Surufatinib NETs solid data at ESMO

Hutchison China MediTech 9 October 2019 Update
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Hutchison China MediTech

Surufatinib NETs solid data at ESMO

Corporate update

Pharma & biotech

9 October 2019

Price

295.0p

Market cap

£2,407m

$1.22/£

Net cash ($m) and short-term investments at 30 June 2019

237.3

Shares in issue

666.8m

Free float

47.4%

Code

HCM

Primary exchange

AIM/Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.2)

(25.3)

(25.3)

Rel (local)

(14.7)

(25.7)

(23.2)

52-week high/low

5,600.00p

3,005.00p

Business description

Hutchison China MediTech is an innovative China-based biopharmaceutical company targeting the global market for novel, highly selective oral oncology and immunology drugs. Its established commercial platform business continues to expand its outreach.

Next events

Elunate (fruquintinib capsules) inclusion on China NRDL

H2 19

Surufatinib pancreatic NET Phase III interim data (SANET-p)

H1 20

Surufatinib start global PII/III trials

H1 20

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Hutchison China MediTech is a research client of Edison Investment Research Limited

Hutchison China MediTech (HCM) presented robust SANET-ep Phase III China data at ESMO 2019 on surufatinib in non-pancreatic neuroendocrine tumours (NET). The data support a China NDA submission (imminent), with surufatinib likely to be the first of HCM’s non-partnered assets to reach the market (late 2020). NET tumours are highly prevalent, fragmented in primary origin and are an unmet medical need. Surufatinib could be the first universal drug to treat NET in all patients regardless of tumour subtype; the SANET-p Phase III data in (pancreatic NET H120), is critical to widening its market potential. The global (US and Europe) registration Phase III study is planned for H120. CK Hutchison Holdings (CKHH) reduced its holding by 1.3% to below 50% (49.9%). We see this as a significant positive as it removes the significant overhang on the shares. We value HCM at $5.7bn.

Year end

Revenue (US$m)

Net profit*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

241.2

(26.7)

(4.3)

0.0

N/A

N/A

12/18

214.1

(74.8)

(11.3)

0.0

N/A

N/A

12/19e

182.9

(117.8)

(17.7)

0.0

N/A

N/A

12/20e

194.6

(164.8)

(24.7)

0.0

N/A

N/A

Note: *Net profit and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Surufatinib solid data in non-pancreatic NET

Positive Phase III surufatinib data unveiled at the interim analysis of SANET-ep (advanced extra-pancreatic NET) led to trial cessation, as recommended by IDMC, a year ahead of schedule. Surufatinib met superiority criteria in meeting its primary endpoint of progression-free survival (PFS) (9.2 months vs placebo 3.8 months, HR=0.334, p<0.0001). Data published at ESMO 2019 highlighted utility across all subtypes of non-pancreatic NET regardless of primary origin and efficacy in resistant patients who had received multiple lines of therapy. Furthermore, data from the Phase Ib US study showed consistency with data to date in Chinese patients. Efficacy was demonstrated across a range of solid tumours in patients who had endured multiple prior lines of therapy.

NET and BTC represents ~$1bn global opportunity

We continue to forecast global peak sales for surufatinib of $953m across the NET and biliary tract cancer (BTC) indications. We now forecast China launch in late 2020 (previously 2021) due to clearer regulatory timelines and US/EU launch in 2024. HCM has accelerated global (ex-China) development of its non-partnered assets (fruquintinib, surufatinib, HMPL-523 and HMPL-689) as evidenced by a leap in R&D expense in 2018/19. In the rapidly changing landscape that is oncology, timeliness is critical and investment in surufatinib is coming to fruition.

Valuation: $5.7bn or £7.01/share

We value HCM at $5.7bn (£7.01/share) vs $5.7bn (£6.99/share) previously. We now forecast surufatinib launch in China in late 2020 (previously early 2021) based on an October 2019 China NDA submission. We have increased 2020 R&D expenses and rolled forward our model in time.

Portfolio rapidly advancing

HCM continues to make rapid progress towards its goal of becoming an international biotech company with a marketed portfolio of innovative drugs. Of its late-stage pipeline, surufatinib, savolitinib and fruquintinib are in pole position to ensure HCM’s goal is reached in the medium term. Surufatinib has made significant strides this year; the Phase III SANET-ep trial cessation one year ahead of schedule due to overwhelming positive efficacy in advanced stage non-pancreatic NET means the drug could launch in China in late 2020. If the global Phase III trial (US and Europe due to initiate in H1 20) results are consistent with data seen in Chinese patients to date, this would pave the way for surufatinib to be the first universal small molecule drug treatment for NET.

NET: Fragmented but highly prevalent disease

Data from Frost & Sullivan indicate the global NET market in 2018 was worth approximately $5.8bn and is expected to grow to $21.2bn by 2030. NET cancers arise out of cells of the endocrine and nervous systems, predominately the digestive and respiratory tracts. NETs can be aggressive or indolent in nature, the latter meaning that patients can survive longer in the course of disease than certain solid tumours. NETs are typically classified as pancreatic NETs or extra pancreatic NETs (a catch all for a tumour that does not arise out the pancreas) and commonly include lung NETs and gastrointestinal (GI) NETs. NETs can be functional (~40% of patients) or non-functional depending on whether the hormones produced by the tumour lead to symptoms (functional NET).

In China there is significant market opportunity with reported incidence of NET in 2018 of approximately 67,600. While the current prevalence of NET in the US is ~150,000 patients (incidence of ~19,000 new cases per year), current treatment modalities are typically limited to subsets of NET with only Afinitor approved for a broad range of NETs (pancreatic, GI and lung).

SANET-ep supports broad use in non-pancreatic NET

Surufatinib’s China Phase III programme consists of two studies evaluating the drug (vs placebo) in pancreatic NET (SANET-p, planned n=195) and non-pancreatic NET (SANET-ep, actual n=198), thus covering all NET patient types. In June 2019, HCM announced the independent data monitoring committee had recommended stopping the Phase III SANET-ep early following positive interim data. This was based on the trial meeting its primary endpoint of PFS and the trial was unblinded a year ahead of schedule. Upon unblinding, patients on placebo had the opportunity to cross over to the surufatinib arm. Surufatinib met primary endpoints and significantly improved investigator-assessed PFS (PFS 9.2 months vs placebo 3.8 months, HR=0.334, p<0.0001), and all secondary endpoints were additionally met vs placebo arm (ORR 10.3% vs 0%, p=0.005; DCR 86.5% vs 65.6%, p=0.002).

Exhibit 1: Surufatinib in extra-pancreatic NET (SANET-ep)

Source: Company presentation at ESMO 2019

Eligibility criteria for the study included well differentiated extrapancreatic (ep) NET pathological grade 1 or 2 with advanced disease, patients with prior use of VEGF/VEGFR inhibitors were excluded. Around 69% of patients on surufatinib had received prior systemic anti-tumour therapy (chemotherapy, somatostatin analogues, everolimus) vs 64% on placebo.

Safety was in line with previous data; hypertension (64.3% on drug vs 26.5% on placebo) and proteinuria (70.5% on drug vs 52.9% on placebo), while the most common adverse events were medically manageable. Given surufatinib inhibits three different targets (vascular endothelial growth factors, VEGFRs; fibroblast growth factor receptor 1, FGFR1; and colony stimulating factor 1 receptor, CSF-1R) at therapeutic dosing; its tolerability with combination therapies is an important factor. However, median exposure days on surufatinib (217 days) and placebo (146 days) suggests discontinuation rates were largely due to disease progression rather than tolerability issues.

At ESMO 2019 HCM reported preliminary results of the global Phase Ib study of surufatinib in US solid tumour patients – HCM initiated the US Phase Ib/II study in P-NET and BTC in July 2018. The two-part study design including dose escalation and dose expansion assessed safety and tolerability. It confirmed a safety and PK (pharmacokinetic) profile consistent with studies in China patients. Importantly, surufatinib showed early signs of utility (two partial responses, n=15 pNET patients) in heavily pre-treated patients with some receiving up to eight different lines of therapy. The maximum tolerated dose/recommended Phase II dose was established as 300mg daily for global development.

Global development plans closely follow China

HCM is building its China oncology commercial team ahead of surufatinib launch, with the intention to have full coverage of China in preparation for launch late 2020. NET will be surufatinib’s first (potential) approved indication. Non-pancreatic NET is estimated by HCM to represent ~80% of NET cases in China. SANET-p Phase III data (pancreatic NET H1 20) is critical to widening its market potential to an additional 10–20% of patients. Based on the SANET-ep data, of the Chinese patients with advanced disease, prior to enrolment around 40% had received treatment with chemotherapy, 30% with a somatostatin analogue and c 10% with everolimus; on the strength of the data presented we believe that surufatinib could provide a universal treatment for NET, particularly if SANET-p provides a similar benefit to patients with pancreatic NET (reduction in risk of disease progression). Pricing strategies in China will be important given competitor NRDL reference pricing of $2,007 per month for Sutent and $1,320 per month for Affinitor.

HCM plans to investigate surufatinib in other solid tumours both as monotherapy and in combination therapy with a PD-1 focus. HCM has multiple PD-1 collaborations in place; the Tuoyi (Junshi collaboration) dose expansion study in multiple tumour types is anticipated to start in Q419.

Following encouraging proof of concept data from the Phase II study in BTC, a pivotal open-label Phase IIb/III trial (NCT03873532) in China initiated in 2019. Interim data on the first 80 patients recruited into this trial are expected mid-2020. BTC represents a high unmet need due to limited treatment options and an increasing patient population.

Surufatinib’s global registration clinical trial is in planning stage. The end of Phase II meeting with the FDA is expected in Q419, with US and Europe Phase II/III estimated to start in H1 20.

Competitive landscape in NET

To date no targeted therapies have been approved across the broad NET population. Although progress has been made in the treatment of NETs, most approved treatments are for subsets of NET, dependent on the primary site of NET, stage and grade. Treatment options include surgery where possible and long-term systemic treatment to treat symptoms and suppress tumour growth include somatostatin inhibitors such as Novartis’s Sandostatin LAR (octreotide) and Lutathera (177Lu-Affinitor), which slow the hormonal production driving the formation of NETs (ex lung). Approved drugs include somatostatin inhibitors, Afinitor, an mTOR inhibitor, and sunitinib, a tyrosine kinase inhibitor. Exhibit 2 highlights the different treatment options by NET subtype available in the US. In China, the Afinitor label has now been expanded to include the same NET indications as its USA label (pancreatic, GI and lung).

Exhibit 2: US NET epidemiology

Source: HCM interim results presentation 2019

The treatment landscape is fragmented, for example Lanreotide data (CLARINET) supports use in pNET, and GI NET, while Sutent (sunitinib) data support its use in pNET only. Targeting aberrant angiogenic VEGF signalling has been proven with Sutent in treating pancreatic NETs, demonstrating a 5.9-month improvement in mPFS vs placebo (HR=0.42; p<0.001). However, Phase III efficacy for VEGFR inhibitors in treating extra-pancreatic NETs had not been established until SANET-ep. These data could establish surufatinib as a leading treatment option. Everolimus (Afinitor) has the broadest US label to date and is approved for pNET, and non-functional NET of lung or GI primary site of origin (full US prescribing label). This is based on data from the Phase III RADIANT4 trial. Afinitor is not approved for functional non-pancreatic NET. In China Afinitor is now approved for the same broad range of NETs as in the US (pancreatic, GI and lung). A limitation of Afinitor is that as an immunosuppressive agent, as such patients have increased risk of localised and systemic infections including pneumonia, bacterial, viral and fungal inhibitions of a severe or fatal nature. In its registrational study in patients with pNET tumours of a GI or lung origin, Afinitor was discontinued for adverse reactions in 29% of patients and dose reduction or delay was required in 70% of everolimus-treated patients. Serious adverse reactions occurred in 42% of everolimus-treated patients and included three fatal events (cardiac failure, respiratory failure and septic shock). Surufatinib Phase II data supported its broad spectrum efficacy in NET including Sutent/Afinitor failures; it is likely that the three-pronged target inhibition is its differentiating factor in patients who have progressed with these latter drugs.

Surufatinib multiple modes of action in cancer

Surufatinib is an oral angio-immunokinase inhibitor that targets VEGF1, 2 and 3; FGFR1 and CSF-1R kinases. During the last decade modalities of cancer treatment that involve targeted therapy (addressing cancer specific mutations), harnessing the power of the immune system and cancer cell blood supply to treat the tumour microenvironment are additional armaments to traditional chemotherapy and surgical treatment options. As such combination therapies evaluating drugs with multiple mechanism of action are approved (eg EGFR inhibitor plus PD-1 inhibition) or undergoing late-stage testing in a multitude of cancer. Surufatinib is a small molecule therapeutic protein that addresses three distinct kinases and thus multiple different regulatory processes that enable cancer proliferation:

Anti-angiogenesis via VEGF receptor and FGFR inhibition. VEGF inhibition is a well-known mechanism of action, with leading antibody Avastin (FY18 sales: $7.0bn) approved for over 30 tumour types in its decade on the market. FGFRs are transmembrane receptor tyrosine kinases that mediate cell differentiation, migration and survival; genetic aberrations to FGFRs can lead to a gain-in-function and have been implicated in the progression of a range of cancers.

CSF-1R is a cell-surface protein that acts as the receptor for the cytokine CSF1, which controls macrophage (a type of white blood cell) function. Inhibition of CSF-1R limits the production of pro-tumour macrophages, which, among other functions, is believed to aid in angiogenesis, tumour cell invasion and evasion of the immune system. CSF-1R activity, which is very novel and potentially important for PD-1 combinations as there may be synergy (both act by activating the immune system against the cancer), may differentiate it from competitor PD-1/PD-L1 inhibitor combination studies with axitinib (Pfizer) or lenvatinib.

Surufatinib’s three-in-one profile bodes well for current and evolving treatment paradigms in oncology where immunomodulatory drugs such as checkpoint inhibitors are being used in earlier lines of therapy.

Valuation

We value HCM at $5.7bn (£7.01/share) vs $5.7bn (£6.99/share) previously. We now forecast surufatinib is launched in China in late 2020 (previously early 2021). We have increased 2020 R&D expenses and rolled our model forward in time. We use a risk-adjusted net present value (NPV) method to discount future cash flows for the innovation platform (savolitinib, fruquintinib, surufatinib, epitinib, HMPL-523 and HMPL-689) (valuation of $4,131.4m). We use earnings-based multiples for HCM’s commercial platform (subsidiaries and JVs). Applying a 20.4x multiple on our forecast 2019 net attributable profit (equity in earnings of equity investees, net of tax) for the JVs of $39.2m yields a valuation of $800.4m (Exhibit 3).

Exhibit 3: HCM SOTP valuation

Product

Indication

Launch/peak

Peak sales

Value ($m)

Probability

rNPV ($m)

rNPV/ share ($/share)

rNPV/ share (£)

rNPV/ ADS ($/ADS)

NPV per share (£)

Savolitinib (AZD6094)

PRCC

2024/2028 (China)

$64m (China)

102.9

50%

63.2

0.09

0.08

0.47

0.13

2022/2026 (ROW)

$267m (RoW)

73.2

75%

51.6

0.08

0.06

0.39

0.09

ccRCC

2025/2029 (China)

$169m (China)

92.7

35%

27.8

0.04

0.03

0.21

0.11

2023/2027 (ROW)

$658m (RoW)

98.7

35%

34.5

0.05

0.04

0.26

0.12

NSCLC

2022/2026 (China)

$387m (China)

260.5

75%

193.5

0.29

0.24

1.45

0.32

2022/2026 (ROW)

$1.7bn (RoW)

372.7

75%

279.6

0.42

0.34

2.10

0.46

Gastric cancer

2023/2027 (China)

$326m (China)

144.5

35%

46.3

0.07

0.06

0.35

0.18

2024/2028 (ROW)

$757m (RoW)

134.6

35%

47.1

0.07

0.06

0.35

0.17

Fruquintinib

CRC

2018/2022 (China)

$199m (China)

99.3

100%

99.3

0.15

0.12

0.74

0.12

2023/2027 (ROW)

$565m (RoW)

1,205.2

75%

900.6

1.35

1.11

6.76

1.48

NSCLC

2025/2029 (China)

$393m (China)

82.2

50%

33.3

0.05

0.04

0.25

0.10

2025/2029 (ROW)

$721 (RoW)

808.5

50%

382.7

0.57

0.47

2.87

0.99

Gastric cancer

2021/2025 (China)

$340m (China)

168.7

75%

124.5

0.19

0.15

0.93

0.21

2025/2029 (ROW)

$392m (RoW)

485.4

50%

231.0

0.35

0.28

1.73

0.60

Surufatinib

NET

2020/2025 (China)

$169m (China)

410.8

90%

369.1

0.55

0.45

2.77

0.51

2024/2028 (ROW)

$454m (RoW)

656.2

50%

311.6

0.47

0.38

2.34

0.81

BTC

2022/2026 (China)

$187m (China)

404.8

75%

301.8

0.45

0.37

2.26

0.50

2024/2028 (ROW)

$143m (RoW)

182.1

50%

85.2

0.13

0.10

0.64

0.22

Epitinib

Glioblastoma

2023/2027 (China)

$42m (China)

137.7

30%

37.6

0.06

0.05

0.28

0.17

HMPL 523

Haematological cancers

2023/2027 (China)

$143m (China)

288.5

30%

80.6

0.12

0.10

0.60

0.35

2025/2029 (ROW)

$584m (RoW)

799.7

30%

227.2

0.34

0.28

1.70

0.98

HMPL-689

Haematological cancers

2024/2028 (China)

$102m (China)

158.5

30%

40.4

0.06

0.05

0.30

0.19

2025/2029 (ROW)

$468m (RoW)

591.4

30%

162.7

0.24

0.20

1.22

0.73

Commercial platform

800.4

100%

800.4

1.20

0.98

6.00

0.98

Unallocated costs

(488.4)

100%

(488.4)

(0.73)

(0.60)

(3.66)

(0.60)

Net cash June 2019

237.0

100%

237.0

0.36

0.29

1.78

0.29

Terminal value

1,022.4

100%

1,022.4

1.53

1.26

7.67

1.26

Valuation

 

 

 

$9,330.3

$5,702.7

$8.6

£7.01

$42.78

£11.47

Valuation of IP only

 

 

 

$6,209.3

$4,131.4

$6.20

£5.08

$30.99

£7.64

Source: Edison Investment Research. Note: Non-risk adjusted NPV per share assumes 100% probability of success. FX rate $1.22/£. Number of shares outstanding = 666.57m

CKHH offering removes a significant overhang on the shares

In June 2019, major shareholder CKHH completed an offering of some of its ADSs, which reduced its holding in HCM to 51.15% (from 60.2% previously). CKHH recently announced it had reduced its holding by 1.3% to below 50% (49.9%). This will enable CKHH to deconsolidate HCM from its accounts. CKHH remains committed to its investment in HCM and has no plans in the near future to reduce its holdings further. We see this as a positive for HCM as it removes a significant overhang on the shares. We note that this latest offering has had no effect on the number of shares in issue and does not dilute any current shareholders.

Exhibit 4: Financial summary

US$000s

 

2017

2018

2019e

2020e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

241,203

214,109

182,885

194,589

Cost of Sales

(175,820)

(143,944)

(128,232)

(129,503)

Gross Profit

65,383

70,165

54,653

65,085

Research and development

(75,523)

(114,161)

(152,500)

(207,000)

Other overheads

(43,277)

(48,645)

(51,604)

(52,752)

EBITDA

 

 

(50,692)

(88,975)

(144,811)

(189,201)

Operating Profit (before amort. and except.)

 

 

(53,417)

(92,641)

(149,452)

(194,667)

Intangible Amortisation

0

0

0

0

Operating Profit

(53,417)

(92,641)

(149,452)

(194,667)

Net Interest

(235)

4,969

2,458

(726)

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(53,536)

(86,655)

(146,994)

(195,393)

Profit Before Tax (reported)

 

 

(53,536)

(86,655)

(146,994)

(195,393)

Tax

(3,080)

(3,964)

(5,004)

(5,200)

Equity investments, after tax

33,653

19,333

39,233

40,813

Profit After Tax (norm)

(22,963)

(71,286)

(112,765)

(159,780)

Profit After Tax (reported)

(22,963)

(71,286)

(112,765)

(159,780)

Minority

(3,774)

(3,519)

(5,000)

(5,000)

Discontinued operations

0

0

0

0

Net profit (norm)

(26,737)

(74,805)

(117,765)

(164,780)

Net profit (reported)

(26,737)

(74,805)

(117,765)

(164,780)

Average Number of Shares Outstanding (m)

617.2

664.3

666.6

666.6

EPS - normalised (c)

 

 

(4.3)

(11.3)

(17.7)

(24.7)

EPS - normalised and fully diluted (c)

 

 

(4.3)

(11.3)

(17.7)

(24.7)

EPS - (reported) (c)

 

 

(4.3)

(11.3)

(17.7)

(24.7)

Average number of ADS outstanding (m)

123.4

132.9

133.3

133.3

Earnings per ADS - normalised ($)

 

 

(0.02)

(0.06)

(0.09)

(0.12)

Earnings per ADS ($)

 

 

(0.02)

(0.06)

(0.09)

(0.12)

BALANCE SHEET

Fixed Assets

 

 

165,737

161,577

176,169

192,947

Intangible Assets

3,738

3,533

3,301

3,028

Tangible Assets

14,220

16,616

22,207

27,014

Investments

147,779

141,428

150,661

162,905

Current Assets

 

 

432,195

370,541

257,157

71,922

Stocks

11,789

12,309

10,540

10,644

Debtors

53,566

56,392

56,000

29,855

Cash

85,265

86,036

64,729

30,534

St investments

273,031

214,915

125,000

0

Other

8,544

889

889

889

Current Liabilities

 

 

(104,600)

(85,479)

(101,457)

(94,779)

Creditors

(25,344)

(26,180)

(42,158)

(35,480)

Short term borrowings

(29,987)

0

0

0

Other

(49,269)

(59,299)

(59,299)

(59,299)

Long Term Liabilities

 

 

(8,366)

(34,384)

(34,384)

(34,384)

Long term borrowings

0

(26,739)

(26,739)

(26,739)

Other long-term liabilities

(8,366)

(7,645)

(7,645)

(7,645)

Net Assets

 

 

484,966

412,255

297,485

135,705

Minority

(23,233)

(23,259)

(28,259)

(33,259)

Shareholder equity

 

 

461,733

388,996

269,226

102,446

CASH FLOW

Operating Cash Flow

 

 

(8,943)

(32,847)

(99,217)

(147,195)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(5,019)

(6,364)

(10,000)

(10,000)

Acquisitions/disposals

0

0

0

0

Dividends

(1,594)

(1,282)

(2,000)

(2,000)

Equity financing and capital movements

291,737

(2,322)

0

0

Other

(255,761)

50,116

89,910

125,000

Net Cash Flow

20,420

7,301

(21,307)

(34,195)

Opening net debt/(cash)

 

 

(56,914)

(328,309)

(274,212)

(162,990)

Increase/(decrease) in ST investments

248,761

(58,116)

(89,915)

(125,000)

Other

2,214

(3,282)

0

0

Closing net debt/(cash)

 

 

(328,309)

(274,212)

(162,990)

(3,795)

Source: Hutchison China Meditech accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison, in consideration of a fee payable by Hutchison China MediTech. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Hutchison China MediTech and prepared and issued by Edison, in consideration of a fee payable by Hutchison China MediTech. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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