Despite yet another difficult year inflicted by the pandemic of COVID-19 on us all, the tenacity, drive and leadership in our DNA were able to deliver sustained stakeholder value.
For the year ended 31 December 2022, the Group achieved a consolidated turnover of approximately HK$1,317.7 million, with a decrease of 19.5% as compared to approximately HK$1,637.7 million in 2021.
Correspondingly, the Group’s profit decreased by 34.8% to approximately HK$225.4 million as compared to approximately HK$346.0 million in 2021. The Group’s profit was weighed down by an impairment loss of approximately HK$25.8 million on goodwill arising from the acquisition of YesDok Pte Ltd and its wholly-owned subsidiary in 2021.
The decrease in turnover and profit is primarily attributable to the surge of COVID-19 cases particularly in the second half of 2022 in a number of provinces and municipalities in the PRC, which significantly disrupted the clinical operations of hospitals in the PRC and prevented non-emergency patients from visiting hospitals and outpatient clinics during 2022. As at the date of this report, the clinical operations of hospitals and outpatient clinics have progressively resumed to normalcy.
The Group’s turnover is primarily made up of the ophthalmology segment (“Ophthalmology”) and surgical (wound care and healing) segment (“Surgical”). The core products that are current growth drivers under each segment are:
2. Surgical (wound care and healing) – Beifuji series (Beifuji spray, Beifuji lyophilised powder and Beifuxin gel), Carisolv® dental caries removal gel, 伢典醫生 (Dr. YaDian) mouth wash and 伊血安顆粒 (Yi Xue An Granules*).
The sectoral turnover of Ophthalmology and Surgical is approximately 42.0% and 58.0% of the Group’s turnover, respectively. The combined turnover of the Group’s flagship biologics, Beifushu series and Beifuji series (the basic fibroblast growth factor (bFGF) based biologic drugs), represented about 86.4% of the Group’s total turnover, of which Beifushu series and Beifuji series accounted for 29.3% and 57.1% of the Group’s turnover, respectively. The remaining 13.6% of the Group’s turnover is mainly contributed by sales of Tobramycin Eye Drops, Levofloxacin Eye Drops, Sodium Hyaluronate Eye Drops, 適麗順® (Iodized Lecithin Capsules*), Carisolv® dental caries removal gel, 伢典醫生 (Dr. YaDian) mouth wash and 伊血安顆粒(Yi Xue An Granules*), collectively.
Ophthalmology contributed approximately HK$553.6 million to the Group’s turnover for the year ended 31 December 2022, representing a decrease of 17.8% as compared to 2021. Surgical recorded a total turnover of approximately HK$764.1 million for the year ended 31 December 2022, representing a decrease of 20.8% as compared to 2021. The decrease was attributable to the aforementioned impact of COVID-19 outbreak in the PRC.
As at 31 December 2022, the Group had cash and cash equivalents of approximately HK$543.5 million (2021: approximately HK$671.3 million).
SIGNIFICANT BUSINESS DEVELOPMENT ACTIVITIES
We are committed to pragmatically investing in new products and technologies to strengthen the Group’s product and research and development (“R&D”) pipeline as near to mid-term growth driver in ophthalmology and long-term plan for new therapeutics in oncology. Major investments in ophthalmic products that are currently in an advanced stage of clinical development are outlined as follows:
Investments in Ophthalmology
In 2018, the Group entered into a co-development agreement with Mitotech S.A. (“Mitotech”) and Mitotech LLC for the United States Food and Drug Administration (the “US FDA”) phase 3 clinical trial of an ophthalmic solution containing SkQ1 for dry eye disease. As disclosed in the announcement of the Company dated 24 February 2021, positive outcome was achieved during second phase 3 clinical trial (VISTA-2). The clinical trial study repeated statistically significant positive results on key predefined secondary end-point (Central Corneal Fluorescein Staining). The board of directors of the Company (the “Board”) is enthusiastic about the read-out of clearing of central staining of the cornea (defined as zero staining in central cornea), which reveals the potential of SkQ1 in addressing oxidative stress in dry eye diseases. Following the positive trial outcome of VISTA-2, Mitotech planned a pivotal trial (VISTA-3), which should have commenced after Mitotech’s management team was satisfied by their assessment that there would be no potential disruption to trial centres and patient recruitment amidst the ongoing COVID-19 pandemic.
In order to provide the Group with flexibility and independence in the continuing development of the US FDA VISTA programme in the field of dry eye disease and allow the Group to explore further the development of other ophthalmic products for other ophthalmic indications to meet the clinical and commercial needs of the Global (as defined below) market, on 13 October 2022, the Group successfully secured (i) a patent assignment deed (the “Patent Assignment Deed”); and (ii) a patent and know-how licence agreement (the “Patent and Know-how Licence Agreement”, together with the Patent Assignment Deed, the “Agreements”) relating to SkQ1 in the field of ophthalmology from Mitotech.
Pursuant to the Patent Assignment Deed, Mitotech agreed to assign to the Group all the rights of a list of inventions and patents relating to SkQ1 in the field of ophthalmology and all ophthalmic indications.
Pursuant to the Patent and Know-how Licence Agreement, Mitotech agreed to grant the Group an exclusive, transferable and irrevocable Global licence to use a list of patents owned by Mitotech relating to SkQ1 to develop, manufacture, sell and supply any therapeutic products or therapies applied to the eye and its adnexa (the “Products”), including the full global (excluding Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia) (“Global”) right to apply for and obtain patents, to apply for and obtain Global regulatory approval for clinical trials, and to obtain marketing authorisation in relation to the Products.
Following the acquisition of the intellectual property rights relating to SkQ1 on 13 October 2022, the Group’s priority is to complete the transfer of chemistry, manufacturing and controls (CMC), know-how and intellectual property rights relating to SkQ1 from Mitotech. Concurrently, the Group is re-establishing the VISTA programme with regulators for mitigating any identifiable risks before continuing with the clinical trial. The aforementioned tasks will inevitably be time-consuming due to external factors and technical challenges involved. The Board will keep shareholders and investors informed as and when appropriate about the development status.
In 2020, the Group entered into a co-development and exclusive license agreement (the “Co-Development License Agreement”) with Shanghai Henlius Biotech, Inc. (“Henlius”) to co-develop a pharmaceutical product that contains an anti-vascular endothelial growth factor (“anti-VEGF”) as a drug substance (the “Anti-VEGF Licensed Product”), which is intended for the treatment of exudative (wet) age-related macular degeneration (“wet-AMD”). As at the date of this report, the recombinant anti-VEGF humanised monoclonal antibody injection HLX04-O (“HLX04-O”) for the treatment of wet-AMD has been approved to commence the phase 3 clinical trial in Australia, the United States, Singapore, Russia, Serbia and European Union countries such as Hungary, Spain, Latvia, the Czech Republic and Poland. Also, the first patient has been dosed in a phase 3 clinical study for HLX04-O for the treatment of wet-AMD in the PRC, Latvia, Australia and the United States.
On 22 February 2023, the Group entered into an amendment agreement with Henlius to amend certain terms of the Co-Development License Agreement, which include payments for regulatory and commercial sales milestones and development costs in respect of the Anti-VEGF Licensed Product. Please refer to the announcement of the Company dated 22 February 2023 and the annual results announcement of the Company dated 8 March 2023 for details.
Over the years, the Group has been relentlessly investing in establishing and strengthening its market access capability. As at 31 December 2022, the Group maintains a network of 43 regional sales offices in the PRC and a total number of about 1,240 sales and marketing representatives, out of which 65% are full-time employees and 35% are on contract basis or from appointed agents. The Group expanded its presence in Singapore in 2020 as a base for market access expansion into Southeast Asian countries.
For achieving a sustainable traction on growth for currently marketed products as well as for near-term to midterm new products being commercialised, the Group initiated investments to improve its competitiveness and widen its customer base under the following plans:
· investing in clinical observation programmes for affirming additional clinical indications of its commercialised products;
· reaching out to market in lower-tier cities in the PRC;
· cultivating pharmaceutical stores, where possible, as a complementary sales channel; and
· building an on-line platform for medical consultation and e-prescription for patients with chronic diseases under its healthtech initiative.
During the year under review, the Group’s therapeutic products are being prescribed in more than 10,900 hospitals and medical providers, coupled with approximately 2,130 pharmaceutical stores, which are widely located in the major cities, provinces and county cities in the PRC.
RESEARCH AND DEVELOPMENT
The R&D’s vision is emphasising the dedication to science and innovation, with a mission to develop therapeutics that would meet unmet clinical and/or commercial needs. The Group kick-started a 5-year development plan from 2021 to further strengthen its R&D capability and its position in ophthalmology.
The Group’s key R&D initiatives comprise of growth factor, antibody (i.e. mAb, bsAb, sdAb, scFv, ADC/FDC, etc.), drug formulation know-how and Blow-Fill-Seal (“BFS”) platform. Growth factor, antibody and drug formulation know-how are used for the development of therapeutic drugs in ophthalmology, surgical (wound care and healing) and oncology, whereas BFS platform is a state-of-the-art manufacturing facility for producing preservative-free unit-dose drugs, in particular for ophthalmic drugs.
As at the date of this report, there are 16 R&D programmes in the pre-clinical to clinical stage, out of which 4 ophthalmology programmes (inclusive of a new addition of EB11-21148P during the year under review) are in clinical stage. The 4 ophthalmology programmes listed below are targeted as mid-term growth driver.
As at the date of this report, the Group has obtained a total of 69 patent certificates or authorisation letters, which include 50 發明專利 (invention patents), 14 實用新型專利 (utility model patents) and 5 外觀專利 (design patents).
The Group currently has diversified its R&D resources to multiple research sites in Zhuhai (PRC), Boston (United States), London (United Kingdom) and Singapore which support not only our pursuit of new therapeutics but also our acquisition of global talent.
COVID-19 remains a major concern in 2023 globally. We continue to monitor the situation and will take appropriate actions to overcome any unforeseen challenges. Barring unforeseen circumstances, the Group remains focused on executing its plans and delivering progressive results.
To reward our valued shareholders, the Board is pleased to propose a final dividend of HK$0.025 (2021:HK$0.055) per ordinary share to be approved at the upcoming annual general meeting of the Company. Together with the interim dividend of HK$0.04 per ordinary share which was paid on 21 September 2022, the total dividend for 2022 would be HK$0.065 (2021: HK$0.095) per ordinary share.
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
8 March 2023
* For identification purpose only