For the year ended 31 December 2019, the Group achieved a consolidated turnover of approximately HK$1,279.5 million, representing an increase of 8.8% (the increase is 13.4% as compared to the results in RMB denomination) over the last year. Whereas, the Group’s consolidated profits for the year rose to approximately HK$302.5 million from approximately HK$231.1 million for the last year, representing an increase of 30.9% (the increase is 36.5% as compared to the results in RMB denomination). We are encouraged with the results amid major medical and pharmaceutical industry-related policy and regulatory changes to drive overall healthcare costs down in recent years.
Turnover from the Group’s two flagship product series – Beifushu series for ocular surface treatment and Beifuji series for surface wounds healing and treatment (collectively referred to as the “bFGF Series”), accounted for 24.7% and 54.5% of the Group’s total turnover, respectively. The turnover of the bFGF Series represented 79.2% of the Group’s total turnover for the year ended 31 December 2019. Turnover from the Group’s third party products, inclusive of Xalatan® Eye Drops, Xalacom® Eye Drops, 適麗順 (Iodized Lecithin Capsules*) and 伊血安顆粒 (Yi Xue An Granules*), collectively accounted for 20.2% of the Group’s total turnover.
The sectoral business of the Group is organised under:
1. Ophthalmology – Beifushu series and third party ophthalmic products including Xalatan® Eye Drops, Xalacom® Eye Drops and 適麗順 (Iodized Lecithin Capsules*); and
2. Surgical – Beifuji series and third party surgical products including 伊血安顆粒 (Yi Xue An Granules*)
The sectoral turnover of Ophthalmology and Surgical is approximately represented by 44.4% and 55.6% of the Group’s turnover, respectively.
As at 31 December 2019, the Group had cash and cash equivalents of approximately HK$473.3 million, representing an increase of 52.2% from the previous year.
MAJOR ACHIEVEMENTS IN 2019
New Product Approval for Commercialisation
During the year under review, the Group was granted with the approval for registration and commercialisation of preservative-free single-dose Beifushu Eye Drops in the People’s Republic of China (the “PRC”).
Honours and Awards Obtained in 2019
As announced in 2019, the Company was honourably awarded the second prize of the National Scientific and Technology Progress Award for its accomplishment in key technical breakthrough, theory innovation, and industrialisation of the cellular growth factor drugs in the PRC, a testament to the Group’s achievements.
The Company has been included by Morgan Stanley Capital International (the “MSCI”) as a constituent of the MSCI China Small Cap Index with effect from 28 May 2019. The inclusion of the Company into the index proved the worldwide recognition of the Company’s track record in capital market.
National Drug Listing
One of the bFGF Series, Beifuxin gel, has been listed on the National Drug List for Basic Medical Insurance, Work-Related Injury Insurance and Maternity Insurance (the “NDL”) issued by the National Healthcare Security Administration and the Ministry of Human Resources and Social Security of the PRC since 20 August 2019. The other three products of the bFGF Series remain listed on the NDL.
SIGNIFICANT BUSINESS DEVELOPMENT ACTIVITIES
The Group’s enrichment programme (the “Enrichment Programme”) was initiated since 2015, chiefly for expanding its research and development (“R&D”) technologies and products portfolio. Up to the date of this report, the Group has invested totalling approximately HK$432.2 million in projects and/or companies that are at different clinical stages of development of therapeutics particularly in the fields of ophthalmology and oncology, and in healthtech for therapy.
During the year under review, the Group has further invested in the followings:
The Group had entered into a co-development agreement (the “Co-Development Agreement”) with Mitotech S.A. and Mitotech LLC on 16 July 2018. Under the Co-Development Agreement (and as supplemented and revised from time to time), as at the date of this report, the Group invested approximately US$17.3 million for a clinical development in the United States Food and Drug Administration first phase 3 clinical trial (the “First P3 Trial”) of an ophthalmic solution containing SkQ1 as its sole active pharmaceutical ingredient (the “SkQ1 Product”) which shall be provided as a pharmaceutical product in the field of dry eye disease. As disclosed in the announcement of the Company dated 19 July 2019, the results of the First P3 Trial have shown positive and encouraging topline data with clinically relevant signs and symptoms in respect of efficacy and safety.
Considering the development milestones are satisfactorily achieved in respect of the SkQ1 Product, on 10 December 2019, the Group exercised the option to fund the second phase 3 clinical trial of the SkQ1 Product (the “Second P3 Trial”) up to a maximum of US$20.0 million. The first patient first visit in the Second P3 Trial has commenced in December 2019. The Second P3 Trial was originally scheduled for completion by the second quarter of 2020, but would be delayed to the third quarter of 2020 due to the disruption from the pandemic of novel coronavirus (COVID-19). As at the date of this report, the Group invested approximately US$6.1 million for the Second P3 Trial.
The Group entered into a convertible loan agreement and a subscription and shareholders deed (the“Subscription and Shareholders Deed”) with Antikor Biopharma Limited (“Antikor”) during the year under review. Antikor is an early stage biotechnology company incorporated and registered in England and Wales, focusing on the development of miniaturised antibody fragment drug conjugates (“FDCs”) for cancer therapy.
Pursuant to the Subscription and Shareholders Deed (and as supplemented and revised from time to time), the Group conditionally agreed to subscribe for ordinary shares of Antikor (the “Subscription Shares”) at the aggregate consideration of around US$3.1 million by way of several tranches, including the conversion of the convertible loan subscribed by the Group in 2019. Payment and completion of each tranche has been and will be made in accordance with the achievement and completion of the corresponding milestones. The Group has converted the principal amount of the convertible loan during the year under review. Assuming all tranches of the Subscription Shares are fully subscribed by the Group, the Subscription Shares will represent approximately 40.1% of the enlarged and fully diluted share capital of Antikor.
On 23 July 2019, the Group and Antikor entered into a license agreement, pursuant to which Antikor granted to the Group an exclusive license in relation to any therapeutic products and therapies (the “Licensed Products”) using the specified patent, know-how and technology in relation to FDCs.
The Group is enthusiastic about the investment opportunity in Antikor and is optimistic about the development and commercialisation potential of the Licensed Products. The strategic investment offers the Group with an opportunity to access to the novel and unique technology platform of FDCs in addressing the immunotherapy in oncology.
In the healthtech arena, the Group invested in 成都上工醫信科技有限公司 (Chengdu Shanggong Medical Technology Co., Ltd.*) (“Shanggong”) which was the first step into the therapy business.
Following the acquisition of around 8% of equity interest in Shanggong in 2018, on 6 December 2019, the Group further entered into a convertible loan agreement with Shanggong to make available a convertible loan in the principal amount of RMB15.0 million to Shanggong for a term of 12 months, interest-bearing at a rate of 10% per annum. The conversion of the principal amount of the convertible loan into such equity interest together with the equity interest acquired in 2018, will represent approximately 15.4% of the enlarged and fully diluted equity interest of Shanggong. As at the date of this report, the Group has not converted any of the principal amount of the convertible loan into equity interest of Shanggong.
Shanggong is a medical data analytics (AI Algorithm) company in the medical service industry in the PRC, having fully curated, quality controlled over 1 million retinal images of diabetic patents in the PRC, which forms a retinopathy big data that enables AI Algorithm to perform its diagnosis. The AI Algorithm can screen retinal images of patients and detect diabetic retinopathy, which affects almost a third of diabetes patients that would otherwise be examined by highly trained ophthalmologists.
The investment in Shanggong is a strategic consideration for enhancing the Group’s market positioning in the field of ophthalmology.
Construction of the Second Factory in the PRC
For the near-term expansion of the Group, a piece of land of about 15,000 square metres located at 珠海高新區科技創新海岸 (Zhuhai Hi-Tech Industrial Park*) was acquired in 2018. The land is within walking distance from the Group’s existing factory. The plan is to construct the Group’s second factory with a gross floor area (GFA) of about 58,000 square metres to house the Group’s R&D centre, additional manufacturing facility, administrative office and staff hostel. Construction work has started on 1 January 2020 and is expected to be completed by mid 2023.
For achieving a sustainable traction in ongoing growth amid recent significant regulatory changes on how drugs are priced and prescribed, the Group initiated the following sales and marketing strategies and tactics during the year under review:
• Investing in clinical observation programmes for affirming additional clinical indications of its commercialised products;
• Reaching out to market in lower-tier cities;
• Cultivating pharmaceutical stores, where possible, as complementary sales channel; and
• Building on-line platform for medical consultation and e-prescription for patients with chronic diseases under its healthtech initiative.
As at 31 December 2019, the Group maintains 43 regional sales offices and a total number of about 1,300 sales and marketing representatives, out of which approximately 730 people are full-time staff and approximately 570 people are on contract basis or from appointed agents.
During the year under review, the Group’s pharmaceutical products are being prescribed in around 8,600 hospitals and medical organisations, coupled with approximately 2,000 pharmaceutical stores, which are mainly located in the major cities, provinces and county cities in the PRC.
RESEARCH AND DEVELOPMENT
The Group’s key R&D initiatives comprise of growth factor, antibody (i.e. mAb, bsAb, sdAb, scFv, ADC/FDC, etc.), drug formulation and Blow-Fill-Seal (“BFS”) platform. Growth factor, antibody and drug formulation are technologies for the development of therapeutic drugs, whereas BFS platform is a state-of-the-art manufacturing plant for producing preservative-free single-dose drugs, in particular for ophthalmic drugs.
During the year under review, the Group was granted with the approval for registration and commercialisation of preservative-free single-dose Beifushu Eye Drops in the PRC.
As at the date of this report, the Group has obtained a total of 18 patent certificates or authorisation letters: 15 發明專利 (invention patents) and 3 實用新型專利 (utility model patents).
To advance our pursuits of new therapeutics programme involving antibodies that, in particular, target in oncology and ophthalmology, a wholly-owned subsidiary, EssexBio Therapeutics Inc. (“EssexBio USA”), has been incorporated in the United States on 9 March 2020. EssexBio USA is set up as the Group’s R&D centre and clinical trial management of the Group’s products in the United States. Being in the United States, EssexBio USA will position the Group with better visibility for in and out licensing potential of technologies and products.
OUTLOOK AND PROSPECTS
The outbreak of the novel coronavirus (COVID-19) has been declared a pandemic by the World Health Organisation as at the date of this report. If the outbreak remains protracted, our performances would be negatively impacted, including our R&D projects and ongoing clinical trial programmes would be delayed. We continue to monitor the situation and take all necessary actions to overcome the difficulties in this unforeseen circumstance.
The Directors have declared during the year an interim dividend of HK$0.035 (2018: HK$0.03) per ordinary share, totalling HK$20,247,745 (2018: HK$17,155,200), which was paid on 20 September 2019. To further reward our valued shareholders, the Board is pleased to propose a final dividend of HK$0.05 (2018: HK$0.033) per ordinary share to be approved at the upcoming annual general meeting of the Company.
I would like to take this opportunity to express my sincere gratitude to all stakeholders, business associates and valued customers for the trust, support and cooperation accorded to us, and each and every member of the Group for their relentless efforts rendered in shaping the Group into being a progressive and promising pharmaceutical player.
Ngiam Mia Je Patrick
17 March 2020
* For identification purpose only