Filing of Registration Statement on Form F-1 for potential Nasdaq Stock Market Listing

The following includes the text of the Announcement but excludes the appendix. For the complete release, please download the PDF.
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London: Friday, 16 October 2015: Hutchison China MediTech Limited (“Chi‑Med”) (AIM: HCM) today announces that it is evaluating the feasibility of a potential issuance of new Ordinary Shares (the “Equity Raise”) in connection with a potential listing of American depositary shares (“ADSs”) representing such Ordinary Shares on the Nasdaq Stock Market (the “Offering”).  Chi‑Med has publicly filed today a registration statement on Form F‑1 (“Form F‑1 Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”) in relation to the potential Offering.  The Offering will be made only by means of an effective Form F‑1 Registration Statement. As at the date of this announcement, Chi‑Med has not yet set a definite timetable or decided on further details of the potential Offering and there can be no assurance that the potential Offering will be completed. The number of offering shares and offering price of the potential Offering have not yet been determined. The directors of Chi‑Med (“Directors”) will assess various factors, including market conditions, in considering whether to formally launch the transaction.

Any equity securities of Chi‑Med listed on Nasdaq as part of the potential Offering will be in the form of ADSs. ADSs are negotiable instruments issued by a depositary bank that represent ownership of Ordinary Shares. They are designed to facilitate the purchase, holding and sale of Ordinary Shares by investors who wish to trade on Nasdaq. ADSs are similar to Depositary Interests in that each ADS will represent a fixed number of Ordinary Shares (the exact ratio of ADSs to Ordinary Shares will be determined during the Offering process), save that ADSs will be denominated in US dollars.

Bank of America Merrill Lynch and Deutsche Bank Securities (in alphabetical order) are acting as joint global coordinators and joint bookrunners for the potential Offering.

Mr Simon To, Executive Director and Chairman of Chi‑Med, said, “We believe the United States not only represents one of the world’s most important pharmaceutical markets for the development of our drug candidates but also the largest healthcare investment community. We consider that Chi‑Med should take this important step to increase its profile amongst U.S. investors and seek to benefit from the additional liquidity that we believe a listing on Nasdaq should provide. The potential U.S. listing and financing will importantly, if successful, enable Chi‑Med to accelerate and broaden investment in its product pipeline and expand its manufacturing facilities to support the potential future commercialisation of its products.”

A copy of the Form F‑1 Registration Statement can be accessed through the website of the United States Securities and Exchange Commission at www.sec.gov.

Background to the potential Equity Raise and Offering

The potential Equity Raise and Offering are intended to support the implementation of Chi‑Med’s current drug development plans. It is the belief of the Directors that the United States represents one of the most important markets for the development of Chi‑Med’s drug candidates, and the United States also has a large number of specialist healthcare investors. The Directors believe that Chi‑Med should obtain exposure to the United States capital markets to increase its profile amongst United States investors and seek to benefit from the additional liquidity that the Directors believe a listing on Nasdaq should provide. In summary, given the nature of the business of Chi‑Med and its subsidiaries (the “Group”), the Directors believe that the potential Equity Raise and Offering together comprise an appropriate and beneficial route for Chi‑Med to take.

Although the final size of the potential Equity Raise is yet to be determined, if the potential Equity Raise and Offering do proceed, Chi‑Med intends to use the net proceeds of the potential Equity Raise, together with the cash generated by its operations, primarily to advance the clinical development of its multiple drug candidates. In particular, Chi‑Med expects to apply these net proceeds as follows:

a) to accelerate and broaden clinical development of the drug candidates for which it retains all worldwide rights, specifically to advance:

i. HMPL 523 through Phase I and Proof of Concept studies, expected to be conducted in Australia, the United States and China, in rheumatoid arthritis, lupus and haematological cancer;

ii. sulfatinib through NDA submission in China and through Phase I and Proof of Concept studies, expected to be conducted in the United States, in neuroendocrine tumours, and through Phase I and Proof of Concept studies, expected to be conducted in China, in thyroid cancer;

iii. epitinib through NDA submission in China and Phase I and Proof of Concept studies, expected to be conducted in the United States, in non small cell lung cancer with brain metastasis; and

iv. theliatinib through Phase I and Proof of Concept studies, expected to be conducted in China and the United States, in head and neck cancer and oesophageal cancer;

b) to support its share of the development costs of its partnered clinical drug candidates, including to advance:

i. savolitinib through NDA submission globally in papillary renal cell carcinoma and EGFR tyrosine kinase inhibitor refractory non small cell lung cancer and through Proof of Concept studies globally in gastric cancer and VEGFR tyrosine kinase inhibitor refractory clear cell renal cell carcinoma;

ii. fruquintinib through NDA submission in colorectal cancer and non small cell lung cancer in China and through Proof of Concept in gastric cancer in China and to advance fruquintinib through Proof of Concept in non small cell lung cancer in the United States either independently or in partnership with Eli Lilly subject to the exercise of its global option; and

iii. HMPL 004 through an interim analysis in a global Phase III study in mild to moderate ulcerative colitis;

c) to progress pre clinical drug candidates, specifically to advance:

i. HMPL 689 through Phase I and Proof of Concept studies, expected to be conducted in Australia, the United States and China, in haematological cancer;

ii. HMPL 453 through Phase I and Proof of Concept studies, expected to be conducted in Australia, the United States and China, in bladder cancer; and

iii. other drug candidates through pre clinical studies and into Phase I clinical trials;

d) to build production facilities to produce both clinical and commercial supply of its drug candidates; and

e) to repay certain of its existing term loan from Scotiabank (Hong Kong) Limited.

Although Chi‑Med expects that the majority of the net proceeds from the potential Equity Raise, if the potential Equity Raise and Offering do proceed, would be used to advance the clinical development of its multiple drug candidates, the precise amounts allocated to each of the expenditure items listed above will only be determined once the final size of the potential Equity Raise is known.

Chi‑Med expects to use the remainder of the net proceeds (if any) to provide funding for working capital and other general corporate purposes, such as acquiring the commercial rights to other drug products and expanding its research organisation and infrastructure.

If the potential Equity Raise and Offering do proceed, the expected usage of the potential Equity Raise net proceeds represents the Directors’ intentions based upon their current plans and Chi‑Med’s business conditions. Due to the many variables inherent in the development of its drug candidates at this time, such as the timing of patient enrolment and evolving regulatory requirements, the Directors cannot currently predict the stage of development they expect to achieve for Chi‑Med’s pre‑clinical and clinical trial and drug candidates with the net proceeds of the potential Equity Raise. The amounts and timings of the actual expenditure to be incurred by Chi‑Med may vary significantly depending on numerous factors, including the results of the pre‑clinical and clinical trial of its drug candidates, its operating costs and expenditures and the amount of cash generated by its operations. Accordingly, the Directors will have broad discretion over the usage of the net proceeds and investors will be relying on the judgment of the Directors regarding the application of the net proceeds. Pending such usage, the Directors intend to invest these net proceeds in high‑quality, investment‑grade, short‑term fixed income instruments.

Pending the execution of the potential Offering, Chi-Med has sufficient resources and support to pursue the current research and development of its drug candidates.

Chi‑Med will be seeking shareholders’ approval to authorise the Directors to issue new Ordinary Shares in connection with the potential Offering at an extraordinary general meeting of Chi‑Med which is expected to take place on Tuesday, 10 November 2015. An explanatory circular will shortly be posted to shareholders to provide further information in relation to the potential Offering. A further announcement will be published if Chi‑Med decides to proceed with the potential Offering.

The Existing Shareholders

The Directors recognise the importance of Chi‑Med’s existing shareholder base and plan to retain admission of the Ordinary Shares to trading on the AIM market of the London Stock Exchange (“AIM”) alongside the listing of the ADSs on Nasdaq. Notwithstanding the planned listing of the ADSs on Nasdaq, Chi‑Med will continue to be subject to the AIM Rules. Shareholders will continue to be able to deal in Depositary Interests and/or Ordinary Shares on AIM and following the listing of the ADSs on Nasdaq will, subject to certain restrictions that apply where such shareholders are affiliates of Chi‑Med, also be able to deal in ADSs on Nasdaq. Shareholders should consult their own legal advisers as to whether they are affiliates of Chi‑Med but, generally, shareholders should note that Directors, certain officers and shareholders holding more than 10 per cent. of the issued Ordinary Shares are considered to be affiliates for these purposes.

The Potential Offering

A document setting out certain information addressing questions concerning the potential Offering and trading of ADSs on Nasdaq, and explaining how to convert Ordinary Shares and Depositary Interests into ADSs (and vice versa), will be prepared for the benefit of shareholders (the “FAQs”). Shareholders are encouraged to review the FAQs, which will be available for viewing on Chi‑Med’s website at www.chi‑med.com following the listing of the ADSs on Nasdaq, and to consult their stockbroker, solicitor, accountant or other independent financial adviser in the event of any doubt.

In relation to the potential Offering, Chi‑Med has filed the Form F‑1 Registration Statement. The Form F‑1 Registration Statement, which has not yet become effective, anticipates an offer of new Ordinary Shares in the form of ADSs. A precise determination of the number of ADSs to be offered by Chi‑Med and the offering price has not yet been made.

Chi‑Med will also make an application for the new Ordinary Shares to be issued in connection with the potential Equity Raise to be admitted to trading on AIM.  As noted above, application has been made to Nasdaq for the ADSs representing such Ordinary Shares to be listed on the Nasdaq Stock Market upon effectiveness of the Form F‑1 Registration Statement. The new Ordinary Shares issued as a result of the potential Equity Raise will rank pari passu with the existing Ordinary Shares of Chi‑Med.

The potential Offering will be made only by means of an effective Form F‑1 Registration Statement.

The ADSs and the new Ordinary Shares to be issued as a result of the potential Equity Raise may not be subscribed for or sold, nor may offers to subscribe for or buy the ADSs or the new Ordinary Shares to be issued as a result of the potential Equity Raise be accepted, prior to the time the Form F‑1 Registration Statement becomes effective.

Shareholders and potential investors should note that the potential Offering may or may not proceed, and accordingly are advised to exercise caution when dealing in the securities of Chi‑Med.

Presentation of Financial Information

The consolidated financial statements of the Group included in the Form F‑1 Registration Statement (comprising the consolidated financial statements for the years ended 31 December 2014 and 31 December 2013 and the unaudited condensed consolidated financial statements for the six months ended 30 June 2015 and 30 June 2014, together the “Historical Financial Information”) have been prepared in accordance with U.S. GAAP, while the historical consolidated financial statements of the Group published prior to the potential Offering were prepared in accordance with IFRS. The Board wishes to change the accounting standards it adopts in the preparation of the consolidated financial statements of the Group from IFRS to U.S. GAAP following the completion of the potential Offering. In addition, Chi‑Med has three non‑consolidated joint ventures ‑ Shanghai Hutchison Pharmaceuticals Limited, Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited and Nutrition Science Partners Limited.  The consolidated financial data of each such joint venture (which are prepared under IFRS, as of and for the years ended 31 December 2014 and 31 December 2013 and as of and for the six months ended 30 June 2015 and 30 June 2014) and the Historical Financial Information, each as extracted from the Form F‑1 Registration Statement, are set out in the Appendix to this announcement.

Ends

Enquiries:

About Chi‑Med

Chi‑Med is a China‑based, globally‑focused healthcare group which researches, develops, manufactures and sells pharmaceuticals and health‑related consumer products.  Its Innovation Platform focuses on discovering and developing innovative therapeutics in oncology and autoimmune diseases for the global market.  Its Commercial Platform manufactures, markets, and distributes prescription drugs and consumer health products in China.

Chi‑Med is majority owned by the multinational conglomerate CK Hutchison Holdings Limited (SEHK: 0001). For more information, please visit: www.chi‑med.com.

Important information

This announcement, which includes the appendices to it, does not constitute a Form F‑1 Registration Statement 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 of the Ordinary Shares or ADSs or any other securities 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 (“U.S. Securities Act”).  Any public offering of securities to be made in the United States will be made by means of a Form F‑1 Registration Statement. Such Form F‑1 Registration Statement will contain detailed information about the issuer and its management and financial statements. This announcement is being issued pursuant to and in accordance with Rule 135e under the U.S. Securities Act.

No money, securities or other consideration is being solicited, and, if sent in response to the information contained in this announcement, will not be accepted.

Members of the public outside the United States will not be eligible to take part in the potential Offering described above.

This announcement 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.

The distribution of this announcement into jurisdictions other than the United Kingdom may be restricted by law.  Persons into whose possession this announcement come should inform themselves about and observe any such restrictions.

For readers in the European Economic Area

In any EEA Member State that has implemented the Prospectus Directive, this announcement, which includes the appendices to it, is only addressed to and directed at qualified investors in that Member State within the meaning of the Prospectus Directive.  The term “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including Directive 2010/73/EU, to the extent implemented in each relevant Member State), together with any relevant implementing measure in the relevant Member State.

For readers in the United Kingdom

This announcement, which includes the appendices to it, insofar as it constitutes an invitation or inducement to enter into investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000, as amended) in connection with the securities which are the subject of the potential Offering described in this announcement or otherwise, is being directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments who fall within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“Order”) or (iii) certain high value persons and entities who fall within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations etc) of the Order; or (iv) any other person to whom it may lawfully be communicated (all such persons in (i) to (iv) together being referred to as “relevant persons”). The ADSs are only available to, and any invitation, offer or agreement to subscribe for, purchase or otherwise acquire such ADSs will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this announcement or any of its contents.

Forward‑looking statements

This announcement, which includes the appendices to it, may contain forward‑looking statements that reflect Chi‑Med’s current expectations regarding future events, including the commercialisation and regulatory clearance of Chi‑Med’s products, the Group’s liquidity and results of operations, as well as the Group’s future capital raising activities. Forward‑looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein and depend on a number of factors, including the success of Chi‑Med’s research and development and commercialisation strategies, the uncertainties related to the regulatory process and the acceptance of Chi‑Med’s products by hospitals and other medical professionals. A further list and description of risks, uncertainties and other risks associated with an investment in Chi‑Med can be found in Chi‑Med’s filings with the United States Securities and Exchange Commission, including the Form F‑1 Registration Statement. Existing and prospective investors are cautioned not to place undue reliance on these forward‑looking statements, which speak only as of the date hereof. Chi‑Med undertakes no obligation to update or revise the information contained in this announcement, whether as a result of new information, future events or circumstances or otherwise.

Defined Terms

For the purposes of this announcement:

“AIM Rules” means the rules and guidance for companies whose shares are admitted to trading on AIM entitled “AIM Rules for Companies” published by the London Stock Exchange, as amended from time to time;

“CREST” means an electronic settlement system for United Kingdom and Irish securities operated by Euroclear UK & Ireland Limited for the paperless settlement of securities in uncertificated form;

“Depositary Interests” means the dematerialised depositary interests each representing an entitlement to Ordinary Shares which may be traded through CREST in dematerialised form;

“EGFR”  means epidermal growth factor receptor;

“Group” means Chi‑Med and its subsidiaries;

“IFRS”  means the International Financial Reporting Standards as issued by the International Accounting Standards Board;

“Nasdaq” means the Nasdaq Stock Market;

“NDA submission” means a request for approval to market a drug containing evidence of safety and efficacy which is demonstrated by extensive pre‑clinical and clinical testing;

“Ordinary Shares” means the fully paid ordinary shares in the capital of Chi‑Med which have a nominal value of US$1 each, and “Ordinary Share” means any one of them;

“Phase I” means a preliminary clinical trial for clinical pharmacology and body safety, conducted to observe the human body tolerance for new medicine and pharmacokinetics, so as to provide a basis for determining the prescription plan;

“Phase III” means a clinical trial stage to verify the clinical effectiveness, the purpose of which is to test and determine the clinical effectiveness and safety of the medicine used on patients with targeted indication, to evaluate the benefits and risks thereof and, eventually, to provide sufficient basis for review of the medicine registration application;

“Proof‑of‑Concept” means a clinical trial conducted to establish the clinical effectiveness and safety of the new medicine used on patients with the targeted indication. Generally Proof‑of‑Concept trials are categorised as either Phase Ib or Phase II trials, which are clinical trials conducted in a larger patient population than for a Phase I trial, but in a smaller patient populations than Phase III registration application trials;

“U.S. GAAP” means the United States generally accepted accounting principles; and

“VEGFR” means vascular endothelial growth factor receptor.

Appendix
Historical Financial Information prepared in accordance with U.S. GAAP
and
Historical Financial Information of Non‑Consolidated Joint Ventures
prepared in accordance with IFRS

Please download the PDF for the full text of the Announcement including the Appendix.