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Hutchison China MediTech Limited (NASDAQ:HCM)
Q2 2020 Earnings Call
Jul 30, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

Okay. This is Christian Hogg, CEO of Chi-Med. Welcome to the Interim 2020 First Half Results. On the line today, we have myself. I have Dr. Wei-Guo Su, our Chief Scientific Officer; and I have Johnny Cheng, our Chief Financial Officer. So if we go straight to the presentation. What I'm going to do is spend maybe 25, 30 minutes on the presentation and then leave half an hour for questions at the end. So starting on page three. The overall strategy of the business remains very well established. But I think page three sums it up very clearly, even more so than perhaps in the last couple of years. We are obviously trying to build a global science-focused biopharmaceutical company from our established base in China. But really, the two key focus areas are realizing the global potential of our novel oncology assets. So building out our global team to maximize the potential of those programs. And then the second area is really building out our fully integrated oncology business in China.

So as we go through the presentation, you'll see how we are working on both of these areas. And I mean, really, we're one of very few companies in China aspiring to bring their homegrown innovations from China to the global market. So I think that sets us apart very significantly from many of the biotechs in China today. If you go to page four. High level look at the strengths of Chi-Med that have been built up over the last 20 years. They're all self-explanatory. But I think in the top left-hand corner there are world-class discovery development organization led by Wei-Guo. It's now up to over 550 full-time people in our scientific team in Shanghai, Suzhou. And we have, as you see on the top right-hand side there, been able, over the last 15-or-so years to create a highly differentiated portfolio of global assets, nine of which are in clinical trials at the moment. We just started with our IDH 1/2 dual inhibitor just last week in Phase I in China. And our three lead assets, as most of you know, are either approved or at NDA filing. I think the bottom right-hand corner, and we'll talk about it later with regards to the announcement we made yesterday around our increased role in the commercialization of Elunate in China, but our commercial platform in China is extremely strong, very deep and great know-how. You'll see we've now built out our oncology team to over 320 people in readiness for both taking over that commercial activity on Elunate as well as launching surufatinib late this year. And then in the bottom left-hand corner, you can see the team, and I'll show we'll talk about the team a bit later, but the median tenure with Chi-Med of the 14-person senior management team is 11 years. It's a very stable large team. It's expanding quickly as we grow but a very powerful group of people that are very committed to developing this business. And in terms of governance, we've been listed for 14 years, and we have a very strong track record of corporate governance. So moving to page five. The pipeline chart, starting with savolitinib. So savolitinib is a very important next sort of six to 12 months for savolitinib. You can see all those red boxes in proof-of-concept and registration intent studies these the red boxes are all global studies. And you can see we're very active in papillary renal cell carcinoma and in non-small cell lung cancer. And I'll obviously talk about these programs later in this presentation. But probably the biggest step that's been taken recently on savolitinib is the submission of the NDA in China for MET Exon 14 skipping non-small cell lung cancer that was filed in May. We just received priority review status a week or so ago or not even a week or so ago, actually a few days ago.

And we're very excited to have that first NDA submitted, accepted and now being processed. And we hope to see savolitinib become the first selective c-MET inhibitor approved in China some time early next year, hopefully. Moving down, surufatinib. It's been a very active past six months on surufatinib. You see the red box with the yellow arrow there pNET and non-pNET. That's essentially, as we've announced recently that the US FDA has aligned and confirmed with Chi-Med that they will accept the clinical data that we have on hand at the moment to support our US NDA, so our two big China Phase IIIs as well as our bridging study in the United States, and that data set is compelling and is, from a clinical standpoint, sufficient to support the NDA. So we'll we will be targeting to submit the NDA for surufatinib in the United States late this year. You can see the blue boxes underneath that. So non-pancreatic NET. We continue to work on the NDA inspection process in China for non-pancreatic NET. We continue to target that to be completed before the end of the year so that we can launch surufatinib in China before the end of the year. And the second blue box there, pancreatic NET, SANET-p, we'll present the clinical data from that pancreatic NET Phase III study at ESMO in a month or two, and the NDA has been submitted. It's in the process of being accepted. Usually, it takes about a month or two from submission to acceptance. So that process is ongoing, but that'll be the second NDA in China for surufatinib. Moving down to L&A obviously, the big news yesterday was the agreement that we reached with Eli Lilly for Chi-Med at our commercial organization to take on all medical detailing, promotion, regional and local marketing activities in China, starting on October 1. We are in now a two month transition period where the Chi-Med commercial team is working hand-in-hand with the Lilly commercial team and essentially transitioning those responsibilities over to Chi-Med. So we're extremely excited about this. The number of reps that will be out detailing fruquintinib is going to multiply pretty significantly, and we feel strongly we're going to see some great results there. That said, we'll continue to work with Lilly closely. They've been a good partner, and we actually have a continued collaboration closely on national marketing and Lilly retains the principal role and is able to, as a result, consolidate sales of fruquintinib, etc. So continued relationship with Lilly in managing fruquintinib and getting the most out of that product in China by using the resources of both parties as best we can.

The gastric cancer study, the FRUTIGA study, we mentioned that, that had gone through a second interim analysis recently. And now we look toward the end of the year or early next year to complete enrollment. Before I move on from fruquintinib, I should mention FRESCO II, which is the third-line colorectal cancer study, it's a red box. So it's a global study. That study has started already. We're in patient screening. We've opened sites all over the world. And we expect our first patient to be dosed very soon it's a very large study covering over 130 clinical sites, well over 500 patients, and we expect to enroll it quite rapidly. So we expect to enroll that FRESCO II study before the end of next year. Last thing I'll say about this chart on page five is the PD-1 combo activities that we have going on in partnership with Junshi with their PD-1 Tuoyi, we have the combination with TIVOT, Innovent's PD-1, and we have the combination now that we will start working on with BeiGene and tezolizumab. So the Tuoyi-surufatinib combo, I'll talk a bit about that later, but that's moving quite nicely, and we're now in Phase II, looking at a number of solid tumor indications, eight to be precise.

And the Tivot-fruquintinib combo is now moving into Phase II looking at five solid tumor settings. So the life cycle indications that follow the first approvals will be significant, and there will be a lot of immunotherapy combos with our VGFR inhibitors. Moving to page six. I'll just talk briefly, 523, our SYK inhibitor and 689, our PI3K delta inhibitor are moving nicely you can see that we're indicating there that we're hoping to move into registration intent studies later this year. I think that's more likely on 689. 523 may need a little bit more time, but we are increasingly clear on the direction for both of those assets. So we are increasingly confident about their future. We also have in on 523, the SYK inhibitor, we have a study in ITP that is enrolling now quite well. And we'd hope to complete our dose escalation section of that study by the end of this year. 453, our FGFR inhibitor is in a Phase II in mesothelioma. We intend to start a second Phase II in cholangiocarcinoma over the second half of this year. And 306, our IDH 1/2 inhibitor, just started in Phase I in China last week, and we are targeting to get into Phase I in the US later this year. So we want to develop 306 in parallel in China and the US at the same time. page seven. Very briefly, just lays out the full pipeline and shows the four other assets that we have coming through late preclinical and regulatory talks. We have four assets. We've not disclosed the MOAs yet. We will when they go into the clinic. But those four assets should enter into clinical trials over the next, call it, six to 18 months six to 12 to 18 months. And you'll see there's one large molecule in the HMPLA 83. So now you start to see Chi-Med's large molecule program starting to come through, and that comes after many years of work by Wei-Guo and the team.

Moving on to page eight. No need to spend too much time on this, but deep management team, expanding rapidly in many areas, both inside and outside of China, and we just feel that we have a very strong foundation as a company in terms of people, in terms of our share register, in terms of our partnerships. So moving on to savolitinib on page 10. So overall, it's about getting a fast monotherapy approval globally in papillary renal cell carcinoma and in China on Exon 14 mutation non-small cell lung cancer and then working hard on the combos. The PD-1 PD-L1 combo, the Imfinzi combo in kidney cancer primarily. And then the big one, obviously, is the Tagrisso combination with savo in EGFR TKI-resistant non-small cell lung cancer. page 11 just shows the pipeline on savolitinib. Obviously, the NDA being accepted is probably the most notable matter to talk about. The savolitinib-Tagrisso combo, we've just been through our first interim analysis on that combination last week. Data is being assessed and reviewed as we speak. So it's a bit premature to talk about that.

But that's a very important program for the company. And all the other programs at various stages of development. So moving on to page 12, the chart that we always talk about. What I'm going to focus on today is the first-line setting or the treatment-naive setting, the MET-positive, 6% there in that first pie chart. Half of those patients roughly half of those patients are MET Exon 14-skipping patients. So if you look at page 13, you can see the results of our registration study in China. In efficacy of valuable patients, we saw a 49% response rate, disease control rate of 93%. So these are terrific levels of efficacy for these patients who have very limited treatment options. Box number three is very important. And I think a lot of you, when we had our announcement on this data around ASCO, you asked for comparisons versus the other selective MET inhibitors out there at the moment, tepotinib from Merck Serono and capmatinib from Novartis. So Box number three is important because it basically shows that the savolitinib registration study, despite delivering such strong efficacy, was heavily loaded with more aggressive subtype patients with pulmonary sarcomatoid carcinoma, PSC. So we have 36% of patients in that registration study had pulmonary sarcomatoid carcinoma, which was vastly more than the competitive products. And as a result, you would expect well, first of all, I think the main thing you can take away from that is it's very difficult to compare study to study. But savolitinib did extremely well, and this is the basis for the NDA submission in China. Efficacy sorry, safety in Box number two was very manageable, and PFS was very positive. Actually, there, you can see the difference between non-small cell lung cancer, Exon 14 skipping and PSC Exon 14 skipping.

You see on the Capler Meier in Box number 4, other non-small cell lung cancer, 9.7-month median PFS. Pulmonary sarcomatoid carcinoma, only 5.5-month median PFS. It's a very aggressive subtype, and we have 36% of patients with that aggressive subtype. So moving on, page 14, the SAVANNAH study. As I said, the interim was conducted last week. Enrollment really continues at speed on the SAVANNAH study. We have I guess what I can say is that this initial interim analysis was primarily focused on the top half of that pictorial there. In other words, patients that were being treated in the third-line-or-above setting, patients that have failed on the rest of Tarceva and then failed on Tagrisso and then went on to the combination. So the majority of the patients, actually, the vast majority of the patients were that type in the interim as far as patient and the reason for that is because, obviously, Tagrisso has been approved in the second-line setting for a long time. And so there are more patients failing on Tagrisso in the second-line setting. The lower section of that chart, where the combo of savo and Tagrisso was used in patients that failed on Tagrisso in the first-line setting, there were very few patients in the interim from that patient population just because Tagrisso has a lot shorter period in the market as an approved therapy in the first-line setting. And also, it has a pretty long median PFS.

So you tend to find fewer patients failing on Tagrisso in the first-line setting. But that's the focus area for the continued enrollment of SAVANNAH, and we expect to build up our patient our data set in those patients over the balance of this year. I think we'll probably complete enrollment of sav by around the end of this year, but it's moving very rapidly. page 15, you've got SAVOIR. The 60-patient data. This, unfortunately, is a case of a study that as the discussion at ASCO stated in his presentation that he felt that this should not have been stopped, and you can see why. The response rates for savo compared to sunitinib, 27% response versus sunitinib, only 7% response. You see very tolerable drug, 42% AEs of Grade three or above for savo and 81% AEs Grade three and above for sunitinib, so much more tolerable rather than sunitinib in this case. And then the most compelling reason why it shouldn't have been stopped is shown in the box on the bottom right, which is the Kaplan-Meier chart for overall survival, where you can see savolitinib with a very important gap between those curves, between sunitinib and savolitinib and a hazard ratio even of only 60 patients a 60-patient study, a hazard ratio of 0.51. So highly compelling so obviously, we've stated before, we're actively evaluating, progressing here in further clinical work and result.

So moving on to surufatinib. page 17. I won't go through it again, looking for the fast approval in China and the United States behind NET and also working on combos, PD-1 combos with BeiGene and with Innovent and with Junshi. So with all three players, we are looking at with all three PD-1 players, we're looking at combos with surufatinib. Moving on to page 2018. So you see all of the NDAs either filed or soon to be accepted sorry, soon to be formally accepted. And obviously, the preparation of the NDA in the red bar at the top of the chart on page eight 18, rather. That's preparing the US NDA for late this year. So very active now on the regulatory side for surufatinib, both inside China and outside of China. Just a brief kind of jogging of the memory on NET and the potential, if you go to page 19. In the treatment landscape for NET, the area that we're most focused on is this grade 1/2 advanced NET space. Where patients have a median OS of about 8.3 years. That's where all of our Phase IIIs have been conducted. The patients to the right, the Grade three NET or neck patients. These patients, there are no treatments for these patients. And what we're seeing, and I'll touch on it in a moment is great efficacy from the PD-1 surufatinib combo in these Grade three NET and neck patients. So that's the landscape, and we think surufatinib has a will play a great role in it. page 20. So this chart, it's a good chart because it covers a lot of the subsections, subsegments of NET, all of the treatments that are available and the most important thing here is to note that there are a lot of unmet medical needs in neuroendocrine tumors. And the positive Phase IIIs for surufatinib in non-pancreatic NET and pancreatic NET, really make surufatinib a treatment that has potential utility across all of these subtypes. So a broad spectrum usage relative to any available therapies today. And actually, the other thing to remember is that surufatinib, from a mechanism of action standpoint is unique in that MTOR everolimus is an MTOR inhibitor, surufatinib is primarily VGFR and CSF1R inhibitor. I suppose you could argue that sunitinib is closest to surufatinib, but it's only approved in the narrow pancreatic NET indication. So the point is, as we now plan the launch and get our commercial mind our commercial plans sort of established for next year for launching surufatinib in the US, we think it'll be a relatively straightforward launch in that we're bringing a therapy to the market that acts in a different manner to what's already there. page 21 is actually support for what I've just said. If you look at the swimmer plot on the left-hand side of page 21, you can see strong efficacy for surufatinib in patients that have progressed on everolimus and sunitinib. So that's where the different mechanism of action can really help patients. Moving on to page 22. The last thing I'll show.

This data we shared at ASCO sorry, at AACR this year, earlier this year, just shows very exciting preliminary Phase I dose-finding data for the PD-1 combo with surufatinib in those Grade three NET and neck patients. All of these patients aren't NET and neck, but many of them are and some of the efficacy that we're seeing there in these very difficult patients is extremely exciting. So surufatinib is very much on track. Fruquintinib, page 24, again, similar strategy of getting approval in a monotherapy setting as quickly as we can and follow it up with combinations with PD-1s and with chemotherapy is the example with the FRUTIGA study. page 25, shows those activities. Obviously, third line colorectal cancer is approved and marketed. And now we will take on those activities ourselves. And obviously, we've been on the NRDL since the beginning of the year. So that's had an impact. I'll talk about that in a moment. But beyond CRC, the big program is gastric cancer and the PD-1 combos as well as the top line on that chart, which is now the start of the global registration study on fruquintinib in colorectal cancer. So we're talking about US, Europe and Japan, 10 countries, 130 sites worldwide with fast track designation granted in the US as we also had on surufatinib.

So page 26, just high level, I think the chart down in the bottom left of page 26 is worth having a look at. Based on the number of cycles that were prescribed during the first half of this year and based on the average usage, we treated around 3,800 patients in the first half and that represents about 14% penetration. This is a rough estimate. But based on all the sensible assumptions we can make, we expect that penetration is about 14%. And roughly. With sales of $14 million, that would give you a sense that the total market here could be probably around 200 million, if you had 100% penetration. 14 million is obviously just 1/2 a year of sales. So we got a lot of upside here, a long way to go. And if we look at page 27, you can see that we are now, in my view, starting to get on a pathway to try to increase that penetration and to get a broader share of treatment in those third line colorectal cancer patients. Obviously, sales increased to $14 million in the first half, which was up versus last year, but coming on to the NRDL, we took a 62% price reduction to broaden access to patients in China to get on the NRDL. And you can see the benefit of getting on the NRDL in the box in the middle box there. Total cycles prescribed, 18,828 day cycles prescribed, up 174% versus last year same time. The last box, the 2020 Lilly amendment. I've mentioned it. We'll start on October 1, take over medical detailing. Lilly will pay off between 70% and 80% of sales in the form of royalty, manufacturing costs and service payments, and there was no upfront payment made by Chi-Med or Eli Lilly around this transaction. So we didn't buy back these rights. This was a win-win agreement that really was devised to maximize the potential of fruquintinib and Elunate over the coming years.

Page 28, you can see the market in the VGFR space in China. These are just the small molecules. So obviously, you've got bevacizumab, which is, I guess, around $500 million now. And you've got all the bevacizumab biosimilars that are arriving as well. So but the VGFR space is big in China. And there are some big there are some big case studies of products that have grown very rapidly. And I think we see this as a major opportunity, not just for fruquintinib, but also for surufatinib as well. So moving on to page 30. The commercial team, I've been talking about this for the last six months, how we're building out the team. We said we'd get up to about 350 by mid-year. We're at $320 million and that team is extremely excited now to get involved in the marketing of Elunate and getting very prepared for surufatinib at the end of the year. We'll cover 95% of of the top 1,300 oncology centers in China.

And I expect, as you can see in the chart on the right-hand side of page 30, we will build that team up very aggressively. I think perhaps even more aggressively than is shown on this chart, but it will depend on performance. page 31 just details some of the other assets, which I won't talk about because we already have. So the SYK inhibitor, the PI3K delta the FGFR and the IDH 1/2 dual inhibitor. So I won't say anymore on that. page 32. What's next from discovery, just multiple programs. As I said in the earlier on in the presentation, there are four assets that we believe will be hitting the clinic in the next probably 12 six to 12 to 18 months latest. So our pipeline is expanding very rapidly on the small molecule and large molecule side. Finally, before I open it up for questions, the results, page 34, the half year results. As expected, the Innovation Platform increases it's an investment on the pipeline. The Commercial Platform did extremely well in the first half despite COVID you can see at constant exchange rates, our commercial platform, net profit was up 19% in the first half. So that's a testament to the flexibility, adaptability of our commercial team in China dealing with all the restrictions that we got hit with on COVID and coming out with very strong results. So we're very proud of that. But overall, the net loss for the first half, around USD50 million, which considering everything we're doing is a relatively low number, and it's made low because of the cash that we get from our partners as well as the profits that we make in our commercial business.

Page 31. We have about $400 million in cash and cash and available resources. At the end of June, we had $281 million in cash. We then did the pipe deal with General Atlantic, raising $100 million. The deal was signed at the end of June, but the cash arrived and was completed 2nd of July, I think it was. So that's not that 100 million is not included in the 281. So it should be 281 plus 100, 381 in cash. We have various bank facilities that are unutilized, and our JVs have a lot of cash in them at the moment because of the land that we handed back to the to the Guangzhou government that is now generating a lot of cash coming into our JVs, which will, in the second half, be paid out to the Chi-Med group level in the form of dividend. So page 35. On the right-hand side, you see the guidance. We haven't changed the guidance. You can see that the first half as far as R&D spend, operating loss, $81 million versus our guidance. So you'll see an acceleration in the second half behind the global Phase III on fruquintinib, the NDA submission, etc. So we will probably hit that guidance of $180 million to $200 million of innovation operating loss. On the cash flows, you can see the cash burn in the first half was very low, 32.5%.

The reason for that was we received very high levels of dividends from our commercial business during the first half, much higher, double what we received last year just because the businesses have been performing so well, and we are just paid out more dividends from our JVs to Chi-Med levels. So but we will reach that total net cash burn of around 140 to 160. Over the balance of the year, we've got expanding clinical activities we are going to break ground on a large oncology manufacturing facility in Shanghai in the second half of the year. And obviously, all the investment on the commercial side will impact our need for cash. So a lot of activities in the second half. Finally, on page 37, I won't go through it in detail. It's laid out very clearly in our announcement, but maybe touch on the major upcoming events, maybe the ones with stars on them. So anticipated decisions around registration studies in lung cancer and kidney cancer on savolitinib, the NDA submission on surufatinib, the approval of that NDA in America, the approval in China and then, hopefully, early next year, the approval of savo in China. So some big events on the horizon. And then finally, page 38, the kind of key targets for the balance of the year. So surufatinib, a big launch in China; savo, getting the NDA in and processing that, the inspections, etc, completing enrollment on SAVANNAH, hopefully, this year, early next year; getting endorsement for Phase III activity in lung cancer; and obviously, our registration strategy on savolitinib in kidney cancer. Elunate is about taking control of the commercial activities on the ground, working closely with Lilly and really maximizing the benefit of being on the NRDL. And then outside of China, it's the NDA submission on sulfatinib, the global Phase III on fruquintinib in progressing the SIC and the PI3K delta program. Finally, on the M&A side, on the large molecule side, we are now working with certain partners to accelerate our large molecule activities. Unlikely to be through acquisition, but probably through collaboration, seems to be the most appropriate manner. And noncore assets, we continue to look to sell off some of our noncore assets.

So Chi-Med. I went a little bit longer than I expected, but maybe now I can open it up for questions.

Questions and Answers:

Operator

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

Louise Alesandra Chen -- Cantor Fitzgerald & Co. -- Analyst

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

Okay. Thanks, Louise. Okay. On the 14% on fruquintinib or Elunate. So we're now that now that we have are getting ready to take on these commercial activities, we are being clear, we've got 320 people on the ground at the moment. I think by the end of the year, it'll be up to 400 people. That is essentially triple the level of medical sales reps that have been in place over the last 12 months. So it's about going deeper. It's about going broader. And it's deepening the investment. We wanted Chi-Med wanted to invest more in the development of fruquintinib. And Eli Lilly are very capable people but they have a lot of priorities. For Chi-Med, fruquintinib and the launch of Elunate is our number one priority from a commercial standpoint. So we're going to essentially triple plus the medical sales team. We're going to go a lot deeper. And I think that 14%, I'd like to see it up in the sort of 40s before too long. But that's going to take a while, and our team is new to this. So I expect next year throughout the balance of this year and next year, we'll see an acceleration of growth. And I think we'll be able to get ourselves up to a to that kind of level within two or three years. We should be able to do that relatively easily. As far as surufatinib is concerned, there's going to be a lot of synergies with the commercial team. One of the great benefits of doing this deal with Eli Lilly is that we can now have more than one product to be out there marketing, and there will be synergies. And that will allow us to broaden the scale of the commercial organization rapidly. And really make the most of this opportunity. So I think that surufatinib, the team has actually been working on the launch of surufatinib in China full on for the last six months. And we're really ready for it when it comes. So I think the our expectations on that launch are pretty significant. Although remember that neuroendocrine tumors, it is a relatively niche indication. But on that's on the negative side. On the positive side, these patients do tend to have very long periods of progression-free survival on surufatinib and tend to live with this disease for a very long time. So we're getting ready to go very hard on surufatinib to educate clinicians about the benefits of surufatinib to try to increase the level of diagnosis in China, all of these things. And that's our advantage. On the collaborations with the on the large molecule side, right now, I mean, we talked maybe six months ago or over the last six months about the potential for acquisitions in this space. We've looked. And what we've seen has been kind of overpriced and unattractive. So the team is working hard with a few key players to identify efficient ways of bringing our large molecule innovations into the clinic. And so that first one that I mentioned earlier on the pipeline, that one, we hope to be seeing into the clinic late this year or maybe next year some time. And to do that, we will be building out these collaborations on the large molecule manufacturing side with one or more potential partners. So and maybe a more efficient way to bring these assets to market or at least our first ones until such time as we build out our own large molecule capability in this new Shanghai factory. I mean the new Shanghai factory is a big facility for us. It will our current Suzhou facility can see us through probably the next three years three, maybe four years of growth on fruquintinib and surufatinib. It can maybe help support the launch of some of the SYK inhibitor and PI3K delta. But come three or four years from now, we're going to need some pretty significant manufacturing capacity. And that's why we're building out the Shanghai facility. It's large enough to enable us space to build out large molecule operations as well. So that's what we would intend to do down the road. And the spin-off of the existing businesses, yes. I mean, we've been talking about it for a while, about maybe the noncore OTC business, for example, that's not really central to where Chi-Med is going, trying to build an integrated oncology company. So the idea of nondilutive financing through spinning off or selling off some noncore assets is attractive. We're close on that OTC business, but we are facing challenges with the certainly, we were close earlier in the year, but then COVID hit and that caused challenges so we're negotiating, and we'll see where we go. We're in no hurry. But if the right buyer comes along at the right place, then we'll the right price, we'll consider it. So hopefully, that answers the question.

Operator

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

Alec Warren Stranahan -- BofA Merrill Lynch -- Analyst

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Alec Warren Stranahan -- BofA Merrill Lynch -- Analyst

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Dr. Wei-guo Su -- Executive Director and Chief Scientific Officer

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Alec Warren Stranahan -- BofA Merrill Lynch -- Analyst

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Operator

Our next question is from Paul Choi from Goldman Sachs.

Kyuwon Choi -- Goldman Sachs Group -- Analyst

I have a few here. Maybe starting with 306 and for either Wei-Guo or Christian. Can you maybe help us understand what you've seen so far in the preclinical characteristics and what you're seeing that's differentiated on the IDH versus the for instance, let's say, the Agios assets? And where do you see 306 in terms of your US development plans bidding either pre or post Mylotarg or just understanding whether it's relapsed/refractory and where in the treatment paradigm you're targeting? And is the plan now that you're already starting with the US IND here, does this reflect a shift in your development philosophy to just start and go global from the get-go there? So that's question one. On question two, with regard to the surufatinib PD-1 combinations, I know you've listed the BeiGene PD-1 but as you think about the US development plan for combination therapy, are you looking to go maybe to a PD-1 agnostic approach and consider some of the other commercial stage PD-1 assets?

And last one is just a quick one for Johnny. How should we think about the capex for the new building here? And how much of the cash burn in the second half here will be driven by capex versus operational expense changes?

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Dr. Wei-guo Su -- Executive Director and Chief Scientific Officer

So Paul, as you know, I think the main rationale here to looking at doing it is a lot of the IDH mutant tumors, they tend to be highly heterogeneous, some patients with harbor, both IDH1 and IDH 2. So a selective inhibitor, obviously, the efficacy would be reduced. It's also noted that the mutation switch tend to be also a resistance pathway, which could be acquired or could be pre existing. But clearly, with the effect of the PFS so we think by targeting by shutting down both IDH1 and IDH 2, I think both in AML and in solid tumors, we will see an improved or, but more importantly, improve the PFS and OS. So that's really the main rationale. With regarding to timing, we are in Phase I in China, and US, we are targeting very shortly to file an IND. We have a lot of groundwork done led by Marek and his team in reduce in terms of leading PIs and sites so forth. Should be a few months early fairly soon.

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Dr. Wei-guo Su -- Executive Director and Chief Scientific Officer

No. I think Paul was asking US versus China. I move on to

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

The second question, the one about surufatinib PD-1s, right.

Dr. Wei-guo Su -- Executive Director and Chief Scientific Officer

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

And then, Johnny.

Kyuwon Choi -- Goldman Sachs Group -- Analyst

Do you think about so given about using other PD-1s besides the Beijing one, I guess, is my question here. And being an agnostic?

Dr. Wei-guo Su -- Executive Director and Chief Scientific Officer

Yes, I think PD-1 0or PD-1, even though they are they target they hit the same target, but they are slightly different. So I think it will be driven by the data at both actually, all three players. As a matter of fact, Beijing during and also Innovent, they'll have global aspirations and so they reached so I think a lot of data coming out of China proof-of-concept will drive the future activities and registration pathways both in China and also outside.

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Simon To -- Executive Chairman

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

Okay. Paul, any other any does that answer your question?

Kyuwon Choi -- Goldman Sachs Group -- Analyst

Yes.

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

Okay. Great. Thanks.

Operator

Our next question is from Tony Ren from CLSA.

Tony Ren -- CLSA Limited -- Analyst

I just want to go back to Elunate, again. I think, Christian, when you were addressing one of the earlier questions, you mentioned going deeper. Could you clarify that a little bit? Does that mean they're going to Tier three or four cities? And also we are starting to see some pricing pressure in China. Again. So do you see any further pricing pressure for Elunate for the remainder of the year? Is there going to be another another round of price cuts going into the negotiation again? Okay,

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Operator

Our next question is Sean Wu room from Morgan Stanley.

Sean Wu -- Morgan Stanley -- Analyst

I still have a bit of question about Elunate. And of course, for your relation with Lilly has been long-standing, and they clearly, I would say, they have provided the business support in the early stage. But your kind license agreement with them have been modified not once but twice. And from today's announcement at Per, you have much more interest than they have just concurs way they get to consolidate the wholesales it means for you don't get to consolidate the wholesales of Elunate in China? That's number one. And number two, the question is you mentioned that you had 14% there. Kind of market share now and you would like to go to 40% next year. What are giving you the confidence? And the what are the patients being treated there? For the 86% now. And how many of those patients like are getting treated with Elunate as is like on label setting or even pain. So I mean those are questions I have for now. And also, you mentioned about like people with the neurocrine type of tumor either can pancreatic or pingit have long kind of progression-free survival. So they will stick to their drug makes for a long while. But if they don't get treated or with an alternative, kind of, treatment and what kind of get survival they will have so which kind of advantage we are providing in terms of, kind of, prolonging their progression for survival.

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Maybe I'll ask Wei-Guo to answer that. Today, what are the other 86% of patients being treated with, in your view, Wei-Guo

Dr. Wei-guo Su -- Executive Director and Chief Scientific Officer

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

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

Operator

Our last question is John Newman from Canaccord.

John Lawrence Newman -- Canaccord Genuity Corp -- Analyst

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

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

Thanks, John. Thanks. Okay. So the first thing is, yes, I mean, I think that now becomes something quite unique that Chi-Med is doing. I mean, obviously, BeiGene has been successful getting their BTK inhibitor approved in the US but next along will be surufatinib with our NDA this year. So I think for US investors, looking at trimed, they'll be looking at a company that actually has global aspirations is yes, obviously, China is our home, and that's where there's a very big unmet medical need that we're trying to help address. But our assets are designed to be competitive globally, and that's what we're trying to do. So as far as how surufatinib fits into the treatment landscape in neuroendocrine tumors in the US. I kind of talked about that a little bit on the landscape slide. In the presentation. It's a different mechanism of action. It's broader spectrum neuroendocrine tumor patients benefit. So across all subgroups and near endocrine tumors as opposed to in most cases, the approved therapies are approved in quite narrow subsegments of NET patients. So there are multiple points of differentiation that gives surufatinib advantage. And we're looking forward to taking advantage of that. With regards to Lilly, actually, the most interesting talking about other companies partnering with local Chinese companies.

I mean, the best example is Innovent and Lilly. I mean and actually, it was this is a collaboration on the PD-1 space, and Eli Lilly has been working closely with innovent over the last few years. Another difference in the launch of sintilimab, the PD-1 from Innovent and fruquintinib is that Innovant launched sintilimab themselves, and Lilly took the back seat. Whereas with fruquintinib, Lilly took the front seat and we took the backseat. Now Innovant has done such a fantastic job launching sintilimab and has invested so deeply in building out their commercial infrastructure and making a success of it. That's one of the main reasons Lilly said: actually maybe it would be a good idea to let Chi-Med get involved in this because we have that same capability that innovant has to invest heavily in fruquintinib and make the most of it. And so I think Lilly kind of learned from their own example, not from examples of others, to say, yes, let's let trimed have a have a shot at this and raise the level of investment in fruquintinib. So but there are other examples. And BeiGene is doing a great job commercializing various products for various multinationals. And local Chinese biotechs, really on the ground, have the resources these days to be very aggressive. And I think that fruquintinib will really benefit from this amendment now.. Okay. So I think that's where we come to an end. But thanks, everybody, for joining the call, and we look forward to speaking to you all in due course. Thanks very much.

Operator

[Operator Closing Remarks]

Duration: 75 minutes

Call participants:

Mr. Christian Hogg -- Executive Director and Chief Executive Officer

Dr. Wei-guo Su -- Executive Director and Chief Scientific Officer

Simon To -- Executive Chairman

Louise Alesandra Chen -- Cantor Fitzgerald & Co. -- Analyst

Alec Warren Stranahan -- BofA Merrill Lynch -- Analyst

Kyuwon Choi -- Goldman Sachs Group -- Analyst

Tony Ren -- CLSA Limited -- Analyst

Sean Wu -- Morgan Stanley -- Analyst

John Lawrence Newman -- Canaccord Genuity Corp -- Analyst

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