HUTCHMED (China) Ltd (HCM) 2018 Q4 法說會逐字稿

Hello, and welcome to the Chi-Med 2018 Full Year Financial Results. My name is Molly, and I'll be your coordinator for today's event. (Operator Instructions) Please note that this call is being recorded. (Operator Instructions)

I will now hand you over to your host, Mr. Christian Hogg, CEO to begin today's conference. Thank you.

Okay. Thank you. Thanks very much, Molly. Welcome everybody to the 2018 full year results conference call for Chi-Med. If I draw your attention to the presentation, if you go through the disclaimer on Page 2 to Page 4, we can start to talk about the 2018 financial results.

So Page 4, just as a reminder, of the 3 sort of core areas of our focus. Actually, before I go into this, I'd just remind everybody that on our side, we have Dr. Weiguo Su, our Chief Scientific Officer; and also Johnny Cheng, our Chief Financial Officer; as well as myself. So back to Page 4. We're very focused on trying to build a science-focused global biopharmaceutical company based in China. We've been working towards that objective for the last 19 years. Our 3 areas of focus are laid out on Page 4: global innovation, China oncology and our existing China business.

Global innovation is very much the creation of a range of targeted therapies, primarily in oncology, but also in immunology, generated from a scientific team or a discovery engine of now over 420 people in China, and really working to bring our innovations to the global market. We're doing a lot in this area these days. Five of our assets are now either in clinical development outside of China or about to start. We're building a big organization on the clinical regulatory side or at least intending to build a big organization on clinical regulatory side in the U.S. and Europe. And a lot of investment and focus is in bringing these assets to the global market. So that's the first area.

The second area is China oncology. And this is an area that, that we have just in the last year become the first company to bring a novel synthetic oncology drug from discovery, all the way through to full approval in China and launch. I will give update -- an update on how fruquintinib is doing in the market as we go through this presentation later. But in summary, we're happy with where fruquintinib sits right now and are encouraged about where we think it's going to go. We have 8 drug candidates in the clinic in oncology in China at the moment, all progressing in parallel. And we're hoping to see savolitinib and surufatinib both reach NDA over the next year or 2.

And then finally, our existing China business has always been a sort of a dual-purpose business. One is to generate cash to help fund our innovation, and secondly is to provide us the expertise in commercialization activities in China. So we run a big organization in China that provides us a great platform for our future innovative drug launches.

So going on to Page 5. You can see the 2018 financial results. On a high level, they are in line with guidance. You can see there on the Innovation Platform, so our investments in global innovation as well as the China oncology operations, we reported a net loss of about USD 102 million in 2018, which was quite a big step up from 2017. That will continue to grow as we broaden global development of certain of our assets. And we'll talk about our guidance for the future later in the presentation.

On the Commercial Platform, we had a good year. Net income after-tax attributable to Chi-Med was $41.4 million, up 10% from 2017. So good progress and good share growth on all our key products. And in general, we're running a very healthy commercial business in China. So in total, group net income -- sorry, net loss for the year was around USD 74.8 million. So you can see that approximately half of our $140-odd million in investment in R&D last year was offset by income from our partners and income from our China business. So good balance as always.

Page 6, the Innovation Platform. You can see we earned $41 million from our partners, Lilly and AstraZeneca and Nestlé. Lilly was the largest portion, 20 -- almost $27 million in revenues from Lilly in 2018. This was milestones for approval on fruquintinib in colorectal cancer. As well as in the last 5 weeks of 2018, we started manufacturing and selling fruquintinib to Lilly, who then sell on to the market, and we booked revenues -- product manufacturing revenues of about $3.3 million in the last 5 weeks of '18, and then about another $300,000 of royalties on top of that. So you can start to see the commercial impact of fruquintinib coming. And then the R&D expense is $142 million. That's non-GAAP. So that's basically all of our costs of moving our pipeline and of 8 drug candidates, as I said, some of them -- 5 of them internationally now. Also, building our small molecule manufacturing operations in China, getting GMP certification around the time of our approvals and expanding our U.S. and international clinical regulatory operations in New Jersey.

On Page 7, you can see the Commercial Platform. Revenues were down because of the 2-invoice policy. It didn't impact net income at all. Net income for the Commercial Platform was up 10% to $41.4 million for the year, very strong performance on our cardiovascular prescription drug business, which was up 11% to $233 million. Market share for 2018 for our cardiovascular business was 17%, up from 15.4% in 2017. So you're seeing great share growth, you're seeing great growth in general on our commercial business there. The third-party products, Seroquel and Concor performed very well in 2018. We saw our service fees from marketing, from providing full-service marketing activities to Astra and to Merck Serono on Seroquel and Concor, they grew 61% to USD 21.2 million. So just another example of our commercial team executing very well.

The Two-Invoice System has been implemented. It came in a bit slower than we expected. So we'll probably see a little bit of Two-Invoice System impact in 2019, but not much. And again, like I said before, it doesn't really impact the net income. And the Two-Invoice System has led us to have to restructure our distribution and logistics system under our largest joint venture, Shanghai Hutchison Pharmaceuticals Limited. It's a prescription drug business and we've had to adjust. And I'll talk about that later. But it's basically gone without any major issues and we're in pretty good shape at this stage.

So Page 8, just lays out a kind of a high-level picture of our clinical activities at the moment. The red boxes are all our global activities, and you see the majority of activities are in the earlier stages. So in proof-of-concept, lot of activity was savolitinib, fruquintinib and surufatinib globally. We started off our dose-finding studies on fruquintinib and surufatinib with the PD-1s, and obviously, the Syk inhibitor and PI3K delta that just about to kick off in the U.S. and Europe in Phase I to go along with the activities we have in China and in Australia on the Syk inhibitor and PI3K delta.

I think the most exciting red box would be the savolitinib [degree so] study. It's a Phase II study. The SAVANNAH study that's now kicked off and moving. We will get into that in a lot more detail later in the presentation. Then you see all the blue boxes are the China studies, where we have registration studies on MET Exon 14 deletion non-small cell lung cancer for savolitinib, I'll talk about that later. Then, the fruquintinib plus Taxol second-line gastric cancer Phase III study, which is about to hit an interim -- an early interim analysis for FRUTIGA in the next month or so. And then the 2 neuroendocrine tumor studies, Phase III studies on surufatinib that will also have very late-stage interim analyses this year. So we're actually quite eager to see the outcomes of those interim analyses, hoping that we might be able to submit for -- submit our NDAs if the data is supportive of that. And then marketed products, Elunate, as we've talked, and I'll update everybody on that later.

So moving on to Page 10, just on a very high level on the global innovation side, what are we trying to do? Ultimately, we're trying to create global step-change innovation off of our discovery engine in China. Going after multiple first-in-class assets like Syk, like c-MET, but also on the discovery side, working very hard to come with a whole range of innovative programs against novel targets. Kinase selectivity has always been our focus. We really believe about attacking cancer from multiple angles. So looking to design drugs that have the lowest level of off-target toxicity possible. And drugs that can be combined with each other to address resistance. And as I said, attack the disease from multiple angles. The last point is broad range of assets. We have 8 programs at the moment. We expect to expand that pretty dramatically over the next 5 years, looking at second-generation immunotherapies and expanding into the whole antibody area.

Page 11 is the organization. We've been operating for 19 years. So this business has been built up step by step by step on a very solid foundation. On the management team side, you'll see that most of the management here have been with the company for extended periods of time. And as we enter into new areas, we bring in top-quality people like Dr. Marek Kania from Lilly, who is now leading our U.S. clinical regulatory operations, and Enrico Magnanelli, who is head of our International operations from Gilead. So as the company expands, you're seeing more and more high-quality talent joining the senior management team.

On the innovation side, you're seeing the integrated innovation organizations, now well over 400 people on the scientific team in Shanghai, Suzhou and New Jersey. And on the commercial side, the numbers are large. I mean, we're approaching 5,000 people, actually a little bit over 5,000 people in our 50-50 JVs. So it's a big organization with a lot of capability.

Page 12 and 13. Very quickly Page 12, just a brief highlight of our 5 global assets. Savolitinib, now we've treated over 900 patients with savolitinib. This is becoming an extensive data set. We will be presenting more data shortly at AACR at the end of this month in lung cancer, and in gastric cancer probably middle of the year. So that data set on savolitinib gives us great degree of confidence about this drug candidate. And I believe that, that we will get this drug to approval at some point.

Fruquintinib has been launched now. We obviously had the disappointment in third-line non-small cell lung cancer. Last year, we have done a extensive analysis on that Phase III, the FALUCA study, and we will be submitting in for presentation sometime this year. What's for sure about fruquintinib in lung cancer is that it's a very effective drug. The unfortunate thing is the treatment landscape in lung cancer is changing so rapidly, that unfortunately the FALUCA study failed to meet its primary endpoint, but all the secondary endpoints were met convincingly. So we've got an active drug. We just got to figure out how to get it approved in that area. And gastric cancer, the FRUTIGA study, we will have an interim analysis shortly and we're looking forward to that.

On Page 13, surufatinib, it's a big year for surufatinib in 2019. We have the neuroendocrine -- extrapancreatic neuroendocrine tumor Phase III interim analysis sort of mid-year and the pancreatic net interim later in the year. And we're hoping for a positive outcome on those studies. And if it is positive, then we would hope to be able to submit, but we'll have to wait to see the data.

And then the Syk inhibitor, 523 and 689, the Syk inhibitor and PI3K delta. The data sets we're building there are expanding. Now over 110 patients treated with the Syk inhibitor. We are now identifying the non-Hodgkin's lymphoma subtypes that do well with the Syk inhibitor, and we hope to have a plan for registration later in the year.

So moving on to 14. I won't go through it in detail, but this lays out all the studies that we're running globally. And you'll see savolitinib obviously has a global program with SAVANNAH being the kind of the lead. The work we're doing in kidney cancer, we'll talk about that later, but there still remains a high degree of optimism that savolitinib and a MET inhibitor is going to play an important role in RCC and papillary renal cell carcinoma, but probably in combination with immunotherapy as opposed to as a monotherapy.

Fruquintinib, we are tooling up to start global registration study on -- in colorectal cancer as well as looking at combinations with the PD-1 in solid tumors. Surufatinib is the same approach. We have a Phase II that's enrolling at the moment, but we intend to start registration studies outside of China on surufatinib later in the year, maybe very early next year. And then the Syk inhibitor and the PI3K delta will be in development in the U.S. and Europe in the not-too-distant future, and that will add to our current China and Australian studies that we have running at the moment.

Page 15, so on a high level. For the next 2 or 3 years, we're looking to get savolitinib and Tagrisso through to a positive outcome in the SAVANNAH study submission for approval and launch. That's a primary objective of the company. The second point is to continue to build out our U.S. and European development operation. We're off to a good start. We've got a great team. You can see the picture there of a few of the team members. And we expect to build out that team in the U.S. and Europe over the coming year or 2. And ultimately, we need people on the ground to run these clinical programs and to move these assets in -- outside of China. So that's been a big investment for us and a big focus area for us. The third point, accelerate the development of our 4 un-partnered global assets. So we've talked [that] fruquintinib, surufatinib, Syk inhibitor and the PI3K delta. And then finally, we intend to move around one novel drug candidate a year into global development.

Moving on to China oncology, Page 17. This is an area of enormous interest these days. The unmet medical need in China remains great in oncology. The reforms that are happening in China are moving at great speed, and that's attracting a lot of investment into China oncology and biotech, in general, in China. We see Chi-Med as a first mover in this space, not the only first mover, but one of the small group of first movers in this space. And I think the success of getting Elunate launched in China as the first-ever therapy of its type, it's a great achievement for us that we managed as an organization delivered in 2018. But we're following very quickly with the rest of our assets in China. And we hope some of these 5 registration studies that are underway or set to start in China will yield further NDAs. And obviously there's a big commercial opportunity in China. We'll talk about that a little bit when I get into how fruquintinib is doing at the moment in a moment.

So Page 18, you can see why China is now the second largest pharmaceutical market in the world and why it's growing so quickly. It's growing because medical insurance coverage is expanding. The reforms in the health care system in China have led, as you can see in the chart, on the top right of Page 18, you can see that in the last 10, 11 years, 5 -- over 550 million new patients have entered into the medical insurance scheme in China and are essentially getting a good portion of their drugs reimbursed. So that's what's driving the pharmaceutical industry growth in China. And that growth has led to the major influx of investment in the industry. So you can see in the bottom left-hand side, the investment of venture capital and private equity money into biotech in China is just really rapidly grown in the last 5 years. And that's great for China because you're bringing the resources in to invest in innovation, to bring innovative therapies to patients in China. And the FDA or the NMPA now is doing their bit. You can see number of priority review NDAs is increasing rapidly and the access to western drugs on the NDRL and on oncology drugs on the NDRL is really increasing with 32 oncology drugs added in the last couple of years to the reimbursement list. So that's really helping.

So Page 19, you can see the incidence of cancer in China is higher than anywhere else in the world, almost 4.3 million new patients a year. The chart in the bottom left of Page 19 is an interesting chart. It shows that taking Tagrisso is a good example. Just its second year of sales in China, on this chart, it was an estimate for '18, it estimated it at around $135 million. Actually, I believe that Tagrisso came in closer to $160 million plus in China just in its second year. That's USD 1 million. This is unheard of. You go back 5, 10 years, it would take years to get a new drug established in China just because the barriers to entry were significant. But the NMPA and the Chinese government has just broken all of that down in an attempt to make these innovative therapies more accessible for patients in China, which is terrific.

On the right-hand side of this chart, you can see 2 examples, Herceptin and Avastin. What's happened since they took their pretty big price reductions to go onto the reimbursement list back in late '17, 66% and 62%, respectively. So big price reductions, but you can see major increases in access, volume and penetration that came off of those price reductions. And so now Avastin and Herceptin doing a lot more sales in China as a result.

So Page 20 lays out all of the 20-odd studies that we're working on in China. Many of them late stage now, registration studies. I won't go through all of them in detail. But on a high level, savolitinib, MET Exon 14 deletion, we hope to complete enrollment this year on that study. And if that is a positive outcome, we will submit. We'll talk more about that in a moment. Fruquintinib, it's all about gastric cancer in addition to colorectal now, and that interim study will be interim -- first 100-patient interim analysis will be sometime in the next month or so. Surufatinib, we want surufatinib to be our first un-partner drug in China that we will launch ourselves. So we're hopeful for extrapancreatic MET as well as pancreatic MET to read out positively from these interim analyses this year. And then moving on the Syk inhibitor and PI3K delta that -- that is in our view is the area of most exciting registration activity over the next couple of years. We'd hope that the Syk inhibitor would be in registration studies this year.

So Page 21, the objectives in China oncology for the next 2 or 3 years really is to establish Elunate as the best-in-class VEGFR TKI in the China market. In our view, Elunate and fruquintinib is the cleanest, most effective VEGF -- small molecule VEGFR inhibitor in the market in China. And frankly, there's an argument to say globally. So we will focus very hard with Lilly to expand development, deepen penetration, look into the PD-1 combinations and essentially establish Elunate as best-in-class in China. We'll focus on the launch of our un-partner drug, surufatinib. We're building our commercial team in China. We currently have a team of about 30 people on the oncology commercial side at the moment that are working to facilitate the enrollment in our late-stage studies, some of our Phase IIIs. As we get approvals, we will expand that team and launch our own products. So we have great commercial capability and building an oncology team is something that is second nature to us. Savolitinib, MET Exon 14, hopefully we can see an NDA submitted early 2020 if all goes to plan, and then progressing the pipeline of other assets.

So to Page 23. This is the highlights of 2018. So fruquintinib, the approval and the amendment with Lilly. I'll talk both -- about those in more detail in a moment. Savolitinib starting 2 studies that have potential for registration in lung cancer. We'll discuss that. And then the presentation of the Imfinzi/savolitinib PRCC data at ASCO GU recently. We'll talk about that. We'll also give a brief update on our hematological malignancy activities, which made great progress in 2018 in China and Australia and also getting the INDs cleared in the U.S. and building on our clinical regulatory team, getting them in place in order that we can now start U.S. and European clinical development imminently. And then the deals we did with the 4 PD-1 antibodies, 2 of which have now been approved in China. Sintilimab from Innovent and toripalimab from Junshi. So those 4 deals really now allow us to use fruquintinib and surufatinib in combinations with those PD-1s and see some synergy. And then obviously last point is setting up the clinical team, as I've mentioned before.

So talking about fruquintinib. Page 24, you can see this is a chart we shared before. But basically just summarizes all the sort of the first that we've achieved with fruquintinib through these last couple of years. The first oral presentation at ASCO; on a big Phase III in China; then the JAMA, the Journal of the American Medical Association Publication last year, first time that it happened for a big Phase III in China, priority review that we got in late '17. And then the approval in September 2018, the first-ever approval of a China discovered oncology asset of this type and obviously followed by the launch in November.

You can see on Page 25, the launch was a big event. This was all staged by Lilly. Lilly has done, in my view, a very good job getting fruquintinib launched. We -- Lilly essentially took this launch presentation across China in multiple events. And the awareness of fruquintinib and Elunate now among health care professionals in this field is close to 100% because of everything we've done.

So 26, you can see the epidemiology, we got about 55,000, 60,000 patients a year. You see the pricing. It's -- fruquintinib or Elunate is priced at about USD 3,300 per cycle. But with the patient access program, patients only need to pay for 3 months. So it's about USD 9,900 total to get on to fruquintinib. So how is it doing? In the first 5 weeks of launch, we launched on November 25. So we booked revenues of $3.3 million, that is not sales to hospitals, that is revenues. Our manufacturing revenues to Lilly. So our cost of goods to Lilly was $3.3 million. Cost of goods because we sell to Lilly at cost essentially at full cost. And you can see the royalty during that period was around $300,000. So with a 15% royalty, you can see the external sales in that first 5 weeks are about USD 2 million. But what we're seeing is continued encouraging month-to-month sort of trajectory. As of the end of January, so on January 31, so this is 9 weeks into the launch, we estimate that well over 1,000 patients were being -- were on Elunate treatment. So from 0 on November 25 to well over 1,000 patients on -- at the end of January 2019. So 9 weeks of effort. Now that's a very preliminary view as to how it's doing. It's encouraging, but rolling out a drug of this type across China is a step-by-step phased process. So I would treat that over 1,000 patients on treatment at the end of January as just a very preliminary look. And in my view, it's encouraging. I think what we're seeing is a high level of awareness of the drug. Lilly is doing a good job, getting distribution out there in China. And I think we will see that accelerate rapidly. The national drug reimbursement list is updated, at least, what we're hearing is it is set to be updated late this year. And at that point, we would hope to get on the national drug reimbursement list. But the process of getting on that list is, through this year, we will work with Eli Lilly to discuss Elunate's inclusion in the national drug reimbursement list. We'll discuss the terms of that inclusion. And if we're able to come to an agreement, then we will hopefully see fruquintinib reimbursed by the end of the year. And if that's the case, I think, we can see -- expect to see a real acceleration of the penetration of the drug in China.

Page 27 is the Lilly amendment of 2018, December 2018. This really, in our view, secures the long-term commercial potential of Elunate in China. Obviously, we've agreed to pay future development costs in China. But in return for that investment, we have been given full freedom to operate with regards to selecting and pursuing any future indications in China. We will be earning materially higher milestones and royalties, which are laid out in the table at the bottom of Page 27. And we'll have freedom to operate and freedom to collaborate with any third party in China. So the PD-1 collaborations or any such type of combination collaborations with other companies in China. So really important freedom to operate. It's our -- Elunate is our first and most important China asset today. So we are very focused on maximizing its potential and expanding development into many new areas. And Lilly is as well, but Lilly also has other priorities. So in this sense, this amendment has allowed us to really bring the resources of both organizations to bear to maximize the future potential of this terrific innovation.

And then finally, we have potential promotion rights in 30% to 40% of China for Elunate now. This is, first of all, it's not expected that we would gain these rights any time before 2021, probably later. And it's triggered by the launch of Cyramza in China. So when Cyramza comes into China, when or if Cyramza comes into China, we will be given 30% to 40% of China. We will take over commercial rights in China in that part of China, 30% to 40% of China. We'll earn service fees for those activities, and we expect that to be net income accretive pretty much straightaway. So we see that as a way for us to get involved in the commercialization of fruquintinib and also to ensure that fruquintinib is given total focus. And through our efforts, we'll be able to establish if Cyramza is, in any way, cannibalizing fruquintinib; and if it is, then we'll be able to adjust. And Lilly's agreement -- is in agreement with that and we're in -- we're very focused on ensuring that we get the maximum commercial potential of Elunate in China as a result. So that's fruquintinib.

So moving on to Page 28 and 29, savolitinib. You've seen this chart on Page 28. The various MET-driven patient populations in non-small cell lung cancer. This is a chart we've been sharing for several years now. I think the biggest change on this chart is Tagrisso. Over the last year, 2018, Tagrisso made a major step forward. I mean, delivered sales almost $1.9 billion in its third year. And just showed everybody just how big this MET-driven patient population and market potential could be.

I think everybody now is of a view that Tagrisso could end up as a $4 billion or $5 billion drug. And if that's the case, with MET-driven disease, the main resistance pathway to Tagrisso, we are looking at a big market potential for savolitinib here.

Page 29 talks about MET Exon 14. We lay out a table in Box #1 there, the competitive landscape. There's been a lot of innovation, a lot of activity -- clinical activity in Exon 14 with capmatinib from Incyte/Novartis with tepotinib and crizotinib. And you can see here what really matters is the line of treatment. So treatment in the first-line MET Exon 14 with a MET inhibitor, you can see very high levels of response sort of 60% and above. If you're in second line and above, the response rates go down into the 30s and 40s. So we will present preliminary data on savolitinib in MET Exon 14 deletion non-small cell lung cancer at AACR on, I believe, it's March 29, so in a few week. That will be the first time we presented data from savolitinib monotherapy and MET Exon 14 patients. It will be a decent size data set and it will give everybody an understanding of exactly how we do in this space. It's China data. We believe that we should be able to complete that registration study by the end of the year enrollment and look to be submitting our NDA sometime in early 2020. So we're very excited about this. And I think my -- I think we just have to wait until March 29 or exactly when the presentation is during that weekend, I don't know, but we'll wait till March 29 and let everybody see savo and MET Exon 14 for themselves.

Moving on to Page 30 and 31, this is the MET-driven patient population post first-generation EGFR TKI. So post-failure of -- on Iressa and Tarceva. And you can see here that in that setting, you've got 19% of patients are MET amplified. This is based on plasma samples. The frequency of MET amplification is expected to be higher than that when tissue samples are analyzed. So this is a really meaningful portion of these patients that -- that fail in that -- well, first of all, they fail on Iressa and Tarceva, then they go on to Tagrisso in that second-line setting, and then they fail Tagrisso. It's those patients that have 19% of the MET amplified.

So you can see on Page 31. This is the TATTON data that we presented at World Conference on Lung Cancer in 2017. In 3 weeks at AACR, we'll be presenting the full oral presentation of the TATTON data. In that presentation, we will provide duration of response data, a view on PFS and it's basically the full TATTON data. So it's a bigger data set and it's a very -- it's a mature data set. So I think, we'll all be able to understand exactly how important that savolitinib, Tagrisso combination is in these Tagrisso refractory patients.

Looking at Page 32 and 33, this is MET-driven disease post-Tagrisso use in the first-line setting. Obviously, Tagrisso now is approved in over 60 countries as a first-line treatment in non-small cell lung cancer, EGFR mutation positive non-small cell lung cancer. And you can see that MET is a major driver of disease there. So we will also present mature data in this patient population in -- at AACR in a few week.

Page 34, ultimately, it's all about safety -- safety and efficacy. But safety of the combination is important. And so as we said about a year ago, we were working on trying to find the optimal dosing regimen of savolitinib and Tagrisso. I think we and AstraZeneca feel that we found that, and we will be presenting information around that shortly.

As we go into the SAVANNAH study, which is laid out on Page 35, our focus is to ensure that patients stay on this combination regimen for as long as they can and derive the greatest benefit from it. And so to do that, you got to get the combination tolerability right, and we think we've got that that sorted out.

So you can see on Page 35, SAVANNAH is going to be -- is going to have patients coming in from both first line as well as second line failure on Tagrisso and multiple sub-studies like ORCHARD that are going to be channeling patients into SAVANNAH. So that program is going. There will be interim analysis on SAVANNAH as we go. So it's our most important study, I think, globally.

Moving on to Page 36 and 37 quickly, just an update on PRCC, papillary renal cell carcinoma. Page 36, you can see we were going after MET positive PRCC with savolitinib monotherapy. We stopped and suspended enrollment into that Phase III study late in the year last year. The reason we did it is shown on Page 37. Page 37 shows the savolitinib/Imfinzi combo that we presented at ASCO GU in February. It is clearly a complex interplay between MET, HGF and the immune system. And the question is a MET inhibitor plus a PD-1 or a PD-L1 is there synergy, much like you see the synergy with VEGFR inhibitors and the PD-1s. It's too early for us to say whether there is or isn't, but the data shown on -- in box #3 is interim data and it's encouraging. You can see the 2 circled numbers there on -- in box #3 on Page 37. The top one is savolitinib monotherapy in MET positive PRCC. And you can see a disease control rate of 73.2% and a 6.2-month median PFS. That strong efficacy, that's why we started the Phase III, the SAVOIR study. If you go down to the bottom right, you can see Keytruda in non-clear cell renal cell carcinoma. You've got a disease control rate of about 41% and a median PFS of about 4.1 month. That's not bad for a monotherapy PD-1. So in between those 2 circles, you see savolitinib and Imfinzi. And you can see the response rate in the sort of the high 20s, low 30s, but a lot of NAs, and that's because this is interim data. We need to see this data mature. We need to look at further biomarker analysis and we need to see what the median PFS and median OS is for this combination and to see if there is synergy of the MET inhibitor in the PD-L1. So that's what we continue to work on with Astra. And we will settle on our registration strategy once we have very clear understanding of -- if we're seeing synergy or if it's just additive effect.

Page 38, just a very brief update on the Syk inhibitor. We have a data set now of over 110 patients. The dose expansion study is almost a 200-patient dose expansion study on the Syk inhibitor that's enrolling. We're encouraged by what we see in open-label dose expansion. Our INDs have been cleared in the U.S. The team has now got HMPL-523 ready to initiate development in the U.S. and EU. And we are planning late this year to identify the key indolent non-Hodgkin's lymphoma subtypes that we want to go after for registration, and we intend to conclude that by the end of this year and hopefully be in registration studies in China around that. It's now time for us to move fast on the Syk inhibitor. We have a Big Data set and we're encouraged by what we see.

Page 39 is an update on the PD-1 collaborations that we've done. These are global collaborations with Innovent and with Junshi. And we intend to -- we actually already have started early dose-finding studies with surufatinib and the Junshi PD-1, and these programs will kick off shortly and move quickly, but there's no doubt in our mind that fruquintinib and surufatinib are ideal combination partners with immunotherapies because of fruquintinib's selectivity and because of surufatinib's really unique angio-immuno kinase profile inhibiting CSF-1R and FGFR1.

So moving quickly on to the China business, Page 41. You can see the market share as well as our products are market leaders in the areas we're in. We cover all of China 320 cities and towns. We cover in China with over 3,000 sales people. And really, we sold almost 5 billion doses of medicine in 2018. So things moving well.

Page 42 just shows the long track record of growth that we've seen in our China Commercial Platform and profitability growth, almost USD 600 million of net income has been generated from these operations in China. Some of them are 50-50. So our share of that has been about $270 million. So this is -- it's not just an important source of cash, it's been an important source of sort of learning and know-how. And I think Page 43 shows, this is a real pan-China commercial organization, and it gives us a great deal of capability.

Page 44, just the third-party products that we've taken in the last -- taken on in the last few years, so Seroquel and Concor from Astra and Merck Serono. And you can see the progress we've made on those third-party products has been terrific, with the service fees really rising to be meaningful for us. Seroquel service fees were up 65% in 2018, and the Merck Concor service fees were more than doubled last year. So good commercial team, able to be very adaptable, go into new areas with either products we manufacture or third-party products.

Page 45 is the kind of the plan for the China business. We continued organic growth. I think 2019, we expect, sort of, low- to mid-single-digit percentage growth. For the long term, it will be higher than that. But we're going through, in 2019, some adjustments due to the 2-invoice policy on our logistics and distribution structure in Shanghai and Shanghai Hutchison Pharmaceuticals. Minor impact, but long term, in our view, a positive thing. So China business, we expect it to continue to do well. We will build out our synergies with our China oncology organization, so leveraging the platform that we have to build out our oncology team. We'll look at M&A. We might even look to divest noncore assets. But really in the long term, it's about focusing on cash generation on the commercial business.

So talking of cash, Page 47. We have -- had at the end of 2018, $420 million in cash and available resources. That's broken down $301 million in cash and short-term investments, another $119 million in unutilized banking facilities, another $42 million in cash in our joint ventures and we had debt of $27 million.

So looking at our guidance for 2019, you can see that we've streamlined our guidance to really, what, we believe, are the 2 most important metrics: number one is the total investment in research and development expenses, which, we think, in 2019, will be in the region of USD 160 million to USD 200 million; and then the adjusted non-GAAP group net cash flows, not including or excluding any financing activity. So essentially our cash burn from our operations. We believe that's somewhere in the region of $120 million to $150 million. The difference between those 2 numbers is the cash generated from our China business, commercial business as well as the cash received from our partners: AstraZeneca, Lilly, et cetera. So given those -- given that guidance for 2019 and the cash and resources we have at hand, we find ourselves in a pretty strong position.

On a high level, the Innovation Platform, I think, 2019 will see a gradual start on the ramp-up of Elunate revenues and contribution, but that should accelerate quite rapidly thereafter. But we are, obviously, planning to increase our R&D investment, particularly around the expansion in the U.S. and EU of our 5 assets that we're developing globally.

And then finally, on the commercial side, yes, as I said earlier, I think, the growth in '19 will be sort of -- on the local currency level will be in the -- be more narrow than previous years. It will be in the single-digit range. And then, obviously, we've got an impact of the RMB weakening against the U.S. dollar, but that could change. But in the first half of this year -- well, actually currently relative to the first half of 2018, the RMB has weakened pretty significantly around 5% versus the U.S. dollar. And that hurts us in the context of the growth in our U.S. dollar reported China health care -- China Commercial Platform net income. But it helps us in the context of the investment that we're making in clinical development in China, most of which is U.S. dollar funded, converted into RMB and then we pay for our clinical programs in China. So in one sense, it hurts us, and in another sense, it helps us.

And then Page 48, the last chart is just the news flow. We've got -- we've tried to restrict the points here as ones that are really important. We have a lot of news flow given that we've got a lot of assets in development and a lot of activities underway. But you can see the boxes that have stars on them, we believe are really quite meaningful news flow. The -- looking at the global innovation side, the savolitinib/Tagrisso Phase Ib data, the full TATTON data that will be presented at AACR in a few weeks, I think, that's very important given that it will focus in on duration of response and give everybody a full understanding of just how long patients can benefit from this combination.

The second star beneath it, in China oncology, is the MET Exon 14 deletion Phase II data also at AACR, again, the first time that we will have presented that data -- preliminary data. So we're excited about that.

Moving over across the right, surufatinib, the non-pancreatic neuroendocrine tumor Phase III interim analysis. This is a very mature interim analysis. It's not an early-stage interim, it's the late interim. So we will wait and see how that goes. We're hopeful, if positive, that we can use this as an outcome to submit the NDA, but we'll have to wait and see on the efficacy.

Going back up to savolitinib in gastric cancer, the VIKTORY study. That Phase II data will be published sometime in the middle of the year, hopefully. This is a study of over 700 gastric cancer patients that were screened on a molecular level and then put into 12 different treatment arms, 3 of which were savolitinib treatment arms. And so we will be able to get a sense on -- in MET-driven gastric cancer, just how strong of a potential treatment savolitinib is.

And then the final one, final star on the far right is the pancreatic NET Phase III late in the year. But obviously, you can see there are other things happening during the year. So it's going to be a busy year for us, off of an extremely busy 2018. We had -- I think, in summary, we had a very exciting 2018. We had a couple of disappointments, but we had a lot of positives. And I think moving forward into 2019, we look forward with great optimism.

So that's it in summary. Molly, I'll hand it back to you if you want to handle any questions.

(Operator Instructions) The first question comes from the line of John Newman calling from Canaccord.

Congrats on the Elunate launch in China. I just wondered if you could give us a little bit of detail as to how you expect the Elunate launch to roll out? You gave us some interesting color on, kind of, the early indication. But I think, especially for U.S. investors, I was curious just to how we should expect that to unfold maybe over the next 12 to 18 months?

John, that's a very tough question because -- I mean, I can put numbers out there, but it would be premature. We've been in the market for 2 months now. And all we're really able to say is what we see as of today and that's encouraging, over 1,000 patients, at the end of January, just 9 weeks after the launch on treatment at full price basically with the patient access program. We know that there are 55,000, 60,000 third-line colorectal cancer patients in China. But we also know that to really access that patient population, you're going to need to be on the reimbursement list. And that's something that we hope will kick in late in the year this year. So I think that we will update the market and the U.S. investors over the year as we learn more about the progress. But all I can say right now is I'm pretty encouraged by how Lilly is doing. They're working very hard on fruquintinib. And -- but I do believe this is the tip of the iceberg. And as the year goes by, we'll see more and more data play out and that hopefully will give us a lot of encouragement, but I think it's very early. First 5, 8, 9 weeks is pretty encouraging.

Great. And maybe if I could just ask one follow-up question. You had a really nice slide on the changes to the Lilly agreement. I just wondered if you could highlight some of the keys there for us? And if it's my correct understanding, you spent quite a bit of time negotiating with Lilly to end up with, what seemed like really favorable terms, just wondered if you can highlight kind of the key?

Yes, thanks. Well, Page 27. Yes, we started negotiating this amendment with Lilly, the best part of 4 years ago and very heavily over the last 18 months to 2 years. The main changes -- it's simple. The main change is that we pay for future development in China. We pay 100%. Historically, we only had to pay 30%. Now we pay 100%. But by taking on that financial responsibility of paying for that development in China of new indications, I'm not talking about the current indication, I'm talking about new indications. We are taking on that responsibility. And so we've given complete freedom to make decisions as to which indications we want to go into, which partners we want to combine with. And so kind of no limitations, which is critical for fruquintinib to ensure that we get into as many new indications as possible. So we put that money in. But I said to Lilly, look, if we're going to inject cash, we need a financial return and we need a strategic return. And the financial return is easy. It's just -- you raise the milestones and you raise the royalty. And if we're successful, we will end up with a pretty materially higher portion of the economics of fruquintinib in China. More risk, more reward. So that's easy on the financial side. On the strategic benefits, getting this potential commercial right in China -- in 30% to 40% in China, I felt that was really important for us. We have a strong commercial team in China. And we had a very strong desire to be involved in the day-to-day commercialization of fruquintinib. And by getting this agreement and by linking it to the potential launch of a Cyramza in China, it's just a very clean way of ensuring that we have a very clear understanding of what the roles and responsibilities of both bodies are in China. So if we take over fruquintinib in 30% to 40% of China, we will put full focus on it and I'm sure we'll do very well. Lilly will have to emulate that. They will have to deliver that same level of performance in the other 60% to 70% of China. So in a sense, it's a bit of a check and balance. And I think they feel positive about it and so do we. So overall, this amendment is a -- I think, is great for Elunate. It's good for Lilly and it's good for us. And I think the impact of it will only really be felt in 2, 3, 4 years from now. But it was the right thing to do and we're excited about it.

The next question comes from the line of Tyler Van Buren calling from Piper Jaffray.

Congratulations on all the progress that's been made over the quarter and especially the Lilly amendment sounds like a very positive development. I guess, I had a question with respect to a couple upcoming AACR TATTON patients. Just wanted to follow up on it. You had a couple of slides. So for the TATTON study Phase II data, is that kind of 9.7 months duration of response, that's circled on Slide 31, really the hurdle and basically anything over that would be well received by physicians? And then secondarily, just the Exon -- MET Exon 14 deletion slide, and there's a bunch of different lines of treatment and response rate and a circle there. Can you help us understand what type of patients were enrolled and what's the most appropriate comparator is for that in that [AACR]?

Got it. Okay. Thank you, Tyler. Good question. On Page 31, the 9.7-month duration of response number that's circled there has to be taken with great care because it's only 4 patients. This was presented in 2017. The data was very immature and it was really sort of for perspective -- for perspective only. So you had 4 responses and the median duration of response there was 9.7 months. What will be presented at AACR in 3 weeks will be a much more mature and broader data set. So I don't really want to say much more on that other than to say you'll get a really good sense in a few weeks as to what savolitinib and Tagrisso do together. In both, the sort of the post-Tagrisso in the first-line setting as well as the post-Tagrisso in the second-line setting patient population, okay. On the MET Exon 14 skipping, yes, we put -- because, obviously, there's -- on Page 29, there's a lot of data out there for MET Exon 14 patients with capmatinib and tepotinib and crizotinib now. But that chart in box 1 on Page 29, it just does a good job of showing -- what's important is that is to understand that, that first-line patients versus second-line and above patients are quite different. So you've got to -- I hear a lot about oh capmatinib have 60% response rate. Yes, but that's in first-line patients in those 25 patients that we see there. So when we put out our data at AACR, I think, what we will just be hoping the people look at it and understand what are the lines of treatments and now with this chart on Page 29, you have a sort of a frame of reference to understand what is -- what's the expected if it's later-line treatment or early-line treatment.

Great. That's very helpful. And for surufatinib, obviously, a couple interim readouts later in the year both in pancreatic and non-pancreatic NETs. So can you just speak a little bit more about the treatment paradigm there and where it could potentially fit in? I'm aware that just [where it is], at increased use, so there's not great options. So what would be a win in those interim analysis? And how should we think about pancreatic versus non-pancreatic NETS distinctly from each other?

Okay. So the standard of care in China is quite limited to this point. It's improving with the approval of Afinitor and Sutent in China, and then putting on the national drug reimbursement list. You're getting better access these days to these treatments for pancreatic neuroendocrine tumors. But pancreatic NET is actually quite a small subsegment of NET, sort of 10%, 15% give or take. And so to date, really it's only pancreatic NET that have approved therapies. There are -- Afinitor does go into some other subcategories, but small subcategories of NET. So for us, when we look at surufatinib and those 2 big Phase IIIs, the extra-pancreatic and pancreatic NET, extra pancreatic, we think, is a pretty open playing field. And if we're able, mid-year, to see a positive outcome of that interim analysis, that would be extremely exciting for us because that's the sort of 85% of neuroendocrine tumor patients that today have really quite limited treatment options. Pancreatic MiNEN will come late in the year. That's more competitive. Weiguo, do you want to say anything on that?

I just want to say, basically there are 2 key points here. One is that surufatinib, these 2 Phase III studies, if successful, will cover every subtype of neuroendocrine tumors. So this is the -- a global first basically as you have global potential and that's very important. The second key point is that surufatinib had early on demonstrated activity behind first-line Sutent or even Afinitor use. So patients who fail on these (inaudible) therapies can still benefit. So those were the 2 -- I think, the 2 key points that you should keep in mind.

Yes, good point.

Right. Just one final question more briefly real quick. The SAVANNAH study. I think it's as estimated 2021 primary completion, but you mentioned that interim analysis when could that potentially come?

Yes. I don't know is the answer to that. The -- it's an open label study. So we'll be watching it as it enrolls rapidly. Obviously, we would be hoping for these patient population -- this particular patient population who have currently no treatment alternatives, you'd hope that you would see a strong signal. You'd hope that you would be able to start considering Breakthrough Therapy designation, accelerated approvals. And as a result, you'd probably be looking for interim analysis along the way, so that you could go and start having these regulatory interactions. It's -- I would see the SAVANNAH study as one that would hopefully take a similar path to the original AURA3 study or the original Phase I on Tagrisso, as it first got going, you, sort of, build your data set and go and have your regulatory interactions as you go. So I think, we'll just have to see how it progresses. But we're extremely excited about it. And AstraZeneca has got a lot of focus and a lot of -- put a lot of effort into the Savannah study. So I think we're all rather encouraged by this.

(Operator Instructions) The next question comes from the line of Ying Huang calling from Bank of America.

So maybe a first question. Can you comment whether Eli Lilly has been already contacted by the government regarding to the inclusion of Elunate in the National Drug Reimbursement List? And how does that work in terms of the procedure here? And then secondly, you estimated about 1,000 patients as of the end of January 1 on the treatment here. It's now, I guess, the mid or early part of March here. Can you talk about whether that rate of adoption has accelerated for the adoption here? And then lastly, maybe I want to ask a question about the savolitinib SAVANNAH study. Under which condition do you think this Phase II will become a registration study? What kind of data could enable that?

Okay. Thanks, Ying. So those are some tough questions because I can't really answer them. The first one around the NDRL, it's not the government that is approaching us, we approach the regulatory authorities about NDRL discussions. We actually have already received agreement on a provincial level from certain provinces and cities to get fruquintinib reimbursed, and that data -- or those provincial approvals or city approvals will come out in due course. So it's just on ongoing dialogue. And the teams, the Lilly team as well as our commercial team are working really closely together and will engage and reach out to the regulatory authorities on NDRL discussions. We already have, actually. Those discussions are already -- the initiation has started, but by no means have negotiations reached any point of depth yet, but that will happen over the year. And for the next update, we would hope to see that we could agree and get Elunate on the NDRL. The second question around, I give you -- I tell you that for Elunate, we have -- it's actually quite well over 1,000 patients that are being treated as of January 31. The reason we don't give any later data than that is not because we are hiding anything, it's because Chinese New Year was shortly thereafter. And frankly, in China, the data it's not immediate. It's unlike the U.S., where you have much more sort of quantified resources to be able to track data. In general, China lags. But we are comfortable. We're feeling pretty good about the month-to-month progressions. All we see is what we are producing and what we're shipping to Lilly and the demand that they have for us. So we feel good about that. But we don't feel comfortable giving any more than what we, kind of, knew was the fact at the end of January. We -- as soon as we know more, we'll provide more through the year. And then the last question was SAVANNAH. What was the question, again?

Criteria to...

Criteria for -- yes, I think, when you start talking about Breakthrough Therapy designation, accelerated approvals, all of that, sort of, stuff, you just need to be showing high-quality efficacy. And often -- I don't want to put a number on it because these things are quite difficult to pin down. But those patients today, we know that -- and also SAVANNAH, you got to remember what we're looking for is -- and it's in the protocol, I think, it's on ClinicalTrials.gov, or may or may not be, but we're looking to have a good balance between first-line Tagrisso failure patients and patients who fail second line and above. Those first-line patients generally are going to be healthier, generally are going to do better than if they are later-stage patients. So it's about balancing the patients that are coming into this study and providing a genuine benefit. I think the chemo doublet, which would be the comparator eventually in a study for confirmation of the SAVANNAH study. Chemo doublet, you probably get efficacy in the region 20% ORR, give or take. Yes, you don't know actually, you don't know that. So that's -- yes, it's just too early to say. So I think we will -- what we've seen in TATTON has been presented, sort of, 50%, 60% response and, sort of, 30% post-Tagrisso in the third-line setting. These are -- this is really all we know at this stage until we present the data at AACR at the end of this month.

We have no further questions in the queue. So I'd like to hand the call back over to your host for any concluding remarks.

Okay. No, thanks very much for everybody for joining. And yes, I'll look forward to a great year in 2019. Thanks very much.

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