HUTCHMED (China) Ltd (HCM) 2022 Q2 法說會逐字稿

2022 Interim Results Conference Call and Webcast. (Operator Instructions) Please be advised that this call will be recorded.

I will turn the call over to our first speaker today, Mark Lee, SVP of Corporate Finance and Development. Please, go ahead.

Thank you, Jim. Welcome, everybody. As you know, this is our 2022 first half results, I'd like to introduce today our speakers. We will have Dr. Weiguo Su, our Chief Executive Officer and Chief Scientific Officer; Mr. Johnny Cheng, our Chief Financial Officer; Dr. Marek Kania, our Manager Director and Chief Medical Officer of HUTCHMED International; Dr. Karen Atkin, our Chief Operating Officer; and Mr. Hong Chen, our Chief Commercial Officer of China.

So with that, I will hand over to Dr. Su.

Thanks, Mark. Hello, everyone. As you all know, the biotech industry is going through some significant changes. HUTCHMED is trying to stay focused on our goals and objectives.

During the first half 2022, HUTCHMED China commercial continue to grow and deliver strong results particularly fulfilling considering the impact from the COVID disruptions. Elunate continues to gain in prescription share for third-line CRC. The lead of STIVARGA continued to widen. SULANDA was included into the NRDL this year with a 52% price reduction yet sales grew 69%, aided by much improved patient access.

ORPATHYS also delivered strong sequential growth compared to second half 2021. On the pipeline, while we were disappointed by this surufatinib U.S. FDA CRL and now MAA withdrawal, our deep and broad pipeline continues to progress.

Our first multinational MRCT for fruquintinib global registration will read out shortly in August. And if positive, NDA filings will begin towards end of the year, starting from the U.S. followed by EU and Japan.

For savolitinib, multiple registration studies, including global MRCT SAMETA for PRCC and SAFFRON for non-small cell lung cancer are enrolling. The SAVANNAH study data to be disclosed at WCLC shortly is also continuing to enroll with potential for filing for accelerated approval. Registration studies for our second wave of products, amdizalisib, savolitinib and tazemetostat are all enrolling, and NDA submissions in China are expected during '23 and '24.

Finally, managing changes and challenges. HUTCHMED has gone through many difficult strategies in our history, the management team is very experienced in dealing with challenges such as our surufatinib setback or the COVID disruption in China or the overall unfavorable market right now.

HUTCHMED has a solid cash balance and a cash-generative commercial operation in China, and we are confident we will be able to emerge from these challenges stronger. Next, I'll ask Mr. Hong Chen, Chief Commercial Officer, China, to give an update on first half China oncology commercial performance. Chen Hong?

Thank you, Weiguo. Hello, everyone. HUTCHMED already had 3 in-house innovative products approved on the market in China and 2022 is also the second year for HUTCHMED to commercialize and Elunate and SULANDA through its own commercialization platform.

From this slide, we can see after a successful and ideal renewal with only 5% price decrease, Elunate continued to grow strongly in the first half of this year. The first 6 months in market sales was more than USD 50 million with 26% growth versus last year.

By the end of May, the cumulative in-market sales of Elunate already achieved more than RMB 1 billion. Elunate already benefited more than 50,000 CRC patients. And it continued to expand the leading position in third-line CRC patient share to 43% they are in the latest posted launches away.

Next slide, please. For SULANDA, the NRDL inclusion allows much wider patient access for SULANDA. We can see despite a 52% price cut, the value sales still increased by 69% to $13.6 million in the first half of this year, which was already over the whole year sales of 2021. The growth was up to 280% in terms of the new patient numbers treated by SULANDA.

Next slide, please. This is the first year anniversary for savolitinib since it's approved in June last year. The first half of this year in market sales increased by 46% to $23.3 million versus the second half of last year. As the first-in-class selective MET inhibitor in China, savolitinib is now recommended for treatment of non-small cell lung cancer with Exon 14 skipping in 5 Chinese treatment guidelines and MET diagnostic testing is already recommended as the new standard of care for patients with late-stage non-small cell lung cancer.

Our commercial partner, AstraZeneca, is now proactively working on the preparation for the coming NRDL negotiation at the end of this year.

Next slide, please. This slide is a high-level summary of HUTCHMED commercial capabilities. We can see with the team size increasing to more than 800 staff, more and more hospitals and HCPs can be covered as well. More than 500 new hospitals were covered in the first half of this year, especially in Tier 2 and Tier 3 cities.

More and highly effective promotion events executed in first half, especially through online and digital communication to mitigate the COVID challenges. For example, we can see we held more than 3,800 Elunate events with more than 100% growth versus the first half of last year, and we covered more than 43,000 HCPs by SULANDA events with also more than 180% growth. So overall, despite of the COVID challenges, we continue to make good progress to commercialize our 3 market products in China in the first half of this year.

I'm very confident this momentum to continue to go from strength to strength as our commercial team continues to build over the balance of this year. Thanks. Okay. Weiguo and Marek, please.

Thanks, Chen Hong. Moving on to the pipeline progress. Our clinical development program -- pipeline continued to grow. Our anti-CD47 antibody, HMPL-883 entered into Phase I study and our first in-license product tazemetostat, initiated the bridging study for China registration.

Next. This slide lists 13 ongoing registration studies, both China and globally with estimated time line for possible NDA filings. Generally speaking, the COVID outbreak in the first half has some impact on enrollment, and we are anticipating some delay for most studies in China.

Next slide. Again, the 7 registration studies for savolitinib, and they are all enrolling, 3 globally and 4 in China. Next slide. This is to highlight the interim SAVANNAH data to be presented at WCLC. The most important information, among other things is the biomarker definition.

The data is from 193 patients, all progressed on TAGRISSO with MET activation, both high and moderately high. In this study, 34% of patients were identified with high MET activation, namely IHC 3 plus greater than 90% of the tumor sales or MET gene copy number greater than 10. And an additional 28% with moderate net activation, IHC 3 plus less than 90% or GCN between 5 and 10 copies.

As you can see, there is a clear difference in efficacy for these 2 subgroups of patients, including ORR, DOR and PFS. These data support it and inform the global SAFFRON's registration study, which is now underway.

Next slide. In addition to targeting net driver genetic alterations such as mutations, Exon 14 skipping or amplification, another area of strong interest is to target the immunosuppressive role of HGF-MET signaling pathway. Last year, we published the CALYPSO study in which the MET-driven PRCC patients appear to derive robust clinical benefit from the treatment of savolitinib-durvalumab combination. Currently, the global registration MRCT is ongoing, the SAMETA study.

We and our partner, AstraZeneca, are now preparing to explore the same combination in MET-driven non-small cell lung cancer. The SUN study is expected to start enroll later this year. Next slide. Moving on to fruquintinib and surufatinib clinical development outside China. Let me ask my colleague, Dr. Marek Kania, Managing Director and CMO of HMI to give you an update.

Thank you. Hello, everyone. I will give you a quick update on our late phase development globally. As you can see on this slide, HUTCHMED continues to focus on colorectal cancer and really housing patients in the -- with this high burden and high unmet medical needs to find solutions and therefore, fruquintinib, what's our main focus in driving that help.

As you can see, the second most common cancer type and post second line standard therapy patients are running quickly out of options, only to approve options in the third plant line is used in 11 than 20% of total patients. So that highlights strong need and strong rationale for sequencing being developed in this setting.

The next slide, please. As you've seen this slide a few times in the past, the last 6 months was our strong focus of driving our second clinical study and multinational MRTP go through the finish line. We are actually narrowing our predictions here. It will be in a position of serving top line results in August and presenting upcoming medical conference for results very soon.

Just as a reminder, I was discussed with all major regulatory agencies before finalizing protocol and started the contract, and therefore, if FRESCO-2 positive. It will be fee-based for efforts, both in the U.S. for NDA; Europe, MAA and Japan, PMDA discussion. Japan has strong participation in this study. So to this global -- truly global effort, it will be our strong position from a regulatory point of view to start our mission.

As a reminder, U.S. granted or FDA granted fast track designation. Therefore, it will afford us rolling submission starting late this year is FRESCO-2 positive. Again, I will be talking more about FRESCO-2 very soon. Next slide, please. Surufatinib, a quick update as we have discussions earlier in April, May, about NDA company response in the U.S. I'm not going to highlight more of this.

Today, we announced withdrawal of our MAA in Europe. The main reasons are summarized in this slide, which really highlights similar contents and similar limitations on objections from European regulatory perspective in addition to those limitations in conducting inspections both GCP and GMP led to our discussion and decision [if you withdraw] and focusing on path forward with both regulatory incentives to bring to surufatinib next phase development, conducting MRCC. For Japan, we are conducting a bridging study on a different main progress with the pivotal study in Japanese regulatory term. And we are in part 2 where we will be approaching PMDA for pre-NDA discussions at the conclusion of that. Next slide, please. Weiguo will be covering this slide.

Yes. Thanks, Marek. Now let's move on to our second wave of compounds in late-stage development or in heme onc space. HUTCHMED has 6 assets in clinical development, with several more programs in discovery. We believe this is a highly valuable human pipeline, covering pretty much entire heme onc spectrum and amdizalisib solve the planet, both with breakthrough therapy designation in China.

Next slide. Amdizalisib, our differentiated Pl3K delta inhibitor with a good safety profile has continued to enroll in 2 registration Phase II studies, the third line plus follicular, and the second line or above marginal zone lymphoma. Data for other subtypes of lymphoma, including MCL and PTCL are still maturing and will be evaluated for possible additional registration studies.

Outside China, in light of the April FDA ODAC on Pl3K delta class of compounds, we are expanding patient enrollment in several subtypes to demonstrate or confirm the differentiation with a priority in post BTK MCL and PTCL. Let me remind you that our intention when amdizalisib was discovered was to improve upon existing PI3K delta inhibitor safety profile, which is now the center of the question.

The data we published at ASH last year should not only this promising efficacy, but also a much more favorable safety profile, obviously, needs to be further confirmed in larger patient population and also U.S. patient population. In addition, also considering combinations such as the EZH2 inhibitor tazemetostat. Next slide. Savolitinib, the SYK inhibitor in China, the Phase III registration study in ITP is enrolling very well with little impact from COVID, suggesting a strong unmet medical need in this patient population. Another indication where we have breakthrough therapy designation. We hope to complete enrollment of this Phase III study by end of the year.

Behind the ITP, 2 INDs have been cleared in China, 1 for autohemolytic anemia and another for COVID-19 to exploit anti-inflammatory activity to reduce death rate in severe-to-critical patient population. Outside China, the dose expansion in lymphoma indications continues to enroll with a priority in Hodgkins and post BTK CLL.

In addition, based on the encouraging POC data from the China ITP study and strong unmet medical needs in this space, we are preparing to submit an IND to explore the potential. Next slide, our in-licensed EZH2 inhibitor, tazemetostat. TAZ is approved in the U.S. for follicular and epithelial sarcoma indication as a monotherapy at 2022 ASCO, the safety run-in data in combination with R Square were presented in a second-line follicular lymphoma.

The efficacy and safety were very encouraging. Together with our partner, Epizyme, the global Phase III study, the SYMPHONY-01 has been initiated in second-line follicular comparing R Square plus 10 versus R Square.

China will be part of the global MRCT to support China registration. In parallel, we just kicked off the bridging study in China to support initial registration of tazemetostat as a monotherapy. TAZ has been approved in Hainan province in China through a special registration pathway based on the U.S. approval. Multiple combination proof-of-concept studies are also being planned. So this update on the late-stage assets.

Next, I will ask Johnny Cheng, CFO, to give us an update on the financials. Johnny?

Thank you, Weiguo. So moving on to the next page, please. So as of June, the company maintains a strong balance sheet. We have cash and short-term investments of over $800 million, unutilized banking facilities of over $170 million. In addition, we have another $58 million cash in our joint venture with Shanghai Pharma. So overall, our target is to extend the cash run rate to 3 years.

Move on to the next page. The strong performance of our commercial teams resulting group revenue up by 28% to over $200 million, of which our oncology business revenue increased by more than double of last year more than over $90 million. So we continue to increase our investment in R&D to over $180 million in China as well as in U.S. and Europe.

So the profitability of our equity investees increased by 17% to over $33 million. Moving on to the next page, please. Our non-core assets continue to do well. So as you all can see, it has contributed more than $0.5 billion net income to the group. So we continue to explore ways to unlock the value of these assets to provide additional cash resources to support our R&D investment.

Moving on to the next page. As you all have heard from Hong Chen earlier, with our strong performance, commercial performance, we will maintain our guidance to the market we gave earlier. That is $160 million to $190 million for our oncology and immunology business. I will now pass on to Weiguo.

Okay. Thanks, Johnny. To recap, while the macro environment continues to change, HUTCHMED strive to stay focused on our commercial operations and pipeline progression. We expect that the strong momentum in China commercial to continue in the second half.

On the pipeline, in China, we continue to expand the life cycle indications behind our 3 approved products, fruquintinib, surufatinib and savolitinib, and at the same time, moving our second wave of, with drug candidates, amdizalisib, savolitinib and tazemetostat towards registration.

Outside China, while surufatinib has been a disappointment, we believe it is a unique case and won't have any significant impact on the rest of the pipeline. And we do have a deep pipeline and a robust registration strategy starting from fruquintinib, for which a multinational MRCT will read out shortly in August and NDA filings, if positive, in the U.S., EU and Japan, starting from the end of the year.

Amdizalisib and savolitinib are both generating POC data and it will be engaged with the FDA to discuss and define the registration pathway in the next 6 to 12 months. Finally, I would like to point out that even though we have a solid cash balance, we are prepared to manage through potentially long-lasting unfavorable equity market. We are reviewing our clinical programs and operations carefully to make sure that we spend cash prudently.

We will also look to grow our China business further to generate more income. And finally, we plan to up all efforts in licensing and collaboration activities. Our current environment is challenged. We are confident that we will be able to leverage our well experienced management team and emerge from the difficult period even stronger. This is not the first time that we have managed through difficult market conditions.

So this wraps up our presentation. The management team will be happy to answer any questions.

(Operator Instructions) The first one comes from Kelly Shi from Jefferies.

So regarding the regulatory pathway for printing in the U.S. based on a global Phase III FRESCO trial, a U.S. Phase I trial and the FRESCO China trial which should provide a comprehensive conical information. But given the experience with suru, do you see any potential issues regarding the applicability to the U.S. patient population?

And also to the current U.S. medical practice, of the potential data package to support U.S. approval in CRC and was this a topic for discussion from the previous U.S. FDA meeting? And I also have a follow-up.

Okay. Thanks, Kelly. Well, obviously, the strategy for fruquintinib registration in the U.S. and elsewhere for that matter, obviously, will be centered on the FRESCO-2 study, which is obviously, MRCT and in representative patient population. I think the China study, the FRESCO -- original FRESCO study and also all other early-stage clinical studies will serve as support. So we don't expect any issues. And we certainly had previous discussion with the agency as well before we actually kicked off the FRESCO-2.

So we are actually quite confident that this MRCT should cover most of the issues. It's completely different from surufatinib case. Maybe Marek, if you want -- you have anything else to add?

Yes. I would just add my voice of confidence and as you said, well, FRESCO fruquintinib case has nothing to do with surufatinib case, we're just unique. We had numerous formal discussions with U.S. FDA in the end of Phase II meeting, I see anything and we were very transparent and FDA was very collaborated in a way how we designed this FRESCO-2 study. We're just main pivotal study. FRESCO-2 will be considered in totality of the package as well.

So we are very confident if FRESCO-2 is positive, that would be based on 3 continental regulatory discussions. As we already reported before, we have also taken the advice with EMA, which provide comments to fact of the design for Europe will be a primary pivotal study. At the same time, we had the same discussion with PMDA. So we remain very confident in our strategy.

Great to hear. I also have a follow-up regarding the PI3 kinase inhibitor. And how should we think about the market opportunity in the lymphoma indications in China market, given CD19 CARTs and also CD20 bispecific antibodies have entered the market, and there are also a few entering the market? How different of the competitive landscape in China versus in the U.S. for those lymphoma indications?

Yes. So obviously, it all comes down to the safety and tolerability if proven safe and efficacious, we believe Pl3K delta should have a very strong competitive edge because it's -- it can be used before or after these biologics treatment and also it's oral. As you know, these are relatively indolent diseases and patients will have to stay on treatment for a very long time. So safety and tolerability is extremely important.

Some of the bispecifics has shown some strong data, but again, these are all single-ARM studies and still remain to be confirmed. CAR Ts, it can work for some patients, but not for all. And even patients benefit, they ultimately progress or have recurrence. So all in all, we believe indolent lymphoma patient population. It's a big population, and they live -- patients live for a long time and they need to rotate to new therapies repeatedly. So a good, efficacious and safe, tolerable PI3K delta inhibitor, we believe, has its place for these patients.

Paul Choi from Goldman Sachs.

Just a couple of quick financial ones to start and then 1 pipeline question. First, was there any inventory build at the end with regard to some of the newer products that were included on the NRDL?

And then with respect to the guidance being maintained, can you maybe speak to how you view the current macro environment and what would sort of be the pushes and pulls that might drive your full year results to the lower end versus the higher end? And then I had a pipeline question to follow up.

Yes, Paul, with regards to the inventory, it's -- we believe it's at the moment, it's a normal inventory level. If anything, during the lockdowns from April, May and into June, there was some kind of depletion -- some level of depletion of inventory.

So at the moment, we think it's all -- it's at a normal level of inventory. And we are quite confident in the second half. We think the momentum will continue. And with regard to the push and pull, again, I think we are a bit concerned about the COVID-19, whether it can now have another outbreak somewhere else or somewhere. And it can be quite disruptive basically. So that remains a bit uncertain. Nobody can predict the situation. Although we have been gone through once, and we -- Chen Hong's team is putting in place multiple measures, including the online doctor's visit, online conferences and also the inventory and distribution management. So we believe we are now better positioned to deal with any potential COVID outbreak in China, lockdown's potential.

But nevertheless, it can be an issue depending on the scale, obviously. So we are cautiously optimistic that we'll be able to deliver within the guidelines. And hopefully, hopefully, we can do better towards the higher end. So I think it's the only the pull, the headwind would be the uncertainty of COVID.

Okay. And as a follow-up, my pipeline question is I know you'll have the FRESCO-2 results imminently here in August, is there a plan to present the data more in detail at a medical meeting here in the second half of '22? Or will we have to wait until 2023?

Yes. Marek, if you are...

Yes, I can take it. So Paul, obviously, our principle is disclosure of important data, both in the announcement level expeditiously, but also in a full data set as quickly as possible at a medical conference.

So I'm not here in a position to confirm which conference, you can go and speculate, but our aim is always as soon as possible to manage a conference that are sort of being accepted and confirmed. Will have a separate announcement when we have exact location and timing for that. But it will be definitely this year.

This year? This year. Okay.

We have another question from Mike Mitchell from Panmure Gordon.

I just have a couple. I just wondered in terms of the current commercial organization, you're continuing to add significantly to the oncology team. I think you said that you are over 800 people now but the number of oncology physicians covered is starting to flatten off somewhat.

So I just wondered how optimal the commercial organization now just in terms of structure. And then a question on fruquintinib and the sort of global strategy. Clearly, the FRESCO-2 data is important in terms of paving the way towards the regulatory process outside of China and more widely also for the global strategy for the business.

But if that doesn't play out as we hope, then I think you'll probably then looking at the global savolitinib study, semi-2 and SAFFRON to progress the global story, which are a little way out in terms of potential NDA. So I just wondered if you could recap the TAZVERIK global plans in that context, please?

Okay. Thanks, Mike. With regard to the commercial organization in China, we are now around 800 staff. We believe this is -- this is the optimal scale for the current portfolio of products. So we don't intend to grow further. However, we instead will focus on driving efficiency and driving productivity from the current staff.

So with regard to your second question on the fruquintinib global registration. I think there can be all kind of scenarios, but -- but first things first, we need to wait and see the FRESCO-2 data to read out. And personally, I'm just like you all anxiously waiting for the FRESCO-2 to read out. And I think through fruquintinib, we have accumulated a well amount of data that this global MRCT should serve as a pivotal. I don't know if Marek you want -- do you have anything else to add?

You said it well. Obviously, given proximity of the outcome, obviously, we are thinking like all of you about positive negative outcome. But given the wealth of data, including 1 positive study in addition to a number of other studies, our cohorts from the U.S. starting across different lines of prior lines of therapy with the consistency of results and the clinical benefit demonstrated there's nothing to make constant about anticipation, but we are doing studies for reasons.

And in the normal circumstance, if you do the first pivotal study, you are approximately 70% probability of success in any study given our already 1 positive study we are confident. But again, let's discuss -- let's cross the finish line, and we are planning for success for now, but obviously, well I just accordingly if in case the negative outcome was surprised by this time.

And I think the next 1 was relative to a (inaudible) Global, maybe that was your angle of question. Do you want to answer?

Well, obviously, post the FDA CRL and also considering that recommendation of MRCT. Are you talking about surufatinib?

No, no, no. I think question was in case of negative fruquintinib, will our focus shift entirely to habilitate global development from that perspective? I mean it's both programs are important, correct?

I think, obviously, if negative, it will be a major setback, right? I mean just similar to surufatinib in the CRL. It just -- obviously, we remain -- we remain confident that these are valuable drugs that can help patients. But the setback basically is a time line.

It's going to push back significant years, we are talking about 3, 4 years for the first approval. So we are -- we'll be evaluated very carefully, similar to what we are doing for surufatinib and we'll be doing the same for fruquintinib, if negative. Again, the NPVs can change greatly if the time line continues to be pushing back. So that's an area we need to be very careful.

Next question comes from Yang Huang from Credit Suisse.

Yes. This is Yang from Credit Suisse. The first 1 actually, I just want to have a follow-up on FRESCO-2, I know some of our peers already asked about this study. But I think given the study actually trial started in, I think, second half 2020. However, we all know FDA certainly changed their position into reviewing drugs from China in 2021. So it will be very helpful if we can get some more color about what kind of communication we had before we started the FRESCO-2 study with FDA?

So what we talk about with FDA before we started up the FRESCO-2 trial. And we note -- have the company noticed any kind of potential change in FDA's view after 2021 event? Thanks. I have a follow-up on financial too.

Yes. I think we already touched on this. Now obviously, we had end of Phase II or pre-Phase III discussion with the U.S. FDA and the goal aligned on the study design for FRESCO-2. And if positive, obviously, we'll have another opportunity for a pre-NDA discussion likely.

And also note that this particular indication, we have fast track destination, and we can discuss it with the agency basically anytime. With regard to FDA kind of position, I'll ask maybe Marek to chime in. He obviously has more involvement and discussions with the FDA. Marek?

Yes. So thank you, Weiguo. Just to clarify, I simply hear some confusion in the system here. Overall challenges with surufatinib are and any other sponsors related in this situation was related to -- is just a concern where application to NDA is made with 1 country Phase III trial or Phase III trials. That's the core of the concern, bringing 1 country and is China now China is just even broader.

If you would bring to 1 country specific not necessarily applicable to U.S. populations at the core of their concern. So FRESCO-2 is a very different case. So fruquintinib is very different case, as Weiguo said we have pre-NDA, end of Phase I meeting or pre-Phase III meeting. We had another type very similar meeting this year and we are preparing for type meeting very shortly post top line results. So, so far, agency has been very consistent.

And therefore, again, important part is we are running global studies -- global studies conducted in 14 countries, 150 sites and U.S. is contributing to this study in a significant way. So it cannot be more than multinational, more than regional study, it is exactly what agency is expecting.

Every other study is supporting a part of the package want to play important role as well. So yes, don't overplay that. Overall, concerns with surufatinib is still happening into everything else moving forward because it's not the thing.

Yes. And my second question is on our financials. So we noticed in the first half, our total revenue has a pretty good growth. I think growth about 30%, but the cost of revenue only grew 10%, much slower than our total revenue growth. Do you think the trend is going to continue? Or what caused this kind of slower growth for the cost of revenue in first half this year?

Okay. Thanks for the question. I'll ask Johnny to provide the answer.

Okay. Thank you, Weiguo. I think it's a composition of our products. In the -- if you compare to the last period, we did not have tabulated in the first half, which we now have tabulated in the first half of this year. As you all know, we recognize for supplemental in-market sales, we actually recognized 30% of the royalty.

So that actually improved in terms of our gross profit margin. And on the other hand, of course, we have invested into our sales force, which are part of which we captured in the cost of sales. So combining altogether the product mix actually makes a difference to this analysis that you just referred to.

But going forward, I think -- we will continue -- hopefully, I think we are targeting to continue to do well in Elunate and surufatinib. At the same time, I think the proportion of savolitinib sales should increase over time. I hope that answered your question.

Next question comes from Louise Chen from Cantor.

This is (inaudible) for Louise, our question is on surufatinib. The EMA indicates that these studies were not representative of patients and medical practice in EU. So why do you think this wouldn't be a potential complication in Japan? And just to clarify, will you still pursue global path forward to surufatinib in light of the U.S. and EU need for local trials?

Well, I think it's -- it's understandable that, that particular argument is almost identical from the U.S. CLL, which is the patient representative patient population. I think in Japan is quite different.

First off, obviously, they are Asians, right? And secondly, it's on a different registration path. They requested us to do a bridging study. So that study is ongoing. And obviously, we'll continue to discuss with the PMDA in Japan. And clearly, I think it's understandable between Asia and the Caucasians in terms of patient population difference. Japan, they're Asians, but they're also on a very different registration path. Anything else to add, Marek?

No, I would only add or highlight, we called surufatinib kind of case as a unique case. And actually, Japan case will be as unique as it can be. I don't recall personally 2 Phase III studies coming from Japan with attempts for NDA submission in -- I'm sorry, from China with the intent to submit in Japan for high unmanned medical needs.

As Weiguo said, with bridging study Phase I will engage post conduct of the study, which we expect in 2023 and discuss a path forward in the pre-NDA discussion. So as you know, Japan always also look at NDA approvals in U.S. So there may be some bias persistent in that context. So but welcome to bridge when we have data.

Next question comes from Matthew Yan from CLSA.

I've got 2 questions regarding savolitinib and first is that I noticed on your presentation materials, you mentioned that you filed the NDA based on SAFFRON in 2025. So does this mean that the SAVANNAH data will not support the NDA filing in the near term?

And my second question is regarding SAVANNAH readout. Because just publishing, how do you see this help savolitinib differentiate in terms of this clinical profile versus peers that are already proof like tepotinib and capmatinib. Yes, those are 2 of my questions.

Thanks, Matthew. Well, the SAFFRON NDA time line, 2025, is obviously an estimate. I think we'll -- we just got started. So it all depends on the enrollment speed and also the PFS falloff, which sometimes it can be longer than what we expect. But the SAVANNAH, I think we probably have more clarity, right?

So obviously, we need to get aligned with the U.S. FDA on the potential for savolitinib SAVANNAH study to support an accelerated approval. But we think both HUTCHMED and AstraZeneca, our assessment is that SAVANNAH can be at least -- the approval time line can be 12 to 18 months ahead of SAFFRON in the U.S.

Now your second question on the -- regarding the differentiation with the tepotinib and others. Now I think obviously, we have not -- these 2 teponitib and capmatinib, they are not approved in China yet. They've been exposed to very limited number of Chinese patients. Just looking at the profile, I think they are all potent and selective C-MET inhibitors.

However, they vary significantly in terms of chemical structures. So I would expect differences in pharmacokinetics or in compound-based safety profile. So because they are -- they have limited exposure in Chinese patients, it's hard to tell the difference. And you can't compare it from the study -- from the Chinese study versus tepotinib or can't imagine studies outside China.

With regard to other studies, I think clearly, AstraZeneca has osimertinib and they know the patients very well. Now we have the biomarkers figured out. So we think we are in a pretty good competitive -- we have a pretty good competitive edge over the other 2 products in terms of -- in the EGFR TKI refractory patient population.

Other studies, I think we are the only -- we have the only combination in PRCC and we are also the only -- how idelalisib is the only compound now exploring gastric as well. So I think we have a much broader program than the other 2. And I think the challenge with MET is it's very fragmented. It has multiple types of driver genetic alterations, including point mutations, Exon 14 skipping, amplification and fusion and so forth. And they all require different diagnostics to support. And just very tedious to do because of low incidence and difficult diagnostics.

But at least AstraZeneca and HUTCHMED, we have made good progress in non-small cell lung cancer, gastric and PRCC. I'm sure there are other -- multiple other tumor types, such as CRC, for instance, head and neck as well yet to be explored.

We have another question from Alec Stranahan from Bank of America.

This is John. I'm on for Alec. Kind of a 2-part question from us. So on the FRESCO-2 trial, through your conversations with the U.S. regulatory agency so far in your experience, how do you think they're going to be more or less viewing the data?

Are they going to view it in kind of the grander landscape of the current U.S. VEGF market? Or are they going to kind of also look into comparison with the FRESCO-1 Chinese trial? So that's the first part. And just to build off of that, if they do look into the comparison with the initial FRESCO-2 Chinese trial, do you think that they will be factoring in the fact that an MRCT with a harder-to-treat population in the U.S. and international landscape will potentially be a factor at play? That's my question.

Yes, I think that's a really good question. I think, yes, I'll have a brief response, and then Marek can chime in. The FRESCO versus FRESCO-2, obviously, these are very different studies, right, different patient population and different prior therapies.

So -- but they both have merits, and they can support each other. I think that's my initial read on this. I think the FRESCO and all other Chinese studies will form the basis to support the FRESCO-2, both in terms of efficacy in different patient population in different settings or subsets with or without prior VEGF or VGFR treatment, Chinese versus Caucasians. So I think that they will complement each other, basically. So that -- maybe Marek now, you can add further your comments on this.

John, this is a good question. But obviously, 1 statement I would make, obviously, because the comparisons are very risky and not scientific, although everyone is doing this, as you know.

FRESCO-2 study is designed to address uniquely and independently questions designed and built in the study. Study finally powered 90% power to detect primary endpoint. So obviously, if positive, this study could stand alone with FRESCO or without FRESCO. But in totality, we always look at the policy of the data.

So far, we haven't seen any so-called big discrepancy in prior lines of therapy. As I mentioned before, we conducted a number of cohorts that we heavily pretreated in our U.S. actually 1 cohort was mimicking exactly for us to like. One was mimicking life exactly FRESCO-2 population to more heavily pretreated.

And we see consistency in clinical benefits. So I mean I'm not going to speculate here, but FDA, if you're asking for more precise answer here, we had those discussions and study designed for FRESCO-2 is a pro-study, if positive, it will do the job obviously, and totality of the data to fix the most convincing package.

And that's the reason why most clinical investigators and really all leaders in the field have very strongly and supportive in the study. And that's why the study also accrued in almost record time, 14, 15 months during COVID limitations. So up here.

It was our last question. So ladies and gentlemen, dear speakers, I'll give you back the floor for the written questions.

There's some written questions. So I will read them out. On the online system, we have several questions. The first is regarding the holding timing company's Capital Act. As several companies are pointed U.S.-based auditors, does the company have an update on this issue?

And regarding the -- regarding amdizalisib, has the China regulatory authority raised any concerns regarding single-ARM design? And the management also share the dose selection strategy. Weiguo?

Yes. At the moment, we've had multiple regulatory interactions with China CDE, and there are 2 registered single-ARM studies are ongoing and without modification. So with regard to dose in the China study, it's a 30-milligram QD flat dose without any dose modifications, basically. I mean, similar.

As you know, I guess, parsaclisib and amdizalisib, these compounds modify their dosing regimen throughout the studies. But amdizalisib can be taken basically a 30-milligram QD flat have continuous.

Okay. Maybe I can direct this question that Johnny, in the past -- or the question is, what is the funding mechanism for the factory, how do we budget them?

So for the factory in terms of the -- I'm reading the question also. So the question is how we fund the factory in terms of the total cost of the factory and so forth. We mentioned earlier, the total project for the new factory in Shai is about $130 million. We have so far spent about $30-odd million. So this year, we target to spend $60 million, but we have a fixed asset infrastructure loan with the local bank in China, which is stretched for 10 years for the arrangement of payback and withdraw the drawdown of this loan.

So the entire factory will be drawn out of this fix infrastructure loan provided by the local bank and the amount -- total amount is $130 million. So the project we target to complete by next year, end of next year. So within this year and next year, we will be drawing down slowly -- drawing down the required amount for this CapEx.

Okay. Jonny, as I could ask you to answer the question on HFC as well.

Okay. So sorry, the question before was related to some of the other companies have changed their auditor, U.S.-based auditor. To our circumstances, it is different to other companies, some of these companies for us, majority of our operation asset revenue-generated business are all based in China. So even by changing the auditor to a U.S.-based auditor, it will not meet the requirements as those U.S.-based auditors, they are not qualified to have license to audit in China, and therefore, they would not be able to provide the supporting documents to the DJLP. We continue to monitor this progress, the development between the SORP of the 2 countries.

But in the meantime, I think everybody knows our listing in Hong Kong and U.K. shares are fungible with the U.S. ADS. Thank you, Mark.

Okay. Thank you, Jonny. Okay. There's another question. Just does the takeover of Epizyme can change anything for development of tazemetostat?

We don't think so. No, we don't think so.

Okay. I think that -- I think we're running out of time now. So maybe we can draw our line here. Weiguo, do you want to have any closing remarks?

No, I just want to say we continue to focus on the execution, and we look forward to a good second half, hopefully, starting from -- I think the most important is the FRESCO-2. Will be in touch.

Thank you, everybody, for joining the call.

Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.