HUTCHMED (China) Ltd

HKEX:13

Earnings Call Transcript 2022-Q2

[Operator]

Dr. Marek Kania, our Managing Director and Chief Medical Officer of HUTCHMED International. Dr. Karen Atkin, Chief Operating Officer and Mr. Hong Chen, our Chief Commercial Officer of China.

With that I will hand over to Dr. Su.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Thanks, Mark. Hello everyone. As you all know the biotech industry is going through some significant changes. HUTCHMED is trying to stay focus on our goals and objectives.

During the first half 2022, HUTCHMED China Commercial continued to grow and deliver strong results, particularly fulfilling, considering the impact from the COVID disruptions.

ELUNATE continues to gain in prescription share for third-line CRC. The lead of Staviga [ph] continue to widen. SULANDA was included into the NRDL this year with a 52% price reduction. Yet sales grew 69%, aided by much improved patient access.

ORPATHYS also delivered strong sequential growth compared to second half of 2021. On the pipeline, while we were disappointed by the surufatinib of U.S. FDA CRL and now MMA withdrawn. Our deep and broad pipeline continues to progress.

Our first multinational MRCT for fruquintinib global registration will read out shortly in August. And if positive, NDA filings will begin towards the end of the year, starting from the U.S. followed by EU and Japan.

For savolitinib, multiple registration studies including global MRCT SAMETA for PRCC and SAFFRON for non-small cell lung cancer enrolling. The SAVANNAH study, data to be disclosed as WCLC shortly, is also continuing to enroll with potential for filings for accelerated approval.

Registration studies for our second wave of products, amdizalisib, sovleplenib and

tazemetostat are all in enrolling. An NDA submissions in China are expected during 2023 and 2024. Finally, managing changes and challenges. HUTCHMED has gone through many difficult stretches in our history.

The management team is very experienced in dealing with challenges, such as Surufatinib setback over the COVID disruption in China, or the overall unfavorable cap market right now. HUTCHMED has a solid cash balance and a cash generative commercial operation in China. And we are confident, we will be able to emerge from these challenges stronger.

Next, I'll ask Mr. Hong Chen, Chief Commercial Officer, China to give an update on first half China oncology commercial performance. Chen?

[Hong Chen]

Thank you, Weiguo. Hello everyone. HUTCHMED already had a three in-house innovative products approved and market in China and 2022 is also the second year for HUTCHMED to commercialize ELUNATE and SULANDA through its own commercialization platform.

From this slide, we can see after successful NRDL renewal with only 5% price decrease, ELUNATE continued to grow strongly first half of this year. The first six months in market sales was more than US$50 million with 26% growth versus last year.

By the end of May, the cumulative in-market sales of ELUNATE already achieved more than RMB1 billion. ELUNATE already benefited more than 50,000 CRC patients, and it continued to expand as a leading position in third-line CRC patients share to 43% during the latest post launches away.

Next slide please. For SULANDA NRDL inclusion allows much wider patient access for SULANDA. We can see despite 52% price cuts, the value of sales still increased by 69% to US$13.6 million in the first half of this year, which was already over the whole year sales of 2021. The growth was up to 280% in terms of the new patient numbers created by SULANDA.

Next slide please. This is the first year anniversary for savolitinib since it was approved in June last year. The first half of this year in market sales increased by 46% to US$23.3 million versus the second half of last year.

As the first-in-class selective MET inhibitor in China, savolitinib is now recommended for treatment of non-small cell lung cancer with exon 14 skipping in five [Indiscernible] treatment guidelines.

And MET diagnostic testing is already recommended as the new standard of care for patients with late stage non small cell lung cancer. Our commercial partner, AstraZeneca is now proactively working on the preparation for the coming NRDL negotiation at the end of this year.

Next slide please. This slide is a high level summary of HUTCHMED commercial capabilities. We can say with the team size increasing to a more than 800 staff, more and more hospitals and HCPs can be covered as well. More than 500 new hospitals were covered in the first half of this year especially in Tier 2 and Tier 3 cities.

More and highly effective promotional events executed in first half especially through online and digital communication to mitigate the COVID challenges. For example, we can see we held more than 3,800 ELUNATE events with more than 100% growth versus the first half of last year. And we covered more than 43,000 HCPs by SULANDA events with also more than 180% growth.

So overall, despite of the COVID challenges, we continue to make good progress to commercialize our three market products in China in the first half of this year. I'm very confident this momentum to continue to go from stress- to-stress as our commercial team continues to build over the balance of this year.

Thanks. Okay. Weiguo and Marek, please.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Thanks, Hong Chen. Moving on to the pipeline progress. Our clinical development pipeline continued to grow. Our anti-CD47 antibody HMPL-A83 entered into Phase 1 study. And our first in-license the product tazemetostat initiated the bridging study for China registration.

Next. This slide lists 13 ongoing registration studies both China and globally, with estimated timeline for possible NDA filings. Generally speaking, the COVID outbreak in the first half has some impact on enrollment and we are anticipating some delay for most

studies in China.

Next slide. Again, the seven registration studies for savolitinib and they are all enrolling. Three globally and four in China. Next slide. This is to highlight the interim SAVANNAH data to be presented at the WCLC. The most important information among other things, is the biomarker definition.

The data is from 193 patients, all progressed on TAGRISSO with MET activation, both high and moderately high. In this study, 34% of patients were identify with high MET activation, namely IHC-3 plus greater than 90% of the tumor cells, or MET gene copy number greater than 10.

And an additional, 28% with a moderate MET activation ICH-3 plus less than 90% or GCN between five and 10 copies. And you can see, there is a clear difference in efficacy for these two subgroups of patients, including OLR, DLR and PFS. These data, supported and inform the global SAFFRON's registration study, which is now underway.

Next slide. In addition to targeting net driver genetic alterations, such as mutations, exon 14, skipping or amplification. Another area of strong interest is to target the immunosuppressive role of HGF MET signaling pathway.

Last year, we published the CALYPSO study in which the MET driven PRCC patients appeared to derive robust clinical benefit from the treatment of savolitinib, durvalumab combination. Currently, the global registration MRCT is ongoing the SAMETA study.

We and our partner, AstraZeneca are now preparing to explore the same combination in MET driven non small cell lung cancer. The sub study is expected to start enroll later this year.

Next slide. Moving on to fruquintinib and surufatinib for clinical development outside China, let me ask my colleague, Dr. Marek Kania, Managing Director and the CMO of HMI to give you an update.

[Marek Kania]

Thank you, Weiguo. Thanks. Hello, everyone. I will give you a quick update on our latest developments globally. As you can see on this slide HUTCHMED continues to focus on colorectal cancer and really housing patients with this high burden and high unmet medical needs to find solutions and therefore fruquintinib was our main focus in driving that.

As you can see, the second most common cancer type and for second line standards therapy patients are running quickly out of options. Only two approved options are in the third-line is use in the less 20% of total patients. So that's highlight strong means and strong rationale for frequently being developed in this setting. And next slide please.

As you seen the slide few times in the past. Last six months was our strong focus on driving our FRESCO-2, which is second pivotal study and multinational MRCT go through the finish line.

We are actually narrowing our predictions here. We will be in position of seven top line results in August, hence presenting upcoming medical conference for your results very soon.

Just as a reminder, FRESCO-2 was discussed with all major regulatory agencies before finalizing protocol and started the contract. And therefore if FRESCO-2 is positive, it will be [Indiscernible] efforts both in U.S., for NDA, Europe, MAA and Japan PMDA discussion. Japan has strong participation in the study. So with this global -- truly global effort, it will be our strong position from a regulatory point of view to start our mission.

As a reminder, U.S. grant -- U.S. FDA granted fast track designation. Therefore, it will afford us rolling submission starting in late this year and stress this is positive. Again, we'll be talking more about FRESCO-2 very soon.

Next slide please. Surufatinib, quick update. We have discussed earlier in April/May about NDA complete response in U.S. I'm not going to highlight more of this. Today, we announced withdrawal of our MAA in Europe.

Main reasons are summarized in this slide, which really highlights similar concerns and similar limitations and objections from European regulatory perspective, in addition to the limitations in conducting inspections, both TCP and GMP, our discussions and decision to withdraw and focusing on fast-forwards with both regulatory influences to bring to the passing to next phase development, conducting MRCT.

For Japan, we are conducting a bridging study on different name for this would be pivotal study in a Japanese regulatory term. And we are in part two below the approaching PMDA for PMDA discussion at the conclusion of that study. Next slide, please.

Weiguo, I think you will be covering this slide. Back to you.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Yes. Thanks, Marek. Now, let's move on to our second wave of compounds in late stage development. All in hem onc space, HUTCHMED has six assets in clinical development with several more programs in discovery. We believe this is a highly valuable heme onc pipeline covering pretty much entire heme oc spectrum.

An Amdizalisib, Sovleplenib, both with breakthrough therapy designation in China. Next slide. Amdizalisib, our differentiated PI3K Delta inhibitor with good safety profile has continued to enroll in two registration Phase 2 studies. The third-line plus follicular and the second-line or above marginal zone lymphoma.

Data for other subtypes of lymphoma including MCL and PTCL are still maturing and it will be evaluated for possible additional registration studies. Outside China in light of the April FDA ODAC on PI3K Delta class of compounds.

We are expanding patient enrollment in several subtypes to demonstrate or confirm the differentiation with a priority in post the BTKiMCL and PTCL. Let me remind you that our intention when amdizalisib was discovered was to improve upon existing P13K Delta inhibitors safety profile, which is now the center of the question.

The data we published at ASH last year showed not only this promising efficacy data, but also much more favorable safety profile, obviously needs to be further confirmed in larger patient population and also in U.S. patient population. In addition, also considering combinations such as the EZH2 inhibitor tazemetostat.

Next slide. Savolitinib, the second inhibitor in China, the Phase 3 registration study in ITP is enrolling very well with a little impact from COVID, suggesting a strong unmet medical need in this patient population.

Another indication where we have breakthrough therapy designation. We hope to complete enrollment of this Phase 3 study by end of the year. Behind the ITP, two INDs have been cleared in China, one for autoimmune hemolytic anemia, and another for COVID-19 to explore its anti-inflammatory activity to reduce death rate in severe to critical patient population.

Outside China, the dose expansion in lymphoma indications continues to enroll with a priority in Hodgkins and post BTKCLL in addition, based on encouraging POC data from the China ITP study and strong unmet medical needs in this space, we are preparing to submit an IND to explore the potential.

Next slide. Our in-licensed EZH2 inhibitor tazemetostat, taz is approved in the U.S. for follicular and epithelial sarcoma indications as a monotherapy. At 2022 ASCO, the Safety Run-in Data in combination with R2 will present it in a second-line follicular lymphoma.

The efficacy and safety were very encouraging together with our partner Epizyme, the global Phase 3 study, the SYMPHONY-01 has been initiated in second-line, follicular comparing R2 plus taz versus R2. China will be part of the global MRCT to support China registration.

In parallel, we just kicked off the bridging study in China to support initial registration of tazemetostat as a monotherapy. Taz has been approved in Hainan province in China through a special registration pathway based on the U.S. approval. Multiple combination proof-of-concept studies are also being planned.

So this update on the last-stage assets. Next, I'll Johnny Cheng, CFO to give us an update on the financials, Johnny?

[Johnny Cheng, Executive Director and Chief Financial Officer]

Thank you, Weiguo Su. So moving on to the next page, please. So, as of June company maintains a strong balance sheet. We have cash and short term investments of over a $800 million [ph] and utilize banking facilities of over $170 million. In addition, we have another $58 million cash in our joint venture with Shanghai fund. So overall, our target is to extend the cash run rate to three years.

Move on to the next page. The strong performance of our commercial teams resulting group revenue up by 28% to over $200 million, of which our oncology business revenue increased by more than double of last year to more than over $90 million. So we continue to increase our investment in R&D to over $180 million in China as well as in the U.S. and Europe. So the popularity of our equity investees increased by 17% to over $33 million.

Moving on to the next page please. Our non-core assets continue to do well. So as you all can see, it has contributed more than $0.5 billion net income to the group. So we continue to explore ways to unlock the value of these assets to provide additional cash resources to support our R&D investment.

Moving on to the next page. As you all have heard from our Hong Chen earlier, with our strong performance, commercial performance, we will maintain our guidance the market we gave earlier, that is $160 million to $290 million for our oncology and immunology business.

I will now pass on to Weiguo.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Okay. Thanks Johnny. To recap, while the macro environment continues to change HUTCHMED strives to stay focused on all commercial operations and pipeline progression. We expect that strong momentum in China commercial to continue in the second half.

On the pipeline in China, we continue to expand the lifecycle indications behind our three approved the products; Fruquintinib, Surufatinib and savolitinib and at the same time moving on to a second wave of drug candidates, amdizalisib, sovleplenib and tazemetostat towards registration.

Outside China, while surufatinib has been a disappointment. We believe it is a unique case and will have a significant impact on the rest of the pipeline. And we do have a deep pipeline and a robust registration strategy starting from fruquintinib, for which a multinational MRCT will read out surely in August, and NDA filings if positive in the U.S., EU and Japan starting from the end of the year.

Amdizalisib and sovleplenib are both generating PLC data, and it will be engaged with FDA to discuss and define the registration pathway in the next six to 12 months. Finally, I would like to point out that even though we have a solid cash balance, we are prepared to manage through potentially long lasting unfavorable equity market.

We are reviewing our clinical programs and operations carefully to make sure that we spend cash prudently. We will also look to grow our China business further to generate more income. And finally, we plan to up all efforts in licensing and collaboration activities.

Our current environment is challenged. We are confident that we will be able to leverage our well experienced management team and emerge from the difficult period even stronger. This is not the first time that we have managed through difficult market conditions.

So this wraps up our presentation. The management team will be happy to answer any questions.

[Operator]

Ladies and gentlemen, we will now start our question and answer session. [Operator

Instructions]. The first one come from comes from Kelly Shi from Jeffries. Please go ahead.

[Kelly Shi, Jeffries]

Congrats on the progress and the thank you for taking my questions. So regarding the regulatory pathway for fruquintinib that in the U.S.-based on a global Phase 3 of FRESCO trial, a U.S. Phase 1 trial and a FRESCO China trial, which should provide a comprehensive clinical information. But again, an experience with the suru, do you see

any potential issues regarding the applicability to the U.S. patient population, and also like to the current U.S. medical practice, potential data package to support U S. approval in CRC? And while there's a topic of discussion from the previous U.S. FDA meetings? Thank you. And also have a follow up.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Okay. Thanks, Kelly. Well, obviously, the strategy for fruquintinib registration in the U.S. and elsewhere for that matter, obviously, will be centered on the FRESCO-2 study which is obviously MRCT and in representative patient population. I think, in China study the FRESCO, the original FRESCO study, and also all other early stage clinical studies will serve as supports. So we don't expect any issues and we certainly had previous discussion with the agency as well before we actually kicked off the FRESCO-2. So, now we are actually quite confident that this MRCT should cover most issues, completely different from surufatinib case. Maybe Marek if you want -- you have anything else to add.

[Marek Kania]

Yes, Weiguo. Thank you. Now I would just add my voice of confidence and as you said well, FRESCO nothing to do with surufatinib and were just unique. We have numerous formal discussions with U.S. and FDA in the FRESCO-2 meeting and we were very transparent in and idea was very collaborative in the way how we designed this FRESCO-2 study, which is main pivotal study. FRESCO-2 will be considered in totality of the package as well. So we are very confident if FRESCO-2 is positive, that would be based on three continental regulatory discussion. As we already reported before, we have also scientific advisor with EMA, who provided comments to the FRESCO-2 design. So Europe FRESCO-2 will be primary pivotal study. At the same time, we have the same discussion with PMDA. So we have remained very confident in our strategy here.

[Kelly Shi, Jeffries]

Great to hear. Thank you very much. I also have a follow up regarding the PI3 kinase inhibitor. And how should we think about a market opportunity in the lymphoma indications in China market given CD19 CAR Ts and anti-CD20 bispecific antibodies have entered the market and there are also a few entering the market. How different of the competitive landscape in China versus in the U.S. for those lymphoma indications? Thanks.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Yes. So obviously, it all comes down to the safety and tolerability if proven how safe and efficacious. We believe PI3K Delta, should have a very strong competitive edge, because it can be used before or after these biologics treatment and also it's oral. As you know, these are relatively indolent diseases and patients will have to stay on treatment for a very long time. So safety and tolerability is extremely important. Some of the bispecifics has shown some strong data. But again, these are all single arm studies and still remain to be confirmed. Car T can works for some patients, but not for all and even patients benefit they ultimately progress or have recurrence.

So, all-in-all we believe indolent lymphoma patient population, and they live --patients live up for a long time. And they need to rotate to new therapies repeatedly. So a good efficacious and safe tolerable PI3K Delta inhibitor. We believe that has its place for these patients.

[Kelly Shi, Jeffries]

Very helpful. Thank you.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Thanks. Move to the next. Operator?

[Operator]

Hello. Paul Choi from Goldman Sachs. Your microphone is open.

[Paul Choi, Goldman Sachs]

Thank you. Good evening, and thank you for taking our questions. Just a couple of quick financial ones to start and then one pipeline question. First, was there any inventory built at the end with regard to some of the newer products that were included on the NRDL?

And then with respect to the guidance being maintained, can you maybe speak to how you view the current macro environment and what would sort of be the pushes and pulls that might drive your full year results to the lower end versus the higher end? And then I had a pipeline question to follow up.

[Johnny Cheng, Executive Director and Chief Financial Officer]

Yes, Paul. With regard to the inventory, we believe that at the moment it's a normal inventory level. If anything, during the lock downs, from April, May and into June, there was some kind of depletion -- some level of depletion of inventories. So, at the moment, we think it's at a normal level of inventory. And we are quite confident the second half, we think the momentum will continue. And with regard to the push and pull. Again, I think we are a bit concerned about the COVID-19, whether you can now have another outbreak somewhere else or somewhere, and it can be quite disruptive basically. So that remains a bit uncertain. Nobody can predict the situation. Although we have been gone through once and our team is putting in place multiple measures, including the online

doctors visit, online conferences, and also the inventory and distribution management.

So, we believe we are now better positioned to deal with any potential COVID outbreak in China with lock downs potential. But nevertheless, it can be an issue, depending on the scale, obviously. So we are cautiously optimistic that we'll be able to deliver within the guidelines. And hopefully we can do better towards the higher end. So I think the only the headwind would have be the uncertainty of COVID.

[Paul Choi, Goldman Sachs]

Okay. Thank you for that. And as a follow up my pipeline question is, I know you'll have the FRESCO-2 results imminently here in August. Is there a plan to present the data more in detail at a medical meeting here in the second half of 2022? Or will we have to wait until 2023? Thank you for taking our questions.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Yes. Marek, if you want.

[Marek Kania]

Yes, I can take it. So Paul, obviously, our principal is disclosure of important data, both in announcements level expeditiously, but also, in a full data set as quickly as possible as a major conference. So I'm not here in the position to confirm which conference, you can go and speculate, but our aim is always as soon as possible as major conference, but obviously short of being accepted and confirmed. We'll have separate announcement when we have exact location and timing for that. But it will be definitely this year.

[Paul Choi, Goldman Sachs]

This year. Okay. Thank you very much.

[Marek Kania]

Yes.

[Operator]

We have another question from Mike Mitchell from Panmure Gordon. Please go ahead.

[Mike Mitchell, Panmure Gordon]

Thanks. Good afternoon, everyone. Many thanks for taking my questions. I just have a couple. I just wondered in terms of the current commercial organization, you're continuing to add significantly to the oncology team. I think you say you have over 800 people now, but the number of oncology physicians covered is starting to flatten off somewhat. So just wondered how optimal the commercial organization now looks just in terms of structure? And then a question on fruquintinib and the sort of global strategy clearly, the FRESCO-2 data is important in terms of paving the way towards the regulatory process outside of China and more widely also for the global strategy for the business. But if that doesn't play out, as we hope, then I think you're probably then looking at the global Savolitinib, SAMETA and SAFFRON global story, which are a little way out in terms of potential NDA. So, I just wondered if you could recap TAZVERIK global terms in that context, please? Thanks.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Okay. Thanks Mike. With regard to the commercial organization, in China, we are now around 800 staff. We believe this is the optimal scale for the current portfolio of products. So we don't intent to grow further. However, we instead of we'll focus on driving efficiency and driving productivity from the current staff. So, with regard to your second question on fruquintinib global registration. I think there can be all kinds of scenarios, but first things first, we need to wait until the FRESCO-2 data to read out. And personally just like you all anxiously waiting for the FRESCO-2 read out. And I think, fruquintinib we have accumulated a wealth amount of data at this global MRCT serve as a pivotal. I don't know, if Marek you want -- you have anything else to add?

[Marek Kania]

You said it well. Obviously, given proximity of the outcome, obviously, we are thinking and like our view about positive negative outcomes, given the wealth of data, including one positive study in addition to a number of other studies. Our cohorts from the U.S. study across different lines of prior lines of therapy with the consistence of results and clinical benefits demonstrated. There is nothing to make concerned about anticipation, but we are doing studies for a reason. And in a normal circumstance we will do first pivotal study approximately 17% probability of success in any study, given our already one positive study, we are confident but again, let's use this course. Let's cross the finish line. And we are planning for success for now. But we will well adjust according if in a case negative outcome and surprise science.

[Mike Mitchell, Panmure Gordon]

Okay. That's fair. And I think the next one was related to SAVO global maybe that angle off question. Do you want to address?

[Weiguo Su, Executive Director and Chief Scientific Officer]

Well, obviously, post FDA CRL and also considering the recommendation of MRCT. Are you talking about surufatinibr?

[Mike Mitchell, Panmure Gordon]

No. I think question was in case of negative surufatinib, will our focus shift entirely to Savolitinib global development from that perspective? I mean, both programs are important?.

[Weiguo Su, Executive Director and Chief Scientific Officer]

I think, obviously, if negative it will be a major setback, right? I mean, just similar to surufatinib, Savolitinib and the CLL. Obviously, we remain confident that these are valuable drugs that can help patients, but the setback is basically is a timeline. It's going to push back significantly years, we are talking about three, four years for the first approval. So we'll evaluate very carefully similar to what we are doing for surufatinib and we'll be doing the same for fruquintinib, but negative. Again, the NPVs can change greatly if the timeline continues to be pushed back. So that's an area we need to be very, very careful.

[Mike Mitchell, Panmure Gordon]

Understood. That's all I have. Thank you.

[Operator]

Next question comes from Yang Huang from Credit Suisse. Please go ahead.

[Yang Huang, Credit Suisse]

Yes. This is Yang Huang from Credit Suisse. Thanks for the opportunity for me to ask questions. The first one I have today, I just want to have a follow up on FRESCO-2. I know some of our peers already asked about this study. But I think given a study actually trial started in, I think second half 2020. However, we all know, FDA certainly changed their position into reviewing drugs from China in 2021. So it will be very helpful if we can get some more colors about what kind of communication we had before we started the FRESCO-2 study with FDA? So what we're talking about it with FDA before we started the FRESCO-2 trial. Have the company noticed any kind of potential change in FDA's view after 2021 events? Thanks. I have a follow up on financial too.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Yes. I think we already touched on this. No, obviously we had end on Phase 2 or Pre-Phase 3 discussion with the U.S. FDA and got aligned on the study designed for FRESCO-2. And if positive, obviously, we'll have another opportunity to enter for pre-NDA discussion likely. And also note that this particular indication we have fast track destination, and we can discuss with agency anytime. With regard to FDA, kind of position I'll ask him maybe Marek to chime in. He obviously, as you know more involvement in the discussions with FDA. Marek?

[Marek Kania]

Yes. Thank you, Weiguo. Yes, just to clarify, I simply hear some confusion in the system here. Overall challenges was surufatinib or/and any other sponsors related in this situation was related to agency concern where application to NDA is made with one country Phase 3 trial, or Phase 3 trials. That's the core of their concern, bringing one country and China, now China is just even broader if you were to bring to one country specific not necessarily applicable to U.S. populations. That's the core of their concern. The FRESCO-2 is very different case. Fruquintinib is very different case. As Weiguo said, we had pre-NDA, pre-end of Phase 1 meeting of pre-Phase 3 meeting.

We had another Type B very similar meeting this year. And we're preparing for Type C meeting very shortly plus top line results. So far, agency has been very consistent. And therefore, again, important fact is we are running global study, global study conducted in 14 countries, 150 sites, and U.S. is contributing to this study in a significant way. So it cannot be more than multinational more than regional study. It is exactly what agency is expecting. Every other studies supporting a part of the package want to play important role as well. So yes, don't overplay that. Overall, in all concerns with Fruquintinib into everything else moving forward, because it's not the thing. Thank you. Weiguo

[Yang Huang, Credit Suisse]

Yes. Thank you. And then my second question is financials. So we notice, the first half, our total revenue has a pretty good growth, and I think growth about 30%. But the cost revenue, only grew 10%. much as low as our total revenue growth. Do you think the trend is going to continue or what cause these kind of slower growth for the cost of revenue in the first half this year?

[Weiguo Su, Executive Director and Chief Scientific Officer]

Okay. Thanks for the question. I'll ask Johnny to provide the answer.

[Johnny Cheng, Executive Director and Chief Financial Officer]

Okay. Thank you, Weiguo. I think it's a composition of our products. If you compare to the last period, we did not have Savolitinib in the first half, which we now have Savolitinib in the first half of this year. As you all know, we recognized for Savolitinib in market sales, we actually recognize 30% of the royalty. So that actually improve in terms of our gross profit margin. And on the other hand, of course, we have invested into our sales force, which are part of which we capture in the cost of sales. So combining all together, the product mix actually makes a difference to the analysis that you just referred to. But going forward, I think we will continue, hopefully, I think we are targeting to continue to do well, in ELUNATE and surufatinib. At the same time, I think the proportion of savolitinib sales have increase over time. I hope that answer your question?

[Yang Huang, Credit Suisse]

Okay. That's very helpful. Thanks.

[Operator]

Next question comes from Louise Chen from Cantor. Please go ahead.

[Unidentified Analyst]

Hi. This is [Indiscernible] for Louise, and thank you for taking our questions. So our question is on fruquintinib. So EMA indicates that these studies were representative of patients and medical practicing EU. So why do you think this wouldn't be a potential complication in Japan? And just to clarify, while you still pursue global path forward to fruquintinib in light of the U.S. and EU need for local trials? Thank you.

[Johnny Cheng, Executive Director and Chief Financial Officer]

Well, I think it's understandable that particular argument is almost identical from U.S. CLL, which is the patient representative patient population. I think Japan is quite different. First off, obviously they are Asians, right. And secondly, it's on a different registration path. They requested us to do a bridging study. So that study is ongoing. And obviously we'll continue to discuss with PMDA in Japan. And clearly, I think it's understandable between Asia and Caucasians in terms of patient population difference. Japan, they are Asians, but they also on a very different registration path. Anything else to add, Marek?

[Marek Kania]

No, I would only add a highlight. We call fruquintinib kind of case as a unique case. And actually Japan case will be as unique as it can be. I don't recall personally two Phase 3 studies coming from Japan with attempts for NDA submission in -- I am sorry, from China with the intent to submit in Japan for high unmet medical needs. As Weiguo said with bridging study Phase 1 will engage post conduct of this study which we expect in 2023 and discuss a path forward in pre-NDA discussion. So we will see. As you know, Japan always also look at NDA approvals in the U.S. There may be some bias persistent in that context. So we'll bridge when we have that later.

[Unidentified Analyst]

Got it. Thank you.

[Operator]

Next question comes from Matthew Yan from CLSA. Please go ahead.

[Matthew Yan, CLSA]

Hi, management. Thanks for taking my question and congratulate on the results. I got two question regarding savolitinib and FRUTIGA. I noticed on your presentation material, you mentioned that you filed the NDA based on SAFFRON in 2025. So does this mean that the SAVANNAH data do not support an NDA filing in the near term? And my second question is regarding SAVANNAH readout, how you see savolitinib differentiate in terms of clinical profile versus peers, they already proved like tepotinib and capmatinib. Those are two of my questions. Thanks.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Okay. Thanks, Matthew. Well, the SAFFRON NDA timeline 2025 is obviously an estimate. I think we just got it started. So it all depends on the enrollment speed and also the PFS follow up, which sometimes it can be longer than what we expect. But the SAVANNAH, I think we'd probably have more clarity, right? So, now obviously we need to get aligned with the U.S. FDA on the potential for savolitinib SAVANNAH study to support an accelerated approval. But we think both HUTCHMED and AstraZeneca, our assessment is that SAVANNAH can be, at least the approval timeline can be 12 to 18 months ahead of SAFFRON in the U.S.

Now your second question, regarding the differentiation with tepotinib and others. Now I think, obviously, we have not -- these two compounds tepotinib and capmatinib, they are not approved in China yet. They've been exposed to a limited number of Chinese patients. Just looking at the profile, I think they're all potent and selective c MET inhibitors. However, they vary significantly in terms of chemical structures. So I would expect differences in pharmacokinetics or in compound base safety profiles. Because they have limited exposure in Chinese patients, its hard to tell the difference. And you can compare it from the Chinese study versus tepotinib or capmatinib studies outside China.

With regard to other studies, I think clearly AstraZeneca has [Indiscernible] and they know the patients very well. Now we have the biomarkers figured out. So we think we are in a pretty good, competitive, we have a bigger competitive edge of the other two products in terms of, in the EGFR, TKI refractory patient population. Else other studies, I think we are the only -- we have the only combination in PRCC. And we also the only compound now exploring gastric as well. So I think we have a much broader program than the other two. And I think the challenge with that is it’s very fragmented, it has multiple types of driver genetic alterations, including potent mutations, exon 14 skipping, amplification, and fusion and so forth. And they all require different diagnostics to support and just very tedious to do because of low incidence and difficult diagnostics. But at least AstraZeneca and HUTCHMED, we have made good progress in non small cell lung cancer, gastric and PRCC. I'm sure there are other, there are multiple other tumor types such as CRC for instance, head and neck as well yet to be explored.

[Matthew Yan, CLSA]

Okay. That's very clear. Thanks, Dr. Su.

[Operator]

We have another question from Alec Stranahan from Bank of America.Please go ahead.

[Unidentified Analyst]

Hey, guys, good morning. Thanks for taking my question. This is John on for Alec. Kind of a two part question from us. So on the FRESCO-2 trial, through your conversations with the U.S. regulatory agency so far in your experience. How do you think there are going to be more or less viewing the data? Are they going to view it in kind of the grander landscape of the current U.S. budget market? Or they going to kind of also look into comparison with the FRESCO-1 Chinese trial? So that's the first part. And just to build off of that. If they do look into the comparison with the initial first quarter Chinese trial, do you think that they will be factoring in the fact that an MRCT with a harder to treat population in the U.S. and international landscape will potentially be a factor at play? That's my question. Thank you.

[Weiguo Su, Executive Director and Chief Scientific Officer]

Yes. I think that's a really good question. I think, yes, I have a brief response. And then Marek can chime in. The FRESCO versus FRESCO-2, obviously, these are very different studies, right, different patient population, and different prior therapies. So, but they both have merits and they can support each other. I think that's my initial read on this. I think the FRESCO and other Chinese studies will form the basis to support the FRESCO-2 both in terms of efficacy in different patient population, in different settings, or subset with or without prior VGF or VGFR treatment, Chinese versus Caucasians. So I think they will complement each other basically. So that, maybe Marek you can add further your comments on this.

[Marek Kania]

Yes. John, this is good question. But obviously one statement, I will make others, because study comparisons are very risky, not scientific, although everyone is doing this, as you know. FRESCO-2 study is designed to address uniquely and independently questions designed and built in the study. Study is highly powered, 90% power to detect primary endpoints. So obviously, if positive, this study could stand alone with FRESCO or without FRESCO. But in totality, we always look into totality of the data. So far, we haven't seen any big discrepancies in prior lines of therapy. As I mentioned, before, we conducted a number of cohorts which heavily pretreated in our U.S. study. Actually one cohort that was mimicking exactly FRESCO like, one was mimicking like exactly FRESCO-2 populations for more heavily pretreated. And we see consistency in the clinical benefits.

So I mean, I'm not going to speculate here, but FDA, is he asking for more precise answer here. We had those discussions and studied design for FRESCO-2 and pivotal studies. So is positive, is the way they'll do the job. Obviously, and to use totality of the data to the most convincing packets. And that's the reason why most clinical investigators and really thought leaders in the field are very strongly and supportive in the study. And that's why the study also accrues in almost record time, 14, 15 months during COVID limitation. So I will stop here.

[Unidentified Analyst]

Okay. Thank you. Thank you for the color.

[Marek Kania]

Thanks, John.

[Operator]

It was our last question. So ladies and gentlemen, dear speakers, I'll give you back the floor for your written questions.

[Unidentified Analyst]

It’s [Indiscernible] questions. So I will read them out. On the online system, we have several questions. The first is regarding holding current companies capital, several companies have pointed U.S. based auditors that the company has an update on this issue. And regarding Amdizalisib, has the China regulatory authority have raise any concerns regarding single arm design. And management also share the dose selection strategy. Weiguo?

[Weiguo Su, Executive Director and Chief Scientific Officer]

Yes. At the moment we've had multiple regulatory interactions with China CDE and there are two registered single arm studies ongoing and without modification. So with regard to dose in the China study, it's 30 milligram QD flat dose without any dose modifications basically, I mean, similar, as you know, I guess, parsaclisib and zandelisib, these compounds, modify their dosing regimen throughout the study. But amdizalisib can be taken basically as 30 milligram QD flat and continuous.

[Unidentified Analyst]

Okay. Thanks, Weiguo. Maybe I can direct this question at Johnny. In the past or the question is, what is the funding mechanism for the factory, fund the factory?

[Johnny Cheng, Executive Director and Chief Financial Officer]

Thank you, Mark. So for the factory in terms of the, I'm reading the question also. So the question is how we fund the factory in terms of the total cost of the factory and so forth. We mentioned earlier, the total project for the new factory in China is about 130 million. We have so far spent about 30-odd million. So, this year we target to spend 60 million, but we have a fixed asset infrastructure loan with the local bank in China, which has stretched for 10 years for the arrangement of payback and withdraw the drawdown of this loan. So, the entire factory will be drawn out of this fixed infrastructure loan provided by the local bank. And the total amount is 130 million. So the project we target to complete by next year, end of next year. So within this year, next year, we will be drawing down, slowly drawing the required amount for this CapEx.

[Unidentified Analyst]

Okay. Thanks. Johnny perhaps I could ask you to answer the question on HSCA as well.

[Johnny Cheng, Executive Director and Chief Financial Officer]

Okay. So sorry, the question before, was related to some of the other companies have changed their auditor, U.S. base auditor. To our circumstances, it is different to other companies, some of these companies. For us, majority of our operation, assets, revenue generated pictures are all based in China. So even by changing the auditor to a U.S. based auditor, we will not meet the requirements as those U.S. auditors, they are not qualified to have license to audit in China and therefore, they will not be able to provide the supporting documents to the PCAOB [ph]. We continue to monitor this progress of the development between the authorities of the two countries. But in the meantime, I think everybody knows our listing in Hong Kong and UK shares are fungible with the U.S. ABS. Thank you, Mark.

[Unidentified Analyst]

Okay. Thank you Johnny. Okay. There's another question. Does the takeover of Epizyme licensing change anything for development of tazemetostat?

[Johnny Cheng, Executive Director and Chief Financial Officer]

We don't think so. No, we don't think so.

[Unidentified Analyst]

Okay. I think we're running out of time now. So maybe we need to draw a line here. Weiguo, do to have any closing remarks?

[Weiguo Su, Executive Director and Chief Scientific Officer]

No. I just want to say, we continue to focus on the execution and we look forward to a good second half hopefully starting from, I think the most important is the FRESCO-2. We will be in touch.

[Mark Lee]

Okay. Thanks Weiguo. Thank you, everybody, for joining the call.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.