Name call. This is Yi Chen, China Healthcare Analyst at Goldman Sachs. Before we kick off the session, I would like to highlight that this call is strictly for clients of Goldman Sachs and Hua Medicine only. This conversation is not intended for the media and is off the record. Participants will be removed from the call if they cannot be properly identified. This webcast is not for the purpose of sharing or receiving non-public otherwise confidential information. Attendees are public and market participants who may not receive, mention, or request non-public otherwise confidential information about issuers or securities or about the market for securities. Joining today's call, Hua Medicine management team, including the Co-founder and CEO, Dr. Chen Li, and the EVP and CFO, Mr. George Lin.
Company's gonna give us a briefing on the results, you know, particularly Hua Medicine, this is the 1st year into commercialization, so there has been a lot of updates here and also in terms of R&D progress. We're gonna open the line for Q&As. If you have any questions, you can raise your hand in the Zoom app, and we can definitely connect you into the call, or you can actually type your questions into the Q&A box, and we can ask the questions on behalf of you. Now, I'm gonna turn the call to the management team to get started. Dr. Chen, please.
Great. Okay. Thank you, everyone. Thanks to Yi organizing this conference. Pleasure to meet you discussing Hua Medicine's 2022 annual results. This disclaimer, as we are Hong Kong Stock Exchange-listed company. A quick overview on our business. I think starting from April 2021, our NDA for type 2 diabetes submission get accepted. We gone through.
Hey, Dr. Chen, I think we are losing you.
Hey, Dr. Chen, you might want to stop your video sharing. That'll increase your bandwidth. Still can't really hear you.
Probably before our technician can fix that, George, you wanna continue?
Yeah, I can do this. Very quickly, you can see that in starting in April 2021, as Dr. Chen was saying, our NDA was accepted by the Chinese NMPA. We presented a lot of data, as you can see at the ADA. Most significantly was that dorzagliatin can regulate GLP release in addition to the activation on GKA. In preparation of approval, we signed a supply chain strategic cooperation agreement with Sinopharm. Very importantly is everybody knows that GKA focuses on glucokinase, which is on the beta cell. What's the benefit of improving beta cell function? Well, the benefit is that we were the only drug that's shown in a controlled trial, remission rate. We reached 65%, and we announced this as well.
A lot more preparation for commercialization, such as increasing scale of manufacturing with WuXi STA, as well as publishing in Nature Medicine as we continued to await approval from the NMPA. In October 2022, the approval for the NDA came, as you guys have seen. A very broad label, actually, approved for 2 indications and 3 allowances. We'll talk about that. Very quickly, which is, I think one of the fastest, especially for a chronic disease, oral drug introduction in China, we were able to get it onto the market in less than a month. By the end of October, we were able to launch.
In addition, we acquired this new company called AscendRare, based in Nanjing, but the founder is actually one of our old friends from UPenn Medical School, who worked with Franz Matschinsky, the godfather of GKA. He's working on GK inhibitors in rare diseases, and so this was a very great opportunity for us to do that. In January 2023, we received additional milestone payments, as we've announced in our press release, of RMB 400 million from Bayer. This bolsters our cash position.
We'll talk about that. In January 2023, right before Chinese New Year, we were able to resume normal commercialization because actually, our 1st batch that we launched and put on the market in early October, that actually was basically within the 1st week, we knew that we would have problem meeting the demand, so we actually put it on a controlled sale. We announced in February, we announced the first 4 months of sales or the first 3 months of sales, so effectively November, December and January, that we had sold 148,000 packs, which ends up being a recorded revenue of $49 million. That's an audited number, and it does include 1 month in 2023.
Different from the financial year 2022 results, but this gives you a sense of the momentum, and we can go into more detail about that. Dr. Chen, are you back?
Yeah.
S till can't hear you. Maybe you wanna dial back in on your phone for the voice. I'll just continue. As we all know, the key thing about diabetes is there's a misperception that this disease is taken care of. Actually, it's a global medical need, right? As we've talked about in the past. I mean, there's 8 classes of drugs, not counting insulin and not counting GKA. If there's so many new drugs after insulin, why is insulin still the largest market share of drugs? Why are people still concerned about accessibility of insulin? It's because a lot of these drugs don't focus on the underlying cause of diabetes.
At the end, their efficacy is gonna wear off, and you're gonna end up with insulin. All of them are designed to actually treat the symptom of diabetes, which of course is important, but the key beauty of the Glucokinase Activator is that this is the 1st time that a drug is designed to try to restore your autonomous ability to restore blood sugar levels. You know, these charts all kind of show you that despite the fact that people think diabetes is under control, expenses are going up. Population of, you know, diabetic patients, especially in emerging markets, is skyrocketing. It's all due to this loss of glucose homeostasis, right? Which if you have a broken glucose sensor, then of course you're not going to be able to maintain glucose homeostasis in a optimal timeframe.
Next slide. Dr. Chen, next slide. Whoever's in control. Yes. Okay. Again, you know, we kinda touched on this earlier, but you can see that dorzagliatin is a differentiated 1st in class anti-diabetic drug. The key thing is that it focuses on the glucose sensor by increasing glucose sensitivity of these disease patients, right, who have lost glucose sensitivity. By doing so, it improves beta cell function. In all of our published reports in Nature Medicine and phase III trials, in The Lancet, even from phase II, we've been able to show that this improvement in beta cell comes with it a very important element, which is insulin resistance decline. We're able to actually decrease the insulin resistance of patients, which is another hallmark of Type 2 diabetes.
In addition, as we look and mine into our data, we've noticed that actually glucokinase actually is beneficial in GLP-1 secretion. GLP-1 is obviously a very important, currently, new drug class, but those are exogenous GLP-1 that comes with it associated side effects such as nausea, diarrhea, vomiting, et cetera, for about 20% of patients that take it. Actually what we're talking about here is inducing the body to secrete endogenous GLP-1. Of course, this is all a function of glucose level sensing, there's a lot of published reports that you can get on our website, or you can contact our IR to look at the data that we've actually published, which is very interesting.
The latest 1, by the way, was just published, I think, in March or February, indicating our combination with sitagliptin and goes extensively into the GLP-1 as well. Next slide. Again, the way to actually induce remission in Type 2 diabetes is actually improving early phase insulin secretion. This is one of the key factors in glycemic remission. It's one of the things that is missing from all the other classes of drugs that we were talking about. Nobody else has been able to induce remission. Remember, just to clarify again, right? For us, the remission was over a 52-week period.
For patients in our phase III monotherapy trial, these are earlier phase Type 2 diabetic patients that participated in our phase III trial, either on the drug for 28 weeks or 52 weeks, they were in remission for a following 52 weeks without any drugs. That's a 65% remission rate versus actually all the other drugs have done this in other trials and have not been able to do it. The only study that has been able to show some sort of remission is actually this DiRECT study, which requires significant weight loss, weight loss of 15 kilograms. That's actually quite difficult for most people to do.
We've seen that with surgery, for example, bariatric surgery and significant weight loss could actually induce diabetes remission, but no other drug has been able to prove this. This chart here, this 1st phase insulin response, was actually a part of our data. You can see actually it does improve this 1st phase insulin response. The people that were able to do this actually corresponded quite directly with remission. Next slide. Again, this is more data that we've seen, that we've been able to mine in our both our SEED and DAWN studies for effective glycemic control.
You know, 43%-45%, which is really, really great for an oral drug when you compare it against all the other, available oral drug, available. Dr. Chen?
Yes. Now can you hear me?
Oh, much better.
Okay.
You go ahead.
Thank you. Thank you.
There seems to be an echo.
Yes.
Let me mute.
We are-
That's better now. That's better now.
Right. Here, we are talking about the different indications where the overall objective for having dorzagliatin and advanced it into the market, really representing a novel breakthrough from the drug, which is approved by NMPA. One of the very important factor that the current NMPA is fully committed to the ICH guidelines and also conducting clinical studies, adopting the close to 95% of the ICH related processes. I think this approval also represent a opportunity and the capability of, in China, in the regulatory agency, to review and approve a globally first-in-class molecule, in China.
It is not just a breakthrough to treat diabetes through restoring the impaired glucose homeostasis, a very novel concept that George has basically discussed before. It is also showing that we are moving into the right direction of controlling diabetes. It's not just lowering the blood glucose, reduce your body weight. It's restore the biophysiological function of our body to control the blood glucose, and then we can reach the remission without medication. That's a very important step forward, and this has happened in China. Now, with this approval in the drug label, this restoring impaired glucose homeostasis in type 2 diabetes patients are clearly written down and very well published in the NMPA website.
We also get 2 indications in this pivotal phase III study, SEED and DAWN study, with the very well-designed study protocols and execution. With 1 real organized practice in phase III, we got 2 indications for monotherapy in treatment of drug-naive type 2 diabetes patients, which allow us to treat the diabetes patients who are just diagnosed and then still under the diet and exercise management, their blood glucose need control. The other group of patients are really, they have been using metformin for years. Average in our study, roughly about 6 years on that. The full dose of metformin cannot control their blood glucose.
For those subject, they can add dorzagliatin HuaTangNing to metformin and then get a blood glucose control. This is 2 indication, we have 3 allowances, which means that in the diabetes kidney disease patients, we can use dorzagliatin to control the blood glucose without adjusting of the dose. As many of you know, diabetics usually develop the complications called diabetes kidney disease. They start losing their kidney function toward dialysis. Now, dorzagliatin did not involving the excretion of the kidney so that the drug can be used directly for the kidney dysfunction patients without changing the medication schedules and very different for all the other antidiabetics. That's the advantage.
We have 2 other allowances basically allow dorzagliatin to be combined with the oral drug sitagliptin, the DPP4 inhibitor, or with the empagliflozin, the SGLT2 inhibitors, to better control blood glucose and also improve the β-cell function and then homeostasis. I think dorzagliatin launched with a well-designed, targeted price. Now we already getting very good feedback from the patients who are using dorzagliatin and benefiting from the improvement of the β-cell functions, and then try to reduce the post-meal glucose and then reduce the hypoglycemia. In that way, we better control the blood glucose fluctuation and then restore the homeostasis.
Now, if we look at the performance in the commercialization in early this year, end of January, we basically sold 148 thousand packs, and then generate revenue around RMB 50 million. I think this representing one of the best launches in the history for our oral drug during the out-of-pocket self-paid stage. I think we are also moving into the production capability expansion to further support and our commercialization this year. We are doing the expansion capabilities and together with our commercial supplier, WuXi AppTec, and also our API and then commercial supplier, Jiuzhou Yaoye.
So that we will ensure the fast ramping opportunities during the sales and commercialization, working very closely with Bayer, who expanding their sales capabilities from 100 salesperson into 500, then pushing the hospital frontline from 500 to over 1,000. This is the efforts that jointly between Hua Medicine and Bayer to move our product into the hand of our patients. There is another very important channel contributed to our commercialization process. This is the digital pharmaceutical business platform championed by the internet drugstores. Hua Medicine has been following the guidance from NMPA on the pharmaceutical internet management routines and standards.
Now we will be able to get HuaTangNing through Jingdong, through Yiyaowang. If you are interested, certainly within mainland China, you can easily go to Jingdong and then type in HuaTangNing, and then get the access to the physicians online, and also getting the disease discussions and so on, and then getting the prescription and eventually the drug for the treatment. This symbolize another major advances in the healthcare system for the chronic diseases, patients can subscribe and obtain the medicine in diabetes or hypertension, so on, to be accessed and getting the help from the internet drugstore.
Now, quickly, update on our R&D pipeline, with the HuaTangNing approval and then the allowed indications in the DKD combination with DPP-4 and the SGLT2. I think, we got 2 major indications, 3 allowances now enter into the market that patients can get their treatment under the guidance of the physician. It is a prescription drug, now we have 3 channels to access the drug from the hospital, from the pharmacy, from the internet pharmacy. I think, that representing a huge advances in the R&D drug discovery development innovation in China, but also continue the reform and opportunity in the pharmaceutical market. We are, at this time, continue to looking to the combinations in the fixed dose with dorzagliatin and other oral antidiabetics.
The molecules and the tablets are in the preparation to getting to the IND. Remember, any of this fixed dose combination with dorzagliatin will become a new drug. We are working with our partners and then define our development processes, and hopefully that will bring in additional benefits through the fixed dose combination, eventually lead to the personalized diabetes care. Now, with dorzagliatin launched, we want to bring in the 2nd generation of dorzagliatin, where it should have a once a day therapy and also be targeted in as effectively in the Western diabetes community. As we all know, diabetes in Eastern community symbolized by losing their beta cell function early.
In the Western community, they start to gain weight and then increase the insulin resistance as their fundamental cause of the disease. Given dorzagliatin acting on the pancreas and liver, and is important to manage the hepatic insulin resistance by improve the glucokinase activity and the expression level in the liver, we're able to restore the impaired insulin resistance in the Type 2 diabetes patients. This kind of studies are currently in planning, we are advancing the 2nd generation of GKAs into a IND filing toward end of this year. We are also looking to the way of developing glucokinase as a technology platform. GKA is a allosteric activator of glucokinase. It bring the glucokinase activity up when its function is down in Type 2 diabetes patients.
We find that in some patients, like the congenital hyperinsulinism, and this type of patients, they have a high insulin secretion related to a genetic variation of high activity of glucokinase. We're now developing molecules to regulate this type of glucokinase activity, and then eventually to help the patients in the hypoglycemia arena. As we already discussed, we have a fructokinase inhibitor program now in good shape. We have several chemical classes, recently file our patent and now working in the animal model to define the applications and the future indications in the metabolic diseases. We are also advancing the glutamate receptor active allosteric modulator program in the CNS indication.
Animal models are being developed, reflecting the joint events from the ionic glutamate and metabolic-Glutamate receptors and through the both system and how glutamate is actually contributing to the neurodegeneration diseases. This study, together with the glucokinase for hypoglycemia are currently working with Professor Changh ong Li, the CEO of Ascend Rare in Nanjing. Joint efforts between Hua Medicine and Ascend Rare now is the fully owned subsidiary of Hua Medicine and continue to drive forward in the drug metabolism area. We'll talk a little bit on the outlook. Most of the discussions we have done in the past, but here we summarize the outlook into 2 sessions. 1 is the R&D part.
I think, 2nd generation of the GKA, as I already mentioned. Now we are preparing to file IND in the US this year. Also, we have the plan to complete the phase I research next year and then eventually, through this process, we'll get our business development partners together in developing this drug in US and European communities. I discussed glucokinase inhibitors for the rare disease, congenital hyperinsulinism, hypoglycemia. This is the very innovative approach that Dr. Changhong Li is championing. We feel that this fitting to our glucokinase regulation platform and then expanded our capability of managing glucose homeostasis.
With HuaTangNing good results and also its mechanistic study recently published by Juliana Chan and Elaine Chow in diabetes this year, showing dorzagliatin direct acted on GK in MODY2 patients. The second study we work with Professor Chan and Elaine Chow is called a SENSITIZE study, in which impaired glucose impaired glucose patients, we call the IGT patients, were involved in the study together with normal glucose tolerant patients in the study to evaluate the difference in the endocrine and into the beta cell function to set the basic understand of the difference in the IGT and NGT patients. Through the intervention of dorzagliatin, we'll be able to develop the new indication for dorzagliatin in the diabetes prevention. That's the research we call the IGT to NGT.
In this current situation reported by International Diabetes Federation, there are somewhere between 500 million to 600 million pre-diabetics, they share a very common disease feature that is a highly and quickly elevated post-meal glucose, which we mean the impaired glucose tolerance. The fast rising post-meal glucose has a lot of impact in the cardiovascular system and also microvascular system that lead to the diabetes complication that George discussed at the beginning of this talk. We believe through the combination work with dorzagliatin, we can move to the patients with moderate diabetes and eventually severe diabetes, preventing and then delay their diabetes complication.
For the HuaTangNing, working to the IGT patients will be able to prevent the progression of IGT into diabetes, and also release the potential risk of the high blood glucose fluctuation in this IGT patients. Now, a quick summary about our outlook in the commercialization. I think we have a very strong sales working with Bayer now to cover more regions and hospitals. We also going to work more Tier 1 distributors and provide a better contribution in the e-commerce and internet driven sales commercial, as well as supporting the hospital and the regional pharmacy by the Bayer's team.
We are working very hard as a matter of fact to increase our capacity at WuXi at the same place where dorzagliatin API is manufacturing and also expanding to a new partner to make sure our API supply can meet the needs for our patients in China and potentially in the future the Southeast Asian regions. We are preparing the NRDL entry this year and then study and preparing the dossiers and the materials prepare for the filing in June, July timeframe.
Obviously, I think, we are also working with many KOLs and then the leading investigator HuaTangNing during the phase III, talking about post-marketing studies so that we're able to collect more data on HuaTangNing and its benefit and safety to the patients. I think, I'm give together with George the overview and forward looking on the business, and George will provide you the financial review.
Great. Thanks, Dr. Chen. We can go to the next slide, right? Perfect. Exciting to report that finally on our financial report, we're starting with revenue sales due to the commercialization. That's a wonderful event for us and our shareholders who have supported us. As you've seen in the announcement, our cash balance as of the end of 12/31/2022 was RMB 490 million versus RMB 675.2 million for the previous year. 1 key thing, look at the note at the bottom of this and also in the announcement, is that in mid-January, we received another RMB 400 million of cash for approval and commercialization milestone payments that was due to us from Bayer.
Now remember, before this collection of this milestone, there was over RMB 4 billion of milestones. This comes as one of the first ones. That will add to our cash balance that you see here. The total cash decrease was RMB 184.6 million. You know, the actual recorded accounting, cash decline used in operation activities was RMB 230 million, split pretty evenly between R&D as well as G&A. Then for the first time, we actually have selling expenses, which will increase. Let's talk a little bit more about that on the next slide. On the next slide, this is interesting, and I'll give you some data that's in the announcement, so that you can see it clearly.
For the year ended 12/31/2022, we sold approximately 53,000 packs of HuaTangNing, and that generated sales of about RMB 17.6 million. If you just do the math, that means that each pack is about RMB 331 per pack to us. Earlier you had seen the retail price, what the patient would pay on online channel like Jingdong or Yiyaowang is RMB 420, but, you know, for our recording, less all the distribution costs, et cetera, it's RMB 331. The reason why I wanna give you that data is going forward, we'll be reporting packs. Packs, each pack, remember, is 28 pills per pack, so it's RMB 15 right now per pill. You have to take it twice a day, so it's RMB 30 per day.
Remember, we haven't entered into NRDL yet. These sales number, as Dr. Chen has mentioned, is basically unseen for an oral metabolic chronic disease drug introduction that this kind of receptivity was done. If you look at, for example, Farxiga. Farxiga was introduced in China in March 2017, at actually RMB 15 per pill, just like us. If you look at the IQVIA data for the first 4 months, it's nothing like this. The key to this kind of good sales is being able to be across all of China, which we are nationally, as Dr. Chen mentioned, already in 500 hospitals, 70 distributors, in addition to that, pharmacies and 2 online channels. Taking that time before the NDA to really let people understand why this drug is different.
The patients, especially if you go online, as Dr. Chen mentioned, if you go online and just type in HuaTangNing, it's amazing to hear the forum that's going on and the very benign and safe and tolerable profile. People are taking it and really excited that there's minimal side effects. This is the sales. Through December 31, 2022. We did also publish in February sales from launch to the end of January 31, 2023. That gives you an extra month. For that period of time, as Dr. Chen has already mentioned, it was 148,000 packs generating revenues of approximately RMB 49 million.
You can see actually in January, if you just subtract the 2, in January, you're looking at around RMB 31 million of sales that is completely out-of-pocket. We think this number is probably a little bit high because as Dr. Chen mentioned, when we launched the drug within the 1st week, we knew that we did not have enough initial supply to be able to keep on ensuring continuous supply for those patients that are going to take it every day. We restricted select new patients from getting the drug until we can ensure that supply. That supply and manufacturing batch, as Dr. Chen had already mentioned, came right before Chinese New Year, mid-January. It was very, very high pent-up demand.
That gives you a sense of kind of the sales and the receptivity that we're getting across the entire country, which is really rewarding for us. The gross profit, this number will keep on changing because the sales revenue was quite low for the year 2022. Of course, we have to invest a lot in building up our inventory, and we're building up a lot more capabilities and a lot more investment in working capital as Dr. Chen and the team negotiate about potentially entering the National Reimbursement List. We can't tell you with certainty that we'll end up in it. It all depends on the pricing. Of course, in anticipation of that, the sales would increase substantially.
This gross profit right now, I think is not really meaningful just because we only had, you know, 2 months of official commercial launch, and even during that period, it was restricted sales of our certification batches, right? The 53,000 packs. That gives you some sense of the revenue and the gross profit. Again, we look forward to reporting our commercial sales in the half-year report, which should be quite exciting as well. The next slide. Selling expenses of RMB 15.3 million. If you look at how we piece it, RMB 5.8 million is for employee compensation. That's actually our team. That will increase, but it will plateau at some point. The RMB 8.2 million is the partnership with Bayer, right?
The partnership with Bayer, this will continue to increase with sales. The 1.3, again, will plateau. These will not be as significant. What will be significant will be this promotion expense because effectively, we're using Bayer's commercial force to really penetrate deeply throughout all of China, their hospitals and the pharmacies and be able to do that. Our R&D, a lot of our R&D will be decreasing. You'll see this trend. We expect to decrease probably a little bit more, but also hit a plateau as we invest in the glucokinase programs with AscendRare, as well as working on our 2nd generation, working on our low-dose IGD to NGT items. Those will be R&D.
In terms of like the manufacturing and for Plazomicin, dorzagliatin in the past, those expenses are done with the approval. Now a lot of the CMC is actually all embedded in cost, right? You know, going forward, this is how you should look at it for us. Then the last slide, the next slide is administrative expenses of RMB 129 million. This will remain fairly stable. We don't expect to really ramp up on this. We don't need to, given that Bayer is absorbing a lot of the sales costs. Our infrastructure is in place, this will continue to remain fairly stable around this RMB 120 million sort of range going forward. As to conclude, as Dr.
Chen mentioned, 2023 will be a year of investment and scale-up. You know, we'll be investing, preparing for the NRDO. Those are our most important things. Bayer is responsible, and that partnership is going very good. They will be responsible for making sure we penetrate all over China. I would say with this type of receptivity and welcome launch, success breeds even more success. They're very excited about actually mobilizing all of their cardiometabolic, renal sales force to jump on this. You can imagine salespeople are very excited to work on this drug, which of course, will end up at a premium relative to others and more money in their pockets with the sales targets that they have to do.
It is very exciting to see this initial but early data, and commercial receptivity. With that, I will stop and maybe have time for a few questions. Xi?
S ure. Thank you. Well, investors, if you wish to raise questions, you can type your questions into the Q&A box or raise your hand.
You know, I'm probably gonna start with a few questions first. I think, when the product hit the market, definitely, people gonna be, you know, curious about this year's NRDL strategy, right? When you trying to get into NRDL when, you know, there has been a lot of different diabetes drugs there, at a really low price. I mean, Forxiga now is also pretty cheap. What could potentially be your pricing strategy, to get into NRDL potentially later this year?
Also we try to understand a bit more about the initial feedback from physicians when after they're using this drug, particularly how does that gonna fit into the algorithm for diabetes treatment when all the doctors have all the different options available to them and, you know, for patients, they have any say on picking which drugs?
I will, you know, Ziyi, asking a very good question. Think, give you the thoughts and some of the actions been taking. One of the discussions recently at a different level, which related to the innovation, and then innovation-driven economy and topics of setting up the mechanism in the market to support the continued development and growth of pharmaceutical innovations and in drug discovery research. As well as the infrastructure, the improvement of regulatory capability and assumptions. Right.
The country is moving toward a innovation-driven economy and where the recognition of an NRDL drug price, especially for the innovation drug, is very low or comparatively low in general, so that there are approaches to address the reward to the innovation drug like HuaTangNing. Those are the ongoing processes and the discussions. At the same time, we preparing the dossiers that enlightening the reason why HuaTangNing deserve a good price and which is also affordable price to the patients, they need this drug. Obviously, we need to address to the broader community is why we need HuaTangNing.
Why can't we just eat old drug and why this old drug hasn't been able to prevent the high rate or incidence rate of stroke, cardiovascular diseases, kidney diseases, and why collectively in China, our health condition now is not, you know, 20% being healthy. It's somewhere about 5% being healthy if the patients suffer from diabetes. The diabetes and diabetes complication will make a big impact to the China economy and also the central government strategy of Healthy China 2030. We don't have a lot of years to get 2023, and we need to act on the using the effective drug, using the good medication and the algorithms to really help the medical community and the patients.
That's 1 part that we're preparing for the first time. Remember, this is the first time a real global innovation, the first-in-class drug and launched in China first, right? We are the champions, we are the pioneers. We have pioneered many policy changes practiced in the MAH. Is one of the first company getting to the MAH system, one of the first group of company getting to the patent expansion program, one of the first company getting to the e-commerce sales through the web stores, will be the first few companies that lead continual reform in the government policy, in the reimbursement system and promotion for the innovation.
We are very confident that we will get the reward for our innovation in China. The 2nd question is really related to the feedback. We have set up a post-marketing pharmacovigilance system and closely monitoring the feedbacks through our 4800, this instead of 1800, it's a 400 hotlines. The hotline basically helping people to find the drug, find the drug store where they can buy drug, and also asking questions of how to use drug and if there is an uncomfortness or potential adverse event. So far, I think overall, the report on the instance is very low of subjects or patients using the drug.
Also, we have got people telling us the reason they switch over from the other drug to HuaTangNing because the other drug generate some intolerable side effect, like infections in the urine tract and diarrheas and or discomfort, the GI side effects and so on. They switch over to HuaTangNing, and then they see their post-meal blood glucose and drop down right away and also avoid from those nasty side effect. I think that's pretty much in line with our expectations that patient will immediately benefit from the post-meal management and also get away from the side effect or intolerability of the other diabetic medication.
The third thing is still many people want to try our DREAM study, right? They want to take the drug for 3 months, 6 months, and then they want to see if their beta cell function get improved and their blood glucose fluctuation get smoother and at the end of the day, whether they can reduce the dose and then eventually get rid of the drug. Many smart patients, they've been testing a different type of antidiabetic drug once it get on the market and then they are very engaging and they have, as far as I know, the so-called patient study groups and together with physicians and pharmacists to help them to managing their blood glucose.
Overall, we are obviously working with our medical teams and then especially the teams from Bayer, and the physicians and from the Bayer, and then collecting more data as we're moving along, as the drug be used for a prolonged treatment period of time. I think a good time to do this assessment is in by the middle of this year, since the programs now are following monitoring is setting up in 111.com as a flagship online store for dorzagliatin. On there's the informations about the medicine and also the opportunity to interact with the physicians and so that the physician also can follow up with the patients to get their medical needs. Thanks.
George, you want to add on?
I think that's right. I think, you know, Zhiyi asks all the excellent questions, especially on the physician algorithms. I think the label is really exciting, and the data, which has been extensive, has very minimal side effects, right, as compared, you mentioned SGLT2. On the side effects, I mean, it's very clear there's UTI side effects, which is quite prevalent. With GLP-1, there's nausea, vomiting, there's even a black box for cancer, right? People kind of gloss over that, but as a patient, you take that seriously if you get the side effect, if you feel nauseous and don't feel like eating anymore. I think, you know, it is an easy drug to get into and the effect is so benign, and then the therapeutic effect is there. Those are the hallmarks of a blockbuster drug.
If you think about Lipitor, you think about metformin, right? You don't really feel it, but from a therapeutic perspective, it's working, it's helping. With real world evidence, we hope to compile even more benefits. One of the cool things about this oral drug is we actually expect to see even more benefits, like Dr. Chen was saying about remission. First thing is a drug holiday, right? Maybe you take it for 6 months and then you have a drug holiday, you go on a lower dose. These are things that people are just trying on themselves with the consultation of their physicians. It's very rewarding to see this.
F or sure. Thank you. Is there any guidance on 2023 sales numbers? You know, people definitely gonna be curious about how big the drug could be, but, you know, 1st full year sales is gonna be really important for investors to get the visibility of the drug potential.
Ziyi, you know we can't give specific estimates that. It's still early days. Dr. Chen and I would argue that the most important thing for a chronic disease drug where the patients don't immediately, you know, die like in cancer, right? What you really want your 1st year is to make sure your question on the physician algorithm and everything is embedded throughout the medical community, that they feel good about it, and that we're covered throughout all the hospitals, and then the sales will follow. If we look at the old Farxiga and Trulicity launches, we are multiples ahead with our current sales. We're getting IQVIA data for the first time. We'll make that available when it's ready, but we're like way ahead, we're past them. As Dr.
Chen said, you know, the goal is to get in excess of over 1,000 hospitals, you know, distributors, way up there, and then pharmacies and online continue while monitoring side effects, right? Not to slow down the momentum. To give you a sense, I mean, I think that RMB 31 million in January, it has some pent-up demand because initially we had to control it. Doing a 30 million times 12 is not. I don't think that's necessarily realistic. I think if you're talking about in excess of 200 million, right? With, you know, who knows, 80,000 to 100,000 patients, et cetera, and we don't really have that data because Bayer has it.
I think, you know, that's a very, very strong target, above 200 million sales, you know, for a drug that hasn't entered NRDL. As you mentioned, if you go on Jingdong.com, you can get metformin for RMB 1.6, you know, per pill, right? Our drug is RMB 15, which is RMB 30, and we're still generating this kind of receptivity. If you think about it, RMB 30 per day, that's quite expensive. How many people actually drink Starbucks coffee in China? It's cheaper than a Starbucks coffee, and this is for your health. I think, you know, we can't give you specific estimates, but the good news is we did give reported numbers, both for, right, the 2 months, November and December, which is for the fiscal year 2022.
You get to see this additional sale in January, and you can kind of make your assumption about that. That's probably as much as we can give. Dr. Chen will definitely be excited to give even more data at the half year report. Right now, you know, the key thing is to make sure we can meet this demand. The supply issue is where our resources focused on, is to make sure we can keep on sending these batches.
Sure. In terms of the capacity and production side, could you also update us on your own in-house manufacturing capacity? You know, potentially in the future, let's say 2023, 2024, what percentage is gonna be in your own facility and what percentage is gonna be manufactured by WuXi AppTec? Is there gonna be any of the, you know, supply chain issues beyond 2023?
I think this has always been a discussion among ourselves and then our partners, CROs. Remember this is a 3-stage commercialization manufacturing process. First, we need to address the API, the active pharmaceutical ingredients as a chemical compounds, and the ultimate production capability will reach 200 metric ton. For any of these cancer drug, and I don't think they will never consider, you know, a ton scale manufacturing is already a lot, right? We are talking about 100 metric ton of APIs and then materials. The most important part and then the really limiting step of address the commercialization is the API synthesis and then manufacturing.
The good thing is, at beginning, roughly about 10 years ago, we evaluating 3 company who are involved in the API development, and now we have 2 of them with us. 1 obviously is WuXi Hequan, right? Who is now our key suppliers of our API and then spray-dried formulation intermediates. This spray-dry technology basically form making dorzagliatin embedded into a biopolymer, and that biopolymer can help dorzagliatin get absorbed in the upper intestine and then quickly reach to the target in the intestine, in the pancreas, in the liver. Very important formulation technology that allow us to address the homeostasis issue because we need to address the GK function issue in those 3 organs and then synchronize the signal.
That technology is also initiated at WuXi AppTec, and then eventually now we have the line of capability device to do that work. This year, WuXi is going to add another line of the spray dry technology online to support our expanded needs in the API for next year and the year beyond. The 2nd manufacturer on the API I mentioned is the Zhejiang Jiuzhou. We started work with them back to 2017, now they got another spray dry machine. That machine has a capacity or produce our formulation intermediate to 60 metric ton scale. Now adding the 2 at WuXi, where is 20 metric ton per scale, and then 60 here at Jiuzhou, collectively, we have a 100 ton API capability.
That's 1 part, very important. We're fully managing this process and the interaction, collaboration went really well. The other is the pill manufacturing, right? The final pills is manufactured at Desano, and their capacity currently is expanding close to 700 million tablets. For Hua Medicine, our own facility, and when we're talking about by 2025 or do 10 billion, 1 billion pills and so on, and all those can be easily managed through the Desano and Hua Medicine's capability. The final tablet manufacturing is not the limitation. It's the APIs and an early stage of the spray dry technology, and the products is what the current limitations all about.
As I mentioned, the investment has been put it in over the years. This year, we put RMB 15 billion investment into the 2 production lines, together with our CROs, so that we will be able to ensure our overall commercialization.
Got it. That's, that's good to know. I think there's, you know, probably 1 more question on that is, you talk about the R&D strategy, our new R&D strategy, talking about next generation, 2 nd generation GKAs. We try to understand a bit more about that, you know, how different it could be compared to the 1st generation dorzagliatin. Also, I think previously, company has been talking about a lot of different fixed-dose combinations with some of the existing different therapies. Looks like you're not mentioning that in this year's slides. Is there any changes on the strategy? Overall, you know, question for, you know, on the financial side, it's gonna be, probably Josh can answer that, is what's gonna be the budget for R&D?
2022, we do see a notable decline in R&D expenses given some of the completion of the trials. This year, how should we think about the R&D budget? Going forward, how should we think about the R&D trend?
Well, let me answer that first while Dr. Chen can answer, you know, the differentiation with 2nd generation GKA. If we go to the pipeline slide, if we can flip there, Xie, we actually have not given up on fixed-dose combination. The reality is right there. It used to be multiple, but now we just put them all in 1. As you remember, we do have fixed-dose combo patents. These are NCEs, right? New chemical entities with patents that go out to at least 2039 for metformin, for sitagliptin, and also for, I wanna say it's empagliflozin as well. We have it for other potential compounds as well. You got metformin, which is approved on the loose dose, right?
DPP4 and sitagliptin, which we got allowances for, and SGLT2 and empagliflozin. These are there. The reason why we haven't mentioned it as much and haven't initiated it is, as you know, this would require at least, right, 60, 70, 50 million RMB to do a phase III in China, right? It would be about $200 million in the United States. We would wanna find a partner. We would wanna do that with an international partner and then use that to expand outside of China. That's the current still strategy. I think as we get more responses back and see that the effects are very beneficial for these combos, perhaps we have a higher chance. That high barrier international is the key thing. We will not do this. Dr. Chen has mentioned this before.
We will not do this on our own, partly because we want international KOLs to feel like they own it, and number 2 is this big investment. You're not gonna see that from our current needs as well. Same thing on your question on R&D. There won't be that much in 2023 or 2024. Simply because our trials will be fairly early. If you, if you look through the outlook again, you'll see that we're doing phase I trials, IND. These are small. We can easily absorb that. We're gonna see R&D pretty much at the same level unless we find a partner and then that will be off balance sheet funding by them. Dr. Chen, you wanna talk a little bit about the 2nd generation and how it's different?
I think the position is very simple. As we're moving along with 1st generation, and we have a very good proof of concept, and also have developing the biomarkers, and then type 2 diabetes sub classification algorithms and technology. I think with the global trend moving diabetes into the personalized treatment and then eventually target on the remission instead of body weight loss, we need to have a different molecule, have different chemical structure, so get a new patent and also a new optimize the manufacturing capabilities and reduce the cost of good. At the same time, we'll be able to address the pharmacokinetics and dynamic issues and become a once a day therapy.
In that, as George mentioned recently, I have just published a paper in Nature Communications showing dorzagliatin can repair the lost function of glucose-stimulated GLP-1 release. That's the endogenous GLP-1, produced and corrected by dorzagliatin. We would like to improve the GLP-1 effect in the new generation of GKAs, and then at the same time maintain the ability of the synergy between the pancreas and the liver, so that they will offer a better support in the diabetes care. Just have this analogy, you know, in the GLP-1 area, the first in class molecule is twice a day Byetta, right? The chief flagship molecule is liraglutide. That's a once a day injection.
Of course, after 10 year on that work and then now we have a 3rd generation once a week therapy. You can see GK as one of the leading platform in the homeostatic control will continue to expand and then lead a sway for the 2nd and potentially a 3rd generation of molecules that are eventually going to cure the diabetes.
Just to reiterate, Zhi, we will not increase R&D significantly, right? Unless there's another BD movement or corporate finance. There's no need. We are investing in low risk or 0 risk, you know, high profit harvesting. We don't need to do, you know, that kind of thing anymore with this. There's plenty of growth opportunity.
Sure. Great. Thank you. Well, I think, we're actually running out of time and, we actually, it's already more than 1 hours. Any final comments and wrap up comments from Dr. Li or George?
Dr. Chen, you wanna go ahead?
I think, thanks again, for Zhi and then investors joining the call. I think Hua Medicine is transitioning from a R&D company into a commercial company, and the team has prepared, and we are engaged in finding innovative ways to help our patients in China. I think China is a big market and then big opportunities so that we can work together and then bring a better health to the nation. Thanks.
Great. Thank you. Well, we're definitely looking forward to see, you know, more milestones coming, particularly on the commercial side, for dorzagliatin in the coming quarters. Looking forward to probably half year results and, see what's gonna be the commercial wrap up. Thank you very much for joining the call. Thank you, Dr. Chen and George for sharing all those insights. We're gonna wrap up call here. Thank you. Have a good day.
Okay. Thank you. Bye-bye.