20220915-招银国际-和黄医药-00013.HK-Fruquintinib_to_unlock_the_global_potential_in_mCRC_indication_5页_1mb

Summary of Hutchmed (13 HK) - Fruquintinib in mCRC

Core Content

Hutchmed (13 HK) is a biopharmaceutical company that has developed fruquintinib, a drug showing significant potential in the treatment of metastatic colorectal cancer (mCRC). The company is focused on pursuing global regulatory approvals and commercialization for fruquintinib, particularly in the United States, Europe, and Japan.

Key Clinical Data from FRESCO-2 Trial

• Trial Overview: The global Phase 3 FRESCO-2 trial included 691 patients with refractory mCRC, with a majority (71%) from Europe, followed by the US (18%), Japan (8%), and Australia (3%).
• Prior Treatments: The median number of prior treatments was five, with 91% and 48% of patients having previously received TAS-102 and regorafenib, respectively.
• Overall Survival (OS):
  • Median OS for fruquintinib + BSC was 7.4 months.
  • Median OS for placebo + BSC was 4.8 months.
  • mOS improvement: 2.6 months.
  • Risk reduction in death: 34% (HR=0.66, p<0.001).
• Progression-Free Survival (PFS):
  • Median PFS for fruquintinib + BSC was 3.7 months.
  • Median PFS for placebo + BSC was 1.8 months.
  • mPFS improvement: 1.9 months.
  • Risk reduction in progression: 68% (HR=0.32, p<0.001).
• Comparison with Other Drugs:
  • TAS-102: Improved mOS by 2.0 months and reduced risk of death by 31%.
  • Regorafenib: Improved mOS by 1.4 months and reduced risk of death by 23%.
• Patient Population: FRESCO-2 included a more heavily pre-treated cohort, with 73% of patients having received >3 lines of prior treatment, compared to 60% for TAS-102 and 49% for regorafenib.

Safety Profile

• Gr≥3 Treatment Emergent Adverse Events (TEAEs):
  • Fruquintinib: 62.7%.
  • Control: 50.4%.
• Common Gr≥3 TEAEs:
  • Hypertension: 13.6% vs 0.9%.
  • Asthenia: 7.7% vs 3.9%.
• Treatment-Related Adverse Events (TRAEs):
  • Fruquintinib: 36.0%.
  • Control: 11.3%.
• Comparison with Other Trials:
  • TAS-102: Gr≥3 TRAEs occurred in 54% of patients (vs 14% in control).
  • Neutropenia and Leukopenia: Higher incidence in TAS-102 (38% and 21%, respectively).

Regulatory and Commercial Strategy

• BLA Filings: Hutchmed plans to file a Biologics License Application (BLA) for fruquintinib in 3L+ mCRC in the US, followed by filings in Europe and Japan.
• Fast Track Designation: The US FDA has granted fruquintinib Fast Track status, allowing for rolling submission.
• NDA Meeting: A pre-NDA meeting with the US FDA is expected in October.
• Global Partnerships: The company is open to cooperation with global partners for the development and marketing of fruquintinib outside of China.

Investment Recommendation

• Analyst Rating: BUY.
• Target Price: HK$36.43 (up from HK$36.06).
• Valuation Basis: Based on a 14-year DCF model with a WACC of 10.73% and a terminal growth rate of 2%.
• Equity Value: Estimated at HK$31,497 million.
• Share Price Performance:
  • 1-month: -9.6%.
  • 3-month: +25.2%.
  • 6-month: -18.4%.

Financial Highlights

• Revenue:
  • FY20A: US$228 million.
  • FY22E: US$440 million.
  • FY24E: US$667 million.
• YoY Growth:
  • FY20A: 11.3%.
  • FY21A: 56.2%.
  • FY22E: 23.4%.
  • FY23E: 17.3%.
  • FY24E: 29.4%.
• Net Profit:
  • FY20A: US$-167 million.
  • FY22E: US$-298 million.
  • FY24E: US$-92 million.
• EPS (Reported):
  • FY20A: US$-0.25.
  • FY22E: US$-0.38.
  • FY24E: US$-0.14.
• R&D Expenses:
  • FY20A: US$299 million.
  • FY22E: US$330 million.
  • FY24E: US$267 million.

Valuation and Sensitivity Analysis

• DCF Valuation:
  • 2022E: US$3,435 million.
  • 2035E: Terminal Value of US$8,509 million.
  • DCF per Share: HK$36.43.
• Sensitivity Analysis:
  • Terminal Growth Rate:
    • 4.00%: HK$52.04.
    • 3.50%: HK$46.79.
    • 3.00%: HK$42.34.
    • 2.50%: HK$38.55.
    • 2.00%: HK$35.27.
  • WACC:
    • 9.73%: HK$40.32.
    • 10.23%: HK$41.68.
    • 10.73%: HK$36.43.
    • 11.23%: HK$33.64.
    • 11.73%: HK$31.16.

CMBIGM vs Consensus

• Revenue:
  • CMBIGM: FY22E: US$440 million, FY23E: US$516 million, FY24E: US$667 million.
  • Consensus: FY22E: US$408 million, FY23E: US$469 million, FY24E: US$666 million.
• Gross Profit:
  • CMBIGM: FY22E: US$126 million, FY23E: US$177 million, FY24E: US$275 million.
  • Consensus: FY22E: US$130 million, FY23E: US$173 million, FY24E: US$288 million.
• Net Profit:
  • CMBIGM: FY22E: US$-326 million, FY23E: US$-299 million, FY24E: US$-120 million.
  • Consensus: FY22E: US$-326 million, FY23E: US$-299 million, FY24E: US$-119 million.
• EPS (US$):
  • CMBIGM: FY22E: -0.38, FY23E: -0.35, FY24E: -0.14.
  • Consensus: FY22E: -0.38, FY23E: -0.35, FY24E: -0.14.

Financial Ratios

• Gross Margin:
  • FY22E: 28.70%.
  • FY23E: 34.27%.
  • FY24E: 41.15%.
• Operating Margin:
  • FY22E: -75.4%.
  • FY23E: -59.1%.
  • FY24E: -18.6%.
• Return on Equity (ROE):
  • FY22E: -36.2%.
  • FY23E: -53.2%.
  • FY24E: -30.6%.
• Current Ratio:
  • FY22E: 2.7.
  • FY23E: 1.7.
  • FY24E: 1.4.
• Net Debt to Equity:
  • FY22E: 1.0.
  • FY23E: 0.9.
  • FY24E: 0.8.

Conclusion

Hutchmed's fruquintinib has demonstrated superior clinical outcomes in the treatment of refractory mCRC, with significant improvements in overall survival and progression-free survival compared to existing therapies. The drug's favorable safety profile and global regulatory strategy support its potential for international commercial success. The company's financial performance shows growth in revenue and a positive outlook for future profitability. The BUY rating is based on a DCF valuation with a target price of HK$36.43, reflecting the positive outlook on fruquintinib's global approval and market potential.