Hutchmed Regulatory News (HCM)

Group: Year of major progress; results in line with guidance

· Group revenue up 12% to $241.2 million (2016: $216.1m);

· Net loss attributable to Chi‑Med $26.7 million (2016: Net profit $11.7m), including $88.0 million in research and development expenses on an adjusted (non-GAAP) basis (2016: $76.1m).

Strengthened cash position: Expected to be sufficient to accelerate and broaden pipeline into 2020

· Cash resources of $479.6 million at Group level as of December 31, 2017 ($173.7m as of December 31, 2016), including cash and cash equivalents, short-term investments and unutilized bank facilities;

· Completed Nasdaq follow-on offering, raising net proceeds of $292.7 million in late 2017.

Innovation Platform: Submitted first China New Drug Application ("NDA") on fruquintinib; initiated first global Phase III registration study on savolitinib; five other pivotal Phase III studies underway and more preparing to start; and discovery engine aiming to produce 1-2 novel clinical drug candidates per year

· Deep clinical pipeline of novel small molecule tyrosine kinase inhibitors ("TKIs"):

o Eight clinical drug candidates now in active or completing clinical trials in 36 target patient populations ("TPP") (2016: 30) around the world; over 3,500 subjects dosed in trials to date, over 700 in 2017;

o Stream of second-generation immunotherapy compounds advancing through pre-clinical development.

· Savolitinib - Highly selective TKI of the mesenchymal epithelial transition factor ("c-MET") - Global Phase III studies underway or in planning in kidney and lung cancer with Phase I/Ib studies in over a dozen exploratory TPPs in multiple further cancer indications:

o Presented positive Phase Ib/II data in second- and third-line non-small cell lung cancer ("NSCLC"), combination of savolitinib and Tagrisso® or Iressa® at the 2017 World Conference on Lung Cancer ("WCLC"); AstraZeneca AB (publ) ("AstraZeneca") have now agreed to proceed with development in second-line NSCLC with the initiation of multiple studies including a global randomized, chemotherapy-doublet controlled study of savolitinib plus Tagrisso® in first-generation epidermal growth factor receptor ("EGFR")-TKI refractory, c-MET gene amplified, T790M negative NSCLC patients;

o Presented positive Phase II data in c-MET-driven papillary renal cell carcinoma ("PRCC") at the ASCO Genitourinary Cancers Symposium; then initiated global Phase III study, the SAVOIR study, in c-MET-driven PRCC in a head-to-head comparison with current standard therapy Sutent® (sunitinib), the first Phase III study ever conducted with molecularly selected patients in renal cell carcinoma ("RCC").

· Fruquintinib - Highly selective TKI of vascular endothelial growth factor receptor ("VEGFR")-1/2/3 - Likely to be Chi-Med's first China Food and Drug Administration ("CFDA")-approved TKI, Phase III studies in colorectal cancer ("CRC"), lung and gastric cancer in China either complete or enrolling and global development now underway:

o Positive outcome in Phase III study, the FRESCO study, in third-line CRC patients in China; 2017 American Society of Clinical Oncology ("ASCO") oral presentation; Potentially best-in-class in terms of both efficacy and safety relative to Stivarga® (regorafenib); NDA submitted to the Center for Drug Evaluation of the CFDA in June 2017 and technical reviews and inspections are ongoing;

o Completed enrolment in early 2018 of a 527 patient Phase III study, the FALUCA study, in third-line NSCLC in China;

o Presented positive Phase Ib data, at the 2017 ASCO Gastrointestinal Cancers Symposium, for fruquintinib in combination with Taxol® (paclitaxel) in second-line gastric cancer; then initiated the FRUTIGA study, an over 500 patient Phase III study in China;

o Initiated Phase I development of fruquintinib in the United States in late 2017.

· In addition, presented positive preliminary proof-of-concept efficacy and safety data on multiple drug candidates over last year, including:

o Savolitinib in c-MET-driven gastric cancer;

o Fruquintinib in combination with Iressa® in first-line EGFR mutation positive NSCLC;

o Sulfatinib against VEGFR, fibroblast growth factor receptor 1/2/3 ("FGFR") and colony stimulating factor 1 receptor ("CSF-1R"), in neuroendocrine tumors ("NET") as well as thyroid cancer;

o Theliatinib in EGFR wild-type esophageal cancer.

· Initiated early/proof-of-concept development on multiple drug candidates over last year, including:

o Savolitinib in combination with Imfinzi® (durvalumab), AstraZeneca's anti-programmed death-ligand 1 ("PD-L1") antibody - Phase II in PRCC and clear cell renal cell carcinoma ("ccRCC") in Europe;

o Savolitinib - Phase II study in pulmonary sarcomatoid carcinoma in China;

o Savolitinib - Phase II study in prostate cancer in Canada;

o Sulfatinib - Phase II in second-line biliary tract cancer in China;

o Epitinib - Phase Ib/II in EGFR gene amplified glioblastoma in China;

o HMPL-523 against spleen tyrosine kinase ("Syk") - Phase I in hematological cancer in China;

o HMPL-453 against FGFR 1/2/3 - Phase I in all comer solid tumors in Australia and China;

o HMPL-689 against phosphoinositide 3-kinase delta ("PI3Kδ") - Phase I in hematological cancer in China;

o Theliatinib against EGFR wild-type - Phase Ib in esophageal cancer in China.

Commercial Platform: High-performance drug marketing and distribution platform covers ~300 cites/towns in China with approximately 3,300 sales people. High-value products and household-name brands

· Total consolidated sales up 13% to $205.2 million (2016: $180.9m);

· Total sales of non-consolidated joint ventures up 6% to $472.0 million (2016: $446.5m);

· Total consolidated net income attributable to Chi-Med up 25% to $37.5 million (2016: $29.9m) on an adjusted (non-GAAP) basis which excludes one-time gains.

Potential milestones targeted for 2018

· Savolitinib:

o Second-line NSCLC - Initiation of a global randomized, chemotherapy-doublet controlled study of savolitinib plus Tagrisso® in first-generation (Iressa®/Tarceva®) EGFR-TKI refractory, c-MET gene amplified, T790M negative NSCLC along with multiple supporting studies;

o Third-line NSCLC - AstraZeneca to decide global registration strategy in third-generation (Tagrisso®) EGFR-TKI refractory NSCLC;

o AstraZeneca/Chi-Med agreement on registration strategy in China for savolitinib plus Iressa®  combination in second-line NSCLC; 

o Release of results of global PRCC molecular epidemiology study ("MES") and review of the potential Breakthrough Therapy opportunity in c-MET-driven PRCC.

· Fruquintinib:

o NDA approval and launch in China, with our partner Eli Lilly and Company ("Lilly"), in advanced CRC;

o Release of top-line results for the FALUCA Phase III study in third-line NSCLC in late 2018.

· Epitinib (EGFR): Initiation of Phase III registration study in first-line NSCLC patients with EGFR activating mutations with brain metastasis in China;

· HMPL-523 (Syk): Presentation of preliminary safety and efficacy data from Phase I/Ib dose escalation and dose expansion study in hematological cancer in Australia and China.

Use of Non-GAAP Financial Measures - References in this announcement to adjusted research and development expenses, adjusted consolidated net income attributable to Chi-Med from the Commercial Platform, adjusted consolidated net income attributable to Chi-Med from our Prescription Drugs business and adjusted revenue of HBYS are based on non-GAAP financial measures. Please see the "Use of Non-GAAP Financial Measures and Reconciliation" below for further information relevant to the interpretation of these financial measures and reconciliations of these financial measures to the most comparable GAAP measures, respectively.

U.K. Analysts Meeting and Webcast Scheduled Today at 9:00 a.m. BST (5:00 p.m. HKT) - at Citigate Dewe Rogerson, 3 London Wall Buildings, London, EC2M 5SY, U.K.. Investors may participate in the call at +44 20 3003 2666 or access a live video webcast of the call via Chi-Med's website at www.chi-med.com/investors/event-information/.

U.S. Conference Call Scheduled Today at 9:00 a.m. EDT - to participate in the call from the United States, please dial 1 866 966 5335.

Additional dial-in numbers are also available at Chi-Med's website. For both calls please use conference ID "Chi-Med."

Simon To, Chairman of Chi-Med, said: "2017 was another year of important progress for Chi-Med.  Both our Commercial Platform and our Innovation Platform delivered very strong performance; we met our financial guidance, substantially strengthened our cash position and continued Chi-Med's multi-year record of generating considerable shareholder value.  We believe that this record will continue in 2018 and beyond.

In our Innovation Platform, we have progressed our deep portfolio of eight clinical drug candidates, now in active or completing clinical trials in 36 TPPs around the world. Two major milestones were the formal NDA submission for fruquintinib in CRC in China; and the initiation of our first global Phase III registration study of savolitinib in c-MET-driven metastatic PRCC. We also presented positive Phase Ib/II data at major scientific conferences on savolitinib in PRCC, NSCLC and gastric cancer; fruquintinib in NSCLC and gastric cancer; sulfatinib in NET and thyroid cancer; and theliatinib in esophageal cancer, all positioning us well for 2018.

We are now entering the final stage of the NDA process for fruquintinib in China - the Good Manufacturing Practice ("GMP") certification of our manufacturing facility in Suzhou - and subject to approval, we expect to launch fruquintinib in China in 2018 with our commercial partner, Lilly. Equally important, the positive Phase Ib/II data on savolitinib in combination with Tagrisso® in NSCLC, presented in late 2017 at WCLC, has now led AstraZeneca to agree to move forward and initiate a global randomized chemotherapy-doublet controlled study in NSCLC - which is targeted to start in H2 2018.  Furthermore, in late 2017 we initiated a Phase III registration study in China of fruquintinib in gastric cancer and, in 2018, will start a Phase III registration study on epitinib in NSCLC patients with brain metastasis.

The systematic progress of our pipeline is testament to the quality of our in-house research organization, which has discovered all eight of our clinical drug candidates. This productivity continues, with the first of a stream of novel second-generation immunotherapy candidates now progressing towards starting human trials in 2019. This all demonstrates that global quality drug discovery is now taking center stage in China.

In parallel, our Commercial Platform continues to deliver, with net income attributable to Chi-Med up 25%, on an adjusted (non-GAAP) basis excluding one-time gains, to $37.5 million. This achievement was made more noteworthy when we consider that during the past two years, we have built two new large-scale GMP certified manufacturing facilities that have affected over 1,000 manufacturing staff. Moving production to these new factories, which approximately triple our capacity and lower production cost, has unlocked one-time property compensation that is expected to exceed their cost. Our Prescription Drugs marketing capabilities are one of our greatest strengths, as proven by our success on Seroquel® and Concor®. Our team of about 2,300 medical sales people now stands ready to enter oncology either through, subject to approval, the launch of our own Innovation Platform drugs, or acquisition.

We are building a company with deep capabilities, aiming to take advantage of emerging opportunities in China and beyond. To this end, in 2017, we appointed five new members to the ten-person Chi-Med board - all industry veterans well positioned to help the company develop. We also successfully completed a $301.3 million follow-on offering on Nasdaq sufficient, we believe, to take us to approvals on multiple drugs. Consequently, we view Chi-Med's future with confidence."

2017 FINANCIAL AND OPERATIONAL HIGHLIGHTS:

Consolidated financial results of the Group are reported under U.S. generally accepted accounting principles ("U.S. GAAP") and in U.S. dollar currency unless otherwise stated. Chi-Med also conducts its business through three non-consolidated joint ventures, which are accounted for under the equity accounting method as non-consolidated entities in our consolidated financial statements. Within this announcement, certain financial results reported by such non-consolidated joint ventures are referred to, which are based on figures reported in their respective consolidated financial statements prepared pursuant to International Financial Reporting Standards (as issued by the International Accounting Standards Board). Unless otherwise indicated, references to "subsidiaries" mean the consolidated subsidiaries and joint ventures (excluding non-consolidated joint ventures) of Chi-Med.

Innovation Platform - a deep, broad, and risk-balanced global oncology/immunology pipeline.

Consolidated revenue from our Innovation Platform was $36.0 million (2016: $35.2m) from milestone payments from Lilly (fruquintinib NDA filing) and AstraZeneca (savolitinib Phase III initiation) and service fee payments from Lilly, AstraZeneca and Nutrition Science Partners Limited ("NSP"), our 50/50 joint venture with Nestlé Health Science S.A. ("Nestlé"). Net loss attributable to Chi-Med from our Innovation Platform of $51.9 million (2016: -$40.7m) primarily driven by $75.5 million (2016: $66.9m) in research and development expenses, or $88.0 million (2016: $76.1m) on an adjusted (non-GAAP) basis, spent on our active or completing clinical trials in 36 TPPs, six of which are pivotal Phase III studies on savolitinib, fruquintinib, and sulfatinib.

· Savolitinib: Potential first-in-class selective c-MET inhibitor currently in active clinical studies in 14 TPPs worldwide in multiple tumor types including kidney, lung, gastric and prostate cancers as a monotherapy or in combination with other targeted and immunotherapy agents. Developing globally in partnership with AstraZeneca:

1. Kidney cancer:

a. Presented Phase II global multi-center study in advanced PRCC at the 2017 ASCO Genitourinary Cancers Symposium showing robust efficacy with savolitinib monotherapy in c-MET-driven patients. Median progression free survival ("PFS") of 6.2 months in patients with c-MET-driven tumors as compared with 1.4 months (p

b. A global Phase III study, the SAVOIR study, was initiated in late June 2017. The SAVOIR study is an open-label, randomized, controlled trial evaluating the efficacy and safety of savolitinib, compared with Sutent®, in patients with c-MET-driven, unresectable, locally advanced or metastatic PRCC. Approximately 180 patients will be randomized in the United States, Europe, Asia and Latin America; c-MET-driven PRCC will be selected via the use of a companion diagnostic kit.

c. During 2017, the CALYPSO study confirmed a safe dose of savolitinib in combination with Imfinzi® (PD-L1 antibody) in RCC patients. Subsequently, a Phase II expansion of CALYPSO was initiated, in both PRCC and ccRCC in the U.K. and Spain.

2. Lung cancer:

a. Presented Phase Ib/II data, the TATTON (Part B) study, in second- and third-line NSCLC, combination of the savolitinib 600mg once-daily ("QD") plus Tagrisso® 80mg QD combination dose regimen at the 2017 WCLC. In c-MET gene amplified NSCLC patients refractory to first-generation EGFR TKIs (Iressa®/Tarceva®) confirmed PRs were reported in 14/23 (ORR 61%) of T790M mutation negative patients, as well as confirmed PRs in 6/11 (55% ORR) of T790M mutation positive patients. In NSCLC patients refractory to third-generation EGFR TKIs (primarily Tagrisso®) confirmed PRs were observed in 10/30 (ORR 33%) patients. Since 2017 WCLC, both PFS and duration of response ("DoR") have further matured. The safety profile of savolitinib plus Tagrisso® is in line with previous reports and going forward, AstraZenca has concluded that a weight-based dosing algorithm will be applied for the combination.

AstraZeneca has now agreed to proceed with development in second-line NSCLC with multiple studies including: (1) a global randomized chemotherapy-doublet (platinum plus Alimta® (pemetrexed)) controlled study of savolitinib plus Tagrisso® combination in first-generation (Iressa®/Tarceva®) EGFR-TKI refractory, c-MET gene amplified, T790M negative NSCLC patients, targeted to start in H2 2018; (2) TATTON (Part D), already enrolling, a study of savolitinib 300mg QD combined with Tagrisso® 80mg QD, aimed at exploring the lower dose in the context of maximizing long-term tolerability of the savolitinib and Tagrisso® combination for patients who could be on the combination for long periods of time; and (3) further supporting studies. We expect that later in 2018 or early 2019, the mature TATTON (Part B) and preliminary TATTON (Part D) data will enable AstraZeneca to engage in regulatory discussion for both second- and third-line NSCLC.

b. Presented Phase Ib/II data in second-line NSCLC, combination of savolitinib and Iressa® at the 2017 WCLC. In c-MET gene amplified NSCLC patients refractory to first-generation EGFR TKIs (Iressa® and Tarceva®) confirmed PRs were reported in 12/23 (ORR 52%) of T790M mutation negative patients, similar to that recorded by the savolitinib and Tagrisso® combination. Plans for a registration study in China for this combination are currently under discussion with AstraZeneca.

3. Gastric cancer:

a. As at the latest report in 2017, Phase II studies in China and South Korea had screened over 850 gastric cancer patients, enrolled 54 c-Met-driven patients (31 China and 23 South Korea) and continue to enroll. Presented preliminary China savolitinib monotherapy data at the 2017 Chinese Society of Clinical Oncology ("CSCO") conference. Based on confirmed and unconfirmed PRs, we reported an ORR of 43% (3/7 patients) and disease control rate ("DCR") of 86% in c-MET gene amplified patients. 

· Fruquintinib: Designed to be a best-in-class selective inhibitor of VEGFR 1/2/3 - we are developing outside of China and in partnership with Lilly within China:

1. CRC (third-line): Reported in March 2017 that fruquintinib met the primary endpoint of median overall survival ("OS"), 9.30 months versus 6.57 months (pthe adverse events ("AEs") demonstrated in FRESCO did not identify any new or unexpected safety issues; then presented the full FRESCO data-set in an oral presentation at the 2017 ASCO and CSCO conferences and completed submission of our China NDA in June 2017.

2. NSCLC (third-line): Completed enrollment in early 2018 of a 527 patient Phase III study, named FALUCA, with a primary endpoint of OS, to evaluate fruquintinib as a monotherapy in third-line NSCLC patients in China; expect top-line Phase III data to be reported in late 2018.

3. Gastric cancer (second-line): Presented positive preliminary data in the Phase Ib dose finding/expansion study in early 2017 at the ASCO Gastrointestinal Cancers Symposium. Established a well-tolerated combination dose of fruquintinib with Taxol® with encouraging efficacy, including ORR of 36% based on confirmed PRs; DCR of 68%; ≥16 week PFS of 50% and ≥7 month OS of 50%. In late 2017, we initiated the FRUTIGA study, a randomized, double-blind, Phase III study in which we target to enroll over 500 patients.

4. NSCLC (first-line): In early 2017, we initiated a Phase II study of fruquintinib in combination with Iressa® in first-line NSCLC patients with EGFR activating mutations in China. Preliminary data was presented at the 2017 WCLC in which 17 efficacy evaluable patients showed an ORR of 76% (13/17 including 4 unconfirmed at data cut-off) and a DCR of 100% (17/17). There were no serious AEs or those that led to death. We have now completed enrollment of about 50 patients and are monitoring outcome.

5. In December 2017, we initiated a multi-center, open-label, Phase I clinical study to evaluate the safety, tolerability and pharmacokinetics ("PK") of fruquintinib in the United States, which is the first step toward development of fruquintinib outside China. 

6. Production facility in Suzhou, China operated by Chi-Med is now ready to support the commercial launch of fruquintinib, if approved, in 2018. The Suzhou facility is now entering the CFDA Pre-Approval Inspection ("PAI") and GMP certification stage of the NDA process.

· Sulfatinib: A unique angio-immuno TKI therapy with high potency against VEGFR, FGFR1 and colony stimulating factor-receptor 1 ("CSF-1R") with emerging strong efficacy in multiple solid tumor settings - enrolling two pivotal Phase III studies as well as multiple Phase II studies:

1. NET and Biliary tract cancer:

a. Presented positive preliminary Phase II data at the European Neuroendocrine Tumor Society ("ENETS") conference in early 2017. Established that sulfatinib was well tolerated with highly encouraging efficacy in both pancreatic NET (ORR 17.1% based on confirmed PRs; DCR 90.2%; and median PFS 19.4 months) and non-pancreatic NET (ORR 15.0% based on confirmed PRs; DCR 92.5%; and median PFS 13.4 months), including 100% DCR in 12 patients who had disease progression on targeted therapies such as Sutent® and Afinitor® (everolimus); now enrolling two Phase III studies in China, named SANET-p (in pancreatic NET patients) and SANET-ep (in non-pancreatic NET patients), with primary endpoint of median PFS and expected to complete enrollment in 2019.

b. Initiated a Phase II proof-of-concept study in biliary tract cancer in China in early 2017.

c. U.S. Phase I study has confirmed the recommended Phase II dose ("RP2D"). Planning is now underway for expansion in the United States into a multi-arm Phase IIa study to explore efficacy and safety in Sutent® and Afinitor® refractory pancreatic NET patients as well as solid tumor patients.

2. Thyroid cancer: Presented Phase II data at ASCO and at the American Thyroid Association Annual Meetings in 2017 in patients with locally advanced or metastatic radioactive iodine ("RAI")-refractory differentiated thyroid cancer ("DTC") or medullary thyroid cancer ("MTC") in China. Preliminary data in 16 efficacy evaluable patients showing an ORR of 30.0% in RAI-DTC and an ORR of 16.7% in MTC patients based on confirmed PRs, with all other patients reporting stable disease ("SD").

· Epitinib: Highly differentiated EGFR TKI designed for optimal blood-brain barrier penetration allowing for higher drug exposure in the brain than currently marketed first-generation EGFR TKIs:

1. NSCLC with brain metastasis: Epitinib has been shown to be well tolerated with encouraging preliminary efficacy. Including confirmed and unconfirmed PRs, epitinib showed an overall ORR (lung and brain) of 62% in all EGFR TKI naïve NSCLC patients (those patients not previously treated with an EGFR TKI) and an ORR of 70% in EGFR TKI naïve NSCLC patients who also had measurable brain metastasis and were c-MET negative. Enrollment continued in 2017 to explore a further dose regimen; we expect to decide on the Phase III dose and initiate the Phase III during 2018.

2. Glioblastoma: Initiated a Phase Ib/II study in glioblastoma, a primary brain cancer that harbors high levels of EGFR gene amplification, in March 2018.

· HMPL-523:  Potential first-in-class Syk inhibitor in oncology and immunology:

1. Immunology:  We have submitted investigational new drug ("IND") applications for autoimmune diseases and target, pending the submission of additional data requested by the U.S. Food & Drug Administration ("FDA"), to progress into a Phase II proof-of-concept study in immunology in late 2018 or early 2019.

2. Hematological cancer: Currently enrolling Phase I dose escalation studies in Australia and China in patients with hematologic malignancies. We have established the RP2D in both Australia and China. We are now in the process of increasing the number of clinical sites in both countries to support Phase Ib/II expansion in a broad range of indolent non-Hodgkin's lymphoma sub-types.

· HMPL-689: Potential best-in-class, highly selective PI3Kδ inhibitor, which we believe should have meaningful advantages in safety and tolerability over Zydelig® (idelalisib) and selectivity over Aliqopa® (copanlisib):

Hematological cancer: Completed Phase I study in healthy volunteers in Australia, and subsequently initiated a Phase I dose escalation and expansion study in patients with hematologic malignancies in China in August 2017.

· Theliatinib: EGFR inhibitor, with high binding affinity to wild-type EGFR protein, with potential in patients with solid tumors presenting EGFR gene amplification or high-level of protein over-expression:

Esophageal cancer: Presented preliminary Phase I results at the 2017 CSCO conference with no dose limiting toxicities or maximum tolerated dose established. The Phase I included seven esophageal cancer patients, five of which were evaluated for response, with all five achieving SD. Subsequently, in early 2017, we began a Phase Ib expansion and are opening further clinical sites in China.

· HMPL-453: Potential first-in-class and/or best-in-class selective FGFR 1/2/3 inhibitor:

Solid tumors: During the first half of 2017, we initiated Phase I dose escalation studies in both Australia and China.

Commercial Platform - a deeply established, cash-generative, pharmaceutical business in China - an established platform to commercialize our Innovation Platform drug candidates.

Total consolidated sales from the Commercial Platform were up 13% to $205.2 million (2016: $180.9m) mainly resulting from growth in our Prescription Drug commercial services business. Total sales of non-consolidated joint ventures were up 6% to $472.0 million (2016: $446.5m). Flat first half sales, due to a price increase on our main cardiovascular prescription drug and a relatively quiet influenza season on the over-the-counter ("OTC") drug business, were offset by very strong second half sales across both the Prescription Drug and Consumer Health businesses. This resulted in total consolidated net income attributable to Chi-Med of $40.0 million (2016: $70.3m), or up 25% to $37.5 million (2016: $29.9m) on an adjusted (non-GAAP) basis excluding one-time gains of $2.5 million in 2017 from research and development subsidies and $40.4 million in 2016 primarily from property compensation.

· Prescription Drugs business continuing profit growth - consolidated sales up 11% to $166.4 million (2016: $149.9m); total sales of non-consolidated Prescription Drugs joint venture up 10% to $244.6 million (2016: $222.4m); and total consolidated net income attributable to Chi-Med up 28% to $26.5 million (2016: $20.7m) on an adjusted (non-GAAP) basis excluding one-time gains.

1. Shanghai Hutchison Pharmaceuticals Limited ("SHPL") - our large-scale non-consolidated Prescription Drugs joint venture - Continued progress on She Xiang Bao Xin ("SXBX") pill, our most important commercial product, a prescription vasodilator that accounts for 15.4% (2016: 12.0%) of China's rapidly growing, approximately $2.0 billion, botanical coronary artery disease prescription drug market. SXBX pill is a proprietary product with full patent protection through 2029.  During late 2016 and early 2017, we were able to effectively implement a pricing strategy that led to very strong second half sales growth, $114.9 million (up 20% versus H2 2016), and materially improved margins.

2. Shanghai government subsidy - In 2017, SHPL recognized a one-time research and development subsidy totaling $5.9 million, equivalent to $2.5 million in net income attributable to Chi-Med.

3. Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Limited ("Hutchison Sinopharm") - our Prescription Drugs commercial services business - Continued commercial success in 2017 on Seroquel® (bi-polar disorder/schizophrenia), including securing inclusion of Seroquel XR® (extended release ("XR") formulation) on the National Drug Reimbursement List ("NDRL") in China, leading to a 22% increase in service fees to $11.4 million (2016: $9.3m) received from AstraZeneca; and Concor® (hypertension/high blood pressure) where strong sales led Merck Serono, in late 2017, to expand Hutchison Sinopharm's exclusive territory by over 70% to now cover a total of six provinces and municipalities with a population of over 360 million people. As a result, service fees from Concor® increased 31% to $1.8 million (2016: $1.4m).

· Consumer Health business first half constrained but very strong second half - consolidated sales up 25% to $38.8 million (2016: $31.0m); total sales of non-consolidated Consumer Health joint venture flat at $227.4 million (2016: $224.1m); and total consolidated net income attributable to Chi-Med up 20% to $11.0 million (2016: $9.2m).

1. Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited ("HBYS") - our large-scale non-consolidated OTC drug joint venture - 2017 was a year of major change with the move of a large part of our production to a new state-of-the-art, high-capacity, cost-efficient factory in central China. The first half of 2017 was consequently affected by short-term capacity constraints; as well as an increase in certain key raw material prices; and a mild influenza season. The second half of the year, however, was very strong, with the new factory up and running and raw material prices drawing back. Sales of our two key products, Fu Fang Dan Shen tablets ("FFDS") (angina) and Banlangen granules (anti-viral), accelerated, increasing to $54.5 million (up 17% versus H2 2016), and margins were also materially improved.

2. Divestment of Nanyang Baiyunshan Hutchison Whampoa Guanbao Pharmaceutical Company Limited ("Guanbao") - In September 2017, HBYS divested Guanbao, a 60% subsidiary of HBYS for a consideration approximately equal to its carrying value. Guanbao was a low-margin, regional OTC logistics business, with no strategic value to Chi-Med.

FINANCIAL GUIDANCE: 2017 revenue and net income met our most recent guidance (provided in our interim results announcement for the six months ended June 30, 2017 dated July 31, 2017) despite the delay in one-time property compensation, reflecting the strength of our Commercial Platform performance and lower than expected administration, interest and tax expenses at the Group level.

In our guidance for 2018, we expect to see an increase in both revenue and expenses in the Innovation Platform, driven by the launch of fruquintinib if approved in China, potential milestone payments from Lilly and AstraZeneca, and continued expansion of clinical development investment on our drug candidates.

On the Commercial Platform, the new CFDA Two-Invoice System ("TIS") roll-out in China, while having limited effect on the scope of our commercial operations or activities in 2018, will reduce the revenue that Hutchison Sinopharm is able to consolidate from the sales of certain third-party drugs. Furthermore, the divestment of the 60% shareholding in Guanbao, under our non-consolidated joint venture, HBYS, eliminates this low margin and non-core business from our 2018 Guidance. Neither the TIS nor the Guanbao divestment, however, will affect growth in the overall Commercial Platform net income, which is expected to continue to progress steadily.

Finally, we continue to work towards achieving a one-time gain on the property in HBYS, however the date of an auction remains dependent on Guangzhou government policy.

Notes:

[1] Attributable to Chi-Med;

[2] Under the new CFDA TIS policy Hutchison Sinopharm will no longer be able to consolidate all sales of third-party products (e.g. Seroquel®), however, it will have no material impact on profitability.

[3] Joint ventures;

[4] Divestment eliminates Guanbao from 2018 (sales in 2017 $38.6 million);

[5] One-time property compensation, timing of which is dependent on Guangzhou government policy.

FINANCIAL STATEMENTS:

Chi-Med will today file with the U.S. Securities and Exchange Commission its Annual Report on Form 20-F.

ANNUAL GENERAL MEETING:

The Annual General Meeting of Chi-Med will be held at 4th Floor, Hutchison House, 5 Hester Road, Battersea, London SW11 4AN on Friday, April 27, 2018 at 11:00 a.m.

CONTACTS:

About Chi-Med

Chi-Med is an innovative biopharmaceutical company which researches, develops, manufactures and sells pharmaceuticals and healthcare products. Its Innovation Platform, Hutchison MediPharma Limited, focuses on discovering and developing innovative therapeutics in oncology and autoimmune diseases for the global market. Its Commercial Platform manufactures, markets, and distributes prescription drugs and consumer health products in China.

Chi-Med is majority owned by the multinational conglomerate CK Hutchison Holdings Limited ("CK Hutchison") (SEHK: 1). For more information, please visit: www.chi-med.com.

References

Unless the context requires otherwise, references in this announcement to the "Group," the "Company," "Chi-Med," "Chi-Med Group," "we," "us" and "our" mean Hutchison China MediTech Limited and its consolidated subsidiaries and joint ventures unless otherwise stated or indicated by context.

Past Performance and Forward-Looking Statements

The performance and results of operations of the Group contained within this announcement are historical in nature, and past performance is no guarantee of future results of the Group. This announcement contains forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by words like "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "pipeline," "could," "potential," "believe," "first-in-class," "best-in-class," "designed to," "objective," "guidance," "pursue," or similar terms, or by express or implied discussions regarding potential drug candidates, potential indications for drug candidates or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements. Such forward-looking statements are based on the current beliefs and expectations of management regarding future events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee that any of our drug candidates will be approved for sale in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such drug candidates will achieve any particular revenue or net income levels. In particular, management's expectations could be affected by, among other things: unexpected regulatory actions or delays or government regulation generally; the uncertainties inherent in research and development, including the inability to meet our key study assumptions regarding enrollment rates, timing and availability of subjects meeting a study's inclusion and exclusion criteria and funding requirements, changes to clinical protocols, unexpected adverse events or safety, quality or manufacturing issues; the inability of a drug candidate to meet the primary or secondary endpoint of a study; the inability of a drug candidate to obtain regulatory approval in different jurisdictions or gain commercial acceptance after obtaining regulatory approval; global trends toward health care cost containment, including ongoing pricing pressures; uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, intellectual property disputes, and government investigations generally; and general economic and industry conditions, including uncertainties regarding the effects of the persistently weak economic and financial environment in many countries and uncertainties regarding future global exchange rates. For further discussion of these and other risks, see Chi-Med's filings with the U.S. Securities and Exchange Commission and on AIM. Chi-Med is providing the information in this announcement as of this date and does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise.

In addition, this announcement contains statistical data and estimates that Chi-Med obtained from industry publications and reports generated by third-party market research firms. Although Chi-Med believes that the publications, reports and surveys are reliable, Chi-Med has not independently verified the data and cannot guarantee the accuracy or completeness of such data. You are cautioned not to give undue weight to this data. Such data involves risks and uncertainties and are subject to change based on various factors, including those discussed above.

Inside Information

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Ends

CHAIRMAN'S STATEMENT

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, un-partnered, 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

FINANCIAL REVIEW

Chi-Med Group revenue for the year ended December 31, 2017 increased 12% to $241.2 million (2016: $216.1m), mainly due to the increase in revenue generated by our Commercial Platform to $205.2 million in 2017 (2016: $180.9m) driven by the progress of our consolidated joint venture Hutchison Sinopharm. On the Innovation Platform, we saw stable revenue of $36.0 million in 2017 (2016: $35.2m), reflecting almost equal levels of milestone payments, service fees and clinical cost reimbursements received from AstraZeneca, Lilly and NSP compared to the prior year. It should be noted that Group revenues do not include the revenues of our two large-scale, 50/50 joint ventures in China, SHPL and HBYS, since these are accounted for using the equity method.

Our Commercial Platform, which continues to be an important profit and cash source for Chi-Med, recorded operating profit of $45.1 million (2016: $74.3m) as a result of strong organic growth in SHPL's coronary artery disease Prescription Drug business and certain of our Consumer Health businesses, but was still lower than 2016 which had included a major $40.4 million one-time property gain. The Innovation Platform incurred an operating loss of $52.0 million (2016: -$40.8m) as a result of expansion of clinical development activities, rapid organization growth to support these clinical activities and investment in the expansion of small molecule manufacturing operations.

Net corporate unallocated expenses, primarily Chi-Med Group overhead and operating costs, declined to $11.5 million (2016: $12.9m) primarily because 2016 included higher third-party advisor costs in the audit, compliance and legal areas in relation to our initial public offering on Nasdaq in that year.

Consequently, Chi-Med Group's operating loss was $18.4 million (2016: profit of $20.5m).

The aggregate of interest and income tax expenses of Chi-Med Group, as well as net income attributable to non-controlling interests during the year fell 6% to $8.3 million (2016: $8.8m) due mainly to higher taxes in 2016 because of the major one-time property gain in 2016.

The resulting total Group net loss attributable to Chi-Med was therefore $26.7 million (2016: net income $11.7m).

As a result, Group net loss attributable to ordinary shareholders of Chi-Med in 2017, was -$0.43 per ordinary share / -$0.22 per American depositary share ("ADS"), compared to net income attributable to ordinary shareholders of Chi-Med of $0.20 per ordinary share / $0.10 per ADS, in 2016.

Cash and Financing

During the past two years, we have had a high degree of success in proof-of-concept studies on our eight clinical drug candidates and that has naturally led us to expand investment. The scale of our late-stage clinical trial programs has expanded significantly, with a total of six Phase III studies either underway or completing. We plan for multiple further Phase III studies to start in 2018 as well as to continue early development through Phase Ib/II studies in 22 TPPs.

We have, and will continue to try to partially offset increasing clinical investment with cash generated in our operating activities from dividends paid by our non-consolidated Commercial Platform joint ventures, as well as payments received from AstraZeneca, Lilly, and NSP, our joint venture with Nestlé. In aggregate, in 2017, these helped offset a meaningful portion of the $88.0 million (2016: $76.1m) in research and development expenses on an adjusted (non-GAAP) basis.

In October 2017, we completed a follow-on offering on Nasdaq and raised $301.3 million in new equity capital, or $292.7 million net of expenses incurred, to strengthen our balance sheet and support development plans, through to planned NDA submissions, for several of our lead drug candidates.

As of December 31, 2017, we had available cash resources of $479.6 million (December 31, 2016: $173.7m) at the Chi-Med Group level including cash and cash equivalents and short-term investments of $358.3 million (December 31, 2016: $103.7m) and unutilized bank borrowing facilities of $121.3 million (December 31, 2016: $70.0m). In addition, as of December 31, 2017, our non-consolidated joint ventures (SHPL, HBYS and NSP) held $67.0 million (December 31, 2016: $91.0m) in available cash resources.

Outstanding bank loans as of December 31, 2017 amounted to $30.0 million (December 31, 2016: $46.8m) at the Chi-Med Group level, with a weighted average cost of borrowing in 2017 of 2.7% (2016: 2.5%). As of December 31, 2017 and 2016, our non-consolidated joint ventures had no outstanding bank loans. 

In summary, we believe that the cash resources that we currently hold are sufficient to fund all our near-term activities, including the full development of our clinical drug pipeline into 2020.

OPERATIONS REVIEW

INNOVATION PLATFORM

The Chi-Med pipeline of drug candidates has been created and developed by the in-house research and development operation which was started in 2002. Since then, we have built a large team of about 360 scientists and staff (December 31, 2016: 330) based in China and operating a fully-integrated drug discovery and development operation covering chemistry, biology, pharmacology, toxicology, chemistry and manufacturing controls for clinical and commercial supply, clinical and regulatory and other functions. Looking ahead, we plan to continue to build and leverage this platform, as we have in the past decade, to produce a stream of novel drug candidates with global potential.

Innovation Platform revenue in 2017 was $36.0 million (2016: $35.2m) reflecting generally similar levels of milestone payments, service fees and clinical cost reimbursements received from AstraZeneca and Lilly to those received last year. Net loss attributable to Chi-Med increased to $51.9 million (2016: -$40.7m) driven by $88.0 million (2016: $76.1m) in research operations and clinical development spending of our pipeline of eight drug candidates on an as adjusted (non-GAAP) basis. Since inception, the Innovation Platform has dosed over 3,500 patients/subjects in clinical trials of our drug candidates with over 700 dosed in 2017 primarily as a result of enrollment in the six Phase III studies that we had underway during the year.

Product Pipeline Progress

Savolitinib (AZD6094): Savolitinib is a potential first-in-class inhibitor of c-MET, an enzyme which has been shown to function abnormally in many types of solid tumors. We designed savolitinib to be a potent and highly selective oral inhibitor, which, through chemical structure modification, addresses human metabolite-related renal toxicity, the primary issue that halted development of several other selective c-MET inhibitors. In clinical studies to date, involving over 500 patients, savolitinib has shown promising signs of clinical efficacy in patients with c-MET gene alterations in PRCC, NSCLC, CRC and gastric cancer with an acceptable safety profile.

We are currently testing savolitinib in partnership with AstraZeneca in multiple Phase Ib/II studies, both as a monotherapy and in combination with other targeted therapies, and in June 2017, we initiated our first global Phase III registration study in PRCC. In late 2017, we presented positive Phase Ib/II data at the WCLC on savolitinib in combination with Tagrisso® and Iressa®, in both second- and third-line NSCLC, and are now working closely with AstraZeneca on next steps for development as discussed below.

Savolitinib - Kidney cancer: High proportion of MET-driven patients.

TPP (Target Patient Population) 1 - Enrolling (NCT03091192) - Phase III PRCC savolitinib 600mg QD monotherapy (Global) - PRCC is the most common of the non-clear cell RCCs representing about 14% of kidney cancer. Approximately 366,000 new cases of kidney cancer were diagnosed globally in 2015, equating to about 50,000 cases of PRCC, with approximately half harboring c-MET-driven disease. No targeted therapies have been approved specifically for PRCC, and to date only modest efficacy in non-ccRCC has been reported in sub-group analyses of broader RCC studies of VEGFR (e.g. Sutent®) and mammalian target of rapamycin (mTOR) (e.g. Afinitor®) TKIs, with ORRs of Tannir N. M. et al.).

During early 2017, we presented the results of our 109-patient global Phase II study in PRCC at the ASCO Genitourinary Cancers Symposium, as well as in the Journal of Clinical Oncology as a Rapid Communication Manuscript. This Phase II study was the largest and most comprehensive clinical study in PRCC ever conducted. Of 109 patients treated with savolitinib, PRCC was c-MET-driven in 44 patients (40%), c-MET-independent in 46 (42%) and MET status unknown in 19 (17%). c-MET-driven PRCC was strongly associated with encouragingly durable response to savolitinib with ORR in the c-MET-driven group of 18.2% (8/44) as compared to 0% (0/46) in the c-MET-independent group (p=0.002, based on confirmed PRs). Median PFS for patients with c-MET-driven and c-MET-independent PRCC was 6.2 months (95% CI: 4.1-7.0) and 1.4 months (95% CI: 1.4-2.7), respectively (hazard ratio=0.33; 95% CI: 0.20-0.52; log-rank p® and Votrient® (pazopanib) in multiple RCC studies (N Eng J Med 369;8, R J Motzer et al).

A global Phase III registration study, the SAVOIR study, of savolitinib versus Sutent® in c-MET-driven metastatic PRCC patients was initiated in June 2017. The primary endpoint for efficacy in the SAVOIR study is median PFS, with secondary endpoints of OS, ORR, DoR and DCR. We expect to complete enrollment in late 2019.

Furthermore, in order to fully understand the role of c-MET-driven disease in PRCC we are currently conducting a global MES (molecular epidemiology study). The MES is in the process of screening, using our companion diagnostic, archived tissue samples from over 300 PRCC patients to identify c-MET-driven disease. Historical medical records from these patients will then be used to determine if c-MET-driven disease is predictive of worse outcome, in terms of PFS and OS, in PRCC patients. If this is proven to be the case, we will consider engaging in discussions regarding Breakthrough Therapy potential with the U.S. Food and Drug Administration ("FDA").

TPP 2 - Enrolling (NCT02761057) - Phase II study of multiple TKIs in metastatic PRCC (U.S.) - A Phase II study, sponsored by the U.S. National Cancer Institute, and named the PAPMET study, to assess the efficacy of multiple TKIs in metastatic PRCC including Sutent®; Cabometyx® (cabozantinib); Xalkori® (crizotinib) and savolitinib. PAPMET began enrolling patients in 2016, and is expected to enroll about 180 patients in over 70 locations in the United States with top-line data targeted for reporting in 2019.

TPP 3, TPP 4 and TPP 5 - Enrolling (NCT02819596) - Phase II study of savolitinib (600mg daily) monotherapy and in combination with Imfinzi® (anti-PD-L1) in both PRCC and ccRCC patients (U.K./Spain) - A dose finding study began in 2016, named the CALYPSO study, at St. Bartholomew's Hospital in London, to assess safety/tolerability of savolitinib and Imfinzi® combination therapy as well as preliminary efficacy of savolitinib as a monotherapy or combination therapy in several c-MET-driven kidney cancer patient populations. During 2016, the dose-finding phase of the CALYPSO study successfully established the combination dose of savolitinib and Imfinzi® and the study moved on to the Phase II expansion stage in PRCC and ccRCC patients in the U.K. and Spain to further explore efficacy during 2017.

Savolitinib - Lung cancer: Savolitinib's largest market opportunity.

TPP 6 - Enrolling (NCT02143466) - Phase Ib/II expansion NSCLC (second-line), EGFR TKI refractory, savolitinib (600mg QD) in combination with Tagrisso® (Global) - In October 2016, at the European Society for Medical Oncology meeting, AstraZeneca presented preliminary proof-of-concept data, the TATTON study (Part A), on 17 evaluable first-generation EGFR TKI (Iressa®/Tarceva®) refractory second-line NSCLC patients who had no prior exposure to third-generation EGFR TKIs (Tagrisso®/rocelitinib). Molecular analysis of both c-MET and T790M status was completed for patients with sufficient available tumor tissue. Of patients treated with the savolitinib and Tagrisso® combination, confirmed PRs were reported in 4/5 (80% ORR) c-MET positive/T790M negative patients and in 6/10 (60% ORR) c-MET positive patients regardless of T790M status.

In 2016, we initiated a global Phase Ib/II expansion study in second-line NSCLC, the TATTON study (Part B), aiming to recruit sufficient c-MET gene amplified patients, who had progressed after prior treatment with a first-generation EGFR inhibitor (Iressa®/Tarceva®), to support a decision on global Phase II/III registration strategy. In this first-generation EGFR TKI refractory NSCLC population, we estimate that c-MET gene amplification occurs in 15-20% of patients. Preliminary data from TATTON (Part B), in 34 evaluable patients, was presented at 2017 WCLC and showed confirmed PRs in 14/23 (ORR 61%) of T790M mutation negative patients, as well as confirmed PRs in 6/11 (55% ORR) of T790M mutation positive patients. AstraZeneca has recently decided to progress into the next stage of development in this indication, with plans outlined below.

TPP 7 - Enrolling (NCT02143466) - Phase Ib/II NSCLC (third-line), EGFR/T790M TKI-refractory, savolitinib (600mg QD) in combination with Tagrisso® (Global) - The TATTON study (Part B) also enrolled third-line NSCLC patients that had progressed after treatment with Tagrisso® as a result of c-MET gene amplification acquired resistance. Data presented in June 2017 at ASCO, by Harvard Medical School and Massachusetts General Hospital Cancer Center ("HMS/MGH"), showed that about 30% (7/23 patients) of Tagrisso® resistant third-line NSCLC patients harbor c-MET gene amplification. This third-line patient population is generally heavily pre-treated and highly complex from a molecular analysis standpoint, with the HMS/MGH study showing that more than half the c-MET gene amplification patients also harbored additional genetic alterations, including but not limited to, EGFR gene amplification and K-Ras mutations.

The TATTON (Part B) study, presented at the 2017 WCLC, also included preliminary data in 30 evaluable patients previously treated with third-generation T790M-directed EGFR inhibitors, primarily Tagrisso®. Confirmed PRs were observed in 10/30 (ORR 33%) of these patients, and while this is lower than the 55-61% ORR in TPP 6, it was as expected given the additional driver genes at work post Tagrisso® monotherapy failure. We believe that the savolitinib/Tagrisso® combination is an important treatment option for these late-stage patients who have no remaining targeted treatment alternatives.

Tagrisso® sales in 2017, only the second year since its launch, were $955 million. At current pricing, this would indicate that over 5,000 patients were treated with Tagrisso® during 2017, thereby indicating that the market potential for savolitinib in third-line, Tagrisso® resistant, NSCLC is material.

AstraZeneca decision on further development of TPP 6 and TPP 7:

In December 2017, AstraZeneca's governance committee in oncology reviewed the TATTON (Part B) data that had been presented at the 2017 WCLC, to decide strategy for further development of the savolitinib and Tagrisso® combination in first-generation (Iressa®/Tarceva®) and third-generation (Tagrisso®) EGFR-TKI refractory NSCLC.

At that time, while the above strong ORR data was available for the savolitinib 600mg QD plus Tagrisso® 80mg QD combination dose regimen, neither median PFS nor DoR had been reached. Since then, both PFS and DoR have continued to mature. The safety profile of the combination is in line with previous reports for savolitinib 600mg QD plus Tagrisso® 80mg and going forward, AstraZeneca has concluded that a weight-based dosing algorithm will be applied for the combination, similar to the dosing algorithm used in the SAVOIR Phase III study in PRCC.

Encouraged by the TATTON (Part B) data, AstraZeneca has decided to proceed with development in second-line NSCLC (TPP 6). Planning is now underway to initiate a global randomized chemotherapy-doublet (platinum plus Alimta®) controlled study of the savolitinib plus Tagrisso® combination in first-generation (Iressa®/Tarceva®) EGFR-TKI refractory, c-MET-driven and T790M negative NSCLC patients. This second-line NSCLC study, currently targeted to start in H2 2018, will start as a Phase II study until such time that regulatory discussions have taken place on dosing approach, and will be powered based on TATTON (Part B) for ORR and PFS.

To further support dosing approach ahead of regulatory discussions, AstraZeneca has already initiated TATTON (Part D), exploring savolitinib 300mg QD dose combined with Tagrisso® 80mg QD, to explore the lower dose in the context of maximizing tolerability of the combination for patients who could be on the combination for long periods of time. A second supporting study, a Phase II, aiming at strengthening the dose justification in EGFR-TKI refractory, c-MET-driven NSCLC will also start in H2 2018, randomizing to either 300mg Savolitinib QD plus Tagrisso® 80mg QD or 600 mg Savolitinib (with weight based dosing) QD plus Tagrisso® 80mg QD with a primary endpoint of tolerability.

Late in 2018 or early in 2019, and subject to the outcome of the mature TATTON (Part B) data as well as preliminary TATTON (Part D) results, we expect AstraZeneca to engage in regulatory discussions regarding our dosing approach for the savolitinib and Tagrisso® combination as well as potential Breakthrough Therapy. These regulatory discussions will also enable AstraZeneca to decide development strategy in third-line NSCLC (TPP 7), defined as third-generation (Tagrisso®) EGFR-TKI refractory, c-MET gene amplified NSCLC patients.

TPP 8 - completed (NCT02374645) - Phase II NSCLC (second-line), EGFR TKI-refractory, savolitinib (600mg QD) in combination with Iressa® (China) - Also at the 2017 WCLC, we presented Phase II proof-of-concept data assessing savolitinib in combination with Iressa® in patients in China with EGFR activating mutation advanced NSCLC with centrally confirmed c-MET gene amplification who had progressed following first-generation EGFR inhibitor therapy. Preliminary results showed confirmed PRs in 12/23 (ORR 52%) of T790M mutation negative patients, as well as confirmed PRs in 2/23 (9% ORR) of T790M mutation positive patients. The 52% ORR in T790M mutation negative patients was as expected, and similar to that recorded in TATTON (Part B) for this TPP, and indicating that for these patients Iressa® might be the most cost-efficient combination partner for savolitinib. The low 9% ORR in T790M mutation positive patients was also as expected, as Iressa® does not effectively address T790M mutants. In terms of safety, the savolitinib plus Iressa® combination dose was safe and well tolerated.

With the launch of multiple lower-priced, and reimbursed, generic first-generation EGFR TKIs in China in 2017, combined with the very high ~50% proportion of NSCLC patients who harbor the EGFR activating mutations, we believe there may be a surge in c-MET gene amplified second-line NSCLC patients in China over the coming years. We continue to discuss Phase III plans in this TPP for the savolitinib/Iressa® combination in China with AstraZeneca and expect to reach agreement in 2018.

TPP 9 and TPP 10 - Enrolling (NCT01985555 / NCT02897479) - Phase II c-MET-driven NSCLC savolitinib (600mg QD) monotherapy (China) - Phase II studies of savolitinib are also ongoing in NSCLC and other lung cancer patient populations, focusing on those with c-MET-driven disease.

Savolitinib - Gastric cancer: Multiple Phase II studies underway in Asia in c-MET-driven patients.

Phase II gastric cancer studies are ongoing in China as well as the VIKTORY study, being run at Samsung Medical Center in South Korea, in which savolitinib is represented in two out of the ten treatment arms. As at the latest report in 2017, a total of over 850 gastric cancer patients have been screened in these studies and those patients with confirmed c-MET-driven disease are being treated with either savolitinib monotherapy or savolitinib in combination with Taxotere®. Presentations of preliminary data from these studies were made in 2017 at CSCO (China Phase II) and ASCO (VIKTORY Phase II).

In China, as at June 2017, a total of 441 metastatic gastric cancer patients had been screened with 13.2% (58/441) determined to have aberrant c-MET, of which 5.0% (22/441) were c-MET gene amplified. A total of 31 patients in China have been enrolled to date in TPP 11 below. In South Korea, as of January 2017, a total of 438 metastatic gastric cancer patients had been screened with 5.3% (23/438) being patients with c-MET-driven (gene amplification or over-expression) disease. A total of 23 patients in South Korea have been enrolled to date in TPP 11, 12 and 13 below.

TPP 11 - Enrolling South Korea (NCT02449551) / China (NCT01985555) - Phase II gastric cancer, savolitinib monotherapy, patients with c-MET gene amplification (South Korea/China) - Preliminary results were presented at CSCO 2017 for the efficacy evaluable c-MET gene amplified patients in China. Based on confirmed and unconfirmed PRs, ORR was 42.9% (3/7) and DCR was 85.7% (6/7), with ORR of 13.6% (3/22) and DCR of 40.9% (9/22) amongst the overall efficacy evaluable aberrant c-MET set. As of data cut-off, the longest duration of treatment was in excess of two years. Savolitinib monotherapy was determined as safe and well tolerated in patients with advanced gastric cancer. Grade 3 or above treatment emergent AEs occurring in above 5% of patients included abnormal hepatic function in 12.9% (4/31), each of gastrointestinal bleeding or decreased appetite in 9.7% (3/31 each), and each of diarrhea or gastrointestinal perforation in 6.4% (2/31 each). This China study concluded that savolitinib monotherapy demonstrated promising anti-tumor efficacy in gastric cancer patients with c-MET gene amplification, and the potential benefit to these patients warrants further exploration, with Phase II enrollment continuing in China. The VIKTORY Phase II study is ongoing in c-MET gene amplified patients in South Korea, with preliminary data likely to be presented at a major scientific conference in 2018.

TPP 12 and TPP 13 - Enrolling (NCT02447380 / NCT02447406) - Phase II studies of savolitinib (600mg QD) in combination with Taxotere® in c-MET over-expression or c-MET gene amplification gastric cancer (South Korea) - Phase II studies are underway to assess safety/tolerability of savolitinib and Taxotere® combination as well as preliminary efficacy of the combination therapy in both c-MET gene amplified patients and, the approximately 40% of gastric cancer patients, that harbor c-MET over-expression. The VIKTORY Phase II is ongoing in South Korea in TPP 12 and 13, with preliminary data likely to be presented at a major scientific conference in 2018.

TPP 14 - Enrolling (NCT03385655) - Phase II of savolitinib in patients with metastatic Castration-Resistant Prostate Cancer ("mCRPC") (Canada) - Phase II study sponsored by the Canadian Cancer Trials Group to determine: the effect of savolitinib on prostate-specific antigen ("PSA") decline and time to PSA progression; ORR as determined by RECIST 1.1 criteria: and to evaluate the safety and toxicity profile of savolitinib in mCRPC patients; and to identify potential predictive and prognostic factors. The umbrella study targets to enroll around 500 patients into six treatment arms based on molecular status, with patients with c-MET-driven disease receiving savolitinib. High levels of c-MET over expression can be prevalent prostate cancer patients.

Fruquintinib (HMPL-013): Fruquintinib is a highly selective and potent oral inhibitor of VEGFR 1/2/3 that was designed to be a global best-in-class VEGFR inhibitor for many types of solid tumors. Fruquintinib's unique kinase selectivity has been shown to reduce off-target toxicity thereby allowing for better target coverage, as well as possible use in combination with other agents such as chemotherapies, targeted therapies and immunotherapies. We believe these are points of meaningful differentiation compared to other approved small molecule VEGFR inhibitors, such as Sutent®, Nexavar® (sorafenib) and Stivarga®, and can potentially significantly expand the use and market potential of fruquintinib.

In addition to our NDA submission in third-line CRC in China, last month we completed enrollment in FALUCA, a pivotal Phase III study of fruquintinib in 527 third-line NSCLC patients, and late last year initiated FRUTIGA, a pivotal Phase III study of fruquintinib in combination with Taxol® in the second-line setting for gastric cancer. Furthermore, a Phase II study of fruquintinib in combination with Iressa® in first-line EGFR activating mutation NSCLC began in early 2017, with encouraging preliminary results presented at the 2017 WCLC; and a Phase I study of fruquintinib in the United States was also initiated in late 2017, the first step in development outside China. In China, fruquintinib is jointly developed with Lilly, our commercial partner.

TPP 15 - NDA submitted June 2017 (NCT02314819) - Phase III study in CRC (third-line), fruquintinib monotherapy (China) - The FRESCO study, is a pivotal Phase III study in 416 patients with locally advanced or metastatic CRC disease that progressed following at least two prior systemic chemotherapies. Patients were randomized in a 2:1 ratio to receive either 5mg of fruquintinib QD orally, on a 3 weeks on/1 week off cycle, plus best supportive care or placebo plus best supportive care. The primary endpoint of median OS was 9.30 months [95% CI: 8.18-10.45] in the fruquintinib group versus 6.57 months [95% CI: 5.88-8.11] in the placebo group, with a hazard ratio of 0.65 [95% CI: 0.51-0.83; two-sided p Significant benefits were also seen in other secondary endpoints. The fruquintinib group DCR was 62.2% vs. 12.3% for placebo (p

In terms of safety, results showed that fruquintinib had a manageable safety profile with lower off-target toxicities compared to other VEGFR TKIs. Of particular interest was that the Grade 3 or above hepatotoxicity was similar for the fruquintinib group as compared to the placebo group, which is in contrast to Stivarga® which was markedly worse and often difficult to manage in this patient population in the CONCUR study. The most frequently reported fruquintinib-related Grade ≥3 AEs included hypertension (21.2%), hand-foot skin reaction (10.8%), proteinuria (3.2%) and diarrhea (2.9%), all possibly associated with VEGFR inhibition. No other Grade ≥3 AEs exceeded 1.4% in the fruquintinib population, including hepatic function AEs such as elevations in bilirubin (1.4%), alanine aminotransferase ("ALT") (0.7%) or aspartate aminotransferase ("AST") (0.4%). In terms of tolerability, dose interruptions or reductions occurred in only 35.3% and 24.1% of patients in the fruquintinib arm, respectively, and only 15.1% of patients discontinued treatment of fruquintinib due to AEs vs. 5.8% for placebo.

Since completing submission of the NDA to the CFDA in early June 2017, we have engaged with the Center for Drug Evaluation (CDE) to conduct reviews in the areas of: pharmacology & toxicity; clinical data and statistical analysis; and chemistry, manufacturing and control of standards and process. We have also facilitated the conduct of clinical site visits including Good Clinical Practice (GCP) and Good Laboratory Practice (GLP) inspections. We are currently entering the PAI (pre-approval inspection) process for our active pharmaceutical ingredient (API) contract manufacturer as well as the PAI and GMP certification process for our Suzhou formulation facility.

TPP 16 - Enrollment complete (NCT02691299) - Phase III study of fruquintinib monotherapy in third-line NSCLC (China) - Following a positive Phase II study comparing fruquintinib with placebo in advanced non-squamous NSCLC patients who have failed two prior systemic chemotherapies, or third-line NSCLC, we initiated a Phase III registration study, the FALUCA study, in December 2015. Results of the Phase II study were presented at the 2016 WCLC and have been accepted for publication in the Journal of Clinical Oncology. In February 2018, we completed enrollment of the FALUCA study in China, in which a total of 527 patients were randomized at a 2:1 ratio to receive either 5mg of fruquintinib orally once per day, on a 3 weeks on/1 week off cycle plus best supportive care, or placebo plus best supportive care. The primary endpoint for FALUCA is OS, with secondary endpoints including PFS, ORR, DCR and DoR. We expect to reach median OS endpoint maturity and report top-line results in late 2018.

TPP 17 - Enrolling (NCT02976116) - Phase II study of fruquintinib in combination with Iressa® in first-line NSCLC (China) - In early 2017, we initiated a multi-center, single-arm, open-label, dose-finding Phase II study of fruquintinib in combination with Iressa® in the first-line setting for patients with advanced or metastatic NSCLC with EGFR activating mutations. We have enrolled about 50 patients in this study with the objective to evaluate the safety and tolerability as well as efficacy of the combination therapy. Preliminary data was presented at the 2017 WCLC, with the eight (31%) Grade 3 treatment emergent AEs being increased ALT (19%); increased AST (4%); proteinuria (4%) and hypertension (4%). There were no serious AEs or those that lead to death. Preliminary results in 17 efficacy evaluable patients showed an ORR of 76% (13/17), including 9 confirmed and 4 unconfirmed PRs at the time of data cut-off, as well as a DCR of 100% (17/17).

Fruquintinib's unique safety and tolerability profile, resulting from its high kinase selectivity, combined with flexibility to adjust dosage to manage treatment emergent toxicities due to its shorter half-life versus monoclonal antibody therapies, along with its potent anti-angiogenic effect, makes it a high potential combination partner for EGFR-TKIs. Subject to continued positive data in TPP 16, we will consider Phase III registration studies both inside and outside of China.

TPP 18 - Enrolling (NCT03251378) - Phase I fruquintinib monotherapy in advanced solid tumors (U.S.) - In December 2017, we initiated a multi-center, open-label, Phase I clinical study to evaluate the safety, tolerability and PK of fruquintinib in U.S. patients with solid tumors. Upon completion, likely late in 2018, our intention is to begin exploring multiple innovative combination studies of fruquintinib and other TKIs, chemotherapy and immunotherapy agents in the United States.

TPP 19 - Enrolling (NCT03223376) - Phase III study of fruquintinib in combination with Taxol® in gastric cancer (second-line) (China) - In early 2017, at the ASCO Gastrointestinal Cancers Symposium, we presented results of an open label, multi-center Phase Ib dose finding/expansion study of fruquintinib in combination with Taxol® in second-line gastric cancer. A total of 32 patients were enrolled in the study and 28 of 32 patients were efficacy evaluable with an ORR of 36% (10/28 based on confirmed PRs) and a DCR of 68% (19/28). At fruquintinib RP2D, ≥16 week PFS was 50% and ≥7 month OS was 50%. Tolerability of the RP2D combination was as expected with common treatment related Grade ≥3 AEs being neutropenia (41%), leukopenia (28%), decreased hemoglobin (6%), and hand-foot syndrome (6%). Based on this encouraging Phase Ib data, in October 2017 we initiated the FRUTIGA study, a randomized, double-blind, Phase III study to evaluate the efficacy and safety of fruquintinib combined with Taxol® compared with Taxol® monotherapy for second-line treatment of advanced gastric or gastroesophageal junction (GEJ) adenocarcinoma, in patients who had failed first-line standard 5-flourouracil (5-FU)-based chemotherapy. A total of over 500 patients are expected to be enrolled into FRUTIGA at a 1:1 ratio. The primary endpoint is OS, with secondary endpoints including PFS, ORR, DCR and quality-of-life score. Biomarkers related to the anti-tumor activity of fruquintinib will also be explored. We intend to conduct an interim analysis of the FRUTIGA study for futility, sometime during 2019.

Sulfatinib (HMPL-012): Sulfatinib is an oral drug candidate with a unique angio-immuno kinase profile which provides both anti-angiogenesis effect and, we believe, activates and effectively enhances the body's immune system, specifically T-cells. Importantly, in 2016 we presented pre-clinical data that show sulfatinib, in addition to inhibiting VEGFR and FGFR1, is a potent inhibitor of CSF-1R, a signaling pathway involved in blocking the activation of tumor-associated macrophages. Sulfatinib is the first oncology candidate that we have taken through proof-of-concept in China and subsequently started clinical development in the United States. We are currently conducting six clinical studies on sulfatinib and retain all rights to sulfatinib worldwide.

In early 2017, at the ENETS conference, we presented the results of an open-label, single-arm Phase II study in China to assess the efficacy and safety of sulfatinib 300mg QD monotherapy in patients with advanced Grade 1 or 2 NETs. A total of 81 patients (41 pancreatic NET and 40 extra-pancreatic NET) were enrolled. The majority of patients had Grade 2 diseases (79%) and had failed previous systemic treatments (65%). As of January 2017, 13 patients had confirmed PR and 61 patients had SD, corresponding to an overall ORR of 16.0% (13/81), with 17.1% (7/41) in pancreatic NET and 15.0% (6/40) in extra-pancreatic NET, and an overall DCR of 91.4%. Median overall PFS was estimated to be 16.6 months (95% CI: 13.4, 19.4) with longer median PFS in pancreatic NET estimated at 19.4 months and shorter median PFS in extra-pancreatic NET estimated at 13.4 months. Importantly, there were fourteen patients who had progressed after treatment with targeted therapies (e.g. Sutent® and Afinitor®) and all benefited from sulfatinib treatment (4 PRs and 10 SDs). These Phase II data compared favorably to the less than 10% ORR and 11.4 month median PFS for Sutent® and Afinitor®, the two approved single agent therapies for pancreatic NET. Sulfatinib was well tolerated with Grade ≥3 AEs, with >5% incidence, regardless of causality of hypertension (31%), proteinuria (14%), hyperuricemia (10%), hypertriglyceridemia (9%), diarrhea (7%) and ALT increase (6%). Based on the above promising Phase II efficacy data and tolerability in patients with advanced NETs, we initiated two randomized Phase III trials (TPPs 20 and 21 below) in China along with U.S. development (TPP 22 below).

TPP 20 - Enrolling (NCT02589821) - Phase III pancreatic NET sulfatinib monotherapy (China) - In 2016, we initiated the SANET-p study, which is a pivotal Phase III study in patients with low- or intermediate-grade, advanced pancreatic NET. Patients are randomized in a 2:1 ratio to receive either 300mg of sulfatinib orally QD, or placebo, on a 28-day treatment cycle. The primary endpoint is PFS, with secondary endpoints including ORR, DCR, time to response, DoR, safety and tolerability. We expect to complete enrollment in 2019 and present top-line results thereafter.

TPP 21 - Enrolling (NCT02588170) - Phase III extra-pancreatic NET sulfatinib monotherapy (China) - In December 2015, we initiated the SANET-ep study, which is a pivotal Phase III study in patients with low or intermediate grade advanced extra-pancreatic NET. Patients are randomized in a 2:1 ratio to receive either 300mg of sulfatinib orally QD, or placebo, on a 28-day treatment cycle. The primary endpoint is PFS, with secondary endpoints including ORR, DCR, time to response, DoR, safety and tolerability. We expect to complete enrollment in 2019 and present top-line results thereafter.

TPP 22 - Enrolling (NCT02549937) - Phase I sulfatinib monotherapy in advanced solid tumors (U.S.) - A Phase I study in cancer patients in the United States is now close to completion having confirmed the RP2D dose. We are currently in final planning for an expansion of sulfatinib development in the United States into a multi-arm Phase IIa study to explore efficacy and safety in both NET and solid tumor patients.

TPP 23 and TPP 24 - Enrollment complete (NCT02614495) - Phase II study in recurrent/refractory thyroid cancer patients (China) - In 2016, we began an open-label, Phase II proof-of-concept study in patients with recurrent/refractory MTC or RAI-refractory DTC in China where there are few safe and effective treatment options. In June 2017, we presented preliminary Phase II data at ASCO showing that as at December 31, 2016 a total of 18 patients had been enrolled, and treated with sulfatinib, with preliminary data showing that confirmed PRs were reported in 3/10 (30.0% ORR) RAI-refractory DTC patients and 1/6 (16.7% ORR) MTC patients, and all other patients were SD.

TPP 25 - Enrolling (NCT02966821) - Phase II study in chemotherapy refractory biliary tract cancer patients (China) - In early 2017, we began a Phase II proof-of-concept study in patients with biliary tract cancer (also known as cholangiocarcinoma), a heterogeneous group of rare malignancies arising from the biliary tract epithelia. We see a major unmet medical need for patients who have progressed on chemotherapy, and sulfatinib may offer a new targeted treatment option in this tumor type.

Epitinib (HMPL-813): A significant portion of NSCLC patients, estimated at approximately 10-15%, have developed brain metastasis by the time of first diagnosis and eventually approximately 50% of NSCLC patients go on to develop brain metastasis. Patients with brain metastasis have a dismal prognosis and a poor quality of life with limited treatment options. Epitinib is a potent and highly selective oral EGFR inhibitor which has demonstrated brain penetration and efficacy in both pre-clinical and clinical studies.  EGFR inhibitors have revolutionized the treatment of NSCLC with EGFR activating mutations. However, approved EGFR inhibitors such as Iressa® and Tarceva® cannot penetrate the blood-brain barrier effectively, leaving the majority of patients with brain metastasis without an effective targeted therapy. We currently retain all rights to epitinib worldwide.

TPP 26 - Continues to enroll (NCT02590952) - Phase Ib epitinib monotherapy in NSCLC patients with activating EGFR-mutations and brain metastasis (China) - In December 2016 at the WCLC, we presented encouraging efficacy data for an open label, multi-center Phase I dose expansion study. For EGFR TKI naïve patients treated with epitinib 160mg QD dose, ORR was in the range of 60-70% (including confirmed and unconfirmed PRs). During 2017, we continued to enroll patients in this Phase Ib study exploring a lower 120mg QD dose in the context of further optimizing tolerability for long-term usage. We expect to decide the Phase III dose in early 2018 and initiate Phase III shortly thereafter.

TPP 27 - Enrolling (NCT03231501) - Phase Ib/II study in glioblastoma - Glioblastoma is a primary brain cancer that harbors high levels of EGFR gene amplification. This month, we initiated a Phase Ib/II study multi-center, single-arm, open-label study to evaluate the efficacy and safety of epitinib as a monotherapy in patients with EGFR gene amplified, histologically confirmed glioblastoma. The primary endpoint is ORR.

Theliatinib (HMPL-309): Theliatinib is a novel molecule EGFR inhibitor under investigation for the treatment of solid tumors. Tumors with wild-type EGFR activation, for instance, through gene amplification or protein over-expression, are less sensitive to current EGFR TKIs, Iressa® and Tarceva®, due to their sub-optimal binding affinity. Theliatinib has been designed with strong affinity to the wild-type EGFR kinase and has been shown to be five to ten times more potent than Tarceva®. Consequently, we believe that theliatinib could benefit patients with tumor-types with a high incidence of wild-type EGFR activation. This is notable in certain cancer types such as esophageal cancer, where 8-30% harbors EGFR gene amplification and 30-90% EGFR overexpression. We currently retain all rights to theliatinib worldwide.

TPP 28 - Complete (NCT02601274) - Phase I study of theliatinib monotherapy in solid tumors (China) - At the 2017 CSCO conference, we presented results from the Phase I study of the safety and preliminary anti-tumor activity of theliatinib. Results showed that doses up to 500mg QD were determined to be safe and well-tolerated, with no dose limiting toxicities or maximum tolerated dose established. PK exposure increased with dose, with 300mg QD or more considered sufficient to inhibit EGFR phosphorylation. Amongst the 21 patients that received 120mg to 500mg QD, there were only four treatment emergent Grade ≥3 AEs: each of gastrointestinal bleeding, decreased white blood cell count, anemia or decreased platelet count of 4.8% (1/21 each). There were no incidences of Grade ≥3 rash or diarrhea. Amongst seven esophageal cancer patients, five had measurable lesions and could be evaluated for response, with all five achieving SD. Of the efficacy evaluable patients in the 120mg to 500mg cohorts, 44.4% (8/18) had SD after 12 weeks. The study concluded that further development of theliatinib 400mg QD amongst esophageal cancer patients with EGFR over expression was warranted (TPP 29).

TPP 29 - Enrolling (NCT02601274) - Phase Ib expansion theliatinib monotherapy in esophageal cancer (China) - In early 2017, we began a Phase Ib proof-of-concept expansion study of theliatinib in esophageal cancer patients with EGFR protein over-expression or gene amplification. This study is now in the process of expanding through the opening of further clinical sites in China.

HMPL-523: HMPL-523 is a potential first/best-in-class oral inhibitor targeting Syk, a key protein involved in B-cell signaling. Modulation of the B-cell signaling system has proven to have significant potential for the treatment of certain chronic diseases in immunology, such as rheumatoid arthritis or lupus, as well as hematological cancers. We currently retain all rights to HMPL-523 worldwide.

TPP 30 and TPP 31 - Complete (NCT02105129) - Phase I study (healthy volunteers) (Australia/China) - We believe HMPL-523, as an oral drug candidate, has advantages over intravenous monoclonal antibody immune modulators in rheumatoid arthritis in that small molecule compounds can be taken orally and have shorter half-lives, thereby reducing the risk of infections from sustained suppression of the immune system. The Phase I dose escalation study showed HMPL-523 exhibited a tolerable safety profile, with data presented in full at the 2016 American College of Rheumatology conference. Off-target toxicities such as diarrhea and hypertension, seen with the first-generation Syk inhibitor fostamatinib, were not observed.

In addition to tolerable safety, this Phase I dose escalation study evaluated the PK and pharmacodynamic ("PD") profile of HMPL-523. We have submitted IND applications for autoimmune diseases and expect, pending the imminent submission of additional data requested by the U.S. FDA, to progress into a Phase II proof-of-concept study in immunology in late 2018 or early 2019.

TPP 32 and TPP 33 - Enrolling (NCT02503033 / NCT02857998) - Phase I study of HMPL-523 in hematological cancers (Australia/China) - In early 2016, we initiated a Phase I dose escalation study of HMPL-523 in Australia in hematological cancer patients and have completed seven dose cohorts. China Phase I began in early 2017 and has now completed five dose cohorts. In both Australia and China, we have established both efficacious QD and twice daily dose regimens. We are now in the process of increasing the number of clinical sites in Australia and China to support Phase Ib/II expansion in a broad range of indolent non-Hodgkin's lymphoma sub-types. We target to present dose escalation and expansion results, including preliminary proof-of-concept data, at a major scientific conference later in 2018.

HMPL-689: HMPL-689 is a novel, potential best-in-class, highly selective and potent small molecule inhibitor targeting the isoform PI3Kδ, a key component in the B-cell receptor signaling pathway. We have designed HMPL-689 with superior PI3Kδ isoform selectivity, in particular to not inhibit PI3Kɣ (gamma), to minimize the risk of serious infection caused by immune suppression. HMPL-689's PK properties have been found to be favorable with good oral absorption, moderate tissue distribution and low clearance in preclinical PK studies. We also expect that HMPL-689 will have low risk of drug accumulation and drug-to-drug interaction. We currently retain all rights to HMPL-689 worldwide.

TPP 34 and TPP 35 - Enrolling (NCT02631642 / NCT03128164) - Phase I dose escalation (Australia/China) - In 2016, we completed a Phase I dose escalation study in Australia in healthy adult volunteers to evaluate HMPL-689's PK and safety profile following single oral dosing. Results were as expected with linear PK properties and good safety profile. We subsequently received IND clearance in China and then initiated a Phase I dose escalation and expansion study in patients with hematologic malignancies in August 2017.

HMPL-453: HMPL-453 is a novel, potentially first-in-class, highly selective and potent small molecule inhibitor that targets FGFR 1/2/3, a sub-family of receptor tyrosine kinases. Aberrant FGFR signaling has been found to be a driving force in tumor growth, promotion of angiogenesis and resistance to anti-tumor therapies. To date, there are no approved therapies specifically targeting the FGFR signaling pathway. In pre-clinical studies, HMPL-453 demonstrated excellent kinase selectivity as well as strong anti-tumor potency. Abnormal FGFR gene alterations are believed to be the drivers of tumor cell proliferation in several solid tumor settings. We currently retain all rights to HMPL-453 worldwide.

TPP 36 and TPP 37 - Enrolling (NCT02966171) / NCT03160833) - Phase I dose escalation (Australia/China) - In early 2017, we initiated first-in-human Phase I dose escalation studies in both Australia and China to evaluate safety, tolerability, PK, PD and preliminary anti-tumor activity in patients with advanced or metastatic solid tumors.

HM004-6599: HM004-6599 is a proprietary botanical drug for the treatment of inflammatory bowel diseases, which we are developing through NSP, a 50/50 joint venture with Nestlé. In the first half of 2017, we submitted our IND application for HM004-6599 in China and we now await clearance to proceed into Phase I clinical studies. We also target to initiate Phase I clinical studies in Australia in 2018. HM004-6599 is an enriched/purified re-formulation of HMPL-004, our drug candidate that reported positive Phase II results in ulcerative colitis in 2010 but then went on to prove futile in an interim analysis of the subsequent Phase III study in 2014.

COMMERCIAL PLATFORM

The Commercial Platform, which has been built over the past 17 years, is focused on two business areas. First is our core Prescription Drugs business, a high-margin/profit business operated through our joint ventures SHPL and Hutchison Sinopharm, in which we nominate management and run the day-to-day operations. Our Prescription Drugs business is a platform that we plan to use to launch our Innovation Platform drugs once approved in China. Second is our Consumer Health business, which is a profitable and cash flow generating business selling primarily market-leading, household-name OTC pharmaceutical products through our non-consolidated joint venture HBYS.

In 2017, sales of our Commercial Platform's subsidiaries grew by 13% to $205.2 million (2016: $180.9m), and sales of our Commercial Platform's non-consolidated joint ventures, SHPL and HBYS, grew by 6% to $472.0 million (2016: $446.5m) resulting in consolidated net income attributable to Chi-Med from our Commercial Platform of $40.0 million (2016: $70.3m). Stripping out one-time gains, adjusted (non-GAAP) consolidated net income attributable to Chi-Med from our Commercial Platform grew by 25% to $37.5 million (2016: $29.9m).

Prescription Drugs business:

In 2017, sales of our Prescription Drugs subsidiaries grew by 11% to $166.4 million (2016: $149.9m), and sales of our non-consolidated Prescription Drugs joint venture (SHPL) grew by 10% to $244.6 million (2016: $222.4m). The consolidated net income attributable to Chi-Med from our Prescription Drugs business was $29.0 million (2016: $61.1m). Adjusted (non-GAAP) consolidated net income attributable to Chi-Med grew 28% to $26.5 million (2016: $20.7m), when excluding one-time gains of $2.5 million in 2017 from research and development subsidies and $40.4 million in 2016 primarily from property compensation. The Prescription Drugs business represented 72% of our overall Commercial Platform net income in 2017.

SHPL:  Our own-brand Prescription Drugs business, operated through our non-consolidated joint venture SHPL, is a well-established and stable-growth business. In 2016, SHPL delivered sales growth of 23%. However, sales in the first half of 2017 were subdued at $129.7 million (up 2% versus H1 2016) as a result of an 11% price increase on our main product SXBX pill, which occurred in December 2016. As expected, SHPL sales performance, as well as gross margins, materially improved as 2017 progressed. Sales in the second half were $114.9 million (up 20% versus H2 2016).

SXBX pill: SHPL's main product is SXBX pill, an oral vasodilator and pro-angiogenesis prescription therapy approved to treat coronary artery disease, which includes stable/unstable angina, myocardial infarction and sudden cardiac death. There are over 1 million deaths due to coronary artery disease per year in China, with this number set to rise due to an aging population with high levels of smoking (34% of adults), increasing levels of obesity (28% of adults overweight) and hypertension (26% of adults). SXBX pill is the third largest botanical prescription drug in this indication in China, with a market share of 15.4% nationally and 47.0% in Shanghai. Sales of SXBX pill have grown more than twenty-fold since 2001 due to continued geographical expansion of sales coverage, including 7% to $209.2 million in 2017 despite the aforementioned late 2016 price increase.

SXBX pill is protected by a formulation patent that expires in 2029 and is one of less than two dozen proprietary prescription drugs represented on China's National Essential Medicines List, which means that all Chinese state-owned health care institutions are required to carry the drug.  SXBX pill is a low-cost drug, fully reimbursed in all provinces in China, listed on China's Low Price Drug List with an average daily cost of RMB4.00, or approximately $0.60 (2016: RMB3.30).  In the coming years, we anticipate stable growth in sales and profit for SXBX pill given the strength of its proposition and the expected expansion of the coronary artery disease market in China driven by an aging population and trends in diet leading to increasing obesity.

The SHPL operation is large-scale in both the commercial and manufacturing areas. The commercial team now has about 2,300 medical sales representatives which allows for the promotion and scientific detailing of our prescription drug products not just in hospitals in provincial capitals and medium-sized cities, but also in the majority of county-level hospitals in China. SHPL's new, GMP-certified factory located 40 kilometers south of Shanghai in Fengpu district, which holds 74 drug product manufacturing licenses and is operated by about 550 manufacturing staff. This new factory has approximately tripled SHPL's capacity and therefore positions us well for continued long-term growth.

Hutchison Sinopharm: Our Prescription Drugs commercial services business, which is operated through Hutchison Sinopharm, focuses on providing logistics services to, and distributing and marketing prescription drugs manufactured by third-party pharmaceutical companies in China. In 2017, Hutchison Sinopharm made continued progress with sales up 11% to $166.4 million (2016: $149.9m) as a result of growth in the third-party drug distribution businesses and Seroquel®.

Seroquel®: Seroquel® (quetiapine tablets) is an anti-psychotic therapy approved for bi-polar disorder and schizophrenia, conditions that are under-diagnosed in China. Seroquel® holds an 5.6% market share in China's approximately $0.9 billion atypical anti-psychotic prescription drug market, and 45% of China's generic quetiapine market, primarily as a result of being the first-mover and original patent holder on quetiapine. Seroquel® is the only brand in China to have an XR (extended release) formulation, which in 2017 was included on the NDRL, thereby providing us with major competitive advantage over quetiapine generics.

Hutchison Sinopharm is the exclusive marketing agent for Seroquel® tablets in China and through a team of about 120 dedicated medical sales representatives reported sales in 2017 of $35.4 million (2016: $34.4m). The new China TIS (two-invoice system), explained in more detail below, came into effect in October 2017, at which point Hutchison Sinopharm's Seroquel® operating model began progressively switching to a fee-for-service model. This change in business model has limited effect on the past or future service fees paid by AstraZeneca to Hutchison Sinopharm for marketing Seroquel®, which in 2017 increased 22% to $11.4 million (2016: $9.3m).

Subject to Hutchison Sinopharm's continued delivery of pre-specified annual sales targets, which would require approximately 22% sales growth in 2018 and 15% per year thereafter, we can continue to retain exclusive commercial rights to Seroquel® in China until 2025. Notwithstanding potential changes in government pricing policy, we expect Seroquel® to have a reasonable chance to meet these annual sales targets over the next several years due to the XR formulation, its recent inclusion in the NDRL, as well as expansion in diagnosis and treatment of anti-psychotic diseases in China.

Concor®: Concor® (Bisoprolol tablets) is a cardiac beta1-receptor blocker, relieving hypertension and reducing high blood pressure. Concor® is the number two beta-blocker in China with an approximately 18% national market share in China's beta-blocker drug market and 70% of China's generic bisoprolol market. Hutchison Sinopharm is now the exclusive marketing agent in six provinces, markets that contain over 360 million people. We have created synergy with SHPL's existing cardiovascular medical sales team by detailing Concor® alongside the SXBX pill on a fee-for-service basis. In 2017, we grew Concor® sales by 90%, resulting in service fees of $1.8 million (2016: $1.4m) to Hutchison Sinopharm and SHPL in aggregate. We expect growth in these fees will continue to be driven by cardiovascular market expansion as well as potential further territorial expansion.

Regulatory reform in the China pharmaceutical distribution system - The new TIS has now been mostly rolled-out across China. In principle, the purpose of the TIS is to restrict the number of layers in the drug distribution system in China, in order to improve transparency, compliant business conduct, and efficiency and thereby lower the cost of drugs. The impact to us is that, starting in October 2017, the Seroquel® sales model, in which our consolidated revenues historically reflected total gross sales of Seroquel®, began to shift to a fee-for-service model similar to that used all along on Concor®. This change will reduce the top-line revenues that Hutchison Sinopharm will in the future be able to record from sales of Seroquel® as well as many of our other third-party customers. Therefore, as a direct result of TIS, sales guidance for Hutchison Sinopharm for 2018 is now estimated at approximately $75-85 million (2017: $166.4m). Importantly, however, this drop in reported sales will have no impact on profitability, the service fees paid to Hutchison Sinopharm, or our commercial team operations and expansion plans.

Consumer Health business:

During 2017, sales of our Consumer Health subsidiaries increased by 25% to $38.8 million (2016: $31.0m) and sales of our non-consolidated Consumer Health joint venture (HBYS) were flat at $227.4 million (2016: $224.1m). Consolidated net income attributable to Chi-Med from our Consumer Health business grew by 20% to $11.0 million (2016: $9.2m) as a result of several factors that are detailed below. The Consumer Heath business represented 28% of our overall Commercial Platform net income in 2017.

HBYS: Our OTC business operated through our non-consolidated joint venture, HBYS, focuses on the manufacture, marketing and distribution of OTC pharmaceutical products. Its Bai Yun Shan brand is a market-leading, household name, established over 40 years ago, and is known by the majority of Chinese consumers. In addition to over 1,000 manufacturing staff, in Guangdong and Anhui, and 189 drug product licenses, HBYS has a commercial team of about 1,000 sales staff that covers the national retail pharmacy channel in China.

2017 was a year of major change for HBYS with the move of the majority of our production to a new low-cost factory over 1,400 kilometers away from its home base in Guangdong province. HBYS sales had grown over five-fold since its establishment in 2005 and, during that period, HBYS has used third-party contract manufacturers to support expansion, a strategy no longer possible under CFDA policy. In early 2017, we secured GMP-certification of our new factory in Bozhou, Anhui province however, final clearance to formally begin production from the local Guangdong and Anhui province FDAs only came in August 2017. This regulatory pause led HBYS to have to continue to use contract manufacturers during the first half of 2017 while at the same time having to start recording depreciation charges for our new factory. The delay also led to some short-term production capacity constraints.

A further change came on September 1, 2017 when HBYS divested its 60% shareholding in Guanbao for a consideration approximately equal to its carrying value. Guanbao was a Good Supply Practice (GSP) distribution company which had been established via a joint venture in 2012. Sales reported under HBYS for Guanbao in 2017 were $38.6 million (2016: 45.0m) as a result of partial year reporting due to the divestiture. This low margin, primarily third-party OTC logistics business, with operations limited mainly to Henan province, had proven to be a business with no strategic value to Chi-Med.

Once the Bozhou factory began production, capacity constraints were eliminated and the performance of HBYS, excluding the divested Guanbao, in the second half of 2017 was particularly strong with revenue on an adjusted (non-GAAP) basis increasing 20% to $94.3 million (H2 2016: $78.5m). HBYS net income attributable to Chi-Med also rebounded strongly in the second half of 2017 increasing 185% to $3.7 million (H2 2016: $1.3m) driven by the available capacity and a decline in the prices of certain key raw materials.

FFDS tablets and Banlangen granules: FFDS tablets (angina) and Banlangen granules (anti-viral cold/flu), the two main products of HBYS, are generic OTC drugs with leading national market share in China of 38% (2016: 32%) and 53% (2016: 51%), respectively. The first half of 2017 was a challenging period for FFDS and Banlangen with sales totaling $64.3 million (down 8% versus H1 2016) due to the aforementioned capacity constraints; unusually high raw material prices on both Banlangen and Sanqi, the main raw material in FFDS; and a relatively quiet influenza season which held back Banlangen demand. In contrast, the second half of 2017 saw FFDS and Banlangen's sales rebound to $54.5 million (up 17% versus H2 2016) as all first half headwinds were either entirely eliminated or materially reversed.

In the mid- to longer-term, while profitability of both FFDS tablets and Banlangen granules in any given year will vary based on the severity of the climate/influenza season, which affect both raw material prices and demand, we anticipate that cost efficiencies in the new Bozhou factory will enhance gross margins. Furthermore, we expect to benefit from the underlying general OTC market expansion and the low risk of price erosion due to our focus on the retail pharmacy channel.

HBYS property update - HBYS's vacant Plot 2 (26,700 sqm.) in Guangzhou has been listed for sale as part of the Guangzhou municipal government's urban redevelopment scheme plan since 2016. The date of this public auction will be determined by the Guangzhou government, but we are actively working to trigger the process. Land prices continue to rise in Guangzhou, and based on precedent land transactions in the vicinity, we expect the auction value for Plot 2 to be over $100 million of which 40 to 50% would be paid to HBYS as compensation for return of the land use rights. In addition, the move away from HBYS's larger Plot 1 (59,400 sqm.) will be contingent on how the Bozhou factory develops, but, when auctioned, Plot 1 could bring HBYS compensation per square meter comparable to Plot 2.

Hutchison Healthcare Limited ("HHL") and Hutchison Hain Organic Holdings Limited ("HHOH"): HHL, HHOH and other minor entities are subsidiaries involved in the commercialization of health related consumer products. Sales of such products in 2017 grew by 25% to $38.8 million (2016: $31.0m) driven in part by good progress on the Zhi Ling Tong® and Earth's Best® infant nutrition business.

Commercial Platform dividends: The profits of the Commercial Platform continue to pass on to the Chi-Med Group through dividend payments primarily from our non-consolidated joint ventures, SHPL and HBYS. Dividends of $55.6 million (2016: $30.5m) were paid from these joint ventures to the Chi-Med Group level during 2017. Net income from SHPL and HBYS have totaled $465.4 million since 2005, of which a total of $316.2 million has been paid in dividends to Chi-Med and its partners, with the balance retained by the joint ventures as cash or used primarily to fund factory upgrades and expansion. As of December 31, 2017, SHPL and HBYS held in aggregate $57.4 million in cash and cash equivalents, with no outstanding bank borrowings.

Christian Hogg

Chief Executive Officer, March 12, 2018

Use of Non-GAAP Financial Measures and Reconciliation: In addition to financial information prepared in accordance with U.S. GAAP, this announcement also contains certain non-GAAP financial measures based on management's view of performance including:

· Adjusted research and development expenses;

· Adjusted consolidated net income attributable to Chi-Med from our Commercial Platform;

· Adjusted consolidated net income attributable to Chi-Med from our Prescription Drugs business; and

· Adjusted revenue of HBYS.

Management uses such measures internally for planning and forecasting purposes and to measure the Chi-Med Group's overall performance. We believe these adjusted financial measures provide useful and meaningful information to us and investors because they enhance investors' understanding of the continuing operating performance of our business and facilitate the comparison of performance between past and future periods. These adjusted financial measures are non-GAAP measures and should be considered in addition to, but not as a substitute for, the information prepared in accordance with U.S. GAAP. Other companies may define these measures in different ways. The following items are excluded from adjusted financial results:

Adjusted research and development expenses: We exclude the impact of the revenue received from external customers of our Innovation Platform, which is reinvested into on our clinical trials, to derive our adjusted research and development expense. Revenue received from external customers of our Innovation Platform consists of milestone and other payments from our collaboration partners. The variability of such payments makes the identification of trends in our ongoing research and development activities more difficult. We believe the presentation of adjusted research and development expenses provides useful and meaningful information about our ongoing research and development activities by enhancing investors' understanding of the scope of our normal, recurring operating research and development expenses.

Adjusted consolidated net income attributable to Chi-Med from our Commercial Platform and adjusted consolidated net income attributable to Chi-Med from our Prescription Drugs business: We exclude the impact of one-time gains which were triggered by the payment of land compensation and subsidies from the Shanghai government to SHPL.

Adjusted HBYS revenue: We exclude the sales of Guanbao because Guanbao was divested by HBYS in September 2017.

Reconciliation of GAAP to adjusted research and development expenses:

Reconciliation of GAAP to adjusted consolidated net income attributable to Chi-Med from our Commercial Platform:

Reconciliation of GAAP to adjusted consolidated net income attributable to Chi-Med from our Prescription Drugs business:

Reconciliation of GAAP to adjusted HBYS revenue:

Hutchison China MediTech Limited

Consolidated Balance Sheets

(in US$'000)

The accompanying notes are an integral part of these consolidated financial statements.

Hutchison China MediTech Limited

Consolidated Statements of Operations

(in US$'000, except share and per share data)

The accompanying notes are an integral part of these consolidated financial statements.

Hutchison China MediTech Limited

Consolidated Statements of Comprehensive (Loss)/Income

(in US$'000)

The accompanying notes are an integral part of these consolidated financial statements.

Hutchison China MediTech Limited

Consolidated Statements of Changes in Shareholders' Equity

(in US$'000, except share data in '000)