HUTCHMED Reports 2023 Full Year Results and Provides Business
Updates
Revenue grew 97% (102% CER) to US$838
million, with net income of US$101 million
First U.S. FDA approval of our
self-developed medicine, FRUZAQLAâ„¢ (fruquintinib)
Sovleplenib for ITP accepted for NDA
review in China, with Priority Review status and Breakthrough
Therapy designation
Hong Kong, Shanghai & Florham Park,
NJ - Wednesday, February 28,
2024: HUTCHMED (China)
Limited ("HUTCHMED", the
"Company" or "we") (Nasdaq/AIM:HCM; HKEX:13), the innovative,
commercial-stage biopharmaceutical company, today reports its
financial results for the year ended December 31, 2023 and provides
updates on key clinical and commercial developments.
HUTCHMED to host results call and webcasts today
at 7:30 a.m. EST / 12:30 p.m. GMT / 8:30 p.m. HKT in English, and
at 8:30 a.m. HKT in Chinese (Putonghua) on Thursday, February 29,
2024.
All amounts are expressed in U.S. dollars
unless otherwise stated.
Strategic: global vision, commitment to patients
and path to self-sustainability
·
Executed our global vision of bringing our
innovative medicines worldwide, as demonstrated through the
Takeda1 partnership which brought $435 million in
upfront and milestone payments plus manufacturing income and
royalties on net sales, setting a strategic example for the rest of
our pipeline.
·
On track to be self-sustaining with a
disciplined approach to leveraging our R&D2 expertise and creating value through licensing
and commercialization.
Pipeline: fruquintinib global and China
expansion, sovleplenib China NDA3 review, savolitinib NSCLC4 enrolled
·
Fruquintinib U.S. FDA5 approval three weeks ahead of
PDUFA6 date for third-line
CRC7,
leading to a swift launch by Takeda, inclusion in
NCCN8 guidelines and U.S. in-market sales9 of
$15.1 million. Global
regulatory progress with MAA10 filing to the EMA11 validated in June 2023 and NDA submitted to
PMDA12 in September 2023.
·
Fruquintinib NDA for second-line gastric cancer
accepted for review in China. Registrations studies in China for 2L
EMC13 and 2L RCC14 completed enrollment during 2023 for
fruquintinib in combination with sintilimab, expecting NDA filing
to the NMPA15 for EMC in early 2024 and topline results for
RCC by end of 2024.
·
NDA for sovleplenib, a novel
Syk16 inhibitor, for primary
ITP17 accepted and
granted priority review in China, supported by data from Phase III trial
(ESLIM-01), meeting all endpoints.
·
SAVANNAH, the pivotal global Phase II trial for
savolitinib in NSCLC, completed enrollment, to be followed by potential NDA filing to the
U.S. FDA by AstraZeneca18 around the end of 2024.
Outlook
and financial: expecting strong product revenue growth and reduced
expenses; substantial cash
·
Total revenue up 97% (102% at CER19)
to $838.0 million for
2023, with Oncology/​Immunology consolidated revenue up 223% (228%
at CER) to $528.6 million at high end of guidance, including
recognition of $280 million of the upfront payment from
Takeda. Net income attributable to HUTCHMED of
$100.8 million.
·
2024 Oncology/Immunology
consolidated revenue guidance of $300 million to $400 million,
driven by 30% to 50% growth target in marketed product sales and
royalties.
·
R&D expenses focused
in line with strategy
targeting key projects.
·
Strengthened cash balance, with $886.3 million
at year end (2022: $631.0m), ensures
HUTCHMED is well placed to deliver on its
objective of becoming a
self-sustaining business.
2023 Full Year Results &
Business Updates
Mr Simon To, Executive Chairman of
HUTCHMED, said, "We
have made significant progress throughout 2023. We executed against
our commitment to bring our innovative medicines to patients
worldwide with the U.S. FDA approval of FRUZAQLAâ„¢ in November 2023,
while remaining dedicated to becoming a self-sustaining business.
The Takeda partnership, which is one of the biggest small-molecule
overseas licensing deals in the history of China biotech,
strengthened our cash position by $435 million. Takeda delivered a
successful U.S. launch within 48 hours of approval, and has
subsequently seen strong early patient uptake."
"We will
continue to deliver on our strategy in 2024. We will stay focused
on our target of becoming sustainable through our balanced strategy
of growing sales of our novel medicines in China, and advancing our
medicines overseas with our partners. This, when combined with our
other goals on pipeline progression and further business
development, means that while the global macroeconomic environment
remains uncertain, HUTCHMED is positioned to thrive and continue to
deliver innovative medicines to ever more patients around the
world."
Dr Weiguo Su, Chief Executive Officer and
Chief Scientific Officer of HUTCHMED, said,
"HUTCHMED delivered impressive
financial results in 2023, with revenue up 97% to $838 million.
This, alongside our significantly strengthened cash balance of $886
million, will enable us to continue advancing our pipeline and
successfully executing our strategy."
"2023 was
an important year for HUTCHMED, particularly for fruquintinib, for
which we filed market authorization applications in the U.S., EU
and Japan, based on the successful FRESCO-2 study. Following the
U.S. FDA approval for third-line patients with advanced CRC, we
continue to work together with Takeda to pursue additional launches
in new markets worldwide. In China, we also filed an NDA for
second-line gastric cancer based on the FRUTIGA study."
"Another milestone was the successful ESLIM-01
registration study in China in ITP patients for sovleplenib, our
first potential novel medicine in immunological diseases. The NDA
was accepted and granted priority review by the NMPA in January
2024. There are over 250,000 new and existing adult ITP patients in
China20. The treatment options are limited to steroids
and TPO/TPO-RAs21, representing an unmet medical need that
sovleplenib could help address, with its new mechanism of action
and favorable safety profile. Syk inhibition has the potential to
target other major diseases such as rheumatoid arthritis. We are
also planning to initiate clinical development of sovleplenib
outside China in 2024."
"For savolitinib, we completed the confirmatory
trial in NSCLC patients with MET22 exon 14 skipping alterations. An NDA submission
is expected in the first quarter of 2024, with potential to expand
the label indication to include first-line patients in China.
Outside China, we will continue our work with AstraZeneca on the
pivotal global savolitinib lung cancer trial SAVANNAH, which,
subject to favorable data, can support a filing to the U.S. FDA for
approval. This study completed enrollment with a potential NDA
submission towards the end of 2024 in EGFR23 mutant NSCLC patients who progressed on
TAGRISSO® treatment, which received U.S. FDA Fast Track
designation in January 2023. We believe the convenient dosing,
targeted efficacy and safety profile of savolitinib as an oral
medicine in combination with TAGRISSO®, the leading oral
third-generation EGFR TKI24, should position it well in a competitive
market and address the unmet needs of MET+ NSCLC
patients."
"Our China commercialization efforts progressed
well, as we successfully renewed NRDL25 coverage for both fruquintinib and surufatinib
without further price reduction. Their in-market sales saw strong
growth in 2023. Over the next two years, we plan to continue growth
in China through expanded indications and the launch of new
products together with revenue from FRUZAQLAâ„¢ overseas
commercialization."
I. COMMERCIAL
OPERATIONS
Total revenue increased 97% (102% at CER)
to $838.0 million in 2023 (2022: $426.4m), driven by the Takeda
partnership, our strong commercial progress in China, and growth in
third-party distribution sales, resulting in a net income of $101
million for 2023.
Oncology/Immunology consolidated revenue
were up 223% (228% at CER) to $528.6 million
(2022: $163.8m); towards the high
end of our guidance, driven by recognition of $280.0 million in
partnering revenue for the upfront payment, $32.0 million for U.S.
FDA approval milestone payments from Takeda, and our strong product
sales growth resulting from in-market sales up 28% (35% at CER) to
$213.6 million (2022: $167.1m);
·
ELUNATE® (fruquintinib China)
in-market sales in 2023 increased 15% (22% at CER) to $107.5
million (2022:
$93.5m), reflecting its continued lead in market share;
·
FRUZAQLAâ„¢ (fruquintinib U.S.) in-market sales in
2023 were $15.1 million, reflecting its U.S. launch in November
2023;
·
SULANDA® (surufatinib) in-market
sales in 2023 increased 36% (43% at CER) to $43.9
million (2022:
$32.3m), reflecting its growing market share after two years on the
NRDL;
·
ORPATHYS® (savolitinib) in-market
sales in 2023 increased 12% (19% at CER) to $46.1
million (2022:
$41.2m). Sales in the first quarter were impacted by customary
channel fluctuations ahead of its NRDL inclusion on March 1, with
the subsequent three quarters of 2023 up 30% compared to the same
period in 2022;
·
R&D services income up 116% (119% at CER) to
$52.4 million (2022:
$24.2m), now also including fees from our new partner Takeda for
the management of regulatory activities;
·
Takeda upfront payment of $400.0
million received, of
which $280.0 million recognized in revenue during
2023, with the
remainder to be recognized when services and performance
obligations are completed; and
·
Successful management of commercial
operations to expand coverage of oncology hospitals and physicians,
despite challenges from COVID-19-related disruptions around the
start of the year, and from an anti-corruption crackdown of the
healthcare sector in China in the second half of 2023. Hospital
access and related activities became more restricted, but improved
starting in October 2023.
$'millions
|
In-market
Sales*
|
Consolidated
Revenue**
|
|
2023
|
2022
|
%Δ
|
(CER)
|
2023
|
2022
|
%Δ
|
(CER)
|
ELUNATE®
|
$107.5
|
$93.5
|
+15%
|
(+22%)
|
$83.2
|
$69.9
|
+19%
|
(+26%)
|
FRUZAQLAâ„¢
|
$15.1
|
-
|
-
|
$7.2
|
-
|
-
|
SULANDA®
|
$43.9
|
$32.3
|
+36%
|
(+43%)
|
$43.9
|
$32.3
|
+36%
|
(+43%)
|
ORPATHYS®
|
$46.1
|
$41.2
|
+12%
|
(+19%)
|
$28.9
|
$22.3
|
+30%
|
(+37%)
|
TAZVERIK®
|
$1.0
|
$0.1
|
>700%
|
$1.0
|
$0.1
|
>700%
|
Products Revenue
|
$213.6
|
$167.1
|
+28%
|
(+35%)
|
$164.2
|
$124.6
|
+32%
|
(+39%)
|
Other R&D services
income
|
|
|
$52.4
|
$24.2
|
+116%
|
(+119%)
|
Upfront and milestone
income
|
|
|
$312.0
|
$15.0
|
|
|
Total Oncology/Immunology
|
|
|
$528.6
|
$163.8
|
+223%
|
(+228%)
|
Other Ventures
|
|
|
$309.4
|
$262.6
|
+18%
|
(+24%)
|
Total revenue
|
|
|
$838.0
|
$426.4
|
+97%
|
(+102%)
|
* = For ELUNATE®, FRUZAQLA™ and
ORPATHYS®, mainly represents total sales to third parties as
provided by Lilly26,
Takeda and AstraZeneca,
respectively.
** = For ELUNATE®,
represents drug
product supply, commercial service fees and royalties paid by
Lilly, to HUTCHMED, and sales to other third parties invoiced by
HUTCHMED; for FRUZAQLAâ„¢, represents drug product supply and
royalties paid by Takeda; for ORPATHYS®,
represents drug
product supply and royalties paid by AstraZeneca and sales to other
third parties invoiced by HUTCHMED; for
SULANDA® and TAZVERIK®,
represents the Company's sales of the products to third
parties.
|
II. REGULATORY
UPDATES
China
·
Fruquintinib NDA accepted
in combination with paclitaxel for
second-line gastric cancer in April 2023;
·
Sovleplenib NDA
accepted for primary
ITP in January 2024, after receiving priority review status in
2023;
·
Fruquintinib received Breakthrough Therapy
designation in
combination with sintilimab for second-line endometrial cancer in
July 2023;
·
Fruquintinib received Hong Kong
approval for
third-line CRC in January 2024; and
·
ORPATHYS® (savolitinib) and
TAZVERIK® (tazemetostat) received Macau approvals
in March 2023.
Ex-China
·
Fruquintinib U.S. FDA approved
in November 2023 for previously
treated metastatic CRC, after the NDA was granted priority review
in May 2023;
·
Fruquintinib NDA submitted to the Japanese
PMDA in September
2023;
·
Fruquintinib MAA submission to the EMA
validated in June
2023; and
·
Savolitinib, in combination with
TAGRISSO®, designated a U.S. FDA Fast Track
program in January
2023 for the treatment of patients with NSCLC with MET
overexpression and/or amplification, and who have had disease
progression during or following prior
TAGRISSO®.
III. LATE-STAGE CLINICAL
DEVELOPMENT ACTIVITIES
Savolitinib (ORPATHYS® in
China), a highly selective oral inhibitor of MET being
developed broadly across MET-driven patient populations in lung,
gastric and papillary renal cell carcinomas
·
Completed enrollment of a pivotal global Phase
II study SAVANNAH (NCT03778229) for NSCLC patients who have
progressed following TAGRISSO® due to MET amplification
or overexpression designated as a Fast Track development program by
the U.S. FDA, with the possibility of accelerated approval.
Continued enrolling SAFFRON
(NCT05261399), a global, pivotal
Phase III study of the TAGRISSO® combination supporting
SAVANNAH;
·
Reported positive results from the confirmatory
China Phase IIIb study
(NCT04923945) first-line cohort in MET exon 14 skipping alteration NSCLC;
completed enrollment in a second-line cohort; and
·
Initiated the registration stage of a China
Phase II study in third-line gastric cancer patients
with MET amplification
(NCT04923932).
Potential upcoming clinical and regulatory
milestones for savolitinib:
·
Submit China NDA for first-line and second-line
MET exon 14 skipping
alteration NSCLC in early-2024;
·
Complete enrollment of SACHI
(NCT05015608), a
pivotal Phase III study of the TAGRISSO® combination in
China for NSCLC patients with MET amplification following
progression on EGFR inhibitor treatment in late 2024;
·
Complete enrollment of SANOVO
(NCT05009836), a
pivotal Phase III study of the TAGRISSO® combination in
China in first-line NSCLC patients with EGFR mutation & MET
overexpression in late 2024; and
·
Engage U.S. FDA regarding possible NDA filing on
SAVANNAH, subject to
positive results, around year end 2024.
Fruquintinib (ELUNATE® in China,
FRUZAQLAâ„¢ in the U.S.), a highly selective oral inhibitor of
VEGFR27 1/2/3 designed to have enhanced selectivity that
limits off-target kinase activity, allowing for high drug exposure,
sustained target inhibition, and flexibility for the potential use
as part of a combination therapy
·
Presented FRUTIGA (NCT03223376) results at ASCO28 Plenary in February 2024
in second-line gastric cancer
patients on fruquintinib plus paclitaxel. PFS29, ORR30 and DCR31 endpoints showed statistically significant
improvements. Although OS32 improvement was not statistically significant
overall, it was statistically significant in a pre-specified
analysis excluding patients taking subsequent antitumor
therapy;
·
Completed enrollment of FRUSICA-1
(NCT03903705), a China endometrial
cancer registration cohort of a Phase II study of fruquintinib in
combination with PD-133 antibody sintilimab in July 2023;
·
Completed enrollment of FRUSICA-2
(NCT05522231), a China Phase II/III
study of fruquintinib in combination with PD-1 antibody sintilimab
in clear cell RCC in December 2023;
·
Updated results from the clear cell
RCC cohort of a China
Phase II study on fruquintinib in combination with PD-1 antibody
sintilimab at ASCO 2023 (NCT03903705); and
·
Published in peer-reviewed journal
The Lancet positive results of the global Phase III
FRESCO-2 registration trial (NCT04322539) in previously treated metastatic
CRC patients in June 2023.
Potential upcoming clinical and regulatory
milestones for fruquintinib:
·
Completion of EMA MAA review
for previously-treated metastatic
CRC in mid-2024;
·
Completion of PMDA NDA review
for previously-treated metastatic
CRC in late-2024;
·
Registration filing to the NMPA
for second-line endometrial cancer
in early 2024; and
·
Top-line results from Phase II/III
registration trial in clear cell RCC
around year end 2024.
Surufatinib (SULANDA® in
China), an
oral inhibitor of VEGFR, FGFR34 and CSF-1R35 designed to inhibit tumor angiogenesis and
promote immune response against tumor cells via tumor associated
macrophage regulation
·
Reported data from the Phase Ib/II China
toripalimab (PD-1 antibody) combination study
at the 2023 AACR36 and ASCO annual meetings (NCT04169672);
and
·
Reported encouraging early results
at ASCO 2023 of an
investigator-initiated trial of surufatinib in combination with a
PD-1 antibody and chemotherapy in first-line treatment for
pancreatic ductal adenocarcinoma.
Sovleplenib (HMPL-523), an investigative and highly
selective oral inhibitor of Syk, an important component of the Fc
receptor and B-cell receptor signaling pathway
·
Met primary endpoint and all secondary endpoints
for a pivotal Phase III study (NCT05029635) in adult patients with primary ITP
in China; and
·
Met primary endpoint for a Phase II
Proof-of-Concept study in warm AIHA37 in China (NCT05535933) with Phase III
registration study being planned.
Potential upcoming clinical milestones for
sovleplenib:
·
Submit ESLIM-01 results for publication and/or
presentation in
mid-2024; and
·
Initiate a dose-finding study in ITP in the
U.S./EU in
mid-2024.
Tazemetostat (TAZVERIK® in Macau and
the China Hainan Pilot Zone), a first-in-class, oral inhibitor of EZH2
licensed from Ipsen38
·
Completed recruitment of a China bridging study
in follicular lymphoma for conditional registration based on U.S.
approvals in September 2023 (NCT05467943);
·
Approved and launched in the Macau
Special Administrative Region in
March 2023; and
·
Published promising results from the Phase Ib
portion of SYMPHONY-1,
a global Phase 1b/III combination study in relapsed/refractory
follicular lymphoma patients after at least two prior therapies
(NCT04224493). ORR was 90.9%, and in the recommended Phase III dose
cohort, 18-month PFS and DoR39 estimates were 94.4% and 100% with no
dose-limiting toxicities.
Potential upcoming clinical and regulatory
milestones for tazemetostat:
·
China NDA filing for relapsed/refractory 3L+ follicular lymphoma
expected in mid-2024.
HMPL-453, a novel, highly selective and potent inhibitor
targeting FGFR 1, 2 and 3
·
Reported human data for the first
time at the 2023 ASCO
annual meeting; and
·
After consultation with NMPA, initiated the
registration phase of the ongoing Phase II trial for
IHCC40 patients with FGFR 2 fusion
(NCT04353375).
Amdizalisib (HMPL-689), an investigative and highly selective oral
inhibitor of PI3Kδ41 designed to address the gastrointestinal and
hepatotoxicity associated with currently approved and
clinical-stage PI3Kδ inhibitors
·
Met primary endpoint of ORR in the follicular lymphoma cohort of a
China registration Phase II study with Breakthrough Therapy
designation (NCT04849351). However, in recent discussions with
China NMPA, it is clear that a randomized study is now required to
support registration. In view of the changing regulatory
requirement, we are currently evaluating the clinical development
plan and regulatory guidance before deciding the regulatory
strategy for this indication.
IV. COLLABORATION
UPDATES
Closed
Exclusive Worldwide License to Takeda for Fruquintinib Outside
China
·
Takeda is responsible for development,
manufacturing and commercialization in all indications and territories outside of
mainland China, Hong Kong and Macau; and
·
HUTCHMED is eligible to receive up to $1.13
billion, including the $400 million upfront received
in April 2023, and up to $730
million in additional potential payments relating to regulatory,
development and commercial sales milestones, of which a $35 million
milestone payment was received in December 2023 after the approval
by the U.S. FDA, as well as manufacturing income and royalties on
net sales.
Further clinical progress by
Inmagene42 with two candidates discovered by
HUTCHMED
·
Inmagene initiated two global Phase IIa trials
with IMG-007, an anti-OX40 antibody, in adults with
moderate-to-severe atopic dermatitis and in adults with alopecia
areata. It was safe and well-tolerated in the completed Phase I
study with no reports of pyrexia or chills, which are common
adverse events of rocatinlimab, another anti-OX40
treatment;
·
Inmagene completed a Phase I study
with IMG-004, a reversible, non-covalent, highly selective
oral BTK43 inhibitor designed to target immunological
diseases. IMG-004 was safe and well-tolerated in this
single-ascending-dose study, with a long half-life and sustained
pharmacodynamic effects that are well above others in its class;
and
·
Inmagene exercised options for an exclusive
license to further
develop, manufacture and commercialize these two drug candidates
worldwide subject to completion of a share subscription agreement
signed in February 2024 for approximately 7.5% of Inmagene shares
(fully diluted).
V. OTHER VENTURES
Other
Ventures include our profitable prescription drug marketing and
distribution platforms
·
Consolidated revenue increased by 18% (24% at
CER) to $309.4 million (2022: $262.6m);
·
SHPL44 non-consolidated joint venture revenue increased
by 4% (10% at CER) to $385.5
million (2022:
$370.6m);
·
Consolidated net income attributable to HUTCHMED
from our Other Ventures decreased by 8% (3% at CER) to $50.3
million (2022:
$54.6m), which was primarily due to decrease on the net income
contributed from SHPL of $47.4 million (2022: $49.9m) resulting
from the impact of gradual price adjustment from volume-based
procurement;
·
Disposed interests in
HHOHK45 and
HSN46 for
$5.1 million;
and
·
We continue to explore opportunities
to monetize the underlying value of our SHPL joint venture
including various divestment and equity capital market
alternatives.
VI. SUSTAINABILITY
HUTCHMED is committed to progressively embedding
sustainability into all aspects of our operations and creating
long-term value for our stakeholders. In 2023, we continued to make progress,
including:
·
Satisfactory progress made in 11
short- to long-term goals and targets; sustainability performance on goals and
targets continued to be incorporated into management's
performance-based remuneration;
·
Enhanced climate actions by conducting Scope 3 emissions screening and
measurement, and engaging with suppliers to gradually implement
sustainability initiatives collaboratively. Following the climate
risk assessment in 2022, regular monitoring and reviews on climate
risks and opportunities have been undertaken; our climate actions
continue to be disclosed in alignment with the recommendations of
the Task Force on Climate-related Financial Disclosures
(TCFD);
·
Enhanced data quality by introducing a digital data collection
platform to streamline collecting, managing, and reporting data, ensuring improved data reliability,
comparability and transparency;
·
Strengthened alignment in the five key
sustainability pillars which encompassed the most relevant and material
sustainability topics for HUTCHMED, including (i) climate action;
(ii) access to healthcare; (iii) human capital; (iv) ethics and
transparency; and (v) innovation;
·
Marked improvements shown in major ESG ratings
and awards, reflecting
wider recognition of HUTCHMED's efforts in sustainability;
and
·
Enhanced disclosure by referencing the latest sustainability
disclosure standards and sector specific disclosure standards ahead
of requirement.
These
efforts will continue to guide HUTCHMED towards a more sustainable
future. The 2023 Sustainability Report will be published alongside
our 2023 Annual Report in April 2024 and will include further
information on HUTCHMED sustainability initiatives and their
performance.
VII. IMPACT OF
COVID-19
While
restrictive measures related to COVID-19 were gradually lifted in
China starting from December 2022, COVꞮD-19 had some impact on our
research, clinical studies and our commercial activities in the
first few months of 2023. Measures were put in place to reduce the
impact and, in the second quarter of 2023, these activities
normalized.
Financial Highlights
Foreign exchange
impact:
The RMB depreciated against the U.S.
dollar on average by approximately 5% during 2023, which has
impacted our consolidated financial results as highlighted
below.
Cash,
Cash Equivalents and Short-Term Investments were $886.3 million as
of December 31, 2023 compared to $631.0 million as of December 31,
2022.
·
Adjusted Group
(non-GAAP47) net cash flows excluding financing activities
in 2023 were $206.7 million (2022: -$297.9m) mainly due to the
receipt of $435 million in upfront and milestone payments from
Takeda; and
·
Net cash generated from financing
activities in 2023 totaled $48.7 million mainly due to the
drawdowns of bank borrowings (2022: net cash used in financing
activities of $82.8m).
Revenue
for the year ended December 31, 2023 were $838.0 million compared
to $426.4 million in 2022.
·
Oncology/Immunology consolidated
revenue increased 223% (228% at
CER) to $528.6 million (2022: $163.8m) resulting from:
§ ELUNATE® revenue
increased 19%
(26% at CER) to $83.2 million (2022: $69.9m) due to continued market share
gains, comprising of manufacturing revenue, promotion and marketing
service revenue and royalties;
§ FRUZAQLA™ revenue was $7.2
million, reflecting
its U.S. launch in early November 2023, comprising of manufacturing
revenue and royalties;
§ SULANDA® revenue
increased 36%
(43% at CER) to $43.9 million (2022: $32.3m) from our continuing marketing
activities, increasing patient access and longer durations of
treatment;
§ ORPATHYS® revenue
increased 30%
(37% at CER) to $28.9 million (2022: $22.3m) after inclusion in the NRDL
effective from March 2023, comprising of manufacturing revenue and
royalties;
§ TAZVERIK® revenue was $1.0 million (2022: $0.1m) from further sales in the Hainan Pilot
Zone;
§ Partnering revenue of $312.0 million was the $280 million recognized
portion
of the $400 million
upfront payment, and the $32 million recognized portion of the
US$35 million milestone payment from Takeda; and
§ Other R&D services income of
$52.4 million (2022: $24.2m), primarily related to fees from
AstraZeneca, Lilly and Takeda for the management of development and
regulatory activities.
·
Other Ventures consolidated
revenue increased 18% (24% at CER) to $309.4
million (2022:
$262.6m), mainly due to higher sales of prescription drugs. This
excludes 4% (10% at CER) growth in non-consolidated revenue at SHPL
of $385.5 million (2022: $370.6m).
Net
Expenses for 2023 were $737.2 million compared to $787.2 million in
2022.
·
Cost of Revenue increased by 24% to $384.4 million (2022:
$311.1m), of which cost of revenue from our Other Ventures
increased by 21% to $292.7 million (2022: $241.9m) due to the
increasing sales of third-party prescription drug products. Cost of
revenue from Oncology/Immunology increased by 33% to $91.7 million
(2022: $69.2m) due to the increase in product sales of our marketed
products and the cost of provision of promotion and marketing
services for ELUNATE® resulting from the increased sales
force;
·
R&D Expenses reduced 22% to $302.0 million (2022: $386.9m),
mainly due to the completion of several large registration-enabling
trials, the focus on ex-China development through partnerships, and
the ongoing strategic prioritization of our pipeline. Our
international clinical and regulatory operations in the U.S. and
Europe incurred expenses of $106.9 million (2022: $170.9m), while
R&D expenses in China were $195.1 million (2022:
$216.0m);
·
SG&A48 Expenses were $133.2 million (2022: $136.1m), which
decreased primarily due to the restructuring of our U.S.
Oncology/Immunology commercial operations at the end of 2022 while
our China commercial infrastructure was able to support further
revenue growth; and
·
Other Items mainly comprised of equity in earnings of SHPL,
interest income and expense, FX and taxes, generated net income of
$82.4 million (2022: $46.9m), which increased primarily due to
higher interest income after receiving the $400 million Takeda
upfront payment.
Net
Income attributable to HUTCHMED for 2023 was
$100.8 million
compared to Net Loss attributable to HUTCHMED of $360.8 million in
2022.
·
The net income attributable to
HUTCHMED in 2023 was $0.12 per ordinary share / $0.59 per
ADS49, compared to net loss attributable to HUTCHMED
of $0.43 per ordinary share / $2.13 per ADS in
2022.
Financial Summary
Condensed Consolidated Balance
Sheets Data
(in $'000)
|
As of December
31,
|
|
2023
|
|
2022
|
Assets
|
|
|
|
Cash and cash equivalents and
short-term investments
|
886,336
|
|
630,996
|
Accounts receivable
|
116,894
|
|
97,988
|
Other current assets
|
93,609
|
|
110,904
|
Property, plant and
equipment
|
99,727
|
|
75,947
|
Investments in equity
investees
|
48,411
|
|
73,777
|
Other non-current
assets
|
34,796
|
|
39,833
|
Total assets
|
1,279,773
|
|
1,029,445
|
Liabilities and shareholders' equity
|
|
|
|
Accounts payable
|
36,327
|
|
71,115
|
Other payables, accruals and
advance receipts
|
271,399
|
|
264,621
|
Deferred revenue
|
127,119
|
|
13,537
|
Bank borrowings
|
79,344
|
|
18,104
|
Other liabilities
|
22,197
|
|
25,198
|
Total liabilities
|
536,386
|
|
392,575
|
Company's shareholders' equity
|
730,541
|
|
610,367
|
Non-controlling
interests
|
12,846
|
|
26,503
|
Total liabilities and shareholders' equity
|
1,279,773
|
|
1,029,445
|
Condensed Consolidated Statements
of Operations Data
(in $'000, except share and per
share data)
|
Year Ended December
31,
|
|
2023
|
|
2022
|
Revenue:
|
|
|
|
Oncology/Immunology - Marketed
Products
|
164,165
|
|
124,642
|
Oncology/Immunology -
R&D
|
364,451
|
|
39,202
|
Oncology/Immunology consolidated
revenue
|
528,616
|
|
163,844
|
Other Ventures
|
309,383
|
|
262,565
|
Total revenue
|
837,999
|
|
426,409
|
|
|
|
|
Operating expenses:
|
|
|
|
Cost of revenue
|
(384,447)
|
|
(311,103)
|
Research and development
expenses
|
(302,001)
|
|
(386,893)
|
Selling and general administrative
expenses
|
(133,176)
|
|
(136,106)
|
Total operating expenses
|
(819,624)
|
|
(834,102)
|
|
|
|
|
|
|
|
|
Other income/(expense),
net
|
39,933
|
|
(2,729)
|
Income/(loss) before income taxes and equity in earnings of
equity investees
|
58,308
|
|
(410,422)
|
Income tax
(expense)/benefit
|
(4,509)
|
|
283
|
Equity in earnings of equity
investees, net of tax
|
47,295
|
|
49,753
|
Net income/(loss)
|
101,094
|
|
(360,386)
|
Less: Net income attributable to
non-controlling interests
|
(314)
|
|
(449)
|
Net income/(loss) attributable to HUTCHMED
|
100,780
|
|
(360,835)
|
|
|
|
|
Earnings/(losses) per share attributable to HUTCHMED
(US$ per share)
|
|
|
|
-
basic
|
0.12
|
|
(0.43)
|
-
diluted
|
0.12
|
|
(0.43)
|
Number of shares used in per share
calculation
|
|
|
|
- basic
|
849,654,296
|
|
847,143,540
|
- diluted
|
869,196,348
|
|
847,143,540
|
|
|
|
|
Earnings/(losses) per ADS attributable to HUTCHMED
(US$ per ADS)
|
|
|
|
-
basic
|
0.59
|
|
(2.13)
|
-
diluted
|
0.58
|
|
(2.13)
|
Number of ADSs used in per share
calculation
|
|
|
|
- basic
|
169,930,859
|
|
169,428,708
|
- diluted
|
173,839,270
|
|
169,428,708
|
Outlook and FINANCIAL
GUIDANCE
2023 was
an impressive year for HUTCHMED, in large part due to the upfront
payment of $400 million received from Takeda, of which $280 million
was recognized in revenue during 2023, with the remainder to be
recognized when services and performance obligations are completed
over approximately three years.
Full year
2024 guidance for Oncology/Immunology consolidated revenue is $300
million to $400 million, driven by 30% to 50% growth target in
oncology marketed product revenue.
HUTCHMED's work in 2024 and beyond will be
supported by its strong balance sheet, which grew by $255 million
to $886 million in Cash, Cash Equivalents and Short-Term
Investments as of December 31, 2023. The Company is thus well
placed to deliver against its target to become a self-sustaining
business and its goal to bring its innovative medicines to patients
globally through its own sales network in China markets and through
partners worldwide.
Shareholders and investors should note
that:
·
we do not provide any guarantee that
the statements contained in the financial guidance will materialize
or that the financial results contained therein will be achieved or
are likely to be achieved; and
·
we have in the past revised our
financial guidance and reference should be made to any
announcements published by us regarding any updates to the
financial guidance after the date of publication of this
announcement.
---
Use
of Non-GAAP Financial Measures and Reconciliation
- References in this announcement to
adjusted Group net cash flows excluding financing activities and
financial measures reported at CER are based on non-GAAP financial
measures. Please see the "Use of Non-GAAP Financial Measures and
Reconciliation" below for further information relevant to the
interpretation of these financial measures and reconciliations of
these financial measures to the most comparable GAAP measures,
respectively.
Conference calls and audio webcast presentations
scheduled today at 7:30 a.m. EST / 12:30 p.m. GMT /
8:30 p.m. HKT in English. In addition to the usual
English webcast, there will also be a Chinese (Putonghua) webcast
at 8:30 a.m. HKT on Thursday, February 29,
2024. After
registering, investors may access a live audio webcast of the call
via HUTCHMED's website at www.hutch-med.com/event/.
Participants who wish to join the call by
telephone and ask a question must register. Upon registration, each
participant will be provided with dial-in numbers and a unique
PIN.
FINANCIAL STATEMENTS
HUTCHMED
will today file with the U.S. Securities and Exchange Commission
its Annual Report on Form 20-F.
About HUTCHMED
HUTCHMED
(Nasdaq/AIM: HCM; HKEX: 13) is an innovative, commercial-stage,
biopharmaceutical company. It is committed to the discovery, global
development and commercialization of targeted therapies and
immunotherapies for the treatment of cancer and immunological
diseases. It has approximately 5,000 personnel across all its
companies, at the center of which is a team of about 1,800 in
oncology/immunology. Since inception, HUTCHMED has focused on
bringing cancer drug candidates from in-house discovery to patients
around the world, with its first three oncology medicines now
approved marketed in China, the first of which is also marketed in
the U.S. For more information, please visit: www.hutch‑med.com or follow us on
LinkedIn.
Contacts
Investor Enquiries
|
+852 2121 8200 / +1 973 306 4490 /
ir@hutch-med.com
|
|
|
Media Enquiries
|
|
Ben Atwell / Alex Shaw,
FTI Consulting
|
+44 20 3727 1030 /
+44 7771 913 902 (Mobile) /
+44 7779 545 055 (Mobile) /
HUTCHMED@fticonsulting.com
|
Zhou Yi, Brunswick
|
+852 9783 6894 (Mobile) /
HUTCHMED@brunswickgroup.com
|
|
|
Nominated Advisor
|
|
Atholl Tweedie / Freddy Crossley /
Daphne Zhang, Panmure Gordon
|
+44 (20) 7886 2500
|
References
Unless the context requires otherwise,
references in this announcement to the "Group," the "Company,"
"HUTCHMED," "HUTCHMED
Group," "we," "us," and "our," mean HUTCHMED (China) Limited and
its subsidiaries unless otherwise stated or indicated by
context.
Past
Performance and Forward-Looking Statements
The performance and results of operations
of the Group contained within this announcement are historical in
nature, and past performance is no guarantee of future results of
the Group. This announcement contains forward-looking statements
within the meaning of the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by words like "will,"
"expects," "anticipates," "future," "intends," "plans," "believes,"
"estimates," "pipeline," "could," "potential," "first-in-class,"
"best-in-class," "designed to," "objective," "guidance," "pursue,"
or similar terms, or by express or implied discussions regarding
potential drug candidates, potential indications for drug
candidates or by discussions of strategy, plans, expectations or
intentions. You should not place undue reliance on these
statements. Such forward-looking statements are based on the
current beliefs and expectations of management regarding future
events, and are subject to significant known and unknown risks and
uncertainties. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those set forth in the
forward-looking statements. There can be no guarantee that any of
our drug candidates will be approved for sale in any market, that
any approvals which have been obtained will continue to remain
valid and effective in the future, or that the sales of products
marketed or otherwise commercialized by HUTCHMED and/or its
collaboration partners (collectively, "HUTCHMED's Products") will
achieve any particular revenue or net income levels. In particular,
management's expectations could be affected by, among other things:
unexpected regulatory actions or delays or government regulation
generally, including, among others, the risk that HUTCHMED's ADSs
could be barred from trading in the United States as a result of
the Holding Foreign Companies Accountable Act and the rules
promulgated thereunder; the uncertainties inherent in research and
development, including the inability to
meet our key study
assumptions regarding enrollment rates, timing and availability of
subjects meeting a study's inclusion and exclusion criteria and
funding requirements, changes to clinical protocols, unexpected
adverse events or safety, quality or manufacturing issues; the
inability of a drug candidate to meet the primary or secondary
endpoint of a study; the inability of a drug candidate to obtain
regulatory approval in different jurisdictions or the utilization,
market acceptance and commercial success of HUTCHMED's Products
after obtaining regulatory approval; discovery, development and/or
commercialization of competing products and drug candidates that
may be superior to, or more cost effective than, HUTCHMED's
Products and drug candidates; the impact of studies (whether
conducted by HUTCHMED or others and whether mandated or voluntary)
or recommendations and guidelines from governmental authorities and
other third parties on the commercial success of HUTCHMED's
Products and drug candidates in development; the ability of
HUTCHMED to manufacture and manage supply chains for multiple
products and drug candidates; the availability and extent of
reimbursement of HUTCHMED's Products from third-party payers,
including private payer healthcare and insurance programs and
government insurance programs; the costs of developing, producing
and selling HUTCHMED's Products; the ability of HUTCHMED to meet
any of its financial projections or guidance and changes to the
assumptions underlying those projections or guidance; global trends
toward health care cost containment, including ongoing pricing
pressures; uncertainties regarding actual or potential legal
proceedings, including, among others, actual or potential product
liability litigation, litigation and investigations regarding sales
and marketing practices, intellectual property disputes, and
government investigations generally; and general economic and
industry conditions, including uncertainties regarding the effects
of the persistently weak economic and financial environment in many
countries, uncertainties regarding future global exchange rates and
uncertainties regarding the impact of pandemics and disease
outbreaks. For further discussion of these and other risks, see
HUTCHMED's filings with the U.S. Securities and Exchange
Commission, on AIM and on HKEX50. HUTCHMED is providing the information in this
announcement as of this date and does not undertake any obligation
to update any forward-looking statements as a result of new
information, future events or otherwise.
In addition, this
announcement contains statistical
data and estimates that HUTCHMED obtained from industry
publications and reports generated by third-party market research
firms. Although HUTCHMED believes that the publications, reports
and surveys are reliable, HUTCHMED has not independently verified
the data and cannot guarantee the accuracy or completeness of such
data. You are cautioned not to give undue weight to this data. Such
data involves risks and uncertainties and are subject to change
based on various factors, including those discussed
above.
Inside
Information
This announcement contains inside
information for the purposes of Article 7 of Regulation (E.U.) No
596/2014 (as it forms
part of retained E.U. law as defined in the European Union
(Withdrawal) Act 2018).
Medical
Information
This announcement contains information
about products that may not be available in all countries, or may
be available under different trademarks, for different indications,
in different dosages, or in different strengths. Nothing contained
herein should be considered a solicitation, promotion or
advertisement for any prescription drugs including the ones under
development.
Ends
OPERATIONS REVIEW
Oncology/Immunology
We
discover, develop, manufacture and market targeted therapies and
immunotherapies for the treatment of cancer and immunological
diseases through a fully integrated team of approximately 900
scientists and staff (December 31, 2022: ~960), and an in-house
oncology commercial organization of approximately 930 staff
(December 31, 2022: ~870).
We have
13 oncology drug candidates in clinical trials. Three of our
medicines, fruquintinib, surufatinib and savolitinib, have all been
approved and launched in mainland China with fruquintinib also
approved in the U.S., Hong Kong and Macau. Our fourth medicine,
tazemetostat, has been approved and launched in Hainan Pilot Zone
and Macau.
MARKETED PRODUCT
SALES
Despite
some initial challenges in the first quarter of the year due to the
impact of COVID-19 and impact from an anti-corruption crackdown of
the healthcare sector in China from the third quarter onwards,
in-market sales of HUTCHMED's novel oncology products continued to
grow at 28% (35% at CER) to $213.6 million (2022: $167.1m) in
2023.
Fruquintinib (ELUNATE® in China,
FRUZAQLAâ„¢ in the U.S.)
ELUNATE® is approved for the
treatment of third-line metastatic CRC for which there is an
approximate incidence of 105,000 new patients per year in China. In
2023, ELUNATE® in China achieved in-market sales of
$107.5 million, up 15% (22 % at CER) versus 2022 ($93.5 million).
In China, ELUNATE® is the leading treatment for
late-stage CRC with 47% of 3L treated patient share according to an
IQVIA tracking study in Q2 2023.
Under the
terms of our agreement with Lilly, HUTCHMED manages all
on-the-ground medical detailing, promotion and local and regional
marketing activities for ELUNATE® in China. We
consolidate as revenue approximately 70-80% of ELUNATE®
in-market sales from manufacturing fees, service fees and royalties
paid to us by Lilly. In 2023, we consolidated $83.2 million in
revenue for ELUNATE®, equal to 77% of in-market
sales.
Following negotiations with the China
NHSA51, ELUNATE® continues to be included
in the NRDL for a new two-year term starting in January 2024 at the
same price as the 2023 NRDL price.
Takeda
launched FRUZAQLAâ„¢ in the U.S. within 48 hours after it was
approved for previously-treated metastatic CRC on November 8, 2023,
with the first prescription received a day after approval.
According to Takeda, uptake has been strong, with new patient
starts exceeding expectations, and additional regulatory
applications progressing as expected including in the EU and Japan.
Since its launch until the end of 2023, FRUZAQLAâ„¢ achieved
in-market U.S. sales of $15.1 million.
This U.S. patient uptake was in parallel to the
rapid inclusion of fruquintinib to the 2023 "NCCN Clinical Practice Guidelines for Colon
Cancer" and the 2023
"NCCN Clinical Practice Guidelines for Rectal
Cancer" on November
16, 2023. Fruquintinib has also been successfully recommended in
six other major treatment guidelines for colorectal cancer. These
will continue to drive awareness and usage of fruquintinib among
doctors and patients.
In
January 2024, ELUNATE® was approved in the Hong Kong
Special Administrative Region. This was the first medicine to be
approved under the new mechanism for registration of new drugs
("1+" mechanism). CRC was the second most common cancer in Hong
Kong in 2021, with about 5,900 new patients diagnosed and
associated with about 2,300 deaths.
Surufatinib (SULANDA® in
China)
SULANDA® was launched in China in
2021 for the treatment of all advanced NETs52 for which there is an approximate incidence of
34,000 new patients per year in China.
Total
in-market sales in 2023 increased by 36% (43% at CER) to $43.9
million (2022: $32.3 million). According to IQVIA tracking study
report in Q4 2023, SULANDA® maintained its position in
the market with 21% prescription share in NET treatment, ahead of
competitors SUTENT® and AFINITOR®.
Following
negotiations with the China NHSA, SULANDA® continues to
be included in the NRDL for a new two-year term starting in January
2024, at the same price as the 2023 NRDL price.
Surufatinib has been successfully recommended in
2023 "Chinese medical association consensus for
standardized diagnosis and treatment of pancreatic cancer
neuroendocrine neoplasms" and four other treatment guidelines for
neuroendocrine tumors. As a result, doctors' acceptance and
patients' access to SULANDA® continue to
increase.
Savolitinib (ORPATHYS® in
China)
ORPATHYS® is the first-in-class
selective MET inhibitor to be approved in China, launched and
marketed by our partner, AstraZeneca for patients with MET exon 14
skipping alteration NSCLC. More than a third of the world's lung
cancer patients are in China. Among those with NSCLC globally,
approximately 2-3% have tumors with MET exon 14 skipping
alterations.
In 2021,
2022 and the first two months of 2023, ORPATHYS® was
sold as a self-pay drug. Following negotiations with the China NHSA
in January 2023, ORPATHYS® has been included in the
updated NRDL since March 1, 2023 at a 38% discount relative to the
self-pay price, broadening patient access to this medicine. Sales
in 2023 were impacted by customary channel fluctuations following
the announcement (in January 2023) and implementation of the NRDL
listing (in March 2023), with increased volume in the latter part
of 2023. In-market sales for ORPATHYS® increased 12%
(increased 19% at CER) in 2023 to $46.1 million (2022: $41.2m)
resulting in our consolidation of $28.9 million (2022: $22.3m) in
revenue primarily from drug product supply and royalties. Sales in
the second, third and fourth quarters of 2023 were substantially
higher than during the same period in 2022 before NRDL listing,
increasing 104% by volume.
Market understanding of the need for MET testing
has improved significantly, with approximately half of new
advanced/relapsed NSCLC patients in China being tested. In the
National Health Commission's Treatment Guidelines for Primary Lung Cancer
2022 and the China
Medical Association Oncology Committee Lung Cancer Group's
China Medical Association Guideline for Clinical
Diagnosis and Treatment of Lung Cancer, ORPATHYS® was identified as the
only targeted therapy recommended for MET exon 14 patients, while a
similar guideline from CSCO53 also recommended ORPATHYS® as the
standard of care for such patients. As MET testing awareness and
access increases, more patients are expected to be prescribed a
selective MET inhibitor.
In March
2023, ORPATHYS® was also approved in the Macau Special
Administrative Region.
Tazemetostat (TAZVERIK® in Hainan and
Macau, China; the U.S. and Japan)
In
May 2022, TAZVERIK® was approved by the Health
Commission and Medical Products Administration of Hainan Province
to be used in the Hainan Boao Lecheng International Medical Tourism
Pilot Zone (Hainan Pilot Zone), under the Clinically Urgently Needed Imported
Drugs scheme, for the
treatment of certain patients with epithelioid sarcoma and
follicular lymphoma consistent with the label as approved by the
FDA. Tazemetostat was included in the 2022 CSCO guidelines for
epithelioid sarcoma. 16 epithelioid sarcoma patients began
treatment in 2023 (2022: 3). Tazemetostat is included in the 2023
CSCO guideline for follicular lymphoma.
In March
2023, TAZVERIK® was approved in the Macau Special
Administrative Region.
RESEARCH &
DEVELOPMENT
With U.S.
FDA approval of fruquintinib in November 2023, we now possess a
track record of discovery, clinical development and marketing
approval of an innovative medicine in the global market.
Our
strategy is aimed at accelerating our path to establish a long-term
sustainable business, by prioritizing late-stage and registrational
studies in China and partnering outside of China.
HUTCHMED intends to continue to run
early phase development programs for selected drug candidates
internationally where we believe we can differentiate from a global
perspective.
Below is
a summary update of the clinical trial progress of our
investigational drug candidates. For more details about each trial,
please refer to recent scientific publications.
Savolitinib (ORPATHYS®
in China)
Savolitinib is an oral, potent, and highly
selective oral inhibitor of MET. In global partnership with
AstraZeneca, savolitinib is being studied in NSCLC,
PRCC54 and gastric cancer clinical trials with about
2,500 patients to date, both as a monotherapy and in combinations.
AstraZeneca has paid HUTCHMED $85 million of the total $140 million
in upfront payments, development and approval milestones that are
potentially payable under the relevant license and collaboration
agreement.
MET-aberration is a major mechanism for acquired
resistance to both first/second-generation EGFR TKIs as well as
third-generation EGFR TKIs like TAGRISSO®. Among
patients who experience disease progression
post-TAGRISSO® treatment, approximately 15-50% present
with MET aberration. The prevalence of MET amplification and
overexpression may differ depending on the sample type, detection
method and assay cut-off used. Savolitinib has been studied
extensively in these patients in the TATTON (NCT02143466) and SAVANNAH (NCT03778229) studies. The encouraging results
led to the initiation of three Phase III studies:
SACHI and SANOVO were initiated in China in 2021, and the global,
pivotal Phase III SAFFRON study started enrollment in
2022.
Savolitinib - NSCLC updates:
The table
below shows a summary of the clinical studies for savolitinib in
lung cancer patients.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Savolitinib +
TAGRISSO®
|
SAVANNAH: 2L/3L EGFRm+55; TAGRISSO® refractory;
MET+
|
Global
|
II Registration-intent
|
Fully enrolled
|
NCT03778229
|
Savolitinib +
TAGRISSO®
|
SAFFRON: 2L/3L EGFRm+; TAGRISSO® refractory;
MET+
|
Global
|
III
|
Ongoing since 2022
|
NCT05261399
|
Savolitinib +
TAGRISSO®
|
SACHI: 2L EGFR TKI refractory NSCLC; MET+
|
China
|
III
|
Ongoing since 2021
|
NCT05015608
|
Savolitinib +
TAGRISSO®
|
SANOVO: Naïve patients with EGFRm &
MET+
|
China
|
III
|
Ongoing since 2021
|
NCT05009836
|
Savolitinib monotherapy
|
MET exon 14 skipping
alterations
|
China
|
II Registration
|
Approved & launched in 2021;
Final OS analysis at ELCC56
2022
|
NCT02897479
|
Savolitinib monotherapy
|
MET exon 14 skipping
alterations
|
China
|
IIIb Confirmatory
|
Fully enrolled in H1 2023; 1L
cohort data at WCLC57
2023
|
NCT04923945
|
Savolitinib +
IMFINZI®
|
SOUND: MET-driven, EGFR wild type
|
China
|
II
|
Ongoing since 2022
|
NCT05374603
|
The SAVANNAH global Phase II
study in patients who have
progressed following TAGRISSO® due to MET amplification
or overexpression has completed recruitment. In January 2023,
the U.S. FDA designated as a Fast
Track development
program the investigation of savolitinib for use in combination
with TAGRISSO® for the treatment of patients with
locally advanced or metastatic NSCLC whose tumors have MET
overexpression and/or amplification, as detected by an FDA-approved
test, and who have had disease progression during or following
prior TAGRISSO®. We continue to evaluate the possibility
of using the SAVANNAH study as the basis for U.S. accelerated
approval. In comparison to other treatments options, this treatment
is chemotherapy-free, biomarker-specific and orally administered,
aiming for a balanced efficacy, safety and quality-of-life profile
for lung cancer patients.
The SAFFRON study, which will evaluate the efficacy and
safety of savolitinib in combination with TAGRISSO®
compared to pemetrexed plus platinum doublet-chemotherapy, has now
activated a majority of the approximately 250 sites in over 20
countries planned for the study.
Two
registrational studies are ongoing in China in EGFR mutated NSCLC
with MET aberrations: the SANOVO study in treatment naïve patients, and
SACHI study in patients whose disease progressed
following treatment with any first-line EGFR TKI. Both trials are
expected to complete enrollment in 2024.
Update on MET altered, EGFR wild type
NSCLC in China - The
June 2021 monotherapy approval by the NMPA was based on positive
results from a Phase II trial conducted in China in patients with
NSCLC with MET exon 14 skipping alterations (NCT02897479). A
confirmatory Phase IIIb study in this patient population fully
enrolled in H1 2023 (NCT04923945). Results from the first-line
cohort of this study were disclosed at WCLC 2023. At data cut-off
date of April 30, 2023, among the 84 patients in the tumor response
evaluable set (TRES), ORR was 60.7% (95% CІ: 49.5% to 71.2%) and
DCR was 95.2% (95% CІ: 88.3% to 98.7%), as assessed by an
independent review committee. At median follow-up of 11.1 months,
median PFS was 13.8 months (95% CІ: 9.7 months to not reached).
Median DoR and OS have not been reached. No new safety signals were
observed.
Savolitinib - Gastric cancer:
MET-driven gastric cancer has a very poor
prognosis. Multiple
Phase II studies have been conducted in Asia to study savolitinib
in MET-driven gastric cancer, of which approximately 5% of all
gastric cancer patients, demonstrated promising efficacy, including
VIKTORY. The VIKTORY study reported a 50% ORR with savolitinib
monotherapy in gastric cancer patients whose tumors harbor MET
amplification.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Savolitinib
|
3L gastric cancer with MET
amplification. Two-stage, single-arm study
|
China
|
II registration-intent
|
~64 patient registration
cohort enrolling since March 2023;
Breakthrough Therapy Designation
|
NCT04923932
|
Preliminary efficacy and safety data from an
interim analysis of 20 patients in a Phase II trial of savolitinib
monotherapy in patients with MET-amplified advanced or metastatic
gastroesophageal junction adeno-carcinomas or gastric cancer was
reported at AACR 2023, showing promising efficacy in patients with
MET-amplified diseases, particularly in patients with high MET gene
copy number. Confirmed ORR by independent review was 45%, or 50% in
the 16 patients with high MET gene copy number. DoR rate at
4-months was 85.7%. The most common grade 3 or above
TRAEs58 (more than 5%) were decreased platelet count,
hypersensitivity, anemia, neutropenia and abnormal hepatic
function. The BID59 regimen is being investigated to further
evaluate the efficacy and safety of savolitinib in MET high
patients. Following consultation with the NMPA with this data, a
patient registration cohort began enrolling in March
2023.
Savolitinib - Kidney cancer:
MET is a key genetic driver in
PRCC. Emerging
evidence suggests that combining immunotherapies with a MET
inhibitor could enhance anti-tumor activity. PRCC is a subtype of
kidney cancer, representing about 15% of patients, with no
treatments approved for patients with tumors that harbor MET-driven
alterations. Savolitinib has been studied in multiple global
studies in PRCC patients, including the SAVOIR monotherapy and
CALYPSO combination therapy global Phase II trials, that both
demonstrated highly encouraging results. 24-month follow-up of
CALYPSO trial (NCT02819596) showed median PFS of 15.7 months and
median OS of 27.4 months in MET-driven PRCC patients. These results
led to the initiation of a global Phase III, the SAMETA study, in
2021. Over 140 sites in over 20 countries are enrolling
patients.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Savolitinib +
IMFINZI®
|
SAMETA: MET-driven, unresectable and locally advanced
or metastatic PRCC
|
Global
|
III
|
Ongoing since 2021
|
NCT05043090
|
Fruquintinib (ELUNATE®
in China, FRUZAQLAâ„¢ in the U.S.)
Fruquintinib is a novel, selective, oral
inhibitor of VEGFR 1/2/3 kinases that was designed to improve
kinase selectivity to minimize off-target toxicity and thereby
improve efficacy and tolerability. Fruquintinib has been studied in
clinical trials with about 5,700 patients to date, both as a
monotherapy and in combination with other agents.
Aside
from its first approved indication of previously-treated metastatic
CRC (in China and the U.S.), studies of fruquintinib combined with
various checkpoint inhibitors (including TYVYT® and
tislelizumab) are underway. Registration-intent studies combined
with chemotherapy (FRUTIGA study in gastric cancer) or checkpoint
inhibitors (TYVYT® combo, in endometrial cancer and RCC)
are ongoing in China.
We are
partnered with Lilly in China and with Takeda outside of China. The
table below shows a summary of the clinical studies for
fruquintinib.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Fruquintinib
monotherapy
|
FRESCO-2:
metastatic CRC
|
U.S. / Europe /
Japan / Aus.
|
III
|
Approved & launched in the
U.S. in Nov 2023; EMA MAA validated in Jun 2023; NDA filed in Japan
in Sep 2023; Results published in The Lancet;
further data presented at ASCO GI60, JSMO61 & ASCO 2023
|
NCT04322539
|
Fruquintinib
monotherapy
|
FRESCO: ≥ 3L CRC; chemotherapy refractory
|
China
|
III
|
Approved & launched in
2018
|
NCT02314819
|
Fruquintinib +
paclitaxel
|
FRUTIGA:
2L gastric cancer
|
China
|
III
|
Supplemental NDA accepted by NMPA
in Apr 2023; data at ASCO Plenary Series Feb 2024
|
NCT03223376
|
Fruquintinib + TYVYT®
(PD-1)
|
FRUSICA-1:
endometrial cancer
|
China
|
II registration-intent
|
Fully enrolled; NDA filing
expected in early 2024; Ib data at CSCO 2021
|
NCT03903705
|
Fruquintinib + TYVYT®
(PD-1)
|
FRUSICA-2:
clear cell renal cell carcinoma
|
China
|
II/III
|
Fully enrolled; topline results
expected around year end 2024
|
NCT05522231
|
Fruquintinib + TYVYT®
(PD-1)
|
Clear cell renal cell
carcinoma
|
China
|
Ib/II
|
Fully enrolled; Updated data at
ASCO 2023
|
NCT03903705
|
Fruquintinib + TYVYT®
(PD-1)
|
CRC
|
China
|
II
|
Data published in European Journal of
Cancer
|
NCT04179084
|
Fruquintinib + TYVYT®
(PD-1)
|
Gastrointestinal tumors, NSCLC,
cervical cancer
|
China
|
Ib/II
|
Fully enrolled; Gastric cancer
data at ESMO62 2023; NSCLC and
cervical cancer data at ESMO Asia 2023
|
NCT03903705
|
Fruquintinib
monotherapy
|
CRC; TN63 & HR+64/
Her2-65 breast cancer
|
U.S.
|
I/Ib
|
CRC data at ASCO GI 2022; results
supported the initiation of FRESCO‑2
|
NCT03251378
|
Fruquintinib + tislelizumab
(PD-1)
|
MSS66-CRC
|
U.S.
|
Ib/II
|
Ongoing since 2021; Fully
enrolled; Follow-up ongoing; Conference submission pending
completion of follow-up
|
NCT04577963
|
Fruquintinib + tislelizumab
(PD-1)
|
CRC
|
Korea / China
|
Ib/II
|
Fully enrolled
|
NCT04716634
|
Fruquintinib - CRC updates:
FRESCO-2 (NCT04322539)
- Positive results from this
double-blind, placebo-controlled, global Phase III study in 691
patients demonstrated that treatment with fruquintinib resulted in
a statistically significant and clinically meaningful increase in
OS and the key secondary endpoint of PFS compared to treatment with
placebo. ASCO presentations showed that in subgroup analyses by
prior lines of therapies up to six or more and by prior treatment
with approved agents, fruquintinib improved OS and PFS for all
subgroups and prior therapies, consistent with those of the overall
study population. A separate study showed that during the study
adverse events of special interest led to low rates of dose
reduction (13.6% for patients who received fruquintinib vs 0.9% for
patients who received placebo) and dose discontinuation (8.3% for
patients who received fruquintinib vs 6.1% for patients who
received placebo).
Filing of
a rolling submission of an NDA was accepted by the FDA in May 2023
for priority review, with PDUFA date of November 30, 2023.
Fruquintinib (FRUZAQLAâ„¢ in the U.S.) was approved by the FDA on
November 8, 2023. The MAA filing to the EMA was validated in June
2023. The NDA was submitted to the Japan PMDA in September
2023.
On
January 26, 2024, fruquintinib obtained the marketing approval from
the Pharmacy and Poisons Board of Hong Kong for the treatment of
adult patients with previously treated metastatic CRC. This marked
the first medicine to be approved under the new mechanism for
registration of new drugs ("1+" mechanism) officially commenced on
November 1, 2023. It allows drugs which are beneficial for
treatment of life-threatening or severely debilitating diseases to
apply for registration for use in Hong Kong, if they have
supporting local clinical data and recognition from relevant
experts, when they have been approved by only one reference drug
regulatory authority (instead of two otherwise). CRC was the second
most common cancer in Hong Kong in 2021.
China Phase IV (NCT04005066)
- Results presented at ASCO 2023
from a prospective, 3,005-patient study to evaluate the safety of
fruquintinib in real-world clinical practice in China are
consistent with the fruquintinib safety profile observed in
existing clinical studies, with no new or significant safety
signals identified.
Fruquintinib - Gastric cancer
updates:
FRUTIGA (NCT03223376) - This randomized, double-blind, Phase III study
in China to evaluate fruquintinib combined with paclitaxel compared
with paclitaxel monotherapy, for second-line treatment of advanced
gastric cancer, enrolled approximately 700 patients in July 2022.
Its co-primary endpoints are PFS and OS. The trial met the PFS
endpoint at a statistically and clinically meaningful level. The OS
endpoint was not statistically significant per the pre-specified
statistical plan, although there was an improvement in median
OS.
Results were presented orally at ASCO Plenary
Series in February 2024. Patients on fruquintinib combined with
paclitaxel achieved median PFS of 5.6 months, vs 2.7 months in the
control group on paclitaxel only with HR of 0.569 and
p < 0.0001. There was a numerical improvement
in OS, with median OS of 9.6 months vs. 8.4 months; however, this
was not statistically significant. There was an imbalance of
patients receiving subsequent antitumor therapies across the two
groups, with 52.7% in the fruquintinib plus paclitaxel group vs.
72.2% in the paclitaxel monotherapy group. In a pre-specified
sensitivity analysis, when excluding patients taking subsequent
antitumor therapy, OS improvement was statistically significant for
the treatment arm at 6.9 months vs 4.8 months in the control arm
with HR of 0.72 and p=0.0422. Fruquintinib also demonstrated a
statistically significant improvement in secondary endpoints
including ORR, DCR and DoR. The safety profile of fruquintinib in
FRUTIGA was consistent with previously reported
studies.
In April
2023, the NDA in China was accepted for review by the
NMPA.
Fruquintinib - Combinations with checkpoint
inhibitors updates:
Advanced endometrial cancer registration-intent
cohort of TYVYT® combination (NCT03903705)
- Platinum-based systemic
chemotherapy is the standard first-line treatment for advanced
endometrial cancer in China. However, patients who progress
following first-line therapy have limited treatment options, and
the prognosis remains poor. Initially presented at CSCO 2021, data
in this endometrial cancer cohort is encouraging.
We agreed
with the NMPA to expand this cohort into a single-arm
registrational Phase II study. In July 2023, the cohort fully
enrolled and was granted Breakthrough Therapy Designation. If the
study results are positive, we expect to file the NDA with the NMPA
in this treatment setting in mid-2024.
Advanced metastatic clear-cell RCC
(NCT05522231) - In
first-line clear-cell RCC, clinical benefits have been demonstrated
for the combination of antiangiogenic therapy and immunotherapy.
However, there is limited evidence on the benefits of this
combination in the second-line setting. Phase II (NCT03903705) data
disclosed at ASCO 2023 showed encouraging anti-tumor efficacy and
durability in these patients. PFS results from this exploratory
study of the fruquintinib and sintilimab combination in metastatic
clear-cell RCC were reported. At data cut-off on November 30, 2022,
median PFS was 15.9 months in 20 previously treated patients. No
new safety signals were observed.
A Phase
II/III trial of fruquintinib in combination with TYVYT®
as second-line treatment for locally advanced or metastatic RCC was
initiated in October 2022. The study is a randomized, open-label,
active-controlled study to evaluate the efficacy and safety of
fruquintinib in combination with TYVYT® versus axitinib
or everolimus monotherapy for the second-line treatment of advanced
RCC. The primary endpoint is PFS. The enrollment was completed in
December 2023. A total of 234 patients have been enrolled in the
study. We expect to announce topline results around year end
2024.
Fruquintinib - Exploratory
development:
In China,
we support an investigator-initiated trial program for
fruquintinib, and there are about 90 of such trials ongoing in
various solid tumor settings. A number of investigator-initiated
trials were presented at ASCO 2023, ESMO 2023 and ASCO GI 2024,
including initial results of a Phase II study of fruquintinib in
combination with investigator's choice of chemotherapy in
second-line metastatic CRC with microsatellite stable (MSS)
phenotype, as well as fruquintinib monotherapy for the treatment of
biliary tract cancer and soft tissue sarcoma.
Fruquintinib - Partnership with
Takeda:
In March
2023, HUTCHMED completed an exclusive worldwide license to Takeda
to develop and commercialize fruquintinib in all indications and
territories outside of mainland China, Hong Kong and Macau, where
it is marketed and will continue to be marketed by HUTCHMED in
partnership with Lilly. Subject to the terms of the agreement,
HUTCHMED is eligible to receive up to $1.13 billion. This includes
$400 million which was received in April 2023 on closing of the
agreement, and up to $730 million in additional potential payments
relating to regulatory, development and commercial sales
milestones, of which a $35 million milestone payment was received
in December 2023 for the approval by the U.S. FDA. HUTCHMED is also
eligible to receive royalties on net sales.
Surufatinib (SULANDA®
in China)
Surufatinib is a novel, oral angio-immuno kinase
inhibitor that selectively inhibits the tyrosine kinase activity
associated with VEGFR and FGFR, both shown to be involved in tumor
angiogenesis, and CSF-1R, which plays a key role in regulating
tumor-associated macrophages, promoting the body's immune response
against tumor cells. Surufatinib has been studied in clinical
trials with around 2,900 patients to date, both as a monotherapy
and in combinations, and is approved in China. HUTCHMED currently
retains rights to surufatinib worldwide.
Surufatinib's ability to inhibit angiogenesis,
block the accumulation of tumor associated macrophages and promote
infiltration of effector T cells into tumors could help improve the
anti-tumor activity of PD-1 antibodies. Several combination studies
with PD-1 antibodies have shown promising data. A summary of the
clinical studies of surufatinib is shown in the table
below.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Surufatinib monotherapy
|
SANET-ep: epNET67
|
China
|
III
|
Approved; Launched in
2021
|
NCT02588170
|
Surufatinib monotherapy
|
SANET-p: pNET68
|
China
|
III
|
Approved; Launched in
2021
|
NCT02589821
|
Surufatinib + TUOYI®
(PD-1)
|
SURTORI-01: 2L NEC69
|
China
|
III
|
Ongoing since 2021
|
NCT05015621
|
Surufatinib + TUOYI®
(PD-1)
|
NENs70, GC71,
ESCC72, SCLC73, NSCLC, EMC, TC74, STS75, BTC76
|
China
|
II
|
Fully enrolled; Data at AACR 2023
& ASCO 2023
|
NCT04169672
|
Surufatinib + TUOYI®
(PD-1)
|
SCLC
|
China
|
II
|
Fully enrolled
|
NCT05509699
|
Ex-China regulatory discussions
- Surufatinib received FDA Fast
Track Designations in April 2020 for the treatment of pNETs and
epNETs. Orphan Drug Designation for pNETs was granted in November
2019. While discussions in 2020 suggested that two positive Phase
III studies of surufatinib in patients with pNETs and epNETs in
China could form the basis to support a U.S. NDA submission, this
was ultimately not accepted. A new multi-regional clinical trial
(MRCT) would be required to move forward with this program in the
U.S., Europe and Japan. Following dialogue with the Japanese PMDA,
we have decided not to file a Japanese NDA on the basis of the
clinical trial data available at this time.
Surufatinib - Combination therapy with
checkpoint inhibitors:
A Phase
II China study (NCT04169672) combining surufatinib with
TUOYI® enrolled patients in nine solid tumor types.
These have led to the initiation in September 2021 of the first
Phase III trial combining surufatinib with a PD-1 antibody, the
SURTORI-01 study in NEC, and a Phase II study in SCLC in
2022.
We
reported the results from the advanced endometrial cancer cohorts
at ASCO 2023. Amongst efficacy evaluable endometrial cancer
patients, median PFS was 5.4 months and 12-month OS rate was 71.0%
(median follow-up duration was 16.8 months). The combination showed
a tolerable safety profile. Additionally, results from the NSCLC
cohort were presented at AACR 2023 demonstrating promising
anti-tumor activity in first-line setting for advanced PD-L1
positive NSCLC patients with manageable toxicity.
Surufatinib - Exploratory
development:
In China,
we support an investigator-initiated trial program for surufatinib,
with about 110 of such trials in various solid tumor settings being
conducted for both combination and single agent regimens. These
trials explore and answer important medical questions in addition
to our own company-sponsored clinical trials. A number of
investigator-initiated trials were presented at ASCO 2023, ESMO
2023 and ASCO GI 2024 for surufatinib in combination with other
agents, including with chemotherapy as well as with anti-PD-1
antibodies plus different chemotherapy regimens in various solid
types including pancreatic adenocarcinoma, gastric/gastroesophageal
junction adenocarcinoma and biliary tract cancer. In one of these
trials (NCT05218889) using surufatinib in combination with
camrelizumab (an anti-PD-1) plus chemotherapy in first-line therapy
for pancreatic adenocarcinoma, median PFS and OS were 9.2 months
and 15.6 months, respectively, compared to 6.3 months and 8.6
months in the control group with chemotherapy only.
Sovleplenib
(HMPL-523)
Sovleplenib is a novel, selective, oral
inhibitor targeting Syk, for the treatment of hematological
malignancies and immune diseases. Syk is a component in Fc receptor
and B-cell receptor signaling pathway. Sovleplenib has been studied
in clinical trials with around 600 patients to date.
In
December 2022, we completed recruitment of a Phase III study in
China for primary ITP, for which it has received Breakthrough
Therapy designation. Positive proof of concept data was reported on
primary ITP at ASH77 2021 and published in Lancet Hematology in April 2023. In 2024, we plan to start a
dose-finding study in the U.S. HUTCHMED currently retains all
rights to sovleplenib worldwide. The table below shows a summary of
the clinical studies for sovleplenib.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Sovleplenib monotherapy
|
ESLIM-01: ≥2L ITP
|
China
|
III
|
Fully enrolled; positive topline
results achieved and NDA accepted with priority review status in
Jan 2024; results to be submitted at an upcoming conference in
mid-2024; Breakthrough Therapy Designation
|
NCT05029635
|
Sovleplenib monotherapy
|
≥2L ITP
|
U.S.
|
Ib
|
Dose-finding study to begin in
2024
|
Pending
|
Sovleplenib monotherapy
|
Warm AIHA
|
China
|
II/III
|
Phase II fully enrolled; Phase III
expected in early 2024
|
NCT05535933
|
ESLIM-01 (Evaluation of Sovleplenib for
immunological diseases-01, NCT05029635) - In October 2021, we initiated a randomized,
double-blinded, placebo-controlled Phase III trial in China of
sovleplenib in 188 adult patients with primary ITP who have
received at least one prior line of standard therapy. ITP is an
autoimmune disorder that can lead to increased risk of bleeding.
The primary endpoint of the study is the durable response rate. In
January 2022, the NMPA granted Breakthrough Therapy Designation for
this indication. All endpoints were met in August 2023 and the NDA
has been accepted for review and granted priority review by the
NMPA in January 2024. We plan to submit the results for
presentation and/or publication in mid-2024.
China Phase II/III in warm AIHA
- This is a randomized,
double-blind, placebo-controlled Phase II/III study to evaluate the
efficacy, safety, tolerability, and pharmacokinetics of sovleplenib
in the treatment of warm AIHA. AIHA is the result of destruction of
red blood cells due to the production of antibodies against red
blood cells which bind to antigens on the red blood cell membrane
in autoimmune disorders. The first patient was enrolled in
September 2022. The enrollment of Phase II part of the study was
completed in mid-2023 and primary end point has been met. We expect
to initiate Phase III in early-2024.
Tazemetostat
In August
2021, we entered into a strategic collaboration with Epizyme, a
subsidiary of Ipsen, to research, develop, manufacture and
commercialize tazemetostat in Greater China, including the
mainland, Hong Kong, Macau and Taiwan. Tazemetostat is an inhibitor
of EZH2 developed by Ipsen that is approved by the U.S. FDA for the
treatment of certain epithelioid sarcoma and follicular lymphoma
patients. It received accelerated approval from the FDA based on
ORR and DoR in January and June 2020 for epithelioid sarcoma and
follicular lymphoma, respectively. Tazemetostat has been studied in
clinical trials with around 1,300 patients to date.
We are
developing and plan to seek approval for tazemetostat in various
hematological and solid tumors in China. We are participating in
Ipsen's SYMPHONY-1 (EZH-302) study, leading it in China. We are
generally responsible for funding all clinical trials of
tazemetostat in China, including the portion of global trials
conducted there. Separately, we are conducting a China bridging
study in follicular lymphoma for potential conditional registration
based on its U.S. approvals. The study is fully enrolled and,
subject to the data, we plan to file the NDA in China in mid-2024.
We are responsible for the research, manufacturing and
commercialization of tazemetostat in China. Tazemetostat was
approved in China Hainan Pilot Zone in 2022 and the Macau Special
Administrative Region in 2023.
The table
below shows a summary of the clinical studies for
tazemetostat.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Tazemetostat
monotherapy
|
Metastatic or locally advanced epithelioid
sarcoma; Relapsed/​refractory
3L+ follicular lymphoma
|
Hainan, Macau
|
N/A - Hainan Pilot Zone,
Macau
|
Approved; Launched in 2022 and
2023, respectively
|
N/A
|
Tazemetostat
monotherapy
|
Relapsed/refractory 3L+ follicular
lymphoma
|
China
|
II registration-intent
(bridging)
|
Fully enrolled; NDA filing
expected in mid-2024
|
NCT05467943
|
Tazemetostat + lenalidomide +
rituximab (R²)
|
SYMPHONY-1:
2L follicular lymphoma
|
Global
|
Ib/III
|
Ongoing; PhIb data at ASH 2022;
China portion of global Ph III started H2 2022
|
NCT04224493
|
Tazemetostat +
amdizalisib
|
Relapsed/refractory
lymphoma
|
China
|
II
|
Ongoing since Feb 2023
|
NCT05713110
|
SYMPHONY-1 Global Phase Ib/III combination study
in relapsed/refractory follicular lymphoma with ≥2 prior therapies
(NCT04224493) - The
Phase Ib open-label portion of SYMPHONY-1 recruited 44 patients and
showed ORR of 90.9%. In the 800-mg BID recommended Phase III dose
cohort, 18-month PFS and DOR estimates were 94.4% and 100%. There
were no dose-limiting toxicities.
HMPL-453
HMPL-453
is a novel, selective, oral inhibitor targeting FGFR 1/2/3.
Aberrant FGFR signaling is associated with tumor growth, promotion
of angiogenesis, as well as resistance to anti-tumor therapies.
Approximately 10-15% of IHCC patients globally have tumors
harboring FGFR2 fusion. HUTCHMED currently retains all rights to
HMPL-453 worldwide. The table below shows a summary of the clinical
studies for HMPL-453.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
HMPL-453 monotherapy
|
2L cholangiocarcinoma (IHCC with
FGFR fusion)
|
China
|
II
|
Results presented at ASCO 2023;
registration cohort enrolling since March 2023
|
NCT04353375
|
HMPL-453 +
chemotherapies
|
Multiple
|
China
|
I/II
|
Ongoing since 2022
|
NCT05173142
|
HMPL-453 +TUOYI®
(PD‑1)
|
Multiple
|
China
|
I/II
|
Ongoing since 2022
|
NCT05173142
|
China Phase II in IHCC
(NCT04353375) - This
is an open-label, single-arm Phase II study to evaluate the
efficacy and safety of HMPL-453 in the treatment of patients with
advanced IHCC harboring FGFR2 fusions/rearrangements after at least
one line of systemic treatment failure or intolerance. Results from
25 patients treated with two different dosing regimens were
presented at the ASCO 2023 annual meeting, supporting the choice of
the recommended Phase II dose of 300mg oral QD78 (ORR of 50%). After consultation with the NMPA,
a monotherapy registration trial design was agreed with ORR as
primary endpoint, and the first patient was enrolled in March
2023.
Amdizalisib
(HMPL-689)
Amdizalisib is a novel, highly selective oral
inhibitor targeting the isoform PI3Kδ, a key component in the
B-cell receptor signaling pathway. Amdizalisib has been studied in
clinical trials with around 500 patients to date. HUTCHMED
currently retains all rights to amdizalisib worldwide.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
Amdizalisib monotherapy
|
3L Relapsed/refractory follicular
lymphoma
|
China
|
II registration-intent
|
Met primary endpoint; Breakthrough
Therapy Designation
|
NCT04849351
|
Amdizalisib monotherapy
|
2L Relapsed/refractory marginal
zone lymphoma
|
China
|
II registration-intent
|
Ongoing since Apr 2021
|
NCT04849351
|
Amdizalisib monotherapy
|
Indolent NHL79, peripheral T-cell lymphomas
|
China
|
Ib
|
Completed; Updated data presented
at ICML80 2023
|
NCT03128164
|
Phase II registration-intent trial
(NCT04849351) -
In April 2021, we commenced a
registration-intent, single-arm, open-label Phase II trial in China
in approximately 100 patients with relapsed/refractory follicular
lymphoma and approximately 80 patients with relapsed/refractory
marginal zone lymphoma, two subtypes of non-Hodgkin's lymphoma with
alignment with China NMPA to support conditional approval. The
trial has fully enrolled the follicular lymphoma cohort and the
marginal zone lymphoma cohort enrollment is ongoing. In the
follicular lymphoma cohort, the primary endpoint of ORR met its
pre-specified threshold of demonstrating a clinically meaningful
and a significant increase in ORR in this setting. However, in
recent discussions with China NMPA, it is clear that a randomized
study is required to support registration. In view of the changing
regulatory requirement, we are currently evaluating the clinical
development plan and regulatory guidance before deciding the
regulatory strategy for this indication.
Phase Ib expansion study in
relapsed/refractory
lymphoma (NCT03128164) - This is an open‑label
study to evaluate amdizalisib in relapsed and/or refractory
non-Hodgkin lymphoma patients. Updated safety data as well as
efficacy data were reported at ICML in June 2023. At median
follow-up duration of 22.1 months, median DoR and PFS were not
reached for the 26 efficacy evaluable patients in the follicular
lymphoma cohort. For the marginal zone lymphoma cohort of 16
efficacy evaluable patients, at median follow-up duration of 20.3
months, median DoR was not reached and median PFS was 26.8 months.
Amdizalisib showed an acceptable safety profile and promising
anti-tumor activity in relapsed/refractory lymphoma.
HMPL-306
HMPL-306 is a novel dual-inhibitor of
IDH181 and IDH2 enzymes. IDH1 and IDH2 mutations have
been implicated as drivers of certain hematological malignancies,
gliomas and solid tumors, particularly among acute myeloid leukemia
patients. HUTCHMED currently retains all rights to HMPL-306
worldwide. The table below shows a summary of the clinical studies
for HMPL-306.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
HMPL-306 monotherapy
|
Myeloid hematological
malignancies
|
China
|
I
|
Dose
escalation data presented at
EHA82 2023; registration Phase III study planned in
2024
|
NCT04272957
|
HMPL-306 monotherapy
|
Solid tumors including but not
limited to gliomas, chondrosarcomas or
cholangiocarcinomas
|
U.S.
|
I
|
Ongoing since 2021
|
NCT04762602
|
HMPL-306 monotherapy
|
Hematological
malignancies
|
U.S.
|
I
|
Ongoing since 2021
|
NCT04764474
|
China Phase I in hematological malignancies
(NCT04272957) - This
is a two-phase, open-label Phase I study to evaluate the safety,
pharmacokinetics, pharmacodynamics and efficacy of
HMPL‑306 in
patients of relapsed or refractory hematological malignancies
harboring IDH1 and/or IDH2 mutations. The dose escalation phase of
the study is completed. The first-in-human dose-escalation phase
data was presented at EHA Annual Meeting in June 2023 with ORR of
45-50%. Based on the pharmacodynamic, pharmacokinetic and
preliminary clinical findings, a recommended Phase II dose was
determined for the dose expansion phase of the study. We are
planning to initiate a Phase III registration study during the
first half of 2024.
HMPL-760
HMPL-760 is an investigational, non-covalent,
third-generation BTK inhibitor. It is a highly potent, selective,
and reversible inhibitor with long target engagement against BTK,
including wild-type and C481S-mutated BTK. China Phase I studies
opened in early 2022 will include relapsed or refractory B-cell
non-Hodgkin's lymphoma or CLL83 patients with or without a prior regimen
containing a BTK inhibitor. HUTCHMED currently retains all rights
to HMPL-760 worldwide.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
HMPL-760 monotherapy
|
CLL, SLL84, other B-NHL
|
China
|
I
|
Ongoing since Jan 2022;
RP2D85 determined; dose
expansion ongoing
|
NCT05190068
|
HMPL-295
HMPL-295 is a novel ERK inhibitor. ERK is a
downstream component of the RAS-RAF-MEK-ERK signaling cascade
(MAPK86 pathway). This is our first of multiple
candidates in discovery targeting the MAPK pathway, followed by
HMPL-415 targeting SHP2. A China Phase I study was initiated in
July 2021 for HMPL-295. HUTCHMED currently retains all rights to
HMPL-295 worldwide.
RAS-MAPK
pathway is dysregulated in cancer, in which mutations or
non-genetic events hyper-activate the pathway in up to 50% of
cancers. RAS and RAF predict worse clinical prognosis in a wide
variety of tumor types, mediate resistance to targeted therapies,
and decrease the response to the approved standards of care,
namely, targeted therapy and immunotherapy. ERK inhibition has the
potential to overcome or avoid the intrinsic or acquired resistance
from the inhibition of RAS, RAF and MEK upstream mechanisms. Safety
and efficacy results on 22 patients with advanced solid tumors were
reported during ESMO Asia 2023.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
HMPL-295 monotherapy
|
Solid tumors
|
China
|
I
|
Ongoing since 2021; data at ESMO
Asia 2023
|
NCT04908046
|
HMPL-653
HMPL-653
is a novel, highly selective, and potent CSF-1R inhibitor designed
to target CSF-1R driven tumors as a monotherapy or in combination
with other drugs. We initiated a China Phase I study in January
2022. HUTCHMED currently retains all rights to HMPL-653
worldwide.
CSF-1R is
usually expressed on the surface of macrophages and can promote
growth and differentiation of macrophages. Studies have shown that
blocking the CSF-1R signaling pathway could effectively modulate
the tumor microenvironment, relieve tumor immunosuppression, and
synergize with other anti-cancer therapies such as immune
checkpoint inhibitors to achieve tumor inhibition. It has been
demonstrated in several clinical studies that CSF-1R inhibitors
could treat tenosynovial giant cell tumors, and treat a variety of
malignancies in combinations. Currently no CSF-1R inhibitor has
been approved in China.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
HMPL-653 monotherapy
|
Solid tumors & tenosynovial
giant cell tumors
|
China
|
I
|
Ongoing since Jan 2022; ~110
expected to be enrolled
|
NCT05190068
|
HMPL-A83
HMPL-A83
is an investigational IgG4-type humanized anti-CD47 monoclonal
antibody that exhibits high affinity for CD47. HMPL-A83 blocks CD47
binding to Signal regulatory protein (SIRP) α and disrupts the "do
not eat me" signal that cancer cells use to shield themselves from
the immune system. In preclinical studies, HMPL‑A83 demonstrated a high affinity for CD47
antigen on tumor cells and strong phagocytosis induction of
multiple tumor cells, as well as weak affinity for red blood cells
and no induction of hemagglutination, implying low risk of anemia,
a potential event of special interest. HMPL-A83 has also
demonstrated strong anti-tumor activity in multiple animal models.
HUTCHMED currently retains all rights to HMPL-A83
worldwide.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
HMPL-A83 monotherapy
|
Advanced malignant
neoplasms
|
China
|
I
|
Ongoing since July 2022
|
NCT05429008
|
HMPL-415
HMPL-415
is a novel SHP2 allosteric inhibitor. A China Phase I study was
initiated in July 2023. HUTCHMED currently retains all rights to
HMPL-415 worldwide.
SHP2 is a
non-receptor protein tyrosine phosphatase ubiquitously expressed
mainly in the cytoplasm of several tissues. SHP2 modulates diverse
cell signaling events that control metabolism, cell growth,
differentiation, cell migration, transcription and oncogenic
transformation. It interacts with diverse molecules in the cell,
and regulates key signaling events including RAS/ERK, PI3K/AKT,
JAK/STAT and PD-1 pathways downstream of several receptor tyrosine
kinases (RTKs) upon stimulation by growth factors and cytokines.
This is the second of multiple candidates to have emerged from our
discovery research that targets this pathway, the first being
HMPL-295. Dysregulation of SHP2 expression or activity causes many
developmental diseases, and hematological and solid
tumors.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
HMPL-415 monotherapy
|
Solid tumors
|
China
|
I
|
Ongoing since 2023
|
NCT05886374
|
Immunology Collaboration with
Inmagene
We have a
strategic partnership with Inmagene, a clinical development stage
company with a focus on immunological diseases, to further develop
novel preclinical drug candidates we discovered for the potential
treatment of multiple immunological diseases. Funded by Inmagene,
we worked together to move two drug candidates towards clinical
trials. Inmagene advanced the drug candidates through global
clinical development. In October 2023, Inmagene issued a notice to
exercise its options to license these two drug candidates, and the
parties entered into a share subscription agreement in February
2024, which, subject to customary closing conditions, entitles us
to receive common shares representing approximately 7.5% of the
shares (fully diluted) in Inmagene as consideration for the
exercise of the options. Following receipt of the shares, Inmagene
will be granted an exclusive license to further develop,
manufacture and commercialize these two drug candidates
worldwide.
Treatment
|
Name, Line, Patient Focus
|
Sites
|
Phase
|
Status/Plan
|
NCT #
|
IMG-007 (OX40 antibody)
|
Adults with alopecia areata with
50% or greater scalp hair loss
|
Global
|
IIa
|
First patient dosed in October
2023
|
NCT06060977
|
IMG-007 (OX40 antibody)
|
Adults with moderate to severe
atopic dermatitis
|
Global
|
IIa
|
First patient dosed in August
2023
|
NCT05984784
|
IMG-007 (OX40 antibody)
|
Adult healthy
volunteers
|
Australia
|
I
|
Single ascending dose
completed
|
NCT05353972
|
IMG-004 (BTK inhibitor)
|
Adult healthy
volunteers
|
Global
|
I
|
Single ascending dose
completed
|
NCT05349097
|
IMG-007 in atopic dermatitis
- This is a novel antagonistic
monoclonal antibody targeting the OX40 receptor. OX40 is a
costimulatory receptor member of the tumor necrosis factor receptor
(TNFR) superfamily expressed predominantly on activated T cells.
Phase I study in healthy volunteers demonstrated that up to 600 mg
of IMG-007 was safe and well-tolerated, with no reports of pyrexia
or chills, which were common adverse events of rocatinlimab,
another OX40 antibody treatment. At projected therapeutic dose
levels, IMG-007 demonstrated a mean terminal half-life of 31-37
days. The long half-life combined with a potentially improved
safety profile supports IMG-007's best-in-class potential as an
OX40 targeted therapy.
Two
global, proof-of-concept Phase IIa trials are ongoing. One trial
evaluates the safety, pharmacokinetics and efficacy (EASI at week
12) of IMG-007 in moderate-to-severe atopic dermatitis. Patients
received intravenous IMG-007 three times over four weeks. The first
patient was dosed in August 2023 and Inmagene expects interim data
readout in the third quarter of 2024. Another trial evaluates the
safety of IMG-007 in adults with alopecia areata with SALT score ≥
50. They will be given three doses over four weeks. First patient
was dosed in October 2023 and Inmagene expects interim data readout
in the third quarter of 2024.
IMG-004 in immunological diseases
- This is a small molecule inhibitor
that binds to BTK in a non-covalent, reversible manner. Designed
specifically for inflammatory and autoimmune diseases that usually
require long-term treatment, IMG-004 is potent, highly selective
and brain permeable. A Phase I single ascending dose study in
healthy volunteers in the U.S., initiated in August 2022, has
recently completed. It showed that IMG‑004 was safe and
well-tolerated with a long half-life and sustained pharmacodynamic
effects, supporting further clinical development. Results will be
submitted to an upcoming medical conference.
MANUFACTURING
We have a
drug product manufacturing facility in Suzhou which manufactures
both clinical and commercial supplies for fruquintinib and
surufatinib. Our Suzhou facility passed a pre-approval inspection
(PAI) by the U.S. FDA in August 2023. We have qualified two drug
product sites for supplying fruquintinib to the U.S. market: our
own facility in Suzhou and a second site in Switzerland.
We have
also completed construction of, qualified, and obtained Drug
Manufacturing Permit for a new drug product facility in Pudong,
Shanghai, which will increase our novel drug product manufacturing
capacity by over five times. The manufacturing and technology
transfer for some of our commercial products are underway to this
new facility. This is in line with our previously outlined
expectations of manufacturing clinical supplies from the new
facility starting in 2023 and commercial supplies around 2025,
after the necessary regulatory filings and approvals.
In line
with our commitment to sustainable practices and environmental
stewardship, we have installed solar panels at this new facility.
They contribute renewable energy directly to our operations,
particularly in cooling indoor areas, significantly reducing
electricity usage and greenhouse gas emissions.
We
completed process validation for the API87 and drug product of sovleplenib at the selected
commercial manufacturing facilities to support the approval of the
product.
OTHER VENTURES
Our Other
Ventures include drug marketing and distribution platforms covering
about 290 cities and towns in China with over 2,900 mainly
manufacturing and commercial personnel. Built over the past 20
years, it primarily focuses on prescription drugs and science-based
nutrition products through several joint ventures and subsidiary
companies.
In 2023,
our Other Ventures delivered growth with consolidated revenue up
18% (24% at CER) to $309.4 million (2022: $262.6m). Consolidated
net income attributable to HUTCHMED from our Other Ventures
decreased by 8% (3% at CER) to $50.3 million (2022:
$54.6m).
Hutchison
Sinopharm88: Our prescription drugs commercial services
business, which in addition to providing certain commercial
services for our own products, provides services to third-party
pharmaceutical companies in China, grew sales by 24% (31% at CER)
to $295.4 million in 2023 (2022: $237.3m).
In
2021, the Hong Kong International Arbitration Centre made a final
award in favor of Hutchison Sinopharm against
Luye89 in the amount of RMB253.2 million ($35.4
million), plus costs and interest (the "Award"), in connection with
the termination of Hutchison Sinopharm's right to distribute
SEROQUEL® in China. In June 2022, Luye provided a bank
guarantee of up to RMB286.0 million to cover the Award, pending the
outcome of an application by Luye to the High Court of Hong Kong to
set aside the Award and subsequent appeals. On July 26, 2022,
Luye's application to set aside the Award was dismissed by the High
Court with costs awarded in favor of Hutchison Sinopharm. On June
6, 2023, an appeal hearing filed by Luye was heard by the Court of
Appeal in Hong Kong and judgment is awaited.
SHPL: Our own-brand prescription drugs business,
operated through our non-consolidated joint venture SHPL, grew
sales by 4% (10% at CER) to $385.5 million (2022: $370.6m). Net
income attributable to HUTCHMED slightly decreased by 5% (increase
1% at CER) to $47.4 million (2022: $49.9m) mainly due to the impact
of gradual price adjustment from volume-based procurement.
The SHPL
operation is large-scale, with a commercial team of
about 2,300 staff managing the
medical detailing and marketing of its products not just in
hospitals in provincial capitals and medium-sized cities, but also
in the majority of county-level hospitals in China. SHPL's Good
Manufacturing Practice-certified factory holds 74 drug product
manufacturing licenses and is operated by about 560 manufacturing
staff.
SXBX90 pill: SHPL's main product is SXBX pill, an oral
vasodilator prescription therapy for coronary artery disease. SXBX
pill is the second largest botanical prescription drug in this
indication in China, with a national market share in January to
December 2023 of 22.0% (2022: 21.0%). Sales increased by 2% (8% at
CER) to $348.6 million in 2023 (2022: $341.6m).
SXBX pill
is protected by a formulation patent that expires in
2029, but also retains
certain state protection that extends indefinitely, and is one of
less than two dozen proprietary prescription drugs represented on
China's National Essential Medicines List (NEML). Inclusion on this
list means that all Chinese state-owned health care institutions
are required to carry it. SXBX pill is fully reimbursed in all of
China.
We
continue to explore divestment and equity capital market
opportunities to monetize our investment in SHPL.
Dividends: Our share of SHPL's profits are passed to the
HUTCHMED Group through dividend payments. In 2023, dividends of
$42.3 million (2022: $43.7m) were paid from SHPL to the HUTCHMED
Group level with aggregate dividends received by HUTCHMED since
inception of over $320 million.
Consumer products businesses
disposal: On December
7, 2023, HUTCHMED disposed of its interests in HHOHK and HSN for
HK$39.8 million ($5.1 million) to Hutchison Whampoa (China)
Limited. The disposal allows HUTCHMED to focus its resources on its
core business areas.
Weiguo Su
Chief
Executive Officer and Chief Scientific Officer
February 28, 2024
USE OF NON-GAAP FINANCIAL MEASURES
AND RECONCILIATION
In
addition to financial information prepared in accordance with U.S.
GAAP, this announcement also contains certain non-GAAP financial
measures based on management's view of performance
including:
·
Adjusted Group net cash flows
excluding financing activities
·
CER
Management uses such measures internally for
planning and forecasting purposes and to measure the HUTCHMED
Group's overall performance. We believe these adjusted financial
measures provide useful and meaningful information to us and
investors because they enhance investors' understanding of the
continuing operating performance of our business and facilitate the
comparison of performance between past and future periods. These
adjusted financial measures are non-GAAP measures and should be
considered in addition to, but not as a substitute for, the
information prepared in accordance with U.S. GAAP. Other companies
may define these measures in different ways.
Adjusted Group net cash flows excluding
financing activities: We exclude deposits in and proceeds from
short-term investments for the period, and exclude the net cash
generated from financing activities for the period to derive our
adjusted Group net cash flows excluding financing activities. We
believe the presentation of adjusted Group net cash flows excluding
financing activities provides useful and meaningful information
about the change in our cash resources excluding those from
financing activities which may present significant period-to-period
differences.
CER: We remove the effects of currency movements from
period-to-period comparisons by retranslating the current period's
performance at previous period's foreign currency exchange rates.
Because we have significant operations in China, the RMB to U.S.
dollar exchange rates used for translation may have a significant
effect on our reported results. We believe the presentation at CER
provides useful and meaningful information because it facilitates
period-to-period comparisons of our results and increases the
transparency of our underlying performance.
Reconciliation of GAAP change in
net cash generated from/(used in) operating activities to Adjusted
Group net cash flows excluding financing activities:
$'millions
|
|
2023
|
2022
|
Net cash generated from/(used in)
operating activities
|
|
219.3
|
(268.6)
|
Net cash (used in)/generated from
investing activities
|
|
(291.1)
|
296.6
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
(6.5)
|
(9.5)
|
Excludes: Deposits in short-term
investments
|
|
1,627.8
|
1,202.0
|
Excludes: Proceeds from short-term
investments
|
|
(1,342.8)
|
(1,518.4)
|
Adjusted Group net cash flows
excluding financing activities
|
|
206.7
|
(297.9)
|
Reconciliation of GAAP revenue
and net income attributable to HUTCHMED to CER:
$'millions (except %)
|
Year Ended December
31,
|
|
Change
Amount
|
|
Change %
|
2023
|
2022
|
|
Actual
|
CER
|
Exchange
effect
|
|
Actual
|
CER
|
Exchange
effect
|
Consolidated revenue
|
838.0
|
426.4
|
|
411.6
|
437.0
|
(25.4)
|
|
97%
|
102%
|
-5%
|
|
|
|
|
|
|
|
|
|
|
|
- Oncology/Immunology*
|
528.6
|
163.8
|
|
364.8
|
374.0
|
(9.2)
|
|
223%
|
228%
|
-5%
|
|
|
|
|
|
|
|
|
|
|
|
* Includes:
|
|
|
|
|
|
|
|
|
|
|
- Products Sales
|
164.2
|
124.6
|
|
39.6
|
48.2
|
(8.6)
|
|
32%
|
39%
|
-7%
|
-
ELUNATE®
|
83.2
|
69.9
|
|
13.3
|
17.9
|
(4.6)
|
|
19%
|
26%
|
-7%
|
- FRUZAQLAâ„¢
|
7.2
|
-
|
|
7.2
|
7.2
|
-
|
|
-
|
-
|
-
|
-
SULANDA®
|
43.9
|
32.3
|
|
11.6
|
13.8
|
(2.2)
|
|
36%
|
43%
|
-7%
|
-
ORPATHYS®
|
28.9
|
22.3
|
|
6.6
|
8.3
|
(1.7)
|
|
30%
|
37%
|
-7%
|
-
TAZVERIK®
|
1.0
|
0.1
|
|
0.9
|
1.0
|
(0.1)
|
|
713%
|
728%
|
-15%
|
|
|
|
|
|
|
|
|
|
|
|
- Other R&D services
income
|
52.4
|
24.2
|
|
28.2
|
28.8
|
(0.6)
|
|
116%
|
119%
|
-3%
|
|
|
|
|
|
|
|
|
|
|
|
- Other
Ventures^
|
309.4
|
262.6
|
|
46.8
|
63.0
|
(16.2)
|
|
18%
|
24%
|
-6%
|
|
|
|
|
|
|
|
|
|
|
|
^ Includes:
|
|
|
|
|
|
|
|
|
|
|
- Hutchison Sinopharm
- prescription drugs
|
295.4
|
237.3
|
|
58.1
|
74.0
|
(15.9)
|
|
24%
|
31%
|
-7%
|
|
|
|
|
|
|
|
|
|
|
|
Non-consolidated joint venture revenue
|
|
|
|
|
|
|
|
|
|
|
- SHPL
|
385.5
|
370.6
|
|
14.9
|
36.1
|
(21.2)
|
|
4%
|
10%
|
-6%
|
- SXBX pill
|
348.6
|
341.6
|
|
7.0
|
26.2
|
(19.2)
|
|
2%
|
8%
|
-6%
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income attributable to
HUTCHMED - Other Ventures
|
50.3
|
54.6
|
|
(4.3)
|
(1.3)
|
(3.0)
|
|
-8%
|
-3%
|
-5%
|
- Consolidated entities
|
2.9
|
4.7
|
|
(1.8)
|
(1.6)
|
(0.2)
|
|
-39%
|
-35%
|
-4%
|
- Equity investees
- SHPL
|
47.4
|
49.9
|
|
(2.5)
|
0.3
|
(2.8)
|
|
-5%
|
1%
|
-6%
|
|
|
|
|
|
|
|
|
|
|
|
|
GROUP CAPITAL RESOURCES
LIQUIDITY AND CAPITAL
RESOURCES
To date,
we have taken a multi-source approach to fund our operations,
including through cash flows generated and dividend payments from
our Oncology/Immunology and Other Ventures operations, service and
milestone and upfront payments from our collaboration partners,
bank borrowings, investments from third parties, proceeds from our
listings on various stock exchanges and follow-on
offerings.
Primarily
due to an increase in total revenue driven by Oncology/Immunology
partnering, its strong commercial progress in China, and growth in
third-party distribution sales, we generated a net income
attributable to HUTCHMED of $100.8 million for the year ended
December 31, 2023 (2022: net loss of $360.8m).
As of
December 31, 2023, we had cash and cash equivalents and short-term
investments of $886.3 million and unutilized bank facilities of
$68.1 million. As of December 31, 2023, we had $79.3 million in
bank borrowings.
Certain
of our subsidiaries and joint ventures, including those registered
as wholly foreign-owned enterprises in China, are required to set
aside at least 10.0% of their after-tax profits to their general
reserves until such reserves reach 50.0% of their registered
capital. In addition, certain
of our joint ventures are required to allocate certain of their
after-tax profits as determined in accordance with related
regulations and their respective articles of association to the
reserve funds, upon approval of the board.
Profit
appropriated to the reserve funds for our subsidiaries and joint
ventures incorporated in the PRC was approximately $168,000 and
$318,000 for the years ended December 31, 2023 and 2022,
respectively. In addition, as a result of PRC regulations
restricting dividend distributions from such reserve funds and from
a company's registered capital, our PRC subsidiaries are restricted
in their ability to transfer a certain amount of their net assets
to us as cash dividends, loans or advances. This restricted portion
amounted to $1.0 million as of December 31, 2023.
In
addition, our non-consolidated joint venture, SHPL, held an
aggregate of $19.1 million in cash and cash equivalents and no bank
borrowings as of December 31, 2023. Such cash and cash equivalents
are only accessible by us through dividend payments from the joint
venture. The level of dividends declared by the joint venture is
subject to agreement each year between us and our joint venture
partner based on the profitability and working capital needs of the
joint venture.
CASH FLOW
|
|
Year Ended December
31,
|
|
|
2023
|
|
2022
|
|
|
(in $'000)
|
Cash Flow Data:
|
|
|
|
|
Net cash generated from/(used in)
operating activities
|
|
219,258
|
|
(268,599)
|
Net cash (used in)/generated from
investing activities
|
|
(291,136)
|
|
296,588
|
Net cash generated from/(used in)
financing activities
|
|
48,660
|
|
(82,763)
|
Net decrease in cash and cash
equivalents
|
|
(23,218)
|
|
(54,774)
|
Effect of exchange rate
changes
|
|
(6,471)
|
|
(9,490)
|
Cash and cash equivalents at
beginning of the year
|
|
313,278
|
|
377,542
|
Cash and cash equivalents at end
of the year
|
|
283,589
|
|
313,278
|
Net Cash
generated from/(used in) Operating Activities
Net cash
used in operating activities was $268.6 million for the year ended
December 31, 2022, compared to net cash generated from operating
activities of $219.3 million for the year ended December 31, 2023.
The net change of $487.9 million was primarily attributable to the
net loss attributable to HUTCHMED of $360.8 million for the year
ended December 31, 2022 compared to net income attributable to
HUTCHMED of $100.8 million for the year ended December 31, 2023
(which included $312.0 million in upfront and milestone income
recognized from Takeda).
Net Cash
(used in)/generated from Investing Activities
Net cash
generated from investing activities was $296.6 million for the year
ended December 31, 2022, compared to net cash used in investing
activities of $291.1 million for the year ended December 31, 2023.
The net change of $587.7 million was primarily attributable to
placement of more short-term investments which had net withdrawals
of $316.4 million for the year ended December 31, 2022 as compared
to net deposits of $285.0 million for the year ended December 31,
2023. The net change was partially offset by an increase in
dividend received from divestment of a former equity investee by
$13.0 million from $16.5 million during the year ended December 31,
2022 to $29.5 million during the year ended December 31,
2023.
Net Cash
generated from/(used in) Financing Activities
Net cash used in financing activities was $82.8 million for the
year ended December 31,
2022, compared to
net cash generated
from financing
activities of $48.7 million for the year ended December
31, 2023. The net change of $131.5 million
was mainly
attributable to
bank borrowings which had a net
repayment of $9.2 million during the year ended December 31, 2022
as compared to net proceeds of $61.7 million during the year ended
December 31, 2023. The net change was also attributable to a $39.0 million decrease in purchases of ADSs by a trustee for the
settlement of equity awards of the Company which totaled
$48.1 million for the year
ended December 31, 2022
as compared to
$9.1 million for the year ended December 31, 2023, as well as a $16.5 million decrease in
dividends paid to non-controlling shareholders of subsidiaries from
$25.6 million for the year ended December 31, 2022 to $9.1 million for the year ended
December 31, 2023.
LOAN FACILITIES
In
October 2021, our subsidiary entered into a 10-year fixed asset
loan facility agreement with BOC91 for the provision of a secured credit facility
in the amount of RMB754.9 million ($105.5 million) with an annual
interest rate at the 5-year China LPR92 less 0.8% (which was supplemented in June 2022).
This credit facility is guaranteed by another subsidiary of the
Group, and secured by the underlying leasehold land and buildings,
and includes certain financial covenant requirements. As of
December 31, 2023, RMB344.8 million ($48.2 million) was utilized
from the fixed asset loan facility.
In May 2022, our subsidiary entered into a
12-month revolving loan facility with HSBC93 in the amount of HK$390.0 million ($50.0
million) with an interest rate at HIBOR94 plus 0.5% per annum. This revolving
facility is guaranteed by us. The revolving loan facility expired
in May 2023.
In November 2023, our subsidiary entered into a
short-term working capital loan facility with BOC in the amount of
RMB300.0 million ($41.9 million) with an annual interest rate at
the 1-year China LPR less 0.95%. This credit facility includes certain financial
covenant requirements. As of December 31, 2023, RMB222.9 million ($31.1
million) was drawn from the facility.
Our
non-consolidated joint venture SHPL had no bank borrowings
outstanding as of December 31, 2023.
CONTRACTUAL OBLIGATIONS AND
COMMITMENTS
The
following table sets forth our contractual obligations as of
December 31, 2023. Our purchase obligations relate to property,
plant and equipment that are contracted for but not yet paid. Our
lease obligations primarily comprise future aggregate minimum lease
payments in respect of various factories, warehouses, offices and
other assets under non-cancellable lease agreements.
|
Payment Due by Period (in
$'000)
|
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years
|
Bank borrowings
|
79,344
|
|
31,155
|
|
3,192
|
|
9,256
|
|
35,741
|
Interest on bank
borrowings
|
11,034
|
|
2,411
|
|
3,228
|
|
2,913
|
|
2,482
|
Purchase obligations
|
1,259
|
|
1,259
|
|
-
|
|
-
|
|
-
|
Lease obligations
|
7,583
|
|
3,919
|
|
2,682
|
|
982
|
|
-
|
|
99,220
|
|
38,744
|
|
9,102
|
|
13,151
|
|
38,223
|
SHPL
The
following table sets forth the contractual obligations of our
non-consolidated joint venture SHPL as of December 31, 2023. SHPL's
purchase obligations comprise capital commitments for property,
plant and equipment contracted for but not yet paid. SHPL's lease
obligations primarily comprise future aggregate minimum lease
payments in respect of various offices under non-cancellable lease
agreements.
|
Payment Due by Period (in
$'000)
|
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years
|
Purchase obligations
|
376
|
|
376
|
|
-
|
|
-
|
|
-
|
Lease obligations
|
1,459
|
|
791
|
|
668
|
|
-
|
|
-
|
|
1,835
|
|
1,167
|
|
668
|
|
-
|
|
-
|
FOREIGN EXCHANGE RISK
A
substantial portion of our revenue and expenses are denominated in
renminbi, and our consolidated financial statements are presented
in U.S. dollars. While we do not believe that we currently have any
significant direct foreign exchange risk and have not used any
derivative financial instruments to hedge our exposure to such
risk, any significant fluctuation in the value of renminbi may
adversely affect our cash flows, results of operations and
financial condition in the future.
The value of the renminbi against the U.S.
dollar and other currencies may fluctuate and is affected by, among
other things, changes in China's political and economic conditions.
The conversion of renminbi into foreign currencies, including U.S.
dollars, has been based on rates set by the PBOC95. If we decide to convert renminbi into
U.S. dollars for the purpose of making payments for dividends on
our ordinary shares or ADSs or for other business purposes,
appreciation of the U.S. dollar against the renminbi would have a
negative effect on the U.S. dollar amounts available to us. On the
other hand, if we need to convert U.S. dollars into renminbi for
business purposes, e.g. capital expenditures and working capital,
appreciation of the renminbi against the U.S. dollar would have a
negative effect on the renminbi amounts we would receive from the
conversion. In addition, for certain cash and bank balances deposited with banks in
the PRC, if we decide to convert them into foreign currencies, they
are subject to the rules and regulations of foreign exchange
control promulgated by the PRC government.
CREDIT RISK
Substantially all of our bank deposits are in
major financial institutions, which we believe are of high credit
quality. We limit the amount of credit exposure to any single
financial institution. We make periodic assessments of the
recoverability of trade and other receivables and amounts due from
related parties. Our historical experience in collection of
receivables falls within the recorded allowances, and we believe
that we have made adequate provision for uncollectible
receivables.
INTEREST RATE RISK
We have no significant interest-bearing assets
except for bank deposits. Our exposure to changes in interest rates
is mainly attributable to our bank borrowings, which bear interest
at floating interest rates and expose us to cash flow interest rate
risk. We have not used any interest rate swaps to hedge our
exposure to interest rate risk. We have performed sensitivity
analysis for the effects on our results for the period from changes
in interest rates on floating rate borrowings. The sensitivity to
interest rates used is based on the market forecasts available at
the end of the reporting period and under the economic environments
in which we operate, with other variables held constant. According
to the analysis, the impact on our results of a 1.0% interest rate
shift would be a maximum increase/decrease of $0.1 million for the
year ended December 31, 2023.
OFF-BALANCE SHEET
ARRANGEMENTS
We did
not have during the years presented, and we do not currently have,
any material off-balance sheet arrangements.
CONTINGENT
LIABILITIES
Other
than as disclosed in note 15 to the full year financial statements,
the Group does not have any other significant commitments or
contingent liabilities.
GEARING RATIO
The
gearing ratio of the Group, which was calculated by dividing total
interest-bearing loans by total equity, was 10.7% as of December
31, 2023, an increase from 2.8% as of December 31, 2022. The
increase was primarily attributable to the increase in
interest-bearing loans.
SIGNIFICANT INVESTMENTS
HELD
Except
for our investment in a non-consolidated joint venture SHPL with a
carrying value of $48.4 million including details below and those
as disclosed in note 11 to the full year financial statements, we
did not hold any other significant investments in the equity of any
other companies as of December 31, 2023.
Place of establishment and operations
|
|
Nominal
Value of Registered Capital
|
|
Equity
Interest Attributable to the Group
|
|
Principal activities
|
|
|
(in
RMB'000)
|
|
|
|
|
PRC
|
|
229,000
|
|
50%
|
|
Manufacture and distribution of prescription drug
products
|
Our
own-brand prescription drugs business under our Other Ventures is
operated through SHPL. Dividends received from SHPL for the year
ended December 31, 2023 were $42.3 million.
FUTURE PLANS FOR MATERIAL
INVESTMENTS AND CAPITAL ASSETS
Note 15
discloses our capital commitment as of December 31, 2023.
Subsequent to the construction completion of the drug product
facility in Shanghai, certain investments in capital assets in
relation to the facility will be made.
MATERIAL ACQUISITIONS AND
DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT
VENTURES
During the year ended December 31,
2023, we did not have any other material acquisitions and disposals
of subsidiaries, associates and joint ventures.
PLEDGE OF ASSETS
Our
10-year fixed asset loan facility agreement with BOC is secured by
the underlying leasehold land and buildings. RMB344.8 million
($48.2 million) was utilized from the fixed asset loan facility as
of December 31, 2023.
INFLATION
In recent years, China has not
experienced significant inflation, and thus inflation has not had a
material impact on our results of operations. According to the
National Bureau of Statistics of China, the Consumer Price Index in
China increased by 1.5% and 1.8% in 2021 and 2022 respectively and
decreased by 0.3% in 2023. Although we have not been materially
affected by inflation in the past, we can provide no assurance that
we will not be affected in the future by higher rates of inflation
in China.
FINAL DIVIDEND
The Board does not recommend any
final dividend for the year ended December 31, 2023.
OTHER INFORMATION
CORPORATE STRATEGY
The primary objective of the
Company is to be a leader in the discovery, development and
commercialization of targeted therapies and immunotherapies for the
treatment of cancer and immunological diseases. The strategy of the
Company is to leverage the highly specialized expertise of the drug
discovery division, the Oncology/Immunology operations, to develop
and expand the drug candidate portfolio of the Group for the global
market, building on the first-mover advantage in the development
and launch of novel cancer medicines in China, and engaging
partners for late-stage development and commercialization outside
of China. This strategy is aligned with the Company's culture of
innovation and high engagement and empowerment of staff with a
strong focus on reward and recognition. The Chairman's Statement
and the Operations Review contain discussions and analyses of the
Group's opportunities, performance and the basis on which the Group
generates or preserves value over the longer term and the basis on
which the Group will execute its strategy for delivering its
objectives. The Group also focuses on sustainability and delivering
business solutions to support the transition to a low-carbon
economy.
HUMAN RESOURCES
As at December 31, 2023, the Group
employed approximately 1,990 (2022: ~2,030) full time staff
members. Staff costs for the year ended December 31, 2023,
including directors' emoluments, totaled $213.7 million (2022:
$227.2 million).
The Group fully recognizes the
importance of high-quality employees in sustaining market
leadership. Salary and benefits are kept at competitive levels,
while individual performance is rewarded within the general
framework of the salary, bonus and incentive system of the Group,
which is reviewed annually. Employees are provided with a wide
range of benefits that include medical coverage, provident funds
and retirement plans, and long-service awards. The Group stresses
the importance of staff development and provides training programs
on an ongoing basis. Employees are also encouraged to play an
active role in community care activities.
SUSTAINABILITY
The key sustainability mission of
the Group is to create long-term value for all stakeholders by
aligning its sustainability objectives to the strategic development
of its businesses. The Board of Directors ("the Board") has the
overall responsibility to ensure that sustainability issues are
integrated into the strategy and long-term development of the
Group. It provides oversight of the sustainability performance of
the Group through closely monitoring key sustainability matters and
performance indicators, along with trends, risks, and opportunities
that may impact the business development of the Group. Supported by
the Sustainability Committee, senior management, and the
Sustainability Working Group, the Board oversees the management
approach to sustainability matters and the formulation of
sustainability strategies.
A standalone Sustainability Report
of the Company for 2023 will be published alongside the 2023 Annual
Report in April 2024 and included further information on the
Group's sustainability initiatives and their performance. It will
further discuss the abovementioned sustainability mission and
strategies, management approach, progress of goals and targets,
material quantitative data, as well as policies and key initiatives
of the Group. Over the course of 2024, the Group continues to
engage its stakeholders to identify areas for improvement in these
sustainability fronts.
CLOSURE OF REGISTER OF
MEMBERS
The register of members of the
Company will be closed from Tuesday, May 7, 2024 to Friday, May 10,
2024, both days inclusive, during which period no transfer of
shares will be effected, to determine shareholders' entitlement to
attend and vote at the 2024 Annual General Meeting (or at any
adjournment or postponement thereof). All share certificates with
completed transfer forms, either overleaf or separately, must be
lodged with (a) the Hong Kong Branch Share Registrar of the
Company, Computershare Hong Kong Investor Services Limited, at
Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road
East, Wanchai, Hong Kong or (b) the Principal Share Registrar of
the Company, Computershare Investor Services (Jersey) Limited c/o
Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol, BS99 6ZY, United Kingdom, no later than 4:30 pm Hong
Kong time on Monday, May 6, 2024.
PURCHASE, SALE OR REDEMPTION OF
LISTED SECURITIES
During the year ended December 31,
2023, neither the Company nor any of its subsidiaries has
purchased, sold or redeemed any of the listed securities of the
Company.
COMPLIANCE WITH THE CORPORATE
GOVERNANCE CODE
The Company strives to attain and
maintain high standards of corporate governance best suited to the
needs and interests of the Company and its subsidiaries as it
believes that effective corporate governance framework is
fundamental to promoting and safeguarding interests of shareholders
and other stakeholders and enhancing shareholder value.
Accordingly, the Company has adopted and applied corporate
governance principles and practices that emphasize a quality Board,
effective risk management and internal control systems, stringent
disclosure practices, transparency and accountability as well as
effective communication and engagement with shareholders and other
stakeholders. It is, in addition, committed to continuously
enhancing these standards and practices and inculcating a robust
culture of compliance and ethical governance underlying the
business operations and practices across the Group.
The Company has complied
throughout the year ended December 31, 2023 with all applicable
code provisions of the Hong Kong Corporate Governance Code
contained in Appendix C1 of the Rules Governing the Listing of
Securities on HKEX (the "Hong Kong Listing Rules").
COMPLIANCE WITH THE SHARE
DEALINGS CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Board has adopted the Code on
Dealings in Shares which is on terms no less exacting than the
required standard set out in the Model Code for Securities
Transactions by Directors of Listed Issuers set out in Appendix C3
of the Hong Kong Listing Rules as the protocol regulating
Directors' dealings in securities of the Company. In response to
specific enquiries made, all Directors have confirmed that they
have complied with the required standards set out in such code
regarding their securities transactions throughout their tenure
during the year ended December 31, 2023.
ANNUAL GENERAL
MEETING
The Annual General Meeting of the
Company will be held on Friday, May 10, 2024. Notice of the 2024
Annual General Meeting will be published and issued to shareholders
in due course.
USE OF NET PROCEEDS
On June 30, 2021, the Company
issued 104,000,000 new ordinary shares for total gross proceeds of
approximately $534.7 million from the listing and offering of the
Company's ordinary shares on HKEX.
On July 15, 2021, the
over-allotment option was fully exercised and the Company issued an
aggregate of 15,600,000 ordinary shares for total gross proceeds of
approximately $80.2 million.
The intended use of total net
proceeds of approximately $585.2 million from the offering and the
over-allotment option for the purposes and in the amounts (adjusted
on pro rata basis based on the actual net proceeds) as disclosed in
the prospectus of the Company dated June 18, 2021 is as
below:
Use of Proceeds
|
|
Percentage of Total Net
Proceeds
|
|
Approximate
Amount
|
|
Actual Usage up to December
31, 2023
|
|
Unutilized Net Proceeds as
of December 31, 2023
|
|
Expected Timeline for
Utilization of Proceeds (note)
|
|
|
(%)
|
|
($'millions)
|
|
($'millions)
|
|
($'millions)
|
|
|
Advance our late-stage clinical
programs for savolitinib, surufatinib, fruquintinib, amdizalisib
and sovleplenib through registration trials and potential NDA
submissions
|
|
50%
|
|
292.7
|
|
292.7
|
|
-
|
|
Fully
utilized
|
Support further proof-of-concept
studies and fund the continued expansion of our product portfolio
in cancer and immunological diseases through internal research,
including the development cost of early-clinical and
preclinical-stage pipeline drug candidates
|
|
10%
|
|
58.5
|
|
58.5
|
|
-
|
|
Fully utilized
|
Further strengthen our integrated
capabilities across commercialization, clinical and regulatory and
manufacturing
|
|
20%
|
|
117.1
|
|
117.1
|
|
-
|
|
Fully
utilized
|
Fund potential global business
development and strategic acquisition opportunities to complement
our internal research and development activities and enhance our
current drug candidate pipeline
|
|
15%
|
|
87.8
|
|
87.8
|
|
-
|
|
Fully
utilized
|
Working capital, expanding
internal capabilities globally and in China and general corporate
purposes
|
|
5%
|
|
29.1
|
|
29.1
|
|
-
|
|
Fully
utilized
|
|
|
100%
|
|
585.2
|
|
585.2
|
|
-
|
|
|
Note: There was no change in the
intended use of net proceeds as previously disclosed. The Company
utilized the remaining net proceeds in accordance with such
intended purposes by the end of 2023.
AUDIT REPORT ON THE ANNUAL
FINANCIAL STATEMENTS
The consolidated financial
statements of the Company and its subsidiary companies for the year
ended December 31, 2023 prepared in accordance with accounting
principles generally accepted in the U.S. have been audited by the
Company's auditors, PricewaterhouseCoopers. The consolidated
financial statements of the Company and its subsidiary companies
for the year ended December 31, 2023 have also been reviewed by the
Audit Committee of the Company.
IMPORTANT EVENTS AFTER THE
REPORTING DATE
Save as disclosed above, no important events
affecting the Company occurred since December 31, 2023 and up to the date of this
announcement.
PUBLICATION OF FULL YEAR RESULTS
AND ANNUAL REPORT
This full year results announcement is published
on the websites of HKEX (www.hkexnews.hk), the U.S.
Securities and Exchange Commission (www.sec.gov/edgar), the
London Stock Exchange (www.londonstockex-change.com)
and the Company (www.hutch‑med.com). The annual report of the
Group for the year ended
December 31, 2023
will be published on the websites of HKEX and the Company in April
2024.
REFERENCES AND ABBRIVATIONS
1. Takeda = Takeda
Pharmaceuticals International AG, a subsidiary of Takeda
Pharmaceutical Company Limited.
2. R&D =
Research and development.
3. NDA = New Drug
Application.
4. NSCLC =
Non-small cell lung cancer.
5. FDA = Food and Drug
Administration.
6. PDUFA = U.S.
Prescription Drug User Fee Act.
7. CRC = Colorectal
cancer.
8. NCCN = National Comprehensive Cancer
Network.
9. In-market sales =
total sales to third parties provided by Eli Lilly
(ELUNATE®), Takeda (FRUZAQLA™), AstraZeneca
(ORPATHYS®) and HUTCHMED (ELUNATE®,
SULANDA®,
ORPATHYS® and
TAZVERIK®).
10. MAA = Marketing
Authorization Application.
11. EMA = European Medicines Agency.
12. PMDA = Pharmaceuticals and
Medical Devices Agency.
13. EMC = Endometrial
cancer.
14. RCC = Renal cell
carcinoma.
15. NMPA = National Medical Products
Administration.
16. Syk = Spleen tyrosine
kinase.
17. ITP = Immune thrombocytopenia
purpura.
18. AstraZeneca = AstraZeneca
AB, a subsidiary of AstraZeneca plc.
19. CER = Constant exchange rate. We also report
changes in performance at CER which is a non-GAAP measure. Please
refer to "Use of Non-GAAP Financial Measures and Reconciliation"
below for further information relevant to the interpretation of
these financial measures and reconciliations of these financial
measures to the most comparable GAAP
measures.
20. Source: IQVIA. Report on
file.
21. TPO = Thrombopoietin; TPO-RAs = Thrombopoietin
receptor agonists.
22. MET = Mesenchymal
epithelial transition factor.
23. EGFR = Epidermal growth factor
receptor.
24. TKI = Tyrosine kinase
inhibitor.
25. NRDL = National
Reimbursement Drug List.
26. Lilly = Eli Lilly and
Company.
27. VEGFR = Vascular
endothelial growth factor receptor.
28. ASCO = American Society of Clinical
Oncology.
29. PFS = Progression free
survival.
30. ORR = Objective response
rate.
31. DCR = Disease control
rate.
32. OS = Overall
survival.
33. PD-1 = Programmed cell
death protein-1.
34. FGFR = Fibroblast growth
factor receptor.
35. CSF-1R =
Colony-stimulating factor 1 receptor.
36. AACR = American
Association for Cancer Research.
37. AIHA = Autoimmune hemolytic
anemia.
38. Ipsen = Ipsen SA, parent
of Epizyme Inc.
39. DoR = Duration of
response.
40. IHCC = Intrahepatic
cholangiocarcinoma.
41. PI3Kδ = Phosphoinositide 3-kinase
delta.
42. Inmagene = Inmagene
Biopharmaceuticals.
43. BTK = Bruton tyrosine
kinase.
44. SHPL = Shanghai Hutchison Pharmaceuticals
Limited.
45. HHOHK = Hutchison Hain
Organic (Hong Kong) Limited.
46. HSN = HUTCHMED Science
Nutrition Limited.
47. GAAP = Generally Accepted Accounting
Principles.
48. SG&A= Selling, general, and administrative
expenses.
49. ADS = American depositary
share.
50. HKEX = The Main Board of
The Stock Exchange of Hong Kong Limited.
51. NHSA = China National
Healthcare Security Administration.
52. NET = Neuroendocrine
tumor.
53. CSCO = Chinese Society of
Clinical Oncology.
54. PRCC = Papillary renal
cell carcinoma.
55. EGFRm+ = Epidermal growth
factor receptor mutated.
56. ELCC = The European Lung
Cancer Congress.
57. WCLC =
World Conference on Lung Cancer.
58. TRAE = Treatment-related adverse
events.
59. BID = Twice a day.
60. GI = Gastrointestinal.
61. JSMO = Japanese Society of
Medical Oncology.
62. ESMO = European Society for Medical
Oncology.
63. TN = Triple
negative.
64. HR+ = Hormone receptor
positive.
65. Her2- = Human epidermal
growth factor receptor 2 negative.
66. MSS = Microsatellite
stable.
67. epNET = Extra-pancreatic neuroendocrine
tumor.
68.
pNET= Pancreatic
neuroendocrine tumor.
69. NEC = Neuroendocrine
carcinoma.
70. NEN = Neuroendocrine
neoplasms.
71. GC = Gastric cancer.
72. ESCC = Esophageal squamous cell
carcinoma.
73. SCLC = Small cell lung
cancer.
74. TC = Thyroid cancer.
75. STS = Soft tissue
sarcoma.
76. BTC = Biliary tract
cancer.
77. ASH = American Society of
Hematology.
78. QD = Once a day.
79. NHL = Non-Hodgkin
Lymphoma.
80. ICML = International Conference on Malignant
Lymphoma.
81. IDH = Isocitrate
dehydrogenase.
82. EHA = European Hematology
Association.
83. CLL = Chronic lymphocytic
leukemia.
84. SLL = Small lymphocytic
lymphoma.
85. RP2D = Recommended phase 2 dose.
86. MAPK = Mitogen-activated
protein kinase.
87. API = Active pharmaceutical
ingredient.
88. Hutchison Sinopharm =
Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company
Limited.
89. Luye = Luye Pharma Hong
Kong Ltd.
90. SXBX = She Xiang Bao Xin.
91. BOC = Bank of China
Limited.
92. LPR = Loan Prime
Rate.
93. HSBC = The Hongkong and
Shanghai Banking Corporation Limited.
94. HIBOR = Hong Kong
Interbank Offered Rate.
95. PBOC = People's Bank of China.
CONSOLIDATED FINANCIAL STATEMENTS
HUTCHMED (CHINA)
LIMITED
Consolidated Balance
Sheets
(in US$'000, except share
data)
|
|
|
December
31,
|
|
Note
|
|
2023
|
|
2022
|
Assets
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash
equivalents
|
5
|
|
283,589
|
|
313,278
|
Short-term investments
|
5
|
|
602,747
|
|
317,718
|
Accounts receivable
|
6
|
|
116,894
|
|
97,988
|
Other receivables, prepayments and
deposits
|
7
|
|
14,889
|
|
53,216
|
Amounts due from related
parties
|
24
|
|
28,462
|
|
998
|
Inventories
|
8
|
|
50,258
|
|
56,690
|
Total current assets
|
|
|
1,096,839
|
|
839,888
|
Property, plant and
equipment
|
9
|
|
99,727
|
|
75,947
|
Right-of-use assets
|
10
|
|
4,665
|
|
8,722
|
Deferred tax assets
|
25(ii)
|
|
15,456
|
|
15,366
|
Investments in equity
investees
|
11
|
|
48,411
|
|
73,777
|
Other non-current
assets
|
|
|
14,675
|
|
15,745
|
Total assets
|
|
|
1,279,773
|
|
1,029,445
|
Liabilities and shareholders' equity
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable
|
12
|
|
36,327
|
|
71,115
|
Other payables, accruals and
advance receipts
|
13
|
|
271,399
|
|
264,621
|
Short-term bank
borrowings
|
14
|
|
31,155
|
|
-
|
Deferred revenue
|
18
|
|
57,639
|
|
13,347
|
Income tax payable
|
25(iii)
|
|
2,580
|
|
1,112
|
Lease liabilities
|
10
|
|
3,927
|
|
3,708
|
Total current liabilities
|
|
|
403,027
|
|
353,903
|
Lease liabilities, non-current
portion
|
10
|
|
2,860
|
|
5,196
|
Deferred tax
liabilities
|
25(ii)
|
|
1,484
|
|
2,710
|
Long-term bank
borrowings
|
14
|
|
48,189
|
|
18,104
|
Deferred revenue, non-current
portion
|
18
|
|
69,480
|
|
190
|
Other non-current
liabilities
|
|
|
11,346
|
|
12,472
|
Total liabilities
|
|
|
536,386
|
|
392,575
|
Commitments and
contingencies
|
15
|
|
|
|
|
|
|
|
|
|
|
Company's shareholders' equity
|
|
|
|
|
|
Ordinary shares; $0.10 par value;
1,500,000,000 shares authorized; 871,256,270 and 864,775,340 shares
issued at December 31, 2023 and 2022 respectively
|
16
|
|
87,126
|
|
86,478
|
Additional paid-in
capital
|
|
|
1,522,447
|
|
1,497,273
|
Accumulated losses
|
|
|
(870,869)
|
|
(971,481)
|
Accumulated other comprehensive
loss
|
|
|
(8,163)
|
|
(1,903)
|
Total Company's shareholders' equity
|
|
|
730,541
|
|
610,367
|
Non-controlling
interests
|
|
|
12,846
|
|
26,503
|
Total shareholders' equity
|
|
|
743,387
|
|
636,870
|
Total liabilities and shareholders' equity
|
|
|
1,279,773
|
|
1,029,445
|
The
accompanying notes are an integral part of these consolidated
financial statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Operations
(in US$'000, except share and per share data)
|
|
|
Year Ended December
31,
|
|
Note
|
|
2023
|
|
2022
|
|
2021
|
Revenue
|
|
|
|
|
|
|
|
Goods
-third parties
|
|
|
388,924
|
|
314,329
|
|
266,199
|
-related parties
|
24(i)
|
|
8,264
|
|
5,293
|
|
4,256
|
Services
-commercialization-third parties
|
|
|
48,608
|
|
41,275
|
|
27,428
|
-research and
development
-related parties
|
24(i)
|
|
481
|
|
507
|
|
525
|
-collaboration research and
development
-third parties
|
|
|
80,397
|
|
23,741
|
|
18,995
|
Other collaboration
revenue
|
|
|
|
|
|
|
|
-royalties-third parties
|
|
|
32,470
|
|
26,310
|
|
15,064
|
-licensing-third parties
|
|
|
278,855
|
|
14,954
|
|
23,661
|
Total revenue
|
18
|
|
837,999
|
|
426,409
|
|
356,128
|
Operating expenses
|
|
|
|
|
|
|
|
Cost of
goods-third parties
|
|
|
(331,984)
|
|
(268,698)
|
|
(229,448)
|
Cost of
goods-related parties
|
|
|
(4,777)
|
|
(3,616)
|
|
(3,114)
|
Cost of services-commercialization
-third parties
|
|
|
(47,686)
|
|
(38,789)
|
|
(25,672)
|
Research and development
expenses
|
20
|
|
(302,001)
|
|
(386,893)
|
|
(299,086)
|
Selling expenses
|
|
|
(53,392)
|
|
(43,933)
|
|
(37,827)
|
Administrative expenses
|
|
|
(79,784)
|
|
(92,173)
|
|
(89,298)
|
Total operating expenses
|
|
|
(819,624)
|
|
(834,102)
|
|
(684,445)
|
|
|
|
18,375
|
|
(407,693)
|
|
(328,317)
|
Gain on divestment of an equity
investee
|
22
|
|
-
|
|
-
|
|
121,310
|
Other income/(expense)
|
|
|
|
|
|
|
|
Interest income
|
27
|
|
36,145
|
|
9,599
|
|
2,076
|
Other income
|
23
|
|
12,949
|
|
1,833
|
|
2,426
|
Interest expense
|
27
|
|
(759)
|
|
(652)
|
|
(592)
|
Other expense
|
23
|
|
(8,402)
|
|
(13,509)
|
|
(12,643)
|
Total other income/(expense)
|
|
|
39,933
|
|
(2,729)
|
|
(8,733)
|
Income/(loss) before income taxes and equity in earnings of
equity investees
|
|
|
58,308
|
|
(410,422)
|
|
(215,740)
|
Income tax
(expense)/benefit
|
25(i)
|
|
(4,509)
|
|
283
|
|
(11,918)
|
Equity in earnings of equity
investees, net of tax
|
11
|
|
47,295
|
|
49,753
|
|
60,617
|
Net income/(loss)
|
|
|
101,094
|
|
(360,386)
|
|
(167,041)
|
Less: Net income attributable to
non-controlling interests
|
|
|
(314)
|
|
(449)
|
|
(27,607)
|
Net income/(loss) attributable to the
Company
|
|
|
100,780
|
|
(360,835)
|
|
(194,648)
|
Earnings/(losses) per share
attributable to the Company (US$ per share)
|
|
|
|
|
|
|
|
-basic
|
26
|
|
0.12
|
|
(0.43)
|
|
(0.25)
|
-diluted
|
26
|
|
0.12
|
|
(0.43)
|
|
(0.25)
|
Number of shares used in per share
calculation
|
|
|
|
|
|
|
|
-basic
|
26
|
|
849,654,296
|
|
847,143,540
|
|
792,684,524
|
-diluted
|
26
|
|
869,196,348
|
|
847,143,540
|
|
792,684,524
|
The
accompanying notes are an integral part of these consolidated
financial statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Comprehensive INCOME/(Loss)
(in US$'000)
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
Net income/(loss)
|
101,094
|
|
(360,386)
|
|
(167,041)
|
Other comprehensive
(loss)/income
|
|
|
|
|
|
Foreign currency translation
(loss)/gain
|
(6,592)
|
|
(8,469)
|
|
2,964
|
Total comprehensive income/(loss)
|
94,502
|
|
(368,855)
|
|
(164,077)
|
Less: Comprehensive loss/(income)
attributable to non-controlling interests
|
39
|
|
545
|
|
(28,029)
|
Total comprehensive income/(loss) attributable to the
Company
|
94,541
|
|
(368,310)
|
|
(192,106)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Changes in Shareholders' Equity
(in US$'000, except share data in '000)
|
Ordinary Shares
Number
|
|
Ordinary Shares
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Losses
|
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
|
Total
Company's
Shareholders'
Equity
|
|
Non-
controlling
Interests
|
|
Total Shareholders'
Equity
|
As at January 1, 2021
|
727,722
|
|
72,772
|
|
822,458
|
|
(415,591)
|
|
4,477
|
|
484,116
|
|
34,833
|
|
518,949
|
Net (loss)/income
|
-
|
|
-
|
|
-
|
|
(194,648)
|
|
-
|
|
(194,648)
|
|
27,607
|
|
(167,041)
|
Issuance in relation to public
offering
|
119,600
|
|
11,960
|
|
602,907
|
|
-
|
|
-
|
|
614,867
|
|
-
|
|
614,867
|
Issuance in relation to private
investment in public equity
|
16,393
|
|
1,639
|
|
98,361
|
|
-
|
|
-
|
|
100,000
|
|
-
|
|
100,000
|
Issuance costs
|
-
|
|
-
|
|
(29,806)
|
|
-
|
|
-
|
|
(29,806)
|
|
-
|
|
(29,806)
|
Issuances in relation to share
option exercises
|
816
|
|
82
|
|
2,370
|
|
-
|
|
-
|
|
2,452
|
|
-
|
|
2,452
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
|
-
|
|
-
|
|
16,339
|
|
-
|
|
-
|
|
16,339
|
|
26
|
|
16,365
|
Long-term incentive plan
("LTIP")
|
-
|
|
-
|
|
19,808
|
|
-
|
|
-
|
|
19,808
|
|
70
|
|
19,878
|
|
-
|
|
-
|
|
36,147
|
|
-
|
|
-
|
|
36,147
|
|
96
|
|
36,243
|
LTIP-treasury shares acquired and
held by Trustee
|
-
|
|
-
|
|
(27,309)
|
|
-
|
|
-
|
|
(27,309)
|
|
-
|
|
(27,309)
|
Dividends declared to
non-controlling shareholders of subsidiaries (Note
24(iii))
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(9,894)
|
|
(9,894)
|
Transfer between
reserves
|
-
|
|
-
|
|
89
|
|
(89)
|
|
-
|
|
-
|
|
-
|
|
-
|
Divestment of an equity investee
(Note 22)
|
-
|
|
-
|
|
(21)
|
|
-
|
|
(1,447)
|
|
(1,468)
|
|
(443)
|
|
(1,911)
|
Foreign currency translation
adjustments
|
-
|
|
-
|
|
-
|
|
-
|
|
2,542
|
|
2,542
|
|
422
|
|
2,964
|
As at December
31, 2021
|
864,531
|
|
86,453
|
|
1,505,196
|
|
(610,328)
|
|
5,572
|
|
986,893
|
|
52,621
|
|
1,039,514
|
Net (loss)/income
|
-
|
|
-
|
|
-
|
|
(360,835)
|
|
-
|
|
(360,835)
|
|
449
|
|
(360,386)
|
Issuances in relation to share
option exercises
|
244
|
|
25
|
|
149
|
|
-
|
|
-
|
|
174
|
|
-
|
|
174
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
|
-
|
|
-
|
|
6,724
|
|
-
|
|
-
|
|
6,724
|
|
12
|
|
6,736
|
LTIP
|
-
|
|
-
|
|
32,970
|
|
-
|
|
-
|
|
32,970
|
|
15
|
|
32,985
|
|
-
|
|
-
|
|
39,694
|
|
-
|
|
-
|
|
39,694
|
|
27
|
|
39,721
|
LTIP-treasury shares acquired and
held by Trustee (Note 17(ii))
|
-
|
|
-
|
|
(48,084)
|
|
-
|
|
-
|
|
(48,084)
|
|
-
|
|
(48,084)
|
Dividends declared to
non-controlling shareholders of subsidiaries (Note
24(iii))
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(25,600)
|
|
(25,600)
|
Transfer between
reserves
|
-
|
|
-
|
|
318
|
|
(318)
|
|
-
|
|
-
|
|
-
|
|
-
|
Foreign currency translation
adjustments
|
-
|
|
-
|
|
-
|
|
-
|
|
(7,475)
|
|
(7,475)
|
|
(994)
|
|
(8,469)
|
As at December 31, 2022
|
864,775
|
|
86,478
|
|
1,497,273
|
|
(971,481)
|
|
(1,903)
|
|
610,367
|
|
26,503
|
|
636,870
|
Net income
|
-
|
|
-
|
|
-
|
|
100,780
|
|
-
|
|
100,780
|
|
314
|
|
101,094
|
Issuances in relation to share
option exercises
|
6,481
|
|
648
|
|
4,446
|
|
-
|
|
-
|
|
5,094
|
|
-
|
|
5,094
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
|
-
|
|
-
|
|
6,175
|
|
-
|
|
-
|
|
6,175
|
|
9
|
|
6,184
|
LTIP
|
-
|
|
-
|
|
23,619
|
|
-
|
|
-
|
|
23,619
|
|
(4)
|
|
23,615
|
|
-
|
|
-
|
|
29,794
|
|
-
|
|
-
|
|
29,794
|
|
5
|
|
29,799
|
LTIP-treasury shares acquired and
held by Trustee (Note 17(ii))
|
-
|
|
-
|
|
(9,071)
|
|
-
|
|
-
|
|
(9,071)
|
|
-
|
|
(9,071)
|
Dividends declared to
non-controlling shareholders of subsidiaries (Note
24(iii))
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(9,068)
|
|
(9,068)
|
Transfer between
reserves
|
-
|
|
-
|
|
168
|
|
(168)
|
|
-
|
|
-
|
|
-
|
|
-
|
Divestment of
subsidiaries
|
-
|
|
-
|
|
(114)
|
|
-
|
|
(25)
|
|
(139)
|
|
(4,555)
|
|
(4,694)
|
Divestment of other equity
investee
|
-
|
|
-
|
|
(49)
|
|
-
|
|
4
|
|
(45)
|
|
-
|
|
(45)
|
Foreign currency translation
adjustments
|
-
|
|
-
|
|
-
|
|
-
|
|
(6,239)
|
|
(6,239)
|
|
(353)
|
|
(6,592)
|
As at December 31, 2023
|
871,256
|
|
87,126
|
|
1,522,447
|
|
(870,869)
|
|
(8,163)
|
|
730,541
|
|
12,846
|
|
743,387
|
The
accompanying notes are an integral part of these consolidated
financial statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Cash Flows
(in US$'000)
|
|
|
Year Ended December
31,
|
|
Note
|
|
2023
|
|
2022
|
|
2021
|
Net cash generated from/(used in)
operating activities
|
28
|
|
219,258
|
|
(268,599)
|
|
(204,223)
|
Investing activities
|
|
|
|
|
|
|
|
Purchases of property, plant and
equipment
|
|
|
(32,612)
|
|
(36,664)
|
|
(16,401)
|
Purchase of leasehold
land
|
|
|
-
|
|
-
|
|
(355)
|
Refund of leasehold land
deposit
|
|
|
-
|
|
-
|
|
930
|
Deposits in short-term
investments
|
|
|
(1,627,875)
|
|
(1,202,013)
|
|
(1,355,976)
|
Proceeds from short-term
investments
|
|
|
1,342,846
|
|
1,518,453
|
|
921,364
|
Purchase of a warrant
|
19
|
|
-
|
|
-
|
|
(15,000)
|
Dividend and proceeds received
from divestment of Hutchison Whampoa Guangzhou Baiyunshan Chinese
Medicine Company Limited ("HBYS")
|
22
|
|
29,495
|
|
16,488
|
|
159,118
|
Proceeds from divestment of other
equity investee
|
|
|
-
|
|
324
|
|
-
|
Proceeds from divestment of
subsidiaries
|
24(i)
|
|
5,103
|
|
-
|
|
-
|
Cash disposed from divestment of
subsidiaries
|
|
|
(8,093)
|
|
-
|
|
-
|
Net cash (used in)/generated from
investing activities
|
|
|
(291,136)
|
|
296,588
|
|
(306,320)
|
Financing activities
|
|
|
|
|
|
|
|
Proceeds from issuances of
ordinary shares
|
|
|
5,094
|
|
174
|
|
717,319
|
Purchases of treasury
shares
|
17(ii)
|
|
(9,071)
|
|
(48,084)
|
|
(27,309)
|
Dividends paid to non-controlling
shareholders of subsidiaries
|
24(iii)
|
|
(9,068)
|
|
(25,600)
|
|
(9,894)
|
Repayment of loan to a
non-controlling shareholder of a subsidiary
|
|
|
-
|
|
-
|
|
(579)
|
Proceeds from bank
borrowings
|
|
|
61,705
|
|
17,753
|
|
-
|
Repayment of bank
borrowings
|
|
|
-
|
|
(26,923)
|
|
-
|
Payment of issuance
costs
|
|
|
-
|
|
(83)
|
|
(29,509)
|
Net cash generated from/(used in)
financing activities
|
|
|
48,660
|
|
(82,763)
|
|
650,028
|
Net (decrease)/increase in cash
and cash equivalents
|
|
|
(23,218)
|
|
(54,774)
|
|
139,485
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
(6,471)
|
|
(9,490)
|
|
2,427
|
|
|
|
(29,689)
|
|
(64,264)
|
|
141,912
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of year
|
|
|
313,278
|
|
377,542
|
|
235,630
|
Cash and cash equivalents at end
of year
|
|
|
283,589
|
|
313,278
|
|
377,542
|
Supplemental disclosure for cash flow
information
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
421
|
|
150
|
|
425
|
Cash paid for tax, net of
refunds
|
25(iii)
|
|
3,728
|
|
18,891
|
|
5,014
|
Supplemental disclosure for non-cash
activities
|
|
|
|
|
|
|
|
Increase in accrued capital expenditures
|
|
|
5,713
|
|
9,618
|
|
8,607
|
Vesting of treasury shares for
LTIP
|
17(ii)
|
|
18,148
|
|
12,034
|
|
1,450
|
The
accompanying notes are an integral part of these consolidated
financial statements.
HUTCHMED (CHINA) LIMITED
Notes to the Consolidated Financial Statements
1. Organization and Nature of
Business
HUTCHMED (China) Limited (the
"Company") and its subsidiaries (together the "Group") are
principally engaged in researching, developing, manufacturing and
marketing pharmaceutical products. The Group and its equity
investee have research and development facilities and manufacturing
plants in the People's Republic of China (the "PRC") and sell their
products mainly in the PRC, including Hong Kong and Macau. In
addition, the Group has established international operations in the
United States of America (the "U.S.") and Europe.
The Company's ordinary shares are
listed on the Main Board of The Stock Exchange of Hong Kong Limited
("HKEX") and the AIM market of the London Stock Exchange, and its
American depositary shares ("ADS") are traded on the Nasdaq Global
Select Market.
Liquidity
As at December 31, 2023, the Group
had accumulated losses of US$870,869,000 primarily due to its
spending in drug research and development activities. The Group
regularly monitors current and expected liquidity requirements to
ensure that it maintains sufficient cash balances and adequate
credit facilities to meet its liquidity requirements in the short
and long term. As at December 31, 2023, the Group had cash and cash
equivalents of US$283,589,000, short-term investments of
US$602,747,000 and unutilized bank borrowing facilities of
US$68,069,000. Short-term investments comprised of bank deposits
maturing over three months. The Group's operating plan includes the
continued receipt of dividends from an equity investee. Dividends
received from Shanghai Hutchison Pharmaceuticals Limited ("SHPL")
for the years ended December 31, 2023, 2022 and 2021 were
US$42,308,000, US$43,718,000 and US$49,872,000
respectively.
Based on the Group's operating
plan, the existing cash and cash equivalents, short-term
investments and unutilized bank borrowing facilities are considered
to be sufficient to meet the cash requirements to fund planned
operations and other commitments for at least the next twelve
months from the issuance date of the consolidated financial
statements.
2. Particulars of Principal
Subsidiaries and Equity Investee
|
|
Place of
establishment
and
operations
|
|
Equity interest
attributable
to the
Group
|
|
|
|
|
|
December
31,
|
|
|
Name
|
|
|
2023
|
|
2022
|
|
Principal
activities
|
Subsidiaries
|
|
|
|
|
|
|
|
|
HUTCHMED Limited
|
|
PRC
|
|
99.75
|
%
|
|
99.75
|
%
|
|
Research, development, manufacture
and commercialization of pharmaceutical products
|
HUTCHMED International
Corporation
|
|
U.S.
|
|
99.75
|
%
|
|
99.75
|
%
|
|
Provision of professional,
scientific and technical support services
|
Hutchison Whampoa Sinopharm
Pharmaceuticals (Shanghai) Company Limited ("HSPL")
|
|
PRC
|
|
50.87
|
%
|
|
50.87
|
%
|
|
Provision of sales, distribution
and marketing services to pharmaceutical manufacturers
|
Hutchison Healthcare
Limited
|
|
PRC
|
|
100
|
%
|
|
100
|
%
|
|
Manufacture and distribution of
healthcare products
|
Hutchison Hain Organic (Hong Kong)
Limited ("HHOHK") (note)
|
|
Hong
Kong
|
|
-
|
%
|
|
50
|
%
|
|
Wholesale and trading of
healthcare and consumer products
|
HUTCHMED Science Nutrition Limited
("HSN") (note)
|
|
Hong
Kong
|
|
-
|
%
|
|
100
|
%
|
|
Wholesale and trading of
healthcare and consumer products
|
Equity investee
|
|
|
|
|
|
|
|
|
|
|
SHPL
|
|
PRC
|
|
50
|
%
|
|
50
|
%
|
|
Manufacture and distribution of
prescription drug products
|
Note: On
December 7, 2023, the Group completed a transaction to divest its
entire investment in HHOHK and HSN to Hutchison Whampoa (China)
Limited, an indirect subsidiary of CK
Hutchison Holdings Limited ("CK
Hutchison") (Note 24(i)).
3. Summary of Significant
Accounting Policies
Principles of Consolidation and
Basis of Presentation
The accompanying consolidated
financial statements reflect the accounts of the Company and all of
its subsidiaries in which a controlling interest is maintained.
When a subsidiary is deconsolidated from the date that control
ceases, any gain or loss on the divestment of the interest sold is
recognized in profit or loss. Amounts previously recognized in
other comprehensive income/(loss) for the subsidiary are
transferred to the consolidated statements of operations as part of
the gain or loss on the divestment. All inter-company balances and
transactions have been eliminated in consolidation. The
consolidated financial statements have been prepared in conformity
with generally accepted accounting principles in the U.S. ("U.S.
GAAP").
Use of Estimates
The preparation of consolidated
financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and
expenses during the reporting period.
Foreign Currency
Translation
The Company's presentation
currency and functional currency is the U.S. dollar ("US$"). The
financial statements of its subsidiaries with a functional currency
other than the US$ have been translated into the Company's
presentation currency. All assets and liabilities of the
subsidiaries are translated using year-end exchange rates and
revenue and expenses are translated at average exchange rates for
the year. Translation adjustments are reflected in accumulated
other comprehensive income/(loss) in shareholders'
equity.
Net foreign currency exchange
gains/(losses) of US$8,661,000, (US$5,704,000) and US$1,671,000
were recorded in other income and expense in the consolidated
statements of operations for the years ended December 31, 2023,
2022 and 2021 respectively.
Foreign Currency Risk
The Group's operating transactions
and its assets and liabilities in the PRC are mainly denominated in
Renminbi ("RMB"), which is not freely convertible into foreign
currencies. The Group's cash and cash equivalents denominated in
RMB are subject to government controls. The value of the RMB is
subject to fluctuations from central government policy changes and
international economic and political developments that affect the
supply and demand of RMB in the foreign exchange market. In the
PRC, certain foreign exchange transactions are required by law to
be transacted only by authorized financial institutions at exchange
rates set by the People's Bank of China (the "PBOC"). Remittances
in currencies other than RMB by the Group in the PRC must be
processed through the PBOC or other PRC foreign exchange regulatory
bodies which require certain supporting documentation in order to
complete the remittance.
Allowance for Current Expected
Credit Losses and Concentration of Credit Risk
Financial instruments that
potentially expose the Group to credit risk consist primarily of
cash and cash equivalents, short-term investments, and financial
assets not carried at fair value including accounts receivable and
other receivables.
The Group recognizes an allowance
for current expected credit losses ("CECLs") on financial assets
not carried at fair value. CECLs are calculated over the expected
life of the financial assets on an individual or a portfolio basis
considering information available about the counterparties'
credit situation and collectability of the specific cash flows,
including information about past events, current conditions and
future forecasts.
The Group places substantially all
of its cash and cash equivalents and short-term investments in
major financial institutions, which management believes are of high
credit quality. The Group has a practice to limit the amount of
credit exposure to any particular financial institution.
Additionally, the Group has policies in place to ensure that sales
are made to customers with an appropriate credit history and the
Group performs periodic credit evaluations of its customers.
Normally the Group does not require collateral from trade debtors.
The Group has not had any material credit losses.
Cash and Cash
Equivalents
The Group considers all highly
liquid investments purchased with original maturities of three
months or less to be cash equivalents. Cash and cash equivalents
consist primarily of cash on hand and bank deposits and are stated
at cost, which approximates fair value.
Short-term
Investments
Short-term investments include
deposits placed with banks with original maturities of more than
three months but less than one year.
Accounts Receivable
Accounts receivable are stated at
the amount management expects to collect from customers based on
their outstanding invoices. The allowance for CECLs reflects the
Group's current estimate of credit losses expected to be incurred
over the life of the receivables. The Group considers various
factors in establishing, monitoring, and adjusting its allowance
for CECLs including the aging of the accounts and aging trends, the
historical level of charge-offs, and specific exposures related to
particular customers. The Group also monitors other risk factors
and forward-looking information, such as country risk, when
determining credit limits for customers and establishing adequate
allowances for CECLs. Accounts receivable are written off after all
reasonable means to collect the full amount (including litigation,
where appropriate) have been exhausted.
Inventories
Inventories are stated at the
lower of cost or net realizable value. Cost is determined using the
weighted average cost method. The cost of finished goods comprises
raw materials, direct labor, other direct costs and related
production overheads based on normal operating capacity. Net
realizable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses. A
provision for excess and obsolete inventory will be made based
primarily on forecasts of product demand and production
requirements. The excess balance determined by this analysis
becomes the basis for excess inventory charge and the written-down
value of the inventory becomes its cost. Written-down inventory is
not written up if market conditions improve.
Property, Plant and
Equipment
Property, plant and equipment
consist of buildings, leasehold improvements, plant and equipment,
furniture and fixtures, other equipment and motor vehicles.
Property, plant and equipment are stated at cost, net of
accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the
depreciable assets.
Buildings
|
20 years
|
Plant and equipment
|
5-10 years
|
Furniture and fixtures, other
equipment and motor vehicles
|
4-5 years
|
Leasehold improvements
|
Shorter of (a) 5 years or (b)
remaining term of lease
|
Additions and improvements that
extend the useful life of an asset are capitalized. Repairs and
maintenance costs are expensed as incurred.
Impairment of Long-Lived
Assets
The Group evaluates the
recoverability of long-lived assets in accordance with
authoritative guidance on accounting for the impairment or disposal
of long-lived assets. The Group evaluates long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying value of these assets may not be recoverable. If
indicators of impairment exist, the first step of the impairment
test is performed to assess if the carrying value of the net assets
exceeds the undiscounted cash flows of the assets. If yes, the
second step of the impairment test is performed in order to
determine if the carrying value of the net assets exceeds the fair
value. If yes, impairment is recognized for the excess.
Investments in Equity
Investees
Investments in equity investees
over which the Group has significant influence are accounted for
using the equity method. The Group evaluates equity method
investments for impairment when events or circumstances suggest
that their carrying amounts may not be recoverable. An impairment
charge would be recognized in earnings for a decline in value that
is determined to be other-than-temporary after assessing the
severity and duration of the impairment and the likelihood of
recovery before disposal. The investments are recorded at fair
value only if impairment is recognized.
Leasehold Land
Leasehold land represents fees
paid to acquire the right to use the land on which various plants
and buildings are situated for a specified period of time from the
date the respective right was granted and are stated at cost less
accumulated amortization and impairment loss, if any. Amortization
is computed using the straight-line basis over the lease period of
50 years.
Goodwill
Goodwill represents the excess of
the purchase price plus fair value of non-controlling interests
over the fair value of identifiable assets and liabilities
acquired. Goodwill is not amortized, but is tested for impairment
at the reporting unit level on at least an annual basis or when an
event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying
amount. When performing an evaluation of goodwill impairment, the
Group has the option to first assess qualitative factors, such as
significant events and changes to expectations and activities that
may have occurred since the last impairment evaluation, to
determine if it is more likely than not that goodwill might be
impaired. If as a result of the qualitative assessment, that it is
more likely than not that the fair value of the reporting unit is
less than its carrying amount, the quantitative fair value test is
performed to determine if the fair value of the reporting unit
exceeds its carrying value.
Other Intangible
Assets
Other intangible assets with
finite useful lives are carried at cost less accumulated
amortization and impairment loss, if any. Amortization is computed
using the straight-line basis over the estimated useful lives of
the assets.
Borrowings
Borrowings are recognized
initially at fair value, net of debt issuance costs incurred.
Borrowings are subsequently stated at amortized cost; any
difference between the proceeds (net of debt issuance costs) and
the redemption value is recognized in the consolidated statements
of operations over the period of the borrowings using the effective
interest method.
Ordinary Shares
The Company's ordinary shares are
stated at par value of US$0.10 per ordinary share. The difference
between the consideration received, net of issuance cost, and the
par value is recorded in additional paid-in capital.
The Company's ordinary shares are
traded in the form of ordinary shares and ADS. Each ADS represents
five ordinary shares.
Treasury Shares
The Group accounts for treasury
shares under the cost method. The treasury shares are purchased for
the purpose of the LTIP and held by a trustee appointed by the
Group (the "Trustee") prior to vesting.
Share-Based
Compensation
Share options
The Group recognizes share-based
compensation expense on share options granted to employees and
directors based on their estimated grant date fair value using the
Polynomial model. This Polynomial pricing model uses various inputs
to measure fair value, including the market value of the Company's
underlying ordinary shares at the grant date, contractual terms,
estimated volatility, risk-free interest rates and expected
dividend yields. The Group recognizes share-based compensation
expense in the consolidated statements of operations on a graded
vesting basis over the requisite service period, and accounts for
forfeitures as they occur.
Share options are classified as
equity-settled awards. Share-based compensation expense, when
recognized, is charged to the consolidated statements of operations
with the corresponding entry to additional paid-in
capital.
LTIP
The Group recognizes the
share-based compensation expense on the LTIP awards based on a
fixed or determinable monetary amount on a straight-line basis for
each annual tranche awarded over the requisite period. For LTIP
awards with performance targets, prior to their determination date,
the amount of LTIP awards that is expected to vest takes into
consideration the achievement of the performance conditions and the
extent to which the performance conditions are likely to be met.
Performance conditions vary by awards, and may include targets for
shareholder returns, financings, revenue, net income after taxes
and the achievement of clinical, regulatory, business development
and manufacturing milestones.
These LTIP awards are classified
as liability-settled awards before the determination date (i.e. the
date when the achievement of any performance conditions are known),
as they settle in a variable number of shares based on a
determinable monetary amount, which is determined upon the actual
achievement of performance targets. As the extent of achievement of
the performance targets is uncertain prior to the determination
date, a probability based on management's assessment of the
achievement of the performance targets has been assigned to
calculate the amount to be recognized as an expense over the
requisite period.
After the determination date or if
the LTIP awards have no performance conditions, the LTIP awards are
classified as equity-settled awards. If the performance target is
achieved, the Group will pay the determined monetary amount to the
Trustee to purchase ordinary shares of the Company or the
equivalent ADS. Any cumulative compensation expense previously
recognized as a liability will be transferred to additional paid-in
capital. If the performance target is not achieved, no ordinary
shares or ADS of the Company will be purchased and the amount
previously recorded in the liability will be reversed and included
in the consolidated statements of operations.
Defined Contribution
Plans
The Group's subsidiaries in the
PRC participate in a government-mandated multi-employer defined
contribution plan pursuant to which certain retirement, medical and
other welfare benefits are provided to employees. The relevant
labor regulations require the Group's subsidiaries in the PRC to
pay the local labor and social welfare authority's monthly
contributions at a stated contribution rate based on the monthly
basic compensation of qualified employees. The relevant local labor
and social welfare authorities are responsible for meeting all
retirement benefits obligations and the Group's subsidiaries in the
PRC have no further commitments beyond their monthly contributions.
The contributions to the plan are expensed as incurred.
The Group also makes payments to
other defined contribution plans for the benefit of employees
employed by subsidiaries outside the PRC. The defined contribution
plans are generally funded by the relevant companies and by
payments from employees.
The Group's contributions to
defined contribution plans for the years ended December 31, 2023,
2022 and 2021 were US$11,708,000, US$11,795,000 and US$7,181,000
respectively.
Revenue Recognition
Revenue is measured based on
consideration specified in a contract with a customer, and excludes
any sales incentives and amounts collected on behalf of third
parties. Taxes assessed by a governmental authority that are both
imposed on and concurrent with a specific revenue-producing
transaction, that are collected by the Group from a customer, are
also excluded from revenue. The Group recognizes revenue when it
satisfies a performance obligation by transferring control over a
good, service or license to a customer.
(i) Goods and
services
The Group principally generates
revenue from (1) sales of goods, which are the manufacture or
purchase and distribution of pharmaceutical products and other
consumer health products, and (2) provision of services, which are
the provision of sales, distribution and marketing services to
pharmaceutical manufacturers. The Group evaluates whether it is the
principal or agent for these contracts. Where the Group obtains
control of the goods for distribution, it is the principal (i.e.
recognizes sales of goods on a gross basis). Where the Group does
not obtain control of the goods for distribution, it is the agent
(i.e. recognizes provision of services on a net basis). Control is
primarily evidenced by taking physical possession and inventory
risk of the goods.
Revenue from sales of goods is
recognized when the customer takes possession of the goods. This
usually occurs upon completed delivery of the goods to the customer
site. The amount of revenue recognized is adjusted for expected
sales incentives as stipulated in the contract, which are generally
issued to customers as direct discounts at the point-of-sale or
indirectly in the form of rebates. Sales incentives are estimated
using the expected value method. Additionally, sales are generally
made with a limited right of return under certain conditions.
Revenue is recorded net of provisions for sales discounts and
returns.
Revenue from provision of services
is recognized when the benefits of the services transfer to the
customer over time, which is based on the proportionate value of
services rendered as determined under the terms of the relevant
contract. Additionally, when the amounts that can be invoiced
correspond directly with the value to the customer for performance
completed to date, the Group recognizes revenue from provision of
services based on amounts that can be invoiced to the
customer.
Deferred revenue is recognized if
consideration is received in advance of transferring control of the
goods or rendering of services. Accounts receivable is recognized
if the Group has an unconditional right to bill the customer, which
is generally when the customer takes possession of the goods or
services are rendered. Payment terms differ by subsidiary and
customer, but generally range from 45 to 180 days from the invoice
date.
(ii) License and collaboration
contracts
The Group's Oncology/Immunology
reportable segment includes revenue generated from license and
collaboration contracts, which generally contain multiple
performance obligations including (1) the licenses to the
development, commercialization and manufacture rights of a drug
compound, (2) the research and development services for each
specified treatment indication, and (3) other deliverables, which
are accounted for separately if they are distinct, i.e. if a
product or service is separately identifiable from other items in
the arrangement and if a customer can benefit from it on its own or
with other resources that are readily available to the
customer.
The transaction price generally
includes fixed and variable consideration in the form of upfront
payment, research and development cost reimbursements, contingent
milestone payments and sales-based royalties. Contingent milestone
payments are not included in the transaction price until it becomes
probable that a significant reversal of revenue will not occur,
which is generally when the specified milestone is achieved. The
allocation of the transaction price to each performance obligation
is based on the relative standalone selling prices of each
performance obligation determined at the inception of the contract.
The Group estimates the standalone selling prices based on the
income approach and cost plus margin approach. Control of the
license to the drug compounds transfers at the inception date of
the collaboration agreements and consequently, amounts allocated to
this performance obligation are generally recognized at a point in
time. Conversely, research and development services for each
specified indication are performed over time and amounts allocated
to these performance obligations are generally recognized over time
using a percentage-of-completion method. The Group has determined
that research and development expenses provide an appropriate
depiction of measure of progress for the research and development
services. Changes to estimated cost inputs may result in a
cumulative catch-up adjustment. Royalty revenue is recognized as
future sales occur as they meet the requirements for the
sales-usage based royalty exception.
Deferred revenue is recognized if
allocated consideration is received in advance of the Group
rendering research and development services or earning royalties on
future sales. Accounts receivable is recognized based on the terms
of the contract and when the Group has an unconditional right to
bill the customer, which is generally when research and development
services are rendered.
Research and Development
Expenses
Research and development expenses
include the following: (i) research and development costs, which
are expensed as incurred; (ii) acquired in-process research and
development ("IPR&D") expenses, which include the initial costs
of externally developed IPR&D projects, acquired directly in a
transaction other than a business combination, that do not have an
alternative future use; and (iii) milestone payment obligations for
externally developed IPR&D projects incurred prior to
regulatory approval of the product in the in-licensed territory,
which are accrued when the event requiring payment of the milestone
occurs (milestone payment obligations incurred upon regulatory
approval are recorded as other intangible assets).
Collaborative
Arrangements
The Group enters into
collaborative arrangements with collaboration partners that fall
under the scope of Accounting Standards Codification ("ASC") 808,
Collaborative Arrangements ("ASC 808"). The Group records all
expenditures for such collaborative arrangements in research and
development expenses as incurred, including payments to third party
vendors and reimbursements to collaboration partners, if any.
Reimbursements from collaboration partners are recorded as
reductions to research and development expenses and accrued when
they can be contractually claimed.
Government Grants
Grants from governments are
recognized at their fair values. Government grants that are
received in advance are deferred and recognized in the consolidated
statements of operations over the period necessary to match them
with the costs that they are intended to compensate. Government
grants in relation to the achievement of stages of research and
development projects are recognized in the consolidated statements
of operations when amounts have been received and all attached
conditions have been met. Non-refundable grants received without
any further obligations or conditions attached are recognized
immediately in the consolidated statements of
operations.
Leases
In an operating lease, a lessee
obtains control of only the use of the underlying asset, but not
the underlying asset itself. An operating lease is recognized as a
right-of-use asset with a corresponding liability at the date which
the leased asset is available for use by the Group. The Group
recognizes an obligation to make lease payments equal to the
present value of the lease payments over the lease term. The lease
terms may include options to extend or terminate the lease when it
is reasonably certain that the Group will exercise that
option.
Lease liabilities include the net
present value of the following lease payments: (i) fixed payments;
(ii) variable lease payments that depend on an index or a rate; and
(iii) payments of penalties for terminating the lease if the lease
term reflects the lessee exercising that option, if any. Lease
liabilities exclude the following payments that are generally
accounted for separately: (i) non-lease components, such as
maintenance and security service fees and value added tax, and (ii)
any payments that a lessee makes before the lease commencement
date. The lease payments are discounted using the interest rate
implicit in the lease or if that rate cannot be determined, the
lessee's incremental borrowing rate being the rate that the lessee
would have to pay to borrow the funds in its currency and
jurisdiction necessary to obtain an asset of similar value,
economic environment and terms and conditions.
An asset representing the right to
use the underlying asset during the lease term is recognized that
consists of the initial measurement of the operating lease
liability, any lease payments made to the lessor at or before the
commencement date less any lease incentives received, any initial
direct cost incurred by the Group and any restoration
costs.
After commencement of the
operating lease, the Group recognizes lease expenses on a
straight-line basis over the lease term. The right-of-use asset is
subsequently measured at cost less accumulated amortization and any
impairment provision. The amortization of the right-of-use asset
represents the difference between the straight-line lease expense
and the accretion of interest on the lease liability each period.
The interest amount is used to accrete the lease liability and to
amortize the right-of-use asset. There is no amount recorded as
interest expense.
Payments associated with
short-term leases are recognized as lease expenses on a
straight-line basis over the period of the leases.
Subleases of right-of-use assets
are accounted for similar to other leases. As an intermediate
lessor, the Group separately accounts for the head-lease and
sublease unless it is relieved of its primary obligation under the
head-lease. Sublease income is recorded on a gross basis separate
from the head-lease expenses. If the total remaining lease cost on
the head-lease is more than the anticipated sublease income for the
lease term, this is an indicator that the carrying amount of the
right-of-use asset associated with the head-lease may not be
recoverable, and the right-of-use asset will be assessed for
impairment.
Income Taxes
The Group accounts for income
taxes under the liability method. Under the liability method,
deferred income tax assets and liabilities are determined based on
the differences between the financial reporting and income tax
bases of assets and liabilities and are measured using the income
tax rates that will be in effect when the differences are expected
to reverse. A valuation allowance is recorded when it is more
likely than not that some of the net deferred income tax asset will
not be realized.
The Group accounts for an
uncertain tax position in the consolidated financial statements
only if it is more likely than not that the position is sustainable
based on its technical merits and consideration of the relevant tax
authority's widely understood administrative practices and
precedents. If the recognition threshold is met, the Group records
the largest amount of tax benefit that is greater than 50 percent
likely to be realized upon ultimate settlement.
The Group recognizes interest and
penalties for income taxes, if any, under income tax payable on its
consolidated balance sheets and under other expense in its
consolidated statements of operations.
Earnings/(losses) per
Share
Basic earnings/(losses) per share
is computed by dividing net income/(loss) attributable to the
Company by the weighted average number of outstanding ordinary
shares in issue during the year. Weighted average number of
outstanding ordinary shares in issue excludes treasury
shares.
Diluted earnings/(losses) per
share is computed by dividing net income/(loss) attributable to the
Company by the weighted average number of outstanding ordinary
shares in issue and dilutive ordinary share equivalents outstanding
during the year. Dilutive ordinary share equivalents include
ordinary shares and treasury shares issuable upon the exercise or
settlement of share-based awards or warrants issued by the Company
using the treasury stock method. The computation of diluted
earnings/(losses) per share does not assume conversion, exercise,
or contingent issuance of securities that would have an
anti-dilutive effect.
Segment Reporting
Operating segments are reported in
a manner consistent with the internal reporting provided to the
chief executive officer who is the Group's chief operating decision
maker. The chief operating decision maker reviews the Group's
internal reporting in order to assess performance and allocate
resources.
Profit Appropriation and
Statutory Reserves
The Group's subsidiaries and
equity investee established in the PRC are required to make
appropriations to certain non-distributable reserve
funds.
In accordance with the relevant
laws and regulations established in the PRC, the Company's
subsidiaries registered as wholly-owned foreign enterprise have to
make appropriations from their after-tax profits (as determined
under generally accepted accounting principles in the PRC ("PRC
GAAP")) to reserve funds including general reserve fund, enterprise
expansion fund and staff bonus and welfare fund. The appropriation
to the general reserve fund must be at least 10% of the after-tax
profits calculated in accordance with PRC GAAP. Appropriation is
not required if the general reserve fund has reached 50% of the
registered capital of the company. Appropriations to the enterprise
expansion fund and staff bonus and welfare fund are made at the
respective company's discretion. For the Group's equity investee,
the amount of appropriations to these funds are made at the
discretion of its respective board.
In addition, Chinese domestic
companies must make appropriations from their after-tax profits as
determined under PRC GAAP to non-distributable reserve funds
including statutory surplus fund and discretionary surplus fund.
The appropriation to the statutory surplus fund must be 10% of the
after-tax profits as determined under PRC GAAP. Appropriation is
not required if the statutory surplus fund has reached 50% of the
registered capital of the company. Appropriation to the
discretionary surplus fund is made at the respective company's
discretion.
The use of the general reserve
fund, enterprise expansion fund, statutory surplus fund and
discretionary surplus fund is restricted to the offsetting of
losses or increases to the registered capital of the respective
company. The staff bonus and welfare fund is a liability in nature
and is restricted to fund payments of special bonus to employees
and for the collective welfare of employees. All these reserves are
not permitted to be transferred to the company as cash dividends,
loans or advances, nor can they be distributed except under
liquidation.
4. Fair Value
Disclosures
Cash equivalents, short-term
investments, accounts receivable, other receivables, accounts
payable and other payables are carried at cost, which approximates
fair value due to the short-term nature of these financial
instruments. Bank borrowings are floating rate instruments and
carried at amortized cost, which approximates fair
values.
5. Cash and Cash Equivalents and
Short-term Investments
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Cash and Cash Equivalents
|
|
|
|
Cash at bank and on
hand
|
129,968
|
|
178,326
|
Bank deposits maturing in three
months or less
|
153,621
|
|
134,952
|
|
283,589
|
|
313,278
|
Short-term Investments
|
|
|
|
Bank deposits maturing over three
months (note)
|
602,747
|
|
317,718
|
|
886,336
|
|
630,996
|
Note: The maturities for
short-term investments ranged from 91 to 187 days and 91 to 99 days
for the years ended December 31, 2023 and 2022
respectively.
Certain cash and bank balances
denominated in RMB, US$ and UK Pound Sterling ("£") were deposited
with banks in the PRC. The conversion of these balances into
foreign currencies is subject to the rules and regulations of
foreign exchange control promulgated by the PRC government. Cash
and cash equivalents and short-term investments were denominated in
the following currencies:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
US$
|
836,718
|
|
533,173
|
RMB
|
45,772
|
|
79,319
|
Hong Kong dollar
("HK$")
|
3,114
|
|
16,721
|
£
|
713
|
|
1,370
|
Others
|
19
|
|
413
|
|
886,336
|
|
630,996
|
6. Accounts
Receivable
Accounts receivable from contracts
with customers consisted of the following:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Accounts receivable-third
parties
|
115,169
|
|
94,531
|
Accounts receivable-related
parties (Note 24(ii))
|
1,896
|
|
3,517
|
Allowance for credit
losses
|
(171)
|
|
(60)
|
Accounts receivable,
net
|
116,894
|
|
97,988
|
Substantially all accounts
receivable are denominated in RMB, US$ and HK$ and are due within
one year from the end of the reporting periods. The carrying values
of accounts receivable approximate their fair values due to their
short-term maturities.
An aging analysis for accounts
receivable-third parties based on the relevant invoice dates is as
follows:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Not later than 3 months
|
96,057
|
|
84,007
|
Between 3 months to 6
months
|
11,507
|
|
7,478
|
Between 6 months to 1
year
|
6,439
|
|
1,947
|
Later than 1 year
|
1,166
|
|
1,099
|
Accounts receivable-third
parties
|
115,169
|
|
94,531
|
Movements on the allowance for
credit losses:
|
2023
|
|
2022
|
|
2021
|
|
(in
US$'000)
|
As at January 1
|
60
|
|
20
|
|
95
|
Increase in allowance for credit
losses
|
141
|
|
150
|
|
16
|
Decrease in allowance due to
subsequent collection
|
(16)
|
|
(107)
|
|
(92)
|
Exchange difference
|
(7)
|
|
(3)
|
|
1
|
Divestment of
subsidiaries
|
(7)
|
|
-
|
|
-
|
As at December 31
|
171
|
|
60
|
|
20
|
7. Other receivables, prepayments
and deposits
Other receivables, prepayments and
deposits consisted of the following:
|
December
31,
|
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Prepayments
|
7,108
|
|
22,329
|
Interest receivables
|
2,936
|
|
807
|
Value-added tax
receivables
|
2,166
|
|
1,491
|
Deposits
|
1,065
|
|
1,214
|
Dividend receivables (Note
22)
|
-
|
|
26,246
|
Others
|
1,614
|
|
1,129
|
|
14,889
|
|
53,216
|
|
|
|
| |
No allowance for credit losses has
been made for other receivables, prepayments and deposits for the
years ended December 31, 2023 and 2022.
8. Inventories
Inventories, net of provision for
excess and obsolete inventories, consisted of the
following:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Raw materials
|
26,784
|
|
27,392
|
Finished goods
|
23,474
|
|
29,298
|
|
50,258
|
|
56,690
|
9. Property, Plant and
Equipment
Property, plant and equipment
consisted of the following:
|
|
Buildings
|
|
Leasehold
improvements
|
|
Plant and
equipment
|
|
Furniture and fixtures,
other equipment and motor vehicles
|
|
Construction in
progress
|
|
Total
|
|
|
(in US$'000)
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
As at January 1, 2023
|
|
2,233
|
|
16,836
|
|
7,454
|
|
31,738
|
|
54,550
|
|
112,811
|
Additions
|
|
-
|
|
216
|
|
99
|
|
1,094
|
|
36,916
|
|
38,325
|
Disposals
|
|
-
|
|
-
|
|
(230)
|
|
(468)
|
|
-
|
|
(698)
|
Divestment of subsidiaries
|
|
-
|
|
(202)
|
|
-
|
|
(172)
|
|
-
|
|
(374)
|
Transfers
|
|
54,549
|
|
1,420
|
|
16,373
|
|
8,453
|
|
(80,795)
|
|
-
|
Exchange differences
|
|
(60)
|
|
(418)
|
|
(212)
|
|
(828)
|
|
(2,250)
|
|
(3,768)
|
As at December 31, 2023
|
|
56,722
|
|
17,852
|
|
23,484
|
|
39,817
|
|
8,421
|
|
146,296
|
Accumulated depreciation and
impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
As at January 1, 2023
|
|
1,753
|
|
13,282
|
|
2,670
|
|
19,159
|
|
-
|
|
36,864
|
Depreciation
|
|
565
|
|
1,824
|
|
1,008
|
|
4,491
|
|
-
|
|
7,888
|
Impairment
|
|
-
|
|
515
|
|
2,013
|
|
1,150
|
|
-
|
|
3,678
|
Disposals
|
|
-
|
|
-
|
|
(148)
|
|
(464)
|
|
-
|
|
(612)
|
Divestment of subsidiaries
|
|
-
|
|
(97)
|
|
-
|
|
(143)
|
|
-
|
|
(240)
|
Exchange differences
|
|
(48)
|
|
(356)
|
|
(80)
|
|
(525)
|
|
-
|
|
(1,009)
|
As at December 31, 2023
|
|
2,270
|
|
15,168
|
|
5,463
|
|
23,668
|
|
-
|
|
46,569
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2023
|
|
54,452
|
|
2,684
|
|
18,021
|
|
16,149
|
|
8,421
|
|
99,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
Leasehold
improvements
|
|
Plant and
equipment
|
|
Furniture and fixtures,
other equipment and motor vehicles
|
|
Construction in
progress
|
|
Total
|
|
|
(in US$'000)
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
As at January 1, 2022
|
|
2,432
|
|
17,828
|
|
5,987
|
|
27,957
|
|
19,970
|
|
74,174
|
Additions
|
|
-
|
|
171
|
|
541
|
|
4,945
|
|
40,625
|
|
46,282
|
Disposals
|
|
-
|
|
(1,105)
|
|
(2)
|
|
(529)
|
|
-
|
|
(1,636)
|
Transfers
|
|
-
|
|
1,336
|
|
1,412
|
|
1,637
|
|
(4,385)
|
|
-
|
Exchange differences
|
|
(199)
|
|
(1,394)
|
|
(484)
|
|
(2,272)
|
|
(1,660)
|
|
(6,009)
|
As at December 31, 2022
|
|
2,233
|
|
16,836
|
|
7,454
|
|
31,738
|
|
54,550
|
|
112,811
|
Accumulated
depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
As at January 1, 2022
|
|
1,788
|
|
11,571
|
|
2,352
|
|
17,188
|
|
-
|
|
32,899
|
Depreciation
|
|
116
|
|
3,741
|
|
590
|
|
3,880
|
|
-
|
|
8,327
|
Disposals
|
|
-
|
|
(1,018)
|
|
(2)
|
|
(505)
|
|
-
|
|
(1,525)
|
Transfers
|
|
-
|
|
-
|
|
(56)
|
|
56
|
|
-
|
|
-
|
Exchange differences
|
|
(151)
|
|
(1,012)
|
|
(214)
|
|
(1,460)
|
|
-
|
|
(2,837)
|
As at December 31, 2022
|
|
1,753
|
|
13,282
|
|
2,670
|
|
19,159
|
|
-
|
|
36,864
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2022
|
|
480
|
|
3,554
|
|
4,784
|
|
12,579
|
|
54,550
|
|
75,947
|
10. Leases
Leases consisted of the
following:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Right-of-use assets
|
|
|
|
Offices
|
3,321
|
|
6,634
|
Factories
|
113
|
|
387
|
Warehouse (note)
|
1,061
|
|
1,500
|
Others
|
170
|
|
201
|
Total right-of-use
assets
|
4,665
|
|
8,722
|
Lease liabilities, current
portion
|
3,927
|
|
3,708
|
Lease liabilities, non-current
portion
|
2,860
|
|
5,196
|
Total lease liabilities
|
6,787
|
|
8,904
|
Note: Comprised of a
warehouse in Suzhou that
is leased through June 2026 in which the contract has a termination
option with 3-month advance notice. The termination option was not
recognized as part of the right-of-use asset and lease liability as
it is uncertain that the Group will exercise such
option.
Lease activities are summarized as
follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Lease expenses:
|
|
|
|
Short-term leases with lease terms
equal or less than 12 months
|
203
|
|
134
|
Leases with lease terms greater
than 12 months
|
5,314
|
|
5,238
|
Impairment
|
2,088
|
|
-
|
|
7,605
|
|
5,372
|
Cash paid on lease
liabilities
|
5,461
|
|
5,212
|
Non-cash: Lease liabilities
recognized from obtaining right-of-use assets
|
3,429
|
|
2,689
|
Non-cash: Lease liabilities
changed in relation to modifications and terminations
|
-
|
|
(499)
|
Lease contracts are typically
within a period of 1 to 8 years. The
weighted average remaining lease term and the weighted average
discount rate as at December 31, 2023 was 2.49 years and 2.92%
respectively. The weighted average remaining lease term and the
weighted average discount rate as at December 31, 2022 was 3.24
years and 3.04% respectively.
Future lease payments are as
follows:
|
December
31,
|
|
2023
|
|
(in
US$'000)
|
Lease payments:
|
|
Not later than
1 year
|
4,042
|
Between 1 to
2 years
|
1,192
|
Between 2 to
3 years
|
919
|
Between 3 to
4 years
|
698
|
Between 4 to
5 years
|
124
|
Total lease payments
|
6,975
|
Less: Discount factor
|
(188)
|
Total lease liabilities
|
6,787
|
11. Investments in Equity
Investees
Investments in equity investees
consisted of the following:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
SHPL
|
48,411
|
|
73,461
|
Other (note)
|
-
|
|
316
|
|
48,411
|
|
73,777
|
Note: On April 13, 2023, the Group
completed a transaction to divest its entire investment in a former
equity investee to a third party.
The equity investees are private
companies and there are no quoted market prices available for their
shares.
Summarized financial information
for the significant equity investees, SHPL and HBYS (divested in
2021), is as follows:
(i) Summarized balance
sheets
|
|
SHPL
|
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in
US$'000)
|
Current assets
|
|
201,025
|
|
214,267
|
Non-current assets
|
|
73,939
|
|
80,062
|
Current liabilities
|
|
(179,649)
|
|
(147,952)
|
Non-current liabilities
|
|
(3,687)
|
|
(4,944)
|
Net assets
|
|
91,628
|
|
141,433
|
(ii) Summarized statements of
operations
|
|
SHPL
|
|
HBYS
|
|
|
Year Ended December
31,
|
|
Period Ended September
28,
|
|
|
2023
|
|
2022
|
|
2021
|
|
2021(note
(a))
|
|
|
(in US$'000)
|
Revenue
|
|
385,483
|
|
370,600
|
|
332,648
|
|
209,528
|
Gross profit
|
|
284,361
|
|
281,113
|
|
255,089
|
|
111,066
|
Interest income
|
|
754
|
|
980
|
|
1,216
|
|
205
|
Profit before taxation
|
|
112,488
|
|
116,454
|
|
105,325
|
|
36,715
|
Income tax expense (note
(b))
|
|
(17,636)
|
|
(16,738)
|
|
(15,896)
|
|
(4,840)
|
Net income (note(c))
|
|
94,852
|
|
99,716
|
|
89,429
|
|
31,875
|
Non-controlling
interests
|
|
-
|
|
-
|
|
-
|
|
(36)
|
Net income attributable to the
shareholders of equity investee
|
|
94,852
|
|
99,716
|
|
89,429
|
|
31,839
|
Notes:
(a) The summarized statement of operations for
HBYS for the year ended December 31, 2021 includes the period when
HBYS was the Group's equity investee from January 1, 2021 to
September 28, 2021, the completion date of the divestment.
The Group has accounted for the investment in
HBYS under the equity method up to September 28, 2021.
(b) The main entity within the SHPL group has
been granted the High and New Technology Enterprise ("HNTE")
status. Accordingly, the entity was eligible to use a preferential
income tax rate of 15% for the years ended December 31, 2023, 2022
and 2021.
(c)
Net income is before elimination of unrealized profits on
transactions with the Group. The amounts eliminated were
approximately US$131,000, US$110,000 and US$36,000 for the years
ended December 31, 2023, 2022 and 2021 respectively.
(iii) Reconciliation of summarized financial
information
Reconciliation of the summarized
financial information presented to the carrying amount of
investments in equity investees is as follows:
|
|
SHPL
|
|
HBYS
|
|
|
2023
|
|
2022
|
|
2021
|
|
2021(note)
|
|
|
(in US$'000)
|
Opening net assets after
non-controlling interests as at January 1
|
|
141,433
|
|
145,741
|
|
152,714
|
|
119,424
|
Net income attributable to the
shareholders of equity investee
|
|
94,852
|
|
99,716
|
|
89,429
|
|
31,839
|
Dividends declared
|
|
(146,974)
|
|
(87,436)
|
|
(99,744)
|
|
(106,159)
|
Other comprehensive
income/(loss)
|
|
2,317
|
|
(16,588)
|
|
3,342
|
|
1,387
|
Closing net assets after
non-controlling interests as at December 31/September 28
|
|
91,628
|
|
141,433
|
|
145,741
|
|
46,491
|
Group's share of net
assets
|
|
45,814
|
|
70,717
|
|
72,871
|
|
23,246
|
Goodwill
|
|
2,795
|
|
2,872
|
|
3,128
|
|
-
|
Elimination of unrealized profits
on downstream sales
|
|
(198)
|
|
(128)
|
|
-
|
|
-
|
Divestment (Note 22)
|
|
-
|
|
-
|
|
-
|
|
(23,246)
|
Carrying amount of investments as
at December 31
|
|
48,411
|
|
73,461
|
|
75,999
|
|
-
|
Note: The summarized financial
information for HBYS for the year ended December 31, 2021 includes
the period when HBYS was the Group's equity investee from January
1, 2021 to September 28, 2021, the completion date of the
divestment. The Group has accounted for
the investment in HBYS under the equity method up to September 28,
2021.
SHPL had the following capital
commitments:
|
December 31,
2023
|
|
(in
US$'000)
|
Property, plant and
equipment
|
|
Contracted but not provided
for
|
376
|
12. Accounts Payable
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in
US$'000)
|
Accounts payable
|
|
36,327
|
|
71,115
|
Substantially all accounts payable
are denominated in RMB, EUR and US$ and due within one year from
the end of the reporting period. The carrying values of accounts
payable approximate their fair values due to their short-term
maturities.
An aging analysis based on the
relevant invoice dates is as follows:
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in
US$'000)
|
Not later than 3 months
|
|
33,233
|
|
60,553
|
Between 3 months to 6
months
|
|
1,058
|
|
7,216
|
Between 6 months to 1
year
|
|
941
|
|
2,137
|
Later than 1 year
|
|
1,095
|
|
1,209
|
|
|
36,327
|
|
71,115
|
13. Other Payables, Accruals and
Advance Receipts
Other payables, accruals and
advance receipts consisted of the following:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Accrued research and development
expenses
|
153,737
|
|
156,134
|
Accrued salaries and
benefits
|
45,048
|
|
42,442
|
Accrued capital
expenditures
|
23,659
|
|
21,390
|
Accrued selling and marketing
expenses
|
16,340
|
|
11,564
|
Accrued administrative and other
general expenses
|
15,777
|
|
14,491
|
Amounts due to related parties
(Note 24(ii))
|
2,162
|
|
2,101
|
Deposits
|
1,564
|
|
3,616
|
Deferred government
grants
|
740
|
|
673
|
Others
|
12,372
|
|
12,210
|
|
271,399
|
|
264,621
|
14. Bank Borrowings
Bank borrowings consisted of the
following:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Current
|
31,155
|
|
-
|
Non-current
|
48,189
|
|
18,104
|
|
79,344
|
|
18,104
|
The weighted average interest rate
for outstanding bank borrowings for the years ended December 31,
2023 and 2022 was 3.41% per annum and 1.73% per annum respectively.
The carrying amounts of the Group's outstanding bank borrowings as
at December 31, 2023 and 2022 were denominated in RMB.
(i) Short-term working capital loan
facility
In November 2023, a subsidiary
entered into a short-term working capital loan facility with a bank
in the amount of RMB300,000,000 (US$41,923,000) with an annual
interest rate at the 1-year China Loan Prime Rate ("LPR") less
0.95%. As at December 31, 2023, RMB222,941,000 (US$31,155,000) was
drawn from the facility.
(ii) 10‑year fixed asset loan facility
In October 2021, a subsidiary
entered into a 10-year fixed asset loan facility agreement with the
bank for the provision of a secured credit facility in the amount
of RMB754,880,000 (US$105,490,000) with an annual interest rate at
the 5-year China LPR less 0.8% (which was supplemented in June
2022) and interest payments commencing upon completion of the
underlying construction in progress. This credit facility is
guaranteed by the immediate holding company of the subsidiary and
secured by the underlying leasehold land and buildings. As at
December 31, 2023 and 2022, RMB344,840,000 (US$48,189,000) and
RMB126,083,000 (US$18,104,000) were utilized from the fixed asset
loan facility respectively. For the years ended December 31, 2023
and 2022, US$1,047,000 and US$110,000 were related to capitalized
interest.
(iii) 1-year revolving loan facility
In May 2022, the Group through its
subsidiary, entered into a 1-year revolving loan facility with a
bank in the amount of HK$390,000,000 (US$50,000,000) with an
interest rate at Hong Kong Interbank Offered Rate plus 0.5% per
annum. This credit facility was guaranteed by the Company and
expired in May 2023.
The Group's bank borrowings are
repayable as from the dates indicated as follows:
|
December
31,
|
|
2023
|
|
2022
|
|
(in
US$'000)
|
Not later than 1 year
|
31,155
|
|
-
|
Between 1 to 3 years
|
3,192
|
|
360
|
Between 3 to 4 years
|
2,872
|
|
839
|
Between 4 to 5 years
|
6,384
|
|
1,079
|
Later than 5 years
|
35,741
|
|
15,826
|
|
79,344
|
|
18,104
|
As at December 31, 2023 and 2022,
the Group had unutilized bank borrowing facilities of US$68,069,000
and US$140,289,000 respectively.
15. Commitments and
Contingencies
The Group had the following
capital commitments:
|
December 31,
2023
|
|
(in
US$'000)
|
Property, plant and
equipment
|
|
Contracted but not provided
for
|
1,259
|
The Group does not have any other
significant commitments or contingencies.
16. Ordinary Shares
As at December 31, 2023, the
Company is authorized to issue 1,500,000,000 ordinary
shares.
Each ordinary share is entitled to
one vote. The holders of ordinary shares are also entitled to
receive dividends whenever funds are legally available and when
declared by the Board of Directors of the Company.
17. Share-based
Compensation
(i) Share‑based Compensation of the
Company
The Company conditionally adopted
a share option scheme on April 24, 2015 (as amended on April 27,
2020) (the "Hutchmed Share Option Scheme"). Pursuant to the
Hutchmed Share Option Scheme, the Board of Directors of the Company
may, at its discretion, offer any employees and directors
(including Executive and Non-executive Directors but excluding
Independent Non-executive Directors) of the Company, holding
companies of the Company and any of their subsidiaries or
affiliates, and subsidiaries or affiliates of the Company share
options to subscribe for shares of the Company.
As at December 31, 2023, the
aggregate number of shares issuable under the Hutchmed Share Option
Scheme was 42,161,098 ordinary shares. The Company will issue new
shares to satisfy share option exercises. Additionally, the number
of shares authorized but unissued was 628,743,730 ordinary
shares.
Share options granted are
generally subject to a four-year vesting schedule, depending on the
nature and the purpose of the grant. Share options subject to the
four-year vesting schedule, in general, vest 25% upon the first
anniversary of the vesting commencement date as defined in the
grant letter, and 25% every subsequent year. However, certain share
option grants may have a different vesting schedule as approved by
the Board of Directors of the Company. No outstanding share options
will be exercisable or subject to vesting after the expiry of a
maximum of ten years from the date of grant.
A summary of the Company's share
option activity and related information is as follows:
|
Number of share
options
|
|
Weighted average exercise
price in US$ per share
|
|
Weighted average remaining
contractual life
(years)
|
|
Aggregate intrinsic
value
(in US$'000)
|
Outstanding at January 1, 2022
|
37,190,590
|
|
4.88
|
|
7.04
|
|
82,377
|
Granted (note)
|
7,680,820
|
|
2.26
|
|
|
|
|
Exercised
|
(244,490)
|
|
1.98
|
|
|
|
|
Cancelled
|
(3,849,905)
|
|
5.19
|
|
|
|
|
Expired
|
(1,255,620)
|
|
5.66
|
|
|
|
|
Outstanding at December 31, 2022
|
39,521,395
|
|
4.34
|
|
6.55
|
|
11,525
|
Granted
|
1,221,900
|
|
2.50
|
|
|
|
|
Exercised
|
(6,480,930)
|
|
2.30
|
|
|
|
|
Cancelled
|
(2,832,340)
|
|
4.61
|
|
|
|
|
Expired
|
(1,893,370)
|
|
5.55
|
|
|
|
|
Outstanding at December 31, 2023
|
29,536,655
|
|
4.57
|
|
6.67
|
|
9,924
|
Vested and exercisable at December 31, 2022
|
21,113,285
|
|
4.57
|
|
4.80
|
|
6,288
|
Vested and exercisable at December 31, 2023
|
18,198,170
|
|
5.10
|
|
5.91
|
|
1,753
|
Note: Includes 861,220 share
options (represented by 172,244 ADS) granted to an executive
director in May 2022 where the number of share options exercisable
is subject to a performance target based on a market condition
covering the 3-year period from 2022 to 2024 which has been
reflected in estimating the grant date fair value. The grant date
fair value of such awards is US$0.24 per share using the Polynomial
model. Vesting of such award will occur in March 2025 if the
performance target based on a market condition is met.
In estimating the fair value of
share options granted, the following assumptions were used in the
Polynomial model for awards granted in the periods
indicated:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
Weighted average grant date fair
value of share options (in US$ per share)
|
1.14
|
|
0.85
|
Significant inputs into the
valuation model (weighted average):
|
|
|
|
Exercise price (in US$ per
share)
|
2.50
|
|
2.26
|
Share price at effective date of
grant (in US$ per share)
|
2.50
|
|
2.22
|
Expected volatility (note
(a))
|
53.3%
|
|
46.7%
|
Risk-free interest rate (note
(b))
|
3.69%
|
|
2.98%
|
Contractual life of share options
(in years)
|
10
|
|
10
|
Expected dividend yield (note
(c))
|
0%
|
|
0%
|
Notes:
(a) The Company calculated its expected
volatility with reference to the historical volatility prior to the
issuances of share options.
(b) The risk-free
interest rates reference the U.S. Treasury yield curves because the
Company's ADS are currently listed on the NASDAQ and denominated in
US$.
(c) The Company has not declared or paid any
dividends and does not currently expect to do so prior to the
exercise of the granted share options, and therefore uses an
expected dividend yield of zero in the Polynomial model.
The Company will issue new shares
to satisfy share option exercises. The following table summarizes
the Company's share option exercises:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Cash received from share option
exercises
|
5,094
|
|
174
|
|
2,452
|
Total intrinsic value of share
option exercises
|
4,626
|
|
92
|
|
2,999
|
The Group recognizes compensation
expense on a graded vesting approach over the requisite service
period. The following table presents share-based compensation
expense included in the Group's consolidated statements of
operations:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Research and development
expenses
|
3,250
|
|
4,803
|
|
8,460
|
Selling and administrative
expenses
|
2,843
|
|
1,803
|
|
7,783
|
Cost of revenue
|
91
|
|
130
|
|
122
|
|
6,184
|
|
6,736
|
|
16,365
|
As at December 31, 2023, the total
unrecognized compensation cost was US$5,057,000, and will be
recognized on a graded vesting approach over the weighted average
remaining service period of 2.15 years.
(ii) LTIP
The Company grants awards under
the LTIP to participating directors and employees, giving them a
conditional right to receive ordinary shares of the Company or the
equivalent ADS (collectively the "Awarded Shares") to be purchased
by the Trustee up to a cash amount. Vesting will depend upon
continued employment of the award holder with the Group and will
otherwise be at the discretion of the Board of Directors of the
Company. Additionally, some awards are subject to change based on
annual performance targets prior to their determination
date.
LTIP awards prior to the determination date
Performance targets vary by award,
and may include targets for shareholder returns, financings,
revenue, net income/(loss) after taxes and the achievement of
clinical, regulatory, business development and manufacturing
milestones. As the extent of achievement of the performance targets
is uncertain prior to the determination date, a probability based
on management's assessment on the achievement of the performance
target has been assigned to calculate the amount to be recognized
as an expense over the requisite period with a corresponding entry
to liability.
LTIP awards after the determination date
Upon the determination date, the
Company will pay a determined monetary amount, up to the maximum
cash amount based on the actual achievement of the performance
target specified in the award, to the Trustee to purchase the
Awarded Shares. Any cumulative compensation expense previously
recognized as a liability will be transferred to additional paid-in
capital. Based on the actual achievement of performance target, the
amount previously recorded in the liability will be adjusted
through share-based compensation expense.
Granted awards under the LTIP are
as follows:
|
|
Maximum cash
amount
|
|
Covered
|
|
Performance
target
|
Grant date
|
|
(in US$
millions)
|
|
financial
years
|
|
determination
date
|
May 23, 2022
|
|
60.4
|
|
2022
|
|
note
(a)
|
September 13, 2022
|
|
3.8
|
|
2022
|
|
note
(a)
|
September 13, 2022
|
|
1.7
|
|
note
(b)
|
|
note
(b)
|
June 5, 2023
|
|
54.9
|
|
2023
|
|
note
(a)
|
Notes:
(a) The annual performance target determination
date is the date of the announcement of the Group's annual results
for the covered financial year and vesting occurs two business days
after the announcement of the Group's annual results for the
financial year falling two years after the covered financial year
to which the LTIP award relates.
(b) This award does not stipulate performance
targets and is subject to a vesting schedule of 25% on each of the
first, second, third and fourth anniversaries of the date of
grant.
The Trustee has been set up solely
for the purpose of purchasing and holding the Awarded Shares during
the vesting period on behalf of the Company using funds provided by
the Company. On the determination date, if any, the Company will
determine the cash amount, based on the actual achievement of each
annual performance target, for the Trustee to purchase the Awarded
Shares. The Awarded Shares will then be held by the Trustee until
they are vested.
The Trustee's assets include
treasury shares and funds for additional treasury shares, trustee
fees and expenses. The number of treasury shares (in ordinary
shares equivalent) held by the Trustee were as follows:
|
Number of
treasury shares
|
|
Cost
(in US$'000)
|
As at January 1, 2022
|
8,139,175
|
|
40,014
|
Purchased
|
14,028,465
|
|
48,084
|
Vested
|
(2,566,265)
|
|
(12,034)
|
As at December 31, 2022
|
19,601,375
|
|
76,064
|
Purchased
|
2,725,515
|
|
9,071
|
Vested
|
(4,714,205)
|
|
(18,148)
|
As at December 31, 2023
|
17,612,685
|
|
66,987
|
Based on the estimated achievement
of performance conditions for 2023 financial year LTIP awards, the
determined monetary amount was US$50,262,000 which is recognized to
share-based compensation expense over the requisite vesting period
to March 2026.
For the years ended December 31,
2023 and 2022, US$7,332,000 and US$19,031,000 of the LTIP awards
were forfeited respectively based on the determined or estimated
monetary amount as at the forfeiture date.
The following table presents the
share-based compensation expenses recognized under the LTIP
awards:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Research and development
expenses
|
18,224
|
|
16,101
|
|
16,880
|
Selling and administrative
expenses
|
11,690
|
|
7,376
|
|
8,451
|
Cost of revenue
|
502
|
|
373
|
|
294
|
|
30,416
|
|
23,850
|
|
25,625
|
Recorded with a corresponding
credit to:
|
|
|
|
|
|
Liability
|
11,364
|
|
6,216
|
|
14,263
|
Additional paid-in
capital
|
19,052
|
|
17,634
|
|
11,362
|
|
30,416
|
|
23,850
|
|
25,625
|
For the years ended December 31,
2023, 2022 and 2021, US$4,563,000, US$15,351,000 and US$8,516,000
were reclassified from liability to additional paid-in capital
respectively upon LTIP awards reaching the determination date. As
at December 31, 2023 and 2022, US$10,502,000 and US$3,701,000 were
recorded as liabilities respectively for LTIP awards prior to the
determination date.
As at December 31, 2023, the total
unrecognized compensation cost was approximately US$50,447,000,
which considers expected performance targets and the amounts
expected to vest, and will be recognized over the requisite
periods.
18. Revenue
The following table presents
revenue disaggregated by contract type:
|
Year Ended December
31, 2023
|
|
Oncology/Immunology
|
|
Other
Ventures
|
|
Total
|
|
|
(in US$'000)
|
Invoiced Goods-Marketed
Products
|
83,087
|
|
-
|
|
83,087
|
-Distribution
|
-
|
|
309,383
|
|
309,383
|
Services-Commercialization of
Marketed Products
|
48,608
|
|
-
|
|
48,608
|
-Research and
Development
|
481
|
|
-
|
|
481
|
License &
Collaborations-Services
|
80,397
|
|
-
|
|
80,397
|
-Royalties
|
32,470
|
|
-
|
|
32,470
|
-Licensing
|
278,855
|
|
-
|
|
278,855
|
-Manufacturing supply
|
4,718
|
|
-
|
|
4,718
|
|
528,616
|
|
309,383
|
|
837,999
|
|
|
|
|
|
|
Third parties
|
528,135
|
|
301,119
|
|
829,254
|
Related parties (Note
24(i))
|
481
|
|
8,264
|
|
8,745
|
|
528,616
|
|
309,383
|
|
837,999
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December
31, 2022
|
|
Oncology/Immunology
|
|
Other
Ventures
|
|
Total
|
|
(in US$'000)
|
Invoiced Goods-Marketed
Products
|
57,057
|
|
-
|
|
57,057
|
-Distribution
|
-
|
|
262,565
|
|
262,565
|
Services-Commercialization of
Marketed Products
|
41,275
|
|
-
|
|
41,275
|
-Research and
Development
|
507
|
|
-
|
|
507
|
License &
Collaborations-Services
|
23,741
|
|
-
|
|
23,741
|
-Royalties
|
26,310
|
|
-
|
|
26,310
|
-Licensing
|
14,954
|
|
-
|
|
14,954
|
|
163,844
|
|
262,565
|
|
426,409
|
|
|
|
|
|
|
Third parties
|
163,337
|
|
257,272
|
|
420,609
|
Related parties (Note
24(i))
|
507
|
|
5,293
|
|
5,800
|
|
163,844
|
|
262,565
|
|
426,409
|
|
Year Ended December 31,
2021
|
|
Oncology/Immunology
|
|
Other
Ventures
|
|
Total
|
|
(in US$'000)
|
Invoiced Goods-Marketed
Products
|
33,937
|
|
-
|
|
33,937
|
-Distribution
|
-
|
|
236,518
|
|
236,518
|
Services-Commercialization of
Marketed Products
|
27,428
|
|
-
|
|
27,428
|
-Research and
Development
|
525
|
|
-
|
|
525
|
License &
Collaborations-Services
|
18,995
|
|
-
|
|
18,995
|
-Royalties
|
15,064
|
|
-
|
|
15,064
|
-Licensing
|
23,661
|
|
-
|
|
23,661
|
|
119,610
|
|
236,518
|
|
356,128
|
|
|
|
|
|
|
Third parties
|
119,085
|
|
232,262
|
|
351,347
|
Related parties (Note
24(i))
|
525
|
|
4,256
|
|
4,781
|
|
119,610
|
|
236,518
|
|
356,128
|
The following table presents
liability balances from contracts with customers:
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in US$'000)
|
Deferred revenue
|
|
|
|
|
Current-Oncology/Immunology
segment (note (a))
|
|
57,566
|
|
11,817
|
Current-Other Ventures segment
(note (b))
|
|
73
|
|
1,530
|
|
|
57,639
|
|
13,347
|
Non-current-Oncology/Immunology
segment (note (a))
|
|
69,480
|
|
190
|
Total deferred revenue (note (c)
and (d))
|
|
127,119
|
|
13,537
|
Notes:
(a) Oncology/Immunology segment deferred revenue
relates to unamortized upfront and milestone payments, invoiced
amounts for royalties where the customer has not yet completed the
in-market sale and advance consideration received for cost
reimbursements which are attributed to research and development
services that have not yet been rendered as at the reporting
date.
(b) Other Ventures segment deferred revenue
relates to payments in advance from customers for goods that have
not been transferred and services that have not been rendered to
the customer as at the reporting date.
(c) Estimated deferred revenue to be recognized
over time as from the date indicated is as follows:
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in US$'000)
|
Not later than 1 year
|
|
57,639
|
|
13,347
|
Between 1 to 2 years
|
|
32,797
|
|
150
|
Between 2 to 3 years
|
|
30,918
|
|
40
|
Between 3 to 4 years
|
|
844
|
|
-
|
Later than 4 years
|
|
4,921
|
|
-
|
|
|
127,119
|
|
13,537
|
(d) As at January 1,
2023, deferred revenue was US$13.5 million, of which US$12.7
million was recognized during the year ended December 31,
2023.
License and collaboration
agreement with Takeda Pharmaceuticals
On January 23, 2023, the Group and
Takeda Pharmaceuticals International AG ("Takeda") entered into an
exclusive out-licensing agreement (the "Takeda Agreement") in
territories outside of Mainland China, Hong Kong and Macau (the
"Territory") to further the global development, commercialization
and manufacturing of Fruzaqla, also known as fruquintinib, a
targeted oncology therapy for the treatment of various types of
solid tumors. Under the terms of the Takeda Agreement, the Group is
entitled to receive a series of payments up to US$1.13 billion,
including upfront, regulatory, development and commercial sales
milestone payments, plus royalties on net sales in the Territory.
Fruzaqla was successfully approved for commercialization in the
U.S. in November 2023, which triggered a regulatory approval
milestone of US$35 million.
Upfront and milestone payments
according to the Takeda Agreement received up to December 31, 2023
are summarized as follows:
|
(in US$'000)
|
Upfront payment
|
400,000
|
Regulatory approval milestone
payment achieved
|
35,000
|
As of December 31, 2023, the total
revenue recognized under the Takeda Agreement is US$353.1 million,
which included US$280.0 million of the upfront payment and US$32.0
million of the regulatory approval milestone payment
received.
The Takeda Agreement has the
following material performance obligations: (1) the licenses for
the development and commercialization of Fruzaqla in the Territory
and the manufacture of Fruzaqla for use in the Territory, (2)
manufacturing supply and (3) services for research and development
including ongoing clinical trials and regulatory submissions and
manufacturing technology transfer.
The transaction price for these
performance obligations includes the upfront payment, service cost
reimbursements, milestone payments and sales-based royalties.
Milestone payments are not included in the transaction price until
they become probable that a significant reversal of revenue would
not occur, which is generally when the criteria to receive the
specified milestone are achieved.
The allocation of the transaction
price to each relevant performance obligation was based on the
relative standalone selling price of each performance obligation
determined at the inception of the contract. Variable consideration
is allocated entirely to a performance obligation or to a distinct
good or service that forms part of a single performance obligation
if the terms of the variable consideration relate to the
satisfaction of the respective performance obligation and the
amount allocated is consistent with the amount expected to be
received for the satisfaction of the respective performance
obligation. The standalone selling price of the licenses
for the development and commercialization of
Fruzaqla in the Territory and the manufacture of Fruzaqla for use
in the Territory and manufacturing supply was determined using a
discounted cash flow method based on the probability-weighted
present value of forecasted cash flows associated with
out-licensing Fruzaqla in the Territory, and the
standalone selling price of the
services for research and development of ongoing
clinical trials, regulatory submissions and manufacturing
technology transfer was determined using a cost plus margin
approach based on the present value of estimated future service
costs plus a reasonable margin. Significant assumptions included in
the determination of the standalone selling prices for each
performance obligation identified including forecasted revenue,
probabilities of regulatory approvals, estimated future service
costs, margin rates and discount rates. Based on these estimations, proportionate amounts of
transaction price to be allocated to the licenses, and other
performance obligations were 62% and 38% respectively at contract
inception. Control of the licenses to Fruzaqla was transferred at the
inception date of the agreement and consequently, amounts allocated
to this performance obligation were recognized at inception.
Manufacturing supply is recognized at a point in time when the
control of the goods is transferred. Services are performed over
the term of the Takeda Agreement and amounts allocated are
recognized over time using a percentage-of-completion method.
Royalties are recognized as future sales occur as they meet the
requirements for the sales-usage based royalty
exception.
Revenue recognized under the
Takeda Agreement is as follows:
|
Year Ended
December 31, 2023
|
|
(in US$'000)
|
Manufacturing supply-Invoiced
Marketed Products sales
|
5,053
|
-Allocated from upfront
payment
|
4,718
|
Services-Research and
Development
|
33,892
|
-Allocated from upfront and
milestone payments
|
28,494
|
Royalties-Marketed
Products
|
2,092
|
Licensing-Allocated from upfront
and milestone payments
|
278,855
|
|
353,104
|
License and collaboration
agreement with Eli Lilly
On October 8, 2013, the Group
entered into a licensing, co-development and commercialization
agreement in China with Eli Lilly and Company ("Lilly") relating to
Elunate ("Lilly Agreement"), as the China brand name for
fruquintinib. Under the terms of the Lilly Agreement, the Group is
entitled to receive a series of payments up to US$86.5 million,
including upfront payments and development and regulatory approval
milestones. Development costs after the first development milestone
are shared between the Group and Lilly. Elunate was successfully
commercialized in China in November 2018, and the Group receives
tiered royalties in the range of 15% to 20% on all sales in
China.
In December 2018, the Group
entered into various amendments to the Lilly Agreement (the "2018
Amendment"). Under the terms of the 2018 Amendment, the Group is
entitled to determine and conduct future life cycle indications
("LCI") development of Elunate in China beyond the three initial
indications specified in the Lilly Agreement and will be
responsible for all associated development costs. In return, the
Group will receive additional regulatory approval milestones of
US$20 million for each LCI approved, for up to three LCI or US$60
million in aggregate, and will increase tiered royalties to a range
of 15% to 29% on all Elunate sales in China upon the commercial
launch of the first LCI. Additionally, through the 2018 Amendment,
Lilly has provided consent, and freedom to operate, for the Group
to enter into joint development collaborations with certain
third-party pharmaceutical companies to explore combination
treatments of Elunate and various immunotherapy agents. The 2018
Amendment also provided the Group rights to promote Elunate in
provinces that represent 30% to 40% of the sales of Elunate in
China upon the occurrence of certain commercial milestones by
Lilly. Such rights were further amended below.
In July 2020, the Group entered
into an amendment to the Lilly Agreement (the "2020 Amendment")
relating to the expansion of the Group's role in the
commercialization of Elunate across all of China. Under the terms
of the 2020 Amendment, the Group is responsible for providing
promotion and marketing services, including the development and
execution of all on-the-ground medical detailing, promotion and
local and regional marketing activities, in return for service fees
on sales of Elunate made by Lilly. In October 2020, the Group
commenced such promotion and marketing services. In addition,
development and regulatory approval milestones for an initial
indication under the Lilly Agreement were increased by US$10
million in lieu of cost reimbursement.
Upfront and cumulative milestone
payments according to the Lilly Agreement received up to December
31, 2023 are summarized as follows:
|
|
(in US$'000)
|
Upfront payment
|
|
6,500
|
Development milestone payments
achieved
|
|
40,000
|
The Lilly Agreement has the
following performance obligations: (1) the license for the
commercialization rights to Elunate and (2) the research and
development services for the specified indications. The transaction
price includes the upfront payment, research and development cost
reimbursements, milestone payments and sales-based royalties.
Milestone payments were not included in the transaction price until
it became probable that a significant reversal of revenue would not
occur, which is generally when the specified milestone is achieved.
The allocation of the transaction price to each performance
obligation was based on the relative standalone selling prices of
each performance obligation determined at the inception of the
contract. Based on this estimation, proportionate amounts of
transaction price to be allocated to the license to Elunate and the
research and development services were 90% and 10% respectively.
Control of the license to Elunate transferred at the inception date
of the agreement and consequently, amounts allocated to this
performance obligation were recognized at inception. Conversely,
research and development services for each specified indication are
performed over time and amounts allocated are recognized over time
using a percentage-of-completion method. Royalties are recognized
as future sales occur as they meet the requirements for the
sales-usage based royalty exception.
The 2018 Amendment is a separate
contract as it added distinct research and development services for
the LCIs to the Lilly Agreement. The 2020 Amendment related to the
promotion and marketing services is a separate contract as it added
distinct services to the Lilly Agreement. Such promotion and
marketing services are recognized over time based on amounts that
can be invoiced to Lilly. The 2020 Amendment related to the
additional development and regulatory approval milestone amounts is
a modification as it only affected the transaction price of
research and development services for a specific indication under
the Lilly Agreement, and therefore, such additional milestone
amounts will be included in the transaction price accounted under
the Lilly Agreement once the specified milestones are
achieved.
Revenue recognized under the Lilly
Agreement and subsequent amendments is as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Goods-Invoiced Marketed Products
sales
|
16,966
|
|
14,407
|
|
15,792
|
Services-Commercialization of
Marketed Products
|
48,608
|
|
41,275
|
|
27,428
|
-Research and
Development
|
2,828
|
|
8,031
|
|
4,491
|
-Allocated from upfront and
milestone payments
|
12
|
|
23
|
|
-
|
Royalties-Marketed
Products
|
16,560
|
|
13,954
|
|
10,292
|
|
84,974
|
|
77,690
|
|
58,003
|
​License and collaboration
agreement with AstraZeneca
On December 21, 2011, the
Group and AstraZeneca AB (publ) ("AZ") entered into a global
licensing, co-development, and commercialization agreement for
Orpathys ("AZ Agreement"), also known as savolitinib, a novel
targeted therapy and a highly selective inhibitor of the c-Met
receptor tyrosine kinase for the treatment of cancer. Under the
terms of the AZ Agreement, the Group is entitled to receive a
series of payments up to US$140 million, including upfront payments
and development and first-sale milestones. Additionally, the AZ
Agreement contains possible significant future commercial sale
milestones. Development costs for Orpathys in China will be shared
between the Group and AZ, with the Group continuing to lead the
development in China. AZ will lead and pay for the development of
Orpathys for the rest of the world. Orpathys was successfully
commercialized in China in July 2021, and the Group receives fixed
royalties of 30% based on all sales in China. Should Orpathys be
successfully commercialized outside China, the Group would receive
tiered royalties from 9% to 13% on all sales outside of
China.
In August 2016 (as amended in
December 2020), the Group entered into an amendment to the AZ
Agreement whereby the Group shall pay the first approximately US$50
million of phase III clinical trial costs related to developing
Orpathys for renal cell carcinoma ("RCC"), and remaining costs will
be shared between the Group and AZ. Subject to approval of Orpathys
in RCC, the Group would receive additional tiered royalties on all
sales outside of China, with the incremental royalty rates
determined based on actual sharing of development costs. In
November 2021, the Group entered into an additional amendment which
revised the sharing between the Group and AZ of development costs
for Orpathys in China for non-small cell lung cancer, as well as
adding potential development milestones.
Upfront and cumulative milestone
payments according to the AZ Agreement received up to December 31,
2023 are summarized as follows:
|
(in US$'000)
|
Upfront payment
|
20,000
|
Development milestone payments
achieved
|
40,000
|
First-sale milestone payment
achieved
|
25,000
|
The AZ Agreement has the following
performance obligations: (1) the license for the commercialization
rights to Orpathys and (2) the research and development services
for the specified indications. The transaction price includes the
upfront payment, research and development cost reimbursements,
milestone payments and sales-based royalties. Milestone payments
were not included in the transaction price until it became probable
that a significant reversal of revenue would not occur, which is
generally when the specified milestone is achieved. The allocation
of the transaction price to each performance obligation was based
on the relative standalone selling prices of each performance
obligation determined at the inception of the contract. Based on
this estimation, proportionate amounts of transaction price to be
allocated to the license to Orpathys and the research and
development services were 95% and 5% respectively. Control of the
license to Orpathys transferred at the inception date of the
agreement and consequently, amounts allocated to this performance
obligation were recognized at inception. Conversely, research and
development services for each specified indication are performed
over time and amounts allocated are recognized over time using a
percentage-of-completion method.
Revenue recognized under the AZ
Agreement and subsequent amendments is as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Goods-Invoiced Marketed Products
sales
|
15,013
|
|
9,904
|
|
6,509
|
Services-Research and
Development
|
14,993
|
|
14,106
|
|
12,743
|
-Allocated from upfront and
milestone payments
|
77
|
|
361
|
|
1,370
|
Royalties-Marketed
Products
|
13,818
|
|
12,356
|
|
4,772
|
Licensing-Allocated from upfront
and milestone payments
|
-
|
|
14,954
|
|
23,661
|
|
43,901
|
|
51,681
|
|
49,055
|
19. In-Licensing
arrangement
On August 7, 2021, the Group and
Epizyme, Inc. ("Epizyme") entered into a license agreement (the
"In-license Agreement") for tazemetostat, a novel inhibitor of EZH2
that is approved by the U.S. Food and Drug Administration for the
treatment of certain patients with epithelioid sarcoma and
follicular lymphoma. The Group is responsible for the development
and commercialization of tazemetostat in the PRC, Hong Kong, Macau
and Taiwan (the "Territory") and also holds rights to manufacture
tazemetostat for the Territory. The Group also received a 4-year
warrant, exercisable up to August 7, 2025, to purchase up to
5,653,000 shares of Epizyme common stock for an exercise price of
US$11.50 per share ("Warrant Exercise Price").
Under the terms of the In-license
Agreement and warrant, the Group paid Epizyme a US$25 million
upfront payment and is obligated for a series of success-based
payments up to US$110 million in development and regulatory
milestones and up to US$175 million in sales milestones.
Success-based payments are recognized when the related milestone is
achieved. After tazemetostat is commercialized in the Territory
(which occurred in 2023), the Group will incur tiered royalties
based on net sales. For the year ended December 31, 2023, the Group
incurred royalties of US$9,000.
The US$25 million upfront payment
was first allocated to the warrant for its initial fair value of
US$15 million, and the remainder was allocated to the rights to
tazemetostat which were expensed to research and development
expense as IPR&D. During the year ended December 31, 2022,
US$5.0 million development milestone was paid and expensed to
research and development expenses as IPR&D.
The warrant was recorded as a
financial asset at fair value with changes to fair value recognized
to the consolidated statements of operations. During the year ended
December 31, 2022, an affiliate of Ipsen S.A. acquired all
outstanding shares of Epizyme and the warrant expired under the
terms of the In-license Agreement and warrant. For the years ended
December 31, 2022 and 2021, fair value losses of US$2.5 million and
US$12.5 million were recognized to other expense in the
consolidated statements of operations respectively.
20. Research and Development
Expenses
Research and development expenses
are summarized as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Clinical trial related
costs
|
199,728
|
|
255,935
|
|
190,051
|
Personnel compensation and related
costs
|
93,030
|
|
119,306
|
|
91,639
|
Other research and development
expenses
|
9,243
|
|
11,652
|
|
17,396
|
|
302,001
|
|
386,893
|
|
299,086
|
The Group has entered into
multiple collaborative arrangements under ASC 808 to evaluate the
combination of the Group's drug compounds with the collaboration
partners' drug compounds. For the years ended December 31, 2023,
2022 and 2021, the Group has incurred research and development
expenses of US$22.0 million,
US$14.7 million and US$18.4 million
respectively, related to such collaborative
arrangements.
21. Government Grants
Government grants in the
Oncology/Immunology segment are primarily given in support of the
construction of a manufacturing plant in Shanghai and R&D
activities which are conditional upon i) the Group spending a
predetermined amount, regardless of success or failure of the
research and development projects and/or ii) the achievement of
certain stages of research and development projects being approved
by the relevant PRC government authority. They are refundable to
the government if the conditions, if any, are not met. Government
grants in the Other Ventures segment are primarily given to promote
local initiatives. These government grants may be subject to
ongoing reporting and monitoring by the government over the period
of the grant.
Government grants, which are
deferred and recognized in the consolidated statements of
operations over the period necessary to match them with the costs
that they are intended to compensate, are recognized in other
payables, accruals and advance receipts (Note 13) and other
non-current liabilities. For the years ended December 31, 2023,
2022 and 2021, the Group received government grants of
US$4,111,000, US$8,474,000 and US$9,095,000
respectively.
Government grants were recognized
in the consolidated statements of operations as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Research and development
expenses
|
1,054
|
|
4,556
|
|
15,515
|
Other income
|
3,134
|
|
1,434
|
|
318
|
|
4,188
|
|
5,990
|
|
15,833
|
22. Gain on Divestment of An
Equity Investee
In March 2021, the Group entered
into a sale and purchase agreement (the "SPA") with a third party
to sell its entire investment in HBYS with closing subject to
regulatory approval in the PRC. On September 28, 2021, the Group
completed the divestment for cash consideration of US$159.1
million.
On May 13, 2021 and September 23,
2021, HBYS had declared dividends to shareholders of US$46.5
million and US$59.7 million respectively which were related to
prior year undistributed profits and distributions of a land bonus
payment. Based on the SPA, the Group was entitled to a portion of
such dividends and as at December 31, 2022, the Group recorded
US$26.2 million dividend receivables, net of taxes, from the third
party to other receivables (Note 7), and as at December 31, 2023,
the third party has fully settled these amounts.
In addition, the Group and
Hutchison Whampoa Enterprises Limited, an affiliate of CK
Hutchison, entered into a license agreement on June 15, 2021,
conditional upon the completion of the divestment, to grant a
continuing right to use the "Hutchison Whampoa" brand by HBYS for
10 years at HK$12 million (approximately US$1.5 million) per year
with aggregate amounts not to exceed HK$120 million (approximately
US$15.4 million). On September 28, 2021, the Group recorded the
present value of future branding liability payments of US$12.7
million. As at December 31, 2023 and 2022, US$1.5 million was
included in amounts due to related parties and US$7.6 million and
US$8.7 million were included in other non-current liabilities
respectively (Note 24(ii)).
The gain on divestment of an
equity investee was recognized in the consolidated statements of
operations as follows:
|
Year Ended December
31,
|
|
2021
|
|
(in US$'000)
|
Proceeds
|
159,118
|
Dividend receivables-third
party
|
46,387
|
|
205,505
|
Less:
Group's share of net assets of HBYS (Note 11(iii))
|
(23,246)
|
Dividend
receivables-HBYS
|
(52,887)
|
Withholding tax liability on
dividend receivables-HBYS
|
2,644
|
Branding liability
|
(12,721)
|
Accumulated other comprehensive
income and reserves
|
1,911
|
Transaction costs and
others
|
104
|
Gain on divestment of an equity
investee
|
121,310
|
Less: Capital gain tax
|
(14,373)
|
Less: Gain on divestment of an
equity investee attributable to non-controlling
interests
|
(24,010)
|
Gain on divestment of an equity
investee attributable to the Group
|
82,927
|
23. Other
income/(expense)
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Other income:
|
|
|
|
|
|
Foreign exchange gains
|
8,661
|
|
-
|
|
1,671
|
Government grants
|
3,134
|
|
1,434
|
|
318
|
Others
|
1,154
|
|
399
|
|
437
|
|
12,949
|
|
1,833
|
|
2,426
|
Other expense:
|
|
|
|
|
|
Impairment of property, plant and
equipment
|
(3,678)
|
|
-
|
|
-
|
Impairment of right-of-use
assets
|
(2,088)
|
|
-
|
|
-
|
Foreign exchange losses
|
-
|
|
(5,704)
|
|
-
|
Fair value losses on
warrant
|
-
|
|
(2,452)
|
|
(12,548)
|
Others
|
(2,636)
|
|
(5,353)
|
|
(95)
|
|
(8,402)
|
|
(13,509)
|
|
(12,643)
|
24. Significant Transactions with
Related Parties and Non-Controlling Shareholders of
Subsidiaries
The Group has the following
significant transactions with related parties and non-controlling
shareholders of subsidiaries, which were carried out in the normal
course of business at terms determined and agreed by the relevant
parties:
(i) Transactions with related
parties:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in
US$'000)
|
Sales to:
|
|
|
|
|
|
Indirect subsidiaries of CK
Hutchison
|
1,914
|
|
3,610
|
|
4,256
|
An equity investee
|
6,350
|
|
1,683
|
|
-
|
|
8,264
|
|
5,293
|
|
4,256
|
Revenue from research and
development services from:
|
|
|
|
|
|
An equity investee
|
481
|
|
507
|
|
525
|
Purchases from:
|
|
|
|
|
|
Equity investees
|
3,651
|
|
4,231
|
|
3,770
|
Rendering of marketing services
from:
|
|
|
|
|
|
Indirect subsidiaries of CK
Hutchison
|
150
|
|
227
|
|
350
|
An equity investee
|
-
|
|
127
|
|
-
|
|
150
|
|
354
|
|
350
|
Rendering of management
services from:
|
|
|
|
|
|
An indirect subsidiary of CK
Hutchison
|
997
|
|
980
|
|
971
|
Entered brand license agreement
with:
|
|
|
|
|
|
An indirect subsidiary of CK
Hutchison (note (a))
|
-
|
|
-
|
|
12,721
|
Divestment of subsidiaries
to:
|
|
|
|
|
|
An indirect subsidiary of CK
Hutchison (note (b))
|
5,103
|
|
-
|
|
-
|
(ii) Balances with related parties included
in:
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in US$'000)
|
Accounts receivable-related
parties
|
|
|
|
|
Indirect subsidiaries of CK
Hutchison (note (c))
|
|
-
|
|
1,319
|
An equity investee
(note (c))
|
|
1,896
|
|
2,198
|
|
|
1,896
|
|
3,517
|
Amounts due from related
parties
|
|
|
|
|
An indirect subsidiary of CK
Hutchison (note (c))
|
|
228
|
|
-
|
An equity investee (note (c)
and (d))
|
|
28,234
|
|
998
|
|
|
28,462
|
|
998
|
Other payables, accruals and
advance receipts
|
|
|
|
|
Indirect subsidiaries of CK
Hutchison (note (e) and (g))
|
|
2,017
|
|
1,953
|
An equity investee (note (c)
and (f))
|
|
145
|
|
148
|
|
|
2,162
|
|
2,101
|
Other non-current
liabilities
|
|
|
|
|
An equity investee
(note (f))
|
|
450
|
|
755
|
An indirect subsidiary of CK
Hutchison (note (g))
|
|
7,619
|
|
8,716
|
|
|
8,069
|
|
9,471
|
Notes:
(a) The branding rights for HBYS from an indirect
subsidiary of CK Hutchison were recognized in the consolidated
statements of operations through the gain on divestment of an
equity investee (Note 22). For each of the years ended December 31,
2023, 2022 and 2021, the Group paid US$1,538,000 for the branding
rights.
(b) On December 7, 2023, the Group completed a
transaction to divest HHOHK and HSN to an indirect subsidiary of CK
Hutchison for proceeds of US$5,103,000. A gain on divestment of
US$96,000 was recorded in other income for
the year ended December 31, 2023.
(c) Balances with related parties are unsecured,
repayable on demand and interest-free. The carrying values of
balances with related parties approximate their fair values due to
their short-term maturities. No allowance for credit losses has
been made for amounts due from related parties for the years ended
December 31, 2023 and 2022.
(d) As at December 31, 2023, dividends receivable
of US$27,130,000 was included in amounts due from related
parties.
(e) Amounts due to indirect subsidiaries of CK
Hutchison are unsecured, repayable on demand and interest-bearing
if not settled within one month.
(f) Includes other deferred income
representing amounts recognized from granting of commercial,
promotion and marketing rights.
(g) As at December 31, 2023 and 2022, a branding
liability payable of US$1,538,000 was included in amounts due to
related parties under other payables, accruals and advance
receipts. As at December 31, 2023 and 2022, US$7,619,000 and
US$8,716,000 of the branding liability payable was included in
other non-current liabilities.
(iii) Transactions with non‑controlling shareholders of
subsidiaries:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Sales
|
66,417
|
|
47,611
|
|
41,974
|
Purchases
|
5,733
|
|
7,936
|
|
10,660
|
Dividends declared
|
9,068
|
|
25,600
|
|
9,894
|
Distribution service
fee
|
369
|
|
-
|
|
-
|
(iv) Balances with non‑controlling shareholders of
subsidiaries included in:
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
|
(in US$'000)
|
Accounts receivable
|
|
7,824
|
|
11,139
|
|
Accounts payable
|
|
27
|
|
2,922
|
|
Other payables, accruals and
advance receipts
|
|
309
|
|
-
|
|
25. Income Taxes
(i) Income tax
expense/(benefit)
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Current tax
|
|
|
|
|
|
HK (note (a))
|
45
|
|
301
|
|
310
|
PRC (note (b) and
(c))
|
1,767
|
|
2,580
|
|
15,909
|
U.S. and others (note
(d))
|
471
|
|
399
|
|
417
|
Total current tax
|
2,283
|
|
3,280
|
|
16,636
|
Deferred income tax
expense/(benefit)
|
2,226
|
|
(3,563)
|
|
(4,718)
|
Income tax
expense/(benefit)
|
4,509
|
|
(283)
|
|
11,918
|
Notes:
(a)
The Company, three subsidiaries incorporated in the British
Virgin Islands and its Hong Kong subsidiaries are subject to Hong
Kong profits tax. Under the Hong Kong two-tiered profits tax rates
regime, the first HK$2.0 million (US$0.3 million) of assessable
profits of qualifying corporations will be taxed at 8.25%, with the
remaining assessable profits taxed at 16.5%. Hong Kong profits tax
has been provided for at the relevant rates on the estimated
assessable profits less estimated available tax losses, if any, of
these entities as applicable.
(b) Taxation in the PRC has been provided for at
the applicable rate on the estimated assessable profits less
estimated available tax losses, if any, in each entity. Under the
PRC Enterprise Income Tax Law (the "EIT Law"), the standard
enterprise income tax rate is 25%. In addition, the EIT Law
provides for a preferential tax rate of 15% for companies which
qualify as HNTE. HUTCHMED Limited and its wholly-owned subsidiary
HUTCHMED (Suzhou) Limited qualify as a HNTE up to December 31,
2025 and 2023 respectively.
Pursuant
to the EIT law, a 10% withholding tax is levied on dividends paid
by PRC companies to their foreign investors. A lower withholding
tax rate of 5% is applicable under the China-HK Tax Arrangement if
direct foreign investors with at least 25% equity interest in the
PRC companies are Hong Kong tax residents, and meet the conditions
or requirements pursuant to the relevant PRC tax regulations
regarding beneficial ownership. Since the equity holders of the
equity investees of the Company are Hong Kong incorporated
companies and Hong Kong tax residents, and meet the aforesaid
conditions or requirements, the Company has used 5% to provide for
deferred tax liabilities on retained earnings which are anticipated
to be distributed. As at December
31, 2023, 2022 and 2021, the amounts
accrued in deferred tax liabilities relating to withholding tax on
dividends were determined on the basis that 100% of the
distributable reserves of the equity investees operating in the PRC
will be distributed as dividends.
Pursuant
to PRC Bulletin on Issues of Enterprise Income Tax and Indirect
Transfers of Assets by Non-PRC Resident Enterprises, an indirect
transfer of a PRC resident enterprise by a non-PRC resident
enterprise, via the transfer of an offshore intermediate holding
company, shall be subject to PRC withholding tax under certain
conditions.
(c) Current tax in the PRC for the year ended
December 31, 2021 includes US$14.4 million arising from the
indirect disposal of HBYS (Note 22), calculated at 10% of the
excess of the disposal proceeds over the cost of acquiring the
equity investment in HBYS.
(d) The Company's subsidiary in the U.S. with
operations primarily in New Jersey is subject to U.S. taxes,
primarily federal and state taxes, which have been provided for at
approximately 21% (federal) and 0% to 11.5% (state tax) on the
estimated assessable profit over the reporting years. Certain
income receivable by the Company is subject to U.S. withholding tax
of 30%. Two of the Group's subsidiaries are subject to corporate
tax in the UK and EU countries at 19% and 15% to 25%, respectively,
on the estimated assessable profits in relation to their presence
in these countries.
The reconciliation of the Group's
reported income tax expense to the theoretical tax amount that
would arise using the tax rates of the Company against the Group's
income/(loss) before income taxes and equity in earnings of equity
investees is as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
|
|
(in US$'000)
|
|
|
Income/(loss) before income taxes
and equity in earnings of equity investees
|
58,308
|
|
(410,422)
|
|
(215,740)
|
Tax calculated at the statutory
tax rate of the Company
|
9,621
|
|
(67,720)
|
|
(35,597)
|
Tax effects of:
|
|
|
|
|
|
Different tax rates applicable in
different jurisdictions
|
541
|
|
6,316
|
|
136
|
Tax valuation allowance
|
26,629
|
|
93,243
|
|
63,975
|
Preferential tax rate
difference
|
(3,065)
|
|
(171)
|
|
(148)
|
Preferential tax deduction and
credits
|
(32,667)
|
|
(40,791)
|
|
(29,838)
|
Expenses not deductible for tax
purposes
|
7,086
|
|
8,886
|
|
8,684
|
Withholding tax on undistributed
earnings of PRC entities
|
2,386
|
|
2,492
|
|
3,153
|
Income not subject to
tax
|
(5,826)
|
|
(2,142)
|
|
(2,704)
|
Temporary difference
|
(817)
|
|
(1,614)
|
|
2,717
|
Others
|
621
|
|
1,218
|
|
1,540
|
Income tax
expense/(benefit)
|
4,509
|
|
(283)
|
|
11,918
|
(ii) Deferred tax assets and
liabilities
The significant components of
deferred tax assets and liabilities are as follows:
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in US$'000)
|
Deferred tax assets
|
|
|
|
|
Cumulative tax losses
|
|
284,271
|
|
264,751
|
Others
|
|
14,707
|
|
15,254
|
Total deferred tax
assets
|
|
298,978
|
|
280,005
|
Less: Valuation
allowance
|
|
(283,522)
|
|
(264,639)
|
Deferred tax assets
|
|
15,456
|
|
15,366
|
Deferred tax
liabilities
|
|
|
|
|
Undistributed earnings from a PRC
entity
|
|
1,478
|
|
2,686
|
Others
|
|
6
|
|
24
|
Deferred tax
liabilities
|
|
1,484
|
|
2,710
|
The movements in deferred tax
assets and liabilities are as follows:
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
As at January 1
|
12,656
|
|
6,636
|
|
(3,548)
|
Movement of previously recognized
withholding tax on undistributed earnings
|
3,674
|
|
2,186
|
|
5,148
|
(Charged)/Credited to the
consolidated statements of operations
|
|
|
|
|
|
Withholding tax on undistributed
earnings of PRC entities
|
(2,385)
|
|
(2,492)
|
|
(3,153)
|
Deferred tax on amortization of
intangible assets
|
18
|
|
19
|
|
19
|
Deferred tax on temporary
differences, tax loss carried forward and research tax
credits
|
142
|
|
6,036
|
|
7,852
|
Reclassification from current
tax
|
11
|
|
-
|
|
-
|
Divestment of
subsidiaries
|
(49)
|
|
-
|
|
-
|
Divestment of an equity
investee
|
-
|
|
-
|
|
370
|
Exchange differences
|
(95)
|
|
271
|
|
(52)
|
As at December 31
|
13,972
|
|
12,656
|
|
6,636
|
The deferred tax assets and
liabilities are offset when there is a legally enforceable right to
set off and when the deferred income taxes relate to the same
fiscal authority.
The cumulative tax losses can be
carried forward against future taxable income and will expire in
the following years:
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(in US$'000)
|
No expiry date
|
|
74,515
|
|
71,325
|
2024
|
|
3,529
|
|
3,763
|
2025
|
|
35,030
|
|
36,098
|
2026
|
|
46,766
|
|
48,150
|
2027
|
|
60,033
|
|
61,808
|
2028
|
|
103,913
|
|
107,297
|
2029
|
|
171,142
|
|
175,853
|
2030
|
|
237,384
|
|
243,918
|
2031
|
|
379,321
|
|
389,761
|
2032
|
|
594,311
|
|
610,800
|
2033
|
|
176,363
|
|
-
|
|
|
1,882,307
|
|
1,748,773
|
The Company believes that it is
more likely than not that future operations outside the U.S. will
not generate sufficient taxable income to realize the benefit of
the deferred tax assets. Certain of the Company's subsidiaries have
had sustained tax losses, which will expire within five years if
not utilized in the case of PRC subsidiaries (ten years for HNTEs),
and which will not be utilized in the case of Hong Kong
subsidiaries as they do not generate taxable profits. Accordingly,
a valuation allowance has been recorded against the relevant
deferred tax assets arising from the tax losses.
A U.S. subsidiary of the Company
has approximately US$4.7 million and US$1.1 million U.S. Federal
and New Jersey state research tax credits which will expire between
2041 and 2043 (Federal) and 2028 and 2030 (New Jersey)
respectively, if not utilized.
The table below summarizes changes
in the deferred tax valuation allowance:
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
As at January 1
|
264,639
|
|
189,700
|
|
122,378
|
Charged to consolidated statements
of operations
|
26,629
|
|
93,243
|
|
63,975
|
Utilization of previously
unrecognized tax losses
|
(39)
|
|
(1)
|
|
(186)
|
Write-off of tax losses
|
(112)
|
|
(125)
|
|
-
|
Divestment of
subsidiaries
|
(433)
|
|
-
|
|
-
|
Others
|
-
|
|
-
|
|
(9)
|
Exchange differences
|
(7,162)
|
|
(18,178)
|
|
3,542
|
As at December 31
|
283,522
|
|
264,639
|
|
189,700
|
As at December 31, 2023, 2022 and
2021, the Group did not have any material unrecognized uncertain
tax positions.
(iii) Income tax payable
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
As at January 1
|
1,112
|
|
15,546
|
|
1,120
|
Current tax
|
2,283
|
|
3,280
|
|
16,636
|
Withholding tax upon dividend
declaration from PRC entities
|
3,674
|
|
2,186
|
|
5,148
|
Tax paid (note)
|
(3,728)
|
|
(18,891)
|
|
(5,014)
|
Reclassification (from)/to prepaid
tax
|
(397)
|
|
(241)
|
|
25
|
Reclassification to deferred
tax
|
11
|
|
-
|
|
-
|
Divestment of
subsidiaries
|
(177)
|
|
-
|
|
-
|
Divestment of an equity investee
(Note 22)
|
-
|
|
-
|
|
(2,644)
|
Exchange difference
|
(198)
|
|
(768)
|
|
275
|
As at December 31
|
2,580
|
|
1,112
|
|
15,546
|
Note: The amount for 2022 includes
US$14.4 million capital gain tax paid for gain on divestment of
HBYS (Note 22).
26. Earnings/(Losses) Per
Share
(i) Basic earnings/(losses) per
share
Basic earnings/(losses) per share
is calculated by dividing the net income/(loss) attributable to the
Company by the weighted average number of outstanding ordinary
shares in issue during the year. Treasury shares held by the
Trustee are excluded from the weighted average number of
outstanding ordinary shares in issue for purposes of calculating
basic earnings/(losses) per share.
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
Weighted average number of
outstanding ordinary shares in issue
|
849,654,296
|
|
847,143,540
|
|
792,684,524
|
Net income/(loss) attributable to
the Company (US$'000)
|
100,780
|
|
(360,835)
|
|
(194,648)
|
Basic earnings/(losses) per share
attributable to the Company (US$ per share)
|
0.12
|
|
(0.43)
|
|
(0.25)
|
(ii) Diluted earnings/(losses) per
share
Diluted earnings/(losses) per
share is calculated by dividing net income/(loss) attributable to
the Company by the weighted average number of outstanding ordinary
shares in issue and dilutive ordinary share equivalents outstanding
during the year. Dilutive ordinary share equivalents include shares
issuable upon the exercise or settlement of share options, LTIP
awards and warrants issued by the Company using the treasury stock
method.
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
Weighted average number of
outstanding ordinary shares in issue
|
849,654,296
|
|
847,143,540
|
|
792,684,524
|
Effect of share options and LTIP
awards
|
19,542,052
|
|
-
|
|
-
|
Weighted average number of
outstanding ordinary shares in issue and dilutive ordinary share
equivalents outstanding
|
869,196,348
|
|
847,143,540
|
|
792,684,524
|
Net income/(loss) attributable to
the Company (US$'000)
|
100,780
|
|
(360,835)
|
|
(194,648)
|
Diluted earnings/(losses) per
share attributable to the Company (US$ per share)
|
0.12
|
|
(0.43)
|
|
(0.25)
|
For the years ended December 31,
2022 and 2021, the share options, LTIP awards and warrants issued
by the Company were not included in the calculation of diluted
losses per share because of their anti-dilutive effect.
27. Segment Reporting
The Group's operating segments are
as follows:
(i) Oncology/Immunology: focuses on
discovering, developing, and commercializing targeted therapies and
immunotherapies for the treatment of cancer and immunological
diseases. Oncology/Immunology is further segregated into two core
business areas:
(a) R&D:
comprises research and development activities covering drug
discovery, development, manufacturing and regulatory
functions, out-licensing of in-house developed drugs, as well as
administrative activities to support research and development
operations; and
(b) Marketed
Products: comprises the invoiced sales, marketing, manufacture and
distribution of drugs developed from research and development
activities including out-licensed marketed products.
(ii) Other Ventures: comprises other commercial
businesses which include the sales, marketing, manufacture and
distribution of other prescription drugs and healthcare
products.
The
performance of the reportable segments is assessed based on segment
net income/(loss) attributable to the Company.
The segment information is as
follows:
|
Year Ended December 31,
2023
|
|
Oncology/Immunology
|
|
|
|
|
|
|
|
R&D
|
|
Marketed
Products
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Ventures
|
|
|
|
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
Subtotal
|
|
PRC
|
|
Un-
allocated
|
|
Total
|
|
(in
US$'000)
|
Revenue from external
customers
|
18,492
|
|
345,959
|
|
364,451
|
|
157,020
|
|
7,145
|
|
164,165
|
|
528,616
|
|
309,383
|
|
-
|
|
837,999
|
Interest income
|
786
|
|
16
|
|
802
|
|
-
|
|
-
|
|
-
|
|
802
|
|
455
|
|
34,888
|
|
36,145
|
Interest expense
|
(279)
|
|
-
|
|
(279)
|
|
-
|
|
-
|
|
-
|
|
(279)
|
|
(38)
|
|
(442)
|
|
(759)
|
Equity in earnings of equity
investees, net of tax
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
47,295
|
|
-
|
|
47,295
|
Income tax (expense)/
benefit
|
(420)
|
|
(208)
|
|
(628)
|
|
(159)
|
|
-
|
|
(159)
|
|
(787)
|
|
(1,201)
|
|
(2,521)
|
|
(4,509)
|
Net (loss)/income attributable to
the Company
|
(198,551)
|
|
224,055
|
|
25,504
|
|
23,090
|
|
2,568
|
|
25,658
|
|
51,162
|
|
50,272
|
|
(654)
|
|
100,780
|
Depreciation/
amortization
|
(7,146)
|
|
(494)
|
|
(7,640)
|
|
-
|
|
-
|
|
-
|
|
(7,640)
|
|
(344)
|
|
(223)
|
|
(8,207)
|
Additions to non-current assets
(other than financial instruments and
deferred tax assets)
|
41,228
|
|
110
|
|
41,338
|
|
-
|
|
-
|
|
-
|
|
41,338
|
|
330
|
|
86
|
|
41,754
|
|
December 31,
2023
|
|
Oncology/Immunology
|
|
|
|
|
|
|
|
R&D
|
|
Marketed
Products
|
|
|
|
Other
Ventures
|
|
|
|
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
Subtotal
|
|
PRC
|
|
Un-
allocated
|
|
Total
|
|
(in
US$'000)
|
Total assets
|
177,601
|
|
24,687
|
|
202,288
|
|
61,472
|
|
2,129
|
|
63,601
|
|
265,889
|
|
163,311
|
|
850,573
|
|
1,279,773
|
Property, plant and
equipment
|
98,034
|
|
918
|
|
98,952
|
|
-
|
|
-
|
|
-
|
|
98,952
|
|
564
|
|
211
|
|
99,727
|
Right-of-use assets
|
3,454
|
|
551
|
|
4,005
|
|
-
|
|
-
|
|
-
|
|
4,005
|
|
366
|
|
294
|
|
4,665
|
Leasehold land
|
11,261
|
|
-
|
|
11,261
|
|
-
|
|
-
|
|
-
|
|
11,261
|
|
-
|
|
-
|
|
11,261
|
Goodwill
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,064
|
|
-
|
|
3,064
|
Other intangible asset
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
21
|
|
-
|
|
21
|
Investments in equity
investees
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
48,411
|
|
-
|
|
48,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2022
|
|
Oncology/Immunology
|
|
|
|
|
|
|
|
R&D
|
|
Marketed
Products
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Ventures
|
|
|
|
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
Subtotal
|
|
PRC
|
|
Un-
allocated
|
|
Total
|
|
(in
US$'000)
|
Revenue from external
customers
|
39,202
|
|
-
|
|
39,202
|
|
124,642
|
|
-
|
|
124,642
|
|
163,844
|
|
262,565
|
|
-
|
|
426,409
|
Interest income
|
674
|
|
4
|
|
678
|
|
-
|
|
-
|
|
-
|
|
678
|
|
272
|
|
8,649
|
|
9,599
|
Interest expense
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(652)
|
|
(652)
|
Equity in earnings of equity
investees, net of tax
|
5
|
|
-
|
|
5
|
|
-
|
|
-
|
|
-
|
|
5
|
|
49,748
|
|
-
|
|
49,753
|
Income tax (expense)/
benefit
|
(552)
|
|
6,053
|
|
5,501
|
|
(631)
|
|
-
|
|
(631)
|
|
4,870
|
|
(1,345)
|
|
(3,242)
|
|
283
|
Net (loss)/income attributable to
the Company
|
(215,834)
|
|
(186,945)
|
|
(402,779)
|
|
17,367
|
|
-
|
|
17,367
|
|
(385,412)
|
|
54,604
|
|
(30,027)
|
|
(360,835)
|
Depreciation/
amortization
|
(7,576)
|
|
(484)
|
|
(8,060)
|
|
-
|
|
-
|
|
-
|
|
(8,060)
|
|
(299)
|
|
(305)
|
|
(8,664)
|
Additions to non-current assets
(other than financial instruments and
deferred tax assets)
|
47,563
|
|
725
|
|
48,288
|
|
-
|
|
-
|
|
-
|
|
48,288
|
|
664
|
|
21
|
|
48,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 31,
2022
|
|
Oncology/Immunology
|
|
|
|
|
|
|
|
R&D
|
|
Marketed
Products
|
|
|
|
Other
Ventures
|
|
|
|
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
Subtotal
|
|
PRC
|
|
Un-allocated
|
|
Total
|
|
(in
US$'000)
|
Total assets
|
221,337
|
|
30,281
|
|
251,618
|
|
45,984
|
|
-
|
|
45,984
|
|
297,602
|
|
235,500
|
|
496,343
|
|
1,029,445
|
Property, plant and
equipment
|
72,775
|
|
2,103
|
|
74,878
|
|
-
|
|
-
|
|
-
|
|
74,878
|
|
735
|
|
334
|
|
75,947
|
Right-of-use assets
|
3,350
|
|
3,167
|
|
6,517
|
|
-
|
|
-
|
|
-
|
|
6,517
|
|
1,308
|
|
897
|
|
8,722
|
Leasehold land
|
11,830
|
|
-
|
|
11,830
|
|
-
|
|
-
|
|
-
|
|
11,830
|
|
-
|
|
-
|
|
11,830
|
Goodwill
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,137
|
|
-
|
|
3,137
|
Other intangible asset
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
85
|
|
-
|
|
85
|
Investments in equity
investees
|
316
|
|
-
|
|
316
|
|
-
|
|
-
|
|
-
|
|
316
|
|
73,461
|
|
-
|
|
73,777
|
|
Year Ended December 31,
2021
|
|
Oncology/Immunology
|
|
|
|
|
|
|
|
R&D
|
|
Marketed
Products
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Ventures
|
|
|
|
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
PRC
|
|
U.S. and
Others
|
|
Subtotal
|
|
Subtotal
|
|
PRC
|
|
Un-
allocated
|
|
Total
|
|
(in
US$'000)
|
Revenue from external
customers
|
43,181
|
|
-
|
|
43,181
|
|
76,429
|
|
-
|
|
76,429
|
|
119,610
|
|
236,518
|
|
-
|
|
356,128
|
Interest income
|
809
|
|
3
|
|
812
|
|
-
|
|
-
|
|
-
|
|
812
|
|
282
|
|
982
|
|
2,076
|
Interest expense
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(592)
|
|
(592)
|
Equity in earnings of equity
investees, net of tax
|
20
|
|
-
|
|
20
|
|
-
|
|
-
|
|
-
|
|
20
|
|
60,597
|
|
-
|
|
60,617
|
Income tax
benefit /(expense)
|
22
|
|
7,160
|
|
7,182
|
|
(1,320)
|
|
-
|
|
(1,320)
|
|
5,862
|
|
(14,573)
|
|
(3,207)
|
|
(11,918)
|
Net (loss)/income attributable to
the Company
|
(143,528)
|
|
(152,235)
|
|
(295,763)
|
|
4,032
|
|
-
|
|
4,032
|
|
(291,731)
|
|
142,890
|
|
(45,807)
|
|
(194,648)
|
Depreciation/
amortization
|
(6,436)
|
|
(197)
|
|
(6,633)
|
|
-
|
|
-
|
|
-
|
|
(6,633)
|
|
(318)
|
|
(239)
|
|
(7,190)
|
Additions to non-current assets
(other than financial instruments and
deferred tax assets)
|
25,295
|
|
4,321
|
|
29,616
|
|
-
|
|
-
|
|
-
|
|
29,616
|
|
1,056
|
|
327
|
|
30,999
|
Revenue from external customers is
after elimination of inter-segment sales. Sales between segments
are carried out at mutually agreed terms. The amounts eliminated
attributable to sales between PRC and U.S. and others under R&D
in Oncology/Immunology segment were US$36,370,000, US$55,433,000,
and US$46,891,000 for the years ended December 31, 2023, 2022, and
2021 respectively.
A summary
of customers which accounted for over 10% of the Group's revenue
for the years ended December 31, 2023, 2022 and 2021 is as
follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in
US$'000)
|
Customer A
|
353,104
|
|
-
|
|
-
|
Customer B
|
84,065
|
|
75,606
|
|
56,082
|
Customer C
|
(note)
|
|
51,681
|
|
49,055
|
Customer D
|
(note)
|
|
47,611
|
|
41,974
|
Note: Customer did not account for
over 10% of the Group's revenue during the year.
Customer A, B and C are included
in Oncology/Immunology and Customer D is primarily included in
Other Ventures.
Unallocated expenses mainly
represent corporate expenses which include corporate administrative
costs, corporate employee benefit expenses and the relevant
share-based compensation expenses, net of interest income.
Unallocated assets mainly comprise cash and cash equivalents and
short-term investments.
28. Note to Consolidated
Statements of Cash Flows
Reconciliation of net
income/(loss) for the year to net cash generated from/(used in)
operating activities:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Net income/(loss)
|
101,094
|
|
(360,386)
|
|
(167,041)
|
Adjustments to reconcile
net income/(loss) to net cash generated from/(used in) operating
activities
|
|
|
|
|
|
Depreciation and
amortization
|
8,207
|
|
8,664
|
|
7,190
|
Amortization of finance
costs
|
-
|
|
18
|
|
44
|
Loss on disposals of property,
plant and equipment
|
86
|
|
111
|
|
70
|
Impairment of property, plant and
equipment
|
3,678
|
|
-
|
|
-
|
Impairment of right-of-use
assets
|
2,088
|
|
-
|
|
-
|
Provision for excess and obsolete
inventories, net
|
552
|
|
293
|
|
(23)
|
Provision for credit losses,
net
|
125
|
|
43
|
|
(76)
|
Share-based compensation
expense-share options
|
6,184
|
|
6,736
|
|
16,365
|
Share-based compensation
expense-LTIP
|
30,416
|
|
23,850
|
|
25,625
|
Equity in earnings of equity
investees, net of tax
|
(47,295)
|
|
(49,753)
|
|
(60,617)
|
Dividends received from
SHPL
|
42,308
|
|
43,718
|
|
49,872
|
Impairment of investment in other
equity investee
|
-
|
|
130
|
|
-
|
Changes in right-of-use
assets
|
1,604
|
|
2,721
|
|
(3,727)
|
Fair value losses on warrant
|
-
|
|
2,452
|
|
12,548
|
Gain from divestment of
HBYS
|
-
|
|
-
|
|
(121,310)
|
Gain from divestment of
subsidiaries
|
(96)
|
|
-
|
|
-
|
Gain from divestment of other
equity investee
|
(45)
|
|
-
|
|
-
|
Unrealized currency translation
(gain)/loss
|
(1,574)
|
|
13,274
|
|
(2,505)
|
Changes in income tax
balances
|
780
|
|
(19,174)
|
|
6,904
|
Changes in operating assets and
liabilities
|
|
|
|
|
|
Accounts receivable
|
(21,336)
|
|
(14,451)
|
|
(35,634)
|
Other receivables, prepayments and
deposits
|
8,624
|
|
11,922
|
|
(5,596)
|
Amounts due from related
parties
|
(339)
|
|
150
|
|
(162)
|
Inventories
|
4,135
|
|
(21,213)
|
|
(16,002)
|
Accounts payable
|
(32,542)
|
|
29,938
|
|
9,565
|
Other payables, accruals and
advance receipts
|
(4,409)
|
|
52,629
|
|
66,224
|
Lease liabilities
|
(1,752)
|
|
(2,701)
|
|
3,079
|
Deferred revenue
|
119,810
|
|
386
|
|
11,071
|
Others
|
(1,045)
|
|
2,044
|
|
(87)
|
Total changes in operating assets
and liabilities
|
71,146
|
|
58,704
|
|
32,458
|
Net cash generated from/(used in)
operating activities
|
219,258
|
|
(268,599)
|
|
(204,223)
|
29. Litigation
From time to time, the Group may
become involved in litigation relating to claims arising from the
ordinary course of business. The Group believes that there are
currently no claims or actions pending against the Group, the
ultimate disposition of which could have a material adverse effect
on the Group's financial position, results of operations or cash
flows. However, litigation is subject to inherent uncertainties and
the Group's view of these matters may change in the future. When an
unfavorable outcome occurs, there exists the possibility of a
material adverse impact on the Group's financial position, results
of operations or cash flows for the periods in which the
unfavorable outcome occurs, and potentially in future
periods.
On May 17, 2019, Luye Pharma Hong
Kong Ltd. ("Luye") issued a notice to the Group purporting to
terminate a distribution agreement that granted the Group exclusive
commercial rights to Seroquel in the PRC for failure to meet a
pre-specified target. The Group disagrees with this assertion and
believes that Luye have no basis for termination. As a result, the
Group commenced legal proceedings in 2019 in order to seek damages.
On October 21, 2021 (and a decision on costs and interest in
December 2021), the Group was awarded an amount of RMB253.2 million
(equivalent to US$35.4 million) with interest of 5.5% per annum
from the date of the award until payment and recovery of costs of
approximately US$2.2 million (collectively the "Award"). On June
27, 2022, Luye provided the Group a bank guarantee of up to
RMB286.0 million to cover the Award amounts, pending the outcome of
an application by Luye to the High Court of Hong Kong to set aside
the Award and subsequent appeals. On July 26, 2022, Luye's
application to set aside the Award was dismissed by the High Court
with costs awarded in favor of the Group. On October 7, 2022, Luye
filed a Notice of Appeal to the Court of Appeal regarding the
dismissal and the notice was accepted on November 8, 2022. On June
6, 2023, a Court of Appeal hearing was held and a judgment is
expected but yet to be received. The legal proceedings are ongoing
and as no Award amounts have been received as at the issuance date
of these consolidated financial statements, no Award amounts have
been recognized and no adjustment has been made to Seroquel-related
balances as at December 31, 2023. Such Seroquel-related balances
include accounts receivable, long-term prepayment, accounts payable
and other payables of US$1.1 million, US$0.2 million, US$0.9
million and US$1.1 million respectively.
30. Restricted Net
Assets
Relevant PRC laws and regulations
permit payments of dividends by the Company's subsidiaries in the
PRC only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. In
addition, the Company's subsidiaries in the PRC are required to
make certain appropriations of net after-tax profits or increases
in net assets to the statutory surplus fund prior to payment of any
dividends. In addition, registered share capital and capital
reserve accounts are restricted from withdrawal in the PRC, up to
the amount of net assets held in each subsidiary. As a result of
these and other restrictions under PRC laws and regulations, the
Company's subsidiaries in the PRC are restricted in their ability
to transfer their net assets to the Group in terms of cash
dividends, loans or advances, with restricted portions amounting to
US$1.0 million and US$0.1 million as at December 31, 2023 and 2022
respectively, which excludes the Company's subsidiaries with a
shareholders' deficit. Even though the Group currently does not
require any such dividends, loans or advances from the PRC
subsidiaries, for working capital and other funding purposes, the
Group may in the future require additional cash resources from the
Company's subsidiaries in the PRC due to changes in business
conditions, to fund future acquisitions and development, or merely
to declare and pay dividends to make distributions to
shareholders.
In addition, the Group has an
equity investee in the PRC, where the Group's equity in
undistributed earnings amounted to US$29.6 million and US$53.7
million as at December 31, 2023 and 2022 respectively.
31. Subsequent Events
The Group evaluated subsequent
events through February 28, 2024, which is the date when the
consolidated financial statements were issued.
In February 2024, pursuant to the
strategic partnership with Inmagene Biopharmaceuticals
("Inmagene"), Inmagene has exercised its options to license two
drug candidates discovered by HUTCHMED, IMG-007 and IMG-004, for
approximately 7.5% of shares (fully diluted) in Inmagene, subject
to customary closing conditions.
32. Additional Information:
Company Balance Sheets (Parent Company Only)
|
|
|
December
31,
|
|
Note
|
|
2023
|
|
2022
|
|
|
|
(in
US$'000)
|
Assets
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
65
|
|
7,892
|
Other receivables, prepayments and
deposits
|
|
|
1,308
|
|
947
|
Total current assets
|
|
|
1,373
|
|
8,839
|
Investments in
subsidiaries
|
|
|
795,326
|
|
726,430
|
Total assets
|
|
|
796,699
|
|
735,269
|
Liabilities and shareholders' equity
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Other payables, accruals and
advance receipts
|
|
|
65,501
|
|
124,178
|
Income tax payable
|
|
|
142
|
|
16
|
Total current liabilities
|
|
|
65,643
|
|
124,194
|
Other non-current
liabilities
|
|
|
515
|
|
708
|
Total liabilities
|
|
|
66,158
|
|
124,902
|
Commitments and
contingencies
|
15
|
|
|
|
|
|
|
|
|
|
|
Company's shareholders' equity
|
|
|
|
|
|
Ordinary shares; $0.10 par value;
1,500,000,000 shares authorized; 871,256,270 and 864,775,340
shares issued at December 31, 2023
and 2022 respectively
|
16
|
|
87,126
|
|
86,478
|
Additional paid-in
capital
|
|
|
1,522,447
|
|
1,497,273
|
Accumulated losses
|
|
|
(870,869)
|
|
(971,481)
|
Accumulated other comprehensive
loss
|
|
|
(8,163)
|
|
(1,903)
|
Total Company's shareholders' equity
|
|
|
730,541
|
|
610,367
|
Total liabilities and shareholders' equity
|
|
|
796,699
|
|
735,269
|
33. Dividends
No dividend has been declared or
paid by the Company since its incorporation.
34. Directors'
Remuneration
Directors' remuneration disclosed
pursuant to the Listing Rules, Section 383(1)(a), (b), (c) and (f)
of the Hong Kong Companies Ordinance and Part 2 of the Companies
(Disclosure of Information about Benefits of Directors) Regulation,
is as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Fees:
|
615
|
|
683
|
|
883
|
Other remuneration
|
|
|
|
|
|
Salaries, allowances and benefits
in kind
|
1,154
|
|
1,173
|
|
1,160
|
Pension contributions
|
101
|
|
98
|
|
93
|
Performance related
bonuses
|
2,008
|
|
1,587
|
|
2,245
|
Share-based compensation expenses
(note)
|
2,573
|
|
2,036
|
|
5,553
|
|
5,836
|
|
4,894
|
|
9,051
|
|
6,451
|
|
5,577
|
|
9,934
|
Note: During the years ended
December 31, 2023, 2022 and 2021, certain directors were granted
share options and LTIP awards in respect of their services to the
Group under the share option schemes and LTIP of the Company,
further details of which are set out in Note 17. The share-based
compensation expenses were recognized in the consolidated
statements of operations during the years ended December 31, 2023,
2022 and 2021.
(i) Independent non-executive
directors
The fees paid to independent
non-executive directors were as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Paul Carter
|
117
|
|
117
|
|
117
|
Karen Ferrante (note)
|
37
|
|
103
|
|
103
|
Graeme Jack
|
111
|
|
111
|
|
111
|
Tony Mok
|
115
|
|
103
|
|
99
|
|
380
|
|
434
|
|
430
|
The share-based compensation
expenses of the independent non-executive directors were as
follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Paul Carter
|
71
|
|
139
|
|
91
|
Karen Ferrante (note)
|
(101)
|
|
139
|
|
91
|
Graeme Jack
|
71
|
|
139
|
|
91
|
Tony Mok
|
71
|
|
139
|
|
91
|
|
112
|
|
556
|
|
364
|
Note: Dr Karen Ferrante retired as an
independent non-executive director on May 12,
2023.
There were no other remunerations
payable to independent non-executive directors during the
years ended December 31, 2023, 2022 and
2021.
(ii) Executive directors and non-executive
directors
|
Year Ended December 31,
2023
|
|
Fees
|
|
Salaries, allowances and
benefits in kind
|
|
Pension
contributions
|
|
Performance related
bonuses
|
|
Share-based
compensation
|
|
Total
|
|
(in US$'000)
|
Executive directors
|
|
|
|
|
|
|
|
|
|
|
|
Simon To
|
85
|
|
-
|
|
-
|
|
-
|
|
71
|
|
156
|
Wei-guo Su (note a)
|
75
|
|
805
|
|
71
|
|
1,500
|
|
1,659
|
|
4,110
|
Johnny Cheng
|
75
|
|
349
|
|
30
|
|
508
|
|
589
|
|
1,551
|
|
235
|
|
1,154
|
|
101
|
|
2,008
|
|
2,319
|
|
5,817
|
Non-executive directors
|
|
|
|
|
|
|
|
|
|
|
|
Dan Eldar
|
-
|
|
-
|
|
-
|
|
-
|
|
71
|
|
71
|
Edith Shih
|
-
|
|
-
|
|
-
|
|
-
|
|
71
|
|
71
|
Ling Yang (note b)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
142
|
|
142
|
|
235
|
|
1,154
|
|
101
|
|
2,008
|
|
2,461
|
|
5,959
|
|
Year Ended December 31,
2022
|
|
Fees
|
|
Salaries, allowances and
benefits in kind
|
|
Pension
contributions
|
|
Performance related
bonuses
|
|
Share-based
compensation
|
|
Total
|
|
(in US$'000)
|
Executive directors
|
|
|
|
|
|
|
|
|
|
|
|
Simon To
|
85
|
|
-
|
|
-
|
|
-
|
|
139
|
|
224
|
Wei-guo Su
|
75
|
|
706
|
|
64
|
|
1,127
|
|
1,650
|
|
3,622
|
Johnny Cheng
|
75
|
|
340
|
|
29
|
|
442
|
|
732
|
|
1,618
|
Christian Hogg (note b)
|
14
|
|
127
|
|
5
|
|
18
|
|
(1,319)
|
|
(1,155)
|
|
249
|
|
1,173
|
|
98
|
|
1,587
|
|
1,202
|
|
4,309
|
Non-executive directors
|
|
|
|
|
|
|
|
|
|
|
|
Dan Eldar
|
-
|
|
-
|
|
-
|
|
-
|
|
139
|
|
139
|
Edith Shih
|
-
|
|
-
|
|
-
|
|
-
|
|
139
|
|
139
|
|
-
|
|
-
|
|
-
|
|
-
|
|
278
|
|
278
|
|
249
|
|
1,173
|
|
98
|
|
1,587
|
|
1,480
|
|
4,587
|
|
Year Ended December 31,
2021
|
|
Fees
|
|
Salaries, allowances and
benefits in kind
|
|
Pension
contributions
|
|
Performance related
bonuses
|
|
Share-based
compensation
|
|
Total
|
|
(in US$'000)
|
Executive directors
|
|
|
|
|
|
|
|
|
|
|
|
Simon To
|
85
|
|
-
|
|
-
|
|
-
|
|
92
|
|
177
|
Wei-guo Su
|
75
|
|
412
|
|
35
|
|
835
|
|
1,934
|
|
3,291
|
Johnny Cheng
|
72
|
|
328
|
|
28
|
|
410
|
|
733
|
|
1,571
|
Christian Hogg (note b)
|
77
|
|
420
|
|
30
|
|
1,000
|
|
2,246
|
|
3,773
|
|
309
|
|
1,160
|
|
93
|
|
2,245
|
|
5,005
|
|
8,812
|
Non-executive directors
|
|
|
|
|
|
|
|
|
|
|
|
Dan Eldar
|
70
|
|
-
|
|
-
|
|
-
|
|
92
|
|
162
|
Edith Shih
|
74
|
|
-
|
|
-
|
|
-
|
|
92
|
|
166
|
|
144
|
|
-
|
|
-
|
|
-
|
|
184
|
|
328
|
|
453
|
|
1,160
|
|
93
|
|
2,245
|
|
5,189
|
|
9,140
|
Notes:
(a) In connection with share options granted in
the year ended December 31, 2016 under the 2015 Share Option
Scheme, Dr. Wei-guo Su was awarded retention bonuses payable
when and if he exercised his options. During the year ended
December 31, 2023, a retention bonus of US$5,225,000 was settled
when he exercised such options, which amount is not included in the
table above.
(b) Mr Christian Hogg retired as executive
director on March 4, 2022, and Ms Ling Yang was appointed as
non-executive director on July 13,
2023.
35. Five Highest-Paid
Employees
The five highest-paid employees
during the years ended December 31, 2023, 2022 and 2021 included
the following number of directors and non-directors:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
Directors
|
2
|
|
2
|
|
3
|
Non-directors
|
3
|
|
3
|
|
2
|
|
5
|
|
5
|
|
5
|
Details of the remuneration for
the years ended December 31, 2023, 2022 and 2021 of the five
highest-paid employees who are non-directors (the "Non-director
Individuals") were as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
|
(in US$'000)
|
Salaries, allowances and benefits
in kind
|
1,506
|
|
1,497
|
|
859
|
Pension contributions
|
54
|
|
51
|
|
52
|
Performance related
bonuses
|
1,909
|
|
1,759
|
|
802
|
Share-based compensation expenses
(note)
|
3,226
|
|
2,001
|
|
1,465
|
|
6,695
|
|
5,308
|
|
3,178
|
Note: During the years ended
December 31, 2023, 2022 and 2021, the Non-director Individuals were
granted share options and LTIP awards in respect of their services
to the Group under the share option schemes and LTIP of the
Company, further details of which are set out in Note 17. The
share-based compensation expenses were recognized in the
consolidated statements of operations during the years ended
December 31, 2023, 2022 and 2021.
The number of Non-director
Individuals whose remuneration fell within the following bands is
as follows:
|
Year Ended December
31,
|
|
2023
|
|
2022
|
|
2021
|
HK$12,000,000 to
HK$12,500,000
|
1
|
|
2
|
|
1
|
HK$12,500,000 to
HK$13,000,000
|
-
|
|
-
|
|
1
|
HK$15,500,000 to
HK$16,000,000
|
1
|
|
-
|
|
-
|
HK$16,500,000 to
HK$17,000,000
|
-
|
|
1
|
|
-
|
HK$24,000,000 to
HK$24,500,000
|
1
|
|
-
|
|
-
|
|
3
|
|
3
|
|
2
|
During the years ended December
31, 2023, 2022 and 2021, no remuneration was paid by the Group to
any directors or Non-director Individuals as an inducement to join
the Group or as compensation for loss of office. Additionally, none
of the directors or Non-director Individuals have waived any
remuneration during the years ended December 31, 2023, 2022 and
2021.
36. Reconciliation between U.S.
GAAP and International Financial Reporting Standards
These consolidated financial
statements are prepared in accordance with U.S. GAAP, which differ
in certain respects from International Financial Reporting
Standards ("IFRS"). The
effects of material differences prepared under U.S. GAAP and IFRS
are as follows:
(i) Reconciliation of consolidated statements of
operations
|
Year Ended December 31,
2023
|
|
Amounts as reported
under
U.S. GAAP
|
|
IFRS
adjustments
|
|
|
|
|
Lease amortization (note
(a))
|
|
Tax effects of intercompany
unrealized profit
(note (b))
|
|
Amounts under
IFRS
|
|
(in US$'000)
|
Cost of
goods-third parties
|
(331,984)
|
|
66
|
|
-
|
|
(331,918)
|
Research and development
expenses
|
(302,001)
|
|
106
|
|
-
|
|
(301,895)
|
Selling expenses
|
(53,392)
|
|
46
|
|
-
|
|
(53,346)
|
Administrative expenses
|
(79,784)
|
|
89
|
|
-
|
|
(79,695)
|
Total operating expenses
|
(819,624)
|
|
307
|
|
-
|
|
(819,317)
|
Interest expense
|
(759)
|
|
(281)
|
|
-
|
|
(1,040)
|
Other expense
|
(8,402)
|
|
63
|
|
-
|
|
(8,339)
|
Total other income/(expense)
|
39,933
|
|
(218)
|
|
-
|
|
39,715
|
Income/(loss) before income taxes and equity in earnings of
equity investees
|
58,308
|
|
89
|
|
-
|
|
58,397
|
Equity in earnings of equity
investees, net of tax
|
47,295
|
|
(1)
|
|
307
|
|
47,601
|
Net income/(loss)
|
101,094
|
|
88
|
|
307
|
|
101,489
|
Less: Net income attributable to
non-controlling interests
|
(314)
|
|
(19)
|
|
-
|
|
(333)
|
Net income/(loss) attributable to the
Company
|
100,780
|
|
69
|
|
307
|
|
101,156
|
|
Year Ended December 31,
2022
|
|
Amounts as reported
under
U.S. GAAP
|
|
IFRS
adjustments
|
|
Amounts under
IFRS
|
|
|
Lease amortization (note
(a))
|
|
Capitalization of
rights
(note (c))
|
|
|
(in US$'000)
|
Cost of
goods-third parties
|
(268,698)
|
|
57
|
|
-
|
|
(268,641)
|
Research and development
expenses
|
(386,893)
|
|
31
|
|
5,000
|
|
(381,862)
|
Selling expenses
|
(43,933)
|
|
49
|
|
-
|
|
(43,884)
|
Administrative expenses
|
(92,173)
|
|
182
|
|
-
|
|
(91,991)
|
Total operating expenses
|
(834,102)
|
|
319
|
|
5,000
|
|
(828,783)
|
Interest expense
|
(652)
|
|
(322)
|
|
-
|
|
(974)
|
Other expense
|
(13,509)
|
|
12
|
|
-
|
|
(13,497)
|
Total other income/(expense)
|
(2,729)
|
|
(310)
|
|
-
|
|
(3,039)
|
Income/(loss) before income taxes and equity in earnings of
equity investees
|
(410,422)
|
|
9
|
|
5,000
|
|
(405,413)
|
Equity in earnings of equity
investees, net of tax
|
49,753
|
|
(16)
|
|
-
|
|
49,737
|
Net income/(loss)
|
(360,386)
|
|
(7)
|
|
5,000
|
|
(355,393)
|
Less: Net income attributable to
non-controlling interests
|
(449)
|
|
(5)
|
|
-
|
|
(454)
|
Net income/(loss) attributable to the
Company
|
(360,835)
|
|
(12)
|
|
5,000
|
|
(355,847)
|
|
Year Ended December 31,
2021
|
|
Amounts as reported
under
U.S.
GAAP
|
|
IFRS
adjustments
|
|
Amounts under
IFRS
|
|
|
Lease amortization (note
(a))
|
|
Issuance
costs
(note (d))
|
|
Capitalization of
rights
(note (c))
|
|
Divestment of an equity
investee
(note (e))
|
|
|
(in US$'000)
|
Cost of
goods-third parties
|
(229,448)
|
|
40
|
|
-
|
|
-
|
|
-
|
|
(229,408)
|
Research and development
expenses
|
(299,086)
|
|
23
|
|
-
|
|
11,111
|
|
-
|
|
(287,952)
|
Selling expenses
|
(37,827)
|
|
53
|
|
-
|
|
-
|
|
-
|
|
(37,774)
|
Administrative expenses
|
(89,298)
|
|
161
|
|
(163)
|
|
-
|
|
-
|
|
(89,300)
|
Total operating expenses
|
(684,445)
|
|
277
|
|
(163)
|
|
11,111
|
|
-
|
|
(673,220)
|
Gain on divestment of an equity
investee
|
121,310
|
|
-
|
|
-
|
|
-
|
|
11,266
|
|
132,576
|
Interest expense
|
(592)
|
|
(400)
|
|
-
|
|
-
|
|
-
|
|
(992)
|
Other expense
|
(12,643)
|
|
9
|
|
-
|
|
-
|
|
-
|
|
(12,634)
|
Total other income/(expense)
|
(8,733)
|
|
(391)
|
|
-
|
|
-
|
|
-
|
|
(9,124)
|
Income/(loss) before income taxes and equity in earnings of
equity investees
|
(215,740)
|
|
(114)
|
|
(163)
|
|
11,111
|
|
11,266
|
|
(193,640)
|
Income tax
(expense)/benefit
|
(11,918)
|
|
-
|
|
-
|
|
-
|
|
370
|
|
(11,548)
|
Equity in earnings of equity
investees, net of tax
|
60,617
|
|
(1)
|
|
-
|
|
-
|
|
(11,636)
|
|
48,980
|
Net income/(loss)
|
(167,041)
|
|
(115)
|
|
(163)
|
|
11,111
|
|
-
|
|
(156,208)
|
Less: Net income attributable to
non-controlling interests
|
(27,607)
|
|
(2)
|
|
-
|
|
(27)
|
|
-
|
|
(27,636)
|
Net income/(loss) attributable to the
Company
|
(194,648)
|
|
(117)
|
|
(163)
|
|
11,084
|
|
-
|
|
(183,844)
|
(ii) Reconciliation of consolidated balance
sheets
|
December 31,
2023
|
|
Amounts as reported
under
U.S. GAAP
|
|
IFRS
adjustments
|
|
Amounts under
IFRS
|
|
|
Lease amortization (note
(a))
|
|
Tax effects of intercompany
unrealized profit
(note (b))
|
|
Issuance
costs
(note (d))
|
|
Capitalization of
rights
(note (c))
|
|
LTIP classification (note
(f))
|
|
|
(in US$'000)
|
Right-of-use assets
|
4,665
|
|
(137)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
4,528
|
Investments in equity
investees
|
48,411
|
|
(37)
|
|
307
|
|
-
|
|
-
|
|
-
|
|
48,681
|
Other non-current
assets
|
14,675
|
|
-
|
|
-
|
|
-
|
|
15,093
|
|
-
|
|
29,768
|
Total assets
|
1,279,773
|
|
(174)
|
|
307
|
|
-
|
|
15,093
|
|
-
|
|
1,294,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other payables, accruals and
advance receipts
|
271,399
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(10,502)
|
|
260,897
|
Total current liabilities
|
403,027
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(10,502)
|
|
392,525
|
Total liabilities
|
536,386
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(10,502)
|
|
525,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in
capital
|
1,522,447
|
|
-
|
|
-
|
|
(697)
|
|
-
|
|
10,502
|
|
1,532,252
|
Accumulated losses
|
(870,869)
|
|
(177)
|
|
307
|
|
697
|
|
16,084
|
|
-
|
|
(853,958)
|
Accumulated other comprehensive
loss
|
(8,163)
|
|
14
|
|
-
|
|
-
|
|
(1,016)
|
|
-
|
|
(9,165)
|
Total Company's shareholders' equity
|
730,541
|
|
(163)
|
|
307
|
|
-
|
|
15,068
|
|
10,502
|
|
756,255
|
Non-controlling
interests
|
12,846
|
|
(11)
|
|
-
|
|
-
|
|
25
|
|
-
|
|
12,860
|
Total shareholders' equity
|
743,387
|
|
(174)
|
|
307
|
|
-
|
|
15,093
|
|
10,502
|
|
769,115
|
|
December 31,
2022
|
|
Amounts as reported
under
U.S. GAAP
|
|
IFRS
adjustments
|
|
Amounts under
IFRS
|
|
|
Lease amortization (note
(a))
|
|
Issuance
costs
(note (d))
|
|
Capitalization of
rights
(note (c))
|
|
LTIP classification (note
(f))
|
|
|
(in US$'000)
|
Right-of-use assets
|
8,722
|
|
(233)
|
|
-
|
|
-
|
|
-
|
|
8,489
|
Investments in equity
investees
|
73,777
|
|
(37)
|
|
-
|
|
-
|
|
-
|
|
73,740
|
Other non-current
assets
|
15,745
|
|
-
|
|
-
|
|
15,370
|
|
-
|
|
31,115
|
Total assets
|
1,029,445
|
|
(270)
|
|
-
|
|
15,370
|
|
-
|
|
1,044,545
|
|
|
|
|
|
|
|
|
|
|
|
|
Other payables, accruals and
advance receipts
|
264,621
|
|
-
|
|
-
|
|
-
|
|
(3,701)
|
|
260,920
|
Total current liabilities
|
353,903
|
|
-
|
|
-
|
|
-
|
|
(3,701)
|
|
350,202
|
Total liabilities
|
392,575
|
|
-
|
|
-
|
|
-
|
|
(3,701)
|
|
388,874
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in
capital
|
1,497,273
|
|
-
|
|
(697)
|
|
-
|
|
3,701
|
|
1,500,277
|
Accumulated losses
|
(971,481)
|
|
(246)
|
|
697
|
|
16,084
|
|
-
|
|
(954,946)
|
Accumulated other comprehensive
loss
|
(1,903)
|
|
8
|
|
-
|
|
(739)
|
|
-
|
|
(2,634)
|
Total Company's shareholders' equity
|
610,367
|
|
(238)
|
|
-
|
|
15,345
|
|
3,701
|
|
629,175
|
Non-controlling
interests
|
26,503
|
|
(32)
|
|
-
|
|
25
|
|
-
|
|
26,496
|
Total shareholders' equity
|
636,870
|
|
(270)
|
|
-
|
|
15,370
|
|
3,701
|
|
655,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Notes:
(a) Lease
amortization
Under U.S. GAAP, for operating
leases, the amortization of right-of-use assets and the interest
expense element of lease liabilities are recorded together as lease
expenses, which results in a straight-line recognition effect in
the consolidated statements of operations.
Under IFRS, all leases are
accounted for like finance leases where right-of-use assets are
generally depreciated on a straight-line basis while lease
liabilities are measured under the effective interest method, which
results in higher expenses at the beginning of the lease term and
lower expenses near the end of the lease term.
(b) Tax effects
of intercompany unrealized profit
Under U.S. GAAP, deferred taxes
for unrealized profit resulting from intercompany sales of
inventory is not recognized.
Under IFRS, deferred taxes for
unrealized profit resulting from an intercompany sale of inventory
is recognized at the buyer's tax rate.
(c)
Capitalization of development and commercial rights
Under U.S. GAAP, the acquired
development and commercial rights do not meet the capitalization
criteria as further development is needed as of the acquisition
date and there is no alternative future use. Such rights are
considered as IPR&D and were expensed to research and
development expense.
Under IFRS, the acquired
development and commercial rights were capitalized to intangible
assets. The recognition criterion is always assumed to be met as
the price already reflects the probability that future economic
benefits will flow to the Group.
(d) Issuance
costs
Under U.S. GAAP and IFRS, there
are differences in the criteria for capitalization of issuance
costs incurred in the offering of equity securities.
(e) Divestment
of an equity investee
Under U.S. GAAP, an equity method
investment to be divested that does not qualify for discontinued
operations reporting would not qualify for held-for-sale
classification. The investment in HBYS was not presented as a
discontinued operation or as an asset classified as held-for-sale
after the signing of the SPA in March 2021 and therefore, it was
accounted for under the equity method until closing on September
28, 2021.
Under IFRS, an equity method
investment may be classified as held-for-sale even if the
discontinued operations criteria are not met. The investment in
HBYS was not presented as a discontinued operation but was
classified as held-for-sale and therefore equity method accounting
was discontinued in March 2021 on the initial classification as
held-for-sale. Accordingly, the reconciliation includes a
classification difference in the consolidated statement of
operations between gain on divestment of an equity investee, equity
earnings of equity investees, net of tax and income tax
expense.
(f) LTIP
classification
Under U.S. GAAP, LTIP awards with
performance conditions are classified as liability-settled awards
prior to the determination date as they settle in a variable number
of shares based on a determinable monetary amount, which is
determined upon the actual achievement of performance targets.
After the determination date, the LTIP awards are reclassified as
equity-settled awards.
Under IFRS, LTIP awards are
classified as equity-settled awards, both prior to and after the
determination date, as they are ultimately settled in ordinary
shares or the equivalent ADS of the Company instead of
cash.