Hutchmed flags fourfold increase in oncology sales

More than a quarter of the world’s cancer patients are based in China and regulatory reforms are currently under way to address major unmet medical needs in the country.

These trends should bode well for Hutchison China Meditech (HCM), which has invested in drug innovation in its namesake nation for two decades. The Aim-traded company now has two oncology drugs approved in China: Elunate for metastatic colorectal cancer and Sulanda for neuroendocrine tumours, a type of hormone cancer.

Hutchmed, as the group will soon be known when its everyday moniker ‘Chi-Med’ formally changes, also submitted a new drug application (NDA) last year for savolitinib in lung cancer. If approved, this would constitute its third approved oncology therapy. It follows that management expects a serious rise in oncology/ immunology sales in 2021, pointing to a range of between $110m (£80m) and $130m – marking a more than fourfold improvement from 2020 at the upper end of guidance.

Breaking down those projections, Elunate (the brand name for ‘fruquintinib’) posted market sales of $34m last year. While pharma group Eli Lilly (US:LLY) was responsible for commercial control of the drug during the first three-quarters of the period, Hutchmed took over in the final three months. “Since then, the sales have increased quite materially,” said chief executive Christian Hogg. Those sales could reach $55m this year, he said. 

Meanwhile, Hutchmed expects Sulanda (or ‘surufatinib’), which launched just under two months ago, to achieve full-year sales of $35m. If all goes to plan, savolitinib will be approved in June, leading to a milestone payment from partner company AstraZeneca (AZN) on the first sale. Hutchmed earns a 30 per cent royalty on all sales in China. It also, Hogg noted, has various other revenue sources in oncology through partner collaborations.

Yet management is not only focused on China for future sales growth. Six of Hutchmed’s 10 new oncology drugs are under development in the US or Europe. In December, it submitted its first rolling NDA submission in the US for surufatinib. Under a rolling submission, completed sections of the NDA can be sent for review by the Food and Drug Administration, rather than waiting until every section of the application is completed. Hogg observed that this was only the second time a Chinese company has submitted an NDA in the country. 

That NDA process cannot be guaranteed. While Hutchmed’s clinical narrative is becoming increasingly commercial, creating new medicines does not come cheap. Research and development (R&D) costs rose from $138m to $175m last year as it expanded the development of its new oncology candidates.

That said, two $100m equity investments by General Atlantic and the Canada Pension Plan Investment Board in 2020 mean the group should theoretically be well placed to continue investing. Speculative buy.