Chairman’s Statement

The statement below is taken from Chi-Med's Interim Results for the six months ended June 30, 2017, released on July 31, 2017.  For more information, please review the Announcement for the Interim Results for the six months ended June 30, 2017.

Chi-Med’s aim remains to become an innovative global biopharmaceutical company based in China, and we keep making significant progress towards this aim.

Our recent progress in advancing fruquintinib through NDA with the CFDA as well as starting our first global Phase III study in oncology with savolitinib have been particularly important. We are making progress step-by-step on all eight of our clinical drug candidates, and we believe that we are very well positioned to create substantial shareholder value. Our confidence in doing so stems from the following factors.

The inevitability of China oncology

In 2016, global market sales of oncology drugs grew by 11% to $175.7 billion making it the largest treatment area in the global pharmaceutical market, with a 17% market share. In China, despite being the home to 8.1 million cancer patients, or about 20-30% of those in the world, 2016 market sales of oncology drugs were just $7.3 billion, or about 4% of the global market. In our view, it is inevitable that the China oncology market is set to emerge over the coming decade as an area of major opportunity, spurred by China’s increasing emphasis on innovation combined with its rapidly improving regulatory environment.

Global innovation out of China

For sixteen years, Chi-Med and its partners have invested about $480 million in building an engine of global oncology innovation in China. Our approximately 330-person strong scientific team has created, and progressed into development, a portfolio of eight differentiated targeted therapies, primarily in the field of oncology. We have used our fully integrated discovery platform, with its particularly deep competence in chemistry, to create highly selective drug candidates against multiple novel and validated molecular targets, many with the potential to be first-in-class or best-in-class. Global quality innovation, out of China, positions us very well to address the major unmet medical needs in China oncology as well as to identify opportunities for our differentiated assets in the global market.

China regulatory reforms

Probably the most exciting development in the context of our ambitions is the transformation that is occurring in the regulatory environment in China. In the clinical and regulatory arena, dozens of policy documents have been published by the State Council and CFDA, aiming to strengthen and speed up China's drug trial and approvals process. These include new standards, supervision and accountability mechanisms that are helping to clear China's drug registration backlog, with the number of applications awaiting CFDA review dropping from 22,000 in 2015 to the current 6,000. Also, the new Priority Review and Market Authorization Holder ("MAH") systems are both clearly helping to speed approval of innovative therapies that meet major unmet medical needs in China.

In the commercial arena, the publication, this month, of the agreed NDRL prices on 36 novel drugs is the first step away from the 100% self-pay system. Many targeted therapies in oncology such as Avastin®, Herceptin®, Tarceva®, Nexavar®, Rituxan®, Afinitor® and Revlimid®, among others are now set to be at least partially reimbursed. While prices have been negotiated down to between about one-third and one-half of global prices, both patients and innovative biopharmaceutical companies in China are set to benefit from broadening of access to these important therapies.

Our first wave of innovation is benefiting from regulatory reforms

Fruquintinib is the first drug out of the Chi-Med innovation engine to take advantage of the above factors. It has shown that a potential best-in-class asset can be discovered and developed in China. We expect fruquintinib to be granted Priority Review and, upon approval, is likely to be the first MAH designated drug ever to reach the market in China. The interaction with the CFDA in our local region, Shanghai, as well as centrally in Beijing, has been highly collaborative because fruquintinib is a test case for the new system. We hope that time from NDA submission to approval could be rapid and help to establish a new standard. We believe that the balance of our first wave of innovation – sulfatinib, epitinib, and theliatinib – will also all benefit from these important regulatory reforms.

Our second wave of innovation is on its way

Chi-Med’s second wave of innovation is focused on more novel, potential first-in-class targets such as c-MET, Syk, and FGFR, as well as a potential best-in-class PI3Kδ inhibitor. All of these programs are in clinical trials and we are moving as fast as we can to reach proof-of-concept in as many indications as possible, looking to build robust data sets that will allow for pivotal trial decisions.

Even greater innovation in the third wave

For the past five years, our discovery platform has been working on our third wave of drug candidates, with an emphasis on second-generation immunotherapy targets. The first of these assets should start reaching the clinic in the coming year or so, and we are most excited about the opportunities that will emerge for innovative combination regimes with our first and second wave therapies.

For all these reasons, combined with the financial strength of Chi-Med, the cash being generated by our Commercial Platform and our consistent commercial and scientific strategies, we are highly optimistic about Chi-Med’s long-term prospects. As always, the success and prospects of Chi-Med are the result of the commitment and dedication of our people, and I would like to express my deep appreciation to all our management and staff and for the support of the investors, directors and partners of Chi-Med.

 

Simon To
Chairman

July 31, 2017