Final Results for the year ended 31 December 2014

For the complete release, please download the PDF.
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Break-out year for Drug R&D Division with 16 clinical studies on 7 drug candidates; 10 potential Breakthrough Therapy indications; as well as record China Healthcare Division revenues and profits.

London: Thursday, 26 February 2015: Chi-Med today announces its final results for the year ended 31 December 2014.

Consolidated Group Results (IFRS11)

• Revenue up 100% to $91.8 million (2013: $46.0m).
• Net profit attributable to Chi-Med equity holders of $5.4 million (2013: $5.9m) as the Company continues to balance a dramatic increase in clinical trial activity on seven new drug candidates with rapidly increasing profit in the China Healthcare Division.
• Cash positive overall during 2014 with Group level cash and bank balances of $51.1 million (31 December 2013: $46.9m). In addition, cash and bank balances held at the joint venture (“JV”) level $77.0 million (31 December 2013: $99.0m) which is being used to fund construction of two new large-scale factories.

Results are reported in US dollar currency unless otherwise stated.

Christian Hogg, Chi-Med CEO, said: “Chi-Med has had a great year in 2014 and the momentum is continuing in 2015. The route to our objective of becoming a large-scale China pharmaceutical company is now clearly laid out before us.

Our Drug R&D Division has made dramatic strides. During the year we published exciting new clinical data on three of our seven drug candidates. We have 16 clinical studies running in parallel, 10 of which are in potential Breakthrough Therapy indications. Many of these studies will publish data during 2015. For AZD6094 (savolitinib) and fruquintinib, we expect to make New Drug Application submissions in 2016 – the first in our history. And, our either first-in-class or best-in-class compounds against important targets such as Syk (HMPL-523), PI3Kδ (HMPL-689), as well as sulfatinib in neuroendocrine tumours all represent attractive near-term licensing opportunities.

Our China Healthcare Division has had a record year with sales of subsidiaries and JVs moving past $500 million and net profit attributable to Chi-Med equity holders growing 21% to $22.6 million. The gradual normalisation of certain raw material prices helped profitability. More importantly, our new third-party drug commercialisation business is now set to accelerate rapidly, building on top of our existing own-brand business. This is demonstrated by our recent third-party deals to take over commercial operations in certain provinces on Merck Serono’s Concor®, the number two beta-blocker in China and, in all of China, on Seroquel®, AstraZeneca’s leading bi-polar disorder/schizophrenia drug – both of which we started selling in early-2015.

As we guided last year, our Consumer Products Division has now moved into net profit.

In the current year, sales and profit in our China Healthcare and Consumer Products Divisions are well ahead of 2014 levels, and we expect this to continue through 2015.

In the Drug R&D Division, in the near term, fruquintinib will report the results of its third-line colorectal cancer Phase II study in early 2015. We expect this to be positive, triggering material success payments from Eli Lilly and Company (“Lilly”). Further milestones and success payments are expected on AZD6094 (savolitinib) later in 2015. We also expect our pipeline of clinical drug candidates to progress, enabling us again to publish further data at scientific community events, thereby building considerable shareholder value.”

Highlights

Drug R&D Division – Innovation platform with potential to yield multiple new drug approvals

• Revenue $24.8 million (2013: $29.5m) resulting mainly from milestone and service income from partnersAstraZeneca AB (Publ) (“AstraZeneca“), Lilly, Janssen Pharmaceuticals, the pharmaceutical division of Johnson & Johnson (“Janssen”), and Nestlé Health Science SA (“Nestlé Health Science”).
• Net loss attributable to Chi-Med equity holders of $9.7 million (2013: -$2.4m) due primarily to the rapid expansion of clinical trial activity on the seven clinical-stage drug candidates of Hutchison MediPharma Limited (“HMP”). A total of 16 clinical trials are underway, compared to 7 twelve months ago, with total clinical trial spending in 2014 of $44.8 million (2013: $30.1m).
• AZD6094 began eight Phase Ib/II studies in 2014 and early 2015 all in stratified c-Met aberrant patient populations in possible Breakthrough Therapy indications. AZD6094 has already achieved partial response in several indications, thereby increasing its chances of becoming the global first-in-class c-Met inhibitor.
• Fruquintinib completed Phase Ib colorectal cancer study, with highly encouraging efficacy and safety profile. Also in colorectal cancer in China we completed enrolment in a Phase II study, which we now judge is highly probable to meet required success criteria, and began a Phase III registration study in late 2014. Gastric and lung cancer Phase Ib/II studies also began in 2014 with rapid progress.
• Sulfatinib completed Phase I study with a 32% objective response rate (“ORR”) among neuroendocrine tumour (“NET”) patients; by far the highest ever ORR observed globally to-date in NET patients on a tolerable therapy. Consequently, a Phase Ib NET study started in late 2014 and a Phase II/III clinical trial application in China has been submitted. Sulfatinib will be the first un-partnered targeted therapy that Chi-Med will develop in the United States (“US”) and as such an Investigational New Drug (“IND”) application has recently been submitted in the US. A short pharmacokinetics bridging study in non-Asian patients on sulfatinib will start in early 2015 followed by a Phase II study in NET patients by mid-year.
• HMPL-523, our novel, potential first-in-class, Syk inhibitor for inflammation and oncology, began Phase I trial in Australia in mid-2014 and will complete in 2015. Phase I success will make HMPL-523 a candidate for licensing – several potential global partners await this critical data.
• Interim analysis on HMPL-004 NATRUL-3 Phase III study showed, despite a solid safety profile, no overall efficacy benefit was observed so the study was terminated. Subsequent sub-group analysis shows a strong trend to efficacy in remission in the high-dose 2,400mg/day treatment arm among 5-ASA refractory patients. Nestlé Health Science and Chi-Med are currently reviewing data. Decision on next steps to be made in 2015.
• On-track and on budget to start fruquintinib production at new Suzhou factory in mid-2015, a requirement for Phase III registration studies. This facility could also produce AZD6094 and sulfatinib in due course.
• Advanced both differentiated epidermal growth factor receptor (“EGFR”) compounds in clinical trials, epitinib into Phase Ib and theliatinib into late Phase I.
• Progressed two late stage preclinical candidates, a PI3Kδ inhibitor (HMPL-689) and a selective fibroblast growth factor receptor (“FGFR”) inhibitor (HMPL-453), into regulatory toxicity study. Both compounds expected to start Phase I human trials in late 2015 or early 2016.

China Healthcare Division – Record revenue and profit performance

• Sales in the China Healthcare Division’s subsidiaries and JVs were up 29% to $509.4 million (2013: $394.6m). Third party drug distribution and commercialisation businesses were up 93% to $99.9 million due to the commencement of operations of Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company Limited (“Hutchison Sinopharm”). Growth in own, non-third party, business was up 19% to $409.5 million with cardiovascular and secondary over-the-counter (“OTC”) drug products performing well. New revenue streams also emerged in 2014 from deeper operational integration and synergy withGuangzhou BaiyunshanPharmaceutical Holdings Co., Ltd. (“Guangzhou Pharmaceutical”).
• Net profit attributable to Chi-Med equity holders was up 21% to $22.6 million (2013: $18.6m) resulting from normalisation of certain raw material costs as well as volume scale efficiencies.
• Established a wholly-owned Good Supply Practice (“GSP”) distribution company under Shanghai Hutchison Pharmaceuticals Limited (“SHPL”) and then completed an exclusive marketing deal for SHPL to take over six Shanghai Pharmaceuticals Holding Co., Ltd. (“Shanghai Pharmaceuticals”) drug products in China.
• Hutchison Sinopharm signed exclusive deals to commercialise Merck Serono’s Concor® (beta-blocker) in several provinces in China; and AstraZeneca’s Seroquel® (bi-polar disorder/schizophrenia) in all China.
• On-track and on budget to complete new factories for both SHPL and Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited (“HBYS”) during 2015 which will increase production capacity by three-fold and allow for release of significant value from the property of our existing sites, which are close to the city centres of Shanghai and Guangzhou.

Consumer Products Division – Focused on profitable activities

• Sales up 6% to $13.2 million (2013: $12.5m)driven by progress on the expansion of the range of Hutchison Hain Organic Holdings Limited (“HHO”) products in Asia.
• Net profit attributable to Chi-Med equity holders of $1.3 million (2013: net loss of $1.9m).
• HHO won an arbitration award of $2.5 million against Swiss supplier of infant formula, $1.0 million of which is attributable to Chi-Med equity holders. To re-launch Earth’s Best® organic formula in China in mid-2015 using The Hain Celestial Group’s (NASDAQ: HAIN) (“Hain Celestial”) reliable US-based supplier.

A presentation for analysts will be held at 9:00 a.m. today at the offices of Citigate Dewe Rogerson, 3 London Wall Buildings, London EC2M 5SY.

The Annual General Meeting of Chi-Med will be held at 4th Floor, Hutchison House, 5 Hester Road, Battersea, London SW11 4AN on Friday, 24 April 2015 at 10:00 a.m.

Ends

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About Chi-Med

Chi-Med is a China-based healthcare group focused on researching, developing, manufacturing and selling pharmaceuticals and health-related consumer products. Its China Healthcare Division manufactures, markets and distributes prescription and OTC pharmaceuticals in China. Its Drug R&D Division focuses on discovering and developing innovative therapeutics in oncology and autoimmune diseases. Its emerging Consumer Products Division focuses on organic and natural consumer products in Asia.

Chi-Med is majority owned by the multi-national conglomerate Hutchison Whampoa Limited (“Hutchison Whampoa”). For more information please visit: www.chi-med.com.

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Please download the PDF for the full text of our interim announcement.