Okay. This is Christian Hogg, CEO of Chi-Med. Welcome to the Interim 2020 First Half Results. On the line today, we have myself. I have Dr. Wei-guo Su, our Chief Scientific Officer, and I have Johnny Cheng, our Chief Financial Officer. So, if we go straight to the presentation. What I'm going to do is spend maybe 25, 30 minutes on the presentation and then leave half an hour for questions at the end. So, starting on page 3. The overall strategy of the business remains very well established, but I think page 3 sums it up very clearly, even more so than perhaps in the last couple of years. We are obviously trying to build a global science-focused biopharmaceutical company from our established base in China. But, really, the two key focus areas are realizing the global potential of our novel oncology assets, so building out our global team to maximize the potential of those programs. And then, the second area is really building out our fully integrated oncology business in China. So, as we go through the presentation, you'll see how we are working on both of these areas. Really, we're one of very few companies in China aspiring to bring their homegrown innovations from China to the global market. So, I think that sets us apart very significantly from many of the biotechs in China today. If you go to page 4. High level look at the strengths of Chi-Med that have been built up over the last 20 years. They are all self-explanatory. But I think in the top left-hand corner, there are world-class discovery development organization led by Wei-guo. It's now up to over 550 full-time people in our scientific team in Shanghai, Suzhou. And we have, as you see on the top right-hand side…

[Operator Instructions]. And our first question is Louise Chen from Cantor.

Hi. Thanks for the questions here. So, I have a few here. First one I wanted to ask you was, could you give more color, please, on your penetration rate for Elunate in China and how you plan to get beyond that 14% that you noted earlier in the call? And then, secondly, just on your go-to-market strategies for surufatinib, any color you can provide there? Marketing message, reimbursement and the synergy with Elunate? And the last question is on something that you had also mentioned, on the collaboration of assets versus an outright acquisition and then spinning out non-core assets, what's the timing on that and what could we see there in terms of collaborations that you're interested in? Thank you.

Okay. Thanks, Louise. Okay, on the 14% on fruquintinib or Elunate, now that we are getting ready to take on these commercial activities, we are being clear. We've got 320 people on the ground at the moment. I think, by the end of the year, it will be up to 400 people. That is essentially triple the level of medical sales reps that have been in place over the last 12 months. So, it's about going deeper. It's about going broader. And it's deepening the investment. Chi-Med wanted to invest more in the development of fruquintinib. And Eli Lilly are very capable people, but they have a lot of priorities. For Chi-Med, fruquintinib and the launch of Elunate is our number 1 priority from a commercial standpoint. So, we're going to essentially triple plus the medical sales team. We're going to go a lot deeper. And I think that 14%, I'd like to see it up in the sort of 40s before too long. But that's going to take a while and our team is new to this. So, I expect next year – throughout the balance of this year and next year, we'll see an acceleration of growth. And I think we'll be able to get ourselves up to that kind of level within two or three years. We should be able to do that relatively easily. As far as surufatinib is concerned, there's going to be a lot of synergies with the commercial team. One of the great benefits of doing this deal with Eli Lilly is that we can now have more than one product to be out there marketing and there will be synergies. And that will allow us to broaden the scale of the commercial organization rapidly and really make the most of this opportunity.…

Okay, thank you.

So, hopefully, that answers the questions.

Yeah. Thank you very much.

Thanks, Louise.

Our next question is from Alec Stranahan from Bank of America.

Hey, guys. Thanks for taking the questions. And congrats on all the progress. So, my first question is on the recently amended agreement with Lilly for Elunate. Could you touch on the rationale for bringing the marketing activities in-house? For example, did you feel that Lilly was not giving the launch enough attention or was it more of boots on the ground type of discussion? And how do you see the increased economic interest offsetting the additional SG&A spend? And then, I have a follow-up.

So, Eli Lilly is one of the world's largest pharmaceutical companies. These guys know how to sell products. But the reason we pushed very hard to convince them to allow Chi-Med to kind of step in and take over on-the-ground activities from October 1 is because it's our prime asset. It's our first asset. It's the one that we – it's the first oncology drug – home-grown oncology drug discovered in China all the way through – taken all the way through to unconditional approval and launch. And so, we just want to push it as hard as is physically possible. And you can see in terms of -- as I've just said, the size of the medical detailing team that we will have on it will be 3 times that – that was on it when Lilly was handling it. So, I think that it's all about focus for us. And it's about pushing this asset that we deeply believe in as aggressively as we can. But don't, in any way, come away from this feeling that Eli Lilly is giving up on fruquintinib. Not at all. We're still working extremely closely with them. They're deeply involved in the strategic thinking around fruquintinib. And the way I think you can think about what Chi-Med is going to be doing here is we're going to be executing on the ground. And as far as the economics are concerned, we are going to be investing significant resources – financial and human – into the expansion of fruquintinib. And as a result, we need to be receiving a greater portion of the economics on fruquintinib. And so, when we talk about the 70% to 80% of all sales will be paid to Chi-Med in the form of revenues, either royalty manufacturing costs or service fees, that's a really sizable portion of the economics. And I think that it's a win-win for Lilly. It derisks the fruquintinib business for them. They continue to earn a good return on fruquintinib. We step in, invest a higher amount and, if successful, we'll see a really material financial reward. Plus the synergies, as I've said. You've got synergies with the balance of our oncology assets that are coming through. So, I think it's just a win-win for everybody. All I can say is the proof will be in the pudding. So, let's just see how we do over the next 3, 6, 9, 12 months on fruquintinib. And if I'm sitting here in a year and we've grown at a disappointing level, I might have to eat my presentation. But I don't think that will be the case. I think we will see some great progress now.

Great. And then, my last question is on the planned US NDA submission for surufatinib. Could you talk a bit about how the clinical data, both from the SANET studies and the NET bridging study, gives you confidence as you put together the submission package and also the US launch plans? And do you think the US FDA is looking for approval in China first as a component of their review? Thanks.

Maybe I'll ask Wei-guo to answer that question. Wei-Guo, would you?

Well, basically, we had a pre-NDA discussion with the US FDA and shared the data, of course. And they came away very much impressed actually. And they're considering the unmet medical needs for this particular disease and also the strength of overall data, including what we've done outside China as well. They felt quite positive and showed affirmative basis to support an NDA filing. In terms of timing, clearly, in the SANET-ep, the NDA we filed last year, it should be approved well ahead of the US for sure. So, I think those clearly are not linked basically. They're completely independent of each other.

Alec, you had a question on the Commercial. So, can you repeat that?

Right. So, in terms of – how does the bulk of the clinical data sort of gives you confidence as you're maybe putting together how you will launch and approach physicians in the US

I got you. I kind of touched on that in the core of the presentation, in that surufatinib has a different mechanism of action to the existing therapies in the neuroendocrine tumor space in the US, makes it quite differentiated. We are studying very closely the type of commercial organization that we will need to cover the vast majority of these patients in the US. It's actually a relatively modest team that will be necessary to cover the key centers for NET in the US. So, yeah, I think we'll have a highly differentiated product and a relatively straightforward commercial exercise, in that it's quite contained and straightforward. So, that's what we're planning. I think we all have quite a high degree of confidence that we'll be quite successful.

Great. Thanks.

Sure.

Our next question is from Paul Choi from Goldman Sachs.

Hi. Thank you. And good evening. And thank you for taking our questions. I have a few here. Maybe starting with 306 and – for either Wei-guo or Christian. Can you maybe help us understand what you've seen so far in the preclinical characteristics and what you're seeing that's differentiated on the IDH versus the, for instance, let's take the Agios assets? And where do you see 306 in terms of your US development plans fitting either pre or post Mylotarg or just understanding whether it's relapsed/refractory and where in the treatment paradigm you're targeting? And is the plan – now that you're already starting with the US IND here, does this reflect a shift in your development philosophy to just start and go global from the get-go there? So, that's question one. On question two, with regard to the surufatinib PD-1 combinations, I know you've listed the BeiGene PD-1. But as you think about the US development plan for combination therapy, are you looking to go maybe to a PD-1 agnostic approach and consider some of the other commercial stage PD-1 assets? And last one is just a quick one for Johnny. How should we think about the CapEx for the new building here and how much of the cash burn in the second half here will be driven by CapEx versus operational expense changes? Thank you.

Great. Thanks, Paul. What I'll do is I'll talk a little bit about the development philosophy, then I'll hand it over to Wei-guo to talk 306 and we'll go from there. I think that the shift in philosophy around development, it's a practical shift. We've built a fantastic team of people in the United States on the clinical regulatory side that give us – give the company the capability of bringing our – particularly our more innovative assets to the global market quickly. So, that's a conscious decision to say on 306 on the IDH inhibitor. We want to go, in parallel, China and the US, no longer in series, China first then the US. And we have the capability and the resources to do that now. So, I think you'll see us doing that more and more in the future, trying to bring these great novel innovations to a broader patient population as possible as quickly as possible. So, Wei-guo, maybe I hand over to you to talk about 306 and where it sits, in your mind, relative to competition, et cetera.

So, Paul, as you know, I think the main rationale here to looking at doing is a lot of the IDH mutant tumors, they tend to be highly heterogeneous. Some patients would harbor both IDH1 and IDH2. So, a selective inhibitor, obviously. The efficacy would be reduced. It's also noted that the mutation switch tend to be also a resistance pathway, which could be acquired or could be pre-existing, but, clearly, it would affect the PFS. So, we think by targeting – by shutting down both IDH1 and IDH2, I think both in AML and in solid tumors, we would see an improved ORR but, more importantly, improved PFS and OS. So, that's really the main rationale. With regarding to timing, we are in Phase I in China. And US, we are targeting very shortly to file an IND. We have a lot of groundwork done, led by Marek and his team in New Jersey in terms of leading PIs and sites and so forth. So, should be in few months, fairly soon.

Okay. Then the surufatinib PD-1 combos. And you're talking about PD-1 agnostic, Paul. Wei-guo, do you want to talk about that?

No. I think Paul was asking US versus China.

I've moved on to the second question, the one about suru and PD-1s.

Right. Yeah. I think the PD-1s, all the collaborations we signed into, they are all global collaborations. So, all three partners will be doing this globally, basically.

And then, Johnny...

Do you think about using other PD-1s besides the BeiGene one, I guess, is my question here and being PD-1 agnostic?

Yeah. I think it depends. PD-1s are PD-1s. Even though they hit the same target, but they are slightly different. So, I think it will be driven by the data at both – actually, all three players, as a matter of fact, BeiGene, Junshi and also Innovent, they all have global aspirations, and so do we. So, I think a lot of data coming out of China proof-of-concept will drive the future activities and registration pathways both in China and also outside.

Okay. Johnny, do you want to talk about the CapEx for Shanghai?

Okay. So, the CapEx for Shanghai, we are planning to spend about $20 million for the second half of this year. And as the project is going to go over the next three to four years, we do plan to potentially mortgage that piece of land and also the project to the local bank, so that we can get some smart financing. And the government would be able to potentially subsidize us in terms of the interest. So, we will substantially derisk ourselves in terms of any financial constraint for this project. So, in total, we estimate it to be over $100 million, maybe $110 million to $130 million, for the whole project.

Okay. Paul, does that answer your questions?

Yes. Thank you very much.

Okay, great. Thanks.

Our next question is Tony Ren from CLSA.

Hi. Thank you for taking my question and congrats on the progress you guys are making. I just want to go back to Elunate, again. I think, Christian, when you were addressing one of the earlier questions, you mentioned going deeper. Could you clarify that a little bit? Does that mean that they're going to tier 3 or 4 cities? And also, we are starting to see some pricing pressure in China again. So, do you see any further pricing pressure for Elunate for the remainder of the year? Is there going to be another round of price cuts going into the negotiation again? Yeah, thank you.

Thank you, Tony. As far as how deep we're going to go, we'll go, obviously, the top 1,300 oncology centers in China. And they vary from class III hospitals all the way down to county town cancer clinics basically. So, you're covering a broad area of China. And we can do that with the commercial team we have in place. So, that's how deep we'll go, about 1,300 clinical centers. On the pricing, no. I don't foresee any pricing activities on Elunate this year or next. We'll, obviously, have to get into discussion next year around renewal of our position on the NRDL. And we've seen for the various oncology assets that were included in the 2017 NRDL, when they were renewed two years later on the 2019 NRDL, they, in general, took further reductions, but they were much more modest reductions, and that's what I would expect to see for Elunate over time. So, yeah, I don't worry about pricing too much because the process is renewal every two years and a sensible fact-based reduction or discussion at that time. So, nothing this year, and there'll be discussions next year, but nothing will kick in until early 2022.

Got it. Okay, thank you very much.

Sure.

Our next question is Sean Wu from Morgan Stanley.

Hi, Christian and everybody. Thank you, management, for taking my question. And congratulations on your great progress. I still have a bit of question about Elunate and, of course, [indiscernible]. Your relationship with kind of Lilly has been longstanding and clearly, I would say, they have provided the business support in the early stage. But your kind of license agreement with them have been modified not once but twice. And from today's announcement, it's clear you have much more economic interest than they have. I'm just kind of curious why they get to consolidate the whole sales. It means, as for you, don't get to consolidate the whole sales of Elunate in China. That's number one. And number two, the question is, you mentioned that you had 14% kind of market share now and you would like to go to 40% next year. What gave you the confidence? And what are the patients being treated there for the 86% now and how many of those patients are getting treated with [indiscernible] at an off-label setting [indiscernible]? Those are the questions I have for now. And also, you mentioned about like people with the neurocrine type of tumor, either nonpancreatic or pancreatic, have long kind of progression-free survival. So they will stick to their drug for a long while. But if they don't get treated with an alternative kind of treatment, what kind of progression-free survival they will have? And which kind of advantages we are providing in terms of kind of prolonging their progression-free survival? Thank you very much.

Okay. Thank you, Sean. So, yeah, you're right on Elunate. It is a significant modification of the agreement. When you strike a license and collaboration agreement, as we did with Eli Lilly back in 2013, seven years is a long time and many things change during that period. It is common to see amendments being agreed along the way as people change, as markets change and as companies change. And so, this was an agreement -- an amendment that actually we've been working on for some time. Eli Lilly had been very supportive of it. They like the idea of Chi-Med coming in and bringing more resource to the story. And so, it made a lot of sense to them and us. As I said, it's a win-win transaction. Yes, our share of the economics increased significantly as a result. But that's only because we're taking more financial risk. And so, that's only justified. So, I think it's a very sensible deal. As the next 6 to 12 months plays out, I think we'll be shown to have made a good move there. You mentioned I said 14% penetration going to 40% next year. I didn't quite say that. I said I'd like to see – to get up to sort of 40% over the next couple of years, two or three years. I don't really know, to be honest with you, Sean. I think when we are on the ground and the team is commercializing Elunate, I think by the end of the year, we'll have a very good sense of what kind of penetration targets we should be setting ourselves. But I do believe that we should be able to increase from 14% to really take over the dominant position in third-line colorectal cancer because we've got the cleanest, most tolerable VGFR inhibitor in the space. And with approval, specifically in third-line colorectal cancer. So I think we've got the best option for patients. And now being on the NRDL, it's actually economically the best option as well. So, there's no reason why we can't build our penetration dramatically from where it is today. As far as what our patients today being treated with, maybe I'll ask Wei-guo to answer that. Today, what are the other 86% of patients being treated with, in your view, Wei-guo?

Obviously, in China, regorafenib is also on the market for this particular population, but also you got cycling with the chemos, participating clinical trials on IOs and other targeted therapies as well. So, there are I think a lot of clinical trials going on in China and also probably a great majority are still struggling with chemos. So, I think if you look at what Lilly has been doing, focusing on tier 1 cities, just by territory, you're not even covering probably that much, right, comparing to just the geographies. So, I think then those patients who don't have access to fruquintinib today, if they are enrolling in NRDL, they might be getting a regorafenib. And also TAS-102 is in China as well, doing a lot of trials as well and IO trials too. So, I think both geography and also other available therapies, cycling through chemos and also participating in clinical trials, I guess. First things first, I think we need to expand the geography first to make sure that all the patients have access to fruquintinib.

Okay, thanks. And your last question, Sean, was around neuroendocrine tumors. I'd mentioned that patients live with neuroendocrine tumors for a long time. So, those grade 1/2 neuroendocrine tumor patients, the median overall survival on the chart I showed in the presentation, it's around – it's over eight years. So, their median overall survival is quite long. As far as PFS is concerned, in the non-pancreatic NET patient population, you see median PFS on surufatinib of over nine months compared to less than four months on a placebo basically. So, it's a reasonably long PFS. We will present also our pancreatic NET Phase III data at ESMO. And similar, you'll see a really meaningful PFS benefit to patients. So, I think that – yeah, that's why we're getting – looking at fruquintinib in colorectal cancer, the PFS is around four months. So, surufatinib in NET, it's sort of double that, if not more, just because of that type of solid tumor. So, we expect to see patients on surufatinib for long periods of time.

Okay. Thank you very much.

Sure.

There is a time constraint. Our last question is John Newman from Canaccord.

Hey, good morning, Christian. Thanks for taking my question. I just had two quick questions. The first one is when I speak with US investors on Chi-Med, one of the first questions they always ask me is about the company's progress towards getting assets approved in the United States. And that's why I think the work that you're doing with surufatinib in neuroendocrine tumors is so interesting and exciting. Just curious if you could talk about how you see surufatinib fitting in with some of the other agents in that market. Second question I had is, regarding the changes in the partnership with Lilly, I just wondered if you could talk about some of the success that other large western players have had partnering with a local company in China. I feel that sometimes investors forget that Chi-Med has been operating a commercial pharmaceutical business for two decades in China. I'm just curious if that was some of what played into the decision by Lilly to change the agreement. Thanks.

Thanks, John. Thanks. Okay. So, the first thing is, yeah, I think that now becomes something quite unique that Chi-Med is doing. Obviously, BeiGene has been successful getting their BTK inhibitor approved in the US, but next along will be surufatinib with our NDA this year. So, I think, for US investors, looking at Chi-Med, they will be looking at a company that actually has global aspirations. Yes, obviously, China is our home and that's where there's a very big unmet medical need that we're trying to help address. But our assets are designed to be competitive globally and that's what we're trying to do. So, as far as how surufatinib fits into the treatment landscape in neuroendocrine tumors in the US, I kind of talked about that a little bit on the landscape slide in the presentation. It's a different mechanism of action. Its broader spectrum neuroendocrine tumor patients benefit across all subgroups in neuroendocrine tumors as opposed to, in most cases, the approved therapies are approved in quite narrow subsegments of NET patients. So, there are multiple points of differentiation that gives surufatinib advantage. And we're looking forward to taking advantage of that. With regards to Lilly, actually, the most interesting – talking about other companies partnering with local Chinese companies, the best example is Innovent and Lilly. This is a collaboration on the PD-1 space and Eli Lilly has been working closely with Innovent over the last few years. Now, the difference in the launch of sintilimab, the PD-1 from Innovent, and fruquintinib is that Innovent launched sintilimab themselves and Lilly took the back seat, whereas, with fruquintinib, Lilly took the front seat and we took the backseat. Now Innovent has done such a fantastic job launching sintilimab and has invested so deeply in building out their commercial infrastructure and making a success of it, that's one of the main reasons Lilly said actually maybe it would be a good idea to let Chi-Med get involved in this because we have that same capability that Innovent has to invest heavily in fruquintinib and make the most of it. And so, I think Lilly kind of learned from their own example, not from examples of others to say, yeah, let's let Chi-Med have a shot at this and raise the level of investment in fruquintinib. But there are other examples and – BeiGene is doing a great job commercializing various products for various multinationals. And local Chinese biotechs, really on the ground, have the resources these days to be very aggressive. And I think that fruquintinib will really benefit from this amendment now.

Okay, great. Thanks, Christian.

Thanks.

So, I think that's where we come to an end. But thanks, everybody, for joining the call. And we look forward to speaking to you all in due course. Thanks very much.

And this concludes our conference call. You may disconnect now. Goodbye.