HUTCHMED (China) Ltd (HCM) 2021 Q4 法說會逐字稿

Ladies and gentlemen, welcome to HUTCHMED Company Update. I will now hand the session to Mr. Christian Hogg, CEO of HUTCHMED, to begin today's presentation.

Mr. Hogg, please.

Thank you very much, Anika, and welcome, everybody, to the 2021 full year results and business update presentation today. Today, we put out two announcements, first being our 2021 full year results, which we want to spend the vast majority of our discussion today covering; the second was an announcement that's just gone out detailing my retirement as CEO from HUTCHMED and the appointment of Dr. Weiguo Su as my successor and the next CEO of HUTCHMED. I'd like to just spend a few moments talking about that and then put that aside and focus on our business.

As many of you will know, I've been in China for the last 27 years, and I've been the CEO of HUTCHMED effectively for 22 years. It's been a long journey, it's been a great journey for us all. And the company, from a sort of zero beginning, has come an awfully long way. I've obviously been accompanied on that journey by a fantastic management team and a group of people that are on the call today, which I'll cover in a moment.

Recently, in the last 6 months, my family have all effectively been moved back to the U.K., to schools. My young -- three young sons all went to boarding schools in the U.K. My wife had to move to be close to them. I found myself in Hong Kong all alone. And with my young family as well as our parents getting older, my wife and I decided that it was time for us to move back to Europe.

And so, about 5 months ago, I informed the Board and the Nominations Committee of this desire. We went through a very detailed and diligent succession process, which was already underway for some time anyway. And we concluded after looking at external and internal candidates, and also asking the question, could I remain CEO based out of Europe, we concluded that the best way forward for the business was to appoint Dr. Weiguo Su as the next CEO of HUTCHMED. I am fully supportive of this. I think it's a great thing for the business, and Weiguo, obviously, many of you are aware of Weiguo and his remarkable history and track record.

So it's a personal decision. It's a tough one for me because it's been a long journey that we've been on, but I have great confidence in the future of the company, the organization, the Board and our shareholders. And I just want to say thank you to everybody for the support that's been given to me and the company through the years. And I really look forward to seeing great things coming from Weiguo and the team.

So leaving it at that, I would like to move now on to the corporate presentation. I'm sure we can answer any Q&A at the end. But hopefully, I think we all understand that the reason for this move are purely based on my primary responsibility.

So on Page 3, you can see -- sorry, if you could go back to Page 3, please. The agenda, please. Thank you. So I'll touch on some quick opening remarks. Then, we have Chen Hong or Hong Chen, as is the convention in China, to talk about -- our Senior Vice President of Commercial in China to talk about our commercial results in oncology; then Weiguo and Marek Kania, will talk about our discovery and development programs; our CFO, Johnny Cheng, will talk about the financial status; and our Chief Operating Officer, Dr. Karen Atkin, will talk about operations and business development. And finally, Weiguo will lay out the upcoming events and the final closing remarks, and then we'll go into Q&A.

So next slide, please. So HUTCHMED has built just the fantastic platform over the last 22 years. It gives me great pride to talk from this chart. The organization now is over 4,600 personnel across the group. We have a team of 1,500 people in oncology and immunology. We have a genuinely world-class global mobile drug discovery and manufacturing operation in China. You can see that over those 20 years, led by Weiguo and the team, we have created 12 innovative small molecule drug candidates. And we've built our team on the innovation side to over 800 integrated R&D staff. There are a few oncology and immunology team of that scale anywhere and gives us enormous capability.

In the pink box, obviously led by Weiguo, but also by Marek in the rest of the world, the United States, Europe and Japan, we've built up great clinical development and regulatory operations. We're currently running over 45 clinical studies around the world. And our first three novel drugs, the novel oncology drugs have all been approved and are now closer to approval outside of China. So creating the innovation in the blue box and bringing it to patients in the pink box.

Now on the right-hand side, you can see we've been investing greatly over the last 3 years in our commercial infrastructure led by Chen Hong. We now have a team, at the end of last year, with 630 people. Actually, now it's closer to 750 people on the ground in China, covering all the main oncology hospitals in China. And Chen Hong will take you through the results of last year and the very encouraging unaudited revenue results of the first 2 months of this year, which we've included in this presentation because of their importance.

We've also built under Marek and our commercial head in the U.S., Tom Held, a terrific group of people in the U.S. in commercial and medical affairs. And now, numbers over 50 people already for the launch of our first product in 2022, surufatinib.

So next slide, please. 2021 was an exceptional year. It was extremely hard work by everybody on this call. And we just achieved some fantastic things. I put them into three buckets. On the commercial side, commercial results in China oncology, with the two launches, SULANDA and ORPATHYS, building the team up to 630 people. And then commercial results that Chen Hong will explain in a bit more detail later, but terrific progress commercially.

The clinical portfolio really enjoyed step-change progress. We are running 13 registration studies and another 5-plus are planned for this year. ORPATHYS with AstraZeneca has stepped up to being a truly global initiative. We've just received word from Astra that we've triggered our global Phase III milestone, $15 million milestone in the last couple of days. And that means that we are now moving very rapidly into a global Phase III for the savo/TAGRISSO combo. Major data presentations, a number of new assets have been put into the clinic and a good deal with Epizyme on TAZVERIK. So a lot of progress on the portfolio.

And the last box is the global ambition. I mean one of the things that differentiates HUTCHMED for many China biotech is that we don't see ourselves in the China biotech. We see ourselves as a biotech company who's bringing homegrown Chinese innovations to the global market. So that development organization, clinical regulatory team in New Jersey and in Europe of now 130 or so people is allowing us to do that. We've got 7 assets in clinical trials outside of China.

Fruquintinib has just completed its global Phase III, the FRESCO study. So we're getting hopefully a readout of that, middle of this year, which will be an enormous step for fruquintinib. Surufatinib, the U.S. NDA and European MAA are filed and under review and in the very late stages of those processes. And we're getting ready for the launch in the second half of the year on suru. So 2021 has just been a great year for us all, and we've positioned ourselves very well for '22.

Next slide, please. So I'll stop there and hand it over to Chen Hong to talk about the progress in commercial so far this year and last year. Over to you, Chen Hong.

Thank you, Christian. Next slide, please. HUTCHMED the homegrown promotional activities for Elunate in Q4 2020. So 2021 was the first full year for HUTCHMED to commercialize its innovative products, both Elunate and SULANDA through its own commercialization platform.

The first slide shows HUTCHMED commercialization capability in terms of team size, hospital pharmacy listing, hospital and city coverage. We can see that the team size increased to 630 by the end of 2021, and will continue to expand along with the business growth. The growth for hospital pharmacy listing, hospital and city coverage were 131%, 73% and 42%, respectively, comparing with the end of September 2020.

Next slide, please. This slide shows the market performance of Elunate. Elunate achieved the USD 71 million in market sales in 2021, with 111% growth versus 2020. More than 22,000 third-line CRC new patients were treated with Elunate in 2021. Around 4,800 educational events were executed in 2021 for Elunate.

According to the post-launch checking study implemented by IQVIA, Elunate achieved share leadership by exceeding STIVARGA, which was launched 2 years earlier, with Elunate capturing 39% of patient share in Q4 last year. And it successfully passed the NRDL review last year with only 5% price cut versus the 2021 NRDL price. From the generally treated patient completion and unaudited the first 2 months sales of 2022, we can see Elunate continues to keep very fast growth.

Next slide, please. This slide shows the market performance of SULANDA. SULANDA was launched January 2021 and achieved USD 11.6 million in market sales for the first year. About 4,800 patients were treated by SULANDA, and more than 10,000 HCPs were involved in SULANDA academic events in 2021.

Comparing with the average [64%] price cut across all oncology NRDL products, we were successful with SULANDA entering into an NRDL with 52% price cuts. We can see that treated patient number in January this year, which was SULANDA's first month for investment was sevenfold versus a year ago. The value growth increased up to 21% in January, February this year, although there was the price cut impact.

Next slide, please. The last-but-not-least slide shows the performance of ORPATHYS. ORPATHYS is the first-in-class MET inhibitor and was launched in July 2021 by our commercial partner, AstraZeneca in China. Around 1,900 new patients were treated in the second half of this year -- of last year with about USD 60 million.

There are about 13,000 new patients per year MET exon 14 skipping for non-small cell lung cancer. But even more importantly, there are over 100,000 MET-driven patients in China across all indications. So 7 registration studies are already ongoing in China to address these patients in lung, kidney and gastric cancers.

AstraZeneca is a strong commercial partner. It has well established and extensive commercial platform on lung cancer business. There are a lot of synergies between ORPATHYS and AstraZeneca's other lung cancer products. We can see ORPATHYS also had a good start in the first 2 months of this year with USD 7.4 million in market sales.

So overall, we have had a very good year in 2021 and are off to a strong start in 2022. We expect this momentum to continue to go from strength to step as our commercial team continues to build over the balance of 2022. Thank you.

Thanks, Chen Hong. So now, we'll hand it over to Weiguo and Marek to take us through the discovery and development programs. Weiguo, Marek? You may be on mute.

I was. Okay. Good evening, good morning. Marek and I will give you an update on the pipeline.

Next slide, please. So 2021 was a busy year, a year with significant progress on our pipeline, highlighted by NDA approvals for savolitinib and surufatinib in China, NDA MAA submissions for surufatinib in the U.S. and EU, and at the same time, progressing our second wave of compounds, amdizalisib and sovleplenib into registration studies in China.

Next slide. Well, behind the initial approval of savolitinib in China, together with our partner, AstraZeneca, we are now shaping a very strong life cycle management strategy with seven studies with registration potential across lung, kidney and gastric cancers.

Next. Three of these studies are in EGFR mutant non-small cell lung cancer with MET amplification or overexpression using TAGRISSO savo combo, supported by POC data from TATTON, ORCHARD and the ongoing SAVANNAH studies.

Next slide. The SAMETA study is a global Phase III in MET-driven PRCC supported by strong data from the CALYPSO study in combination with IMFINZI. To date, PRCC patients have a poor prognosis and very limited treatment options.

Moving to surufatinib. Let me first ask my colleague, Dr. Marek Kania, Head of HUTCHMED International, to give you an update on the global activities.

Yes. Hi, everyone, Marek. On the surufatinib arm, we spent really the majority of last year progressing our regulatory process in addition to conducting our combination studies with number of combination partners, including the PD-1 with BeiGene.

As you can see on this slide, summarizing our package for regulatory commissions across U.S., EMA and in the near future, PMDA in Japan. We progress this package through regulatory process. Just as a reminder, this package consists of two positive Phase III studies conducted in China supported by the [first] package of U.S. patients from U.S. studies.

And as Christian alluded at the beginning, we are in the late stage review process in the U.S. in -- pending some remaining inspections in the clinical side as well as mandatory inspection arm on the manufacturing side. On EMA side, we passed 120-day assessment moving to late-stage review prospects.

Next slide, please. While we are progressing our review process, we're also, as Christian said, aggressively preparing for a potential launch, building a very capable medical team as well as very strong commercial team. Currently, 54 [as seen here,] and at launch was the 84, strong efforts led by Tom Hans.

Next slide, please. Next slide.

Okay. Yes. Life cycle management program for surufatinib is currently focused on PD-1 combinations. These are toripalimab in China and tislelizumab globally. Based on encouraging POC Phase II data, we initiated a Phase III, the SURTORI-01 study, in second-line neuroendocrine carcinoma, and we are preparing to initiate another Phase III in second-line esophageal cancer later this year. Other indications will be considered if more mature data would support.

Now moving to fruquintinib, next slide. Back to Marek.

Yes. Let me quickly summarize the huge efforts in 2021, progressing our fruquintinib program, which in addition to conducting our combination studies with also PD-1 combination, our majority of effort was focusing on successful execution of FRESCO-2, a global study. As a reminder, this is truly first Phase III global study conducted in 14 countries across 115 sites. I'm pleased to share that as of December, we reached full enrollment, and it just happened in 15 months.

So despite of pandemic and limitations, it was huge efforts from the teams, and we are grateful for physicians and patients willing to join this study. This really highlights high-unmet medical need, which was assumed before starting the study that also concerned and gave us high confidence. This study will complement our robust international package, which will be based on our upcoming NDA, MAA and PMDA submissions.

Just important statement to make, this package was fully aligned with U.S. FDA and EMA through scientific consultation as well participation of Japan will assure us our good start with PMDA submissions.

Next slide, please.

In China, we continue to expand life cycle management programs for fruquintinib. The FRUTIGA study in second-line gastric cancer, in combination with paclitaxel, is expected to complete enrollment in second half 2022 and top line results mid next year. Combination with the PD-1 inhibitor, sintilimab, currently second-line endometrial cancer is already in registration study with HCC and RCC registration studies to follow during 2022.

Moving on to our second wave compounds, amdizalisib, the PI3K delta inhibitor and sovleplenib, the SYK inhibitor, both with applications for hematology malignancies. Next. Speaking of the hematologic malignancies, we are building a very strong portfolio. To date, six compounds are already in clinics with several more in discovery. Together, the portfolio provides a broad coverage of three subtypes: lymphoma, leukemia and multiple myeloma with a diverse types of MOAs, a strong potential for combination. The two lead compounds amdizalisib and sovleplenib, progressing into registration studies in China and making good progress as well in global studies.

Next slide. The China multi-cohort Phase Ib study continues to enroll in MCL, CLL and PTCL. Follicular and marginal zone have moved into Phase II registration studies last year based on the favorable efficacy and safety profile data in follicular published at ESMO 2021. China CD granted amdizalisib a breakthrough therapeutic designation for follicular. We expect to complete enrollment for both indications this year and potential NDA submissions during 2023.

Additional indications will be considered for registration studies if data support. Several exploratory studies, including combination with tazemetostat, are preparing to start this year.

Next slide. Back to you, Marek.

Yes. On the global side, we are conducting parallel development for amdizalisib. And based on our initial promising results in the early phase of our development, we expanded significantly our ongoing study into more than 200 patients and other several cohorts, as you can see. We believe, in the second half of the year, we'll be in a very good position to not only having a more robust data set, but also longer follow-ups, which will inform our next phase development decisions. At the same time, we're also embarking on a combination of studies as we speak with several potential combination partners.

Next slide, please.

Continuing on to our Syk inhibitor, sovleplenib or HMPL-523, in addition to lymphoma, we completed a Phase I/II study in ITP last year. Syk is a validated target for ITP. As you know, fostamatinib was approved in 2018. Sovle is a much more selective Syk inhibitor and demonstrated a favorable safety profile with much improved GI and hypotension safety profile. The level of efficacy seen in this Phase I/II study was also very promising, ORR, 80% and durable ORR, 40%, albeit with small sample sizes.

Based on the favorable efficacy and safety, CD granted sovleplenib breakthrough therapy designation for ITP. The Phase III study is now ongoing. We expect to complete enrollment by end of 2022 and top line results in 2023.

Next slide.

On the global side for sovleplenib, as you can see, we are conducting a really parallel development as well. And this expansion cohort study in lymphoma is conducting as we speak. We hope to report more data by end of the year, which will inform our next phase development in lymphoma. At the same time, we are preparing IND for our nonmalignant indication in ITP, again, as Weiguo mentioned, based on promising signals from our China studies. Again, this part was the final development.

Next slide, please.

Okay. Just a quick update on tazemetostat. Tazemetostat is a first-in-class EZH2 inhibitor approved in the U.S. We believe EZH2 is an important target with potential for both solid and blood tumors. Last year, we entered into a collaboration with Epizyme and again, rights for Greater China. Obviously, our top priority is to bring it to registration in China quickly.

Currently, the bridging study IND in follicular has been cleared and this study is ready to go. A second registration study, the global SYMPHONY-1 in second line follicular will be starting off shortly as well. In addition, we are interested in exploring a broad range of indications, including in combination with amdizalisib, fruquintinib and surufatinib. Globally, we are also in discussion with Epizyme to potentially explore combination with amdizalisib in lymphoma.

Next slide. To sum it up, we are expanding our registration studies with our late-stage compounds, both in China and globally. We anticipate this to continue with more compounds reaching registration and approvals.

Next slide. At the same time, our portfolio continued to grow. Four new compounds entered the clinic recently. Our goal is to build a pipeline that can provide a good coverage of various tumor types with diverse MOS that allows science-based combinations of our products to further improve efficacy and maximize the value of our products.

Next.

Right. Thank you, Weiguo and thank you, Marek. Now we'll hand it over to Johnny Cheng, our CFO, to cover our high level, the financial results that were published today. Johnny?

Okay. Thank you, Christian. So next slide. Okay. We have a strong balance sheet, end of last year, with cash resources over $1 billion, contributed by cash proceeds from various sources, the IPO, the pipe and the divestment of our noncore OTC business.

Moving on to our operating results in the next slide. Group revenues, up more than 50% to over $350 million. The oncology revenue was in line with our guidance, approximately 4x of 2020 revenues. Our R&D investments, up over 70% to around $300 million. Investment in U.S. and EU have increased significantly and is now at the scale similar to China. The divestment of the OTC business, together with the income from the other ventures, have helped to offset of the R&D investment. As a result, the overall net loss of the group was $195 million.

Next slide, please. So on this slide, we can see there are still a lot of value within our other ventures. Looking at a high level, those businesses have delivered over $0.5 billion of net income in the last 20 years. So if we divest further the noncore business, it can help to fund our R&D investment in oncology.

Moving on to the next slide. Well, you all heard from Chen Hong, talk about the commercial progress that's been made and the momentum that continues into this year. We also see strong initial results in January and February. So as a result, our guidance for 2022 is $160 million to $190 million revenues from the oncology business. This is China only. So we will incorporate the global revenues in deal cost when we see the approval coming outside of China.

I will now pass to Karen.

Thank you, Johnny. And next slide, please. We're building a world-class leadership team at HUTCHMED in line with our ambition to be a global, innovative oncology biopharma company operating to international standards.

What's really notable about our team's leaders is their long tenure and their track record at HUTCHMED but also in other major multinational pharmaceutical companies.

Tom Held, our U.S. Commercial Head; and Selina Zhang, who joined us recently as our new Head of Global HR, and myself, as the Chief Operating Officer, have all joined more recently to fill in new roles in the company. And actually, there are many more highly experienced leaders who have joined us beyond the few that you can see in this white box on the slide.

Next slide, please. We've doubled the number of people in the oncology team in the last 2 years, and we've got plans to grow further. We currently have 1,500 people. And last year, we added more, particularly in clinical and regulatory, so that we can run our China clinical trial programs with an in-house team for better speed and quality as well as building out our international clinical and regulatory team to ensure we can run truly global development programs.

As you heard before, we've been expanding our oncology commercial team, and at the end of last year, we had 25 people in U.S. commercial. This now expanded to over 50 people in U.S. medical and commercial in anticipation of the launch of surufatinib this year.

Next slide, please. We've had clear success with our in-house R&D pipeline as evidenced by the 3 innovative medicine approvals in China, but scientific partnerships are also very important to us. From a business development perspective, we engaged in 4 key activities. Firstly, we have long-term strategic partnerships with multinational pharmaceutical companies, such as AstraZeneca and Eli Lilly.

Secondly, pipeline synergy collaborations as we really seek out the best novel combinations, for example, with Epizyme, Junshi, Innovent and BeiGene. We're also looking to partnerships to increase our bandwidth and finally, to gain new capabilities in oncology, for example, in the biologics area potentially through strategic acquisitions.

Next slide, please. We have a clear strategy from a geographical perspective. In the largest two markets, the U.S. and China, we will launch with our in-house team, whilst partnering out elsewhere. We have the cash and the resources to be able to commercialize ourselves in China and the U.S., which makes sense as we can retain the maximum economic value from our innovations.

We already have a strong commercial track record in China, and our U.S. team is moving forward now with seven clinical stage assets whilst also setting up our surufatinib launch team.

For the 3 late-stage products in the international team, we have clear registration plans in place for the U.S., EU and Japan with clinical studies underway, and we have the capability to self-develop in those regions. However, for commercialization in Europe, Japan and the rest of the world, we recognize the complexity with more than 100 different countries, each requiring in-depth local knowledge to be successful. And so we've chosen to look for strategic commercial partners outside the U.S. and China, starting with surufatinib and fruquintinib this year.

I'd now like to hand over to Weiguo.

Thank you, Karen. Next slide. Yes. So quick update on the upcoming events. In China, we expect 2022, a year of work with so many studies ongoing and 2023, a year of results and potential regulatory submissions. Obviously, we will be publishing scientific data along the year.

Next slide. Globally, 2022 will be a transformative year with important milestones to hit, including potential surufatinib approval and launch and fruquintinib with FRESCO-2 to read out and potentially file.

Next slide. To conclude, we expect the momentum to continue in 2022. China commercial will continue to grow and the U.S. set through stock. Development programs continue to expand with potentially multiple NDAs lined up for the coming years. And our organization is set to grow to support the execution of our goals in the next few years. So 2021 was a busy and fulfilling year, and we expect 2022 to be equally busy and exciting.

Next slide. Thank you, and I think we are ready now to take questions.

(Operator Instructions) Our first question comes from the line of Alec Stranahan from Bank of America.

And Christian, wanted to offer congratulations on your move. Obviously, quite a legacy you leave behind at HUTCHMED.

I guess two questions from us. First, could you maybe talk about choosing toripalimab for the SURTORI-02 study versus some of the other PD-1s, such as tislelizumab? Is there anything emerging from the clinical data that would suggest that these assets synergized differently with SULANDA or any of your other assets? And as a follow-up to that, when you think about the combination strategies going forward, how much of your approach will be on top of the approved therapies like PD-1s versus rational combinations in-house together with some of your earlier-stage assets?

And then secondly, could you talk a bit about what led to declining the NRDL inclusion for savo? I'm guessing this was about the balance of access, pricing concessions, but any color on your thoughts or Astra's would be great.

Maybe, Weiguo -- I think during the Q&A, Weiguo will lead it. But thank you, Alec, for your kind words. And maybe Weiguo handles the PD-1 questions and I can maybe give a couple of comments on savolitinib and NRDL.

Yes, sure. So yes, thanks for the question, Alec. SURTORI-02 is the registration study in esophageal cancer being planned and we plan -- anticipate the start sometime this year. Now the combination with tisle is actually in exploratory stage. Maybe Marek can give you some more details.

Yes, Alec, thanks for the question. We didn't go into details but both across fruquintinib and surufatinib, we have multi-cohort combination studies going on with tisle. So obviously, we hope, by end of the year, we'll be in position of formulating some good proof-of-concept data across several cohorts. We have colorectal, we have small cell, MET and so on. So we'll be definitely focusing very -- yearly on signals from the studies. A good question. From a U.S. perspective, obviously, that's our first priority.

Thank you, Marek. With regard to your second question, on our kind of preference for combinations, approved versus our own novel drugs, the PD-1s are really a window of opportunity that we pursued and really generated very promising data that now resulted in multiple registration studies.

But going forward, obviously, we would love to combine with our own products in our pipeline and want to address strong unmet medical needs. Obviously, all these combos will be a signed space as I was walking through the -- our pipeline chart, that our goal is really to design and build a pipeline with diverse MLA that can cover the tumor types and that offers the highest potential for science-based combinations. And I think going forward, you will see a lot more of such combinations.

Maybe Christian can touch on the NRDL for savo.

Thanks, Weiguo. Yes, it was a tough decision. AstraZeneca and HUTCHMED agreed, our strategy going into the negotiations for savo. The gap was just too wide. The regulatory authorities wanted a deeper discount than we were willing to accept.

One of the reasons that we didn't accept it is because savolitinib is a first-in-class asset in China. We're the only selective MET inhibitor in China. So until such time as that changes, I think we're happy to go self-pay with big patient access programs to help those lower-income patients access the drug.

My sense is that from a competition standpoint, unlikely to be anything coming to market anytime soon. So I imagine we'll go back to the discussions with the regulatory authorities for the NRDL discussion this year. And we'll go into it with an open mind, but it will be dependent on the competitive environment and a reasonable discount versus an extensive discount.

The next question comes from the line of Rajan Sharma from Deutsche Bank.

Christian, congratulations on your time at HUTCHMED, and best of luck for the future. My first question actually relates to the, obviously, the change in CEO. And just you mentioned that it was something that you informed the Board about 5 months ago. So just wondering why then the kind of immediate change in CEO as of tomorrow, and why there's no kind of longer transition period. Maybe I'll follow up with a second one afterwards.

Yes. Thanks, Rajan. I'll answer that, Weiguo. I mean none of these things happen overnight. I've been away from my home for 34 years. I, as I said, spent 27 years in China. I'm not sure there are too many Western executives that have spent 27 years in China. And as my family and my children have been growing up, it's been in the back of my mind. But I have to say, the move of my entire family to the U.K. just for their education, that really was the event that sort of pushed me to the point of realizing staying in Hong Kong and Shanghai for myself was not sustainable.

So yes, we approached the Nominations Committee and the Board in September, or I did. And we have an ongoing process, but we just sort of escalated the intensity of that process. It does seem, I'm sure to everybody that hears this news today, is quite a surprise. But obviously, it's a sensitive matter that we couldn't signal to the market until we were ready. And as we work through as a Board and concluded that Weiguo was the -- head and shoulders, the best candidate for the succession, we've now come with this as quickly as we could.

The reason for no extent transition is we feel that, first of all, you don't want to have the old CEO hanging around. It's even hard enough in an analyst call today, right? You certainly don't want it in the long term. But Weiguo has been deeply involved in all aspects of the business over the last 16 years. There's no need for a transition as it were, other than in my role as a strategic adviser to be there for Weiguo, to help him in any way I can with the areas that I've been managing independently over the last few years. And also to help the Board and Simon and the Hutchison Group to keep the momentum going. So I'll be there as a strategic adviser. And as a result, there's no need for some sort of extended transition. Hopefully, that answers your question.

Yes. That's helpful. And then just maybe one on operations and on HUTCHMED side of things. Just you've flagged in the release that you would look at obviously noncore asset divestments as a potential for future financing, but then also potentially a second -- or fourth listing in Shanghai. So could you just perhaps talk about your preference for either of those? And if you do choose to go for a Shanghai listing, would that mean that you would delist from another exchange?

Maybe I'll ask Simon To, to answer that question. Maybe Johnny to supplement, Weiguo, if that makes sense to you?

Yes. Absolutely. I was going to suggest. Yes.

Okay. Thank you. This is Simon To here. Yes, as you know, we divested off Baiyunshan -- the company. And it was a very good return for our investment in that company. We, of course, have these other [CCM] business in Shanghai. You know the one that is called -- we call it SHPL, but it sells the She Xiang Bao Xin, which is a cardiovascular prescription medicine. And this is a very successful company. And there are a lot of people wanting to buy this asset.

And we -- of course, we feel that we get an offer that is extremely attractive, we will consider it. And that would be very good for the existing shareholders of HUTCHMED. If we can raise a bunch of money, it's nondilutive financing. And then that would then make us very cash rich.

We have $1 billion in the bank now. We could queue that up, and that will give us plenty of run rate in order for us to apply for listing in Shanghai. So yes, that's what we are considering right now.

Johnny, any additional comments?

No. I think we will continue to discuss -- explore with the interested parties. And as our Chairman, Mr. To said, that this SHPL is a very attractive business. So there are many parties who are interested. And so we will be very selective.

And as far as the listing in Shanghai, I think we understand the process, have been extended previously, but now it seems that the authorities in China have been able to speed up the reviewing process. So we will again, go back and review the plan. And then if the timing is right, then we will initiate some of this initiative that we have looked into earlier.

The next question comes from the line of Louise Chen from Cantor Fitzgerald.

And Christian, thank you for all your contributions to HUTCHMED and good luck with all your future endeavors. So my questions are as follows. Can you help us think about the global sales potential of your oncology and immunology portfolio and how you plan to get there? And then on the cash balance, you have a very strong cash balance. What are your capital allocation priorities?

And then, last question I have is how should we think about the trajectory of the U.S. launch of surufatinib? What kind of sales should we expect to see this year? And what is the U.S. sales potential of this drug?

Okay. On the global sales, I'll ask Marek and Christian perhaps to take the question.

Yes. Thank you, Weiguo. So Louise, the -- this year's sales potential, we're not going to speculate on numbers. Everything depends on the timing of approval. And as you observe, dynamics with pandemic-related scheduling and PDUFA changes. We're not going to speculate when it will happen. We're still pending some inspections. So that all depends.

We will be ready to maximize our launch readiness and commercial activity post launch, and we are confident with our profile. This will be a good place in the setting. So you can obviously do your modeling in an appropriate way, but we feel very confident.

Overall, your second -- or your third part of broader portfolio performance. As you've seen, we are putting really robust efforts in the global development to maximize our global future commercial potential, starting from patients in line, robust clinical trials and bringing those patients, representing multinational reality of clinical practice.

With fruquintinib, we believe this differentiating profile has plenty of space to grow in third line class colorectal setting. And we feel very confident is now [expanding] top line results of FRESCO-2. Again, this space is highly underutilized from approved agents -- 25% of agents approved in this setting is in use. Everything else is (inaudible). So fruquintinib has plenty of space to grow there.

On the broader portfolio, obviously, it will be led by science and to maximize our position in respect of setting, focused on really bringing in clinical benefit and we believe that both the results of commercial success as well.

I will stop here. Christian, do you want to...

Yes. Thanks, Marek. It's a good question. I think we provide, in the appendices to our corporate presentation, quite detailed analysis of the global patient populations and the indications we're going after for fruquintinib and surufatinib. I think if you're modeling it, you can just assume the levels of pricing that you would expect for these targeted -- selective targeted therapies in oncology. Yes, obviously, fruquintinib and surufatinib have many hundreds of millions of dollars of global potential outside of China and inside of China as well. So we'd obviously hoped that both of these drugs become billion drugs. That's what our hope is.

On the capital allocation, you can see it. Johnny shared with you the financial results from this year, where the investment in R&D around our international activities have now effectively caught up with our investment in China in our clinical regulatory operations. So about USD 150 million each of R&D spend.

I would expect as the pipeline continues to develop, we'll see those continue to increase in both areas, but probably particularly outside of China. So that's how we think about it. But as Marek says, we allocate capital based on the science, based on the clinical data. And as we see exciting clinical data come forward, I'm sure we'll be allocating progressively.

Weiguo, any thoughts or comments on that?

I think in general, obviously, supporting R&D activities and expanding our manufacturing capacity and ultimately, and also building our organization further to support our goals, particularly on the globalization side. So I think these would be certainly our top priorities.

Moving to the third question with regard to the trajectory of the U.S. launch of surufatinib. I think Marek can probably shed some light on that.

Well, I can kind of addressed that. Obviously, depending on the timing of approval and obviously, our strong positioning, a few factors depends on the final label and the timing of sort of launch.

So rest assured, we are very aggressively positioned to maximize our 6 months -- first 6 months of launch trajectory, which is usually predictive of your overall success. And again, similar to colorectal, only less than 10% of patients are treated currently with targeted agents. So again, surufatinib profile has plenty of space to play.

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

First of all, I would like to -- sorry to see you leave, Christian. You have been doing great work for the company. And also to Weiguo, congratulations to be -- going to become the CEO of the company. Wish you the best.

And my question will be central around surufatinib and the FDA review process. So in your presentation, you mentioned the middle cycle, late cycle review meeting have been completed. So do we have any kind of -- any color on the meeting?

And also, manufacturing and the clinical site inspection is still pending. So I assume those are going to be virtual inspection? Was there BLA issue given in the recent days, I have seen some [clear competence] -- when they did some virtual inspection, there seemed to be some problem, and I just want to get a color with -- on the inspection side.

And then lastly, for surufatinib, if we got approved in the U.S., what could be the label will say, for second line or third line? Or how exactly will we expect the label to be?

Yes. Thank you. Weiguo, do you want me to address it?

Yes, Marek, go ahead.

So thank you for your question. So regarding your question number one, our ongoing review, obviously, I'm not going to speculate about outcomes nor sharing details of the review. But as you know well, regulatory review process is long, complex and robust. Sponsor has a role to play, and the regulatory agents have very important role to play. And this process needs to go to full completion in a multiple sets of engaging very collaboratively with agents, answering many, many questions. So that's what I can say. There's still definitely a few months to go through.

Regarding your question of the inspections. From FDA perspective, FDA does not like virtual inspection. So I think that's the reality of today. So which, as you've seen across number of sponsors and indications and applications as being in the backlog of inspection issues, including not just China-related, but also domestic in U.S. due to COVID limitations.

So you see trends that has been stopped. Even reacting to PDUFA has just -- they go through their workload. So we do expect that whenever possible, those physical inspections will have to happen. And obviously, we hope the regulations for the limitations in China to travel and move will be soon limited and allow those inspections to happen. A manufacturing inspection is mandatory process for FDA to complete. So obviously, we're already on both rounds, already issued our notification.

Your last question about labeling. The NET space is not really line specific. So as we indicated in prior information, we are -- our label is in advanced and -- both NET and -- epNET and pNET indication. So that's our ongoing review labeling. We will be receiving label and we'll be labeling discussions is still pending. So we're not there yet. But that was our strategic aim, and we continue to do that based on both SANET-p and SANET-ep studies. I hope this answers your question.

Thanks, Marek.

Okay. If I may, a quick follow-up. So also in your presentation, we showed when looking at the prior therapy, right, the China Phase III data still show some difference with U.S. bridging study, right? For example, if we look at prior everolimus use in China, the percentage is very low, and in U.S. bridging study, it's very high, close to 100%. Was that -- indicated some kind of standard of care difference between U.S. and in China?

Well, as we said, standard of care is broadly similar. Obviously, there are some differences to the timing of approval in China and the time of the conduct of the SANET studies, review limited access to targeted agents at some point and the timing of the approval. So when you look at the historical data of SANET studies, you will see some differences.

Keep in mind that bridging study across both pNET and epNET in the U.S. was conducted in a highly refractory population in line with the prior therapy with [up to 8 lines]. And so you will see obviously that population, I don't know point of creating full parallel that really demonstrating safety and efficacy data as well as the source for PK analysis, which demonstrated consistent results. So yes, you cannot compare one-to-one between a Phase III study conducted historically, even been before in a highly refractory population in the U.S. one, Phase I study.

With the refractory results, you see quite impressive clinical benefit in this highly pretreated population. That's what encourages us. That's what drove us to expansion actually in U.S. and Europe.

The next question comes from the line of [Chi Hua] from Jefferies.

This is [Chi Hua], Jefferies. I'm dialing in on behalf of Kelly Shi. And congratulations on a great year. I just have 2 quick questions. Number one, I think in January, fruquintinib showed a great data in Phase I metastatic colorectal cancer trial. Just want to understand whether the trial data will have any impact on the time line of your FRESCO-2 trial and also the maybe subsequent potential filing for NDA?

And my second question is your commercial buildup in the U.S. I understand your China commercial team has progressed very rapidly. Looking at the U.S. personnel on Slide 37, you showed 25 people in the commercial team in the U.S. Could you share your plan for your U.S. commercial buildup maybe this year and next year?

Yes, Marek?

Yes. So first question about fruquintinib. So now overall, we are very encouraged by results in our Phase I studies, both in cohort B and C, as you saw on the slide, which is consistent, again, making almost like FRESCO study population and the other cohort, non-Asian FRESCO-2 population.

To answer your question directly, no, it's not going to change our obviously, timing or trajectory of our ongoing efforts. And as I said, FRESCO-2 completed the enrollment. It's pending maturity in results. The FRESCO-2 study is event-driven, overall survival. We are expecting readout of that study in the second half of the year. Both Phase I study, which you're referring to, FRESCO study completed in China led to approval in China plus approval the entire package in addition to many other supporting projects. So what this Phase I study is giving us really confidence and consistency across different settings and also confirms our assumptions in our FRESCO-2 study, which is very encouraging.

To answer your question about commercial build, we are in a very active launch readiness mode. Actually cross-functionally, both commercial and medical affairs teams are working, as you see, very hard, and we're building up. The 25 was actually as of last year. Currently, the combined head count, as I showed, the 54 will be 80-plus head count.

Obviously, this build will continue to expand with our fruquintinib top line results. So the beauty and efficiency we have here is we are operating within the GI oncology space, mets as well as future colorectal. And there is a number of efficiency with the current existing very strong team on both commercial and medical affairs side, which will give us great trajectory for expansion based on our decisions in the second half of the year.

We feel very strongly and positive, confident that our size of organization, (inaudible) will launch first, will be as much in parity with the needs of highly concentrated coverage in academic centers, but also ready to interact with health professionals in the coming December (inaudible). I hope it answer your question.

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

The first, hate to see you go, Christian. Congratulations on everything you achieved with HUTCHMED, and also congratulations to Weiguo for assuming the leadership role. I just wondered on that point, given that both CEO and CFO will soon be taken on by you Weiguo, are there any organizational changes that have been made in R&D specifically to further support the CSO role? I mean clearly, it's been a dedicated, sole responsibility for Weiguo to date. I just wondered how that will potentially change organizationally?

Well, thanks for the question. We are actively evaluating several options, both internally and externally, with regard to the CSO role. And I think there will be organization change in the future.

Understood. Okay. I think there will a few lines there. And also I just wanted to follow on from Roger's question actually. I'm just wondering what the optimal global capital markets presence looks like for HUTCHMED, I'm just thinking about the proposed Shanghai listing given the listings already in the U.K., U.S. and Hong Kong. Is supporting 4 global listings a realistic expectation on your side over the future?

Maybe I could say...

Christian and Johnny maybe...

Yes. And I'll also let Simon and Johnny mention as well. But I think 3 listings is a lot. Obviously, we've mentioned during this call that we are evaluating other opportunities as well. I think it's not realistic to go higher than 3 listings.

But I'll hand it over to Johnny and Simon to say a couple of things.

Yes. Johnny?

Yes. So...

Go first, Johnny. Simon..

Maybe you go first. Yes, Mr. To. Sorry, you go first.

Yes. There's no -- at the moment, we don't really see an urgency to apply for Shanghai listing. I was in Shanghai recently. I went to the stock exchange. They did mention that, yes, we probably don't like to see 4 listing.

But at the moment, we have plenty of cash. We have also alternative financing possibilities, nondilutive financing possibilities. So there's no real urgency that we must go and get a Shanghai listing. Of course, we will look at which is the best for the shareholders. So yes, that's my answer at the moment.

Johnny, you want to say something?

Yes. No. I think this nondilutive financing is probably at a higher priority for us to look into. And there's no immediate -- the run rate in terms of our cash balance is more than 2 years, so -- which is average for all biotech company and which is healthy for us. And with also, our -- there's other ventures that we talk about potentially. If we can find a good buyer for that, I think that is something that we will focus a little bit more resources on.

And for Shanghai listing like Mr. To just mentioned, I think is -- we will continue to evaluate. And we will not eliminate that possibility, but it is not an urgent matter for us.

Understood. That's great. And congratulations once again.

We're now going to take the last 2 questions. And the next question comes from the line of John Newman from Canaccord.

I also wanted to add my congratulations to you, Christian. You truly built one of the leading biotechnology companies in China. And so congrats to yourself and, obviously, to the whole team. I just had one quick question really on the Syk inhibitor. Just curious if you could talk a little bit more about the time line for global development. And the reason I ask is we obviously have a Syk inhibitors improved in the United States, but your asset has a very interesting safety profile as well as efficacy. So curious about the time line for global development.

Yes, I'll first give you my thoughts, and Marek can chime in as well. So we are all very excited about the proof-of-concept data. Now China is in Phase III. We are considering the U.S. and global development activities for the Syk inhibitor. And we believe the data is very, very competitive. And obviously, with regarding time line, operationally, we are mobilizing. Maybe, Marek, you can chime in and provide some more details.

Yes. Thanks, Weiguo. So John, as Weiguo said, we were very encouraged by the profile, and we believe it can really stand out. Having said that, we are aggressively focusing on execution of the expansion cohorts, which this study was a little bit impacted by our, call it, limitations and slowdowns in the Phase I. So now we are catching up momentum.

So in the second half or maybe by late of this year, we'll have our cohort -- expansion cohort completed. And so these are doing data assessment and where we can take. We have to look carefully at our data, both in China and U.S. holistically, but also on separate, with some exposure difference. But as it come regulatory strategy prospective, we have a different dose in U.S. and China. So while we're having careful look into next phase development. But as you said, we are encouraged, as you intrigued. At the same time, we launch with -- we present -- we are taking forward our development for ITP indication as well. So overall, this program has quite significant potential.

The last question comes from the line of Matthew Yan from CLSA.

I just got a quick one for surufatinib. I understand that the Phase II trial readout likely to come by second half this year. And I wonder how we see the probability of that result. It causes -- support an NDA filing overseas? Or is this more likely you'd like to follow and give it after the Phase II trial separate? That's my question.

Are you talking about -- sorry, are you talking about Phase II gastric cancer?

No, he's talking about SAVANNAH, I think.

Yes, obviously, SAVANNAH is ongoing, and it's still -- but we believe the data is very compelling. And we'll be actually a -- warrants discussion with the regulatory authorities for potential registration for conditional approval. And -- the data is obviously -- the data continues to mature, and we'll evaluate if it warrants discussion with regulatory authorities.

And we are very happy with the level of efficacy. And that's why we are working with AstraZeneca to initiate the Phase III, the global Phase III in this patient population.

As I mentioned during my presentation that together with the data from TATTON, ORCHARD and SAVANNAH, forms a great base for -- a strong base for this SAFFRON study globally. But particularly for the opportunity in China for -- I mean, in the U.S. for conditional approval, we think SAVANNAH is very now strong, and we're just following the data very closely as it matures.

Since there are no further questions from the line, I will hand the session back to the host.

Well, thank you very much, all, and for attending the call and look forward to working with you all in the future.

Christian, do you have anything else to add?

I don't, Weiguo, just other than to say thanks, everybody, for your support through the years. And I wish all the very best of luck to Weiguo and the team going forward. And thank you all.

Thank you very much.

Thank you.

Thanks. Bye-bye.

Thank you.

Thanks. Bye-bye.

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