Chairman’s Statement // Chi-Med
Chairman’s Statement

The statement below is taken from Chi-Med's Final Results for the year ended December 31, 2017, released on March 12, 2018.  For more information, please review the Announcement for the Final Results for the year ended December 31, 2017.

Chi-Med is consistently making significant progress towards its goal of being an innovative global biopharmaceutical company based in China, and our achievements last year amply demonstrate this.

Our recent successes 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 also making solid progress on our other six, unpartnered, clinical drug candidates as well as rapidly growing our Commercial Platform, which stands ready to launch our drug candidates in China, if approved. We believe that we are well positioned to create shareholder value and our confidence in doing so stems from the following factors.

The undisputed need for oncology drugs in China

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 4.3 million new cancer patients per year, 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 almost 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.

China regulatory reforms

An important 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 clinical trial and approvals process. These include new standards, supervision and accountability mechanisms. Also, the new Priority Review and Market Authorization Holder systems are both clearly helping to streamline the approval of innovative therapies that meet major unmet medical needs in China.

In the commercial arena, the recent inclusion of 36 novel drugs on the NDRL is a first step away from the 100% self-pay system. Many targeted therapies in oncology 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 innovators and patients in China are set to benefit from broadening of access to these important therapies.

World-class science

Chi-Med has invested about $500 million, including payments from our partners, in building an engine of global oncology innovation in China. Our approximately 360-person strong scientific team has created and advanced into development, a portfolio of eight differentiated targeted therapies, primarily in the field of oncology. These highly selective drug candidates, all we believe with first- or best-in-class potential, act on novel molecular targets, such as c-MET, Syk and FGFR, as well as on validated targets, including EGFR, VEGFR and PI3Kδ. To add to these, we are developing the next wave of pre-clinical drug candidates against multiple second-generation immunotherapy targets which we believe are nearing readiness for clinical trials.

The reason we have created such a broad portfolio of assets is because we believe that the future of cancer treatment lies in combination therapies. As understanding around the biology of cancer has evolved over the past ten years, it has become increasingly clear in many solid tumor and hematological cancer indications, that combination therapy, acting on multiple primary, secondary and resistance signaling pathways will be required to provide meaningful clinical outcomes. High selectivity and clean drug-drug interaction profiles are essential, if a drug is to be used in a combination regimen.

Establishing the infrastructure and financial support needed to achieve our goal

During the past two years, we have taken steps to further build ourselves into a company with the resources to take advantage of opportunities and ultimately become a major player in both China and the global markets. As long-standing board members retired last year, we appointed five new directors to Chi-Med’s ten-person board, all with deep industry or financial experience and all well positioned to help the company develop. This is important as we embark into new areas, such as establishing our clinical and regulatory team in the United States, and looking to launch fruquintinib outside of China.

In financing, our initial and follow-on public offerings on Nasdaq during the last two years have raised $411.5 million in cash for the company. We believe that these resources, along with the substantial cash generation of our Commercial Platform, will take us through to approvals on multiple drugs. They will also allow us to rapidly expand the indications in which we are developing these drugs, as well as taking un-partnered assets further into development by ourselves, thereby maximizing the economic value to Chi-Med of these innovations.

For all these reasons, we are highly confident about Chi-Med’s long-term prospects. As always, our success and prospects 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

March 12, 2018