HUTCHMED (China) Limited Annual Report 2015

FY2015 Annual Report · HUTCHMED (China) Limited
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(Incorporated in the Cayman Islands with limited liability)

2015 Annual Report

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Innovation Platform - 

Commercial Platform 

 
 
Corporate Information

BOARD OF DIRECTORS

Chairman
Simon TO, BSc, ACGI, MBA

Executive Directors
Christian HOGG, BSc, MBA

Chief Executive Officer

Johnny CHENG, BEc, CA

Chief Financial Officer

Non-executive Directors
Shigeru ENDO, BA

Christian SALBAING, BA, LLL, JD

Edith SHIH, BSE, MA, MA, EdM, Solicitor, FCIS, FCS(PE)

REMUNERATION COMMITTEE
Simon TO (Chairman)
Michael HOWELL

Christopher NASH

TECHNICAL COMMITTEE
Christopher HUANG (Chairman)
Simon TO

Christian HOGG

COMPANY SECRETARY
Edith SHIH

NOMINATED ADVISER
Panmure Gordon (UK) Limited

Independent Non-executive Directors
Christopher NASH, BSc, MBA, ACGI

CORPORATE BROKERS
Panmure Gordon (UK) Limited

Senior Independent Director
Michael HOWELL, MA, MBA, HonFCGI

Christopher HUANG, BA, BMBCh, PhD, DM, DSc, FRSB

UBS Limited

AUDITOR
PricewaterhouseCoopers

AUDIT COMMITTEE
Michael HOWELL (Chairman)
Christopher HUANG

Christopher NASH

 
 
 
Contents

1

Corporate Information 

Contents 

Our Business 

Highlights 

Chairman’s Statement 

Operations Review 

Biographical Details Of Directors 

Report Of The Directors 

Corporate Governance Report 

Independent Auditor’s Report 

Consolidated Balance Sheets 

Consolidated Statements Of Operations 

Consolidated Statements Of Comprehensive Income 

1

2

3

8

12

31

33

39

49

50

52

53

Consolidated Statements Of Changes In Shareholders’ Equity  54

Consolidated Statements Of Cash Flows 

Notes To Consolidated Financial Statements 

55

57

Information For Shareholders

2

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Our Business

Chi-Med is a globally-focused innovative biopharmaceutical 
company based in China

Innovation Platform
small molecule targeted therapies in 
oncology & immunology

Commercial Platform
an extensive commercial network in 
China pharma

✓  7 clinical drug candidates in 19 studies worldwide.

✓  Over 3,200-person China sales team – clear focus on Prescription 

✓  Many  with  global  first-in-class  or  best-in-class  as  well  as 

Drugs business (~1,900 medical reps).

Breakthrough Therapy potential.

✓  Ready to rapidly commercialize Innovation Platform drugs 

✓  First drug candidates targeted for possible NDA submissions 

once approved in China.

late 2016.

✓  >290-person R&D team.

✓  Cash flow positive w/ net income attributable to Chi-Med equity 

holders of >$25m in 2015.

3
3

Highlights

Group Results

Revenue up 104% to $178.2 million (2014: $87.3m).

Net profit from operations attributable to Chi-Med of $8.0 million (2014: net loss -$7.3m), including 
our booking of $3.1 million in one-time preparation costs for our proposed Nasdaq listing.

Stable cash position: Available cash of over $90 million as of February 29, 2016, at the Chi-Med 
Group level, including cash and cash equivalents and unutilized banking facilities.

1. 

2. 

3. 

4. 

$31.9 million in cash and cash equivalents at Chi-Med Group level as at December 31, 2015;

$6.9 million in unutilized bank facilities at Chi-Med Group level as at  December 31, 2015;

$60.0 million additional unsecured bank facilities established in February 2016;

$76.9 million in further cash and cash equivalents held at 50/50 Joint Venture (“JV”) level and 
not consolidated at Chi-Med Group level. Shanghai property compensation of approximately 
$73.9 million expected at JV level in 2016, which is in addition to the $31.1 million that we 
already received in late 2015.

Continued focus on proposed Nasdaq dual listing.

Innovation Platform

Revenue up 156% to $52.0 million (2014: $20.3m) primarily as a result of payments from our 
partners AstraZeneca AB (publ) (“AstraZeneca”), Eli Lilly and Company (“Lilly”), Nutrition Science 
Partners Limited (“NSP”) (our JV with Nestlé Health Science S.A.) and Janssen Pharmaceuticals, Inc. 
(part of the Johnson & Johnson group of companies).

Net loss attributable to Chi-Med down 83% to $3.8 million (2014: net loss -$22.2m).

Major increased investment in clinical programs by Chi-Med and its partners – estimated up 41% to 
$64.1 million (2014: $45.5m). Total of 677 new patients, 249 outside China and 428 inside China, 
were enrolled during 2015 into our 19 active studies.

Commercial Platform

Total sales of subsidiaries and JVs from continuing operations up 11% to $518.9 million (2014: 
$465.4m) driven by 40% increase in prescription drugs sales, namely Seroquel® (quetiapine tablets) 
and She Xiang Bao Xin pill (“SXBXP”), partly offset by an 11% decline in sales, mainly supply driven, 
in our consumer health business.

Net profit attributable to Chi-Med from continuing operations up 10% to $25.2 million (2014: $22.8m) 
due to strong growth in sales of prescription drugs partly offset by $1.7 million in non-recurring one-
time costs from factory relocations and the take-back of commercial rights of certain products.

All ﬁ gures are reported in US dollars unless otherwise stated.

 
 
 
 
 
 
 
 
 
4

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Highlights

2015 / Q1 2016 Highlights

Group:

Announced plan to dual list Chi-Med on Nasdaq

Q4-15 – The planned Nasdaq listing, when completed, will open up a new and deep universe of biopharmaceutical investors 
and analysts that are well positioned to understand our science and support the late-stage development of our pipeline.

Secured 99.8% ownership of Innovation Platform

Q3-15 – Completed a transaction (the “Roll-up”) that converted the 12.24% shareholding of Mitsui & Co., Ltd. (“Mitsui”) in 
our  Innovation  Platform,  Hutchison  MediPharma  Holdings  Limited  (“HMHL”),  into  a  5.69%  shareholding  in  Chi-Med.  The 
Roll-up  eradicated  the  two  downsides  of  Mitsui’s  HMHL  preference  shares  –  the  risk  of  the  cash  drain  of  a  redemption; 
and  the  distortion  of  Chi-Med  Group  earnings  per  share  caused  by  the  non-cash  accretions  required  under  US  generally 
accepted  accounting  principles  (“US  GAAP”).

Innovation Platform:  Reported positive data in five Phase Ib/II proof-of-concept studies – currently enrolling 19 
clinical trials on 7 drug candidates including 3 Phase III registration trials

Savolitinib: Potential global first-in-class Mesenchymal Epithelial Transition Factor (“c-Met”) inhibitor – in 9 
clinical studies worldwide

Q2-15 – Reported clear and durable tumor response of savolitinib/Tagrisso® combination in T790M negative c-Met gene 
amplified non-small cell lung cancer (“NSCLC”) patients at 2015 meeting of the American Society of Clinical Oncology (“ASCO”);

Q4-15  –  Received  Phase  II/III  clinical  trial  clearance  from  the  China  Food  and  Drug  Administration  (“FDA”);

Q4-15  –  Completed  enrollment  of  global  Phase  II  study  of  first-line  papillary  renal  cell  carcinoma  (“PRCC”)  with  109 
patients  –  the  largest  study  in  PRCC  ever  conducted  globally.

HMPL-523: Potential global first-in-class Spleen Tyrosine Kinase (“Syk”) inhibitor – emerging as a very high value asset

Q3-15 – Successfully completed Australia Phase I clinical study showing no material toxicities in healthy volunteers; linear 
dose  dependent  human  drug  exposures  well  above  expected  efficacious  dose;  and  clear  dose  dependent  inhibition  in 
B-cell  activation  in  human  plasma  pharmacodynamic  models;

Q1-16  –  Initiated  Australia  Phase  I  dose  escalation  study  in  hematological  cancer  (lymphoma  and  leukemia  patients).

 
 
 
 
Highlights

5

Innovation Platform:  Reported positive data in five Phase Ib/II proof-of-concept studies – currently enrolling 19 
clinical trials on 7 drug candidates including 3 Phase III registration trials (Continued)

Fruquintinib: Potential global best-in-class small molecule Vascular Endothelial Growth Factor Receptor 
(“VEGFR”) inhibitor in Phase III development

Q2-15  –  Clearly  met  Phase  II  study  primary  endpoint,  in  colorectal  cancer  (third-line),  with  median  Progression  Free 
Survival (“PFS” – the time to disease progression or death) of 4.7 months compared to 1.0 month for the placebo (hazard 
ratio  =  0.30  (p<0.001)),  with  no  major  unexpected  safety  issues;

Q3-15 – Clearly met Phase II study median PFS primary endpoint, in NSCLC (third-line), with no unexpected safety issues 
–  full  data  publication  in  2016;

Q4-15  –  Initiated  pivotal  Phase  III  registration  study,  named  FALUCA,  in  NSCLC  (third-line)  in  China;

2015  –  Received  success-based  proof-of-concept  cash  payments  totaling  $33.1  million  from  Lilly  in  2015.

Sulfatinib: Potential Breakthrough Therapy in neuroendocrine tumors in Phase III development

Q3-15 – Reported 44.4% Objective Response Rate (“ORR” – the proportion of patients with tumor shrinkage of more than 
30%), in a broad range of neuroendocrine tumors (“NET”) in an expanded Phase I study in China – significantly superior to 
<10%  ORR  for  Sutent®  (sunitinib)  and  Afinitor®  (everolimus)  reported  for  pancreatic  NET  (only  ~6.4%  of  all  NET  according 
to  Frost  &  Sullivan);

Q3-15  –  Initiated  US  Phase  I  dose  confirmation  study  in  Caucasians  –  sulfatinib  is  the  first  wholly-owned  cancer  drug 
candidate  being  developed  by  Chi-Med  in  the  US;

Q4-15  –  Completed  enrollment  of  an  81  patient  Phase  Ib/II  NET  study  in  China;

Q4-15 – Initiated pivotal Phase III registration study, named SANET-ep, in extra-pancreatic (i.e. non-pancreatic) NET patients 
in  China.

Epitinib: Potential global best-in-class small molecule Epidermal Growth Factor Receptor (“EGFR”) inhibitor

Q3-15 – Reported highly encouraging early human efficacy data in Phase Ib study of NSCLC patients with brain metastasis 
–  clear  responses  in  both  primary  lung  and  metastasized  brain  lesions.

 
 
 
6

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Highlights

Commercial Platform:  Focus on broadening scope and capacity of higher margin Prescription Drugs business

Rapid  expansion  in  our  Prescription  Drugs  business:  Shanghai  Hutchison  Pharmaceuticals  Limited  (“SHPL”)  and 
Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company Limited (“Hutchison Sinopharm”) – the Commercial 
Platform’s core prescription drug operations – grew sales of subsidiaries and JVs by 40% to $286.6 million (2014: $204.9m) 
with  net  profit  attributable  to  Chi-Med  up  20%  to  $15.9  million  (2014:  $13.2m).

Important 20-year invention patent granted: A new patent covering formulation was granted in July 2015 on SHPL’s 
largest prescription drug product, SXBXP (cardiovascular), which will extend proprietary protection in China through 2029. 
SXBXP sales grew by 15% to $159.3 million in 2015, representing 56% of the total sales of our Prescription Drugs business.

Substantial  progress  on  Seroquel®:  In  the  third  party  Prescription  Drugs  business,  SHPL  has  now  established  an  over 
100-person  psychiatric  disorder  medical  sales  team  to  market  and  sell  Seroquel®  on  behalf  of  AstraZeneca.  Sales  of 
Seroquel®  from  April  to  December  2015  were  $21.1  million  –  evidence  of  the  adaptability  of  our  Commercial  Platform 
in  China  to  enter  new  therapeutic  areas.

New  factories  and  property  compensation  on-track:  The  new  Shanghai  and  Anhui  province  factories,  which  are 
already about 90% paid for, come on-line in 2016 and will triple production capacity for own-brand products. We expect 
considerable  compensation  to  our  JVs  from  our  Shanghai  and  Guangzhou  old  factory  site  returns.  We  received  $31.1 
million  in  cash  from  the  Shanghai  government  in  late  2015,  as  the  first  installment  payment,  for  the  return  of  our  old 
Shanghai  factory  site.  The  balance  of  the  total  Shanghai  compensation  of  about  $105  million  is  expected  in  2016.

2016 Innovation Platform Catalysts

Savolitinib:  Clarity  on  US  FDA  filing  strategy  –  potential  to  submit  for  US  FDA  approval  in  late  2016

Q1-16 – Expect to initiate Phase Ib dose finding study in renal cell carcinoma combining savolitinib with immunotherapy 
agents;

H2-16  –  Plan  to  report  PRCC  Phase  II  results,  subject  to  maturity  of  median  PFS,  at  a  scientific  conference  in  2016;

H2-16 – Thereafter, subject to positive Phase II data and US FDA guidance, possible initiation of global Phase III in PRCC; 
potential  Breakthrough  Therapy  application  and  possible  US  FDA  New  Drug  Application  (“NDA”)  submission;

H2-16  –  Expect  to  report  full  results  of  Phase  Ib/II  proof-of-concept  studies  in  c-Met  gene  amplified  NSCLC  patients  in 
combination with EGFR inhibitors, Tagrisso® and Iressa® and, subject to the strength of the data, we could then potentially 
move  directly  into  registration  studies.

 
 
 
 
 
Catalysts

Highlights

7

2016 Innovation Platform Catalysts (Continued)

HMPL-523:  Consolidate  position  as  one  of  the  leading  global  Syk  inhibitor  candidates

H2-16  –  Expect  to  initiate  global  Phase  II  proof-of-concept  study  in  rheumatoid  arthritis;

H2-16  –  Expect  to  complete  Australia  Phase  I  study  in  lymphoma/leukemia  patients  with  potentially  compelling  proof-
of-concept  efficacy  signal;

H2-16  –  Plan  to  initiate  clinical  development  in  China.

Fruquintinib:  Clarity  on  China  FDA  filing  strategy  and  timing  –  potential  to  submit  for  China  FDA  approval 
in  late  2016  or  early  2017

Q2-16 – Expect to complete enrollment of pivotal Phase III registration study, named FRESCO, in colorectal cancer (third-
line)  in  China;

Q2-16  –  Plan  to  initiate  Phase  Ib  dose  finding  on exploratory  combination  studies  of  fruquintinib/other  agents  such  as 
targeted  therapies,  immunotherapies  and/or  chemotherapies;

H2-16  –  Expect  to  report  full  China  NSCLC  (third-line)  Phase  II  data  at  a  scientific  conference;

H2-16  –  Plan  to  initiate  Phase  II  study  in  gastric  cancer  (second-line)  in  combination  with  Taxol®  in  China.

Sulfatinib:  Global  proof-of-concept  study  planned  to  initiate  in  2016

Q1-16 – Plan to initiate Phase II proof-of-concept study in thyroid cancer (second-line medullary/non-medullary) in China;

Q1-16  –  Plan  to  initiate  pivotal  Phase  III  registration  study,  named  SANET-p,  in  pancreatic  NET  patients  in  China;

H2-16  –  Expect  to  report  full  China  Phase  II  data  in  broad  spectrum  NET  (first-line);

H2-16  –  Plan  to  initiate  US  Phase  II  NET  study.

Epitinib:  Targeting  to  start  both  China  Phase  III  and  US  clinical  development  in  2016

H1-16  –  Expect  to  complete  Phase  Ib  study  of  NSCLC  patients  with  brain  metastasis  in  China;

H2-16  –  Plan  to  initiate  pivotal  Phase  III  registration  study  in  China;

H2-16  –  Plan  to  initiate  US  Phase  I  dose  confirmation  study.

Other  clinical/near  clinical  drug  candidates:

H1-16  –  Expect  to  complete  theliatinib  Phase  I  dose  escalation  study  in  China;

H2-16  –  Plan  to  initiate  theliatinib  Phase  Ib  studies  in  esophageal  and  head  &  neck  cancers  in  China;

H1-16 – Plan to initiate Australia Phase I dose escalation study on HMPL-689, our potentially best-in-class Phosphoinositide 
3-kinase  delta  (“PI3Kδ”)  inhibitor;

H2-16  –  Plan  to  initiate  China  and/or  Australia  Phase  I  dose  escalation  study  on  HMPL-453,  our  potentially  first-in-class 
Fibroblast  Growth  Factor  Receptor  (“FGFR”)  inhibitor.

 
 
 
 
 
8

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Chairman’s Statement

The vision of Chi-Med is to become a leading global 

biopharmaceutical company based in China. We 

intend to achieve this by leveraging our Innovation 

Platform to provide differentiated products in the 

global  targeted  therapy  arena  in  oncology  and 

immunology. Chi-Med has set out to build a broad 

portfolio of highly selective drug candidates against 

multiple novel and validated molecular targets. It is 

intended that the use of these drug candidates as 

monotherapies, or in combinations or rotations of 

treatment with other therapies, have the potential 

to greatly improve patient outcomes and therefore 

build shareholder value. Our key areas of strategic 

focus include:

Designing  drug  candidates  against  novel  but 

well-characterized targets with global first-in-class 
potential – The largest market opportunity is to 
develop innovative drug therapies that have global 

first-in-class  potential  in  areas  of  high  unmet 

needs. Chi-Med focuses on identifying novel but 

well-characterized  kinase  targets  (proteins  or 

enzymes)  associated  with  the  pathogenesis  of 

cancer  or  inflammation,  such  as  c-Met  and  Syk. 

A  chemistry-focused  approach  is  then  used  to 

engineer innovative, highly selective drug candidates 

against these targets. These innovative drugs have 

the chance to be the ﬁ rst drug approved worldwide 

against the speciﬁ c novel molecular target.

Focusing  research  and  development  efforts  on 

kinase selectivity to generate global best-in-class 
product  –  Risk  is  balanced  in  research  and 
development activities by also focusing on drug 

candidates  against  validated  targets,  including 

VEGFR  and  EGFR,  for  which  competitive  drugs 

have already been approved. The objective of this 

research is to develop next generation compounds, 

characterized by both high selectivity and superior 

pharmacokinetic properties. This provides us with a 

chance to become the best-in-class drug candidate, 

against its speciﬁ c already validated target, clinically 

superior in terms of safety and/or efficacy to the 

ﬁ rst-in-class standard of care.

Simon To
Chairman

We believe Chi-Med is uniquely 
positioned to contribute to healthcare 
both in China and globally and to 
generate signiﬁ cant shareholder value 
this year and beyond.

Highly selective drug candidates
E.g. fruquintinib: designed to only inhibit VEGFR 1/2/3

IInnhhiibbiittiioonn  
aatt  11  μμMM

>90%

70~90%

40~70%

<40%

Screening at 1μM 
against  253 Kinases

Source: Sun et al., Cancer Biology & Therapy 15:12, 1635--1645; December 2014.

Continuing  to  invest  in  the  fully  integrated 
Innovation Platform – The creation of high quality 
drug candidates takes time, a stable and high quality 

Pursuing  a  practical  and  efficient  clinical  and 
regulatory  strategy  –  The  China  FDA  is  highly 
supportive of clinical trials for drug candidates that 

Chairman’s Statement 

99

Maximizing economic interest in our drug candidates 

through  in-house  chemistry  development  and 
later-stage  strategic  partnerships  –  Our  existing 
strategic partnerships with global pharmaceutical 

companies  have  brought  Chi-Med  significant 

technical expertise and global clinical, regulatory 

and commercial reach, as well as a necessary source 

of funding during the early-stage development of 

the company. Now, looking forward to potential 

collaborations on our un-partnered drug candidates, 

Chi-Med will either go-it-alone or structure future 

deals in a more risk-sharing manner in order to 

retain a higher proportion of the economic beneﬁ ts.

Leveraging and expanding our Commercial Platform 
– While the majority of the resources and available 

capital of Chi-Med are focused on our Innovation 

Platform, the Commercial Platform and its sales and 

marketing infrastructure will continue to expand. 

We also intend to build an oncology focused sales 

discovery  organization  and  significant  financial 

can address large unmet medical needs. China’s 

team  under  the  Prescription  Drugs  business  to 

resources. Chi-Med has built its position as a leading 

large patient population, combined with relatively 

commercialize  drugs  successfully  developed  by 

China-based innovator in oncology and immunology 

lower clinical trial costs as compared to the US and 

our Innovation Platform in China. Outside of China, 

through continuous efforts and investments over 

Europe, allows for rapid enrollment of patients in 

products  will  be  commercialized,  if  approved, 

the last 14 years, and has led to the creation of 

clinical trials in a cost-effective manner, resulting in 

in  the  US,  Europe  and  other  major  markets  by 

our seven clinical and two late-stage pre-clinical 

more efﬁ cient proof-of-concept. Subject to achieving 

Chi-Med and/or through partnerships with leading 

drug  candidates,  HMPL-453  targeting  FGFR  and 

proof-of-concept  in  our  China  studies,  Chi-Med 

biopharmaceutical companies.

HMPL-689 targeting PI3Kδ.

can then move to initiate the higher cost, mid-to 

late-stage global studies both independently as well 

as with partners.

CChemistry is our edge  
e.g.  use of co-crystal structures 

Focus on small  
molecules interactions  
with kinases  
(cid:2) Optimize binding to  
on-target protein,  
for potency. 

(cid:2) Minimize binding to  
off-target proteins  
for selectivity. 

 
10 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Chairman’s Statement

Financial Review
C h i - M e d   G r o u p   r e v e n u e s   f r o m   c o n t i n u i n g 

investment in our new oncology drug manufacturing 

these  clinical  activities.  We  have  also  increased 

(1) Revenue recognition of upfront and milestone 

operations in 2015 were up 104% to $178.2 million 

operation in Suzhou, which, in the ﬁ rst half of 2015, 

(2014:  $87.3m),  driven  mainly  by  a  full  period 

successfully produced its ﬁ rst batches of fruquintinib 

p a y m e n t s   r e c e i v e d   f r o m   t h e   l i c e n s e   a n d 
collaboration agreements – Under IFRS, the Group 
applied the percentage of completion method to 

of consolidation of Hutchison Sinopharm, which 

for use in Phase III clinical trials.

recognize revenue from its license and collaboration 

began operations in Q2 2014. It should be noted 

agreements in each ﬁ nancial period. Under US GAAP, 

that Group revenues do not include the revenues of 

Net  administrative  expenses  incurred  by  our 

there is prescriptive guidance on multiple element 

our two main large-scale 50/50 JVs in China, SHPL 

corporate  head  office,  primarily  Chi-Med  Group 

arrangements and speciﬁ c guidance on accounting 

and Hutchison Whampoa Guangzhou Baiyunshan 

overheads and running costs, increased signiﬁ cantly 

for arrangements with milestone payments. Under 

Chinese Medicine Company Limited (“HBYS”), which 

to $11.0 million (2014: $6.6m) driven primarily 

US  GAAP,  substantive  milestone  payments  are 

are accounted for using the equity method.

by $3.1 million of one-off costs associated with 

recorded in their entirety when the milestone is 

Revenue

(% change 2015 vs. 2014)

+104%

Net Proﬁ t
Attributable to 
Chi-Med

(US$ million)

8.0

preparing for our proposed Nasdaq dual-listing.

achieved. As a result, the timing of recognition for 

Consequently, Chi-Med Group operating proﬁ t from 

and US GAAP are different, resulting in different 

continuing operations was $13.4 million (2014: 

allocations of such payments to different accounting 

operating loss -$3.3m).

periods.

certain upfront and milestone payments under IFRS 

Total interest, tax and profit attributable to non-

controlling interests from continuing operations 

during the period were $5.4 million (2014: $5.0m).

(2)  Accounting  treatment  of  the  redeemable 
convertible preferred shares – Under IFRS, the Group 
classified  the  redeemable  convertible  preferred 

shares issued by its subsidiary as non-controlling 

Overall,  net  profit  from  continuing  operations 

interests within equity. Under US GAAP, the Group 

attributable to Chi-Med was $8.0 million (2014: net 

is required to classify these redeemable convertible 

loss -$8.3m).

preferred shares as mezzanine equity and to account 

for the accretion to the redemption amount when 

In  2014,  the  Commercial  Platform  received  an 

it  is  probable  that  the  preferred  shares  will  be 

arbitration award in relation to a contract dispute 

redeemed.

with  a  supplier  of  infant  formula.  This  led  to  a 

one-time  gain  and  consequent  total  net  profit 

Mitsui accretion – In July 2015, we completed a 

attributable to Chi-Med on discontinued operation in 

transaction, the Roll-up, with Mitsui under which Chi-

2014 of $1.0 million, as compared to nil in 2015.

Med issued 3,214,404 new ordinary shares (5.69% 

The resulting total Group net profit attributable to 

at $84.0 million in exchange for Mitsui’s 12.24% 

Chi-Med was therefore $8.0 million (2014: net loss 

shareholding in HMHL convertible preferred shares. 

of the enlarged share capital of Chi-Med) valued 

-$7.3m).

This valued HMHL at $686 million, equivalent to 

46.5% of Chi-Med at the time of Roll-up.

Change  to  US  GAAP  from  International 

Financial  Reporting  Standards  (“IFRS”)  –  As 

The HMHL preferred shares were redeemable (i.e. 

previously announced in late 2015, the Company 

Chi-Med could be forced to buy them back) upon 

has  changed  the  basis  of  preparation  of  the 

HMHL valuation reaching over $190 million, and as a 

Our Commercial Platform, which continues to be 

consolidated ﬁ nancial statements of the Group, and 

result they were accounted for as redeemable non-

Chi-Med’s  primary  profit  and  cash  source,  grew 

the adopted ﬁ nancial reporting standards, from IFRS 

controlling interests outside of permanent equity 

operating proﬁ t from continuing operations by 11% 

to US GAAP. Differences between IFRS and US GAAP 

in the Chi-Med consolidated balance sheets before 

to $28.2 million (2014: $25.5m). The Innovation 

which have had a signiﬁ cant impact on the historical 

the completion of the Roll-up. At such time that it 

Platform  reduced  operating  losses  significantly, 

consolidated ﬁ nancial statements published in prior 

became probable that the preferred shares would 

by 83%, to $3.8 million (2014: -$22.2m) despite 

years under IFRS include the following two main 

become redeemable, under US GAAP, Chi-Med was 

a major step-up of clinical activities on both our 

differences:

partnered and wholly-owned drug candidates as 

well as a major organizational expansion to support 

required to record a non-cash accretion equivalent 

to the estimated increase in the value of the Mitsui 

Chairman’s Statement 

1111

shareholding (i.e. effectively Chi-Med’s theoretical 

savolitinib,  fruquintinib,  sulfatinib,  epitinib  and 

and its partners between 2005 and 2015. In 2015 

liability). As a result, in 2015, up to the date of 

HMPL-523 are expected to be published. Given this, 

the JVs paid out $6.4 million (2014: $15.9m) which 

completion  of  the  Roll-up,  HMHL  had  recorded 

Nasdaq provides the right long-term platform for 

was lower than normal, as they went through the 

an  accretion  of  $43.0  million  (2014:  $25.5m) 

Chi-Med, as it opens up a new and deep universe 

final, and also peak, capital expenditure phase of 

to the preferred shares based on such preferred 

of biopharmaceutical investors and analysts that 

the construction of the two new factories. Looking 

shareholder’s share of the estimated valuation of 

are well positioned to understand both the science 

forward,  Chi-Med  expects  to  begin  receiving 

HMHL.

behind our drug candidates and their clinical results 

extraordinary dividends, to the Group level, from 

and therefore support late-stage development of the 

SHPL and HBYS associated with the considerable 

These  non-cash  accounting  entry  accretions 

pipeline.

increased the carrying value of the redeemable non-

compensation, at the JV level, for the surrender of 

the land-use rights to the sites of the old JV factories 

controlling interests and accretions made before the 

At  the  Chi-Med  Group  level,  cash  and  cash 

in Shanghai and Guangzhou.

completion of the Roll-up were recorded against 

equivalents as at December 31, 2015 totaled $31.9 

2015 additional paid-in capital. As a result, Group 

million (December 31, 2014: $38.9m), outstanding 

In summary, as of today, Chi-Med has available cash 

net loss attributable to ordinary shareholders of 

bank loans amounted to $50.0 million (December 

at the Group level of over $90 million, including 

Chi-Med  from  continuing  operations  was  $35.0 

31,  2014:  $53.2m),  of  which  $26.9  million  is 

cash and cash equivalents and unutilized banking 

million, compared to $33.8 million in 2014, with 

guaranteed  by  Hutchison  Whampoa  Limited,  a 

facilities. This does not include dividends from the 

loss per share in 2015 of 64.0 US cents, unchanged 

wholly owned subsidiary of CK Hutchison Holdings 

JVs anticipated during the balance of 2016, which 

versus 2014.

Limited, and un-utilized bank loan facilities totaled 

we expect to be material given extraordinary income 

$6.9 million (December 31, 2014: $8.5m).

from property compensation.

Importantly,  the  Roll-up  eradicated  both  the 

significant, and potentially inconveniently timed, 

In February 2016, Chi-Med established additional 

drain on Chi-Med cash needed to buy back these 

new credit facilities with Bank of America Merrill 

Our People
As  always,  I  would  like  to  express  my  deep 

HMHL shares as well as the distortion caused to 

Lynch and Deutsche Bank totaling an aggregate 

appreciation  for  the  support  of  our  investors, 

Chi-Med Group earnings per share by making non-

amount  of  $60.0  million.  These  facilities  are 

directors and partners and for the commitment and 

cash accounting entry accretions equivalent to the 

unsecured, with a range of 12 and 18 month terms, 

dedication of all of Chi-Med’s management and staff.

estimated increase in the value of the Mitsui shares. 

and  were  established  in  order  to  give  Chi-Med 

All in all the Roll-up eradicated the impact of these 

additional flexibility in the context of execution of 

preferred shares in an efficient manner and at a 

the proposed Nasdaq listing. Total Chi-Med Group 

Outlook
With a high potential clinical pipeline, an efficient 

price that was attractive to Chi-Med.

weighted average cost of borrowing on all loans, 

and  highly  productive  discovery  operation  and 

including all interest and guarantee fees, was 2.4% 

a powerful, profitable, growing commercial and 

Cash and Financing
Since our initial public offering on the AIM market 

as of December 31, 2015.

distribution infrastructure, we believe Chi-Med is 

uniquely positioned to contribute to healthcare both 

of the London Stock Exchange in 2006, Chi-Med has, 

At  the  JV  level,  under  US  GAAP,  the  three  JVs 

in China and globally and to generate significant 

in general, used the steady ﬂ ow of dividends from 

(SHPL,  HBYS  and  NSP),  which  are  all  50/50  JVs, 

shareholder value this year and beyond.

our Commercial Platform combined with service 

are accounted for on an equity accounting basis. 

fee and milestone payments from the four main 

The substantial JV cash and cash equivalents are 

Innovation Platform partners to fund our research 

therefore not separately reflected at the Chi-Med 

and development activities. Bank borrowing has 

Group  level.  Overall,  cash  and  cash  equivalents 

also been utilized to bridge between these cash 

at the JV level as at December 31, 2015 totaled 

injections.

$76.9 million (December 31, 2014: $53.8m), with 

outstanding bank loans of $26.5 million (December 

Simon To
Chairman

With the acceleration and broadening of the late-

31, 2014: $22.6m).

stage clinical pipeline this year, the Chi-Med board 

February 29, 2016

now believes it is important to access the US equity 

These  JVs  have  a  long  track-record  of  paying 

capital markets. Furthermore, during 2016 detailed 

dividends  with  a  total  of  $143.4  million,  out  of 

clinical results on many drug candidates, namely 

retained proﬁ ts of $287.0 million, paid to Chi-Med 

12 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Operations Review

INNOVATION PLATFORM
The Chi-Med pipeline of drug candidates has been 

created and developed by the in-house research and 

development operation, known as the Innovation 

Platform, which was started in 2002. Since then, 

Chi-Med has assembled a team of over 290 scientists 

and staff (end 2014: 238) based in China, of which 

183  had  advanced  technical  degrees  including 

21 M.D.s and 48 doctorate degrees as of January 

31,  2016.  This  fast  growing  team  has  created  a 

large  scale  and  fully-integrated  drug  discovery 

and development operation covering chemistry, 

biology, pharmacology, toxicology, chemistry and 

manufacturing controls for clinical and commercial 

supply, clinical and regulatory and other functions, 

which work seamlessly together.

Over  the  last  decade,  the  core  research  and 

development philosophy has been to take a highly 

disciplined chemistry-focused approach to design 

uniquely selective small molecule tyrosine kinase 

inhibitors against 8 molecular targets, deliberately 

engineered to improve drug exposure and reduce 

known off-target toxicities. Accordingly, we believe 

these drug candidates, such as savolitinib (targeting 

c-Met), HMPL-523 (targeting Syk) and HMPL-453 

(targeting FGFR1/2/3), have the potential to be global 

first-in-class therapies. In the cases of fruquintinib 

(targeting VEGFR 1/2/3), sulfatinib (targeting VEGFR/

FGFR1), epitinib (targeting EGFR activating mutation 

with brain metastasis), theliatinib (targeting EGFR 

wild-type) and HMPL-689 (targeting PI3Kδ), we 

believe  these  drug  candidates  are  sufficiently 

differentiated to be potential global best-in-class, 

next generation therapies.

In 2015, the revenue of the Innovation Platform 

grew signiﬁ cantly to $52.0 million (2014: $20.3m) 

and as a result, the net loss attributable to Chi-Med 

dropped 83% to $3.8 million (2014: -$22.2m) despite 

clinical trial spending during 2015, by Chi-Med and its 

partners, totaling approximately $64.1 million (2014: 

$45.5m). We significantly advanced the oncology 

and immunology pipeline of clinical drug candidates, 

managing 19 active clinical trials (2014: 16) with 

six more in late planning, either independently or 

in collaboration with our partners. A total of 677 

new patients, 249 outside China and 428 inside 

China, were enrolled into these clinical trials in 2015, 

bringing the total number of patients enrolled to 

2,130 since the Innovation Platform’s inception.

Christian Hogg
Chief Executive Ofﬁ cer

Clinical trial spending during 2015, 
by Chi-Med and its partners, totaling 
approximately $64.1 million (2014: 
$45.5m). We signiﬁ cantly advanced 
the oncology and immunology 
pipeline of clinical drug candidates, 
managing 19 active clinical trials

Operations Review - Innovation Platform

1313

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[

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Innovation Platform

Product Pipeline Progress
Important deﬁ nitions: Most of the drug candidates 

Breakthrough  Therapy  designation,  established 

primary issue that has prevented all other selective 

by  the  US  Congress  in  2012,  is  assigned  by  the 

c-Met inhibitors from gaining regulatory approval. 

have been designed for either global ﬁ rst-in-class or 

US FDA to novel drug candidates which, in simple 

In Phase I/II clinical studies, savolitinib has shown 

best-in-class potential and many have Breakthrough 

terms, meet the following three criteria: (1) treat 

promising signs of clinical efﬁ cacy, causing tumor size 

Therapy designation potential. In this context, ﬁ rst-

rare, untreatable, life-threatening disease; (2) clear 

reduction in patients with c-Met gene ampliﬁ cation in 

in-class potential means that a drug candidate has 

understanding of molecular pathways (e.g. kinase 

PRCC, NSCLC, colorectal cancer and gastric cancer.

the chance to be the ﬁ rst drug approved worldwide 

target)  of  the  disease;  and  (3)  unprecedented 

against its specific novel molecular (kinase) target. 

efficacy.  Breakthrough  Therapy  designation  can 

Active  savolitinib  clinical  studies  –  We  are 

The benefits of being first-in-class are significant, 

lead to expedited NDA approval and market launch 

currently  testing  savolitinib  in  partnership  with 

and include ﬁ rst mover advantage and becoming the 

based on Phase II data, with Phase III studies being 

AstraZeneca  in  nine  parallel  proof-of-concept 

established standard of care over which all future 

conﬁ rmatory.

drug  candidates,  targeting  the  same  target  and 

indication, must prove clinical superiority. Best-in-

Savolitinib (AZD6094): Savolitinib is a potential 

class means that a drug candidate, against its speciﬁ c 

global first-in-class inhibitor of c-Met, an enzyme 

already validated target, is clinically superior in terms 

which has been shown to function abnormally in 

studies, both as a monotherapy and in combination 
with  other  targeted  therapies,  such  as  Iressa® 
and  Tagrisso®  (both  EGFR  inhibitors  developed 
by AstraZeneca), and chemotherapy (Taxotere®). 
We  and  AstraZeneca  plan  to  start  three  further 

of safety and/or efﬁ cacy to the ﬁ rst-in-class standard 

many types of solid tumors. We developed savolitinib 

proof-of-concept studies in savolitinib in the first 

of care.

as a potent and highly selective oral inhibitor that 

quarter of 2016, two of which are combinations with 

was designed to address renal (kidney) toxicity, the 

immunotherapies.

Operations Review - Innovation Platform

1515

Study  1  –  Phase  II  PRCC  (first-line) 

savolitinib monotherapy – in the US, 
Canada and Europe. A Phase II study 
is  underway  to  study  savolitinib 

Study 2 – Phase Ib PRCC savolitinib (600mg daily) 
combined with immunotherapy – in UK. A Phase 
Ib study is now in final planning to evaluate the 

safety and efficacy in PRCC. This study is premised 

monotherapy  (600mg  once  daily) 

on the hypothesis that a savolitinib/immunotherapy 

in first-line PRCC. The global Phase II 

combination, if tolerable, could benefit all PRCC 

study,  which  completed  enrollment 

patients, not only those patients with c-Met gene 

of 109 patients in October 2015, is an 

ampliﬁ cation. Enrollment for this study is targeted to 

open  label  study  with  ORR  and  PFS 

start in the ﬁ rst quarter of 2016.

as the primary endpoints and Disease 

Control  Rate  (“DCR”  –  percentage  of 

Study 3 – Phase Ib clear cell renal cell carcinoma 

patients with tumor growth of <20% 

(“CCRCC”)  (second-line),  VEGFR  tyrosine  kinase 

inhibitor-refractory,  savolitinib  (600mg  daily) 
monotherapy – in UK. A Phase Ib study is now in 
final planning to evaluate efficacy among Sutent® 
refractory  CCRCC  patients,  being  those  patients 

versus baseline) and Overall Survival 

as secondary end points. In addition, 

molecular  analysis  of  patient  tissue 

samples is being carried out in parallel 

with treatment to determine the c-Met 

gene ampliﬁ cation status of each PRCC 

patient. In our extended Australia Phase 

I study of savolitinib, in 8 PRCC patients, 

we reported 38% ORR (3/8) and 75% 

DCR  (6/8)  with  PRCC  patients  with 

Savolitinib:  
Papillary Renal Cell Carcinoma 
Phase I Data 

Objective Response Rate[1]:    38%  
Disease Control Rate[2]:               75% 

)

%

(
e
n

i
l
e
s
a
b

.
s
v
s
e
g
n
a
h
c
e
g
a
t
n
e
c
r
e
p
t
s
e
B

Chromosome7 gain 
Focal Met Gene gain 
No changes (Chr/FM) 

60% 

40% 

20% 

0% 

-20% 

-40% 

-60% 

-80% 

-100% 

[1] ORR = percent of patients with >30% tumor diameter 
shrinkage; [2]  DCR = percent of patients with tumor diameter 
growth <20% 

Savolitinib – Kidney Cancer: Our strategy is to 

c-Met gene ampliﬁ cation (40-75% of PRCC patients) 

use PRCC, which currently has no approved targeted 

showing the greatest response (Frost & Sullivan).

treatments  on  the  global  market,  as  the  first 

indication to submit savolitinib for approval. PRCC 

We have observed to date in the Phase II study, as 

is a sub-type of kidney cancer which accounted for 

we did in the Australia Phase I study, clear efﬁ cacy 

approximately 14% (Frost & Sullivan) of all new cases 

of savolitinib among patients with high levels of 

of kidney cancer globally in 2014. We hope that if 

c-Met gene ampliﬁ cation. We expect to publish the 

that have not responded, or stopped responding, 
to  treatment  with  Sutent®.  A  majority  of  these 
patients are known to have high levels of c-Met 

results from our current Phase II study (Study 1) are 

results of the Phase II study, subject to the maturity of 

over-expression and may beneﬁ t from exposure to 

consistent with our Phase I data, we could consider 

median PFS data, at a scientiﬁ c conference in 2016. 

a highly selective c-Met inhibitor. Enrollment for this 

applying for Breakthrough Therapy designation.

In the ﬁ rst half of 2016, we plan to meet with the 

study is targeted to start the ﬁ rst quarter of 2016.

US FDA to discuss and seek guidance on registration 

strategy.

 
 
 
 
 
 
16 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Innovation Platform

Study  4  –  Phase  Ib  CCRCC  (second-line),  VEGFR 

tyrosine kinase inhibitor-refractory, savolitinib (600 
mg daily) combined with immunotherapy – in UK. A 
Phase Ib study is now in ﬁ nal planning to evaluate 

the safety and efﬁ cacy of savolitinib in combination 

with immunotherapy with the hypothesis being 

that the tyrosine kinase inhibitor/immunotherapy 

combination, if tolerable, will be more effective in 

treating CCRCC by targeting the disease from multiple 

angles. Enrollment for this study is targeted to start in 

the ﬁ rst quarter of 2016.

Savolitinib  –  Non-small  Cell  Lung  Cancer 

(“NSCLC”): In November 2015, AstraZeneca received 
US FDA approval for Tagrisso®, a therapy for the 
treatment of patients with metastatic EGFR T790M 

mutation-positive NSCLC who have progressed on or 

after EGFR tyrosine kinase inhibitor (“TKI”) therapy, 
namely  Iressa®  or  Tarceva®  (erlotinib).  Tagrisso® 
was  granted  Breakthrough  Therapy  designation 

and expedited approval by the US FDA and was one 

of fastest development programs ever recorded – 

,
EGFR TKI RESISTANT,
T790M+, C-MET+

1,000 

Prolonged and total
tumor growth
suppression via 
combining savolitinib & 
Tagrisso®.

)
3

m
m

l

(
e
m
u
o
V
r
o
m
u
T

800 

600 

400 

200 

0 

0 

Vehicle 

Savolitinib 

Tagrisso® 

Savolitinib + Tagrisso® 

20 

40 

60 

80 
Days on study 

100 

120 

Study  5  –  Phase  Ib/II  NSCLC  (second-line),  EGFR 

NSCLC tumors are shown to develop resistance to 

TKI-refractory, savolitinib (600 mg daily) combined 
with Tagrisso® – Global. As a result of the encouraging 
Phase I dose ﬁ nding study, named TATTON, published 

at ASCO in 2015, which showed 55% ORR (6/11) 
and 100% DCR (11/11) among Iressa® and Tarceva® 
refractory T790M+/− (which means the patient’s 

third generation EGFR tyrosine kinase inhibitors 
(Tagrisso®) and c-Met gene amplification is one of 
the  major  resistance  mechanisms.  No  firm  data 
exists on what proportion of these Tagrisso® resistant 
patients are c-Met gene ampliﬁ ed, but it is believed 
to be material, and now that Tagrisso® is approved 
and expected to be used broadly, the proportion 

and resulting market potential for savolitinib, as a 
combination therapy with Tagrisso® in this third-line 
setting, should soon emerge.

Study  7  –  Phase  Ib/II  NSCLC  (second-line),  EGFR 

TKI-refractory, savolitinib (600 mg daily) combined 
with Iressa® (EGFR inhibitor) – China. A Phase Ib/II 
study is now underway in China to evaluate efﬁ cacy 
among about 30 Iressa® refractory NSCLC patients. 
According to Frost & Sullivan, between 15% and 

20% of these patients are known to be c-Met gene 

amplified and could benefit from exposure to a 

highly selective c-Met inhibitor such as savolitinib.

from start of Phase I clinical trials to approval in just 

T790M status is known) patients, we have initiated 

over two and a half years. Speed of development 
and approval of Tagrisso® was driven by the clearly 
deﬁ ned molecular pathways (T790M), major unmet 

medical need (TKI resistant NSCLC), and high degree 

of efficacy (59% ORR). In NSCLC, beyond T790M, 

c-Met gene ampliﬁ cation is clearly one of the major 

molecular drivers of cancer cell proliferation and 

a global Phase Ib/II expansion study. The Phase Ib/

II study aims to recruit an additional approximately 

25 c-Met gene ampliﬁ ed, T790M negative patients 

in any line of treatment. This is a patient population 
represents approximately 10% of all Iressa® and 
Tarceva® refractory patients (Frost & Sullivan).

as such, in our view, represents an obvious area of 

Study 6 – Phase Ib/II NSCLC (third-line), EGFR/T790M 

Breakthrough Therapy potential in NSCLC. We, and 

our partner AstraZeneca, are conducting four clinical 

studies in NSCLC, all of which we believe will generate 

important proof-of-concept data in 2016:

TKI-refractory, savolitinib (600 mg daily) combined 
with Tagrisso® (T790M inhibitor) – Global. A second 
arm of the global Phase Ib/II study will evaluate the 
use of savolitinib in combination with Tagrisso® in 
about 20 c-Met gene amplified patients who have 
progressed  following  treatment  with  Tagrisso®. 

32 year old female NSCLC patient
w/ c-Met+ & T790M

visible solid tumor…treated w/ 800mg
savolitinib & 80mg Tagrisso® daily

before treatment …   

… after 4-weeks.  

 
 
 
Operations Review - Innovation Platform

1717

Study 8 – Phase Ib NSCLC (first-line), EGFR wild-type, 
c-Met over-expression – China. A Phase Ib study of 
savolitinib (500mg twice daily) in China has been 

underway since late 2014 in wild-type EGFR, c-Met 

Savolitinib – Gastric Cancer: Patient screening 

Study  10  –  Phase  Ib  gastric  cancer,  savolitinib 

and enrollment for the following four gastric cancer 

studies has been underway in China since 2014.

monotherapy, patients with c-Met over-expression – 
China. A Phase Ib study of savolitinib (500mg twice 
daily) in China is ongoing. In this study, 40% of the 

over-expression, NSCLC patients. According to Frost 

Study  9  –  Phase  Ib  gastric  cancer,  savolitinib 

patients have some level c-Met over-expression.

& Sullivan, approximately 67% of first-line NSCLC 

patients have some level of c-Met over-expression. 

For this study, we are only selecting patients with a 

monotherapy, patients with c-Met gene amplification 
–  China.  A  Phase  Ib  study  of  savolitinib  (500mg 
twice daily) in China is ongoing and to date we 

high degree of c-Met over-expression based on the 

have seen clear partial response efﬁ cacy among the 

hypothesis that patients may beneﬁ t if we are able 

approximately 10% of gastric cancer patients with 

to heavily inhibit c-Met with high doses of savolitinib. 

high c-Met gene ampliﬁ cation.

This study is ongoing.

Studies 11 and 12 – Phase Ib gastric cancer, patients 

with  c-Met  gene  amplification/overexpression, 
savolitinib combined with Taxotere® (docetaxel) – 
China. The ﬁ rst section of these Phase Ib dose ﬁ nding 
studies are underway to assess combinability in 

patients with c-Met gene ampliﬁ cation and/or c-Met 

over-expression.

Syk, the most upstream B-cell pathway kinase target,
is clinically validated in rheumatoid arthritis (“RA”), but 
currently Chi-Med & Gilead are the only companies pursuing.

B-Cell Receptor 

Rituxan®

PIP2 

PIP3 

PI3Kδ 

P 

BTK 

P 

CD79 

A  B 

P 
P 

LY
LYN 

S
Y
K

P 

HHMMPPLL--552233   

GS-9876 

Fostamatinib 

Humira®

Remicade® 

TNFα 

Enbrel® 

IL-6 Receptor 

TNFα Receptor 

Cell Membrane 

AKT 

P 
mTOR 

P 
PLCɣ2 

PKCβ 

IKK 

TNF receptor 
associated  
factors  
(TRAFs) 

Xeljanz® 

Baricitinib 

Filgotinib 

ABT-494 

J
A
K
1

J
A
K
2

STAT 
P 
P 
STAT 

LLeeggeenndd  [1] 
LLeeggeenndd [ ]
LLeeggggeenndd
)
Immunology (Imm.) 
gy (

Hematological Cancer (Onc.) 

NF-κB 

PPro-inflammatory 
cytokines 

[1]  Approved drug = ®; All other clinical candidates: mAb = antibody (extracellular); small molecule (intracellular) 

 
 
 
 
18 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Innovation Platform

HMPL-523: We believe HMPL-523 is a potential 

improvements of 44%/36%/15% in methotrexate 

Syk is the upstream kinase in the B-cell signaling 

global ﬁ rst-in-class oral inhibitor of Syk, a key protein 

resistant, placebo adjusted, rheumatoid arthritis 

pathway, a different and possibly complimentary 

involved in B-cell signaling. We are developing HMPL-

patients. As an example, an ACR20 of 44% means that 

molecular pathway to JAK, and has been clinically 

523 for use in immunology, rheumatoid arthritis 

over a 24 week period an additional 44% of patients, 

validated  as  an  important  target  in  rheumatoid 

and lupus, as well as hematological cancers such as 

over and above the placebo arm, observed a 20% 

arthritis. In 2010, fostamatinib 100mg twice daily 

lymphoma and leukemia. In the past year, HMPL-

improvement in their rheumatoid arthritis symptoms, 

(AstraZeneca/Rigel)  reported  exciting  Phase  II 

523 has emerged, in our view, as one of Chi-Med’s 

according to the measurement scale established by 

ACR20/50/70  clinical  efficacy  of  32%/24%/18% 

highest potential drug candidates. This is as a result 

the American College of Rheumatology (“ACR”).

showing that a small molecule Syk inhibitor can 

of the successful completion of our Phase I study 

deliver meaningful clinical benefit. Unfortunately, 

in healthy volunteers as well as fast emerging and 

A  small  molecule  drug  candidate  has  important 

fostamatinib was not a selective Syk inhibitor as it 

highly compelling clinical proof-of-concept data from 

advantages  over  intravenous  mAb  immune 

potently inhibited multiple other kinases including 

entospletinib (Gilead), which has begun to validate 

modulators because oral small molecule compounds 

FLT-3,  Ret,  KDR,  FGFR,  Lyn  and  JAK.  We  believe 

Syk as an important target in hematological cancer, 

are more convenient to take and clear the system 

that this poor kinase selectivity led to off-target 

in addition to its already established importance as a 

faster, thereby reducing the risk of infections from 

toxicity, with patients suffering diarrhea (19%) as 

target in immunology.

Modulation of the B-cell signaling pathway has been 

sustained  suppression  of  the  immune  system. 
Xeljanz® was the ﬁ rst-in-class JAK inhibitor, however 
poor selectivity and resulting off-target toxicities 

well as hypertension, leading to 23% of patients 

having to receive anti-hypertensive therapy. After 

conducting global Phase III studies (OSKIRA 1/2/3) on 

proven to significantly advance the treatment of 

have limited its usage. Most recently a group of more 

fostamatinib, ultimately AstraZeneca decided not to 

certain chronic immune diseases, such as rheumatoid 

selective, and thereby cleaner, potential best-in-class 

proceed with regulatory ﬁ lings because efﬁ cacy at 

arthritis. To date, targeted therapies approved in 

JAK inhibitors have shown positive Phase II results 

the safe dose level, while statistically signiﬁ cant over 

this  area  include  monoclonal  antibody  (“mAb”) 
anti-Tumor Necrosis Factor alpha (“TNFα”) immune 
modulators as well as the small molecule Janus 
Tyrosine Kinase (“JAK”) inhibitor, Xeljanz® (tofacitinib). 
The performance of Enbrel®, Pﬁ zer’s anti-TNFα mAb, 
is generally seen as the gold standard among these 

approved therapies, with 24 week ACR20/50/70 

in rheumatoid arthritis with baricitinib 4mg daily 

the placebo, was not clinically meaningful relative to 

(Lilly/Incyte); GLPG0634 100mg twice daily (Gilead/

mAbs.

Galapagos)  and  ABT-494  24mg  daily  (AbbVie) 

reporting 12 week ACR20/50/70 improvements of 

With  respect  to  the  treatment  of  hematological 

30%/28%/14%;  35%/40%/23%;  and  32%/24%/18% 

cancers,  in  recent  years  there  have  been  major 

respectively.

clinical successes and drug approvals of inhibitors 

targeting  other  kinases  in  the  B-cell  signaling 

HMPL-523 – far superior selectivity to fostamatinib 

Selectivity 

Syk enzyme 

HMPL-523 IC50 (nM) 
25 ± 5  (n=10)*

fostamatinib IC50 (nM) 
54 ± 16  (n=10)*

JAK 1,2,3 enzyme 

>300, >300, >300*

FGFR 1,2,3 

FLT3 enzyme 

LYN enzyme 

Ret enzyme 

KDR enzyme 

KDR cell 

>3,000, >3,000, >3,000 

63* 

921*

>3,000* 

120, 30, 480*

89, 22, 32*

9* 

160* 

5** 

390 ± 38 (n=3)* 

61 ± 2 (n=3)* 

5,501 ± 1,607 (n=3)* 

422 ± 126 (n=3)* 

*: HMPL data and Eun-ho Lee, 2011; ** Birth Defects Research (Part A) 2009, 85: 130-6

Operations Review - Innovation Platform

1919

pathway such as Bruton’s tyrosine kinase, or BTK, and 

HMPL-523  clinical  results  published  in 

The preliminary safety proﬁ le of HMPL-523 was in-

PI3Kδ. While these inhibitors have been successful, 

2015/2016 – During late 2015, we reported the top-

line with our expectations. No material off-target 

resistance to these inhibitors can emerge over time, 

line results our successful Phase I dose escalation 

toxicities such as diarrhea and hypertension were 

leading to loss in efﬁ cacy, and new targets in B-cell 

study in healthy volunteers in Australia.

observed with HMPL-523 in this study. Furthermore, 

signaling  such  as  Syk  are  potential  solutions  to 

this problem. In late 2015, Gilead published highly 

compelling Phase II results for entospletinib (GS-

9973), a small molecule selective Syk inhibitor being 

Study 20 – Phase I study of HMPL-523 in healthy 
volunteers – Australia. The first-in-human Phase I 
study of HMPL-523 was a dose-escalation study 

HMPL-523 exhibited a linear human pharmacokinetic 

proﬁ le and a dose dependent suppression of human 

plasma B-cell activation. Full results of this Phase I 

study will be published in due course.

developed only in hematological cancer, in which a 

conducted  to  assess  the  safety,  tolerability  and 

Nodal Response Rate (“NRR”) of 65% was observed 

pharmacokinetics of both single and repeat doses 

Active HMPL-523 clinical studies – We currently 

in chronic lymphocytic leukemia (“CLL”) and small 

of HMPL-523 in healthy volunteers in Australia. The 

retain all rights to HMPL-523 worldwide. Now that a 

lymphocytic lymphoma. Nodal response is deﬁ ned as 

study began in June 2014, and completed ten single 

dose range for the further development of HMPL-523 

a >50% decrease from baseline in the sum of lymph 

dose cohorts, with eight patients per cohort, from 

in autoimmune disease has been established, we are 

node diameters. Importantly also, GS-9973 reported 

5mg single dose through 800mg single dose. In mid-

planning Phase II proof-of-concept studies against 

an NRR of 44.4% (4/9 patients) in an exploratory 

2015, the multiple ascending dose section of the 

multiple autoimmune diseases, such as rheumatoid 

clinical study in CLL patients previously treated with 
the ﬁ rst-in-class BTK inhibitor, Imbruvica® (ibrutinib), 
and  the  first-in-class  PI3Kδ  inhibitor,  Zydelig® 
(idelalisib), thereby indicating that Syk inhibition 
has potential to overcome resistance to Imbruvica® 
and Zydelig®. TAK-659 (Takeda), also a selective Syk 
inhibitor, saw similar strong signals of efﬁ cacy in their 

Phase I study commenced in which HMPL-523 was 

arthritis  and  lupus.  These  studies  are  targeted 

administered once daily for 14 consecutive days. 

to start in 2016. In addition, we have just begun 

Four dose cohorts were completed in this section of 

dose escalation in the following Phase I study in 

the study, again with eight patients per cohort, from 

hematological cancer patients:

200mg multiple dose through to 400mg multiple 

dose. At 400mg daily, HMPL-523 drug exposures are 

believed to be well above the predicted efﬁ cacious 

Study 21 – Phase I of HMPL-523 in second/third-
line lymphoma/leukemia patients – Australia. In 
January 2016, we began a Phase I, open-label, dose 

TAK-659 Phase I dose escalation study in lymphoma, 

dose level and, consequently, there is no intention to 

also published in late 2015.

escalate dosing further in healthy volunteers.

escalation  study  of  HMPL-523  as  monotherapy 

administered orally to relapsed and/or refractory 

B-cell  non-Hodgkin’s  lymphoma  or  CLL  patients 

who do not respond to, or are unable to tolerate, 

standard therapy or for whom there is no standard 

therapy. We are planning two stages for this study: 

a dose escalation stage and a dose-expansion stage. 

20 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Innovation Platform

We believe this study could quickly provide clinical 

proof-of-concept  that  HMPL-523  is  an  effective 

Syk  inhibitor  and  that,  as  has  been  shown  with 

entospletinib and TAK-659, modulation of the B-cell 

signaling pathway through inhibition of Syk will 

provide patients with a highly meaningful clinical 

beneﬁ t.

Fruquintinib: Fruquintinib is a highly selective and 

potent oral inhibitor of VEGFR, a receptor tyrosine 

kinase which contributes to tumor angiogenesis, 

which we believe has the potential to be a global 

best-in-class VEGFR inhibitor for many types of solid 

tumors. Based on the pre-clinical and clinical data 

compiled so far, fruquintinib’s kinase selectivity has 

been shown to reduce off-target toxicity. This allows 

for drug exposure, from a single 5mg oral dose, 

that is able to fully inhibit VEGFR for 24 hours a day 

and has potential for use in combination with other 

targeted  therapies  and  chemotherapy  in  earlier 

Fruquintinib Phase II study in Colorectal Cancer:
Kaplan-Meier Plot Of Progression Free Survival (”PFS”)

(Investigator Review) 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

)

%

(
y
t
i
l
i

b
a
b
o
r
P
S
F
P

Stratified HR [95% CI]:  
0.30 [0.15-0.59]   P<0.001 

Placebo 
(n=24) 

Fruquintinib 
(n=47) 
Events, n  36 (76.6%)  21 (87.5%) 
Median, 
4.73  
(2.86,  5.59) 
months 

0.99  
(0.95,  1.58) 

0 

0 

1 

2 

3 

4 

5 

6 

7 

8 

Time from randomization (months) 

Phase  II  study  of  fruquintinib  monotherapy  in 
third-line colorectal cancer – China. In August 2014, 
we completed enrollment for a Phase II double-blind, 

Fruquintinib demonstrated very strong anti-tumor 

activity in this study. Median PFS was 4.7 months 

in the fruquintinib arm compared to median PFS of 

lines of treatment with larger patient populations. 

placebo-controlled,  multi-center  study  in  China 

1.0 month in the placebo arm (hazard ratio = 0.30 

We believe these are major points of differentiation 

in  just  over  four  months  to  test  fruquintinib  as 

(p<0.001)). The DCR in the fruquintinib arm was 

compared to other less selective small molecule 

monotherapy among third-line metastatic colorectal 

68.1% compared with 20.8% in the placebo arm 

VEGFR inhibitors that have already been approved, 
such as Sutent®, Nexavar® (sorafenib) and Stivarga® 
(regorafenib).

cancer patients, using the 5mg daily, 3 weeks on/1 

(p<0.001).  Interim  median  Overall  Survival  rate, 

week off dose regimen. The goal of this study was 

at the 6-month cut-off, was 7.6 months and 5.5 

to compare the PFS efficacy of fruquintinib versus 

months in the fruquintinib arm and the placebo arm, 

placebo in metastatic colorectal cancer patients 

respectively. In this study, fruquintinib has not shown 

Fruquintinib  clinical  results  published  in 

who failed at least two prior lines of treatment, 

any major unexpected safety issues and clearly met 

2015/2016 – During 2015 we reported the results 

including fluorouracil, oxaliplatin and irinotecan. A 

its primary endpoint of superiority in median PFS.

of the two Phase II proof-of-concept studies detailed 

total of 71 patients were enrolled, with 47 in the 

below for which Lilly paid us $33.1 million in success-

fruquintinib arm and 24 in the placebo arm. Patient 

based proof-of-concept cash payments during the 

baseline characteristics were similar between the two 

year:

treatment arms.

Phase II study of fruquintinib monotherapy in third-
line NSCLC – China. In June 2014, we initiated a Phase 
II randomized, double-blind, placebo-controlled, 

multi-center study of fruquintinib versus placebo 

among  patients  with  advanced  non-squamous 

NSCLC who failed two lines of chemotherapy. By 

early March 2015, enrollment had been completed 

with a total of 91 patients randomized to 5mg of 

fruquintinib orally once per day, on a 3 weeks on/1 

week  off  regimen  plus  best  supportive  care,  or 

placebo plus best supportive care at a 2:1 ratio.

 
 
 
 
 
Operations Review - Innovation Platform

2121

In September 2015, we reported that fruquintinib 

had clearly met its primary endpoint of superior 

median PFS versus placebo in this study. Assessment 

of  secondary  efficacy  endpoints,  including  ORR, 

DCR and Overall Survival rate is ongoing, with all 

appearing in line with expectations at the August 

2015 five-month data cut-off. The adverse events 

demonstrated in this study were consistent with the 

known safety proﬁ le for fruquintinib with no major 

unexpected safety issues. We expect to report the full 

data for this study at a scientiﬁ c conference in 2016.

Active  fruquintinib  clinical  studies  –  In 

partnership with Lilly, on fruquintinib, in China we 

are currently enrolling Phase III registration studies 

in two indications; the FRESCO study on colorectal 

cancer; and the FALUCA study on NSCLC. We also 

expect to start a Phase II proof-of-concept study on 

gastric cancer in China in the second half of 2016.

Study 14 – Phase III study in third-line colorectal 
c a n c e r   –   C h i n a .   I n   D e c e m b e r   2 0 1 4 ,   w e 
initiated  FRESCO,  a  randomized,  double-blind, 

placebo-controlled,  multi-center,  Phase  III 

registration study of fruquintinib as monotherapy 

targeted at treating patients with locally advanced 

or metastatic colorectal cancer who have failed at 

least two prior systemic cancer therapies, including 

Sulfatinib clear superiority

ﬂ uoropyrimidine, oxaliplatin and irinotecan. Patients 

are randomized at a two-to-one ratio to receive 

either 5mg of fruquintinib orally once per day, on a 

Study 15 – Phase III study in third-line non-small cell 
lung cancer – China. In December 2015, we initiated 
FALUCA, a Phase III registration study for fruquintinib 

3 weeks on/1 week off cycle, plus best supportive 

in third-line non-squamous NSCLC patients in China 

care  or  placebo  plus  best  supportive  care.  The 

who have failed two prior systemic cancer therapies. 

primary endpoint is Overall Survival, with secondary 

Patients are randomized at a two-to-one ratio to 

endpoints including PFS, ORR, DCR and duration of 

receive either 5mg of fruquintinib orally once per 

response. We expect enrollment to be completed 

day, on a 3 weeks on/1 week off cycle, plus best 

in Q2 2016 after which we plan to establish an 

supportive  care  or  placebo  plus  best  supportive 

Independent Data Monitoring Committee (“IDMC”) 

care. The primary endpoint is Overall Survival, with 

to conduct an interim analysis on FRESCO in Q4 

secondary endpoints including PFS, ORR, DCR and 

2016. Our China FDA registration strategy will be 

duration of response.

determined based on the results of the IDMC.

Sandostatin®®
(octreotide) / 
Placebo 

Afinitor® 
(everolimus) / 
Placebo 

Sutent® 
(sunitinib) / 
Placebo 

NET Approval 

Mid-gut 

Pancreatic 

Pancreatic 

Somatuline Depot® 
(lanreotide) /  
Placebo 
Gastrointestinal 
(Antigen Ki67<10%) 

sulfatinib

All NET efficacy 

Median PFS (months) 

14.3/6.0 

11.0 / 4.6 

11.4 / 5.5 

NR / 18.0 

Hazard Ratio 
p-value 
Objective Response Rate[1] 
Disease Control Rate[2] 

0.34 
0.000072 
2% / 2% 
69% / 40% 

0.35 
<0.001 
5% / 2% 
73% / 51% 

0.42 
<0.001 
9% / 0% 
72% / 60% 

0.47 
<0.001 
NR 
NR 

18.3 

38% 
86% 

[1] ORR = percent of patients with >30% tumor diameter shrinkage (Note: Intent to Treat ITT population = 21; patients evaluable for 
efficacy = 18; 3 patients  withdrawn/lost to follow-up/AE); [2] DCR = percent of patients with tumor diameter growth <20%; [3] CTA = 
Clinical Trial Application (for Phase II/III in China).

 
 
  
22 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Innovation Platform

Study 16 – Phase Ib study of fruquintinib combined 
with Taxol® in second-line gastric cancer – China. 
In early 2015, we began a Phase Ib dose finding 
study of fruquintinib in combination with Taxol® 
to determine the recommended Phase II dose. We 

have completed two dose cohorts, 2mg daily and 

lead to potential global development of fruquintinib 

in combination with chemotherapy in earlier line 

settings  in  many  other  solid  tumor  indications 

the gastrointestinal tract. This compares favorably to 
less than 10% ORR for Sutent® and Aﬁ nitor®, the two 
targeted therapies that are approved for pancreatic 

including, but not limited to, NSCLC, colorectal cancer 

NET patients only.

and breast cancer.

Active sulfatinib clinical studies – We currently 

3mg daily (both 3 weeks on/1 week off) with both 

Sulfatinib:  Sulfatinib  is  an  oral  drug  candidate 

retain all rights to sulfatinib worldwide. In 2015, 

regimens being tolerable and showing encouraging 

that selectively inhibits the tyrosine kinase activity 

we applied for and received clearance to proceed 

preliminary response. We are currently in the final 

associated with VEGFR and FGFR1, a receptor for a 

with  both  Phase  I  clinical  trials  in  the  US  and 

expansion phase of a 4mg daily cohort which, if 

protein which also plays a role in tumor growth.

Phase III clinical trials in China. Sulfatinib is the ﬁ rst 

successful, is expected to deliver full 24 hours a day 

VEGFR inhibition through an oral dose in combination 
with chemotherapy (Taxol®). This is an outcome that 
we believe has never been achieved before with 

Sulfatinib  clinical  results  published  in 

proof-of-concept in China and have expanded into 

2015/2016 – During 2015, we released expanded 

global development ourselves.

oncology candidate that we have taken through 

Phase I clinical data indicating that sulfatinib has 

a small molecule VEGFR TKI. After the completion 

the highest ORR reported to date in patients with 

of this Phase Ib dose finding study we expect to 

NET. An ORR of 44.4% was observed for sulfatinib in 

initiate a second-line gastric cancer Phase II study 

18 evaluable NET patients, and importantly efﬁ cacy 

in China in the second half of 2016. Positive proof-
of-concept results in combination with Taxol® could 

was observed across many NET sub-types including 

those originating in the thymus, pancreas and across 

Operations Review - Innovation Platform

2323

Study 17 – Phase Ib/II study in first-line NET – China. 
In  early  2015,  we  began  a  30  patient,  300mg 

sulfatinib daily, Phase Ib/II study in China in broad 

Study 17b. – Phase III study in first-line pancreatic 
NET – China. In the ﬁ rst quarter 2016, we intend to 
initiate a second sulfatinib Phase III registration trial, 

Study  18  –  Phase  I  monotherapy  in  advanced 
solid  tumors  –  US.  A  Phase  I  study  in  Caucasian 
patients also began in the US in late 2015. This 

spectrum NET patients (pancreatic, gastrointestinal, 

SANET-p, in pancreatic NET patients. SANET-p employs 

study  will  evaluate  the  safety,  tolerability  and 

liver, lymph and lung, among others) which, due 

a similar treatment regimen and has primary and 

pharmacokinetics of sulfatinib in advanced solid 

to strong demand due to the major unmet medical 

secondary endpoints similar to those for SANET-

tumors to determine the maximum tolerated dose 

need and clear efﬁ cacy of sulfatinib, was expanded 

ep trial. We expect to enroll about 195 patients in 

and/or recommended Phase II dose, dose-limiting 

and subsequently completed enrollment of 81 NET 

SANET-p.

patients in December 2015. We expect to publish 

top-line results for this study during the course of 

2016.

toxicities, pharmacokinetics proﬁ le, and preliminary 

anti-tumor activity in Caucasian patients. Once we 

(cid:78)(cid:102)(cid:95)(cid:113)(cid:99)(cid:30)(cid:71)(cid:96)(cid:30)(cid:192)(cid:30)(cid:99)(cid:110)(cid:103)(cid:114)(cid:103)(cid:108)(cid:103)(cid:96)(cid:30)(cid:102)(cid:115)(cid:107)(cid:95)(cid:108)(cid:30)(cid:99)(cid:100)(cid:100)(cid:103)(cid:97)(cid:95)(cid:97)(cid:119)(cid:30)(cid:103)(cid:108)(cid:30)(cid:106)(cid:115)(cid:108)(cid:101)(cid:30)(cid:36)(cid:30)(cid:96)(cid:112)(cid:95)(cid:103)(cid:108)(cid:30)
(cid:74)(cid:115)(cid:108)(cid:101)(cid:30)(cid:64)(cid:95)(cid:113)(cid:99)(cid:106)(cid:103)(cid:108)(cid:99)(cid:30)

(cid:41)(cid:49)(cid:52)(cid:30)(cid:98)(cid:95)(cid:119)(cid:113)(cid:30)

(cid:64)(cid:112)(cid:95)(cid:103)(cid:108)(cid:30)(cid:64)(cid:95)(cid:113)(cid:99)(cid:106)(cid:103)(cid:108)(cid:99)(cid:30)

(cid:41)(cid:49)(cid:52)(cid:30)(cid:98)(cid:95)(cid:119)(cid:113)(cid:30)

Study  17a.  –  Phase  III  study  in  first-line  extra-
pancreatic  NET  –  China.  In  December  2015,  we 
initiated SANET-ep, a Phase III sulfatinib registration 

trial in China in patients with extra-pancreatic NET 

(non-pancreatic). SANET-ep is a randomized, double-

blind, placebo-controlled, multi-center registration 

study to treat pathologically low or intermediate 

grade NET patients whose disease has progressed, 

locally advanced or distant metastasized and for 

whom there is no effective therapy. Patients are 

being randomized at a 2:1 ratio to receive either 

300mg of sulfatinib orally once per day, or placebo, 

on a 28-day treatment cycle. The primary objective 

of this study is to evaluate the PFS of sulfatinib 

as compared to that of placebo, with secondary 

endpoints including ORR, DCR, time to response, 

duration of response, Overall Survival, safety and 

tolerability. We expect to enroll about 270 patients in 

SANET-ep.

24 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Innovation Platform

have established the recommended Phase II dose 

that ultimately develop brain metastasis without 

in tumor assessments in the ﬁ rst 14 patients treated 

among Caucasian patients, we expect to start a US 

an effective therapy. In contrast, epitinib is a potent 

in the Phase Ib (Study 22 below) have been highly 

Phase II study of sulfatinib in broad spectrum NET 

and highly selective oral EGFR inhibitor designed to 

encouraging, with early patient tumor assessments 

patients in the second half of 2016.

optimize brain penetration and has demonstrated 

showing strong efﬁ cacy in both the lung and brain.

brain penetration and efficacy in both pre-clinical 

Study  19  –  Phase  II  sulfatinib  monotherapy  in 
second-line thyroid cancer – China. In Q1 2016, 
we plan to begin enrollment in a Phase II study in 

and clinical studies. We therefore believe epitinib 

Active epitinib clinical studies – We currently 

is well-positioned to address a major global unmet 

retain  all  rights  to  epitinib  worldwide.  In  late 

medical  need  and  possibly  be  considered  for 

2015, we also submitted our Phase III clinical trial 

China in approximately 50 patients to evaluate the 

Breakthrough Therapy designation.

application in China for which we hope to receive 

safety, pharmacokinetics and efficacy of sulfatinib 

clearance by mid-2016. Upon clearance, and subject 

in  patients  with  locally  advanced  or  metastatic 

Epitinib clinical results published in 2015/2016 

to continued positive Phase Ib results, we expect to 

radioactive iodine-refractory differentiated thyroid 

–  During  2015,  we  completed  a  Phase  I  dose 

initiate a Phase III trial in China.

cancer or medullary thyroid cancer into this study, 

escalation study and identiﬁ ed a recommended dose 

with approximately 25 patients in each tumor type. 

for proof-of-concept studies. We subsequently began 

Study 22 – Phase Ib epitinib monotherapy in first-line 

We believe that sulfatinib’s VEGFR/FGFR1 inhibition 

a Phase Ib proof-of-concept study in NSCLC patients 

profile has strong potential in second-line thyroid 

with EGFR activating mutation and brain metastasis. 

cancer patients, particularly in China where there 

We have announced that preliminary clinical results 

are few safe and effective treatment options for this 

patient population.

Epitinib: EGFR inhibitors have revolutionized the 

treatment of NSCLC with EGFR activating mutation. 
However, existing EGFR inhibitors such as Iressa® 
and  Tarceva®  cannot  penetrate  the  blood-brain 
barrier effectively, leaving the >50% of patients 

EGFR activating mutation positive NSCLC with brain 
metastasis – China. We are conducting a Phase Ib 
proof-of-concept study of epitinib in approximately 

30 patients to establish activity in EGFR activating 

mutation  positive  NSCLC  patients  with  tumors 

metastasized to the brain. Full results of this Phase Ib 

study are expected later in 2016.

HMPL-689 more potent and more selective than idelalisib & duvelisib
IC50 (nM) 

Enzyme  

PI3K  
PI3K  (fold vs. PI3K ) 
PI3K  (fold vs. PI3K ) 
PI3K  human whole blood 
CD63+ 
PI3K  (fold vs. PI3K ) 

HMPL-689 
0.8 (n = 3) 
114 (142x) 
>1,000 (>1,250x) 

Zydelig® 
2 
104 (52x) 
866 (433x) 

duvelisib 
1 
2 (2x) 
143 (143x) 

3 

14 

87 (109x) 

293 (147x) 

15 

8 (8x) 

[1] IC50 = concentration of a drug required for 50% inhibition of the target kinase in vitro.  Very low IC 50 for the target cells and 
very high IC    for healthy cells indicates high selectivity.

50

 
Operations Review - Innovation Platform

2525

Theliatinib: Theliatinib is a novel EGFR inhibitor 

HMPL-689: There are multiple 

designed  to  treat  tumors  with  wild-type  EGFR 

sub-families of PI3K kinases, 

activation such as gene amplification or protein 

and  PI3Kδ  plays  important 

over-expression. The current EGFR inhibitors such as 
Iressa® and Tarceva® are approved only for patients 
with EGFR activating mutation because they have 

roles  in  B-cell  activation, 

development,  survival  and 

migration.  PI3Kδ  is  mainly 

limited binding affinity, and therefore response/

expressed  in  circulating 

efﬁ cacy, in cancers with wild-type EGFR. Theliatinib 

leukocytes  and  lymphoid 

on the other hand has very strong binding afﬁ nity to 

tissues. PI3Kδ is the central 

the wild-type EGFR kinase and as such, in pre-clinical 

s i g n a l i n g   e n z y m e   t h a t 

models, theliatinib has demonstrated 5- to 10-fold 
higher potency than Tarceva®.

m e d i a t e s   t h e   e f f e c t s   o f 

multiple receptors on B-cells. 

Aberrant B-cell function has 

Active theliatinib clinical studies – We currently 

also been observed in multiple autoimmune diseases 

in 2014. HMPL-689 is, in general, differentiated 

retain all rights to theliatinib worldwide and are 

and B-cell mediated malignancies. Therefore, PI3Kδ 

through  high  selectivity,  particularly  on  a  PI3K 

nearing completion of a Phase I dose escalation 

is considered to be a promising target for drugs 

isoform level, sparing PI3Kγ and minimizing the risk 

study.

Study 23 – Phase I dose escalation – China. We have 
completed 7 cohorts from 10mg daily through to 

that aim to prevent or treat hematologic cancer, 

autoimmunity and transplant organ rejection and 

other related inﬂ ammation diseases.

of serious infection. HMPL-689 is over ﬁ ve-fold more 
potent than Zydelig® at the whole blood level and has 
favorable pharmacokinetic properties, with expected 

good  human  oral  absorption,  moderate  tissue 

160mg daily. We have seen no dose limiting toxicities 

HMPL-689  has  been  designed  to  be  a  second 

distribution and low clearance, making it suitable for 

and intend to continue dose escalation. Once the 

generation, potentially global best-in-class PI3Kδ 

once daily oral dosing. We also expect HMPL-689 will 

Phase II dose is determined we intend to commence 

exploratory Phase Ib/II proof-of-concept studies in 

esophageal and head and neck cancers in 2016.

inhibitor in hematological cancer. It is intended 
to compete with Zydelig®, the first-in-class PI3Kδ 
inhibitor, which was granted Breakthrough Therapy 

designation in 2013 and approved for the treatment 

of  multiple  types  of  non-Hodgkin’s  lymphoma 

have a low risk of drug accumulation and drug-drug 

interaction issues. As a result, HMPL-689 is expected 

to provide improved target coverage and robust 
efﬁ cacy at much lower doses than Zydelig® and as 
such reduce compound related toxicities.

Study 24 – Phase I of HMPL-689 in second/third-

line hematological cancers (lymphoma/leukemia) – 
Australia. In 2016, we plan to initiate a ﬁ rst-in-human 
Phase  I  dose  escalation  study  of  HMPL-689  in 

patients with hematologic malignancies in Australia. 

Subject to success in Phase I we will look to develop 

HMPL-689 both as a monotherapy and potentially 

in combination with other B-cell mediators such as 

HMPL-523.

26 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Innovation Platform

HMPL-453: FGFRs belong to a sub-family of receptor 

their  early  clinical  trials  provided  substantial 

The remaining major issue with HMPL-004, which 

tyrosine  kinases  whose  activation  through  the 

proof-of-concept with regard to anti-tumor efﬁ cacy 

is a botanical substance, is the high pill burden and 

phosphorylation of various downstream molecules 

and pharmacodynamic markers of effective FGFR 

resulting compliance challenges of the 2,400mg 

ultimately  leads  to  increased  cell  proliferation, 

pathway inhibition. However, there are still many 

daily HMPL-004 dose. In 2015, a team of about 

migration  and  survival.  FGF/FGFR  signaling 

challenges in the development of FGFR-directed 

30  research  staff  focused  on  optimizing  HMPL-

regulates a wide range of basic biological processes, 

therapies.  Uncertainties  include  the  screening 

004 formulation, by adding several steps to the 

including tissue development, angiogenesis, and 

and stratifying of patients who are most likely to 

extraction  process  and  thereby  increasing  the 

tissue  regeneration.  Aberrant  activation  in  FGF/

benefit from FGFR targeted therapy. Intra-tumor 

concentration  of  the  key  bioactive  ingredients. 

FGFR signaling through mutations, fusion and gene 

heterogeneity observed in FGFR amplified cancer 

The new enriched formulation of HMPL-004 that 

ampliﬁ cation has been found to be a driving force in 

may compromise the anti-tumor activity. In addition, 

has  been  created,  named  HM004-6599,  is  now 

many types of cancer, including NSCLC, gastric, breast, 

the  low  frequency  of  specific  FGFR  molecular 

over 70% diterpenoids as compared to the original 

cholangiocarcinoma and bladder.

aberrance in each cancer type may hinder clinical trial 

formulation which comprised approximately 15% 

Currently, FGFR mAbs, FGF ligand traps and small 

enrollment.

molecule FGFR inhibitors are being evaluated in 

HMPL-453 is a highly selective and potent, small 

early clinical studies. BGJ-398 (Novartis), AZD4547 

molecule  that  targets  FGFR  1/2/3.  HMPL-453 

(AstraZeneca)  and  JNJ-42756493  (Janssen) 

exhibited strong anti-tumor activity that correlated 

are  the  leading  selective  FGFR  inhibitors,  and 

with  target  inhibition  in  tumor  models  with 

diterpenoids. In extensive pre-clinical in-vitro and in-

vivo models HM004-6599 has now been shown to 

demonstrate superior inhibition of NF-kB activation, 
pro-inflammatory cytokine IL-1β production and 
TNFα dependent chemokine production including 
CCL-20. Given the enrichment, the predicted human 

abnormal  FGFR  activation.  HMPL-453  has  good 

efficacious dose of HM004-6599 could be as low 

pharmacokinetic  properties  characterized  by 

as 400-500mg daily versus 2,400mg daily usage of 

rapid  absorption  following  oral  dosing,  good 

HMPL-004. We now intend to progress HM004-6599 

bioavailability, moderate tissue distribution and 

through IND enabling drug safety and manufacturing 

moderate clearance in all pre-clinical animal species. 

processes and target to re-start clinical trials in 2017.

HMPL-453  was  found  to  have  low  likelihood  of 

drug-to-drug interaction issues. We intend to start 

In parallel with the work being conducted on HM004-

Phase I clinical trials in China, as well as possibly in 

6599 we have expanded our joint research activities 

Australia, in 2016.

with Nestlé Health Science S.A., expecting to fund 

a team of 45 research staff in 2016 and working 

HMPL-004: Since the result of our interim analysis 

on creating a pipeline of multiple highly enriched 

of the Phase III registration study in ulcerative colitis 

botanical  drug  candidates  in  the  immunology/

(NATRUL-3) was published in August 2014, we have 

inﬂ ammation arena of gastrointestinal disease.

been working closely with Nestlé Health Science 

SA, our partner in the Nutrition Science Partners JV, 

Discovery programs: Our fully integrated discovery 

to improve the chance of clinical success for HMPL-

teams in oncology and immunology continued to 

004. We now have a better understanding, in the 

make substantial progress during the period. We staff 

context of HMPL-004, of the clinical importance of 

and resource our discovery team with the objective 

concomitant use of 5-ASAs; the deﬁ nition of 5-ASA 

of producing one or two new internally discovered 

resistance and importantly biomarker analysis.

drug candidates per year. In addition to the drug 

candidates  against  8  molecular  targets  that  are 

either in clinical development or are expected to start 

clinical development in 2016, we have compounds 

against  two  further  targets  (one  novel  and  one 

validated) that should reach candidate nomination in 

2016 as well discovery programs against ﬁ ve further 

novel molecular targets that could reach candidate 

nomination over the next few years.

Operations Review - Commercial Platform

2727

A powerful Prescription Drugs Commercial Platform in China

NORTH 
Pop’n: 

 320m (23%) 

CV medical reps: 
CNS medical reps: 
HSP commercial staff: 

 385 (22%) 
 22 (21%) 
  0 (0%) 

407(cid:3)
(22%) 

61
(3%) 

WEST 
Pop’n:

 100m (7%) 

CV medical reps:
CNS medical reps: 
HSP commercial staff:

 59 (3%) 
 2 (2%) 
 0 (0%) 

SOUTHWEST 
Pop’n:     190m (14%) 

CV medical reps: 
CNS medical reps: 
HSP commercial staff: 

 114 (7%) 
 8 (8%) 
  0 (0%) 

Notes: 2010 Population – China State Census; CV = Cardiovascular; CNS = Central nervous system.  

122(cid:3)
(6%)

490 
(26%) 

EAST 
Pop’n: 

 393m (28%) 

CV medical reps: 
CNS medical reps: 
HSP commercial staff: 

 744 (42%) 
 46 (45%) 
 31 (100%) 

821
(43%) 

CENTRAL-SOUTH 
Pop’n: 

 383m (28%) 

CV medical reps: 
CNS medical reps: 
HSP commercial staff: 

 465 (26%) 
 25 (24%) 
 0 (0%) 

2015 Sales: 
US$286.6m
up +40%

•  Over 1,900 sales people
•  Covering in 300 cities and towns
•  Detailing drugs to over 80,000 physicians
•  Products distributed in over 13,500 hospitals

 
  
 
 
 
 
 
 
 
 
28 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Commercial Platform

COMMERCIAL PLATFORM
Since 2001, we have also developed a profitable 

We intend to leverage this Commercial Platform, 

particularly  our  established  Prescription  Drugs 

Commercial Platform, with the key element being our 

business, to support the launch of products from our 

Prescription Drugs business which has a commercial 

Innovation Platform if they are approved for use in 

network of over 1,900 medical sales representatives 

China. Outside of China, we intend to commercialize 

covering over 16,500 hospitals in about 300 cities 

our products in the US, Europe and other major 

and towns in China. We operate our Prescription 

markets either on our own or through partnerships 

Drugs business through our JVs, SHPL and Hutchison 

with leading global pharmaceutical companies.

She Xiang Bao Xin pill (cardiovascular)

Sinopharm, in which we nominate management 

and run the day-to-day operations. The second, less 

In  2015,  sales  of  the  Commercial  Platform 

12.1%  market  share,  and  market  leadership  in 

core, element of our Commercial Platform is our 

subsidiaries  and  JVs  grew  by  11%  to  $518.9 

Shanghai with approximately 35.3% market share, 

Consumer Health business which focuses primarily 

million  (2014:  $465.4m)  and  consolidated  net 

among oral Chinese patented drugs (Frost & Sullivan).

on the manufacture, marketing and distribution of 

profit  attributable  to  Chi-Med  from  continuing 

over-the-counter (“OTC”) pharmaceutical products in 

operations increased by 10% to $25.2 million (2014: 

Since its launch in 1983, the proprietary status of 

China.

$22.8m), including non-recurring one-time costs 

SXBXP has been supported by a combination of 

of $1.7 million associated with relocation to our 

regulatory protection and in recent years the grant of 

new factories ($0.4 million) and the take-back of 

State Secrecy protection which expires in December 

commercial rights of certain products ($1.3 million).

2016. In July 2015, we were granted a 20-year 

invention patent covering SXBXP formulation from 

Prescription Drugs business:
Sales of the subsidiaries and JVs in our Prescription 

the China State Patent Ofﬁ ce which will now secure 

our proprietary position on SXBXP in China through 

Seroquel (psychiatric disorders)

Drugs business (SHPL and Hutchison Sinopharm) 

2029. Furthermore, in 2015 we began to phase-in 

grew by 40% to $286.6 million (2014: $204.9m) 

a 22% price increase on SXBXP, from its early 2015 

and consolidated net proﬁ t attributable to Chi-Med 

level of RMB 2.7/day to RMB 3.3/day. This increase 

increased by 20% to $15.9 million (2014: $13.2m) 

will bring SXBXP closer in-line with the 2014 Low 

representing 63% of our Commercial Platform net 

Price Drug List policy which allows for maximum 

proﬁ t.

daily pricing for such products at RMB 5.0/day.

SHPL: Our primarily own-brand Prescription Drugs 

The SHPL commercial team now has about 1,900 

business continues to perform very well, with 2015 

medical sales representatives covering all regions 

sales up 17% to $181.1 million (2014: $154.7m). 

of China, including about 1,800 cardiovascular and 

Our proprietary prescription cardiovascular drug 

100 central nervous system personnel. In 2015, for 

SXBXP, which represented 88% of SHPL sales in 2015, 

the ﬁ rst time since its inception in 2001, SHPL began 

grew 15% to $159.3 million (2014: $138.8m) as we 

to expand into commercialization of third party 

continued to make progress through geographic and 

prescription drug products. Fee for service income of 

sales channel expansion and gaining market share in 

its mature markets. Within the coronary heart disease 

market in China, in 2015 SXBXP had approximately 

$5.1 million was earned during 2015 (2014: nil) from 
detailing Concor® (cardiovascular, Merck Serono) in 
certain provinces in China and Seroquel® (psychiatric 
disorders, AstraZeneca) across all China. The gross 

Operations Review - Commercial Platform

2929

margins earned on this third party business are 

meaningful and while 2015 was a period of start-up 

Consumer Health business:
Sales from continuing operations of the subsidiaries 

While our pricing strategy has helped ease supply 

pressure in the short term, we remain focused on 

and investment, we expect these activities to become 

and JVs in our Consumer Health business (HBYS, 

bringing on line the ﬁ rst phase of our 230,000 sqm 

an important net proﬁ t contributor for SHPL.

Hutchison Hain Organic Holdings Limited (“HHO”), 

Bozhou factory in late 2016. This will provide >50% 

Hutchison Healthcare Limited (“HHL”) and Hutchison 

increases  in  formulation  (tablets  and  granules) 

In 2016 we plan to transition production of SHPL’s 

Consumer Products Limited (“HCPL”)) fell by 11% to 

capacity and, most importantly, it should address 

own-brand products, including SXBXP, to our new 

$232.3 million (2014: $260.5m); and consolidated 

our main production bottle-neck – extraction – by 

78,000 sqm factory in Feng Pu district, 40 kilometers 

net profit attributable to Chi-Med from continuing 

adding 8,000 tons of new extraction capacity (>250% 

south of Shanghai. The transition, including the re-

operations fell by 4% to $9.3 million (2014: $9.6m) 

increase). The transition to Bozhou is highly complex 

location of approximately 500 full time staff and the 

due mainly to a non-recurring one-time cost of 

due to the fact it is over 1,400 kilometers away 

attainment of Good Manufacturing Practice (“GMP”) 

$1.3 million resulting from our decision to take-

from our Guangzhou base. We will however beneﬁ t 

certification on the new facility, while in parallel 

back commercial rights on all HHL’s Zhi Ling Tong 

in the mid- to long-term from cost efficiencies, by 

maintaining record production despite operating 

infant nutrition products from our former exclusive 

establishing this operation in central China, in terms 

at full capacity in the old site, has required major 

distributor.

coordination.

of lower people and operating costs as well as close 

proximity to the source of key raw materials. We 

Hutchison Sinopharm: Our third-party prescription 

complex transition in both pricing and manufacturing 

materially increasing baseline HBYS gross margins, 

drugs  commercialization  business,  Hutchison 

strategy. As a result, HBYS sales fell 13% to $211.6 

which  were  43%  in  2015  (2014:  40%),  in  future 

HBYS: Our OTC drugs business in China is navigating a 

believe these cost efficiencies will contribute to 

Sinopharm, is making very good progress with sales 

million (2014: $243.7m) while net proﬁ t attributable 

periods.

of  $105.5  million  (2014:  $50.2m)  as  we  report 

to Chi-Med grew 3% to $8.6 million (2014: $8.3m). 

our first full year of operations versus less than 

HBYS is the market leader in China for its two core 

In July 2015, HBYS agreed to inject up to $9.0 million 

nine months in 2014. The majority of the legacy 

generic OTC drug sub-categories, with market share 

into a new JV with Guangdong Lai Da Pharmaceutical 

business of Hutchison Sinopharm is to provide low-

of  approximately  32.5%  for  Fu  Fang  Dan  Shen 

Company Limited (“Lai Da”) for a 70% share in the 

margin logistics and distribution services, primarily in 

(“FFDS”) tablets (angina) and 51.1% for Banlangen 

new JV. Lai Da, for its 30% share, has contributed 

Shanghai municipality, to third-party pharmaceutical 

granules (anti-viral) in 2015 (Frost & Sullivan).

a portfolio of 31 drug products, with some being 

companies.

higher margin proprietary prescription drugs.

In 2015, HBYS entered a period of transition in which 

The core strategic focus of Hutchison Sinopharm 

key raw material costs dropped dramatically, thereby 

HHO: The performance of HHO, our natural and 

is now to rapidly expand/evolve its team of over 

improving our profitability. At the same time, we 

organic products venture with The Hain Celestial 

90  commercial  staff  (2014:  50),  into  a  higher 

have been capacity constrained as we encounter 

Group,  Inc.  (“Hain”),  during  2015  continued  to 

margin  full-service  third-party  prescription 

tightening of supply by our contract manufacturers 

be strong with sales from continuing operations 

drugs commercialization company in China. This 

ahead of the start-up of our new GMP factory in 

growing by 48% to $17.0 million (2014: $11.5m) 

will  allow  Hutchison  Sinopharm  to  complete 

Bozhou, Anhui province. Our strategy to manage this 

and  net  profit  attributable  to  Chi-Med  of  $0.7 

more commercial deals, similar  to  the exclusive 
China commercialization deal on Seroquel® with 
AstraZeneca  that  was  signed  in  early  2015.  In 
2015, Seroquel® had approximately 47% market 
share (Frost & Sullivan) of the Chinese market for 

schizophrenia and bipolar drugs and accounted for 

$21.1 million (2014: nil) of the sales of Hutchison 

Sinopharm between April and December 2015.

temporary supply tightness has been to keep prices 

million (2014: $0.3m). We believe the demand for 

high on key products such as FFDS. As a result, while 

high quality health-oriented consumer products 

FFDS gross margin increased to 62% (2014: 49%) 

is  increasing  and  HHO  is  the  exclusive  regional 

overall sales fell by -21% to $60.2 million (2014: 

distributor/marketer of a range of over 30 Hain 

$76.3m).

brands  of  organic  and  natural  products  in  nine 

countries/territories in Asia. In mid-2015 we re-
entered the China market with the Earth’s Best® 
brand,  Hain’s  market  leading  US  organic  infant 

formula brand.

30 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Commercial Platform

HHL and HCPL: The sales in our smaller consumer 

In December 2015, SHPL received a ﬁ rst installment 

studies in China and epitinib is expected to start its 

businesses HHL and HCPL fell by 27% to $3.6 million 

payment of $31.1 million in cash with the balance of 

ﬁ rst Phase III registration study in 2016. We believe 

(2014: $4.9m) with net loss attributable to Chi-Med 

approximately $73.9 million expected to be received 

all this is set to create substantial shareholder value 

of-$0.1 million (2014: net profit $1.1m). Our key 

in 2016. Furthermore, as a result of the deal, SHPL is 

by providing great beneﬁ ts to patients.

product, Zhi Ling Tong, a supplement brand for babies 

also likely to receive approximately $15.0 million in 

and pregnant mothers, remains popular within its 

additional subsidies over the next ﬁ ve years.

Our research team, the largest of its type in China, 

obstetrics and gynecology hospital, mother/baby 

continues to produce global innovations in oncology 

and drug store commercial channels. In late 2015, 

Recently, the Guangzhou government has issued 

and immunology with as many as half a dozen drug 

we took the decision to terminate the commercial 

their new urban redevelopment policy. Under this 

candidates against novel molecular targets expected 

agreement on Zhi Ling Tong with our exclusive China 

new policy, we estimate that HBYS compensation, 

to reach the clinic in the next ﬁ ve years.

distributor of almost ten years, thereby incurring 

based  solely  on  precedent  land  auctions  in  the 

one-time non-cash expenses of $1.3 million. Under 

immediate vicinity, for surrender of the remaining 

A solid foundation of Chi-Med’s business continues 

our direct control, we believe sales of Zhi Ling Tong in 

38-year land-use rights on our two plots of land 

to be our increasingly cash generative Commercial 

2016 should grow rapidly and rapidly offset this cost 

in  Guangzhou,  Plot  1  (59,400  sqm)  and  Plot  2 

Platform,  with  the  Prescription  Drugs  business 

of transition.

(26,700 sqm), could be similar on a compensation 

in China being the strategic core. We expect this 

per square meter basis, to that paid to SHPL above. 

cash flow will continue to help sustain Chi-Med’s 

Property compensation: As previously reported 

For reference, the aggregate net book value, as at 

continuous investment in innovation in the future. 

both  Commercial  Platform  JVs,  SHPL  and  HBYS, 

December 31, 2015, for the land and ﬁ xed assets in 

Now looking forward to the next two to three years, 

are well advanced in the process of approximately 

Plot 1 and Plot 2 was $24.0 million. While precedent 

a second beneﬁ t of this deep commercial capability 

tripling capacity through the construction of two 

land  auctions  are  for  indication  only,  and  the 

is set to emerge – the ability to use our commercial 

major  new  GMP  factories.  The  estimated  total 

outcome and timing of any deal remain uncertain 

team to launch our un-partnered innovative products 

planned capital expenditures on these new factories 

and are not fully within our control, we are working 

in  China  ourselves  and  thereby  maximize  the 

are  $140  million.  In  2015,  capital  expenditures 

towards agreeing on a compensation deal for Plot 2 

economic beneﬁ ts to Chi-Med.

were  $64.8  million  and  total  aggregate  capital 

in late 2016 or 2017.

expenditure, as at December 31, 2015, on the two 

new factories was $125.4 million, or 90% of the 

planned total expenditure. We have funded this 

Summary
As a result of over a decade of total focus on investing 

Achieving our ambitious objectives requires that we 

continue to move fast, and execute effectively, on all 

aspects of our business. We are conﬁ dent we are well 

capital expenditure during the last two years mostly 

in innovation, we now believe that Chi-Med is within 

positioned to do this in 2016 and beyond.

with the cash reserves held in our JVs as well as bank 

reach of our primary objective of becoming a leading 

borrowing of $26.5 million as at December 31, 2015.

global biopharmaceutical company based in China.

In late 2015, we announced that SHPL had signed a 

Referencing our global biotech peers, clinical and 

land deal for the surrender of its 36-year land-use 

regulatory success during 2016 and 2017 in just one 

rights on its old 58,000 sqm factory site back to the 

of our novel global first-in-class drug candidates, 

Shanghai government in return for $105 million in 

savolitinib and HMPL-523, could provide the catalyst 

compensation. This will result in a substantial gain in 

to achieve this. And, beyond these global ﬁ rst-in-class 

2016, for both SHPL and Chi-Med, given that the total 

drug candidates, we have our broad clinical pipeline 

Christian Hogg
Chief Executive Ofﬁ cer

net book value of the land and fixed assets at the 

of possible best-in-class compounds – fruquintinib 

old site was $12.7 million as at December 31, 2015. 

and sulfatinib are now both in Phase III registration 

February 29, 2016

Biographical Details Of Directors

31

Simon TO
Executive Director 
and Chairman

Mr To, aged 64, has been 
a Director since 2000 and 
an Executive Director and 
Chairman since 2006. He 
is also Chairman of the 
Remuneration Committee 
and  a  member  of  the 
Technical Committee of the Company. He is managing 
director  of  Hutchison  Whampoa  (China)  Limited 
(“Hutchison  China”)  and  has  been  with  Hutchison 
China for over thirty-five years, building its business 
from  a  small  trading  company  to  a  multi-billion 
dollar investment group. He has negotiated major 
transactions with multinationals such as Procter & 
Gamble (“P&G”), Lockheed, Pirelli, Beiersdorf, United 
Airlines and British Airways.

Mr To’s career in China spans more than thirty-ﬁ ve years 
and he is well known to many of the top Government 
leaders  in  China.  Mr  To  is  the  original  founder  of 
Hutchison Whampoa Limited’s (currently a subsidiary 
of CK Hutchison Holdings Limited (“CK Hutchison”)) TCM 
business and has been instrumental in the acquisitions 
made  to  date.  He  received  a  First  Class  Honors 
Bachelor’s Degree in Mechanical Engineering from 
Imperial College, London and an MBA from Stanford 
University’s Graduate School of Business (graduated top 
5% of his class).

Christian HOGG
Executive Director 
and Chief Executive 
Ofﬁ cer

Johnny CHENG
Executive Director 
and Chief Financial 
Ofﬁ cer

Mr Hogg, aged 50, has 
been an Executive Director 
a n d   C h i e f   E x e c u t i v e 
Officer  since  2006.  He 
is also a member of the 
Technical Committee of the 
Company. He joined Hutchison China in 2000 and has 
since led all aspects of the creation, implementation 
and management of the Company’s strategy, business 
and listing. This includes the creation of the Company’s 
start-up businesses and the acquisition and operational 
integration of assets that led to the formation of the 
Company’s China joint ventures.

Prior to joining Hutchison China, Mr Hogg spent ten 
years with P&G starting in the US in Finance and then 
Brand  Management  in  the  Laundry  and  Cleaning 
Products Division. Mr Hogg then moved to China to 
manage P&G’s detergent business followed by a move 
to  Brussels  to  run  P&G’s  global  bleach  business. 
Mr Hogg received a Bachelor’s degree in Civil Engineering 
from the University of Edinburgh and an MBA from the 
University of Tennessee.

M r   C h e n g ,   a g e d   4 9 , 
has  been  an  Executive 
Director since 2011 and 
Chief Financial Ofﬁ cer of 
the Company since 2008. 
He is also a director of 
Hutchison MediPharma (Hong Kong) Limited, Sen 
Medicine Company Limited, Hutchison MediPharma 
Limited,  Hutchison  MediPharma  (Suzhou)  Limited 
and Hutchison MediPharma (Yulin) Limited. He was a 
director of Hutchison Healthcare Limited during 2009.

Prior  to  joining  the  Company,  Mr  Cheng  was  Vice 
President, Finance of Bristol Myers Squibb in China 
and was a director of Sino-American Shanghai Squibb 
Pharmaceuticals Ltd. and Bristol-Myers Squibb (China) 
Investment Co. Ltd. in Shanghai between late 2006 and 
2008.

Mr Cheng started his career as an auditor with Price 
Waterhouse (currently PricewaterhouseCoopers) in 
Australia and then KPMG in Beijing before spending 
eight years with Nestle China where he was in charge 
of  a  number  of  finance  and  control  functions  in 
various operations. Mr Cheng received a Bachelor of 
Economics, Accounting Major from the University of 
Adelaide and is a member of the Institute of Chartered 
Accountants in Australia.

9

5

4

8

1

3

6

7

2

32 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Biographical Details Of Directors

Shigeru ENDO
Non-executive 
Director

Mr Endo, aged 81, has 
been  a  Non-executive 
Director  since  2008. 
He  is  chief  executive 
officer  and  a  director 
of Hutchison Whampoa 
Japan K.K. and a director 
of Sanwa Enterprises Limited. He worked for over 40 
years with Mitsui & Co., Ltd (“Mitsui”), where he became 
senior executive managing director and a member of 
the main board of Mitsui.

Mr  Endo  received  a  Bachelor  of  Arts  degree  in 
Economics from Keio University. During his career, 
Mr Endo, a Japanese citizen and fluent English and 
Mandarin speaker, has managed large-scale business 
operations in Japan, China and the US.

Christian 
SALBAING
Non-executive 
Director

M r   S a l b a i n g ,   a g e d 
66,  has  been  a  Non-
executive Director since 
2 0 0 6 .   H e   i s   d e p u t y 
chairman of Hutchison 
W h a m p o a   ( E u r o p e ) 
Limited, the European headquarters company of CK 
Hutchison. He is also deputy chairman of Hutchison 
Whampoa Luxembourg Holdings S.à r.l., the principal 
holding company for the businesses of CK Hutchison in 
Europe. He represents CK Hutchison across its European 
businesses, in particular with key strategic partners 
of the group, the European Commission and member 
governments and in relation to regulatory and public 
affairs matters. He is a member of the GSMA Limited 
Board.

Mr Salbaing received an LL.L. degree in Civil Law from 
the University of Montreal in 1970 and a Juris Doctor 
degree from the University of San Francisco in 1974. 
He is a member of the Bars of Quebec, California 
(inactive status since 2006) and Paris.

Edith SHIH
Non-executive 
Director and 
Company Secretary

Christopher 
HUANG
Independent Non-
executive Director

Ms  Shih,  aged  64,  has 
been  a  Non-executive 
Director  and  Company 
Secretary  since  2006 
and  company  secretary 
o f   G r o u p   c o m p a n i e s 
since 2000. She is also head group general counsel and 
company secretary of CK Hutchison, a director of Hutchison 
International Limited, as well as director and company 
secretary of numerous companies in the CK Hutchison 
group. Ms Shih has been employed by Hutchison Whampoa 
Limited (currently a subsidiary of CK Hutchison) since 
1991 and oversees all legal, regulatory, compliance and 
corporate secretarial affairs of the CK Hutchison group. She 
is the Vice President and Executive Committee member of 
The Institute of Chartered Secretaries and Administrators in 
the UK and a past President and current Council member 
of The Hong Kong Institute of Chartered Secretaries. She 
is also the Chairman of the Remuneration Committee 
and member of Governance Committee and the Audit 
Profession Reform Advisory Group of the Hong Kong 
Institute of Certiﬁ ed Public Accountants.

Ms Shih received a Bachelor of Science degree in Education 
and a Master of Arts degree from the University of the 
Philippines and a Master of Arts degree and a Master of 
Education degree from Columbia University, New York. 
Ms Shih is a qualiﬁ ed solicitor in England and Wales, Hong 
Kong and Victoria, Australia and a Fellow of both The 
Institute of Chartered Secretaries and Administrators and 
The Hong Kong Institute of Chartered Secretaries.

Michael HOWELL
Independent Non-
executive Director

Mr Howell, aged 68, has 
been  an  Independent 
Non-executive  Director 
since  2006.  He  is  also 
Chairman  of  the  Audit 
Committee and a member 
of  the  Remuneration 
Committee  of  the  Company.  From  2002  to  2006, 
Mr Howell was chief executive of Transport Initiatives 
Edinburgh Ltd., a public-sector company responsible for 
major transportation projects in Scotland, including a 
new tram system for Edinburgh. From 1998 to 2002, he 
was executive chairman of FPT Group Limited, a global 
distribution company. Mr Howell’s prior career was in 
manufacturing, and transportation services where, after 
beginning his career in the UK motor industry, he went on 
to hold senior positions at Cummins Engine and General 
Electric in the US and Europe, and Railtrack Group plc in 
the UK. Mr Howell holds directorships in other private and 
public companies in the UK and US.

Mr Howell attended Trinity College, Cambridge receiving his 
Master’s degree in Engineering/Economics from Cambridge 
University (UK), followed by MBAs from INSEAD (France) 
and Harvard University (US).

P r o f e s s o r   H u a n g , 
aged  64,  has  been  an 
I n d e p e n d e n t   N o n -
e x e c u t i v e   D i r e c t o r 
s i n c e   2 0 0 6 .   H e   i s 
also  Chairman  of  the 
Technical  Committee  and  a  member  of  the  Audit 
Committee of the Company. He is a director of Hutchison 
Biofilm Medical Solutions Limited. He is currently 
Professor of Cell Physiology, and Fellow and Director 
of Studies in Medicine at Murray Edwards College, 
University of Cambridge, UK. Professor Huang has spent 
over twenty years in academia and research in the ﬁ eld 
of cellular and systems physiology. He has authored 
over 300 publications in the form of monographs, 
books, papers and articles whilst pursuing research 
collaborations with major pharmaceutical companies 
and holding editorships of Biological Reviews, the 
Journal of Physiology and Europace.

Professor Huang completed his Bachelor’s degrees 
in Physiological Sciences (BA) and Clinical Medicine 
(BMBCh)  at  The  Queen’s  College,  Oxford,  and  his 
postgraduate  (PhD)  degree  at  the  University  of 
Cambridge. He has also been awarded higher medical 
(DM) and scientiﬁ c (DSc) degrees by both Oxford and 
Cambridge. He is also a Fellow of the Royal Society 
of Biology (FRSB), and is currently President of the 
Cambridge Philosophical Society.

Christopher NASH
Independent Non-
executive Director

Mr Nash, aged 57, has 
been  an  Independent 
Non-executive Director 
since  2006  and  was 
appointed  as  Senior 
Independent  Director 
in  September  2006. 
He is also a member of the Audit Committee and the 
Remuneration Committee of the Company. He is a non-
executive director of Gasrec Limited. He was previously 
Chairman  of  Tempus  Technology  Limited,  a  non-
executive director of NTR plc and GKN Evo eDrive Systems 
Ltd and a Director of Current OpenGrid Limited. Mr Nash’s 
career has spanned over thirty six years during which he 
was senior vice president and group head of strategy 
and corporate finance at Global Crossing Ltd., where 
he also served on the management board and several 
divisional boards. In the mid-1990s he was group head 
of corporate ﬁ nance at Cable & Wireless Plc., and before 
that a director of North West Water International Ltd. 
Earlier in his career Mr Nash worked for S.G. Warburg and 
Co. Ltd. and also spent some time in the venture capital 
sector. During his career, Mr Nash has spent signiﬁ cant 
periods of time in Asia.

Mr  Nash  received  a  Bachelor’s  degree  in  Civil 
Engineering from Imperial College, London and an MBA 
from Manchester Business School.

Report Of The Directors

3333

The Directors have pleasure in submitting to shareholders their report and statement of audited ﬁ nancial statements for the year ended December 31, 2015.

PRINCIPAL ACTIVITIES
The principal activity of the Company is that of a holding company of a healthcare group whose main country of operation is China. It is focused on researching, 

developing, manufacturing and selling pharmaceuticals and health-related consumer products.

BUSINESS REVIEW
A detailed review of the performance, business activities and future development of the Company and its subsidiaries (the “Group”) is set out in the Chairman’s Statement 

and the Operations Review.

RESULTS
The Consolidated Statements of Operations are set out on page 52 and show the Group’s results for the year ended December 31, 2015.

DIVIDENDS
No interim dividend for the year ended December 31, 2015 was declared and the Directors do not recommend the payment of a ﬁ nal dividend for the year ended 

December 31, 2015.

RESERVES
Movements in the reserves of the Group during the year are set out in the Consolidated Statements of Changes in Shareholders’ Equity on page 54.

NON-CURRENT ASSETS
Particulars of the movements of non-current assets of the Group are set out in notes 12 to 15 to the ﬁ nancial statements.

SHARE CAPITAL
The share capital of the Company is set out in the Consolidated Balance Sheets. Details of the ordinary shares of the Company are set out in note 21 to the ﬁ nancial 

statements.

34

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Report Of The Directors

DIRECTORS
The Directors of the Company as at December 31, 2015 were:

Executive Directors:
Simon To

Christian Hogg

Johnny Cheng

Non-executive Directors:
Shigeru Endo

Christian Salbaing

Edith Shih

Independent Non-executive Directors:
Christopher Nash

Michael Howell

Christopher Huang

Mr Simon To, Mr Christian Hogg, Mr Christian Salbaing, Ms Edith Shih, Mr Christopher Nash, Mr Michael Howell and Professor Christopher Huang will retire by rotation at 

the forthcoming annual general meeting under the provisions of Article 91(1) of the Articles of Association of the Company and, being eligible, will offer themselves for 

re-election.

The Directors’ biographical details are set out on pages 31 to 32.

DIRECTORS’ INTERESTS IN SHARES
As at December 31, 2015, the interests in the shares of the Company held by the Directors and their families were as follows:

Name of Director 

Christian Hogg 

Johnny Cheng 

Simon To 

Michael Howell 

Edith Shih 

Christopher Nash 

Christopher Huang 

Number of ordinary

shares held

1,088,182

256,146

180,000

153,600

60,000

36,434

2,475

 
Report Of The Directors

3535

SHARE OPTION SCHEMES AND DIRECTORS’ RIGHTS TO ACQUIRE SHARES

(i) 

Share option scheme adopted in 2005 by the Company
The Company conditionally adopted a share option scheme on June 4, 2005 which was amended on March 21, 2007 (the “2005 Share Option Scheme”). Pursuant 

to the 2005 Share Option Scheme, the Board of Directors of the Company may, at its discretion, offer any employees and directors (including Executive and 

Non-executive Directors but excluding Independent Non-executive Directors) of the Company, holding companies of the Company and any of their subsidiaries or 

afﬁ liates, and subsidiaries or afﬁ liates of the Company share options to subscribe for shares of the Company.

The following share options were outstanding under the 2005 Share Option Scheme during the year ended December 31, 2015:

Effective date of 

Number of share 

Granted  

Exercised   Expired/lapsed/ 

Number of share

Name or category 

grant of share 

options held at 

during 

during  

canceled  

options held at 

Exercise period of 

Exercise price of

of participants 

options 

January 1, 2015 

2015 

2015 

during 2015  December 31, 2015 

share options 

share options

Director

Johnny Cheng 

Employees in aggregate 

Total: 

Notes:

25.8.2008 (1) 

64,038 

11.9.2006 (2) 
18.5.2007 (3) 
1.12.2010 (1) 
24.6.2011 (1) 
20.12.2013 (1) 

26,808 

40,857 

100,000 

150,000 

302,700 

684,403 

– 

– 

– 

– 

– 

– 

– 

(64,038) 

– 

(3,000) 

(100,000) 

(75,000) 

– 

(242,038) 

– 

– 

– 

– 

– 

– 

– 

– 

25.8.2008 to 24.8.2018 

26,808 

37,857 

11.9.2006 to 18.5.2016 

18.5.2007 to 17.5.2017 

– 

1.12.2010 to 30.11.2020 

75,000 

24.6.2011 to 23.6.2021 

302,700 

20.12.2013 to 19.12.2023 

442,365

£

1.260

1.715

1.535

4.967

4.405

6.100

(1) 

The share options granted are exercisable subject to, amongst other relevant vesting criteria, the vesting schedule of 25% on each of the ﬁ rst, second, third and fourth 

anniversaries of the effective date of grant.

(2) 

The share options granted are exercisable subject to, amongst other relevant vesting criteria, the vesting schedule of one-third on each of  May 19, 2007, May 19, 2008 and 

May 19, 2009.

(3) 

The share options granted are exercisable subject to, amongst other relevant vesting criteria, the vesting schedule of one-third on each of the first, second and third 

anniversaries of the effective date of grant.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
36

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Report Of The Directors

(ii) 

Share option scheme adopted in 2015 by the Company
The Company conditionally adopted a share option scheme on April 24, 2015 (the “2015 Share Option Scheme”). Pursuant to the 2015 Share Option Scheme, 

the Board of Directors of the Company may, at its discretion, offer any employees and directors (including Executive and Non-executive Directors but excluding 

Independent Non-executive Directors) of the Company, holding companies of the Company and any of their subsidiaries or afﬁ liates, and subsidiaries or afﬁ liates 

of the Company share options to subscribe for shares of the Company.

The 2015 Share Option Scheme is subject to the approval of the shareholders of CK Hutchison Holdings Limited, being the ultimate holding company of the 

Company. Accordingly, no share option has been granted under the 2015 Share Option Scheme.

(iii) 

Share option schemes for existing shares of Hutchison MediPharma Holdings Limited
Hutchison MediPharma Holdings Limited (“HMHL”), a subsidiary of the Company, adopted a share option scheme on August 6, 2008 (as amended on April 15, 

2011) and another share option scheme on December 17, 2014 (together the “HMHL Share Option Schemes”). The HMHL Share Option Schemes are share-based 

incentive programs for employees or directors of HMHL and any of its holding company, subsidiaries and afﬁ liates (each an “Eligible Employee”). Each Eligible 

Employee is eligible to participate in the HMHL Share Option Schemes and share options may be granted to him or her to acquire existing shares in HMHL subject 

to the rules of the HMHL Share Option Schemes.

The following share options were outstanding under the HMHL Share Option Schemes during the year ended December 31, 2015:

Effective date of 

Number of share 

Granted  

Exercised   Expired/lapsed/ 

Number of share

Category of 

participants 

grant of share 

options held at 

during  

during  

canceled  

options held at 

Exercise period of 

Exercise price of

options 

January 1, 2015 

2015 

2015 

during 2015  December 31, 2015 

share options 

share options

5,000 

19,400 

1,187,372 

1,211,772 

– 

– 

– 

– 

(5,000) 

(19,400) 

– 

(24,400) 

– 

– 

– 

– 

– 

– 

2.8.2010 to 1.8.2016 

18.4.2011 to 17.4.2017 

1,187,372 

17.12.2014 to 19.12.2023 

1,187,372

US$

2.24

2.36

7.82

Employees in aggregate 

2.8.2010 (1) 
18.4.2011 (2) 
17.12.2014 (3) 

Total: 

Notes:

(1) 

(2) 

The outstanding share options are fully vested and exercisable within a period of 6 years from the effective date of grant.

The share options granted are exercisable subject to, amongst other relevant vesting criteria, the vesting schedule of 25% on each of the ﬁ rst, second, third and fourth 

anniversaries of the effective date of grant.

(3) 

The share options granted are exercisable subject to, amongst other relevant vesting criteria, the vesting schedule of 25% on December 20, 2014 and 25% on each of the ﬁ rst, 

second and third anniversaries of such date.

 
 
 
 
 
 
 
 
 
 
 
 
Report Of The Directors

3737

LONG TERM INCENTIVE PLAN
The Company adopted a Long Term Incentive Plan on April 24, 2015 (the “LTIP”). The Directors (including Executive Directors, Non-executive Directors and Independent 

Non-executive Directors), the directors of the Company’s subsidiaries and the employees of the Group are eligible to participate in the LTIP. The LTIP awards grant 

participating directors or employees a conditional right to receive ordinary shares in the Company, to be purchased by an independent third party trustee (the “Trustee”) 

up to a maximum cash amount depending upon the achievement of annual performance targets for each ﬁ nancial year of the Company stipulated in the LTIP awards.

On October 19, 2015, the Company granted awards under the LTIP to 2 Executive Directors and 41 senior managers and executives, giving each a conditional right to 

receive ordinary shares to be purchased by the Trustee up to a certain maximum cash amount depending upon the achievement of annual performance targets from 2014 

to 2016. Details of the grants are as follows:

Name or category of participants 

period stipulated in the LTIP awards

Maximum US$ amount per annum for the LTIP 

Executive Directors

Christian Hogg 

Johnny Cheng 

Senior managers and executives in aggregate 

Total: 

329,385

101,619

1,370,893

1,801,897

Any ordinary shares purchased on behalf of an LTIP grantee are to be held by the Trustee until they are vested. Vesting will occur one business day after the publication 

date of the annual report for the ﬁ nancial year falling two years after the ﬁ nancial year to which the LTIP award relates. Vesting will also depend upon the continued 

employment of the award holder and will otherwise be at the discretion of the Board.

Based on the annual performance targets in 2014, 7,498 ordinary shares and 2,313 ordinary shares have been allocated to Mr Christian Hogg and Mr Johnny Cheng 

respectively. In addition, 30,825 ordinary shares have been allocated to senior managers and executives. The allocation of shares is due to vest one business day after the 

publication date of the 2016 annual report.

 
38

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Report Of The Directors

SIGNIFICANT SHAREHOLDINGS
As at February 23, 2016, according to the records of the Company, the following holders held interests in 3% or more of the issued share capital of the Company:

Name 

Hutchison Healthcare Holdings Limited (1) (“HHHL”) 
Mitsui & Co., Ltd. (2) 
FIL Limited (2) 
Slater Investments Limited (2) 

Notes:

Number of ordinary 

shares held 

36,666,667 

3,214,404 

2,560,184 

2,090,266 

Approximate 

% of issued

share capital

64.86%

5.69%

4.53%

3.70%

(1) 

HHHL is a private company registered in the British Virgin Islands and carries on business as a holding company. HHHL is an indirect wholly-owned subsidiary of CK Hutchison Holdings 

Limited which is a Cayman Islands company registered and listed in Hong Kong.

(2) 

Major interests in shares of the Company notiﬁ ed to the Company under the provisions of rule 5 of the Disclosure Rules and Transparency Rules of the UK Financial Conduct Authority 

which have been incorporated by reference into the Company’s articles of association.

AUDITOR
The ﬁ nancial statements have been audited by PricewaterhouseCoopers who will retire and, being eligible, will offer themselves for re-appointment.

ANNUAL GENERAL MEETING
The annual general meeting (“AGM”) of the Company will be held on Wednesday, April 27, 2016 at 10:00 am at 4th Floor, Hutchison House, 5 Hester Road, Battersea, 

London. Details of the resolutions proposed are set out in the Notice of the AGM.

By Order of the Board

Edith Shih

Director and Company Secretary

February 29, 2016

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Governance Report

3939

The Company strives to attain and maintain high standards of corporate governance best suited to the needs and interests of the Company and its subsidiaries (the 

“Group”) as it believes that effective corporate governance practices are fundamental to safeguarding shareholder interests and enhancing shareholder value. Accordingly, 

the Company has adopted corporate governance principles that emphasize a quality board of Directors (the “Board”), effective risk management, internal controls, 

stringent disclosure practices, transparency and accountability. It is, in addition, committed to continuously improving these practices and inculcating an ethical corporate 

culture. The Company has applied the principles of the UK Corporate Governance Code (the “Code”) notwithstanding that the Company’s shares are admitted to trade on 

AIM, and is therefore not required to comply with the Code.

Set out below are the corporate governance practices adopted by the Company.

THE BOARD
The Board is responsible for directing the strategic objectives of the Company and overseeing the management of the business. Directors are charged with the task of 

promoting the success of the Company and making decisions in the best interests of the Company. The Board is satisﬁ ed that it meets the Code’s requirement for effective 

operation.

The Board, led by the Chairman, Mr Simon To, determines and monitors the Group’s long term objectives and commercial strategies, annual operating and capital 

expenditure budgets and business plans, evaluates the performance of the Company, and supervises the management of the Company (“Management”). Management is 

responsible for the day-to-day operations of the Group under the leadership of the Chief Executive Ofﬁ cer.

As at December 31, 2015, the Board comprised nine Directors, including the Chairman, Chief Executive Ofﬁ cer, Chief Financial Ofﬁ cer, three Non-executive Directors and 

three Independent Non-executive Directors (one of whom is Senior Independent Director). Biographical details of the Directors are set out in the “Biographical Details of 

Directors” section on pages 31 to 32 and on the website of the Company (www.chi-med.com).

The Board has adopted a policy which recognizes the beneﬁ ts of a Board that possesses a balance of skills, experience, expertise, independence and knowledge and 

diversity of perspectives appropriate to the requirements of the businesses of the Company.

Board appointment has been, and will continue to be, made based on attributes of candidates that complement and expand the skills, experience, expertise, independence 

and knowledge of the Board as a whole, taking into account gender, age, professional experience and qualiﬁ cations, cultural and educational background, and any other 

factors that the Board may consider relevant and applicable from time to time towards achieving a diverse Board.

The Board diversity policy is available on the website of the Company. The Board will review and monitor from time to time the implementation of the policy to ensure 

its effectiveness and application.

Mr Christian Salbaing and Ms Edith Shih have served as Non-executive Directors and Mr Christopher Nash, Mr Michael Howell and Professor Christopher Huang have served 

as Independent Non-executive Directors of the Company for more than nine years. Notwithstanding the length of their service, Mr Salbaing and Ms Shih continue to 

demonstrate their commitment to fulﬁ lling their role as Non-executive Directors, providing direction on Company strategy assisting generally on business operation and 

liaising with the majority shareholder. Similarly, Mr Nash, Mr Howell and Professor Huang satisfy the independence factors set out in Code Provision B.1.1 of the Code 

except for the length of their service. They are not involved in the daily management of the Company nor in any relationships or circumstances which might possibly 

interfere with their exercise of independent judgment. In addition, they continue to demonstrate the attributes of Independent Non-executive Directors and there is no 

evidence that their tenure has had any adverse impact on their independence.

40

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Corporate Governance Report

The Board is of the opinion that Mr Nash, Mr Howell and Professor Huang remain independent in judgment and character, notwithstanding the length of their service. The 

Board believes that the knowledge and experience of the Group’s business and the general business acumen of Mr Salbaing, Ms Shih, Mr Nash, Mr Howell and Professor 

Huang continue to generate signiﬁ cant contribution to the Company and the shareholders as a whole.

The role of the Chairman is separate from that of the Chief Executive Ofﬁ cer. Such division of responsibilities reinforces the independence and accountability of these 

executives.

The Chairman is responsible for the effective conduct of the Board, ensuring that it as a whole plays an effective role in the development and determination of the Group’s 

strategy and overall commercial objectives and acts as the guardian of the Board’s decision-making processes. He is responsible for setting the agenda for each Board 

meeting, taking into account, where appropriate, matters proposed by Directors. He also ensures that the Board receives accurate, timely and clear information on the 

Group’s performance, the issues, challenges and opportunities facing the Group and matters reserved to it for decision. With the support of the Executive Directors and 

the Company Secretary, the Chairman seeks to ensure that the Board complies with approved procedures, including the schedule of Reserved Matters to the Board for its 

decision and the Terms of Reference of all Board Committees. The Board, under the leadership of the Chairman, has adopted good corporate governance practices and 

procedures and taken appropriate steps to provide effective communication with shareholders, as outlined later in the report.

The Chief Executive Ofﬁ cer, Mr Christian Hogg, is responsible for managing the businesses of the Group, formulating and developing the Group’s strategy and overall 

commercial objectives in close consultation with the Chairman and the Board. With the executive management team of each core business division, the Chief Executive 

Ofﬁ cer implements the decisions of the Board and its Committees. He maintains an ongoing dialog with the Chairman to keep him fully informed of all major business 

development and issues. He is also responsible for ensuring that the development needs of senior management reporting to him are identiﬁ ed and met as well as leading 

the communication program with shareholders.

The Board meets regularly. Between scheduled meetings, senior management of the Group provides information to Directors on a regular basis with respect to the 

activities and development of the Group. Throughout the year, Directors participate in the deliberation and approval of routine and operational matters of the Company 

by way of written resolutions with supporting explanatory materials, supplemented by additional verbal and/or written information from the Company Secretary or 

other executives as and when required. Whenever warranted, additional Board meetings are held. In addition, Directors have full access to information on the Group and 

independent professional advice at all times whenever deemed necessary by the Directors and they are at liberty to propose appropriate matters for inclusion in Board 

agendas.

With respect to regular meetings of the Board, Directors receive written notice of the meetings generally about a month in advance and an agenda with supporting 

Board papers no less than three days prior to the meeting. With respect to other meetings, Directors are given as much notice as is reasonable and practicable in the 

circumstances. Except for those circumstances permitted by the Articles of Association of the Company, a Director who has a material interest in any contract, transaction, 

arrangement or any other kind of proposal put forward to the Board for consideration abstains from voting on the relevant resolution and such Director is not counted for 

quorum determination purposes.

The Company held eight Board meetings in 2015 with 100% attendance of its members.

Position 

Chairman 

Executive Directors: 

Non-executive Directors: 

Independent Non-executive Directors: 

Name of Director 

Simon To 

Christian Hogg 

Johnny Cheng 

Shigeru Endo 

Christian Salbaing 

Edith Shih 

Michael Howell 

Christopher Huang 

Christopher Nash 

Corporate Governance Report

4141

Attended/Eligible to attend

8/8

8/8

8/8

8/8

8/8

8/8

8/8

8/8

8/8

In addition to Board meetings, the Chairman held two meetings with Non-executive Directors without the presence of the Executive Directors, with full attendance, to 

review the performance of the Executive Directors. The Senior Independent Director, Mr Nash, also held a meeting with all Non-executive Directors without the presence 

of the Chairman, with full attendance, for the appraisal of the Chairman’s performance.

In addition, evaluation of the performance of the Board and its Committees together with the Chairman of each Committee was conducted by questionnaire. The objective 

of such evaluation is to ensure that the Board, its Committees and the Chairman of each Committee continued to act effectively in fulﬁ lling the duties and responsibilities 

expected of them.

All Non-executive Directors are engaged on service contracts which are automatically renewed for successive 12-month periods unless terminated by written notice given 

by either party. The Chairman of the Board is of the view that the performance of each of the Non-executive Directors continues to be effective and they all demonstrate 

commitment to their role as a Non-executive Director. All Directors are subject to re-election by shareholders at annual general meetings and at least once every three 

years on a rotation basis in accordance with the Articles of Association of the Company. A retiring Director is eligible for re-election and re-election of retiring Directors 

at general meetings is dealt with by separate individual resolutions. Save as mentioned herein, there are no existing or proposed service contracts between any of the 

Directors and the Company which cannot be terminated by the Company within 12 months and without payment of compensation. Where vacancies arise at the Board, 

candidates are proposed and put forward to the Board for consideration and approval, with the objective of appointing to the Board individuals with expertise in the 

businesses of the Group and leadership qualities to complement the capabilities of the existing Directors thereby enabling the Company to retain as well as improve its 

competitive position.

Upon appointment to the Board, Directors receive a package of orientation materials on the Group and are provided with a comprehensive induction to the Group’s 

businesses by senior executives. Continuing education and relevant reading materials are provided to Directors regularly to help ensure that they are apprised of the latest 

changes in the commercial, legal and regulatory environment in which the Group conducts its businesses.

 
 
 
 
 
42

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Corporate Governance Report

BOARD COMMITTEES
The Company has established three permanent board committees: an Audit Committee, a Remuneration Committee and a Technical Committee, details of which are 

described later in this report. Other board committees are established by the Board as and when warranted to take charge of speciﬁ c duties.

COMPANY SECRETARY
The Company Secretary, Ms Shih, is accountable to the Board for ensuring that Board procedures are followed and Board activities are efﬁ ciently and effectively conducted. 

These objectives are achieved through adherence to proper Board processes and the timely preparation and dissemination to Directors comprehensive Board agendas and 

papers.

The Company Secretary is responsible for ensuring that the Board is fully apprised of the relevant legislative, regulatory and corporate governance developments of 

relevance to the Group and that it takes these into consideration when making decisions for the Group. From time to time, she organizes seminars on speciﬁ c topics of 

importance and interest and disseminates relevant reference materials to Directors for their information.

The Company Secretary is also directly responsible for the Group’s compliance with all obligations of the AIM Rules for Companies (“AIM Rules”), including the preparation, 

publication and dispatch of annual and interim reports within the time limits laid down in the AIM Rules, the timely dissemination to shareholders and the market of 

announcements, press releases and information relating to the Group and assisting in the notiﬁ cation of Directors’ dealings in securities of the Group.

Furthermore, the Company Secretary advises the Directors on their obligations for disclosure of interests and dealings in the Company’s securities, related party 

transactions and price-sensitive inside information and ensures that the standards and disclosures requirements of the AIM Rules are complied with and, where required, 

reported in the annual and interim reports of the Company. In relation to related party transactions, detailed analysis is performed on all potential related party 

transactions to ensure full compliance and for Directors’ consideration.

ACCOUNTABILITY AND AUDIT

Financial Reporting
The responsibility of Directors in relation to the ﬁ nancial statements is set out below. It should be read in conjunction with, but distinguished from, the Independent 

Auditor’s Report on page 49 which acknowledges the reporting responsibility of the Group’s Auditor.

Annual Report and Accounts
The Directors acknowledge their responsibility for the preparation of the annual report and ﬁ nancial statements of the Company, ensuring that the annual report and 

ﬁ nancial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, 

performance, business model and strategy in accordance with the Code, Cayman Islands Companies Law and the applicable accounting standards.

Accounting Policies
The Directors consider that in preparing the ﬁ nancial statements, the Group has applied appropriate accounting policies that are consistently adopted and made judgments 

and estimates that are reasonable and prudent in accordance with the applicable accounting standards.

Accounting Records
The Directors are responsible for ensuring that the Group keeps accounting records which disclose the ﬁ nancial position of the Group upon which ﬁ nancial statements of 

the Group could be prepared in accordance with the Group’s accounting policies.

Corporate Governance Report

4343

Safeguarding Assets
The Directors are responsible for taking all reasonable and necessary steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities 

within the Group.

Going Concern
The Directors, having made appropriate inquiries, are of the view that the Group has adequate resources to continue in operational existence for the foreseeable future 

and that, for this reason, it is appropriate to adopt the going concern basis in preparing the ﬁ nancial statements.

Audit Committee
Under the Terms of Reference of the Audit Committee, the Audit Committee is required to review the Group’s annual and interim results, and annual and interim ﬁ nancial 

statements, oversee the relationship between the Company and its external auditor, monitor and review the effectiveness of the Company’s internal audit function in the 

context of the Company’s overall risk management systems giving due consideration to laws and regulations and the provisions of the Code. The Committee is authorized 

to obtain, at the Company’s expense, external legal or other professional advice on any matters within its Terms of Reference.

In addition, the Audit Committee assists the Board in meeting its responsibilities for maintaining effective risk management and internal control systems. It reviews the 

process by which the Group evaluates its control environment and risk assessment process, and the way in which business and control risks are managed. It receives and 

considers the presentations of Management in relation to the reviews on the effectiveness of the Group’s risk management and internal control systems and the adequacy 

of resources, qualiﬁ cations and experience of staff in the Group’s accounting and ﬁ nancial reporting function, and their training programs and budget. In addition, the 

Audit Committee reviews with the internal auditor of the Group’s holding company the work plans for its audits for the Group together with its resource requirements and 

considers the reports of the internal auditor of the Group’s holding company to the Audit Committee on the effectiveness of risk management and internal controls in 

the Group business operations. Further, it also receives the reports from the Company Secretary on the Group’s material litigation proceedings and compliance status on 

regulatory requirements. These reviews and reports are taken into consideration by the Audit Committee when it makes its recommendation to the Board for approval of 

the consolidated ﬁ nancial statements for the year.

The Terms of Reference for the Audit Committee and the Complaints Procedures adopted by the Board are published on the website of the Company.

The Audit Committee comprises three Independent Non-executive Directors who possess the relevant business and ﬁ nancial management experience and skills to 

understand ﬁ nancial statements and contribute to the ﬁ nancial governance, internal controls and risk management of the Company. It is chaired by Mr Howell with 

Professor Huang and Mr Nash as members. None of the Committee Members is related to the Company’s external auditor.

The Audit Committee held nine meetings in 2015 with 100% attendance of its members.

Name of Member 

Michael Howell (Chairman) 

Christopher Huang 

Christopher Nash 

Attended/Eligible to attend

9/9

9/9

9/9

The Audit Committee meets with the Chief Financial Ofﬁ cer and other senior management of the Company from time to time for the purposes of reviewing the annual and 

interim results, the annual and interim reports and other ﬁ nancial, internal control and risk management matters of the Company. It considers and discusses the reports 

and presentations of Management and the Group’s internal and external auditors, with a view to ensuring that the Group’s consolidated ﬁ nancial statements are prepared 

in accordance with generally accepted accounting principles in the US. It also meets with the Group’s principal external auditor, PricewaterhouseCoopers (“PwC”), to 

consider the reports of PwC on the scope, strategy, progress and outcome of its independent review of the interim ﬁ nancial report and its annual audit of the consolidated 

ﬁ nancial statements. In addition, the Audit Committee holds regular private meetings with the external auditor, the Chief Financial Ofﬁ cer and the internal auditor of the 

Group’s holding company separately without the presence of Management.

44

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Corporate Governance Report

External Auditor
The Audit Committee reviews and monitors the external auditor’s independence, objectivity and effectiveness of the audit process. It receives each year the letter from the 

external auditor conﬁ rming its independence and objectivity and holds meetings with representatives of the external auditor to consider the scope of its audit, approve 

its fees, and the scope and appropriateness of non-audit services, if any, to be provided by it. The Audit Committee also makes recommendations to the Board on the 

appointment and retention of the external auditor.

The Group’s policy regarding the engagement of PwC for the various services listed below is as follows:

• 

Audit services – include audit services provided in connection with the audit of the consolidated ﬁ nancial statements. All such services are to be provided by 

external auditor.

• 

Audit related services – include services that would normally be provided by an external auditor but not generally included in the audit fees, for example, audits 

of the Group’s pension plans, due diligence and accounting advice related to mergers and acquisitions, internal control reviews of systems and/or processes, 

and issuance of special audit reports for tax or other purposes. The external auditor is to be invited to undertake those services that it must, or is best placed to, 

undertake in its capacity as auditor.

• 

Taxation related services – include all tax compliance and tax planning services, except for those services which are provided in connection with the audit. The Group 

uses the services of the external auditor where it is best suited. All other signiﬁ cant taxation related work is undertaken by other parties as appropriate.

• 

Other services – include, for example, audit or review of third parties to assess compliance with contracts, risk management diagnostics and assessments, and non-

ﬁ nancial systems consultations. The external auditor is also permitted to assist Management and the internal auditor of the Group’s holding company with internal 

investigations and fact-ﬁ nding into alleged improprieties. These services are subject to speciﬁ c approval by the Audit Committee.

• 

General consulting services – the external auditor is not eligible to provide services involving general consulting work.

For the year ended December 31, 2015, the fees paid to PwC were for both audit and non-audit services. The non-audit services, which amounted to approximately 

US$1.8 million, were mainly related to the provision of non-audit advisory services and internal control assessment review in preparation for the potential listing in the 

US. These non-audit services had been reviewed prior to the engagement by the Audit Committee, which considered such services not having an impairing effect on the 

independence of the auditor.

INTERNAL CONTROL, LEGAL AND REGULATORY CONTROL AND GROUP RISK MANAGEMENT
The Board has overall responsibility for the Group’s systems of internal control and assessment and management of risks.

In meeting its responsibility, the Board seeks to increase risk awareness across the Group’s business operations and has put in place policies and procedures, including 

parameters of delegated authority, which provide a framework for the identiﬁ cation and management of risks. It also reviews and monitors the effectiveness of the 

systems of internal control to ensure that the policies and procedures in place are adequate. Reporting and review activities include review by the Executive Directors and 

the Board and approval of detailed operational and ﬁ nancial reports, budgets and plans provided by management of the business operations, review by the Board of 

actual results against budget, review by the Audit Committee of the ongoing work of the internal audit and risk management functions of the Group’s holding company, 

as well as regular business reviews by the Executive Directors and the executive management team of each core business division.

Whilst these procedures are designed to identify and manage risks that could adversely impact the achievement of the Group’s business objectives, they do not provide 

absolute assurance against material mis-statement, errors, losses or fraud.

Corporate Governance Report

4545

Internal Control Environment and Systems
Executive Directors are appointed to the boards of all material operating subsidiaries and associates for monitoring those companies, including attendance at board 

meetings, review and approval of business strategies, budgets and plans, and setting of key business performance targets. The executive management team of each core 

business division is accountable for the conduct and performance of each business in the division within the agreed strategies and similarly management of each business 

is accountable for its conduct and performance.

The Group’s internal control procedures include a comprehensive system for reporting information to the executive management team of each core business division and 

the Executive Directors.

Business plans and budgets are prepared annually by management of individual businesses and subject to review and approval by both the executive management team 

and the Executive Directors as part of the Group’s ﬁ ve-year corporate planning cycle. Reforecasts for the current year are prepared on a quarterly basis and reviewed for 

variances to the budget and for approval. When setting budgets and reforecasts, Management identiﬁ es, evaluates and reports on the likelihood and potential ﬁ nancial 

impact of signiﬁ cant business risks.

The Executive Directors review monthly management reports on the ﬁ nancial results and key operating statistics of each business and discuss with the executive 

management team and senior management of business operations to review these reports, business performance against budgets, forecasts, signiﬁ cant business risk 

sensitivities and strategies. In addition, ﬁ nancial controllers of the executive management team of each core business division discuss with the representatives of the 

Finance Department to review monthly performance against budget and forecast, and to address accounting and ﬁ nance related matters.

The Finance Department has established guidelines and procedures for the approval and control of expenditures. Operating expenditures are subject to overall budget 

control and are controlled within each business with approval levels set by reference to the level of responsibility of each executive and ofﬁ cer. Capital expenditures are 

subject to overall control within the annual budget review and approval process, and more speciﬁ c control and approval prior to commitment by the Finance Department 

or Executive Directors are required for unbudgeted expenditures and material expenditures within the approved budget. Quarterly reports of actual versus budgeted and 

approved expenditures are also reviewed.

The General Manager of the internal audit function of the Group’s holding company, reporting directly to the Audit Committee, provides independent assurance as to the 

existence and effectiveness of the risk management activities and controls in the Group’s business operations in various countries. Using risk assessment methodology and 

taking into account the dynamics of the Group’s activities, internal audit derives its yearly audit plan which is reviewed by the Audit Committee, and reassessed during the 

year as needed to ensure that adequate resources are deployed and the plan’s objectives are met. Internal audit function of the Group’s holding company is responsible for 

assessing the Group’s risk management and internal control systems, formulating an impartial opinion on the systems, and reporting its ﬁ ndings to the Audit Committee, 

the Chief Executive Ofﬁ cer, the Chief Financial Ofﬁ cer and the senior management concerned as well as following up on all reports to ensure that all issues have been 

satisfactorily resolved. In addition, a regular dialogue is maintained with the external auditor so that both are aware of the signiﬁ cant factors which may affect their 

respective scope of work.

Depending on the nature of business and risk exposure of individual business units, the scope of work performed by the internal audit function includes ﬁ nancial / IT and 

operations reviews, recurring and surprise audits, fraud investigations and productivity efﬁ ciency reviews.

Reports from the external auditor on internal controls and relevant ﬁ nancial reporting matters are presented to the General Manager of the internal audit function of the 

Group’s holding company and, as appropriate, to the Chief Financial Ofﬁ cer. These reports are reviewed and appropriate actions are taken.

The Board, through the Audit Committee, has monitored of the Group’s risk management and internal control systems for the year ended December 31, 2015 covering 

all material ﬁ nancial, operational and compliance controls, has conducted a review of their effectiveness, and is satisﬁ ed that such systems are effective and adequate. In 

addition, it has reviewed and is satisﬁ ed with the adequacy of resources, qualiﬁ cations and experience of the staff of the Group’s accounting and ﬁ nancial reporting and 

internal audit functions, and their training programs and budget.

46

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Corporate Governance Report

Legal and Regulatory Control
The Group Legal Department has the responsibility of safeguarding the legal interests of the Group. The team is responsible for monitoring the day-to-day legal affairs 

of the Group, including preparing, reviewing and approving all legal and corporate secretarial documentation of Group companies, working in conjunction with ﬁ nance, 

tax, treasury, corporate secretarial and business unit personnel on the review and co-ordination process, and advising Management of legal and commercial issues of 

concern. In addition, the Group Legal Department is also responsible for overseeing regulatory (business and AIM) compliance matters of all Group companies. It analyses 

and monitors the regulatory framework within which the Group operates, including reviewing applicable laws and regulations and preparing and submitting responses 

or ﬁ lings to relevant regulatory and/or government authorities on regulating issues and consultations. The Department also determines and approves the engagement 

of external legal advisors, ensuring the requisite professional standards are adhered to as well as most cost effective services are rendered. Further, the Group Legal 

Department organizes and holds continuing education seminars/conferences on legal and regulatory matters of relevance to the Group for Directors, business executives 

and the Group legal team.

Group Risk Management
The Chief Executive Ofﬁ cer and the Group Risk Management Department of the Group’s holding company have the responsibility of developing and implementing risk 

mitigation strategies including the deployment of insurance to transfer the ﬁ nancial impact of risks. The Group Risk Management Department of the Group’s holding 

company, working with the business operations worldwide, is responsible for arranging appropriate insurance coverage and organizing Group-wide risk reporting. 

Directors and Ofﬁ cers Liability Insurance is also in place to protect Directors and ofﬁ cers of the Group against their potential legal liabilities.

Workplace Safety
The Group is committed to providing a healthy and safe workplace for all its employees and complying with all applicable health and safety laws and regulations. Health 

and safety considerations are incorporated into the design, operations and maintenance of the Group’s premises. Employees are provided with appropriate job skills and 

safety training and are educated with regard to their responsibilities for achieving the health and safety objectives of the Group. The Group also communicates with its 

employees on occupational health and safety issues.

REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT

Remuneration Committee
The responsibilities of the Remuneration Committee are to assist the Board in achieving its objectives of attracting, retaining and motivating employees of the highest 

caliber and experience needed to shape and execute strategy across the Group’s substantial, diverse and international business operations. It assists the Group in the 

administration of a fair and transparent procedure for setting remuneration policies including assessing the performance of Executive Directors and senior executives of 

the Group and determining their remuneration packages.

The Terms of Reference for the Remuneration Committee adopted by the Board are published on the website of the Company.

The Remuneration Committee comprises three members, chaired by the Chairman Mr To with Mr Howell and Mr Nash, both Independent Non-executive Directors, as 

members who possess experience in human resources and personnel emoluments. Mr To has experience in the traditional Chinese medicine industry as well as expertise 

in human resources and personnel in China. The Remuneration Committee meets towards the end of each year to determine the remuneration package of Executive 

Directors and senior management of the Group and during the year to consider grants of share options and long term incentive plan awards and other remuneration 

related matters. Remuneration matters are also considered and approved by way of written resolutions and additional meetings where warranted.

The Remuneration Committee held three meetings in 2015 with 100% attendance of its members. During the year, the Remuneration Committee reviewed background 

information on market data (including economic indicators, statistics and the Remuneration Bulletin), headcount and staff costs. It also reviewed and approved the 

proposed 2016 directors’ fees, year end bonus and 2016 remuneration package of Executive Directors and senior executives of the Company. Executive Directors do not 

participate in the determination on their own remuneration.

Corporate Governance Report

4747

Remuneration Policy
The remuneration of Mr Hogg and Mr Cheng, the Executive Directors, and senior executives is determined with reference to their expertise and experience in the industry, 

the performance and proﬁ tability of the Group and remuneration benchmarks from other local and international companies as well as prevailing market conditions. Senior 

management also participates in bonus arrangements which are determined in accordance with the performance of the Group and of the individual. The Chairman, Mr To, 

does not receive performance related remuneration from the Company and is remunerated through his service agreement. All Non-executive Directors have entered into 

service agreements with the Company and are remunerated with ﬁ xed fees as determined by the Board.

Directors’ emoluments comprise payments to Directors from the Company and its subsidiaries. The emoluments of each of the Directors exclude amounts received from 

the subsidiaries of the Company and paid to a subsidiary or an intermediate holding company of the Company. The amounts paid to each Director for 2015 are as below:

Taxable beneﬁ ts 

Pension contributions 

Share award/option beneﬁ ts 

Total

US$

US$ 

Name of Director 

Executive Directors:
Simon To 

Christian Hogg 

Johnny Cheng 

Non-executive Directors:
Shigeru Endo 

Christian Salbaing 

Edith Shih 

Independent Non-executive Directors:
Michael Howell 

Christopher Huang 

Christopher Nash 

Salary and fees 

US$ 

18,990 (1) (4) 
357,975 (2) (4) 
283,779 (2) 

18,990 (3) 
18,990 (3) 
18,990 (3) (4) 

54,692 

54,692 

54,692 

Bonus 

US$ 

– 

676,923 

239,744 

– 

– 

– 

– 

– 

– 

US$ 

– 

14,902 

– 

– 

– 

– 

– 

– 

– 

US$ 

– 

24,960 

22,556 

– 

– 

– 

– 

– 

– 

– 
– (5) (6) 
– (5) (6) 

18,990

1,074,760

546,079

– 

– 

– 

– 

– 

– 

0 

18,990

18,990

18,990

54,692

54,692

54,692

1,860,875

Aggregate emoluments 

881,790 

916,667 

14,902 

47,516 

Notes:

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

Such Director’s fees were paid to Hutchison Whampoa (China) Limited.

Emoluments paid include Director’s fees of US$18,990.

Such Director’s fees were paid to Hutchison International Limited.

Director’s fees received from the subsidiaries of the Company during the period he/she served as director that were paid to a subsidiary or an intermediate holding company of the 

Company are not included in the amounts above.

The fair value of share options granted to the Executive Director had been fully recognized as expenses in the past few years and no such expenses were recognized in 2015.

For the year ended December 31, 2015, the Group accrued US$52,342 and US$16,148 with respect to the awards of Long Term Incentive Plan of the Company granted to Mr Hogg and 

Mr Cheng respectively, which amounts are not included in the table above.

TECHNICAL COMMITTEE
The Technical Committee comprises three members, chaired by Professor Huang with Mr To and Mr Hogg, both Executive Directors, as members. The Technical Committee 

members consider from time to time matters relating to the technical aspects of the business and in research and development. It also invites such executives as it thinks 

ﬁ t to attend meetings as and when required.

The Terms of Reference for the Technical Committee adopted by the Board are published on the website of the Company.

The Technical Committee held one meeting in 2015 with 100% attendance of its members.

 
48

HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Corporate Governance Report

CODE OF ETHICS
The Group places utmost importance on employees’ ethical, personal and professional standards. Every employee is provided with the Group’s Code of Ethics booklet, and 

all employees are expected to achieve the highest standards set out in the Code of Ethics including avoiding conﬂ ict of interest, discrimination or harassment and bribery 

etc. Employees are required to report any non-compliance with the Code of Ethics to Management.

INVESTOR RELATIONS AND SHAREHOLDERS’ RIGHTS
The Group actively promotes investor relations and communication with the investment community throughout the year. Through its Chairman and Chief Executive Ofﬁ cer, 

the Group responds to requests for information and queries from the investment community including shareholders, analysts and the media through regular brieﬁ ng 

meetings, announcements, press releases, conference calls and presentations. The other Directors, including Non-executive Directors, develop an understanding of the 

views of the major shareholders about the Company by periodic meetings on the subject with the Chairman and the Chief Executive Ofﬁ cer.

The Board is committed to providing clear and full information on the Group to shareholders through the publication of notices, announcements, press releases, annual 

and interim reports. An updated version of the Memorandum and Articles of Association of the Company is published on the website of the Company. Moreover, additional 

information on the Group is also available to shareholders through the Investor Relations page on the website of the Company.

Shareholders are encouraged to attend all general meetings of the Company, such as the annual general meeting for which at least 20 working days’ notice is given and 

at which the Chairman and Directors are available to answer questions on the Group’s businesses. All shareholders have statutory rights to call for extraordinary general 

meetings and put forward agenda items for consideration by shareholders by sending the Company Secretary a written request for such general meetings together with 

the proposed agenda items. Regularly updated ﬁ nancial, business and other information on the Group is made available on the website of the Company for shareholders.

The 2015 Annual General Meeting was held on April 24, 2015 at 4th Floor, Hutchison House, 5 Hester Road, Battersea, London attended by PwC and all Directors including 

the Chairmen of the Board, the Audit Committee and the Remuneration Committee, except for the Chairman of the Technical Committee who was not in a position to 

attend the AGM due to personal reasons.

The latest shareholders’ meeting of the Company was the 2015 Extraordinary General Meeting which was held on November 10, 2015 at 4th Floor, Hutchison House, 

5 Hester Road, Battersea, London attended by PwC and all Directors including the Chairmen of the Board, the Audit Committee, the Remuneration Committee and the 

Technical Committee, except for a Non-executive Director who was not in a position to attend due to other business commitment.

Directors are requested and encouraged to attend shareholders’ meetings albeit presence overseas for the Group businesses or unforeseen circumstances might prevent 

Directors from so doing.

The Group values feedback from shareholders on its efforts to promote transparency and foster investor relationship. Comments and suggestions to the Board or the 

Company are welcome and can be addressed to the Company Secretary by mail/e-mail or to the Company by e-mail at info@chi-med.com.

By Order of the Board

Edith Shih

Director and Company Secretary

February 29, 2016

Independent Auditor’s Report

4949

TO THE SHAREHOLDERS OF HUTCHISON CHINA MEDITECH LIMITED
(incorporated in the Cayman Islands with limited liability)

We have audited the consolidated ﬁ nancial statements of Hutchison China MediTech Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on 

pages 50 to 108, which comprise the consolidated balance sheet as at December 31, 2015, and the consolidated statement of operations, the consolidated statement 

of comprehensive income, the consolidated statement of changes in shareholders’ equity and the consolidated statement of cash ﬂ ows for the year then ended, and a 

summary of signiﬁ cant accounting policies and other explanatory information.

Directors’ responsibility for the consolidated ﬁ nancial statements
The directors of the Company are responsible for the preparation and fair presentation of consolidated ﬁ nancial statements in accordance with accounting principles 

generally accepted in the United States of America, and for such internal control as the directors determine is necessary to enable the preparation of consolidated ﬁ nancial 

statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated ﬁ nancial statements based on our audit. We conducted our audit in accordance with International 

Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether 

the consolidated ﬁ nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated ﬁ nancial statements. The procedures selected 

depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated ﬁ nancial statements, whether due to fraud or error. 

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of consolidated ﬁ nancial statements in 

order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal 

control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well 

as evaluating the overall presentation of the consolidated ﬁ nancial statements.

We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated ﬁ nancial statements present fairly, in all material respects, the ﬁ nancial position of the Group as at December 31, 2015, and of the Group’s 

ﬁ nancial performance and cash ﬂ ows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other matters
This report, including the opinion, has been prepared for and only for you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability 

to any other person for the contents of this report.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, February 29, 2016

50 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Consolidated Balance Sheets

As at December 31, 2015

Assets
Current assets

Cash and cash equivalents 
Short-term investments 

  Accounts receivable – third parties 
  Accounts receivable – related parties 
  Other receivables, prepayments and deposits 
  Amounts due from related parties 

Inventories 

  Deferred tax assets 

Total current assets 

Property, plant and equipment, net 
Leasehold land 
Goodwill 
Other intangible asset 
Long-term prepayment 
Deferred costs for initial public offering in the United States 
Investments in equity investees 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

31,941 
– 
33,346 
1,869 
3,413 
9,293 
9,555 
250 

89,667 

8,507 
1,343 
3,332 
571 
2,132 
4,446 
119,756 

38,946
12,179
22,724
2,184
3,016
6,283
4,405
105

89,842

7,482
1,436
3,430
666
–
–
107,978

Total assets 

229,754 

210,834

Liabilities and shareholders’ equity
Current liabilities
  Accounts payable – third parties 
  Accounts payable – related parties 
  Other payables, accruals and advance receipts 
  Deferred revenue 
  Amounts due to related parties 
Short-term bank borrowings 

  Deferred tax liabilities 

Total current liabilities 

Deferred tax liabilities 
Long-term bank borrowings 
Deferred revenue 
Deferred income 
Other non-current liabilities 

Total liabilities 

20,565 
3,521 
26,177 
1,171 
6,243 
23,077 
308 

81,062 

3,415 
26,923 
3,498 
2,132 
10,447 

18,237
2,190
17,159
2,394
8,716
26,282
321

75,299

2,626
26,923
4,182
–
3,853

127,477 

112,883

 
 
 
 
 
 
 
Consolidated Balance Sheets

5151

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

– 

41,036

56,533 
113,848 
(92,040) 
5,015 

83,356 
18,921 

102,277 

53,076
76,256
(100,051)
9,870

39,151
17,764

56,915

Commitments and contingencies (Note 19)

Redeemable non-controlling interests 

Company’s shareholders’ equity
  Ordinary shares; $1.00 par value; 75,000,000 shares authorized; 56,533,118 

  and 53,076,676 shares issued at December 31, 2015 and 2014 

  Additional paid-in capital 
  Accumulated losses 
  Accumulated other comprehensive income 

Total Company’s shareholders’ equity 
Non-controlling interests 

Total shareholders’ equity 

Total liabilities and shareholders’ equity 

229,754 

210,834

Simon To 

Director 

Christian Hogg

Director

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

 
 
 
 
 
 
52 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Consolidated Statements Of Operations

For the year ended December 31, 2015

Revenues
Sales of goods – third parties 
Sales of goods – related parties 
Revenue from license and collaboration agreements – third parties 
Revenue from research and development services – third parties 
Revenue from research and development services – related parties 

Total revenues 

Operating expenses
Costs of sales of goods – third parties 
Costs of sales of goods – related parties 
Research and development expenses 
Selling expenses 
Administrative expenses 

Total operating expenses 

Loss from operations 

Other (expense)/income

Interest income 

  Other income 

Interest expense 

  Other expense 

Total other (expense)/income 

Loss before income taxes and equity in earnings of equity investees 
Income tax expense 
Equity in earnings of equity investees, net of tax 

Net income/(loss) from continuing operations 
Income from discontinued operation, net of tax 

Net income/(loss) 
Less: Net income attributable to non-controlling interests 

Net income/(loss) attributable to the Company 

Accretion on redeemable non-controlling interests 

Net loss attributable to ordinary shareholders of the Company 

(Losses)/earnings per share attributable to ordinary shareholders 
  of the Company – basic and diluted (US$ per share)
Continuing operations 
Discontinued operation 
Number of shares used in per share calculation – basic and diluted 

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

2015 
US$’000 

118,113 
8,074 
44,060 
2,573 
5,383 

178,203 

(104,859) 
(5,918) 
(47,368) 
(10,209) 
(19,620) 

2014
US$’000

59,162
7,823
12,336
3,696
4,312

87,329

(53,477)
(5,372)
(29,914)
(4,112)
(12,713)

(187,974) 

(105,588)

(9,771) 

(18,259)

451 
386 
(1,404) 
(202) 

(769) 

(10,540) 
(1,605) 
22,572 

10,427 
– 

10,427 
(2,434) 

7,993 

(43,001) 

(35,008) 

559
20
(1,516)
(761)

(1,698)

(19,957)
(1,343)
15,180

(6,120)
2,034

(4,086)
(3,220)

(7,306)

(25,510)

(32,816)

(0.64) 
– 
54,659,315 

(0.64)
0.02
52,563,387

 
 
 
 
Consolidated Statements Of Comprehensive Income

For the year ended December 31, 2015

5353

Net income/(loss) 

Other comprehensive loss:
  Foreign currency translation loss 

Total Comprehensive income/(loss) 

Less: Comprehensive income attributable to non-controlling interests 

Total Comprehensive income/(loss) attributable to the Company 

2015 
US$’000 

2014
US$’000

10,427 

(4,086)

(5,557) 

4,870 

(1,732) 

3,138 

(2,712)

(6,798)

(2,944)

(9,742)

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

 
 
54 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Consolidated Statements Of Changes In Shareholders’ Equity

For the year ended December 31, 2015

Ordinary 
Number 

Shares 
Amount 
US$’000 

Additional 
Paid-in 
Capital 
US$’000 

Accumulated 
Losses 
US$’000 

Accumulated 
Other 
Comprehensive 
Income 
US$’000 

Total
Company’s 
Shareholders 
Equity 
US$’000 

Non-
controlling 
Interests 
US$’000 

As of December 31, 2013 

52,051 

52,051 

99,361 

(92,575) 

12,310 

71,147 

Net (loss)/income 
Non–controlling interests arising from
  acquisition of a subsidiary 
Purchase of additional interest in 
  a subsidiary of an equity investee 
Issuance of ordinary shares in relation

to exercise of share options 

Share–based compensation – share options 
Foreign currency translation adjustments 
Dividend paid to a non–controlling
shareholder of a subsidiary 

Transfer between reserves 
Dilution of interests in a subsidiary in relation
to exercise of share options of a subsidiary 

Accretion to redemption value of

redeemable non–controlling interests 

– 

– 

– 

1,025 
– 
– 

– 
– 

– 

– 

– 

– 

– 

1,025 
– 
– 

– 
– 

– 

– 

– 

– 

– 

1,655 
725 
– 

– 
25 

– 

(25,510) 

(7,306) 

– 

(234) 

– 
– 
– 

– 
(25) 

89 

– 

– 

– 

– 

– 
– 
(2,436) 

– 
– 

(4) 

– 

(7,306) 

– 

(234) 

2,680 
725 
(2,436) 

– 
– 

85 

(25,510) 

6,960 

3,220 

9,003 

– 

– 
– 
(276) 

(1,179) 
– 

36 

– 

Total
Equity
US$’000

78,107

(4,086)

9,003

(234)

2,680
725
(2,712)

(1,179)
–

121

(25,510)

As of December 31, 2014 

53,076 

53,076 

76,256 

(100,051) 

9,870 

39,151 

17,764 

56,915

Net income 
Issuance of ordinary shares in relation 

to exercise of share options 

Issuance of ordinary shares in exchange
  of redeemable non–controlling interest 
Share–based compensation 

Share options 
Long term incentive plan 

Long term incentive plan – treasury shares
  held by Trustee (note 22(iii)) 
Foreign currency translation adjustments 
Dividend paid to a non–controlling
shareholder of a subsidiary 

Transfer between reserves 
Dilution of interests in a subsidiary in relation 
to exercise of share options of a subsidiary 
Accretion to redemption value of redeemable
  non–controlling interests 

– 

243 

– 

243 

1,131 

– 

7,993 

3,214 

3,214 

80,823 

– 
– 

– 

– 
– 

– 
– 

– 

– 

– 
– 

– 

– 
– 

– 
– 

– 

– 

168 
233 

401 

(1,786) 
– 

– 
24 

– 

(43,001) 

– 

– 

– 

– 
– 

– 

7,993 

1,374 

84,037 

168 
233 

401 

– 
(4,855) 

(1,786) 
(4,855) 

– 
– 

– 

– 

– 
– 

42 

(43,001) 

2,434 

10,427

– 

– 

– 
– 

– 

– 
(702) 

(590) 
– 

15 

– 

1,374

84,037

168
233

401

(1,786)
(5,557)

(590)
–

57

(43,001)

– 

– 

– 
– 

– 

– 
– 

– 
(24) 

42 

– 

As of December 31, 2015 

56,533 

56,533 

113,848 

(92,040) 

5,015 

83,356 

18,921 

102,277

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements Of Cash Flows

For the year ended December 31, 2015

5555

Operating activities
Net income/(loss) 
Adjustments to reconcile net income/(loss) to net cash (used in)/generated from operating activities
  Depreciation and amortization 

Loss on retirement of property, plant and equipment 
Inventories written off 

  Provision for excess and obsolete inventories 
  Decrease in provision for excess and obsolete inventories due to sale of inventories 
  Allowance for doubtful accounts 

Share-based compensation expense - share options 
Share-based compensation expense - long-term incentive plan 
Equity in earnings of equity investees 
  Dividend received from equity investees 
  Foreign currency gain 

Income taxes 
Changes in operating assets and liabilities
  Accounts receivable – third parties 
  Accounts receivable – related parties 
  Other receivables, prepayments and deposits 
  Amounts due from related parties 

Inventories 
Long-term prepayment 

  Accounts payable – third parties 
  Accounts payable – related parties 
  Other payables, accruals and advance receipts 
  Deferred revenue 
  Deferred income 
  Amounts due to related parties 

Net cash (used in)/generated from operating activities 

Investing activities
Acquisition of a subsidiary, net of cash acquired 
Purchases of property, plant and equipment 
Deposit in short-term investments 

2015 
US$’000 

2014
US$’000

10,427 

(4,086)

2,015 
60 
12 
25 
(33) 
1,408 
1,151 
308 
(22,572) 
6,410 
198 
1,093 

(12,030) 
315 
(397) 
(3,010) 
(5,154) 
(2,132) 
2,328 
1,331 
4,660 
(1,907) 
2,132 
3,977 

(9,385) 

– 
(3,324) 
12,179 

1,265
36
147
15
(106)
185
1,065
–
(15,180)
15,949
173
497

8,285
1,754
454
(5,029)
167
–
2,332
(162)
(47)
(697)
–
1,342

8,359

689
(3,729)
(12,179)

Net cash generated from/(used in) investing activities 

8,855 

(15,219)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Consolidated Statements Of Cash Flows

For the year ended December 31, 2015

2015 
US$’000 

2014
US$’000

1,374 
57 
(1,786) 
(590) 
– 
– 
3,205 
(6,410) 
(1,321) 

(5,471) 

(6,001) 
(1,004) 

(7,005) 

38,946 

31,941 

1,220 
510 

84,037 
3,125 

2,680
121
–
(1,179)
3,059
(2,250)
8,205
(11,277)
–

(641)

(7,501)
(416)

(7,917)

46,863

38,946

1,466
908

–
–

Financing activities
Proceeds from issuance of ordinary shares 
Proceeds from exercise of share options of a subsidiary 
Purchases of treasury shares 
Dividends paid to a non-controlling shareholder of a subsidiary 
Capital contribution from redeemable non-controlling interests 
Repayment of loan to a non-controlling shareholder of a subsidiary 
Proceeds from bank borrowings 
Repayment of bank borrowings 
Payment for deferred costs for initial public offering in the United States 

Net cash used in ﬁ nancing activities 

Net decrease in cash and cash equivalents 
Effect of exchange rate changes on cash and cash equivalents 

Cash and cash equivalents
Cash and cash equivalents at beginning of year 

Cash and cash equivalents at end of year 

Supplemental disclosure for cash ﬂ ow information
Cash paid for interest 
Cash paid for tax, net of refunds 
Supplemental disclosure for non-cash activities
Issuance of ordinary shares in exchange of redeemable non-controlling interests 
Deferred costs for initial public offering in the United States incurred but not yet paid 

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

 
 
 
Notes To Consolidated Financial Statements

5757

1. 

ORGANIZATION AND NATURE OF BUSINESS

Hutchison China MediTech Limited (the “Company”) and its subsidiaries (together the “Group”) are principally engaged in researching, developing, manufacturing 

and selling pharmaceuticals and health-related consumer products. The Group and its equity investees have manufacturing plants in Shanghai and Guangzhou in 

the People’s Republic of China (the “PRC”) and sell mainly in the PRC and Hong Kong.

The Company considers Hutchison Healthcare Holdings Limited as its immediate holding company and CK Hutchison Holdings Limited (“CK Hutchison”) as its 

ultimate holding company. Hutchison Whampoa Limited was the Company’s ultimate holding company till June 3, 2015 when it became a subsidiary of CK 

Hutchison upon certain reorganization within the group.

The Group determines the operating segments from both business and geographic perspectives as follows:

(i) 

Innovation Platform (Drug research and development (“Drug R&D”)): focuses on discovering and developing innovative therapeutics in oncology and 

autoimmune diseases, and the provision of research and development services; and

(ii) 

Commercial Platform: comprising of the manufacture, marketing and distribution of prescription and over-the-counter pharmaceuticals in the PRC as well 

as certain health-related consumer products through Hong Kong. The Commercial Platform is further segregated into two core business areas:

(a) 

Prescription Drugs: comprises the development, manufacture, distribution, marketing and sale of prescription pharmaceuticals; and

(b) 

Consumer Health: comprises the development, manufacture, distribution, marketing and sale of over-the-counter pharmaceuticals and health-

related consumer products.

Innovation Platform and Prescription Drugs business under the Commercial Platform are primarily located in the PRC. The locations for Consumer Health business 

under the Commercial Platform are further segregated into the PRC and Hong Kong.

The Group discontinued an operation in the PRC of the Consumer Health business under the Commercial Platform.

The Company was incorporated in the Cayman Islands on December 18, 2000 as an exempted company with limited liability under the Companies Law (2000 

Revision), Chapter 22 of the Cayman Islands. The address of its registered ofﬁ ce is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

The Company’s ordinary shares are listed on the AIM regulated by the London Stock Exchange.

Liquidity

The Group incurred losses from operations of US$9.8 million and US$18.3 million for the years ended December 31, 2015 and 2014 respectively. As of December 

31, 2015, the Group had accumulated losses of US$92.0 million. As of December 31, 2015, the Group had cash and cash equivalents of US$31.9 million and 

unutilized bank borrowing facilities of US$6.9 million. Subsequently, in February 2016, the Group has established new bank borrowing facilities of US$60.0 million. 

The Group regularly monitors current and expected liquidity requirements to ensure that it maintains sufﬁ cient cash balances and adequate credit facilities to meet 

its liquidity requirements in the short and long term.

Based on the Group’s operating plan, the existing cash and cash equivalents are considered to be sufﬁ cient to meet the cash requirements to fund planned 

operations and other commitments for at least the next twelve months. The Group’s operating plan includes the continued receipt of dividends from certain of its 

equity investees and there can be no assurances that these entities will continue to declare and pay dividends to its shareholders.

58 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

2. 

PARTICULARS OF PRINCIPAL SUBSIDIARIES AND EQUITY INVESTEES

Place of
establishment
and operations

Equity interest
attributable
to the Group

Principal activities

At December 31,
2015

2014

Name

Subsidiaries

Hutchison MediPharma Limited

Hutchison Whampoa Sinopharm Pharmaceuticals

(Shanghai) Company Limited (“Hutchison Sinopharm”)

PRC

PRC

Hutchison Hain Organic (Hong Kong) Limited

Hong Kong

(“HHOL”) (note (i))

Hutchison Hain Organic (Guangzhou) Limited

(“HHOGZL”) (note (i))

Hutchison Healthcare Limited (“HHL”)

PRC

PRC

99.75%

99.81%

Research and development
of pharmaceutical products

51%

51%

Provision of sales, distribution
and marketing services to
pharmaceutical manufacturers

50%

50%

50%

50%

Wholesale and trading of
healthcare and consumer products

Wholesale and trading of
healthcare and consumer products

100%

100%

Manufacture and distribution
of healthcare products

Hutchison Consumer Products Limited

Hong Kong

100%

100%

Equity investees

Nutrition Science Partners Limited (“NSPL”) (note (ii))

Hong Kong

49.88%

49.91%

Shanghai Hutchison Pharmaceuticals Limited (“SHPL”)

PRC

Hutchison Whampoa Guangzhou Baiyunshan

PRC

Chinese Medicine Company Limited (“HBYS”) (note (iii))

Notes:

50%

40%

50%

40%

Wholesale and trading of
healthcare and consumer products

Research and development
of pharmaceutical products

Manufacture and distribution
of prescription drugs products

Manufacture and distribution
of over-the-counter drug products

(i) 

HHOL and HHOGZL are regarded as subsidiaries of the Company as while both shareholders of these subsidiaries have equal representation at the Board, in the event of a 

deadlock, the Group has a casting vote and is therefore, able to unilaterally control the ﬁ nancial and operating policies of HHOL and HHOGZL.

(ii) 

The 50% equity interest in NSPL is held by a 99.75% and 99.81% owned subsidiary of the Group as of December 31, 2015 and 2014. The effective equity interest of the Group 

in NSPL is therefore 49.88% and 49.91% for 2015 and 2014 respectively.

(iii) 

The 50% equity interest in HBYS is held by a 80% owned subsidiary of the Group. The effective equity interest of the Group in HBYS is therefore 40% for both 2015 and 2014.

 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

5959

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated ﬁ nancial statements reﬂ ect the ﬁ nancial statements of the Company and all of its subsidiaries in which a controlling interest 

is maintained. Investments in equity investees over which the Group has signiﬁ cant inﬂ uence are accounted for using the equity method. All inter-company 

balances and transactions have been eliminated in consolidation. The consolidated ﬁ nancial statements have been prepared in conformity with generally accepted 

accounting principles in the United States of America (“US GAAP”).

Use of Estimates

The preparation of consolidated ﬁ nancial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the 

reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated ﬁ nancial statements and the 

reported amounts of revenues and expenses during the reporting period. Estimates are used when accounting for amounts recorded in connection with 

acquisitions, including initial fair value determinations of assets and liabilities and other intangible assets as well as subsequent fair value measurements. 

Additionally, estimates are used in determining items such as useful lives of property, plant and equipment, write-down of inventories, allowance for doubtful 

accounts, share-based compensation, impairments of long-lived assets, impairment of other intangible asset and goodwill, taxes on income, tax valuation 

allowances and revenues from research and development projects. Actual results could differ from those estimates.

Foreign Currency Translation

The Group’s functional currency is Renminbi (“RMB”) but the presentation currency is US dollar (“US$”). The ﬁ nancial statements of the Company’s subsidiaries with 

a functional currency other than the US dollar have been translated into the Company’s reporting currency, the US dollar. All assets and liabilities of the subsidiaries 

are translated using year-end exchange rates and revenues and expenses are translated at average exchange rates for the year. Translation adjustments are 

reﬂ ected in the accumulated other comprehensive income/(loss) component of shareholders’ equity.

Net foreign currency exchange losses of US$79,000 and US$480,000 were recorded in other (expense)/income for the years ended December 31, 2015 and 2014 

respectively.

Cash and Cash Equivalents

The Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and cash equivalents 

consist primarily of cash in hand and demand deposits and are stated at cost, which approximates fair value.

Short-term Investments

Short-term investments include deposits placed with banks with original maturities of more than three months but less than one year. Interest generated from 

short-term investments are recorded over the period earned. It is recorded as ‘interest income’ on the statement of operations and measured based on the actual 

amount of interest the Group earns.

60 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentration of Credit Risk

Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, 

accounts receivable, other receivables and amounts due from related parties.

The Group places substantially all of its deposits of cash and cash equivalents and short-term investments in major ﬁ nancial institutions, which management 

believes are of high credit quality. The Group has a policy to limit the amount of credit exposure to any particular ﬁ nancial institution.

The Group has no signiﬁ cant concentration of credit risk. The Group has policies in place to ensure that sales of goods are made to customers with an appropriate 

credit history and the Group performs periodic credit evaluations of its customers. Normally the Group does not require collaterals from trade debtors.

Foreign Currency Risk

The Group’s operating transactions and its assets and liabilities are mainly denominated in RMB, which is not freely convertible into foreign currencies. The Group’s 

cash and cash equivalents that are subject to such government controls as of December 31, 2015 and 2014 are as disclosed in Note 7. The value of the RMB 

is subject to changes by the central government policies and international economic and political developments that affect the supply and demand of RMB in 

the foreign exchange market. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized ﬁ nancial institutions at 

exchange rates set by the People’s Bank of China (the “PBOC”). Remittances in currencies other than RMB by the Group in China must be processed through the 

PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to effect the remittance.

Fair Value of Financial Instruments

Financial instruments that are measured at fair value is determined according to a fair value hierarchy that prioritizes the inputs and assumptions used, and the 

valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described as follows:

Level 1 

Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 

Inputs are quoted prices for similar assets or liabilities in active markets; or quoted prices for identical or similar instruments in markets that are not 

active; and model-derived valuations in which all signiﬁ cant inputs and signiﬁ cant value drivers are observable in active markets.

Level 3 

Inputs are unobservable inputs based on the Group’s assumptions and valuation techniques used to measure assets or liabilities at fair value. The inputs 

require signiﬁ cant management judgment or estimation.

The assessment of the signiﬁ cance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and 

liabilities and their placement within the fair value hierarchy levels.

The fair value of assets and liabilities is established using the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction 

between market participants at the measurement date and a fair value hierarchy is established based on the inputs used to measure fair value.

Notes To Consolidated Financial Statements

6161

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill

Goodwill represents the excess of the purchase price plus fair value of non-controlling interests over the fair value of identiﬁ able assets and liabilities acquired. 

Goodwill is not amortized, but is tested for impairment at the reporting unit level on at least an annual basis or when an event occurs or circumstances change 

that would more likely than not reduce the fair value of a reporting unit below its carrying amount. When performing an evaluation of goodwill impairment, the 

Group has the option to ﬁ rst assess qualitative factors, such as signiﬁ cant events and changes to expectations and activities that may have occurred since the last 

impairment evaluation, to determine if it is more likely than not that goodwill might be impaired. If as a result of the qualitative assessment, that it is more likely 

than not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative fair value test is performed. No impairments of goodwill 

were identiﬁ ed during any of the years presented.

Property, Plant and Equipment

Property, plant and equipment consist of buildings, leasehold improvements, plant and equipment, furniture, ﬁ xtures, other equipment and motor vehicles. 

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated 

useful lives of the depreciable assets.

Buildings 

Plant and equipment 

Furniture and ﬁ xtures, other equipment and motor vehicles 

Leasehold improvements 

20 years

10 years

4-5 years

Shorter of (a) 5 years or (b) remaining term of lease

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is 

reﬂ ected in the statement of operations in the year of disposition. Additions and improvements that increase the value or extend the life of an asset are capitalized. 

Repairs and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

The Group evaluates the recoverability of long-lived assets in accordance with authoritative guidance on accounting for the impairment or disposal of long-lived 

assets. The Group evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not 

be recoverable. Such impairment is recognized in the event the net book value of such assets exceeds their fair value. If the carrying value of the net assets assigned 

exceeds the fair value of the assets, then the second step of the impairment test is performed in order to determine the implied fair value. No impairment of long-

lived assets occurred in the years presented.

Leasehold Land

Leasehold land represents fees paid to acquire the right to use the land on which various plants and buildings are situated for a speciﬁ ed period of time from the 

date the respective right was granted and are stated at cost less accumulated amortization and impairment loss, if any. Amortization is computed using straight-

line basis over the lease period of 50 years.

Other Intangible Asset

Intangible asset with ﬁ nite useful life represents the Goods Supply Practice (“GSP”) license. It is carried at cost less accumulated amortization and impairment loss, 

if any. Amortization is computed using straight-line basis over its estimated useful life of 10 years.

62 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventories

Inventories are stated at the lower of cost or net realisable value. Cost is determined using the weighted average cost method. The cost of ﬁnished goods comprises 

raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). Net realizable value is the estimated selling 

price in the ordinary course of business, less applicable variable selling expenses. A provision for excess and obsolete inventory will be made based primarily on 

forecast of product demand and production requirements. The excess balance determined by this analysis becomes the basis for excess inventory charge and the 

written-down value of the inventory becomes its cost. Written-down inventory is not written up if market conditions improve.

Accounts Receivable

Accounts receivable are stated at the amount management expect to collect from customers based on their outstanding invoices. Management reviews accounts 

receivable regularly to determine if any receivable will potentially be uncollectible. Estimates are used to determine the amount of allowance for doubtful 

accounts necessary to reduce accounts receivable to its estimated net realizable value. The amount of the allowance for doubtful accounts is recognized in the 

statement of operations.

Research and Development Expense

Research and development expenses consist primarily of salaries and beneﬁ ts, share-based compensation, occupancy, materials and supplies, contracted research, 

consulting arrangements and other expenses incurred to sustain the Group’s research and development programs. Research and development costs are expensed 

as incurred.

Operating Leases

Leases in which a signiﬁ cant portion of the risks and rewards of ownership are retained by the lessor are classiﬁ ed as operating leases. Payments made under 

operating leases are charged to the statement of operations on a straight-line basis over the period of the leases.

Total operating lease rentals for land and building for the years ended December 31, 2015 and 2014 amounted to US$1,426,000 and US$810,000 respectively. 

Out of this total, US$237,000 and nil were recorded in research and development expenses for the years ended December 31, 2015 and 2014 respectively and 

US$1,189,000 and US$810,000 were recorded in administrative expenses for the years ended December 31, 2015 and 2014 respectively. Government incentives 

received in respect of research and development are recorded as a reduction to operating lease rentals in 2015 and 2014.

Income Taxes

The Group accounts for income taxes under the liability method. Under the liability method, deferred income tax assets and liabilities are determined based on the 

differences between the ﬁ nancial reporting and income tax bases of assets and liabilities and are measured using the tax income rates that will be in effect when 

the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some of the net deferred income tax asset will not 

be realized.

The Group accounts for a tax position from an uncertain tax position in the consolidated ﬁ nancial statements only if it is more likely than not that the position 

is sustainable based on its technical merits and consideration of the relevant tax authority’s widely understood administrative practices and precedents. If the 

recognition threshold is met, the Group records only the portion of the tax position that is greater than 50 percent likely to be realized.

Notes To Consolidated Financial Statements

6363

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between 

the proceeds (net of transaction costs) and the redemption value is recognized in the statement of operations over the period of the borrowings using the effective 

interest method.

Deﬁ ned Contribution Plans

The Company’s subsidiaries in the PRC participate in a government-mandated multi-employer deﬁ ned contribution plan pursuant to which certain retirement, 

medical and other welfare beneﬁ ts are provided to employees. The relevant labor regulations require the Company’s subsidiaries in the PRC to pay the local labor 

and social welfare authorities monthly contributions at a stated contribution rate based on the monthly basic compensation of qualiﬁ ed employees. The relevant 

local labor and social welfare authorities are responsible for meeting all retirement beneﬁ ts obligations and the Company’s subsidiaries in the PRC have no further 

commitments beyond their monthly contributions. The contributions to the plan are expensed as incurred.

The Group also makes payments to other deﬁ ned contribution plans for the beneﬁ t of employees employed by subsidiaries outside the PRC. The deﬁ ned 

contribution plans are generally funded by the relevant companies and by payments from employees of the contribution plans.

The Group’s contributions to deﬁ ned contribution plans for the years ended December 31, 2015 and 2014 amounted to US$1,653,000 and US$1,370,000 

respectively.

Share-Based Compensation

Share options

The share options are classiﬁ ed as equity settled awards. The Group recognizes share-based compensation expense on share options granted to employees and 

directors based on their estimated grant date fair value using the Binomial model. This Binomial pricing model uses various inputs to measure fair value, including 

estimated market value of the underlying ordinary share at the grant date, contractual terms, estimated volatility, risk-free interest rate and expected dividend 

yields. The Group recognizes share-based compensation expense, net of estimated forfeitures, in the consolidated statements of operations on a graded vesting 

over the requisite service period. The Group applies an estimated forfeiture rate derived from historical and expected future employee termination behavior. If the 

actual number of forfeitures differs from those estimated by management, adjustments to compensation expense may be required in future periods.

For share options granted to non-employees, the fair value of the share options is estimated using the Binomial model. This model utilizes the estimated market 

value of the Company’s underlying ordinary share at the measurement date, the contractual terms of the option, estimated volatility, risk-free interest rates and 

expected dividend yields of the Company’s ordinary share. The Company recognizes share-based compensation expense, net of estimated forfeitures, in the 

consolidated statements of operations on graded vesting over the requisite service period. Measurement of share-based compensation is subject to periodic 

adjustment for changes in the fair value of the award.

Share-based compensation expense, when recognized, is charged to the consolidated statements of operations with the corresponding entry to additional paid-

in capital or non-controlling interests.

64 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Share-Based Compensation (Continued)

Long Term Incentive Plan

The Long Term Incentive Plan (“LTIP”) is recognized as a liability in the consolidated balance sheets before the determination date (i.e. the achievement date on 

which the performance conditions is known, being one business day following the publication of the annual report for the ﬁ nancial year to which the award 

relates). Following the determination dates, the LTIP are settled in a variable number of shares based on a ﬁ xed monetary amount, which is determined by the 

actual achievement of performance target. The LTIP are classiﬁ ed as equity-settled awards from this date. The amounts previously recorded in the liability will be 

transferred to additional paid-in capital.

The Group recognizes the expense, net of estimated forfeitures, on the LTIP based on a ﬁ xed monetary amount on a straight-line basis over the requisite period. 

The Group applies an estimated forfeiture rate derived from historical and expected future employee termination behavior. If the actual number of forfeitures 

differs from those estimated by management, adjustments to compensation expense may be required in future periods. Prior to the determination date, the 

amount of LTIP that are expected to vest also takes into consideration the achievement of the non-market performance conditions and the extent to which the 

performance conditions are likely to be met.

Treasury shares

The Company accounted for treasury shares under the cost method. As of December 31, 2015 and 2014, the amount of treasury shares is approximately 

US$1,786,000 and nil, respectively, and the number of treasury shares is 40,655 and nil, respectively. The treasury shares were purchased for the purpose of the 

granting of conditional awards under LTIP as disclosed in Note 22. The Company expects to repurchase the shares amounting to approximately US$307,000 during 

2016, based on estimation of the determination of LTIP.

Ordinary shares

The Company’s ordinary shares are stated at par value of $1.00 per ordinary share. The difference between the consideration received, net of issuance cost, and 

the par value is recorded in additional paid-in capital. Speciﬁ c incremental costs directly attributable to the Company’s proposed offering of shares in the United 

States have been deferred and will be charged against the gross proceeds of the offering upon closing of the offering.

Convertible Preferred Shares

When the Company or its subsidiaries issues preferred shares, the Group assesses whether such instruments should be liability, mezzanine equity, or permanent 

equity classified based on multiple indicators such as redemption features, conversion features, voting rights and other embedded features. Freestanding 

equity instruments with mandatory redemption requirements, embodies an obligation to repurchase the issuer’s equity shares by transferring assets, or certain 

obligations to issue a variable number of shares, are treated as liability-classiﬁ ed instruments. Equity instruments that are redeemable at the option of the holder 

or not solely within our control are classiﬁ ed as mezzanine equity of the issuer entity (and redeemable non-controlling interests of the consolidated ﬁ nancial 

statements of the Group if preferred shares are issued by its subsidiaries). Subsequent measurements of ﬁ nancing instruments are driven by the instruments’ 

balance sheet classiﬁ cation.

The Group also reviews the terms of each convertible instrument and determines whether the host instrument is more akin to debt or equity based on the 

economic characteristics and risks in order to evaluate if there were any embedded features would require bifurcation and separate accounting from the host 

contract. For embedded conversion features that are not required to be separated under ASC 815, Derivatives and Hedging, the Group analyzes the accounting 

conversion price and our share price at the commitment date to identify any beneﬁ cial conversion features.

Notes To Consolidated Financial Statements

6565

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Convertible Preferred Shares (Continued)

For modification to preferred shares not classified as liabilities, the Group assesses whether an amendment to the term of the preferred shares is an 

extinguishment or a modiﬁ cation using the fair value model. The Group considers that a signiﬁ cant change in fair value after the change of the terms to be 

substantive and thus triggers extinguishment. A change in fair value which is not signiﬁ cant immediately after the change of the terms is considered non-

substantive and thus is subject to modiﬁ cation accounting. When preferred shares are extinguished, the difference between the fair value of the consideration 

transferred to the preferred shareholders and the carrying amount of such preferred shares (net of issuance costs) is treated as a deemed dividend to the preferred 

shareholders. When preferred shares are modiﬁ ed and such modiﬁ cation results in value transfer between preferred shareholders and ordinary shareholders, the 

change in fair value resulted from the amendment is treated as a deemed dividend to or from the preferred shareholders.

Government Incentives

Incentives from governments are recognized at their fair values. Government incentives that are received in advance are deferred and recognized in the statement 

of operations over the period necessary to match them with the costs that they are intended to compensate. Government incentives in relation to the achievement 

of stages of research and development projects are recognized in the statement of operations when there is reasonable assurance that the incentives will be 

received and all attached conditions have been compiled with.

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief executive ofﬁ cer who is the chief operating decision 

maker.

The chief operating decision maker has reviewed the Group’s internal reporting in order to assess performance and allocate resources and determined that the 

Group’s reportable segments are as disclosed in Note 1.

Revenue Recognition

Sales of goods – wholesale

Revenue from our Commercial Platform segments are recognized when product is delivered and title passes to the customer and there are no further obligations 

to the customer. Recognition of revenue also requires reasonable assurance of collection of sales proceeds and completion of all performance obligations. Sales 

discounts are issued to customers as direct discounts at the point-of-sales or indirectly in the form of rebates. Additionally, sales are generally made with a limited 

right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns.

Revenues from research and development projects

The Group recognizes revenue for the performance of services when each of the following four criteria is met: (i) persuasive evidence of an arrangement exists; (ii) 

services are rendered; (iii) the sales price is ﬁ xed or determinable; and (iv) collectability is reasonably assured.

The Group follows ASC 605-25, Revenue Recognition – Multiple-Element Arrangements and ASC 808, Collaborative Arrangements, if applicable, to determine the 

recognition of revenue under the Group’s license and collaborative research, development and commercialization agreements. The terms of these agreements 

generally contain multiple elements, or deliverables, which may include (i) licenses to the Group’s intellectual property, (ii) materials and technology, (iii) clinical 

supply, and/or (iv) participation in joint research or joint steering committees. The payments the Group may receive under these arrangements typically include 

one or more of the following: non-refundable, up-front license fees; funding of research and/or development efforts; amounts due upon the achievement of 

speciﬁ ed milestones; and/or royalties on future product sales.

66 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (Continued)

Revenues from research and development projects (Continued)

ASC 605-25 provides guidance relating to the separability of deliverables included in an arrangement into different units of accounting and the allocation of 

arrangement consideration to the units of accounting. The evaluation of multiple-element arrangements requires management to make judgments about (i) the 

identiﬁ cation of deliverables, (ii) whether such deliverables are separable from the other aspects of the contractual relationship, (iii) the estimated selling price of 

each deliverable, and (iv) the expected period of performance for each deliverable.

To determine the units of accounting under a multiple-element arrangement, management evaluates certain separation criteria, including whether the 

deliverables have stand-alone value, based on the relevant facts and circumstances for each arrangement. Management then estimates the selling price for each 

unit of accounting and allocates the arrangement consideration to each unit utilizing the relative selling price method. The Company determines the estimated 

selling price for deliverables within each agreement using vendor-speciﬁ c objective evidence (“VSOE”) of selling price, if available, or third party evidence of selling 

price if VSOE is not available, or the Company’s best estimate of selling price, if neither VSOE nor third party evidence is available. Determining the best estimate 

of selling price for a deliverable requires signiﬁ cant judgment. The Company typically uses its best estimate of a selling price to estimate the selling price for 

licenses to do development work, since it often does not have VSOE or third party evidence of selling price for these deliverables. In those circumstances where the 

Company applies its best estimate of selling price to determine the estimated selling price of a license to development work, it considers market conditions as well 

as entity-speciﬁ c factors, including those factors contemplated in negotiating the agreements as well as internally developed estimates that include assumptions 

related to the market opportunity, estimated development costs, probability of success and the time needed to commercialize a product candidate pursuant to 

the license. In validating its best estimate of selling price, the Company evaluates whether changes in the key assumptions used to determine its best estimate of 

selling price will have a signiﬁ cant effect on the allocation of arrangement consideration between deliverables. The Company recognizes consideration allocated 

to an individual element when all other revenue recognition criteria are met for that element.

The allocated consideration for each unit of accounting is recognized over the related obligation period in accordance with the applicable revenue recognition 

criteria.

If there are deliverables in an arrangement that are not separable from other aspects of the contractual relationship, they are treated as a combined unit of 

accounting, with the allocated revenue for the combined unit recognized in a manner consistent with the revenue recognition applicable to the ﬁ nal deliverable in 

the combined unit. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as unearned revenue in the accompanying balance 

sheets and recognized as revenue when the related revenue recognition criteria are met.

The Group typically receives non-refundable, up-front payments when licensing the Group’s intellectual property, which often occurs in conjunction with a research 

and development agreement. If management believes that the license to the Group’s intellectual property has stand-alone value, the Group generally recognizes 

revenue attributed to the license upon delivery provided that there are no future performance requirements for use of the license. When management believes 

that the license to the Group’s intellectual property does not have stand-alone value, the Group would recognize revenue attributed to the license rateably over 

the contractual or estimated performance period. For payments payable on achievement of milestones that do not meet all of the conditions to be considered 

substantive, the Group recognizes a portion of the payment as revenue when the speciﬁ c milestone is achieved, and the contingency is removed. Other contingent 

event-based payments for which payment is either contingent solely upon the passage of time or the result of collaborator’s performance are recognized when 

earned. The Company’s collaboration and license agreements generally include contingent milestone payments related to speciﬁ ed pre-clinical research and 

development milestones, clinical development milestones, regulatory milestones and sales-based milestones. Pre-clinical research and development milestones 

are typically payable upon the selection of a compound candidate for the next stage of research and development. Clinical development milestones are typically 

payable when a product candidate initiates or advances in clinical trial phases or achieves deﬁ ned clinical events such as proof-of-concept. Regulatory milestones 

are typically payable upon submission for marketing approval with regulatory authorities or upon receipt of actual marketing approvals for a compound, approvals 

for additional indications, or upon the ﬁ rst commercial sale. Sales-based milestones are typically payable when annual sales reach speciﬁ ed levels.

Notes To Consolidated Financial Statements

6767

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (Continued)

Revenues from research and development projects (Continued)

At the inception of each arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk to both parties 

on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (i) 

the entity’s performance to achieve the milestone or (ii) the enhancement of the value of the delivered item(s) as a result of a speciﬁ c outcome resulting from 

the entity’s performance to achieve the milestone; (b) the consideration relates solely to past performance; and (c) the consideration is reasonable relative to all 

of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientiﬁ c, regulatory, commercial and other risks that 

must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone 

consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment.

For further details on the license and collaboration agreements, see Note 23.

Comprehensive Income/(loss)

Comprehensive income/(loss) is deﬁ ned as the change in equity of a business enterprise during a period from transactions, and other events and circumstances 

from non-owner sources, and currently consists of net income and gains and losses on foreign currency translation related to the Company’s subsidiaries.

Earnings/(losses) per share

Basic earnings/(losses) per share is computed by dividing net income/(loss) available to ordinary shareholders by the weighted average number of ordinary shares 

outstanding during the period.

Diluted earnings/(losses) per share is calculated by dividing net income/(loss) attributable to ordinary shareholders, by the weighted average number of ordinary 

and dilutive ordinary share equivalents outstanding during the period. Dilutive ordinary share equivalents include shares issuable upon the exercise or settlement 

of share-based awards issued by the Company and its subsidiaries using the treasury stock method and the ordinary shares issuable upon the conversion of 

the preferred shares issued by its subsidiary, Hutchison MediPharma Holdings Limited (“HMHL”), (referred to as redeemable non-controlling interests on the 

consolidated balance sheets) using the if-converted method.

The computation of diluted earnings/(losses) per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive 

effect.

In determining the impact from share-based awards and convertible preferred shares issued by HMHL, the Company ﬁ rst calculates the diluted earnings per share 

at the HMHL and includes in the numerator of consolidated earnings/(losses) per share the amount based on the diluted earnings/(losses) per share of HMHL 

multiplied by the number of shares owned by the Company.

In addition, periodic accretion to preferred shares of HMHL (Note 20) is recorded as deductions to consolidated net income to arrive at net income/(loss) available 

to the Company’s ordinary shareholders for purpose of calculating the consolidated basic earnings/(losses) per share.

Discontinued Operation

A discontinued operation is a component of the Group’s business, the operations and cash ﬂ ows of which can be clearly distinguished from the rest of the Group 

and which represents a separate major line of business or geographic area of operations, or is part of a single co-ordinated plan to dispose of a separate major 

line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

When an operation is classiﬁ ed as discontinued, a single amount is presented in the statement of operations, which comprises the post-tax proﬁ t or loss of the 

discontinued operation.

68 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Proﬁ t appropriation and statutory reserves

The Group’s subsidiaries established in the PRC are required to make appropriations to certain non-distributable reserve funds.

In accordance with the laws applicable to the Foreign Investment Enterprises established in the PRC, the Group’s subsidiaries registered as wholly-owned foreign 

enterprise have to make appropriations from its after-tax proﬁ t (as determined under generally accepted accounting principles in the PRC (“PRC GAAP”) to reserve 

funds including general reserve fund, the enterprise expansion fund and staff bonus and welfare fund. The appropriation to the general reserve fund must be 

at least 10% of the after-tax proﬁ ts calculated in accordance with PRC GAAP. Appropriation is not required if the general reserve fund has reached 50% of the 

registered capital of the company. Appropriation to the enterprise expansion fund and staff bonus and welfare fund is made at the company’s discretion.

The use of the general reserve fund, enterprise expansion fund, statutory surplus reserve and discretionary surplus fund are restricted to the offsetting of losses 

or increases the registered capital of the respective company. The staff bonus and welfare fund is a liability in nature and is restricted to fund payments of special 

bonus to employees and for the collective welfare of employees. All these reserves are not allowed to be transferred to the company in terms of cash dividends, 

loans or advances, nor can they be distributed except under liquidation.

For the years ended December 31, 2015 and 2014, proﬁ t appropriation to statutory funds for the Group’s entities incorporated in the PRC was approximately 

US$24,000 and US$25,000 respectively. No appropriation to other reserves was made for any of the years presented.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant 

and Equipment (Topic 360) – Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 deﬁ nes a discontinued 

operation as a disposal of a component or group of components that is disposed of or is classiﬁ ed as held for sale and represents a strategic shift that has (or will 

have) a major effect on an entity’s operations and ﬁ nancial results. The standard states that a strategic shift could include a disposal of a major geographic area 

of operations, a major line of business, a major equity investment, or other major parts of an entity. ASU 2014-08 is effective for ﬁ scal years and interim periods 

within those years beginning after December 15, 2014. The adoption of ASU 2014-08 did not have a material impact on the Group’s consolidated balance sheets, 

results of operations, or cash ﬂ ows. However, in the event that a future disposition meets the revised criteria, this standard will have an impact on the presentation 

of the ﬁ nancial statements and associated disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), to clarify the principles of recognizing revenue and create 

common revenue recognition guidance between US GAAP and International Financial Reporting Standards (“IFRS”). An entity has the option to apply the provisions 

of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this standard 

recognized at the date of initial application. ASU 2014-09 is effective for ﬁ scal years and interim periods within those years beginning after December 15, 2017, 

and early adoption is permitted but not earlier than the original effective date of December 15, 2016. The Group is currently evaluating the method of adoption 

and the impact ASU 2014-09 will have on the Group’s consolidated balance sheets, results of operations, cash ﬂ ows, and associated disclosures.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an 

Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance regarding management’s responsibility to (i) evaluate whether there is substantial 

doubt about an organization’s ability to continue as a going concern and (ii) provide related footnote disclosures. ASU 2014-15 is effective for ﬁ scal years and 

interim periods within those years beginning after December 15, 2016. The adoption of ASU 2014-15 is not expected to have a signiﬁ cant impact on the Group’s 

consolidated ﬁ nancial statement disclosures.

Notes To Consolidated Financial Statements

6969

3. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) – Simplifying the Measurement of Inventory which requires an entity to measure inventory 

within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less 

reasonably predictable costs of completion, disposal, and transportation. The amendments in this guidance more closely align the measurement of inventory in US 

GAAP with the measurement of inventory in IFRS. ASU 2015-11 is effective for ﬁ scal years and interim periods within those years beginning after December 15, 

2016. The Group does not expect this updated standard to have a material impact on the consolidated ﬁ nancial statements and associated disclosures.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes. ASU 2015-17 simplifies the 

presentation of deferred income taxes, which require the deferred tax liabilities and assets be classiﬁ ed as noncurrent in a classiﬁ ed balance sheet. ASU 2015-17 

is effective for ﬁ scal years and interim periods within those years beginning after December 15, 2016. The adoption of ASU 2015-17 is expected to impact the 

presentation of the Group’s consolidated balance sheets only.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and 

Financial Liabilities. ASU 2016-01 makes a number of changes to the accounting for equity investments and ﬁ nancial liabilities under the fair value option, 

and the presentation and disclosure requirements for ﬁ nancial instruments. It also simpliﬁ es the impairment assessment of equity investments without readily 

determinable fair values by requiring assessment for impairment qualitatively at each reporting period. ASU 2016-01 is effective for ﬁ scal years and interim 

periods within those years beginning after December 15, 2017. Early adoption of this particular guidance from ASU 2016-01 is not permitted. The Group is 

currently evaluating the method of adoption and impact ASU 2016-01 will have on the Group’s consolidated balance sheets, results of operations, cash ﬂ ows, and 

associated disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that 

arise from leases. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its 

right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class 

of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally 

on a straight-line basis over the lease term. ASU 2016-02 is effective for ﬁ scal years and interim periods within those years beginning after December 15, 2018. 

Early adoption is permitted. The Group is currently evaluating the method of adoption and the impact ASU 2016-02 will have on the Group’s consolidated balance 

sheets, results of operations, cash ﬂ ows and associated disclosures.

Other amendments that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have 

a material impact on the Group’s consolidated ﬁ nancial statements upon adoption.

70 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

4. 

ACQUISITION

In April 2014, the Group invested approximately US$9,597,000 in cash for the subscription of 51% equity interests in the enlarged share capital of Hutchison 

Sinopharm which was formerly known as Sinopharm Holding HuYong Pharmaceutical (Shanghai) Co., Ltd.. Hutchison Sinopharm is engaged in providing sales, 

distribution, and marketing services to major domestic and multi-national third party pharmaceutical manufacturers. The Group expects the acquisition will provide 

a broadened sales and marketing platform for synergy across the Group.

The Group accounted for the transaction using the acquisition method. The allocation of the purchase price is based on the fair value of assets acquired and 

liabilities assumed as at the acquisition date. The following table summarizes the amount invested in Hutchison Sinopharm and the fair value of the assets acquired 

and liabilities assumed recognized at the acquisition date.

Cash and cash equivalents 
Property, plant and equipment 
Goodwill (note (i)) 
Other intangible asset (note (ii)) 
Deferred tax assets 
Inventories 
Accounts receivable and other receivables 
Accounts payable and other payables 
Deferred tax liabilities 
Short-term bank borrowings 

Fair value of net assets acquired 
Less: Non-controlling interest (note (iii)) 

Total purchase consideration 

Cash and cash equivalents acquired 
Less: cash injected 

Net cash inﬂ ow arising from acquisition 

Notes:

US$’000

10,286
69
3,023
708
100
3,208
21,105
(14,932)
(198)
(4,769)

18,600
(9,003)

9,597

10,286
(9,597)

689

(i) 

Goodwill arising from this acquisition is from the premium attributable to a pre-existing, well positioned business in a competitive market. This goodwill is recorded at the 

consolidation level and is not expected to be deductible for tax purposes. This goodwill is attributable to the Prescription Drugs business under the Commercial Platform.

(ii) 

Other intangible asset of US$708,000 represents the GSP license which enables Hutchison Sinopharm to carry out the drug distribution business and is amortized over its useful 

life of 10 years.

(iii) 

The non-controlling interest is measured as the proportion of fair value of the net assets acquired shared by the non-controlling interest.

(iv) 

The fair value of accounts receivable and other receivables was equal to the gross contractual amount of which all were expected to be collectible.

(v) 

Acquisition related costs of approximately US$23,000 have been included in the administrative expenses in the Consolidated Statements of Operations.

(vi) 

Hutchison Sinopharm contributed revenue of US$50,202,000 and net income of US$55,000 to the Group for the period from April 25, 2014 to December 31, 2014. If the 

acquisition had occurred on January 1, 2014, the revenue and net income attributed by Hutchison Sinopharm for the year ended December 31, 2014 would have been 

US$71,344,000 and US$125,000 respectively.

 
Notes To Consolidated Financial Statements

7171

5. 

DISCONTINUED OPERATION

In 2013, the Group discontinued an operation in the PRC which was part of the Group’s Consumer Health business under the Commercial Platform segment, as its 

performance was below expectation in light of increased competitive activities in the consumer products market.

The results and cash ﬂ ows of the discontinued operation are set out below.

Sales of goods 
Expenses 
Other income (note) 

Net income before taxation from discontinued operation 
Income tax expense 

Net income for the year from discontinued operation 

Cash ﬂ ow from discontinued operation
Net cash generated from operating activities 

Net increase in cash and cash equivalents 

Note:

2015 
US$’000 

2014
US$’000

– 
– 
– 

– 
– 

– 

– 

– 

–
–
2,096

2,096
(62)

2,034

2,515

2,515

The income from the discontinued operation for the year ended December 31, 2014 represented the compensation income from an arbitration proceeding against a supplier, being 

the excess of US$2.5 million compensation proceeds received over the carrying amount of US$0.4 million receivables recorded in prior years.

6. 

FAIR VALUE DISCLOSURES

The following table presents the Group’s ﬁ nancial instruments by level within the fair value hierarchy:

As of December 31, 2015
Cash and cash equivalents 

As of December 31, 2014
Cash and cash equivalents 
Short-term investments 

Fair Value Measurement Using

Level 1 
US$’000 

Level 2 
US$’000 

Level 3 
US$’000 

Total
US$’000

31,941 

38,946 
12,179 

– 

– 
– 

– 

– 
– 

31,941

38,946
12,179

Accounts receivable, other receivables, amounts due from related parties, accounts payable and amounts due to related parties are carried at cost, which 

approximates fair value due to the short-term nature of these ﬁ nancial instruments and are therefore, excluded from the above table.

The carrying amount of bank borrowings also approximates its fair values.

 
 
 
 
 
72 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

7. 

CASH AND CASH EQUIVALENTS

Cash at bank and in hand 
Short-term bank deposits (note (i)) 

Denominated in:
US$ (note (ii)) 
RMB (note (ii)) 
UK Pound Sterling 
Hong Kong dollar (“HK$”) 
Euro 

Notes:

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

31,941 
– 

31,941 

7,352 
19,271 
318 
4,987 
13 

31,941 

32,019
6,927

38,946

8,104
28,034
247
2,543
18

38,946

(i) 

The weighted average effective interest rate on bank deposits, with maturity ranging from 7 to 30 days and 7 to 78 days as of December 31, 2015 and 2014 respectively, was 

3.72% and 1.74% per annum as of December 31, 2015 and 2014 respectively.

(ii) 

Certain cash and bank balances denominated in RMB and US$ were deposited with banks in the PRC. The conversion of these RMB and US$ denominated balances into foreign 

currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

8. 

SHORT-TERM INVESTMENTS

Bank deposits maturing over three months (note (i))

Denominated in:
RMB 

Note:

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

– 

12,179

(i) 

The weighted average effective interest rate on bank deposits, with maturity ranging from 91 to 167 days, was 2.92% per annum as of December 31, 2014.

 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

7373

9. 

ACCOUNTS RECEIVABLE

Substantially all the accounts receivable are denominated in RMB and HK$ and are due within one year from the end of the reporting period.

The carrying value of accounts receivable approximates their fair values.

Movements on the allowance for doubtful accounts, which is only in respect of accounts receivable-third parties, are as follows:

At January 1 
Allowance 
Exchange difference 

At December 31 

2015 
US$’000 

1,793 
1,408 
(74) 

3,127 

2014
US$’000

1,670
185
(62)

1,793

In December 2015, the Group recorded a provision amounting to approximately US$1,322,000 which represents the outstanding balance due from a distributor 

of which collection has become doubtful due to the distributor’s unsatisfactory performance during the fourth quarter of 2015. The Group has terminated the 

distributor’s exclusive distribution rights in January 2016.

As at December 31, 2015 and 2014, accounts receivable of approximately US$52,000 and US$2,130,000 respectively were past due but not impaired. These are 

in respect of a number of independent customers for whom there is no recent history of default. The aging analysis of these receivables is as follows:

Up to 3 months 
4 to 6 months 
6 to 12 months 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

– 
– 
52 

52 

–
24
2,106

2,130

The credit quality of accounts receivable neither past due nor impaired has been assessed by reference to historical information about the counterparty default 

rates. These counterparties do not have defaults in the past.

As at December 31, 2015, there are no accounts receivables from related parties that are past due or impaired.

 
 
 
 
 
 
74 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

10.  OTHER RECEIVABLE, PREPAYMENTS AND DEPOSITS

Other prepayments and deposits consisted of the following:

Prepayments to suppliers 
Interest receivable 
Prepaid general and administrative expenses 
Government incentives 
Deposits 
Value-added tax receivables 
Others 

11. 

INVENTORIES

Inventories consisted of the following:

Raw materials 
Finished goods 

Movements on the provision for excess and obsolete inventories are as follows:

At January 1 
Provision 
Decrease due to sale of inventories 
Exchange difference 

At December 31 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

1,542 
– 
253 
– 
309 
748 
561 

3,413 

1,327
200
295
407
147
441
199

3,016

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

753 
8,802 

9,555 

291
4,114

4,405

2015 
US$’000 

2014
US$’000

34 
25 
(33) 
(1) 

25 

126
15
(106)
(1)

34

 
 
 
 
 
 
 
 
 
 
12.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

Cost
Buildings 
Leasehold improvements 
Plant and equipment 
Furniture and ﬁ xtures, other equipment and motor vehicles 
Construction in progress 

Total Cost 

Less: Accumulated depreciation
As at January 1 
Exchange differences 
Acquisition of a subsidiary 
Expense for the year 
Disposals 

As at December 31 

Notes To Consolidated Financial Statements

7575

2015 
US$’000 

2014
US$’000

2,392 
5,989 
88 
12,806 
567 

21,842 

12,501 
(524) 
– 
1,908 
(550) 

13,335 

8,507 

2,491
4,291
91
12,278
832

19,983

11,860
(278)
112
1,180
(373)

12,501

7,482

Depreciation expense for the years ended December 31, 2015 and 2014 is approximately US$1,908,000 and US$1,180,000 respectively.

 
 
 
76 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

13. 

LEASEHOLD LAND

The Group’s interests in leasehold land represent prepaid operating lease payments and are located in the PRC.

Cost
As at January 1 
Exchange differences 

As at December 31 

Accumulated amortization
As at January 1 
Exchange differences 
Amortization charge 

As at December 31 

Net book value
As at December 31 

14.  GOODWILL AND OTHER INTANGIBLE ASSET

Goodwill consisted of the following:

As at January 1 
Addition 
Exchange differences 

As at December 31 

2015 
US$’000 

2014
US$’000

1,720 
(69) 

1,651 

284 
(13) 
37 

308 

1,761
(41)

1,720

253
(6)
37

284

1,343 

1,436

Commercial Platform

2015 
US$’000 

3,430 
– 
(98) 

3,332 

2014
US$’000

407
3,023
–

3,430

The addition to goodwill in 2014 in the Prescription Drugs business under Commercial Platform arose from the acquisition of Hutchison Sinopharm (see Note 4).

Goodwill as at January 1, 2014 of US$407,000 represents goodwill arising from the acquisition of HHL in 2009, which is included in the Consumer Health business 

under the Commercial Platform.

The Group performed its most recent annual impairment test as of December 31, 2015 and concluded that goodwill was not impaired.

 
 
 
 
 
Notes To Consolidated Financial Statements

7777

2015 
US$’000 

2014
US$’000

714 
– 
(29) 

685 

48 
70 
(4) 

114 

571 

–
708
6

714

–
48
–

48

666

14.  GOODWILL AND OTHER INTANGIBLE ASSET (Continued)

Other intangible asset consisted of the following:

GSP License
Cost
As at January 1 
Addition 
Exchange differences 

As at December 31 

Accumulated amortization
As at January 1 
Amortization charge 
Exchange differences 

As at December 31 

Net book value
As at December 31 

The GSP license arose from the acquisition of Hutchison Sinopharm (see Note 4), is recorded at fair value, and is amortized on a straight-line basis over its estimated 
useful life of 10 years. The amortization expense for the years ended December 31, 2015 and 2014 is approximately US$70,000 and US$48,000 respectively.

The estimated aggregate amortization expense for each of the next ﬁ ve years as of December 31, 2015 is as follows:

2016 
2017 
2018 
2019 
2020 

GSP License

US$’000

70
70
70
70
70

 
 
 
 
78 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

15. 

INVESTMENTS IN EQUITY INVESTEES

Investments in equity investees comprised the following:

Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited 
Shanghai Hutchison Pharmaceuticals Limited 
Nutrition Science Partners Limited 
Other 

Particulars regarding the principal equity investees are as disclosed in Note 2.

All of the equity investees are private companies and there is no quoted market price available for their shares.

Summarized ﬁ nancial information for the signiﬁ cant equity investees HBYS, SHPL and NSPL are as follows:

(i) 

Summarized balance sheet

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

60,762 
49,709 
9,046 
239 

55,753
39,158
12,823
244

119,756 

107,978

Commercial Platform 

Consumer Health 
HBYS 
December 31, 

Prescription Drugs 
SHPL 
December 31, 

Innovation Platform
Drug R&D
NSPL
December 31,

2015 
US$’000 

2014 
US$’000 

2015 
US$’000 

2014 
US$’000 

2015 
US$’000 

2014
US$’000

Current assets 
Non-current assets 
Current liabilities 
Non-current liabilities 

114,383 
88,263 
(61,467) 
(16,116) 

144,129 
73,042 
(84,850) 
(17,013) 

129,456 
95,513 
(124,617) 
(7,089) 

77,566 
65,608 
(52,052) 
(19,216) 

3,034 
30,000 
(14,941) 
– 

8,548
30,000
(12,903)
–

Net assets 

125,063 

115,308 

93,263 

71,906 

18,093 

25,645

 
 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

7979

15. 

INVESTMENTS IN EQUITY INVESTEES (Continued)

(ii) 

Summarized statement of operations

Commercial Platform 

Consumer Health 
HBYS 

Prescription Drugs 
SHPL 

Innovation Platform
Drug R&D (a)
NSPL

2015 
US$’000 

2014 
US$’000 

2015 
US$’000 

2014 
US$’000 

2015 
US$’000 

2014
US$’000

211,603 
91,461 
(3,274) 
628 
(158) 
25,164 

243,746 
96,421 
(3,206) 
1,322 
(139) 
24,805 

181,140 
127,608 
(2,765) 
306 
– 
37,401 

154,703 
109,965 
(2,651) 
257 
– 
31,505 

– 
– 
– 
– 
– 
(7,552) 

–
–
–
–
–
(16,812)

(3,788) 

(4,030) 

(6,094) 

(5,103) 

– 

–

Revenue 
Gross proﬁ t 
Depreciation and amortization 
Interest income 
Finance cost 
Income/(loss) before taxation 
Income tax expense and
  non-controlling interest 

Net income/(loss) 

21,376 

20,775 

31,307 

26,402 

(7,552) 

(16,812)

Notes:

(a) 

NSPL only incurs research and development expenses in 2015 and 2014.

(b) 

The net income for other individual immaterial equity investees for the year ended December 31, 2015 is approximately US$12,000. The net loss for other individual 

immaterial equity investees for the year ended 2014 is approximately US$5,000.

 
 
 
 
 
80 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

15. 

INVESTMENTS IN EQUITY INVESTEES (Continued)

(iii) 

Reconciliation of summarized ﬁ nancial information

Reconciliation of the summarized ﬁ nancial information presented to the carrying amount of investments in equity investees is as follows:

Commercial Platform 

Consumer Health 
HBYS 
As at December 31, 

2015 
US$’000 

2014 
US$’000 

Prescription Drugs 
SHPL 
As at December 31, 
2015 
US$’000 

2014 
US$’000 

Innovation Platform
Drug R&D
NSPL
As at December 31,
2015 
US$’000 

2014
US$’000

115,308 

109,986 

71,906 

66,476 

25,645 

42,457

– 
21,376 
(6,410) 

(468) 
20,775 
(12,820) 

– 
31,307 
(6,410) 

– 
26,402 
(19,077) 

– 
(7,552) 
– 

–
(16,812)
–

(5,211) 

(2,165) 

(3,540) 

(1,895) 

– 

–

Opening net assets at January 1 
Purchase of additional interests in
  a subsidiary of an equity investee 
Net income/(loss) 
Dividend declared 
Other comprehensive income and
  non-controlling interests 

Closing net assets at December 31 

125,063 

115,308 

93,263 

71,906 

18,093 

25,645

Group’s share of net assets 

62,532 

57,654 

46,632 

35,953 

9,046 

12,823

Goodwill 
Non-controlling interests 

– 
(1,770) 

– 
(1,901) 

3,077 
– 

3,205 
– 

– 
– 

–
–

Carrying value 

60,762 

55,753 

49,709 

39,158 

9,046 

12,823

The equity investees had the following operating lease commitments and capital commitments:

(a) 

The equity investees lease various factories and ofﬁ ces under non-cancelable operating lease agreements. Future aggregate minimum payments 

under non-cancelable operating leases as of the date indicated are as follows:

Not later than one year 
Later than one year and not later than ﬁ ve years 

Total minimum lease payments 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

1,452 
509 

1,961 

1,109
548

1,657

 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

8181

15. 

INVESTMENTS IN EQUITY INVESTEES (Continued)

(iii) 

Reconciliation of summarized ﬁ nancial information (Continued)

(b) 

Capital commitments

The equity investees had the following capital commitments:

Property, plant and equipment

Contracted but not provided for 

16.  ACCOUNTS PAYABLE

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

27,789 

61,311

Substantially all the accounts payable due to third parties are denominated in RMB and US$ and due within one year from the end of the reporting period.

The carrying value of accounts payables approximates their fair values due to their short-term maturities.

17.  OTHER PAYABLES, ACCRUALS AND ADVANCE RECEIPTS

Other payables, accruals and advance receipts consisted of the following:

Research and development expenses 
Accrued salaries and beneﬁ ts 
Accrued expenses 
Other payables 
Payments in advance from customers 
Deferred government incentives 
Current tax liabilities 
Accrued interest 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

3,758 
5,521 
11,232 
3,322 
641 
1,256 
442 
5 

26,177 

5,963
4,140
3,938
1,802
564
580
122
50

17,159

 
 
 
 
 
 
 
 
82 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

18.  BANK BORROWINGS

Summarized below are the bank borrowings as of December 31, 2015 and 2014:

Non-current (note (i)) 
Current (note (i),(ii) and (iii)) 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

26,923 
23,077 

50,000 

26,923
26,282

53,205

The weighted average interest rate for bank borrowings outstanding as of December 31, 2015 and 2014 was 1.39% and 1.60% respectively.

Notes:

(i) 

In December 2011, the Group, through its subsidiary entered into a three-year term loan with a bank in the aggregate principal amount of HK$210,000,000 (US$26,923,000). 

The term loan bears interest at 1.50% over the Hong Kong Interbank Offered Rate (“HIBOR”) per annum and was classiﬁ ed as a short-term bank borrowing as at December 31, 

2013.

In June 2014, the term loan was reﬁ nanced into a four-year term loan which bears interest at 1.35% over the HIBOR per annum. Accordingly, the term loan is recorded as a 

long-term bank borrowing as at December 31, 2015 and 2014.

The term loan is unsecured and guaranteed by Hutchison Whampoa Limited (an indirect subsidiary of CK Hutchison) as at December 31, 2015 and 2014. A fee is paid to 

Hutchison Whampoa Limited for the guarantee (note 25).

(ii) 

As at December 31, 2015 and 2014, the Group, through its subsidiary has revolving loans of HK$180,000,000 (US$23,077,000) and HK$205,000,000 (US$26,282,000) which 

bears interest at 1.05% over HIBOR per annum till October 2015 and 1.25% over HIBOR per annum from November 2015 and are unsecured. The borrowing was classiﬁ ed as 

current borrowings as of December 31, 2015 and 2014.

(iii) 

The carrying amount of all bank borrowings approximates their fair values. The fair value of bank borrowings was estimated using a discounted cash ﬂ ows approach (an income 

approach) using market based observable inputs. Such fair value measurements are considered Level 2 under the fair value hierarchy.

(iv) 

The Group’s bank borrowings are repayable as follows:

Within 1 year 

Between 2 and 5 years 

December 31, 

December 31,

2015 

US$’000 

23,077 

26,923 

50,000 

2014

US$’000

26,282

26,923

53,205

(v) 

As at December 31, 2015 and 2014, the carrying amounts of the Group’s bank borrowings are all denominated in HK$.

(vi) 

As at December 31, 2015 and 2014, the Group has unused credit facilities in relation to revolving loan facilities of US$6,923,000 and US$8,526,000 respectively.

 
 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

8383

19. 

COMMITMENTS AND CONTINGENCIES

(a) 

Lease commitments

The Group leases various factories and ofﬁ ces under non-cancelable operating lease agreements. Future aggregate minimum payments under non-

cancelable operating leases as of the date indicated are as follows:

Not later than one year 
Later than one year and not later than ﬁ ve years 
Later than ﬁ ve years 

Total minimum lease payments 

(b) 

Capital commitments

The Group had the following capital commitments:

Property, plant and equipment

Contracted but not provided for 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

1,274 
911 
183 

2,368 

980
1,425
329

2,734

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

593 

719

In addition, the Group has also undertaken to provide the necessary additional funds for NSPL to ﬁ nance its ongoing operations.

20.  REDEEMABLE NON-CONTROLLING INTERESTS

In November and December 2010, the Company and HMHL, entered into subscription and shareholders’ agreements (‘‘SSAs’’) with Mitsui & Co., Ltd. (‘‘Mitsui’’) and 

SBCVC Fund III Company Limited (‘‘SBCVC’’) (collectively, the ‘‘preferred shareholders’’), whereby HMHL issued 7,390,029 redeemable convertible preferred shares 

(‘‘Preferred Shares’’) for an aggregate consideration of US$20.1 million. The Preferred Shares on an as-if-converted basis represented approximately 19.76% of the 

aggregate issued and outstanding share capital of HMHL on the closing date.

In October 2012, the Company repurchased all 2,815,249 Preferred Shares from SBCVC. The remaining 4,574,780 Preferred Shares of US$12.5 million held by 

Mitsui represents approximately 12.24% of HMHL on a fully diluted basis.

In May and June 2014, the Company and HMHL further entered into two subscription agreements with Mitsui, whereby HMHL issued a total of 672,713 HMHL’s 

Preferred Shares to Mitsui and 4,825,418 HMHL’s ordinary shares to the Company for an aggregate consideration of US$25.0 million, after which Mitsui’s interest 

in HMHL remained at 12.24% on a fully diluted basis.

On July 23, 2015, the Company entered into a subscription agreement with Mitsui under which the Company has issued 3,214,404 new ordinary shares of the 

Company valued at approximately US$84.0 million in exchange for the Preferred Shares held by Mitsui with carrying value of US$84.0 million (including accretion 

adjustment up to July 23, 2015). The transaction was completed on July 23, 2015 and as a result of this transaction, Mitsui held approximately 5.69% of the 

enlarged share capital of the Company. The outstanding balance of redeemable non-controlling interests was extinguished with the corresponding increase in the 

Company’s shares and additional paid-in capital amounts.

 
 
 
 
 
 
 
84 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

20.  REDEEMABLE NON-CONTROLLING INTERESTS (Continued)

Conversion

Pursuant to the SSAs signed in 2010, the preferred shareholders have the right to convert all of their preferred shareholdings into ordinary shares of HMHL at the 

initial conversion ratio of 1:1 at any time after the date of issuance of the preferred shares by issuing a notice to the Company. However, these preferred shares 

could be convertible into a higher conversion ratio of ordinary shares of HMHL when there is occurrence of a pre-deﬁ ned adjustment event (‘‘Adjustment Event’’).

In July 2012, Mitsui and SBCVC agreed for an extension of triggering of Adjustment Event. The Company assessed whether this amendment to the preferred 

shares was an extinguishment or a modiﬁ cation in accordance with its accounting policy. It was concluded that it was modiﬁ cation, rather than extinguishment, of 

preferred shares as the change in fair value of the preferred shares due to the amendment was less than 10%.

In March 2013, as a result of the satisfaction of the required condition, the conversion ratio of the preferred shares is no longer subject to change due to 

Adjustment Event.

Redemption

Preferred shareholders have the right to require the Company to redeem the preferred shares if HMHL fails to be listed after the company valuation of HMHL has 

reached above the speciﬁ ed threshold. The redemption price shall be based on such preferred shareholder’s share of the actual valuation that would have been 

obtained in the event of occurrence of such pre-deﬁ ned condition.

Liquidation

In the event of a winding-up of HMHL, any other return of capital (other than a redemption or purchases by HMHL of its own shares), or a trade sale, where 

the distribution proceeds are equal to or less than the post money valuation at preferred shares issuance, then such proceeds shall be distributed ﬁ rst to repay 

preferred shareholders up to the subscription price and any accrued and unpaid dividend before any surplus will be distributed to the holders of the ordinary 

shares. However, if the distribution proceeds are greater than the post money valuation at preferred shares issuance, distribution proceeds will be distributed 

equally and ratably among the preferred and ordinary shareholders.

Accounting for preferred shares

The preferred shares issued by HMHL are redeemable upon occurrence of an event that is not solely within the control of the issuer. Accordingly, the redeemable 

preferred shares issued by HMHL are recorded and accounted for as redeemable non-controlling interests outside of permanent equity in the Group’s consolidated 

balance sheets. The Group recorded accretion when it is probable that the preferred shares will become redeemable. The accretion, which increases the carrying 

value of the redeemable non-controlling interests, is recorded against retained earnings, or in the absence of retained earnings, by recording against the additional 

paid-in capital. During the years ended December 31, 2015 and 2014, HMHL recorded an accretion of US$43,001,000 and US$25,510,000 respectively to the 

preferred shares based on such preferred shareholder’s share of the estimated valuation of HMHL.

Notes To Consolidated Financial Statements

8585

21.  ORDINARY SHARES

The Company is authorized to issue 75,000,000 ordinary shares.

A summary of ordinary shares transactions (in thousands) is as follows:

Balance as at January 1 
Issuances of shares 
Issuances in relation to exercise of options 

Balance as at December 31 

2015 

53,076 
3,214 
243 

56,533 

2014

52,051
–
1,025

53,076

Each ordinary share is entitled to one vote. The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available and when 

declared by the board of directors.

22. 

SHARE-BASED COMPENSATION

(i) 

Share-based Compensation of the Company

The Company conditionally adopted a share option scheme (the “HCML Share Option Scheme”) on June 4, 2005 which was amended on March 21, 2007. 

Pursuant to the HCML Share Option Scheme, the Board of Directors of the Company may, at its discretion, offer any employees and directors (including 

Executive and Non-executive Directors but excluding Independent Non-executive Directors) of the Company, holding companies of the Company and any 

of their subsidiaries or afﬁ liates and subsidiaries or afﬁ liates, of the Company share options to subscribe for shares of the Company.

The aggregate number of shares issuable under the HCML Share Option Scheme is 2,560,606 ordinary shares. As of December 31, 2015, the number of 

shares authorized but unissued was 18,466,882 ordinary shares.

Share options granted are generally subject to a three-year or four-year vesting schedule, depending on the nature and the purpose of the grant. Share 

options subject to three-year vesting schedule, in general, vest 33.3% upon the ﬁ rst anniversary of the vesting commencement date as deﬁ ned in the grant 

letter, and 33.3% every subsequent year. Share options subject to four-year vesting schedule, in general, vest 25% upon the ﬁ rst anniversary of the vesting 

commencement date as deﬁ ned in the grant letter, and 25% every subsequent year. No outstanding share options will be exercisable or subject to vesting 

after the expiry of a maximum of ten years from the date of grant.

On December 17, 2014, 593,686 share options were canceled with the consent of the relevant eligible employees in exchange for 1,187,372 new share 

options of a subsidiary (see note (ii)). This was accounted for as a modiﬁ cation of the original share options granted which did not result in any incremental 

fair value to the Group.

As of December 31, 2014, 75,000 outstanding share options were held by non-employees. These share options are subject to re-measurement through 

each vesting date to determine the appropriate share-based compensation expense. These share options were fully vested as of December 31, 2014 and 

were exercised during the year ended December 31, 2015. As of December 31, 2015, no share options are held by non-employees.

 
86 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

22. 

SHARE-BASED COMPENSATION (Continued)

(i) 

Share-based Compensation of the Company (Continued)

A summary of the Company’s share option activity and related information is as follows:

Weighted- 
average 
Exercise Price in 
£ per share 

Weighted-
average 
remaining 
contractual life 
(years) 

Aggregate
intrinsic
value
(in £’000)

Number of 
share options 

2,303,317 
– 
(1,025,228) 
(593,686) 
684,403 
– 
(242,038) 
– 
442,365 
569,931 
419,878 
333,393 
291,015 

3.67 
–
1.59
6.10
4.67 
–
3.77
–
5.16 
4.39 
3.91 
4.85 
4.67 

5.93 

5,843

6.79 

6,423

6.53 
6.38 
5.64 
6.05 
5.77 

10,061
5,506
4,256
7,685
6,762

Outstanding at January 1, 2014 
Granted 
Exercised 
Canceled 
Outstanding at December 31, 2014 
Granted 
Exercised 
Canceled 
Outstanding at December 31, 2015 
Vested and expected to vest at December 31, 2014 
Vested and exercisable at December 31, 2014 
Vested and expected to vest at December 31, 2015 
Vested and exercisable at December 31, 2015 

The Company uses the Binomial model to estimate the fair value of share option awards using various assumptions that require management to apply 

judgment and make estimates, including:

Volatility

The Company calculated its expected volatility with reference to the historical volatility prior to the issuances of share options.

Risk-free Rate

The risk-free interest rates used in the Binomial model are with reference to the sovereign yield of the United Kingdom because the Company’s shares are 

currently listed on AIM and denominated in pounds sterling (£).

 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

8787

22. 

SHARE-BASED COMPENSATION (Continued)

(i) 

Share-based Compensation of the Company (Continued)

Dividends

The Company has not declared or paid any dividends and does not currently expect to do so in the foreseeable future, and therefore uses an expected 

dividend yield of zero in the Binomial model.

In determining the fair value of share options granted, the following assumptions were used in the Binomial model for awards granted in the periods 

indicated:

Value of each share option 
Signiﬁ cant inputs into the valuation model:

Exercise price 
Share price at effective date of grant 
Expected volatility 
  Risk-free interest rate 

Contractual life of share options 
Expected dividend yield 

The following table summarizes the Company’s share option values:

Effective date of grant of share options

June 24, 
2011 

December 20,
2013

£1.841 

£3.154

£4.405 
£4.3250 
46.6% 
3.130% 
10 years 
0% 

£6.100
£6.1000
36.0%
3.160%
10 years
0%

2015 
(in £’000, except per  
share data) 

2014
(in £’000, except per 
share data)

Weighted-average grant-date fair value of share option granted during the period 
Total intrinsic value of share options exercised 
Total intrinsic value of share options exercised in US$’000 

– 
3,296 
5,020 

–
7,738
12,034

 
 
 
 
 
 
 
 
 
 
 
 
 
88 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

22. 

SHARE-BASED COMPENSATION (Continued)

(i) 

Share-based Compensation of the Company (Continued)

Share-based Compensation Expense

The Company recognizes compensation expense for only the portion of options expected to vest, on a graded vesting approach over the requisite service 

period. The following table presents share-based compensation expense included in the Group’s consolidated statements of operations:

Research and development expenses 
Administrative expenses 

2015 
US$’000 

2014
US$’000

74 
14 

88 

539
233

772

As of December 31, 2015, the total unrecognized compensation cost was US$55,000, net of estimated forfeiture rates, and will be recognized on a graded 

vesting approach over the weighted-average remaining service period of 1.97 years.

Cash received from option exercises under the share option plan for the years ended December 31, 2015 and 2014 was approximately US$1,374,000 and 

US$2,680,000 respectively. The Company will issue new shares to satisfy share options exercises.

(ii) 

Share-based Compensation of a subsidiary

HMHL adopted a share option scheme on August 6, 2008 (as amended on April 15, 2011) and another share option scheme on December 17, 2014 

(collectively the “HMHL Share Option Schemes”). Pursuant to the HMHL Share Option Schemes, any employee or director of HMHL and any of its holding 

company, subsidiaries and afﬁ liates is eligible to participate in the HMHL Share Option Schemes subject to the discretion of the board of directors of HMHL.

The aggregate number of shares issuable under the HMHL Share Option Schemes is 9,622,414 ordinary shares. As of December 31, 2015, the number of 

shares authorized but unissued was 157,111,839 ordinary shares.

Share options granted are generally subject to a four-year vesting schedule, depending on the nature and the purpose of the grant, share options subject 

to four-year vesting schedule, in general, vest 25% upon the ﬁ rst anniversary of the vesting commencement date as deﬁ ned in the grant letter, and 25% 

every subsequent year. No outstanding share options will be exercisable or subject to vesting after the expiry of a maximum of six or nine years from the 

date of grant.

On December 20, 2013, 2,485,189 share options were canceled with the consent of the relevant eligible employees in exchange for new share options of 

the Company vesting over a period of four years and/or cash consideration payable over a period of four years. This was accounted for as a modiﬁ cation 

of the original share options which did not result in any incremental fair value to the Group for the options in exchange for new share options under HCML 

Share Option Scheme. For the share options in exchange for cash consideration, this was accounted for as a modiﬁ cation in classiﬁ cation that changed the 

award’s classiﬁ cation from equity-settled to a liability.

A liability has been recognized on the modiﬁ cation date taking into account the requisite service period that has been provided by the employee at the 

modiﬁ cation date. As at December 31, 2015, US$0.9 million and US$0.8 million have been recognized in other non-current liabilities and other payables 

respectively. As at December 31, 2014, US$0.7 million and US$1.0 million were recognized in other non-current liabilities and other payables respectively.

 
 
 
Notes To Consolidated Financial Statements

8989

22. 

SHARE-BASED COMPENSATION (Continued)

(ii) 

Share-based Compensation of a subsidiary (Continued)

A summary of the subsidiary’s share option activity and related information follows:

Weighted- 
average 
Exercise Price in 
US$ per share 

Weighted-
average 
remaining 
contractual life 
(years) 

Aggregate
intrinsic
value
US$’000

Number of 
share options 

538,420 
1,187,372 
(80,924) 
(393,212) 
(39,884) 
1,211,772 
– 
(24,400) 
– 
– 
1,187,372 
769,714 
316,393 
759,918 
593,686 

2.03 
7.82
1.50
2.15
1.70
7.71 
–
2.34
–
–
7.82 
7.75 
7.48 
7.82 
7.82 

2.30 

1,356

8.84 

134

7.97 
8.88 
8.55 
7.97 
7.97 

32,292
54
107
20,667
16,146

Outstanding at January 1, 2014 
Granted 
Exercised 
Lapsed 
Canceled 
Outstanding at December 31, 2014 
Granted 
Exercised 
Lapsed 
Canceled 
Outstanding at December 31, 2015 
Vested and expected to vest at December 31, 2014 
Vested and exercisable at December 31, 2014 
Vested and expected to vest at December 31, 2015 
Vested and exercisable at December 31, 2015 

The subsidiary uses the Binomial model to estimate the fair value of share option awards using various assumptions that require management to apply 

judgment and make estimates, including:

Volatility

The subsidiary calculated its expected volatility with reference to the historical volatility of the comparable companies for the past ﬁ ve to six years as of the 

valuation date.

Risk-free Rate

The risk-free interest rates used in the Binomial model are with reference to the sovereign yield of the United States.

Dividends

The subsidiary has not declared or paid any dividends and does not currently expect to do so in the foreseeable future, and therefore uses an expected 

dividend yield of zero in the Binomial model.

 
 
 
 
 
 
 
 
 
90 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

22. 

SHARE-BASED COMPENSATION (Continued)

(ii) 

Share-based Compensation of a subsidiary (Continued)

Dividends (Continued)

In determining the fair value of share options granted, the following weighted-average assumptions were used in the Binomial model for awards granted 

in the periods indicated:

Value of each share option 
Signiﬁ cant inputs into the valuation model:

Exercise price 
Share price at effective date of grant 
Expected volatility 
  Risk-free interest rate 

Contractual life of share options 
Expected dividend yield 

The following table summarizes the subsidiary’s share option values:

Weighted-average fair value of share option granted during the period 
Total intrinsic value of share options exercised 

Share-based Compensation Expense

Effective date of grant of share options

August 2, 2010 

April 18, 2011 

December 17, 2014

US$0.258 

US$0.923 

US$3.490

US$2.240 
US$1.030 
48.6% 
2.007% 
6 years 
0% 

US$2.360 
US$2.048 
55.4% 
2.439% 
6 years 
0% 

US$7.820
US$7.820
48.4%
1.660%
9 years
0%

2015 
(in US$’000, except 
per share data) 

2014
(in US$’000, except
per share data)

– 
352 

3.49
247

The subsidiary recognizes compensation expense for only the portion of options expected to vest, on a graded vesting approach over the requisite service 

period. The following table presents share-based compensation expense included in the Group’s consolidated statements of operations:

Research and development 

2015 
US$’000 

2014
US$’000

1,063 

293

As of December 31, 2015, the total unrecognized compensation cost was US$336,000, net of estimated forfeiture rate, and will be recognized on a graded 

vesting approach over the weighted-average remaining service period of 1.97 years.

Cash received from option exercises under the share option plan for the years ended December 31, 2015 and 2014 were US$57,000 and US$121,000 

respectively. The subsidiary will issue new shares to satisfy share option exercises.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

9191

22. 

SHARE-BASED COMPENSATION (Continued)

(iii) 

Long Term Incentive Plan

The Company granted awards under LTIP on October 19, 2015. The LTIP awards granted participating directors or employees a conditional right to receive 

ordinary shares in the Company (the “Ordinary Shares”), to be purchased by a trustee consolidated by the Company (the “Trustee”) up to a maximum cash 

amount depending upon the achievement of annual performance targets for each ﬁ nancial year of the Company stipulated in the LTIP awards. The Trustee 

has been set up solely for the purpose of purchasing and holding the Ordinary Shares during the vesting period on behalf of the Group using funds provided 

by the Group.

On the determination date, the Company will determine the cash amount, based on the actual achievement of each annual performance target, for the 

Trustee to purchase the Ordinary Shares. The Ordinary Shares will then be held by the Trustee until they are vested. Vesting will occur one business day after 

the publication date of the annual report of the Company for the ﬁ nancial year falling two years after the ﬁ nancial year to which the LTIP award relates. 

Vesting will also depend upon continued employment of the award holder with the Group and will otherwise be at the discretion of the Board of Directors 

of the Group. The initial LTIP awards will cover a three-year period from 2014 to 2016 (the “LTIP Period”). The maximum cash amount per annum for the 

LTIP Period stipulated in the LTIP awards is approximately US$1.8 million.

As at December 31, 2015, the number of Ordinary Shares purchased and held by the Trustee is 40,655 amounted to approximately US$1.8 million and 

none of the LTIP awards have been vested or forfeited. Other than the treasury shares, the Trustee does not have any assets or liabilities as at December 

31, 2015.

LTIP awards prior to the determination date

As the extent of achievement of the performance targets is uncertain prior to the determination date, a probability based on management’s assessment 

on the achievement of the performance target has been assigned to calculate the amount to be recognized as an expense over the requisite period with 

corresponding entry to liability. As at December 31, 2015, approximately US$75,000 was recorded as compensation expense with a corresponding liability 

for LTIP awards prior to the determination date.

LTIP awards after the determination date

Upon the determination date, if the performance target is achieved, the Company will pay the ﬁ xed monetary amount to the Trustee to purchase the 

Ordinary Shares. If the performance target is not achieved, no Ordinary Shares of the Company will be purchased and the amount previously recorded 

in the liability will be reversed through proﬁ t or loss. Any cumulative compensation expense previously recognized as a liability will be transferred to 

additional paid-in capital, as an equity-settled award.

As at December 31, 2015, approximately US$1,786,000 was paid to the Trustee and debited to the additional paid-in capital as treasury shares and 

approximately US$233,000 was recorded as a compensation expense with a credit to additional paid-in capital.

92 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

22. 

SHARE-BASED COMPENSATION (Continued)

(iii) 

Long Term Incentive Plan (Continued)

The following table presents the expenses recognized under the LTIP awards:

Research and development expenses 
Administrative expenses 

2015 
US$’000 

2014
US$’000

156 
152 

308 

–
–

–

As of December 31, 2015, the total unrecognized compensation cost was approximately US$2,678,000 net of the estimated probability rate, and will be 

recognized over the requisite period.

23.  REVENUE FROM LICENSE AND COLLABORATION AGREEMENTS – THIRD PARTIES

The Group recognized revenue from license and collaboration agreements – third parties of US$44.1 million and US$12.3 million for the years ended December 31,

2015 and 2014 respectively, which consisted of the following:

Milestone revenues 
Amortization of upfront payment 
Research and development services 

These are mainly from 2 license and collaboration agreements as follows:

License and collaboration agreement with Eli Lilly

2015 
US$’000 

19,212 
1,907 
22,941 

44,060 

2014
US$’000

5,000
701
6,635

12,336

On October 8, 2013, the Group entered into a licensing, co-development and commercialization agreement in China with Eli Lilly (“Lilly”) relating to fruquintinib, a 

targeted oncology therapy for the treatment of various types of solid tumors. In accordance with terms of the agreement, the Group is entitled to receive a series 

of payments of up to US$86.5 million, including upfront payments and development and regulatory approval milestones. Should fruquintinib be successfully 

commercialized in China, the Group would receive tiered royalties based on certain percentage of net sales. Development costs after the ﬁ rst development 

milestone are shared between the Group and Lilly.

Following execution of the agreement, the Group received a non-refundable, up-front payment of US$6.5 million.

 
 
 
 
 
 
Notes To Consolidated Financial Statements

9393

23.  REVENUE FROM LICENSE AND COLLABORATION AGREEMENTS – THIRD PARTIES (Continued)

License and collaboration agreement with Eli Lilly (Continued)

Supplemental to the main agreement, the Group also signed an option agreement which grants Lilly an exclusive option to expand the fruquintinib rights beyond 

Hong Kong and China. The option agreement further sets out certain milestone payments and royalty rates that apply in the event the option is exercised on a 

global basis. However, these are subject to further negotiation should the option be exercised on a speciﬁ c territory basis as opposed to a global basis. The option 

was not considered to be a separate deliverable in the arrangement as it was considered to be substantive.

As at December 31, 2015, the option has not been exercised by Lilly.

The license rights to fruquintinib, delivered at the inception of the arrangement, did not have stand-alone value apart from the other deliverables in the 

arrangement which include the development services, the participation in the joint steering committee and the manufacturing of active pharmaceutical 

ingredients during the development phase. The non-refundable up-front payment was deferred and is being recognized rateably over the development period, 

which has been estimated to end in 2018. The Group recognizes milestone revenue relating to the deliverables in the agreement as a single unit of accounting 

using the milestone method.

For the year ended December 31, 2015, the Group recognized US$19.2 million milestone revenues in relation to the achievement of the “proof of concept” 

milestone for two indications in accordance with the terms of the agreement. The Group did not recognize any milestone revenues in relation to this contract 

during the year ended December 31, 2014. The Group recognized US$1.8 million and US$0.6 million revenue from amortization of the up-front payment during 

the years ended December 31, 2015 and 2014. In addition, the Group recognized US$19.4 million for the provision of research and development services for the 

year ended December 31, 2015.

License and collaboration agreement with AstraZeneca

On December 21, 2011, the Group and AstraZeneca (“AZ”) entered into a global licensing, co-development, and commercialization agreement for volitinib (name 

subsequently changed to ‘savolitinib’), a novel targeted therapy and a highly selective inhibitor of the c-Met receptor tyrosine kinase for the treatment of cancer.

Under the terms of the agreement, development costs for savolitinib in China will be shared between the Group and AZ, with the Group continuing to lead the 

development in China. AZ will lead and pay for the development of savolitinib for the rest of the world. The Group received a non-refundable upfront payment of 

US$20.0 million upon the signing of the agreement and will receive up to US$120 million contingent upon the successful achievement of clinical development 

and ﬁ rst sale milestones. The agreement also contains possible signiﬁ cant future commercial sale milestones and up to double-digit percentage royalties on net 

sales. Following execution of the agreement, the Group received milestone payment of US$5.0 million in 2013, and a further US$5.0 million in 2014.

The license right to develop savolitinib in the rest of the world was delivered to AZ at the inception of the arrangement. Such license had stand-alone value apart 

from the other deliverables in the arrangement which include the development of savolitinib in China and the participation in the joint steering committee. 

The non-refundable up-front payment was allocated to (a) the license to develop savolitinib in the rest of the world, which was recognized at inception and (b) 

the research and development services for which amount allocated has been deferred and is being recognized rateably over the development period which is 

expected to end in 2021.

The Group recognizes milestone revenue relating to the deliverables, in the agreement as a single unit of using the milestone method. The Group did not recognize 

any milestone income for the year ended December 31, 2015 but US$5.0 million for the year ended December 31, 2014. The Group also recognized US$3.5 

million and US$6.6 million for the provision of research and development services for the years ended December 31, 2015 and 2014 respectively. In addition, the 

Group recognized US$0.1 million and US$0.1 million as revenue from amortization of the upfront payment during the years ended December 31, 2015 and 2014.

94 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

23.  REVENUE FROM LICENSE AND COLLABORATION AGREEMENTS – THIRD PARTIES (Continued)

License and collaboration agreement with Ortho-McNeil-Janssen

After an original research and development alliance agreement entered in December 2008, the Group modiﬁ ed the original arrangement and entered into a new 

research and development alliance agreement with Ortho-McNeil-Janssen Pharmaceuticals, Inc. (“Janssen”) on June 2, 2010 for the discovery and development of 

novel small-molecule therapeutics against a target in the area of inﬂ ammation/immunology. The original agreement signed in December 2008 was terminated 

and superseded by the new agreement.

Under the terms of the 2010 agreement, the Group will provide drug discovery activities in order to assess whether the selected compound meets certain criteria 

speciﬁ ed in the agreement. Upon selected compound meeting the speciﬁ ed criteria, Janssen has the option to elect to receive from the Group an exclusive 

worldwide license to develop and commercialize the compound. If Janssen opts not to do so, the Group may choose to further pursue clinical development of 

drug compounds from the discovery program through the demonstration of clinical proof-of-concept. Upon the success in achieving the clinical proof-of-concept, 

Janssen may again opt to take over further development and obtain the exclusive rights to develop and commercialize drug compounds from the Group’s program. 

The option did not have any signiﬁ cant value at inception of the arrangement.

The Group received from Janssen an up-front, non-refundable payment of US$3.0 million upon execution of the 2008 agreement, which was carried forward to 

cover discovery activities under the 2010 agreement.

The Group recognized the upfront payment of US$3.0 million over the drug discovery period under the initial agreement signed in 2008. Upon signing of the 2010 

agreement, the portion of revenue that had not been recognized under the 2008 agreement was adjusted to be recognized over the remaining drug discovery 

period under the terms of the 2010 agreement to September 2012. The Group received US$1.0 million in 2011 following conﬁ rmation of selected compound 

meeting sustainable lead criteria and a further US$6.0 million in 2013 when the selected compound met development candidate criteria as speciﬁ ed in the 

agreement.

The Group did not recognize any milestone for the years ended December 31, 2015 and 2014.

In November 2015, Janssen has terminated the license and collaboration agreement between HMPL and Janssen dated June 2, 2010 for the discovery and 

development of novel small molecule therapeutics against a target in the area of inﬂ ammation/immunology. All licenses and other rights granted by the Group to 

Janssen should have been terminated upon the termination date. The Group does not have any outstanding liabilities or obligations due to/from Janssen in relation 

to the termination of the agreement.

24.  GOVERNMENT INCENTIVES

The Group receives government grants from the PRC Government (including the National level and Shanghai province). These grants are given in support of drug 

research and development activities and are conditional upon i) the Group spending a predetermined budget cost, regardless of success or failure of the research 

and development projects and ii) achievement of certain stages of research and development projects being approved by relevant PRC government authority. 

These government grants are subject to ongoing reporting and monitoring by the PRC Government over the period of the grant.

Government incentives which are deferred and recognized in the statement of operations over the period necessary to match them with the costs that they are 

intended to compensate are recognized in other payable, accruals and advance receipts (note 17) and will be refundable to the PRC Government if the related 

research and development projects are suspended. In 2015 and 2014, the Group received government grants of US$4,898,000 and US$859,000 respectively.

The government grants recorded as a reduction to research and development expenses for the years ended December 31, 2015 and 2014 was US$3,664,000 and 

US$3,558,000 respectively.

Notes To Consolidated Financial Statements

9595

25. 

SIGNIFICANT RELATED PARTY TRANSACTIONS

The Group has the following signiﬁ cant transactions during the year with related parties which were carried out in the normal course of business at terms 

determined and agreed by the relevant parties:

(a) 

Transactions with related parties:

Sales of goods to
– Indirect subsidiaries of CK Hutchison 

Income from provision of research and development services
– Equity investees 

Purchase of goods from
– A non-controlling shareholder of a subsidiary 
– Equity investees 

Providing consultancy services to
– An equity investee 

Rendering of marketing services from
– Indirect subsidiaries of CK Hutchison 
– An equity investee 

Rendering of management service from
– An indirect subsidiary of CK Hutchison 

Interest paid to
– An immediate holding company 
– A non-controlling shareholder of a subsidiary 

Guarantee fee on bank loan to
– An indirect subsidiary of CK Hutchison 

Dividend paid to
– A non-controlling shareholder of a subsidiary 

2015 
US$’000 

2014
US$’000

8,074 

7,823

5,383 

4,312

11,894 
3,701 

15,595 

– 

751 
5,093 

5,844 

845 

144 
85 

229 

471 

590 

6,727
2,480

9,207

38

480
–

480

989

113
19

132

471

1,179

 
 
 
 
 
96 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

25. 

SIGNIFICANT RELATED PARTY TRANSACTIONS (Continued)

(b) 

Balances with related parties included in:

Accounts receivable from related parties:
– Indirect subsidiaries of CK Hutchison (note (i)) 
– An equity investee (note (i)) 

Accounts payable due to a related party:
– A non-controlling shareholder of a subsidiary (note (i)) 

Amounts due from related parties:
– Indirect subsidiaries of CK Hutchison (note (i)) 
– Equity investees (note (i)) 
– Loan to an equity investee (note (ii)) 

Amounts due to related parties:
– Immediate holding company (note (iii)) 
– An indirect subsidiary of CK Hutchison (note (i)) 
– An equity investee 
– Loan from a non-controlling shareholder of a subsidiary (note (iv)) 

Non-controlling shareholders:
– Loan from a non-controlling shareholder of a subsidiary (note (iv)) 
– Loan from a non-controlling shareholder of a subsidiary (note (v)) 
– Interest payable due to a non-controlling shareholder of a subsidiary 

Deferred income:
– An equity investee (note (vi)) 

Other non-current liabilities
–Immediate holding company (note (iii)) 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

1,379 
490 

1,869 

1,922
262

2,184

3,521 

2,190

136 
2,157 
7,000 

9,293 

1,775 
20 
1,898 
2,550 

6,243 

– 
579 
105 

684 

2,132 

9,000 

107
1,176
5,000

6,283

8,694
22
–
–

8,716

2,550
579
19

3,148

–

–

 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

9797

25. 

SIGNIFICANT RELATED PARTY TRANSACTIONS (Continued)

(b) 

Balances with related parties included in: (Continued)

Notes:

(i) 

Other balances with related parties are unsecured, interest-free and repayable on demand. The carrying values of balances with related parties approximate their fair values 

due to their short-term maturities.

(ii) 

Loan to an equity investee is unsecured and interest-bearing (with waiver of interest).

(iii) 

Amount due to immediate holding company is unsecured, interest-bearing. As of December 31, 2015, approximately US$1,775,000 is repayable within one year or repayable 

on demand and approximately US$9,000,000 is repayable within three years from December 2017. As of December 31, 2014, the balance is repayable on demand. The 

carrying value of amount due to immediate holding company approximates its fair value.

(iv) 

Loan from a non-controlling shareholder of a subsidiary is unsecured and interest-bearing and is repayable in December 2016. The balance is recorded in current liabilities as 

at December 31, 2015 and non-current liabilities as at December 31, 2014. US$2,250,000 was repaid during the year ended December 31, 2014.

(v) 

Loan from a non-controlling shareholder of a subsidiary is unsecured, interest bearing (with waiver of interest) and is recorded in other non-current liabilities.

(vi) 

Deferred income represents amount recognized from granting of promotion and marketing rights. 50% of the amount is received during the year ended December 31, 2015 

and the remaining 50% balance to be received is recorded in amounts due from related parties: equity investees.

26. 

INCOME TAXES

Continuing operations:
Current tax
– HK 
– PRC 

Deferred income tax – PRC 

Income tax expense 

2015 
US$’000 

2014
US$’000

150 
415 
1,040 

1,605 

131
51
1,161

1,343

(a) 

The Company, a subsidiary incorporated in British Virgin Islands and its Hong Kong subsidiaries are subject to Hong Kong proﬁ ts tax which has been 

provided for at the rate of 16.5% on the estimated assessable proﬁ ts less estimated available tax losses for the years ended December 31, 2015 and 2014.

(b) 

Taxation in the PRC has been provided for at the applicable rate on the estimated assessable proﬁ ts less estimated available tax losses. Under the PRC 

Enterprise Income Tax Law (the “EIT Law”), the standard enterprise income tax rate for domestic enterprises and foreign invested enterprises is 25%. In 

addition, the EIT Law provides for, among others, a preferential tax rate of 15% for companies which qualiﬁ es as High and New Technology Enterprises. 

Hutchison MediPharma Limited qualiﬁ es as a High and New Technology Enterprise. Pursuant to the EIT Law, a 10% withholding tax is levied on dividends 

declared by their PRC to their foreign investors. A lower withholding tax rate of 5% is applicable if direct foreign investors with at least 25% equity interest 

in the PRC companies are incorporated in Hong Kong and meet the condition or requirements pursuant to the tax arrangement between the PRC and 

Hong Kong. Since the equity holders of the major subsidiaries and equity investees of the Company are Hong Kong incorporated companies, the Company 

has used 5% to provide for deferred tax liabilities on retained earnings which are anticipated to be distributed. As of December 31, 2015 and 2014, the 

amounts accrued in deferred tax liabilities relating to withholding tax on dividends were determined on the basis that 100% of the distributable reserves 

of the major subsidiaries and equity investees operating in the PRC will be distributed as dividends.

 
 
 
 
98 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

26. 

INCOME TAXES (Continued)

The reconciliation of the Group’s reported income tax expense to the theoretical tax amount that would arise using the tax rates of the Company against the Group’s 

(loss)/income before income taxes and equity in earnings of equity investees is as follows:

Continuing operations:
Loss before income taxes and equity in earnings of equity investees 

Tax calculated at the statutory tax rate of the Company 
Effects of different tax rates available to different jurisdictions 
Tax valuation allowance 
Expenses not deductible for tax purposes 
Utilization of previously unrecognized tax losses 
Withholding tax on undistributed earnings of equity investees 
Others 

Income tax expense 

Deferred income tax as at December 31 is as follows:

Deferred tax assets 
Deferred tax liabilities 

Net deferred tax liabilities 

The movements in net deferred income tax liabilities are as follows:

At January 1 
Exchange differences 
Acquisition of a subsidiary (Note 4) 
Utilization of previously recognized withholding tax on undistributed earnings 
(Charged)/Credited to the consolidated statement of operations

– withholding tax on undistributed earnings of equity investees 
– deferred tax on amortization of intangible assets 
– deferred tax on provision of assets 
– utilization of previously recognized tax losses 

At December 31 

2015 
US$’000 

2014
US$’000

(10,540) 

(19,957)

(1,739) 
(2,953) 
4,505 
253 
(34) 
1,216 
357 

1,605 

(3,293)
3,551
783
399
(1,055)
1,161
(203)

1,343

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

250 
(3,723) 

(3,473) 

105
(2,947)

(2,842)

2015 
US$’000 

2014
US$’000

(2,842) 
88 
– 
321 

(1,216) 
24 
152 
– 

(3,473) 

(2,267)
4
(98)
797

(1,161)
11
–
(128)

(2,842)

 
 
 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

9999

26. 

INCOME TAXES (Continued)

The deferred tax assets and liabilities are offset when there is a legally enforceable right to set off and when the deferred income taxes related to the same ﬁ scal 

authority.

The signiﬁ cant components of deferred tax assets and liabilities are as follows:

Deferred income tax assets:

Tax losses 

  Depreciation allowances 
  Others 

Total deferred income tax assets 
Less: Valuation allowance 

Deferred income tax assets 

Deferred income tax liabilities:
  Undistributed earnings from equity investees 
  Others 

Deferred income tax liabilities 

The tax losses can be carried forward against future taxable income and will expire in the following years:

No expiry date 
2015 
2016 
2017 
2018 
2019 
2020 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

9,297 
– 
250 

9,547 
(9,297) 

250 

3,560 
163 

3,723 

7,468
49
43

7,560
(7,455)

105

2,760
187

2,947

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

28,699 
– 
– 
3,982 
865 
4,298 
33,735 

71,579 

21,063
10,098
–
4,097
1,148
633
–

37,039

 
 
 
 
 
 
 
 
100 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

26. 

INCOME TAXES (Continued)

The Company believes that it is not more likely than not that future operations will generate sufﬁ cient taxable income to realize the beneﬁ t of the deferred income 

tax assets as the subsidiaries of the Company have had sustained pre-tax losses. Accordingly, a valuation allowance has been recorded against the deferred income 

tax assets arising from the tax losses of the Company.

The table below summarizes changes in the deferred tax valuation allowance:

Deferred income tax valuation allowance:

At January 1 
Exchange differences 
Charged to statement of operations 
Utilization of previously unrecognized tax losses 
Write-off of expired tax losses 
Others 

At December 31 

2015 
US$’000 

2014
US$’000

7,455 
(235) 
4,505 
(34) 
(1,493) 
(901) 

9,297 

9,470
(135)
783
(1,055)
(1,169)
(439)

7,455

The Group recognizes interests and penalties, if any, under other payables, accruals and advance receipts on its consolidated balance sheets and under other 

expenses in its consolidated statement of operations. As of December 31, 2015 and 2014, the Group did not have any material unrecognized uncertain tax 

positions.

 
 
Notes To Consolidated Financial Statements

101101

27. 

(LOSSES)/EARNINGS PER SHARE

(a) 

Basic (losses)/earnings per share

Basic (losses)/earnings per share is calculated by dividing the net (loss)/income attributable to ordinary shareholders of the Company by the weighted 

average number of ordinary shares in issue during the year. Periodic accretion to preferred shares of HMHL (note 20) is recorded as deductions to 

consolidated net income to arrive at net (loss)/income available to the Company’s ordinary shareholders for purpose of calculating the consolidated basic 

(losses)/earnings per share.

Weighted average number of outstanding ordinary shares in issue 

54,659,315 

52,563,387

2015 

2014

Net income/(loss) from continuing operations 
Net income attributable to non-controlling interests 
Accretion on redeemable non-controlling interests 

Net loss for the year attributable to ordinary shareholders of

the Company – Continuing operations (US$’000) 

Income from discontinued operation, net of tax 
Net income attributable to non-controlling interests 

Net income for the year attributable to ordinary shareholders of

the Company – Discontinued operation (US$’000) 

(Losses)/earnings per share attributable to ordinary shareholders of the Company

– Continuing operations (US$ per share) 
– Discontinued operation (US$ per share) 

10,427 
(2,434) 
(43,001) 

(6,120)
(2,203)
(25,510)

(35,008) 

(33,833)

– 
– 

– 

2,034
(1,017)

1,017

(35,008) 

(32,816)

(0.64) 
– 

(0.64) 

(0.64)
0.02

(0.62)

 
 
 
 
 
 
 
102 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

27. 

(LOSSES)/EARNINGS PER SHARE (Continued)

(b) 

Diluted (losses)/earnings per share

Diluted (losses)/earnings per share is calculated by dividing net (loss)/income attributable to ordinary shareholders, by the weighted average number 

of ordinary and dilutive ordinary share equivalent outstanding during the period. Dilutive ordinary share equivalents include shares issuable upon the 

exercise or settlement of share-based awards issued by the Company and its subsidiaries using the treasury stock method and the ordinary shares issuable 

upon the conversion of the preferred shares issued by HMHL using the if-converted method. The computation of diluted (losses)/earnings per share does 

not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect.

In determining the impact from share-based awards and convertible preferred shares issued by HMHL, the Company ﬁ rst calculates the diluted earnings 

per share at HMHL and includes in the numerator of consolidated (losses)/earnings per share the amount based on the diluted (losses)/earnings per share 

of HMHL multiplied by the number of shares owned by the Company. If dilutive, the percentage of the Company’s shareholding in HMHL was calculated by 

treating convertible preferred shares issued by HMHL as having been converted at the beginning of the period and share options as having been exercised 

during the period.

For purpose of calculating (losses)/earnings per share for discontinued operation the same number of potential ordinary shares used in computing 

the diluted per share amount for income from continuing operations was used in computing diluted per share amount for income from discontinued 

operation.

(Losses)/earnings per share attributable to ordinary shareholders of the Company

– Continuing operations (US$ per share) 
– Discontinued operation (US$ per share) 

2015 

2014

(0.64) 
– 

(0.64) 

(0.64)
0.02

(0.62)

For the years ended December 31, 2015 and 2014, the preferred shares issued by HMHL and share options issued by the Company and HMHL were not 

included in the calculation of diluted loss per share because of their anti-dilutive effect.

Diluted loss per share from continuing operations for the years ended December 31, 2015 and 2014 was the same as the basic loss per share from 

continuing operations.

28. 

SEGMENT REPORTING

The operating segments are strategic business units that offer different products and services. They are managed separately because each business requires 

different technological advancement and marketing approach. Details of the operating segments are disclosed in Note 1. The performance of the reportable 

segments are assessed based on two measurements: (a) earnings or losses of subsidiaries before interest income, ﬁ nance costs and tax expenses (“EBIT/(LBIT)”) 

and (b) equity in earnings of equity investees, net of tax.

 
 
 
 
Notes To Consolidated Financial Statements

103103

28. 

SEGMENT REPORTING (Continued)

The segment information for the reportable segments is as follows:

Continuing operations

For the year ended December 31, 2015

Innovation
Platform 

Commercial Platform

  Prescription 
Drugs 

Drug R&D 

Consumer Health 

Reportable
 segment

PRC 
US$’000 

PRC 
US$’000 

PRC  Hong Kong 
US$’000 

US$’000 

Total  Unallocated 
US$’000 

US$’000 

Total
US$’000

Revenue from external customers 

52,016 

105,478 

3,028 

17,681 

178,203 

– 

178,203

EBIT/(LBIT) 
Interest income 
Equity in earnings of equity investees, net of tax 

Operating proﬁ t/(loss) 
Finance costs 
Additions to non-current assets

(other than ﬁ nancial instrument

  and deferred tax assets) 
Depreciation/amortization 
Income tax expense 

(119) 
79 
(3,770) 

(3,810) 
– 

3,218 
1,864 
– 

676 
114 
15,653 

16,443 
– 

88 
94 
239 

(169) 
29 
10,689 

10,549 
– 

5 
11 
– 

1,211 
1 
– 

1,212 
85 

4 
5 
148 

1,599 
223 
22,572 

24,394 
85 

3,315 
1,974 
387 

(11,186) 
228 
– 

(9,587)
451
22,572

(10,958) 
1,319 

13,436
1,404

9 
41 
1,218 

3,324
2,015
1,605

As at December 31, 2015

Innovation
Platform 

Commercial Platform

  Prescription 
Drugs 

Drug R&D 

Consumer Health 

Reportable
 segment

PRC 
US$’000 

PRC 
US$’000 

PRC  Hong Kong 
US$’000 

US$’000 

Total  Unallocated 
US$’000 

US$’000 

Total
US$’000

49,545 
8,312 
1,343 
– 
– 
9,285 

97,572 
122 
– 
2,925 
571 
49,709 

66,552 
27 
– 
407 
– 
60,762 

8,651 
7 
– 
– 
– 
– 

222,320 
8,468 
1,343 
3,332 
571 
119,756 

7,434 
39 
– 
– 
– 
– 

229,754
8,507
1,343
3,332
571
119,756

Total assets 
Property, plant and equipment 
Leasehold land 
Goodwill 
Intangible asset 
Investments in equity investees 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
104 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

28. 

SEGMENT REPORTING (Continued)

Continuing operations (Continued)

For the year ended December 31, 2014

Commercial Platform

Prescription 
Drugs 

Consumer Health 

Reportable
 segment

PRC 
US$’000 

PRC 
US$’000 

Hong Kong 
US$’000 

Total  Unallocated 
US$’000 

US$’000 

Total
US$’000

Innovation
Platform 

Drug R&D 

PRC 
US$’000 

Revenue from external customers 

20,344 

50,202 

3,847 

12,936 

87,329 

– 

87,329

EBIT/(LBIT) 
Interest income 
Equity in earnings of equity investees, net of tax 

Operating proﬁ t/(loss) 
Finance costs 
Additions to non-current assets

(other than ﬁ nancial instrument

  and deferred tax assets) 
Depreciation/amortization 
Income tax expense 

Total assets 
Property, plant and equipment 
Leasehold land 
Goodwill 
Intangible asset 
Investments in equity investees 

(13,817) 
33 
(8,409) 

(22,193) 
– 

3,671 
1,145 
– 

Innovation
Platform 

Drug R&D 

PRC 
US$’000 

43,061 
7,305 
1,436 
– 
– 
13,067 

48 
68 
13,201 

13,317 
10 

915 
65 
51 

771 
12 
10,388 

11,171 
77 

24 
6 
– 

999 
3 
– 

1,002 
19 

2 
7 
131 

(11,999) 
116 
15,180 

3,297 
106 

4,612 
1,223 
182 

(7,001) 
443 
– 

(6,558) 
1,410 

6 
42 
1,161 

(19,000)
559
15,180

(3,261)
1,516

4,618
1,265
1,343

As at December 31, 2014

Commercial Platform

Prescription 
Drugs 

Consumer Health 

Reportable
 segment

PRC 
US$’000 

PRC 
US$’000 

Hong Kong 
US$’000 

Total  Unallocated 
US$’000 

US$’000 

Total
US$’000

68,650 
62 
– 
3,023 
666 
39,158 

70,731 
36 
– 
407 
– 
55,753 

7,050 
8 
– 
– 
– 
– 

189,492 
7,411 
1,436 
3,430 
666 
107,978 

21,342 
71 
– 
– 
– 
– 

210,834
7,482
1,436
3,430
666
107,978

Segment information for discontinued operation has been disclosed in Note 5.

Revenue from external customers is after elimination of inter-segment sales. The amount eliminated attributable to (a) sales between Prescription Drugs business 

and Consumer Health business within the PRC of US$1,187,000 and US$271,000; (b) sales within Consumer Health business from Hong Kong to the PRC of 

US$2,874,000 and US$105,000 for the years ended December 31, 2015 and 2014.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes To Consolidated Financial Statements

105105

28. 

SEGMENT REPORTING (Continued)

Sales between segments are carried out at mutually agreed terms.

There was one customer under Innovation Platform who accounted for 23% of the Group’s revenue for the year ended December 31, 2015. There was one 

customer under Innovation Platform who accounted for 13% of the Group’s revenue for the year ended December 31, 2014.

Unallocated expenses mainly represent corporate expenses which include corporate employee beneﬁ t expenses and the relevant share-based compensation 

expenses. Unallocated assets mainly comprise cash at banks.

A reconciliation of EBIT/(LBIT) for reportable segments to net income/(loss) from continuing operations is provided as follows:

EBIT/(LBIT) 
Unallocated expenses 
Interest income 
Equity in earnings of equity investees, net of tax 
Finance costs 
Income taxes 

2015 
US$’000 

1,599 
(11,186) 
451 
22,572 
(1,404) 
(1,605) 

2014
US$’000

(11,999)
(7,001)
559
15,180
(1,516)
(1,343)

Net income/(loss) from continuing operations 

10,427 

(6,120)

29. 

LITIGATION

From time to time, the Group may become involved in litigation relating to claims arising from the ordinary course of business. The Group believes that there 

are currently no claims or actions pending against the Group, the ultimate disposition of which could have a material adverse effect on the Group’s results of 

operations, ﬁ nancial condition or cash ﬂ ows. However, litigation is subject to inherent uncertainties and the Group’s view of these matters may change in the 

future. When an unfavorable outcome occurs, there exists the possibility of a material adverse impact on the Group’s ﬁ nancial position and results of operations 

for the periods in which the unfavorable outcome occurs, and potentially in future periods.

30.  RESTRICTED NET ASSETS

Relevant PRC laws and regulations permit payments of dividends by the Company’s subsidiaries in China only out of their retained earnings, if any, as determined 

in accordance with PRC accounting standards and regulations. In addition, the Company’s subsidiaries in China are required to make certain appropriation of net 

after-tax proﬁ ts or increase in net assets to the statutory surplus fund prior to payment of any dividends. In addition, registered share capital and capital reserve 

accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each subsidiary. As a result of these and other restrictions under 

PRC laws and regulations, the Company’s subsidiaries in China are restricted in their ability to transfer their net assets to the Group in terms of cash dividends, 

loans or advances, which restricted portion amounted to US$80,040,000 and US$79,441,000 as at December 31, 2015 and 2014 respectively. Even though the 

Group currently does not require any such dividends, loans or advances from the PRC subsidiaries, for working capital and other funding purposes, the Group may 

in the future require additional cash resources from the Company’s subsidiaries in China due to changes in business conditions, to fund future acquisitions and 

development, or merely to declare and pay dividends to make distributions to shareholders.

Further, the Group has certain investments in equity investees, of which the Group’s equity in undistributed earnings amounted to US$74,715,000 and 

US$51,244,000 as at December 31, 2015 and 2014 respectively.

 
 
106 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

31.  ADDITIONAL INFORMATION: CONDENSED FINANCIAL STATEMENTS OF THE COMPANY

Regulation S-X require condensed ﬁ nancial information as to ﬁ nancial position, changes in ﬁ nancial position and results of operations of a parent company as of 

the same dates and for the same periods for which audited consolidated ﬁ nancial statements have been presented when the restricted net assets of consolidated 

and unconsolidated subsidiaries together exceed 25 percent of consolidated net assets as of the end of the most recently completed ﬁ scal year.

The Company’s investments in its subsidiaries are accounted for under the equity method of accounting. Such investment is presented on separate condensed 

balance sheets of the Company as “Investments in subsidiaries” and the Company’s shares of the proﬁ t or loss of subsidiaries are presented as “Equity in earnings 

of subsidiaries” in the statements of operations. Ordinarily under the equity method, an investor in an equity method investee would cease to recognize its 

share of the losses of an investee once the carrying value of the investment has been reduced to nil absent an undertaking by the investor to provide continuing 

support and fund losses. For the purpose of this condensed ﬁ nancial information of parent company, the Company has continued to reﬂ ect its share, based on its 

proportionate interest, of the losses of a subsidiary regardless of the carrying value of the investment even though the Company is not legally obligated to provide 

continuing support or fund losses.

The Company’s subsidiaries did not pay any dividends to the Company for the periods presented except for Hutchison Chinese Medicine Holding Limited 

and Hutchison Chinese Medicine (Shanghai) Investment Limited. Hutchison Chinese Medicine Holding Limited declared dividends of US$1,923,000 and 

US$2,564,000 during the years ended December 31, 2015 and 2014 respectively. Hutchison Chinese Medicine (Shanghai) Investment Limited declared dividends 

of US$2,949,000 and US$15,385,000 during the years ended December 31, 2015 and 2014 respectively. These dividends were settled by off-setting against 

amounts due to the same subsidiaries.

Certain information and footnote disclosures generally included in ﬁ nancial statements prepared in accordance with US GAAP have been condensed and omitted. 

The footnote disclosures represent supplemental information relating to the operations of the Company, as such, these statements should be read in conjunction 

with the notes to the consolidated ﬁ nancial statements of the Group.

Notes To Consolidated Financial Statements

107107

31.  ADDITIONAL INFORMATION: CONDENSED FINANCIAL STATEMENTS OF THE COMPANY (Continued)

Condensed Balance Sheets

Assets
Current assets

Cash and cash equivalents 

  Prepayments 
  Amounts due from related parties 

Total current assets 
Non-current asset
Investments in subsidiaries 
Deferred costs for initial public offering in the United States 

Total assets 

Liabilities and shareholders’ equity
Current liabilities
  Other payables and accruals 
  Amounts due to subsidiaries 
  Amounts due to immediate holding company 

Total liabilities 

Redeemable non-controlling interests 

Company’s shareholders’ equity
  Ordinary share; $1.00 par value; 75,000,000 shares authorized;

  56,533,118 and 53,076,676 shares issued at December 31, 2015 and 2014 

  Other shareholders’ equity 

Total Company’s shareholders’ equity 

Total liabilities and shareholders’ equity 

December 31, 
2015 
US$’000 

December 31,
2014
US$’000

1 
19 
76 

96 

93,396 
4,446 

97,938 

5,224 
9,029 
329 

14,582 

1
1
76

78

90,004
–

90,082

599
9,055
241

9,895

– 

41,036

56,533 
26,823 

83,356 

97,938 

53,076
(13,925)

39,151

90,082

 
 
 
 
 
108 HUTCHISON CHINA MEDITECH LIMITED    2015 Annual Report

Notes To Consolidated Financial Statements

31.  ADDITIONAL INFORMATION: CONDENSED FINANCIAL STATEMENTS OF THE COMPANY (Continued)

Condensed Statements of Operations

Operating expenses
Administrative 

Other expense

Interest expense 

  Other expense 

Total other expenses 

Equity in earnings of subsidiaries, net of tax 

Net income/(loss) 

Condensed Statements of Cash Flows

Operating activities
Net income/(loss) 
Adjustments to reconcile net income/(loss) to net cash used in operating activities
Equity in earnings of subsidiaries, net of tax 
Loss on dilution of interest in a subsidiary 
Changes in operating assets and liabilities 
  Prepayments 
  Amounts due to subsidiaries 
  Other payables and accruals 
  Amounts due to immediate holding company 

Net cash from operating activities and net increase in cash and cash equivalents 
Cash and cash equivalents at beginning of year 

Cash and cash equivalents at end of year 

32. 

SUBSEQUENT EVENTS

2015 
US$’000 

2014
US$’000

(4,658) 

(1,146)

(4) 
(7) 

(11) 

12,662 

7,993 

(3)
(98)

(101)

(6,059)

(7,306)

2015 
US$’000 

2014
US$’000

7,993 

(7,306)

(12,662) 
3 

(18) 
3,171 
1,425 
88 

– 
1 

1 

6,059
98

(1)
1,379
(318)
89

–
1

1

The Group evaluated subsequent events through February 29, 2016 which is the date when the consolidated ﬁ nancial statements were issued.

In February 2016, the Group established additional new credit facilities with Bank of America N.A. and Deutsche Bank AG, Hong Kong Branch totaling an aggregate 
amount of HK$468.0 million (equivalent to US$60.0 million). These facilities are unsecured with certain ﬁ nancial covenant requirements, with a range of 12 and 
18 month terms, and were established in order to give the Group additional ﬂ exibility in the context of execution of the proposed listing in the United States.

 
 
 
 
 
Information For Shareholders

Depositary
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
United Kingdom
Telephone: 
Facsimile: 

+44 (0)906 999 0000
+44 (0)370 703 6114

Shareholders Contact
Please direct enquiries to:
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attn: 

Edith Shih
Non-executive Director & Company Secretary
ediths@hwl.com.hk
+852 2128 1778

E-mail: 
Facsimile: 

Investor Information
Corporate press releases, ﬁ nancial reports and other investor information on the 
Company are available online at the Company’s website.

Investor Relations Contact
Please direct enquiries to:
E-mail: 
Telephone: 
Facsimile: 

ir@chi-med.com
+852 2121 8200
+852 2121 8281

Website Address
www.chi-med.com

Listing
The ordinary shares of the Company are listed on AIM regulated by the London 
Stock Exchange

April 26, 2016 to April 27, 2016
April 27, 2016
August 2016

Code
HCM

Financial Calendar
Closure of Register of Members 
Annual General Meeting 
Interim Results Announcement 

Registered Ofﬁ ce
P.O. Box 309, Ugland House
Grand Cayman, KY1-1104
Cayman Islands
Telephone: 
Facsimile: 

+1 345 949 8066
+1 345 949 8080

Principal Place of Business
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Telephone: 
Facsimile: 

+852 2128 1188
+852 2128 1778

Principal Executive Ofﬁ ce
21st Floor, Hutchison House
10 Harcourt Road
Hong Kong
Telephone: 
Facsimile: 

+852 2121 8200
+852 2121 8281

Share Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street, St. Helier
Jersey, Channel Islands JE1 1ES
Telephone: 
Facsimile: 

+44 (0)370 707 4040
+44 (0)370 873 5851

Important information
This annual report does not constitute a registration statement on Form F-1 and does not constitute or form, and will not form, part of any offer or invitation to sell or 
issue, or the solicitation of an offer to purchase or acquire, any ordinary shares or any other securities of the Company in the United States or in any other jurisdiction. 
Securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended 
(“US Securities Act”). Any potential public offering of securities to be made in the United States will be made by means of a Form F-1 Registration Statement that has been 
declared effective by the United States Securities and Exchange Commission. The Form F-1 Registration Statement contains detailed information about the issuer and its 
management and ﬁ nancial statements. This annual report is being issued pursuant to and in accordance with Rule 135e under the US Securities Act.

No money, securities or other consideration is being solicited, and, if sent in response to the information contained in this annual report, will not be accepted.

This annual report is not directed to, or intended for distribution or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other 
jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such 
jurisdiction.

Past Performance and Forward Looking Statements
The performance and the results of operations of the Group contained within this annual report are historical in nature, and past performance is no guarantee of the 
future results of the Group. Any forward-looking statements and opinions contained within this annual report are based on current plans, estimates and projections, and 
therefore involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements and opinions. The Group, the 
Directors, employees and agents of the Group assume (a) no obligation to correct or update the forward-looking statements or opinions contained in this annual report; 
and (b) no liability in the event that any of the forward-looking statements or opinions do not materialize or turn out to be incorrect.

 
(Incorporated in the Cayman Islands with limited liability)

2015 Annual Report

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Innovation Platform - 

Commercial Platform