Chairman’s Statement

The statement below is taken from Chi-Med's 2018 Annual Report

2018 has been a year of rapid progress for Chi-Med, manifesting the potential of our business. We are now a proven Chinese innovator in our field and we continue steadily moving towards becoming a global biopharmaceutical company.

With the launch of Elunate® (fruquintinib) in late 2018, we have become the only company ever to take a novel cancer drug from discovery to unconditional approval and launch in China. It is an outstanding achievement, and while still very early, we are encouraged by initial Elunate® uptake. We see this as just the first of a stream of new globally competitive drugs Chi-Med brings to market.

At the end of 2018, we also achieved an important change in our agreement with our partner Eli Lilly on fruquintinib. We believe that this change will secure fruquintinib’s full long-term commercial potential. In return for our increased support of development costs, a material portion of which will be borne by third-party PD-1 partners, Lilly has removed all constraints on life cycle development, materially improved our economics through significantly increased milestone and royalty payments and potential future co-promotion rights.

Meanwhile, savolitinib continues to have the potential to become a first-in-class selective c-Met inhibitor. In lung cancer, we are developing savolitinib both as a monotherapy and in combination with Tagrisso®, as well as exploring kidney cancer in combination with Imfinzi® and gastric cancer as a monotherapy.

The pace of innovation in oncology has accelerated dramatically, with immunotherapy revolutionizing the treatment of many solid tumors. We are therefore accelerating our focus on innovative combinations to combine fruquintinib, surufatinib and savolitinib with immunotherapies. We have also established a US/international clinical and regulatory operation in New Jersey and plan to expand this rapidly to enable us to speed global development of our un-partnered drug candidates.

Our Commercial Platform once again produced good net income growth to $41.4 million, and this helped contain the Chi-Med Group total cash burn to $57.3 million in 2018, despite the substantial, and planned, increase to $142.2 million in our R&D expenses, from $88.0 million in 2017, on an as adjusted (non- GAAP) basis.

Looking ahead, we have a clear plan to potentially gain approval on three of our drugs in the next three years, and in so doing we are confident that we will provide important benefits to patients as well as create substantial shareholder value.

Simon To
Chairman

March 11, 2019