Chairman’s Statement

The statement below is from taken from Chi-Med's Final Results for the Year Ended December 31, 2016, released on March 13, 2017.  For more information, please review the Announcement for the Final Results for the Year Ended December 31, 2016.

Chi-Med’s aim remains to become a large-scale innovative global biopharmaceutical company based in China.

The progress in 2016 in advancing savolitinib and fruquintinib toward submissions for approval is particularly encouraging. Approval of these drug candidates, if successful, would propel Chi-Med into a new era, in which its six other clinical drug candidates, and the proven discovery capability of its scientific team, could take the company to new heights.

For over fifteen years, Chi-Med and its partners have invested over $400 million in pursuit of this aim. The approximately 330-person strong scientific team has created a broad portfolio of differentiated products in the global targeted therapy arena in oncology and immunology. Chi-Med has focused on creating highly selective drug candidates against multiple novel and validated molecular targets with the potential to be global first-inclass or best-in-class. It is intended that these drug candidates will be used as monotherapies or in combination treatments with other oncology and immunology therapies and as a result, improve global patient outcomes and create shareholder value.

The 2016 amendment of the global collaboration agreement on savolitinib with AstraZeneca is further evidence of our belief in savolitinib’s potential across multiple oncology indications.

Key elements of Chi-Med’s strategy are:

To design novel drug candidates against well-characterized targets with global first-in-class potential

Chi-Med believes its most significant market opportunity is developing innovative drug therapies that have global first-inclass potential in areas of high unmet needs. In order to limit its risk, the scientific team has focused on novel tyrosine kinase targets, which have a deep body of evidence to support their role in cell signaling in cancer or inflammation, such as c-Met, Syk and FGFR.

To use a chemistry-focused approach centered on kinase selectivity to create global best-in-class products

In addition to novel targets, risk is also balanced by creating drug candidates against proven validated targets including VEGFR, EGFR and PI3Kδ. The belief being that there is a lot of room to improve on the first generation of TKIs that have emerged over the last fifteen years. Chi-Med works to develop differentiated next generation TKIs characterized by high selectivity and superior PK properties leading to improved patient tolerability and efficacy. This scientific approach should be strongly validated once the full data set of the FRESCO study on fruquintinib is presented in mid-2017.

To pursue a practical, efficient and global best practice clinical and regulatory strategy

China’s large patient population, combined with lower clinical trial costs, as compared to the West, allows for rapid and lower risk development through proof-of-concept on validated targets. All studies in China are conducted to global Good
Clinical Practice standards, predominantly using global Contract Research Organizations. On novel targets, Chi-Med accepts higher risk and pursues global clinical development from day one in order to maximize the chance of achieving a global first-in-class position.

To deploy a risk-balanced approach to financing long-term investment in innovation

Chi-Med has followed an unconventional path to reach its current stage of development as a company. Risk has been balanced in every manner possible, focusing on building a financially sustainable operation with a low chance of negative binary outcome. Starting with the above risk-balanced portfolio approach to choosing the novel/validated kinase targets on which to focus research; to the partnerships with AstraZeneca and Lilly which have broadened development plans, and provided technical support and global reach; to basing the operations of Chi-Med in China where generally lower operating costs allow for a scientific team large enough to manage development of such a broad pipeline; to building a powerful Commercial Platform which provides steady cash flow; and finally, to the relationship with its majority shareholder, CK Hutchison, who has had a long-term, practical, mind-set. These factors distinguish Chi-Med from, and provide competitive advantages over, the more common path of evolution of many emerging biotech companies.

As always, I would like to express my deep appreciation for the support of the investors, directors and partners of Chi-Med and for the commitment and dedication of all of the management and staff of Chi-Med.

 

Simon To
Chairman

March 13, 2017