. In
general, our exposure to foreign exchange risks is limited.
The value of the renminbi against the U.S. dollar and other
currencies may fluctuate and is affected by, among other things,
changes in China's political and economic conditions. The
conversion of renminbi into foreign currencies, including U.S.
dollars, has been based on rates set by the PBOC(79) . If we decide
to convert renminbi into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or ADSs or for other
business purposes, appreciation of the U.S. dollar against the
renminbi would have a negative effect on the U.S. dollar amounts
available to us. On the other hand, if we need to convert U.S.
dollars into renminbi for business purposes, e.g. capital
expenditures and working capital, appreciation of the renminbi
against the U.S. dollar would have a negative effect on the
renminbi amounts we would receive from the conversion. In addition,
for certain cash and bank balances deposited with banks in the PRC,
if we decided to convert them into foreign currencies, they are
subject to the rules and regulations of foreign exchange control
promulgated by the PRC government.
CREDIT RISK
Substantially all of our bank deposits are in major financial
institutions, which we believe are of high credit quality. We limit
the amount of credit exposure to any single financial institution.
We make periodic assessments of the recoverability of trade and
other receivables and amounts due from related parties. Our
historical experience in collection of receivables falls within the
recorded allowances, and we believe that we have made adequate
provision for uncollectible receivables.
INTEREST RATE RISK
We have no significant interest-bearing assets except for bank
deposits. Our exposure to changes in interest rates is mainly
attributable to our bank borrowings, which bear interest at
floating interest rates and expose us to cash flow interest rate
risk. We have not used any interest rate swaps to hedge our
exposure to interest rate risk. We have performed sensitivity
analysis for the effects on our results for the period from changes
in interest rates on floating rate borrowings. The sensitivity to
interest rates used is based on the market forecasts available at
the end of the reporting period and under the economic environments
in which we operate, with other variables held constant. According
to the analysis, the impact on our net loss of a 1.0% interest rate
shift would be a maximum increase/decrease of $0.1 million for the
six months ended June 30, 2021.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and we do not
currently have, any material off-balance sheet arrangements.
CONTINGENT LIABILITIES
Other than as disclosed in note 11 to the interim financial
statements, the Group does not have any other significant
commitments or contingent liabilities.
GEARING RATIO
The gearing ratio of the Group, which was calculated by dividing
total interest-bearing loans by total equity, was 2.7% as of June
30, 2021, a decrease from 5.2% as of December 31, 2020. The
decrease was primarily attributable to the increase in equity due
to the Global Offering on HKEX.
SIGNIFICANT INVESTMENTS HELD
Except for our investment in a non-consolidated joint venture
SHPL with a carrying value of $66.5 million including details below
and those as disclosed in note 7 to the interim financial
statements, we did not hold any other significant investments in
the equity of any other companies as of June 30, 2021.
Place of establishment Nominal Value of Equity Interest
and operations Registered Capital Attributable to the Group Principal activities
-------------------------- -------------------------- -------------------------- --------------------------
(in RMB'000)
PRC 229,000 50% Manufacture and
distribution of
prescription drug
products
Our own-brand prescription drugs business under Other Ventures
is operated through SHPL. Dividends received from SHPL for the six
months ended June 30, 2021 were $42.1 million.
FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS
Note 11 to the interim financial statements discloses our
planned expenditures on capital assets as of June 30, 2021. At this
date there were no other plans to incur material expenditures on
additional investments or capital assets.
MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES
AND JOINT VENTURES
During the six months ended June 30, 2021, except for the HBYS
disposal as disclosed in note 7 to the interim financial
statements, we did not have any other material acquisitions and
disposals of subsidiaries, associates and joint ventures.
PLEDGE OF ASSETS
As of June 30, 2021, we did not have any pledge of assets (as of
December 31, 2020: nil).
INFLATION
In recent years, China has not experienced significant
inflation, and thus inflation has not had a material impact on our
results of operations. According to the National Bureau of
Statistics of China, the Consumer Price Index in China increased by
1.9%, 4.5%, 0.2% and 1.1% in 2018, 2019, 2020 and June 2021,
respectively. Although we have not been materially affected by
inflation in the past, we can provide no assurance that we will not
be affected in the future by higher rates of inflation in
China.
INTERIM DIVID
The Board does not recommend any interim dividend for the six
months ended June 30, 2021.
OTHER INFORMATION
CORPORATE STRATEGY
The primary objective of the Company and its subsidiaries (the
"Group") is to become a fully integrated global leader in the
discovery, development and commercialization of targeted therapies
and immunotherapies for the treatment of cancer and immunological
diseases. The strategy of the Company is to leverage the highly
specialized expertise of the drug discovery division, known as the
Oncology/Immunology operations, to develop and expand its drug
candidate portfolio for the global market while also building on
the first-mover advantage in the development and launch of novel
cancer drugs in China. The Chairman's Statement and the Operations
Review contain discussions and analyses of the Group's
opportunities, performance and the basis on which the Group
generates or preserves value over the longer term and the basis on
which the group will execute its strategy for delivering this
objective.
HUMAN RESOURCES
As at June 30, 2021, the Group employed approximately 1,530
(December 31, 2020: 1,230) full time staff members. Staff costs
during the six months ended June 30, 2021, including directors'
emoluments, totaled $85.5 million (H1-2020 $43.3 million).
The Group fully recognizes the importance of high-quality human
resources in sustaining market leadership. Salary and benefits are
kept at competitive levels, while individual performance is
rewarded within the general framework of the salary, bonus and
incentive system of the Group, which is reviewed annually.
Employees are provided with a wide range of benefits that include
medical coverage, provident funds and retirement plans, and
long-service awards. The Group stresses the importance of staff
development and provides training programs on an ongoing basis.
Employees are also encouraged to play an active role in community
care activities.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") RESPONSIBILITY
The Group is committed to the long-term sustainability of its
businesses and the communities in which it conducts business. The
Group supports the proposition that enterprises should give back to
society and bear social responsibility. It encourages its business
units to contribute to the welfare of the communities in which it
operates. Moreover, the Group's business is anchored to the purpose
of serving medical needs of the public and distributing its drugs
to those in need. While advancing breakthroughs with its novel
drugs, the Group ensures every drug product is marketed and
manufactured in a high quality, safe, traceable and affordable
manner. Furthermore, the Group is continually improving its
business practices and employee training in such best practices. It
has adopted a proactive approach to ESG responsibility and has
established a Sustainability Committee comprising four Directors to
spearhead the ESG initiatives and activities of the Group and to
enhance the Group's ESG efforts.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the period from January 1, 2021 to June 30, 2021 (the
"Reporting Period"):
(a) on April 14, 2021, the Company issued 16,393,445 ordinary
shares to Pachytene Limited (an investment vehicle wholly-owned by
Baring Private Equity Asia Fund VII) at the price of $30.50 per
American depositary shares pursuant to a private placement; and
(b) on June 30, 2021, the Company issued 104,000,000 ordinary
shares at the price of HK$40.10 per ordinary share pursuant to the
Global Offering. After the Reporting Period, following the exercise
of an over-allotment option granted by the Company in the context
of the Global Offering, the Company issued an additional 15,600,000
ordinary shares at the same price per ordinary share on July 15,
2021. Details of the Global Offering and the over-allotment option
are set out in the prospectus issued by the Company dated June 18,
2021.
Save as disclosed above, neither the Company nor any of its
subsidiaries has purchased, sold or redeemed any of the listed
securities of the Company during the Reporting Period.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Company strives to attain and maintain high standards of
corporate governance best suited to the needs and interests of the
Company and its subsidiaries as it believes that an effective
corporate governance framework is fundamental to promoting and
safeguarding interests of shareholders and other stakeholders and
enhancing shareholder value. Accordingly, the Company has adopted
and applied corporate governance principles and practices that
emphasize a quality board of Directors (the "Board"), effective
risk management and internal control systems, stringent disclosure
practices, transparency and accountability. It is, in addition,
committed to continuously improving these practices and inculcating
an ethical corporate culture.
Prior to the Global Offering, the Company has adopted the
principles of the UK Corporate Governance Code ("UK CG Code")
applicable to companies listed on the premium segment of the London
Stock Exchange main market, despite its shares being traded on the
AIM market and hence not required to comply with the UK CG Code.
Please refer to the Corporate Governance Report contained in the
2020 annual report for compliance details in 2020.
Following the listing of the Company on the HKEX on June 30,
2021, the Board has adopted the Corporate Governance Code ("HK CG
Code") as set out in Appendix 14 to the Rules Governing the Listing
of Securities on HKEX in replacement of the UK CG Code and was in
compliance with all code provisions of the HK CG Code. The Company
will disclose the compliance of the HK CG Code in future
announcements and financial reports.
COMPLIANCE WITH THE SHARE DEALINGS CODE FOR SECURITIES
TRANSACTIONS BY DIRECTORS
The Board has adopted the Code on Dealings in Shares on terms no
less exacting than the required standard set out in the Model Code
for Securities Transactions by Directors of Listed Issuers set out
in Appendix 10 to the Hong Kong Listing Rules as the protocol
regulating Directors' dealings in securities of the Company. In
response to specific enquiries made, all Directors have confirmed
their compliance with the required standards set out in such code
regarding their securities transactions throughout their tenure
during the six months ended June 30, 2021.
USE OF NET PROCEEDS
On June 30, 2021, the Company issued 104,000,000 new ordinary
shares for total gross proceeds of approximately $534.7 million
from the listing of the Company's ordinary shares on HKEX.
On July 15, 2021, the over-allotment option was fully exercised
and the Company issued an aggregate of 15,600,000 ordinary shares
for total gross proceeds of approximately $80.2 million.
The intended use of total net proceeds of approximately $585
million from the Global Offering for the purposes and in the
amounts (adjusted on pro rata basis based on the actual net
proceeds) as disclosed in the prospectus of the Company dated June
18, 2021 is as below (the "Prospectus"):
Expected Timeline for
Percentage of Total Net Utilization of Proceeds
Use of Proceeds Proceeds Approximate Amount (note)
----------------------------- ---------------------------- ------------------ ----------------------------
($'millions)
Advance our late-stage
clinical programs for
savolitinib, surufatinib,
fruquintinib, HMPL-689
and HMPL-523 through
registration trials and Expected to be fully
potential NDA submissions 50% 293 utilized by end of 2023
Support further
proof-of-concept studies and
fund the continued expansion
of our product portfolio
in cancer and immunological
diseases through internal
research, including the
development
cost of early-clinical and
preclinical-stage pipeline Expected to be fully
drug candidates 10% 59 utilized by end of 2023
Further strengthen our
integrated capabilities
across commercialization,
clinical and regulatory Expected to be fully
and manufacturing 20% 117 utilized by end of 2023
Fund potential global
business development and
strategic acquisition
opportunities to complement
our internal research and
development activities and
enhance our current drug Expected to be fully
candidate pipeline 15% 87 utilized by end of 2023
Working capital, expanding
internal capabilities
globally and in China and
general corporate Expected to be fully
purposes 5% 29 utilized by end of 2022
---------------------------- ------------------
100% 585
============================ ==================
Note: The expected timeline was based on the Company's
estimation of future market conditions and business operations, and
remains subject to change based on actual market conditions and
business needs.
As of June 30, 2021, due to the proximity in time between
completion of the Global Offering and the period-end date the net
proceeds from the Global Offering had not been used. The proceeds
are intended to be used for the purposes as disclosed in the
Prospectus.
REVIEW OF INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The interim unaudited condensed consolidated financial
statements of the Group for the six months ended June 30, 2021 have
been reviewed by the auditor of the Company,
PricewaterhouseCoopers, in accordance with Hong Kong Standard on
Review Engagements 2410 - "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Hong Kong Institute of Certified Public Accountants for the Hong
Kong filing. The interim unaudited condensed consolidated financial
statements of the Group for the six months ended June 30, 2021 have
also been reviewed by the Audit Committee of the Company.
IMPORTANT EVENTS AFTER THE REPORTING DATE
Save as disclosed above, no important events affecting the
Company occurred since June 30, 2021 and up to the date of this
announcement.
PUBLICATION OF INTERIM RESULTS AND INTERIM REPORT
This interim results announcement is published on the websites
of HKEX ( www.hkexnews.hk ), the U.S. Securities and Exchange
Commission ( www.sec.gov/edgar ), the London Stock Exchange (
www.londonstockexchange.com ) and the Company ( www.hutch --
med.com ). The interim report of the Group for the six months ended
June 30, 2021 will be published on the websites of HKEX and the
Company, and dispatched to the Company's shareholders in due
course.
REFERENCES AND ABBREVIATIONS
1 ELUNATE(R) In-market sales = total sales to third parties provided by Eli Lilly.
2 Gross proceeds of $534.7 million raised through the sale of
new ordinary shares on June 30, 2021, and additional gross proceeds
of $80.2 million raised via the sale of additional new ordinary
shares from the full exercise of the over-allotment option on July
15, 2021.
3 HKEX = The Stock Exchange of Hong Kong Limited.
4 NDA = New Drug Application.
5 FDA = Food and Drug Administration.
6 EMA = European Medicines Agency.
7 TKI = Tyrosine kinase inhibitor.
8 IDH = Isocitrate dehydrogenase.
9 ERK = Extracellular signal-regulated kinase.
10 BTK = Bruton's tyrosine kinase.
11 In-market sales = total sales to third parties provided by
Eli Lilly (ELUNATE(R)) and HUTCHMED (SULANDA(R)).
12 AstraZeneca = AstraZeneca PLC and its wholly owned
subsidiary, AstraZeneca AB (publ).
13 IPO = Initial public offering.
14 OTC = Over the counter.
15 R&D = Research and development.
16 NET = Neuroendocrine tumors.
17 NMPA = National Medical Products Administration.
18 MET = Mesenchymal epithelial transition receptor.
19 NSCLC = Non-small cell lung cancer.
20 PDUFA = Prescription Drug User Fee Act.
21 MAA = Marketing Authorisation Application.
22 VEGFR = Vascular endothelial growth factor receptor.
23 FGFR = Fibroblast growth factor receptor.
24 CSF-1R = Colony stimulating factor-1 receptor.
25 BeiGene = BeiGene, Ltd.
26 PD-1 = Programmed Cell Death Protein-1.
27 NEC = Neuroendocrine carcinoma.
28 Junshi = Shanghai Junshi Biosciences Co., Ltd.
29 ASCO = American Society of Clinical Oncology.
30 CgA = Chromogranin A.
31 PFS = Progression-free survival.
32 BTC = Biliary tract cancer.
33 Innovent = Innovent Biologics, Inc.
34 CRC = Colorectal cancer.
35 HCC = Hepatocellular carcinoma.
36 RCC = Renal cell cancer.
37 Genor = Genor Biopharma Co. Ltd.
38 PD-L1 = Programmed death-ligand 1.
39 PRCC = Papillary renal cell carcinoma.
40 WCLC = World Conference on Lung Cancer.
41 EGFR = Epidermal growth factor receptor.
42 PI3K = Phosphoinositide 3-kinase delta.
43 RP2D = Recommended Phase II dose.
44 Syk = Spleen tyrosine kinase.
45 ITP = Immune thrombocytopenia purpura.
46 CDE = Center for Drug Evaluation.
47 AIHA = Autoimmune hemolytic anemia.
48 IND = Investigational New Drug application.
49 MAPK pathway = RAS-RAF-MEK-ERK signaling cascade.
50 119,600,000 new ordinary shares represented by 104,000,000
new ordinary shares issued on June 30, 2021 (raising net proceeds
of $508 million) and additional 15,600,000 new ordinary shares from
the full exercise of the over-allotment option on July 15, 2021
(raising net proceeds of $77 million).
51 HBYS = Hutchison Whampoa Guangzhou Baiyunshan Chinese
Medicine Company Limited.
52 GL Capital = GL Mountrose Investment Two Limited, a company
controlled and managed by GL Capital Group.
53 HBYS' adjusted net profit attributable to HUTCHMED equity
holders (after 20% non-controlling interest) in 2020 of $7.7
million is a non-GAAP measure which is 40% of HBYS' 2020 net profit
of $91.3 million less $72.0 million gain on land compensation, net
of tax.
54 Inmagene = Inmagene Biopharmaceuticals.
55 GAAP = Generally Accepted Accounting Principles.
56 BPEA = Baring Private Equity Asia.
57 We also report changes in performance at constant exchange
rate ("CER") which is a non-GAAP measure. Please refer to "Use of
Non-GAAP Financial Measures and Reconciliation" below for further
information relevant to the interpretation of these financial
measures and reconciliations of these financial measures to the
most comparable GAAP measures.
58 Lilly = Eli Lilly and Company.
59 SG&A = Selling, general and administrative.
60 Other items = Includes other income, net of other expenses,
income tax expense, equity in earnings of equity investees, net of
tax and net income attributable to non-controlling interests.
61 ADS = American depositary share.
62 EGFRm = Epidermal growth factor receptor mutation.
63 QD = Once daily dose.
64 BID = Twice daily dose.
65 NENs = Neuroendocrine neoplasms.
66 SCLC = Small cell lung cancer.
67 GI = Gastrointestinal.
68 TRAE = Treatment related adverse event.
69 TN = Triple-negative.
70 HR+ = Hormone receptor-positive.
71 Her2 = Human epidermal growth factor receptor 2.
72 CR = Complete response.
73 SHPL = Shanghai Hutchison Pharmaceuticals Limited.
74 SXBX = She Xiang Bao Xin.
75 Hutchison Sinopharm = Hutchison Whampoa Sinopharm
Pharmaceuticals (Shanghai) Company Limited.
76 HSBC = The Hongkong and Shanghai Banking Corporation
Limited
77 HIBOR = Hong Kong Interbank Offered Rate
78 Deutsche Bank AG = Deutsche Bank AG, Hong Kong Branch
79 PBOC = People's Bank of China
CONSOLIDATED FINANCIAL STATEMENTS
HUTCHMED (China) Limited
Condensed Consolidated Balance Sheets
(in US$'000, except share data)
June 30, December 31,
Note 2021 2020
----- ------------ -------------
Assets (Unaudited)
Current assets
Cash and cash equivalents 3 587,441 235,630
Short-term investments 4 363,007 199,546
Accounts receivable-third parties 5 57,953 46,648
Accounts receivable-related parties 16 925 1,222
Other receivables, prepayments and deposits 32,118 26,786
Amounts due from related parties 16 24,225 1,142
Inventories 6 25,505 19,766
-------------
Total current assets 1,091,174 530,740
Property, plant and equipment 29,168 24,170
Right-of-use assets 9,523 8,016
Investments in equity investees 7 118,316 139,505
Other non-current assets 24,708 21,687
------------ -------------
Total assets 1,272,889 724,118
============ =============
Liabilities and shareholders' equity
Current liabilities
Accounts payable 8 28,513 31,612
Other payables, accruals and advance receipts 9 181,610 120,882
Bank borrowings 10 26,883 -
Lease liabilities 3,852 2,785
Other current liabilities 6,857 3,118
Total current liabilities 247,715 158,397
Lease liabilities 5,957 6,064
Bank borrowings 10 - 26,861
Other non-current liabilities 5,522 13,847
------------ -------------
Total liabilities 259,194 205,169
Commitments and contingencies 11
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000 shares authorized;
848,515,660 and 727,722,215
shares issued at June 30, 2021 and December 31, 2020 respectively 12 84,851 72,772
Additional paid-in capital 1,412,607 822,458
Accumulated losses (517,996) (415,591)
Accumulated other comprehensive income 5,333 4,477
------------ -------------
Total Company's shareholders' equity 984,795 484,116
Non-controlling interests 28,900 34,833
------------ -------------
Total shareholders' equity 1,013,695 518,949
------------ -------------
Total liabilities and shareholders' equity 1,272,889 724,118
============ =============
The accompanying notes are an integral part of these interim
unaudited condensed consolidated financial statements.
HUTCHMED (China) Limited
Condensed Consolidated Statements of Operations
(Unaudited, in US$'000, except share and per share data)
Six Months Ended June 30,
----------------------------
Note 2021 2020
----- ------------- -------------
Revenues
Goods -third parties 129,148 94,889
* related parties 16 2,311 2,084
Services -commercialization-third parties 15,030 -
* collaboration research and development-third parties 4,795 7,507
* research and development-related parties 16 261 240
Other collaboration revenue
* royalties-third parties 5,817 2,045
Total revenues 14 157,362 106,765
------------- -------------
Operating expenses
Costs of goods-third parties (107,511) (82,186)
Costs of goods-related parties (1,673) (1,386)
Costs of services-commercialization-third parties (14,065) -
Research and development expenses 15 (123,050) (73,974)
Selling expenses (18,007) (5,673)
Administrative expenses (36,790) (21,711)
------------- -------------
Total operating expenses (301,096) (184,930)
------------- -------------
(143,734) (78,165)
Other income, net of other expenses 3,287 1,585
------------- -------------
Loss before income taxes and equity in earnings of equity investees (140,447) (76,580)
Income tax expense 17 (1,859) (2,032)
Equity in earnings of equity investees, net of tax 7 42,966 30,366
------------- -------------
Net loss (99,340) (48,246)
Less: Net income attributable to non-controlling interests (3,057) (1,448)
------------- -------------
Net loss attributable to the Company (102,397) (49,694)
============= =============
Losses per share attributable to the Company-basic and diluted (US$ per
share) 18 (0.14) (0.07)
Number of shares used in per share calculation-basic and diluted 18 729,239,181 685,285,841
The accompanying notes are an integral part of these interim
unaudited condensed consolidated financial statements.
HUTCHMED (China) Limited
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited, in US$'000)
Six Months Ended June 30,
----------------------------
2021 2020
-------------- ------------
Net loss (99,340) (48,246)
Other comprehensive income/(loss)
Foreign currency translation gain/(loss) 1,084 (1,827)
-------------- ------------
Total comprehensive loss (98,256) (50,073)
Less: Comprehensive income attributable to non-controlling interests (3,285) (1,302)
-------------- ------------
Total comprehensive loss attributable to the Company (101,541) (51,375)
============== ============
The accompanying notes are an integral part of these interim
unaudited condensed consolidated financial statements.
HUTCHMED (China) Limited
Condensed Consolidated Statements of Changes in Shareholders'
Equity
(Unaudited, in US$'000, except share data in '000)
Accumulated Total
Ordinary Ordinary Additional Other Company's Non- Total
Shares Shares Paid-in Accumulated Comprehensive Shareholders' controlling Shareholders'
Number Value Capital Losses (Loss)/Income Equity Interests Equity
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at January 1,
2020 666,906 66,691 514,904 (289,734) (3,849) 288,012 24,891 312,903
Net
(loss)/income - - - (49,694) - (49,694) 1,448 (48,246)
Issuance in
relation
to public
offering 23,669 2,366 115,975 - - 118,341 - 118,341
Issuance costs - - (8,033) - - (8,033) - (8,033)
Share--based
compensation
Share options - - 3,001 - - 3,001 5 3,006
Long-term
incentive
plan ("LTIP") - - 5,217 - - 5,217 (4) 5,213
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
- - 8,218 - - 8,218 1 8,219
LTIP-treasury
shares
acquired and
held
by Trustee - - (12,904) - - (12,904) - (12,904)
Dividend
declared
to a
non-controlling
shareholder of
a
subsidiary - - - - - - (1,231) (1,231)
Purchase of
additional
interests in a
subsidiary
of an equity
investee
(Note 7) - - (52) (83) (4) (139) (35) (174)
Transfer between
reserves - - 17 (17) - - - -
Foreign currency
translation
adjustments - - - - (1,681) (1,681) (146) (1,827)
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at June 30,
2020 690,575 69,057 618,125 (339,528) (5,534) 342,120 24,928 367,048
========= ========= =========== ============ ============== ============== ============ ==============
As at January 1,
2021 727,722 72,772 822,458 (415,591) 4,477 484,116 34,833 518,949
Net
(loss)/income - - - (102,397) - (102,397) 3,057 (99,340)
Issuance in
relation
to public
offering 104,000 10,400 524,267 - - 534,667 - 534,667
Issuances in
relation
to private
investment
in public
equity
("PIPE") 16,393 1,639 98,361 - - 100,000 - 100,000
Issuance costs - - (26,952) - - (26,952) - (26,952)
Issuances in
relation
to share option
exercises 400 40 202 - - 242 - 242
Share-based
compensation
Share options - - 7,913 - - 7,913 12 7,925
LTIP - - 13,108 - - 13,108 26 13,134
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
- - 21,021 - - 21,021 38 21,059
LTIP-treasury
shares
acquired and
held
by Trustee - - (26,758) - - (26,758) - (26,758)
Dividend
declared
to a
non-controlling
shareholder of
a
subsidiary - - - - - - (9,256) (9,256)
Transfer between
reserves - - 8 (8) - - - -
Foreign currency
translation
adjustments - - - - 856 856 228 1,084
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at June 30,
2021 848,515 84,851 1,412,607 (517,996) 5,333 984,795 28,900 1,013,695
========= ========= =========== ============ ============== ============== ============ ==============
The accompanying notes are an integral part of these interim
unaudited condensed consolidated financial statements.
HUTCHMED (China) Limited
Condensed Consolidated Statements of Cash Flows
(Unaudited, in US$'000)
Six Months Ended June 30,
----------------------------
Note 2021 2020
----- ------------- -------------
Net cash used in operating activities 20 (71,319) (28,376)
------------- -------------
Investing activities
Purchases of property, plant and equipment (8,914) (4,058)
Deposits in short-term investments (412,961) (422,838)
Proceeds from short-term investments 249,500 287,775
Deposit received for divestment of an equity investee 9 15,912 -
Purchase of leasehold land (355) -
Refund of leasehold land deposit 930 -
Net cash used in investing activities (155,888) (139,121)
------------- -------------
Financing activities
Proceeds from issuance of ordinary shares 634,909 118,341
Purchases of treasury shares 13 (26,758) (12,904)
Dividends paid to a non-controlling shareholder of a subsidiary 16 (9,256) (1,231)
Repayment of loan to a non-controlling shareholder of a subsidiary 16 (579) -
Payment of issuance costs (19,985) (7,863)
------------- -------------
Net cash generated from financing activities 578,331 96,343
------------- -------------
Net increase/(decrease) in cash and cash equivalents 351,124 (71,154)
Effect of exchange rate changes on cash and cash equivalents 687 (63)
------------- -------------
351,811 (71,217)
Cash and cash equivalents
Cash and cash equivalents at beginning of period 235,630 121,157
------------- -------------
Cash and cash equivalents at end of period 587,441 49,940
============= =============
The accompanying notes are an integral part of these interim
unaudited condensed consolidated financial statements.
HUTCHMED (China) Limited
Notes to the Interim Unaudited Condensed Consolidated Financial
Statements
1. Organization and Nature of Business
HUTCHMED (China) Limited (formerly Hutchison China MediTech
Limited) (the "Company") and its subsidiaries (together the
"Group") are principally engaged in researching, developing,
manufacturing and marketing pharmaceutical products. The Group and
its equity investees have research and development facilities and
manufacturing plants in the People's Republic of China (the "PRC")
and sell their products mainly in the PRC, including Hong Kong. In
addition, the Group has established international operations in the
United States of America (the "U.S.") and Europe.
The Company's ordinary shares are listed on the Main Board of
The Stock Exchange of Hong Kong Limited ("HKEX") (listing completed
in June 2021) and the AIM market of the London Stock Exchange, and
its American depositary shares ("ADSs") are traded on the Nasdaq
Global Select Market.
Liquidity
As at June 30, 2021, the Group had accumulated losses of
US$517,996,000 primarily due to its spending in drug research and
development activities. The Group regularly monitors current and
expected liquidity requirements to ensure that it maintains
sufficient cash balances and adequate credit facilities to meet its
liquidity requirements in the short and long term. As at June 30,
2021, the Group had cash and cash equivalents of US$587,441,000,
short-term investments of US$363,007,000 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 six months ended June 30, 2021 and 2020 were
US$42,051,000 and US$35,321,000 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 condensed
consolidated financial statements on a going concern basis.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The interim unaudited condensed consolidated financial
statements have been prepared in conformity with generally accepted
accounting principles in the United States of America ("U.S. GAAP")
for interim financial information. Accordingly, they do not include
all of the information and footnotes required by U.S. GAAP for
complete financial statements. The interim unaudited condensed
consolidated financial statements have been prepared on the same
basis as the annual audited consolidated financial statements. In
the opinion of management, all adjustments, consisting of normal
recurring adjustments necessary for the fair statement of results
for the periods presented, have been included. The results of
operations of any interim period are not necessarily indicative of
the results of operations for the full year or any other interim
period.
The comparative year-end condensed balance sheet data was
derived from the annual audited consolidated financial statements,
but is condensed to the same degree as the interim condensed
balance sheet data.
The interim unaudited condensed consolidated financial
statements and related disclosures have been prepared with the
presumption that users have read or have access to the annual
audited consolidated financial statements for the preceding fiscal
year.
The preparation of interim unaudited condensed consolidated
financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the interim
unaudited condensed consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period.
Recent Accounting Pronouncements
Amendments that have been issued by the Financial Accounting
Standards Board or other standards-setting bodies that do not
require adoption until a future date are not expected to have a
material impact on the Group's condensed consolidated financial
statements.
3. Cash and Cash Equivalents
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Cash at bank and on hand (note (a)) 113,922 87,828
Bank deposits maturing in three months or
less (note (a)) 473,519 147,802
--------- -------------
587,441 235,630
========= =============
Denominated in:
U.S. dollar ("US$") (note (b)) 440,309 164,201
Renminbi ("RMB") (note (b)) 74,061 64,258
UK Pound Sterling ("GBP") (note (b)) 124 954
Hong Kong dollar ("HK$") 72,909 5,907
Euro 38 310
--------- -------------
587,441 235,630
========= =============
Notes:
(a) The weighted average effective interest rate on bank
deposits for the six months ended June 30, 2021 and the year ended
December 31, 2020 was 0.73% per annum and 1.12% 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.
4. Short-term Investments
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Bank deposits maturing over three months (note)
Denominated in:
US$ 358,776 187,961
RMB 1,154 612
HK$ 3,077 10,973
--------- -------------
363,007 199,546
========= =============
Note: The weighted average effective interest rate on bank
deposits for the six months ended June 30, 2021 and the year ended
December 31, 2020 was 0.26% per annum and 1.06% per annum
respectively (with maturities ranging from 91 to 180 days).
5. Accounts Receivable-Third Parties
Accounts receivable from contracts with customers, net of
allowance for credit losses, consisted of the following:
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Accounts receivable, gross 57,978 46,743
Allowance for credit losses (25) (95)
--------- -------------
Accounts receivable, net 57,953 46,648
========= =============
Substantially all accounts receivable are denominated in RMB,
US$ 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:
2021 2020
------- ------
(in US$'000)
As at January 1 95 16
Increase in allowance for credit losses 21 8
Decrease in allowance due to subsequent collection (92) (16)
Exchange difference 1 -
------- ------
As at June 30 25 8
======= ======
An aging analysis based on the relevant invoice dates is as
follows:
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Not later than 3 months 53,601 42,434
Between 3 months to 6 months 3,191 3,118
Between 6 months to 1 year 6 23
Later than 1 year 1,180 1,168
Account receivable, gross 57,978 46,743
========= =============
6. Inventories
Inventories, net of provision for excess and obsolete
inventories, consisted of the following:
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Raw materials 8,202 4,502
Finished goods 17,303 15,264
--------- -------------
25,505 19,766
========= =============
7. Investments in Equity Investees
Investments in equity investees consisted of the following:
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Hutchison Whampoa Guangzhou Baiyunshan Chinese
Medicine Company Limited ("HBYS") (note) 51,425 59,712
Shanghai Hutchison Pharmaceuticals Limited
("SHPL") 66,465 79,408
Other 426 385
--------- -------------
118,316 139,505
========= =============
Note: In March 2021, the Group entered into a sale and purchase
agreement (the "SPA") with a third party (the "Buyer") to sell its
entire investment in HBYS with closing subject to regulatory
approval in the PRC. As part of the divestment, the Group is
entitled to (a) cash consideration of US$159.1 million, which
includes US$15.9 million deposit collected upon the signing of the
SPA and the remainder due upon closing; and (b) US$52.3 million
related to distributions of prior year undistributed profits and a
land bonus payment. The amounts to be received under (a) and (b)
aggregate to US$211.4 million of which the amounts attributable to
the Company are US$169.1 million.
The equity investees are private companies and there are no
quoted market prices available for their shares.
Summarized financial information for the significant equity
investees HBYS and SHPL, both under Other Ventures segment, is as
follows:
(i) Summarized balance sheets
HBYS SHPL
-------------------- --------------------
December December
June 30, 31, June 30, 31,
2021 2020 2021 2020
--------- --------- --------- ---------
(in US$'000)
Current assets 194,035 177,888 161,508 175,965
Non-current assets 93,361 95,731 93,211 93,361
Current liabilities (154,871) (137,179) (119,821) (109,873)
Non-current liabilities (28,673) (16,034) (8,123) (6,739)
--------- --------- --------- ---------
Net assets 103,852 120, 406 126,775 152,714
Non-controlling interests (1,002) (9 82 ) - -
--------- --------- --------- ---------
102,850 119,424 126,775 152,714
========= ========= ========= =========
(ii) Summarized statements of operations
HBYS (note (a)) SHPL
----------------- ----------------
Six Months Ended June 30,
-----------------------------------
2021 2020 2021 2020
-------- ------- ------- -------
(in US$'000)
Revenue 153,689 124,098 180,413 150,703
======== ======= ======= =======
Gross profit 82,251 60,794 138,979 112,363
======== ======= ======= =======
Interest income 66 81 751 396
======== ======= ======= =======
Finance cost - (5) - -
======== ======= ======= =======
Profit before taxation 33,397 14,792 67,108 55,470
Income tax expense (note (b)) (4,807) (2,386) (9,764) (7,485)
-------- ------- ------- -------
Net income 28,590 12,406 57,344 47,985
Non-controlling interests (14) 207 - -
-------- ------- ------- -------
Net income attributable to the
shareholders of equity investee 28,576 12,613 57,344 47,985
======== ======= ======= =======
Notes:
(a) In June 2020, HBYS entered into an agreement with the
government to return the land use right for a plot of land in
Guangzhou to the government (the "Land Compensation Agreement") for
cash consideration which aggregated to RMB679.5 million
(approximately US$103.1 million). In November 2020, HBYS completed
all material obligations as stipulated in the Land Compensation
Agreement and recognized land compensation of RMB569.2 million
(approximately US$86.1 million).
In June 2021, HBYS received a completion confirmation from the
government and became entitled to an additional land compensation
bonus of RMB110.3 million (approximately US$17.0 million). HBYS
recorded a gain before tax of RMB107.6 million (approximately
US$16.6 million) after deducting costs of RMB2.7 million
(approximately US$0.4 million).
(b) The main entities within each of the HBYS and SHPL groups
have been granted the High and New Technology Enterprise 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 six months ended June 30, 2021 on this
basis.
For the six months ended June 30, 2021 and 2020, other equity
investees had net income of approximately US$79,000 and US$135,000
respectively.
(iii) Reconciliation of summarized financial information
Reconciliation of the summarized financial information presented
to the carrying amount of investments in equity investees is as
follows:
HBYS SHPL
---------------- ------------------
2021 2020 2021 2020
-------- ------ -------- --------
(in US$'000)
Opening net assets after non-controlling interests as at January 1 119,424 44,541 152,714 146,759
Net income attributable to the shareholders of equity investee 28,576 12,613 57,344 47,985
Purchase of additional interests in a subsidiary of an equity investee
(note) - (347) - -
Dividends declared (46,538) - (84,103) (42,308)
Other comprehensive income/(loss) 1,388 (477) 820 (1,499)
-------- ------ -------- --------
Closing net assets after non-controlling interests as at June 30 102,850 56,330 126,775 150,937
======== ====== ======== ========
Group's share of net assets 51,425 28,165 63,387 75,468
Goodwill - - 3,078 2,821
Carrying amount of investments as at June 30 51,425 28,165 66,465 78,289
======== ====== ======== ========
Note: During the six months ended June 30, 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:
June 30,
2021
-------------
(in US$'000)
Property, plant and equipment
Contracted but not provided for 2,654
=============
8. Accounts Payable
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Accounts payable 28,513 31,612
========= =============
Substantially all accounts payable are denominated in RMB and
US$ and due within one year from the end of the reporting period.
The carrying values of accounts payable approximate their fair
values due to their short-term maturities.
An aging analysis based on the relevant invoice dates is as
follows:
December
June 30, 31,
2021 2020
--------- ---------
(in US$'000)
Not later than 3 months 22,935 26,270
Between 3 months to 6 months 3,557 3,364
Between 6 months to 1 year 813 782
Later than 1 year 1,208 1,196
28,513 31,612
========= =========
9. Other Payables, Accruals and Advance Receipts
Other payables, accruals and advance receipts consisted of the
following:
December
June 30, 31,
2021 2020
--------- ---------
(in US$'000)
Accrued salaries and benefits 28,527 21,982
Accrued research and development expenses 86,477 72,697
Accrued selling and marketing expenses 7,800 5,747
Accrued administrative and other general expenses 12,587 10,319
Accrued issuance costs 8,678 1,352
Deferred government grants 6,889 374
Deposits 1,636 1,408
Deposit received for divestment of HBYS (Note 7) 15,912 -
Others 13,104 7,003
--------- ---------
181,610 120,882
========= =========
10. Bank Borrowings
Bank borrowings consisted of the following:
December
June 30, 31,
2021 2020
--------- ---------
(in US$'000)
Current 26,883 -
Non-current - 26,861
--------- ---------
26,883 26,861
========= =========
The weighted average interest rate for outstanding bank
borrowings for the six months ended June 30, 2021 and the year
ended December 31, 2020 was 1.10% per annum and 1.89% per annum
respectively. The carrying amounts of the Group's bank borrowings
were denominated in HK$.
(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 June 30, 2021
and December 31, 2020 , 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 June 30, 2021
and December 31, 2020 , no amount has been drawn from the revolving
loan facility.
(ii) 2--year revolving loan facility
In August 2020, the Group through its subsidiary, entered into a
2-year revolving loan facility with a bank in the amount of
HK$117,000,000 (US$15,000,000) with an interest rate at HIBOR plus
4.5% per annum. This credit facility is guaranteed by the Company.
As at June 30, 2021 and December 31, 2020, no amount has been drawn
from the revolving loan facility.
The Group's bank borrowings are repayable as from the dates
indicated as follows:
June 30, December 31,
2021 2020
--------- -------------
(in US$'000)
Not later than 1 year 26,923 -
Between 1 to 2 years - 26,923
26,923 26,923
========= =============
As at June 30, 2021 and December 31, 2020, the Group had
unutilized bank borrowing facilities of HK$541,000,000
(US$69,359,000).
11. Commitments and Contingencies
The Group had the following capital commitments:
June 30,
2021
-------------
(in US$'000)
Property, plant and equipment
Contracted but not provided for 44,793
=============
Capital commitments for property, plant and equipment are mainly
for construction of a factory in Shanghai. The Group does not have
any other significant commitments or contingencies.
12. Ordinary Shares
As at June 30, 2021, the Company is authorized to issue
1,500,000,000 ordinary shares.
On April 14, 2021, the Company issued 16,393,445 ordinary shares
to a third party for gross proceeds of US$100.0 million through a
PIPE. Issuance costs totaled US$0.1 million.
On June 30, 2021, the Company issued 104,000,000 ordinary shares
in a public offering on the HKEX for gross proceeds of US$534.7
million. Issuance costs totaled US$26.9 million.
In connection with the public offering on the HKEX, the Company
also granted an over-allotment option. Refer to Note 22.
Each ordinary share is entitled to one vote. The holders of
ordinary shares are also entitled to receive dividends whenever
funds are legally available and when declared by the Board of
Directors of the Company.
13. Share-based Compensation
(i) Share--based Compensation of the Company
The Company conditionally adopted a share option scheme on June
4, 2005 (as amended on March 21, 2007) and such scheme has a term
of 10 years. It expired in 2016 and no further share options can be
granted. Another share option scheme was conditionally adopted on
April 24, 2015 (the "Hutchmed Share Option Scheme"). Pursuant to
the Hutchmed Share Option Scheme, the Board of Directors of the
Company may, at its discretion, offer any employees and directors
(including Executive and Non-executive Directors but excluding
Independent Non-executive Directors) of the Company, holding
companies of the Company and any of their subsidiaries or
affiliates, and subsidiaries or affiliates of the Company share
options to subscribe for shares of the Company.
As at June 30, 2021, the aggregate number of shares issuable
under the Hutchmed Share Option Scheme was 50,613,268 ordinary
shares and the aggregate number of shares issuable under the prior
share option scheme which expired in 2016 was 716,180 ordinary
shares. The Company will issue new shares to satisfy share option
exercises. Additionally, the number of shares authorized but
unissued was 651,484,340 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
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
=====================
Granted 8,279,900 4.05
Exercised (400,000) 0.44
Cancelled (817,800) 4.31
Expired (42,400) 4.33
---------------------
Outstanding at June
30, 2021 36,180,690 3.57 7.42 72,650
=====================
Vested and
exercisable at
December 31, 2020 11,529,280 2.73 4.57 21,864
Vested and
exercisable at June
30, 2021 15,374,075 3.11 5.25 37,879
In estimating the fair value of share options granted, the
following assumptions were used in the Polynomial model for awards
granted in the periods indicated:
Six Months Ended June 30, 2021 Year Ended December 31, 2020
------------------------------- -----------------------------
Weighted average grant date fair value of share
options (in GBP per share) 1.51 1.40
Significant inputs into the valuation model
(weighted average):
Exercise price (in GBP per share) 4.05 3.71
Share price at effective date of grant (in GBP
per share) 4.01 3.71
Expected volatility (note (a)) 40.8% 42.6%
Risk-free interest rate (note (b)) 1.68% 0.59%
Contractual life of share options (in years) 10 10
Expected dividend yield (note (c)) 0% 0%
Notes:
(a) The Company calculated its expected volatility with
reference to the historical volatility prior to the issuances of
share options.
(b) The risk-free interest rates reference the U.S. Treasury
yield curves because the Company's ADSs 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:
Six Months Ended June 30,
------------------------------
2021 2020
--------------- -----------
(in US$'000)
Cash received from share option exercises 242 -
Total intrinsic value of share option exercises 2,012 -
The Group recognizes compensation expense on a graded vesting
approach over the requisite service period. The following table
presents share-based compensation expense for share options:
Six Months Ended June 30,
----------------------------
2021 2020
------------- -------------
(in US$'000)
Research and development expenses 4,101 1,697
Selling and administrative expenses 3,749 1,237
Cost of revenues 75 72
------------- -------------
7,925 3,006
============= =============
As at June 30, 2021, the total unrecognized compensation cost
was US$26,901,000, and will be recognized on a graded vesting
approach over the weighted average remaining service period of 3.30
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 ADSs (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, the achievement of clinical and regulatory milestones and
equity financings. 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
---------------- ------------------------------ ---------------- -------------------
April 20, 2020 5.3 2019 note (d)
April 20, 2020 37.4 2020 note (a)
April 20, 2020 1.9 note (b) note (b)
April 20, 2020 0.2 note (c) note (c)
August 12, 2020 2.1 2020 note (a)
August 12, 2020 0.3 note (b) note (b)
March 26, 2021 57.3 2021 note (a)
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 ADSs of the
Company) held by the Trustee were as follows:
Number of
treasury Cost
shares (in US$'000)
---------- --------------
As at December 31, 2019 941,310 6,079
Purchased 3,281,920 12,904
Vested (712,555) (4,828)
---------- --------------
As at December 31, 2020 3,510,675 14,155
Purchased 4,821,680 26,758
Vested (271,595) (1,416)
---------- --------------
As at June 30, 2021 8,060,760 39,497
========== ==============
For the six months ended June 30, 2021 and 2020, US$2,532,000
and US$ 430,000 of the LTIP awards were forfeited respectively.
The following table presents the share-based compensation
expenses recognized for LTIP awards:
Six Months Ended June 30,
----------------------------
2021 2020
-------------- ------------
(in US$'000)
Research and development expenses 6,725 3,145
Selling and administrative expenses 3,542 756
Cost of revenues 165 60
-------------- ------------
10,432 3,961
============== ============
Recorded with a corresponding credit to:
Liability 5,814 2,840
Additional paid-in capital 4,618 1,121
-------------- ------------
10,432 3,961
============== ============
For the six months ended June 30, 2021 and 2020, US$8,516,000
and US$4,092,000 were reclassified from liability to additional
paid-in capital respectively upon LTIP awards reaching the
determination date. As at June 30, 2021 and December 31, 2020,
US$4,387,000 and US$7,089,000 were recorded as liabilities
respectively for LTIP awards prior to the determination date.
As at June 30, 2021, the total unrecognized compensation cost
was approximately US$65,893,000, which considers expected
performance targets and the amount expected to vest, and will be
recognized over the requisite periods.
14. Revenues
The following table presents disaggregated revenue, with sales
of goods recognized at a point-in-time and provision of services
recognized over time:
Six Months Ended June 30, 2021
-----------------------------------------------
Oncology/Immunology Other Ventures Total
-------------------- --------------- --------
(in US$'000)
Goods-Marketed Products 16,948 - 16,948
-Distribution - 114,511 114,511
Services-Commercialization-Marketed
Products 15,030 - 15,030
* Collaboration Research and Development 4,795 - 4,795
-Research and Development 261 - 261
Royalties 5,817 - 5,817
-------------------- --------------- --------
42,851 114,511 157,362
==================== =============== ========
Third parties 42,590 112,200 154,790
Related parties (Note 16(i)) 261 2,311 2,572
-------------------- --------------- --------
42,851 114,511 157,362
==================== =============== ========
Six Months Ended June 30, 2020
-----------------------------------------------
Oncology/Immunology Other Ventures Total
-------------------- --------------- --------
(in US$'000)
Goods-Marketed Products 6,600 - 6,600
-Distribution - 90,373 90,373
Services-Collaboration Research
and Development 7,507 - 7,507
-Research and Development 240 - 240
Royalties 2,045 - 2,045
-------------------- --------------- --------
16,392 90,373 106,765
==================== =============== ========
Third parties 16,152 88,289 104,441
Related parties (Note 16(i)) 240 2,084 2,324
-------------------- --------------- --------
16,392 90,373 106,765
==================== =============== ========
15. Research and Development Expenses
Research and development expenses are summarized as follows:
Six Months Ended June 30,
----------------------------
2021 2020
-------------- ------------
(in US$'000)
Clinical trial related costs 72,721 40,986
Personnel compensation and related costs 41,056 29,356
Other research and development expenses 9,273 3,632
-------------- ------------
123,050 73,974
============== ============
The Group has entered into multiple collaborative arrangements
under ASC 808 to evaluate the combination of the Group's drug
compounds with the collaboration partners' drug compounds. For the
six months ended June 30, 2021 and 2020, the Group has incurred
research and development expenses of US$6,146,000 and US$2,360,000
respectively, related to such collaborative arrangements.
16. Significant Transactions with Related Parties and
Non-Controlling Shareholders of Subsidiaries
The Group has the following significant transactions with
related parties and non-controlling shareholders of subsidiaries,
which were carried out in the normal course of business at terms
determined and agreed by the relevant parties:
(i) Transactions with related parties:
Six Months Ended June 30,
---------------------------
2021 2020
------------- ------------
(in US$'000)
Sales to:
Indirect subsidiaries of CK Hutchison Holdings Limited ("CK Hutchison") 2,311 2,084
============= ============
Revenue from research and development services from:
An equity investee 261 240
============= ============
Purchases from:
Equity investees 1,954 1,887
============= ============
Rendering of marketing services from:
Indirect subsidiaries of CK Hutchison 186 152
Rendering of management service s from:
An indirect subsidiary of CK Hutchison 485 478
============= ============
(ii) Balances with related parties included in:
June 30, December 31,
2021 2020
-------- ------------
(in US$'000)
Accounts receivable-related parties
Indirect subsidiaries of CK Hutchison (note (a)) 664 1,222
An equity investee (note (a)) 261 -
-------- ------------
925 1,222
Amounts due from related parties
Equity investees (note (a) and (b)) 24,225 1,142
======== ============
Amounts due to a related party
An indirect subsidiary of CK Hutchison (note (c)) 428 401
======== ============
Other deferred income
An equity investee (note (d)) 841 950
======== ============
Notes:
(a) Balances with related parties are unsecured, repayable on
demand and interest-free. The carrying values of balances with
related parties approximate their fair values due to their
short-term maturities.
(b) As at June 30, 2021 and December 31, 2020, the Group had
dividend receivables from an equity investee of US$23,077,000 and
nil respectively.
(c) Amounts due to an indirect subsidiary of CK Hutchison are
unsecured, repayable on demand and interest-bearing if not settled
within one month.
(d) Other deferred income represents amounts recognized from
granting of promotion and marketing rights.
(iii) Transactions with non--controlling shareholders of
subsidiaries:
Six Months Ended June 30,
---------------------------
2021 2020
------------- ------------
(in US$'000)
Sales 20,144 16,784
============= ============
Purchases 7,211 6,625
============= ============
Dividend paid 9,256 1,231
============= ============
(iv) Balances with non--controlling shareholders of subsidiaries
included in:
December
June 30, 31,
2021 2020
-------- --------
(in US$'000)
Accounts receivable 9,051 6,184
Accounts payable 5,835 4,856
======== ========
Other non-current liabilities
Loan - 579
======== ========
17. Income Taxes
Six Months Ended June 30,
----------------------------
2021 2020
------------- -------------
(in US$'000)
Current tax
HK 226 232
PRC 2,184 48
U.S. and others 231 530
------------- -------------
Total current tax 2,641 810
Deferred income tax (782) 1,222
------------- -------------
Income tax expense 1,859 2,032
============= =============
The reconciliation of the Group's reported income tax expense to
the theoretical tax amount that would arise using the tax rate of
the Company against the Group's loss before income taxes and equity
in earnings of equity investees is as follows:
Six Months Ended June 30,
----------------------------
2021 2020
-------------- ------------
(in US$'000)
Loss before income taxes and equity in earnings of equity investees (140,447) (76,580)
============== ============
Tax calculated at the statutory tax rate of the Company (23,174) (12,636)
Tax effects of:
Different tax rates applicable in different jurisdictions 3,585 1,431
Tax valuation allowance 28,634 16,178
Preferential tax rate difference (253) (119)
Preferential tax deduction and credits (11,288) (4,678)
Expenses not deductible for tax purposes 3,034 1,618
Utilization of previously unrecognized tax losses (864) (152)
Withholding tax on undistributed earnings of PRC entities 2,360 1,513
Income not subject to tax (436) (552)
Others 261 (571)
Income tax expense 1,859 2,032
============== ============
18. Losses Per Share
(i) Basic losses per share
Basic losses per share is calculated by dividing the net loss
attributable to the Company by the weighted average number of
outstanding ordinary shares in issue during the period. Treasury
shares held by the Trustee are excluded from the weighted average
number of outstanding ordinary shares in issue for purposes of
calculating basic losses per share.
Six Months Ended June 30,
---------------------------
2021 2020
------------- ------------
Weighted average number of outstanding ordinary shares in issue 729,239,181 685,285,841
============= ============
Net loss attributable to the Company (US$'000) (102,397) (49,694)
Losses per share attributable to the Company (US$ per share) (0.14) (0.07)
(ii) Diluted losses per share
Diluted losses per share is calculated by dividing net loss
attributable to the Company by the weighted average number of
outstanding ordinary shares in issue and dilutive ordinary share
equivalents outstanding during the period. Dilutive ordinary share
equivalents include shares issuable upon the exercise or settlement
of share options, LTIP awards and warrants issued by the Company
using the treasury stock method.
For the six months ended June 30, 2021 and 2020, 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 six months ended June
30, 2021 and 2020.
19. Segment Reporting
The Group's operating segments are as follows:
(i) Oncology/Immunology: focuses on discovering, developing, and
commercializing targeted therapies and immunotherapies for the
treatment of cancer and immunological diseases. Oncology/Immunology
is further segregated into two core business areas:
(a) R&D: comprises research and development activities
covering drug discovery, development, manufacturing and regulatory
functions as well as administrative activities to support research
and development operations; and
(b) Marketed Products: comprises the sales, marketing,
manufacture and distribution of drugs developed from research and
development activities.
(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.
The segment information is as follows:
Six Months Ended June 30, 2021
------------------------------------------------------------------------------------------
Oncology/Immunology
------------------------------------------------------
Marketed Other
R&D Products Ventures
------------------------------- --------- ---------
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
-------- --------- ---------- --------- ---------- --------- ------------ ---------
(in US$'000)
Revenue from
external
customers 5,056 - 5,056 37,795 42,851 114,511 - 157,362
-------- --------- ---------- --------- ---------- ---------
Interest income 523 2 525 - 525 145 361 1,031
Equity in
earnings
of equity
investees,
net of tax 40 - 40 - 40 42,926 - 42,966
Segment operating
(loss)/profit (69,961) (62,341) (132,302) 4,707 (127,595) 44,663 (14,307) (97,239)
Interest expense - - - - - - 242 242
Income tax
expense/(credit) 109 (1,492) (1,383) 571 (812) 265 2,406 1,859
Net (loss)/income
attributable
to the Company (69,911) (60,699) (130,610) 3,650 (126,960) 41,263 (16,700) (102,397)
Depreciation/
amortization 3,198 67 3,265 - 3,265 160 97 3,522
Additions to
non-current
assets (other
than financial
instruments
and deferred
tax assets) 10,183 466 10,649 - 10,649 632 66 11,347
June 30, 2021
Oncology/Immunology
Marketed Other
R&D Products Ventures
----------
U.S.
PRC and Others Subtotal PRC Subtotal PRC Unallocated Total
--------- --------- --------- ---------- ------------ ---------
(in US$'000)
Total assets 143,099 7,751 150,850 24,942 175,792 215,563 881,534 1,272,889
Property,
plant
and
equipment 27,160 853 28,013 - 28,013 713 442 29,168
Right-of-use
assets 4,455 1,284 5,739 - 5,739 2,686 1,098 9,523
Leasehold
land 13,092 - 13,092 - 13,092 - - 13,092
Goodwill - - - - - 3,332 - 3,332
Other
intangible
asset - - - - - 194 - 194
Investments
in equity
investees 426 - 426 - 426 117,890 - 118,316
Six Months Ended June 30, 2020
Oncology/Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from
external
customers 7,747 - 7,747 8,645 16,392 90,373 - 106,765
Interest
income 114 - 114 - 114 71 1,732 1,917
Equity in
earnings
of equity
investees,
net of tax 68 - 68 - 68 30,298 - 30,366
Segment
operating
(loss)/profit (53,454) (19,923) (73,377) 5,048 (68,329) 32,300 (9,674) (45,703)
Interest
expense - - - - - - 511 511
Income tax
expense 167 145 312 - 312 156 1,564 2,032
Net
(loss)/income
attributable
to the
Company (53,590) (20,018) (73,608) 5,035 (68,573) 30,438 (11,559) (49,694)
Depreciation/
amortization 2,629 58 2,687 - 2,687 141 95 2,923
Additions to
non-current
assets (other
than
financial
instruments
and deferred
tax assets) 4,241 21 4,262 - 4,262 140 13 4,415
December 31, 2020
Oncology/Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
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
Revenue from external customers is after elimination of
inter-segment sales. Sales between segments are carried out at
mutually agreed terms. The amount eliminated attributable to sales
between PRC and U.S. and others under the Oncology/Immunology
segment was US$14,837,000 and US$6,554,000 for the six months ended
June 30, 2021 and 2020 respectively.
There was one customer under Oncology/Immunology segment (with
revenue of US$30,981,000) and one customer under Other Ventures
segment (with aggregate revenue of US$20,144,000), which accounted
for over 10% of the Group's revenue for the six months ended June
30, 2021. There was one customer under Oncology/Immunology segment
(with revenue of US$10,846,000) and one customer under Other
Ventures segment (with revenue of US$16,784,000), which accounted
for over 10% of the Group's revenue for the six months ended June
30, 2020.
Unallocated expenses mainly represent corporate expenses which
include corporate employee benefit expenses and the relevant
share-based compensation expenses. Unallocated assets mainly
comprise cash and cash equivalents and short-term investments.
A reconciliation of segment operating loss to net loss is as
follows:
Six Months Ended June 30,
2021 2020
(in US$'000)
Segment operating loss (97,239) (45,703)
Interest expense (242) (511)
Income tax expense (1,859) (2,032)
Net loss (99,340) (48,246)
20. Note to Condensed Consolidated Statements of Cash Flows
Reconciliation of net loss for the period to net cash used in
operating activities:
Six Months Ended June 30,
2021 2020
(in US$'000)
Net loss (99,340) (48,246)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 3,522 2,923
Share-based compensation expense-share options 7,925 3,006
Share-based compensation expense-LTIP 10,432 3,961
Equity in earnings of equity investees, net of tax (42,966) (30,366)
Dividends received from equity investees 42,051 35,321
Changes in right-of-use assets (1,468) 205
Other adjustments (2,464) (740)
Changes in working capital
Accounts receivable-third parties (11,234) (3,205)
Inventories (5,669) 1,171
Accounts payable (3,099) 1,910
Other payables, accruals and advance receipts 33,836 7,313
Lease liabilities 902 (334)
Other changes in working capital (3,747) (1,295)
Total changes in working capital 10,989 5,560
Net cash used in operating activities (71,319) (28,376)
21. 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
confidential legal proceedings in 2019 in order to seek damages. As
at June 30, 2021, the legal proceedings are still in progress.
Accordingly, no adjustment has been made to Seroquel-related
balances as at June 30, 2021, including accounts receivable,
long-term prepayment, accounts payable and other payables of US$1.2
million, US$0.8 million, US$1.0 million and US$1.3 million
respectively.
22. Subsequent Events
The Group evaluated subsequent events through July 28, 2021,
which is the date when the interim unaudited condensed consolidated
financial statements were issued.
On July 12, 2021, the over-allotment option in connection with
the Company's public offering on the HKEX was exercised in full.
The Company issued 15,600,000 ordinary shares at an exercise price
of HK$40.10 per ordinary shares for gross proceeds of US$80.2
million.
23. Reconciliation between U.S. GAAP and International Financial
Reporting Standards
These interim unaudited condensed consolidated financial
statements are prepared in accordance with U.S. GAAP, which differ
in certain respects from International Financial Reporting
Standards ("IFRS"). The effects of material differences prepared
under U.S. GAAP and IFRS are as follows:
Six Months Ended June 30,
2021 2020
(in US$'000)
Reconciliation of net loss attributable to the Company in the condensed consolidated
statements
of operations
Net loss attributable to the Company as reported under U.S. GAAP (102,397) (49,694)
IFRS adjustments:
Leases amortization (note (a)) (65) 20
Issuance costs (note (b)) 724 -
Divestment of HBYS (note (c)) (7,421) -
Net loss attributable to the Company as reported under IFRS (109,159) (49,674)
June 30, December 31,
2021 2020
(in US$'000)
Reconciliation of total shareholders' equity in the condensed consolidated balance
sheets
Total shareholders' equity as reported under U.S. GAAP 1,013,695 518,949
IFRS adjustments:
Leases amortization (note (a)) (233) (162)
Issuance costs (note (b)) 860 860
Divestment of HBYS (note (c)) (9,269) -
LTIP classification (note (d)) 4,387 7,089
Total shareholders' equity as reported under IFRS 1,009,440 526,736
Notes:
(a) Leases amortization
Under U.S. GAAP, for operating leases, the amortization of
right-of-use assets and the interest expense element of lease
liabilities are recorded together as lease expenses, which results
in a straight-line recognition effect in the condensed consolidated
statements of operations.
Under IFRS, all leases are accounted for like finance leases
where right-of-use assets are generally depreciated on a
straight-line basis while lease liabilities are measured under the
effective interest method, which results in higher expenses at the
beginning of the lease term and lower expenses near the end of the
lease term. Accordingly, the reconciliation includes an expense
recognition difference in the interim unaudited condensed
consolidated statements of operations of less than US$0.1 million
for the six months ended June 30, 2021 and 2020 and a difference in
total shareholders' equity under IFRS of US$0.2 million as at June
30, 2021 and December 31, 2020.
(b) Issuance costs
Under U.S. GAAP and IFRS, there are differences in the criteria
for capitalization of issuance costs incurred in the offering of
equity securities. Accordingly, the reconciliation includes an
expense recognition difference in the interim unaudited condensed
consolidated statements of operations of US$0.7 million for the six
months ended June 30, 2021 and a difference in total shareholders'
equity of US$0.9 million as at June 30, 2021 and December 31, 2020
in relation to capital market activities.
(c) Divestment of HBYS
Under U.S. GAAP, an equity method investment to be divested that
does not qualify for discontinued operations reporting would not
qualify for held-for-sale classification. The investment in HBYS
was not presented as a discontinued operation or as an asset
classified as held-for-sale after the signing of the SPA in March
2021 and therefore, it continues to be accounted for under the
equity method until closing.
Under IFRS, an equity method investment may be classified as
held-for-sale even if the discontinued operations criteria are not
met. The investment in HBYS was not presented as a discontinued
operation but was classified as held-for-sale and therefore equity
method accounting was discontinued in March 2021 on the initial
classification as held-for-sale. Accordingly, the reconciliation
includes the recognition of the Group's share of the earnings of
HBYS from April 2021 to June 2021 in the interim unaudited
condensed consolidated statements of operations of US$7.4 million
for the six months ended June 30, 2021 and a difference in total
shareholders' equity of US$9.3 million as at June 30, 2021.
(d) LTIP classification
Under U.S. GAAP, LTIP awards with performance conditions are
classified as liability-settled awards prior to the determination
date as they settle in a variable number of shares based on a
determinable monetary amount, which is determined upon the actual
achievement of performance targets. After the determination date,
the LTIP awards are reclassified as equity-settled awards.
Under IFRS, LTIP awards are classified as equity-settled awards,
both prior to and after the determination date, as they are
ultimately settled in ordinary shares or the equivalent ADS of the
Company instead of cash. Accordingly, the reconciliation includes a
classification difference between liabilities under U.S. GAAP and
total shareholders' equity under IFRS of US$ 4.4 million and US$7.1
million as at June 30, 2021 and December 31, 2020,
respectively.
24. Dividends
The board of directors of the Company did not recommend the
distribution of any interim dividend for the six months ended June
30, 2021 and 2020.
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END
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