Good day, thank you for standing by. Welcome to the HUTCHMED Licensing to Takeda conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star one and one on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Mark Lee. Please go ahead.
Thank you, Nadia. Welcome, everybody. Good morning, good afternoon, good evening. you know, we're excited to talk to you today about this partnership we have with Takeda for fruquintinib development and commercialization outside of China. Today, we'll have a few speakers with us. Of course, Dr. Weiguo Su, our Chief Executive Officer and Chief Scientific Officer. Mr. Johnny Cheng, our Chief Financial Officer, Dr. Karen Atkin, our Chief Operating Officer, and Dr. Michael Shi, our Head of R&D and Chief Medical Officer. We also have, for questions and answers, Pallavi Garg, the Head of Global Oncology Products and Pipeline Strategy for Takeda. We're honored to have her with us as well today. Without further ado, I'll hand over to Dr.
Su to go through a few slides that you should be able to download and view from our website. Weiguo.
Okay. Thanks, Mark. Good morning, good evening, everyone. Welcome to the conference call. A few hours ago, HUTCHMED announced a collaboration with Takeda on fruquintinib development and commercialization outside China. This collaboration is all about bringing fruquintinib to patients globally and advancing our clinical development opportunities to maximize value of fruquintinib. Let's go to slide number 5. Number 4, I'm sorry. Obviously, as you are all aware of, this is the pipeline chart of HUTCHMED and fruquintinib on top. Today what we just announced is a partnership with Takeda for fruquintinib outside China. Let's go to slide number 5. This slide is basically a brief intro. fruquintinib is an oral kinase inhibitor targeting VEGFR 1, 2, and 3, and is highly selective against other kinases.
In clinical studies, fruquintinib has demonstrated a favorable safety profile with reduced off-target toxicities, allowing it to be combined with other anti-cancer therapies, including chemotherapies, targeted therapies, and IOs. Based on the strong clinical results from the FRESCO trial, fruquintinib was approved in China in 2018 for third-line and above metastatic colorectal cancer. Slide number 6, some brief information on CRC. Colorectal cancer is the third most common cancer in the world, with over 935,000 deaths in 2020. While progress has been made for tumors with actionable gene alterations such as BRAF mutations or MSI-H dMMR, treatment options are very limited for late-stage patients. Go to slide number 7. In China, fruquintinib was approved in 2018 based on the FRESCO results. It is now included in the NRDL for reimbursement and has become the patient share leader in China over regorafenib.
We expect a strong growth for fruquintinib to continue. Slide number 8. As I alluded to earlier, it's all about bringing fruquintinib to patients globally. In China, as I just introduced, it's doing extremely well. Behind the CRC, there are multiple registration studies ongoing to cover additional tumor types. Also, we completed a global phase 3 registrational study, an MRCT, which also demonstrated robust clinical benefit for late-stage CRC patients. Now we will be partnering with Takeda to rapidly bring it to patients ex China and continue clinical development for additional indications to maximize the value for fruquintinib. Takeda is a global pharma with very large footprint and very strong in oncology. Slide 9. Page 9.
The data we presented, the FRESCO-2 data we presented at ESMO demonstrated significant clinical value of fruquintinib for patients with late stage metastatic CRC. This study was carried out in over 150 sites in 14 countries. The survival benefit was highly significant with a very good safety profile, and these results were highly consistent with the FRESCO results in Chinese patients. Slide number 10, just for benchmarking. Obviously, these are not head-to-head studies. fruquintinib produced a very strong clinical benefit in heavily pre-treated patients and in FRESCO-2 study as well as FRESCO study, and across all efficacy endpoints, including overall survival, progression-free survival, and disease control rate. In the bottom here, looking at the safety profile, it is also quite favorable.
In the FRESCO-2 study, for instance, the discontinuation rate of fruquintinib is similar to placebo and grade 3 or above TEAEs are very similar as well comparing to placebo, suggesting fruquintinib is highly tolerated or very well tolerated in these late-stage patients and also clinical benefit in terms of efficacy is very robust. Now, slide number 11. Talking about financials. This collaboration with Takeda, as we just announced, consisted of an upfront payment, $400 million. The milestones including development, regulatory, and commercial, total is $730 million, and with tier royalties consistent with assets of this stage, which is NDA stage.
This collaboration will help accelerate HUTCHMED's strategy or vision about bringing our innovative medicines to patients worldwide, and also validates our high confidence in the future success and commercial opportunity of fruquintinib. Also accelerates and broadens development and potential commercialization of fruquintinib globally. Of course, these financials will add additional resources to advance our own and other pipeline products. Page 12. Some more details on the collaboration, including future development, manufacturing, and sales and marketing, covering all territories except for China, Hong Kong, and Macau. Regulatory filings for the late-stage metastatic CRC will be led by HUTCHMED and expect to be completed over the course of this year. Takeda is now initiating launch readiness and will be responsible for all commercial activities as well as further clinical development for additional indications. Slide number 13.
In a nutshell, we think Takeda is the right partner for HUTCHMED. The two companies are very complementary and have shared values and ambitions for fruquintinib. Next slide, number 14. Takeda obviously is a global pharma with $30 billion in sales or revenues in 2021, and a large presence in global major markets. Next slide. For oncology, Takeda has oncology hubs in 10 countries, R&D center in Cambridge, Massachusetts, and oncology manufacturing in 5 countries. Slide numbers, page 15 or page 16. Takeda is very strong in oncology, covering both solid tumors and hematologic malignancies, with a strong track record in successful launches of new products such as Exkivity and also Alunbrig.
In CRC, Takeda is also a strong leader in Japan with Vectibix and EGFR antibodies for earlier lines of CRC. Slide number 17. The fruquintinib, in addition to CRC, is being developed in China for many other tumor types, including gastric, endometrial, and renal cell carcinoma. Multiple registration studies are ongoing and expected NDA filings if studies are positive, are listed here on this slide. We look to capitalize on excellent efficacy and safety profile of fruquintinib. Finally, HUTCHMED, we believe, is well-positioned to deliver on our vision about bringing our innovative medicines to patients worldwide with 10+ NDAs in the next three years and a strong commercial organization in China. This collaboration with Takeda will help accelerate our strategy globally. I think we'll now move to Q&A. Lines should be open.
Thank you. Dear participants, as a reminder, to ask a question, you will need to slowly press star one and one on your telephone keypad and wait for a name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. This will take a few moments. Now we're going to take our first question. The question comes to line of Louise Chen from Cantor. Your line is open. Please ask your question.
Hi. Congratulations on the deal, and thank you for taking my questions here. I had a few questions for you. First one I wanted to ask you is, how do you think about the peak sales potential for fruquintinib in the U.S., Europe, and Japan? I guess you must have some idea in order to have reached the deal that you did. Secondly, where do you think it would fit into the treatment paradigm in these major markets, for example, like the U.S.? If it's approved, where do you expect it coming into play? The last one I wanted to ask you is, what did you like about Takeda's capabilities and infrastructure in these major global markets that drove you to sign a deal with them? Thank you.
Okay, thanks for the question. Maybe I'll do this, your last question first, and I'll ask Pallavi to chime in on the peak sales and so forth. As I kind of went through in my presentation, we think Takeda is the right partner for fruquintinib. Obviously, Takeda is a global pharma with very large footprint, and obviously they're also very strong in oncology, particularly, you know, their recent success in new product launches, you know, really demonstrate their ability to launch new medicines in various markets. Finally, Takeda is also very strong in CRC, which will be our first indication for fruquintinib outside China.
They've been leading the sales of Vectibix in Japan by far the best-selling EGFR inhibitor for earlier lines of CRC. You know, taken together, I think the other thing is, you know, really important is that, you know, throughout the discussions, we have talked to quite a few potential partners. Takeda stood out as, you know, clearly we have shared values and passion and ambition. I think it's really important. You know, the team chemistry is very, very important for the success of this collaboration. With regard to, you know, the sales forecast, obviously, you know, CRC being the first indication, we think CRC, as I mentioned, is the third most common cancer globally.
Treatment options are very limited for late-stage patients. There's a clearly a strong unmet medical need. Takeda is gonna mobilize all resources to support the launch and we think it's a very significant commercial opportunity. Behind CRC, the first indication, we're also evaluating to initiate additional clinical development programs for lifecycle indications. I'll probably now ask Pallavi to chime in here. Pallavi?
Thank you. Thank you, Weiguo Su. Very excited to chime in here. We are very excited to be partnering with HUTCHMED on fruquintinib. In the United States, in Japan, in Europe, the world over, as Weiguo Su mentioned, a tremendous unmet need, particularly for the later line all comers patient population, because this is a very high-incident tumor type, where while advancements have happened in the last several years, many of those advancements are able to benefit small patient groups of less than 15%, where the disease is biomarker driven. Fruquintinib, was, you know, uniquely exciting for us because of the potential to benefit patients in the refractory setting in the all comers patient population, regardless of biomarker type. I'll build on our commercial capabilities here at Takeda.
We have very solid presence in oncology, in heme, as well as solid tumors and state-of-the-art launch capabilities. In particular, one of the things that we have built recently and will be leveraging for the successful launch for fruquintinib is our hybrid commercialization models across the world. These include not just sort of your traditional face-to-face personal selling, but also very state-of-the-art data and digital driven next best actions, which will ensure that we get to the patients who need these medicines as quickly as possible and have a very successful launch.
I will not be specifically commenting on the peak sales potential at this point, but as you can see, there is tremendous unmet need and it's because of that, you know, we were convinced that this partnership was the right partnership for us at Takeda, to enable that we move forward in partnership with HUTCHMED, with a purpose of, you know, curing cancer and improving lives of patients. Thank you.
Thank you.
Thank you.
Thank you. Louise, have you finished with your questions?
That's it. Thank you very much.
Thank you. Now, I'm gonna take our next question. Please stand by. The next question comes to line of Alex Horgan from Bank of America. Your line is open. Please ask your question.
Hey, guys. Thanks for taking our questions, and congrats from me as well, on the deal. Two questions from us. First, just on manufacturing, could you remind us, I guess, where the clinical drug supply came from for the international studies? It wasn't totally clear from the slide, would HUTCHMED still be producing the commercial product, or would this be transferred over to Takeda and how would that process sort of look? Second question, just on label expansions, is there a desire maybe, obviously you're focused on advanced colorectal cancer currently, but, you know, would there be a desire to move fruquintinib to earlier lines in CRC?
I guess what would just sort of be the gating around, you know, what you need to see from the China studies that... you know, initiating those at the global scale? Thanks.
Yes. Thanks, Alex, for the question. Yeah, currently the clinical supply of fruquintinib is manufactured at our plant in Suzhou, in China. We plan to work together with Takeda going forward on the manufacturing and the supply. Will be probably a combination of our Suzhou plant and also a plant outside China as well. Yeah, we'll be working together on this very closely with Takeda. With regard to, you know, additional clinical development, yeah, earlier lines of CRC definitely are, you know, very interesting to us.
Obviously, you know, whether this is gonna be globally in combination with various anti-cancer therapies, including chemo and IOs. We are currently, you know, looking at the data generated in China, evaluating opportunities to look at CRC as a whole in different settings. Other tumor types, again, you know, we have multiple trials in combination with PD-1 ongoing in China. A few already in phase 3 registration studies and we'll be able to leverage both POC and also registration study data to kind of inform us the directions going forward. Thanks.
Great. Thank you.
Thank you. Now, I'm gonna take our next question. Please stand by. The next question comes to line of Mike Mitchell from Panmure Gordon. Your line is open. Please ask your question.
Hi there. Thanks for taking my questions. Again, congratulations on the deal. I just wanted to understand a little bit more about the respective responsibilities on the ex-China development of fruquintinib at this point and your exposure on costs at this stage. The regulatory process, I'm thinking, you know, that's obviously still underway in the region outside of China, although it's most advanced in the U.S.
You've also incurred the major costs on fruquintinib, given that FRESCO-2 is behind us. I'm still thinking about ex-China. What are the costs will you incur on fruquintinib ex-China from now? In aggregate, how much investment are you targeting for ongoing China development of fruquintinib? Thanks.
Okay, thanks for the question. Well obviously, Takeda will cover all the clinical and regulatory costs going forward. We'll be working together on the clinical development side in terms of indication selection, operation and but Takeda will be covering all the costs. As a matter of fact, we anticipate we will be transferring everything to Takeda, but given we have deep insight into the product, but also we have ongoing studies in China that will be generating data. We'll be working together with the clinical and regulatory team from Takeda.
That's great. Thanks, Weiguo. I'm just thinking about the China development, the ongoing China development of fruquintinib, in terms of sort of total investment that you might be targeting 'cause, of course, there are a number of different indications there as well.
Okay.
At this stage.
China is completely under HUTCHMED, and we have a partnership in China with Eli Lilly on the commercial side. All the studies currently ongoing in China are funded by HUTCHMED, and obviously there will be development milestones and so forth with Eli Lilly. Regarding the total aggregate, I think it's quite hard to predict because we have, you know, multiple trials ongoing in registration studies, but also in POCs. But all I can say is we are very confident about the product and its future success as well.
We are investing quite heavily and to ensure that we maximize the value of the product and also helping as many patients as possible.
That's great. Thank you.
Thank you. Now we're going to take our next question. The next question comes to line of Kelly Shi from Jefferies. Your line is open. Please ask your question.
Congrats on the deal, thanks for taking my questions. Firstly, could you talk about what the $713 million milestone in potential future milestones are tied to? Are these all sales in CRC-related milestones or some development milestones related to like, maybe even combo PD-1 combo or any other tumor indications also included? Secondly, where do you see the synergy of fruquintinib with Takeda's commercial pipeline? How does today's deal impact the future development plan of fruquintinib globally? Thank you.
Okay, thanks. Thanks, Kelly, for the questions. We are not going to break down the future milestones, but these will obviously cover, you know, additional lifecycle management indications or trials, so both clinical and also regulatory milestones as well as commercial milestones. Obviously, commercial milestones are not tied to CRC only. It will be total sales, tiered kind of at different milestones, of course. Your second question about potential synergy, I think, you know, Takeda has a very strong pipeline in solid tumors, including their recent launches of two products, two targeted therapies for lung cancer. I think, you know, we've demonstrated fruquintinib in combination with the EGFR inhibitors, TKI, TKIs, for instance, in the past.
Potentially we can explore combination with those therapies for lung cancer for those specific lung cancer patients. In CRC, obviously, they have very, they have, you know, they have panitumumab in Japan, where we can perhaps explore combinations there as well. So yeah, they're, you know, they have a very strong emerging pipeline and, you know, EGFR can be actually a backbone for many, many different tumor types, in combination with chemotherapies, targeted therapies, and IOs. So we do see potential for, you know, for, for the combinations with Takeda pipelines. So obviously need to generate, need to generate some exploratory POC data to support. Okay? Thanks.
Thank you.
Thank you, Kelly. Now we're going to take our next question. The next question comes to line of Yang from Credit Suisse. Your line is open. Please pose your question.
Hello, can you hear me?
Yes.
Yes, thanks. This is Yang from Credit Suisse, and congrats on the deal, and thanks for giving the opportunity to ask questions. I have two. First one is, kind of more broad question. Starting in November, China has this faster than expected reopening process and with the Omicron wave hitting a lot of hospital. I would like to understand from company's perspective, how do we see in November, December and also January, how China commercialization is going compared to last year the same period considering the Omicron wave? Second question is for, kind of Takeda.
I want to understand, since right now it seems to be in the U.S. and the EU, Takeda's drug is more for either blood cancer or for non-small cell lung cancer. Is Takeda going to build a kind of separate commercial team for fruquintinib once it's got commercialized, approved? If so, what's the size for this potential commercial team for fruquintinib in the EU and the U.S.? Thanks.
Okay. Thank you, Yang, for the question. I'll take the first question on the COVID situation in China. With the, you know, with the opening of the, you know, Obviously you all probably are aware of that, you know, China has gone through initial wave of infections and things start to calm down. Other than a very brief interruption with, because of a lot of colleagues were infected, everyone seemed to be back to work now. Going forward, we think it's actually gonna be positive.
It's gonna be good for the operations and also for our commercial team as well, since now, we expect that things start to get back to normal. Overall, we believe 2023, its impact from COVID will be much less comparing to 2022, when we had multiple lockdowns and clinical study, clinical trials and also commercial teams were severely impacted. 2023, we see much less of it. With regard to Takeda's plan for fruquintinib, for CRC, I'll ask Pallavi to comment.
Thanks, Weiguo. Happy to provide some more detail on our commercialization plan. Immediately upon the close of the transaction, our number one focus would be the commercialization and launch for fruquintinib in territories outside China and really worldwide. We have very strong commercialization capabilities, and we have shown in the past as well that we have a track record of strong partnerships. If you go back to our ARIAD deal in 2017 or you look back at the partnership that we've had with Seattle Genetics and Adcetris. Specifically for fruquintinib, when we talk about Japan, we know this market from a colorectal cancer perspective. We know this market really well.
As Wei you mentioned, we are present here with Vectibix, where we're doing extremely well. Moving on to U.S. and Europe, we have presence in solid tumors in lung. When you actually, you know, dig into the details of the U.S. market, particularly the community setting in the United States, where many of these colorectal cancer patients are treated, there is a heavy overlap between the treaters for lung cancer and the treaters for colorectal cancer. We have those relationships, as well there. In addition to that, we have leadership, including myself, who has been in the colorectal cancer market before and deeply understand the unmet need in this market and the patient experience and what we have to do to launch, you know, a medicine as promising as fruquintinib, you know, successfully.
Because of all of that, we are very excited and confident that we will use our state-of-the-art launch capabilities to make this medicine available as quickly as possible to as many patients as possible across the world. As I mentioned earlier, we will be leveraging our hybrid commercialization capabilities that include not just personal selling and promotion, but also data and digital levers. Thank you.
Thank you.
Thanks a lot.
Thank you.
Thank you. Now we're going to take our last question. The last question comes through line of Kyuwon Choi from Goldman Sachs. Your line is open. Please ask your question.
Hi, this is Roderick for Pao. Thanks for taking our questions, and congratulations on the deal. Maybe just a couple of questions from us. The first one is, since you mentioned, the manufacturing will be still part of China and probably part of by Takeda. What will be the timing on the FDA inspection in China since China has already reopened? The second one is, are there any other limiting steps for the regulatory submissions? The third one is, with the $400 million up from cash, can you provide a view on your current capital position and maybe now you have a better sense on profitability in futures? Thanks.
Okay. Thank you for the question. With regard to inspection in China, obviously this will be after the NDAs are accepted. We, you know, we've worked very hard in the last few months to prepare for the inspections. We expect, obviously we'll be, you know, during the course of this year leading to the approval, both clinical and manufacturing PAIs. We just have to stand ready whenever we are notified of, and we'll be ready for the inspections. Yeah, with... as you say, with COVID policies now removed, the zero policy removed and it's completely opened up, we don't expect any issues.
With regard to the capital position, I'll ask our CFO, Johnny, to make some comments. Johnny, please.
Thank you, Weiguo. As in June 2022, we have announced that we have over $800 million cash on hand. Obviously we have invest more in the second half of this year. We will be announcing our cash position at year-end in a few weeks' time when we announce our year-end result announcement. With the additional $400 million, we are aiming to maintain a high level of cash position similar to what we had at the beginning of 2022.
Going forward, as Weiguo have mentioned that with the strategy that we have now adapted that overseas investments in particular in fruquintinib, will be responsible by Takeda and hence, we will be able to reduce quite a lot of investment outside of China for fruquintinib. We will be aiming towards this sustainable position to hopefully to reach our target of a break even in the near future.
Okay. Thanks, Johnny.
Thank you so much.
I think this will wrap up the session.
Yes.
So sorry, just the last comment. Our IR team will stand ready to take additional questions through email or other calls going forward. Thank you.
That does conclude our conference for today. Thank You for participating. You may now all disconnect. Have a nice day.