TIDMHCM
RNS Number : 5443D
Hutchmed (China) Limited
03 March 2022
HUTCHMED Reports 2021 Full Year Results and Provides Business
Updates
Oncology/Immunology revenues up 296% to $119.6 million, due to
ELUNATE(R) growth and the 2021 launches of SULANDA(R) and
ORPATHYS(R) ;
Positive SAVANNAH, CALYPSO and VIKTORY studies triggered five
registration studies on ORPATHYS(R) in lung cancer, kidney and
gastric cancer during 2021;
Broad late-stage development program - currently enrolling 13
registration studies on 6 assets - with enrollment on the 691
patient FRESCO-2 global Phase III of fruquintinib now complete.
Company to Host Annual Results Call & Webcast Today at 9
p.m. HKT / 1 p.m. GMT / 8 a.m. EST
Hong Kong, Shanghai & Florham Park, NJ - Thursday, March 3,
2022: HUTCHMED (China) Limited ("HUTCHMED") (Nasdaq/AIM:HCM;
HKEX:13), the innovative, commercial-stage biopharmaceutical
company, today reports its audited financial results for the year
ended December 31, 2021 and provides updates on key clinical and
commercial developments since the start of 2022.
All amounts are expressed in U.S. dollars unless otherwise
stated.
2021 FULL YEAR Results & Business Updates
"2021 was an exceptional year for HUTCHMED," said Mr. Simon To,
Chairman of HUTCHMED. "Commercial success on ELUNATE(R) and the
launches of SULANDA(R) and ORPATHYS(R) contributed to an almost
four-fold increase in consolidated oncology/immunology revenues to
$119.6 million, with momentum continuing in 2022.
ORPATHYS (R) took a major step forward in 2021 with its first
approval and important, and as yet unpublished, data from the
SAVANNAH study in combination with TAGRISSO (R) . We and our
partner AstraZeneca(1) initiated four Phase III studies and one
Phase II study, with registration potential, for ORPATHYS (R)
during 2021. These actions have triggered $40 million in milestone
payments to HUTCHMED since mid-2021. A seventh registration study,
a global Phase III in NSCLC(2) , the SAFFRON study, is set to
initiate in mid-2022.
We are rapidly progressing our plan to expand our oncology
assets into global markets. Led by our team of over 800-personnel
in discovery, development and manufacturing operations, we have an
un-equaled fifteen-year track-record of producing highly quality
novel oncology/immunology drug candidates.
Seven of our assets are now being developed outside China. In
addition to the global progress of ORPATHYS (R) , surufatinib's
U.S. NDA(3) and EU MAA(4) are in the later stages of regulatory
review for advanced NETs; enrollment was completed for fruquintinib
in a fourteen-country global Phase III study, the FRESCO-2 study,
in CRC(5) which reads-out later in 2022; positive and
differentiated POC data was presented for amdizalisib and
sovleplenib; and our FGFR(6) , IDH1/2(7) , ERK(8) , third
generation BTK(9) and CSF-1R(10) inhibitors all made good progress
in early development.
With a strong track record in bringing innovative drugs to
patients through rigorous clinical trials, our seasoned clinical
team is now enrolling 13 registration studies for six assets with
an additional 5 registration studies set to initiate in 2022. With
over $1 billion in cash, and the intention to divest further
non-core assets, we anticipate having sufficient runway to see our
plans through.
Our strategy is to launch a stream of new products in both the
China and global markets over the coming years, helping patients
with unmet needs and creating value for all our stakeholders."
I. COMMERCIAL OPERATIONS
-- Total revenues increased 56% to $356.1 million in 2021 (2020:
$228.0m), driven by commercial progress on our three in-house
developed oncology drugs ELUNATE(R) , SULANDA(R) and ORPATHYS(R)
;
-- Full year 2021 Oncology/Immunology consolidated revenues of
$119.6 million , up 296% (2020: $30.2m), and in line with 2021
guidance of $110-130 million;
-- Continuing expansion of in-house oncology commercial
organization in China, which at the end of 2021 numbered about 630
personnel (end 2020: 390) covering over 2,500 oncology hospitals
and over 29,000 oncology physicians;
-- ELUNATE(R) (fruquintinib in China) in-market sales(11)
increased 111% to $71.0 million (2020: $33.7m), reflecting a full
year of HUTCHMED management of all on-the-ground medical detailing,
promotion and local and regional marketing activities in China;
-- SULANDA(R) (surufatinib in China) launched for both
extra-pancreatic NET and pancreatic NET with in-market sales in
2021 of $11.6 million (2020: nil). An encouraging start in the
self-pay market and positioned well for national reimbursement
which started in January 2022;
-- ORPATHYS(R) (savolitinib in China) launched in mid-2021
through AstraZeneca's extensive oncology commercial organization,
with in-market sales of $15.9 million (2020: nil). Rapid initial
self-pay uptake due to being the first-in-class selective MET(12)
inhibitor in China;
-- Successful management of the NRDL(13) process to expand
access to our key products in January 2022.
Concluded ELUNATE(R) NRDL renewal and first time NRDL inclusion of SULANDA(R) ; and
-- U.S. commercial team continued to build for the potential
surufatinib U.S. approval in 2022. The team, more than 30
personnel, is fully engaged on all aspects of launch readiness
including supply chain, market access, marketing, sales and
commercial operations.
(Growth vs. Prior Period) In-market Sales* Consolidated Revenue**
----------------------------------- ---------------------------------------
2021 Jan -Feb 2022 2021 Jan-Feb 2022
Unaudited Unaudited
----------------------------------- -------------------- ------------------- ------------------
ELUNATE(R) $71.0m (111%) $21.6m (51%) $53.5m (168%) $13.5m (33%)
SULANDA(R) $11.6m - $6.0m (21%) $11.6m - $6.0m (21%)
ORPATHYS(R) $15.9m - $7.4m - $11.3m - $4.8m -
----------------------------------- --------- --------- --------- ------- --------- -------- -------- --------
Product Sales $98.5m (192%) $35.0m (81%) $76.4m (282%) $24.3m (61%)
Other R&D(14) Service income $18.2m (77%) $3.7m (80%)
Milestone payments $25.0m - $15.0m -
Total Oncology/ Immunology $119.6m (296%) $43.0m (151%)
* = For ELUNATE (R) and ORPATHYS (R) , represents total sales to third parties as provided
by Lilly and AstraZeneca, respectively; ** = For ELUNATE (R) and ORPATHYS (R) , represents
manufacturing fees, commercial service fees and royalties paid by Lilly and AstraZeneca, respectively,
to HUTCHMED, and sales to other third parties invoiced by HUTCHMED; For SULANDA (R) , represents
the Company's sales of the product to third parties.
II. REGULATORY ACHIEVEMENTS
China
-- Received China NMPA(15) NDA approval for ORPATHYS(R)
(savolitinib) as a treatment for patients with MET exon 14 skipping
alteration NSCLC in June 2021, making savolitinib the
first-in-class selective MET inhibitor in China.
-- Received second China NMPA NDA approval for SULANDA(R)
(surufatinib) in June 2021 as a treatment for patients with
advanced pancreatic NET;
-- A $25 million milestone payment was made to us by AstraZeneca
in July 2021 upon first sale of ORPATHYS(R) in China;
-- Received Breakthrough Therapy Designation in China for
amdizalisib (HMPL-689) in September 2021 for the treatment of
relapsed or refractory follicular lymphoma; and
-- Received Breakthrough Therapy Designation in China for
sovleplenib (HMPL-523) in January 2022 for the treatment of ITP(16)
.
United States and Europe
-- Surufatinib U.S. FDA(17) NDA process update:
o Completed submission of U.S. FDA NDA for surufatinib , which
was accepted in June 2021, for the treatment of both pancreatic and
extra-pancreatic NET;
o U.S. FDA NDA review, as well as the clinical site inspections
and pre-approval inspections of our manufacturing facilities, are
ongoing , several inspections have been completed with others
pending subject to COVID-19 travel restrictions and security
requirements for foreign visitors; and
o The PDUFA(18) goal date is April 30, 2022 and mid- and
late-cycle review meetings with the FDA have completed. Timing of
completion of the NDA review is subject to FDA scheduling
limitations.
-- Surufatinib EMA(19) MAA process update:
o Fully submitted EMA MAA for surufatinib , which was validated
and accepted in July 2021 , for the treatment of both pancreatic
and non-pancreatic NET; and
o Completed the 120-day assessment , and now entering the later
stages of MAA review.
-- Savolitinib: conducted U.S. FDA EOP2(20) meeting for SAVANNAH
study of savolitinib plus TAGRISSO(R) in EGFR(21) TKI(22)
refractory NSCLC.
o Continued evaluation of SAVANNAH study for potential
accelerated approval use; and
o Completed clinical trial applications in U.S., EU and Japan
for the SAFFRON study, a global pivotal Phase III study of
savolitinib and TAGRISSO(R) in patients with NSCLC who have
progressed following TAGRISSO(R) treatment due to MET
amplification.
III. CLINICAL DEVELOPMENT ACTIVITIES
Savolitinib (ORPATHYS(R) ) , a highly selective oral inhibitor
of MET being developed broadly across MET-driven patient
populations in lung and gastric cancer and renal cell carcinoma
Major clinical milestones for savolitinib in 2021:
-- Initiated SAMETA, a global Phase III pivotal study of the
savolitinib plus IMFINZI(R) combination in MET-driven, unresectable
and locally advanced or metastatic PRCC in October 2021
(NCT05043090);
-- Initiated SANOVO, a pivotal Phase III study in China for the
savolitinib plus TAGRISSO(R) combination in treatment naïve
patients with EGFR mutant NSCLC with MET aberration in September
2021 (NCT05009836);
-- Initiated SACHI, a pivotal Phase III study in China for the
savolitinib plus TAGRISSO(R) combination in patients with EGFR
mutant NSCLC who have progressed following EGFR TKI treatment due
to MET amplification in November 2021 (NCT05015608);
-- Initiated Phase II study with potential for registration
(NCT04923932) for savolitinib in metastatic gastric cancer with MET
amplification in China in mid-2021;
-- Initiated a confirmatory China Phase IIIb post-approval study
(NCT04923945) of savolitinib monotherapy in MET exon 14 skipping
alteration patients in mid-2021; and
-- A further $15 million milestone payment, to us by
AstraZeneca, was triggered in February 2022 upon initiation of
start-up activities for SAFFRON.
Major savolitinib clinical data presentations in 2021:
-- Presented CALYPSO Phase II study data in MET-driven PRCC
patients (NCT02819596) for savolitinib in combination with
IMFINZI(R) at the 2021 ASCO(23) Annual Meeting;
-- Published in The Lancet Respiratory Medicine updated data
from the Phase II study in patients with MET exon 14 skipping
alteration NSCLC (NCT02897479); and
-- Presented final Phase II data at WCLC(24) 2020 for the TATTON
study (NCT02143466) in NSCLC patients with MET amplification who
had progressed after prior treatment with EGFR inhibitors.
Potential upcoming clinical and regulatory milestones for
savolitinib in 2022:
-- Submit for presentation the SAVANNAH Phase II study
(NCT03778229) for the savolitinib plus TAGRISSO(R) combination in
NSCLC patients harboring EGFR mutation and MET amplification or
overexpression at a scientific conference in the second half of
2022; and
-- Commence enrollment in SAFFRON, a global, pivotal Phase III
study for the savolitinib plus TAGRISSO(R) combination in mid-2022
(NCT05261399).
Surufatinib (SULANDA(R) in China), an oral inhibitor of
VEGFR(25) , FGFR and CSF- 1R designed to inhibit tumor angiogenesis
and promote the body's immune response against tumor cells via
tumor associated macrophage regulation; approved and launched in
China
Major clinical milestones for surufatinib in 2021:
-- Initiated the SURTORI-01 Phase III trial in NEC(26) patients
in China, the first pivotal study combining SULANDA(R) and TUOYI(R)
, Junshi's(27) anti-PD-1 antibody, in September 2021
(NCT05015621);
-- Initiated a bridging study in NET patients in Japan in
September 2021 (NCT05077384) based on dialogue with the Japanese
PMDA(28) ; and
-- Initiated an international Phase Ib/II study of surufatinib
combined with tislelizumab (NCT04579757), BeiGene's(29) PD-1(30)
antibody, in the U.S. and Europe in March 2021.
Major surufatinib clinical data presentations in 2021:
-- Presented NEC cohort data from the China Phase II study of
surufatinib plus TUOYI(R) (NCT04169672) at the 2021 ASCO and ESMO
IO(31) 2021 annual meetings;
-- Presented data from the gastric and gastroesophageal junction
cancers cohort of the China Phase II study of surufatinib plus
TUOYI(R) (NCT04169672) at the 2021 ASCO and ESMO IO 2021 annual
meetings;
-- Presented data from two additional cohorts of the China Phase
II study of surufatinib plus TUOYI (R) (NCT04169672) at the ESMO IO
2021 for esophageal and small cell lung cancer;
-- Presented updated results from U.S. Phase Ib monotherapy NET
cohorts (NCT02549937) in heavily pretreated patients with NET at
the 2021 ASCO Annual Meeting;
-- Presented a subgroup analysis by Ki-67 and baseline CgA(32)
of the Phase III monotherapy study in pancreatic NET (SANET-p)
(NCT02589821) at the 2021 ASCO Annual Meeting; and
-- Presented Phase II data for surufatinib monotherapy in
BTC(33) patients (NCT02966821) at the 2021 ASCO Annual Meeting in
U.S. patients after first-line chemotherapy.
Potential upcoming clinical and regulatory milestones for
surufatinib in 2022:
-- Submit for presentation data from the Phase Ib/II combination
study with tislelizumab at a scientific conference in the second
half of 2022;
-- Submit for presentation further Phase II data for the
TUOYI(R) combination study for biliary tract, thyroid cancer,
non-small cell lung cancer, endometrial cancer and sarcoma cohorts
at a scientific conference in the second half of 2022, and
-- Plan to initiate SURTORI-02, a Phase III study of surufatinib
in combination with TUOYI(R) in esophageal cancer in China in the
second half of 2022.
Fruquintinib (ELUNATE(R) in China), a highly selective oral
inhibitor of VEGFR 1/2/3 designed to improve kinase selectivity to
minimize off-target toxicity and thereby improve tolerability;
approved and launched in China
Major clinical milestones for fruquintinib in 2021:
-- Completed enrollment in the FRESCO-2 global Phase III
registration study (NCT04322539) in refractory metastatic CRC in
late 2021, with 691 patients recruited in 15 months, across 14
countries including U.S., EU, Japan and Australia, ahead of
schedule;
-- Initiated registration-intent Phase II study in endometrial
cancer for fruquintinib in combination with
TYVYT(R) (NCT03903705) following discussion with the NMPA;
-- Initiated a Phase II study in China and Korea for
fruquintinib in combination with tislelizumab (NCT04716634) with
advanced or metastatic, unresectable gastric cancer, CRC or
NSCLC;
-- Initiated a Phase Ib/II study in the U.S. for fruquintinib in combination with tislelizumab (NCT04577963) in patients with triple negative breast or endometrial cancer and metastatic CRC; and
-- Completed enrollment in four cohorts of the Phase II study of
fruquintinib combined with TYVYT(R) (NCT03903705), in CRC,
endometrial cancer, HCC(34) and RCC(35) in China.
Major fruquintinib clinical data presentations in 2021:
-- Presented preliminary endometrial cancer, HCC and RCC cohorts
data from the Phase Ib/II studies of fruquintinib combined with
TYVYT(R) at CSCO(36) 2021 (NCT03903705);
-- Presented preliminary CRC cohorts data from the Phase Ib/II
studies of fruquintinib combined with TYVYT(R) and of fruquintinib
combined with geptanolimab , Genor's(37) PD-1 antibody, at the 2021
ASCO Annual Meeting (NCT04179084 and NCT03977090, respectively);
and
-- Presented Phase Ib U.S. monotherapy data in two different
cohorts of patients with refractory metastatic CRC (NCT03251378) at
the 2022 ASCO Gastrointestinal Cancers Symposium.
Potential upcoming clinical and regulatory milestones for
fruquintinib in 2022:
-- Complete enrollment of the FRUTIGA China Phase III
registration study (NCT03223376) in advanced gastric cancer in
2022, which is expected to enroll about 700 patients in China;
-- Report outcome of the FRESCO-2 trial (NCT04322539) in the
second half of 2022 when the event-driven primary endpoint, OS(38)
, is reached;
-- If FRESCO-2 is positive, HUTCHMED plans to initiate a
simultaneous submission program to apply for fruquintinib marketing
authorization with the U.S. FDA, the EMA and the PMDA; and
-- Plan to initiate Phase III studies of fruquintinib plus
TYVYT(R) combination in HCC, RCC and endometrial cancer in
China.
Amdizalisib (HMPL-689), an investigative and highly selective
oral inhibitor of PI3K(39) designed to address the gastrointestinal
and hepatotoxicity associated with currently approved and
clinical-stage PI3K inhibitors
Major clinical milestones for amdizalisib in 2021:
-- Initiated two Phase II studies with potential for
registration in China for the treatment of patients with follicular
lymphoma and patients with marginal zone lymphoma in April 2021;
and
-- Initiated dose expansion portion of the Phase I/Ib study in
the U.S. and Europe (NCT03786926) in the second half of 2021 in
multiple types of non-Hodgkin's lymphoma.
Major amdizalisib clinical data presentation in 2021:
-- Presented initial dose expansion data at ESMO in September
2021 at the RP2D(40) , in patients with multiple types of
non-Hodgkin's lymphoma in China.
Potential upcoming clinical and regulatory milestones for
amdizalisib in 2022:
-- Initiate additional Phase II studies with potential for
registration intent in China in additional relapsed/refractory
non-Hodgkin's lymphoma indications in the second half of 2022;
-- Initiate studies in combination with other anti-cancer
therapies in China in early 2022; and
-- Complete recruitment of patients for Phase II studies with
potential for registration intent in China for the treatment of
follicular lymphoma and marginal zone lymphoma in late 2022.
Sovleplenib (HMPL-523), an investigative and highly selective
oral inhibitor of Syk(41) , an important component of the B-cell
receptor signaling pathway, for the treatment of hematological
cancers and immune diseases
Major clinical and regulatory milestones for sovleplenib in
2021:
-- Initiated the ESLIM-01 Phase III pivotal study in ITP
(NCT03951623) in China in October 2021; and
-- Initiated dose expansion portion of the international Phase I
study in the second half of 2021 in multiple non-Hodgkin's lymphoma
indications.
Major sovleplenib clinical data presentations in 2021:
-- Presented initial Phase Ib ITP study (NCT03951623) in China at ASH 2021(42) ; and
-- Presented initial data from the dose escalation portion of
the international Phase I study (NCT03779113) in lymphoma patients
in the U.S. and Europe at ASH 2021.
Potential upcoming clinical milestone for sovleplenib in
2022:
-- Complete U.S. IND and initiate Phase I study in the U.S. in patients with ITP.
Tazemetostat (TAZVERIK(R) in the U.S. and Japan), an inhibitor
of EZH2 licensed from Epizyme for which HUTCHMED is collaborating
to research, develop, manufacture and commercialize in Greater
China
Potential upcoming clinical and regulatory milestones for
tazemetostat in 2022:
-- Initiate a bridging study in follicular lymphoma in China for
conditional registration based on U.S. approvals;
-- Initiate the China portion of the global SYMPHONY-1 Phase III
trial (NCT04224493) of tazemetostat combined with lenalidomide and
rituximab in patients with relapsed or refractory follicular
lymphoma after at least one prior line of therapy;
-- Initiate Phase II combination studies with other HUTCHMED assets; and
-- Engage with NMPA on potential path for regulatory approval
for the treatment of patients with epithelioid sarcoma, a rare
disease for which TAZVERIK(R) has FDA approval.
HMPL-453, an investigative and highly selective oral inhibitor
of FGFR 1/2/3
-- Initiated combination studies with other anti-cancer
therapies, including chemotherapies and/or PD-1 antibodies, in
China in January 2022 (NCT05173142).
HMPL-306, an investigative and highly selective oral inhibitor
of IDH1/2 designed to address resistance to the currently marketed
IDH inhibitors
Major clinical and regulatory milestones for HMPL-306 in
2021:
-- Initiated Phase I dose escalation study in China in hematological malignancies;
-- Initiated dose escalation portion of a Phase I study
(NCT04764474) in the U.S. and Europe in patients with hematological
malignancies with an IDH1 and/or IDH2 mutation in early 2021;
and
-- Initiated dose escalation portion of a Phase I study
(NCT04762602) in the U.S. and Europe in patients with solid tumors
with an IDH1 and/or IDH2 mutation in early 2021.
Potential upcoming clinical and regulatory milestones for
HMPL-306 in 2022:
-- Submit for presentation data from the dose escalation portion
of the Phase I study (NCT04272957) in China at a scientific
conference in mid-2022; and
-- Initiate dose expansion portion of the Phase I study in China in mid-2022; and
-- Initiate dose expansion portion of the Phase I studies in the U.S. and Europe in mid-2022.
HMPL-295, an investigative and highly selective oral inhibitor
of ERK in the MAPK pathway (43) with the potential to address
intrinsic or acquired resistance from upstream mechanisms such as
RAS-RAF-MEK
-- Initiated Phase I trial (NCT04908046) in patients with
advanced solid tumors in China in July 2021.
HMPL-760, an investigative, highly selective, third-generation
oral inhibitor of BTK with improved potency versus first generation
BTK inhibitors against both wild type & C481S mutant
enzymes
-- Initiated Phase I trials in China (NCT05190068) and the U.S.
(NCT05176691) in patients with advanced hematological malignancies
in January 2022 .
HMPL-653, an investigative, highly selective, and potent CSF-1R
inhibitor designed to target CSF-1R driven tumors as a monotherapy
or in combinations
-- Initiated Phase I trial in China (NCT05190068) in patients
with advanced malignant solid tumors and tenosynovial giant cell
tumors in January 2022 .
HMPL-A83, a differentiated, red blood cell sparing CD47
monoclonal antibody
-- Completed IND submission for HMPL-A83 in China in early 2022.
IV. MANUFACTURING
-- Commercial scale-up and launches of SULANDA(R) and
ORPATHYS(R) , alongside ongoing supply of ELUNATE(R) ;
-- Completed all relevant amdizalisib and sovleplenib
manufacturing process studies , in preparation for potential NDA
submissions; and
-- Rapid progress in building our new flagship Shanghai
manufacturing facility , designed to increase our novel drug
product manufacturing capacity by over five-fold. Small molecule
and large molecule equipment installation is planned for late 2022,
with GMP compliance targeted for late 2023.
V. OTHER VENTURES
Other Ventures include our profitable prescription drug
marketing and distribution platforms covering about 290 cities and
towns in China with around 2,900 mainly manufacturing and
commercial personnel.
-- Other Ventures delivered encouraging growth with consolidated
revenues up 20% (13% at CER(44) ) to $236.5 million (2020:
$197.8m). This does not include revenues from our non-consolidated
joint venture SHPL(45) , which also grew by 20% (12% at CER) to
$332.6 million (2020: $276.4m);
-- Consolidated net income attributable to HUTCHMED from our
Other Ventures grew by 24% (16% at CER) to $54.4 million (2020:
$44.0m), excluding one-time gains; and
-- One-time gains totaled $88.5 million (2020: $28.8m),
including $82.9 million (2020: nil) from the divestment of HBYS(46)
and $5.6 million (2020: $28.8m) from land compensation, before
withholding tax.
VI. OTHER CORPORATE DEVELOPMENTS
-- Completed listing on the Main Board of HKEX(47) , raising net
proceeds of approximately $585 million;
-- Completed divestment of interest in HBYS , a non-core and
non-consolidated over-the-counter drug joint venture business for
$159.1 million in cash, representing about 22 times HBYS's adjusted
net profit attributable to HUTCHMED equity holders in 2020 with an
additional $46.4 million related to declared dividends expected to
be collected in 2022;
-- Entered into a collaboration with Epizyme in August 2021 to
research, develop, manufacture and commercialize in Greater China
its drug TAZVERIK(R) , an EZH2 inhibitor approved by the U.S. FDA
for the treatment of certain patients with epithelioid sarcoma and
follicular lymphoma;
-- Changed our group company name/corporate identity to HUTCHMED
in April 2021, unifying the names of the majority of our key
subsidiaries;
-- Announced a strategic partnership with Inmagene(48) in
January 2021 to further develop four novel preclinical drug
candidates discovered by HUTCHMED for the potential treatment of
multiple immunological diseases; and
-- Arbitral award in favor of Hutchison Sinopharm(49) in
connection with the termination of its distribution rights for
SEROQUEL (R) in mainland China by Luye Pharma Hong Kong Ltd. In
2021, the Hong Kong International Arbitration Centre made a final
award in favor of Hutchison Sinopharm against Luye Pharma Hong Kong
Ltd. in the amount of RMB253.2 million ($39.6 million), plus costs
and interest. Payment of the award is expected in 2022.
Potential upcoming corporate developments:
-- Divestment of further non-core operations , we continue to
look for opportunities to divest non-core businesses, including
SHPL, to better focus on the development and global
commercialization of our innovation-driven assets; and
-- Large molecule advancement , we continue to evaluate
opportunities which might accelerate our capabilities in the large
molecule arena.
VII. IMPACT OF COVID-19
COVID-19 did not impact our research, our clinical studies or
our commercial activities in any material manner in 2021. Certain
regulatory inspections of our manufacturing facilities in China by
the U.S. FDA have, however, been postponed due to travel
restrictions. We will continue to closely work with regulators and
monitor the evolving situation.
VIII. SUSTAINABILITY
As an innovative, commercial-stage biopharmaceutical company,
HUTCHMED embraces sustainability at the core of how we operate.
Over the past two decades, we worked hard to strengthen healthcare
systems by providing quality and accessible drugs. As the world is
gradually adapting to the changes brought about by COVID-19, the
pandemic has highlighted the importance of building sustainability
and environmental, social and governance factors into business
strategy. HUTCHMED has embarked on our sustainability journey in
2020 by publishing our inaugural ESG report to demonstrate our
efforts, and establishing a board level Sustainability Committee in
2021 to support the Board of Directors in fulfilling their
responsibilities. We plan to publish our second sustainability
report for 2021 at the end of May 2022.
Going forward, HUTCHMED will be working with our stakeholders to
embrace sustainable business practices and develop a sustainability
strategy that will help focus our efforts on areas which are most
relevant to our business. Through a materiality assessment exercise
for 2021, priority areas include: Business ethics; Drug
research-related topics; Drug development; Commercial operations
responsibilities; Environmental topics; and Management of our
people. Over the course of 2022, we will continue to engage our
stakeholders to identify areas for improvement to building a more
sustainable and responsible future.
FULL YEAR 2021 Financial Results
Cash, Cash Equivalents and Short-Term Investments were $1,011.7
million as of December 31, 2021 compared to $435.2 million as of
December 31, 2020.
-- Adjusted Group (non-GAAP(50) ) net cash flows excluding
financing activities were -$73.5 million (2020: -$78.4m), with the
net decrease mainly due to $159.1 million in proceeds from the
divestment of HBYS, which offset the increasing Oncology/Immunology
R&D spending and lower dividends received from our
non-consolidated joint ventures totaling $49.9 million (2020:
$86.7m); and
-- Net cash generated from financing activities totaled $650.0
million (2020: $296.4m) mainly resulting from the global offering
of shares and listing on the HKEX in June 2021 and a private
placement in April 2021 to a fund affiliated with Baring Private
Equity Asia.
Revenues for the year ended December 31, 2021 were $356.1
million compared to $228.0 million in 2020.
-- Oncology/Immunology consolidated revenues increased 296%
(287% at CER) to $119.6 million (2020: $30.2m) resulting from :
ELUNATE(R) revenues increased 168% to $53.5 million (2020:
$20.0m) in manufacturing revenues, promotion and marketing service
revenues and royalties, as our in-house sales team increased
in-market sales 111 % to $71.0 million (20 20: $33.7m), as provided
by Lilly(51) ;
SULANDA(R) sales revenues of $11.6 million since mid-January
2021 launch, initially approved to treat patients with advanced
extra-pancreatic (non-pancreatic) NET and subsequently also
approved to treat patients with pancreatic NET in June 2021;
ORPATHYS(R) revenue of $36.3 million since mid-July 2021 launch
, which was comprised of a $25.0 million first sale milestone
payment and $11.3 million in manufacturing revenues and royalties.
AstraZeneca reported $15.9 million in-market sales (2020: nil) of
ORPATHYS(R) in 2021; and
Other R&D service fee revenues of $18.2 million (2020:
$10.2m), which were primarily fees from AstraZeneca and Lilly for
the management of development activities in China .
-- Other Ventures consolidated revenues increased 20% (13% at
CER) to $236.5 million (2020: $197.8m), mainly due to continued
sales growth of third-party prescription drug products .
Net Expenses for the year ended December 31, 2021 were $550.7
million compared to $353.7 million in 2020.
-- Cost of Revenues were $258.2 million (2020: $188.5m), the
majority of which were the cost of third-party prescription drug
products marketed through our profitable Other Ventures, as well as
full year costs associated with ELUNATE(R) , including the
provision of promotion and marketing services to Lilly which
commenced in October 2020, and the costs for SULANDA(R) and
ORPATHYS(R) which commenced commercial sales in 2021;
-- R&D Expenses were $299.1 million (2020: $174.8m), which
increased mainly as a result of an expansion in the active
development of eleven novel oncology drug candidates. Our rapidly
scaling international clinical and regulatory operations in the
U.S. and Europe incurred expenses of $140.1 million (2020: $63.3m),
while R&D expenses in China were $159.0 million (2020:
$111.5m);
-- SG&A Expenses(52) were $127.1 million (2020: $61.3m),
which increased primarily due to higher staff costs and share-based
compensation expense to support rapidly expanding operations. This
included the build-up of a large-scale national oncology commercial
infrastructure in China and commercial launch readiness in the U.S.
to support our oncology products; and
-- Other Items generated net income of $133.7 million (2020:
$70.9m), which increased primarily due to a one-off gain on the
divestment of HBYS attributable to the Group of $82.9 million
(comprised of a gain of $121.3 million offset in part by related
taxes of $14.4 million and amounts attributable to a
non-controlling interest of $24.0 million), offset in part by lower
one-time land compensation of $5.6 million (2020: $28.8m)
recognized for HBYS.
Net Loss attributable to HUTCHMED for the year ended December
31, 2021 was $194.6 million compared to $125.7 million in 2020.
-- As a result, the net loss attributable to HUTCHMED in 2021
was $0.25 per ordinary share / $1.23 per ADS(53) , compared to net
loss attributable to HUTCHMED of $0.18 per ordinary share / $0.90
per ADS, in 2020.
Financial Summary
Condensed Consolidated Balance Sheet Data
(in $'000)
As of December 31,
----------------------
2021 2020
------------ --------
Assets
Cash and cash equivalents and short-term investments 1,011,700 435,176
Accounts receivable 83,580 47,870
Other current assets 116,796 47,694
Property, plant and equipment 41,275 24,170
Investments in equity investees 76,479 139,505
Other non-current assets 42,831 29,703
------------ --------
Total assets 1,372,661 724,118
============ ========
Liabilities and shareholders' equity
Accounts payable 41,177 31,612
Other payables, accruals and advance receipts 210,839 121,283
Bank borrowings 26,905 26,861
Other liabilities 54,226 25,413
------------ --------
Total liabilities 333,147 205,169
Company's shareholders' equity 986,893 484,116
Non-controlling interests 52,621 34,833
------------ --------
Total liabilities and shareholders' equity 1,372,661 724,118
============ ========
Condensed Consolidated Statement of Operations Data
(in $'000, except share and per share data)
Year Ended December 31,
-------------------------------------
2021 2020
---------------------- -------------
Revenues:
Oncology/Immunology - Marketed Products 76,429 19,953
Oncology/Immunology - R&D 43,181 10,262
---------------------- -------------
Oncology/Immunology consolidated revenues 119,610 30,215
Other Ventures 236,518 197,761
---------------------- -------------
Total revenues 356,128 227,976
====================== =============
Expenses:
Costs of revenues (258,234) (188,519)
Research and development expenses (299,086) (174,776)
Selling and general administrative expenses (127,125) (61,349)
Total expenses (684,445) (424,644)
---------------------- -------------
Loss from Operations (328,317) (196,668)
Gain on divestment of an equity investee 121,310 -
Other (expense)/income (8,733) 6,934
---------------------- -------------
Loss before income taxes and equity in earnings of equity investees (215,740) (189,734)
Income tax expense (11,918) (4,829)
Equity in earnings of equity investees, net of tax 60,617 79,046
---------------------- -------------
Net loss (167,041) (115,517)
Less: Net income attributable to non-controlling interests (27,607) (10,213)
---------------------- -------------
Net loss attributable to HUTCHMED (194,648) (125,730)
====================== =============
Losses per share attributable to HUTCHMED - basic and diluted (US$ per
share) (0.25) (0.18)
Number of shares used in per share calculation - basic and diluted 792,684,524 697,931,437
Losses per ADS attributable to HUTCHMED - basic and diluted (US$ per ADS) (1.23) (0.90)
Number of ADSs used in per share calculation - basic and diluted 158,536,905 139,586,287
All amounts are expressed in U.S. dollars unless otherwise
stated.
FINANCIAL GUIDANCE
We provide financial guidance for 2022 below reflecting expected
revenue growth of ELUNATE(R) , SULANDA(R) and ORPATHYS(R) in China.
We intend to update guidance to include ex-China consolidated
revenues, upon the occurrence of surufatinib U.S. and EU approval
(if granted) and to reflect any developments in the non-core market
out-licensing of our products.
While we are not providing net cash flow guidance for 2022, we
do expect an increase in investment to support global clinical and
organizational expansion. To support our cash needs, we continue to
engage in active discussions regarding the potential divestment of
non-core assets, such as SHPL, as well as evaluate equity capital
markets action, such as a potential future listing on the STAR
Market of the Shanghai Stock Exchange.
2021 2022
Actual Guidance
------------------------------------------ -------------- ------------------
Oncology/Immunology consolidated revenues $119.6 million $160 - 190 million
------------------------------------------ -------------- ------------------
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 measure s. 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, r espectively.
-----
Conference Call and Audio Webcast Presentation scheduled today
at 9 p.m. HKT / 1 p.m. GMT / 8 a.m. EST - Investors may participate
in the call as follows: +852 3027 6500 (Hong Kong) / +44 20 3194
0569 (U.K.) / +1 646 722 4977 (U.S.), or access a live audio
webcast of the call via HUTCHMED's website at
www.hutch-med.com/event/.
Additional dial-in numbers are also available at HUTCHMED's
website. Please use participant access code " 19304872# ."
-----
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 more than 4,600 personnel across all
its companies, at the center of which is a team of over 1,500 in
oncology/immunology. Since inception it has advanced 12 cancer drug
candidates from in-house discovery into clinical studies around the
world, with its first three oncology drugs now approved and
marketed in China. For more information, please visit:
www.hutch--med.com or follow us on LinkedIn.
Contacts
Investor Enquiries
Mark Lee, Senior Vice President +852 2121 8200
Annie Cheng, Vice President +1 (973) 567 3786
Media Enquiries
Americas - Brad Miles, Solebury Trout +1 (917) 570 7340 (Mobile)
bmiles@troutgroup.com
Europe - Ben Atwell / Alex Shaw, FTI Consulting +44 20 3727 1030 / +44 7771 913 902 (Mobile) / +44 7779
545 055 (Mobile)
HUTCHMED@fticonsulting.com
Asia - Zhou Yi, Brunswick +852 9783 6894 (Mobile)
HUTCHMED@brunswickgroup.com
Nominated Advisor
Atholl Tweedie / Freddy Crossley, Panmure Gordon (UK)
Limited +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 consolidated subsidiaries and joint ventures 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," "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, or that any approvals which are obtained will be obtained
at any particular time, or that any such drug candidates 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 me e t 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 gain commercial
acceptance after obtaining regulatory approval; 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 the COVID-19 pandemic. For
further discussion of these and other risks, see HUTCHMED's filings
with the U.S. Securities and Exchange Commission, on AIM and on
HKEX. 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 (EU) No 596/2014 (as it forms part of
retained EU law as defined in the European Union (Withdrawal) Act
2018).
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 820
scientists and staff (December 31, 2020: >600), and an in-house
oncology commercial organization of about 630 staff (December 31,
2020: 390).
We have advanced 13 oncology drug candidates into clinical
trials in China, with seven also in clinical development in the
U.S. and Europe. Our first three drug candidates, fruquintinib,
surufatinib and savolitinib, have all been approved and launched in
China.
MARKETED PRODUCT SALES
Fruquintinib (ELUNATE(R) in China)
ELUNATE(R) is approved for the treatment of third-line
metastatic CRC for which there is an approximate incidence of
83,000 new patients per year in China. We estimate that in 2021,
approximately 22,000 new patients were treated with ELUNATE(R) in
China with resulting in-market sales of $71.0 million, up 111%
versus 2020 ($33.7m).
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(R) in China. We
consolidate as revenues approximately 70-80% of ELUNATE(R)
in-market sales from service fees and royalties paid to us by
Lilly. In 2021, we consolidated $53.5 million in revenue for
ELUNATE(R) , equal to 75.4% of in-market sales.
Following negotiations with the China National Healthcare
Security Administration ("NHSA"), ELUNATE(R) continues to be
included in the NRDL for a new two-year term starting in January
2022. For this renewal, we agreed to a discount of 5% relative to
the 2021 NRDL price.
During 2021, our medical marketing and affairs teams conducted
about 4,800 educational/scientific events for ELUNATE(R) in China.
As a result of the above activities, ELUNATE(R) continues to expand
with unaudited in-market sales in the months of January and
February 2022 increasing 51% to $21.6 million (Jan-Feb 2021: $14.3
million). In January 2022, a total of 5,473 new and continuing
patients were treated with ELUNATE(R) representing a 50% increase
as compared to 3,661 in January 2021.
The only other approved and NRDL reimbursed product in
third-line CRC in China is STIVARGA(R) . LONSURF(R) , a nucleoside
metabolic and thymidine phosphorylase inhibitor, is approved in
China for third-line CRC but is not on the NRDL.
Surufatinib (SULANDA(R) in China)
SULANDA(R) was launched in China in 2021 for the treatment of
all advanced NETs for which there is an approximate incidence of
34,000 new patients per year in China.
In 2021, SULANDA(R) was sold as a self-pay drug. We used
means-tested early access and patient access programs to help
patients afford SULANDA(R) , and we estimate that approximately
4,800 new patients were treated. Despite these access programs,
duration of treatment was often affected by the economic
constraints of patients. As a result, total sales in 2021 were
$11.6 million (2020: nil).
Following negotiations with the China NHSA, SULANDA(R) was
included in the NRDL starting in January 2022 at a 52% discount on
our main 50mg dosage form, relative to the 2021 self-pay price.
Under the NRDL, actual out-of-pocket costs for patients in 2022
represent approximately 15-20% of the 2021 self-pay price.
During 2021, we introduced SULANDA(R) through a campaign of
local, regional and national launch events involving approximately
12,000 healthcare professionals. As a result of the above
activities, patient access to SULANDA(R) , as well as duration of
treatment, are increasing with unaudited in-market sales for the
months of January and February 2022 up 21% to $6.0 million (Jan-Feb
2021: $4.9m). It should be noted that January and February 2021
in-market sales included normal pipeline fill behind the initial
launch of SULANDA(R) whereas January and February 2022 figures
represent consumption sales. In January 2022, a total of 1,497 new
and continuing patients were treated with SULANDA(R) representing
an over 7-fold increase as compared to 213 in January 2021.
There are two therapies for advanced NETs approved and NRDL
reimbursed in China: SUTENT(R) for the treatment of pancreatic NET
(approximately 10% of NET), and AFINITOR(R) in broadly the same
indication as SULANDA(R) .
Savolitinib (ORPATHYS(R) )
On June 22, 2021, ORPATHYS(R) became the first-in-class
selective MET inhibitor to be approved in China. Our partner,
AstraZeneca, then launched ORPATHYS(R) in mid-July 2021, less than
three weeks after its conditional approval by the NMPA for patients
with MET exon 14 skipping alteration NSCLC.
More than a third of the world's lung cancer patients are in
China and, among those with NSCLC, approximately 2-3% have tumors
with MET exon 14 skipping alterations, representing an approximate
incidence of 13,000 new patients per year in China. Importantly
also, MET plays a role in multiple other solid tumors, with an
estimated total incidence of 120,000 new patients per year in
China.
In-market sales of ORPATHYS(R) since its launch in July 2021
were $15.9 million (2020: nil) resulting in our consolidation of
$11.3 million (2020: nil) in revenues from manufacturing fees and
royalties. We estimate that approximately 1,900 patients were
treated with ORPATHYS(R) in 2021.
Following negotiations with the China NHSA, AstraZeneca and
HUTCHMED declined inclusion in the 2022 NRDL, a position that will
be reassessed for potential 2023 inclusion.
AstraZeneca introduced a patient access program in late 2021
which subsidizes use of ORPATHYS(R) , through progressive disease.
As a result, in-market sales for ORPATHYS(R) have started strongly
in 2022 with unaudited in-market sales in the months of January and
February 2022 of $7.4 million (Jan-Feb 2021: nil).
ORPATHYS(R) is the first and only selective MET inhibitor on the
market in China, however XALKORI(R) is an approved multi-kinase
inhibitor of ALK and ROS1 with modest MET activity. Several
selective MET inhibitors are in development in China, but none are
currently expected to reach the market before 2023.
RESEARCH & DEVELOPMENT
Savolitinib (ORPATHYS(R) in China)
Savolitinib is an oral, potent, and highly selective oral
inhibitor of MET. In global partnership with AstraZeneca,
savolitinib has been studied in NSCLC, PRCC and gastric cancer
clinical trials with over 1,500 patients to date, both as a
monotherapy and in combinations.
In July 2021, we received a $25 million first sale milestone
from AstraZeneca upon launch of ORPATHYS(R) in China and in
February 2022, a $15 million milestone from AstraZeneca was
triggered by the initiation of start-up activities for the SAFFRON
study. In total, AstraZeneca will have paid HUTCHMED $85 million of
the total $140 million in upfront payments, development and
approvals milestones that are potentially payable under the 2011
license and collaboration agreement.
Savolitinib - Lung cancer:
MET plays an important role in NSCLC. Savolitinib has made
significant development progress in lung cancer, completing NMPA
NDA review, gaining approval and successfully launching as a
monotherapy in China. It is also now in multiple late stage
registrational studies as a combination therapy.
The table below shows a summary of the clinical studies for
savolitinib in lung cancer patients.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
-------------- ------------------------- ------ ---------------------- ------------------- -----------
Savolitinib MET exon 14 skipping China II Registration Approved and NCT02897479
monotherapy alterations launched
-------------- ------------------------- ------ ---------------------- ------------------- -----------
Savolitinib MET exon 14 skipping China III Confirmatory Ongoing NCT04923945
monotherapy alterations
-------------- ------------------------- ------ ---------------------- ------------------- -----------
Savolitinib SAVANNAH : 2L/3L Global II Registration-intent Ongoing. Data NCT03778229
+ TAGRISSO(R) EGFRm+(54) ; TAGRISSO(R) has supported
refractory; MET+ progression
into Phase
IIIs
-------------- ------------------------- ------ ---------------------- ------------------- -----------
Savolitinib SAFFRON: 2L/3L Global III In planning. NCT05261399
+ TAGRISSO(R) EGFRm+; TAGRISSO(R) Intend to initiate
refractory; MET+ in mid-2022
-------------- ------------------------- ------ ---------------------- ------------------- -----------
Savolitinib SACHI : 2L EGFR China III Ongoing NCT05015608
+ TAGRISSO(R) TKI refractory NSCLC;
MET+
-------------- ------------------------- ------ ---------------------- ------------------- -----------
Savolitinib SANOVO : Naïve China III Ongoing NCT05009836
+ TAGRISSO(R) patients with EGFRm
& MET+
-------------- ------------------------- ------ ---------------------- ------------------- -----------
Update on monotherapy in MET altered NSCLC - In June 2021,
savolitinib was approved by the NMPA based on positive results from
a Phase II trial conducted in China in patients with NSCLC with MET
exon 14 skipping alterations (NCT02897479), having demonstrated
effective anti-tumor activity based on ORR(55) and DCR(56) . The
approval is conditional upon successful completion of a
confirmatory study in this patient population (NCT04923945), which
is expected to enroll approximately 160 patients from approximately
40 sites.
Update on combination therapies in EGFR TKI-resistant NSCLC -
MET-amplification is a major mechanism for acquired resistance to
both first-generation EGFR TKIs as well as third-generation EGFR
TKIs like TAGRISSO(R) . As many as 30-40% of EGFR mutation positive
NSCLC patients develop MET amplification driven resistance to EGFR
TKIs. Savolitinib has been studied extensively in these patients in
the TATTON and SAVANNAH studies. The successful results led to the
initiation and planning of three Phase III studies: SACHI and
SANOVO were initiated in China in 2021, and the global, pivotal
Phase III study, the SAFFRON study, is planned to commence
enrollment in mid-2022.
SAVANNAH (NCT03778229) - This global, single-arm study in
patients who have progressed following TAGRISSO(R) due to MET
amplification or overexpression has three dose cohorts of
savolitinib combined with TAGRISSO(R) . We plan to submit results
for presentation at a scientific conference in 2022. In addition to
the planned global Phase III, which will initiate in mid-2022, we
continue to evaluate the possibility of using the SAVANNAH study as
the basis for U.S. accelerated approval.
SACHI (NCT05015608) - In November 2021, we initiated this China
Phase III study of savolitinib in combination with TAGRISSO(R) ,
which is a multi-center, open-label, randomized, controlled study
in patients with locally advanced or metastatic EGFR
mutation-positive NSCLC with MET amplification after disease
progression on EGFR inhibitor therapy. The study will evaluate
savolitinib in combination with TAGRISSO(R) , compared to
platinum-based doublet-chemotherapy (pemetrexed plus cisplatin or
carboplatin), the standard-of-care treatment option in this
setting. The primary endpoint of the study is PFS.
SANOVO (NCT05009836 ) - In September 2021, we initiated this
China Phase III study of savolitinib in combination with
TAGRISSO(R) as a first-line treatment in certain NSCLC patients
whose tumors harbor EGFR mutations and overexpress MET. The Phase
III trial is a blinded, randomized, controlled study in previously
untreated patients with locally advanced or metastatic NSCLC with
activating EGFR mutations and MET overexpression. The study will
evaluate TAGRISSO(R) in combination with savolitinib comparing to
TAGRISSO(R) alone, a standard-of-care treatment option for these
patients. The primary endpoint of the study is PFS.
Savolitinib - Kidney cancer:
MET is a key genetic driver in RCC , and 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. We have
conducted multiple global studies of savolitinib in PRCC patients,
including the SAVOIR monotherapy and CALYPSO combination therapy
global Phase II trials, that both demonstrated highly encouraging
results. These results led to the initiation of a global Phase III,
the SAMETA study, in 2021.
The table below shows a summary of the clinical studies for
savolitinib in kidney cancer patients.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
------------- -------------------------- ---------- ----- ------------- -----------
Savolitinib SAMETA : MET-driven, Global III Ongoing NCT05043090
+ IMFINZI(R) unresectable and locally
advanced or metastatic
PRCC
------------- -------------------------- ---------- ----- ------------- -----------
Savolitinib CALYPSO : PRCC U.K./Spain II Data updated NCT02819596
+ IMFINZI(R) at ASCO 2021
------------- -------------------------- ---------- ----- ------------- -----------
Savolitinib CALYPSO : Clear cell U.K./Spain II Ongoing NCT02819596
+ IMFINZI(R) RCC; VEGFR TKI refractory
------------- -------------------------- ---------- ----- ------------- -----------
SAMETA (NCT05043090) - In November 2021, we initiated this
global Phase III study of savolitinib in combination with
AstraZeneca's PD-L1 inhibitor IMFINZI(R) in patients with
MET-driven advanced PRCC. The Phase III trial is an open-label,
randomized, controlled study in treatment-naïve patients with
MET-driven, unresectable and locally advanced or metastatic PRCC,
to evaluate savolitinib in combination with IMFINZI(R) , compared
to single agent IMFINZI(R) or single agent SUTENT(R) , an oral
multi-kinase inhibitor considered the standard-of-care treatment
option in PRCC. The primary endpoint of the study is median
PFS.
CALYPSO (NCT02819596) - This investigator-initiated open-label
Phase I/II study of savolitinib in combination with IMFINZI(R) is
evaluating the savolitinib/IMFINZI(R) combination in patients with
PRCC and clear cell RCC. Interim results of the PRCC cohort of the
CALYPSO study were presented at the ASCO 2021 and showed
encouraging efficacy across all patients, particularly in
MET-driven PRCC patients. Importantly, for patients whose tumors
are MET-driven, ORR was 57%, median PFS was 10.5 months (95% CI:
2.9-15.7) and median OS was 27.4 months (95% CI: 7.3-NR).
Tolerability was consistent with established single agent safety
profiles.
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.
Phase II with potential for registration intent in 2L+ gastric
cancer with MET amplification (NCT04923932) - In July 2021, we
initiated a Phase II registration-intent study in MET-amplified
gastric cancer in China. This is a two-stage, single-arm study
which targets advanced gastric cancer patients who have failed at
least one line of treatment. The primary endpoint is ORR. Subject
to the results of the first stage of this study, we will discuss
with the CDE of NMPA the appropriate approach and necessary
criteria for registration.
Surufatinib (SULANDA(R) 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
1,200 patients to date, both as a monotherapy and in combinations,
and is approved in China. We currently retain all rights to
surufatinib worldwide.
Initial approvals for surufatinib in China are for the treatment
of advanced NET patients. NETs present in the body's organ system
with fragmented epidemiology. About 58% of NETs originate in the
gastrointestinal tract and pancreas, 27% in the lung or bronchus,
and a further 15% in other organs or unknown origins.
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 Sites Phase Status/Plan NCT #
Focus
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib monotherapy SANET-ep : extra-pancreatic China III Approved & NCT02588170
NET launched
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib monotherapy SANET-p : pancreatic China III Approved & NCT02589821
NET launched; subgroup
analysis at
ASCO 2021
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib monotherapy NETs U.S. Ib FDA accepted NCT02549937
NDA (June 2021);
updated Ib
data at ASCO
2021
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib monotherapy NETs Europe II EMA accepted NCT04579679
MAA (July 2021)
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib monotherapy NETs Japan Bridging Ongoing. Reg-enabling NCT05077384
study.
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib monotherapy BTC China Ib/IIa Completed; NCT02966821
data at ASCO
2021
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) SURTORI-01 : China III Ongoing NCT05015621
(PD-1) NEC
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) NENs(57) China II Ongoing; data NCT04169672
(PD-1) at ASCO 2021
& ESMO IO 2021
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) BTC China II Ongoing NCT04169672
(PD-1)
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) Gastric cancer China II Ongoing; data NCT04169672
(PD-1) at ASCO 2021
and updated
at ESMO IO
2021
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) Thyroid cancer China II Ongoing NCT04169672
(PD-1)
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) SCLC(58) China II Ongoing; data NCT04169672
(PD-1) at ESMO IO
2021
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) Soft tissue sarcoma China II Ongoing NCT04169672
(PD-1)
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) Endometrial cancer China II Ongoing NCT04169672
(PD-1)
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) Esophageal cancer China II Ongoing; data NCT04169672
(PD-1) at ESMO IO
2021
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + TUOYI(R) NSCLC China II Ongoing NCT04169672
(PD-1)
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib + tislelizumab Solid tumors U.S. / Ib/II Ongoing NCT04579757
(PD-1) Europe
-------------------------- --------------------------- ------- -------- --------------------- -----------
Surufatinib - monotherapy in NET updates:
Global development of surufatinib in NET: U.S. NDA and EU MAA
under review - The U.S. NDA and EU MAA are supported by data from
two positive Phase III studies of surufatinib in patients with
pancreatic and extra-pancreatic NET in China (SANET-p and SANET-ep
both previously reported in The Lancet Oncology, as mentioned
below), and a surufatinib Phase Ib study conducted in U.S. NET
patients (N=107 for safety and N=67 for efficacy) .
In June 2021, the U.S. FDA accepted our filing of the NDA for
surufatinib for the treatment of pancreatic and extra-pancreatic
(non-pancreatic) NETs. Surufatinib received fast track designation
in April 2020 for the treatment of pancreatic and extra-pancreatic
NET. Orphan Drug Designation for pancreatic NET was also granted in
November 2019. We have also initiated an Expanded Access Protocol
in the U.S. to ensure patients with NET with limited therapeutic
options have access to this treatment. Regulatory clearance of this
protocol has been granted by the U.S. FDA and this program is open
for site activation.
U.S. FDA NDA review, as well as the clinical site inspections
and pre-approval inspections of our manufacturing facilities, are
ongoing. The PDUFA goal date for the FDA's completion of review is
April 30, 2022. Timing of completion of the NDA review is subject
to FDA scheduling limitations which are contingent on COVID-19
travel restrictions and security requirements for foreign visitors.
Remaining inspections must be completed before regulatory action
can be taken.
We have also submitted the EMA MAA for surufatinib, which was
validated and accepted in July 2021, for the treatment of both
pancreatic and non-pancreatic NET. The 120-day assessment has been
completed, and we are now entering the later stages of MAA review.
In addition, we initiated a registration-enabling bridging study in
NET patients in Japan in September 2021.
U.S. Phase Ib NET cohorts (NCT02549937) - Updated data from a
study in U.S. patients was presented at ASCO 2021, reinforcing the
dosage, efficacy and safety profile as comparable to the China
trials data. At data cut-off, confirmed response and DCR was
observed in 18.8% and 87.5% of pancreatic NET patients, and 6.3%
and 93.8% of extra-pancreatic NET patients, respectively. Median
PFS was 11.5 months in both cohorts (95% CI: 6.5-17.5).
Japan Bridging Study to Support Registration for Advanced NET
(NCT05077384) - Based on dialogue with the Japanese PMDA, it was
agreed that the Japanese NDA would include results from a
34-patient, registration-enabling bridging study in Japan to
complement the registration data package submitted to the U.S. FDA
and the EMA. It was initiated in September 2021.
Surufatinib - combination therapy with checkpoint inhibitor
TUOYI(R) updates:
A Phase II China study (NCT04169672) is enrolling approximately
260 patients in nine solid tumor indications, including NENs, BTC,
gastric cancer, thyroid cancer, SCLC, soft tissue sarcoma,
endometrial cancer, esophageal cancer and NSCLC. In 2021, we
presented encouraging preliminary data on several of these
surufatinib-TUOYI(R) combination cohorts at CSCO and ESMO IO. These
have led to the initiation of the first Phase III trial combining
surufatinib with a PD-1 antibody, the SURTORI-01 study in NEC, and
we are currently considering further registration studies in
gastric cancer, SCLC and esophageal cancer.
NEC (subset of NENs) cohort - At CSCO 2021, we presented data,
with a cutoff date of July 30, 2021, for all 21 enrolled NEC
patients that were efficacy evaluable. Average duration of
treatment was 4.9 months (range 1-19) and median OS was 10.3 months
(95% CI: 9.1-not reached). The median PFS was 4.14 months (95% CI:
1.5-5.5) and median DoR(59) was 4.1 months (95% CI: 3.0-not
reached). The confirmed ORR was 23.8% (95% CI: 8.2-47.2) and DCR
was 71.4% (95% CI: 47.8-88.7).
All patients experienced TRAEs(60) , including 9 (42.9%) who
experienced grade 3 or above TRAEs. One (4.8%) patient reported
treatment-related serious adverse events. Hyperglycemia (3
patients, 14.3%), hypertension (2 patients, 9.5%) and
hypertriglyceridemia (2 patients, 9.5%) were the most commonly
(more than one patient) reported grade 3 or above TRAEs. No TRAEs
led to treatment discontinuation or treatment-related deaths.
SURTORI-01 (NCT05015621) - In September 2021, we initiated this
Phase III study to evaluate the combination compared with FOLFIRI
to treat patients with advanced NEC who have progression of disease
or intolerable toxicity after previous first-line chemotherapy. It
is a randomized, controlled, open-label, multi-center study where
approximately 200 patients are expected to be enrolled. For the
study group, all patients will receive study treatment on a 21-day
cycle. The primary outcome measure is OS. HUTCHMED is the sponsor
and is responsible for the study's execution. HUTCHMED and Junshi
Biosciences are jointly funding the study.
Surufatinib - combination with checkpoint inhibitor
tislelizumab:
In addition to the TUOYI(R) and TYVYT(R) combination studies in
China, in March 2021 we initiated an open-label, Phase Ib/II study
of surufatinib in combination with BeiGene's tislelizumab in the
U.S. and Europe, evaluating the safety, tolerability,
pharmacokinetics and efficacy in patients with advanced solid
tumors, including CRC, NET, small cell lung cancer, gastric cancer
and soft tissue sarcoma. The dose finding phase of the study is now
complete and the expansion phase is ongoing (NCT04579757).
Surufatinib - Exploratory development:
In China, we support an Investigator Initiated Trial ("IIT")
program for surufatinib, with about 50 IITs 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.
Fruquintinib (ELUNATE(R) in China)
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 tolerability.
Fruquintinib has been studied in clinical trials with about 5,000
patients to date, both as a monotherapy and in combinations.
Aside from its first approved indication of third-line CRC (in
China), several studies of fruquintinib combined with checkpoint
inhibitors (including TYVYT(R) , geptanolimab and tislelizumab)
have been underway, some of which presented encouraging data in
2021. Registration-intent studies combined with chemotherapy
(FRUTIGA study in gastric cancer) or checkpoint inhibitors
(TYVYT(R) combo, in endometrial cancer) are ongoing in China, with
further registration studies in HCC and RCC under
consideration.
We retain all rights to fruquintinib outside of China and are
partnered with Lilly in China. The table below shows a summary of
the clinical studies for fruquintinib.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib monotherapy FRESCO : >= China III Approved and NCT02314819
3L CRC; chemotherapy launched
refractory
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib monotherapy FRESCO-2 : metastatic U.S. / III Fully enrolled NCT04322539
CRC Europe
/ Japan
/ Aus.
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib monotherapy CRC; TN(61) & U.S. Ib Ongoing NCT03251378
HR+(62) /Her2-(63)
breast cancer
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + paclitaxel FRUTIGA : 2L China III Ongoing; completed NCT03223376
gastric cancer 2(nd) interim
analysis
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + TYVYT(R) CRC China II Ongoing; data NCT04179084
(PD-1) at ASCO 2021
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + TYVYT(R) HCC China Ib/II Ongoing; data NCT03903705
(PD-1) at CSCO 2021
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + TYVYT(R) endometrial cancer China II registration-intent Ongoing; Ib NCT03903705
(PD-1) data at CSCO
2021
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + TYVYT(R) RCC China Ib/II Ongoing; data NCT03903705
(PD-1) at CSCO 2021
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + TYVYT(R) Gastrointestinal China Ib/II Ongoing NCT03903705
(PD-1) tumors
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + tislelizumab TN breast cancer U.S. Ib/II Ongoing NCT04577963
(PD-1) & endometrial
cancer
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib + tislelizumab Solid tumors Korea Ib/II Ongoing NCT04716634
(PD-1) / China
--------------------------- --------------------- -------- ---------------------- ------------------ -----------
Fruquintinib - CRC updates:
FRESCO-2 (NCT04322539) - This double-blind, placebo-controlled,
global Phase III study in refractory metastatic CRC patients
reached its enrollment goal in December 2021. It recruited 691
patients from over 150 sites in 14 countries in fifteen months,
ahead of schedule. The primary endpoint of the study is OS. Topline
results are expected to be reported in the second half of 2022 when
the event-driven primary endpoint, OS, is mature. If positive,
HUTCHMED would simultaneously initiate plans to apply for marketing
authorization of fruquintinib by the U.S. FDA, which granted Fast
Track Designation in 2020, the EMA and the Japanese PMDA.
U.S. Phase I/Ib CRC cohorts (NCT03251378) - Preliminary efficacy
and safety data of fruquintinib in patients with refractory,
metastatic CRC were presented at ASCO GI in early 2022. In patients
who had progressed on all standard therapies, including LONSURF(R)
and/or STIVARGA(R) , the DCR was 68.3% and the median duration of
treatment was 19.3 weeks. In patients who had not received
LONSURF(R) or STIVARGA(R) , the DCR was 57.5% and the median
duration of treatment was 14.1 weeks. The safety profile in both
patient populations was consistent with what has previously been
reported.
Fruquintinib - Gastric cancer:
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, is expected to enroll approximately 700
patients. Its co-primary endpoints are PFS and OS. We expect to
complete enrollment of FRUTIGA in 2022.
Fruquintinib - Combinations with checkpoint inhibitors:
Advanced endometrial cancer registration-intent cohort -
Platinum-based systemic chemotherapy is the standard first-line
treatment for advanced endometrial cancer. However, patients who
progress following first-line chemotherapy have limited treatment
options, and the prognosis remains poor. As disclosed at CSCO 2021,
as of data cutoff date of August 31, 2021, 35 patients were
enrolled (NCT03903705), including 7 treatment-naïve and 28
pretreated patients. Of them, 29 were efficacy evaluable, 4 were
treatment-naïve and 25 were pretreated. All 4 treatment-naïve
patients experienced confirmed tumor response, for ORR of 100% (95%
CI: 39.8-100.0), and median PFS was not reached. Among the 25
pretreated patients, the confirmed ORR was 32.0% (95% CI:
14.9-53.5), DCR was 92.0% (95% CI: 74.0-99.0) and the median PFS
was 6.9 months (95% CI: 4.1-NR). Among the 19 proficient mismatch
repair (pMMR) patients in the pretreated cohort, the confirmed ORR
was 36.8% (95% CI: 16.3-61.6), DCR was 94.7% (95% CI: 74.0-99.9),
median PFS was 6.9 months (95% CI: 4.1-NR), and the median OS was
not reached. Among the 35 enrolled patients, TRAEs of grade 3 or
above that occurred in more than 10% of patients were hypertension
(4 patients, 11.4%) and proteinuria (11.4%). 5 (14.3%) patients
reported treatment-related serious adverse events.
Following discussion with the NMPA in late 2021, the cohort is
now targeting to enroll over 130 patients to meet the requirements
to be a single-arm, registration-intent Phase II study.
CRC registration strategy for mCRC under discussion -
Encouraging preliminary data disclosed at ASCO 2021 for
fruquintinib in combination with two PD-1 inhibitors, TYVYT(R) and
geptanolimab, in advanced CRC showed a five-fold increase in ORR
and a doubling of median PFS as compared to the FRESCO study for
fruquintinib as a monotherapy.
In the TYVYT(R) combination study (NCT04179084), 44 patients
were enrolled into the CRC cohort, 22 of whom received the RP2D.
ORR was 23% for all patients and 27% for those who received the
RP2D. DCR was 86% for all patients and 96% for those who received
the RP2D. Median PFS was 5.6 months for all patients, and 6.9
months for those who received the RP2D. Median OS was 11.8 months
for all patients.
In the geptanolimab combination study (NCT03977090), for the 15
patients in the CRC cohort ORR was 26.7% (including 1 patient with
unconfirmed PR) and 33% in the group that received the RP2D. DCR
for all evaluable patients was 80% and median PFS was 7.3 months
(95% CI: 1.9-NR). Grade 3 TRAEs occurred in 47% of patients, and no
incidences of grade 4 or 5 TRAEs were observed.
Tislelizumab combinations (NCT04577963 & NCT04716634) - In
August 2021, we initiated an open-label, multi-center,
non-randomized Phase Ib/II study in the U.S. to assess fruquintinib
in combination with tislelizumab in patients with locally advanced
triple negative breast cancer or advanced endometrial cancer. In
addition, a Phase II study in China and Korea for fruquintinib in
combination with tislelizumab was initiated and is being led by
BeiGene for the treatment of advanced or metastatic, unresectable
gastric cancer, CRC or NSCLC.
Fruquintinib - Exploratory development:
We are conducting multiple Phase Ib expansion cohorts in the
U.S. to explore fruquintinib in CRC and breast cancer. In China,
there are about 40 ongoing IIT's in various solid tumor
settings.
Hematological Malignancies Candidates
HUTCHMED currently has five investigational drug candidates
targeting hematological malig-nan-cies in clinical development,
with its sixth expected to enter clinical development in mid-2022.
Amdizalisib (targeting PI3K ), sovleplenib (HMPL-523, targeting
Syk) and HMPL-760 (targeting BTK) are being studied in several
trials against B-cell dominant malignancies. In addition to the
three B-cell receptor pathway inhibitors, HUTCHMED is also
develop-ing HMPL-306 (targeting IDH1 and IDH2); tazemetostat (a
methyl-trans-ferase inhibitor of EZH2); and HMPL-A83 (a IND-stage
anti-CD47 monoclonal antibody).
Amdizalisib (HMPL-689)
Amdizalisib is a novel, highly selective oral inhibitor
targeting the isoform PI3K , a key component in the B-cell receptor
signaling pathway. Amdizalisib's pharmacokinetic properties have
been found to be favorable with good oral absorption, moderate
tissue distribution and low clearance in preclinical studies. We
also expect that amdizalisib will have low risk of drug
accumulation and drug-drug interactions. In 2021,
registration-intent studies for amdizalisib were initiated and
Breakthrough Therapy Designation was granted for relapse or
refractory follicular lymphoma in China. We currently retain all
rights to amdizalisib worldwide. The table below shows a summary of
the clinical studies for amdizalisib.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
------------ ----------------------- ------- ---------------------- -------------------- -----------
Amdizalisib Indolent non-Hodgkin's China Ib Ongoing; expansion NCT03128164
monotherapy lymphoma data presented
PTCL at ESMO 2021
------------ ----------------------- ------- ---------------------- -------------------- -----------
Amdizalisib Relapsed/refractory China II registration-intent Ongoing: initiated NCT04849351
monotherapy follicular lymphoma in Apr 2021.
Breakthrough
Therapy Designation
------------ ----------------------- ------- ---------------------- -------------------- -----------
Amdizalisib Relapsed/refractory China II registration-intent Ongoing: initiated NCT04849351
monotherapy marginal zone lymphoma in Apr 2021
------------ ----------------------- ------- ---------------------- -------------------- -----------
Amdizalisib Indolent non-Hodgkin's U.S./ I/Ib Dose expansion NCT03786926
monotherapy lymphoma Europe initiated in
H2 2021
------------ ----------------------- ------- ---------------------- -------------------- -----------
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. The primary endpoint is ORR.
The trial is being conducted in over 35 sites in China.
This initiation is based on the highly promising preliminary
results presented at ESMO 2021 from the Phase Ib expansion study
ongoing in China (NCT03128164), which demonstrated that amdizalisib
was well tolerated with single-agent clinical activity in
relapsed/refractory B-cell lymphoma patients.
Sovleplenib (HMPL-523)
Sovleplenib is a novel, selective, oral inhibitor targeting Syk,
for the treatment of hematological cancers and immune diseases. Syk
is a component in B-cell receptor signaling pathway.
In 2021 we initiated Phase III study in China for ITP, for which
it has received Breakthrough Therapy Designation, and presented
data on both ITP and hematological malignancies at ASH 2021. We
currently retain all rights to sovleplenib worldwide. The table
below shows a summary of the clinical studies for sovleplenib.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
----------------------- ----------------------- --------- ----- -------------------------- -----------
Sovleplenib monotherapy ESLIM-01 : ITP China III Ongoing: initiated NCT05029635
in Oct 2021. Breakthrough
Therapy Designation
----------------------- ----------------------- --------- ----- -------------------------- -----------
Sovleplenib monotherapy ITP China I/Ib Completed. Data at NCT03951623
ASH 2021
----------------------- ----------------------- --------- ----- -------------------------- -----------
Sovleplenib monotherapy Indolent non-Hodgkin's Australia Ib Active, not recruiting NCT02503033
lymphoma
----------------------- ----------------------- --------- ----- -------------------------- -----------
Sovleplenib monotherapy Indolent non-Hodgkin's U.S. I/Ib Ongoing. Prelim. NCT03779113
lymphoma / Europe data at ASH 2021
----------------------- ----------------------- --------- ----- -------------------------- -----------
Sovleplenib monotherapy Multiple sub-types China I/Ib Completed NCT02857998
of B-cell malignancies
----------------------- ----------------------- --------- ----- -------------------------- -----------
Sovleplenib monotherapy wAIHA China II In planning N/A
----------------------- ----------------------- --------- ----- -------------------------- -----------
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 approximately 180 adult patients with
primary ITP, 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.
China Phase I/Ib in ITP (NCT03951623) - ESLIM-01 was initiated
based on encouraging data from this Phase Ib study presented at ASH
2021. At data cutoff, 34 patients received sovleplenib and 11
received placebo. Among 16 patients who received the RP2D of 300mg
once daily, 11 (68.8%) experienced response (defined by at least
one incident of platelet count being >= 50x10 /L in the initial
8-week double-blinded phase of the study), compared to one placebo
patient (9.1%). One additional patient at the RP2D experienced
response during the subsequent 16-week open-label phase of the
study, and all four placebo patients that crossed over to receive
treatment at RP2D after the initial 8-week double-blinded phase
experienced response. In total, 16 out of 20 patients (80%)
experienced response during both phases of the study. Durable
response (defined as platelet count being >= 50x10 /L in at
least 4 out of 6 last scheduled visits) was reported in 8 out of 20
patients (40%) who received RP2D in both phases of the study.
Safety data were presented for all 41 patients treated by
sovleplenib. The median duration of treatment was 142 days (range:
23-170). No patients discontinued treatment due to TRAE, and no
cases of treatment-related serious adverse events were reported.
There were 30 patients (73%) who experienced TRAEs, including 3
(7.3%) who experienced grade 3 or above TRAEs, one of whom received
the RP2D. No TRAEs of grade 3 or above occurred in more than one
patient.
Australia/China Phase I/Ib studies in multiple subtypes of
B-cell malignancies (NCT02503033/NCT02857998) - Our Phase I/Ib dose
escalation and expansion studies in Australia and China have now
enrolled over 200 patients in a broad range of hematological
cancers and have identified indications of interest for future
development.
U.S./Europe Phase I/Ib in indolent non-Hodgkin's lymphoma
(NCT03779113) - We presented preliminary results from this Phase I
study at ASH 2021, which support progressing sovleplenib into the
ongoing dose expansion phase of the study to evaluate its safety
and efficacy in multiple subtypes of B-cell and T-cell lymphoma at
the RP2D of 700mg.
TAZVERIK(R) (tazemetostat)
In August 2021, we entered into a strategic collaboration with
Epizyme to research, develop, manufacture and commercialize
TAZVERIK(R) in Greater China, including mainland China, Hong Kong,
Macau and Taiwan. TAZVERIK(R) is an inhibitor of EZH2 developed by
Epizyme 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.
Under the terms of the agreement, we are responsible for the
development and commercialization of TAZVERIK(R) in Greater China.
Epizyme received a $25 million upfront payment and is eligible to
receive up to an additional $110 million in development and
regulatory milestone payments, across up to eight potential
indications, and up to an additional $175 million in sales
milestone payments. Epizyme is also eligible to receive tiered
royalties of mid -teen to low-twenties percent based on annual net
sales of TAZVERIK(R) in Greater China. In addition, we received a
four-year warrant to acquire up to $65 million of Epizyme shares at
$11.50 per share.
We are developing and plan to seek approval for TAZVERIK(R) in
various hematological and solid tumors, including epithelial
sarcoma, follicular lymphoma and diffuse large b-cell lymphoma
(DLBCL) in Greater China. We are participating in Epizyme's
SYMPHONY-1 (EZH-302) study, leading it in Greater China. The
parties also intend to conduct additional global studies jointly.
We will generally be responsible for funding all clinical trials of
TAZVERIK(R) in Greater China, including the portion of global
trials conducted there. We are responsible for the research,
manufacturing and commercialization of TAZVERIK(R) in Greater
China.
The table below shows a summary of the clinical studies for
TAZVERIK(R) .
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
--------------------- -------------------- ------ ---------------------- ------------------ -----------
TAZVERIK(R) SYMPHONY-1 : 2L Global III Ongoing: HUTCHMED NCT04224493
+ R(2) (lenalidomide follicular lymphoma is leading China
& rituximab) portion of global
Ph III
--------------------- -------------------- ------ ---------------------- ------------------ -----------
TAZVERIK(R) Relapsed/refractory China II registration-intent In planning Pending
monotherapy 3L+ follicular (bridging)
lymphoma
--------------------- -------------------- ------ ---------------------- ------------------ -----------
TAZVERIK(R) Indolent lymphoma China II In planning N/A
combinations combinations
--------------------- -------------------- ------ ---------------------- ------------------ -----------
SYMPHONY-1 (NCT04224493) - This is a global, multicenter,
randomized, double-blind, active-controlled, 3-stage,
biomarker-enriched, Phase Ib/III study of TAZVERIK(R) in
combination with R(2) in patients with relapsed or refractory
follicular lymphoma after at least one prior line of therapy.
Epizyme conducted the Phase Ib portion of the study in 2021, which
determined the recommended Phase III dose ("RP3D") and also
demonstrated potential efficacy in second-line follicular lymphoma.
The safety profile of the combination was consistent with the
previously reported safety information in the U.S. prescribing
information for both TAZVERIK(R) and R(2), respectively.
In the Phase III portion of the trial, approximately 500
patients are randomly assigned to receive the RP3D of TAZVERIK(R) +
R(2) or placebo + R(2). The study will also include a maintenance
arm with TAZVERIK(R) or placebo following the first year of
treatment with TAZVERIK(R) + R(2) or placebo + R(2). We anticipate
the first patient enrollment in H1 2022 in the China Phase III
portion of SYMPHONY-1.
We intend to initiate a bridging study in follicular lymphoma to
support China registration, as well as several combination studies
of TAZVERIK(R) with HUTCHMED assets.
HMPL-306
HMPL-306 is a novel dual-inhibitor of IDH1 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. We currently retain all
rights to HMPL-306 worldwide. The table below shows a summary of
the clinical studies for HMPL-306.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
-------------------- ---------------------------- ----- ----- ---------------------- -----------
HMPL-306 monotherapy Hematological malignancies China I Ongoing: close NCT04272957
to establishing
the RP2D, dose
expansion in mid-2022
-------------------- ---------------------------- ----- ----- ---------------------- -----------
HMPL-306 monotherapy Solid tumors including U.S. I Ongoing: initiated NCT04762602
but not limited in Mar 2021 Dose
to gliomas, chondrosarcomas expansion phase
or cholangiocarcinomas is expected to
start in mid-2022
-------------------- ---------------------------- ----- ----- ---------------------- -----------
HMPL-306 monotherapy Hematological malignancies U.S. I Ongoing: initiated NCT04764474
in Mar 2021
-------------------- ---------------------------- ----- ----- ---------------------- -----------
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 and U.S. Phase I studies
initiated in early 2022 will include patients treated with a prior
regimen containing a BTK inhibitor. We currently retain all rights
to HMPL-760 worldwide.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
-------------------- ------------------- ----- ----- ------------------ -----------
HMPL-760 monotherapy CLL, SLL, other China I Ongoing: initiated NCT05190068
NHL in Jan 2022
-------------------- ------------------- ----- ----- ------------------ -----------
HMPL-760 monotherapy CLL, SLL, other U.S. I Initiating NCT05176691
NHL
-------------------- ------------------- ----- ----- ------------------ -----------
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. We currently retain all rights to HMPL-453 worldwide.
The table below shows a summary of the clinical studies for
HMPL-453.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
------------------------- --------------------- ----- ----- -------------------- -----------
HMPL-453 monotherapy 2L Cholangiocarcinoma China II Ongoing. 10-15% NCT04353375
(IHCC with FGFR of IHCC pts' tumors
fusion) harbor FGFR2 fusion
------------------------- --------------------- ----- ----- -------------------- -----------
HMPL-453 + chemotherapies Multiple China I/II Ongoing: initiated NCT05173142
in Jan 2022
------------------------- --------------------- ----- ----- -------------------- -----------
HMPL-453 +TUOYI(R) Multiple China I/II Ongoing: initiated NCT05173142
(PD--1) in Jan 2022
------------------------- --------------------- ----- ----- -------------------- -----------
HMPL-295
HMPL-295 is a novel ERK inhibitor. ERK is a downstream component
of the RAS-RAF-MEK-ERK signaling cascade (MAPK pathway). This is
our first of multiple candidates in discovery targeting the MAPK
pathway. A China Phase I study was initiated in July 2021. We
currently retain 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 more than 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.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
-------------------- ------------------- ----- ----- ------------------ -----------
HMPL-295 monotherapy Solid tumors China I Ongoing: initiated NCT04908046
in Jul 2021
-------------------- ------------------- ----- ----- ------------------ -----------
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. We currently retain 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 combined with immuno-oncology or other
therapeutic agents. Currently no CSF-1R inhibitor has been approved
in China.
Treatment Name, Line, Patient Sites Phase Status/Plan NCT #
Focus
-------------------- ------------------- ----- ----- ------------------ -----------
HMPL-653 monotherapy Solid tumors & China I Ongoing: initiated NCT05190068
tenosynovial giant in Jan 2022, 110
cell tumors patients expected
to be enrolled
-------------------- ------------------- ----- ----- ------------------ -----------
Immunology Collaboration with Inmagene
In January 2021, we entered into a strategic partnership with
Inmagene, a clinical development stage company with a focus on
immunological diseases, to further develop four novel preclinical
drug candidates we discovered for the potential treatment of
multiple immunological diseases. Funded by Inmagene, we will work
together to move the drug candidates towards IND. If successful,
Inmagene will then advance the drug candidates through global
clinical development. INDs for the first two compounds are expected
to be submitted in China in 2022.
OTHER VENTURES
Our Other Ventures include drug marketing and distribution
platforms covering about 290 cities and towns in China with around
2,900 mainly manufacturing and commercial personnel. Built over the
past 20 years, it primarily focuses on prescription drug and
science-based nutrition products through several joint ventures and
subsidiary companies.
In 2021, our Other Ventures delivered encouraging growth with
consolidated revenues up 20% (13% at CER) to $236.5 million (2020:
$197.8m). Consolidated net income attributable to HUTCHMED from our
Other Ventures grew by 24% (15% at CER) to $54.4 million (2020:
$44.0m), excluding one-time gains. One-time gains in 2021 totaled
$88.5 million (2020: $28.8m), including $82.9 million (2020: nil)
from the divestment of HBYS and $5.6 million (2020: $28.8m) from
one-time land compensation.
Hutchison Sinopharm: O ur 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% (16% at CER) to $204.1 million in 2021 (2020: $165.1m).
In 2021, the Hong Kong International Arbitration Centre made a
final award in favor of Hutchison Sinopharm against Luye Pharma
Hong Kong Ltd. in the amount of RMB253.2 million ($39.6 million),
plus costs and interest, in connection with the termination of
Hutchison Sinopharm's right to distribute SEROQUEL(R) in China.
Payment of the award is expected in 2022.
Hutchison Sinopharm has a dedicated team of about 130 commercial
staff focused on two key areas of operation. First, a team that
markets third-party prescription drug products directly to about
700 public and private hospitals in the Shanghai region and through
a network of about 50 distributors to cover all other provinces in
China. Second, a team that markets HUTCHMED's science-based
maternal and infant supplements through a network of over 32,000
promoters in China.
SHPL: Our own-brand prescription drugs business, operated
through our non-consolidated joint venture SHPL, grew sales by 20%
(12% at CER) to $332.6 million (2020: $276.4m). This sales growth
and favorable product mix led to an increase of 33% (24% at CER) in
net income attributable to HUTCHMED to $44.7 million (2020:
$33.5m).
The SHPL operation is large-scale, with a commercial team of
over 2,2 00 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 over 530 manufacturing staff .
SXBX(64) pill : SHPL's main product is SXBX pill, an oral
vasodilator prescription therapy for coronary artery disease. SXBX
pill is the third largest botanical prescription drug in this
indication in China, with a national market share in January to
December 2021 of 19.6% (2020: 18.2%) . Sales increased by 23% (15%
at CER) to $307.1 million in 2021 (2020: $250.0m).
SXBX pill is protected by a formulation patent that expires in
202 9, 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 the NEML means that all
Chinese state-owned health care institutions are required to carry
it. SXBX pill is fully reimbursed in all China .
Dividends: Our share of SHPL's profits are passed to the
HUTCHMED Group through dividend payments. In 2021, dividends of
$49.9 million (2020: $36.1m) were paid from SHPL to the HUTCHMED
Group level with aggregate dividends received by HUTCHMED since
inception of over $240 million.
HBYS disposal: In September 2021, we divested our entire
indirect interest in HBYS, a non-core and non-consolidated
over-the-counter drug joint venture business, to GL Capital for
$159.1 million in cash and including $46.4 million expected to be
received related to undistributed profits, this represents about 22
times of HBYS' adjusted 2020 net profit attributable to HUTCHMED
equity holders of $7.7 million(65) . The sale of this non-core
consumer health products business resulted in a one-time gain of
approximately $82.9 million attributable to HUTCHMED equity
holders.
Christian Hogg
Chief Executive Officer
March 3, 2022
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
include the change in short-term investments for the period to the
change in cash and cash equivalents 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 cash and cash equivalents and
short-term investments to Adjusted Group net cash flows excluding
financing activities:
$'millions 2021 2020
---------------------------------------------------------- ------- -------
Cash and cash equivalents and short-term investments
at end of year 1,011.7 435.2
Excludes: Cash and cash equivalents and short-term
investments at beginning of year (435.2) (217.2)
Excludes: Net cash generated from financing activities
for the year (650.0) (296.4)
----------------------------------------------------------- ------- -------
Adjusted Group net cash flows excluding financing
activities (73.5) (78.4)
----------------------------------------------------------- ------- -------
Reconciliation of GAAP revenues and net income attributable to
HUTCHMED to CER:
$'millions (except
%) Year Ended Change Amount Change %
---------------------------------------------- ------------------ ----------------------- ----------------------
December December Exchange Exchange
31, 2021 31, 2020 Actual CER effect Actual CER effect
---------------------------------------------- -------- -------- ------ ----- -------- ------ ---- --------
Consolidated revenues
Oncology/Immunology 119.6 30.2 89.4 86.6 2.8 296% 287% 9%
Other Ventures^ 236.5 197.8 38.7 25.2 13.5 20% 13% 7%
^ Includes:
* Hutchison Sinopharm- prescription drugs 204.1 165.1 39.0 26.2 12.8 24% 16% 8%
Non-consolidated joint
venture revenues
- SHPL 332.6 276.4 56.2 34.1 22.1 20% 12% 8%
- SXBX pill 307.1 250.0 57.1 36.5 20.6 23% 15% 8%
Consolidated net income
attributable to HUTCHMED
- Other Ventures 142.9 72.8 70.1 66.4 3.7 96% 91% 5%
- Consolidated entities 2.6 2.8 (0.2) (0.3) 0.1 -8% -12% 4%
- Equity investees 140.3 70.0 70.3 66.7 3.6 100% 95% 5%
- SHPL 44.7 33.5 11.2 7.9 3.3 33% 24% 9%
- HBYS* 95.6 36.5 59.1 58.8 0.3 162% 161% 1%
Excluding one-time
gains
Other Ventures 54.4 44.0 10.4 6.7 3.7 24% 15% 9%
- Consolidated entities 2.6 2.8 (0.2) (0.3) 0.1 -8% -12% 4%
* Equity investees 51.8 41.2 10.6 7.0 3.6 26% 17% 9%
- SHPL 44.7 33.5 11.2 7.9 3.3 33% 24% 9%
- HBYS* 7.1 7.7 (0.6) (0.9) 0.3 -7% -12% 5%
* Period from January 1, 2021 to September 28, 2021. For the year
ended December 31, 2021, one-time gains include gain on divestment
of $82.9 million (2020: nil) and land compensation gain of $5.6
million (2020: $28.8 million), respectively.
-------------------------------------------------------------------------------------------------------------------
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.
Our Oncology/Immunology operations have historically not
generated significant profits or have operated at a net loss, as
creating potential global first-in-class or best-in-class drug
candidates requires a significant investment of resources over a
prolonged period of time. As such, we incurred net losses of $194.6
million for the year ended December 31, 2021 and net losses of
$125.7 million for the year ended December 31, 2020.
As of December 31, 2021, we had cash and cash equivalents and
short-term investments of $1,011.7 million and unutilized bank
facilities of $157.4 million. As of December 31, 2021, we had $26.9
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
$89,000 and $44,000 for the years ended December 31, 2021 and 2020,
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 $0.1 million as of December 31, 2021.
In addition, our non-consolidated joint venture, SHPL, held an
aggregate of $50.0 million in cash and cash equivalents and no bank
borrowings as of December 31, 2021. 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,
-------------------------
2021 2020
------------ -----------
(in $'000)
Cash Flow Data:
Net cash used in operating activities (204,223) (62,066)
Net cash used in investing activities (306,320) (125,441)
Net cash generated from financing activities 650,028 296,434
------------ -----------
Net increase in cash and cash equivalents 139,485 108,927
Effect of exchange rate changes 2,427 5,546
Cash and cash equivalents at beginning of the year 235,630 121,157
------------ -----------
Cash and cash equivalents at end of the year 377,542 235,630
============ ===========
Net Cash used in Operating Activities
Net cash used in operating activities was $62.1 million for the
year ended December 31, 2020, compared to net cash used in
operating activities of $204.2 million for the year ended December
31, 2021. The net change of $142.1 million was primarily
attributable to higher operating expenses of $259.8 million from
$424.6 million for the year ended December 31, 2020 to $684.4
million for the year ended December 31, 2021, partially offset by
an increase in revenues of approximately $128.1 million from $228.0
million for the year ended December 31, 2020 to $356.1 million for
the year ended December 31, 2021 .
Net Cash used in Investing Activities
Net cash used in investing activities was $125.4 million for the
year ended December 31, 2020, compared to net cash used in
investing activities of $306.3 million for the year ended December
31, 2021. The net change of $180.9 million was primarily
attributable to an increase in net deposits in short-term
investments of $331.1 million from $103.5 million for the year
ended December 31, 2020 to $434.6 million for the year ended
December 31, 2021. The net change was also attributable to the
payment of $15.0 million during the year ended December 31, 2021 to
acquire a warrant to purchase Epizyme shares. The net change was
partially offset by the proceeds received from the divestment of
Hutchison Baiyunshan of $159.1 million during the year ended
December 31, 2021.
Net Cash generated from Financing Activities
Net cash generated from financing activities was $296.4 million
for the year ended December 31, 2020, compared to net cash
generated from financing activities of $650.0 million for the year
ended December 31, 2021. The net change of $353.6 million was
primarily attributable to net proceeds of $685.4 million from a
private placement in April 2021 and from our public offering on the
SEHK with over-allotment option exercised in full in June and July
2021, as compared to net proceeds of $310.0 million from our
follow-on offering in the United States and private placements in
2020. The net change was partially offset by an increase in
purchases of ADSs by our Company for the settlement of certain
equity awards which totaled $12.9 million for the year ended
December 31, 2020 as compared to $27.3 million for the year ended
December 31, 2021, as well as an increase in dividends paid to
non-controlling shareholders of subsidiaries which totaled $1.5
million for the year ended December 31, 2020 as compared to $9.9
million for the year ended December 31, 2021.
LOAN FACILITIES
In November 2018, our subsidiary renewed a three-year revolving
loan facility with HSBC(66) . The facility amount of this loan was
HK$234.0 million ($30.0 million) with an interest rate at HIBOR(67)
plus 0.85% per annum. This credit facility was guaranteed by us and
includes certain financial covenant requirements. The revolving
loan facility expired in November 2021.
In May 2019, our subsidiary entered into additional credit
facility arrangements with HSBC for the provision of unsecured
credit facilities in the aggregate amount of HK$400.0 million
($51.3 million). The 3-year credit facilities include (i) a
HK$210.0 million ($26.9 million) term loan facility and (ii) a
HK$190.0 million ($24.4 million) revolving loan facility, both with
an interest rate at HIBOR plus 0.85% per annum. These credit
facilities are guaranteed by us and include certain financial
covenant requirements. In October 2019, we drew down HK$210.0
million ($26.9 million) from the term loan facility and as of
December 31, 2021, no amount was drawn from the revolving loan
facility.
In August 2020, our subsidiary entered into a 24-month revolving
credit facility with Deutsche Bank AG(68) in the amount of HK$117.0
million ($15.0 million) with an interest rate at HIBOR plus 4.5%
per annum. This revolving facility is guaranteed by us and includes
certain financial covenant requirements. As of December 31, 2021,
no amount was drawn from the revolving loan facility.
In October 2021, our subsidiary entered into a 10-year fixed
asset loan facility agreement with Bank of China Limited for the
provision of a secured credit facility in the amount of RMB754.9
million ($118.1 million) with an annual interest rate at the 5-year
China Loan Prime Rate less 0.65%. 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, 2021, no amount
was drawn from the fixed asset loan facility.
Our non-consolidated joint venture SHPL had no bank borrowings
outstanding as of December 31, 2021.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table sets forth our contractual obligations as of
December 31, 2021. 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, warehouse, 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 26,923 26,923 - - -
Interest on bank borrowings 104 104 - - -
Purchase obligations 44,204 42,519 1,685 - -
Lease obligations 12,818 5,348 5,316 1,359 795
------ ---------------- --------- --------- -----------------
84,049 74,894 7,001 1,359 795
====== ================ ========= ========= =================
SHPL
The following table sets forth the contractual obligations of
our non-consolidated joint venture SHPL as of December 31, 2021.
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 155 155 - - -
Lease obligations 3,149 859 1,577 713 -
----- ---------------- --------- --------- -----------------
3,304 1,014 1,577 713 -
===== ================ ========= ========= =================
FOREIGN EXCHANGE RISK
Most of our revenues and expenses are denominated in renminbi,
and our consolidated financial statements are presented in U.S.
dollars. 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. In
general, our exposure to foreign exchange risks is limited.
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 PBOC(69) . 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 net loss of a 1.0% interest rate
shift would be a maximum increase/decrease of $0.3 million for the
year ended December 31, 2021.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and we do not
currently have, any material off-balance sheet arrangements.
CONTINGENT LIABILITIES
Other than as disclosed in note 16 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 2.6% as of
December 31, 2021, a decrease from 5.2% as of December 31, 2020.
The decrease was primarily attributable to the increase in equity
due to the primary offering of shares on HKEX.
SIGNIFICANT INVESTMENTS HELD
Except for our investment in a non-consolidated joint venture
SHPL with a carrying value of $76.0 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, 2021.
Place of establishment and Nominal Value of Equity Interest
operations Registered Capital 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 Other Ventures
is operated through SHPL. Dividends received from SHPL for the year
ended December 31, 2021 were $49.9 million.
FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS
Note 16 to the full year financial statements discloses our
planned expenditures on capital assets as of December 31, 2021. At
this date there were no other plans to incur material expenditures
on additional investments or capital assets.
MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES
AND JOINT VENTURES
During the year ended December 31, 2021, except for the HBYS
disposal as disclosed in note 23 to the full year financial
statements, we did not have any other material acquisitions and
disposals of subsidiaries, associates and joint ventures.
PLEDGE OF ASSETS
As of December 31, 2021, we did not have any pledge of assets
(as of December 31, 2020: nil). Our 10-year fixed asset loan
facility agreement with Bank of China Limited is secured by the
underlying leasehold land and buildings; however, no amount was
drawn from the fixed asset loan facility as of December 31,
2021.
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
4.5%, 0.2% and 1.5% in 2019, 2020 and 2021, respectively. 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 DIVID
The Board does not recommend any final dividend for the year
ended December 31, 2021.
OTHER INFORMATION
CORPORATE STRATEGY
The primary objective of the Company and its subsidiaries (the
"Group") is to become a fully integrated global 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, known as the
Oncology/Immunology operations, to develop and expand its drug
candidate portfolio for the global market while also building on
the first-mover advantage in the development and launch of novel
cancer drugs in China. 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 this
objective. Further information on the sustainability initiatives of
the Group and its key relationships with stakeholders can also be
found in the standalone Sustainability Report of the Group.
HUMAN RESOURCES
As at December 31, 2021, the Group employed approximately 1,760
(2020: 1,280) full time staff members. Staff costs during the year
ended December 31, 2021, including directors' emoluments, totaled
$180.2 million (2020: $101.0 m).
The Group fully recognizes the importance of high-quality human
resources 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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") RESPONSIBILITY
The Group is committed to the long-term sustainability of its
businesses and the communities in which it conducts business. The
Group supports the proposition that enterprises should give back to
society and bear social responsibility. It encourages its business
units to contribute to the welfare of the communities in which it
operates. Moreover, the Group's business is anchored to the purpose
of serving medical needs of the public and distributing its drugs
to those in need. While advancing breakthroughs with its novel
drugs, the Group ensures every drug product is marketed and
manufactured in a high quality, safe, traceable and affordable
manner. Furthermore, the Group is continually improving its
business practices and employee training in such best practices. It
has adopted a proactive approach to ESG responsibility and has
established a Sustainability Committee comprising four Directors to
spearhead the ESG initiatives and activities of the Group and to
enhance the Group's ESG efforts.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from
Friday, April 22, 2022 to Wednesday, April 27, 2022, both days
inclusive, during which period no transfer of shares will be
effected, to determine shareholders' entitlement to attend and vote
at the 2022 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, 17(th) 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 Thursday, April 21, 2022.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the year ended December 31, 2021 (the "Reporting
Period"):
(a) on April 14, 2021, the Company issued 16,393,445 ordinary
shares to Pachytene Limited (an investment vehicle wholly-owned by
Baring Private Equity Asia Fund VII) at the price of $30.50 per
American depositary share pursuant to a private placement; and
(b) on June 30, 2021, the Company issued 104,000,000 ordinary
shares at the price of HK$40.10 per ordinary share pursuant to the
listing and primary offering of ordinary shares on the Main Board
of HKEX. Following the exercise of an over-allotment option granted
by the Company in the context of that offering, the Company issued
an additional 15,600,000 ordinary shares at the same price per
ordinary share on July 15, 2021. Details of the offering and the
over-allotment option are set out in the prospectus issued by the
Company dated June 18, 2021 (the "Prospectus").
Save as disclosed above, neither the Company nor any of its
subsidiaries has purchased, sold or redeemed any of the listed
securities of the Company during the Reporting Period.
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
Group as it believes that an 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
of Directors (the "Board"), effective risk management and internal
control systems, stringent disclosure practices, transparency and
accountability. It is, in addition, committed to continuously
improving these practices and inculcating an ethical corporate
culture.
Prior to the listing on HKEX, the Company has adopted the
principles of the UK Corporate Governance Code ("UK CG Code")
applicable to companies listed on the premium segment of the London
Stock Exchange main market, despite its shares being traded on the
AIM market and hence not required to comply with the UK CG Code.
Following the listing of the Company on HKEX on June 30, 2021, the
Board has adopted the Corporate Governance Code ("HK CG Code") as
set out in Appendix 14 to the Rules Governing the Listing of
Securities on HKEX in replacement of the UK CG Code and was in
compliance with all code provisions of the HK CG Code.
COMPLIANCE WITH THE SHARE DEALINGS CODE FOR SECURITIES
TRANSACTIONS BY DIRECTORS
The Board has adopted the Code on Dealings in Shares 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 10 to 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
their compliance with the required standards set out in such code
regarding their securities transactions throughout their tenure
during the year ended December 31, 2021.
ANNUAL GENERAL MEETING
The Annual General Meeting of HUTCHMED will be held on
Wednesday, April 27, 2022. Notice of the 2022 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 $585.2
million from the offering and the over-allotment option for the
purposes and in the amounts (adjusted on pro rata basis based on
the actual net proceeds) as disclosed in the Prospectus is as
below:
Unutilized Net Expected
Percentage of Actual Usage up Proceeds as of Timeline for
Total Net Approximate to December 31, December 31, Utilization of
Use of Proceeds Proceeds Amount 2021 2021 Proceeds (note)
------------------- ---------------- ---------------- ---------------- --------------- ---------------
(%) ($'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 99.8 192.9 2023
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 17.9 40.6 2023
Further strengthen
our integrated
capabilities across
commercialization,
clinical and
regulatory
and manufacturing 20% 117.1 21.9 95.2 2023
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 25.0 62.8 2023
Working capital,
expanding internal
capabilities
globally and in
China and general
corporate
purposes 5% 29.1 17.2 11.9 2022
---------------- ---------------- ---------------- ---------------
100% 585.2 181.8 403.4
================ ================ ================ ===============
Note: There was no change in the intended use of net proceeds as
previously disclosed, and the Company plans to gradually utilize
the remaining net proceeds in accordance with such intended
purposes depending on actual market conditions and business needs,
which is expected to be fully utilized by the end of year 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, 2021 have been
audited by the Company's auditor, PricewaterhouseCoopers, in
accordance with accounting principles generally accepted in the
U.S. The consolidated financial statements of the Company and its
subsidiary companies for the year ended December 31, 2021 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, 2021 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.londonstockexchange.com ) and the Company ( www.hutch --
med.com ). The annual report of the Group for the year ended
December 31, 2021 will be published on the websites of HKEX and the
Company, and dispatched to the Company's shareholders in due
course.
REFERENCES & ABBREVIATIONS
1 AstraZeneca = AstraZeneca PLC and its wholly owned subsidiary, AstraZeneca AB (publ).
2 NSCLC = Non-small cell lung cancer.
3 NDA = New Drug Application.
4 MAA = Marketing Authorisation Application.
5 CRC = Colorectal cancer.
6 FGFR = Fibroblast growth factor receptor.
7 IDH = Isocitrate dehydrogenase.
8 ERK = Extracellular signal-regulated kinase.
9 BTK = Bruton's tyrosine kinase.
10 CSF-1R = Colony stimulating factor-1 receptor.
11 In-market sales = total sales to third parties provided by
Eli Lilly (ELUNATE(R) ), AstraZeneca (ORPATHYS(R) ) and HUTCHMED
(SULANDA(R) ).
12 MET = Mesenchymal epithelial transition receptor.
13 NRDL = National Reimbursement Drug List.
14 R&D = Research and development.
15 NMPA = National Medical Products Administration.
16 ITP = Immune thrombocytopenia purpura.
17 FDA = Food and Drug Administration.
18 PDUFA = Prescription Drug User Fee Act.
19 EMA = European Medicines Agency.
20 EOP2 = End of Phase 2.
21 EGFR = Epidermal growth factor receptor.
22 TKI = Tyrosine kinase inhibitor.
23 ASCO = American Society of Clinical Oncology.
24 WCLC = World Conference on Lung Cancer.
25 VEGFR = Vascular endothelial growth factor receptor.
26 NEC = Neuroendocrine carcinoma.
27 Junshi = Shanghai Junshi Biosciences Co., Ltd.
28 PMDA = Japanese Pharmaceuticals and Medical Devices Agency.
29 BeiGene = BeiGene, Ltd.
30 PD-1 = Programmed Cell Death Protein-1.
31 ESMO IO = European Society for Medical Oncology Immuno-Oncology Congress.
32 CgA = Chromogranin A.
33 BTC = Biliary tract cancer.
34 HCC = Hepatocellular carcinoma.
35 RCC = Renal cell cancer.
36 CSCO = Chinese Society of Clinical Oncology Annual Meeting.
37 Genor = Genor Biopharma Co. Ltd.
38 OS = Overall survival.
39 PI3K = Phosphoinositide 3-kinase delta.
40 RP2D = Recommended Phase II dose.
41 Syk = Spleen tyrosine kinase.
42 ASH 2021 = the 63(rd) ASH Annual Meeting and Exposition in December 2021.
43 MAPK pathway = RAS-RAF-MEK-ERK signaling cascade.
44 We also report changes in performance at constant exchange
rate ("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.
45 SHPL = Shanghai Hutchison Pharmaceuticals Limited.
46 HBYS = Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited.
47 HKEX = The Stock Exchange of Hong Kong Limited.
48 Inmagene = Inmagene Biopharmaceuticals.
49 Hutchison Sinopharm = Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company Limited.
50 GAAP = Generally Accepted Accounting Principles.
51 Lilly = Eli Lilly and Company.
52 SG&A Expenses = selling, general and administrative expenses.
53 ADS = American depositary share.
54 EGFRm+ = Epidermal growth factor receptor mutation positive.
55 ORR = Objective response rate.
56 DCR = Disease control rate.
57 NEN = Neuroendocrine neoplasms.
58 SCLC = Small cell lung cancer.
59 DoR = Duration of response.
60 TRAE = Treatment related adverse event.
61 TN = Triple negative.
62 HR+ = Hormone receptor positive.
63 Her2- = Human epidermal growth factor receptor 2 negative.
64 SXBX = She Xiang Bao Xin.
65 HBYS' adjusted net profit attributable to HUTCHMED equity
holders (after 20% non-controlling interest) in 2020 of $7.7
million is a non-GAAP measure which is 40% of HBYS' 2020 net profit
of $91.3 million less $72.0 million gain on land compensation, net
of tax
66 HSBC = The Hongkong and Shanghai Banking Corporation Limited.
67 HIBOR = Hong Kong Interbank Offered Rate.
68 Deutsche Bank AG = Deutsche Bank AG, Hong Kong Branch.
69 PBOC = People's Bank of China.
CONSOLIDATED FINANCIAL STATEMENTS
HUTCHMED (CHINA) LIMITED
Consolidated Balance Sheets
(in US$'000, except share data)
December 31,
----------------------
Note 2021 2020
-------- ---------- ----------
Assets
Current assets
Cash and cash equivalents 5 377,542 235,630
Short-term investments 5 634,158 199,546
Accounts receivable 6 83,580 47,870
Other receivables, prepayments and deposits 7 81,041 27,928
Inventories 8 35,755 19,766
----------
Total current assets 1,212,076 530,740
Property, plant and equipment 9 41,275 24,170
Right-of-use assets 10 11,879 8,016
Deferred tax assets 25(ii) 9,401 1,515
Investments in equity investees 11 76,479 139,505
Other non-current assets 12 21,551 20,172
---------- ----------
Total assets 1,372,661 724,118
========== ==========
Liabilities and shareholders' equity
Current liabilities
Accounts payable 13 41,177 31,612
Other payables, accruals and advance receipts 14 210,839 121,283
Bank borrowings 15 26,905 -
Income tax payable 25(iii) 15,546 1,120
Other current liabilities 17,191 4,382
Total current liabilities 311,658 158,397
Lease liabilities 10 7,161 6,064
Deferred tax liabilities 25(ii) 2,765 5,063
Long-term bank borrowings 15 - 26,861
Other non-current liabilities 11,563 8,784
---------- ----------
Total liabilities 333,147 205,169
Commitments and contingencies 16
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000 shares authorized;
864,530,850 and 727,722,215
shares issued at December 31, 2021 and 2020 respectively 17 86,453 72,772
Additional paid-in capital 1,505,196 822,458
Accumulated losses (610,328) (415,591)
Accumulated other comprehensive income 5,572 4,477
---------- ----------
Total Company's shareholders' equity 986,893 484,116
Non-controlling interests 52,621 34,833
---------- ----------
Total shareholders' equity 1,039,514 518,949
---------- ----------
Total liabilities and shareholders' equity 1,372,661 724,118
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Operations
(in US$'000, except share and per share data)
Year Ended December 31,
----------------------------------------
Note 2021 2020 2019
------ ------------ ------------ ------------
Revenues
Goods -third parties 266,199 203,606 175,990
* related parties 24(i) 4,256 5,484 7,637
Services -commercialization-third parties 27,428 3,734 2,584
* collaboration research and development
-third parties 18,995 9,771 15,532
* research and development
-related parties 24(i) 525 491 494
Other collaboration revenue
-royalties-third parties 15,064 4,890 2,653
* licensing-third parties 23,661 - -
Total revenues 19 356,128 227,976 204,890
------------ ------------ ------------
Operating expenses
Costs of goods-third parties (229,448) (178,828) (152,729)
Costs of goods-related parties (3,114) (3,671) (5,494)
Costs of services-commercialization -third parties (25,672) (6,020) (1,929)
Research and development expenses 21 (299,086) (174,776) (138,190)
Selling expenses (37,827) (11,334) (13,724)
Administrative expenses (89,298) (50,015) (39,210)
------------ ------------ ------------
Total operating expenses (684,445) (424,644) (351,276)
------------ ------------ ------------
(328,317) (196,668) (146,386)
Gain on divestment of an equity investee 23 121,310 - -
Other income/(expense)
Interest income 27 2,076 3,236 4,944
Other income 2,426 4,600 1,855
Interest expense 27 (592) (787) (1,030)
Other expense (12,643) (115) (488)
------------ ------------ ------------
Total other income/(expense) (8,733) 6,934 5,281
------------ ------------ ------------
Loss before income taxes and equity in earnings of equity
investees (215,740) (189,734) (141,105)
Income tax expense 25(i) (11,918) (4,829) (3,274)
Equity in earnings of equity investees, net of tax 11 60,617 79,046 40,700
------------ ------------ ------------
Net loss (167,041) (115,517) (103,679)
Less: Net income attributable to non-controlling interests (27,607) (10,213) (2,345)
------------ ------------ ------------
Net loss attributable to the Company (194,648) (125,730) (106,024)
============ ============ ============
Losses per share attributable to the Company-basic and diluted
(US$ per share) 26 (0.25) (0.18) (0.16)
Number of shares used in per share calculation-basic and diluted 26 792,684,524 697,931,437 665,683,145
The accompanying notes are an integral part of these
consolidated financial statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Comprehensive Loss
(in US$'000)
Year Ended December 31,
----------------------------------
2021 2020 2019
---------- ---------- ----------
Net loss (167,041) (115,517) (103,679)
Other comprehensive income/(loss)
Foreign currency translation gain/(loss) 2,964 9,530 (4,331)
---------- ---------- ----------
Total comprehensive loss (164,077) (105,987) (108,010)
Less: Comprehensive income attributable to non-controlling interests (28,029) (11,413) (1,620)
---------- ---------- ----------
Total comprehensive loss attributable to the Company (192,106) (117,400) (109,630)
========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
HUTCHMED (CHINA) LIMITED
Consolidated Statements of Changes in Shareholders' Equity
(in US$'000, except share data in '000)
Accumulated Total
Ordinary Ordinary Additional Other Company's Non- Total
Shares Shares Paid-in Accumulated Comprehensive Shareholders' controlling Shareholders'
Number Value Capital Losses (Loss)/Income Equity Interests Equity
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at January 1,
2019 666,577 66,658 505,585 (183,659) (243) 388,341 23,243 411,584
Net
(loss)/income - - - (106,024) - (106,024) 2,345 (103,679)
Issuances in
relation
to share option
exercises 329 33 218 - - 251 - 251
Share-based
compensation
Share options - - 7,157 - - 7,157 16 7,173
Long-term
incentive
plan ("LTIP") - - 2,239 - - 2,239 12 2,251
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
- - 9,396 - - 9,396 28 9,424
LTIP-treasury
shares
acquired and
held
by Trustee - - (346) - - (346) - (346)
Transfer between
reserves - - 51 (51) - - - -
Foreign currency
translation
adjustments - - - - (3,606) (3,606) (725) (4,331)
As at December
31, 2019 666,906 66,691 514,904 (289,734) (3,849) 288,012 24,891 312,903
========= ========= =========== ============ ============== ============== ============ ==============
Net
(loss)/income - - - (125,730) - (125,730) 10,213 (115,517)
Issuance in
relation
to public
offering 23,669 2,366 115,975 - - 118,341 - 118,341
Issuances in
relation
to private
investment
in public
equity
("PIPE") 36,667 3,667 196,333 - - 200,000 - 200,000
Issuance costs - - (8,317) - - (8,317) - (8,317)
Issuances in
relation
to share option
exercises 480 48 545 - - 593 - 593
Share-based
compensation
Share options - - 8,727 - - 8,727 10 8,737
LTIP - - 7,203 - - 7,203 16 7,219
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
- - 15,930 - - 15,930 26 15,956
LTIP-treasury
shares
acquired and
held
by Trustee - - (12,904) - - (12,904) - (12,904)
Dividends
declared
to
non-controlling
shareholders of
subsidiaries - - - - - - (1,462) (1,462)
Purchase of
additional
interests in
a
subsidiary of
an
equity
investee
(Note 11) - - (52) (83) (4) (139) (35) (174)
Transfer between
reserves - - 44 (44) - - - -
Foreign currency
translation
adjustments - - - - 8,330 8,330 1,200 9,530
--------- --------- ----------- ------------ -------------- -------------- ------------ --------------
As at December
31 , 2020 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 PIPE 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
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 - - - - - - (9,894) (9,894)
Transfer between
reserves - - 89 (89) - - - -
Divestment of
an
equity
investee
(Note 23) - - (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
========= ========= =========== ============ ============== ============== ============ ==============
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 2021 2020 2019
-------- ------------ ---------- ----------
Net cash used in operating activities 28 (204,223) (62,066) (80,912)
------------ ---------- ----------
Investing activities
Purchases of property, plant and equipment (16,401) (7,949) (8,565)
Purchase of leasehold land (355) (11,631) -
Refund/(payment) of leasehold land deposit 12 930 (2,326) -
Deposits in short-term investments (1,355,976) (732,908) (478,140)
Proceeds from short-term investments 921,364 629,373 597,044
Purchase of a warrant 20 (15,000) - -
Proceeds from divestment of an equity investee 23 159,118 - -
Purchase of a subsidiary company - - (8,080)
Cash acquired in purchase of a subsidiary company - - 16,769
Net cash (used in)/generated from investing activities (306,320) (125,441) 119,028
------------ ---------- ----------
Financing activities
Proceeds from issuances of ordinary shares 717,319 318,934 251
Purchases of treasury shares 18(ii) (27,309) (12,904) (346)
Dividends paid to non-controlling shareholders of subsidiaries (9,894) (1,462) (1,282)
Repayment of loan to a non-controlling shareholder of a
subsidiary (579) - -
Proceeds from bank borrowings - - 26,807
Repayment of bank borrowings - - (26,923)
Payment of issuance costs (29,509) (8,134) -
------------ ---------- ----------
Net cash generated from/(used in) financing activities 650,028 296,434 (1,493)
------------ ---------- ----------
Net increase in cash and cash equivalents 139,485 108,927 36,623
Effect of exchange rate changes on cash and cash equivalents 2,427 5,546 (1,502)
------------ ---------- ----------
141,912 114,473 35,121
Cash and cash equivalents
Cash and cash equivalents at beginning of year 235,630 121,157 86,036
------------ ---------- ----------
Cash and cash equivalents at end of year 377,542 235,630 121,157
============ ========== ==========
Supplemental disclosure for cash flow information
Cash paid for interest 425 815 917
Cash paid for tax, net of refunds 25(iii) 5,014 5,940 3,249
Supplemental disclosure for non-cash activities
Increase in accrued capital expenditures 8,607 298 1,068
Vesting of treasury shares for LTIP 18(ii) 1,450 4,828 944
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 (formerly known as "Hutchison China
MediTech 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 investees 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. 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") (listing completed
in June 2021) 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, 2021, the Group had accumulated losses of
US$610,328,000 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, 2021, the Group had cash and cash equivalents of
US$377,542,000, short-term investments of US$634,158,000 and
unutilized bank borrowing facilities of US$157,430,000. 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 for the years
ended December 31, 2021, 2020 and 2019 were US$49,872,000,
US$86,708,000 and US$28,135,000 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 (the look-forward period used).
2. Particulars of Principal Subsidiaries and Equity Investees
Equity interest attributable to the Group
--------------- -------------------------------------------------
December 31,
Place of
establishment
Name and operations 2021 2020 Principal activities
---------------------- --------------- ----------------------- ---------------------- ----------------------
Subsidiaries
HUTCHMED Limited PRC 99.75 % 99.75 % Research, development,
(formerly known as manufacture and
"Hutchison MediPharma commercialization of
Limited") pharmaceutical
products
HUTCHMED International U.S. 99.75 % 99.75 % Provision of
Corporation (formerly professional,
known as "Hutchison scientific and
MediPharma technical support
International services
Inc.")
Hutchison Whampoa PRC 50.87 % 50.87 % Provision of sales,
Sinopharm distribution and
Pharmaceuticals marketing services to
(Shanghai) Company pharmaceutical
Limited ("HSPL") manufacturers
Hutchison Hain Organic Hong Kong 50 % 50 % Wholesale and trading
(Hong Kong) Limited of healthcare and
("HHOHK") (note (a)) consumer products
Hutchison Healthcare PRC 100 % 100 % Manufacture and
Limited distribution of
healthcare products
HUTCHMED Science Hong Kong 100 % 100 % Wholesale and trading
Nutrition Limited of healthcare and
(formerly known as consumer products
"Hutchison Consumer
Products Limited")
Equity investees
Shanghai Hutchison PRC 50 % 50 % Manufacture and
Pharmaceuticals distribution of
Limited ("SHPL") prescription drug
products
Hutchison Whampoa PRC - % 40 % Manufacture and
Guangzhou Baiyunshan distribution of
Chinese Medicine over-the-counter drug
Company Limited products
("HBYS") (note (b))
Notes:
(a) HHOHK is regarded as a subsidiary of the Company, as while
both its shareholders have equal representation at the board, in
the event of a deadlock, the Group has a casting vote and is
therefore able to unilaterally control the financial and operating
policies of HHOHK.
(b) On September 28, 2021, the Group completed a transaction to
sell its entire investment in HBYS to a third party (Note 23).
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. 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 revenues 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 revenues and expenses are translated at
average exchange rates for the year. Translation adjustments are
reflected in accumulated other comprehensive (loss)/income in
shareholders' equity.
Net foreign currency exchange gains of US$1,671,000,
US$3,265,000 and US$246,000 were recorded in other income in the
consolidated statements of operations for the years ended December
31, 2021, 2020 and 2019 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 on financial assets not carried at fair value. Current
expected credit losses 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 has no significant concentration of credit risk. 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.
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 credit losses 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 credit losses 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 credit losses. 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.
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, free cash flows, revenues, net profit after taxes and
the achievement of clinical and regulatory 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, as an
equity-settled award. 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, 2021, 2020 and 2019 amounted to
US$7,181,000, US$2,660,000 and US$3,479,000 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. Revenues are 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 license to the commercialization rights of a drug compound and
(2) the research and development services for each specified
treatment indication, 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. 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 cost inputs as a measure of progress. 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 revenues are
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 expenses in its consolidated statements of
operations.
Losses per Share
Basic losses per share is computed by dividing net 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 losses per share is computed by dividing net 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 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 investees 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 investees, the amount of appropriations to these
funds are made at the discretion of their respective boards.
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
The following table presents the Group's financial instruments
by level within the fair value hierarchy under ASC 820, Fair Value
Measurement:
Fair Value Measurement Using
Level Level Level
1 2 3 Total
--------- ------ ------ --------
(in US$'000)
As at December 31, 2021
Cash and cash equivalents 377,542 - - 377,542
Short-term investments 634,158 - - 634,158
Warrant (Note 20) - 2,452 - 2,452
========= ====== ========
As at December 31, 2020
Cash and cash equivalents 235,630 - - 235,630
Short-term investments 199,546 - - 199,546
========= ====== ====== ========
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, and
are therefore excluded from the above table. Bank borrowings are
floating rate instruments and carried at amortized cost, which
approximates their fair values, and are therefore excluded from the
above table.
5. Cash and Cash Equivalents and Short-term Investments
December 31,
2021 2020
---------- --------
(in US$'000)
Cash and Cash Equivalents
Cash at bank and on hand 104,620 87,828
Bank deposits maturing in three months or
less 272,922 147,802
---------- --------
377,542 235,630
---------- --------
Short-term Investments
Bank deposits maturing over three months
(note) 634,158 199,546
---------- --------
1,011,700 435,176
========== ========
Note: The maturities for short-term investment ranged from 91 to
180 days for the year ended December 31, 2021 and 2020.
Certain cash and bank balances denominated in RMB, US$ and UK
Pound Sterling ("GBP") 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,
2021 2020
---------- --------
(in US$'000)
US$ 895,935 352,162
RMB 53,455 64,870
Hong Kong dollar ("HK$") 60,535 16,880
GBP 1,090 954
Euro 685 310
---------- --------
1,011,700 435,176
========== ========
6. Accounts Receivable
Accounts receivable from contracts with customers consisted of
the following:
December 31,
----------------
2021 2020
------- -------
(in US$'000)
Accounts receivable-third parties 82,434 46,743
Accounts receivable-related parties (Note
24(ii)) 1,166 1,222
Allowance for credit losses (20) (95)
------- -------
Accounts receivable, net 83,580 47,870
======= =======
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,
----------------
2021 2020
------- -------
(in US$'000)
Not later than 3 months 78,288 42,434
Between 3 months to 6 months 2,867 3,118
Between 6 months to 1 year 78 23
Later than 1 year 1,201 1,168
------- -------
Account receivable-third parties 82,434 46,743
======= =======
Movements on the allowance for credit losses:
2021 2020 2019
----- ----- -----
(in US$'000)
As at January 1 95 16 41
Increase in allowance for credit losses 16 95 16
Decrease in allowance due to subsequent
collection (92) (18) (41)
Exchange difference 1 2 -
----- ----- -----
As at December 31 20 95 16
===== ===== =====
7. Other receivables, prepayments and deposits
Other receivables, prepayments and deposits consisted of the
following:
December 31,
----------------
2021 2020
------- -------
(in US$'000)
Dividend receivables (Note 23) 46,387 -
Value-added tax receivables 16,616 14,957
Prepayments 14,128 7,038
Deposits 1,255 905
Amounts due from related parties (Note 24(ii)) 1,149 1,142
Leasehold land deposit (Note 12) - 930
Others 1,506 2,956
------- -------
81,041 27,928
======= =======
No allowance for credit losses have been made for other
receivables, prepayments and deposits for the year ended December
31, 2021 and 2020.
8. Inventories
Inventories, net of provision for excess and obsolete
inventories, consisted of the following:
December 31,
----------------
2021 2020
------- -------
(in US$'000)
Raw materials 15,837 4,502
Finished goods 19,918 15,264
------- -------
35,755 19,766
======= =======
9. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
Furniture
and fixtures,
other equipment
Leasehold Plant and motor Construction
Buildings improvements and equipment vehicles in progress Total
--------- ------------- -------------- ---------------- ------------ ------
(in US$'000)
Cost
As at January 1,
2021 2,372 16,346 5,643 23,040 3,050 50,451
Additions - 452 24 3,189 19,669 23,334
Disposals - (275) (19) (705) - (999)
Transfers - 916 197 1,849 (2,962) -
Exchange differences 60 389 142 584 213 1,388
--------- ------------- -------------- ---------------- ------------ ------
As at December 31,
2021 2,432 17,828 5,987 27,957 19,970 74,174
--------- ------------- -------------- ---------------- ------------ ------
Accumulated
depreciation
As at January 1,
2021 1,626 8,652 1,747 14,256 - 26,281
Depreciation 120 2,904 574 3,244 - 6,842
Disposals - (223) (18) (688) - (929)
Exchange differences 42 238 49 376 - 705
--------- ------------- -------------- ---------------- ------------ ------
As at December 31,
2021 1,788 11,571 2,352 17,188 - 32,899
--------- ------------- -------------- ---------------- ------------ ------
Net book value
As at December 31,
2021 644 6,257 3,635 10,769 19,970 41,275
========= ============= ============== ================ ============ ======
Furniture
and fixtures,
other equipment
Leasehold Plant and motor Construction
Buildings improvements and equipment vehicles in progress Total
--------- ------------- -------------- ---------------- ------------ -------
(in US$'000)
Cost
As at January 1,
2020 2,212 17,022 4,474 19,571 928 44,207
Additions - 269 59 2,993 4,571 7,892
Disposals - (3,103) (3) (1,846) - (4,952)
Transfers - 1,014 789 913 (2,716) -
Exchange differences 160 1,144 324 1,409 267 3,304
--------- ------------- -------------- ---------------- ------------ -------
As at December 31,
2020 2,372 16,346 5,643 23,040 3,050 50,451
--------- ------------- -------------- ---------------- ------------ -------
Accumulated
depreciation
As at January 1,
2020 1,406 8,304 1,155 12,487 - 23,352
Depreciation 112 2,701 484 2,646 - 5,943
Disposals - (3,051) (1) (1,815) - (4,867)
Exchange differences 108 698 109 938 - 1,853
--------- ------------- -------------- ---------------- ------------ -------
As at December 31,
2020 1,626 8,652 1,747 14,256 - 26,281
--------- ------------- -------------- ---------------- ------------ -------
Net book value
As at December 31,
2020 746 7,694 3,896 8,784 3,050 24,170
========= ============= ============== ================ ============ =======
10. Leases
Leases consisted of the following:
December 31,
---------------
2021 2020
------- ------
(in US$'000)
Right-of-use assets
Offices (note) 10,605 6,789
Factories 702 945
Warehouse 281 197
Others 291 85
------- ------
Total right-of-use assets 11,879 8,016
======= ======
Lease liabilities-current 4,917 2,785
Lease liabilities-non-current 7,161 6,064
------- ------
Total lease liabilities 12,078 8,849
======= ======
Note: Includes US$1.4 million right-of-use asset for corporate
offices in Hong Kong that is leased through May 2024 in which the
contract has a termination option with 1-month advance notice. The
termination option was not recognized as part of the right-of-use
asset and lease liability as it is uncertain that the Group will
exercise such option.
Lease activities are summarized as follows:
Year Ended December
31,
----------------------
2021 2020
---------- ----------
(in US$'000)
Lease expenses:
Short-term leases with lease terms equal or less
than 12 months 106 323
Leases with lease terms greater than 12 months 4,306 3,400
---------- ----------
4,412 3,723
========== ==========
Cash paid on lease liabilities 4,954 3,340
========== ==========
Non-cash: Lease liabilities recognized from obtaining
right-of-use assets 7,665 3,098
========== ==========
Non-cash: Lease liabilities changed in relation
to modifications and terminations (33) 2,259
========== ==========
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, 2021 was 3.38 years and 3.33%
respectively. The weighted average remaining lease term and the
weighted average discount rate as at December 31, 2020 was 3.72
years and 3.87% respectively.
Future lease payments are as follows:
December
31,
2021
-------------
(in US$'000)
Lease payments:
Not later than 1 year 5,216
Between 1 to 2 years 3,376
Between 2 to 3 years 1,882
Between 3 to 4 years 679
Between 4 to 5 years 680
Later than 5 years 795
-------------
Total lease payments 12,628
Less: Discount factor (550)
-------------
Total lease liabilities 12,078
=============
11. Investments in Equity Investees
Investments in equity investees consisted of the following:
December 31,
-----------------
2021 2020
------- --------
(in US$'000)
SHPL 75,999 79,408
HBYS (note) - 59,712
Other 480 385
------- --------
76,479 139,505
======= ========
Note: On September 28, 2021, the Group completed a transaction
to sell its entire investment in HBYS to a third party (Note 23).
The Group has accounted for the investment in HBYS under the equity
method up to September 28, 2021.
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, both under Other Ventures segment, is as
follows:
(i) Summarized balance sheets
SHPL HBYS
-------------------- ---------------
December 31,
-------------------------------------
2021 2020 2021 2020
--------- --------- ---- ---------
(in US$'000)
Current assets 190,260 175,965 - 177,888
Non-current assets 91,605 93,361 - 95,731
Current liabilities (128,993) (109,873) - (137,179)
Non-current liabilities (7,131) (6,739) - (16,034)
--------- --------- ---- ---------
Net assets 145,741 152,714 - 120, 406
Non-controlling interests - - - (9 82 )
--------- --------- ---- ---------
145,741 152,714 - 119,424
========= ========= ==== =========
(ii) Summarized statements of operations
SHPL HBYS(note (a))
---------------------------- --------------------------
Year Ended December 31,
--------------------------------------------------------
2021
(note
2021 2020 2019 (b)) 2020 2019
-------- -------- -------- ------- -------- -------
(in US$'000)
Revenue 332,648 276,354 272,082 209,528 232,368 215,403
======== ======== ======== ======= ======== =======
Gross profit 255,089 204,191 194,769 111,066 116,804 115,124
======== ======== ======== ======= ======== =======
Interest income 1,216 975 582 205 271 160
======== ======== ======== ======= ======== =======
Finance cost - - - - (5) (16)
======== ======== ======== ======= ======== =======
Profit before taxation 105,325 77,837 72,324 36,715 107,715 22,926
Income tax expense (note
(c)) (15,896) (10,833) (11,015) (4,840) (16,494) (3,634)
-------- -------- -------- ------- -------- -------
Net income 89,429 67,004 61,309 31,875 91,221 19,292
Non-controlling interests - - - (36) 62 505
-------- -------- -------- ------- -------- -------
Net income attributable
to the shareholders
of equity investee 89,429 67,004 61,309 31,839 91,283 19,797
======== ======== ======== ======= ======== =======
Notes:
(a) In June 2020, HBYS entered into an agreement with the
government to return the land use right for a plot of land in
Guangzhou to the government (the "Land Compensation Agreement") for
cash consideration which aggregated to RMB679.5 million
(approximately US$103.1 million). In November 2020, HBYS completed
all material obligations as stipulated in the Land Compensation
Agreement and recognized land compensation of RMB569.2 million
(approximately US$86.1 million). In June 2021, HBYS received a
completion confirmation from the government and became entitled to
an additional land compensation bonus of RMB110.3 million
(approximately US$17.0 million). HBYS recorded a gain before tax of
RMB106.8 million (approximately US$16.4 million) after deducting
costs of RMB3.5 million (approximately US$0.6 million).
(b) 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.
(c) The main entities within each of the SHPL and HBYS groups
have been granted the High and New Technology Enterprise ("HNTE")
status (the latest renewal of this status covers the years from
2020 to 2022). These entities were eligible to use a preferential
income tax rate of 15% for the year ended December 31, 2021 on this
basis.
For the years ended December 31, 2021, 2020 and 2019, other
equity investees had net income of approximately US$41,000, net
losses of approximately US$194,000 and net income of approximately
US$294,000 respectively.
(iii) Reconciliation of summarized financial information
Reconciliation of the summarized financial information presented
to the carrying amount of investments in equity investees is as
follows:
SHPL HBYS
---------------------------- -----------------------------
2021 2020 2019 2021 2020 2019
-------- -------- -------- --------- -------- --------
(in US$'000)
Opening net assets after non-controlling
interests as at January 1 152,714 146,759 131,778 119,424 44,541 121,984
Impact of change in accounting policy (ASC
842-Leases) - - (2) - - (19)
Net income attributable to the shareholders
of equity investee 89,429 67,004 61,309 31,839 91,283 19,797
Purchase of additional interests in a
subsidiary of an equity investee (note) - - - - (347) -
Dividends declared (99,744) (72,179) (41,654) (106,159) (20,756) (93,957)
Other comprehensive income/(loss) 3,342 11,130 (4,672) 1,387 4,703 (3,264)
-------- -------- -------- --------- -------- --------
Closing net assets after non-controlling
interests as at December 31 145,741 152,71 4 146,759 46,491 119,424 44,541
======== ======== ======== ========= ======== ========
Group's share of net assets 72,871 76,357 73,380 23,246 59,7 12 22,271
Divestment (Note 23) - - - (23,246) - -
Goodwill 3,128 3,051 2,846 - - -
-------- -------- -------- --------- -------- --------
Carrying amount of investments as at December
31 75,999 79,408 76,226 - 59,7 12 22,271
======== ======== ======== ========= ======== ========
Note: During the year ended December 31, 2020, HBYS acquired an
additional 30% interest in a subsidiary and after the acquisition,
it became a wholly owned subsidiary of HBYS.
SHPL had the following capital commitments:
December 31,
2021
-------------
(in US$'000)
Property, plant and equipment
Contracted but not provided for 155
=============
12. Other Non-Current Assets
December 31,
----------------
2021 2020
------- -------
(in US$'000)
Leasehold land (note) 13,169 13,121
Goodwill 3,380 3,307
Warrant (Note 20) 2,452 -
Leasehold land deposit (note) 1,436 1,396
Long term prepayment 951 950
Other intangible asset 163 227
Deferred issuance cost - 1,171
21,551 20,172
======= =======
Note: In December 2020, HUTCHMED Limited acquired a land use
right in Shanghai for consideration of US$12.0 million. In
addition, a leasehold land deposit amounting to US$2.3 million was
required to be paid to the government which is refundable upon
reaching specific milestones for the construction of a
manufacturing plant on the land. US$0.9 million was returned in
January 2021 (Note 7) and US$1.4 million was included in other
non-current assets based on the expected timing of the specific
milestones.
13. Accounts Payable
December 31,
----------------
2021 2020
------- -------
(in US$'000)
Accounts payable-third parties 39,115 26,756
Accounts payable-non-controlling shareholder s of subsidiar ies (Note 24(iv)) 2,062 4,856
------- -------
41,177 31,612
======= =======
Substantially all accounts payable are denominated in RMB 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,
----------------
2021 2020
------- -------
(in US$'000)
Not later than 3 months 35,615 26,270
Between 3 months to 6 months 3,705 3,364
Between 6 months to 1 year 588 782
Later than 1 year 1,269 1,196
------- -------
41,177 31,612
======= =======
14. Other Payables, Accruals and Advance Receipts
Other payables, accruals and advance receipts consisted of the
following:
December 31,
------------------
2021 2020
-------- --------
(in US$'000)
Accrued research and development expenses 116,134 72,697
Accrued salaries and benefits 41,786 21,982
Accrued administrative and other general expenses 15,836 10,319
Accrued capital expenditures 11,343 2,736
Accrued selling and marketing expenses 8,412 5,747
Deposits 2,111 1,408
Amounts due to related parties (Note 24(ii)) 1,915 401
Deferred government grants 314 374
Others 12,988 5,619
-------- --------
210,839 121,283
======== ========
15. Bank Borrowings
Bank borrowings consisted of the following:
December 31,
------------------
2021 2020
-------- -------
(in US$'000)
Current 26,905 -
Non-current - 26,861
========= =======
The weighted average interest rate for outstanding bank
borrowings for the years ended December 31, 2021 and 2020 was 1.08%
per annum and 1.89% per annum respectively. The carrying amounts of
the Group's outstanding bank borrowings were denominated in
HK$.
(i) 3--year revolving loan facility and 3--year term loan and revolving loan facilities
In November 2018, the Group through its subsidiary, renewed a
3-year revolving loan facility with a bank in the amount of
HK$234,000,000 (US$30,000,000) with an interest rate at the Hong
Kong Interbank Offered Rate ("HIBOR") plus 0.85% per annum. This
credit facility is guaranteed by the Company. No amount had been
drawn from the revolving loan facility and it expired in November
2021.
In May 2019, the Group through its subsidiary, entered into a
separate facility agreement with the bank for the provision of
additional unsecured credit facilities in the aggregate amount of
HK$400,000,000 (US$51,282,000). The 3-year credit facilities
include (i) a HK$210,000,000 (US$26,923,000) term loan facility and
(ii) a HK$190,000,000 (US$24,359,000) revolving loan facility, both
with an interest rate at HIBOR plus 0.85% per annum, and an upfront
fee of HK$819,000 (US$105,000) on the term loan. These credit
facilities are guaranteed by the Company. The term loan was drawn
in October 2019 and is due in May 2022. No amount has been drawn
from the revolving loan facility.
(ii) 2--year revolving loan facilities
In August 2018, the Group through its subsidiary, entered into
two separate facility agreements with banks for the provision of
unsecured credit facilities in the aggregate amount of
HK$507,000,000 (US$65,000,000). The first credit facility was a
HK$351,000,000 (US$45,000,000) revolving loan facility, with a term
of 2 years and an interest rate at HIBOR plus 1.35% per annum. The
second credit facility was a HK$156,000,000 (US$20,000,000)
revolving loan facility, with a term of 2 years and an interest
rate at HIBOR plus 1.35% per annum. These credit facilities were
guaranteed by the Company. No amount has been drawn from either of
the revolving loan facilities. Both loan facilities expired in
August 2020.
In August 2020, the Group through its subsidiary, entered into a
2-year revolving loan facility with a bank in the amount of
HK$117,000,000 (US$15,000,000) with an interest rate at HIBOR plus
4.5% per annum. This credit facility is guaranteed by the Company.
As at December 31, 2021 and 2020, no amount has been drawn from the
revolving loan facility.
(iii) 10--year fixed asset loan facility
In October 2021, a subsidiary entered into a 10-year fixed asset
loan facility agreement with a bank for the provision of a secured
credit facility in the amount of RMB754,880,000 (US$118,071,000)
with an annual interest rate at the 5-year China Loan Prime Rate
less 0.65%. This credit facility is guaranteed by the immediate
holding company of the subsidiary and secured by the underlying
leasehold land and buildings. As at December 31, 2021, no amount
has been drawn from the fixed asset loan facility.
The Group's bank borrowings are repayable as from the dates
indicated as follows:
December 31,
----------------
2021 2020
------- -------
(in US$'000)
Not later than 1 year 26,923 -
Between 1 to 2 years - 26,923
26,923 26,923
======= =======
As at December 31, 2021 and 2020, the Group had unutilized bank
borrowing facilities of US$157,430,000 and US$69,359,000
respectively.
16. Commitments and Contingencies
The Group had the following capital commitments:
December 31,
2021
-------------
(in US$'000)
Property, plant and equipment
Contracted but not provided for 44,204
=============
The Group does not have any other significant commitments or
contingencies.
17. Ordinary Shares
As at December 31, 2021, the Company is authorized to issue
1,500,000,000 ordinary shares.
On January 27, 2020, the Company issued 22,000,000 ordinary
shares in the form of 4,400,000 ADS for gross proceeds of US$110.0
million. On February 10, 2020, the Company issued an additional
1,668,315 ordinary shares in the form of 333,663 ADS for gross
proceeds of US$8.3 million. Issuance costs totaled US$8.0
million.
On July 2, 2020 and July 3, 2020, the Company issued (1)
aggregate 20,000,000 ordinary shares and (2) warrants to a third
party for gross proceeds of US$100.0 million through a PIPE. The
warrants allowed the third party to purchase up to 16,666,670
ordinary shares of the Company within 18 months of the issuance
date for an exercise price of US$6.00 per ordinary share, which
have since expired. Issuance costs totaled US$0.2 million.
On November 26, 2020, the Company issued 16,666,670 ordinary
shares to a third party for gross proceeds of US$100.0 million
through a PIPE. Issuance costs totaled US$0.1 million.
On April 14, 2021, the Company issued 16,393,445 ordinary shares
to a third party for gross proceeds of US$100.0 million through a
PIPE. Issuance costs totaled US$0.1 million.
On June 30, 2021 and July 15, 2021, the Company issued an
aggregate of 119,600,000 ordinary shares in a public offering on
the HKEX with over-allotment option exercised in full for aggregate
gross proceeds of US$614.9 million. Issuance costs totaled US$29.7
million.
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.
18. Share-based Compensation
(i) Share--based Compensation of the Company
The Company conditionally adopted a share option scheme on June
4, 2005 (as amended on March 21, 2007) and such scheme has a term
of 10 years. It expired in 2016 and no further share options can be
granted. Another share option scheme was conditionally adopted on
April 24, 2015 (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, 2021, the aggregate number of shares issuable
under the Hutchmed Share Option Scheme was 50,059,198 ordinary
shares and the aggregate number of shares issuable under the prior
share option scheme which expired in 2016 was 705,060 ordinary
shares. The Company will issue new shares to satisfy share option
exercises. Additionally, the number of shares authorized but
unissued was 635,469,150 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 eight to ten
years from the date of grant.
A summary of the Company's share option activity and related
information is as follows:
Weighted average
Weighted average remaining Aggregate intrinsic
Number of share exercise price in contractual life value
options US$ per share (years) (in US$'000)
--------------------- -------------------- --------------------- ---------------------
Outstanding at
January 1, 2019 18,554,850 4.57 7.35 19,277
Granted 2,315,000 4.12
Exercised (329,000) 0.76
Cancelled (1,012,110) 6.33
Expired (96,180) 6.51
---------------------
Outstanding at
December 31, 2019 19,432,560 4.48 6.67 24,316
=====================
Granted 15,437,080 4.66
Exercised (480,780) 1.23
Cancelled (4,486,200) 5.02
Expired (741,670) 6.46
---------------------
Outstanding at
December 31, 2020 29,160,990 4.49 7.21 53,990
=====================
Granted 10,174,840 5.96
Exercised (815,190) 3.01
Cancelled (1,287,650) 5.50
Expired (42,400) 5.52
---------------------
Outstanding at
December 31, 2021 37,190,590 4.88 7.04 82,377
=====================
Vested and
exercisable at
December 31, 2020 11,529,280 3.74 4.57 29,433
Vested and
exercisable at
December 31, 2021 16,077,770 4.24 4.91 46,491
In estimating the fair value of share options granted, the
following assumptions were used in the Polynomial model for awards
granted in the periods indicated:
Year Ended December 31,
----------------------------
2021 2020 2019
-------- -------- --------
Weighted average grant date fair value of share options (in US$ per share) 2.24 1.76 1.33
Significant inputs into the valuation model (weighted average):
Exercise price (in US$ per share) 5.96 4.66 4.12
Share price at effective date of grant (in US$ per share) 5.91 4.66 3.98
Expected volatility (note (a)) 41.1% 42.6% 38.4%
Risk-free interest rate (note (b)) 1.62% 0.59% 0.56%
Contractual life of share options (in years) 10 10 10
Expected dividend yield (note (c)) 0% 0% 0%
Notes:
(a) The Company calculated its expected volatility with
reference to the historical volatility prior to the issuances of
share options.
(b) For share options exercisable into ordinary shares, the
risk-free interest rates reference the sovereign yield of the
United Kingdom because the Company's ordinary shares are currently
listed on AIM and denominated in GBP. For share options exercisable
into ADS, 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$.
(c) The Company has not declared or paid any dividends and does
not currently expect to do so prior to the exercise of the granted
share options, and therefore uses an expected dividend yield of
zero in the Polynomial model.
The Company will issue new shares to satisfy share option
exercises. The following table summarizes the Company's share
option exercises:
Year Ended December 31,
----------------------------
2021 2020 2019
-------- -------- --------
(in US$'000)
Cash received from share option exercises 2,452 593 251
Total intrinsic value of share option exercises 2,999 2,475 1,189
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,
----------------------------
2021 2020 2019
--------- -------- -------
(in US$'000)
Research and development expenses 8,460 4,061 6,634
Selling and administrative expenses 7,783 4,586 539
Cost of revenues 122 90 -
--------- -------- -------
16,365 8,737 7,173
========= ======== =======
As at December 31, 2021, the total unrecognized compensation
cost was US$23,051,000, and will be recognized on a graded vesting
approach over the weighted average remaining service period of 3.04
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, free cash flows, revenues, net
profit after taxes and the achievement of clinical and regulatory
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, as an equity-settled
award. If the performance target is not achieved, no Awarded Shares
of the Company will be purchased and the amount previously recorded
in the liability will be reversed 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
----------------- -------------------- ---------------- -------------------
August 5, 2019 0.7 2019 note (a)
October 10, 2019 0.1 note (b) note (b)
April 20, 2020 5.3 2019 note (d)
April 20, 2020 37.4 2020 note (a)
April 20, 2020 1.9 note (b) note (b)
April 20, 2020 0.2 note (c) note (c)
August 12, 2020 2.1 2020 note (a)
August 12, 2020 0.3 note (b) note (b)
March 26, 2021 57.3 2021 note (a)
September 1, 2021 7.3 2021 note (a)
September 1, 2021 0.5 note (b) note (b)
October 20, 2021 1.7 note (b) note (b)
December 14, 2021 0.1 note (b) note (b)
December 14, 2021 0.1 note (c) note (c)
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.
(c) This award does not stipulate performance targets and will
be vested on the first anniversary of the date of grant.
(d) This award does not stipulate performance targets 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.
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 the form of ordinary shares or ADS of the
Company) held by the Trustee were as follows:
Number of
treasury Cost
shares (in US$'000)
As at January 1, 2019 1,121,030 6,677
Purchased 60,430 346
Vested (240,150) (944)
As at December 31, 2019 941,310 6,079
Purchased 3,281,920 12,904
Vested (712,555) (4,828)
As at December 31, 2020 3,510,675 14,155
Purchased 4,907,045 27,309
Vested (278,545) (1,450)
As at December 31, 2021 8,139,175 40,014
Based on the estimated achievement of performance conditions for
2021 financial year LTIP awards, the determined monetary amount was
US$52,056,000 which is recognized to share-based compensation
expense over the requisite vesting period to March 2024.
For the years ended December 31, 2021, 2020 and 2019,
US$6,618,000, US$7,038,000 and US$262,000 of the LTIP awards were
forfeited respectively based on the determined or estimated
monetary amount as at the forfeiture date.
The following table presents the share-based compensation
expenses recognized under the LTIP awards:
Year Ended December 31,
----------------------------
2021 2020 2019
--------- -------
(in US$'000)
Research and development expenses 16,880 7,252 2,640
Selling and administrative expenses 8,451 3,552 1,779
Cost of revenues 294 101 -
25,625 10,905 4,419
Recorded with a corresponding credit to:
Liability 14,263 7,778 2,694
Additional paid-in capital 11,362 3,127 1,725
--------- -------
25,625 10,905 4,419
========= =======
For the years ended December 31, 2021, 2020 and 2019,
US$8,516,000, US$4,092,000 and US$526,000 were reclassified from
liability to additional paid-in capital respectively upon LTIP
awards reaching the determination date. As at December 31, 2021 and
2020, US$12,836,000 and US$7,089,000 were recorded as liabilities
respectively for LTIP awards prior to the determination date.
As at December 31, 2021, the total unrecognized compensation
cost was approximately US$53,152,000, which considers expected
performance targets and the amounts expected to vest, and will be
recognized over the requisite periods.
19. Revenues
The following table presents disaggregated revenue, with sales
of goods recognized at a point-in-time and provision of services
recognized over time:
Year Ended December 31, 2021
Oncology/ Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 33,937 - 33,937
Goods-Distribution - 236,518 236,518
Services-Commercialization-Marketed
Products 27,428 - 27,428
* Collaboration Research and Development 18,995 - 18,995
* Research and Development 525 - 525
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
Year Ended December 31, 2020
Oncology/ Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 11,329 - 11,329
Goods-Distribution - 197,761 197,761
Services-Commercialization-Marketed
Products 3,734 - 3,734
* Collaboration Research and Development 9,771 - 9,771
* Research and Development 491 - 491
Royalties 4,890 - 4,890
30,215 197,761 227,976
Third parties 29,724 192,277 222,001
Related parties (Note 24(i)) 491 5,484 5,975
30,215 197,761 227,976
Year Ended December 31, 2019
Oncology/ Immunology Other Ventures Total
(in US$'000)
Goods-Marketed Products 8,113 - 8,113
Goods-Distribution - 175,514 175,514
Services-Commercialization - 2,584 2,584
* Collaboration Research and Development 15,532 - 15,532
* Research and Development 494 - 494
Royalties 2,653 - 2,653
26,792 178,098 204,890
Third parties 26,298 170,461 196,759
Related parties (Note 24(i)) 494 7,637 8,131
26,792 178,098 204,890
The following table presents liability balances from contracts
with customers:
December 31,
2021 2020
(in US$'000)
Deferred revenue
Current-Oncology/Immunology segment (note ( a) ) 11,078 1,450
Current-Other Ventures segment (note (b)) 1,196 147
12,274 1,597
Non-current-Oncology/Immunology segment (note (a)) 878 484
Total deferred revenue (note (c) and (d)) 13,152 2,081
Notes:
(a) Oncology/Immunology segment deferred revenue relates to
invoiced amounts for royalties which the customer has not yet
completed the in-market sale, unamortized upfront and milestone
payments and advance consideration received for cost reimbursements
which are attributed to research and development services that have
not yet been rendered as at the reporting date.
(b) Other Ventures segment deferred revenue relates to payments
in advance from customers for goods that have not been transferred
and services that have not been rendered to the customer as at the
reporting date.
(c) Estimated deferred revenue to be recognized over time as
from the date indicated is as follows:
December 31,
2021 2020
(in US$'000)
Not later than 1 year 12,274 1,597
Between 1 to 2 years 476 211
Between 2 to 3 years 255 205
Between 3 to 4 years 147 68
13,152 2,081
(c) As at January 1, 2021, deferred revenue was US$2.1 million,
of which US$0.7 million was recognized during the year ended
December 31, 2021.
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"), also known as fruquintinib, a targeted oncology
therapy for the treatment of various types of solid tumors. 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$10 million in lieu of cost
reimbursement.
Upfront and cumulative milestone payments according to the Lilly
Agreement received up to December 31, 2021 are summarized as
follows:
(in US$'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 the prior and
estimated future development costs for Elunate as a measure of
progress. 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,
----------------------------
2021 2020 2019
--------- -------- -------
(in US$'000)
Goods-Marketed Products 15,792 11,329 8,113
Services-Commercialization-Marketed Products 27,428 3,734 -
* Collaboration Research and Development 4,491 1,991 4,005
Royalties 10,292 4,890 2,653
58,003 21,944 14,771
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$50 million of phase III clinical trial
costs related to developing Orpathys for renal cell carcinoma
("RCC"), and remaining costs will be shared between the Group and
AZ. Subject to approval of Orpathys in RCC, the Group would receive
additional tiered royalties on all sales outside of China, with the
incremental royalty rates determined based on actual sharing of
development costs. In November 2021, the Group entered into an
additional amendment which revised the sharing between the Group
and AZ of development costs for Orpathys in China for non-small
cell lung cancer, as well as adding potential development
milestones.
Upfront and cumulative milestone payments according to the AZ
Agreement received up to December 31, 2021 are summarized as
follows:
(in US$'000)
Upfront payment 20,000
Development milestone payments achieved 25,000
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 the prior and
estimated future development costs for Orpathys as a measure of
progress.
Revenue recognized under the AZ Agreement and subsequent
amendments is as follows:
Year Ended December 31,
----------------------------
2021 2020 2019
--------- ------- --------
(in US$'000)
Goods-Marketed Products 6,509 - -
Services-Collaboration Research and Development 14,113 7,780 11,527
Royalties 4,772 - -
Licensing 23,661 - -
49,055 7,780 11,527
20. 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 will be 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.
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, the Group will incur tiered royalties based on
net sales. As at December 31, 2021, no amounts of development and
regulatory milestones, sales milestones or royalties had been
paid.
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 in-process research
and development.
The warrant was recorded as a financial asset at fair value with
changes to fair value recognized to the consolidated statements of
operations. As at December 31, 2021, the warrant had not been
exercised. For the year ended December 31, 2021, a fair value loss
of US$12.5 million was recognized to other expenses in the
consolidated statements of operations. In estimating the fair value
of the warrant, the following assumptions were used in the Black
Scholes model for the dates indicated:
August 7, December 31,
2021 2021
Fair value of the warrant (in US$'000) 15,000 2,452
Significant inputs into the valuation model:
Exercise price (in US$ per share) 11.50 11.50
Share price (in US$ per share) 6.47 2.50
Expected volatility (note (a)) 74.48% 72.03%
Risk-free interest rate (note (b)) 0.59% 1.05%
Remaining contractual life of the warrant (in years) 4.00 3.60
Expected dividend yield (note (c)) 0% 0%
Notes:
(a) Expected volatility references the historical volatility for
the remaining contractual life of the warrant.
(b) The risk-free interest rates reference the U.S. Treasury
yield curves because Epizyme's common stock is currently listed on
the NASDAQ and denominated in US$.
(c) Epizyme has not declared or paid any dividends and the Group
does not currently expect it to do so within the remaining
contractual life of the warrant.
21. Research and Development Expenses
Research and development expenses are summarized as follows:
Year Ended December 31,
----------------------------
2021 2020 2019
-------- -------- --------
(in US$'000)
Clinical trial related costs 190,051 105,869 87,777
Personnel compensation and related costs 91,639 63,542 46,246
Other research and development expenses 17,396 5,365 4,167
-------- -------- --------
299,086 174,776 138,190
======== ======== ========
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, 2021, 2020 and 2019, the Group has
incurred research and development expenses of US$18,408,000,
US$8,291,000 and US$2,921,000 respectively, related to such
collaborative arrangements.
22. Government Grants
Government grants in the Oncology/Immunology segment are
primarily given in support of R&D activities and 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 payable, accruals and advance receipts (Note
14) and other non-current liabilities. For the years ended December
31, 2021, 2020 and 2019, the Group received government grants of
US$9,095,000, US$4,724,000 and US$8,742,000 respectively.
Government grants were recognized as reductions in the
consolidated statements of operations as follows:
Year Ended December 31,
----------------------------
2021 2020 2019
--------- -------- -------
(in US$'000)
Research and development expenses 15,515 1,607 6,133
Other income 318 539 780
15,833 2,146 6,913
23. 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 is entitled to a portion of such dividends and the third
party will settle these amounts, net of taxes, after HBYS completes
the distribution. As at December 31, 2021, US$46.4 million of
dividends receivable, net of taxes, from the third party was
recorded in other receivables (Note 7).
In addition, the Group and Hutchison Whampoa Enterprises
Limited, an affiliate of CK Hutchison Holdings Limited ("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, and
the Group agrees to pay 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, 2021, US$1.5
million and US$9.8 million were included in amounts due to related
parties (Note 24(ii)) and other non-current liabilities
respectively.
The gain on divestment of an equity investee was recognized in
the consolidated statements of operations as follows:
Year Ended December
31,
2021
(in US$'000)
Proceeds 159,118
Dividend receivables-third party (Note 7) 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
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,
2021 2020 2019
(in US$'000)
Sales to:
Indirect subsidiaries of CK Hutchison 4,256 5,484 7,637
Revenue from research and development services from:
An equity investee 525 491 494
Purchases from:
Equity investees 3,770 3,347 2,465
Rendering of marketing services from:
Indirect subsidiaries of CK Hutchison 350 332 430
An equity investee - - 2,682
350 332 3,112
Rendering of management service s from:
An indirect subsidiary of CK Hutchison 971 955 931
Entered brand license agreement with:
An indirect subsidiary of CK Hutchison (note (a)) 12,721 - -
(ii) Balances with related parties included in:
December 31,
2021 2020
(in US$'000)
Accounts receivable-related parties
Indirect subsidiaries of CK Hutchison (note (b)) 1,166 1,222
Other receivables, prepayments and deposits
Equity investees (note (b)) 1,149 1,142
Other payables, accruals and advance receipts
Indirect subsidiaries of CK Hutchison (note (c) and (e)) 1,915 401
Other non-current liabilities
An equity investee (note (d)) 736 950
An indirect subsidiary of CK Hutchison (note (e)) 9,766 -
10,502 950
Notes:
(a) The branding rights for HBYS from an indirect subsidiary of
CK Hutchison was recognized in the consolidated statements of
operations through the gain on divestment of an equity investee
(Note 23). For the year ended December 31, 2021, actual cash paid
was US$1,538,000.
(b) 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.
(c) Amounts due to indirect subsidiaries of CK Hutchison are
unsecured, repayable on demand and interest-bearing if not settled
within one month.
(d) Other deferred income represents amounts recognized from
granting of promotion and marketing rights.
(e) As at December 31, 2021, branding liability payable of
approximately US$1,538,000 and US$9,766,000 were included in
amounts due to related parties under other payables, accruals and
advance receipts and other non-current liabilities respectively
(Note 23).
(iii) Transactions with non--controlling shareholders of
subsidiaries:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Sales 41,974 36,500 27,343
Purchases 10,660 13,936 13,380
Dividends declared 9,894 1,462 -
(iv) Balances with non--controlling shareholders of subsidiaries
included in:
December 31,
2021 2020
(in US$'000)
Accounts receivable 8,436 6,184
Accounts payable 2,062 4,856
Other non-current liabilities
Loan - 579
25. Income Taxes
(i) Income tax expense
Year Ended December 31,
----------------------------
2021 2020 2019
---------- -------- ------
(in US$'000)
Current tax
HK (note (a)) 310 457 321
PRC (note (b) and (c)) 15 , 909 872 708
U.S. and others (note (d)) 417 219 636
---------- -------- ------
Total current tax 16,636 1,548 1,665
Deferred income tax (benefits)/expense (4,718) 3 ,281 1,609
---------- -------- ------
Income tax expense 11,918 4 ,829 3,274
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 (formerly
known as "Hutchison MediPharma (Suzhou) Limited") qualify as a HNTE
up to December 31, 2022 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 , 2021, 2020 and
2019, 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$14.4 million arising from the indirect disposal of HBYS
(Note 23), calculated at 10% of the excess of the disposal proceeds
over the cost of acquiring the equity investment in HBYS.
(d) The Company's subsidiary in the U.S. with operations
primarily in New Jersey and New York states is subject to U.S.
taxes, primarily federal and state taxes, which have been provided
for at approximately 21% (federal) and 0% to 11.5% (state tax) on
the estimated assessable profit over the reporting years. Certain
income receivable by the Company is subject to U.S. withholding tax
of 30%. Two of the Group's subsidiaries are subject to corporate
tax in the UK and EU countries at 19% and 20% to 25%, respectively,
on the estimated assessable profits in relation to their presence
in these countries.
The reconciliation of the Group's reported income tax expense to
the theoretical tax amount that would arise using the tax rates of
the Company against the Group's loss before income taxes and equity
in earnings of equity investees is as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Loss before income taxes and equity in earnings of equity investees (215,740) (189,734) (141,105)
Tax calculated at the statutory tax rate of the Company (35,597) (31,306) (23,282)
Tax effects of:
Different tax rates applicable in different jurisdictions 136 4,025 2,027
Tax valuation allowance 63,975 46,321 25,498
Preferential tax rate difference (148) (154) (177)
Preferential tax deduction and credits (29,838) (18,814) (5,444)
Expenses not deductible for tax purposes 8,684 3,476 4,098
Utilization of previously unrecognized tax losses (186) (114) (285)
Withholding tax on undistributed earnings of PRC entities 3,153 3,962 1,894
Others 1,739 (2,567) (1,055)
Income tax expense 11,918 4,829 3,274
(ii) Deferred tax assets and liabilities
The significant components of deferred tax assets and
liabilities are as follows:
December 31,
2021 2020
(in US$'000)
Deferred tax assets
Cumulative tax losses 186,832 117 ,064
Others 12,269 6,829
Total deferred tax assets 199,101 123,893
Less: Valuation allowance (189,700) (122,378)
Deferred tax assets 9,401 1,515
Deferred tax liabilities
Undistributed earnings from PRC entities 2,720 4,994
Others 45 69
Deferred tax liabilities 2,765 5,063
The movements in deferred tax assets and liabilities are as
follows:
2021 2020 2019
(in US$'000)
As at January 1 (3,548) (2,343) (4,256)
Utilization of previously recognized withholding tax on undistributed earnings 5,148 2,323 3,390
(Charged)/Credited to the consolidated statements of operations
Withholding tax on undistributed earnings of PRC entities (3,153) (3,962) (1,894)
Deferred tax on amortization of intangible assets 19 18 18
Deferred tax on temporary differences, tax loss carried forward and research tax
credits 7,852 663 267
Divestment of an equity investee 370 - -
Exchange differences (52) (247) 132
As at December 31 6,636 (3,548) (2,343)
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,
2021 2020
(in US$'000)
No expiry date 60,450 53,940
2022 200 195
2023 - -
2024 4,099 3,998
2025 39,321 38,357
2026 52,452 51,034
2027 67,217 66,555
2028 117,376 114,490
2029 191,554 186,844
2030 265,696 259,163
2031 432,278 -
1,230,643 774,576
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$2.0
million and US$0.6 million U.S. Federal and New Jersey state
research tax credits which will expire between 2039 and 2041
(Federal) and 2026 and 2028 (New Jersey) respectively, if not
utilized.
The table below summarizes changes in the deferred tax valuation
allowance:
2021 2020 2019
(in US$'000)
As at January 1 122,378 69,399 49,021
Charged to consolidated statements of operations 63,975 46,321 25,498
Utilization of previously unrecognized tax losses (186) (114) (285)
Write-off of tax losses - - (3,142)
Others (9) - -
Exchange differences 3,542 6,772 (1,693)
As at December 31 189,700 122,378 69,399
As at December 31, 2021, 2020 and 2019, the Group did not have
any material unrecognized uncertain tax positions.
(iii) Income tax payable
2021 2020 2019
(in US$'000)
As at January 1 1,120 1,828 555
Current tax 16,636 1,548 1,665
Withholding tax upon dividend declaration from PRC entities (note (a)) 5,148 2,323 2,581
Tax paid (note (b)) (5,014) (5,940) (2,970)
Reclassification from non-current withholding tax - 812 -
Reclassification to prepaid tax 25 485 -
Divestment of an equity investee (Note 23) (2,644) - -
Exchange difference 275 64 (3)
As at December 31 15,546 1,120 1,828
Notes:
(a) The amount for 2019 excludes a non-current withholding tax
of US$0.8 million which is included under other non-current
liabilities.
(b) The amount for 2020 is net of the PRC Enterprise Income Tax
("EIT") refund of US$0.4 million received by HSPL. The amount for
2019 excludes the PRC EIT of US$0.3 million prepaid by HSPL which
is included under other receivables, prepayments and deposits.
26. Losses Per Share
(i) Basic losses per share
Basic losses per share is calculated by dividing the net loss
attributable to the Company by the weighted average number of
outstanding ordinary shares in issue during the year. Treasury
shares held by the Trustee are excluded from the weighted average
number of outstanding ordinary shares in issue for purposes of
calculating basic losses per share.
Year Ended December 31,
2021 2020 2019
Weighted average number of outstanding ordinary shares in issue 792,684,524 697,931,437 665,683,145
Net loss attributable to the Company (US$'000) (194,648) (125,730) (106,024)
Losses per share attributable to the Company (US$ per share) (0.25) (0.18) (0.16)
(ii) Diluted losses per share
Diluted losses per share is calculated by dividing net 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.
For the years ended December 31, 2021, 2020 and 2019, 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. Therefore, diluted losses per share
were equal to basic losses per share for the years ended December
31, 2021, 2020 and 2019.
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 as well as administrative activities to support research
and development operations; and
(b) Marketed Products: comprises the sales, marketing,
manufacture and distribution of drug developed from research and
development activities.
(ii) Other Ventures: comprises other commercial businesses which
include the sales, marketing, manufacture and distribution of other
prescription drugs and consumer health products.
The performance of the reportable segments is assessed based on
segment operating (loss)/profit.
The segment information is as follows:
Year Ended December 31, 2021
Oncology/ Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from
external
customers 43,181 - 43,181 76,429 119,610 236,518 - 356,128
Interest income 809 3 812 - 812 282 982 2,076
Equity in
earnings
of equity
investees,
net of tax 20 - 20 - 20 60,597 - 60,617
Segment operating
(loss)/profit (143,876) (159,770) (303,646) 6,178 (297,468) 185,240 (42,303) (154,531)
Interest expense - - - - - - (592) (592)
Income tax
credit/(expense) 22 7,160 7,182 (1,320) 5,862 (14,573) (3,207) (11,918)
Net (loss)/income
attributable
to the Company (143,528) (152,235) (295,763) 4,032 (291,731) 142,890 (45,807) (194,648)
Depreciation/
amortization (6,436) (197) (6,633) - (6,633) (318) (239) (7,190)
Additions to
non-current
assets (other
than financial
instruments
and deferred
tax assets) 25,295 4,321 29,616 - 29,616 1,056 327 30,999
December 31, 2021
Oncology/ Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 166,802 19,870 186,672 35,978 222,650 225,898 924,113 1,372,661
Property, plant
and equipment 38,049 1,862 39,911 - 39,911 746 618 41,275
Right-of-use
assets 4,798 3,768 8,566 - 8,566 1,827 1,486 11,879
Leasehold land 13,169 - 13,169 - 13,169 - - 13,169
Goodwill - - - - - 3,380 - 3,380
Other intangible
asset - - - - - 163 - 163
Investments
in equity investees 480 - 480 - 480 75,999 - 76,479
Year Ended December 31, 2020
Oncology/ Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from
external
customers 10,262 - 10,262 19,953 30,215 197,761 - 227,976
Interest income 461 - 461 - 461 167 2,608 3,236
Equity in
earnings
of equity
investees,
net of tax (97) - (97) - (97) 79,143 - 79,046
Segment operating
(loss)/profit (119,740) (63,482) (183,222) 7,607 (175,615) 83,888 (18,174) ( 109,901)
Interest expense - - - - - - (787) (787)
Income tax
(expense)/credit (402) 642 240 (167) 73 (824) (4,078) (4,829)
Net (loss)/income (182,
attributable 779 (125,
to the Company (120,096) (62,683) ) 7,282 (175,497) 72,785 (23,018) 730)
Depreciation/
amortization (5,458) (119) (5,577) - (5,577) (292) (192) (6,061)
Additions to
non-current
assets (other
than financial
instruments
and deferred
tax assets) 22,574 754 23,328 - 23,328 817 1,090 25,235
December 31, 2020
Oncology/ Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Total assets 127,637 9,957 137,594 5,728 143,322 231,234 349,562 724,118
Property, plant
and equipment 22,554 454 23,008 - 23,008 688 474 24,170
Right-of-use
assets 2,782 1,375 4,157 - 4,157 2,582 1,277 8,016
Leasehold land 13,121 - 13,121 - 13,121 - - 13,121
Goodwill - - - - - 3,307 - 3,307
Other intangible
asset - - - - - 227 - 227
Investments
in equity investees 385 - 385 - 385 139,120 - 139,505
Year Ended December 31, 2019
Oncology/ Immunology
Marketed Other
R&D Products Ventures
U.S.
and
PRC Others Subtotal PRC Subtotal PRC Unallocated Total
(in US$'000)
Revenue from
external
customers 16,026 - 16,026 10,766 26,792 178,098 - 204,890
Interest income 322 - 322 - 322 109 4,513 4,944
Equity in
earnings
of equity
investees,
net of tax 147 - 147 - 147 40,553 - 40,700
Segment
operating
(loss)/profit (111,518) (21,785) (133,303) 5,887 (127,416) 45,255 (17,214) (99,375)
Interest
expense - - - - - - (1,030) (1,030)
Income tax
expense (63) (197) (260) - (260) (939) (2,075) (3,274)
Net
(loss)/income
attributable
to the Company (111,308) (21,926) (133,234) 5,872 (127,362) 41,488 (20,150) (106,024)
Depreciation/
amortization (4,448) (62) (4,510) - (4,510) (264) (168) (4,942)
Additions to
non-current
assets (other
than financial
instruments
and deferred
tax assets) 8,602 1,308 9,910 - 9,910 2,772 148 12,830
Revenue from external customers is after elimination of
inter-segment sales. Sales between segments are carried out at
mutually agreed terms. The amount eliminated attributable to sales
between PRC and U.S. and others under Oncology/Immunology segment
was US$46,891,000, US$19,230,000 and US$8,406,000 for the years
ended December 31, 2021, 2020, and 2019 respectively.
There were three customers with aggregate revenue of
US$147,111,000, which accounted for over 10% of the Group's revenue
for the year ended December 31, 2021. There were two customers with
aggregate revenue of US$62,493,000, which accounted for over 10% of
the Group's revenue for the year ended December 31, 2020. There was
one customer with revenue of US$27,343,000, which accounted for
over 10% of the Group's revenue for the year ended December 31,
2019.
Unallocated expenses mainly represent corporate expenses which
include corporate employee benefit expenses and the relevant
share-based compensation expenses. Unallocated assets mainly
comprise cash and cash equivalents and short-term investments.
A reconciliation of segment operating loss to net loss is as
follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Segment operating loss (154,531) (109,901) (99,375)
Interest expense (592) (787) (1,030)
Income tax expense (11,918) (4,829) (3,274)
Net loss (167,041) (115,517) (103,679)
28. Note to Consolidated Statements of Cash Flows
Reconciliation of net loss for the year to net cash used in
operating activities:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Net loss (167,041) (115,517) (103,679)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of finance costs 44 43 195
Depreciation and amortization 7,190 6,061 4,942
Gain from purchase of a subsidiary - - (17)
Loss on disposals of property, plant and equipment 70 85 17
Provision for excess and obsolete inventories (23) 65 316
Provision for credit losses (76) 77 (25)
Share-based compensation expense-share options 16,365 8,737 7,173
Share-based compensation expense-LTIP 25,625 10,905 4,419
Equity in earnings of equity investees, net of tax (60,617) (79,046) (40,700)
Dividends received from SHPL and HBYS 49,872 86,708 28,135
Changes in right-of-use assets (3,727) (2,197) 224
Fair value loss on Warrant 12,548 - -
Gain from disposal of HBYS (121,310) - -
Unrealized currency translation (gain)/loss (2,505) (6,149) 1,679
Changes in income tax balances 6,904 (1,111) 304
Changes in working capital
Accounts receivable (35,634) (4,693) (271)
Other receivables, prepayments and deposits (5,758) (9,602) (2,734)
Inventories (16,002) (3,623) (4,215)
Accounts payable 9,565 7,651 (1,664)
Other payables, accruals and advance receipts 66,224 37,472 25,953
Lease liabilities 3,079 2,258 (101)
Deferred revenue 11,071 (158) (709)
Other (87) (32) (154)
Total changes in working capital 32,458 29,273 16,105
Net cash used in operating activities (204,223) (62,066) (80,912)
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 results of
operations, financial position 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 and results of operations 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 further updated in December 2021), the Group was awarded an
amount of RMB253.2 million (equivalent to US$39.6 million) with
interest of 5.5% per annum from the date of the award until payment
and recovery of costs of US$2.2 million ("Award"). Luye is still
pursuing further legal proceedings and no Award amounts have been
received as at the issuance date of these consolidated financial
statements. Hence no Award amounts have been recognized and no
adjustment has been made to Seroquel-related balances as at
December 31, 2021. Such Seroquel-related balances include accounts
receivable, long-term prepayment, accounts payable and other
payables of US$1.2 million, US$0.7 million, US$1.0 million and
US$1.3 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$0.1 million and
US$0.2 million as at December 31, 2021 and 2020 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 certain investments in equity
investees in the PRC, where the Group's equity in undistributed
earnings amounted to US$54.4 million and US$99.9 million as at
December 31, 2021 and 2020 respectively.
30. Additional Information: Company Balance Sheets (Parent
Company Only)
December 31,
Note 2021 2020
(in US$'000)
Assets
Current assets
Cash and cash equivalents 979 21
Short-term investments 55,128 -
Other receivables, prepayments and deposits 934 1,120
Total current assets 57,041 1,141
Investments in subsidiaries 972,831 506,150
Deferred issuance costs - 1,171
Total assets 1,029,872 508,462
Liabilities and shareholders' equity
Current liabilities
Other payables, accruals and advance receipts 42,952 24,253
Income tax payable 16 93
Total current liabilities 42,968 24,346
Other non-current liabilities 11 -
Total liabilities 42,979 24,346
Commitments and contingencies 16
Company's shareholders' equity
Ordinary shares; $0.10 par value; 1,500,000,000
shares authorized; 864,530,850 and 727,722,215
shares issued at December 31 , 20 21 and 2020
respectively 17 86,453 72,772
Additional paid-in capital 1,505,196 822,458
Accumulated losses (610,328) (415,591)
Accumulated other comprehensive income 5,572 4,477
Total Company's shareholders' equity 986,893 484,116
Total liabilities and shareholders' equity 1,029,872 508,462
31. Subsequent Events
The Group evaluated subsequent events through March 3, 2022,
which is the date when the consolidated financial statements were
issued.
In February 2022, a US$15 million milestone payment was
triggered and receivable in relation to the initiation of the Phase
III study for the primary indication non-small cell lung cancer
pursuant to the AZ Agreement.
32. Dividends
No dividend has been paid or declared by the Company since its
incorporation.
33. Directors' Remuneration
Directors' remuneration disclosed pursuant to the Listing Rules,
Section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies
Ordinance and Part 2 of the Companies (Disclosure of Information
about Benefits of Directors) Regulation, is as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Fees: 883 848 848
Other remuneration
Salaries, allowances and benefits in kind 1,160 1,093 1,001
Pension contributions 93 89 79
Performance related bonuses 2,245 2,005 2,042
Share-based compensation expenses (note) 5,553 3,336 1,911
9,051 6,523 5,033
9,934 7,371 5,881
Note: During the years ended December 31, 2021, 2020 and 2019,
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 18. The share-based compensation expenses were
recognized in the consolidated statements of operations during the
years ended December 31, 2021, 2020 and 2019.
(i) Independent non-executive directors
The fees paid to independent non-executive directors were as
follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Paul Carter 117 1 17 117
Karen Ferrante 103 1 03 103
Graeme Jack 111 104 104
Tony Mok 99 84 84
430 408 408
The share-based compensation expenses of the independent
non-executive directors were as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Paul Carter 91 73 -
Karen Ferrante 91 73 -
Graeme Jack 91 73 -
Tony Mok 91 73 -
364 292 -
There were no other remunerations payable to independent
non-executive directors during the years ended December 31, 2021,
2020 and 2019.
(ii) Executive directors and non-executive directors
Year Ended December 31, 2021
Salaries,
allowances and Pension Performance Share-based
Fees benefits in kind contributions related bonuses compensation Total
(in US$'000)
Executive
directors
Simon To 85 - - - 92 177
Christian Hogg 77 420 30 1,000 2,246 3,773
Johnny Cheng 72 328 28 410 733 1,571
Wei-guo Su 75 412 35 835 1,934 3,291
309 1,160 93 2,245 5,005 8,812
Non-executive
directors
Dan Eldar 70 - - - 92 162
Edith Shih 74 - - - 92 166
144 - - - 184 328
453 1,160 93 2,245 5,189 9,140
Year Ended December 31, 2020
Salaries,
allowances and Pension Performance Share-based
Fees benefits in kind contributions related bonuses compensation Total
(in US$'000)
Executive
directors
Simon To 80 - - - 73 153
Christian Hogg 75 411 30 897 1,012 2,425
Johnny Cheng 70 320 27 372 341 1,130
Wei-guo Su 75 362 32 736 1,472 2,677
300 1,093 89 2,005 2,898 6,385
Non-executive
directors
Dan Eldar 70 - - - 73 143
Edith Shih 70 - - - 73 143
140 - - - 146 286
440 1,093 89 2,005 3,044 6,671
Year Ended December 31, 2019
Salaries,
allowances and Pension Performance Share-based
Fees benefits in kind contributions related bonuses compensation Total
(in US$'000)
Executive
directors
Simon To 80 - - - - 80
Christian Hogg 75 401 29 936 399 1,840
Johnny Cheng 70 309 26 365 155 925
Wei-guo Su 75 291 24 741 1,357 2,488
300 1,001 79 2,042 1,911 5,333
Non-executive
directors
Dan Eldar 70 - - - - 70
Edith Shih 70 - - - - 70
140 - - - - 140
440 1,001 79 2,042 1,911 5,473
34. Five Highest-Paid Employees
The five highest-paid employees during years ended December 31,
2021, 2020 and 2019 included the following number of directors and
non-directors:
Year Ended December 31,
2021 2020 2019
Directors 3 3 3
Non-directors 2 2 2
5 5 5
Details of the remuneration for the years ended December 31,
2021, 2020 and 2019 of the five highest-paid employees who are
non-directors (the "Non-director Individuals") were as follows:
Year Ended December 31,
2021 2020 2019
(in US$'000)
Salaries, allowances and benefits in kind 859 715 643
Pension contributions 52 48 36
Performance related bonuses 802 735 511
Share-based compensation expenses (note) 1,465 1,104 953
3,178 2,602 2,143
Note: During the years ended December 31, 2021, 2020 and 2019,
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 18. The share-based compensation expenses were
recognized in the consolidated statements of operations during the
years ended December 31, 2021, 2020 and 2019.
The number of Non-director Individuals whose remuneration fell
within the following bands is as follows:
Year Ended December 31,
2021 2020 2019
HK$7,500,000 to HK$8,000,000 - - 1
HK$9,000,000 to HK$9,500,000 - - 1
HK$10,000,000 to HK$10,500,000 - 2 -
HK$12,000,000 to HK$12,500,000 1 - -
HK$12,500,000 to HK$13,000,000 1 - -
2 2 2
During the years ended December 31, 2021, 2020 and 2019, no
remuneration was paid by the Group to any directors or Non-director
Individuals as an inducement to join the Group or as compensation
for loss of office. Additionally, none of the directors or
Non-director Individuals have waived any remuneration during the
years ended December 31, 2021, 2020 and 2019.
35. Reconciliation between U.S. GAAP and International Financial
Reporting Standards
These consolidated financial statements are prepared in
accordance with U.S. GAAP, which differ in certain respects from
International Financial Reporting Standards ("IFRS"). The effects
of material differences prepared under U.S. GAAP and IFRS are as
follows:
(i) Reconciliation of consolidated statements of operations
Year Ended December 31, 2021
IFRS adjustments
Amounts as Divestment
reported Lease Issuance Capitalization of an equity
under U.S. amortization costs of rights investee Amounts under
GAAP (note (a)) (note (b)) (note (c)) (note (d)) IFRS
(in US$'000)
Costs 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)
Loss before
income taxes and
equity in
earnings of
equity investees (215,740) (114) (163) 11,111 11,266 (193,640)
Income tax
expense (11,918) - - - 370 (11,548)
Equity in
earnings of
equity
investees, net
of tax 60,617 (1) - - (11,636) 48,980
Net loss (167,041) (115) (163) 11,111 - (156,208)
Less: Net income
attributable to
non-controlling
interests (27,607) (2) - (27) - (27,636)
Net loss
attributable to
the Company (194,648) (117) (163) 11,084 - (183,844)
Year Ended December 31, 2020
IFRS adjustments
Amounts as Divestment
reported Lease Issuance Capitalization of an equity
under U.S. amortization costs of rights investee Amounts under
GAAP (note (a)) (note (b)) (note (c)) (note (d)) IFRS
(in US$'000)
Costs of
goods-third
parties (178,828) 29 - - - (178,799)
Research and
development
expenses (174,776) 18 - - - (174,758)
Selling expenses (11,334) 51 - - - (11,283)
Administrative
expenses (50,015) 132 860 - - (49,023)
Total operating
expenses (424,644) 230 860 - - (423,554)
Interest expense (787) (237) - - - (1,024)
Other expense (115) 15 - - - (100)
Total other
income/(expense) 6,934 (222) - - - 6,712
Loss before
income taxes and
equity in
earnings of
equity investees (189,734) 8 860 - - (188,866)
Equity in
earnings of
equity
investees, net
of tax 79,046 4 - - - 79,050
Net loss (115,517) 12 860 - - (114,645)
Less: Net income
attributable to
non-controlling
interests (10,213) 17 - - - (10,196)
Net loss
attributable to
the Company (125,730) 29 860 - - (124,841)
Year Ended December 31, 2019
IFRS adjustments
Amounts as Divestment
reported Lease Issuance Capitalization of an equity
under U.S. amortization costs of rights investee Amounts under
GAAP (note (a)) (note (b)) (note (c)) (note (d)) IFRS
(in US$'000)
Research and
development
expenses (138,190) 31 - - - (138,159)
Administrative
expenses (39,210) 192 - - - (39,018)
Total operating
expenses (351,276) 223 - - - (351,053)
Interest expense (1,030) (275) - - - (1,305)
Other expense (488) 92 - - - (396)
Total other
income/(expense) 5,281 (183) - - - 5,098
Loss before
income taxes and
equity in
earnings of
equity investees (141,105) 40 - - - (141,065)
Equity in
earnings of
equity
investees, net
of tax 40,700 (5) - - - 40,695
Net loss (103,679) 35 - - - (103,644)
Less: Net income
attributable to
non-controlling
interests (2,345) 15 - - - (2,330)
Net loss
attributable to
the Company (106,024) 50 - - - (105,974)
(ii) Reconciliation of consolidated balance sheets
December 31, 2021
IFRS adjustments
Amounts Divestment
as of an
reported Lease Issuance Capitalization equity LTIP Amounts
under amortization costs of rights investee classification under
U.S. GAAP (note (a)) (note (b)) (note (c)) (note (d)) (note (e)) IFRS
(in US$'000)
Right-of-use
assets 11,879 (257) - - - - 11,622
Investments in
equity
investees 76,479 (24) - - - - 76,455
Other
non-current
assets 21,551 - - 11,296 - - 32,847
Total assets 1,372,661 (281) - 11,296 - - 1,383,676
Other payables,
accruals and
advance
receipts 210,839 - - - - (12,836) 198,003
Total current
liabilities 311,658 - - - - (12,836) 298,822
Total
liabilities 333,147 - - - - (12,836) 320,311
Additional
paid-in capital 1,505,196 - (697) - - 12,836 1,517,335
Accumulated
losses (610,328) (233) 697 11,084 - - (598,780)
Accumulated
other
comprehensive
income 5,572 (7) - 185 - - 5,750
Total Company's
shareholders'
equity 986,893 (240) - 11,269 - 12,836 1,010,758
Non-controlling
interests 52,621 (41) - 27 - - 52,607
Total
shareholders'
equity 1,039,514 (281) - 11,296 - 12,836 1,063,365
December 31, 2020
IFRS adjustments
Amounts Divestment LTIP
as of an classification
reported Lease Issuance Capitalization equity (note (e)) Amounts
under amortization costs of rights investee under
U.S. GAAP (note (a)) (note (b)) (note (c)) (note (d)) IFRS
(in US$'000)
Right-of-use
assets 8,016 (140) - - - - 7,876
Investments in
equity
investees 139,505 (22) - - - - 139,483
Other
non-current
assets 20,172 - 860 - - - 21,032
Total assets 724,118 (162) 860 - - - 724,816
Other payables,
accruals and
advance
receipts 121,283 - - - - (7,089) 114,194
Total current
liabilities 158,397 - - - - (7,089) 151,308
Total
liabilities 205,169 - - - - (7,089) 198,080
Additional
paid-in capital 822,458 - - - - 7,089 829,547
Accumulated
losses (415,591) (116) 860 - - - (414,847)
Accumulated
other
comprehensive
income 4,477 (4) - - - - 4,473
Total Company's
shareholders'
equity 484,116 (120) 860 - - 7,089 491,945
Non-controlling
interests 34,833 (42) - - - - 34,791
Total
shareholders'
equity 518,949 (162) 860 - - 7,089 526,736
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) 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.
(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 in-process research and
development 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) Divestment of HBYS
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.
(e) 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.
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END
FR BBGDXDBGDGDX
(END) Dow Jones Newswires
March 03, 2022 07:00 ET (12:00 GMT)
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