HUTCHMED (China) Limited Q4 FY2022 earnings call

Strategic Changes: Made significant strategic changes in 2022 to focus on profitability. ### Pipeline Progress: Fruquintinib had positive Phase 2 global registration study FRESCO-2, with NDA submissions planned for 2023. Second wave of products like Sovleplenib, Amdizalisib, and Tazemetostat in registration trials in China. ### Partnerships: Revised commercial partnership strategy for fruquintinib, announced licensing agreement with Takeda for global development, manufacturing, and commercialization outside China. Partnership with AstraZeneca for Sovleplenib with seven registration studies ongoing. ### R&D Updates: Next wave of compounds entering clinical for registration trials. Fruquintinib showed positive results in CRC and gastric cancer trials. Sovleplenib, Amdizalisib, and others in advanced clinical stages with registration trials ongoing.

The oncology business recognized $164 million of revenue, up 37% from the prior year. In China commercial, ELUNATE had sales revenue up to $93.5 million with 32% growth, 32,000 new patients treated; SULANDA achieved 178% revenue growth despite a 52% price reduction, with around 17,000 new patients treated; ORPATHYS had 160% growth for its full commercial year, with in-market sales value up to $41 million.

Oncology Revenue: Guidance for 2023 oncology business revenue is $450 million to $550 million, including partial recognition of $400 million upfront income from Takeda. ### Profitability Target: Target to be profitable by 2025, with royalties from ex-China sales of partner products (fruquintinib and Sovleplenib) expected to contribute starting in late 2024 and 2025. ### OpEx: Operating expenses in 2023 expected to be similar to 2022, with synergy and cost reduction in U.S. due to partnership with Takeda.

Regulatory Risks: Uncertainties related to the regulatory submission and approval processes for various products. ### Partnership Risks: Dependencies on partners for global development and commercialization, which could impact timelines and outcomes.

Q: Regarding HUTCHMED's commercial infrastructure for oncology franchise, have you achieved optimal targets in terms of number of covered hospitals and healthcare providers? And when do you expect the company to become profitable?

A: We are around 900 FTEs supporting oncology products. Target to be profitable by 2025.

Q: Which was for the rolling submission for fruquintinib? And on amdizalisib, the follicular lymphoma readout?

A: We already started rolling submissions for fruquintinib. Amdizalisib finished Phase 2 follicular lymphoma enrollment and anticipating a readout later this year.

Q: Management has just guided for this year, oncology revenue will be 450 to 550 with some partial recognition of Takeda upfront payment. Can you give more color on how you're going to recognize partially?

A: The accounting recognitions would take into account performance obligations, with partial recognition in 2023 and some in 2024. Product sales expected to have high double-digit growth in 2023.

Q: What are the likely steps regarding the SEC and the U.S. accounting oversight issue?

A: FDA from the PCAOB have reviewed and we believe no further negative news, with auditors working on assessing revenue recognitions.

Q: Since you already started the rolling submission for fruquintinib in the U.S. and have you heard any FDA feedback on the submission?

A: Submission is ongoing smoothly with first modules submitted, targeting to finish other modules in the first half of this year.

Q: Regarding the supplementary filing for second-line gastric cancer for fruquintinib, what's your view on the primary endpoint of PFS?

A: The trial design was agreeable with CDE, and PFS is considered sufficient for submission based on trial data reflecting practice in Asia.