SEC Comment Letter for HUTCHMED (China) Ltd (HCM, HMDCF) (CIK 0001648257) (HCM) — Sep 21, 2015
HUTCHMED (China) Ltd (HCM, HMDCF) (CIK 0001648257)
Date: Sept. 21, 2015 · CIK: 0001648257 · Accession: 0000000000-15-046445
AI Filing Summary & Sentiment
Reasoning
Letter
Mail Stop 4546 September 18, 2015 Via E -mail Christian Hogg Chief Executive Officer Hutchison China MediTech Limited Room 2108, 21/F, Hutchison House 10 Harcourt Road Hong Kong
Re: Hutchison China MediTech Limited Draft Registration Statement on Form F -1 Submitted August 21, 2015 CIK No. 0001648257
Dear Mr. Hogg :
We have reviewed your draft registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter by providing the requested information and either submitting an amended draft registration statement or publicly filing your registration statement on EDGAR. If you do not believe our comments apply to your facts and circums tances or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments and your amended draft registration statement or filed registration statement, we may have additional comments.
General
1. Please suppleme ntally provide us with copies of all written communications, as defined in Securities Act Rule 405, that you, or anyone authorized to do so on your behalf, present to potential investors in reliance on Securities Act Section 5(d), whether or not they retai n copies of the communications.
Christian Hogg Hutchison China MediTech Limited September 18, 2015 Page 2
2. We note that you have requested confidential treatment for several of your exhibits. We int end to send comments on your confidential treatment request under separate cover.
Prospectus Summary, page 1
3. Please disclose the extent to which you rely on PRC entities for revenue and dividends and describe how PRC restrictions on currency exchange and foreign investment impact your operations.
Our Corporate Structure, page 8
4. Please revise the chart on page 8 to in corporate pictorially the information in footn otes (5) and (7) to the chart.
The Offering, page 12
5. Please disclose what percentage of your total outstanding share capital will be held by the public and by insiders, respectively, immediately after the offering.
Risk Factors, pa ge 19
If we are unable to obtai n and/or maintain CFDA approval…, page 31
6. Refer to the following statement on page 31: “ We achieved green -channel approval from the CFDA for sulfatinib and certain of our other drug candidates. ” Please identify the other drug candidates for which you received green -channel approval from the CFDA.
Other Risks and Risks Related to Doing Business in China, page 46
7. We understand that the Chinese Ministry of Commerce recently released a draft Foreign Investment Law that may significantly change procedures for foreign investment in PRC companies. Please tell us what consideration you have given to including a risk fac tor to address the potential impact of the draft law.
Any failure to comply with PRC regulations regarding our employee, page 51
8. We note your disclosure , both here and on page 220 , concerning the application of the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Partici pating in Stock Incentive Plans of Overseas Publicly Listed Companies. Please re vise your statement on page 51 that you “may” be subject to these rules, in light of your disclosure on page 220 indicating that you are and will continue to be subject to the se rules due to your listing on the London Stock
Christian Hogg Hutchison China MediTech Limited September 18, 2015 Page 3
Exchange’s AIM and your listing in the U.S. Please also clarify whether your PRC resident employees have completed their SAFE registrations.
Certain shareholders will own a significant percentage…, page 57
9. Where you state that Hutchison Healthcare Holdings Limited will own a significant percentage of your ordinary shares after the completion of this offering, please disclose the percentage.
As a foreign private issuer, we are permitted to adopt certain home country practices, page 59
10. Please revise your discussion to include each of the home country corporate governance provisions that you intend to rely upon as disclosed under “Foreign Private Issuer Status, page 224.”
The deposit ary for our ADSs will give us a discretionary proxy, page 63
11. Please reconcile the inclusion of this risk with your disclosur e under “Voting Rights, page 263” that the depositary will vote or attempt to vote only as ADS holders instruct and will not itself exercise any voting discretion .
Use of Proceeds, page 68
12. Please expand your discussion to indicate what stage of clinical program completion you expect to achieve for each allocation of proceeds.
13. We note your disclosure that you intend to use a portion of the proceeds to repay indebtedness. Elsewhere, on page 238, you state that you intend to use proceeds from this offering to fully pay off the 2014 Scotiabank Term Loan. Please disclose in your Use of Proceeds section the additional information required by Instruction 4 to Item 504 of Regulation S -K.
Price Range of Ordinary Shares, page 78
14. Please revise to disclose information on your trading volume.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 79
Research and Development Expenses, page 80
Christian Hogg Hutchison China MediTech Limited September 18, 2015 Page 4
15. Refer to your pipeline chart on pages 3 and 115. Identify those candidates that you consider significant and disclose the following:
The costs incurred during each period presented and to d ate; The nature of efforts and steps necessary to complete the project; The risks and uncertainties associated with completing development; and The extent and nature of additional resources that need to be obtained if current liquidity is not expected to b e sufficient to complete the project.
Liquidity and Capital Resources, page 104
16. Please tell us your consideration as to disclosing the effect and expected effects of the restrictions and appropriations discussed in Notes 3 and 31 on pages F -21 and F -54, respectively, on your liquidity and capital resources.
Business, page 114
Foreign Investment and “State Secret” Technology, page 198
17. We note your disclosure that your business is deemed prohibited from any foreign investment. Discuss in detail the basis for your belief that you are in compliance with all applicable PRC laws and regulation s (and will continue to be following your proposed offering to U.S. investors). Please also make clear the extent to which your current investment structure and ownership interests have obt ained all needed approvals and licenses from applicable PRC authorities.
18. Please revise the Overview section to describe in greater detail the distinction between the “chemistry -focused approach” that you have taken and the alternative approach(es) reflected in your competitors’ drugs . Explain what prevents your competitors from refi ning their drugs to be more selective for their intended targets of interest.
Our Clinical Pipeline, page 12 2
19. For each of your products for which you are conducting clinical trials, identify the countries where the clinical trials are being condu cted.
Overview of Our Collaborations, page 167
20. With respect to the AstraZeneca Agreement and the Eli Lilly Agreement, please revise your disclosure concerning the tiered royalties in each case to indicate the potential royalties within a range of ten percent.
Patents and Other Intellectual Property, page 183
Christian Hogg Hutchison China MediTech Limited September 18, 2015 Page 5
21. Please explain the scope of an “invent ion patent” in China.
22. If you license any of the patents from third parties, please disclose that fact and identify the licensor.
PRC Regulation of Foreign Currency Exchange and Offshore Investment, page 219
23. Please expand this section to explain the following statement on page 48: “ 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 inves tment and the amount of the registered capital as approved by the Ministry of Commerce, or MOFCOM, and registered with the SAFE. ” Explain the concept of registered capital. Also describe how PRC regulation of foreign currency exchange and offshore invest ment has impacted the manner in which you and your collaboration partners have contributed f inancing to your PRC subsidiaries and joint ventures to date.
Description of Share Capital, page 243
24. Please revise your disclosure under this heading as follows:
It is not sufficient to merely reference the Companies Law, the AIM Rules, and your memorandum and articles of association, and any special rights conferred on holders, when discussing the material rights of your shareholders or information material to the rights associated with the sh ares they may own. Therefore, to the extent practicable, reduce your reliance on the term “subject to” under the headings “Dividends,” “Transfer of Ordinary Shares,” “Calls on Shares and Forfeiture of Shares,” “Variation of Rights of Shares,” and “Issuanc e of Additional Shares,” since it implies additional rights, privileges, or restrictions that are not explained in your descriptions. We also note your qualification by reference to the AIM Rules un der “AIM Rules, page 256.” Under “Voting Rights, page 244 ,” please make clear when a member must abstain from or be restricted when voting on a resolution under the AIM Rules. Also, reconcile this with your disclosure under “Transactions with Interested Shareholders, page 254.”
Differences in Corporate Law, page 250
25. We note under “U.K. Corporate Governance Code, page 227,” that you comply with the principles of the U.K. Corporate Governance Code which differs from the Cayman Islands Companies Law. Please include comparative disclosure rel ated to U.K. corporate law, as necessary.
Christian Hogg Hutchison China MediTech Limited September 18, 2015 Page 6
U.K. Taxation, page 276
26. We note your inclusion of a discussion of U.K law. Please make clear how the tax laws of the U.K. may actually affect prospective investors. Additionally, make clear whether you meet the criteria for exemption referenced in the penultimate sentence under this heading.
Hutchison China MediTech Limited
Financial Statements for the Years Ended December 31, 2014 and December 31, 2013
Consolidated Statements of Operations, F -5
27. Please revise your presentation herein and on F -60 to comply with SAB Topic 6.B. on the face of your consolidated statements of operations.
You may contact Christine Torney, Staff Accoun tant, at (202) 551 -3652 or James Rosenberg, Senior Assistant Chief Accountant, at (202) 551 -3679 if you have questions regarding comments on the financial statements and related matters. Please contact Alexandra M. Ledbetter , Staff Attorney, at (202) 551 -3317 or me at (202) 551 -3675 with any other questions.
Sincerely,
/s/ Suzanne Hayes
Suzanne Hayes
Assistant Director
Show Raw Text
Mail Stop 4546
September 18, 2015
Via E -mail
Christian Hogg
Chief Executive Officer
Hutchison China MediTech Limited
Room 2108, 21/F, Hutchison House
10 Harcourt Road
Hong Kong
Re: Hutchison China MediTech Limited
Draft Registration Statement on Form F -1
Submitted August 21, 2015
CIK No. 0001648257
Dear Mr. Hogg :
We have reviewed your draft registration statement and have the following
comments. In some of our comments, we may ask you to provide us with information so we
may better understand your disclosure.
Please respond to this letter by providing the requested information and either
submitting an amended draft registration statement or publicly filing your registration
statement on EDGAR. If you do not believe our comments apply to your facts and
circums tances or do not believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these comments and your
amended draft registration statement or filed registration statement, we may have additional
comments.
General
1. Please suppleme ntally provide us with copies of all written communications, as
defined in Securities Act Rule 405, that you, or anyone authorized to do so on your
behalf, present to potential investors in reliance on Securities Act Section 5(d),
whether or not they retai n copies of the communications.
Christian Hogg
Hutchison China MediTech Limited
September 18, 2015
Page 2
2. We note that you have requested confidential treatment for several of your exhibits.
We int end to send comments on your confidential treatment request under separate
cover.
Prospectus Summary, page 1
3. Please disclose the extent to which you rely on PRC entities for revenue and
dividends and describe how PRC restrictions on currency exchange and foreign
investment impact your operations.
Our Corporate Structure, page 8
4. Please revise the chart on page 8 to in corporate pictorially the information in
footn otes (5) and (7) to the chart.
The Offering, page 12
5. Please disclose what percentage of your total outstanding share capital will be held by
the public and by insiders, respectively, immediately after the offering.
Risk Factors, pa ge 19
If we are unable to obtai n and/or maintain CFDA approval…, page 31
6. Refer to the following statement on page 31: “ We achieved green -channel approval
from the CFDA for sulfatinib and certain of our other drug candidates. ” Please
identify the other drug candidates for which you received green -channel approval
from the CFDA.
Other Risks and Risks Related to Doing Business in China, page 46
7. We understand that the Chinese Ministry of Commerce recently released a draft
Foreign Investment Law that may significantly change procedures for foreign
investment in PRC companies. Please tell us what consideration you have given to
including a risk fac tor to address the potential impact of the draft law.
Any failure to comply with PRC regulations regarding our employee, page 51
8. We note your disclosure , both here and on page 220 , concerning the application of the
Notices on Issues Concerning the Foreign Exchange Administration for Domestic
Individuals Partici pating in Stock Incentive Plans of Overseas Publicly Listed
Companies. Please re vise your statement on page 51 that you “may” be subject to
these rules, in light of your disclosure on page 220 indicating that you are and will
continue to be subject to the se rules due to your listing on the London Stock
Christian Hogg
Hutchison China MediTech Limited
September 18, 2015
Page 3
Exchange’s AIM and your listing in the U.S. Please also clarify whether your PRC
resident employees have completed their SAFE registrations.
Certain shareholders will own a significant percentage…, page 57
9. Where you state that Hutchison Healthcare Holdings Limited will own a significant
percentage of your ordinary shares after the completion of this offering, please
disclose the percentage.
As a foreign private issuer, we are permitted to adopt certain home country practices, page 59
10. Please revise your discussion to include each of the home country corporate
governance provisions that you intend to rely upon as disclosed under “Foreign
Private Issuer Status, page 224.”
The deposit ary for our ADSs will give us a discretionary proxy, page 63
11. Please reconcile the inclusion of this risk with your disclosur e under “Voting Rights,
page 263” that the depositary will vote or attempt to vote only as ADS holders
instruct and will not itself exercise any voting discretion .
Use of Proceeds, page 68
12. Please expand your discussion to indicate what stage of clinical program completion
you expect to achieve for each allocation of proceeds.
13. We note your disclosure that you intend to use a portion of the proceeds to repay
indebtedness. Elsewhere, on page 238, you state that you intend to use proceeds from
this offering to fully pay off the 2014 Scotiabank Term Loan. Please disclose in your
Use of Proceeds section the additional information required by Instruction 4 to Item
504 of Regulation S -K.
Price Range of Ordinary Shares, page 78
14. Please revise to disclose information on your trading volume.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,
page 79
Research and Development Expenses, page 80
Christian Hogg
Hutchison China MediTech Limited
September 18, 2015
Page 4
15. Refer to your pipeline chart on pages 3 and 115. Identify those candidates that you
consider significant and disclose the following:
The costs incurred during each period presented and to d ate;
The nature of efforts and steps necessary to complete the project;
The risks and uncertainties associated with completing development; and
The extent and nature of additional resources that need to be obtained if current
liquidity is not expected to b e sufficient to complete the project.
Liquidity and Capital Resources, page 104
16. Please tell us your consideration as to disclosing the effect and expected effects of the
restrictions and appropriations discussed in Notes 3 and 31 on pages F -21 and F -54,
respectively, on your liquidity and capital resources.
Business, page 114
Foreign Investment and “State Secret” Technology, page 198
17. We note your disclosure that your business is deemed prohibited from any foreign
investment. Discuss in detail the basis for your belief that you are in compliance with
all applicable PRC laws and regulation s (and will continue to be following your
proposed offering to U.S. investors). Please also make clear the extent to which your
current investment structure and ownership interests have obt ained all needed
approvals and licenses from applicable PRC authorities.
18. Please revise the Overview section to describe in greater detail the distinction
between the “chemistry -focused approach” that you have taken and the alternative
approach(es) reflected in your competitors’ drugs . Explain what prevents your
competitors from refi ning their drugs to be more selective for their intended targets of
interest.
Our Clinical Pipeline, page 12 2
19. For each of your products for which you are conducting clinical trials, identify the
countries where the clinical trials are being condu cted.
Overview of Our Collaborations, page 167
20. With respect to the AstraZeneca Agreement and the Eli Lilly Agreement, please
revise your disclosure concerning the tiered royalties in each case to indicate the
potential royalties within a range of ten percent.
Patents and Other Intellectual Property, page 183
Christian Hogg
Hutchison China MediTech Limited
September 18, 2015
Page 5
21. Please explain the scope of an “invent ion patent” in China.
22. If you license any of the patents from third parties, please disclose that fact and
identify the licensor.
PRC Regulation of Foreign Currency Exchange and Offshore Investment, page 219
23. Please expand this section to explain the following statement on page 48: “ 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 inves tment and the amount of the registered
capital as approved by the Ministry of Commerce, or MOFCOM, and registered with
the SAFE. ” Explain the concept of registered capital. Also describe how PRC
regulation of foreign currency exchange and offshore invest ment has impacted the
manner in which you and your collaboration partners have contributed f inancing to
your PRC subsidiaries and joint ventures to date.
Description of Share Capital, page 243
24. Please revise your disclosure under this heading as follows:
It is not sufficient to merely reference the Companies Law, the AIM Rules, and
your memorandum and articles of association, and any special rights conferred on
holders, when discussing the material rights of your shareholders or information
material to the rights associated with the sh ares they may own. Therefore, to the
extent practicable, reduce your reliance on the term “subject to” under the
headings “Dividends,” “Transfer of Ordinary Shares,” “Calls on Shares and
Forfeiture of Shares,” “Variation of Rights of Shares,” and “Issuanc e of
Additional Shares,” since it implies additional rights, privileges, or restrictions
that are not explained in your descriptions. We also note your qualification by
reference to the AIM Rules un der “AIM Rules, page 256.”
Under “Voting Rights, page 244 ,” please make clear when a member must abstain
from or be restricted when voting on a resolution under the AIM Rules. Also,
reconcile this with your disclosure under “Transactions with Interested
Shareholders, page 254.”
Differences in Corporate Law, page 250
25. We note under “U.K. Corporate Governance Code, page 227,” that you comply with
the principles of the U.K. Corporate Governance Code which differs from the
Cayman Islands Companies Law. Please include comparative disclosure rel ated to
U.K. corporate law, as necessary.
Christian Hogg
Hutchison China MediTech Limited
September 18, 2015
Page 6
U.K. Taxation, page 276
26. We note your inclusion of a discussion of U.K law. Please make clear how the tax
laws of the U.K. may actually affect prospective investors. Additionally, make clear
whether you meet the criteria for exemption referenced in the penultimate sentence
under this heading.
Hutchison China MediTech Limited
Financial Statements for the Years Ended December 31, 2014 and December 31, 2013
Consolidated Statements of Operations, F -5
27. Please revise your presentation herein and on F -60 to comply with SAB Topic 6.B. on
the face of your consolidated statements of operations.
You may contact Christine Torney, Staff Accoun tant, at (202) 551 -3652 or James
Rosenberg, Senior Assistant Chief Accountant, at (202) 551 -3679 if you have questions
regarding comments on the financial statements and related matters. Please contact
Alexandra M. Ledbetter , Staff Attorney, at (202) 551 -3317 or me at (202) 551 -3675 with any
other questions.
Sincerely,
/s/ Suzanne Hayes
Suzanne Hayes
Assistant Director
cc: Paul Boltz
Ropes & Gray
Mary Kathryn Papaioannou
Ropes & Gray
Christian Hogg
Hutchison China MediTech Limited
September 18, 2015
Page 7
Jimmy Gao
Ropes & Gray