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Edited Transcript of HCM.L earnings conference call or presentation 3-Mar-20 1:00pm GMT

Full Year 2019 Hutchison China MediTech Ltd Earnings Call

Mar 24, 2020 (Thomson StreetEvents) -- Edited Transcript of Hutchison China MediTech Ltd earnings conference call or presentation Tuesday, March 3, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christian Hogg

Hutchison China MediTech Limited - CEO & Executive Director

* Wei-Guo Su

Hutchison China MediTech Limited - Chief Scientific Officer, Executive VP & Executive Director

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Conference Call Participants

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* John Lawrence Newman

Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst

* Kyuwon Choi

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Michael Clive Mitchell

Panmure Gordon (UK) Limited, Research Division - Healthcare Analyst

* Rajan Sharma

Deutsche Bank AG, Research Division - Analyst

* Stephen McGarry

HSBC, Research Division - Analyst

* Tony Ren

CLSA Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Chi-Med 2019 Full Year Financial Results. My name is Maxine, and I will be coordinating your call today. (Operator Instructions)

I will now hand you over to your host, Mr. Christian Hogg, to begin. Christian, please go ahead when you're ready.

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [2]

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Thank you, Maxine. Welcome, everybody, to the Chi-Med 2019 results presentation. It's an hour-long session today. I'm going to try and complete the presentation in maybe 35, 40 minutes, and then leave 20, 25 minutes at the end for Q&A.

So if we go to Page #3 of the presentation. You can see we've made a lot of progress in 2019 towards our aim of building a global science-focused biopharmaceutical company from our established base in China. On the global innovation side, our team is now over 500 people, scientific team on the ground, in China. We've built and continue to build a global development infrastructure. Our team in New Jersey, in Florham Park in New Jersey, has been built up over the last 18 months and is now really ready to go to start our global Phase III programs on fruquintinib and surufatinib. And obviously, as I've just said, we have multiple Phase III initiating. So that team in the U.S. is now in place to support that -- those launches of those pivotal studies, global studies.

In China, the market continues to reform the expansion of the medical insurance scheme, and the National Reimbursement Drug List continues at great speed in China. And we're very well positioned to take advantage of that and to capitalize on the broadening of availability of oncology drugs in China. Our first 3 NDAs are locked in. At least Elunate, obviously, is approved and launched in 2017; surufatinib, the NDA was submitted late last year; and we are very hopeful that savolitinib's first NDA will be submitted in the next few months. So bringing our first 3 drugs to market in China or first 3 drug candidates to market in China has been a great achievement, and I think will set us apart for the next few years.

On the commercial side, we've always had a deep commercial presence in China through our joint ventures in various legacy businesses. But on the oncology side, we really are moving rapidly to build up our oncology commercial team now to launch surufatinib late this year. We're targeting 350 people on the ground by the middle of the year. We're already well over 140 people in the team on the ground in China today, and I'm talking about oncology commercial team on the ground in China today. And getting -- and the entire senior management team is in place and building out the organization, so in a very exciting time for our commercial group in China.

Moving on to Page #4. You can see, as I always show the breadth of our organization and the depth. I think on the management team, the most notable new joiner is Dr. James He, our Chief Medical Officer in China. James joined the company 3 weeks ago. Formerly, he was the Country Medical Director for GSK in China and the GM for R&D for GSK in China. So James comes with a wealth of experience over the last 15 years in China, and is going to help us really accelerate and broaden our clinical programs in China.

So the integrated innovation organization, as I've said, over 500 people, and I will make note of the progress that's been made by our U.S. team in New Jersey in getting established over the last, really, 18 months to 2 years. It's really been a fantastic rate of progress that we've seen in the American organization, and it just opens up a whole new dynamic for Chi-Med as a company with our global vision, and our ability now to execute against that global vision.

Moving to Page #5. You can see that 2019 was a year in which we put a lot of building blocks in place. Savolitinib made a lot of progress in '19 and is set to have, in our view, a very important year this year. The Tagrisso combination in non-small cell lung cancer will read out in interim midyear, and multiple global registration studies have the potential to be started. And I'll go through that in more detail later.

The second point there, our first NDA submission in China for savolitinib, and the presentation of the data supporting that MET Exon 14 skipping indication will all play out over the next few months.

Surufatinib for neuroendocrine tumors, the first NDA submission was late last year. The pancreatic neuroendocrine tumor, positive Phase III readout in January, January 20 of this year, is the second indication in which we had to stop a Phase III early because we had already met the primary end points of the study. So the NDA last year went in, in October and -- for extrapancreatic NET, and the pancreatic NET NDA will go in, hopefully, in the first half of this year. And the U.S., Europe and Japan global registration study discussions for surufatinib, we are -- and again, thanks to the team that is sitting in New Jersey, managing our global regulatory operations.

We're now very engaged with the regulatory authorities in U.S., Europe and Japan around the plan for surufatinib, and we expect that to be laid out very clearly over the coming couple of months. Elunate in colorectal cancer, fruquintinib. We have now completed our end of Phase II meeting with the U.S. FDA on colorectal cancer. We expect to start our global Phase III on fruquintinib, the FRESCO 2 study sometime around the middle of the year, and we're very much looking forward to that. And maximizing China access, the NRDL inclusion January 1 of this year has had a big impact, and I'll talk more about that later.

On the organization, as I've mentioned, the oncology team in China, commercial team in China is expanding rapidly. Our other programs that are making progress, the lymphoma programs, HMPL-523 and 689 making progress in China and in the United States. The PD-1 combos, our VEGFR combinations with a number of PD-1 antibodies are making good progress. And our ninth clinical drug candidate, HMPL-306, our IDH 1/2 dual inhibitor will kick off clinical development in China in the next few months. So a lot going on.

From a financial standpoint, on a high level, revenues this year were a little bit over USD 200 million. Our net loss was around a little bit over USD 100 million. The cash that we have on hand at the moment, roughly over USD 400 million if you take into account unutilized banking facilities. So the follow-on offer that we did in January of this year helped us to beef up our balance sheet ahead of an important year. And the cash flow guidance, the negative cash flow guidance we have for this year is around USD 140 million to USD 160 million. So the cash runway we have at the moment certainly is sufficient for 2, 2.5 years or so.

Moving on to Page 6. The pipeline chart. I think I'll just highlight the programs that are in the process of transitioning. So under the registration in pink column, you can see obviously the 3 NDAs that are all either have been submitted or about to be submitted. Savolitinib in MET Exon 14 deletion non-small cell lung cancer. And then the 2 surufatinib neuroendocrine tumor NDAS: extrapancreatic submitted in October, pancreatic in the next couple of months. So hopefully, 6 months from now, we will have all those 3 arrows, the NDAs submitted, and be planning on launching surufatinib late this year and then in extrapancreatic NET and then pancreatic NET and savolitinib in Exon 14 deletion will be launches likely in 2021, hopefully in the first half.

In proof of concept, you can see there are 6 programs that are now moving towards registration. The savolitinib MET Exon 14 deletion non-small cell lung cancer global activities are under discussion and planning with AstraZeneca. We have intention to also move into later development on -- in papillary renal cell carcinoma, which I'll talk about a bit more later. Then fruquintinib and colorectal cancer, surufatinib in NET -- those are both programs that we are moving into Phase III ourselves or into the final registration stage ourselves. And then the last 2 HMPL-523 and 689, we've been working hard for a long time building a data set in both of those assets. And while this is a very competitive area, we hope that that data will allow us to decide on our registration strategy through the balance of this year.

Going further back into the dose finding, we've progressed the surufatinib Tuoyi PD-1 combo into proof of concept already. We're hoping that the fruquintinib pivot PD-1 combination will also move into proof of concept shortly. And our FGFR inhibitor, FGFR1, 2 and 3 small molecule, we'll be moving into a proof-of-concept Phase II study in mesothelioma this year as well. So a lot of progress on our pipeline.

If we move on to savolitinib on Page 8. On a high level, we are thinking about most of our later-stage drug candidates in a similar manner. The first thing for us is to get the monotherapy approved. So as you can see here on savolitinib, the strategy to lead to rapid monotherapy approval is a dual strategy global as well as China. And you see here papillary renal cell carcinoma is the global, probably the furthest along global approach to get the monotherapy savolitinib approved in PRCC. And then obviously, in China, the MET Exon 14 deletion with our first NDA about to be being submitted. So ultimately, it's about getting savolitinib monotherapy approved as quickly and efficiently as we can.

Behind that, we have the development of combination opportunities with other TKIs or immunotherapies. And you can see, obviously, we've been very active in this area. The most advanced, obviously, is the Tagrisso combination. And as I've said, I'll talk more about that later in this presentation, but we've got a very big year ahead of us for the Tagrisso combination. And I think the hard work of AstraZeneca and Chi-Med organizations over the last 3 or 4 years sets us up to do very well on that Tagrisso combination this year. So we look forward to the progress that will be made this year or could be made this year.

The PD-1 combo, the Imfinzi combination, we continue to look at that closely in papillary renal cell carcinoma, a broader patient population, not just MET positive patients and also starting to consider it in potentially other indications as well.

Exploratory development is shown on -- in a bit more detail on Page 9, where you can see each of the clinical programs we have on this chart as with all of the charts throughout this deck. The red bars are global ex-China studies and the blue bars are China studies. So you can see here for savolitinib on Page 9, a very broad program that I've just mentioned in lung cancer and in kidney cancer, but also a solid range of investigator-initiated study in multiple other solid tumor settings, so in clear cell renal cell carcinoma and gastric cancer, prostate cancer and colorectal cancer. So we are investigating and exploring savolitinib in all of these indications, particularly those indications with biomarker selected patients who are MET positive. I won't repeat everything I've said on savolitinib, but yes, you can add them up and you've got 10 clinical studies moving in parallel there.

Moving on to Page 10 to look at lung cancer. This is a chart that we share very regularly. Really the 2 updates on this chart are the continued progress on Tagrisso now in 2019, almost $3.2 billion in sales. And obviously, as patients progress on Tagrisso 30% of those, plus potentially, are going to need a MET inhibitor. So that's where we see a very large value-creation opportunity for savolitinib and Tagrisso in combo.

Page 11, the Met Exon 14 deletion non-small cell lung cancer program in China. The NDA submission, as I said, probably in the next couple of months. We will present, if you look at the chart on the bottom left, the red dot, will be in the data that we present at the -- at a scientific conference middle of the year. So that will be the first time that we really present the data in full of savolitinib and Exon 14 deletion non-small cell lung cancer, and that should follow the NDA submission, which should come a couple of months earlier, maybe in -- maybe April-type time frame.

Moving on to Page 12. This is a chart we've shown in the past, so I won't dwell on it, but this is data from the TATTON study showing TATTON B and TATTON D. These were 2 arms that helped us decide on the Tagrisso/savolitinib combination dose. We chose savolitinib, 300 milligram; Tagrisso 80 milligram QD. So both of them daily doses. Efficacy was not compromised with the slightly lower savolitinib dose and safety and tolerability was better. And so that's why we chose to go with the 300 milligram savolitinib dose.

You can see on Page 13 the waterfall plots and just really effective combination treatment in both T790M negative patients, which are the orange chart as well as patients that have failed on Tagrisso. That's the pink chart. So with a response rate of about 30%. Now those patients with T790M positive and had not had access to Tagrisso or a third-generation EGFR TKI, you see a response rate of 67%. So very strong efficacy.

Moving on to Page 14. The SAVANNAH study, which many of you are aware of, a global study in 14 countries around the world. It's enrolling quite rapidly now. It kicked off about a year ago. These kinds of studies take time to get set up. But now we're enrolling very rapidly and towards our interim analysis, middle of the year. And our hope is, obviously, with that data from that interim analysis, we'll be able to then potentially go or AstraZeneca will potentially go and engage with regulatory discussions about how to accelerate this program. So very optimistic about non-small cell lung cancer, particularly the combination with Tagrisso.

So moving on to Page 15, papillary renal cell carcinoma. We haven't shown this chart for a while. When we go back to December 2018, we took a pretty big hit when the SAVOIR study was terminated early. As we've announced in our announcement today that but the basis for terminating the SAVOIR study was molecular epidemiology data as well as the sort of changing landscape of -- in RCC treatment with regards to immunotherapy. But from this chart on Page 15, you can see the importance of MET-driven papillary renal cell carcinoma patients. It's about 8% of all RCC. And today, there genuinely are very few treatment options for those patients.

So if you go to Page 16, you can see the Phase II data that we presented 2 or 3 years ago, and that was the Phase II data that led to us starting the SAVOIR Phase III study. We saw in MET-driven patients around 18% response rate and MET negative patients, obviously 0% response rate to a MET inhibitor. And good PFS somewhere in the region of 6 months for MET positive patients and, obviously, very rapid progression for those patients that were MET negative and being treated with a MET inhibitor.

So that was the reason we started SAVOIR. SAVOIR was terminated at the end of '18 after around 60 patients were enrolled in the study. During 2019, the data from those 60 patients matured. And in late 2019, that data was unblinded. And AstraZeneca and Chi-Med were able to understand how the first 60 patients performed. Remember, the SAVOIR study was a 1:1 randomization of savolitinib against Sutent, sunitinib in MET-driven papillary renal cell carcinoma patients. So we have that data. We plan to present it in full in a scientific conference later this year. And as we say in our results announcement, AstraZeneca and Chi-Med are currently preparing and in dialogue around restarting the SAVOIR study. And that would not be restarting of the SAVOIR study. It would be restarting a study essentially of a very similar design to SAVOIR, likely to be called SAVOIR 2, but there will be more updates on that later in the year.

Page 17 talks about the savolitinib/Imfinzi combination. This data was, again, presented at ASCO GU early this year. You can see that the savolitinib/Imfinzi combination in the middle on the far right of the chart shows you the objective response rate data and the median overall survival of 12.3 months for the savolitinib/Imfinzi combination. That's across all PRCC, so MET positive as well as MET negative. It's early data. It's encouraging, obviously, in our view and in the view of the investigators. It warrants further development. So we are in discussions with the investigators, and AstraZeneca's in discussions with investigators with regards to the potential expansion of that CALYPSO study.

On the next page, Page #19, I think it is -- 18, you see the response data of the combination of savolitinib and durvalumab or Imfinzi, and you can see while it starts to get to be pretty small numbers as far as patients are concerned, you see in the MET positive patients the combination dose delivering a 40% response rate. That obviously compares to, as we saw in the Phase II of the monotherapy, around an 18% response rate. Now MET positivity isn't necessarily the exact same. So in this case, MET positivity was IHC 3-plus, whereas for the Phase II study, it covered various other genetic aberrations of MET, but encouraging and certainly was continuing development. So on PRCC, this year, hopefully, we're seeing the restart on monotherapy in MET positive patients for savo and then continued parallel development of the combination in perhaps a broader patient population.

So moving on to surufatinib, Page 20. You can see, obviously, surufatinib is wholly owned by Chi-Med worldwide. A very similar strategy to savolitinib in the -- what we're looking to do is get the single-agent savolitinib approved both in China and outside of China as rapidly as possible. Obviously, China, with the NDA now under review in extrapancreatic NET and a positive Phase III in pancreatic NET, we're well on our way to that -- meeting that objective. The global NET registration, as you can see in the middle, is the subject of deep discussions with the regulatory authorities at the moment. And that clarity from those discussions, I think, will come in the next couple of months, certainly in the United States and Europe and Japan shortly thereafter.

Biliary tract cancer, a very difficult patient population and solid tumor indication, but surufatinib is currently in development in a Phase IIb/III study. We should have an interim analysis on biliary tract cancer later this year, and that will drive our decision on whether to continue into the Phase III. We continue to work to solidify combination opportunities with immunotherapy. So for surufatinib, we're working both inside China and outside China to work in combinations with the PD-1, the first data from that will be presented, I believe, at AACR for surufatinib and Tuoyi. That will be the Phase I dose escalation data, and we're excited to present that.

Moving on to Page 21. You can see each trial we're running in more detail. The neuroendocrine tumor, the 2 positive Phase IIIs reached, obviously, the end of registration studies. The red bar there is surufatinib in NET, about to start the last stage of development outside of China. And then the PD-1 combos, as you can see in Block #4 there with Tuoyi and Tyvyt. Tuoyi is Junshi's PD-1 approved in China, and Tyvyt is the PD-1 antibody from Innovent that's also approved in China. So surufatinib development is ongoing. We're working also -- Wei-Guo and the team are working closely with a number of investigators to expand investigator-led studies in a number of other solid tumor setting.

One of the things that's quite exciting about the surufatinib/Tuoyi combination that can be seen as the second last bar on the chart there on Page 21 is that that's now in proof of concept. So we've now started Phase II development of that combination, and we're expanding that Phase II development into multiple solid tumor setting. So we will be able to get data from a lot of patients in a lot of solid tumor settings with that combination, so quite exciting.

Moving on to Page 22. This is a chart we've shown around surufatinib in NET. In the past, there's always been a caveat in the past that pancreatic NET was not covered. Well, now you can see on the far right-hand side, surufatinib has successfully made it through Phase III studies in all solid tumor NET patient populations across all tumor origin site, whether that's GI tract, pancreas, lung or other, both functional, nonfunctional NET across the board. And this, we believe, is the first time that any oral therapy or any therapy of any type for that matter has successfully done this. So you can see there's a lot of untreated patient populations there on Page 22. Obviously, there are a lot of approved therapies, both globally and in China, but mostly in subsets of NET. And surufatinib, we believe, is the first therapy that is effective across all NET neuroendocrine tumor -- advanced neuroendocrine tumor patient population.

Page 23, you can see getting ready for the launch. As I mentioned, 140 people already on board with the sales team and very active this year in preparation. It's fantastic for our company, for Chi-Med, to be building out an oncology team of 350 people in readiness for the launch of this fantastic drug so -- or the potential launch of this fantastic drug. So it's a great focus for the company this year. And hopefully, by the end of the year, we can -- we can really launch it with a big bang.

Page 24. The neuroendocrine tumor patient population in China, probably around 300,000 people. That's a conservative estimate. It could be higher. It could be somewhere in the 400,000 range. The diagnosis of neuroendocrine tumors in China is less sophisticated than it is in the west where there's been seen a very big increase in incidents over the last 40 years of NET in the west. And the reason for that increase in incidents is because of better diagnosis. So our job, Chi-Med's job in China will be to use our commercial organization to really educate the clinical community on how to identify NET and how to treat NET, and really try to access this big patient population of patients that live with this disease for many years. So it's a disease that is treated over many years in a large group of people, and that's why we think commercially, this is an attractive opportunity for us as well.

Page 25 shows the efficacy of surufatinib against everolimus in the extrapancreatic NET. It's really apples-to-oranges comparison because the Chinese patients, the SANET study was all in Chinese patients. Generally, as can be seen in charts in the appendices, are sicker patients. They're mostly grade 2 advanced NET patients, whereas the RADIANT study, they were mostly grade 1 less sick patients. And you can see that from the placebo on the RADIANT study being longer. So surufatinib, really outstanding efficacy in a really large patient population.

Moving on to fruquintinib, similar type strategy on Page 27, get the monotherapy approved first. Obviously, we're doing that -- we've done that in China in colorectal cancer. Now we're moving and the team in the United States is moving really rapidly to get that global colorectal cancer registration study started, not just the United States but Europe and Japan as well, and then solidifying the combo opportunities with the PD-1. So you've got the Tuoyi -- sorry, the Tyvyt-fruquintinib combo, the genolimzumab PD-1 combo with fruquintinib and a number of other opportunities. Second-line gastric cancer is a very big opportunity for us, combining paclitaxel and fruquintinib together in China, a patient population that is potentially 4 or 5x the size of the colorectal cancer opportunity, so that's a big area for us.

If you move on to Page 28, you can see all the details of the programs we have on fruquintinib. Obviously, most of the people on this line will know that we're partnered with Eli Lilly on fruquintinib in China, but outside of China, Chi-Med retains all rights to fruquintinib. And that's why global development fruquintinib is very important for us because we own 100% of those rights outside of China.

Okay. Going to Page 29, talking about the performance of Elunate during 2019. You can see the sales there were USD 17.6 million, about CNY 120 million in its first year. Total cycles, both out-of-pocket paid or patient access, were about 14,500 cycles of fruquintinib were used by patients in 2019. It's a start. And during that year, fruquintinib was priced high. And it was more expensive than STIVARGA, the main competitor in colorectal cancer, and very much more expensive than off-label use of local VEGFR inhibitors. So we had headwinds with regards to the price of fruquintinib. Despite that, we booked revenue of about USD 10.8 million, which came from the manufacturing costs that we charge Eli Lilly as well as the royalties that we earn, the 15-or-so percent royalties at this level of sales. So the most important thing as we went through this year was working with Eli Lilly to get on the national reimbursement list.

And that can be shown on the next page, Page 30, where you can see that in November of last year, we were able to get on to the national reimbursement list. We took 63% price reduction on Elunate. And you can see the chart on the bottom right-hand side shows the sort of the pre-NRDL price versus post-NRDL price. And you can see Elunate went from almost USD 3,300 a cycle per month to a price of about USD 1,200 -- USD 1,180 per cycle post-NRDL, so a 63% reduction. The circled numbers show for the 317 million people on the national medical insurance scheme for urban employees and residents, those patients, the out-of-pocket costs now for Elunate are between USD 350 and USD 600 per month.

So you've gone from out-of-pocket price of USD 3,300 to approximately 25% of the population of China having access to fruquintinib for between USD 350 and USD 600 a month, which is an enormous improvement in accessibility. So as you can see from this chart on the bottom left, at the high price pre-NRDL, in 2019, Elunate recorded around 5% market share, about 5% penetration, about 3,000 of the 55,000 patients in China. These are new patients in China were given out or got access to Elunate.

Now on the reimbursement list, that penetration is going to increase dramatically. And we report here unaudited results for January, February. For the first 2 months of the year since we went on the reimbursement list, Elunate has recorded USD 6.6 million in sales. So that's a material change versus a year ago when you consider all of 2019 was $17.6 million. So it's still too early to say. Obviously, the coronavirus in China has affected January, February results somewhat. Although, in this case, not by that much. I won't go through 31 and 32. These are the efficacy and safety advantages of fruquintinib.

Moving on to Page 34 is a chart that lays out the sort of structure that we plan to put in place with our oncology commercial team in China. We intend to cover 1,300 hospitals in China that is going to cover 95% of the sales of oncology products in China. And for a coverage of that scale, we intend by the end of this year to have about -- by the mid- to end of this year for the launch of surufatinib to have a team of about 350 people in place. That will grow, as you can see on the chart here, over the next 3 or 4 years up to -- by the end of 2023, we'll be targeting to have a team of about 900 people on the oncology side. But that team will be doing multiple things. They'll be, obviously, marketing surufatinib and potentially marketing fruquintinib in parts of China per the agreement that we signed with Lilly a year ago. But also our other assets as they start coming through, so -- and more indications on our initial assets. So an exciting time as we build out that team.

Page 35, just the next wave of innovation, the Syk inhibitor, the PI3K delta, the FGFR inhibitor, all just moving along. HMPL-306 is our IDH 1/2 dual inhibitor. It's not on this chart, but it will be hopefully by the time we report our midyear results, so everything moving along there.

Page 36, since we're running short of time, I won't talk a lot about it. This is a chart many people have seen in the past, 523 and 689 Syk inhibitor PI3K delta. I think the chart on the bottom right is the important one -- sorry, the box on the bottom right is the important one, showing that the Phase I/Ib data now on the Syk inhibitor is around 200 patients. We dosed on PI3K delta. We're now through dose escalation and into expansion. That data will really help us inform our registration study decisions this year.

Page 37, a brief explanation of the IDH 1/2 inhibitor and the opportunity there. There are some very important patient populations, which have high levels of IDH 1/2 mutations. There are obviously drugs IDH1 inhibitors and IDH2 inhibitors approved globally or in the United States. But IDH 1/2 dual inhibitors, we feel that HMPL-306 really brings a unique angle in that it addresses resistance to IDH1 inhibitors and resistance to IDH2 inhibitors. So that's our sort of point of differentiation. And that, I think, will be explained more to you all as time goes by.

The next page, Page number 38, what's next from the discovery organization. Wei-Guo and the team have been working long and hard on a number of large molecule and small molecule programs coming through. We're very excited about KRAS and ERK, and we have a number of things that we're working on that will play out in the coming years. And we expect potentially 1 novel drug candidate a year coming into the clinic from our team.

Page 40, the financial results. I won't go through it in a lot of detail. I'm sure you can all cover that.

On the commercial platform, I think Page 41 shows it quite well. Continued growth in revenues. But in terms of net income to Chi-Med, 13% growth on a constant exchange rate basis to over $47 million -- $47.4 million for the year in 2019. You can see on that chart, on Page 41, 85% of our profit comes from our prescription drug business, 15% comes from the consumer health business, the noncore consumer health business.

Next page, Page 42, is the cash position and guidance, which I touched on earlier. So I won't reiterate it. Around $400 million in cash resources and a burn of about $140 million to $160 million this year.

Page number 44 is the upcoming events. There are many of them. They're laid out in great detail in our announcement. I won't go through them in detail here. The ones with the stars on them are the important one. So data on the PD-1 combo, the NDA for savo and surufatinib. The potential launch of surufatinib this year in China and then progress on Tagrisso and savo in lung cancer and savo monotherapy in PRCC.

So last chart that I'll talk from, and then I'll open it up to Q&A. Page 45, the targets. We've covered these pretty much through this presentation. Surufatinib, it's about launching it, building the team. Savo, it's about getting the NDA submitted, getting through the interim analysis on Tagrisso combo and moving forward on papillary renal cell carcinoma. Elunate, it's all about expanding access and establishing ourselves as the best-in-class VEGFR TKI in China, U.S., European clinical regulatory organization, as I said, it's a great team. Well-established and really primed and ready to go. And then on the M&A side, we have some interest in entering into the large molecule space. And we also as we've said many times before, have interest in divesting some of our non-core commercial businesses such as OTC, for example.

So that's where I'll leave it, leaving us 15 minutes now for Q&A. Maxine?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a question from Alec Stranahan from BAML.

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Unidentified Analyst, [2]

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It's [Jaspin] on for Alec. Just a couple on savolitinib. What kind of data can we expect from SAVANNAH in the next coming months? And then what would the next steps be for the program after the trial reads out? And then a quick follow-up on that is, what do you see is the ideal combination partner in your mind for savo?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [3]

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Okay. SAVANNAH, it's an interim analysis on the first 50 patients of that 200-patient SAVANNAH study. We will not be publishing that data. That data -- that interim analysis is really mainly to guide our regulatory dialogue. So what will happen after that interim analysis is -- obviously subject to it being positive, is I'm sure we will engage with the regulatory authorities and determine what is the -- what's the most accelerated pathway to approval for the combination. So those are the sort of the next steps coming out of the interim analysis. I think that regulatory dialogue and potentially the starting up of further studies on the combination will really give you over the back half of the year an understanding of the state of play on the savolitinib/Tagrisso combo, which I hope is a positive state of play. I'm quite optimistic of that. On the combination, I'm not really clear what you mean what's the best combination. Obviously, the Tagrisso combo is the main focus area. We have studied Iressa/savolitinib combination in T790M negative patients and were recorded terrific efficacy in that patient population as well. But I think AstraZeneca's, obviously, prime objective is to broaden the Tagrisso franchise, and savolitinib is really a perfect bed fellow for Tagrisso to help broaden that franchise. Hopefully, that answers your question.

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Operator [4]

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We have another question from Paul Choi, Goldman Sachs.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [5]

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I had a follow-up question with regard to SAVANNAH, Christian, if I could, with -- on the interim with the first 50 patients. Could you maybe just speak to what would be the level of maturity of data that you would have by the interim? And specifically, about roughly how much follow-up would you have for that -- for those first 50 patients? And would you just be in a position to discuss ORR? Would you have PFS data that you think you could approach regulators with at that point?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [6]

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Got it. Well, so the primary end point of the study is ORR. And what we'll have on that 50-patient data or at least what is planned to have is 50 patients treated with the 300 milligram/80 milligram combination, and I believe around 2/3 of them through 2 tumor assessments. The other 1/3 being through 1 tumor assessment. So obviously, in the past, we've seen the efficacy of the combination come on very quickly. And so the expectation would be that with maybe 2/3 of the patients with 2 tumor assessments and 1/3 with 1 tumor assessment, you would get a very good idea of the objective response rate for those -- for the combination. And remember also this comes on the back of the TATTON data, which albeit in multiple treatment arms, different types of patients with different molecular profiles, that TATTON data numbered up to a total of around 200 patients, I think, 190 patients. So we have a very large data set now for the savolitinib/Tagrisso combo. And I think the savo -- I'm sorry, the SAVANNAH interim analysis will just sort of be the kind of bringing together all of that information.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [7]

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Okay. And then with regard to the SAVOIR 2 trial that you referenced here earlier, could you -- I know that you'll have a data presentation later this year, but could you maybe just speak to what you're seeing or learnings that you've seen from the first 60 patients that, I guess, is reinvigorating the enthusiasm for monotherapy development here?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [8]

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Difficult for me to go into detail, Paul, because, obviously, this is subject to a scientific conference presentation. But what SAVOIR 2 -- what SAVOIR provided us, as I say, around 60 patients, 1:1 randomization of savolitinib against sunitinib. What we didn't have ever was a prospective view on what sunitinib would do in MET positive patient. We had Phase II data. We had a lot of single-arm data on savolitinib in MET positive PRCC patients. So we have a good sense. So we have a good sense even before SAVOIR on what savolitinib does in these patients. But we have no idea what sunitinib did as the control in these patients.

And we made our best guess when the SAVOIR study was designed. So what we will have coming out of SAVOIR on those first 60 patients is a much -- is a very good understanding what sunitinib does in those MET positive PRCC patients, and that's the big difference. So I think that we obviously have to wait until the scientific -- until the sort of conference where we present all of this data. But I think if you read between the lines and look at our announcement, which is an announcement that was carefully crafted by both Chi-Med and AstraZeneca together, you can see that we're obviously quite encouraged by what we've seen on SAVOIR, and we are now working closely to consider the next steps and to restart the program basically.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [9]

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Okay. And if I could maybe just squeeze in a quick commercial one. With regard to the 25 clinical sites that you use for surufatinib ahead of your commercial sales force expansion later this year, are those centers in the clinical trial, the primary treatment centers for NETs? Or do you need to go into a second-tier of medical centers and hospitals to expand your reach with regard to treating NET tumors?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [10]

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Yes. Thanks, Paul. So obviously, the SANET-ep and p studies were done in sites that had probably the most high-volume neuroendocrine tumor sites in China. But we see neuroendocrine tumors and the availability of patients for us to go after and to go and try and help as being far, far greater than the sites that were just in our Phase III studies, these 25 plus 5.

As I say in the presentation, our commercial team is being set up to cover 1,300 -- the 1,300 key oncology clinics and hospitals across China. And that's where we think 95% of the business will be located. There will be, obviously, diminishing returns. But based on the way we plan to cover these institutions, we think a team of 350 makes a lot of sense to cover that. And we'll take out 95% of the -- or gain access to 95% of the patients that are living with neuroendocrine tumors in China. So I don't whether that answers your question, but it's -- that's our approach.

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Operator [11]

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We have another question from Rajan Sharma from Deutsche Bank.

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Rajan Sharma, Deutsche Bank AG, Research Division - Analyst [12]

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I just wanted to ask about that PI3K kinase inhibitors. It looks like this has kind of potential favorable tolerability profile relative to competitors. So I was just wondering if you've done any combination work with this asset or whether it's the potential to do so in the future.

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [13]

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Rajan, thanks. Maybe I'll ask Dr. Wei-Guo Su, our Chief Scientific Officer, to answer that question.

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Wei-Guo Su, Hutchison China MediTech Limited - Chief Scientific Officer, Executive VP & Executive Director [14]

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Sure. Well, the brief answer is that up until now, it's pretty much a single agent, but we do have plans now going forward to initiate several combination exploratory studies, could be later this year.

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Rajan Sharma, Deutsche Bank AG, Research Division - Analyst [15]

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Okay. And then just secondly, on -- so you've kind of highlighted M&A as a potential to support the innovation platform. And the preference there, would that be on kind of single assets? Or would you be looking at kind of building out platform capabilities?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [16]

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So on the M&A side, what we're interested in is expanding our large molecule footprint. Wei-Guo and the team have been working for the last 4 or 5 years on a number of novel targets for large molecule innovations. And we've now got some things we want to start putting into the clinic. So we're looking rather than just outsourcing production of these assets to third parties. We're looking to potentially acquire a platform to do that. But also when we do that, we're looking for a platform that already has some approved products. Because when you're building out a commercial, you look at Chi-Med's commercial capability and sort of history in China. We're very deep, and we know what we're doing when it comes to commercialization.

And so now we're building out the oncology team. It would be -- it certainly would be synergistic to be able to acquire some assets that we could channel through that commercial team as well. So the large molecule M&A side for us, it's sort of -- it's a 2-pillar strategy. One is to get the manufacturing sort of footprint. The second is potentially get hold of some new products, but new products are expensive in China. They're not growing on trees. So we'll take our time, and we'll look at this carefully.

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Operator [17]

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We have a question from John Newman from Canaccord.

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John Lawrence Newman, Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst [18]

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Christian, I just wondered if you could walk us through a little bit more of what we should expect this year for fruquintinib in China. You mentioned on the call that you were on the national reimbursement list. Just wondering if you could explain to us just the importance of that process and sort of what that does for you in terms of access?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [19]

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Well, John, there's -- I don't know whether they can pull it up on the presentation, but there are some charts in the appendices that show the impact of getting on the reimbursement list in China. When Avastin got on the national reimbursement list in China 3 years or 2 in mid-2017, so 2.5 years ago, Avastin was doing about $200 million in sales in 2017. 2019, they did $566 million in sales. So it's pretty much close to tripled in terms of sales in China, and that's Avastin having been launched in China a good decade ago. So it took many years to get to $200 million onto the reimbursement list. They took a 62% price reduction. And within 2 years, they've almost tripled their sales. So getting on the NRDL really matters because it expands access to patients.

It makes the drug much more affordable. And you go from, as I've shown you on our charts, 5% penetration on fruquintinib at a high price to potentially really meaningful penetration. Where it ends up, I don't know, but you would certainly hope to see 30%, 40% penetration once you get well established. So getting on the NRDL is absolutely critical. And only time will tell the impact of it. But as I've shown for January, February, the result. Since we got onto the reimbursements, and taking into account you've had a fair amount of disruption in February because of this coronavirus, we've still done very well on fruquintinib in January, February, so -- reasonably well so -- I think, relative to last year. So I think that's the impact. I don't know, is that sufficient for you?

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John Lawrence Newman, Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst [20]

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Yes. Yes. And I just had 1 follow-up question on surufatinib. Just wondering if you could talk a little bit more about the global strategy here for neuroendocrine tumors given that this is a very attractive and large revenue opportunity, especially in the United States. You have an oral small molecule. Just curious if you could talk to us a bit about how you're thinking about perhaps some of the design aspects of the registrational study.

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [21]

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So this is the huge question. And our team based out of New Jersey, led by our Chief Medical Officer, Marek Kania, in Florham Park is deeply in discussions with regulatory authorities on exactly this question. I'm not going to be able to give you an answer on it here. But I think over the next couple of months, we will have real clarity on what is the registration pathway for surufatinib outside of China in neuroendocrine tumors. One of the things that we believe is that neuroendocrine tumor patients and the standard of care for those patients in China is not a whole lot different than the standard of care outside of China.

So we would hope that those 2 very important Phase III study in extrapancreatic and pancreatic NET in China would be data that would be of really important to the regulatory authorities outside of China. So those discussions are underway, and we'll see where it takes us over the next couple of months, and we'll report back as soon as we are very clear on the -- on what we need to do to get surufatinib to patients as quickly as possible.

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Operator [22]

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We have a question from Mike Mitchell from Panmure Gordon.

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Michael Clive Mitchell, Panmure Gordon (UK) Limited, Research Division - Healthcare Analyst [23]

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Christian, just 2 on savolitinib actually. Just thinking about the combination with Iressa. I might have missed it. I would like to think that that was one of the programs expected to transition into registration study level during this year. Is that still the case? Or if that's not, how should I sort of think about the relative progress of that program at this point? And secondly, on MET Exon 14 skipping. Just thinking about the FDA's given priority review to capmatinib. How should I think about the relative positioning again to savolitinib given the rare -- their indication profile for this, for non-small cell lung cancer? And should I think about more strategically on that particular product?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [24]

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Got it, Mike. Thanks. So just very quickly, savolitinib/Iressa, obviously great data from the Phase II that we've presented. We have in the past said we're working with AstraZeneca to figure out the registration pathway for savolitinib/Iressa combo. To be honest, the -- how the SAVANNAH study is moving, the speed at which it's moving, and the level of energy around the Tagrisso combination, AstraZeneca is pouring a huge amount of effort and energy and financial resource into that combination at the moment. So the savolitinib/Iressa combination. It's there as a potential fallback but it certainly isn't a priority at the moment. The priority is savolitinib/Tagrisso which I think everybody in the industry recognizes as a pretty important combination. So savo/Iressa is there. It's good. But I would -- if I were you, thinking about it, I'd see it as a sort of a more of a fallback on insurance policy in case something goes awry on savolitinib/Tagrisso combination.

On capmatinib, obviously, their submissions in, so they're ahead of us globally. Savolitinib for Exon 14 is way ahead of everybody in China with the NDA about to be submitted, hopefully. So -- but we are behind outside of China, and Wei-Guo and the team, and the AstraZeneca team are obviously working to figure out what is the sensible and most sort of aggressive way to consider Exon 14 outside of China, leveraging the big data that we have in China, but also taking into account things like companion diagnostics, which are necessary outside of China and also taking into account capmatinib submission.

Now they got BTD, and they've made that submission. It will be a conditional approval. So we -- we're not so far behind it. We can't get ourselves to a submission in this area. But clearly, we're way ahead in China, and we're behind outside of China, but we would hope to be able to catch up. And I think, ultimately, when the Phase II data, the registration intent study, Phase II registration intent study of about 70 patients is presented at a scientific conference this year, everybody will be able to look at sort of the relative efficacy and safety of surufatinib relative to the other MET inhibitors that are out there.

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Operator [25]

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We have another question from Tony Ren from CLSA.

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Tony Ren, CLSA Limited, Research Division - Research Analyst [26]

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Christian, so I got 2 questions. One is about colorectal cancer and the other is about the situation surrounding COVID-19 in China. So in colorectal cancer, we know that Taiho's drug Lonsurf was approved in China in September last year. So just wondering if you guys see any impact from Lonsurf on Elunate? And so the second question is about the current COVID-19 outbreak in China. We know that there is a lot of social distancing, there's a lot of business affected. Is the regulatory process still taking place? Do you expect any delay on any of your regulatory filings?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [27]

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Okay. Thanks, Tony. I'll let Wei-Guo talk about the regulatory process in a moment. But on CRC on TAS-102 Lonsurf from Taiho in China, this is a different mechanism of action to VEGFR inhibitors. Obviously, TAS-102 or Lonsurf is approved outside of China. It actually is used more often outside of China than regorafenib in third-line colorectal cancer just because regorafenib is a drug that has its issues with liver toxicity in the black box warning. But what we've seen in our development outside of China is that patients have had exposure to Lonsurf. They do -- it doesn't diminish the efficacy of fruquintinib. So we don't see Lonsurf as a major issue either inside China or outside of China for fruquintinib.

On COVID-19, there's been -- obviously, we put a relatively simple update in our results announcement about a paragraph on COVID-19. We don't really have a lot more to say other than that in that. Obviously, it was a pretty significant disruption in early February. We've seen in late February the organization improvising and figuring out how to go. So we've seen on our commercial business in China has not seen too much impact of COVID-19 on, for example, the sales and profits of our commercial business. But maybe, Wei-Guo, you could say a couple of words on how COVID-19 may have affected the regulatory process.

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Wei-Guo Su, Hutchison China MediTech Limited - Chief Scientific Officer, Executive VP & Executive Director [28]

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Well, I mean you've probably read in the news that recently multiple, actually, maybe dozens of anti-coronavirus clinical trials got off in China. And so you could imagine that the CDE would be quite a busy reviewing and approving these trials. However, we've been in very close contact with the CDE on our NDA both on surufatinib and savolitinib, that they are quite -- they are working on our cases, so didn't think quite responsive as well. So I would say, I mean obviously, resources within CDE, you can imagine are quite limited there. So -- but I think COVID-19 is made -- I mean I think it made a big impact, but I hope it's going to be very short-lived. I think more so we -- our concern would be in the hospitals where we have to get all the CSRs finalized and signed off, and we may have to chase the PUIs. But the bottom line, I think there could be some risk of delay but would be really limited.

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Operator [29]

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We have a question from Steve McGarry from HSBC.

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Stephen McGarry, HSBC, Research Division - Analyst [30]

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A couple of things. Firstly, just on the R&D pipeline. You're trialing Elunate in combination with Tyvyt and genolimzumab, so both PD-1. Can you run us through the rationale for trials to programs of PD-1? Was the go-no-go criteria for taking either one of those in their Phase II? And secondly, in terms of the sales force expansion in China, you said about 900-plus personnel by 2023. Could you just give us some guidance in terms of -- will that be balanced with the revenues that you expect to January or [after] January, and by that point, that it wouldn't just be -- is going to be 900 regardless? And then finally, just in terms of the noncore asset, potential divestments, you have been talking about that for a little while. Are we moving any quarter to a conclusion on that?

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [31]

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Thank you, Steve. Great questions. So on the R&D pipeline, the genolimzumab and the Tyvyt PD-1 combos. We feel that this sort of early stage, the modern area. We partnered with Innovent. We partnered with Genor here to combine fruquintinib with their PD-1s. They both are ambitious companies that are keen to do a lot with these combinations. So our view is early development with both assets really let the science and the clinical data do the decision-making. The go-no-go criteria will purely be driven by the data. It would be very difficult for me without that data or for Wei-Guo without their data to make any kind of decisions on which is the better combination. So it's about doing early development with a number of partners and then moving into later development probably with more focus and with fanning in on what we do in late development.

On the 900-people-plus by 2023, yes, we're obviously not -- this isn't a business that's about building the size of the team. This is a business that's about ensuring that we are making good financial decisions and developing our business competently towards ultimately making money. So our hope is that the oncology team of 900-plus people by the end of 2023 will be justified by the assets that we have through NDA approval and launch. We certainly won't be building a team of 900 people if there's no sort of financially attractive reason to have those people.

But I can clearly say that the first 350 this year makes a lot of sense. It will cover 95% of the institutions in China, and it will get surufatinib off to a great start. And I think then we can get into next year and look at it, and see how we're doing and, thus, stepping up to the next level makes sense. And that's the approach we took getting to 2,400 medical reps in cardiovascular space. When we first started selling our cardiovascular drug in China, we had less than 100 medical reps, and we just literally year after year after year built up around the business case on the business. And now we have a large team, and it makes a lot of money. So that's what we'll do in oncology as well.

As far as the divestiture of noncore assets, we've been working really hard on this. And I don't want to tempt fate, so I won't go into details on this. But needless to say, we've been working very hard on this. And if something is going to happen, it will happen. You can never tell until you've actually signed a deal on these things. But we've been saying, we're keen to offload certain noncore assets to enable us to focus in on our core focus on oncology in China, and we intend to do that. Hopefully, that answers your question.

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Operator [32]

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(Operator Instructions) It seems we currently have no further questions. So Christian, if you'd like to continue.

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Christian Hogg, Hutchison China MediTech Limited - CEO & Executive Director [33]

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Yes, last comment. Okay. Thank you very much. We went over a bit here, but thank you, everyone, for your questions. And please feel free to reach out further if you have additional questions. But thanks very much, and look forward to a big year. Bye-bye.

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Wei-Guo Su, Hutchison China MediTech Limited - Chief Scientific Officer, Executive VP & Executive Director [34]

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Bye-bye.

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Operator [35]

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This concludes today's call. Thank you for joining. You may now disconnect your lines.