Half Year 2018 Hutchison China MediTech Ltd Earnings Call

Jul 27, 2018 AM UTC 查看原文
HCM.L - Hutchison China MediTech Ltd
Half Year 2018 Hutchison China MediTech Ltd Earnings Call
Jul 27, 2018 / 08:00AM GMT 

Corporate Participants
   *  Christian Hogg
      Hutchison China MediTech Limited - CEO & Executive Director
   *  Weiguo Su
      Hutchison China MediTech Limited - Chief Scientific Officer, Executive VP & Executive Director

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

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [1]
 Thank you, everybody, for coming today to our Interim Results Presentation for Hutchinson China MediTech. We've got a slightly different format today than we have in the past. It's a bit more brief summary focusing on some of the key things that are going on at the moment. As you'll see in the presentation, the appendices are extensive, so much of the detail -- a lot of detail is in the back. But let's start, first of all, on the latest updates, including the financial updates as well as the key progress on the pipeline.

 So overall, probably the biggest thing that the market and investors, and we as a company, are focused on at the moment is our first NDA on fruquintinib. I'll give you a full update on that. It's going to plan. As I've said before, it's a very long and arduous process that the company has spent now the last 12 months working on, but we're getting very close, I think. And I'll update you on that in more details.

 On fruquintinib also, at the back end of this year, probably in November, late November, we'll see the top line results on the third line non-small cell lung cancer, Phase III. So that's the second indication for fruquintinib we'll report in November. So we're obviously quite optimistic about that, but we'll talk that in a moment.

 On savolitinib, where you see the word “breakthrough,” there's a lot going on. AstraZeneca's moving rapidly now in planning for the combination with Tagrisso and savolitinib. I can give an update on that later.

 We have a fairly big piece of news that I think is probably the most important thing to update people on on savolitinib. In the last couple of months, we've been running a MET Exon 14 skipping Phase II study in China on savolitinib monotherapy. It had been a Phase II study that we'd just been moving along nicely, expecting to see how it went, and then eventually move it into a Phase III.

 But the efficacy and the response that we've seen in patients has been so startling that we went and engaged with the Chinese FDA, which is now renamed as the CNDA, the Chinese National Drug Administration. And we had a meeting with the CDE, which is the Center for Drug Evaluation, just about a month ago and shared with them the data from this Phase II study that we're working on. We've got agreement now from them, based on that Phase II data, that if we are able to continue to see the level of efficacy that we've already seen in a Phase II study that is -- we're almost 40% of the way enrolled in it, but in that Phase II study, that will be sufficient for submission for approval in China. So it's a big step for us. And it may well be the fastest way to get savolitinib to approval.

 So we're working very hard on that. We've got 17 clinical sites open in China. We're about to open another 17. So it'll be mid-30s sites by the Q4 of this year. And I think that we could be done with this next year sometime, and that would be really the fastest way to get savolitinib approved in China. Anyway, we'll talk more about that later.

 So in total, we've got currently on the registration studies, we've got 7 that are currently enrolling, either Phase IIIs or, as I've just said on this Exon 14, a Phase II registration study enrolling. And we have another 4 that are in planning.

 And then finally, as you all know, we have 20 or so proof-of-concept studies that are running on our 8 drug candidates. So an awful lot going on, and I can update you on some of that.

 The discovery engine continues to throw out or to produce high-quality assets. I have -- actually Weiguo is not here today, but he's on the phone in Shanghai. So if we need him during this presentation, I'll call him in. But the discovery engine's doing extremely well, and the commercial platform for the first half of the year has had a great first half of the year. So we'll take you through that, as well.

 So the financial results, a big investment relative to previous years on the pipeline. Almost US$70 million was put into our pipeline in the first half. You can see on this chart the revenues were down. The revenues were down because of the two-invoice policy in China. That's not representative of the volume. The business was actually up a lot. But we're not able now, under the two-invoice policy, to consolidate the sales of some of our third-party products, such as Seroquel, for example. So while we book the profit, we don't report the sales any longer. So there's a decline there, but it's more of a cosmetic decline than a real decline.

 You can see on the commercial platform the net profit after tax, or the net income on the commercial platform after tax was up 19% in the first half of this year, from $22.7 million in the first half of last year to almost $27 million this year. So it's in robust form, and I'll share that with you later.

 So in the 2 platforms, the innovation platform, you can see slightly less milestones in the first half of this year than last year. We had a milestone from Lilly and a milestone from AstraZeneca last year in the first half. We didn't receive milestones this year. On the approval of fruquintinib, which will hopefully happen in the second half of this year, we'll receive a large milestone. So by the end of the year, we'll at least catch up with where we were last year in terms of income coming into our R&D platform. And on the commercial side, you can see, as I've just said, the net income up 19%.

 From a cash standpoint, we're in good shape following the follow-on offer last year in October, currently around $417 million in cash and available resources. You can see $322 million of that is cash. The balance is unutilized banking facilities. So we're in a good position from a financial standpoint. JV is still holding -- our joint venture's holding around $60 million in cash.

 Our guidance for the year. We've increased our expected spend on the R&D side. As I said on the previous slide, we've burned $67 million in the first half of the year on our pipeline. So at that rate, we expect the full year to be somewhere in the region of $130 million to $140 million. The previous guidance was $110 million to $120 million, so we've increased it by around $20 million on the investment in our R&D side.

 That comes in 2 areas, that increase. The market in China is very competitive at the moment for talent. There's a lot of investment into China biotech, mainly driven by the huge unmet medical need in China, but also the success of companies like Chi-Med and some others. And so a lot of financial investment is coming into China, and that's leading to many biotech companies starting up. And in fact, with the new rule changes in the Stock Exchange of Hong Kong for listing of biotech companies without a track record of profitability, there's just a lot of action. And as a result, we chose, at the beginning of this year, to implement a share option scheme for the middle management of our innovation platform that was a pretty far-reaching employee share option scheme. That will impact our P&L this year by about $7 million. So of that $20 million increase on the R&D side, part of it is securing that really important base of talent for the long-term using share-based incentives.

 The other reason it's going up is just because the costs are going up. When you've got more interest in China biotech, you've got more activity. You're running clinical studies. You've got a finite amount of clinical centers in China that you can really access. And now there are many, many companies trying to access those sites, so costs are generally going up a little bit. But we remain in a pretty good position to be competitive.

 So looking at the 11 sort of registration studies, the 7 that we have ongoing and the 4 that we've got planned, here on this chart you can see the red lines are the registration studies that are actually enrolling today, and the pink lines are those that are being planned, and should start up over the next sort of 6 to 9 months. The planning of a large global registration study takes time. You don't just flip a switch. It can take 6 to 9 months to plan it. So you can see, on savolitinib, really 4 registration studies: the papillary renal cell carcinoma studies you're all aware of; the 2 Tagrisso combination studies that AstraZeneca's working on at the moment, and then the starred MET Exon 14 deletion single-arm Phase II study that we've now been given a guidance from the CNDA that sort of a north of 50% response rate in about 50 patients should be sufficient for a submission, as shown on this chart.

 On fruquintinib, obviously the colorectal cancer, the tic, the third line colorectal cancer that hopefully, we'll see approval of in the relatively near-term, the Phase III in lung cancer that we'll read out in the next 4 months or so. And then the second line gastric cancer Phase III is enrolling as planned. So we will reach an interim analysis on that Phase III sometime in the middle of next year, at which point there is a proof-of-concept milestone payment from Eli Lilly subject to us delivering the desired outcome. So gastric cancer for fruquintinib should reach that point next year.

 Sulfatinib, the 2 pancreatic and non-pancreatic neuroendocrine tumors Phase IIIs are moving quite well now. They will both hit interim analyses middle of next year, middle to -- the first one will be second quarter; the second one will be third quarter the next year. So we will get a sense of those at that point. Biliary tract cancer for sulfatinib, this is a Phase II that we've been enrolling. We're pretty encouraged by what we're seeing in that Phase II in biliary tract cancer, and so that will move into a Phase III somewhere around the middle of next -- sorry, early next year.

 And then epitinib, the brain-penetrating EGFR inhibitor, I'll give you a bit of an update on that. That is continuing to move towards starting the Phase III. It's very complex, designing that protocol for brain mets, but we're making good progress, regulatory interaction as well as with our PI.

 So fruquintinib, you can see what's happened over the last 12 months since we submitted the NDA. This chart's a lot of detail. I won't go through it in too much detail. But you can basically see that you have multiple activities involved in getting an NDA approved in China. They cover the qualification and the analytical work on the clinical supply, and then the finished product. Looking at the clinical data, the stats, doing all the technical review of the study itself, and then CFDI in the purple down there, all the inspections of the clinical sites, preclinical and clinical sites.

 What we've just completed is the second purple box down at the bottom there, which is the full GMP inspection of our formulation facility as well as our API manufacturer. So that's done. The PAI sample analytical work, which is the result of all the GMP inspections, we produced fruquintinib. It was then sent off for analysis to ensure that it was on spec. That's complete as well. So we are basically here now, on the final step of taking the whole dossier of inspection work that's been conducted by the CFDI, the inspectors, and it's about to go on for final review. And ultimately, our work is kind of done in the context of managing the process. So now it just comes down to how long it takes for that review to take place.

 Obviously, we're hopeful that that will lead to an approval in the next few months and a launch within this year, because, upon approval, we will then have to produce the drug from 0, and that'll take a couple of months, and then it will launch. So that's where we are right now, fruquintinib. A lot of checkmarks, a lot of tics have been achieved, and we're, I think, hopefully in the final stretch.

 But that approval on colorectal cancer is really the first step for fruquintinib. You've got now a lot of other things happening. The non-small cell lung cancer Phase III, you've seen the Phase II data before, very high-quality Phase II data in terms of PFS. We're looking forward to the Phase III data that should publish in maybe November of this year. The gastric cancer Phase III, moving quickly. And as I said earlier, there'll be an interim in probably middle of '19 on that to give some comfort as to the quality of that Phase III. And as I said earlier, there will be a milestone. So if we hit our targets as far as proof-of-concept readout, it's about a $10 million milestone from Lilly.

 And then, most importantly is global expansion. What are we doing with regards to taking fruquintinib outside of China? This is a waterfall plot for axitinib plus pembrolizumab, the VGFR inhibitor combination with PD-1. And you're seeing terrific efficacy of these combinations, the VGFR inhibitors and the immunotherapy. And we'll talk more about that later because that's an area we're going to now start getting into hopefully in quite a lot of detail.

 So fruquintinib, we often just kind of go through this quickly. But on a high level, we should all sort of remember, the VGFR is probably the largest single sub-category of targeted therapies. It's an $18 billion market globally. You can see all of these approved VGFR inhibitors, either antibodies or small molecules, around the world, the biggest being Avastin, bevacizumab, from Roche, but there are many. There are some even now that are getting approved in various indications in China, like Hengrui. Apatinib is now in its third-year post-launch and is doing about -- well, well over US$200 million in sales. So VGFR space is a very active space.

 But we believe fruquintinib, in terms of cell activity, is the most selective VGFR inhibitor in existence. And that is very important in the context of combinations. So here's what I talked about a little bit before, about the use of VGFR inhibitors in combination with immunotherapy. And you can see here axitinib in first line clear cell renal cell carcinoma, you're seeing axitinib delivering an ORR of 34%, so good efficacy in those first line clear cell renal cell carcinoma patient. You see pembrolizumab, the PD-1 also delivers around mid-30s response rate in these first line clear cell renal cell carcinoma patients. So both monotherapies are really providing benefits to patients.

 But when you put them together, you get the third chart, which is 73% objective response rate, 8% complete response, and breakthrough therapy designation from the U.S. FDA. So what you're seeing here is VGFR is all about cutting off the blood flow to the tumor, as I showed in the last chart. A small tumor will secrete VEGF. VEGF will bind to VEGFR, will cause small capillaries to build up around the tumor, feeding that tumor, and that's how it grows very rapidly. So as a platform therapy, VGFR inhibitors are very important pretty much for all solid tumors. And you can see on that prior chart, you've got VGFR inhibitors approved in over 30 cancer solid tumor indications and some hematological malignancy indications as well.

 So clearly -- and this is one of the things that came out of ASCO, was fantastic data that got everyone excited. So where we sit with fruquintinib on this chart, it shows that, relative to the main small molecule VGFR inhibitors that are out there, axitinib is on that chart, Sutent, Sorafenib, Lenvantinib from Eisai, fruquintinib is just the most selective, just [sitting] VGFR1, 2 and 3. And that selectivity, our view, is that that selectivity will allow for more tolerable combinations with PD-1 inhibitors. So we're working on this. Sulfatinib also has an angle with respect to PD-1 combinations in that it inhibits CSF-1R and limits the tumor-associated macrophage production, which is a shroud to the cancer cell that stops the T-cells coming in and killing it. So Sulfatinib has, from a scientific standpoint, a great opportunity to be combined with PD-1s as well. So that we're working on.

 So that's fruquintinib, hopefully about to get approved. The lung cancer Phase III about to be reported top lines, as well as, in our view, great opportunity now to expand into combinations with immunotherapy agents around the world. We've established our own clinical regulatory organization now in the U.S. It's small, but it's getting going. We've hired our -- appointed our first Chief Medical Officer in the U.S., 25-year veteran of Eli Lilly, and we're getting ready to take action and bring some of our assets into the clinic into later-stage development in the U.S. And fruquintinib will be one of the first, along with sulfatinib.

 So a quick update on savolitinib. You can see here background. MET is apparent in many different solid tumor settings, and savolitinib is 1,000-fold more potent against c-MET as it is any other kinase. So again, a very selective compound. The biggest area -- this is a chart many of you have seen already -- the biggest area of opportunity for us is in non-small cell lung cancer. First line MET Exon 14 skipping and c-MET gene-amplified patients; second line in combination with Tagrisso; and third line in combination with Tagrisso. And you see as those -- as you go further along the treatment paradigm, you're seeing more and more MET-driven resistance in non-small cell lung cancer.

 So the next chart shows some of the efficacy that we've seen. You've seen some of it before, but this is probably the one that we should focus on, is first line non-small cell lung cancer, the MET Exon 14 skipping patients. And you can see savolitinib monotherapy in the lung here on the bottom of Page 17, you can see a 9-centimeter diameter tumor in the lung here. 336 days on savolitinib, and you see 70%-odd shrinkage of that tumor. You see that same patient before treatment with savolitinib with a big tumor that's developed on the head. 112 days, completely shut down. So that is startling efficacy. And what we've seen with savolitinib in these MET Exon 14 patients is really very encouraging. And obviously, the regulatory authorities in China also feel the same way, and we're moving as fast as we can now on this to bring it to approval in China, then submission for approval.

 Then obviously, the pictures you've seen before in second line in combination with Tagrisso, really startling efficacy. And even in the third line setting post-Tagrisso, which is probably the area that AstraZeneca is most interested in just because of the success of Tagrisso and the broad-scale adoption of Tagrisso in both first line now, as well as second line. C-MET is a major -- is probably the major resistance pathway to Tagrisso. And you can see on the chart, on the far right of this chart, really meaningful efficacy in those post-Tagrisso failure patients.

 So I won't go through this in a lot of detail, but it just shows the -- I think the boxes to watch are the ones on the far right. These are all color-coordinated with the previous slides. And you can see that the post-Tagrisso, the pink, that now is probably Astra's most high priority as far as starting off a global study in combination with Tagrisso, post-Tagrisso failure. You've always got to shut down EGFR, so you're going to have to continue to use Tagrisso, but adding savolitinib on top of that. And our hope is that that study, that global study, which initially until such time as we've had regulatory discussions, that will start out as a Phase II. But subject to positive regulatory discussions, that could end up then being a registration study in the future. So that'll hopefully start up late this year.

 The second orange area is in the second line post-Iressa and Tarceva. That Phase II study -- that global study, based on the back of the 60%-odd response we saw in TATTON B, is likely to start up slightly later than the Tagrisso combo post-Tagrisso study. So that'll start up probably early next year. And then TPP 10, the red one, well, this one now is enrolling its registration study, so as I've just mentioned on Exon 14 skipping patients.

 And then it's not just lung cancer. It's kidney cancer as well. These charts you've seen. A lot of you have seen these before, but this chart I want to re-emphasize how important this is, the chart in the bottom left here. You can see that MET gene amplified patients in gastric cancer have less than 2-year overall survival, median overall survival versus MET-negative patients have a median overall survival of 10 years. So MET in gastric cancer is just a terrible thing. And it's consistent throughout many solid tumor types.

 So we have our molecular epidemiology study in kidney cancer, over 200 patient molecular epidemiology study that'll read out -- interims will be soon. We'll probably have the full data set by the end of this year. And I'm hopeful that we would be able to see that kind of a chart showing that MET is also a big negative in kidney cancer. And as I've said in the past, if we can show that in the molecular epidemiology study, combine it with our Phase II data that shows clear benefit to patients that are MET positive, then potentially we can bring that all together and go reengage with the U.S. FDA around breakthrough therapy designation.

 Very briefly on some of the other key assets. Sulfatinib is now moving into global development. The first thing obviously, though, is the China Phase III, is the 2 big China Phase IIIs, the SANET-p and SANET-ep studies in neuroendocrine tumors. As it says here, the interim analysis on both of those studies will be in 2019, so we will reach a point -- and we're hopeful that if we've been able to enroll sufficient patients, and if the data is anywhere near what we saw in Phase II in terms of PFS, median PFS, there is a chance that we can find ourselves in a situation where the interim analysis could lead to a stopping of the study and submitting for approval if the data's strong enough. So we're hopeful for that, but we'll have to see how enrollment continues.

 The biliary tract cancer, BTC, which is an extremely difficult type of cancer with a very short overall -- median overall survival of today maybe 4 or 5 months overall survival. So BTC, we've got the Phase II. We've been enrolling it. We're encouraged by the data, and we're going into Phase III on BTC. So we'll start that up, as it says here, probably early next year in a Phase III in China.

 And then the U.S. development, we've already expanded now from our Phase I study into Phase II exploratory study in pancreatic neuroendocrine tumor patients and biliary tract cancer patients in the U.S. So that study's already kicked off. We just announced that last week, I think.

 Epitinib, so epitinib. This is something we've been talking about for quite some time about how we're about to go into a Phase III. But it is a complex patient population, patients with brain metastasis. And so we have spent enormous amount of effort engaged with the regulators in China as well as our principal investigators to design the protocol. And one thing we're certain of is that epitinib gets into the brain and provides great benefit to patients, as we've seen in the Phase Ib study that we presented at the World Conference on Lung Cancer.

 But one of the big challenges that we have is the design of the protocol around brain mets, because what we're doing is we're going to have to prove a superior result in intra-cranial response and median PFS on the intra-cranial side. But you have a very big range of brain metastasis and stage of brain metastasis. So these 2 examples on the side here, the 2 CT scans, on the top you see a patient that has brain metastasis. It's a sort of a “stars in the sky” type brain metastasis. They're small. They're present in a big way. They are less than 10 millimeters in diameter. They are not measurable under RECIST. And generally, they're asymptomatic. So, in general, it takes a long time for that type of brain metastasis to progress.

 On the other hand, you have on the bottom of this chart, you have a patient with a measurable lesion that may be symptomatic and is more than 10 millimeters in diameter, and is probably more aggressive and moving. So how we enroll patients into our study to establish superiority in brain mets, it's very important that we design that study to get the right patients in at the right point, and we stratify those patients carefully along the treatment arm as well as the control arm.

 So it's this understanding of this patient population that we've been working very hard on and the design of the Phase III to give ourselves the greatest chance of success. There are other complexities as well that make it challenging. The EGFR (inaudible) landscape in China has been changing fairly rapidly over the last year or so. So we're close now, I would say, to having it all locked down and being clear on the design of this Phase III. The last thing you want to do is run into a Phase III quickly with a protocol and a design that is, for whatever reason, going to yield a sub-optimal result. So I think we're very close, and we're getting there.

 On the Syk inhibitor, things are looking exciting as well. The dose escalation's complete. And these are quite big dose escalations. Australia plus China is about 60 patients, you can see here. We've enrolled 13 dose cohorts. We started very low. Syk has a long history of toxicities with fostamatinib, et cetera. So we were very careful starting at a low dose, making our way up. But we've got a wealth now of data in those 60 patients, and we're planning to present that data at ASH in November. It's actually December, I think, early December this year.

 Meanwhile, our dose expansion study has started in both China and Australia, and you can see the scale of it is large. I mean, it's a 192-patient dose expansion study, so it's a Phase Ib, but we're enrolling a lot of patients into this expansion study. These are indolent non-Hodgkin's lymphoma patients. And more and more, we're identifying the sub-types of hematological cancer -- hematological malignancies that the Syk inhibitor is going to be able to provide benefit for.

 So the Syk inhibitor is moving very rapidly now, and it's all very encouraging. The U.S. IND has been cleared. If you'll recall, we had a hold as we were doing a 3-month tox study on the M1 metabolite of 523. That 3-month tox study was done, was fine, was resubmitted, and the U.S. FDA has cleared 523 now for development in the U.S. So that's another area we'll start working on.

 So on a very high level, I've talked savolitinib. I've talked fruquintinib. We've talked sulfatinib. We've talked epitinib. Theliatinib, we continue to work on esophageal cancer in EGFR over-expression patients. That Phase II is happening. The Syk inhibitor we've discussed. 689, our PI3K delta, it's in dose escalation now, and we are seriously encouraged by what we're seeing on 689. It's still very early, obviously, but it's a highly encouraging sort of status update I can give you on 689. And as we go through this dose escalation, we'll be able to provide more information on that.

 The FGFR inhibitor, as I say, deep in the announcement. In the Australia study, the Phase I study, we've encountered some problems on toxicities. These are FGFR target-related toxicities, the toxicities that have been seen for many other FGFR inhibitors around the world. So we're working on that. We, funnily enough, have not seen those same FGFR target-related toxicities emerging in China. The Chinese patients are not as -- actually when it comes to drug exposure, Chinese patients, it's just counter to every other drug candidate that we have. But in FGFR, Chinese patients are able to take higher doses without the same levels of toxicities that Australian patients. And you would imagine Australian patients would be larger than Chinese patients and would probably be able to take a greater dose, and that is the case in 7 out of our 8 drug candidates. But in the FGFR inhibitor, Chinese patients are more tolerant of this compound.

 So we continue to explore it, recognizing very much the FGFR target-related toxicities we've seen in Australia, and very strict monitoring in China in that Phase I to ensure the patient safety is paramount. But we're working on it, and we'll see. It's clearly a very active drug in FGFR-[apparent] patient populations. We've seen a lot of activity in those types of patients, but we'll continue to work on it.

 So that's the pipeline on a high level. As a company, over 4,000 subjects have been treated with our drug candidates, over 400 in the first 6 months of this year. And that's another reason for the broadening of our investment in this area.

 The news flow over the next couple of months, or over the next 6 to 9 months, you've got -- on savolitinib, you've got the 2 Tagrisso/savolitinib combination studies I've mentioned. You've got the molecular epidemiology data I think at the end of this year. You've got fruquintinib, hopefully, the NDA approval and the launch in China. You've got the top lines on FALUCA, the third line non-small cell lung cancer study, the start of epitinib in brain mets, the start of sulfatinib in biliary tract carcinoma. You've got the publication of the 60-patient dose escalation study on 523 at ASH. And probably the Phase I dose escalation early next year for the PI3K delta will also come. So there's a lot of data and start of major studies that is coming.

 Very briefly on the commercial platform. We continue to do very well. These charts better visualize the progress we've made in the last 13 or so years. On the commercial platform, looking at total sales of our JVs as well as our subsidiaries, you can see that we've seen compound annual growth of 27% over that last 13 years, and in terms of profit, compound annual growth of 37%. So this has been a very, very good run, and the reason for that is just the general growth of the Chinese pharmaceutical industry that we continue to believe will continue to grow.

 The first half of this year in terms of sales was up 10%. In terms of profit, as I've said earlier on, net income was up 19% when you look at the JVs and the subsidiaries altogether. This is obviously not the number that we consolidate, but this is a measure, a non-GAAP measure of the total scale and size of our business.

 On some of the third party products, the most high profile one, Seroquel and Concor, we've seen continued great results even though, unfortunately, we can no longer consolidate the sales of Seroquel. The business continues to grow rapidly. You can see that in the first half, sales of Seroquel were up 36% in China under our commercial organization. That led to a service fee from AstraZeneca of US$9.6 million, up from $5.5 million last year. So you can see it's substantial, it's material, and it's moving in the right direction.

 Concor, with Merck Serono, total sales in the first half were up 25% on Concor, the beta blocker from Merck Serono. Now the fee structure is slightly different there, but you can see our service fees were $2.2 million, up 100% from last year. So it's working well, the third party operations that we have. AstraZeneca sold Seroquel to a Chinese company called Luye Pharmaceuticals in June of this year. So what AstraZeneca sold was the top right. So now we work with Luye as their exclusive commercial agent in China, and Luye is responsible to uphold all of the contractual obligations that AstraZeneca were contractually obligated to us before.

 For us to continue to commercialize Seroquel in China, we have to hit targets. The target for this year is 22% sales growth, and for the first half, we did 36%. So we are optimistic that, if we continue to do what we do on Seroquel in China, we'll continue to hold those commercial rights. But we now have a new partner to deal with. It's slightly different than the past, so we'll see how it plays out. So that's the commercial side, very strong at all levels.

 I'll leave it there. I'll stop it there. We've got 15 minutes. We can open it up for questions at this time. But overall, I think Chi-Med is in great health. The pipeline is moving very rapidly. You're never going to get absolutely everything right in the biotech industry. It's a risky industry. But savolitinib's moving well. Fruquintinib's moving well. Sulfatinib's moving well. The Syk inhibitor's moving very well. And our secondary assets are all playing out, as well, so it's encouraging, basically. So open it up for questions. I'll start with [Sidney] here from Bloomberg.

Questions and Answers
 Unidentified Analyst,    [1]
 [Sidney] from Bloomberg Intelligence. I have 2 questions. First one, while we're waiting for fruquintinib's approval, can you just give us an update on your launch preparations, reimbursement negotiations?

 And my second question is on savolitinib. In your press release, you mentioned we'll see some preliminary data for Phase II in c-MET amplified gastric cancer. And can you just specify [at] which meeting we'll see the data? Also, is that a Chinese study? If so, will you be able to use the data to engage with U.S. FDA for breakthrough therapy discussions?

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [2]
 So for fruquintinib, obviously Eli Lilly is our commercial partner in China, so we do everything in terms of the development, in terms of the manufacturing. But in terms of actually commercializing fruquintinib, it will be Eli Lilly that commercializes it. Now Eli Lilly is very well prepared. They've built a team of medical reps that are now waiting, ready to go. They've appointed several, I would say, very experienced industry veterans on the commercial side to be responsible for the launch of fruquintinib. So yes, I'd say they're ready. They are involving us in all of this commercial planning, as much as they can, obviously. But yes, subject to approval, I think we'll be very ready to launch fruquintinib.

 On the pricing and on the negotiation of the pricing, this is something that comes later. It will be launched initially as an out-of-pocket drug, so patients will pay out-of-pocket. But very soon after launch, we will start to engage with the regulatory authorities around reimbursement and how to broaden the availability of this product to patient populations in China. So that's on fruquintinib.

 On savolitinib, you asked about gastric cancer. We've presented some very preliminary data from our gastric cancer Phase II studies, one in Korea and one in China. And that data's been very encouraging, and we continue in c-MET gene amplified gastric cancer patients to be very encouraged by the data that we see, so much so that we are working closely with AstraZeneca to talk about what's the next step for gastric cancer on savolitinib. In my opinion, there is an exciting next step for gastric cancer and savolitinib in those MET gene amplified patients.

 As far as when is the data -- the Phase II data going to be presented, it's a little bit out of my hands, because the main study is an investigator-led study in Korea at Samsung Medical Center. It's a huge study that covers not just c-MET, but many other molecular or genetic mutations in gastric cancer. So when that study is published is a bit out of my control, but I can say the data's starting to look very interesting. And if that's the case, I would imagine -- you could imagine that it could be a scientific conference in 2019 sometime, maybe in ASCO or before that.

 Michael Clive Mitchell,  Panmure Gordon & Co. plc, Research Division - Healthcare Analyst   [3]
 Mike Mitchell from Panmure Gordon. The investment in the messaging from the U.S. expansion is I think very strong. Could you tell us a little bit more about what you'll be expecting to establish in terms of the U.S. operations, international operations? And also, does that, given your comments on the inflationary pressures in China, does that potentially give you optionality in the future?

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [4]
 Yes, I think the optionality is good. As a company, we've always been focused globally. So Weiguo and the team have created this portfolio of clinical drug candidates with global potential in mind, not just China. So it's absolutely essential that we build out our capability globally, or particularly in the United States and Europe, to bring our assets through development ourselves.

 Historically, we've relied on partners, AstraZeneca being one example. But I think, going forward as a company, we're bigger, we're stronger, we have more resource. We have more capabilities. Our assets are further along, are de-risked. It's now time for us to take on that work ourselves. And so building this clinical regulatory team in New Jersey has been a big strategy for the company, and we've been able to appoint some really good people. Actually, there's one sitting in the back here, Enrico Magnanelli, formerly from Gilead, who's joined as our Head of International, who's going to be helping our clinical regulatory team in the U.S. get established and look for opportunities to bring our assets outside of China. So yes, it's an important step for the company, but it's one that is long overdue.

 Christian Glennie,  Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst   [5]
 Christian Glennie with Stifel. Just I guess to follow up on that point on potential of getting fruquintinib into more global markets, so what do you think in terms of the potential combination studies you're thinking of in terms of what modalities there, or mechanisms [think] particularly attractive? And therefore, when you think about those combinations and those companies that ultimately have those other products that would be in combination, how you would look to structure such a -- is it a straightforward they'll supply the product and you'll investigate a combo, and then see where that gets you? Or something maybe a bit more formal?

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [6]
 What I'm going to do is I'll answer the part about how we structure it, and then I'll hand it over to Weiguo, who's on the phone, for him to answer what areas are we interested in, what combination opportunities are we interested in.

 So to start with, the structure that we will look at for collaborations is -- well, it's easy if you're going to combine it with something that we've already got. So fruquintinib in combination with savolitinib would be, for us, a no-brainer. And there are probably 2 or 3 other combination opportunities with our own assets that would be quite interesting.

 But as we've said in this presentation, probably the biggest area is looking at [IO], and I'll let Weiguo talk about that. How we would do it is we would find the right partner, and probably in a relatively non-exclusive manner, provide product. The partner provides product. We work on safety run-ins to ensure that these products are combinable. And we may do small exploratory expansions to see that does the combination provide benefit in the patient populations that we're looking for.

 And then maybe you'd go into a more exclusive collaboration once you've designed and defined your registration strategy and you start investing in registration. These kinds of collaborations could be for just China, or they could be global collaborations. And I would imagine there would be many of those types of collaborations. These are very common in the industry these days, I think particularly as companies start looking for innovative combinations of their assets with other assets. You've got to be fairly flexible, and you've got to make sure that both parties have the same objective.

 So maybe I'll hand it over to Weiguo to address which combination areas are we interested in. I don't know whether [he'll be able to hear].

 Weiguo Su,  Hutchison China MediTech Limited - Chief Scientific Officer, Executive VP & Executive Director   [7]
 Sure. So good morning, Weiguo here calling in from Hong Kong. So with regard to -- I mean specifically for PD-1 combinations, as you know, VEGFR is obviously very important, over 30 tumor types have been approved, or indications have been approved for these type of therapies.

 So specifically for PD-1 combination, a lot of promising data already produced and published over the last 2 to 3 years. So what we are thinking, I think we will treat China and outside China a bit differently simply because the competitive situation. So inside China, I think it's wide open. We probably will go -- [there's even] chance for [while] we establish indications, such as kidney cancer and liver cancer, for that matter. So we may go for a bit more mature indications with better proof of concept, but still a window of opportunity to get in there and really move fast towards registration. So we may take that route while the opportunity still exists.

 Outside China, as I already kind of alluded to, kidney cancer is a bit late, and even liver cancer, given Roche got the breakthrough therapy designation just 2 weeks ago with atezo plus bev combination. And data from other combinations, pembro plus lenvantinib, for instance, also looking pretty strong. So we feel it's a bit late there. We might explore other indications, perhaps maybe in GI, for instance, gastric, colorectal, and area where everyone is at the same start, pretty much at a start line, and where PD-1s or PDL-1 therapies have not really succeeded on large scale, for that matter.

 Another area would be also, of course, angiogenesis plays a very important role in the GYN, these indications, breast cancer, ovarian cancer, even cervical cancer as well. So this is an area immunotherapies have not done very well, but angiogenesis is extremely important. So perhaps the combination will lead to some breakthroughs there, as well.

 So in all, we'll probably take a balanced approach. In China, we would love to identify a few indications perhaps with more proof-of-concept data with a bit more mature, but there's still an opportunity in China for rapid registration. But outside China, we'll take some more risk and explore areas where PD-1 monotherapies have not done very well while we also understand that angiogenesis is very, very important. And this probably include GI, GYN, maybe also GU. Aside from kidney, I think bladder cancer, urothelial cancer, I think all these perhaps worth exploring. So yes, outside China we'll be more exploring, but inside China, we would take on some of the more mature indications, try to move rapidly towards registration.

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [8]
 Great. Thanks, Weiguo.

 Christian Glennie,  Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst   [9]
 And then just one follow-up, if I can, on savolitinib. And particularly on the MET Exon 14 skipping, a sense for the percentage of patients, if you know that yet, in terms of these patients that have that phenomenon, and then what potential read across -- is this something that you've shared with Astra, and what potential [read across] does that have in terms of their plans for development.

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [10]
 So everything on savolitinib is working in tandem with AstraZeneca, so we don't do anything independently. This is all joint. It's a Joint Steering Committee. We work together on everything we do. So the Exon 14 skipping program, while in China we are running that clinical trial with the sponsor of that clinical trial, we're doing it in collaboration with Astra.

 As far as the proportion of patients that are MET Exon 14 skipping, it varies in various different subsets of non-small cell lung cancer. But in general, it's 1% or 2%. It's a very small subset. It's difficult to find them. But when you talk about 1.7 million new non-small cell lung cancer patients a year, 1% or 2% is actually 30,000 patients a year. So it's particularly in China, where non-small cell lung cancer's such a very large program. So I think it's a material and relevant patient population. And as far as how we see savolitinib performing in that area, we're very encouraged. Our PIs are very encouraged. AstraZeneca's very encouraged. And we intend to capitalize on this as quickly as we can.

 And we're also -- it's wonderful to see the Chinese regulatory authorities identifying great efficacy. And while there is no breakthrough therapy designation structure in China today, they are essentially saying, “Take that Phase II data, make it big enough, deliver that level of efficacy, and we will treat it essentially as breakthrough therapy and approve it based on that.” So it's very encouraging from a regulatory standpoint in China and from an efficacy standpoint in the patients that we've seen to this point.

 Unidentified Analyst,    [11]
 Can I follow on from what Mike and Christian have been talking about? When we look at fruquintinib, there's an obvious opportunity there. Is having Lilly on board an asset or a liability as you look forward?

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [12]
 That's a loaded question. As we look forward, actually we retain the rights on fruquintinib outside of China. So Lilly still has an option on the global rights, which expires after the third line non-small cell lung cancer study reads out in November. So probably January, their global option will expire. I do not expect them to take that up. They have CYRAMZA, which is the VGFR2 antibody that they've worked on pretty hard over the years, and there's a bit of overlap between fruquintinib and CYRAMZA. I doubt that they will take up fruquintinib.

 So in terms of are they an asset or not, outside of China, subject to them not taking up the global option, it's neither here nor there. It's all us. And actually, that's where, as Weiguo has just said, our interest is in combinations, is to really go off and develop fruquintinib ourselves outside. That's why we're building our own clinical regulatory team in the U.S. to start this work and to get this work going. So I think outside of China, there's no impact of Eli Lilly.

 Inside of China, looking forward, this is an area that we have deep discussions with Eli Lilly on around lifecycle indications on fruquintinib. You've got the first drug -- the first indication hopefully close to approval in colorectal cancer, but you can see there are 30 different solid tumor types for which VGFR inhibitors are approved around the world. In China, it's a fraction of that. There's maybe a dozen.

 So there's a lot of solid tumor indications in China that a high-quality VGFR inhibitor is going to do very well in. And it's in that area that it's difficult for us to be on the same -- have the same objectives as Lilly. For us, it's move as rapidly as we can in these lifecycle indications to maximize the potential sales and profits and use of this drug in China, whereas Eli Lilly may have a different philosophy towards it.

 So in China, I can't really tell, to be honest with you, at this stage of the game. I would hope that we would not be held back and that fruquintinib would be given every opportunity to become as big as it can be. We think fruquintinib can be an enormous therapy in China. Outside of China, I'm less concerned because it's more in our control.

 Unidentified Analyst,    [13]
 Just talking about that MET monotherapy Exon 14, it's a single-arm study. What's the Chinese FDA asking for comparisons to that?

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [14]
 So basically for MET Exon 14 patients, actually that study, that Phase II study is chemo-refractory MET Exon 14. So you cannot -- it's not ethical to not treat those patients with chemo to start with. And so they are chemo-refractory MET Exon 14 skipping patients. Then, post-failure on chemo, really there's nothing left for them. So putting them on savolitinib is ethical, and it's in those patients that you're seeing that fantastic efficacy. Now, ultimately, that's not the patient population that we would seek to get approval in. You obviously want to become the first line therapy for MET Exon 14. But in this case, this study is around chemo-refractory patients. So we do that. We get it approved. Then we'll have another study, which will be first line, and that'll be how you get it approved in the absolute first line.

 Unidentified Analyst,    [15]
 And then just looking at epitinib, obviously, it's kind of (inaudible) fruquintinib outside of China quite positive, but [epitinib], and then maybe Tagrisso being kind of positive in brain mets, what's your thoughts kind of outside of China [with that]?

 Christian Hogg,  Hutchison China MediTech Limited - CEO & Executive Director   [16]
 Yes. I think epitinib, our primary focus is get epitinib right in China, because EGFR mutation-positive non-small cell lung cancer, around 50%-plus of non-small cell lung cancer patients in China are EGFR mutation-positive. In the West, it's between 10% and 15%, so it's a much smaller subsegment of non-small cell lung cancer is EGFR mutation-positive. So China is, by far and away, the biggest reservoir of EGFR mutation-positive patients. And so, our real primary focus on epitinib is for China at the moment.

 As you say, Tagrisso does have -- it's a metabolite that can penetrate the blood-brain barrier and provide benefit to patients, but it's a very expensive drug. So epitinib would probably be something at a much lower level. But we'd see. We'll see. I think our focus is squarely on China for the moment, and we'll look at global at a later date.

 Okay, great. Well, that's the hour up. And thank you all very much for coming. Thanks very much for the questions. And I think we will call it here. We have probably some on the line, but we'll call it. Thanks very much for coming.

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