HCM 和黄医药(ADR)

Christian Hogg

Welcome everybody to the 2016 Hutchison China Meditech Full Year Result Presentation. We've got quite a extensive presentation here, I'm going to try and cover it in about 35 minutes and then open it up or Q&A after that. This presentation is very, very detailed. The reason for that is we are now entering into a point with many of our drug candidates that we have to start looking at the competitive environment, what competitors are out there, what's in the clinic, what do we feel are points of differentiation. So, we're going to all the detail, I will not cover with that depth in this presentation, it would take too long. But it will layout all the details so that analysts can look at that in due course and come to your own conclusions. Overall, we’ve had a great year in 2016 on a high level. We continued against our strategy, the two pronged strategy, of cash generative China business that is generating significant resource to help fund our increasing investment on the innovation side. So the China business, China Pharmaceutical Business, in 2016 had a fantastic year. I'll take you through the numbers later. But net profit after tax was over $70 million. Now, we had a big one-time gain in there from the land-up in Shanghai, a $40 million gain. But core underlying profit growth on our China business was up 19% last year, apples-to-apples, excluding the one-time gain from the property. So, the business doing very well in China, and represents a big platform for us upon which to launch our oncology drugs one they do get growth in China. On the innovation platform, we've now got eight clinical drug candidates in 30 clinical studies around the world. We just published -- we've just announced that we've met all the clinical endpoints, primary and secondary endpoints, of our big Phase III study in colorectal cancer for fruquintinib just about 10 days ago. And that's the first for us; after 15, 16, 17 years of grinding hard work we got one, and it was our first one. So, I think what makes us most excited is two things; number one, getting that full dataset out. We're hoping to target to get that full dataset out at ASCO or around ASCO; and the second thing that makes us quite excited about our business is the fact that we've got seven other drug candidates, all coming behind it with eight pivotal studies, all underway or scheduled to start this year. So this is a big late stage clinical portfolio we have. So, high level on the results, you can see that revenues were up 21% to $216 million. Net income was $11.7 million, up 46% versus last year. But as we always say, our business is about generating cash from the China business to fund the innovation. So, we're not a PE type company, we’re some of the parts type company. You have to look at our China business value that for what it's worth, and then look at our pipeline value that for what it's worth. If you look at the two businesses separately, you can see on the commercial platform, $70.3 million net income in the year $40.4 million of that was one-time land gain, so gain $29.9 million, up 19% from the year before. So base operations doing very well. On the innovation side, you can see big investment in the pipeline. So last year, our spending on clinical development and pushing our portfolio of clinical drug candidates forward was about $76.1 million. Cash-wise, we're in a pretty good cash position, thanks to the NASDAQ IPO. We've got about $173 million at the group level, at the end of the year, $173 million in cash. About $70 million of that is unutilized banking facility. So, actual cash in hand is a little bit over $100 million. But that doesn't take into account the cash in our joint ventures. Our joint ventures have another $91 million in cash in them. Some of the land compensation et cetera coming in, and now that's coming back up to the Chi-Med level. We expect to get about $40 million dividend from our Shanghai joint venture to Chi-Med sometime in the first half of this year. So, that'll help. Guidance, we gave guidance last year for the first time. Again, it's for us, we struggle over guidance because we're not really a company that is trying to indicate to a million here or million there, how much profit we're going to make. It's not about that. For us, it's about explaining what the clinical spend is and why. And separately, explaining how our China commercial business is doing and is it continuing on track. And when you give those two pieces of information then guidance on the whole Company is pretty straightforward. So, you can see that for 2016 we were ahead of our guidance, for 2017 the clinical trial spending, which is the key area for us as our eight pivotal studies are enrolling starts to increase. China business continues to do well. We expect growth continuing in our China business. And when you add it all up, you have a situation where the clinical spend is more than the profits coming out of China. So, you have a loss for the full year. But we have probably two or three, potentially four, things that we are working on that could significantly alter this picture. And that's what you get in a company like us is one that is still active in so many areas, potential licensing deals, many-many things that are going on that could -- Eli Lilly for example, we all know that Eli Lilly has an option on the global rights for fruquintinib, if they were to exercise those rights that would alter this picture pretty significantly. So, I think guidance for you analysts is just to make sure that all the things are in the right places, it's about understand that it’s many moving parts. So, on the innovation platform, exceptional scale for the pre-approval biotech, we have over 330 scientists and staff in Shanghai, managing all of these eight programs, I won't go into that in a lot of detail. Many of you already know this. But the main strengths that we position ourselves as having our chemistry, Weiguo, Dr. Weiguo Su, our Chief Scientific Officer, isn’t here today, he's arriving one day late because he was in Beijing on Sunday receiving an award from the state government as the leading innovator in this field in 2016. So, we've built a superb team of people that is able to manage this broad group of clinical activities. Chemistry, as I said is our age. It's all about selectivity. I think we look, really look forward to presenting the FRESCO phase III data at ASCO, because fruquintinib has been designed to be a really uniquely selected VEGFR inhibitor. The theory that we’ve always -- the series that we've always worked against has been that selectivity will lead to patients being able to tolerate the drug longer, less off target toxicities, better target coverage. And if you’re covering the target for longer periods of time, 24 hours a day, that lead to clinical benefit. Now, the FRESCO study for fruquintinib, we've said that we've met all of our endpoints. But when we're able to present the full dataset, people will be able to see the level to which we've met all of those primary endpoints and the safety profile of this drug, and the tolerability of this drug. And that’s what we're mostly excited about. So, hopefully, fruquntinib is going to be able to support, from a scientific standpoint; once the scientific community is able to study those results and evaluate those hopefully they will conclude that fruquintinib delivered against this strategy, which is superior selectivity leads to better tolerability, leads to better efficacy ultimately. And relative to all the first generation multi-kinase inhibitors, many of which here, a lot of kinases that are off target and have lots of unnecessary or lots of side effects essentially, fruquintinib doesn't have that kind of problem. So, the 30 active trials on eight drug candidates, I've had to split this chart into two now. It's on two pages, so it's easy to read. But what you can see on the first four compounds, they're all now in late stage. In most cases, they're in multiple late stage clinical trials. Savolitinib is the big one this year, moving into the global Phase III study in papillary renal cell carcinoma; hopefully, at the end of the year, moving also into the global Phase III on second line non-small cell lung cancer. Fruquintinib, you can see the colorectal cancer study there successful. But we have the third-line lung cancer study coming quickly behind it, and we have a Phase III in second line gastric cancer that will start enrolling this year as well; so, moving rapidly in many indications on all of these drug candidates. Sulfatinib we just published last week the Phase II data in neuroendocrine tumor patients at the European Symposium in Barcelona, outstanding efficacy in those patients. So, we have two Phase IIIs enrolling in China on sulfatinib. And epitinib, the brain penetrating EGFR inhibitor, we published at the world conference on lung cancer in Vienna in December, very strong efficacy data in patients with brain metastasis; 70% of patients with response in brain meds. So, a Phase III will start on epitinib this year as well. Looking at the second wave of innovation, it's all now in proof-of-concept. So, you've the SYK inhibitor, you've got the PI3K Delta inhibitor, you got theliatinib, which is a compound that we haven't spoken much about through the years, but designed to be a highly potent EGFR inhibitor 5 to 10 fold more potent than Iressa Tarceva, so we're starting to see efficacy in EGFR protein over expression patients, which is a patient population that currently has very few treatment alternatives. And the FGFR inhibitor 453 just starting off in Australia in Phase I recently, so the second wave is now all entering into proof-of-concept. The third wave of innovation that we've been working on for the last three-four-five years is immunoncology focused. We have multiple programs that are working their way through pre-clinical, and we expect those to start making their way into the clinic over the next year or two. They are being designed in a manner that makes them high potential for combinations with our first wave and second wave of innovation. Ultimately, this is about creating a basket of therapies that are able to be combined together; either as first line treatments, first line combinations, monotherapies, combination therapies, or use in later lines after immunoncology agents, for example. So, we've tried to give a bit of a feel for the scale of the market potential of these eight Phase 3 pivotal studies that we have here. This is a chart we showed before. It just gives the read on the pivotal trial readouts. You can see the circled ones for fruquintinib in colorectal is already read-out and has met all endpoints. This chart is probably a bit more interesting with regards to, at least our view on, what the market potential is in each of these pivotal indications that we're working on. And you can see we've tried to layout when do we believe the potential launch will be; what's the general incidence of patients in the markets that we're working on, and we're developing these drug candidates in; what’s the approximate wholesaler acquisition costs for each of these drugs, showing reference tyrosine kinase inhibitors, so that that can give you a sense of what to compare it to; and then what's the medium PFS; how long are patients on these drugs for. That allows you to in the case of fruquinitinib in third line colorectal cancer find yourself, to at least our view of what we think is a deliverable peak sales target of about $110 million to $160 million for third line colorectal cancer in China. Now, based on the Lilly contract and the deal that we have with Lilly, that will yield between $20 million and $35 million after tax income to Chi-Med. When we put that together, it dawned on me actually that's not a whole lot different than our current entire commercial platform, that one indication. Now, that shows you how important each of these indications are with regards to what they can deliver to company as far as net income, going forward. So, to give some further perspective, and that's where we get into a lot more detail for you to study later. But there are two tyrosine kinase inhibitors that have been launched into the Chinese market by Chinese companies. One is a drug called Apatinib for Hengrui and one is a drug called icotinib from Beta Pharma. They've done very well. Apatinib, its second year sales; it's a VEGFR inhibitor approved in third line gastric cancers, so very similar indication to where fruquintinib is going; its second year sales is $116 million; its third year sales, which is 2016, it's about announced is around the $140 million. So, very rapid uptake of these therapies because there is such a large unmet medical need in China. You’ve got icotinib, the EGFR inhibitor, which is essentially very close to Tarceva as far as chemical structure; Icotinib, fifth year sales about $145 million; so big patient population; big unmet medical need. And that’s why we believe, fruquintinib as a really superior drug candidate, is going to be able to take some significant market share. Savolitinib, I won’t go through in a lot of details, because many of you have seen these charts in the past. But c-Met is a very big and important target; lots of failures; we believe, we through structural design of Savolitinib, have addressed the main issues associated with the whole first wave of selective c-Met inhibitors, which was the kidney toxicity driven by the qingling ring you can see in this pink box, common to all of the first wave c-Met inhibitors. So, Savolitinib now has actually been in almost 500, over 460 patients, and still not a single issue with kidney toxicity. You can see on this chart the unmet medical need on c-Met positive for renal cell carcinoma, about $200 million to $300 million market potentially. It is a niche, but these patients are very specific patients that we now have a companion diagnostic. We’re able to select these patients, and we’re able to identify the ones that should respond to Savolitinib. Lot of information here about what are current treatments in clear cell, and what are their efficacy and non-clear cell, but basically in a nutshell, the current treatments for clear cell renal cell carcinoma don’t do very well in non-clear cell. So, there is a big unmet medical there for patients. Our results that we published, the Phase II data, basically show 18% response -- 18.2% response in MET positive patients. If you're not MET positive, you don’t response basically. So, zero percent response, and medium PFS in MET positive patients is 6.2 month. To this point, there is no evidence of any other therapy providing that length of efficacy in c-Met positive PRCC patients. So, based on that level of efficacy, we are now moving into the Phase III globally, Astra and Chi-Med are working together on this. And we expect to dose our first patient in the next month of two on that. Safety is Savolitnib's big, big advantage relative to this sutents of world and the afinitors of the world. You can see here grade three adverse events, greater than grade three adverse events; Savolitinib 19%. You look at sutent and and votrient, Sunitinib and Pazopanib almost 80% grade three adverse events for these multi kinase inhibitors. So, the selectivity of Savolitinib again is really cutting to removing all of this off target toxicity, and that’s one of the big advantages and it will be a big advantage in the context of potential combinations. So, right now we’re looking at Savolitinib in combination with Tagrisso in lung cancer in combination with durvalumab; AstraZeneca's PDL1 antibody in clear cell renal cell carcinoma. And all of these dose finding studies have been working out well. We do Iressa, we have another combination with Savolitinib, no significant toxicity; so all good. The bigger opportunity on Savolitinib in lung, I won’t go through this in huge detail, but I think maybe this one is the biggest, the second line non-small cell lung cancer activities we've got. Tagrisso has launched, is doing very well. I believe their sales last year in their first year were around $460 million for these second line non-small cell lung cancer patients with the T790M mutation; 45%-50% of patients have that mutation and Tagrisso addresses that patient population. But you can see here 15% to 20% of patients are MET positive, and they need a MET inhibitor. So our combination study of Tagrisso and Savolitinib really helps this patient population up here. And we have the example, many of you seen this before, of the lung cancer patient in Boston, whose lung cancer metastatized to the lymph node. You can see the solid tumor on the side of the neck. And four weeks of treatment, and 80%-plus tumor shrinkage, because she's a MET positive patient, T790M negative patient. Moving on, third line is a big area. Tagrisso now its second line treatment, but also Astra is working together it into the first line setting. Once patients become resistant to Tagrisso, which they do, c-Met is a big reason for that resistance. So, we have another big Phase II study globally going on in Tagrisso progresses. And those patients I think will benefit greatly from Savolitinib. So Savolitinib has many, many areas that we're looking at in the lung cancer treatment algorithm. All of those studies many of them phase II studies all moving in parallel. Gastric cancer it's a very difficult disease very big in Asia. And you can see that about 6% to 10% of gastric cancer patients are driven by c-Met. So, c-Met gene amplified. So, we have multiple studies underway; one in South Korea, this particular patient in South Korea on the VICTORY trial with Samsung Medical Center. You can see here in the base PET-CT Scan, all of these black areas are fast proliferating solid tumors driven by MET. This patient has a very high level of c-Met gene amplification. Now, you put this patient on Savolitinib monothreapy and 17 days later all of that cancer sub-proliferation is shutdown, because you've shut-off the signaling pathway. So, this is a very, very sensitive patient to c-Met inhibitor. And we are continuing to work on this. This is obviously very encouraging to see this kind of efficacy in a very sick patient. But we continue to work on it. But I would say gastric cancer is definitely more the follow-up after lung and papillary renal cell carcinoma. So, the point I would like to make on this is that Savolitinib is a multi-fascinated drug candidate that is going to be used as a monotherapy, as well as in combinations in many different cancer types where MET is apparent basically. So, moving to fruquintinib. I've said many times it's, in our view, the most selective and potent VEGFR inhibitor in clinical trials today, globally; these charts support that. However, at the end of the day, it comes down the clinical trials, in particular, the pivotal studies to support that kind of statement. The Phase II data on third line colorectal cancer was very strong, medium progression free survival of over four months compared to the placebo just one month. Overall survival was, placebo was about 5.5 months versus the treatment arm 7.6 month. This was a 71 person Phase II study. That's a small study. The Phase III study was 416 patients, much larger study. So we, as I said earlier, we look forward to publishing the Phase III data in due course. And I think we feel that it’s certainly this Phase II data has supported our confidence in where we're going with Phase III or what we will publish in Phase III. Very detailed chart for study in this format. But what we've laid out here are all the VEGFR inhibitors that are being studied in third line colorectal cancer in China and outside of China. The main comparator really is regorafenib from Bayer. Now regorafenib its brand name is STIVARGA, it was approved in the U.S. and Europe for third line colorectal cancer. Its current sales are somewhere in the region of 300 million, 400 million U.S., just in that patient population. We believe fruquintinib is global best-in-class. And when it comes to publication of or presentation of the Phase III data, I guess, the scientific community will decide whether our belief is indeed accurate. But you have to be careful. Third line colorectal cancer patients in China are very different from third line colorectal cancer patients in America, generally. In America or Europe, patients will get exposure to Avastin or erbitux in the early lines of treatment in colorectal cancer, whereas in China they're getting exposure mostly to chemotherapy. But for regorafenib they did two studies, a global study called the CORRECT study, which led to approval in the U.S. and Europe. They also did the CONCUR study, which is the last two columns of this chart which was in China. So, we have the ability to take the FRESCO study and look at it in the context of the CONCUR study, to get a sense of how does fruquintinib stack up to regorafenib. And I think that's what, when we do publish the full data set, that's what the scientific community will be looking at. With regards to other competitors in China, in this field in third line colorectal cancer, there is some activity. But these drug candidates are not going to give us any sleepless nights on fruquintinib based on the Phase III data. In third line lung cancer, similar story; good Phase II data that led to good size payments from Eli Lilly; the Phase III in on fruquintinib is about halfway enrolled, little bit more than halfway enrolled; it’s a 520 patient study; it's accelerating now rapidly, because with the FRESCO positive readout, all the investigators in China are all quite excited and moving on enrollment of other studies on fruquintinib; so that's a positive thing. A drug called, drug candidate, called anlotinib from Sino Biopharm has completed a Phase III study; it's a VEGFR inhibitor; it's completed a Phase III study in third line non small cell lung cancer; they’ve stated it’s positive; they haven't given any further details on that. So, we'll see. We'll see but ultimately, I think, fruquintinib should do very well in non small cell lung cancer; Apatinib from Hengrui, the drug that you saw on the previous chart, was doing about $140 million in sales in its third year. They're also studying apatinib in third line non small cell lung cancer, having had a failure, they've adjusted the patient population that they are going after and are doing a second Phase III. But it's not complete yet. Gastric cancer for fruquintinib, you can see in combination with paclitaxel; you're seeing in the second line setting, you're seeing over 30% increase in the exposure of paclitaxel. So when you combine paclitaxel and fruiquintinib, the exposure on paclitaxel increases. That allows for you to cut the dose essentially, and that helps on the safety side. So, what we’ve seen is the combination in the big Phase Ib that we’ve already presented, the safety was fine relative to paclitaxel alone. The combination adding fruiquintinib to paclitaxel doesn’t really cause a whole lot of trouble. So, we’re about to start Phase III in China with this combination. Sulfatinib, we just published last week some data on sulfatinib, the Phase II data. Neuroendocrine tumors, you can see they are tumors in the intestines or it actually it's hormone cancer basically -- it’s a cancer of the hormone system. But what they do is they produce these peptides in hormones that cause endocrines symptoms. The current treatments for them are some other start in analogs that basically just shut down these symptoms. But they don’t shrink the tumors. They basically keep it all stable. So, it's quite a competitive environment, lot of therapies being developed. Now, sulfatinib, we published recently information around the innovation of CSF-1R. CSF-1R, we didn’t know this. Going back year or two ago, we thought the primary kinase is the sulfatinib inhibitors with just VEGFR and FGFR-1. But what we noticed in our clinical trials was liquifaction of the tumors of certain patients. And that is basically almost like an immune oncology response, where the tumor would stop growing and then after a couple of cycles, it would just collapse on itself. And that led us to think well maybe some kind of the immuno-oncology aspect for sulfatinib. And so we worked closely with our investigators in China on this, as well as broadening some of the work on mechanism of action of sulfatinib. And as it turns out sulfatinib is a highly potent inhibitor of CSF-1R. Now, CSF-1R is a receptor, when hit it produces microphages, which essentially cloak or shroud the cancer cell, giving it a shroud so the T-cells come in and kill the cancer cell. When you inhibit is the production of these microphages, you leave that cancer cell vulnerable to T-cells coming in and doing what they do, which is to essentially kill that cancer cell. So, that’s where we’re going with this. It seems that sulfatinib does have that additional angle to it, which is quite a point of differentiation versus many of the therapies out there today. So, the Phase II data tremendous Phase II data, you can see 17% response in pMET, medium PFS, 19 months, non-pMET medium PFS 13 months, decent safety profile. So, encouraging; and the two big Phase IIIs we have running in China are in these two areas. So, we would have quite high levels of confidence that we will succeed in those Phase IIIs. Also, if you look closely at this chart you'll see that Sulfatinib patients or patients treated with Sulfatinib respond well even if they've failed on sutent and afinitor, which are really the first line treatments for these MET patients. So, you've got a different mechanism of action that is providing clinical benefit. You see the scale of the tumor response. These are liver metastasis of angina MET and rectal MET. And you can see the big impact from baseline to week 52. It's a very slow growing tumor. It's a very slow growing cancer, but it's got slow restating. These visual show you patients after 52 weeks and 56 weeks on Sulfatinib, the kind of benefit you're seeing in liver MET. It's also gives us some interest in clearly the drug exposure in the liver is strong. So it's give us some interest in going after HCC as well. Moving on to Epitinib, the brain penetrating EGFR inhibitor. These red bars are patients with brain metastasis. Now, historically, Iressa and Tarceva didn't do much for patients with brain metastasis, not being designed to penetrate the blood brain barrier, particularly well. Epitinib is designed to penetrate the blood brain barrier. So what you’re seeing is 70% response rate in brain mets. And that's never been single for that level of response. You can see here Epitinib, 75% response in the lung, 50% response in the brain, so the tumor shrinking by 50%. So, we're now quite aggressive on this one moving very rapidly into a phase III in China, and will be in Phase III in China before the end of the year. Case study on Epitinib, this individual, when brain metastasis get so bad, generally, it will lead to incapacitation of that patient; so either if they go into a coma or they can't walk, it's just basically incapacitation. So, this particular patient presented walking with crunches, barely able to move; put on the Epitinib and within a couple of cycles was functioning perfectly well. We had another case where an individual who had fallen into a coma, the brain mets had grown so much that patient had fallen into coma in Guangzhou was Epitinib was administered in less than a week, they can now out of Coma. So it has an immediate impact of getting that EGFR inhibitor into the brain and shutting down cancer cell proliferation into the brain. I want to go through all the other drug candidates. Theliatinib, this is a chart that we’re adding for the first time. And this is meaningful, there is only one patient. But in this area, you're able to select patients with high levels of EGFR protein over-expression. This is a problem that is very broad in an esophageal cancer head and neck cancer, where there are very few treatment options. And if you can select the right patient, as we have in this case and see tumor shrinkage of 30% tumors, so this is liver metastasis as well from an esophageal cancer patient with high levels EGFR protein over-expression. This is very rare to see a patient like this responding. So now, we're moving very rapidly into a Phase Ib study in esophageal cancer patients with theliatinib to get more and more data and evidence. There are well over 4000 new esophageal cancer patients a year in China. So, it's a big unmet medical need. And most of them have a high level of EGFR protein over-expression or at least a large portion of them do. So, I'm not going to take you through all the other programs, 523 the SYK inhibitor, great pharmacodynamic data showing the higher you dose 523 the lower goes the immune system and the B-cell activation. In hematological cancer, this is probably major focus area at the moment, is going hard on this. We've got IND approval in China. We're enrolling our hematological cancer study on 523 in China rapidly. You can see Gilead's compound Entospletinib terrific efficacy, but it has very levels of toxicity. So it's, in our view 523, is a superior compound and we're moving very rapidly in that area. I won't take you through all of these details; 689, we just received a couple of weeks ago clearance in China to go into clinical studies on 689 our PI3K delta compound that we believe is about a selective PI3K delta compound with a terrific pharmacokinetic profile. And so we're moving now rapidly on 689. So, that's the innovation platform. I will leave you to study the chart later, and if you have questions you can always reach out to us. On the commercial side, the chart that always shows our 13 year history, our key competitive advantages; growth of the total commercial business, 21% in 2016, that's despite opening two big new factories, while really one and the next, the one in [Bojo] is coming this year. But there's been a lot of change on our commercial business with a lot of structural change, opening new factories and moving 500 people, 40 kilometers in Shanghai to our new facility. But we've done it and we've done it without missing a beat. The China business has done extremely well this year. So the profit, you can see here $70.3 million after tax, particularly strong performance from our prescription drug business. Our core product, She Xiang Bao Xin pill coronary artery disease product sales up 23%. This is a very mature product. And to be able to grow the business at that rate has been terrific, it's great execution. Now, there is a fair amount of pricing in there as we've taken the prices up. But I'd say it's about half and half pricing versus volume growth, the OTC’s business been fairly stable. Seroquel under exclusive commercialization deal that we have with AstraZeneca has done very well, up to $34 million last year, and the smaller products. But the key thing about our commercial business in China is you have seven or eight key products to represent 90% of the profit in our commercial business. So, it is quite big. There are many joint ventures, but it is actually a very straight forward business and some key products that do very well. The team, the prescription drug medical detailing team, now is up to 2200 people across China. That will give us a big competitive advantage when we get some of our innovation approved in China, and start launching our own products in China. China market growing, and continues to grow rapidly. There are a lot of changes in policy that some that might affect us more than others. But for the most part it's an upward trend in the double-digit growth area, growth range. And the peers groups analysis that I always put on so that everybody can understand who the peers groups are. Now, our China business is probably more difficult for western investors and analyst who understand, these are household name brands. They are known by everybody in China. The products have leadership market shares in the areas that we compete. And so these are very powerful mature and stable businesses that in comparison to peer groups would be in, at least from my standpoint but always be at the top end of the peer, as far as the value of these assets. So, these are very valuable businesses for us, and underpin a lot of our investment thesis. So, catalyst, overall, long list of innovation catalyst. We’ve got data that we intend to present on four drug candidates over the balance of the year on Savolitinib. The biggest, well two big ones on Savolitinib; one will be the median and overall survival data in papillary renal cell carcinoma. So you know the PFS is good, but what does that mean with regards to OS, overall survival, which ultimately is what really matters. And we’ll publish that hopefully by the end of the year. We have not reach median OS on the Savolitinib treated c-Met driven PLCC patients yet. Probably the biggest news for Savolitinib will be the data in second line non-small cell lung cell cancer in combination with Tagrisso. We’ve put out data from about 12 patients about a year and half ago. And now we’ve just built up a lot more data in that patient population. So, we’re very excited to get that study presented and then hopefully move into Phase III globally. The FRESCO the full dataset will come mid-year at ASCO. I think again that will hopefully validate our research strategy around selectivity and the importance of dialing out off target kinase inhibition; Sulfatinib, the thyroid cancer data, maybe closer to the end of the year; and we'd hope to start seeing some efforts to see data in hematological cancer patients on 523 that we could present by the end of the year. As far as clinical regulatory milestones, we just got a lot of studies that we are initiating and moving on. And I think for fruiquintinib is probably -- well Savolitinib the two Phase IIIs, global Phase III, one in PRCC one in second line lung; Fruiquintinib, its really all around FRESCO and getting it to an NDA submission in the middle of the year. And we’re all on track to that July-August timeframe. FALUCA, the third line lung cancer study, completed and also start U.S. bridging study on in Caucasian patients. And then as you go down the list, you can see all the other things we’re doing. So that, I'll leave the presentation at that point here; but we’ve got a lot going on; it's been a great year to, 2016; and we’ve started the year off in 2017 very well. But our accelerating and I think that the balance of the year, will yield a lot of progress for the Company. So maybe I'll now open it up for questions.

Max Herrmann

It’s Max Herrmann from Stifel, just a quick question on your Lily program. And what in terms of then taking up the option, what are the -- it look like fairly obvious option take up. But I wonder you’re your thoughts are around…

Christian Hogg

I think that I can't speak for Lily. But fruquintinib is clearly a tremendous drug candidate with global potential. I'd say the only reason that Lily might not exercise their options, there is probably two reasons. Number one is that they have a potential conflict with Ramcirumab, which is the VEGFR monoclonal antibody. So they're going to have to get comfortable with how does Fruquintinib and Ramricumab, how do those two drugs fit together in a portfolio. And it's not that simple. There is a lot of overlap from those two therapies, Ramcirumab and Fruquintinib. So that they probably need some time to think through. The second reason they may not exercise it is because they have a second widow, option exercise window that comes 12 months from now. It will cost them more. But they will also have the Phase III non-small cell lung cancer data in hand before they have to make that decision. So, they have a two months window that starts from March 18th through to, I believe the middle of May. Based on the colorectal data they can decide whether they want to execute it during that time or they can wait for 12 months later, pay a little bit more, 50% more. But exercise it based on having the CRC data and the lung cancer data in hand. So, it's difficult for me to tell. But either way, we are progressing at full speed outside of China. We've got the IND approved in the U.S., and intend to go into bridging study in Caucasian patients in the U.S. in the next few months starting.

Unidentified Analyst

[45.52] Christian [indiscernible] from Stifel. Just on an update on Savolitimab, you talked previously around breakthrough therapy option there. But obviously you plan to kick off the Phase III this year anyway. But what's the update on the breakthrough and what are some of the issues around that in terms of the diagnostic around it?

Christian Hogg

So on papillary renal cell carcinoma, we have to address really one additional question before we can really consider breakthrough therapy designation in papillary renal cell carcinoma. And that question, and it's a valid question from the FDA is, well it's clear that in c-Met driven patients, Savolitinib does really well. Is that because of the drug or is that because c-Met is a positive prognostic for patients with papillary renal cell carcinoma? It's a fair question to ask. Now c-Met has been proven to be a negative prognostic in pretty much every solid tumor type that has been studied in. But nobody has ever looked at it in papillary renal cell carcinoma. So, what we have to do, and we're working on it. There is activity underway that will hopefully resolve this matter by the end of the year to be able to show that actually in papillary renal cell carcinoma if you are MET-driven you will progress faster, you will reach your overall survival endpoint faster. And so, I would say once we have the answer to that question, breakthrough therapy designation in MET-driven papillary renal cell carcinoma, becomes if the answer is affirmative, becomes something that we would be going after pretty aggressively. On second line non-small cell lung cancer, combination with Tagrisso, I think breakthrough therapy designation is ultimately be driven by the Phase IIb data and the strength of that data. But it's certainly an area where it's very fertile breakthrough therapy designation area.

Unidentified Analyst

And then just on fruquintinib. Just interested in the combo paclitaxel thing, in terms of the benefit in terms of the exposure to paclitaxel, what's going on there? And is it that something unique in that particular combination of setting or is it something you see across when you do combinations with other…

Christian Hogg

We haven't -- we don’t have the answer to that yet. All we know is that when you combine fruquintinib and paclitaxel together, average drug exposures of paclitaxel increased significantly. I mean that is, it's a good thing. Well, it’s a good thing so long as there's no ensuing toxicity, because paclitaxel is pretty toxic agent. But this is something that's just come from our Phase Ib study that we've just published. We're now looking into it in more detail to try and understand exactly why that is -- and we don’t have the answer to that yet.

Susie Jana

Hi, Susie Jana from Edison. You mentioned fruquintinib is possibly the most innovative oncology drug to come into China for a long time. Can you talk us through the NDA submission process? Is that going to be a bit easier because of the innovation, or possibly a little bit harder?

Christian Hogg

So the whole process of submitting the NDA in China on fruquintibib is something that's being planned for some time now. We've been interacting really closely with the FDA in China, in Shanghai. Shanghai is the first poll of call, so it’s the Shanghai FDA that we submit the NDA to. Then they review it, and they send it up to Beijing for final approvals. And so, we've been cooperating very closely with the Shanghai FDA for best part of 12 months in readiness for this positive outcome. The entire NDA -- and also been working very closely with Eli Lilly, because they have a pretty big stake in the success and the expedited submission of the NDA and approval et cetera. So everything is ready, basically; the manufacturing; the CMC side of the NDA; all the pre-clinical sides of the NDA, everything is ready. It's now a matter of taking the clinical study report and putting it into the NDA and submitting it. Now, that is not a trivial matter, clinical study reports, when you've been running a study in 28 centers around China, each of those centers needs to validate, and chop they call it in China, put the hospital's chop on the report and then you bring them all together and put them in. So we expect to go through that process, it's going to take us probably two or three months. We've been working hard on prepping for that. And so there's nobody sitting around waiting. We're being proactive. But it's a very, very highly high quality study that's being conducted, using quintiles, global CRO, to run this study in China. And we don't believe that the FRESCO study will have loose ends that will lead to slowness in submission of the NDA. So, its number one priority for us as a Company, all hands are on deck, moving this program forward towards the NDA and probably July-August, I expect.

Daniel Wilkinson

Hi, Daniel Wilkinson at Edison. Just also on your preclinical immuno-effect platform. Are they known mechanism of action, or you're going for now the novel targets, and which way you're doing it as kind of disease focused or more kind of pathway focus on this?

Christian Hogg

So, both is the answer to that. We have four or five targets we’re going after in preclinical in oncology, mostly small molecule. But not all only small molecules we’re looking beyond. And I think it's pretty obvious, there are clear IO target that would do well in combination with our wave 1 and wave 2 innovations. So, we need to take those boxes, but we are also looking at some quite innovative stuffs and novel targets that should -- more of the high risk, high return type opportunities.

Martin Hall

Hi, Martin Hall from Hardman. Christian, you mentioned some competing products, I'm just thinking about the commercial prospects here. In the competing products that are approved for your first two products, is there much evidence that they’ve being used in earlier stages in the tertiary level that they are actually approved for?

Christian Hogg

So, the best example of a competitive product that’s in the market, it's very detailed exponential that you couldn’t can see it from how far back you are. But is Apatinib, the drug from Hengrui. It’s a VEGFR inhibitor. So, it’s a same kind of mechanism as fruiquintinib. Iits first generation, so it hits a bunch of other things. So that toxicities, they’ve got to be careful on the toxicities. But it's approved in third line gastric cancer. Now, the reason it's done so well so quickly is because it's not just being prescribed in third line gastric cancer, it's being prescribed heavily off-label; so, in third line colorectal cancer, third line non small cell lung cancer, where VEGFR inhibitors can provide clinical benefit to patients. And today, because it’s the only approved VEGFR inhibitor of its type in China at that sort of price level, they’re pushing it everywhere. And that’s why it’s $140 million in its second and third year. In gastric cancer, the view is about half of the sales is in its approved indication, maybe $60 million $70 million is in gastric. So, now your question is about what about coming forward into the bigger patient populations. The problem, at least our view of the problem with Apatinib, is there are certain limitations as to its combined ability. It inhibits a family of proteins called steep, so drug, drug interaction is a bit of initiative of Apatinib, at least in our preclinical analysis of it. So, it's going to be very difficult for it. It certainly wouldn’t be used off label earlier. And they're going to have to put it into earlier clinical trials, and show a benefit to patients for physicians to broadly prescribe it in earlier line treatments. You don’t get that off label, you won’t get off label usage in combination with paclitaxel in second line colorectal cancer it's too risky. So, you get broad off-label usage in the third line, but very limited use outside of that. So for us the way we see it now on for fruquintinib, which is a very clean drug. And you can see in combination with paclitaxel, the additional toxicity, is negligible relative to paclitaxel alone. Now, we go really hard in second line gastric cancer to bring it to patient populations 250,000 patients, relative to third line which is 50,000-60,000. You multiply three or four fold or five-fold the amount of patients that you can expose your drug to. So, that's really how pharmaceutical companies do it is get the approval in the later stage of patients, because generally those trials are shorter. Because those are very sick patients who have shorter survival time left. And so, you go in there, you provide benefit, you get the drug approved, and then you bring it into the much bigger patient population, so that all of our drug candidates are designed to do that. The cell activity is a key for that.

Unidentified Analyst

Right, just on fruquinitib, you're seeing increased taxol, PK. So, is -- that’s not through the set pathway. I mean you're obviously having some effect to the metabolism of the drug. So, does that also preclude you from being use without the data in the second line setting?

Christian Hogg

I think without data you just can't be pushing to be used in any setting. I think, as I said to your colleague, we've just really learned this about the increased taxol exposure. And what you see in the charts as you see the safety profile of fruquintinib and paclitaxel, both of their full doses. And you see the paclitaxel drug exposure is 30% half. And the safety, based on that combination, is okay. It's fine. So the idea for us would be that if we are able to ascertain, that combination is truly delivering that 30% increase in drug exposure. Can you dial down the amount of paclitaxel that you're exposing patients to, and still get the same drug exposure, as is necessary? If you can dial it down, the safety profile should improve significantly, because most of the safety -- or in fact, all of the safety data that we've shown, all the AEs grade three and above, are paclitaxel driven AEs. So, there is still work to be done on that. We don't have all the answers to this. But it's encouraging for us, because even at those high levels of drug exposure on paclitaxel and fruquintinib, patients are; A, they’re seeing good response; and B, it's tolerable.

Unidentified Analyst

[59.05] Bruce Anderson, [indiscernible]. On 523, you’re moving ahead on hematological cancer. And can you say what you're doing on RA?

Christian Hogg

On rheumatoid arthritis, we submitted our U.S. IND last year; and based on the Phase I data that we've also presented on 523 at the end of the year. The FDA came back to us and we’ve said this in our recent announcements. The FDA came back to us and said 523 is an interesting drug candidate, it's metabolize, so once it’s consumed it’s metabolized. Now, there is a single metabolite that represents 30% of all of the metabolites on 523, or a high proportion of the metabolites with 523. And when you get a situation like that, the FDA wants you to do regulatory toxicity work on the metabolite; not just on the drug, which is what we did but also on the metabolite, to show that that metabolite is not going to cause any trouble. Now, it didn't cause any trouble in the Phase 1 healthy volunteer study in Australia. So, we don’t believe it should cause any problems. But we're in the process of completing that animal toxicity testing on that metabolite. And that's why on immunology, we have to wait until that's done. Because in immunology, when we talk about rheumatoid arthritis, these are healthy people other than their arthritis. And there can be no room, whatsoever, for any answered questions when it comes to toxicity. So, we're working on that. Hopefully, that'll get done pretty soon, and we can progress that. Meanwhile, we’re moving as rapidly as we can on the hematological cancer side where the toxicity is obviously always important for all patients. But in late stage hematological cancer patients, they have a higher tolerance for toxicity just because they've got a bigger problem.

Unidentified Analyst

And in terms of short-term catalysts, will they even trigger milestone payments in the coming year?

Christian Hogg

Yes, the submission of the NDA will trigger a milestone; the start of the Phase III in papillary will trigger a milestone; the start of the Phase III in non-small cell lung cancer, the second line Tagrisso combination will trigger a milestone; our collaborations, because they're progressing on multiple fronts, trigger a lot of milestones.

Unidentified Analyst

Just last question, given your success with Seroquel, are you going to expand -- is there an opportunity to expand the third-party drug activity in China? Is that something you would choose to do or not to?

Christian Hogg

Yes, I think I said this at the last meeting in August. We will, if it makes sense. There is a lot of Chinese companies these days paying very big money for these kinds of assets. And so we're not going to get into a bidding war for anything. The best use of our resources is against our pipeline, and moving that quickly. But if there are sensible assets that we can get our hands on for reasonable prices then we can consider that. But actually probably the biggest thing versus that we're tooling up to get ready to launch is sulfatinib and epatinib into the China market. Now, that may be in two or three years, but you start working towards that now to get ready to do it. Okay, any other questions on there? Okay, good. If no more questions, I'll call it a day. One hour, that worked pretty well. So, thanks very much for coming everybody, and look forward to delivering some more results for you. Thanks.