Half Year 2017 Hutchison China MediTech Ltd Earnings Call

Jul 31, 2017 AM EDT
HCM.L - Hutchison China MediTech Ltd
Half Year 2017 Hutchison China MediTech Ltd Earnings Call
Jul 31, 2017 / 08:00AM GMT 

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Corporate Participants
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   *  Christian Hogg
      Hutchison China MediTech Limited - CEO and Executive Director 

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Conference Call Participants
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   *  Christian Glennie
      Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst
   *  Daniel Wilkinson
      Edison Investment Research Limited - Analyst
   *  Michael Mitchell
      Panmure Gordon & Co. plc, Research Division - Healthcare Analyst

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Presentation
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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [1]
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 Okay. Thank you, everybody, for coming today to our interim results presentation. The presentation is -- many of the slides you all have seen from our full year results presentation from 2016 have we published or presented in March. So what I'm planning on doing today is taking you through the updates, really to go through and focusing in on the main things that have changed in the last 3 or 4 months, beginning of this year, but also to summarize the high-level financial results.

 So starting off on the first half results, pretty much a continuation of the way that we have been performing over the last few years, balancing our investment on the research and development pipeline with the earnings that we've been bringing in from our commercial operations as well as our partnered assets, savolitinib, fruquintinib as well as the relationship with Nestlé.

 So first half results. Revenues were up to USD 126.6 million, and we made a net profit of USD 1.7 million, despite an investment of about $37.5 million on the pipeline.

 The commercial platform continues to do well, up 14% net profit after tax to $25.2 million. We had challenges on the OTC business, some market dynamics that are not long-term things. The Prescription Drugs Business did very well in the first half, so net, we ended up 14% up. There was a onetime gain in there from research subsidies from the Shanghai government, but in overall the commercial business continues to do very well. It's a robust business with very well established brands and continues to just to be a very good source of cash for us.

 On the innovation side, much as the same as last year, income of about USD 22 million, USD 23 million, mostly through milestone payments from Nestlé -- sorry, from Lilly, from AstraZeneca as well as service fees from all of those partners. So $20 million or so helps pay for what we're doing and net losses of around USD 14 million, USD 15 million consistent with last year.

 Today, we have about USD 190 million in cash. Now that's about $110 million in cash in the bank and then unutilized banking facilities of another USD 80 million. So we are in quite a good cash position.

 On the Innovation Platform, this is a chart you all know very well. We have exceptional scale for preapproval biotech. Hopefully, next time we won't be a preapproval biotech. Hopefully, next time when we publish our results in March for the next year, we will have got our first approval on fruquintinib, but anyway for now, we can still say this.

 Today, when you add it all up, we've around USD 480 million into our Innovation Platform over the last few years. So it's an increasingly large amount of financial resources gone into building up this portfolio of drug candidates, maintain a very large organization that is now very much focused on submitting NDAs and trying to get this first wave of drug candidates actually to market.

 Chemistry is our edge. This is a slide we've talked about all along. It's about selectivity. I think as I take you through fruquintinib and the Phase III results that we've published recently on fruquintinib, you'll see the benefits of selectivity -- the benefits of kinase selectivity, hitting the targets you're going after, not hitting anything else. And as a result, patients can tolerate your drug better and stay on it longer and, as a result, get better efficacy.

 This just makes that point. So the pipeline chart has been updated. I think the most important -- if I can find the right button here. The most important thing here to see is, on savolitinib, you can see the papillary renal cell carcinoma Phase III -- global Phase III has started now. That's very exciting for us. It's our first global Phase III in Oncology.

 Almost as exciting as that, these 3 programs that are now all basically at the end of Phase II. This is the Tagrisso combination in second line, third-line non-small cell lung cancer and the Iressa combination in second-line non-small cell lung cancer. So they're all done and we -- they are maturing, the data is maturing and we expect to present all of that Phase II data in the second half of this year. And that will be, in our view, a very big deal for savolitinib. And it will define what we then plan to do globally in Phase III, what we and AstraZeneca plan to do in Phase III.

 So fruquintinib, you've got obviously, the FRESCO study positive. I'll talk about that later. You've got FALUCA, which is the third-line non-small cell lung cancer study, is over 70% enrolled now. It should complete enrollment in third-line non-small cell lung cancer around the end of the year, maybe very early next year. So that's the next big news for fruquintinib.

 We're about to start the gastric cancer Phase III in second line. That will start a global Phase III, probably late third quarter, early fourth quarter. That's the big indication for fruquintinib. So you're talking second-line gastric cancer anywhere up to 200,000 patients a year, whereas third-line colorectal cancer, you're talking 50,000, 60,000 patients a year. So third -- second-line gastric cancer on fruquintinib is a big deal.

 Sulfatinib, the 2 Phase IIIs on pancreatic MET and nonpancreatic MET, continue to enroll probably about 30%, 35% enrolled but picking up steam, finally. The thyroid cancer study we published, the biliary tract carcinoma study Phase II that is underway, and then the Phase I in the United States on sulfatinib is about finished. So we're now working on the next stage in the U.S. And then epitinib, the brain penetrating EGFR inhibitor, that will also start a Phase III in China within the next 6 months or so.

 On the second wave of innovation, it's starting to get exciting for us at least. What we're starting to see is emerging efficacy in multiple assets. We've already mentioned on theliatinib, some nice activity in esophageal cancer patients. We are enrolling a Phase Ib expansion in China at the moment in esophageal cancer. The Syk inhibitor, particularly in hematological cancer, we're now getting to a point where we believe that maybe next year -- early next year or in the first half of next year, we might be able to start seeing presentation of some of our early data in the dose escalation study, and certainly, starting off dose expansion studies in hematological cancer patients both in Caucasian patients in Australia as well as in China.

 689, the PI3K delta compound will start off in the clinic in China, sometime in the next few months, in hematological cancer patients. And the FGFR inhibitor is now in Phase I in both China and Australia. So the second wave of innovation is coming, and we are excited by it.

 The third wave, everything that Weiguo and the team have been working on for the last, probably 4 or 5 years, is also coming. A bit of a focus on second-generation immunotherapy targets. And that's going to be exciting for us because we'll look to combine those third wave assets with the drugs from our first and our second wave. So there's going to be some really interesting combination opportunities.

 I won't go through this in a lot of detail, but the main one is, looking to launch fruquintinib in likely early 2018. We're working very closely with Eli Lilly at the moment around the launch of fruquintinib. A very capable group of people, their commercial team is very deep in China, and so we work closely with them on this and the launch, we hope, is relatively certain for 2018 and hopefully the earlier part of it.

 So savolitinib, I'm going to touch on papillary renal cell carcinoma. You know we've shown this chart before, but basically, c-MET-driven papillary renal cell carcinoma, it's a niche. It's a niche in kidney cancer, but it's an important one where there are no approved therapies. And you can see, nonclear cell is maybe 20% of renal cell carcinoma, and of that, about 1/3 of it is MET-driven.

 So it's about 25,000 patients a year globally, as I say, it's a niche, but it's an important one where those patients, their diseases, to a great extent, are driven by the aberration or the malfunction of c-MET. We believe it's a USD 200 million or USD 300 million opportunity. And so USD 200 million, USD 300 million opportunity is not something that many companies are going to go chasing after, but for us it's important because it's the first opportunity to get a selective c-MET inhibitor approved as a monotherapy. And getting it approved in its first indication will then open it up for use in many other MET-driven disease populations and it will allow us to then go and study those.

 Now we've shown -- we published this Phase II data in the first half. We've all seen it before c-MET-driven papillary renal cell carcinoma, a 6.2 months medium PFS versus non-MET-driven. So MET independent 1.4 months. So basically, you're seeing patients that are MET-driven do better, do well with the MET inhibitor, which is very much the opposite of what is normal.

 I mean, if you look in gastric cancer, molecular epidemiology study is in gastric cancer, you can see here that the red line are MET-driven patients. Now this is time after surgery. And you can see that -- you've hit the median overall survival. So half of the patients have already died by around 20 months, whereas if they're not MET-driven, it doesn't reach the median for 10 years. So being a MET-driven gastric cancer patient, you have a far worse prognosis. The same goes for lung here. You can see MET-driven, I mean, this is a small patient population, but you can see here in a less than 2 years for median overall survival, whereas if you're not MET-driven, you can see it keeps going for 10 years. So MET being dysfunctional is a real problem.

 Now what we've got is a large molecular epidemiology study of over 300 patient archive tissue samples to basically plot these charts for papillary renal cell carcinoma. If these -- this kind of a rapid progression and rapid progression towards death happens also from MET-driven papillary renal cell carcinoma patients, we'll be able to combine that hopefully with the Phase II data, and go talk to the FDA potentially about breakthrough therapy designation. But that's why we're doing the molecular epidemiology study is to really better understand how MET is a factor in papillary renal cell carcinoma and then how savolitinib can help those patients.

 The safety is the big advantage for savolitinib. You can see here, grade 3 and above adverse events on savolitinib in the PRCC Phase II study, only 19% of patients showing treatment related grade 3 adverse event whereas you can see on slightly apples-to-oranges, but looking at renal cell carcinoma, primarily clear cell renal cell carcinoma, Sutent to pazopanib, votrient showing 75%, 80% grade 3 and above adverse event. So savolitinib is a really clean drug candidate, highly selective, just hits MET. And that's its big advantage. And that -- we'll talk more about that when I talk about the combination with Tagrisso in a minute.

 So going into lung cancer, you can see the big area for savolitinib are the red areas here. In first line, second line, third line non-small cell lung cancer. In the first-line setting, c-MET is a driver of the disease in maybe between 5% and 6% of patients, but that's a big chunk of patients. And if you look down at all fusion patients where you've got 5%, you've got Xalkori, Pfizer's crizotinib is doing about a little bit less than USD 600 million in sales in this small subsegment.

 So for us we see monotherapy savolitinib in the first-line setting is a really material market opportunity for us, even bigger is in the second-line setting, once patients progress on Iressa and Tarceva, you've got 15% to 20% of patients are MET-driven patients. And it's this data here in combination with Tagrisso, also in combination with Iressa that we'll be presenting later this year.

 And these are Phase II studies that have been enrolling now for 18 months or so, highly unique patient populations, high levels of molecular screening to select the patients that we want to put into these Phase IIs. So we're really looking forward to presenting that data later this year.

 In the third-line setting, Tagrisso now after its launch in December of 2015, so it's been on the market for 18 months. It's been a tremendous success for AstraZeneca. It gets a bit lost in all of the news of the last few weeks. But you can see in the first half of 2017, sales of over $400 million. In the second quarter of 2017, sales of $230 million or so. So it's on track to become a $1 billion drug couple of years after launch.

 Now for us what does that mean? It's important because Tagrisso, we've heard last week that they've succeeded in the FLAURA study, that will bring Tagrisso into the first-line setting and ultimately, obsolete Iressa and Tarceva.

 Also already approved in the second-line setting that's where most of the sales are today, but more importantly, for savolitinib, when patients now build resistance to Tagrisso, and a scientific paper was published at ASCO in June from Harvard University and Massachusetts General Hospital, showing that about 30% of Tagrisso-resistant patients, it's because of c-MET, it's -- c-MET being the resistance pathway. So you've got a very big drug in Tagrisso that's now emerging and it's emerging also that c-MET is the primary resistance pathway to Tagrisso. So that puts us into a very good position to address that patient population, and we're in with the right partner, AstraZeneca, to work on this together.

 I won't go through in a lot of details on each of these different indications, but you can see -- if you take time after the presentation, you can see that in the first-line setting, you treat this small 5%, 6% of patients with the c-MET inhibitor and you get 24 months median OS, you don't treat them with the c-MET inhibitor, you get 8 months median OS. So big effect for those patients. And more and more data is coming out around c-MET in non-small cell lung cancer. In the second-line setting, you can see that the combination of savolitinib and Tagrisso and Iressa, just provides for total cancer cell proliferation -- shutdown of cancer cell proliferation and this is very powerful data.

 And we've shown this chart before. It's very eye-catching visual of the Tarceva resistant second-line non-small cell lung cancer patient with a very visible solid tumor that on the lymph, metastasized to the lymph and 4 weeks on the savolitinib, Tagrisso combination, and you see very remarkable response. But this data here is data that's been published or presented last year, I believe, it was at ESMO by Astra. But this is represented in a slightly different fashion. And it basically shows that c-MET positive, T790M negative patients, it's only 5 patients, but 4 out of 5 of them were responders.

 T790M negative, all positive, MET positive, you got about 60% response. So it's a kind of a taste of what is to come with the Phase II data later. This is just a sort of a small subsegment of it, the first 18-or-so patients. If we're able to see levels of response anywhere near this, we would be very happy.

 This is the data from Harvard and Massachusetts General Hospital around Tagrisso resistance showing that MET represents 30% of resistance to Tagrisso. And then you can see a patient here, an example, of a MET-driven Tagrisso-resistant patient, a baseline, put them on the savolitinib combination after 6 weeks, and you see a big response.

 Actually 3 out of 3 Tagrisso-resistant patients with MET-driven disease responded, partial response to savolitinib. So a very small amount of data, but very specific patients treated with this very specific drug candidate and delivering nice results.

 I want to go through this in a lot of detail. Gastric cancer, also we've seen a lot of interesting efficacy in gastric cancer.

 So fruquintinib, this is the Phase III FRESCO data. Obviously 9.3 months overall survival median, overall survival relative to 6.57 months on the placebo. So this was oral presentation at ASCO last year, obviously met all the primary and secondary endpoints.

 There's a chart in the pack here that goes into a lot of detail. Now you've also got to be careful comparing trial versus trial. But the most obvious comparator is the regorafenib CORRECT study -- sorry, the CONCUR study in Chinese patients. You can see, in this regorafenib is an approved therapy VEGFR inhibitor from Bayer, approved in third-line colorectal cancer outside of China.

 But they did a study in China, the CONCUR study, relatively small patient population, but you could see median overall survival about 8.4 months versus 6.2 months for the placebo relative to fruquintinib, they're basically higher numbers. So -- and a much, much more statistically powered study, much bigger study.

 But the -- probably the bigger benefit of fruquintinib is the safety profile. And here you can see safety on fruquintinib because of its selectivity is very, very clean. So you can see here basically very little, in fact no off-target toxicities. The only real AEs that are derived from fruquintinib are VEGFR inhibition related AEs. So hypertension, hand-foot syndrome, those are the main ones.

 But the areas in black here are all liver toxicities and you can see here this is a black box warning that's on regorafenib in the United States. It's a hepatotoxicity black box warning. It requires very high levels of liver function monitoring both before patients are put on to the drug and after. Any elevation in liver enzymes leads to discontinuation of the drug or dose reduction.

 And so what you see on regorafenib is actually very high levels of dose interruption, sort of 70% of patients have dose interruption because of the liver function tests and watching it very closely. We, obviously, don't have that problem with fruquintinib where much, much lower levels of dose interruption, dose reduction.

 And what that means is that patients can stay on the drug longer, it means you can cover the target longer and it means you can deliver better efficacy. So that's really fruquintinib in colorectal cancer. As I said, the NDA was submitted in June and we're hoping for a rapid turnaround of that NDA and the launch of this drug and approval and the launch of the drug early next year sometime.

 FALUCA, the Phase III, this is the Phase II data, so very similar PFS to colorectal cancer sort of almost 4 months median PFS on the drug versus about a month for the placebo. So this Phase III, it's a 520-patient Phase III, and right now 70%, 75% enrolled.

 Gastric cancer, this one second line in combination with paclitaxel or Taxol. You can see, in the Phase Ib, we saw sort of high 30s response rate, which compared to paclitaxel alone of about 20. It's clearly pretty attractive. The safety profile also very good for the combination. So as a result, Eli Lilly and Chi-Med decided, okay, we're going to go into a Phase III, full on Phase III on this combination. And as I said earlier, that will start later this year.

 Sulfatinib, the Phase II data we published on neuroendocrine tumor. So 17%, 15% response rate. The kind of response that you see in neuroendocrine tumors are on Sutent or Afinitor, they're all single-digit response rates, single digit percentage response rates.

 The median progression free survival, you can see over here 19 months, 15 months, 13 months, on Sutent, you're talking about 11 months, on pancreatic, which is the most sensitive patient population. So really exciting efficacy.

 As I said earlier, also, we've now almost completed our Phase I in Caucasian patients in the U.S. And now we're looking at innovative patient population, so we can go after in America basically with sulfatinib. This hopefully can be our first unpartnered drug approved in China as well as our first unpartnered drug to be approved or drug candidate to be approved in America. So we are moving rapidly on this.

 And you can see some of the efficacy. I mean this is liver metastasis from a Duodenum MET patient, so the -- obviously the neuroendocrine tumor metastasizes to the liver. This is after a year of treatment with sulfatinib, really significant efficacy same down here, you can see.

 So neuroendocrine tumors are -- it's a very slow growing, slow progressing cancer, also so slow to recede as well, but these patients really need treatment options. They can live with neuroendocrine tumors for 10 years-plus. So there is constant need for therapies for these patients.

 Epitinib, just outstanding efficacy in brain metastasis patients. We all know today lung cancer metastasizes to the brain, there is very limited treatment options other than whole brain radiotherapy. It's very difficult while epitinib has been designed to penetrate the blood-brain barrier. 70% response in measurable brain metastasis is outstanding. So we are now moving onto a Phase III in China on this.

 So additional studies. 523 in hematological cancer, this is the entospletinib data. We've shared this before sort of 65% response, entospletinib is Gilead Syk inhibitor. You can see they've also published data in patients that are refractory or resistant or don't respond or can't tolerate BTK inhibitors and PI3K delta inhibitors, and you can see that on a Syk inhibitor they do very well. You can see the Syk is the most upstream kinase in the B cell signaling pathway. It goes through PI3K delta, it goes through BTK. So ibrutinib, acalabrutinib, the very successful BTK inhibitors in hematological cancer.

 But patients feel resistance to these 2 targets and inhibitors against those 2 targets. So shutting of Syk higher up seems to do good, seems to be good for patients. So we're increasingly excited about the progress that we're making in hematological cancer on HMPL-523 and we expect that to start playing out over the next 6 to 9 months.

 Entospletinib, the Gilead compound, one of the reasons it's been -- while it's got some nice efficacy data, it has been limited to some extent because of its toxicities and its solubility. So it's quite a challenging compound. So we think we have advantages purely from a drug -- from a compound standpoint.

 Now I won't take you through all the rest, but we continue to work on immunology for 523 Theliatinib, the esophageal cancer, drug we're working on in EGFR wild-type patients or protein over expression patients as progressing. We are excited by that. 689, our PI3K delta compound, a very, very clean and potent PI3K delta compound. You have idelalisib, also a Gilead drug, that is approved the first of its class PI3K delta compound but it's got a lot of toxicity, liver toxicity as well as colitis. Solubility being a bit of an issue as well on idelalisib but it's at $200 million drug because there is a real need for it.

 So we hope that 689 can really be a best-in-class asset against PI3K delta, and actually, can be a really important combination partner for HMPL-523, our Syk inhibitor.

 453, we haven't ever really talked about much about our FGFR inhibitor. But FGFR has -- there are a lot of similarities to c-MET with FGFR in the FGFR is apparent in many different solid tumor settings and you tend to find that it's not large proportions of patients that have aberrant FGFR, but you find them across many different solid tumor settings. So we've now started Phase I in Australia in Caucasian patients, in China as well we are working up on dose escalation. And we certainly hope that we can be a first-in-class asset in FGFR, but we've got a long way to go and it's competitive but it's a very good compound and we have confidence in it.

 So that's the pipeline update in as quickly as I can do it. I think the most important things for analysts and for investors to focus on the Innovation Platform is the progress of fruquintinib towards approval in the coming months hopefully. The presentation of the savolitinib Phase II data in second line and third-line non-small cell lung cancer combinations with Iressa and Tagrisso. That's very big for us and for savolitinib, and also to watch closely on HMPL-523 as we make our way through the next 6 to 9 months and release preliminary data on that.

 The China commercial platform, way too small to see on a chart like this -- on a presentation like this, but the profitability $25.2 million after-tax, total sales of subsidiaries and joining the controlled entities USD 357 million. Our China commercial business just continues to progress. It's a very big business with scope across all of China.

 You see over 2,200 medical reps across all China, not just in Eastern and Southern China, which is where many companies focus but across all of China, Northern and Southwest as well. It gives us a lot of knowledge, a lot of know-how around how to commercialize our assets, and when those innovative drugs do come to market, the sulfatinibs, the epitinibs, the 523s, the 689s of the world, we will bring those drugs to market in China and we believe we are well positioned to do that.

 You can see the chart that shows the sort of the top 7 key products that we have. She Xiang Bao Xin pill had a flat first half. Now we took the price up 11% in December of last year. And so there was a bit of loading going on, customers buying ahead of the price increase. And it took us the first quarter to digest that.

 In the second quarter, sales of She Xiang Bao Xin pill were back up in the mid to high double-digit percentage level, so mid to high-teens that is. And so it's back, and the gross margins are improved and it's moving very nicely.

 The OTC products, it was challenging in the first half, Banlangen, particularly the antiviral, we had some capacity constraints, are moved to the new factory in Anhui Province. 1,400 kilometers away from our old factory is a big deal, dealing with 2 jurisdictions for a local production, so the SFDA in Anhui Province, the SFDA in Guangdong Province, it was a challenge. And as a result, we got our GMP certification, but we didn't get clearance to actually start producing.

 So we had to start taking depreciation costs early in the year, without the ability to actually produce at the site. So we had to continue using contract manufactures. It was a double cost, basically, for the first half. Now we've been given clearance and/or assurances that we will be able to start producing in Bozhou in Anhui Province in the very near future. So that sort of short-term capacity constrain and short-term double impact on depreciation will be gone, and that's good.

 Fu Fang Dan Shen, we got hurt. In the first half on Fu Fang Dan Shen. Sales were okay, but gross margins got hit by raw material prices doubling, basically, over the last year. So that -- the price of San Qi, the main raw material in Fu Fang Dan Shen is very volatile. We got hit by it in the first half.

 But overall, when you add it all up, everything we've done on our commercial business in the first half, net profit up 14%. So despite having some challenges here and there, the overall business did very well.

 So upcoming milestones, I've mentioned them already: Savolitinib, the second and third-line Phase II data, Phase II data in combination with Iressa. And then the strategy. What is AstraZeneca going to do with savolitinib outside of China in non-small cell lung cancer? That will all be playing out at the end of this year.

 Based on this Phase II data, we'll be able to look at it and say, okay, are we going to go into Phase III globally? Is the data strong enough to justify a breakthrough therapy designation dialogue with the U.S. FDA and accelerated approvals, et cetera, all of that plays out over the second half for this year.

 Then you've got on fruquintinib -- I mean, to this point, the fastest ever drug approval in China to our knowledge is 10 months from NDA to approval. That's on a drug called icotinib, which is an EGFR inhibitor, kind of a me too to [Hasma]. And that happened about 3 or 4 years ago.

 So fruquintinib, it has -- we believe we're going to get priority review. It has MAH status, or market authorization holder status, which makes it from an innovation standpoint on the high-end of programs being assessed by the FDA. So we should get priority and be reviewed quickly.

 The data is outstanding. The safety is outstanding. The unmet medical need in China is massive. So we're hopeful that all of those 3 things together -- 3 or 4 things together are going to lead to potentially fruquintinib being -- setting a new benchmark for speed of approvals in China. And again, that plays out over the back end of this year and very early next year. The launch will come probably 3 or 4 months after approval. We're ready to go based on that.

 The U.S. GMP standard facility in Suzhou is already up and running and ready to go. So as soon as we get approved, we'll take 3, maybe 4 months and will be launched. And Eli Lilly, as I mentioned earlier, is working very hard preparing for this launch. This is the biggest launch that Lilly has had in China for 10 years. So a lot of effort has gone into this.

 And then other than starting up a few more Phase III studies and completing the FALUCA enrollment, I'd say the next big one will be 523 and seeing the Syk inhibitor playing out. We've just got very high hopes for HMPL-523, particularly in hematological cancer because we are really sitting there potentially as global first in class with a very high-quality asset.

 And the target -- that clearly, even if you look at entospletinib, you can see you hit Syk and you -- patients derive pretty significant benefits. So that's the -- those are the kind of major milestones over the balance of the year and into next year.

 Cash, a bit more information on the cash. $192 million, $112 million in cash, $80 million on unutilized facilities. There's another almost $90 million in cash in our JVs and about -- in the first half of this year, our joint ventures in China paid Chi-Med USD 42.6 million in dividends. So that was great, and a lot of that was driven by the land transaction last year.

 The guidance, really nothing to update. Everything's on track. The only thing we're saying here is there is a chart that the property income from Guangzhou doesn't come in this year. It might come in next year. There's a chance it will come this year, but I'd say it's increasingly looking like it will probably come next year.

 But we haven't adjusted the overall guidance on top line or bottom line because the way we see everything playing out at the moment, even if that property income does move into next year, everything else is moving in the right direction to be able to make up for that. So we haven't changed the overall guidance yet and don't really -- don't intend to. I wanted to flag that, that property again may fall in next year.

 And that's it. I won't go through the appendices. So we've got about 20 minutes left. Maybe we can open it up for any questions. Yes, Mike?

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Questions and Answers
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 Michael Mitchell,  Panmure Gordon & Co. plc, Research Division - Healthcare Analyst   [1]
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 Mike Mitchell, Panmure Gordon. Just on the property compensation, just wonder what's visibility on a rolling basis on that, what the dynamic is there in terms of the information that you received? And then a second question on savolitinib, regarding alternatives on the c-MET programs. I'm thinking of Genmab, I'm thinking of Symphogen, just wondered how that's viewed -- how those programs are viewed within Chi-Med?

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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [2]
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 Okay. So on the property, it's one of these things that's very difficult for us to determine. A lot is quite political. It's the Guangzhou government. The piece of land has been put into the urban redevelopment scheme. How then the government takes it and does all their auctioning is kind of up to them and the timing that they want to do it. So we can't really -- other than having done what we've done, we can't now push it even further. It's just going to play out. So it's kind of up to the government when they plan to do that. I expect it will happen because they are trying to redevelop that particular part of Guangzhou. I guess, the good thing we can say is the cost and the price of landing in Guangzhou just continues to go up a lot. So even if it's delayed a bit, it's not going to be a negative for us. In fact, we'll probably end up with more compensation than less. So that's that. On savolitinib, you asked about what are the competitors, right? And basically, we see on savolitinib probably 3 -- 2 or 3 relevant competitors for savolitinib. They are the small molecule competitors. It's not the large molecule antibodies. You see with MetMAb, the Roche drug, the c-MET antibody that didn't do very well. This is about intracellular. It's about the receptor. It's about shutting down intracellular signaling. And so small molecules, we believe, are the way to go on c-MET. If you look at what's out there, you have the Incyte INC280, which is the Incyte-Novartis small molecule c-MET inhibitor. Now they have the same issue with -- if I can go back to it, the same issue with the quinoline ring structure that led to the failure of -- if I can -- here we go. So INC280 is here, has the quinoline ring structure. This is the structure that we believe led to the failure, the kidney toxicities in all the first wave of selective c-MET inhibitors. Now INC280 hasn't really shown too much kidney tox, to this point. So we kind of -- it's a bit of a don't really understand why there's no kidney tox because they've got the quinoline ring structure. And that quinoline ring structure is metabolized in humans through a quinolone, which has poor solubility, which leads to obstructive kidney toxicity. So they're still playing in the game, but in combination with Iressa in second-line non-small cell lung cancer. Merck Serono has a c-MET inhibitor called tepotinib, which doesn't have the quinoline ring structure. So we see that one as well as a potential competitor, but actually, in the field of second-line non-small cell lung cancer. While we still are interested in the second-line setting in combination with Iressa, just because Iressa is off patent now and it's cheap, and so savolitinib on top of Iressa, it's actually -- for patients that are T790M negative, MET positive in Iressa combination is probably going to work and is probably going to be the most cost-efficient way to treat those patients. But we believe being in partnership with Astra with Tagrisso is -- Tagrisso is going to change the way first-line EGFR mutation-positive non-small cell lung cancer is treated. It's just going to change the way that it's treated. And so for us to be partnered up with Astra and Tagrisso gives us a great advantage. Tagrisso is USD 15,000 a cycle a month to be on Tagrisso. You want to run studies on Tagrisso. If you're INC280, you're going to have to pay a lot of money for those -- for that combination drug. We've obviously done so. And also you get access to a lot of the patient populations that are on Tagrisso. And as they progress, we can be right there ready to give those patients savolitinib. So I think, from a competitive standpoint, small molecules are probably the thing that we would classify as our competition, but I think we're in a very strong position. I think we're further along. I think we've got a much cleaner compound that doesn't have the quinoline ring issue. And we've got the right partner with sort of the inside track on Tagrisso.

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 Christian Glennie,  Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst   [3]
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 Christian Glennie with Stifel. Just following up obviously on the topical news last week. I know it's obviously not directly comparable to savo and the approach you're taking. But obviously, on the MYSTIC trial and the implications potentially of that, potentially as you consider -- as you've laid out, as AstraZeneca's key decisions around how they advance savo and combinations in lung cancer and/or in other areas as well.

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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [4]
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 Well, all I can say is durvalumab is a good drug. It's been approved in bladder cancer. Now I hear yesterday, they've got breakthrough therapy designation in second-line non-small cell lung cancer. Yes, the MYSTIC study was unfortunate. And it's obviously led to a lot of news in the press, et cetera. But durvalumab is a good drug. And I'm sure it will be a very successful drug in many therapeutic areas ultimately long term. But obviously, immunotherapy is a very competitive environment. And what you're seeing is it's not unpredictable but a little bit unpredictable. Durvalumab in the second-line setting, fantastic data; in the first-line setting, not so good, right? So it's -- I think the world, the scientific community continues to learn about immunotherapies and how it all plays out. With regards to savolitinib, as I've just said, Tagrisso is a great drug, and second year sales on drug for USD 1 billion. And I think everybody believes that if it can get into the first-line setting, it's going to be a $3 billion or $4 billion drug. It's an absolutely enormous winner. Savolitinib is the absolute logical partner -- combination partner with Tagrisso. Because as you've seen from the presentation, 30% of Tagrisso-resistant patients is because of c-MET and even ahead of Tagrisso -- in the first-line setting, you've got 5% or 6% of patients with MET-driven disease. So I think the way I see everything has played out over the last couple of weeks is -- over the last week or so is I don't think it affects us that much. The Tagrisso-savolitinib combination is just really, really important on a stand-alone level. We do have durvalumab-savolitinib combination underway in an expansion study in clear cell renal cell carcinoma at the moment, and that looks good. So ultimately, there's going to be -- cancer is a complex animal. And I think that as we learn more about immunotherapies and as we learn more about small molecules [that hit] the genetic drivers, the disease, there's a lot of opportunity for combinations. And you're not going to win all of them. You're going to win some. You're going to lose some. But I don't see what's happened in the last couple of weeks as really that important for us.

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 Christian Glennie,  Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst   [5]
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 And then just to follow up on that, on the potential for breakthrough designation. Just on the actual, I mean, sort of tangible impact of that, you obviously -- aside from (inaudible), obviously you're getting a designation. Now that is good. But in terms of the clinical development, obviously, there'll still be a plan to conduct a Phase III, I'd assume, in terms of what the breakthrough gives you.

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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [6]
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 Yes. So what basically breakthrough therapy designation is going to give you is potential to maybe run an interim on the Phase III. And if the data supports it, then submit it for approval. The Phase II data, it wasn't designed for submission. But if it is very compelling, then maybe the regulatory authorities are going to look at that in a positive light. But essentially, what breakthrough therapy designation gives you is the ability to engage with the regulatory authorities and to look for ways to provide evidence, short of a full Phase III study to allow for submission. You've still got to do a Phase III study as confirmation. And actually, there's a couple of Phase IIIs. So in a combination like Tagrisso and savolitinib, you do a single-arm savolitinib-Tagrisso combination. And the end points, I assume, would be sort of a -- probably a response of PFS. And if you hit certain thresholds maybe at an interim stage, this would be sufficient to support a submission. But separately, you have another Phase III, which would be to compare with what's the current standard of care, which is basic chemotherapy. And that would be a double-blind placebo-controlled study, and that's more of a confirmatory-type study that needs to be done. So it's complex, have to do loads of -- lots of things. But if you're able to show in a Phase II study of the sort that we will present in the second half of the year, if you're able to show really compelling efficacy in terms of response as well as duration of response, then you go, you get your dialogue going on, breakthrough therapy designation, and then that ultimately helps accelerate everything.

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 Daniel Wilkinson,  Edison Investment Research Limited - Analyst   [7]
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 Daniel Wilkinson, Edison. Just on -- about your -- the c-MET-driven stuff. If you're looking at second line and then with Tagrisso third line, you get a 30% kind of drive. When Tagrisso gets first line, is it like you're going to be -- [you miss the disease] by 30% or more like you kind of see with Iressa, are you looking at kind of 10%, 6% kind of levels?

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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [8]
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 No idea yet. No idea of what the proportion of MET-driven disease will be post-Tagrisso in the first-line setting. I mean, what you can see from the data that was published by Massachusetts General Hospital and Harvard at ASCO this year is in the third-line setting post Tagrisso -- so they failed on Iressa and Tarceva, then they failed on Tagrisso, then what's driving the disease is 30% at that point. Now when you bring Tagrisso right into the first frontline setting, who knows? But my guess would be -- I would imagine, it would be probably something similar to what you see in the third-line setting. But you just don't know until you get that evidence. But the sooner Tagrisso is brought into the treatment paradigm, the better, I think, for both patients as well as for savolitinib.

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 Unidentified Analyst,    [9]
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 A couple of questions. Firstly, are there any plans for savolitinib to go into China?

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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [10]
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 Yes, there are. We're running a bunch of studies in China at the moment in first-line non-small cell lung cancer. So selecting out MET-driven patients in the frontline setting and treating them with a monotherapy of savolitinib. Also for savolitinib, the Iressa combination, that Phase II study was done all in China. So the Phase II that we'll present later in the year is all Chinese patients. So that's the second-line setting. We're also looking at gastric cancer because China, you've got -- 50% of the world's gastric cancer patients are in China. So we have multiple studies that are looking at savolitinib monotherapies as well as combination therapy with docetaxel in gastric cancer patients in China. They're very -- I would say the Iressa combination, less difficult because you've just got so many EGFR mutation-positive patients that go on to EGFR inhibitors and then progress. There's a lot of those patients in China. In Caucasian patients, only about 10% to 15% of patients are EGFR mutation positive. In China, 50% to 60% are EGFR mutation positive. So there's a big pool of patients. So relatively easy to enroll in those studies. As far as looking for MET-driven patients in first-line setting, it's really hard. I mean, you're screening. You see here 5% or 6%. Well, actually, if you set your patient characteristics to say, okay, you want only patients that are at certain level of ECOG, for example, and you try to screen those patients, well, you may only end up with 1 or 2 patients out of 100 screened that fit your criteria. So those studies are lot of enrollment, lot of screening and not many patients coming in. But when they do come in, they're very, very specific patients. So we're doing a lot in China on that.

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 Unidentified Analyst,    [11]
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 Another question, too, with M&A, in particular, are there any plans to license more drugs into the HSP? And also, what about divesting the consumer health business, which looks increasingly like a distraction from the growth in the rest of your business?

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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [12]
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 So bringing more stuff into HSP, Hutchison Sinopharm, as we've done with Seroquel and as we've done with Concor -- we've just published today a bit of an update on Concor, the Merck Serono drug that we commercialized in China, fantastic results. Our team has delivered 75% increased growth versus last year. And Seroquel is doing well as well. So yes, we -- I'd say we're not totally driven by that. We are looking for oncology assets that might help us get a hold of some assets that can help build our infrastructure for when our unpartnered assets start coming to market in China. But it's an area that we -- I wouldn't classify it as our primary objective on that business. Our primary objective is getting ready for the -- our own innovation to come as opposed to paying a lot of money upfront to get a hold of the China rights for kind of noncore assets. As far as the OTC business, it's just a good business. It's a household name, product. It is what it is. It's a consumer business. But I think you're right, [Mike]. It's not central to what we're trying to do. What we're doing is we're creating highly innovative therapeutics in the field of oncology. We'll take advantage of the China opportunities but also look to take them outside of China. So our real focus is on prescription drug commercialization operations in China. That's where we're doing really well. That's where the business is growing very rapidly. And on the OTC, OTC business for us has always been just more of a cash generator to help fund our innovation. So yes, I'd say, long term, it's probably not the most strategically important aspect of what we're doing.

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 Unidentified Analyst,    [13]
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 And consumer health, it's not just OTC, but consumer health division, that's in the same space where...

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 Christian Hogg,  Hutchison China MediTech Limited - CEO and Executive Director    [14]
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 Yes, it is. So consumer -- it's like I said, our China commercial platform really has 2 strategic reasons for being. One is to generate cash to help fund our innovation; 2 is to act as a platform for us to launch our oncology assets when they come to market in China. So clearly, our prescription drug business meets both of those strategic objectives. Our consumer health business; really only meets one, which is generate cash to help fund. And it's not that much cash as well. Of all the profits that we've made in our commercial platform, our prescription drug business is close to 80% of the profits. And actually, if you go back 5 years, the prescription drug business was about 30%. So it's really come on over the last 5 years. And the consumer -- the profits out of consumer has really kind of become less of a factor for us.

 Okay. So I think we're dead on time, 10:00. And thanks very much for your questions, and thanks very much for coming today. Thanks a lot.




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