HUTCHMED (China) Ltd (HCM) 2022 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to HUTCHMED 2022 Full Year Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Mr. Mark Lee, SVP, Corporate Finance and Development of HUTCHMED. Please go ahead, sir.

Thank you, Amber. Welcome, everyone. Good morning, good afternoon, good evening. Welcome to the HUTCHMED 2022 Full Year Results and Business Update Presentation. Just at this time, I'll mention that the performance and the results of our operations that we'll be talking about today are historic in nature, and past performance is not guaranteed. This presentation does contain forward-looking statements in relation to the safe harbor provisions, and anything that is said and discussed should be heard and read in conjunction with HUTCHMED results that we have published on RNS, on our SEC filings and in our announcements in Hong Kong Stock Exchange.

Today, we have a broad management team for you to present and answer questions, including Wei-Guo Su, our Chief Executive Officer and Chief Scientific Officer; Johnny Cheng, our Chief Financial Officer; Karen Atkin, our Chief Operating Officer; Hong Chen, our Chief Commercial Officer; Mike Shi, our Chief Medical Officer and Head of R&D; Zhenping Wu, our Executive Vice President of Pharmaceutical Sciences and Manufacturing; and Charles Nixon, our General Counsel.

So with that, I'll hand over to Wei-Guo.

Okay. Thank you very much, Mark. Good morning, good afternoon, good evening, everyone. Welcome again to our HUTCHMED 2022 Full Year Results Conference Call. A few hours ago, we announced our 2022 full year results. Mark, can you share the next slide, please? Thank you.

And during 2022, HUTCHMED made significant strategic changes to allow us to better deal with adverse external conditions and to focus on getting to profitability sooner. On the pipeline, we made significant progress, including the positive Phase III global registration study FRESCO-2 for fruquintinib. And based on the strong data, NDA submissions are planned for 2023, starting from the U.S., followed by EU and Japan.

In parallel, our second wave of products, including savolitinib, amdizalisib and tazemetostat, in registration trials in China also made a significant progress. China NDA submissions are planned for 2023 and 2024. Finally, on the China commercial, despite all the challenges associated with COVID and unfavorable exchange rate, our China commercial team delivered strong numbers for our 3 approved products.

Now I'll pass it to Mr. Chen Hong, Chief Commercial Officer of China Commercial, to lead it off to give you an update on the China commercial operation. Next slide, Mark, and for Chen Hong.

Thank you, Wei-Guo. Hello, everyone. I'm glad to present the 2022 China commercial achievement of our 3 novel products. Just as Wei-Guo said, 2022 was the most difficult year during the last 3 years due to the COVID impacts. Furthermore, the foreign exchange rate is unfavorable. Even so, our 3 market products, fruquintinib, surufatinib and savolitinib, still achieved significant sales growth.

So firstly, I would like to update you on the HUTCHMED commercial infrastructure and capabilities. From this slide, we can see more than 900 dedicated and experienced commercial staff covering more than 33,000 oncology specialists and 3,000 key hospitals. The list of the hospital pharmacies increased 100% to more than 800 in 2022. In order to mitigate the COVID challenges, many more and highly effective academic events were held online for covering more HCP.

Next slide, please. For ELUNATE, it continued to keep strong growth. The sales value was up to USD 93.5 million in terms of in-market sales with 32% growth. Around 32,000 new patients were treated with ELUNATE, and we can see ELUNATE continue to keep leading position in third-line CRC market with 44% patient share according to the latest IQVIA tracking study.

Next slide, please. 2022 was the first year for SULANDA listed into NRDL in spite of the 52% price reduction. SULANDA still achieved 178% value growth. Around 17,000 new patients were treated. And it was recommended by important guidelines such as CSCO and CACA, et cetera. The patient share ranked to be the second in NET market since Q3 last year, which surpassed Sutent and Afinitor despite the later launch.

Next slide, please. ORPATHYS, as the first in-class MET inhibitor in China, achieved around 160% growth for its first full commercial year. In-market sales value was up to USD 41 million. It's recommended by 5 important guidelines such as NHC, CSCO, CACA, et cetera. And more important, it's listed in NRDL this year and will be officially reimbursed in March 1, actually tomorrow, with modest price reductions. It can be expected that many more patients will be benefiting from ORPATHYS treatment.

So overall, in spite of COVID challenges, we continue to make good progress for all 3 market products. Along with everything getting back to normal, we are confident in the stronger momentum in 2023.

So that's all for the China commercial part. Thank you.

Thank you, Chen Hong. Yes. So on this Slide #9, on the right-hand bottom corner, as you all can see, overall with our oncology business, we have recognized $164 million of revenue, up 37% from prior year, in line with our guidance for 2022. As for 2023, our revenue guidance for the oncology business, subject to the closing of the Takeda deal, is $450 million to $550 million. This includes partial recognition of the $400 million upfront income from Takeda, and we continue to target a high double-digit growth from our product sales.

Moving on to the next page, Page 10. As you all can see, we have over $630 million cash and short-term investments and $140 million of unutilized banking facilities. In addition, as mentioned, we expect to receive $400 million of upfront income from Takeda at closing. So overall, we have very strong cash resources.

Moving on to the next page, Page 11, a quick summary of our operating performance. Consolidated revenue up 20% to $426 million, of which, as I mentioned earlier, our oncology revenue up 37% to $164 million. Our investment in R&D increased by 29% to $387 million, mainly focused on over 15 registration-enabling trials. Also, our joint venture increased their net income contribution by 11% to $50 million. So overall, the net loss of the company increased to $361 million. A point to note is that we had a onetime gain from prior year on divestment of one of our equity investees.

I will now pass on to Karen.

Thank you, Johnny. Let's go to Slide 12, please. Our partnership strategy is focused on 3 main activities. We have a very successful long-standing partnership with [AstraZeneca for ORPATHYS in all] territories worldwide.

For fruquintinib, we've already launched in China in partnership with Eli Lilly, and we recently decided to revise our commercial partnership strategy to plan to launch with a single global commercial partner outside of China. We've moved quickly on that strategy to announce the licensing agreement in January with Takeda for the global development, manufacturing and commercialization of fruquintinib in all territories apart from China, Hong Kong and Macau, where we will lead the commercialization. The decision to include the U.S. alongside other territories and scope for partnerships has meant we attracted a great deal of interest, and we were delighted to have selected a strong partner as Takeda.

Going forward, we will also seek partners with some of our earlier-stage assets, as you can see here, for all territories outside of China. For the China partnership, we're also actively seeking additional late-stage products to (inaudible) 100-plus oncology commercial team.

Can we go to Slide 13, please? The partnership we have with AstraZeneca for savolitinib was announced back in 2011 at a very early stage of development but has grown from strength to strength with 7 registration studies ongoing. AstraZeneca is leading the clinical development outside of China. The nearest term NDA submission opportunity is in late 2024 in the U.S. subject to a positive readout for the SAVANNAH study in non-small cell lung cancer and alignment with the FDA on the potential for accelerated approval.

Our newest global partnership, you can see on the top line in yellow, was announced on the 23rd of January for fruquintinib with Takeda and is progressing very well. We chose Takeda for their strong oncology commercial capabilities in the U.S. in particular but also in Japan and Europe. They showed us how they would leverage their recent U.S. product launch experiences together with the knowledge of the CRC space they have in Japan to maximize the potential of fruquintinib for patients with refractory colorectal cancer but also develop beyond CRC.

Takeda are hungry for a major oncology product such as fruquintinib, and they impressed us with their launch plans. This is a really high-profile landmark deal for us. And subject to regulatory clearances, we will receive an upfront payment of USD 400 million together with the potential to receive up to an additional $730 million in development and sales-related milestones.

We've already started the rolling U.S. FDA submission, and we expect to complete it in a few months' time. The FDA typically provides target review completion date on acceptance of an NDA filing. Subject to U.S. approval, we therefore have the potential to start to book royalties from this partnership from 2024 onwards.

I'll now pass on to Mike for the R&D update.

Thank you, Karen. Slide 14, please. Yes, this slide shows the HUTCHMED's deep and broad pipeline advancing into the clinic, and these compounds cover both spectrum of hematology and oncology indication. The first 3 products, as Karen mentioned, right, we are already in the market and 2 are already in global partnership.

And our next wave of compounds has really entered the clinic for the registration trial. And 2 compounds, our amdizalisib and sovleplenib, both have CDE Breakthrough Designation stage, and we are entering the -- finishing the clinical enrollment. EZH2 inhibitor, tazemetostat, is our first in-licensed product, and we're working with our partner, Ipsen. We have the global China rights, and it's currently in the bridging study. We're also running the global -- China part of the study in the second-line lymphoma.

The third wave of compounds is advancing very rapidly. The FGFR inhibitor, 306 IDH1/2 inhibitor, our third-generation BTK inhibitor 760 and CSF-1R inhibitor 653 are all potentially entering pivotal trial stage this year.

Next slide. And colorectal cancer is the third most common cancer worldwide with over 900,000 deaths, and the 5-year survival rate is very poor. And most of the recent advances in CRC are focused on the small patient population with actionable mutations such as BRAF, MSI-H or HER2. But the majority of the metastatic colorectal cancer patients, the treatment options are very limited. Essentially, they actually remain the same, almost the same about a decade ago with regorafenib and Lonsurf as approved for third-line therapy. So there's still a very high unmet need in the late-stage metastatic cancer patients.

Next slide. So our first global MRCT FRESCO-2 trial was presented at ESMO last year and demonstrates that fruquintinib has a statistically significant and clinically meaningful increase of the primary endpoint of overall survival and key secondary endpoint of PFS compared with placebo in late-line CRC patients. So the marginally significant improvement of all clinical endpoints, OS, PFS and DCR, are clearly standing out for fruquintinib compared with existing therapies. And also because the fruquintinib is a very specific VEGFR inhibitor -1, -2 and -3, it has less off-target toxicities and is well tolerated with a safety profile consistent with previous therapy.

Slide 17. The FRESCO trial was started after consultation with the U.S., EU and Japan health authorities and conducted across the globe. And the results are highly consistent with the China pivotal trial FRESCO and also the U.S. bridging study. And we also believe this is truly practice-changing. As FDA previously granted a Fast Track Designation for third-line-plus CRC, HUTCHMED has already started rolling submission. And we are planning to complete this submission, U.S. NDA, first half of the year and also follow with the EU and Japan completion this year.

Next slide. In November 2022, we announced the top line results of fruquintinib Phase III trial in the second-line gastric cancer in China. The gastric cancer is the fifth most common diagnosed cancer worldwide with over 1 million new cases globally. And China alone account for 44% global cases, also very high prevalent in Asian countries. FRUTIGA is a double-blind second-line trial, placebo-controlled trial in combination with paclitaxel. And the trial met one of the dual primary endpoints with a significant improvement and clinically meaningful PFS improvement and also have other secondary endpoints with OR and DCR have statically significant improvement and also improved durable response. And the safety profile of fruquintinib in the FRUTIGA trial is also very consistent with the previously reported study. So based on that, HUTCHMED is preparing to file the supplementary NDA with the NMPA in the first half of this year.

Next slide. And this slide shows the 7 registration trials of our MET inhibitor savolitinib and are currently enrolling, 3 led by AstraZeneca globally and 4 led by HUTCHMED. And with the robust SAVANNAH trial reported at WCLC last year, AstraZeneca needed a new cohort of the SAVANNAH, really aiming for evaluating the potential accelerated approval.

And savolitinib has also been granted Fast Track Designation by FDA for the combination treatment of TAGRISSO in TAGRISSO-refractory non-small cell cancer patients and also reinforced the SAFFRON trial as the second and third line TAGRISSO plus savolitinib in the TAGRISSO-refractory non-small cell lung cancer with MET aberration. And also, we reached the milestone payment for AstraZeneca last year.

And the other registration trial, SAMETA in the papillary renal cell carcinoma led by AZ and also the other trial, the SACHI, SANOVO in lung cancer, are all continuing enrolling led by HUTCHMED. And also, we are entering the registration phase for the gastric cancer with MET amplification for savolitinib.

Next slide. We are very excited about the second wave of compounds that are advancing in the late-stage development. Sovleplenib is a highly differentiated oral Syk inhibitor with a Breakthrough Designation for ITP in China. ITP is acquired autoimmune disorder characterized by low platelet count resulting from platelet destruction and impaired production. There's about estimated 2 to 5 per 100,000 person in the general population. So we are very encouraged by our Phase I/II results demonstrating the robust ORR of 80% and the durable response rate of 40% in relapsed/refractory primary ITP patients. This is really on par with the current existing widely used ITP second-line treatment like TPO-RA and also the same response rate shown in the patients who are refractory or previously treated with TPO. So it's very robust product. So we are very excited we completed the enrollment for the Phase III registration trial ESLIM-01 in December last year, and we're prepared for the potential readout and NDA filing in China later this year.

Slide 21. The other compound, amdizalisib, is a differentiated PI3K delta inhibitor that's currently ongoing in 2 single-arm Phase II registration study in China, third-line-plus follicular lymphoma and second-line marginal zone lymphoma. The data we published before show the compound is not only promising with efficacy but also has a favorable safety profile when compared with the same class of compound as highlighted in the low incidence of area of interest such as diarrhea, liver enzyme increase as well as lower discontinuation rate. So of course, this needs to be further characterized in the larger patient population, and we are excited to report that we have completed enrollment for this pivotal trial in third-line follicular lymphoma yesterday. We reported yesterday, and the clinical readout and potential NDA filing will be later this year.

Next slide. And tazemetostat is our in-licensed EZH2 inhibitor from Epizyme. And currently, it's in the bridging study, and we are anticipating to file next year. And also, Epizyme with Ipsen reported at ASH its very robust tazemetostat in combination with our R2 in the second-line follicular lymphoma. And we are part of the global SYMPHONY-1 trial really testing in the second-line setting. And so we are also exploring tazemetostat in combination with our PI3K-delta inhibitor, amdizalisib, in the relapsed/refractory lymphoma patients.

Next slide. Our clinical development pipeline continues to grow. And in addition to the positive readout for fruquintinib trials in the CRC and gastric cancer, this slide shows the 15Plus ongoing registration trials in the 6 leading compounds, including the life cycle indication of market products and of the late-stage assets and with the anticipated NDA filing time line in the next few years.

Slide 24. So I'm highlighting the deliverables for 2023 for R&D. On the regulatory activity, we already compete -- will complete the registration filing for fruquintinib in all major global markets, U.S., EU and Japan, for third-line CRC. We initiated a supplementary NDA filing in the first half for the fruquintinib in the second-line gastric cancer in China. We'll also initiate the PMDA consultation for surufatinib in the midyear based on the Japan bridging study and the final registration trial in China.

And also importantly, we're anticipating data readout and potential NDA filing in China for sovleplenib in second-line ITP and amdizalisib in third-line follicular lymphoma pivotal trial, both slated for later part of this year. And also on the development side, HUTCHMED and our partner continue to complete enrollment for multiple registration trials for sovleplenib in non-small cell lung cancer. And also, we'll complete multiple trials like the fruquintinib plus sintilimab in endometrial cancer and RCC.

So on the heme side, we also advanced pipeline with amdizalisib, advancing our tazemetostat bridging study. And we also have a readout for our savolitinib monotherapy in MET-amplified patients and also sovleplenib in the AIHA advancing the Phase III trial.

So to recap the R&D progress, HUTCHMED has a deep and broad portfolio and multiple near-term catalysts for this year. And our R&D team will remain laser-focused on the execution of our late-line development products.

So with that, I'll turn to Dr. Wei-Guo Su, our CEO, and the CFO.

Okay. Thanks, Mike. Just to sum it up, HUTCHMED took the necessary steps in 2022, focused on getting to profitability and becoming self-sustaining. Now we have a lot to execute and deliver on our pipeline. We believe these launches of new products -- next slide, Mark.

As Mike just showed you, we have many registration trials ongoing, leading to NDA submissions, both in China and globally, in the next few years. And clearly, we have a lot to execute and deliver on our pipeline. We believe these launches of new products and new indications will position us to continue to grow our China commercial, and we also expect to start receiving royalties from our ex China sales of our partnered products, savolitinib and fruquintinib. And we believe these changes will not only help us get through tough market conditions but also ensure that we emerge a stronger company.

And with that, I would like to thank you all for your attention, and the management team is available to take questions.

(Operator Instructions) Our first question comes from the line of Kelly Shi from Jefferies.

Congrats on a great year. Regarding HUTCHMED commercial infrastructure for oncology franchise, have you achieved the optimal target in terms of the number of covered hospitals and health care providers? And where would be our focus area in 2023 to grow sales further? And also, could you talk about when do you expect the company to become profitable?

Okay. Thanks, Kelly, for the questions. Just very quickly on commercial structure, I'll probably give a quick answer and see if Chen Hong has anything else to add. So basically, we are around 900 FTEs supporting fruquintinib and surufatinib, and we should be able to support even more indications for these 2 products. With regard to further build-out, I think given that our next wave of products, sovleplenib, amdizalisib and tazemetostat, are all in hematologic indications, so we actually plan to build up a specialty team to support our next wave of compounds in heme indications.

With regard to specific time line for profitability, we are targeting 2025. Obviously, we need to continue to grow our China commercial to increase revenues. But also, I think the timing of our ex China products to start to contribute the income, I think that matters as well, including savolitinib and fruquintinib. We believe both will start to contribute royalties to us late '24 and certainly '25. So again, our target is 2025.

Maybe Chen Hong or Johnny, if you have any anything else to add with regard to commercial infrastructure in China. Are we covering all the hospitals now? And anything else where we need to beef up?

Thank you, Wei-Guo. I think our commercial infrastructure is optimal for launched products as well as the indications. And we continue to improve our efficacy for this team, and we need to catch up the market opportunities. And definitely, we will increase with more opportunity coming or more products coming. So it's on the way to build up the great team to achieve more targets.

Our next question comes from the line of Louise Chen from Cantor.

Congratulations on all the progress this quarter. So I wanted to ask you a few questions. First one, just a follow-up on the first question that Kelly had asked you. Are you expecting profitability for the full year 2025? And then I also wanted to ask -- you have a lot going on this year, very busy. I wanted to ask you, what are your key, most important readouts or approvals that you're looking forward to this year? And then last question is, how are you thinking about operating expenses year-over-year?

Okay. Thank you for these questions, Louise. I'll ask Johnny to provide some more details on these questions.

Okay. So first, regarding profitability, 2025 is consistent with what we have communicated to the market for the last couple of years. That remains our target, to be able to break even and turn around to become profitable in 2025. And as I said, this is our target, and we haven't changed our target for the last couple of years.

And in terms of the OpEx year-on-year, I think for 2023, you can expect the level for OpEx, operating expenses, will be similar, by and large, overall, will be similar to 2022, the reason being we are continuing to grow our China commercial. But at the same time, we have a synergy and a cost reduction in U.S. as we are not building our U.S. commercial team due to this partnership with Takeda. So that is the overall in terms of profitability and OpEx.

Our next question comes from the line of Alec Stranahan from Bank of America.

Just a few from us. First, what's left for the rolling submission for fruquintinib? And just remind us whether you guys are handling the submission yourself or if Takeda or a combination of both are doing the submission.

Second, on amdizalisib, the follicular lymphoma readout, I think, is second half of this year. Is this just due to the pace of the enrollment or when the study started? Or is it a prioritized indication for you, guys, at this point? And would you file in follicular lymphoma next year if the data looks good? Or would you wait for, say, MZL to read out as well?

And then just lastly, on the business update, obviously, some trade-offs of giving up the economics to partners while maximizing the revenue potential and same thing on focusing on the late-stage pipeline. Can you just help us walk through the thought process a little bit more? That would be helpful.

Okay. Thanks, Alec, for the questions. Let me ask Mike to take your questions first. Mike?

Yes. So just to answer your question for fruquintinib submission, we already started the rolling submission because we have the Fast Track Designation. So as you know, the Takeda deal has not yet been finalized. So we already hit on 4 cylinders, right, to do the submission. The NDA submission, the EU submission and Japan submission, we already got started. We also plan a lot of things. For example, the EU market assesses, all these program has been ongoing. And of course, when the final transaction happen, we'll certainly discuss with our partner about how we can really accelerate the registration process. For example, Takeda has a very strong presence in Japan. We do think, right, their expertise in all the markets is going to accelerate the registration process without slowing it down.

And to answer the question for amdizalisib, we just finished the Phase II follicular lymphoma enrollment. We're anticipating a readout. Again, I remind you, this is the third-line follicular lymphoma. We previously have agreement with the CDE of the trial design. If the trial have a positive readout, we're going to submit later this year for the CDE approval. And I also mentioned, right, for amdizalisib, we also have other combination trials going on. But with the base of the submission, it will be all the data that we have, right, for the follicular lymphoma and also all the patient data that we have to support the NDA package.

And for the development prioritization, what we really focus on the late-stage product, where we can -- how we can really, in the near term, drive the value for all these late-stage products and towards what Dr. Su mentioned, towards a breakeven point, right, by 2025. So we have multiple products in the development. We hope our registration and sales-related development will support our path for the sustained profitability.

Okay. Thanks, Mike. Maybe just add a couple of points, Alec, regarding amdizalisib filing strategy. Certainly, FL will be first. Marginal zone will be actually a second. NDA will be sometime likely next year or late next year. So this will be filed separately instead of together. Regarding portfolio prioritization, we will plan an R&D Day sometime this year to go over in detail the prioritization process and the priorities going forward with various trials in China and outside. Thank you.

The next question comes from the line of Yang Huang from Credit Suisse.

I have 2 questions. First one, management has just guided for this year, oncology revenue will be $450 million to $550 million with some partial recognition of Takeda upfront payment. Can you give us some more color on how you're going to kind of recognize partially? And then what's going to be kind of more color can we have in terms of product sales for this year's guidance? That's my first question.

Okay. Maybe Johnny can provide some details on the $450 million to $550 million guidance as well as our expectation for 2023 product sales. Johnny?

Okay. Thank you, Dr. Su. So the $400 million upfront income, the accounting recognitions would have to take into consideration of the performance obligation under the terms of the licensing agreement, so that as the closing has yet to happen, so our auditors have to determine when it actually happens and the degree of percentage of completion in terms of our obligation. As a result, we have estimated a certain level of recognition in 2023. Part of the performance obligation, we anticipate that will be completed in 2024 and some of which may be beyond. So this is -- although we received the full $400 million, the accounting recognition would not allow us to actually recognize it in full.

So in terms of the product sales, as you have looked at our recognitions of the product sales, HUTCHMED level is about 63% growth versus last year. We continue to project a high double-digit growth in 2023. So basically, in a range of high double-digit estimation. As such, we are not giving specific guidance to this. So you can estimate that the level of projection growth, you have to take into account -- basically, you have to take into account ELUNATE, SULANDA already entered into the NRDL and ORPATHYS will be in the first year starting from March that they would be able to -- the patients will be able to gain access from -- benefits from the NRDL.

Yes. Thanks, Johnny. I think given the opening of China, COVID impact is going to diminish this year. And certainly, in January, we had COVID outbreak, right, and also China New Year as well. But we expect conditions to become far better this year compared to last year. So we expect similar levels of growth this year, if not better.

Okay. Got it. Yes. That's helpful. My second question is the company is going to file sNDA for fruquintinib in gastric cancer. It looked like a larger indication. Can company comment on how should we compare the commercial kind of prospect for fruquintinib in terms of gastric cancer compared with its current indication in CRC?

Sure. Maybe Mike, you can take this question.

Yes. So for the gastric cancer, right, in the second line, currently approved product is really paclitaxel and also RAM-paclitaxel, right? So it was approved last year, the RAM plus paclitaxel. And we look at -- I think the fruquintinib has really started the trial when the paclitaxel was the standard of care. So the trial was a positive and [met one of the bureau] primary endpoints. It is a large indication for second-line gastric cancer. So as I mentioned, 44% of patients globally are in China and also is representing this huge opportunity in terms of patient volume. And for the commercial side, I think the company will plan accordingly, right, for the NDA submission and the follow-on commercial part. Yes.

So briefly, second-line GC patient population size should almost double that of third-line CRC or later-line CRC and less competitive treatment available also other than paclitaxel as still standard of care. And as Mike mentioned, paclitaxel plus ramucirumab was approved last year, but it is highly priced, and it is far from standard of care in China. So we view it a great opportunity here.

Okay. I see. Just a quick follow-up. Have we got any feedback or have any meeting with the CDE in terms of gastric cancer filing?

No. The answer is no. We are actually focusing on preparation of CSR and just to get ready for submission.

Our next question comes from the line of Mike Mitchell from Panmure Gordon.

I just wanted to know from your perspective what the likely steps are regarding the SEC and the U.S. accounting oversight issue. I know you've put a comment in today's statements. But if you have any more on that, that would be great.

And just a second question, actually, just a follow-up to the previous Q&A. I just wondered with regards to the Takeda deal, just on the point of partial recognition of the upfront. Would there be material obligations still to be completed in 2024 relating to the upfront payment? I'm just trying to understand exactly what those would be. So any more color on that would be helpful.

Okay. Thanks, Mike. Maybe Johnny.

Yes. Okay. So thank you, Dr. Su. So HFCAA from the PCAOB, we heard it from December last year that they have come to this side of the world. And basically, they have reviewed and they were able to gain access. This is what we have -- know, and we do not foresee issues in terms of the U.S. authorities gaining access to the audit -- working paper of the auditors of the company that they have selected. This is as far as we know. Our resources and our auditors have not able to give us more color on this, but we believe that this issue based on the announcement by the PCAOB last year, actually, we have no further negative news regarding this issue.

So in terms of the revenue recognitions, in terms of this performance obligation, basically, by and large, I think, 2023, 2024 is all related to the regulatory submission as well as some of the approval step that requires us to follow up. So some of which I think made it to 2023. And also, of course, some items related to technical transfer, for example, they are all the consideration that the auditor would assess. As I said, the closing timing hasn't occurred yet. So we are not in a position to actually comment in great detail about the recognition method and the extent that we can recognize for this year. I hope that answers your -- thank you.

Our next question comes from the line of Roderick Ma from Goldman Sachs.

This is Roderick for Paul. And just 2 questions from us. So since you already started the rolling submission for fruquintinib in the U.S., have you heard any FDA feedback on the submission? And the second question is for the NRDL inclusion of savolitinib. Just is there any like details on the price maybe will be provided at some point?

Okay. Thanks for the question. For the U.S. NDA for fruquintinib, I'll ask Mike to provide some feedback.

Yes. So we are -- it's ongoing smoothly, and we already have the first modules submitted. And as what I said, right, this all went through. We'll continue targeting to finish those -- the other modules in the first half of this year. So, so far, it's been going on smoothly.

Okay. Yes. Typically, you don't hear anything until you finish or complete filing. With regard to savo NRDL, we agreed with AstraZeneca not to disclose the price after negotiation. However, it will become available tomorrow, I assume, how much first. So you probably will be able to find out the NRDL price very soon.

Our next question comes from the line of Matthew Yan from CLSA.

Congratulations on the results. I've got 2 questions. First is regarding the supplementary filing for second-line gastric cancer for fruquintinib. I wonder what's your view regarding [fruquintinib] results and that's the primary endpoint of PFS but not overall survival. So do you think that CDE is very likely to agree that PFS will be enough to support this filing this year?

And my second question is regarding the PI3K amdizalisib. I wonder, can you elaborate more on how will it differentiate itself in the China PI3K market especially versus the more leading peers approved and about to be approved from (inaudible). Those are my 2 questions.

Okay. Thanks for the questions, and I'll ask Mike again to provide his view on second-line GC for fruquintinib and also amdizalisib differentiation.

Yes. So for the second-line gastric cancer, so what the -- for a lot of trials, as you can see, particularly found in Asia, right, because the subsequent treatment is very high compared with the global, so, so far, if you look at all the Asian trials, including the subset of patients in the RAINBOW trial, right, the global trial, all even for ramuciruab plus paclitaxel and the RAINBOW Asia trial, as you can see, is the PFS significant and the OS is not significant. And this is particularly related to the treatment paradigm in Asia.

So we think this is -- as what we have with the design, right, we have a lot of the factors we can look into. I think this is really reflecting the practice in Asia and in China. So from what we have, we do think this is -- the PFS as a primary endpoint is one of the [CDE] endpoints. We have built in statistical analysis to really adjust the [upper] for this specific design, and it was -- the trial design was agreed upon with the CDE. So we do intend to use this trial data to submit for the second-line GC and pretty much benchmarking for the RAINBOW Asia if you look at that data, right? And it's approved in China, like what I mentioned last year.

And go back to amdizalisib, right? So the data will be reported is really -- if you look at the comparisons with the competitor, the safety profile is really quite -- not only the efficacy is quite robust, but also the safety profile, some of the area of interest like diarrhea, liver enzyme increase. We do see amdizalisib looks very favorable. And in the treatment landscape, again, right, the single-arm registration for Phase II trial was discussed and agreed upon with the CDE design.

At the moment, right, we also received the Breakthrough Therapy in China, right? So based on the safety profile and the robust clinical efficacy, we are intending -- of course, if you look at the CDE discussion recently, we are also preparing for conditional approval and potentially confirmatory trial. So at this stage, right, based on the time frame what we have, we do think it's a good opportunity to file based on the single-arm followed with the confirmatory trial to confirm this study. Yes.

I'm showing no further questions. I'll now turn the conference back to Mark for closing remarks.

Okay. Thanks. And Wei-Guo, any comments? Or you can close, I think.

Well, again, thank you, everyone, for attending the call. 2022, we made really significant strategic changes. And now we believe we are well positioned to execute on our plan towards profitability. We have a lot to deliver in our pipeline, including our 3 approved products with additional life cycle management indications as well as our second wave of products now reaching NDA stage, all in parallel with our third wave of compounds entering into registration studies later this year.

So we are really positioned to grow -- actually to accelerate our growth in China and outside China. And this will actually see us all the way through '25 and even beyond, '26, '27, with all this third wave of compounds lineup for registration studies and potential NDA submissions in China. So we are really confident that we will be able to deliver on our pipeline. And also, our China commercial team led by Chen Hong is really high performing, worked through 2022 with all the difficulties. And they are, again, also positioned to grow very quickly, very rapidly with new launches of new indications and also new products in the next few years.

So all in all, we got through 2022, a very difficult year. But now we believe we are on our way to profitability, and we are a much stronger company today. Thank you all for your attention. And if you have any further questions, reach out to us, to Mark's team or to myself. Thank you.

Right. Thank you. So this concludes today's conference call. Thank you for participating. You may now disconnect.