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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on March 4, 2016

Registration No. 333-207447


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 4
to

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Hutchison China MediTech Limited
(Exact name of registrant as specified in its charter)

Not applicable
(Translation of Registrant's name into English)

Cayman Islands
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  Not applicable
(I.R.S. Employer
Identification Number)

Room 2108, 21/F, Hutchison House
10 Harcourt Road
Hong Kong
Telephone: +852 2121 8200

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Law Debenture Corporate Services Inc.
400 Madison Avenue, 4th Floor
New York, New York 10017
Telephone: 212-750-6474

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Paul W. Boltz, Jr.
Marc A. Rubenstein
Ropes & Gray
41st Floor, One Exchange Square
8 Connaught Place
Hong Kong
Telephone: +852 3664 6488

 

Christian Hogg
Chief Executive Officer
Hutchison China MediTech Limited
Room 2108, 21/F, Hutchison House
10 Harcourt Road
Hong Kong
Telephone: +852 2121 8200

 

Matthew Bersani
Shearman & Sterling LLP
12th Floor, Gloucester Tower
The Landmark
15 Queen's Road Central
Hong Kong
Telephone: +852 2978 8000



Approximate date of commencement of proposed sale to public: As soon as practicable after this registration statement is declared effective.



          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

CALCULATION OF REGISTRATION FEE

       
 
Title of each class of securities
to be registered(1)

  Proposed maximum
aggregate
offering price(1)(2)(3)

  Amount of
registration fee

 

Ordinary Shares, $1.00 par value

  $115,000,000   $11,581

 

(1)
American depositary shares issuable upon deposit of the ordinary shares registered hereby have been registered under a separate registration statement on Form F-6 (Registration No. 333-        ). Each American depositary share represents one-half of one ordinary share.

(2)
Includes (i) ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public and (ii) ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. These ordinary shares are not being registered for the purposes of sales outside of the United States.

(3)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.



          The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus dated March 4, 2016

P R O S P E C T U S

Hutchison China MediTech Limited

LOGO

6,123,698 American Depositary Shares
Representing 3,061,849 Ordinary Shares



        We are offering 6,123,698 American depositary shares, or ADSs. Each ADS represents one-half of one ordinary share.

        This is our initial public offering in the United States, and no public market currently exists for our ADSs. Our ordinary shares have been listed on the AIM market of the London Stock Exchange since May 19, 2006 under the symbol "HCM." On March 3, 2016, the closing sale price of our ordinary shares on the AIM market was £23.50 per share, equivalent to a price of $16.33 per ADS, assuming an exchange rate of £1.00 to $1.39.

        For a discussion of factors considered in determining the price to the public of the ADSs, see "Underwriting" in this prospectus. After pricing of the offering, we expect that the shares will trade on the NASDAQ Global Market under the symbol "HCM."

        We are eligible to be treated as an "emerging growth company" under applicable U.S. federal securities laws and, as a result, are eligible for reduced public company reporting requirements.

        Investing in our ADSs involves risks that are described in the "Risk Factors" section beginning on page 17 of this prospectus.



       
 
 
  Per ADS
  Total
 

Public offering price

  $                           $                        
 

Underwriting discount(1)

  $                           $                        
 

Proceeds to Hutchison China MediTech Limited before expenses

  $                           $                        

 

(1)
See "Underwriting" for additional information regarding underwriter compensation.



        To the extent that the underwriters sell more than 6,123,698 ADSs, the underwriters have the option to purchase up to an aggregate of 918,554 additional ADSs from us at the initial public offering price less the underwriting discounts and commissions within 30 days after the date of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the ADSs to the purchasers on or about                        , 2016.



Joint Global Coordinators and Joint Bookrunners
(in alphabetical order)

BofA Merrill Lynch   Deutsche Bank Securities



Co-Managers

Stifel   Canaccord
Genuity
  Panmure
Gordon & Co.
  CITIC CLSA



The date of this prospectus is                        , 2016


GRAPHIC


GRAPHIC


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TABLE OF CONTENTS

 
  Page

PROSPECTUS SUMMARY

  1

RISK FACTORS

  17

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

  64

USE OF PROCEEDS

  66

DIVIDEND POLICY

  68

CAPITALIZATION

  69

DILUTION

  70

OUR SELECTED CONSOLIDATED FINANCIAL DATA

  72

SELECTED FINANCIAL DATA OF OUR NON-CONSOLIDATED JOINT VENTURES

  75

PRICE RANGE OF OUR ORDINARY SHARES

  77

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  78

OUR HISTORY

  116

BUSINESS

  118

REGULATION

  194

MANAGEMENT

  225

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

  233

SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

  240

RELATED PARTY TRANSACTIONS

  242

DESCRIPTION OF SHARE CAPITAL

  247

DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS

  262

SHARES ELIGIBLE FOR FUTURE SALE

  273

TAXATION

  275

UNDERWRITING

  286

LEGAL MATTERS

  294

EXPERTS

  294

ENFORCEMENT OF CIVIL LIABILITIES

  296

EXPENSES RELATING TO THIS OFFERING

  298

WHERE YOU CAN FIND MORE INFORMATION

  298

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

  F-1



        We are responsible for the information contained in this prospectus and in any free writing prospectus we prepare or authorize. We have not and the underwriters have not authorized anyone to provide you with different information, and we and the underwriters take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

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Industry and Market Data

        Although we are responsible for all disclosure contained in this prospectus, in some cases we have relied on certain market and industry data obtained from third-party sources that we believe to be reliable, including Frost & Sullivan, an independent market research firm. Market estimates are calculated by using independent industry publications, government publications and third-party forecasts in conjunction with our assumptions about our markets. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in this prospectus.

Trademarks and Service Marks

        We own or have been licensed rights to trademarks, service marks and trade names for use in connection with the operation of our business, including, but not limited to, our trademark Chi-Med. All other trademarks, service marks or trade names appearing in this prospectus that are not identified as marks owned by us are the property of their respective owners.

        Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the ®, (TM) and (sm) symbols, but we will assert, to the fullest extent under applicable law, our applicable rights in these trademarks, service marks and trade names.

Presentation of Financial Information

        Our consolidated statements of operations data for the years ended December 31, 2015, 2014 and 2013 and our consolidated balance sheet data as of December 31, 2015 and 2014 have been derived from our audited consolidated financial statements included herein. Our consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, while our historical consolidated financial statements which we previously made publicly available in connection with the listing of our ordinary shares on the AIM market were prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We expect that our consolidated financial statements will continue to be prepared in accordance with U.S. GAAP following this offering.

        We also include in this prospectus certain financial data regarding our three non-consolidated joint ventures, Shanghai Hutchison Pharmaceuticals, Hutchison Baiyunshan and Nutrition Science Partners, which are accounted for using the equity accounting method. The consolidated income statement data of each such non-consolidated joint venture presented herein for the years ended December 31, 2015, 2014 and 2013 and the consolidated statements of financial position as of December 31, 2015 and 2014 for each such non-consolidated joint venture presented herein have been derived from their respective audited consolidated financial statements, which are also included herein. These consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.

Conventions Used in this Prospectus

        Unless otherwise indicated, references in this prospectus to:

    "ADRs" are to the American depositary receipts, which evidence our ADSs;

    "ADSs" are to our American depositary shares, each of which represents one-half of one ordinary share;

    "China" or "PRC" are to the People's Republic of China, excluding, for the purposes of this prospectus only, Taiwan and the special administrative regions of Hong Kong and Macau;

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    "CK Hutchison" are to CK Hutchison Holdings Limited, a company incorporated in the Cayman Islands and listed on The Stock Exchange of Hong Kong Limited, or the Hong Kong Stock Exchange, and the ultimate parent company of our majority shareholder, Hutchison Healthcare Holdings Limited;

    "Guangzhou Baiyunshan" are to Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited, a leading China-based pharmaceutical company listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange;

    "Hain Celestial" are to The Hain Celestial Group, Inc., a NASDAQ-listed, natural and organic food and personal care products company;

    "HK$" or "HK dollar" are to the legal currency of the Hong Kong Special Administrative Region;

    "Hutchison Baiyunshan" are to Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited, our non-consolidated joint venture with Guangzhou Baiyunshan in which we have a 50% interest through a holding company in which we have a 80% interest;

    "Hutchison Consumer Products" are to Hutchison Consumer Products Limited, our wholly owned subsidiary;

    "Hutchison Hain Organic" are to Hutchison Hain Organic Holdings Limited, our joint venture with Hain Celestial in which we have a 50% interest;

    "Hutchison Healthcare" are to Hutchison Healthcare Limited, our wholly owned subsidiary;

    "Hutchison MediPharma" are to Hutchison MediPharma Limited, our subsidiary through which we operate our Innovation Platform in which we have a 99.8% interest;

    "Hutchison Sinopharm" are to Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company Limited, our joint venture with Sinopharm in which we have a 51% interest;

    "Nutrition Science Partners" are to Nutrition Science Partners Limited, our non-consolidated joint venture with Nestlé Health Science S.A. in which we have a 50% interest;

    "ordinary shares" or "shares" are to our ordinary shares, par value $1.00 per share;

    "RMB" or "renminbi" are to the legal currency of the PRC;

    "Shanghai Hutchison Pharmaceuticals" are to Shanghai Hutchison Pharmaceuticals Limited, our non-consolidated joint venture with Shanghai Pharmaceuticals in which we have a 50% interest;

    "Shanghai Pharmaceuticals" are to Shanghai Pharmaceuticals Holding Co., Ltd., a leading pharmaceutical company in China listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange;

    "Sinopharm" are to Sinopharm Group Co. Ltd., a leading distributor of pharmaceutical and healthcare products and a leading supply chain service provider in China listed on the Hong Kong Stock Exchange;

    "United States" or "U.S." are to the United States of America;

    "$" or "U.S. dollars" are to the legal currency of the United States;

    "£" or "pound sterling" are to the legal currency of the United Kingdom; and

    "€" or "euro" are to the legal currency of the European Economic and Monetary Union.

        Our reporting currency is the U.S. dollar. In addition, this prospectus also contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of pound sterling into U.S. dollar were made at £1.00 to $1.39, all translations of

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euro into U.S. dollars were made at €1.00 to $1.09 and all translations of HK dollars into U.S. dollars were made at HK$7.77 to $1.00, the noon buying rates on February 26, 2016 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. The exchange rates used in the financial statements and related notes in this prospectus are as indicated therein. We make no representation that the pound sterling, euro, HK dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars, pounds sterling, euro or HK dollars, as the case may be, at any particular rate or at all.

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PROSPECTUS SUMMARY

        This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in our ADSs and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially "Risk Factors," "Our Selected Consolidated Financial Data," "Selected Financial Data of our Non-consolidated Joint Ventures" along with our and our non-consolidated joint ventures' financial statements and the related notes appearing elsewhere in this prospectus, before deciding to buy our ADSs. Unless the context requires otherwise, references in this prospectus to the "company," "Chi-Med," "we," "us" and "our" refer to Hutchison China MediTech Limited and its consolidated subsidiaries and joint ventures unless otherwise stated or indicated by context.

Business Overview

        We are an innovative biopharmaceutical company based in China aiming to become a global leader in the discovery, development and commercialization of targeted therapies for oncology and immunological diseases.

        We have created a broad portfolio of drug candidates targeting eight molecular targets. We have taken a chemistry-focused approach to develop highly selective small molecule tyrosine kinase inhibitors that are intended to have potentially global best-in-class efficacy and are deliberately engineered to improve drug exposure, reduce known class-related toxicities and allow different drug therapies to be combinable. Highlights of our pipeline include:

    seven clinical-stage drug candidates, five of which have already achieved proof-of-concept (meaning positive outcome achieved in Phase Ib/II studies), with multiple potential global first-in-class or Breakthrough Therapy opportunities, which means that such drug candidates could be eligible for accelerated approval by the U.S. Food and Drug Administration, or the FDA,

    out of these seven drug candidates, four are wholly owned and three are partnered with leading pharmaceutical companies, AstraZeneca AB (publ), or AstraZeneca, Eli Lilly Trading (Shanghai) Company Limited, or Eli Lilly, and Nestlé Health Science S.A., or Nestlé Health Science,

    20 active clinical trials in various countries, with a further five planned to start during the first quarter of 2016,

    three Phase III clinical trials currently enrolling, with a fourth expected to start during the first quarter of 2016, and

    subject to favorable clinical outcomes, savolitinib has the potential to be submitted for new drug application, or NDA, approval in late 2016 in the United States, and fruquintinib has the potential to be submitted for NDA approval in late 2016 or early 2017 in China.

        We believe our current drug candidates, such as savolitinib (targeting c-Met) and HMPL-523 (targeting Syk), have the potential to be global first-in-class therapies, or, as in the cases of fruquintinib (targeting VEGFR1/2/3), sulfatinib (targeting VEGFR/FGFR1), epitinib (targeting EGFRm+ with brain metastasis) and HMPL-689 (targeting PI3Kd), are sufficiently differentiated to potentially be global best-in-class, next generation therapies with a superior profile compared to existing approved drugs that act against the relevant kinase targets. Kinases are a class of proteins and enzymes that function in many signaling pathways and have been shown to drive several key activities of cancer cells, including growth, survival and angiogenesis.

        Innovation Platform—Our pipeline of drug candidates has been developed and progressed by our in-house research and development division, known as our Innovation Platform, which was launched in 2002. Since then, we have assembled a leading drug research and development team of 290 scientists and staff based in China, of which 183 have advanced technical degrees including 21 M.D.s and 48 doctorate

 

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degrees as of January 31, 2016. This 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. We intend to continue to leverage this platform to produce investigational new drug, or IND, applications on drug candidates with global potential.

        Commercial Platform—Since 2001, we have also developed a profitable Commercial Platform, with the key element being our Prescription Drugs business which had a commercial network of over 1,900 medical sales representatives covering over 16,500 hospitals in 300 cities and towns in China as of January 31, 2016. We operate our Prescription Drugs business through our joint ventures Shanghai Hutchison Pharmaceuticals and Hutchison Sinopharm, in which we nominate management and run the day-to-day operations. The second element of our Commercial Platform is our Consumer Health business which focuses primarily on the manufacture, marketing and distribution of over-the-counter pharmaceutical products in China. Net income attributable to our company from the continuing operations of our Commercial Platform grew by 25.5% from $18.2 million in 2013 to $22.8 million in 2014 and further grew by 10.1% to $25.2 million in 2015.

        We intend to leverage this Commercial Platform, particularly our established Prescription Drugs business, to support the launch of products from our Innovation Platform if they are approved for use in China. Outside of China, we intend to commercialize our products, if approved, in the United States, Europe and other major markets on our own and/or through partnerships with leading biopharmaceutical companies.

        Our History—Our company was founded in 2000 by Hutchison Whampoa Limited, which recently became a wholly owned subsidiary of CK Hutchison Holdings Limited, or CK Hutchison, which is a Hong Kong-based, multinational conglomerate with operations in over 50 countries. CK Hutchison is the ultimate parent company of Hutchison Healthcare Holdings Limited, which as of the date of this prospectus owns 64.9% of our total outstanding share capital. We have taken a multi-source approach to fund our Innovation Platform, including through equity fundraising such as our initial public offering on the AIM market of the London Stock Exchange in 2006, partnering certain of our drug candidates, utilizing cashflow generated from our Commercial Platform and bank borrowings, some of which have been guaranteed by Hutchison Whampoa Limited.

        A substantial portion of our revenue is generated from our operations in China, in particular from our Commercial Platform. Under China's existing foreign investment and foreign exchange laws and regulations, our PRC subsidiaries and joint ventures are able to pay dividends without prior approval from the PRC government by complying with certain procedural requirements. They are, however, required to make payments to certain statutory funds and reserve accounts which are not distributable as dividends. Other PRC regulations, including restrictions on foreign investment in specified industries, can also affect the operations of our Commercial Platform and Innovation Platform if we invest or are deemed to invest in those specified industries. For more information regarding government regulation in China and other jurisdictions, see "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and "Regulation" elsewhere in this prospectus.

Our Innovation Platform's Pipeline

        Figure one on the inside front cover page of this prospectus sets forth information regarding the status of the current clinical and late-stage pre-clinical studies of our Innovation Platform's drug candidates. We refer to this chart as our pipeline chart. For convenience, each study has been labeled with a study number. Each study will be discussed in more detail within this prospectus. We have included references to this pipeline chart and the study number for the reader's convenience when discussing the corresponding studies in more detail within this prospectus.

 

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Overview of Our Clinical-stage Drug Candidates

    Savolitinib

        Savolitinib is a potential global first-in-class inhibitor of the mesenchymal epithelial transition factor, or c-Met, receptor tyrosine kinase, an enzyme which has been shown to function abnormally in many types of solid tumors. We developed savolitinib as a potent and highly selective oral inhibitor that was designed to address renal toxicity, the primary issue that has prevented all other selective c-Met inhibitors from gaining regulatory approval. In Phase I clinical studies, savolitinib has shown promising signs of clinical efficacy, causing tumor size reduction in patients with c-Met gene amplification in papillary renal cell carcinoma, non-small cell lung cancer, colorectal cancer and gastric cancer. We are currently testing savolitinib in partnership with AstraZeneca in nine parallel proof-of-concept studies, both as a monotherapy and in combination with other targeted therapies, such as Iressa (gefitinib) and Tagrisso (AZD9291/osimertinib) (both EGFR inhibitors developed by AstraZeneca), and chemotherapy. We and AstraZeneca plan to start three further proof-of-concept studies in savolitinib in the first quarter of 2016, two of which are combinations with immunotherapies. A global Phase II study in papillary renal cell carcinoma is expected to report interim results in 2016. If results from this study are consistent with our published Phase I data, we would consider applying for Breakthrough Therapy designation which, if granted, could enable us to use the Phase II data to support a new drug application to the FDA in late 2016.

    Fruquintinib

        Fruquintinib is a highly selective and potent oral inhibitor of the vascular endothelial growth factor receptor, or VEGFR, and consequently we believe it has the potential to be a global best-in-class VEGFR inhibitor for many types of solid tumors. Based on pre-clinical and clinical data to date, fruquintinib's kinase selectivity has been shown to reduce off-target toxicity. This allows for drug exposure that is able to fully inhibit VEGFR, a protein ligand which contributes to the growth of tumors, and use in potential combinations with other targeted therapies and chemotherapy in earlier lines of treatment with larger patient populations. We believe these are major points of differentiation compared to other small molecule VEGFR inhibitors that have already been approved, such as Sutent (sunitinib), Nexavar (sorafenib) and Stivarga (regorafenib). In partnership with Eli Lilly, we are currently enrolling Phase III registration studies of fruquintinib in China for the treatment of colorectal cancer and non-small cell lung cancer. We also expect to start a Phase II proof-of-concept study on gastric cancer in China during the second half of 2016.

    Sulfatinib

        Sulfatinib is an oral drug candidate that selectively inhibits the tyrosine kinase activity associated with VEGFR and fibroblast growth factor receptor 1, or FGFR1, a receptor for a protein which also plays a role in tumor growth. Our published expanded Phase I clinical data indicate that sulfatinib has the highest objective response rate, or the proportion of patients with tumor shrinkage of more than 30%, reported to date in patients with neuroendocrine tumors. The objective response rate of 38.1% in the intent-to-treat population observed for sulfatinib in this study compares favorably to less than 10% for Sutent and Afinitor (everolimus), the only two currently approved single agent therapies for neuroendocrine tumors. Sulfatinib is the first oncology candidate that we have taken through proof-of-concept in China, where we have one Phase III registration study currently enrolling patients and a second expected to start in the first quarter of 2016, and expanded to a U.S. clinical study. We currently retain all rights to sulfatinib worldwide.

 

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    HMPL-523

        We believe HMPL-523 is a potential global first-in-class oral inhibitor targeting the spleen tyrosine kinase, or Syk, a key protein involved in B-cell signaling. Modulation of the B-cell signaling system has been proven to significantly advance the treatment of certain chronic immune diseases, such as rheumatoid arthritis. To date, only monoclonal antibody modulators, which seek to use the patient's own immune system to treat the disease, have been approved. We believe HMPL-523, as an oral drug candidate, has important advantages over intravenous monoclonal antibody immune modulators in that small molecule compounds clear the system faster, thereby reducing the risk of infections from sustained suppression of the immune system. Moreover, other drug development companies have tried to design small molecule Syk inhibitors for the treatment of chronic immune diseases. However, no drug products targeting Syk have been approved to date due to severe off-target toxicity side effects, such as hypertension, as a result of poor kinase selectivity. HMPL-523 is a potent and highly selective oral inhibitor specifically designed to overcome these off-target toxicity issues.

        We believe the market potential for a successful Syk inhibitor is substantial. For example, the estimated size of the global market for rheumatoid arthritis drugs was approximately $36 billion in 2015 and is projected to grow to approximately $45 billion in 2020, according to Frost & Sullivan. To our knowledge, we are the only company worldwide, other than Gilead Sciences, Inc., or Gilead, developing Syk inhibitors for chronic immune diseases as well as oncology. We successfully completed a Phase I clinical study among healthy volunteers in Australia in October 2015 and are now planning Phase II proof-of-concept studies in multiple indications. We currently retain all rights to HMPL-523 worldwide.

    Epitinib

        Epidermal growth factor receptor, or EGFR, inhibitors have revolutionized the treatment of non-small cell lung cancer with EGFR activating mutations. However, existing EGFR inhibitors such as Iressa and Tarceva (erlotinib) cannot penetrate the blood-brain barrier effectively, leaving the majority of patients with brain metastasis without an effective therapy. In contrast, epitinib is a potent and highly selective oral EGFR inhibitor designed to optimize brain penetration and has demonstrated brain penetration and efficacy in pre-clinical studies. If epitinib is able to provide clinical benefit to non-small cell lung cancer patients with brain metastasis in its current proof-of-concept study in China, we believe that, subject to regulatory approval, we will be well-positioned to address a major global unmet medical need. Early results of this open label proof-of-concept study appear positive, and top-line results are expected to be reported in 2016. We currently retain all rights to epitinib worldwide.

    Theliatinib

        Current EGFR inhibitors on the market are less effective at treating solid tumors with wild-type EGFR activation, which are EGFR proteins without activating mutations. These tumors include head and neck, esophageal and non-small cell lung cancers, for which there are few effective treatments, representing a major unmet medical need. In contrast, theliatinib is a potent and highly selective oral EGFR inhibitor engineered to have significantly greater binding affinity to wild-type EGFR proteins. As a result, theliatinib more effectively inhibits EGFR wild-type activity as compared to existing EGFR targeted therapies and has demonstrated superior anti-tumor activity in our pre-clinical studies among tumors with wild-type EGFR. We expect to complete a Phase I clinical study in China in the first half of 2016. We currently retain all rights to theliatinib worldwide.

        For more detailed information on the pre-clinical and clinical studies of these and our other drug candidates, please see "Business—Our Clinical Pipeline."

 

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Investment Highlights

    High potential clinical pipeline with seven clinical stage drug candidates and first candidates nearing NDA submissions—We believe we have one of the broadest clinical pipelines among global oncology/immunology focused biotechnology companies, with seven clinical-stage drug candidates that are being investigated in a total of 20 active clinical studies in various countries and a further five clinical studies targeted to start during the first quarter of 2016. Our drug candidates have been designed to be highly differentiated and are characterized by superior kinase selectivity, leading to reduced off-target toxicity and superior potency, which has to date been supported by favorable clinical data. For example, our Phase II studies of savolitinib globally and Phase II and III studies of fruquintinib in China are underway with our partners AstraZeneca and Eli Lilly, respectively. Savolitinib has the potential for an NDA submission in the U.S. in late 2016, and fruquintinib has the potential for an NDA submission in China in late 2016 or early 2017.

    Productive Innovation Platform with proven track record—Our experienced research and development management team members have worked at multinational pharmaceutical and biotechnology companies and have participated in the discovery and development of global blockbuster drugs, including Humira, Sutent, Zithromax, Revlimid, Zometa and Incivek. Together, they have systematically built a productive research and development organization of 290 scientists and staff as of January 31, 2016, with a proven track record in internal discovery having advanced seven differentiated drug candidates into the clinic in the past 10 years.
    Profitable and high growth Commercial Platform from which to launch our new drug innovations—Our Commercial Platform consists of profitable and high growth specialty Prescription Drugs and Consumer Health businesses that have a significant footprint in the Chinese healthcare market. Additionally, the joint ventures that comprise our Prescription Drugs business, in which we nominate management and run the day-to-day operations, operate an extensive sales force in China, including more than 1,900 medical sales representatives. This provides us with a nationwide platform in China covering over 16,500 hospitals in 300 cities and towns through which we intend to bring our new oncology/immunology drug innovations to market if we receive regulatory approval for them.

Our Vision and Strategy

        Our vision 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. We have set out to build a broad portfolio of highly selective drug candidates against multiple novel and validated molecular targets. We believe that the use of these drug candidates as monotherapies or in combinations or rotations of treatment with other oncology and immunology therapies have the potential to significantly improve patient outcomes. Key elements of our strategy are to:

    Design drug candidates against novel but well-characterized targets with global first-in-class potential—We believe our most significant market opportunity is developing innovative drug therapies that have global first-in-class potential in areas of high unmet needs. We focus on identifying novel but well-characterized tyrosine kinase targets (proteins or enzymes) associated with the pathogenesis of cancer or inflammation, such as c-Met and Syk, and use our chemistry-focused approach to engineer our own innovative, highly selective drug candidates against these targets. We design our drug candidates to address problems encountered by earlier compounds developed by other parties. We then rapidly progress through pre-clinical studies to clinical development in order to seek potential global first-in-class status for such drug candidates.

    Focus our research and development efforts on kinase selectivity to generate global best-in-class products—We balance risk in our research and development activities by also focusing on drug

 

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      candidates against validated targets, generally tyrosine kinases, including VEGFR and EGFR. A primary objective of our research efforts is to develop next generation tyrosine kinase inhibitors characterized by both high selectivity and superior pharmacokinetic properties. This approach has led to favorable clinical outcomes in our clinical trials to date. As a result, we believe our portfolio has the potential to discover candidates that are global best-in-class therapies in their respective categories.

    Continue to invest in our fully integrated Innovation Platform—We believe that implementing our strategy to create high quality drug candidates takes time, a stable and high quality discovery organization and significant financial resources. Our position as one of the leading China-based innovators in oncology and immunology is based on our continuous efforts and investments over the last 15 years, with approximately $330 million invested in our Innovation Platform as of December 31, 2015. Our strategy is to provide high levels of continuous and sustained investment in our Innovation Platform in the future, which we believe will allow us to accelerate and broaden the development programs of our current clinical and late-stage pre-clinical drug candidates, such as HMPL-453 (targeting FGFR) and HMPL-689 (targeting PI3Kd).

    Pursue a practical and efficient clinical and regulatory strategy—We have benefited, and will look to continue to benefit, from the position of the China Food and Drug Administration, or CFDA, of supporting clinical trials for drug candidates against validated targets that can address large unmet medical needs as well as for novel targets where safety has been established in other jurisdictions. China's large patient population, combined with relatively lower clinical trial costs as compared to the United States and Europe, allows for rapid enrollment of patients in clinical trials in a cost-effective manner, resulting in more efficient proof-of-concept studies in certain high prevalence tumor types. Subject to achieving proof-of-concept in China, we plan to initiate the higher cost, mid- to late-stage global studies both by ourselves as well as with partners.

    Maximize economic interest in our drug candidates through in-house development and later-stage strategic partnerships—Our strategic partnerships with global pharmaceutical companies have brought us significant technical expertise and global clinical, regulatory and commercial reach, as well as a necessary source of funding during the early-stage development of our company. These partnerships have supported accelerated development of a number of our drug candidates, including savolitinib and fruquintinib. As our drug candidate pipeline continues to develop, however, we will look to maintain more flexibility with respect to certain of our drug candidates for which we currently retain all rights worldwide in order to achieve enhanced economic benefits to our company.

    Leverage and expand our Commercial Platform—While we will continue to focus the majority of our resources and available capital on our Innovation Platform, we will continue to expand our Commercial Platform and its sales and marketing infrastructure. We also intend to build an oncology focused sales team under the Prescription Drugs business to commercialize drugs developed by our Innovation Platform if they are approved for sale in China, which represents an attractive opportunity in the area of targeted therapies with significant unmet medical needs. Outside of China, we intend to commercialize our products, if approved, in the United States, Europe and other major markets on our own and/or through partnerships with leading biopharmaceutical companies.

 

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Our Corporate Structure

        We conduct our business operations through our subsidiaries, including our consolidated joint ventures, Hutchison Sinopharm and Hutchison Hain Organic, and three non-consolidated joint ventures. The chart below shows our principal subsidiaries and joint ventures as of the date of this prospectus.

GRAPHIC


Notes:

(1)
Employees of Hutchison MediPharma Limited hold the remaining 0.2% shareholding.
(2)
Nestlé Health Science S.A. is the other 50% joint venture partner.
(3)
Shanghai Pharmaceuticals Holding Co., Limited is the other 50% joint venture partner.
(4)
Sinopharm Group Co. Limited is the other 49% joint venture partner.
(5)
Dian Son Development Limited holds the other 20% interest.
(6)
Guangzhou Baiyunshan Pharmaceutical Holdings Co. Limited is the other 50% joint venture partner.
(7)
The Hain Celestial Group, Inc. is the other 50% joint venture partner.

 

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Risks Associated with Our Business

        Our business is subject to risks and uncertainties that may materially and adversely affect us, including the following:

    even if we consummate this offering, we may need substantial additional funding for our product development programs and commercialization efforts. If we are unable to raise capital on acceptable terms when needed, we could incur losses and be forced to delay, reduce or eliminate such efforts;

    historically, our Innovation Platform has not generated significant profits or has operated at a net loss;

    all of our drug candidates are still in development. If we are unable to obtain regulatory approval and ultimately commercialize our drug candidates or experience significant delays in doing so, our business will be harmed;

    our primary approach to the discovery and development of drug candidates focuses on the inhibition of kinases, some of which are unproven, and we do not know whether we will be able to develop any products of commercial value;

    we and our collaboration partners may incur additional costs or experience delays in completing our pre-clinical or clinical trials or ultimately be unable to complete the development and commercialization of our drug candidates;

    our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following regulatory approval, if any;

    we face substantial competition, which may result in others discovering, developing or commercializing drugs before or more successfully than we do;

    as a significant portion of our Commercial Platform business is conducted through joint ventures, we are largely dependent on the success of our joint ventures and our receipt of dividends or other payments from our joint ventures for cash to fund our operations;

    reimbursement may not be available for the products currently sold through our Commercial Platform or our drug candidates in China, the United States or other countries, which could diminish our sales or affect our profitability;

    rapid changes and competition in the pharmaceutical industry may render our Commercial Platform's current products or our drug candidates obsolete;

    disagreements with our current or future collaboration partners, or the termination of any collaboration arrangement, could cause delays in our product development and materially and adversely affect our business;

    our Commercial Platform's principal products involve the cultivation or sourcing of key raw materials including botanical products, and any quality control or supply failure or price fluctuations could adversely affect our Commercial Platform's ability to manufacture our products and/or could materially and adversely affect our operating results;

    we rely on our collaborations with third parties for certain of our drug development activities, and, if we are unable to establish new collaborations when desired on commercially attractive terms or at all, we may have to alter our development and commercialization plans;

    further development and commercialization of our own drug candidates will depend, in part, on strategic alliances with our collaborators. If our collaborators do not diligently pursue product

 

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      development efforts, impeding our ability to collect milestone and royalty payments, our progress may be delayed and our revenue may be deferred;

    we and our collaboration partners rely, and expect to continue to rely, on third parties to conduct certain of our clinical trials for our drug candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be harmed;

    joint ventures form an important part of our Commercial Platform business, and our ability to manage and develop the businesses conducted by these joint ventures depends in part on our relationship with our joint venture partners;

    we and our joint ventures may be exposed to liabilities under the Foreign Corrupt Practices Act, or the FCPA, the Bribery Act 2010 of the Parliament of the United Kingdom, or the U.K. Bribery Act, and Chinese anti-corruption laws, and any determination that we have violated these laws could have a material adverse effect on our business or our reputation; and

    if we or our joint ventures are unable to protect our or their products and our drug candidates through intellectual property rights, our competitors may compete directly against us or them.

        See "Risk Factors" and other information included elsewhere in this prospectus for a discussion of these and other risks and uncertainties.

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

        As a company with less than $1.0 billion in revenue during our most recently completed fiscal year as of the initial filing date of the registration statement of which this prospectus forms a part, we qualify as an "emerging growth company" as defined in Section 2(a) of the Securities Act of 1933, as amended, which we refer to as the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies that are not emerging growth companies. These provisions include an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. The JOBS Act also permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We do not intend to take advantage of this extended transition period for complying with new or revised accounting standards.

        Upon consummation of this offering, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. As a foreign private issuer, we may take advantage of certain provisions in the NASDAQ listing rules that allow us to follow Cayman Islands law for certain corporate governance matters. See "Management—Foreign Private Issuer Status." Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;

    the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission, or the SEC, of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and

 

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    Regulation Fair Disclosure, or Regulation FD, which regulates selective disclosures of material information by issuers.

Corporate Information

        Hutchison China MediTech Limited was incorporated in the Cayman Islands on December 18, 2000 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, which we refer to as the Companies Law. The address of our registered office in the Cayman Islands is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our principal executive offices are located at Room 2108, 21/F, Hutchison House, 10 Harcourt Road, Hong Kong. Our telephone number at that address is +852 2121 8200.

        Investor inquiries should be directed to us at the address and telephone number of our principal executive offices set forth above. Our website address is www.chi-med.com. Our website and the information contained on our website do not constitute a part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017. Our ordinary shares have traded on the AIM market of the London Stock Exchange since May 19, 2006.

 

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The Offering

ADSs offered by us   6,123,698 ADSs (or 7,042,252 ADSs if the underwriters exercise their option to purchase additional ADSs in full).

Price per ADS

 

On March 3, 2016, the closing sale price of our ordinary shares on the AIM market was £23.50 per share, equivalent to a price of $16.33 per ADS, based on the exchange rate set forth on the cover page of this prospectus. For a discussion of factors considered in determining the price to the public of the ADSs, see "Underwriting" in this prospectus.

ADSs to be outstanding immediately after completion of this offering

 

6,123,698 ADSs (or 7,042,252 ADSs if the underwriters exercise their option to purchase additional ADSs in full).

Ordinary shares to be outstanding immediately after completion of this offering

 

59,594,967 ordinary shares (or 60,054,244 ordinary shares if the underwriters exercise their option to purchase additional ADSs in full). Immediately after completion of this offering and assuming the underwriters do not exercise such option, approximately 3.0% of our outstanding ordinary shares will be held by our directors and executive officers, 61.5% will be held by our majority shareholder, Hutchison Healthcare Holdings Limited, and 35.5% will be held by our public shareholders on NASDAQ and on the AIM market.

The ADSs

 

Each ADS represents one-half of one ordinary share, par value $1.00 per share. The ADSs may be evidenced by ADRs.

 

 

The depositary will hold ordinary shares underlying your ADSs, and you will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time.

 

 

If we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares, after deducting the depositary's fees, charges and expenses and any applicable taxes or governmental charges.

 

 

You may turn in your ADSs to the depositary in exchange for ordinary shares. The depositary will charge you fees and related charges for any exchange.

 

 

We may amend or terminate the deposit agreement without your consent. If an amendment becomes effective and you continue to hold your ADSs, you will be bound by the deposit agreement as amended.

 

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    To better understand the terms of the ADSs, you should carefully read "Description of American Depositary Receipts" in this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

Depositary

 

Deutsche Bank Trust Company Americas

Option to purchase additional ADSs

 

The underwriters have an option for a period of 30 days after the date of this prospectus to purchase up to 918,554 additional ADSs.

Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $86.6 million, or approximately $100.6 million if the underwriters exercise their option to purchase additional ADSs in full, at an assumed initial public offering price of $16.33 per ADS, based on the closing price of our ordinary shares and exchange rate set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering to advance the clinical development of our multiple drug candidates, expand our production capabilities, repay certain of our existing indebtedness and for working capital and other general corporate purposes.

 

 

See "Use of Proceeds" for additional information.

Dividend Policy

 

We do not have any present plan to pay any dividends on our ADSs. See "Dividend Policy" for more information.

Risk factors

 

You should read the "Risk Factors" section of this prospectus for a discussion of factors to consider carefully before deciding to invest in our ADSs.

Proposed NASDAQ trading symbol

 

We have applied for listing of the ADSs on the NASDAQ Global Market under the symbol "HCM."

AIM trading symbol

 

Our ordinary shares are listed on the AIM market of the London Stock Exchange under the symbol "HCM."

        The number of ordinary shares to be outstanding after this offering is 59,594,967 ordinary shares outstanding as of March 4, 2016, after giving effect to 3,061,849 ordinary shares we will issue and sell in the form of ADSs in this offering, assuming the underwriters do not exercise their option to purchase additional ADSs.

 

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Our Summary Consolidated Financial Data

        The following summary consolidated statements of operations data for the years ended December 31, 2015, 2014 and 2013 and the summary consolidated balance sheet data as of December 31, 2015 and 2014 have been derived from our audited consolidated financial statements appearing elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. Our consolidated financial statements appearing in this prospectus have been prepared in accordance with U.S. GAAP while our historical consolidated financial statements which we previously made publicly available in connection with the listing of our ordinary shares on the AIM market were prepared in accordance with IFRS as issued by the IASB.

        Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. The following information should be read in conjunction with "—Summary Financial Data of our Non-consolidated Joint Ventures," "Risk Factors," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our and our significant joint ventures' consolidated financial statements and the related notes included elsewhere in this prospectus.

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands, except per share data)
 

Statements of operations data:

                   

Revenue

   
 
   
 
   
 
 

Sales of goods—third parties

  $ 118,113   $ 59,162   $ 8,667  

Sales of goods—related parties

    8,074     7,823     7,803  

Revenue from license and collaboration agreements—third parties

    44,060     12,336     14,546  

Revenue from research and development services—third parties

    2,573     3,696     1,919  

Revenue from research and development services—related parties

    5,383     4,312     3,612  

Total revenue

    178,203     87,329     36,547  

Operating expenses

   
 
   
 
   
 
 

Costs of sales of goods—third parties

    (104,859 )   (53,477 )   (5,380 )

Costs of sales of goods—related parties

    (5,918 )   (5,372 )   (5,814 )

Research and development expenses

    (47,368 )   (29,914 )   (22,731 )

Selling expenses

    (10,209 )   (4,112 )   (3,452 )

Administrative expenses

    (19,620 )   (12,713 )   (12,366 )

Total operating expenses

    (187,974 )   (105,588 )   (49,743 )

Loss from operations

   
(9,771

)
 
(18,259

)
 
(13,196

)

Other (expense)/income

   
 
   
 
   
 
 

Interest income

    451     559     451  

Gain on disposal of a business

            30,000  

Other income

    386     20     1,221  

Interest expense

    (1,404 )   (1,516 )   (1,485 )

Other expense

    (202 )   (761 )   (69 )

Total other (expenses)/income

    (769 )   (1,698 )   30,118  

 

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  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands, except per share data)
 

(Loss)/income before income taxes and equity in earnings of equity investees

    (10,540 )   (19,957 )   16,922  

Income tax expense

    (1,605 )   (1,343 )   (1,050 )

Equity in earnings of equity investees, net of tax

    22,572     15,180     11,031  

Net income/(loss) from continuing operations

    10,427     (6,120 )   26,903  

Income/(loss) from discontinued operations, net of tax

        2,034     (1,978 )

Net income/(loss)

    10,427     (4,086 )   24,925  

Less: Net income attributable to non-controlling interests

    (2,434 )   (3,220 )   (983 )

Net income/(loss) attributable to the company

   
7,993
   
(7,306

)
 
23,942
 

Accretion on redeemable non-controlling interests

   
(43,001

)
 
(25,510

)
 
 

Net (loss)/income attributable to ordinary shareholders of the company

  $ (35,008 ) $ (32,816 ) $ 23,942  

(Losses)/earnings per share attributable to ordinary shareholders of the company—basic ($ per share)

   
 
   
 
   
 
 

Continuing Operations

  $ (0.64 ) $ (0.64 ) $ 0.49  

Discontinued Operations    

  $   $ 0.02   $ (0.03 )

(Losses)/earnings per share attributable to ordinary shareholders of the company—diluted ($ per share)

   
 
   
 
   
 
 

Continuing Operations

  $ (0.64 ) $ (0.64 ) $ 0.44  

Discontinued Operations    

  $   $ 0.02   $ (0.03 )

Number of shares used in per share calculation—basic

   
54,659,315
   
52,563,387
   
52,050,988
 

Number of shares used in per share calculation—diluted

    54,659,315     52,563,387     52,878,426  

Net income/(loss)

 
$

10,427
 
$

(4,086

)

$

24,925
 

Other comprehensive (loss)/income:

   
 
   
 
   
 
 

Foreign currency translation (loss)/income

    (5,557 )   (2,712 )   3,243  

Total Comprehensive income/(loss)

    4,870     (6,798 )   28,168  

Less: Comprehensive income attributable to non-controlling interests

   
(1,732

)
 
(2,944

)
 
(1,296

)

Total Comprehensive income/(loss) attributable to the company

  $ 3,138   $ (9,742 ) $ 26,872  

 

 
  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Balance sheet data (at year end):

             

Cash and cash equivalents

  $ 31,941   $ 38,946  

Total assets

  $ 229,754   $ 210,834  

Total shareholder's equity

  $ 102,277   $ 56,915  

Total current liabilities

  $ 81,062   $ 75,299  

Total non-current liabilities

  $ 46,415   $ 37,584  

 

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Summary Financial Data
of our Non-consolidated Joint Ventures

        We have three non-consolidated joint ventures, Shanghai Hutchison Pharmaceuticals, Hutchison Baiyunshan and Nutrition Science Partners. The following summary consolidated income statement data of each such joint venture for the years ended December 31, 2015, 2014 and 2013 and the following summary consolidated statements of financial position of each such joint venture as of December 31, 2015 and 2014 have been derived from their respective audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated financial statements of Shanghai Hutchison Pharmaceuticals, Hutchison Baiyunshan and Nutrition Science Partners have been prepared in accordance with IFRS as issued by the IASB.

        The historical results of our joint ventures for any prior period are not necessarily indicative of results to be expected in any future period. The following information should be read in conjunction with "Our Summary Consolidated Financial Data," "Risk Factors," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our and our non-consolidated joint ventures' financial statements and their related notes included elsewhere in this prospectus.

Shanghai Hutchison Pharmaceuticals

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands)
 

Comprehensive income and cash flow data:

                   

Revenue

  $ 181,140   $ 154,703   $ 138,160  

Profit for the year

  $ 31,307   $ 26,402   $ 22,424  

Dividend paid to equity holders

  $ (6,410 ) $ (19,077 ) $ (17,162 )

        Our equity in earnings of Shanghai Hutchison Pharmaceuticals reported under U.S. GAAP was $15.7 million, $13.2 million and $11.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

 
  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Financial position data (at year end):

       

Cash and cash equivalents

  $ 43,141   $ 16,575  

Total assets

  $ 224,969   $ 143,174  

Total company's equity holders' equity

  $ 93,263   $ 71,906  

Total liabilities

  $ 131,706   $ 71,268  

Hutchison Baiyunshan

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands)
 

Comprehensive income and cash flow data:

                   

Revenue

  $ 211,603   $ 243,746   $ 247,626  

Profit for the year

  $ 21,216   $ 20,865   $ 17,361  

Profit for the year attributable to equity holders of Hutchison Baiyunshan

  $ 21,376   $ 20,775   $ 17,165  

Dividend paid to equity holders

  $ (6,410 ) $ (12,820 ) $ (6,462 )

 

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        Our equity in earnings of Hutchison Baiyunshan reported under U.S. GAAP was $10.7 million, $10.4 million and $8.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

 
  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Financial position data (at year end):

       

Cash and cash equivalents

  $ 31,155   $ 31,004  

Total assets

  $ 202,646   $ 217,171  

Total company's equity holders' equity

  $ 125,063   $ 115,308  

Total liabilities

  $ 77,583   $ 101,863  

Nutrition Science Partners

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands)
 

Comprehensive Income Data:

                   

Revenue

             

Net loss for the year

  $ (7,552 ) $ (16,812 ) $ (17,543 )

        Our equity in loss of Nutrition Science Partners reported under U.S. GAAP was $3.8 million, $8.4 million and $8.8 million for the years ended December 31, 2015, 2014 and 2013, respectively.

 
  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Financial position data (at year end):

       

Cash and cash equivalents

  $ 2,624   $ 6,249  

Total assets

  $ 33,034   $ 38,548  

Total company's equity holders' equity

  $ 18,093   $ 25,645  

Total liabilities

  $ 14,941   $ 12,903  

 

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RISK FACTORS

        Investing in our ADSs involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our and our non-consolidated joint ventures' financial statements and their related notes appearing at the end of this prospectus, before deciding to invest in our ADSs. If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our ADSs could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Risks Related to Our Financial Position and Need for Additional Capital

Even if we consummate this offering, we may need substantial additional funding for our product development programs and commercialization efforts. If we are unable to raise capital on acceptable terms when needed, we could incur losses and be forced to delay, reduce or eliminate such efforts.

        We expect our expenses to increase significantly in connection with our ongoing activities, particularly as we or our collaboration partners advance the clinical development of our seven clinical drug candidates, which are currently in 20 active clinical studies in various countries with another five targeted to begin in the first quarter of 2016, and continue research and development and initiate additional clinical trials of, and seek regulatory approval for, these and other future drug candidates. In addition, if we obtain regulatory approval for any of our drug candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In particular, the costs that may be required for the manufacture of any drug candidate that receives regulatory approval may be substantial as we may have to modify or increase the production capacity at our current manufacturing facilities or contract with third-party manufacturers. We may also incur expenses as we create additional infrastructure to support our operations as a U.S. public company. Accordingly, we may need to obtain substantial additional funding in connection with our continuing operations through public or private equity offerings, debt financings, collaborations or licensing arrangements or other sources. If we are unable to raise capital when needed or on attractive terms, we could incur losses and be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

        We believe that our expected cashflow from operations (including from our Commercial Platform and milestone and other payments from our collaboration partners) and our cash and cash equivalents as of December 31, 2015, as well as the $6.9 million in borrowings available under our revolving credit facility with The Hongkong and Shanghai Banking Corporation Limited, or HSBC, the $26.9 million we received pursuant to a four-year term loan from Scotiabank (Hong Kong) Limited, which we refer to as our 2014 Scotiabank Term Loan, and the $60.2 million in borrowings available under our credit facilities with Bank of America N.A. and Deutsche Bank AG, Hong Kong Branch, combined with the net proceeds from this offering, will enable us to fund our operating expenses, debt service and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:

    the number and development requirements of the drug candidates we pursue;

    the scope, progress, timing, results and costs of researching and developing our drug candidates, and conducting pre-clinical and clinical trials;

    the cost, timing and outcome of regulatory review of our drug candidates;

    the cost and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our drug candidates for which we receive regulatory approval;

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    the amount and timing of any milestone payments from our collaboration partners, with whom we cooperate with respect to the development and potential commercialization of certain of our drug candidates;

    the cash received, if any, received from commercial sales of any drug candidates for which we receive regulatory approval;

    our ability to establish and maintain strategic partnerships, collaboration, licensing or other arrangements and the financial terms of such agreements;

    the cost, timing and outcome of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

    our headcount growth and associated costs; and

    the costs of operating as a public company in the United States and on the AIM market.

        Identifying potential drug candidates and conducting pre-clinical testing and clinical trials is a time-consuming, expensive and uncertain process that may take years to complete, and our commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available until we receive regulatory approval, if at all. We may never generate the necessary data or results required to obtain regulatory approval and achieve product sales, and even if one or more of our drug candidates is approved, they may not achieve commercial success. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

If the CK Hutchison group does not renew our existing loan guarantee or does not enter into new guarantees with us, we may incur significantly higher borrowing costs.

        Hutchison Whampoa Limited, a wholly owned subsidiary of CK Hutchison, has guaranteed our 2014 Scotiabank Term Loan for a guarantee fee. The CK Hutchison group has no obligation to enter into new guarantees. We may incur significantly higher funding costs if we no longer have the benefit of the CK Hutchison group guarantees or other similar arrangements by the CK Hutchison group.

Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to technologies or drug candidates.

        We expect to finance our cash needs in part through cash flow generated by our Commercial Platform, and we may also rely on raising additional capital through a combination of public or private equity offerings, debt financings and/or license and development agreements with collaboration partners. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of our existing shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. Additional debt financing would also result in increased fixed payment obligations.

        In addition, if we raise funds through collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us. We may also lose control of the development of drug candidates, such as the pace and scope of clinical trials, as a result of such third-party arrangements. If we are unable to raise additional

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funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

Our existing and any future indebtedness could adversely affect our ability to operate our business.

        Our outstanding indebtedness combined with current and future financial obligations and contractual commitments, including any additional indebtedness beyond our current borrowings from HSBC and Scotiabank, could have significant adverse consequences, including:

    requiring us to dedicate a portion of our cash resources to the payment of interest and principal, and prepayment and repayment fees and penalties, thereby reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes;

    increasing our vulnerability to adverse changes in general economic, industry and market conditions;

    subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;

    limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

    placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

        We intend to satisfy our current and future debt service obligations with our existing cash and cash equivalents. Nevertheless, we may not have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under our existing debt. Failure to make payments or comply with other covenants under our existing debt instruments could result in an event of default and acceleration of amounts due.

Risks Related to Our Innovation Platform

Historically, our Innovation Platform has not generated significant profits or has operated at a net loss.

        We do not expect our Innovation Platform to be significantly profitable unless and until we obtain regulatory approval of, and begin to sell, one or more of our drug candidates. We expect to incur significant sales and marketing costs as we prepare to commercialize our drug candidates. Even if we initiate and successfully complete clinical trials of our drug candidates, and our drug candidates are approved for commercial sale, and despite expending these costs, our drug candidates may not be commercially successful. We may not achieve profitability soon after generating drug sales, if ever. If we are unable to generate drug revenue, we will not become profitable and may be unable to continue operations without continued funding.

All of our drug candidates are still in development. If we are unable to obtain regulatory approval and ultimately commercialize our drug candidates or experience significant delays in doing so, our business will be materially harmed.

        All of our drug candidates are still in development. Seven of our drug candidates are in clinical development and three are in pre-clinical development. Although we and our joint venture Nutrition Science Partners receive certain payments from our collaboration partners, including upfront payments and payments for achieving certain development, regulatory or commercial milestones, for four of our drug candidates, our ability to generate revenue from our drug candidates is dependent on their receipt of regulatory approval for and successfully commercializing such products, which may never occur. Each of our drug candidates will require additional pre-clinical and/or clinical development, regulatory approval in

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multiple jurisdictions, manufacturing supply, substantial investment and significant marketing efforts before we generate any revenue from product sales. The success of our drug candidates will depend on several factors, including the following:

    successful completion of pre-clinical and/or clinical studies;

    successful enrollment in, and completion of, clinical trials;

    receipt of regulatory approvals from applicable regulatory authorities for planned clinical trials, future clinical trials or drug registrations;

    successful completion of all safety studies required to obtain regulatory approval in the United States, China and other jurisdictions for our drug candidates;

    adapting our commercial manufacturing capabilities to the specifications for our drug candidates for clinical supply and commercial manufacturing;

    obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our drug candidates;

    launching commercial sales of our drug candidates, if and when approved, whether alone or in collaboration with others;

    acceptance of the drug candidates, if and when approved, by patients, the medical community and third-party payors;

    effectively competing with other therapies;

    obtaining and maintaining healthcare coverage and adequate reimbursement;

    enforcing and defending intellectual property rights and claims; and

    maintaining a continued acceptable safety profile of the drug candidates following approval.

        If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our drug candidates, which would materially harm our business.

Our primary approach to the discovery and development of drug candidates focuses on the inhibition of kinases, some of which are unproven, and we do not know whether we will be able to develop any products of commercial value.

        A primary focus of our research and development efforts is on identifying kinase targets for which drug compounds previously developed by others affecting those targets have been unsuccessful due to limited selectivity, off-target toxicity and other problems. We then work to engineer drug candidates which have the potential to have superior efficacy, safety and other features as compared to such prior drug compounds. We also focus on developing drug compounds with the potential to be global best-in-class/next generation therapies for validated kinase targets.

        Even if we are able to develop compounds that successfully target the relevant kinases in pre-clinical studies, we may not succeed in demonstrating safety and efficacy of the drug candidates in clinical trials. As a result, our efforts may not result in the discovery or development of drugs that are commercially viable or are superior to existing drugs or other therapies on the market. While the results of pre-clinical studies and early-stage clinical trials have suggested that certain of our drug candidates may successfully inhibit kinases and may have significant utility in several cancer indications, potentially in combination with other cancer drugs and with chemotherapy, we have not yet demonstrated efficacy and safety for any of our drug candidates in later stage clinical trials.

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        In addition, we have not yet had a drug candidate receive approval or clearance from the FDA, CFDA, or another regulatory authority. While the FDA and CFDA have approved kinases inhibitors before, the regulatory review process for our drug candidates is uncertain, and we may be required to conduct additional studies or trials beyond those we anticipate resulting in a longer regulatory approval pathway.

We may expend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success.

        Because we have limited financial and managerial resources, we must limit our research programs to specific drug candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. In addition, if we do not accurately evaluate the commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royalty arrangements when it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate.

We have no history of commercializing our internally developed drugs, which may make it difficult to evaluate our future prospects.

        The operations of our Innovation Platform have been limited to developing and securing our technology and undertaking pre-clinical studies and clinical trials of our drug candidates, either independently or with our collaboration partners. We have not yet demonstrated the ability to successfully complete development of any drug candidates, obtain marketing approvals, manufacture our internally developed drugs at a commercial scale, or conduct sales and regulatory activities necessary for successful product commercialization of our drug candidates. While we believe we will be able to successfully leverage our existing Commercial Platform to manufacture, sell and market our drug candidates in China once approved, any predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing our internally developed pharmaceutical products.

The regulatory approval processes of the FDA, CFDA and comparable authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our drug candidates, our ability to generate revenue will be materially impaired.

        Our drug candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution, import and export are subject to comprehensive regulation by the FDA, CFDA and other regulatory agencies in the United States and China and by comparable authorities in other countries. Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the drug candidate's safety and efficacy. Securing regulatory approval also requires the submission of information about the drug manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Our drug candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use.

        The process of obtaining regulatory approvals, both in the United States, China and other countries, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the

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drug candidates involved. Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted NDA, pre-market approval or equivalent application types, may cause delays in the approval or rejection of an application. The FDA, CFDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional pre-clinical, clinical or other studies. Our drug candidates could be delayed in receiving, or fail to receive, regulatory approval for many reasons, including the following:

    the FDA, CFDA or comparable regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical trials;

    we may be unable to demonstrate to the satisfaction of the FDA, CFDA or comparable regulatory authorities that a drug candidate is safe and effective for its proposed indication;

    the results of clinical trials may not meet the level of statistical significance required by the FDA, CFDA or comparable regulatory authorities for approval;

    we may be unable to demonstrate that a drug candidate's clinical and other benefits outweigh its safety risks;

    the FDA, CFDA or comparable regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials;

    the data collected from clinical trials of our drug candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

    the FDA, CFDA or comparable regulatory authorities may fail to approve the manufacturing processes for our clinical and commercial supplies;

    the approval policies or regulations of the FDA, CFDA or comparable regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval;

    the FDA, CFDA or comparable regulatory authorities may restrict the use of our products to a narrow population; and

    our collaboration partners or the CROs that are retained to conduct the clinical trials of our drug candidates may take actions that materially and adversely impact the clinical trials.

        In addition, even if we were to obtain approval, regulatory authorities may approve any of our drug candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our drugs, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a drug candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that drug candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our drug candidates.

If the FDA, CFDA or another regulatory agency revokes its approval of, or if safety, efficacy, manufacturing or supply issues arise with, any therapeutic that we use in combination with our drug candidates, we may be unable to market such drug candidate or may experience significant regulatory delays or supply shortages, and our business could be materially harmed.

        We are currently focusing on the clinical development of savolitinib as both a monotherapy and in combination with immunotherapy, targeted therapies (Tagrisso and Iressa) and chemotherapy (docetaxel). We are also focusing on the clinical development of fruquintinib as both a monotherapy and in combination with chemotherapy (paclitaxel) and may focus on additional combinations in the future. However, we did not develop or obtain regulatory approval for, and we do not manufacture or sell,

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Tagrisso, Iressa, docetaxel or paclitaxel or any other therapeutic we use in combination with our drug candidates. We may also seek to develop our drug candidates in combination with other therapeutics in the future.

        If the FDA, CFDA or another regulatory agency revokes its approval of any of Tagrisso, Iressa, docetaxel, paclitaxel or another therapeutic we use in combination with our drug candidates, we will not be able to market our drug candidates in combination with such revoked therapeutic. If safety or efficacy issues arise with these or other therapeutics that we seek to combine with our drug candidates in the future, we may experience significant regulatory delays, and we may be required to redesign or terminate the applicable clinical trials. In addition, if manufacturing or other issues result in a supply shortage of Tagrisso, Iressa, docetaxel or paclitaxel or any other combination therapeutics, we may not be able to complete clinical development of savolitinib, fruquintinib and/or another of our drug candidates on our current timeline or at all.

        Even if one or more of our drug candidates were to receive regulatory approval for use in combination with Tagrisso, Iressa, docetaxel or paclitaxel, as applicable, or another therapeutic, we would continue to be subject to the risk that the FDA, CFDA or another regulatory agency could revoke its approval of the combination therapeutic, or that safety, efficacy, manufacturing or supply issues could arise with one of these combination therapeutics. This could result in savolitinib, fruquintinib or one of our other products being removed from the market or being less successful commercially.

We face substantial competition, which may result in others discovering, developing or commercializing drugs before or more successfully than we do.

        The development and commercialization of new drugs is highly competitive. We face competition with respect to our current drug candidates, and will face competition with respect to any drug candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market drugs or are pursuing the development of therapies in the field of kinase inhibition for cancer and other diseases. Some of these competitive drugs and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Specifically, there are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies.

        Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

        Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drugs that we or our collaborators may develop. Our competitors also may obtain FDA, CFDA or other regulatory approval for their drugs more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we or

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our collaborators are able to enter the market. The key competitive factors affecting the success of all of our drug candidates, if approved, are likely to be their efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.

Clinical development involves a lengthy and expensive process with an uncertain outcome.

        There is a risk of failure for each of our drug candidates. It is difficult to predict when or if any of our drug candidates will prove effective and safe in humans or will receive regulatory approval. Before obtaining regulatory approval from regulatory authorities for the sale of any drug candidate, we or our collaboration partners must complete pre-clinical studies and then conduct extensive clinical trials to demonstrate the safety and efficacy of our drug candidates in humans. Clinical testing is expensive, difficult to design and implement and can take many years to complete. The outcomes of pre-clinical development testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their drug candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain regulatory approval of their drug candidates. Our future clinical trials may not be successful.

        Commencing each of our clinical trials is subject to finalizing the trial design based on ongoing discussions with the FDA, CFDA or other regulatory authorities. The FDA, CFDA and other regulatory authorities could change their position on the acceptability of our trial designs or clinical endpoints, which could require us to complete additional clinical trials or impose approval conditions that we do not currently expect. Successful completion of our clinical trials is a prerequisite to submitting an NDA (or analogous filing) to the FDA, CFDA or other regulatory authorities for each drug candidate and, consequently, the ultimate approval and commercial marketing of our drug candidates. We do not know whether any of our clinical trials will begin or be completed on schedule, if at all.

We and our collaboration partners may incur additional costs or experience delays in completing our pre-clinical or clinical trials, or ultimately be unable to complete the development and commercialization of our drug candidates.

        We and our collaboration partners, including AstraZeneca, Eli Lilly and Nestlé Health Science, may experience delays in completing our pre-clinical or clinical trials, and numerous unforeseen events could arise during, or as a result of, future clinical trials, which could delay or prevent us from receiving regulatory approval, including:

    regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence or conduct a clinical trial at a prospective trial site;

    we may experience delays in reaching, or we may fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs, who conduct clinical trials on behalf of us and our collaboration partners, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

    clinical trials may produce negative or inconclusive results, and we or our collaboration partners may decide, or regulators may require us or them, to conduct additional clinical trials or we may decide to abandon drug development programs;

    the number of patients required for clinical trials of our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;

    third-party contractors used in our clinical trials may fail to comply with regulatory requirements or meet their contractual obligations in a timely manner, or at all, or may deviate from the clinical trial

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      protocol or drop out of the trial, which may require that we or our collaboration partners add new clinical trial sites or investigators;

    we or our collaboration partners may elect to, or regulators, IRBs or ethics committees may require that we or our investigators, suspend or terminate clinical research for various reasons, including non-compliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

    the cost of clinical trials of our drug candidates may be greater than we anticipate;

    the supply or quality of our drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient or inadequate; and

    our drug candidates may have undesirable side effects or unexpected characteristics, causing us or our investigators, regulators, IRBs or ethics committees to suspend or terminate the trials, or reports may arise from pre-clinical or clinical testing of other cancer therapies that raise safety or efficacy concerns about our drug candidates.

        We could encounter regulatory delays if a clinical trial is suspended or terminated by us or our collaboration partners, by, as applicable, the IRBs of the institutions in which such trials are being conducted, by the data safety monitoring board, which is an independent group of experts that is formed to monitor clinical trials while ongoing, or by the FDA, CFDA or other regulatory authorities. Such authorities may impose a suspension or termination due to a number of factors, including: a failure to conduct the clinical trial in accordance with regulatory requirements or the applicable clinical protocols, inspection of the clinical trial operations or trial site by the FDA, CFDA or other regulatory authorities that results in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Many of the factors that cause a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our drug candidates. Further, the FDA, CFDA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials.

        If we or our collaboration partners are required to conduct additional clinical trials or other testing of our drug candidates beyond those that are currently contemplated, if we or our collaboration partners are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

    be delayed in obtaining regulatory approval for our drug candidates;

    not obtain regulatory approval at all;

    obtain approval for indications or patient populations that are not as broad as intended or desired;

    be subject to post-marketing testing requirements; or

    have the drug removed from the market after obtaining regulatory approval.

        Our drug development costs will also increase if we experience delays in testing or regulatory approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant pre-clinical study or clinical trial delays also could allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our drug candidates and may harm our business and results of operations. Any delays in our clinical development programs may harm our business, financial condition and prospects significantly.

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If we or our collaboration partners experience delays or difficulties in the enrollment of patients in clinical trials, the progress of such clinical trials and our receipt of necessary regulatory approvals could be delayed or prevented.

        We or our collaboration partners may not be able to initiate or continue clinical trials for our drug candidates if we or our collaboration partners are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA, CFDA or similar regulatory authorities. In particular, we and our collaboration partners have designed many of our clinical trials, and expect to design future trials, to include some patients with the applicable genomic alteration that causes the disease with a view to assessing possible early evidence of potential therapeutic effect. Genomically defined diseases, however, may have relatively low prevalence, and it may be difficult to identify patients with the applicable genomic alteration. In addition, for our fruquintinib trials, we focus on enrolling patients who have failed their first or second-line treatments, which limits the total size of the patient population available for such trials. The inability to enroll a sufficient number of patients with the applicable genomic alteration or that meet other applicable criteria for our clinical trials would result in significant delays and could require us or our collaboration partners to abandon one or more clinical trials altogether.

        In addition, some of our competitors have ongoing clinical trials for drug candidates that treat the same indications as our drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors' drug candidates.

        Patient enrollment may be affected by other factors including:

    the severity of the disease under investigation;

    the total size and nature of the relevant patient population;

    the design and eligibility criteria for the clinical trial in question;

    the availability of an appropriate genomic screening test;

    the perceived risks and benefits of the drug candidate under study;

    the efforts to facilitate timely enrollment in clinical trials;

    the patient referral practices of physicians;

    the availability of competing therapies which are undergoing clinical trials;

    the ability to monitor patients adequately during and after treatment; and

    the proximity and availability of clinical trial sites for prospective patients.

        Enrollment delays in our clinical trials may result in increased development costs for our drug candidates, which could cause the value of our company to decline and limit our ability to obtain additional financing.

Our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following regulatory approval, if any.

        Undesirable side effects caused by our drug candidates could cause us or our collaboration partners to interrupt, delay or halt clinical trials or could cause regulatory authorities to interrupt, delay or halt our clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, CFDA or other regulatory authorities. In particular, as is the case with all oncology drugs, it is likely that there may be side effects, for example, hand-foot syndrome, associated with the use of certain of our drug candidates. Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA, CFDA or

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comparable regulatory authorities could order us to cease further development of or deny approval of our drug candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

        Further, our drug candidates could cause undesirable side effects related to off-target toxicity. Many of the currently approved tyrosine-kinase inhibitors have been associated with off-target toxicities because they affect multiple kinases. While we believe that the kinase selectivity of our drug candidates has the potential to significantly improve the unfavorable adverse off-target toxicity issues, if patients were to experience off-target toxicity, we may not be able to achieve an effective dosage level, receive approval to market, or achieve the commercial success we anticipate with respect to, any of our drug candidates, which could prevent us from ever generating revenue or achieving profitability. Many compounds that initially showed promise in early stage testing for treating cancer have later been found to cause side effects that prevented further development of the compound.

        Clinical trials assess a sample of the potential patient population. With a limited number of patients and duration of exposure, rare and severe side effects of our drug candidates may only be uncovered with a significantly larger number of patients exposed to the drug candidate. If our drug candidates receive regulatory approval and we or others identify undesirable side effects caused by such drug candidates (or any other similar drugs) after such approval, a number of potentially significant negative consequences could result, including:

    regulatory authorities may withdraw or limit their approval of such drug candidates;

    regulatory authorities may require the addition of labeling statements, such as a "boxed" warning or a contra-indication;

    we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

    we may be required to change the way such drug candidates are distributed or administered, conduct additional clinical trials or change the labeling of the drug candidates;

    regulatory authorities may require a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools;

    we may be subject to regulatory investigations and government enforcement actions;

    we may decide to remove such drug candidates from the marketplace;

    we could be sued and held liable for injury caused to individuals exposed to or taking our drug candidates; and

    our reputation may suffer.

        Any of these events could prevent us from achieving or maintaining market acceptance of the affected drug candidates and could substantially increase the costs of commercializing our drug candidates, if approved, and significantly impact our ability to successfully commercialize our drug candidates and generate revenue.

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We and our collaboration partners have conducted and intend to conduct additional clinical trials for certain of our drug candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations or may require additional U.S.-based trials.

        We and our collaboration partners have conducted, currently are conducting and intend in the future to conduct, clinical trials outside the United States, particularly in China where our Innovation Platform is headquartered as well as in Australia.

        Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted by qualified investigators in accordance with current good clinical practices, or GCPs, including review and approval by an independent ethics committee and receipt of informed consent from trial patients. The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. Generally, the patient population for any clinical trial conducted outside of the United States must be representative of the population for which we intend to seek approval in the United States. In addition, while these clinical trials are subject to applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also comply with all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from our clinical trials of savolitinib, fruquintinib, sulfatinib, epitinib or theliatinib in China or HMPL-523, HMPL-689 and HMPL-453 in Australia, for example, or any other trial that we or our collaboration partners conduct outside the United States, it would likely result in the need for additional clinical trials, which would be costly and time-consuming and delay or permanently halt our ability to develop and market these or other drug candidates in the United States.

        In addition, there are risks inherent in conducting clinical trials in jurisdictions outside the United States including:

    regulatory and administrative requirements of the jurisdiction where the trial is conducted that could burden or limit our ability to conduct our clinical trials;

    foreign exchange fluctuations;

    manufacturing, customs, shipment and storage requirements;

    cultural differences in medical practice and clinical research; and

    the risk that patient populations in such trials are not considered representative as compared to patient populations in the United States and other markets.

A Breakthrough Therapy designation by the FDA may not be granted to any of our drug candidates, and even if granted, may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our drug candidates will receive regulatory approval.

        We intend to seek Breakthrough Therapy designation in the United States for some of our drug candidates, including savolitinib in patients with papillary renal cell carcinoma, non-small cell lung cancer and gastric cancer, sulfatinib in patients with neuroendocrine tumors and epitinib in patients with non-small cell lung cancer with brain metastasis. A Breakthrough Therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of

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patients placed in ineffective control regimens. Drugs designated as Breakthrough Therapies by the FDA are also eligible for accelerated approval.

        Designation as a Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe one of our drug candidates meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy designation for a drug candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our drug candidates qualify as Breakthrough Therapies, the FDA may later decide that the drugs no longer meet the conditions for qualification.

If we are unable to obtain and/or maintain CFDA approval for our drug candidates to be eligible for an expedited registration pathway, the time and cost we incur to obtain regulatory approvals may increase. Even if we receive such approvals, they may not lead to a faster development, review or approval process.

        Under the Special Examination and Approval of the Registration of New Drugs provisions, the CFDA may grant "green-channel" approval to (i) active ingredients and their preparations extracted from plants, animals and minerals, and newly discovered medical materials and their preparations that have not been sold in the China market, (ii) chemical drugs and their preparations and biological products that have not been approved for sale at its origin country or abroad, (iii) new drugs with obvious clinical treatment advantages for such diseases as AIDS, therioma, and rare diseases, and (iv) new drugs for diseases that have not been treated effectively. We have achieved green-channel approval from the CFDA for savolitinib, fruquintinib, sulfatinib, epitinib and theliatinib. We anticipate that we may seek a green-channel development pathway for certain of our other drug candidates and indications. If granted, the green-channel will enable us to establish streamlined communication with the relevant review panel of the CFDA, thus improving the efficiency of new drug approval.

        A failure to obtain and/or maintain green-channel approval or any other form of expedited development, review or approval for our drug candidates would result in a longer time period to commercialization of such drug candidate, could increase the cost of development of such drug candidate and could harm our competitive position in the marketplace. In addition, even if we obtain green-channel approval, there is no guarantee that we will experience a faster development process, review or approval compared to non-accelerated registration pathways or that a drug candidate will ultimately be approved for sale.

Even if we receive regulatory approval for any of our drug candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense.

        If the FDA, CFDA or a comparable regulatory authority approves any of our drug candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the drug will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current Good Manufacturing Practices, or GMPs, and GCPs. Any regulatory approvals that we receive for our drug candidates may also be subject to limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials, and surveillance to monitor the safety and efficacy of the drug.

        In addition, regulatory policies may change or additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able

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to maintain regulatory compliance, we may lose any regulatory approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

We may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with any of our drugs that receive regulatory approval.

        Once a drug is approved by the FDA, CFDA or a comparable regulatory authority for marketing, it is possible that there could be a subsequent discovery of previously unknown problems with the drug, including problems with third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements. If any of the foregoing occurs with respect to our drug products, it may result in, among other things:

    restrictions on the marketing or manufacturing of the drug, withdrawal of the drug from the market, or voluntary or mandatory drug recalls;

    fines, warning letters or holds on clinical trials;

    refusal by the FDA, CFDA or comparable regulatory authority to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of drug license approvals;

    drug seizure or detention, or refusal to permit the import or export of drugs; and

    injunctions or the imposition of civil or criminal penalties.

        Any government investigation of alleged violations of law could require us to expend significant time and resources and could generate negative publicity. If we or our collaborators are not able to maintain regulatory compliance, regulatory approval that has been obtained may be lost and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

The incidence and prevalence for target patient populations of our drug candidates are based on estimates and third-party sources. If the market opportunities for our drug candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability will be adversely affected, possibly materially.

        Periodically, we make estimates regarding the incidence and prevalence of target patient populations for particular diseases based on various third-party sources and internally generated analysis and use such estimates in making decisions regarding our drug development strategy, including determining indications on which to focus in pre-clinical or clinical trials.

        These estimates may be inaccurate or based on imprecise data. For example, the total addressable market opportunity will depend on, among other things, their acceptance by the medical community and patient access, drug pricing and reimbursement. The number of patients in the addressable markets may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our drugs, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

        We are highly dependent on the expertise of the members of our research and development team, as well as the other principal members of our management, including Christian Hogg, our Chief Executive Officer and a director, and Weiguo Su, Ph.D., our Chief Scientific Officer. Although we have entered into employment letter agreements with our executive officers, each of them may terminate their employment

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with us at any time with three months' prior written notice. We do not maintain "key person" insurance for any of our executives or other employees.

        Recruiting and retaining qualified management, scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize drugs. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel.

Risks Related to Our Commercial Platform

As a significant portion of our Commercial Platform business is conducted through joint ventures, we are largely dependent on the success of our joint ventures and our receipt of dividends or other payments from our joint ventures for cash to fund our operations.

        We are party to joint venture agreements with our non-consolidated joint ventures Shanghai Pharmaceuticals and Guangzhou Baiyunshan, which together form an important part of our Commercial Platform business. Our equity in the earnings of these non-consolidated joint ventures was $19.8 million, $23.6 million and $26.3 million for the years ended December 31, 2013, 2014 and 2015, respectively, as recorded in our consolidated financial statements. Furthermore, we have consolidated joint ventures with each of Sinopharm and Hain Celestial which accounted for substantially all of our Commercial Platform's consolidated revenue for the years ended December 31, 2013, 2014 and 2015.

        As a result, our ability to fund our operations and pay our expenses or to make future dividend payments, if any, is largely dependent on the earnings of our joint ventures and the payment of those earnings to us in the form of dividends. Payments to us by our joint ventures will be contingent upon our joint ventures' earnings and other business considerations and may be subject to statutory or contractual restrictions. Each joint venture's ability to distribute dividends to us is subject to approval by their respective boards of directors, which in the case of Shanghai Hutchison Pharmaceuticals and Hutchison Baiyunshan are comprised of an equal number of representatives from each party.

        Operationally, our joint venture partners have certain responsibilities and/or certain rights to exercise control or influence over operations and decision-making under the joint venture arrangements. Therefore, the success of our joint ventures depends on the efforts and abilities of our joint venture parties to varying degrees. For example, we share the ability to appoint the general manager of our joint venture with Guangzhou Baiyunshan, with each of us having a rotating four-year right, and therefore, our ability to manage the day-to-day operations of this joint venture is more limited. On the other hand we appoint the general managers of Hutchison Sinopharm and Shanghai Hutchison Pharmaceuticals pursuant to the joint venture agreements governing these entities and therefore oversee the day-to-day management of these joint ventures. However, we still rely on Sinopharm and Shanghai Pharmaceuticals to provide certain distribution and logistics services. See "—Risks Related to our Dependence on Third Parties—Joint ventures form an important part of our Commercial Platform business, and our ability to manage and develop the businesses conducted by these joint ventures depends in part on our relationship with our joint venture partners" for more information.

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We intend to use our Commercial Platform's Prescription Drugs business to commercialize our internally developed drug candidates, but we may not be successful in adapting this business to successfully manufacture, sell and market our drug candidates if and when they are approved, and we may not be able to generate any revenue from such products.

        Our Prescription Drugs business is operated by our Shanghai Hutchison Pharmaceuticals and Hutchison Sinopharm joint ventures and currently has a manufacturing, sales and marketing infrastructure in China. If our drug candidates are approved, we intend to leverage our Prescription Drugs business to commercialize such drug candidates; however, to do so, we must adapt our Prescription Drugs business to cater to oncology and/or immunology drug sales to achieve commercial success for any approved drug candidate in these areas. In the future, we may need to expand the sales and marketing team of these joint ventures or refocus their activities to some of our drug candidates if and when they are approved.

        There are risks involved with adapting our current Prescription Drugs business. For example, recruiting and/or training a sales force in new therapeutic areas is time consuming and could delay any drug launch.

        Factors that may inhibit our efforts to commercialize our drug candidates through our Prescription Drugs business include:

    our joint ventures' inability to recruit and retain adequate numbers of effective sales and marketing personnel;

    the inability of our joint ventures' sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future drugs; and

    the lack of complementary drugs to be offered by our joint ventures' sales personnel, which may put our joint ventures at a competitive disadvantage relative to companies with more extensive product lines.

        In such case, our business, results of operations, financial condition and prospects will be materially and adversely affected.

Our Commercial Platform faces substantial competition.

        Our Commercial Platform's Prescription Drugs business competes in the pharmaceutical industry in China, which is characterized by a number of established, large pharmaceutical companies, as well as some smaller emerging pharmaceutical companies. The top 10 domestic pharmaceutical manufacturers only accounted for 19.1% of total pharmaceutical sales in 2015, according to Frost & Sullivan. Our Prescription Drugs business competes with pharmaceutical companies engaged in the development, production, marketing or sales of prescription drugs, in particular cardiovascular drugs. The identities of the key competitors with respect to our Prescription Drugs business vary by product and, in certain cases, competitors have greater financial resources than us and may elect to focus these resources on developing, importing or in-licensing and marketing products in the PRC that are substitutes for our products and may have broader sales and marketing infrastructure with which to do so. Our Commercial Platform's Consumer Health business also competes in a highly fragmented market in Asia.

        The products sold through our Commercial Platform, which may include our drug candidates if they receive regulatory approval, may compete against products that have lower prices, superior performance, greater ease of administration or other advantages compared to our products. In some circumstances, price competition may drive our competitors to conduct illegal manufacturing processes to lower their manufacturing costs. Increased competition may result in price reductions, reduced margins and loss of market share, whether achieved by either legal or illegal means, any of which could materially and adversely affect our profit margins. We and our joint ventures may not be able to compete effectively against current and future competitors.

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If we are not able to maintain and enhance brand recognition of the Commercial Platform's products to maintain its competitive advantage, our reputation, business and operating results may be harmed.

        We believe that market awareness of the products sold through our Commercial Platform, which include our joint ventures' branded products, such as Baiyunshan and Shang Yao, and the brands of third-party products which are distributed through our joint ventures, such as AstraZeneca's Seroquel, has contributed significantly to the success of our Commercial Platform. We also believe that maintaining and enhancing such brands is critical to maintaining our competitive advantage. Although the sales and marketing staff of our Commercial Platform will continue to further promote such brands to remain competitive, they may not be successful. If our joint ventures are unable to further enhance brand recognition and increase awareness of their products, or if they are compelled to incur excessive marketing and promotion expenses in order to maintain brand awareness, our business and results of operations may be materially and adversely affected. Furthermore, our results of operations could be adversely affected if the Baiyunshan and Shang Yao brands, or the brands of any other products, or our reputation, are impaired by certain actions taken by our joint venture partners, distributors, competitors or relevant regulatory authorities.

Reimbursement may not be available for the products currently sold through our Commercial Platform or our drug candidates in China, the United States or other countries, which could diminish our sales or affect our profitability.

        The regulations that govern pricing and reimbursement for pharmaceuticals vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after regulatory approval is granted. In some foreign markets, pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. Furthermore, once marketed and sold, government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. Adverse pricing reimbursement levels may hinder market acceptance of products sold by our Commercial Platform or drug candidates.

        In China, for example, the Ministry of Labor and Social Security of the PRC or provincial or local labor and social security authorities, together with other government authorities, review the inclusion or removal of drugs from the PRC's National Medical Insurance Catalogue or provincial or local medical insurance catalogues for the National Medical Insurance Program every other year, and the tier under which a drug will be classified, both of which affect the amounts reimbursable to program participants for their purchases of those medicines. These determinations are made based on a number of factors, including price and efficacy. Depending on the tier under which a drug is classified in the provincial medicine catalogue, a National Medical Insurance Program participant residing in that province can be reimbursed for the full cost of Tier 1 medicine and for the majority of the cost of a Tier 2 medicine. In some instances, if the price range designated by the local or provincial government decreases, it may adversely affect our business and could reduce our total revenue or decrease our profit falls below production costs, we may stop manufacturing certain products. In addition, in order to access certain local or provincial-level markets, our joint ventures are periodically required to enter into competitive bidding processes for She Xiang Bao Xin pills (the best selling product of our Shanghai Hutchison Pharmaceuticals joint venture), Fu Fang Dan Shen tablets (the best selling product of our Hutchison Baiyunshan joint venture) and other products with a pre-defined price range. The competitive bidding in effect sets price ceilings for those products, thereby limiting our profitability.

        In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs which may affect reimbursement rates of our drug candidates if approved. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act, was passed, which substantially changes the way health care is financed by both governmental and private insurers. The Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars and establishes annual

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fees and taxes on manufacturers of certain branded prescription drugs. It also establishes a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D. In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. We expect that additional U.S. state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our drug candidates or additional pricing pressures.

        Moreover, eligibility for reimbursement in the United States does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim U.S. reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by U.S. government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors in the United States often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved drugs that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize drugs and our overall financial condition.

Sales of products sold by our Prescription Drugs business rely on the ability to win tender bids for the medicine purchases of hospitals in China.

        Our Commercial Platform's Prescription Drugs business markets to hospitals in China who may make bulk purchases of a medicine only if that medicine is selected under a government-administered tender process. Periodically, a bidding process is organized on a provincial or municipal basis. Whether a drug manufacturer is invited to participate in the tender depends on the level of interest that hospitals have in purchasing this drug. The interest of a hospital in a medicine is evidenced by:

    the inclusion of this medicine on the hospital's formulary, which establishes the scope of drug physicians at this hospital may prescribe to their patients, and

    the willingness of physicians at this hospital to prescribe this drug to their patients.

        We believe that effective marketing efforts are critical in making and keeping hospitals interested in purchasing the Prescription Drugs sold through our Commercial Platform so that we and our joint ventures are invited to submit the products to the tender. Even if we and our joint ventures are invited to do so, competitors may be able to substantially reduce the price of their products or services. If competitors are able to offer lower prices, our and our joint ventures' ability to win tender bids during the hospital tender process will be materially affected, and could reduce our total revenue or decrease our profit.

Counterfeit products in China could negatively impact our revenue, brand reputation, business and results of operations.

        Our Commercial Platform's products are subject to competition from counterfeit products, especially counterfeit pharmaceuticals which are manufactured without proper licenses or approvals and are fraudulently mislabeled with respect to their content and/or manufacturer. Counterfeiters may illegally manufacture and market products under our or our joint venture's brand names, the brand names of the

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third-party products we or they sell, or those of our or their competitors. Counterfeit pharmaceuticals are generally sold at lower prices than the authentic products due to their low production costs, and in some cases are very similar in appearance to the authentic products. Counterfeit pharmaceuticals may or may not have the same chemical content as their authentic counterparts. If counterfeit pharmaceuticals illegally sold under our or our joint ventures' brand names or the brand names of third-party products we or they sell result in adverse side effects to consumers, we or our joint ventures may be associated with any negative publicity resulting from such incidents. In addition, consumers may buy counterfeit pharmaceuticals that are in direct competition with the products sold through our Commercial Platform, which could have an adverse impact on our revenue, business and results of operations. The proliferation of counterfeit pharmaceuticals in China and globally may grow in the future. Any such increase in the sales and production of counterfeit pharmaceuticals in China, or the technological capabilities of the counterfeiters, could negatively impact our revenue, brand reputation, business and results of operations.

Pharmaceutical companies in China are required to comply with extensive regulations and hold a number of permits and licenses to carry on their business. Our and our joint ventures' ability to obtain and maintain these regulatory approvals is uncertain, and future government regulation may place additional burdens on the Commercial Platform business.

        The pharmaceutical industry in China is subject to extensive government regulation and supervision. The regulatory framework addresses all aspects of operating in the pharmaceutical industry, including approval, production, distribution, advertising, licensing and certification requirements and procedures, periodic renewal and reassessment processes, registration of new drugs and environmental protection. Violation of applicable laws and regulations may materially and adversely affect our business. In order to manufacture and distribute pharmaceutical products in China, we and our joint ventures are required to:

    obtain a pharmaceutical manufacturing permit and GMP certificate for each production facility from the relevant food and drug administrative authority;

    obtain a drug registration certificate, which includes a drug approval number, from the CFDA for each drug manufactured by us;

    obtain a pharmaceutical distribution permit and good supply practice, or GSP, certificate from the CFDA; and

    renew the pharmaceutical manufacturing permits, the pharmaceutical distribution permits, drug registration certificates, GMP certificates and GSP certificates every five years, among other requirements.

        If we or our joint ventures are unable to obtain or renew such permits or any other permits or licenses required for our or their operations, we will not be able to engage in the manufacture and distribution of our products and our business may be adversely affected.

        The regulatory framework regarding the pharmaceutical industry in China is subject to change and amendment from time to time. Any such change or amendment could materially and adversely impact our business, financial condition and results of operations. The PRC government has introduced various reforms to the Chinese healthcare system in recent years and may continue to do so, with an overall objective to expand basic medical insurance coverage and improve the quality and reliability of healthcare services. The specific regulatory changes under the reform still remain uncertain. The implementing measures to be issued may not be sufficiently effective to achieve the stated goals, and as a result, we may not be able to benefit from such reform to the level we expect, if at all. Moreover, the reform could give rise to regulatory developments, such as more burdensome administrative procedures, which may have an adverse effect on our business and prospects.

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        For further information regarding government regulation in China and other jurisdictions, see "Regulation—Government Regulation of Pharmaceutical Product Development and Approval," "Regulation—Coverage and Reimbursement" and "Regulation—Other Healthcare Laws."

Rapid changes in the pharmaceutical industry may render our Commercial Platform's current products or our drug candidates obsolete.

        Future technological improvements by our competitors and continual product developments in the pharmaceutical market may render our and our joint ventures' existing products, our or their third-party licensed products or our drug candidates obsolete or affect our Commercial Platform's viability and competitiveness. Therefore, our Commercial Platform's future success will largely depend on our and our joint ventures' ability to:

    improve existing products;

    develop innovative drug candidates;

    diversify the product and drug candidate portfolio;

    license diverse third-party products; and

    develop new and competitively priced products which meet the requirements of the constantly changing market.

        If we or our joint ventures fail to respond to this environment by improving our Commercial Platform's existing products, licensing new third-party products or developing new drug candidates in a timely fashion, or if such new or improved products do not achieve adequate market acceptance, our business and profitability may be materially and adversely affected.

Our Commercial Platform's principal products involve the cultivation or sourcing of key raw materials including botanical products, and any quality control or supply failure or price fluctuations could adversely affect our Commercial Platform's ability to manufacture our products and/or could materially and adversely affect our operating results.

        The key raw materials used in the manufacturing process of certain of our Commercial Platform's principal products are medicinal herbs whose properties are related to the regions and climatic conditions in which they are grown. Access to quality raw materials and products necessary for the manufacture of our Commercial Platform products is not guaranteed. We rely on a combination of materials grown by our or our joint ventures' good agriculture practice, or GAP-certified entities and materials sourced from third-party growers and suppliers. The availability, quality and prices of these raw materials are dependent on and closely affected by weather conditions and other seasonal factors which have an impact on the yields of the harvests each year. The quality, in some instances, also depends on the operations of third-party growers or suppliers. There is a risk that such growers or suppliers sell or attempt to sell us or our joint ventures raw materials which are not authentic. If there is any supply interruption for an indeterminate period of time, our joint ventures may not be able to identify and obtain alternative supplies that comply with our quality standards in a timely manner. Any supply disruption could adversely affect our ability to satisfy demand for our products, and materially and adversely affect our product sales and operating results. Moreover, any use by us or our joint ventures of unauthentic materials illegally sold to us by third-party growers or suppliers in our or our joint ventures' products may result in adverse side effects to the consumers, negative publicity, or product liability claims against us or our joint ventures, any of which may materially and adversely affect our operating results.

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        The prices of necessary raw materials and products may be subject to price fluctuations according to market conditions, and any sudden increases in demand in the case of a widespread illness such as SARS, MERS or avian flu may impact the costs of production. For example, the market price of Sanqi, one of the main natural raw materials in Hutchison Baiyunshan's Fu Fang Dan Shen tablets, fluctuated significantly between 2009 and 2015. Our Commercial Platform sources Sanqi and other necessary raw materials on a purchase order basis and does not have long-term supply contracts in place so that it can manage inventory levels to reduce its risk to price fluctuations; however, we cannot guarantee that we or our joint ventures will be successful. Raw material price fluctuations could increase the cost to manufacture our Commercial Platform's products and adversely affect our operating results.

Adverse publicity associated with our company, our joint ventures or our or their products or third-party licensed products or similar products manufactured by our competitors could have a material adverse effect on our results of operations.

        Sales of the Commercial Platform's products are highly dependent upon market perceptions of the safety and quality of our and our joint ventures' products and the third-party products we and they distribute. Concerns over the safety of biopharmaceutical products manufactured in China could have an adverse effect on the reputation of our industry and the sale of such products, including products manufactured or distributed by us and our joint ventures.

        We could be adversely affected if any of our or our joint ventures' products, third-party licensed products or any similar products manufactured by other companies prove to be, or are alleged to be, harmful to patients. Any negative publicity associated with severe adverse reactions or other adverse effects resulting from patients' use or misuse of our and our joint ventures' products or any similar products manufactured by other companies could also have a material adverse impact on our results of operations. We and our joint ventures have not, to date, experienced any significant quality control or safety problems. If in the future we or our joint ventures become involved in incidents of the type described above, such problems could severely and adversely impact our financial position and reputation.

We are dependent on our joint ventures' production facilities in Shanghai, Guangzhou and Anhui, China for the manufacture of our principal Commercial Platform products.

        The principal products sold by our Commercial Platform are mainly produced or expected to be produced at our joint ventures' manufacturing facilities in Shanghai, Guangzhou and Anhui, China. A significant disruption at those facilities, even on a short-term basis, could impair our joint ventures' ability to timely produce and ship products, which could have a material adverse effect on our business, financial position and results of operations.

        Our joint ventures' manufacturing operations are vulnerable to interruption and damage from natural and other types of disasters, including earthquake, fire, floods, environmental accidents, power loss, communications failures and similar events. If any disaster were to occur, our ability to operate our or our joint ventures' business at these facilities would be materially impaired. In addition, the nature of our production and research activities could cause significant delays in our programs and make it difficult for us to recover from a disaster. We and our joint ventures maintain insurance for business interruptions to cover some of our potential losses; however, such disasters could still disrupt our operations and thereby result in substantial costs and diversion of resources.

        In addition, our and our joint ventures' production process requires a continuous supply of electricity. We and they have encountered power shortages historically due to restricted power supply to industrial users during summers when the usage of electricity is high and supply is limited or as a result of damage to the electricity supply network. Because the duration of those power shortages was brief, they had no material impact on our or their operations. Interruptions of electricity supply could result in lengthy production shutdowns, increased costs associated with restarting production and the loss of production in

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progress. Any major suspension or termination of electricity or other unexpected business interruptions could have a material adverse impact on our business, financial condition and results of operations.

Risks Related to our Dependence on Third Parties

Disagreements with our current or future collaboration partners, or the termination of any collaboration arrangement, could cause delays in our product development and materially and adversely affect our business.

        Our collaborations with AstraZeneca, Eli Lilly and Nestlé Health Science and any future collaborations that we enter into may not be successful. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable drug candidate and, in some cases, termination of the collaboration arrangement. Because, among other things, we are much smaller than our collaboration partners and because they or their affiliates may sell competing products, our interests may not always be aligned. This may result in potential conflicts between our collaborators and us on matters that we may not be able to resolve on favorable terms or at all.

        Collaborations with pharmaceutical or biotechnology companies and other third parties, including our existing agreements with AstraZeneca, Eli Lilly and Nestlé Health Science, are often terminable by the other party for any reason with certain advance notice. For example, we had a collaboration arrangement with Janssen Pharmaceuticals, Inc., or Janssen, with respect to the development of a compound for a specific target related to inflammation and immunology, but Janssen gave notice to terminate the arrangement following their scientific review of the compound effective November 2015. Any such termination or expiration would adversely affect us financially and could harm our business reputation. For instance, in the event one of the strategic alliances with a current collaborator is terminated, we may require significant time and resources to secure a new collaboration partner, if we are able to secure such an arrangement at all. As noted in the following risk factor, establishing new collaboration arrangements can be challenging and time-consuming. The loss of existing or future collaboration arrangements would not only delay or potentially terminate the possible development or commercialization of products we may derive from our technologies, but it may also delay or terminate our ability to test specific target candidates.

We rely on our collaborations with third parties for certain of our drug development activities, and, if we are unable to establish new collaborations when desired on commercially attractive terms or at all, we may have to alter our development and commercialization plans.

        Certain of our drug development programs and the potential commercialization of certain drug candidates rely on collaborations with AstraZeneca, Eli Lilly and Nestlé Health Science. For some of our drug candidates, we may decide to collaborate with additional pharmaceutical and biotechnology companies for the development and potential commercialization of those drug candidates.

        We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA, CFDA or similar regulatory authorities outside the United States and China, the potential market for the subject drug candidate, the costs and complexities of manufacturing and delivering such drug candidate to patients, the potential of competing drugs, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative drug candidates or technologies for similar indications that may be available to collaborate on and whether such collaboration could be more

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attractive than the one with us for our drug candidate. The terms of any additional collaboration or other arrangements that we may establish may not be favorable to us.

        We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

        We may not be able to negotiate additional collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the drug candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our drug candidates or bring them to market and generate drug revenue.

Further development and commercialization of our own drug candidates will depend, in part, on strategic alliances with our collaborators. If our collaborators do not diligently pursue product development efforts, impeding our ability to collect milestone and royalty payments, our progress may be delayed and our revenue may be deferred.

        We rely and expect to continue to rely, to some extent, on our collaborators to provide funding in support of our own independent research and pre-clinical and clinical testing. We do not currently possess the financial resources necessary to fully develop and commercialize each of our drug candidates or the resources or capabilities to complete the lengthy regulatory approval processes that may be required for our drug candidates. Therefore, we rely and plan to continue to rely on strategic alliances to financially help us develop and commercialize certain of our drug candidates. As a result, our success depends, in part, on our ability to collect milestone and royalty payments from our existing collaborators, AstraZeneca, Eli Lilly, Nestlé Health Science and potential new collaborators. To the extent our collaborators do not aggressively pursue drug candidates for which we are entitled to such payments or pursue such drug candidates ineffectively, we will fail to realize these significant revenue streams, which could have an adverse effect on our business and future prospects.

        If the alliances we currently have with AstraZeneca, Eli Lilly and Nestlé Health Science, or future collaborators with whom we may engage, are unable or unwilling to advance our programs, or if they do not diligently pursue product development and product approval, this may slow our progress and defer our revenue. Any such failure would have an adverse effect on our ability to collect key revenue streams and, for this reason, would adversely impact our business, financial position and prospects. Our collaborators may sub-license or abandon drug candidates or we may have disagreements with our collaborators, which would cause associated product development to slow or cease. There can be no assurance that our current strategic alliances will be successful, and we may require significant time to secure new strategic alliances because we need to effectively market the benefits of our technology to these future alliance partners, which may direct the attention and resources of our research and development personnel and management away from our primary business operations. Further, each strategic alliance arrangement will involve the negotiation of terms that may be unique to each collaborator. These business development efforts may not result in a strategic alliance or may result in unfavorable arrangements.

        Under typical collaboration agreements, we would expect to receive revenue for our selective kinase inhibitors based on achievement of specific development, sales or regulatory approval milestones, as well as royalties based on a percentage of sales of the commercialized products. Achieving these milestones will

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depend, in part, on the efforts of our partner as well as our own. If we, or any alliance partner, fail to meet specific milestones, then the strategic alliance may be terminated, which could reduce our revenue.

The third-party vendors upon whom we rely for the supply of the active pharmaceutical ingredient, drug product and drug substance used in our drug candidates are our sole source of supply, and the loss of any of these suppliers could significantly harm our business.

        The active pharmaceutical ingredients, or API, drug product and drug substance used in our drug candidates are supplied to us from third-party vendors. Our ability to successfully develop our drug candidates, and to ultimately supply our commercial drugs in quantities sufficient to meet the market demand, depends in part on our ability to obtain the API, drug product and drug substance for these drugs in accordance with regulatory requirements and in sufficient quantities for commercialization and clinical testing. While we do produce small amounts of API, we do not currently have arrangements in place for a redundant or second-source supply of any such API, drug product or drug substance in the event any of our current suppliers of such API, drug product and drug substance cease their operations for any reason, which may lead to an interruption in our production.

        For all of our drug candidates, we intend to identify and qualify additional manufacturers to provide such API, drug product and drug substance prior to submission of an NDA to the FDA and/or CFDA. We are not certain, however, that our current suppliers will be able to meet our demand for their products, either because of the nature of our agreements with those suppliers, our limited experience with those suppliers or our relative importance as a customer to those suppliers. It may be difficult for us to assess their ability to timely meet our demand in the future based on past performance. While our suppliers have generally met our demand for their products on a timely basis in the past, they may subordinate our needs in the future to their other customers.

        Establishing additional or replacement suppliers for the API, drug product and drug substance used in our drug candidates, if required, may not be accomplished quickly. If we are able to find a replacement supplier, such replacement supplier would need to be qualified and may require additional regulatory approval, which could result in further delay. While we seek to maintain adequate inventory of the API, drug product and drug substance used in our drug candidates, any interruption or delay in the supply of components or materials, or our inability to obtain such API, drug product and drug substance from alternate sources at acceptable prices in a timely manner could impede, delay, limit or prevent our development efforts, which could harm our business, results of operations, financial condition and prospects.

We and our collaborators rely, and expect to continue to rely, on third parties to conduct certain of our clinical trials for our drug candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be harmed.

        We do not have the ability to independently conduct large-scale clinical trials. We and our collaboration partners rely, and expect to continue to rely, on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct or otherwise support certain clinical trials for our drug candidates. Nevertheless, we and our collaboration partners (as applicable) will be responsible for ensuring that each clinical trial is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and reliance on CROs will not relieve us of our regulatory responsibilities. For any violations of laws and regulations during the conduct of clinical trials for our drug candidates, we could be subject to warning letters or enforcement action that may include civil penalties up to and including criminal prosecution.

        Although we or our collaboration partners design the clinical trials for our drug candidates, CROs conduct most of the clinical trials. As a result, many important aspects of our development programs,

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including their conduct and timing, are outside of our direct control. Our reliance on third parties to conduct clinical trials results in less control over the management of data developed through clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may:

    have staffing difficulties;

    fail to comply with contractual obligations;

    experience regulatory compliance issues;

    undergo changes in priorities or become financially distressed; or

    form relationships with other entities, some of which may be our competitors.

        These factors may materially and adversely affect the willingness or ability of third parties to conduct our and our collaboration partners' clinical trials and may subject us or them to unexpected cost increases that are beyond our or their control.

        If any of our and our collaboration partners' relationships with these third-party CROs terminate, we or they may not be able to enter into arrangements with alternative CROs on reasonable terms or at all. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such CROs are associated with may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, we believe that our financial results and the commercial prospects for our drug candidates in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.

We, our collaboration partners or our CROs may fail to comply with the regulatory requirements pertaining to clinical trials, which could result in fines, adverse publicity and civil or criminal sanctions.

        We, our collaboration partners and our CROs are required to comply with regulations for conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial patients are adequately informed of the potential risks of participating in clinical trials and their rights are protected. These regulations are enforced by the FDA, the CFDA and comparable foreign regulatory authorities for any drugs in clinical development. In the United States, the FDA GCP regulates through periodic inspections of clinical trial sponsors, principal investigators and trial sites. If we, our collaboration partners or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require additional clinical trials before approving the marketing applications for the relevant drug candidate. We cannot assure you that, upon inspection, the FDA or other applicable regulatory authority will determine that any of the future clinical trials for our drug candidates will comply with GCPs. In addition, clinical trials must be conducted with drug candidates produced under GMP regulations. Our failure or the failure of our collaboration partners or CROs to comply with these regulations may require us or them to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action. We are also required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

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Joint ventures form an important part of our Commercial Platform business, and our ability to manage and develop the businesses conducted by these joint ventures depends in part on our relationship with our joint venture partners.

        We are party to joint venture agreements with each of Shanghai Pharmaceuticals, Guangzhou Baiyunshan, Sinopharm and Hain Celestial, which together form an important part of our Commercial Platform business. Under these arrangements, our joint venture partners have certain operational responsibilities and/or certain rights to exercise control or influence over operations and decision-making.

        Our equity interests in these operating companies do not provide us with the ability to control actions that require shareholder approval. In addition, under the joint venture contracts for these entities, the consent of the directors nominated by our joint venture partners is required for the passing of resolutions in relation to certain matters concerning the operations of these companies. As a result, although we participate in the management, and in the case of Sinopharm and Shanghai Pharmaceuticals nominate the management and run the day-to-day operations, we may not be able to secure the consent of our joint venture partners to pursue activities or strategic objectives that are beneficial to or that facilitate our overall business strategies. With respect to Hutchison Baiyunshan, which is a jointly controlled and managed joint venture where we share the ability to appoint the general manager with our partner Guangzhou Baiyunshan, with each of us having a rotating four-year right, we rely on our relationship with our partner, and our ability to manage the day-to-day operations of this joint venture is more limited. To the extent Guangzhou Baiyunshan does not, for example, diligently perform its responsibilities with respect to any aspect of Hutchison Baiyunshan's operations, agree with or cooperate in the implementation of any plans we may have for Hutchison Baiyunshan's business in the future or take steps to ensure that Hutchison Baiyunshan is in compliance with applicable laws and regulations, our business and ability to comply with legal, regulatory and financial reporting requirements which will apply to us as a public company, as well as the results of this joint venture, could be materially and adversely affected. Furthermore, disagreements or disputes which arise between us and our joint venture partners may potentially require legal action to resolve and hinder the smooth operation of our Commercial Platform business or adversely affect our financial condition, results of operations and prospects.

We and our joint ventures rely on our distributors for logistics and distribution services for our Commercial Platform business.

        We and our joint ventures rely on distributors to perform certain operational activities, including invoicing, logistics and delivery of the products we and they market to the end customers. Because we and our joint ventures rely on third-party distributors, we have less control than if we handled distribution logistics directly and can be adversely impacted by the actions of our distributors. Any disruption of our distribution network, including failure to renew existing distribution agreements with desired distributors, could negatively affect our ability to effectively sell our products and materially and adversely affect the business, financial condition and results of operations of us and our joint ventures.

There is no assurance that the benefits currently enjoyed by virtue of our association with CK Hutchison will continue to be available.

        Historically, we have relied on the reputation and experience of, and support provided by, our founding shareholder, Hutchison Whampoa Limited (a wholly owned subsidiary of CK Hutchison) to advance our joint ventures and collaborations in China and elsewhere. CK Hutchison is a Hong Kong-based, multinational conglomerate with operations in over 50 countries. CK Hutchison is the ultimate parent company of Hutchison Healthcare Holdings Limited, which as of the date of this prospectus owns 64.9% of our total outstanding share capital. We believe that CK Hutchison group's reputation in China has given us an advantage in negotiating collaborations and obtaining opportunities.

        We also benefit from sharing certain services with the CK Hutchison group including, among others, legal and regulatory services, company secretarial support services, tax and internal audit services, shared

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use of accounting software system and related services, participation in the CK Hutchison group's pension, medical and insurance plans, participation in the CK Hutchison group's procurement projects with third-party vendors/suppliers, other staff benefits and staff training services, company functions and activities and operation advisory and support services. We pay a management fee to an affiliate of CK Hutchison for the provision of such services. In the years ended December 31, 2013, 2014 and 2015, we paid a management fee of approximately $951,000, $989,000 and $845,000 respectively. In addition, we benefit from the fact that two retail chains affiliated with the CK Hutchison group, PARKnSHOP and Watsons, sell certain of our Commercial Platform products in their stores throughout Hong Kong and in other Asian countries. For the years ended December 31, 2013, 2014 and 2015, sales of our products to members of the CK Hutchison group amounted to $7.8 million, $7.8 million and $8.1 million, respectively.

        Our business also depends on certain intellectual property rights licensed to us by the CK Hutchison group. See "—Risks Related to Intellectual Property—We and our joint ventures are dependent on trademark and other intellectual property rights licensed from others. If we lose our licenses for any of our products, we or our joint ventures may not be able to continue developing such products or may be required to change the way we market such products" for more information on risks associated with such intellectual property licensed to us.

        There can be no assurance the CK Hutchison group will continue to provide the same benefits or support that they have provided to our business historically. Such benefit or support may no longer be available to us, in particular, if CK Hutchison's ownership interest in our company significantly decreases as a resulting of this offering or other events in the future.

Other Risks and Risks Related to Doing Business in China

We and our joint ventures may be exposed to liabilities under the FCPA, the U.K. Bribery Act and Chinese anti-corruption laws, and any determination that we have violated these laws could have a material adverse effect on our business or our reputation.

        In the day-to-day conduct of our business, we and our joint ventures are in frequent contact with persons who may be considered government officials under applicable anti-corruption, anti-bribery and anti-kickback laws, and therefore, we and our joint ventures are subject to risk of violations under the FCPA, the U.K. Bribery Act, and other laws in the countries where we do business. We and our joint ventures have operations, agreements with third parties and we and our joint ventures make most of our sales in China. The PRC also strictly prohibits bribery of government officials. Our and our joint ventures' activities in China create the risk of unauthorized payments or offers of payments by the directors, employees, representatives, consultants or agents of our company or our joint ventures, even though they may not always be subject to our control.

        It is our policy to implement safeguards to discourage these practices by our and our joint ventures' employees. We have implemented and adopted policies designed by the R&D-based Pharmaceutical Association Committee, an industry association representing 39 global biopharmaceutical companies, to ensure compliance by us and our joint ventures and our and their directors, officers, employees, representatives, distributors, consultants and agents with the anti-corruption laws and regulations. We cannot assure you, however, that our existing safeguards are sufficient or that our or our joint venture's directors, officers, employees, representatives, distributors, consultants and agents have not engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to us or even result in our being held liable for such conduct. Violations of the FCPA, the U.K. Bribery Act or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, reputation financial condition, cash flows and results of operations.

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        Ensuring that our and our joint ventures' future business arrangements with third parties comply with applicable laws could also involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our or our joint ventures' operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment and exclusion from government funded healthcare programs, any of which could substantially disrupt our operations. If the physicians, hospitals or other providers or entities with whom we and our joint ventures do business are found not to be in compliance with applicable laws, they may also be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

If we or our joint ventures fail to comply with environmental, health and safety laws and regulations, we or they could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

        We and our joint ventures are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemical materials. Our operations also produce hazardous waste products. We and our joint ventures are therefore subject to PRC laws and regulations concerning the discharge of waste water, gaseous waste and solid waste during our manufacturing processes. We and our joint ventures are required to establish and maintain facilities to dispose of waste and report the volume of waste to the relevant government authorities, which conduct scheduled or unscheduled inspections of our facilities and treatment of such discharge. We and our joint ventures may not at all times comply fully with environmental regulations. Any violation of these regulations may result in substantial fines, criminal sanctions, revocations of operating permits, shutdown of our facilities and obligation to take corrective measures. We and our joint ventures generally contract with third parties for the disposal of these materials and waste. We and our joint ventures cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from the use of hazardous materials, we and/or our joint ventures could be held liable for any resulting damages, and any liability could exceed our resources. We and/or our joint ventures also could incur significant costs associated with civil or criminal fines and penalties.

        Although we and our joint ventures maintain workers' compensation insurance to cover costs and expenses incurred due to on-the-job injuries to our employees and third party liability insurance for injuries caused by unexpected seepage, pollution or contamination, this insurance may not provide adequate coverage against potential liabilities. Furthermore, the PRC government may take steps towards the adoption of more stringent environmental regulations. Due to the possibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary substantially from those currently anticipated. If there is any unanticipated change in the environmental regulations, we and our joint ventures may need to incur substantial capital expenditures to install, replace, upgrade or supplement our equipment or make operational changes to limit any adverse impact or potential adverse impact on the environment in order to comply with new environmental protection laws and regulations. If such costs become prohibitively expensive, we may be forced to cease certain aspects of our or our joint ventures' business operations.

Product liability claims or lawsuits could cause us or our joint ventures to incur substantial liabilities.

        We and our joint ventures face an inherent risk of product liability exposure related to the use of our drug candidates in clinical trials, sales of our or our joint ventures' products or the products we or they license from third parties through our Commercial Platform. If we and our joint ventures cannot

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successfully defend against claims that the use of such drug candidates in our clinical trials or any products sold through our Commercial Platform, including any of our drug candidates which receive regulatory approval, caused injuries, we and our joint ventures could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

    decreased demand for any products sold through our Commercial Platform;

    significant negative media attention and reputational damage;

    withdrawal of clinical trial participants;

    significant costs to defend the related litigation;

    substantial monetary awards to trial participants or patients;

    loss of revenue; and

    the inability to commercialize any drug candidates that we may develop.

        Existing PRC laws and regulations do not require us or our joint ventures to have, nor do we or they, maintain liability insurance to cover product liability claims. We and our joint ventures do not have business liability, or in particular, product liability for each of our drug candidates or our or their products. Any litigation might result in substantial costs and diversion of resources. While we and our joint ventures maintain liability insurance for certain clinical trials, this insurance may not fully cover our potential liabilities. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of products that we or our collaborators develop.

The PRC's economic, political and social conditions, as well as governmental policies, could affect the business environment and financial markets in China, our ability to operate our business, our liquidity and our access to capital.

        Substantially all of our and our joint ventures' business operations are conducted in China. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China's economy differs from the economies of developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past 30 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may have a negative effect on us or our joint ventures. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us or our joint ventures. More generally, if the business environment in China deteriorates from the perspective of domestic or international investors, our or our joint ventures' business in China may also be adversely affected.

Uncertainties with respect to the PRC legal system and changes in laws, regulations and policies in China could materially and adversely affect us.

        We conduct our business primarily through our subsidiaries and joint ventures in China. PRC laws and regulations govern our and their operations in China. Our subsidiaries and joint ventures are generally subject to laws and regulations applicable to foreign investments in China, which may not sufficiently cover all of the aspects of our or their economic activities in China. In particular, some laws, particularly with respect to drug price reimbursement, are relatively new, and because of the limited volume of published judicial decisions and their non-binding nature, the interpretation and enforcement of these laws and

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regulations are uncertain. In addition, the implementation of laws and regulations may be in part based on government policies and internal rules that are subject to the interpretation and discretion of different government agencies (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our or our joint ventures' violation of these policies and rules until some time after the violation. In addition, any litigation in China, regardless of outcome, may be protracted and result in substantial costs and diversion of resources and management attention.

        For further information regarding government regulation in China and other jurisdictions, see "Regulation—Government Regulation of Pharmaceutical Product Development and Approval—PRC Regulation of Pharmaceutical Product Development and Approval," "Regulation—Coverage and Reimbursement—PRC Coverage and Reimbursement" and "Regulation—Other Healthcare Laws—Other PRC Healthcare Laws."

Restrictions on currency exchange may limit our ability to receive and use our revenue effectively.

        Substantially all of our revenue are denominated in renminbi, which currently is not a freely convertible currency. A portion of our revenue may be converted into other currencies to meet our foreign currency obligations, including, among others, payments of dividends declared, if any, in respect of our ordinary shares or ADSs. Under China's existing foreign exchange regulations, our subsidiaries and joint ventures are able to pay dividends in foreign currencies or convert renminbi into other currencies for use in operations without prior approval from the PRC State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, we cannot assure you that the PRC government will not take future measures to restrict access to foreign currencies for current account transactions.

        Our PRC subsidiaries' and joint ventures' ability to obtain foreign exchange is subject to significant foreign exchange controls and, in the case of amounts under the capital account, requires the approval of and/or registration with PRC government authorities, including the SAFE. In particular, if we finance our PRC subsidiaries or joint ventures by means of foreign debt from us or other foreign lenders, the amount is not allowed to exceed the difference between the amount of total investment and the amount of the registered capital as approved by the Ministry of Commerce, or MOFCOM, and registered with the SAFE. Further, such loans must be registered with the SAFE. If we finance our PRC subsidiaries or joint ventures by means of additional capital contributions, the amount of these capital contributions must first be approved by the relevant government approval authority. These limitations could affect the ability of our PRC subsidiaries and joint ventures to obtain foreign exchange through debt or equity financing.

Our business benefits from certain PRC government tax incentives. The expiration of, changes to, or our PRC subsidiaries/joint ventures failing to continuously meet the criteria for these incentives could have a material adverse effect on our operating results by significantly increasing our tax expenses.

        Certain of our PRC subsidiaries and joint ventures have been granted the special High and New Technology Enterprise, or HNTE, status (since 2005, 2008 or 2014) and/or the Technological Advance Service Enterprise, or TASE, status (since 2010) by the relevant PRC authorities. Both of these statuses allow the relevant enterprise to enjoy a reduced Enterprise Income Tax, or EIT, rate at 15% on its taxable profits. The statuses are valid until the end of 2016 (for HNTE) or 2018 (for TASE) during which the relevant PRC enterprise must continue to meet the relevant criteria or else the 25% standard EIT rate will be applied from the beginning of the calendar year when the enterprise fails to meet the relevant criteria. In addition, it is unclear whether the HNTE/TASE status and tax incentives under the current policy will continue to be granted after their respective expiration dates. If the rules for such incentives are amended or not renewed, higher EIT rates may apply resulting in increased tax burden which will impact our business, financial condition, results of operations and growth prospects.

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We may be treated as a resident enterprise for PRC Tax purposes under the PRC EIT Law, and our global income may therefore be subject to PRC income tax.

        China's EIT Law and the Regulation on the Implementation of the EIT Law, effective as of January 1, 2008, define the term "de facto management bodies" as "bodies that substantially carry out comprehensive management and control on the business operation, employees, accounts and assets of enterprises." Under the EIT Law, an enterprise incorporated outside of China whose "de facto management bodies" are located in China is considered a "resident enterprise" and will be subject to a uniform 25% EIT rate on its global income. On April 22, 2009, China's State Administration of Taxation, or the SAT, in the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, further specified certain criteria for the determination of what constitutes "de facto management bodies." If all of these criteria are met, the relevant foreign enterprise may be regarded to have its "de facto management bodies" located in China and therefore be considered a resident enterprise in China. These criteria include: (i) the enterprise's day-to-day operational management is primarily exercised in China; (ii) decisions relating to the enterprise's financial and human resource matters are made or subject to approval by organizations or personnel in China; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholders' meeting minutes are located or maintained in China; and (iv) 50% or more of voting board members or senior executives of the enterprise habitually reside in China. Although Circular 82 only applies to foreign enterprises that are majority-owned and controlled by PRC enterprises, not those owned and controlled by foreign enterprises or individuals, the determining criteria set forth in Circular 82 may be adopted by the PRC tax authorities as the test for determining whether the enterprises are PRC tax residents, regardless of whether they are majority-owned and controlled by PRC enterprises.

        Except for our PRC subsidiaries and joint ventures incorporated in China, we believe that none of our entities incorporated outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities, and uncertainties remain with respect to the interpretation of the term "de facto management body."

If we are treated as a PRC tax resident, dividends distributed by us to our non-PRC shareholders and ADS holders or any gains realized by non-PRC shareholders and ADS holders from the transfer of our shares or ADSs may be subject to PRC tax.

        Under the EIT Law, dividends payable by a PRC enterprise to its foreign investor who is a non-PRC resident enterprise, as well as gains on transfers of shares of a PRC enterprise by such a foreign investor will generally be subject to a 10% withholding tax, unless such non-PRC resident enterprise's jurisdiction of tax residency has an applicable tax treaty with the PRC that provides for a reduced rate of withholding tax.

        If the PRC tax authorities determine that we should be considered a PRC resident enterprise for EIT purposes, any dividends payable by us to our non-PRC resident enterprise shareholders or ADS holders, as well as gains realized by such investors from the transfer of our shares or ADSs may be subject to a 10% withholding tax, unless a reduced rate is available under an applicable tax treaty. Furthermore, if we are considered a PRC resident enterprise for EIT purposes, it is unclear whether our non-PRC individual shareholders (including our ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders. If any PRC tax were to apply to dividends or gains realized by non-PRC individuals, it would generally apply at a rate of up to 20% unless a reduced rate is available under an applicable tax treaty. If dividends payable to our non-PRC resident shareholders, or gains from the transfer of our shares or ADSs by such shareholders are subject to PRC tax, the value of your investment in our shares or ADSs may decline significantly.

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There is uncertainty regarding the PRC withholding tax rate that will be applied to distributions from our PRC subsidiaries and joint ventures to their respective Hong Kong immediate holding companies, which could have a negative impact on our business.

        The EIT Law provides that a withholding tax at the rate of 10% is applicable to dividends payable by a PRC resident enterprise to investors who are "non-resident enterprises" (i.e., that do not have an establishment or place of business in the PRC or that have such establishment or place of business but the relevant dividend is not effectively connected with the establishment or place of business). However, pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, or the Arrangement, withholding tax at a reduced rate of 5% may be applicable to dividends payable to non-resident beneficial owners of the dividends by PRC resident enterprises if certain requirements are met.

        There is uncertainty regarding whether the PRC tax authorities will consider us to be eligible to the reduced tax rate. If the Arrangement is deemed not to apply to dividends payable by our PRC subsidiaries and joint ventures to their respective Hong Kong immediate holding companies that are ultimately owned by us, the withholding tax rate applicable to us will be the statutory rate of 10% instead of 5% which may potentially impact our business, financial condition, results of operations and growth prospects.

We and our shareholders face uncertainties in the PRC with respect to indirect transfers of equity interests in PRC resident enterprises.

        The indirect transfer of equity interest in PRC enterprises by a non-resident enterprise, or Indirect Transfer, is potentially subject to income tax in China at a rate of 10% on the gain if such transfer is considered not having a commercial purpose and is carried out for tax avoidance. The SAT issued the Public Notice on Several Issues Relating to EIT on Gains from Indirect Transfer of Assets by Non-resident Enterprises, or PN7, on February 3, 2015, that sets out the scope of Indirect Transfers, which includes any changes in the shareholders of a foreign enterprise holding PRC assets directly or indirectly in the course of a group's overseas restructuring, and the factors to consider in determining whether an Indirect Transfer has a commercial purpose. It also provides detailed guidelines on the circumstances when such Indirect Transfer is considered to lack, or be deemed to have, a bona fide commercial purpose. At the same time, PN7 provides that a non-PRC resident enterprise which buys and sells, in the public market, shares of the same listed foreign company is considered out of the scope of PN7.

        PN7 sets out voluntary reporting procedures for an Indirect Transfer by the transferor, the transferee or the underlying PRC resident enterprise(s) being transferred. Furthermore, if an Indirect Transfer is considered taxable, the transferee has the obligation to withhold tax from the sale proceeds, unless the transferor reports the transaction to the PRC tax authorities under PN7.

        There is uncertainty as to the application of PN7. For example, the PRC tax authorities may consider that our current offering involves an indirect change of shareholding in our PRC subsidiaries and joint ventures and therefore it may be regarded as an Indirect Transfer under PN7. Although we believe no PN7 reporting is required on the basis that the current offering has commercial purposes and is not conducted for tax avoidance, the PRC tax authorities may pursue us to report under PN7 and request that we and our PRC subsidiaries and joint ventures assist in the filing. As a result, we and our subsidiaries and joint ventures may be required to expend significant resources to provide assistance and comply with PN7, or establish that we or our non-resident enterprises should not be subject to tax under PN7, for the current offering or other transactions, which may have an adverse effect on our and their financial condition and day-to-day operations.

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We may be treated as a resident enterprise for U.K. corporate tax purposes, and our global income may therefore be subject to U.K. corporation tax.

        U.K. resident companies are taxable in the United Kingdom on their worldwide profits. A company incorporated outside of the United Kingdom would be regarded as a resident if its central management and control resides in the United Kingdom. The place of central management and control generally means the place where the high-level strategic decisions of a company are made.

        We are an investment holding company incorporated in the Cayman Islands that is listed on the AIM market of the London Stock Exchange. Our central management and control resides in Hong Kong, and therefore we believe that we are not a U.K. resident for corporate tax purposes. However, the tax resident status of a non-resident entity could be challenged by the U.K. tax authorities.

        If the U.K. tax authorities determine that we are a U.K. tax resident, our profits will be subject to U.K. Corporation Tax rate at 20%, subject to the potential availability of certain exemptions related to dividend income and capital gains. This may have a material adverse effect on our financial condition and results of operations.

Any failure to comply with PRC regulations regarding our employee equity incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions, which could adversely affect our business, financial condition and results of operations.

        In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly Listed Companies. Based on this regulation, PRC residents who are granted shares or share options by a company listed on an overseas stock market under its employee share option or share incentive plan are required to register with the SAFE or its local counterparts by following certain procedures. We and our employees who are PRC residents and individual beneficial owners who have been granted shares or share options have been subject to these rules due to our listing on the AIM market of the London Stock Exchange and will continue to be so upon the listing of our ADSs on the NASDAQ Global Market. We have been working with the relevant SAFE office and in December 2015 successfully registered the option schemes and the share incentive plan. We will continue to assist our employees to register their share options or shares. However, any failure of our PRC individual beneficial owners and holders of share options or shares to comply with the SAFE registration requirements in the future may subject them to fines and legal sanctions and may, in rare instances, limit the ability of our PRC subsidiaries to distribute dividends to us.

        In addition, the SAT has issued circulars concerning employee share options or restricted shares. Under these circulars, employees working in the PRC who exercise share options, or whose restricted shares vest, will be subject to PRC individual income tax, or the IIT. The PRC subsidiaries of an overseas listed company have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold IIT of those employees related to their share options or restricted shares. Although we currently withhold IIT from our PRC employees in connection with their exercise of share options, if the employees fail to pay, or the PRC subsidiaries fail to withhold, their IIT according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government authorities.

Risks Related to Intellectual Property

If we or our joint ventures are unable to protect our or their products and our drug candidates through intellectual property rights, our competitors may compete directly against us or them.

        Our success depends, in part, on our ability to protect our joint ventures' products and our drug candidates from competition by establishing, maintaining and enforcing our or their intellectual property rights. We and our joint ventures seek to protect the products and technology that we and they consider

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commercially important by filing PRC and international patent applications, relying on trade secrets or pharmaceutical regulatory protection or employing a combination of these methods. As of January 31, 2016, we had 116 issued patents, including 21 Chinese patents, 18 U.S. patents and six European patents, 161 patent applications pending in major market jurisdictions, and four pending Patent Cooperation Treaty, or PCT, patent applications relating to the drug candidates of our Innovation Platform. As of the same date, our joint venture Nutrition Science Partners had 23 issued patents and 11 pending patent applications relating to HMPL-004. Additionally, our joint ventures collectively had 111 issued patents and 18 patent applications in China relating to our Commercial Platform's products as of January 31, 2016. For more details, see "Business—Patents and Other Intellectual Property." Patents may become invalid and patent applications may not be granted for a number of reasons, including known or unknown prior art, deficiencies in the patent application or the lack of originality of the technology. In addition, the PRC and the United States have adopted the "first-to-file" system under which whoever first files an invention patent application will be awarded the patent. Under the first-to-file system, third parties may be granted a patent relating to a technology which we invented. Furthermore, the terms of patents are finite. The patents we hold and patents to be issued from our currently pending patent applications generally have a twenty-year protection period starting from the date of application.

        We or our joint ventures may become involved in patent litigation against third parties to enforce our or their patent rights, to invalidate patents held by such third parties, or to defend against such claims. A court may refuse to stop the other party from using the technology at issue on the grounds that our or our joint ventures' patents do not cover the third-party technology in question. Further, such third parties could counterclaim that we or our joint ventures infringe their intellectual property or that a patent we or our joint ventures have asserted against them is invalid or unenforceable. In patent litigation, defendant counterclaims challenging the validity, enforceability or scope of asserted patents are commonplace. In addition, third parties may initiate legal proceedings against us or our intellectual property to assert such challenges to our intellectual property rights.

        The outcome of any such proceeding is generally unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Patents may be unenforceable if someone connected with prosecution of the patent withheld relevant information or made a misleading statement during prosecution. It is possible that prior art of which we or our joint ventures and the patent examiner were unaware during prosecution exists, which could render our or their patents invalid. Moreover, it is also possible that prior art may exist that we or our joint ventures are aware of but do not believe is relevant to our or their current or future patents, but that could nevertheless be determined to render our patents invalid. The cost to us or our joint ventures of any patent litigation or similar proceeding could be substantial, and it may consume significant management time. We and our joint ventures do not maintain insurance to cover intellectual property infringement.

        An adverse result in any litigation proceeding could put one or more of our or our joint ventures' patents at risk of being invalidated or interpreted narrowly. If a defendant were to prevail on a legal assertion of invalidity or unenforceability of our patents covering one of our or our joint ventures' products or our drug candidates, we could lose at least part, and perhaps all, of the patent protection covering such product or drug candidate. Competing drugs may also be sold in other countries in which our or our joint ventures' patent coverage might not exist or be as strong. If we lose a foreign patent lawsuit, alleging our or our joint ventures' infringement of a competitor's patents, we could be prevented from marketing our drugs in one or more foreign countries. Any of these outcomes would have a materially adverse effect on our business.

        Intellectual property and confidentiality legal regimes in China may not afford protection to the same extent as in the United States or other countries. Implementation and enforcement of PRC intellectual property laws may be deficient and ineffective. Policing unauthorized use of proprietary technology is difficult and expensive, and we or our joint ventures may need to resort to litigation to enforce or defend

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patents issued to us or them or to determine the enforceability, scope and validity of our proprietary rights or those of others. The experience and capabilities of PRC courts in handling intellectual property litigation varies, and outcomes are unpredictable. Further, such litigation may require a significant expenditure of cash and may divert management's attention from our or our joint ventures' operations, which could harm our business, financial condition and results of operations. An adverse determination in any such litigation could materially impair our or our joint ventures' intellectual property rights and may harm our business, prospects and reputation.

Developments in patent law could have a negative impact on our business.

        From time to time, authorities in the United States, China and other government authorities may change the standards of patentability, and any such changes could have a negative impact on our business.

        For example, in the United States, the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in 2011, includes a number of significant changes to U.S. patent law. These changes include a transition from a "first-to-invent" system to a "first-to-file" system, changes to the way issued patents are challenged, and changes to the way patent applications are disputed during the examination process. As a result of these changes, patent law in the United States may favor larger and more established companies that have greater resources to devote to patent application filing and prosecution. The U.S. Patent and Trademark Office, or USPTO, has developed new and untested regulations and procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law associated with the America Invents Act, and, in particular, the first-to-file provisions became effective on March 16, 2013. Substantive changes to patent law associated with the America Invents Act may affect our ability to obtain patents, and if obtained, to enforce or defend them. Accordingly, it is not clear what, if any, impact the America Invents Act will have on the cost of prosecuting our or our joint ventures' patent applications and our or their ability to obtain patents based on our or our joint ventures' discoveries and to enforce or defend any patents that may issue from our or their patent applications, all of which could have a material adverse effect on our business.

If we are unable to maintain the confidentiality of our and our joint ventures' trade secrets, the business and competitive position of ourselves and our joint ventures may be harmed.

        In addition to the protection afforded by patents and the PRC's State Secret certification, we and our joint ventures rely upon unpatented trade secret protection, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our and our joint ventures' proprietary technology and processes, in part, by entering into confidentiality agreements with our and their collaborators, scientific advisors, employees and consultants, and invention assignment agreements with our and their consultants and employees. We and our joint ventures may not be able to prevent the unauthorized disclosure or use of our or their technical know-how or other trade secrets by the parties to these agreements, however, despite the existence generally of confidentiality agreements and other contractual restrictions. If any of the collaborators, scientific advisors, employees and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we and our joint ventures may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Enforcing a claim that a third-party illegally obtained and is using our or our joint ventures' trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts in China and other jurisdictions outside the United States are sometimes less prepared or willing to protect trade secrets.

        Our and our joint ventures' trade secrets could otherwise become known or be independently discovered by our or their competitors. For example, competitors could purchase our drugs and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our or our joint

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ventures' trade secrets were to be lawfully obtained or independently developed by a competitor, we and our joint ventures would have no right to prevent them, or others to whom they communicate it, from using that technology or information to compete against us or our joint ventures. If our or our joint ventures' trade secrets are unable to adequately protect our business against competitors' drugs, our competitive position could be adversely affected, as could our business.

We and our joint ventures are dependent on trademark and other intellectual property rights licensed from others. If we lose our licenses for any of our products, we or our joint ventures may not be able to continue developing such products or may be required to change the way we market such products.

        We and our joint ventures are parties to licenses that give us or them rights to third-party intellectual property that are necessary or useful for our or our joint ventures' businesses. In particular, the "Hutchison", "Chi-Med" and "China-MediTech" brands, among others, have been licensed to us by Hutchison Whampoa Enterprises Limited, an affiliate of our majority shareholder, Hutchison Healthcare Holdings Limited. Hutchison Whampoa Enterprises Limited grants us a royalty-free, worldwide license to such brands. Hutchison Whampoa Enterprises Limited has the right to terminate the license during the 12-month period following each time the interest of Hutchison Whampoa Limited, an indirect parent of Hutchison Healthcare Holdings Limited, in us is reduced below 50%, 40%, 30% or 20%. In addition, the "Baiyunshan" brand, which is a key brand used by Hutchison Baiyunshan on its products, has been licensed to Hutchison Baiyunshan by our joint venture partner, Guangzhou Baiyunshan, for use during the 50-year joint venture period, however Guangzhou Baiyunshan has the right to terminate the license if its interest in Hutchison Baiyunshan falls below 50%. If any such license is terminated, our or Hutchison Baiyunshan's business, and our or their positioning in the Chinese market and our financial condition, results of operations and prospects may be materially and adversely affected.

        In some cases, our licensors have retained the right to prosecute and defend the intellectual property rights licensed to us or our joint ventures. We depend in part on the ability of our licensors to obtain, maintain and enforce intellectual property protection for such licensed intellectual property. Such licensors may not successfully maintain their intellectual property, may determine not to pursue litigation against other companies that are infringing on such intellectual property, or may pursue litigation less aggressively than we or our joint ventures would. Without protection for the intellectual property we or our joint ventures license, other companies might be able to offer substantially identical products or branding, which could adversely affect our competitive business position and harm our business prospects.

If our or our joint ventures' products or drug candidates infringe the intellectual property rights of third parties, we and they may incur substantial liabilities, and we and they may be unable to sell these products.

        Our commercial success depends significantly on our and our joint ventures' ability to operate without infringing the patents and other proprietary rights of third parties. In the PRC, invention patent applications are generally maintained in confidence until their publication 18 months from the filing date. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and invention patent applications are filed. Even after reasonable investigation, we may not know with certainty whether any third-party may have filed a patent application without our knowledge while we or our joint ventures are still developing or producing that product. While the success of pending patent applications and applicability of any of them to our or our joint ventures' programs are uncertain, if asserted against us or them, we could incur substantial costs and we or they may have to:

    obtain licenses, which may not be available on commercially reasonable terms, if at all;

    redesign products or processes to avoid infringement; and

    stop producing products using the patents held by others, which could cause us or them to lose the use of one or more of our or their products.

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        To date, we and our joint ventures have not received any material claims of infringement by any third parties. If a third-party claims that we or our joint ventures infringe its proprietary rights, any of the following may occur:

    we or our joint ventures may have to defend litigation or administrative proceedings that may be costly whether we or they win or lose, and which could result in a substantial diversion of management resources;

    we or our joint ventures may become liable for substantial damages for past infringement if a court decides that our technology infringes a third-party's intellectual property rights;

    a court may prohibit us or our joint ventures from producing and selling our or their product(s) without a license from the holder of the intellectual property rights, which may not be available on commercially acceptable terms, if at all; and

    we or our joint ventures may have to reformulate product(s) so that it does not infringe the intellectual property rights of others, which may not be possible or could be very expensive and time consuming.

        Any costs incurred in connection with such events or the inability to sell our or our joint ventures' products may have a material adverse effect on our business and results of operations.

We and our joint ventures may not be able to effectively enforce our intellectual property rights throughout the world.

        Filing, prosecuting and defending patents on our or our joint venture's products or our drug candidates in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly in developing countries. Moreover, our or our joint ventures' ability to protect and enforce our or their intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, the patent laws of some foreign countries do not afford intellectual property protection to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, may not favor the enforcement of patents and other intellectual property rights. This could make it difficult for us or our joint ventures to stop the infringement of our or their patents or the misappropriation of our or their other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our or our joint ventures' inventions throughout the world. Competitors may use our or our joint ventures' technologies in jurisdictions where we or they have not obtained patent protection to develop their own drugs and, further, may export otherwise infringing drugs to territories where we or our joint ventures have patent protection, if our or our joint ventures' ability to enforce our or their patents to stop infringing activities is inadequate. These drugs may compete with our drug candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

        Proceedings to enforce our or our joint ventures' patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our or their efforts and resources from other aspects of our and their businesses. Furthermore, while we intend to protect our intellectual property rights in the major markets for our drug candidates, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our drug candidates. Accordingly, our efforts to protect the intellectual property rights of our drug candidates in such countries may be inadequate.

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We and our joint ventures may be subject to damages resulting from claims that we or they, or our or their employees, have wrongfully used or disclosed alleged trade secrets of competitors or are in breach of non-competition or non-solicitation agreements with competitors.

        We and our joint ventures could in the future be subject to claims that we or they, or our or their employees, have inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of former employers or competitors. Although we try to ensure that our and our joint ventures' employees and consultants do not improperly use the intellectual property, proprietary information, know-how or trade secrets of others in their work for us or our joint ventures, we or our joint ventures may in the future be subject to claims that we or they caused an employee to breach the terms of his or her non-competition or non-solicitation agreement, or that we, our joint ventures, or these individuals have, inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of a former employer or competitor. Litigation may be necessary to defend against these claims. Even if we and our joint ventures are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. If our or our joint ventures' defenses to these claims fail, in addition to requiring us and them to pay monetary damages, a court could prohibit us or our joint ventures from using technologies or features that are essential to our or their products or our drug candidates, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. An inability to incorporate such technologies or features would have a material adverse effect on our business, and may prevent us from successfully commercializing our drug candidates. In addition, we or our joint ventures may lose valuable intellectual property rights or personnel as a result of such claims. Moreover, any such litigation or the threat thereof may adversely affect our or our joint ventures' ability to hire employees or contract with independent sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our drug candidates, which would have an adverse effect on our business, results of operations and financial condition.

Risks Related to Our ADSs and this Offering

Certain shareholders will own a significant percentage of our ordinary shares following this offering, which will limit your ability to influence corporate matters.

        Immediately after completion of this offering, Hutchison Healthcare Holdings Limited will own approximately 61.5% of our ordinary shares. Accordingly, Hutchison Healthcare Holdings Limited will have a significant influence over the outcome of any corporate transaction or other matter submitted to shareholders for approval and the interests of Hutchison Healthcare Holdings Limited may differ from the interests of our other shareholders. Because we are incorporated in the Cayman Islands, certain matters, such as amendments to our memorandum and articles of association, require approval of at least two-thirds of our shareholders by law subject to higher thresholds which we may set in our memorandum and articles of association. Therefore, following this offering, Hutchison Healthcare Holdings Limited's approval will be required to achieve any such threshold. In addition, Hutchison Healthcare Holdings Limited will have a significant influence over the management and the strategic direction of our company.

After the completion of the global offering, we may be at an increased risk of securities class action litigation.

        Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant share price volatility in recent years. If we were to be sued, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.

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If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our business, the price of our ADSs could decline.

        The trading market for our ADSs will rely in part on the research and reports that industry or financial analysts publish about us or our business. We may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

We are eligible to be treated as an "emerging growth company," as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to us as an "emerging growth company" will make our ADSs less attractive to investors.

        We are eligible to be treated as an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.0 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if the market value of our ordinary shares held by non-affiliates exceeds $700.0 million as of any last Saturday in July before that time. We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If some investors find our ADSs less attractive as a result, there may be a less active trading market for our ADSs and our stock price may be more volatile.

If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.

        Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to file a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. The presence of material weaknesses in internal control over financial reporting could result in financial statement errors which, in turn, could lead to errors in our financial reports and/or delays in our financial reporting, which could require us to restate our operating results. We might not identify one or more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and provide significant management oversight. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management's attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.

        Prior to this offering, our books and records were maintained in accordance with IFRS as issued by the IASB, and we had not committed resources to develop our personnel's U.S. GAAP experience. Our management concluded that our accounting team's deficiency of U.S. GAAP experience is a material weakness in internal control over financial reporting as of the date of this prospectus, such that there is a

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reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. We are seeking to remedy this deficiency and have added staff with extensive U.S. GAAP experience to our accounting team, although no assurance can be given as to whether these steps will be sufficient.

        If we are unable to conclude that we have effective internal controls over financial reporting, investors may lose confidence in our operating results, the price of the ADSs could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, the ADSs may not be able to remain listed on NASDAQ.

As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.

        As a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual general meetings will be governed by the AIM Rules for Companies, or the AIM Rules, and Cayman Islands requirements. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our ordinary shares or ADSs.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from NASDAQ corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.

        As a foreign private issuer, we are permitted to take advantage of certain provisions in the NASDAQ listing rules that allow us to follow Cayman Islands law for certain governance matters. Certain corporate governance practices in the Cayman Islands may differ significantly from corporate governance listing standards as, except for general fiduciary duties and duties of care, Cayman Islands law has no corporate governance regime which prescribes specific corporate governance standards. When our ADSs are listed on the NASDAQ Global Market, we intend to continue to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the NASDAQ Global Market in respect of the following: (i) the majority independent director requirement under Section 5605(b)(1) of the NASDAQ listing rules, (ii) the requirement under Section 5605(d) of the NASDAQ listing rules that a remuneration committee comprised solely of independent directors governed by a remuneration committee charter oversee executive compensation and (iii) the requirement under Section 5605(e) of the NASDAQ listing rules that director nominees be selected or recommended for selection by either a majority of the independent directors or a nominations committee comprised solely of independent directors. Cayman Islands law does not impose a requirement that our board of directors consist of a majority of independent directors. Nor does Cayman Islands law impose specific requirements on the establishment of a remuneration committee or nominating committee or nominating process. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers. We have voluntarily complied with, and plan to continue to comply with for the foreseeable future, the principles of the U.K. Corporate Governance Code published by the U.K. Financial Reporting Council which guides certain of our other corporate governance practices. See "Management" for more details.

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We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

        As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer's most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2016. We would lose our foreign private issuer status if, for example, more than 50% of our ordinary shares are directly or indirectly held by residents of the United States on June 30, 2016 and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on January 1, 2017, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the NASDAQ listing rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.

Certain audit reports included in this prospectus were prepared by an auditor who is not inspected by the U.S. Public Company Accounting Oversight Board, or the PCAOB, and as such, you are deprived of the benefits of such inspection.

        Auditors of companies that are registered with the SEC and traded publicly in the United States, including the independent registered public accounting firm of our company, must be registered with the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because we have substantial operations within the PRC, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditor and the auditors of our joint ventures are not currently inspected by the PCAOB.

        In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission, or CSRC, and the Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by the PCAOB, the CSRC, or the Ministry of Finance in the United States and the PRC, respectively. The PCAOB continues to be in discussions with the CSRC and the Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that trade on U.S. exchanges.

        This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures of any auditors operating in China, including our auditor and the auditors of our joint ventures. As a result, investors may be deprived of the benefits of PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor's audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

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We do not currently intend to pay dividends on our securities, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the ADSs.

        We have never declared or paid any dividends on our ordinary shares. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your ADSs at least in the near term, and the success of an investment in ADSs will depend upon any future appreciation in its value. Consequently, investors may need to sell all or part of their holdings of ADSs after price appreciation, which may never occur, to realize any future gains on their investment. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which our shareholders have purchased the ADSs.

There has been no public market in the United States for our ordinary shares or ADSs prior to this offering, and you may not be able to resell our ADSs at or above the price you paid, or at all.

        Prior to this U.S. initial public offering, while our ordinary shares have been traded on the AIM market of the London Stock Exchange since May 19, 2006, there has been no public market in the United States for our ordinary shares or ADSs. We have applied to have our ADSs listed on the NASDAQ Global Market. Our ordinary shares will not be listed on any other exchange, or quoted for trading on any over-the-counter trading system, in the United States.

        The initial public offering price for our ADSs will be determined by negotiations between us and the underwriters and may bear no relationship to the market price for our ADSs after this initial public offering. We cannot assure you that an active trading market for our ADSs will develop or that the market price of our ADSs will not decline below the initial public offering price. If an active trading market for our ADSs does not develop after this offering, the market price and liquidity of our ADSs will be materially and adversely affected.

The market price for our ADSs may be volatile which could result in substantial loss to you.

        The market price of our ordinary shares on the AIM market of the London Stock Exchange has been, and the market price of the ADSs may be, volatile. From January 1, 2014 to January 31, 2016, the closing sale price of our ordinary shares on AIM ranged from a high of £28.35 ($39.41) to a low of £6.21 ($8.63) per ordinary share.

        The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors, including the following:

    announcements of competitive developments;

    regulatory developments affecting us, our customers or our competitors;

    announcements regarding litigation or administrative proceedings involving us;

    actual or anticipated fluctuations in our period-to-period operating results;

    changes in financial estimates by securities research analysts;

    additions or departures of our executive officers;

    release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and

    sales or perceived sales of additional ordinary shares or ADSs.

        In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. For example, since August 2008, multiple exchanges in the United States and other countries and regions, including China, experienced sharp declines in response to the growing credit market crisis and the recession in the

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United States. As recently as July 2015, the exchanges in China experienced a sharp decline. Prolonged global capital markets volatility may affect overall investor sentiment towards our ADSs, which would also negatively affect the trading prices for our ADSs.

The dual listing of our ordinary shares and the ADSs following this offering may adversely affect the liquidity and value of the ADSs.

        Following this offering and after the ADSs are traded on the NASDAQ Global Market, our ordinary shares will continue to be listed on the AIM market of the London Stock Exchange. We cannot predict the effect of this dual listing on the value of our ordinary shares and ADSs. However, the dual listing of our ordinary shares and the ADSs may dilute the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for the ADSs in the Unites States. The price of the ADSs could also be adversely affected by trading in our ordinary shares on the AIM market. Furthermore, our ordinary shares trade on the AIM market of the London Stock Exchange in the form of depository interests, each of which is an electronic book-entry interest representing one of our ordinary shares. However, the ADSs are backed by physical ordinary share certificates, and the depositary for our ADS program is unable to accept depository interests into its custody in order to issue ADSs. As a result, if an ADS holder wishes to cancel its ADSs and instead hold depository interests for trading on the AIM market or vice versa, the issuance and cancellation process may be longer than if the depositary could accept such depository interests.

        Although our ordinary shares will initially continue to be listed on the AIM market following this offering, we may decide at some point in the future to propose to our ordinary shareholders to delist our ordinary shares from the AIM market, and our ordinary shareholders may approve such delisting. We cannot predict the effect such delisting of our ordinary shares on the AIM market would have on the market price of the ADSs on the NASDAQ Global Market.

Fluctuations in the exchange rate between the U.S. dollar and the pound sterling may increase the risk of holding the ADSs.

        Our share price is quoted on the AIM market of the London Stock Exchange in pence sterling, while the ADSs will trade on NASDAQ in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the pound sterling may result in temporary differences between the value of the ADSs and the value of our ordinary shares, which may result in heavy trading by investors seeking to exploit such differences. In addition, as a result of fluctuations in the exchange rate between the U.S. dollar and the pound sterling, the U.S. dollar equivalent of the proceeds that a holder of the ADSs would receive upon the sale in the United Kingdom of any shares withdrawn from the depositary and the U.S. dollar equivalent of any cash dividends paid in pound sterling on our shares represented by the ADSs could also decline.

Fluctuations in the value of the renminbi may have a material adverse effect on your investment.

        The value of the renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the renminbi to the U.S. dollar, and the renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted, and the exchange rate between the renminbi and U.S. dollar remained within a narrow band. In June 2010, China's People's Bank of China, or PBOC, announced that the PRC government would increase the flexibility of the exchange rate, and thereafter allowed the renminbi to appreciate slowly against the U.S. dollar within the narrow band fixed by the PBOC. However, more recently, on August 11, 12 and 13, 2015, the PBOC significantly devalued the renminbi by fixing its price against the U.S. dollar 1.9%, 1.6%, and 1.1% lower than the previous day's value, respectively.

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        Significant revaluation of the renminbi may have a material adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars into renminbi for our operations, appreciation of the renminbi against the U.S. dollar would have an adverse effect on the renminbi amount we would receive from the conversion. Conversely, if we decide to convert our renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the renminbi relative to U.S. dollars would affect our financial results reported in U.S. dollar terms regardless of any underlying change in our business or results of operations.

        Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert renminbi into foreign currency.

Securities traded on the AIM market of the London Stock Exchange may carry a higher risk than shares traded on other exchanges and may impact the value of your investment.

        Our ordinary shares are currently traded on the AIM market of the London Stock Exchange. Investment in equities traded on AIM is perceived by some to carry a higher risk than an investment in equities quoted on exchanges with more stringent listing requirements, such as the New York Stock Exchange or the NASDAQ Stock Market. This is because the AIM market imposes less stringent ongoing reporting requirements than those other exchanges. You should be aware that the value of our ordinary shares may be influenced by many factors, some of which may be specific to us and some of which may affect AIM-listed companies generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our ordinary shares, legislative changes and general economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive fluctuations. Therefore, the market price of our ordinary shares underlying the ADSs may not reflect the underlying value of our company.

Since the U.S. initial public offering price is substantially higher than our net tangible book value per share, you will incur immediate and substantial dilution.

        If you purchase our ADSs in this offering, you will pay more for your ADSs than the amount paid by our existing shareholders for their ordinary shares on a per ADS basis. As a result, you will experience immediate and substantial dilution of approximately $14.78 per ADS, representing the difference between our net tangible book value per ADS as of December 31, 2015, after giving effect to this offering and an assumed initial public offering price of $16.33 per ADS, based on the closing price of our ordinary shares and exchange rate set forth on the cover page of this prospectus. In addition, you may experience further dilution to the extent that our ordinary shares are issued upon the exercise of share options. See "Dilution" for a more complete description of how the value of your investment in our ADSs will be diluted upon completion of this offering.

Substantial future sales or perceived sales of our ADSs in the public market could cause the price of our ADSs to decline.

        Sales of our ADSs or ordinary shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Upon completion of this offering, we will have ordinary shares outstanding, including ordinary shares represented by ADSs. All ADSs sold in this offering will be freely transferable without restriction or additional registration under the Securities Act. The remaining ordinary shares outstanding after this offering will be available for sale,

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subject to restrictions as applicable under Rule 144 under the Securities Act, upon the expiration of the 180-day lock-up arrangements entered into among us and the underwriters. There are certain exceptions to these lock-up arrangements. See "Underwriting" and "Shares Eligible for Future Sale" for additional information. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs.

The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders' meetings, except in limited circumstances, which could adversely affect your interests.

        Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders' meetings if you do not vote, unless:

    we do not wish a discretionary proxy to be given;

    we are aware or should reasonably be aware that there is substantial opposition as to a matter to be voted on at the meeting; or

    a matter to be voted on at the meeting would materially and adversely affect the rights of shareholders.

        The effect of this discretionary proxy is that you cannot prevent our ordinary shares underlying your ADSs from being voted, absent the situations described above, and it may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights.

        Holders of our ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement. Under our memorandum and articles of association, an annual general meeting and any extraordinary general meeting at which the passing of a special resolution is to be considered may be called with not less than 21 clear days' notice, and all other extraordinary general meetings may be called with not less than 14 clear days' notice. When a general meeting is convened, you may not receive sufficient notice of a shareholders' meeting to permit you to withdraw the ordinary shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask for your instructions, we will give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 30 days in advance of the meeting date and the depositary will send a notice to you about the upcoming vote and will arrange to deliver our voting materials to you. The depositary and its agents, however, may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the ordinary shares underlying your ADSs. Furthermore, the depositary will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ADSs are not voted as you request. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders' meeting.

You may not receive distributions on our ADSs or any value for them if such distribution is illegal or if any required government approval cannot be obtained in order to make such distribution available to you.

        Although we do not have any present plan to pay any dividends, the depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary

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shares or other deposited securities underlying our ADSs, after deducting its fees and expenses and any applicable taxes and governmental charges. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities whose offering would require registration under the Securities Act but is not so properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not reasonably practicable to distribute certain property. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under the U.S. securities laws any offering of ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

        We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary bank will not make rights available to you unless either both the rights and any related securities are registered under the Securities Act, or the distribution of them to ADS holders is exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. If the depositary does not distribute the rights, it may, under the deposit agreement, either sell them, if possible, or allow them to lapse. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

If we are classified as a passive foreign investment company, U.S. investors could be subject to adverse U.S. federal income tax consequences.

        The rules governing passive foreign investment companies, or PFICs, can have adverse effects for U.S. investors for U.S. federal income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the relative amounts of certain kinds of income. As discussed in "Taxation—Material United States Federal Income Tax Considerations," we do not believe that we are currently a PFIC, and we do not anticipate becoming a PFIC in the foreseeable future. Notwithstanding the foregoing, the determination of whether we are a PFIC depends on particular facts and circumstances (such as the valuation of our assets, including goodwill and other intangible assets) and may also be affected by the application of the PFIC rules, which are subject to differing interpretations. The fair market value of our assets is expected to depend, in part, upon (1) the market price of the ADSs and (2) the composition of our income and assets, which will be affected by how, and how quickly, we spend any cash that is raised in any financing transaction, including this offering. In light of the foregoing, no assurance can be provided that we are not currently a PFIC or that we will not become a PFIC in any future taxable year.

        If we are or become a PFIC, U.S. holders of the ADSs would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferential tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. Whether U.S. holders of ADSs make a timely qualified electing fund, or QEF, election or a mark-to-market election may affect the U.S. federal

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income tax consequences to U.S. holders with respect to the acquisition, ownership and disposition of the ADSs and any distributions such U.S. holders may receive. We do not, however, expect to provide the information regarding our income that would be necessary in order for a U.S. Holder to make a QEF election with respect to its ADSs if we are classified as a PFIC. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to the ADSs.

You may have difficulty enforcing judgments obtained against us.

        We are a company incorporated under the laws of the Cayman Islands, and substantially all of our assets are located outside the United States. Substantially all of our current operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, all of whom are not residents in the United States and whose assets are located outside the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

You may be subject to limitations on transfers of your ADSs.

        Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our operational results and other future conditions. Forward-looking statements can be identified by words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "seek," "target," "potential," "will," "would," "could," "should," "continue," "contemplate" and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs or current expectation concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

        By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the "Risk Factors" section of this prospectus, which include, but are not limited to, the following:

    our beliefs regarding our strengths and strategies;

    the initiation, timing, progress and results of our or our collaboration partners' pre-clinical and clinical studies, and our research and development programs;

    our or our collaboration partners' ability to advance our drug candidates into, and/or successfully complete, clinical studies;

    the timing or regulatory filings and the likelihood of favorable regulatory outcomes and approvals;

    regulatory developments in China, the United States and other countries;

    the adaptation of our Commercial Platform to market and sell our drug candidates and the commercialization of our drug candidates, if approved;

    the pricing and reimbursement of our and our joint ventures' products and our drug candidates, if approved;

    our ability to contract on commercially reasonable terms with CROs, third-party suppliers and manufacturers;

    the scope of protection we are able to establish and maintain for intellectual property rights covering our or our joint ventures' products and our drug candidates;

    the ability of third parties with whom we contract to successfully conduct, supervise and monitor clinical studies for our drug candidates;

    our planned use of proceeds;

    estimates of our expenses, future revenue, capital requirements and our needs for additional financing;

    our ability to obtain additional funding for our operations;

    the potential benefits of our collaborations and our ability to enter into future collaboration arrangements;

    the ability and willingness of our collaborators to actively pursue development activities under our collaboration agreements;

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    our or our joint venture Nutrition Science Partners' receipt of milestone or royalty payments pursuant to our strategic alliances with AstraZeneca, Eli Lilly and Nestlé Health Science, as applicable;

    the rate and degree of market acceptance of our drug candidates;

    our status as a PFIC;

    our financial performance;

    our ability to attract and retain key scientific and management personnel;

    our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act or as a foreign private issuer;

    our relationship with our joint venture and collaboration partners;

    developments relating to our competitors and our industry, including competing drug products;

    changes in tax laws in the jurisdictions that we operate; and

    other risks and uncertainties, including those listed under the caption "Risk Factors."

        These factors should not be construed as exhaustive and should be read with the other cautionary statements in this prospectus.

        Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

        Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this prospectus speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

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USE OF PROCEEDS

        We estimate that the net proceeds to us from our issuance and sale of 6,123,698 ADSs in this offering will be approximately $86.6 million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and assuming the underwriters do not exercise their option to purchase additional ADSs. This estimate assumes an initial public offering price of $16.33 per ADS, based on the closing price of our ordinary shares and exchange rate set forth on the cover page of this prospectus.

        A $1.00 increase (decrease) in the assumed initial public offering price of $16.33 per ADS would increase (decrease) the net proceeds to us from this offering by $5.7 million, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

        We intend to use the net proceeds of this offering, together with the cash generated by our operations and other cash resources, primarily to further advance the clinical development of our multiple drug candidates. In particular, we currently expect to use the net proceeds from this offering as follows:

    approximately $41.0 million to accelerate and broaden clinical development of the drug candidates for which we retain all worldwide rights, specifically:

    i.
    approximately $20.0 million to advance HMPL-523 through Phase I and into proof-of-concept studies, expected to be conducted in Australia, the United States and China, in rheumatoid arthritis, lupus and hematological cancer;

    ii.
    approximately $12.0 million to advance sulfatinib toward NDA submission in China and through Phase I and into proof-of-concept studies, expected to be conducted in the United States, in neuroendocrine tumors, and through Phase II and into proof-of-concept studies, expected to be conducted in China, in thyroid cancer;

    iii.
    approximately $7.0 million to advance epitinib into a Phase III registration in China and through Phase I and into proof-of-concept studies, expected to be conducted in the United States, in non-small cell lung cancer with brain metastasis; and

    iv.
    approximately $2.0 million to advance theliatinib through Phase I and into proof-of-concept studies, expected to be conducted in China, in head and neck cancer and esophageal cancer.

    approximately $27.0 million to support our share of the development costs of our partnered clinical drug candidates, including:

    i.
    approximately $12.0 million to advance 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 in gastric cancer and VEGFR tyrosine kinase inhibitor-refractory clear cell renal cell carcinoma;

    ii.
    approximately $10.0 million to advance 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 into proof-of-concept studies in non-small cell lung cancer and/or other solid tumor indications in the United States either independently or in partnership with Eli Lilly subject to the exercise of its global option; and

    iii.
    approximately $5.0 million to advance either existing or new-formulations of HMPL-004 into clinical development in mild-to-moderate ulcerative colitis.

    approximately $11.0 million to progress pre-clinical drug candidates, specifically:

    i.
    approximately $4.0 million to advance HMPL-689 through Phase I and into proof-of-concept studies, expected to be conducted in Australia, the United States and China, in hematological cancer;

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      ii.
      approximately $4.0 million to advance HMPL-453 through Phase I and into proof-of-concept studies, expected to be conducted in Australia, the United States and China, in bladder cancer; and

      iii.
      approximately $3.0 million to advance other drug candidates through pre-clinical studies and into Phase I clinical trials.

    approximately $5.0 million to build production facilities to produce both clinical and commercial supply of our drug candidates.

        The expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which we could change in our discretion in the future as our plans and business conditions evolve. Due to the many variables inherent to the development of our drug candidates at this time, such as the timing of patient enrollment and evolving regulatory requirements, we cannot currently predict the stage of development we expect to achieve for our pre-clinical and clinical trial and drug candidates with the net proceeds of this offering. We expect to use the remainder of the net proceeds for working capital and other general corporate purposes, such as acquiring the commercial rights to other drug products and expanding our research organization and infrastructure. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the results of the pre-clinical and clinical trial of our drug candidates, our operating costs and expenditures and the amount of cash generated by our operations. As a result, our management will have broad discretion over the use of the net proceeds from this offering.

        Pending these uses, we intend to invest the net proceeds in high-quality, investment-grade, short-term fixed income instruments.

        For additional information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

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DIVIDEND POLICY

        We have never declared or paid dividends on our ordinary shares. We currently expect to retain all future earnings for use in the operation and expansion of our business and do not have any present plan to pay any dividends. The declaration and payment of any dividends in the future will be determined by our board of directors in its discretion, and will depend on a number of factors, including our earnings, capital requirements, overall financial condition, and contractual restrictions.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2015:

    on an actual basis; and

    on an as adjusted basis to reflect the issuance and sale of ordinary shares in the form of ADSs by us in this offering and the application of net proceeds from this offering described under "Use of Proceeds."

        The information below is illustrative only, and assumes an initial public offering price of $16.33 per ADS, based on the closing price of our ordinary shares and exchange rate set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our capitalization following this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing, including the amount by which actual offering expenses are higher or lower than estimated. The table should be read in conjunction with the information contained in "Use of Proceeds," "Our Selected Consolidated Financial Data," "Selected Financial Data of our Non-consolidated Joint Ventures," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as our non-consolidated joint ventures' financial statements and the related notes included elsewhere in this prospectus.

 
  As of December 31, 2015  
 
  Actual   As Adjusted  
 
  (in thousands)
 

Cash and cash equivalents(1)

  $ 31,941   $ 119,881  

Long term debt

    26,923     26,923  

Shareholders equity:

   
 
   
 
 

Share capital, par value $1.00 per share, 56,533,118 shares issued and outstanding on an actual basis and 59,594,967 shares issued and outstanding on an as adjusted basis

    56,533     59,595  

Additional paid-in capital

    113,848     197,405  

Accumulated losses

    (92,040 )   (92,040 )

Accumulated other comprehensive income

    5,015     5,015  

Non-controlling interests

    18,921     18,921  

Total shareholders' equity

    102,277     188,896  

Total capitalization

  $ 129,200   $ 215,819  

(1)
The adjustment to cash and cash equivalents reflects the net proceeds of $86,619,000 resulting from this offering, taking into account approximately $1,321,000 of offering expense that has been settled as at December 31, 2015.

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DILUTION

        If you invest in our ADSs, your investment will be diluted for each ADS you purchase to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

        As of December 31, 2015, we had a net tangible book value of $1.74 per ordinary share and $0.87 per ADS. We calculate net tangible book value per share of our ordinary shares by dividing our total tangible assets less our total liabilities by the number of our outstanding ordinary shares. As adjusted net tangible book value per ordinary share is calculated after giving effect to the issuance of ordinary shares in the form of ADSs by us in this offering. Dilution is determined by subtracting the net tangible book value per ordinary share immediately upon the completion of this offering from the initial public offering price per ordinary share.

        Without taking into account any other changes in such net tangible book value after December 31, 2015, other than giving effect to the receipt of the estimated net proceeds from our sale of ADSs in this offering, assuming an initial public offering price of $16.33 per ADS (based on an ordinary share to ADS ratio of one-half of one to one, the closing price of our ordinary shares and exchange rate set forth on the cover page of this prospectus), and the application of the estimated net proceeds therefrom as described under "Use of Proceeds," our as adjusted net tangible book value at December 31, 2015 would have been approximately $3.10 per ordinary share and $1.55 per ADS. This represents an immediate increase in net tangible book value of $1.36 per ordinary share and $0.68 per ADS to existing shareholders and an immediate dilution in net tangible book value of $29.56 per ordinary share and $14.78 per ADS to you, or 90.5%. The following table illustrates this dilution to new investors purchasing ADSs in the offering:

 
  Per
ordinary
share
  Per ADS  

Assumed initial public offering price

  $ 32.66   $ 16.33  

Actual net tangible book value as of December 31, 2015

    1.74     0.87  

As adjusted net tangible book value per share after giving effect to the issuance of 3,061,849 ordinary shares in the form of ADSs in this offering

    3.10     1.55  

Amount of dilution in net tangible book value per share to new investors in this offering

  $ 29.56   $ 14.78  

        A $1.00 increase (decrease) in the assumed initial public offering price of $16.33 per ADS would increase (decrease) our as adjusted net tangible book value by $0.10 per ordinary share and $0.05 per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us.

        The following table summarizes, on a pro forma basis as of December 31, 2015, the differences between our existing shareholders and the new investors in this offering with respect to the number of ordinary shares purchased from us, the total consideration paid to us and the average price per ordinary share and per ADS paid at the assumed initial public offering price of $16.33 per ADS, without deducting the underwriting discounts and commissions and other estimated offering expenses payable by us. The

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total number of ordinary shares does not include ordinary shares underlying the ADSs issuable upon the exercise of the option to purchase additional ADSs granted to the underwriters.

 
  Ordinary
shares purchased
  Total
consideration
   
   
 
 
  Average
price per
ordinary
share
   
 
 
  Average
price per
ADS
 
 
  Number   Percent   Amount   Percent  
 
   
   
  (in thousands)
   
   
   
 

Existing shareholders

    56,533,118     94.9 % $ 238,407     70.4 % $ 4.22   $ 2.11  

New investors

    3,061,849     5.1 %   100,000     29.6 %   32.66     16.33  

Total

    59,594,967     100.0 % $ 338,407     100.0 % $ 5.68   $ 2.84  

        Each $1.00 increase (decrease) in the assumed public offering price of $16.33 per ADS would increase (decrease) total consideration paid by new investors in this offering by $6.1 million, total consideration paid by all shareholders by $6.1 million and average price per ordinary share and per ADS paid by all shareholders by $0.10 per ordinary share and $0.05 per ADS, assuming the sale of 6,123,698 ADSs by us at the assumed initial public offering price of $16.33 per ADS, without deducting estimated underwriting discounts and commissions and estimated expenses payable by us.

        The foregoing discussion and tables do not include the impact of any exercise of our outstanding share options. As of the date of this prospectus, there were 442,365 ordinary shares issuable upon the exercise of outstanding share options at a weighted average exercise price of $7.17 per share. To the extent that any of these share options are exercised, there will be further dilution to new investors.

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OUR SELECTED CONSOLIDATED FINANCIAL DATA

        The following selected consolidated statements of operations data for the years ended December 31, 2015, 2014 and 2013 and the selected consolidated balance sheet data as of December 31, 2015 and 2014 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. Our audited consolidated financial statements included herein have been prepared in accordance with U.S. GAAP while our historical consolidated financial statements which we previously made publicly available in connection with the listing of our ordinary shares on the AIM market of the London Stock Exchange were prepared in accordance with IFRS as issued by the IASB. We expect that our consolidated financial statements will continue to be prepared in accordance with U.S. GAAP following this offering.

        This selected historical consolidated financial data should be read in conjunction with the disclosures set forth under "Capitalization," "Selected Financial Data of our Non-consolidated Joint Ventures" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our and our non-consolidated joint ventures' consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus.

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands, except per share data)
 

Consolidated Statements of operations data:

                   

Revenue

   
 
   
 
   
 
 

Sales of goods—third parties

  $ 118,113   $ 59,162   $ 8,667  

Sales of goods—related parties

    8,074     7,823     7,803  

Revenue from license and collaboration agreements—third parties

    44,060     12,336     14,546  

Revenue from research and development services—third parties

    2,573     3,696     1,919  

Revenue from research and development services—related parties

    5,383     4,312     3,612  

Total revenue

    178,203     87,329     36,547  

Operating expenses

   
 
   
 
   
 
 

Costs of sales of goods—third parties

    (104,859 )   (53,477 )   (5,380 )

Costs of sales of goods—related parties

    (5,918 )   (5,372 )   (5,814 )

Research and development expenses

    (47,368 )   (29,914 )   (22,731 )

Selling expenses

    (10,209 )   (4,112 )   (3,452 )

Administrative expenses

    (19,620 )   (12,713 )   (12,366 )

Total operating expenses

    (187,974 )   (105,588 )   (49,743 )

Loss from operations

   
(9,771

)
 
(18,259

)
 
(13,196

)

Other (expense)/income

   
 
   
 
   
 
 

Interest income

    451     559     451  

Gain on disposal of a business

            30,000  

Other income

    386     20     1,221  

Interest expense

    (1,404 )   (1,516 )   (1,485 )

Other expense

    (202 )   (761 )   (69 )

Total other (expenses)/income

    (769 )   (1,698 )   30,118  

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  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands, except per share data)
 

(Loss)/income before income taxes and equity in earnings of equity investees

    (10,540 )   (19,957 )   16,922  

Income tax expense

    (1,605 )   (1,343 )   (1,050 )

Equity in earnings of equity investees, net of tax

    22,572     15,180     11,031  

Net income/(loss) from continuing operations

    10,427     (6,120 )   26,903  

Income/(loss) from discontinued operations, net of tax

        2,034     (1,978 )

Net income/(loss)

    10,427     (4,086 )   24,925  

Less: Net income attributable to non-controlling interests

    (2,434 )   (3,220 )   (983 )

Net income/(loss) attributable to the company

   
7,993
   
(7,306

)
 
23,942
 

Accretion on redeemable non-controlling interests

   
(43,001

)
 
(25,510

)
 
 

Net (loss)/income attributable to ordinary shareholders of the company

  $ (35,008 ) $ (32,816 ) $ 23,942  

(Losses)/earnings per share attributable to ordinary shareholders of the company—basic ($ per share):

   
 
   
 
   
 
 

Continuing Operations

  $ (0.64 ) $ (0.64 ) $ 0.49  

Discontinued Operations

  $   $ 0.02   $ (0.03 )

(Losses)/earnings per share attributable to ordinary shareholders of the company—diluted ($ per share):

   
 
   
 
   
 
 

Continuing Operations

  $ (0.64 ) $ (0.64 ) $ 0.44  

Discontinued Operations

  $   $ 0.02   $ (0.03 )

Number of shares used in per share calculation—basic

   
54,659,315
   
52,563,387
   
52,050,988
 

Number of shares used in per share calculation—diluted

    54,659,315     52,563,387     52,878,426  

Net income/(loss)

 
$

10,427
 
$

(4,086

)

$

24,925
 

Other comprehensive (loss)/income:

   
 
   
 
   
 
 

Foreign currency translation (loss)/income

    (5,557 )   (2,712 )   3,243  

Total Comprehensive income/(loss)

    4,870     (6,798 )   28,168  

Less: Comprehensive income attributable to non-controlling interests

   
(1,732

)
 
(2,944

)
 
(1,296

)

Total Comprehensive income/(loss) attributable to the company

  $ 3,138   $ (9,742 ) $ 26,872  

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  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Consolidated Balance sheet data (at year end):

             

Cash and cash equivalents

  $ 31,941   $ 38,946  

Total assets

  $ 229,754   $ 210,834  

Total shareholder's equity

  $ 102,277   $ 56,915  

Total current liabilities

  $ 81,062   $ 75,299  

Total non-current liabilities

  $ 46,415   $ 37,584  

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SELECTED FINANCIAL DATA
OF OUR NON-CONSOLIDATED JOINT VENTURES

        We have a 50% interest in three non-consolidated joint ventures—Shanghai Hutchison Pharmaceuticals, Hutchison Baiyunshan and Nutrition Science Partners. The following selected consolidated income statement data of each such joint venture for the years ended December 31, 2015, 2014 and 2013 and the following selected consolidated statements of financial position of each such joint venture as of December 31, 2015 and 2014 have been derived from their respective audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated financial statements of Shanghai Hutchison Pharmaceuticals, Hutchison Baiyunshan and Nutrition Science Partners have been prepared in accordance with IFRS as issued by the IASB.

        The historical results of our joint ventures for any prior period are not necessarily indicative of results to be expected in any future period. The following information should be read in conjunction with "Risk Factors," "Capitalization," "Our Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our non-consolidated joint ventures' financial statements and the related notes included elsewhere in this prospectus.

Shanghai Hutchison Pharmaceuticals

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands)
 

Comprehensive income and cash flow data:

                   

Revenue

  $ 181,140   $ 154,703   $ 138,160  

Profit for the year

  $ 31,307   $ 26,402   $ 22,424  

Dividend paid to equity holders

  $ (6,410 ) $ (19,077 ) $ (17,162 )

        Our equity in earnings of Shanghai Hutchison Pharmaceuticals reported under U.S. GAAP was $15.7 million, $13.2 million and $11.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

 
  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Financial position data (at year end):

       

Cash and cash equivalents

  $ 43,141   $ 16,575  

Total assets

  $ 224,969   $ 143,174  

Total company's equity holders' equity

  $ 93,263   $ 71,906  

Total liabilities

  $ 131,706   $ 71,268  

Hutchison Baiyunshan

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands)
 

Comprehensive income and cash flow data:

                   

Revenue

  $ 211,603   $ 243,746   $ 247,626  

Profit for the year

  $ 21,216   $ 20,865   $ 17,361  

Profit for the year attributable to equity holders of Hutchison Baiyunshan

  $ 21,376   $ 20,775   $ 17,165  

Dividend paid to equity holders

  $ (6,410 ) $ (12,820 ) $ (6,462 )

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        Our equity in earnings of Hutchison Baiyunshan reported under U.S. GAAP was $10.7 million, $10.4 million and $8.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

 
  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Financial position data (at year end):

       

Cash and cash equivalents

  $ 31,155   $ 31,004  

Total assets

  $ 202,646   $ 217,171  

Total company's equity holders' equity

  $ 125,063   $ 115,308  

Total liabilities

  $ 77,583   $ 101,863  

Nutrition Science Partners

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  (in thousands)
 

Comprehensive Income Data:

                   

Revenue

             

Net loss for the year

  $ (7,552 ) $ (16,812 ) $ (17,543 )

        Our equity in loss of Nutrition Science Partners reported under U.S. GAAP was $3.8 million, $8.4 million and $8.8 million for the years ended December 31, 2015, 2014 and 2013, respectively.

 
  As of December 31,  
 
  2015   2014  
 
  (in thousands)
 

Financial position data (at year end):

       

Cash and cash equivalents

  $ 2,624   $ 6,249  

Total assets

  $ 33,034   $ 38,548  

Total company's equity holders' equity

  $ 18,093   $ 25,645  

Total liabilities

  $ 14,941   $ 12,903  

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PRICE RANGE OF OUR ORDINARY SHARES

        Our ordinary shares have been trading on the AIM market of the London Stock Exchange under the symbol "HCM" since May 19, 2006. The following table sets forth, for the periods indicated, the reported high and low closing sale prices and the average daily trading volumes of our ordinary shares on the AIM market. Share prices are presented in pounds sterling and U.S. dollars.

 
  Price Per
Ordinary Share
  Price Per
Ordinary Share
   
 
 
  £   $    
 
 
  Average Daily
Trading
Volume
 
 
  High   Low   High   Low  
 
   
   
   
   
  (in shares)
 

Annual (Fiscal Year Ended December 31):

                               

2011

    5.53     2.63     7.69     3.66     42,852  

2012

    4.60     3.25     6.39     4.52     34,774  

2013

    6.39     4.15     8.88     5.77     29,003  

2014

    15.30     6.21     21.27     8.63     51,238  

2015

    28.35     11.80     39.41     16.40     38,287  

Quarterly:

   
 
   
 
   
 
   
 
   
 
 

First Quarter 2014

    9.85     6.21     13.69     8.63     53,840  

Second Quarter 2014

    9.08     7.50     12.62     10.43     44,653  

Third Quarter 2014

    12.20     9.15     16.96     12.72     77,638  

Fourth Quarter 2014

    15.30     10.60     21.27     14.73     28,141  

First Quarter 2015

    14.70     11.80     20.43     16.40     62,957  

Second Quarter 2015

    19.93     13.70     27.70     19.04     42,197  

Third Quarter 2015

    19.28     15.83     26.80     22.00     17,760  

Fourth Quarter 2015

    28.35     18.00     39.41     25.02     31,124  

Most Recent Six Months:

   
 
   
 
   
 
   
 
   
 
 

September 2015

    18.25     17.75     25.37     24.67     15,537  

October 2015

    27.93     18.00     38.82     25.02     40,290  

November 2015

    27.30     24.70     37.71     34.33     22,953  

December 2015

    28.35     26.45     39.41     36.77     29,692  

January 2016

    27.90     20.18     38.78     28.05     27,708  

February 2016

    24.60     20.18     34.19     28.05     7,274  

March 2016 (through March 3)

    23.35     23.50     32.46     32.66     9,085  

        On March 3, 2016, the closing sale price of our ordinary shares on the AIM market was £23.50 per ordinary share ($32.66 per ordinary share).

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations together with "Our Selected Consolidated Financial Data," "Selected Financial Data of our Non-consolidated Joint Ventures," our consolidated financial statements and the related notes and our non-consolidated joint ventures' financial statements and the related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The terms "company," "Chi-Med," "we," "our" or "us" as used herein refer to Hutchison China MediTech Limited and its consolidated subsidiaries and joint ventures unless otherwise stated or indicated by context.

Overview

        We are an innovative biopharmaceutical company based in China aiming to become a global leader in the discovery, development and commercialization of targeted therapies for oncology and immunological diseases.

        Through our Innovation Platform, we have created a broad pipeline including seven clinical-stage drug candidates that are being developed to cover a wide spectrum of solid tumors, hematological malignancies and immunology applications which address significant unmet medical needs and large commercial opportunities. Our success in research and development has led to partnerships with leading global pharmaceutical companies, AstraZeneca, Eli Lilly and Nestlé Health Science, for three of our seven clinical drug candidates. We have taken a multi-source approach to funding in order to continuously support our Innovation Platform. As of December 31, 2015, we and our collaboration partners have invested approximately $330 million in our Innovation Platform.

        We have also established a profitable commercial infrastructure in China to market and distribute prescription drugs (under our Prescription Drugs business) and consumer health products (under our Consumer Health business) which together form our Commercial Platform. Net income attributable to our company generated from the continuing operations of our Commercial Platform was $18.2 million, $22.8 million and $25.2 million for the years ended December 31, 2013, 2014 and 2015, respectively, most of which was used to fund our Innovation Platform's drug development programs. In addition to helping to fund our Innovation Platform, we anticipate that we will be able to utilize Shanghai Hutchison Pharmaceuticals and Hutchison Sinopharm, our Commercial Platform's two Prescription Drugs business joint ventures in which we nominate the management and run the day-to-day operations, to support the launch of products from our Innovation Platform if they are approved by the CFDA for use in China. Our Commercial Platform also includes our Consumer Health business, which is a profitable and cash flow generating business selling primarily over-the-counter pharmaceutical products (through our non-consolidated joint venture Hutchison Baiyunshan) and a range of health-focused consumer products.

        Our consolidated revenue was $36.5 million, $87.3 million and $178.2 million for the years ended December 31, 2013, 2014 and 2015, respectively. Net income attributable to our company was $23.9 million for the year ended December 31, 2013 and $8.0 million for the year ended December 31, 2015, compared to a net loss attributable to our company of $7.3 million for the year ended December 31, 2014.

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Basis of Presentation

        Our consolidated statements of operations data presented herein for the years ended December 31, 2015, 2014 and 2013 and our consolidated balance sheet data presented herein as of December 31, 2015 and 2014 have been derived from our audited consolidated financial statements, which were prepared in accordance with U.S. GAAP, and should be read in conjunction with those statements which are included elsewhere in this prospectus.

        Our Shanghai Hutchison Pharmaceuticals and Hutchison Baiyunshan joint ventures under our Commercial Platform and our Nutrition Science Partners joint venture under our Innovation Platform are accounted for under the equity accounting method as non-consolidated entities in our financial statements, and their financial statements are presented separately pursuant to IFRS (as issued by the IASB) elsewhere in this prospectus.

        We have two strategic business units, our Innovation Platform and our Commercial Platform, that offer different products and services. Our Commercial Platform is further segregated into the two core business areas of Prescription Drugs and Consumer Health. The presentation of financial data for our business units excludes certain unallocated costs attributed to expenses incurred by our corporate head office. For more information on our corporate structure, see "Prospectus Summary—Our Corporate Structure."

Factors Affecting our Results of Operations

Innovation Platform

    Research and Development Expenses

        We believe our ability to successfully develop innovative drug candidates through our Innovation Platform will be the primary factor affecting our long-term competitiveness, as well as our future growth and development. Creating high quality global first-in-class or best-in-class drug candidates requires a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in this area. As a result of this commitment, our pipeline of drug candidates has been steadily advancing and expanding, with seven clinical-stage drug candidates being investigated in a total of 20 clinical studies in various countries and a further five clinical studies targeted to start in the first quarter of 2016. For more information on the nature of the efforts and steps necessary to develop our drug candidates, see "Business—Our Clinical Pipeline" and "Regulation."

        All of the drug candidates of our Innovation Platform are still in development, and we have incurred and will continue to incur significant research and development costs for pre-clinical studies and clinical trials. We expect that our research and development expenses will significantly increase in future periods in line with the advance and expansion of the development of our drug candidates.

        We and our collaboration partners have invested approximately $330 million in our Innovation Platform as of December 31, 2015, with almost all of these funds used to pay for research and development expenses incurred for the development of our drug candidates. These expenses include:

    employee compensation related expenses, including salaries, benefits and equity compensation expense;

    expenses incurred for payments to contract research organizations, investigators and clinical trial sites that conduct our clinical studies;

    the cost of acquiring, developing, and manufacturing clinical study materials;

    facilities, depreciation, and other expenses, which include office leases and other overhead expenses; and

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    costs associated with pre-clinical activities and regulatory operations.

        Research and development costs incurred by our Innovation Platform totaled $22.7 million, $29.9 million and $47.4 million for the years ended December 31, 2013, 2014 and 2015, respectively, representing 62.2%, 34.3% and 26.6% of our total consolidated revenue for the respective period. These figures do not include payments made by our collaboration partners directly to third parties to help fund the research and development of our drug candidates.

        We have historically been able to fund the research and development expenses for our Innovation Platform via a range of sources, including financial support provided by our collaboration partners, cash flows generated from and dividend payments from our Commercial Platform, the proceeds raised from our initial public offering on the AIM market of the London Stock Exchange, banks loans (some of which have been guaranteed by Hutchison Whampoa Limited, a subsidiary of CK Hutchison) and investments from other third-parties such as Mitsui.

        If completed, the net proceeds to us from this offering will also be an important source of funds for our research and development. For more information on the nature of the intended uses for the proceeds from this offering, see "Use of Proceeds." This diversified approach to funding allows us to not depend on any one method of funding for our Innovation Platform, thereby reducing the risk that sufficient financing will be unavailable as we continue to accelerate the development of our drug candidates.

        For more information on the research and development expenses incurred for the development of our drug candidates, see "—Key Components of Results of Operations—Research and Development Expenses."

    Our Ability to Commercialize Our Drug Candidates

        Our ability to generate revenue from our drug candidates depends on our ability to successfully complete clinical trials for our drug candidates and obtain regulatory approvals for them in the United States, Europe, China and other major markets.

        We believe that our risk-balanced strategy of focusing on developing tyrosine kinase inhibitors for novel but relatively well-characterized targets and for validated targets, in combination with our development of multiple drug candidates concurrently and testing them for multiple indications, enhances the likelihood that our research and development efforts will yield successful drug candidates. Nonetheless, we cannot be certain if any of our drug candidates will receive regulatory approvals. Even if such approvals are granted, we will need to thereafter establish manufacturing supply and engage in extensive marketing prior to generating any revenue from such drugs, and the ultimate commercial success of our drugs will depend on their acceptance by patients, the medical community and third-party payors and their ability to compete effectively with other therapies on the market.

        As a first step towards commercialization, we incurred a total of approximately $3.6 million in capital expenditures during 2013, 2014 and 2015 to establish a GMP standard manufacturing (formulation) facility in Suzhou, China, which now produces Phase III clinical supplies and will be used to produce fruquintinib, as well as our other drugs, for commercial supply, if they receive regulatory approval.

        The competitive environment is also an important factor with the commercial success of our potential global first-in-class products, such as savolitinib and HMPL-523, depending on whether we are able to gain regulatory approvals and quickly bring such products to market ahead of competing drug candidates being developed by other companies.

        For those of our drug candidates to which we retain all rights worldwide, which currently include sulfatinib, epitinib, theliatinib, HMPL-523, HMPL-689 and HMPL-453, if they remain unpartnered, we will be able to retain all the profits if any of them is successfully commercialized, though we will need to bear all the costs associated with such drug candidates. Conversely, as discussed below, for our drug

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candidates which are subject to collaboration partnerships, our collaboration partners provide funding for development of the drug candidates but are entitled to retain a significant portion of any revenue generated by such drug candidates.

    Our Collaboration Partnerships

        Our results of operations have been, and we expect them to continue to be, affected by our collaborations with third parties for the development and commercialization of certain of our drug candidates. Currently, these mainly include savolitinib (collaboration with AstraZeneca), fruquintinib (collaboration with Eli Lilly) and HMPL-004 (collaboration with Nestlé Health Science). In addition to providing us with invaluable technical expertise and organizational resources, the financial support provided by these collaborations has been critical to our ability to develop and quickly advance the pre-clinical and clinical studies of multiple drug candidates concurrently.

        In particular, our partners cover a major portion of our research and development costs for drug candidates developed in collaboration with them. For example, under our collaboration agreement with AstraZeneca, it is responsible for a significant portion of the development costs for savolitinib. Under our collaboration agreement with Eli Lilly, it is responsible for a significant portion of all fruquintinib development costs in an indication after we have achieved proof-of-concept for such indication. We share the research and development costs for HMPL-004 with Nestlé Health Science through our non-consolidated joint venture Nutrition Science Partners.

        In addition, under our licensing, co-development and commercialization agreements, we receive upfront payments upon our entry into such agreements and milestone payments upon the achievement of certain development, regulatory and commercial milestones for the relevant drug candidate. Revenue recognized in our consolidated financial statements from such agreements totaled $11.1 million, $5.7 million and $21.1 million for the years ended December 31, 2013, 2014 and 2015, respectively. In addition, income from research and development services from these partners under such agreements, which is paid to us to cover certain of our research and development expenses, totaled $9.0 million, $14.6 million and $30.9 million for the years ended December 31, 2013, 2014 and 2015, respectively.

        The achievement of milestones for our drug candidates, which is dependent on the outcome of clinical studies, is subject to a high degree of uncertainty and, as a result, we cannot reasonably estimate when we can expect to receive future milestone payments, or at all. For more information on our revenue recognition policies, see "—Critical Accounting Policies and Estimates—Revenue recognition for research and development projects." If we are unable to achieve development milestones for our drug candidates or if our partners were to terminate their collaborative agreements with us, payments for research and development services could also be affected.

        Our collaboration partners are entitled to a significant proportion of any future revenue from commercialization of our drug candidates developed in collaboration with them, as well as a degree of influence over the clinical development process for such drug candidates. We may not be able to negotiate additional collaborations on a timely basis, on acceptable terms, or at all, which would affect our ability to receive additional upfront, milestone or service payments in the future. For more information regarding our collaboration agreements, see "Business—Overview of Our Collaborations."

Commercial Platform

    China Government Healthcare Spending and Drug Pricing Policies

        Revenue of our Prescription Drugs business and our non-consolidated joint venture Hutchison Baiyunshan, part of our Consumer Health business, is directly affected by the sales volume and pricing of their own-brand prescription and over-the-counter pharmaceutical products as well as third-party pharmaceutical products. The principal activities of our Prescription Drugs business are described below

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under "—Ability of Prescription Drugs Business to Effectively Market Own-Brand and Third-Party Drugs". Hutchison Baiyunshan is a non-consolidated joint venture whose key products are two generic over-the-counter therapies, Fu Fang Dan Shen tablets, a treatment for chest congestion and angina pectoris, and Banlangen granules, an anti-viral treatment.

        The sales volume of the products sold by these businesses is driven in part by the level of Chinese government spending on healthcare and the coverage of Chinese government medical insurance schemes, which is correlated with patient reimbursements for drug purchases, all of which have increased significantly in recent years as part of healthcare reforms in China. For example, two of the main government medical insurance schemes in China are the Urban Employee Basic Medical Insurance Program and the Urban Resident Basic Medical Insurance Program, which together had enrolled approximately 44% of China's population in 2014 compared to only 12% in 2006, according to the PRC National Bureau of Statistics. The sales volume of pharmaceutical products in China is also influenced by their representation on the Medicines Catalogue for the National Basic Medical Insurance, Labor Injury Insurance and Childbirth Insurance Systems in China, or the National Medicines Catalogue, which determines eligibility for drug reimbursement, as well as their representation on the National Essential Medicines List, which mandates distribution of drugs in China. Over 96% of all pharmaceutical sales by Shanghai Hutchison Pharmaceuticals in 2015 and approximately 89% of pharmaceutical products manufactured and sold by Hutchison Baiyunshan in 2015 were capable of being reimbursed under the National Medicines Catalogue.

        In addition, among these two joint ventures an aggregate of 45 drugs, of which 12 were in active production as of January 31, 2016, have been included on the National Essential Medicines List. She Xiang Bao Xin pills, Shanghai Hutchison Pharmaceuticals' top-selling drug, is one of the few proprietary drugs included on the National Essential Medicines List. The National Medicines Catalogue and the National Essential Medicines List are subject to revision by the government from time to time, and our results could be materially and adversely affected if any products sold by our Prescription Drugs business or Hutchison Baiyunshan are removed from the National Medicines Catalogue or the National Essential Medicines List. For more information, see "Risk Factors—Risks Related to Our Commercial Platform—Reimbursement may not be available for the products currently sold through our Commercial Platform or our drug candidates in China, the United States or other countries, which could diminish our sales or affect our profitability."

        The sale prices of certain pharmaceutical products sold by our Commercial Platform joint ventures are also subject to Chinese government's price controls. In April 2014, the China National Development and Reform Commission, or the NDRC, announced a new Low Price Drug List, or LPDL, aimed at making certain low-price pharmaceuticals more profitable for manufacturers to produce. The LPDL established caps for the daily cost of chemical pharmaceuticals at less than RMB3.0 per day and of traditional Chinese medicine pharmaceuticals at less than RMB5.0 per day. The LPDL gives manufacturers flexibility to increase prices within the caps and exempts LPDL pharmaceuticals from hospital tenders. As of the end of 2015, Hutchison Baiyunshan's two top-selling products, Fu Fang Dan Shen tablets and Banlangen, cost consumers RMB1.2 per day and RMB1.4 per day, respectively, and Shanghai Hutchison Pharmaceuticals' two top-selling products, She Xiang Bao Xin pills and Danning tablets, cost RMB2.7 and RMB3.3 per day, respectively, well below the established caps for traditional Chinese medicine pharmaceuticals under the LPDL. As a result, we do not expect the LPDL to exert downward pressure on the pricing of these products unless the government makes significant downward adjustments to the LPDL price caps in the future.

        Subject to customer demand, we have the ability to increase the prices for these products under the current LPDL price caps. For example, during 2015 we began to phase in, on a province-by-province basis, a 22% price increase for She Xiang Bao Xin pills from RMB2.7 per day to RMB3.3 per day. In addition, the pricing of Shanghai Hutchison Pharmaceuticals' prescription drugs are influenced by the outcomes of periodic provincial and municipal tender processes organized by the various provincial or municipal

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government agencies in China. For more information, see "Regulation—Coverage and Reimbursement—PRC Coverage and Reimbursement."

    Ability of Prescription Drugs Business to Effectively Market Own-Brand and Third-Party Drugs

        A key component of our Commercial Platform is the extensive marketing network of our Prescription Drugs business operated by our joint ventures Shanghai Hutchison Pharmaceuticals and Hutchison Sinopharm, which includes over 1,900 medical sales staff covering approximately 16,500 hospitals in around 300 cities and towns in China. Our results of operations are affected by the degree to which this marketing network is successful in not only marketing its existing drugs but also new drugs either from third parties or developed by our Innovation Platform, if approved. Historically, the substantial majority of revenue from our Prescription Drugs business was generated from sales of She Xiang Bao Xin pills, a vasodilator, which represented approximately 90% of Shanghai Hutchison Pharmaceuticals' total revenue for each of the years ended December 31, 2013 and 2014 and approximately 88% of its total revenue for the year ended December 31, 2015. In addition, since our acquisition of a 51% equity interest in Hutchison Sinopharm in April 2014, its revenue was mainly derived from the legacy logistics and distribution business of a predecessor entity previously operated by our joint venture partner.

        To further leverage our marketing network, we intend to focus on third-party drugs distribution and commercialization services for Chinese and multinational pharmaceutical companies seeking to market their products in China. In the second quarter of 2015, Hutchison Sinopharm became the exclusive first-tier distributor to distribute and market AstraZeneca's quetiapine tablets (under the Seroquel trademark), a medication to treat schizophrenia and bipolar disorder, in all of China. In addition, Hutchison Sinopharm began to exclusively co-promote Merck Serono's bisoprolol fumarate tablets (under the Concor trademark), a beta-blocker to treat hypertension, in a few provinces in China in the first quarter of 2015. Under these arrangements, Hutchison Sinopharm manages the distribution and logistics for these drugs and Shanghai Hutchison Pharmaceuticals markets them.

        Seroquel in particular represents a new therapeutic area for our medical sales representatives, and we believe that in the limited time since we commenced our services for these drugs, we have been successful in generating sales. During 2015, Shanghai Hutchison Pharmaceuticals established a dedicated medical sales team of over 100 people to support the commercialization of Seroquel.

        In the longer term, the ability of our marketing network to adapt to effectively market such drugs to doctors and hospitals, as well as other third-party drugs we may provide services for in the future and any oncology or immunology drugs from our Innovation Platform, will impact our revenue and profitability. In addition, if we are unsuccessful in marketing any third-party drugs, it may adversely affect our ability to enter into commercialization arrangements for additional drugs or prevent us from expanding the geographic scope of existing arrangements.

    Seasonality

        The results of operations of our Commercial Platform are also affected by seasonal factors. Our Commercial Platform typically experiences higher profits in the first half of the year due to the sale cycles of our distributors, whereby they typically increase their inventories at the beginning of each year. In addition, in the second half of each year, our Commercial Platform typically spends more on marketing activities to help reduce such inventory held by distributors. We do not experience material seasonal variations in the results of our Innovation Platform.

    Overall Economic Growth and Consumer Spending Patterns

        The results of operations and growth of our Consumer Health business depend in part on continuing economic growth and increasing income and health awareness of consumers in Asia. Although economic growth in China has slowed in recent periods, it achieved a compound annual growth rate in real gross

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domestic product of approximately 8% from 2010 through 2015 according to the International Monetary Fund. As per capita disposable income has increased, consumer spending has also increased, and consumers in China have tended to be more health conscious and to spend more on organic and natural products for their families' health and well-being. However, if customer demand for such products does not achieve the levels we expect, whether due to slowing economic conditions, changing consumer tastes or otherwise, the results of operations and growth of our Consumer Health business could be materially and adversely affected.

Critical Accounting Policies and Significant Judgments and Estimates

        Our discussion and analysis of operating results and financial condition are based upon our consolidated financial statements. The preparation of consolidated financial statements requires us to estimate the effect of various matters that are inherently uncertain as of the date of the consolidated financial statements. Each of these required estimates varies with regard to the level of judgment involved and its potential impact on our reported financial results. Estimates are deemed critical when a different estimate could have reasonably been used or where changes in the estimates are reasonably likely to occur from period to period, and a different estimate would materially impact our financial position, changes in financial position or results of operations. Our significant accounting policies are discussed under note 3 to our consolidated financial statements included elsewhere in this prospectus. We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial statements and that the judgments and estimates are reasonable.

Revenue recognition for research and development projects

        We recognize 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 fixed or determinable; and (iv) collectability is reasonably assured.

        We have entered into and in the future may enter into research and developments agreements with collaborative partners for the research and development of drug products. The terms of the agreements may include non-refunding upfront and licensing fees, funding for research, development and manufacturing, milestone payments and royalties on any product sales derived from collaborations. These multiple element arrangements are analyzed to determine whether the deliverables can be separated or whether they must be accounted for as a single unit of accounting. This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. In determining the units of accounting, management evaluates certain criteria, including whether the deliverables have standalone value, based on the consideration of the relevant facts and circumstances for each arrangement. We estimate the selling price for each unit of accounting and allocate the arrangement consideration to each unit utilizing the relative selling price method.

        We determine the estimated selling price for deliverables within each agreement using vendor-specific objective evidence of selling price, if available, or third party evidence of selling price if vendor-specific objective evidence is not available, or our best estimate of selling price if neither vendor-specific objective evidence nor third party evidence is available. Determining the best estimate of selling price for a deliverable requires significant judgment. Our process for determining the best estimate of selling price involves management's judgment. Our process considers multiple factors such as discounted cash flows, estimated expenses and other costs and available data, which may vary over time, depending upon the circumstances, and relate to each deliverable. If the estimated obligation period of one or more deliverables should change, the future amortization of the revenue would also change. Revenue allocated to an individual element is recognized when all other revenue recognition criteria are met for that element.

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        These collaborative and other agreements may contain milestone payments. Revenues from milestones, if they are considered substantive, are recognized upon successful accomplishment of the milestones. Determining whether a milestone is substantive involves judgment, including an assessment of our involvement in achieving the milestones and whether the amount of the payment is commensurate to our performance. If not considered substantive, milestones are initially deferred and recognized over the remaining period of the performance obligation.

        We recognize a contingent milestone payment as revenue in its entirety upon our achievement of the milestone. A milestone is substantive if the consideration earned from the achievement of the milestone (i) is consistent with performance required to achieve the milestone or the increase in value to the delivered item, (ii) relates solely to past performance and (iii) is reasonable relative to all of the other deliverables and payments within the arrangement.

Share-based Compensation

        We account for share-based compensation by measuring and recognizing compensation expense for share options made to employees and directors based on the estimated grant date fair values. We used the graded vesting method to allocate compensation expense to reporting periods over each optionee's requisite service period.

        For share options granted to non-employees, we record such share options at fair value, periodically remeasure awards to reflect the current fair value at each reporting period and recognize expense over the related service period.

        We estimate the fair value of share options to employees, directors and non-employees using the Binominal model. Determining the fair value of share options requires the use of highly subjective assumptions, including volatility, risk free interest rate, dividend yield and the fair value of the underlying ordinary shares on the dates of grant or the dates of modification, among other inputs. In addition, certain awards are share options underlying the ordinary shares of Hutchison MediPharma Holdings, a subsidiary of the Company, which is a private company. In the absence of a public trading market, the determination of the fair value of ordinary shares of Hutchison MediPharma Holdings involves valuation of the business enterprise value, or BEV, and ordinary shares. The valuation was performed based on the discounted cash flow method with significant assumptions including milestones payments and royalty income for various drug products, as adjusted by probabilities for different milestones, the associated costs of development, and the discount rate. The assumptions we use in the valuation model are based on future expectations combined with management judgment, with inputs of numerous objective and subjective factors, to determine the fair value of Hutchison MediPharma Holdings's BEV and ordinary shares. The assumptions in determining the fair value of share options, Hutchison MediPharma Holdings's BEV and ordinary shares represent our best estimates, which involve inherent uncertainties and the application of judgment. As a result, if factors change and different assumptions are used, our level of share-based compensation could be materially different in the future.

        We recognize compensation expense for only the portion of options that are expected to vest. Accordingly, expected future forfeiture rates of share options have been estimated based on our historical forfeiture rate, as adjusted for known trends. Forfeitures are estimated at the time of grant, with adjustments in future periods if actual forfeiture rates vary from historical rates and estimates.

Convertible Preferred Shares

        When we issue preferred shares, we assess whether such instruments should be liability, mezzanine equity, or permanent equity classified based on their features 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-classified

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instruments. Equity instruments that are redeemable at the option of the holder or not solely within our control are classified as mezzanine equity of the issuer entity (and redeemable non-controlling interests of our consolidated financial statements if such instruments are issued by its subsidiaries). Subsequent measurements of financing instruments are driven by the instruments' balance sheet classification.

        We review the terms of each convertible instrument and determines whether the host instrument is more akin to debt or equity following the whole instrument approach, which considers the economic characteristics and risks of the entire hybrid financial instrument including the embedded feature being evaluated for potential bifurcation, for the purpose of evaluating if there were any embedded features would require bifurcation and separate accounting from the host contract. We determine the nature of the host contract by considering and weighing all of the stated and implied substantive terms and features of the preferred shares, including: (i) how and when any contingent or non-contingent redemption features could be exercised, (ii) the existence and nature of any conversion rights, (iii) dividend rights, and (iv) the voting rights. For embedded conversion features that are not required to be separated under ASC 815, Derivatives and Hedging, we analyze the accounting conversion price and our share price at the commitment date to identify any beneficial conversion features.

        For modification to preferred shares not classified as liabilities, we assess whether an amendment to the term of the preferred shares is an extinguishment or a modification using the fair value model. We consider that a significant 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 significant immediately after the change of the terms is considered non-substantive and thus is subject to modification accounting.

        The redeemable preferred shares issued by Hutchison MediPharma Holdings are redeemable upon occurrence of an event that is not solely within our control. Accordingly, these preferred shares issued by Hutchison MediPharma Holdings are recorded and accounted for as redeemable non-controlling interest outside of permanent equity in the consolidated balance sheets. We concluded that the preferred shares represent an equity host with no embedded features bifurcated from the host instrument. Accretion to the preferred shares redemption amount is accounted for when it is probable that the preferred shares will become redeemable and is based on such preferred shareholder's share of the estimated valuation of Hutchison MediPharma Holdings. Determining when future redemption of the preferred shares becomes probable involves significant judgment as the redemption is contingent upon the company valuation of Hutchison MediPharma Holdings reaching the specified valuation threshold and Hutchison MediPharma Holdings's failure to have a successful listing. We assessed the probability of the preferred shares becoming redeemable by identifying critical events (e.g., notable progress achieved in the development of certain compound) that significantly increased the overall valuation of Hutchison MediPharma Holdings. We concluded that the trigger of redemption feature was not probable until substantial progress made in connection with one of our compounds in 2014 and therefore started recognizing accretion in 2014. The accretion, which increases the carrying value of the redeemable non-controlling interest, is recorded against retained earnings, or in the absence of retained earnings, by recording against the additional paid-in capital.

Impairment of long-lived property, plant and equipment and other definite life intangible assets

        We assess property, plant and equipment and other definite life intangible assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. We measure the recoverability of assets that we will continue to use in our operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset grouping's carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired. We measure the impairment by comparing the difference

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between the asset grouping's carrying value and its fair value. Property, plant and equipment and other definite life intangible assets are considered non-financial assets and are recorded at fair value only if an impairment charge is recognized.

        Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. When we determine that the useful lives of assets are shorter than we had originally estimated, we accelerate the rate of depreciation over the assets' new, shorter useful lives.

Impairment of Goodwill

        Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired. Goodwill is allocated to our reporting units based on the relative expected fair value provided by the acquisition. Reporting units may be operating segments as a whole or an operation one level below an operating segment, referred to as a component. The goodwill is attributable to the Prescription Drugs and Consumer Health (PRC) business under the Commercial Platform. We perform an annual impairment assessment in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit in which goodwill resides is less than its carrying value. For reporting units in which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is not considered impaired and we are not required to perform the two-step goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit's fair value. For reporting units in which the impairment assessment concludes that it is more likely than not that the fair value is less than its carrying value, we perform the first step of the goodwill impairment test, which compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not considered impaired and we are not required to perform additional analysis. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the goodwill impairment test to determine the implied fair value of the reporting unit's goodwill. If we determine during the second step that the carrying value of a reporting unit's goodwill exceeds its implied fair value, we record an impairment loss equal to the difference.

        Our goodwill impairment test uses the income method to estimate a reporting unit's fair value. The income method is based on a discounted future cash flow approach that uses the following assumptions and inputs: revenue, based on assumed market segment growth rates; estimated costs; and appropriate discount rates based on a reporting unit's weighted average cost of capital as determined by considering the observable weighted average cost of capital of comparable companies. Our estimates of market segment growth, and costs are based on historical data, various internal estimates, and a variety of external sources. These estimates are developed as part of our routine long-range planning process. We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data. A reporting unit's carrying value represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt. For the annual impairment assessment in 2014 and 2013, we determined that for each of our reporting units, it was more likely than not that the fair value of the reporting units exceeded the carrying value. As a result, we concluded that performing the first step of the goodwill impairment test was not necessary for any reporting unit.

Impairment of equity method investments

        Our equity method investments represent our investments in our non-consolidated joint venture. All of these are in non-marketable equity investments.

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        Non-marketable equity investments are inherently risky, and their success depends on their ability to generate revenues and remain profitable, operational efficiency, the ability of the investee companies to raise additional funds and other key business factors. The companies could fail or not be able to raise additional funds when needed, or they may receive lower valuations with less favourable investment terms. These events could cause our investments to become impaired. In addition, financial market volatility could negatively affect our ability to realize value in our investments through liquidity events such as initial public offerings, mergers, and private sales.

        We determine the fair value of our non-marketable equity investments for impairment; however, the investments are recorded at fair value only if an impairment is recognized. The measurement of fair value requires significant judgment and includes a qualitative and quantitative analysis of events or circumstances that impact the fair value of the investment. Qualitative analysis of our investments involves understanding our investee's revenue and earnings trends relative to pre-defined milestones and overall business prospects, the technological feasibility of our investee's products and technologies, the general market conditions in the investee's industry or geographic area including adverse regulatory or economic changes, and the management and governance structure of the investee.

        If the fair value of an investment is below our carrying value, we determine whether the investment is other-than-temporarily impaired based on our quantitative and qualitative analysis, which includes assessing the severity and duration of the impairment and the likelihood of recovery before disposal.

Internal Control over Financial Reporting

        In connection with the audits of our consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013 and our consolidated balance sheets as of December 31, 2015 and 2014, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting. As defined in the standards established by the PCAOB, a "material weakness" is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

        The material weakness that has been identified relates to our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. The material weakness, if not timely remedied, may lead to significant misstatements in our consolidated financial statements in the future.

        We have implemented a number of measures to address the material weakness that has been identified in connection with the audits of our consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013 and our consolidated balance sheets as of December 31, 2015 and 2014. During 2015, we have hired additional qualified financial and accounting staff with extensive U.S. GAAP and SEC reporting experience, and we have allocated additional resources to improve financial control function, to introduce formal business performance review process, and to prepare and review the consolidated financial statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements. Furthermore, we will continue to hire additional competent accounting staff with appropriate knowledge and experience of U.S. GAAP and SEC reporting requirements. We have also established an ongoing program to provide sufficient and additional appropriate training to our accounting staff, especially training related to U.S. GAAP and SEC reporting requirements. We have also been making continuous efforts to further enhance our internal audit function to enhance our monitoring of U.S. GAAP accounting and reporting matters. However, we cannot assure you that all these measures will be sufficient to remediate our material weakness in time, or at all. See "Risk Factors—Risks Related to Our ADSs and this Offering—If we fail to establish and maintain proper internal financial reporting

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controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired."

Key Components of Results of Operations

Revenue

        We derive our consolidated revenue primarily from (i) licensing and collaboration projects conducted by our Innovation Platform, which generates revenue in the form of upfront payments, milestone payments and the payments received for providing research and development services for our collaboration projects and for other third parties and related parties and (ii) the sales of goods by our Commercial Platform, which generates revenue from the distribution and marketing of prescription pharmaceutical products by our Prescription Drugs business and consumer health products by our Consumer Health business.

        The following table sets forth the components of our consolidated revenue for the years indicated, which does not include the revenue from our Commercial Platform's non-consolidated joint ventures, Shanghai Hutchison Pharmaceuticals and Hutchison Baiyunshan. Our revenue from sales of goods to related parties is attributable to sales of goods by our Commercial Platform to indirect subsidiaries of CK Hutchison. Our revenue from research and development projects for related parties is attributable to income for research and development services that we receive primarily from Nutrition Science Partners, our non-consolidated joint venture with Nestlé Health Science.

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  $'000   %   $'000   %   $'000   %  

Revenue

                                     

Innovation Platform:

                                     

Licensing and collaboration agreements—third parties

    44,060     24.7     12,336     14.1     14,546     39.8  

R&D services—third parties

    2,573     1.5     3,696     4.2     1,919     5.3  

R&D services—related parties

    5,383     3.0     4,312     5.0     3,612     9.9  

Total

    52,016     29.2     20,344     23.3     20,077     55.0  

Commercial Platform:

   
 
   
 
   
 
   
 
   
 
   
 
 

Sales of goods—third parties

    118,113     66.3     59,162     67.7     8,667     23.7  

Sales of goods—related parties

    8,074     4.5     7,823     9.0     7,803     21.3  

Total

    126,187     70.8     66,985     76.7     16,470     45.0  

Total

    178,203     100.0     87,329     100.0     36,547     100.0  

        Our Innovation Platform's revenue primarily comprises revenue recognized in our consolidated financial statements under licensing, co-development and commercialization agreements for upfront and milestone payments for our drug candidates developed in collaboration with, among others, AstraZeneca and Eli Lilly, as well as income from research and development services that we receive from certain of our partners, including, among others, AstraZeneca and Eli Lilly as well as Nutrition Science Partners, our non-consolidated joint venture with Nestlé Health Science. Our Innovation Platform revenue also includes income from research and development services provided to other third parties and related parties, which are not related to our licensing and collaboration agreements.

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        The following table sets forth the components of our consolidated revenue contributed by the two core business areas of our Commercial Platform, namely Prescription Drugs and Consumer Health, for the years indicated.

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  $'000   %   $'000   %   $'000   %  

Revenue from Commercial Platform

                                     

Prescription Drugs

    105,478     83.6     50,202     74.9          

Consumer Health

    20,709     16.4     16,783     25.1     16,470     100.0  

Total

    126,187     100.0     66,985     100.0     16,470     100.0  

        Our Prescription Drugs business's revenue primarily comprises revenue from the logistics and distribution business of our consolidated Hutchison Sinopharm joint venture with Sinopharm, a leading distributor of pharmaceutical and healthcare products and a leading supply chain service provider in China.

        In April 2014, we invested approximately $9.6 million in cash for 51% of the equity interest in Hutchison Sinopharm, which is a GSP-certified pharmaceutical and healthcare logistics, distribution and marketing company in China. We intend to increasingly shift Hutchison Sinopharm's business from the legacy logistics and distribution business of a predecessor entity, which contributed substantially all of its revenue in 2014 and approximately 80% of its revenue in 2015, to focus on higher margin, full service, third-party drugs distribution and commercialization services.

        The revenue of our Prescription Drugs business's non-consolidated joint venture, Shanghai Hutchison Pharmaceuticals, the accounts of which are prepared in accordance with IFRS (as issued by the IASB) and whose revenue is not included in our consolidated revenue, was $138.2 million, $154.7 million and $181.1 million for the years ended December 31, 2013, 2014 and 2015, respectively. Shanghai Hutchison Pharmaceuticals is a joint venture with Shanghai Pharmaceuticals, a leading pharmaceuticals company in China, and primarily focuses on the manufacture and sale of prescription pharmaceutical products in China. We and Shanghai Pharmaceuticals each own 50% of this joint venture. We have the right to nominate the general manager and other management of this joint venture and run its day-to-day operations. The effect of Shanghai Hutchison Pharmaceuticals on our consolidated financial results is discussed below under "—Equity in Earnings of Equity Investees."

        Our Consumer Health business's revenue primarily comprises revenue from sales of organic and natural products by Hutchison Hain Organic, our 50% consolidated joint venture with Hain Celestial, a NASDAQ-listed, natural and organic food and personal care products company. We consolidate the results of this joint venture into our results of operations as we own 50% of its equity and hold an additional casting vote in the event of a deadlock. To a lesser extent, our Consumer Health business's revenue was also contributed by Hutchison Healthcare, our wholly owned subsidiary which manufactures and sells infant nutrition products, and Hutchison Consumer Products, a wholly owned subsidiary that distributes and markets certain third-party consumer products.

        The revenue of our Consumer Health business's non-consolidated joint venture, Hutchison Baiyunshan, the accounts of which are prepared in accordance with IFRS (as issued by the IASB) and which revenue is not included in our consolidated revenue, was $247.6 million, $243.7 million and $211.6 million for the years ended December 31, 2013, 2014 and 2015, respectively. Hutchison Baiyunshan is a joint venture with Guangzhou Baiyunshan, a leading China-based pharmaceutical company listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange, and primarily focuses on the manufacture and distribution of over-the-counter pharmaceutical products in China. Our interest in Hutchison Baiyunshan is held through an 80%-owned subsidiary of ours, Hutchison BYS (Guangzhou) Holding

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Limited, which owns 50% of that joint venture, with the other 50% interest held by Guangzhou Baiyunshan. The effect of Hutchison Baiyunshan on our consolidated financial results are discussed under "—Equity in Earnings of Equity Investees."

Cost of Sales and Operating Expenses

Cost of Sales of Goods

        Our cost of sales of goods are primarily attributable to the cost of sales of goods of our Prescription Drugs business's consolidated Hutchison Sinopharm joint venture as well as the cost of sales of goods of our Consumer Health business. Our cost of sales of goods to related parties is attributable to sales of goods by our Consumer Health business to indirect subsidiaries of CK Hutchison. The following table sets forth the components of our cost of sales of goods attributable to third parties and related parties for the years indicated.

 
  Year Ended December 31  
 
  2015   2014   2013  
 
  $'000   %   $'000   %   $'000   %  

Cost of Sales of Goods

                                     

Costs of sales of goods—third parties

    104,859     94.7     53,477     90.9     5,380     48.1  

Costs of sales of goods—related parties

    5,918     5.3     5,372     9.1     5,814     51.9  

Total

    110,777     100.0     58,849     100.0     11,194     100.0  

        The following table sets forth the components of our cost of sales of goods attributable to the two core business areas of our Commercial Platform, namely Prescription Drugs and Consumer Health, for the years indicated.

 
  Year Ended December 31  
 
  2015   2014   2013  
 
  $'000   %   $'000   %   $'000   %  

Cost of Sales of Goods

                                     

Prescription Drugs

    96,927     87.5     47,795     81.2          

Consumer Health

    13,850     12.5     11,054     18.8     11,194     100.0  

Total

    110,777     100.0     58,849     100.0     11,194     100.0  

        Our Prescription Drugs business's cost of sales of goods primarily comprises the cost of goods sold and transportation costs incurred by the legacy logistics and distribution activities of Hutchison Sinopharm, which commenced operations in April 2014, as well as the third-party drugs distribution and commercialization business of Hutchison Sinopharm beginning in the first quarter of 2015.

        Our Consumer Health business's cost of sales of goods primarily comprises the cost of goods sold by Hutchison Hain Organic, which purchases its product inventory from Hain Celestial for distribution in Asian markets, as well as the cost of goods sold, contract packing and transportation costs incurred by Hutchison Healthcare and Hutchison Consumer Products.

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Research and Development Expenses

        Our research and development expenses are attributable to our Innovation Platform. These costs primarily comprise the cost of research and development and clinical trials for our drug candidates, including personnel compensation and related costs, clinical trial related costs such as payments to third-party contract research organizations, and other research and development costs. The following table sets forth the components of our research and development expenses for the years indicated.

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  $'000   %   $'000   %   $'000   %  

R&D Expenses

                                     

Innovation Platform:

                                     

Personnel compensation and related costs

    17,339     36.6     13,554     45.3     11,042     48.6  

Clinical trial related costs

    24,690     52.1     12,440     41.6     8,037     35.3  

Other costs

    5,339     11.3     3,920     13.1     3,652     16.1  
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