707448 Edison_Fancy Cover Eng_HR.pdf 1 22/4/2019 10:53:00 AM

(Incorporated in the Cayman Islands as an exempted company with limited liability)

Sole Sponsor

Joint Global Coordinators, Joint Bookrunners, Joint Lead Managers

Joint Bookrunners, Joint Lead Managers

Joint Lead Managers IMPORTANT

IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.

VIVA BIOTECH HOLDINGS

(Incorporated in the Cayman Islands as an exempted company with limited liability) GLOBAL OFFERING Number of Offer Shares under the Global Offering : 345,000,000 Shares (subject to the Over-allotment Option) Number of Hong Kong Offer Shares : 34,500,000 Shares (subject to reallocation) Number of International Offer Shares : 310,500,000 Shares (subject to reallocation and the Over- allotment Option) Maximum Offer Price : HK$4.41 per Offer Share, plus brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) Nominal value : US$0.000025 per Share Stock code : 1873 Sole Sponsor

Joint Global Coordinators, Joint Bookrunners, Joint Lead Managers

Joint Bookrunners, Joint Lead Managers

Joint Lead Managers

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus. A copy of this prospectus, having attached thereto the documents specified in “Appendix V — Documents Delivered to the Registrar of Companies and Available for Inspection”, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document referred to above. The Offer Price is expected to be determined by agreement between the Joint Representatives and our Company on or about Tuesday, April 30, 2019 and, in any event, not later than Wednesday, May 8, 2019. The Offer Price will be not more than HK$4.41 per Offer Share and is currently expected to be not less than HK$3.42 per Offer Share, unless otherwise announced. Investors applying for the Hong Kong Offer Shares must pay, on application, the maximum Offer Price of HK$4.41 per Offer Share, together with brokerage of 1.0%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%, subject to refund if the Offer Price is less than HK$4.41 per Offer Share. The Joint Representatives, with our consent, may reduce the number of Offer Shares being offered under the Global Offering and/or the Offer Price stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, an announcement will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and on the websites of the Stock Exchange at www.hkexnews.hk and our Company at www.vivabiotech.com not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering. Details of the arrangement will then be announced by us as soon as practicable. For further information, please see the sections headed “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares”. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Joint Representatives if certain grounds arise prior to 8:00 a.m. on the Listing Date. Please see the section headed “Underwriting — Underwriting Arrangements and Expenses — The Hong Kong Public Offering — Grounds for Termination.” The Shares have not been and will not be registered under the U.S. Securities Act or any state securities law of the United States. The Company has not been and will not be registered under the U.S. Investment Company Act, in reliance on the exemption provided by Section 3(c)(7) thereof. The Offer Shares may not be offered, sold, pledged or transferred within the United States, except that Offer Shares may be offered, sold or delivered to persons who are both (i) QIBs and (ii) Qualified Purchasers, in reliance on an exemption from registration under the U.S. Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another exemption from the registration requirements of the U.S. Securities Act. The Offer Shares may be offered, sold or delivered outside of the United States to persons who are neither (i) U.S. Persons (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) nor (ii) U.S. residents (as defined for purposes of the U.S. Investment Company Act) in offshore transactions in accordance with Regulation S. Each person acquiring any Offer Shares in making such acquisition will be deemed to have made certain acknowledgments, representations and agreements as set forth in the section headed “Information About this Prospectus and the Global Offering — Restrictions on Offer and Sale of the Offer Shares” of this prospectus. April 25, 2019 EXPECTED TIMETABLE(1)

If there is any change in the following expected timetable of the Hong Kong Public Offering, we will issue an announcement in Hong Kong to be published in English in the South China Morning Post and in Chinese in the Hong Kong Economic Times.

Latest time to complete electronic applications under HK eIPO White Form service through the designated website www.hkeipo.hk(2) ...... 11:30 a.m. on Tuesday, April 30, 2019 Application lists of the Hong Kong Public Offering open(3) . . . 11:45 a.m. on Tuesday, April 30, 2019 Latest time to lodge WHITE and YELLOW Application Forms ...... 12:00 noon on Tuesday, April 30, 2019 Latest time to give electronic application instructions to HKSCC(4) ...... 12:00 noon on Tuesday, April 30, 2019 Latest time to complete payment of HK eIPO White Form applications by effecting internet banking transfer(s) or PPS payment transfer(s) ...... 12:00 noon on Tuesday, April 30, 2019 Application lists of the Hong Kong Public Offering close .... 12:00 noon on Tuesday, April 30, 2019 Expected Price Determination Date ...... Tuesday, April 30, 2019 (1) Announcement of: Š the level of applications in the Hong Kong Public Offering; Š the indication of level of interest in the International Offering; and Š the basis of allocation of the Hong Kong Offer Shares expected to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and on the websites of the Stock Exchange at www.hkexnews.hk and our Company at www.vivabiotech.com on or before ...... Wednesday, May 8, 2019 (2) Announcement of results of allocations in the Hong Kong Public Offering (including successful applicants’ identification document numbers, where appropriate) to be available through a variety of channels including the website of the Stock Exchange at www.hkexnews.hk and our Company’s website at www.vivabiotech.com (see the section headed “How to Apply for Hong Kong Offer Shares — 11. Publication of Results”) from ...... Wednesday, May 8, 2019 (3) A full announcement of the Hong Kong Public Offering containing (1) and (2) above to be published on the website of the Stock Exchange at www.hkexnews.hk(5) and our Company’s website at www.vivabiotech.com(6) from ...... Wednesday, May 8, 2019 Results of allocations in the Hong Kong Public Offering (with successful applicants’ identification document numbers where appropriate) will be available at www.tricor.com.hk/ipo/result (or www.hkeipo.hk/ IPOResult) with a “search by ID” function from ...... Wednesday, May 8, 2019 Dispatch/collection of share certificates in respect of wholly or partially successful applications pursuant to the Hong Kong Public Offering on or before(7) ...... Wednesday, May 8, 2019

i EXPECTED TIMETABLE(1)

Dispatch/collection of HK eIPO White Form e-Auto Refund payment instructions/refund cheques in respect of wholly or partially successful applications on or before(8)(9) ...... Wednesday, May 8, 2019 Dealings in Shares on the Stock Exchange expected to commence on ...... Thursday, May 9, 2019

Notes: (1) All times and dates refer to Hong Kong local time and date, except as otherwise stated. (2) You will not be permitted to submit your application through the designated website at www.hkeipo.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until 12:00 noon on the last day for submitting applications, when the application lists close. (3) If there is a tropical cyclone warning signal number 8 or above, or a “black” rainstorm warning in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, April 30, 2019, the application lists will not open on that day. Please see the section headed “How to Apply for Hong Kong Offer Shares — 10. Effect of Bad Weather on the Opening of the Application Lists”. (4) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC should refer to the section headed “How to Apply for Hong Kong Offer Shares — 6. Applying by Giving Electronic Application Instructions to HKSCC via CCASS”. (5) The announcement will be available for viewing on the Stock Exchange’s website at www.hkexnews.hk. (6) None of the website or any of the information contained on the website forms part of this prospectus. (7) Share certificates are expected to be issued on Wednesday, May 8, 2019, but will only become valid provided that the Global Offering has become unconditional in all respects and neither of the Underwriting Agreements has been terminated in accordance with its terms. Investors who trade Shares on the basis of publicly available allocation details before the receipt of share certificates and before they become valid do so entirely at their own risk. (8) Applicants who apply for 1,000,000 or more Hong Kong Offer Shares and have provided all information required in their Application Forms that they may collect Share certificates (if applicable) and refund cheques (if applicable) in person may do so from our Hong Kong Branch Share Registrar, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong from 9:00 a.m. to 1:00 p.m. on Wednesday, May 8, 2019 or any other date notified by us as the date of dispatch of Share certificates/e-Auto Refund payment instructions/refund cheques. Applicants being individuals who are eligible for personal collection must not authorize any other person to make their collection on their behalf. Applicants being corporations who are eligible for personal collection must attend by sending their authorized representatives each bearing a letter of authorization from his corporation stamped with the corporation’s chop. Both individuals and authorized representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to our Hong Kong Branch Share Registrar. Applicants who have applied on YELLOW Application Forms may not elect to collect their Share certificates, which will be deposited into CCASS for the credit of their designated CCASS Participants’ stock accounts or CCASS Investor Participant stock accounts, as appropriate. Uncollected Share certificates and refund cheques (if any) will be dispatched by ordinary post at the applicant’s own risk to the address specified in the relevant Application Form. For further information, applicants should refer to the section headed “How to Apply for the Hong Kong Offer Shares — 14. Dispatch/Collection of Share Certificates and Refund Monies” in this prospectus. (9) e-Auto Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful applications and also in respect of successful applications in the event that the Offer Price is less than the initial price per Hong Kong Offer Share payable on application. Part of your Hong Kong identity card number/passport number, or, if you are joint applicants, part of the Hong Kong identity card number/passport number of the first-named applicant, provided by you may be printed on your refund cheque, if any. Such data would also be transferred to a third party to facilitate your refund. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque. Inaccurate completion of your Hong Kong identity card number/ passport number may lead to delay in encashment of your refund cheque or may invalidate your refund cheque. Further information is set out in the section headed “How to Apply for the Hong Kong Offer Shares” in this prospectus. Applicants who apply through the HK eIPO White Form service and paid their application monies through single bank account may have refund monies (if any) dispatched to their application payment bank account, in the form of e-Auto Refund payment instructions. Applicants who apply through the HK eIPO White Form service and paid their application monies through multiple bank accounts may have refund monies (if any) dispatched to the address as specified in their application instructions to the HK eIPO White Form Services Provider, in the form of refund cheques, by ordinary post at their own risk.

You should read carefully the sections headed “Underwriting”, “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” for details relating to the structure of the Global Offering, procedures on the applications for Hong Kong Offer Shares and the expected timetable, including conditions, effect of bad weather and the dispatch of refund cheques and share certificates.

ii CONTENTS

IMPORTANT NOTICE TO PROSPECTIVE INVESTORS

This prospectus is issued by us solely in connection with the Hong Kong Public Offering and the Hong Kong Offer Shares and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Hong Kong Offer Shares offered by this prospectus pursuant to the Hong Kong Public Offering. This prospectus may not be used for the purpose of making, and does not constitute, an offer or invitation in any other jurisdiction or in any other circumstances. No action has been taken to permit a public offering of the Offer Shares in any jurisdiction other than Hong Kong and no action has been taken to permit the distribution of this prospectus in any jurisdiction other than Hong Kong. The distribution of this prospectus for purposes of a public offering and the offering and sale of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom.

You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. We have not authorized anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not made in this prospectus must not be relied on by you as having been authorized by us, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Sole Sponsor, the Underwriters, any of our or their respective directors, officers, employees, partners, agents or representatives, or any other party involved in the Global Offering.

Page Expected Timetable ...... i Contents ...... iii Summary ...... 1 Definitions ...... 11 Glossary ...... 22 Forward-looking Statements ...... 31 Risk Factors ...... 32 Waivers from Strict Compliance with the Listing Rules and Exemptions from Compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance ...... 65 Information about this Prospectus and the Global Offering ...... 72 Directors and Parties Involved in the Global Offering ...... 77 Corporate Information ...... 82 Industry Overview ...... 84 Regulatory Overview ...... 94 History, Development and Corporate Structure ...... 111 Business ...... 130 Financial Information ...... 185 Relationship with Our Controlling Shareholders ...... 231

iii CONTENTS

Page Share Capital ...... 240 Substantial Shareholders ...... 243 Cornerstone Investors ...... 245 Directors and Senior Management ...... 248 Future Plans and Use of Proceeds ...... 259 Underwriting ...... 261 Structure of the Global Offering ...... 273 How to Apply for Hong Kong Offer Shares ...... 284 Appendix I — Accountants’ Report ...... I-1 Appendix II — Unaudited Pro Forma Financial Information ...... II-1 Appendix III — Summary of the Constitution of Our Company and Cayman Islands Companies Law ...... III-1 Appendix IV — Statutory and General Information ...... IV-1 Appendix V — Documents Delivered to the Registrar of Companies and Available for Inspection ...... V-1

iv SUMMARY

This summary aims to give you an overview of the information contained in this prospectus. As this is a summary, it does not contain all the information that may be important to you. You should read the entire prospectus before you decide to invest in the Offer Shares. There are risks associated with any investment. Some of the particular risks in investing in the Offer Shares are set out in the section headed “Risk Factors” in this prospectus. You should read that section carefully before you decide to invest in the Offer Shares.

OVERVIEW We operate a leading structure-based, integrated drug discovery platform in terms of revenue in 2018 and beam time for synchrotron radiation in 2018 with a number of world-leading technologies and a scalable business model to share the upside of our customers’ IP value. We provide structure- based drug discovery services to our biotechnology and pharmaceutical customers worldwide for their pre-clinical stage innovative drug development. Our services cover the full spectrum of our customers’ needs for early stage drug discovery, including target protein expression and structure research, hit screening, lead optimization and drug candidate determination. Our patented core technologies, as well as our proprietary know-how which enables us to effectively shorten the average time required for drug discovery, are widely recognized by our customers. According to Frost & Sullivan, we provide world- leading structure-based drug discovery (SBDD) services. SBDD has resulted in faster definition of drug-binding properties and has made it easier to identify hit compounds through screening programs. We have provided drug discovery services to nine of the ten largest global pharmaceutical companies (in term of revenues in 2018), as well as hundreds of biotechnology companies and research institutes worldwide including 23 companies named in the Fierce Biotech Top 15 Promising Biotechs. As of the Latest Practicable Date, we had provided drug discovery services to over 370 biotechnology and pharmaceutical customers worldwide, worked on over 1,000 independent drug targets and delivered approximately 9,500 independent protein structures. Our mission is to become a cradle for promising biotechnology startups around the world. We have developed a scalable business model combining the conventional cash-for-service (CFS) model, under which we receive cash service fees from our non-investee customers, and our unique equity-for- service (EFS) model. Under the EFS model, we provide drug discovery and/or incubation services to selected customers in exchange for equity or economic interests in them, and to certain promising biotechnology companies which we have invested in. By holding equity/economic interest in these selected customers or investees, we can effectively foster the development of these promising biotechnology startups and enjoy the upside of their IP value, while maintaining steady cash inflow generated from services provided to our CFS customers. In addition, we may make strategic investments in biotechnology startup companies that we think are of potential for future cooperation. According to the Frost & Sullivan Report, CRO industry is conventionally a labor intensive industry and the average profit per employee of CRO service providers globally in 2018 was US$12,581. In contrast, our profit per employee in 2018 was US$51,880, which was 312% higher than the global average (or profit per employee in 2018 of US$20,709 that was 65% higher than the global average after deducting the fair value gains on financial assets at FVTPL of RMB68.3 million, share of loss from associate/joint venture of RMB3.2 million and gains on deemed/actual disposal of interests in an associate of RMB16.4 million, without taking into account relevant income tax implications), reflecting the advantages of our technology driven platform that allows us to enjoy a higher gross margin and our unique EFS model that enables us to enjoy the fair value gains in the equity interest acquired by us. Our management team and key business partners comprise of top scientists and top talents from renowned global pharmaceutical companies and prestigious biomedical research institutes, such as Pfizer Inc., Merck & Co., Abbott and Novartis, and are specialized in innovative drug R&D in diverse therapeutic fields. For example, certain members of our management team and business partners have committed to diverse areas, such as immunology, oncology, metabolism and ophthalmology and have been deeply involved in the research and development of certain marketed drugs, such as Lifitegrast for the treatment of dry eye syndrome, Sutent for the treatment of metastatic renal cell carcinoma and

1 SUMMARY

Venetoclax for the treatment of chronic lymphocytic leukemia. Led by these top scientists, we have established a scalable and reliable technology platform for innovative drug R&D. We have also introduced a “business partners” system to identify business partners from external sources and our incubation portfolio companies. With the help of the specialty and experience of our business partners, we have established a systematic, scientific and modularized incubation program which helps ensure the scalability and sustainability of our unique business model. Leveraging on our world-leading technologies and integrated platform, we are able to successfully maintain a high customer stickiness and to build up an ecosystem comprising of top scientists, talents, biotechnology startups, large pharmaceutical companies, research institutes and other industry participants. We believe that our strong value propositions to the customers and our ecosystem partners strengthen our leading position and create entry barriers for potential competitors. We have established an excellent reputation in the industry and have accumulated a diverse and growing quality customer base via word of mouth referrals. Our customers include nine out of the top 10 global pharmaceutical companies (in term of revenues in 2018) as well as 23 biotechnology companies named in the Fierce Biotech Top 15 Promising Biotechs. We also provide services to prestigious scientific research institutes such as Shanghai Jiaotong University. Since 2014, we had established two incubation centers and incubated 31 early stage R&D projects as of the Latest Practicable Date, and plan to establish several additional modularized incubation centers in Shanghai, Jiaxing and Chengdu, China. We expanded our incubation portfolio by continuously screening new projects. We added six, four and 11 incubation portfolio companies in 2016, 2017 and 2018, respectively. In addition, after the Track Record Period, we added additional four incubation portfolio companies, and plan to incubate approximately 21, 35 and 50 additional incubation projects in 2019, 2020 and 2021, respectively. As of the Latest Practicable Date, 11 of our incubation portfolio companies had completed private financing rounds. As of the Latest Practicable Date, we had realized gains from disposal of equity interest in four of our incubation portfolio companies with return rates of 212%, 494%, 200% and 315%, respectively. Gains from increases in the fair value and deemed disposal of equity interests in our incubation portfolio companies held by us was a key factor leading to the significant increase in our net profit in 2017 and 2018. We expect that our results of operations and financial performance will continue to be impacted by such fair value gains in future periods. OUR STRENGTHS We believe the following strengths have contributed to our success and differentiate us from our competitors: Š world-leading structure-based technologies that enable us to stand at the gateway for first- in-class drug discovery, Š innovative and unique business model to tap into vast pharmaceutical market, Š integrated drug discovery platform attracting top scientists and talents worldwide, Š systematic incubation program to capture the highest return of the biotechnology value chain, and Š growing ecosystem open to global industry participants. OUR STRATEGIES Our mission is to become a cradle for promising biotechnology startups around the world. We aim to leverage on our leading drug discovery capability to scalably participate in our customers’ early stage R&D activities, thereby driving and capitalizing the value of our customers’ intellectual property. We plan to execute the following key strategies to achieve our goal: Š continue to invest in cutting-edge technologies through both in-house research and development and potential acquisitions, Š further expand our incubation portfolios, Š develop CMO business to achieve vertical integration of a discovery, development and manufacturing platform, Š continue to attract and train quality talents and further strengthen our R&D team, and Š further expand our customer base.

2 SUMMARY

OUR LEADING TECHNOLOGY PLATFORMS Our core technologies include SBDD platform, FBDD platform, ASMS screening platform and membrane protein targeted drug discovery platform. In addition, we have in vitro pharmacology, medicinal chemistry research, antibody generation and molecular cloning platforms. Our technology platforms provide us with strong competitive edge and allow us to offer comprehensive services for our customers’ drug discovery projects. We have been granted seven patents in the United States and China in connection with our proprietary membrane protein targeted drug discovery technology, and our ASMS screening and FBDD platforms have been widely recognized by our customers.

In addition, according to the Frost & Sullivan Report, high precision and successful rate makes structural biology a crucial stage to rationally develop a new drug, with beam used as a main research method on structure biology. Specifically, structural analysis through synchrotron radiation accounts for more than 80% of new crystal structures submitted every year. We used more than 67% of average industrial beam time at Shanghai Light Source from 2016 to 2018, which demonstrates our leading position in drug target protein structure research in China.

OUR SERVICES According to Frost & Sullivan, we are one of the world’s top branded pre-clinical drug discovery service provider specialized in structure-based drug discovery. The following chart sets forth the structure-based drug discovery process and our services:

Gene

SBDD Cloning FBDD Gene-to- Protein expressing Protein Purification

Purified protein

Viva Compounds Library Gene-to- X-ray crystallography Viva Fragment Library Structure Structure

ASMS SPR X-ray Compounds Assay Fragments Novel hits

X-ray crystallography in vitro pharmacology(assay) Lead compounds

X-ray crystallography in vitro and in vivo pharmacology,etc. Drug candidate

Our structure based drug discovery services start from a disease relevant gene, where a target protein is produced through gene cloning, protein expression and purification. Purified proteins can be used for x-ray crystallography and bioassay developments. Hits are discovered from screening of compound or fragment libraries with affinity screening mass spectrometry (ASMS) against purified target protein and are developed into drug leads and candidates through hit-to-lead and lead optimization processes. If the hits are discovered from the fragment library, then the process is called fragment based drug discovery (FBDD). In addition, if the gene expresses a membrane protein, then the process is called membrane protein targeted drug discovery. During hit-to-lead and lead optimization, structure information from X-ray crystallography allows a better understanding of the molecular interactions of the compound with the target protein, while data from bioassay facilitate the establishment of SAR of the compounds. This SBDD capability can significantly reduce the cost of drug discovery and speed up the process.

3 SUMMARY

OUR INCUBATION PROGRAM AND BUSINESS PARTNERS According to the Frost & Sullivan Report, the incubation business model based on early stage drug discovery services has strong technical barriers. As a pioneer of this model and to leverage on our gateway role in the structure-based drug discovery process, we have established a systematic, scientific and modularized incubation program that enables us to effectively optimize our capital utilization while managing associated risks. We have also introduced an innovative “business partners” system to identify business partners consisting of top scientists from China and overseas as well as external professionals specialized in investment or project management. These business partners have diverse professional backgrounds and experience of founding successful biopharmaceutical companies or a good track record of venture investment management. Our business partners play a leading role in our incubation program as they assist us in the screening of potential candidates, advise us on the due diligence of the incubation projects, advise our incubation portfolio company on its R&D activities, and supervise our incubation portfolio companies. For our business partners who are the senior management of our existing incubation portfolio companies, they may serve as the chief scientists of our incubation project candidates or to co-invest in such candidates. For our business partners who are external professionals, we may provide a cash bonus to our business partners upon a successful exit of our equity interest in our incubation portfolio companies. Our modularized incubation center is approximately 3,000 sq.m. in size on average, and is expected to incubate 12 early stage R&D projects per year with an average turnover time of one to two years. In general, for each of our incubation projects under the EFS model, we plan to contribute an average of US$1.5 million in cash or via drug discovery services we provide, with an aim to exit 50% of our the equity/economic interest in 2.5 years after investment and the remaining interest in 5.5 years after investment. In general, we aim to receive a 10% to 30% equity/economic interest in such incubation portfolio companies through our EFS model. Under our respective incubation/service agreements, upon completion of all pre-agreed milestones, we are entitled to receive an average of 24.47% equity/economic interest in our incubation portfolio companies that we have incubated since 2014 (excluding equity interests we may receive from our investments in the form of convertible instruments). OUR CUSTOMERS AND SUPPLIERS We have a diversified customer base. During the year ended December 31, 2018, we primarily provided services to customers headquartered in the United States and PRC. As a result of our world- leading technology platforms and our quality services, we enjoy a high level of customer loyalty and have developed solid working relationships with many customers. We provided services to 107, 117 and 152 customers in the years ended December 31, 2016, 2017 and 2018, respectively, and revenue generated from our repeated customers accounted for 69.6%, 88.5% and 81.0% of our total revenue in such periods. We procure a wide variety of raw materials, such as reagents and culture media, equipment and synchrotron radiation light source. These raw materials and equipment are generally available from various suppliers in quantities adequate to meet our needs. We primarily source our raw materials and equipment from a variety of suppliers that are located in China or have branches or subsidiaries in China, and we have established detailed internal rules governing the selection of raw material suppliers and raw material quality control. We carefully select our suppliers based on various factors, including their qualifications, product selection, quality, reputation, pricing, business scale, technological strengths, quality management capabilities and overall services, and regularly monitor and review their performance. SUMMARY HISTORICAL FINANCIAL INFORMATION The summary of our historical financial information set forth below has been derived from and should be read in conjunction with our consolidated financial information, including the accompanying notes set forth in the Accountant’s Report included in Appendix I to this prospectus, as well as the information in the “Financial Information” section included in this prospectus. Our financial information was prepared in accordance with IFRS.

4 SUMMARY

Summary Consolidated Statements of Profit or Loss and Other Comprehensive Income Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue ...... 96,492 148,245 210,033 Cost of services(1) ...... (42,349) (62,056) (104,576) Gross profit ...... 54,143 86,189 105,457 Other income ...... 7,088 6,412 4,671 Other gains and losses ...... 1,808 18,953 30,934 Research and development expenses(1) ...... (16,794) (17,253) (25,251) Selling and marketing expenses(1) ...... (1,392) (2,017) (3,925) Administrative expenses ...... (12,827) (15,228) (25,576) Listing expenses ...... — — (24,274) Fair value gain on financial assets at fair value through profit or loss (“FVTPL”)...... — 14,720 68,286 Share of loss of associates ...... (1,351) (2,418) (1,748) Share of loss of joint ventures ...... (2,052) (1,694) (1,498) Finance cost ...... (203) (853) (557) Profit before fair value loss on financial liabilities at FVTPL and tax ...... 28,420 86,811 126,519 Fair value loss on financial liabilities at FVTPL ...... — — (20,658) Profit before tax ...... 28,420 86,811 105,861 Income tax expense ...... (3,947) (10,551) (15,311) Profit and total comprehensive income for the year ...... 24,473 76,260 90,550

Earnings per share ...... RMB RMB RMB —Basic ...... 0.02 0.07 0.08 —Diluted ...... 0.02 0.07 0.08

Note: (1) Cost of services, R&D expenses, selling and marketing expenses and administrative expenses include our share-based compensation, which are not tax deductible under the PRC Enterprise Income Tax Law. We recorded RMB16,000, nil, and RMB8.6 millions of our own share-based compensation for the years ended December 31, 2016, 2017 and 2018, respectively.

Breakdown of Revenue by Business Model Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from services to non-investees (CFS model): —FTE...... 55,168 65,334 117,358 —FFS...... 26,289 56,119 37,317 81,457 121,453 154,675 Revenue from services to investees (EFS model): —FTE...... 9,809 6,979 33,593 —FFS...... 3,221 3,192 1,365 —SFE...... 2,005 16,621 20,400 15,035 26,792 55,358 96,492 148,245 210,033

5 SUMMARY

Summary Consolidated Statements of Financial Position At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Current Assets ...... 65,164 83,447 241,170 Current Liabilities ...... 16,320 36,991 42,462 Net Current Assets ...... 48,844 46,456 198,708 Total Equity ...... 76,502 152,762 251,442

Summary Consolidated Statements of Cash Flows

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Net cash from operating activities ...... 21,118 27,891 12,110 Net cash used in investing activities ...... (19,589) (9,762) (69,949) Net cash from (used in) financing activities ...... (741) (849) 179,479 Net (decrease) increase in cash and cash equivalents ...... 788 17,280 121,640 Cash and cash equivalents at beginning of year ...... 12,013 13,425 29,766 Cash and cash equivalents at end of year ...... 13,425 29,766 155,554

We provide drug discovery services to our customers in exchange for cash under CFS model or for equity under EFS model. In addition, we charge our customers and recognize our revenue for drug discovery services we provide using the Full-time-equivalent (FTE), Fee-for-service (FFS) or Service- for-equity (SFE) charge methods, as applicable. Under the FTE method, we charge the customers at a pre-agreed fixed rate per FTE employee per period of time. Under the FFS method, we generally receive payments in accordance with a pre-agreed payment schedule and milestones specified in the contract or work order. Under the SFE method, we receive equity interests in our SFE customers in accordance with a pre-agreed development schedule set forth in the contract or work order. During the Track Record Period, the respective revenue that we recognized under the three charge methods was as follows:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from services to non-investees: —FTE ...... 55,168 65,334 117,358 —FFS ...... 26,289 56,119 37,317 81,457 121,453 154,675 Revenue from services to investees: —FTE ...... 9,809 6,979 33,593 —FFS ...... 3,221 3,192 1,365 —SFE ...... 2,005 16,621 20,400 15,035 26,792 55,358 96,492 148,245 210,033

During the Track Record Period, our benchmark charge rate for biologics drug discovery services was approximately US$85,000 per FTE per year, as compared to approximately US$75,000 per FTE per year for chemical drug discovery services. The total working hours of our biologics drug discovery technicians were 152,636 hours, 190,828 hours and 331,872 hours in 2016, 2017 and 2018, respectively, while the total working hours of our chemical drug discovery technicians were 52,048 hours, 81,196 hours and 253,972 hours, respectively, during the same periods.

6 SUMMARY

In addition, for the years ended December 31, 2016, 2017 and 2018, we recorded net other gains of RMB1.8 million, RMB19.0 million and RMB30.9 million, respectively. Our other gains and losses consist primarily on gains arising on disposal of interests in an associate/joint venture, net foreign exchange gain or loss and impairment loss on financial assets measured at amortized cost. The significant increases of our other gains and losses in 2017 and 2018 were primarily due to the deemed disposal of interests in our associate/joint venture, which led to a one-off fair value gain. In connection with our EFS business model, the fair value changes of our financial assets/liabilities designated at FVTPL is recurring in nature and may vary significantly from period to period.

KEY FINANCIAL RATIOS The following table sets forth certain of our key financial ratios as of the dates for the periods indicated:

Year ended December 31, 2016 2017 2018 (%) Profitability ratios Gross profit margin(1) ...... 56.1 58.1 50.2 Net profit margin(2) ...... 25.4 51.4 43.1 Return on equity(3) ...... 38.1 66.5 44.8 Notes: (1) Gross profit margin is calculated using gross profit divided by revenue and multiplied by 100%. (2) Net profit margin is calculated using profit and total comprehensive income for the year divided by revenue and multiplied by 100%. (3) Return on equity is calculated using profit and total comprehensive income for the year attributable to equity shareholders of our Company divided by the average of the opening and closing balances of total equity in the relevant year and multiplied by 100%. (4) As we do not have significant outstanding bank and other borrowings, the current and gearing ratios are not meaningful indicators of our financial position.

Please see the section headed “Financial Information — General — Key Financial Ratios” for descriptions of the calculations of the above ratios.

OUR CONTROLLING SHAREHOLDERS Immediately after the completion of the Capitalization Issue (as defined below) and the Global Offering (assuming the Over-allotment Option is not exercised and without taking into account any Shares to be issued upon the exercise of options granted under the Pre-IPO Share Incentive Schemes), Mr. Mao will be directly interested in approximately 29.31% of the total issued share capital of our Company, which includes interest held by him individually and as trustee of the Mao Investment Trust. In addition, Mr. Mao, as the investment director of the Min Zhou 2018 Family Trust as well as the manager of MZFT, LLC, is entitled to control and will continue to control the exercise of approximately 1.44% voting powers attached to the Shares in the Company directly held by MZFT, LLC immediately upon completion of the Global Offering. By virtue of being the trustee of the Min Zhou 2018 Family Trust to which Mr. Mao is a beneficiary, Concord Trust Company, LLC and Mr. Mao are presumed to be a group of Controlling Shareholders of our Company. Accordingly, Mr. Mao and Concord Trust Company, LLC will be our Controlling Shareholders upon Listing as defined under the Listing Rules, with an aggregate of approximately 30.75% voting powers in our Company immediately upon completion of the Global Offering. For more details of the Min Zhou 2018 Family Trust, please refer to the section headed “History, Development and Corporate Structure.” Mr. Mao is one of our founders, as well as the Chairman, chief executive officer and executive Director of our Company. For further background information of Mr. Mao, see the section headed “Directors and Senior Management.”

DIVIDEND POLICY Pursuant to a resolution passed by our Board on April 13, 2019, we declared a special dividend in the amount of RMB128,686,000 to the shareholders listed on our register of members on March 24, 2019, which amount was determined based on the accumulated distributable reserve for the period

7 SUMMARY from the inception of the Group to December 31, 2018 (excluding any unrealized fair value gains from the equity interest of our incubation portfolio companies held by us) as determined based on the audited consolidated financial statements and unaudited management accounts prepared in accordance with IFRS. Such special dividend is expected to be paid out of our profits and share premium account prior to the completion of our Global Offering. Our Directors are of the view that we will have sufficient cash resources to pay such special dividend from (i) cash and cash equivalent held our Company, (ii) cash inflow from our operation activities and (iii) dividends received from our Subsidiaries. In the event our Company does not have sufficient cash for the proposed special dividend distribution, subject to the approval by our existing Shareholders, we may consider lowering the amount of the special dividends or paying off the special dividends with the proceeds received from our Pre-IPO Investment. We may declare and pay dividends by way of cash or by other means that we consider appropriate in the future. Distribution of dividends shall be formulated by our Board at its discretion and will be subject to shareholders’ approval. A decision to declare or to pay any dividends in the future, and the amount of any dividends, will depend on, among other things, our results of operations, cash flows and financial condition, operating and capital expenditure requirements, distributable profits as determined under IFRS, our Articles of Association, the Companies Law and any other applicable law and regulations and other factors that our Directors may consider relevant. In addition, declaration and/or payment of dividends may be limited by legal restrictions and/or by financing agreements that we may enter into in the future. Our Board currently intends, subject to the approval of our shareholders and unless otherwise required by applicable laws, to distribute to our shareholders up to 30% of any distributable profit (excluding any unrealized fair value gains from our incubation portfolio companies) for the financial year ending December 31, 2019 and each year thereafter provided that the Company shall have sufficient working capital for business operations. There is, however, no assurance that dividends of such amount or any amount will be declared or distributed in such year or in any given year. GLOBAL OFFERING STATISTICS(1) Based on the Offer Based on the Offer Price of HK$3.42 Price of HK$4.41 Market capitalization of our Shares(2) ...... HK$5,130,000,000 HK$6,615,000,000 Unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company per Share(3) ...... HK$0.99 HK$1.20

Notes: (1) All statistics in this table are based on the assumption that the Over-allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised. (2) The calculation of market capitalization is based on Shares expected to be in issue immediately after completion of the Global Offering. (3) The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company per Share is calculated after making the adjustments referred to in “Financial Information — Unaudited Pro Forma Adjusted Consolidated Net Tangible Assets” and on the Shares expected to be in issue immediately after completion of the Global Offering. No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group as at December 31, 2018 to reflect any trading result or other transactions of the Group entered into subsequent to December 31, 2018. In particular, the unaudited pro forma adjusted consolidated net tangible assets of the Group have not been adjusted to illustrate the effect of the planned dividend distribution by the Group as detailed in Financial Information section of this Prospectus and the conversion of Series B Preferred Shares into ordinary shares upon IPO completion. The planned dividend distribution would have decreased the unaudited pro forma adjusted consolidated net tangible assets of the Group at December 31, 2018 by RMB128,686,000. The conversion of Series B Preferred Shares would have reclassified the Series B Preferred Shares amounting to RMB220,600,000 to equity and increased the unaudited proforma adjusted consolidated net tangible assets of the Group at December 31, 2018 by RMB220,600,000. The unaudited pro forma adjusted consolidated net tangible assets of the Group as at December 31, 2018 after taking into account the planned dividend distribution and conversion of the Series B Preferred Shares would have been RMB1,275,462,000 and RMB1,541,301,000 respectively, while the unaudited pro forma adjusted consolidated net tangible assets of the Group as at December 31, 2018 per Share would have been HK$0.99 and HK$1.20, respectively, based on low end and high end of the Offer Price. USE OF PROCEEDS Using the Offer Price of HK$3.92 per Offer Share, we estimate that we will receive net proceeds from the Global Offering of approximately HK$1,231.7 million, assuming that there is no exercise of the Over-allotment Option. We currently intend to apply such net proceeds for the following purposes: (a) approximately 30%, or HK$369.5 million, will be used for expanding our EFS model to add more promising biotechnology startups in China and overseas to our incubation

8 SUMMARY

portfolio, among which HK$258.6 million is expected to be used for drug discovery services provided to potential incubation portfolio companies adopting EFS model while HK$110.8 million is expected to be used for future strategic investments; (b) approximately 30%, or HK$369.5 million, will be used for building up our commercial and research manufacturing capabilities and capacities both in biologics CMO and chemistry CMO areas, which potentially includes acquiring land parcels, constructing relevant facilities, completing renovations and expanding our office spaces. In early 2018, we started preliminary discussions with a local government authority in Chengdu regarding potentially acquiring a land parcel for the purpose of constructing new biologics manufacturing facilities, which is pending on the completion of all necessary procedures set forth in the agreement. (c) approximately 10%, or HK$123.2 million, will be used for purchasing laboratory equipment and materials in accordance with our expansion plans, such as cell incubators, centrifuges, bioreactors, ultra-low degree freezer, ultrafiltration/diafiltration system, cell metric CLD, cedex bio HT analyzer and fill/finish system; (d) approximately 10%, or HK$123.2 million, will be used for hiring, training and retaining biologics and chemical drug research and development personnel, which is expected to reach 500 staffs by the end of 2019 and to consist of bachelors, masters and doctors with biology or chemistry related majors, and their respective annual salaries will be determined in accordance with their credentials and work experience; (e) approximately 10%, or HK$123.2 million, will be used for expanding our CMO business by acquisition or alliance, which potentially includes acquiring new technologies, businesses or services, such as technologies for upstream process biologic development, downstream process biologics capability or a small molecule CMO facility, and/or entering into strategic alliances with third parties; and (f) approximately 10%, or HK$123.2 million, will be used for our general corporate and working capital purposes.

LISTING EXPENSES The total amount of listing expenses, including commissions together with SFC transaction levy and Stock Exchange trading fee that will be borne by us in connection with the Global Offering, is estimated to be approximately RMB103.3 million, of which approximately RMB65.0 million is expected to be capitalized after the Listing. The remaining approximately RMB38.3 million fees and expenses is expected to be charged to our profit and loss accounts.

REGULATORY COMPLIANCE AND LEGAL PROCEEDINGS During the Track Record Period and up to the Latest Practicable Date, we had not been and were not involved in any material noncompliance incidents or legal proceedings that have led to fines, enforcement actions or other penalties that could, individually or in the aggregate, have a material adverse effect on our business, financial condition and results of operations.

RECENT DEVELOPMENTS AND NO ADVERSE CHANGE After the Track Record Period, we added four additional incubation portfolio companies. Please refer to “Business — Our Incubation Program and Business Partners — Our Incubation Portfolio Companies” for details. As of the Latest Practicable Date, no material adverse change has occurred with respect to the regulatory approvals we have received in relation to our operations. Our Directors confirm there has been no material adverse change in our financial, operational, or trading positions or prospects since December 31, 2018, which is the end of the period covered by the Accountant’s Report as set out in Appendix I of this prospectus, and up to the date of this prospectus.

CAPITALIZATION ISSUE Subject to the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the issue of Offer Shares pursuant to the Global Offering, our Directors

9 SUMMARY shall be authorized to allot and issue a total of 102,394,632 Shares credited as fully paid at par value to the Shareholders on the register of members of our Company at the close of business on the date immediately preceding the date on which the Global Offering becomes unconditional (or as it/they may direct) in proportion to their respective shareholdings in the Company (as nearly as possible without fractions) by way of capitalization of the sum of US$2,559.87 standing to the credit of the share premium account of our Company, and the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the then existing issued Shares (the “Capitalization Issue”).

RISK FACTORS There are certain risks relating to an investment in our Shares. These risks can be broadly categorized into: (i) risks relating to our business and industry; (ii) risks relating to doing business in China; and (iii) risks relating to the Global Offering. A detailed discussion of the risk factors is set forth in the section headed “Risk Factors”. A summary of certain of these risk factors is set forth below. Any of the following developments may have a material and adverse effect on our business, financial condition, results of operations and prospects: Š Our business largely depends on our customers’ demand for outsourced services and their R&D budget, and any reduction in our customers’ demand or budget could have a material adverse effect on our business, financial condition, results of operations and prospects. Š Our success depends on our ability to attract, train and retain highly skilled scientists and other technical personnel. Š We may not be able to realize our anticipated investment returns from our incubation portfolio companies. Š Valuation methodologies for our investments can involve subjective judgments, and our financial condition and results of operations may be materially impacted by gains or losses arising from changes in the fair value of the equity interest that we hold in our incubation portfolio companies. Š The due diligence process that we undertake in connection with investments in our incubation portfolio companies may not reveal all facts that may be relevant in connection with an investment. Š We face liquidity risks relating to our incubation portfolio companies. Š Changes in government regulations or in practices relating to the pharmaceutical and biotechnology industries could decrease demand for the services we provide, and compliance with new regulations may result in additional costs. Š Adverse changes in the PRC economic, political and social conditions as well as laws and government policies, may materially and adversely affect our business, financial condition, results of operations and prospects. Š You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China against us or our management named in the documents based on Hong Kong or other foreign laws. Š No public market currently exists for our Shares; an active trading market for our Shares may not develop and the market price for our Shares may decline or become volatile. Š Facts, forecasts and statistics in this prospectus relating to the PRC economy and healthcare industry may not be fully reliable. You should read the entire section headed “Risk Factors” in this prospectus before you decide to invest in the Offer Shares.

APPLICATION FOR LISTING ON THE STOCK EXCHANGE We have applied to the Listing Committee for the granting of the listing of, and permission to deal in, the Shares in issue immediately before the Global Offering, the Offer Shares to be issued by us pursuant to the Global Offering (including any Shares which may be issued pursuant to the exercise of the Over-allotment Option) and Shares which may be issued pursuant to the exercise of the options granted under the Pre-IPO Share Incentive Schemes or any option that may be granted under the Post- IPO Share Option Scheme.

10 DEFINITIONS

In this prospectus, the following expressions shall have the meanings set out below unless the context otherwise requires.

“Absolute Ventures” Absolute Ventures Limited, one of our Pre-IPO Investors, the details of which are set out in the section headed “History, Development and Corporate Structure”

“affiliate(s)” any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person

“Application Form(s)” WHITE, YELLOW and GREEN application form(s) relating to the Hong Kong Public Offering or, where the context so requires, any of them

“Application Lists” the application lists for the Hong Kong Public Offering

“Articles” or “Articles of the amended and restated articles of association of our Company Association” conditionally adopted on April 14, 2019 and will come into effect upon Listing (as amended, supplemented or otherwise modified from time to time), a summary of which is set out in Appendix III to this prospectus

“associate(s)” has the meaning ascribed thereto under the Listing Rules

“Board” the board of Directors

“Business Day” a day that is not a Saturday, Sunday or public holiday in Hong Kong

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing participant or a general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian participant

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor participant, which may be an individual, joint individuals or a corporation

“CCASS Operational the Operational Procedures of HKSCC in relation to CCASS, Procedures” containing the practices, procedures and administrative

11 DEFINITIONS

requirements relating to operations and functions of CCASS, as from time to time in force

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant

“Chairman” the chairman of our Board

“China” or “the PRC” the People’s Republic of China excluding, for the purposes of this prospectus, Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan

“China Finance Strategies” China Finance Strategies Investment DB Limited, a company incorporated in the BVI on December 15, 2006, which is wholly owned by Mr. Hua

“close associate(s)” has the meaning ascribed thereto under the Listing Rules

“CMO” contract manufacturing organization

“Companies Law” the Companies Law (2018 Revision) of the Cayman Islands (as amended, supplemented or otherwise modified from time to time)

“Companies Ordinance” the Companies Ordinance, Chapter 622 of the Laws of Hong Kong (as amended, supplemented or otherwise modified from time to time)

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions) Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong (as amended, Ordinance” supplemented or otherwise modified from time to time)

“Company” or “our Company” Viva Biotech Holdings ( ), an exempted company with limited liability incorporated in the Cayman Islands on August 27, 2008

“connected person(s)” has the meaning ascribed thereto under the Listing Rules

“connected transaction(s)” has the meaning ascribed thereto under the Listing Rules

“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules and, unless the context requires otherwise, refers to Mr. Mao and Concord Trust Company, LLC (for more details, see the section headed “Relationship with Our Controlling Shareholders”)

“core connected person(s)” has the meaning ascribed thereto under the Listing Rules

“Corporate Governance Code” the Corporate Governance Code set out in Appendix 14 to the Listing Rules

“CRO” contract research organization

12 DEFINITIONS

“CSRC” China Securities Regulatory Commission (中國證券監督管理委員 會)

“Deed of Non-Competition” the deed of non-competition executed by Mr. Mao in favor of us on April 16, 2019, as further described in “Relationship with our Controlling Shareholders — Non-competition Undertakings” in this prospectus

“Deed of Undertakings” the deed of undertakings executed by Mr. Mao, Mr. Wu, Mr. Hua, Mr. Ren Delin, Ms. Mao and Mr. John Wu Jiong, in favor of us on April 15, 2019, as further described in “Relationship with our Controlling Shareholders — Directors’ Interests in Our Incubation Portfolio Companies” in this prospectus

“Director(s)” the director(s) of our Company

“EIT” enterprise income tax

“EIT Law” the PRC Enterprise Income Tax Law

“FengHe Canary” FengHe Canary Limited, one of our Pre-IPO Investors, the details of which are set out in the section headed “History, Development and Corporate Structure”

“Fenghe Harvest” Fenghe Harvest Ltd, a company incorporated in the BVI on July 1, 2014, which is wholly-owned by Mr. John Wu Jiong, a non- executive Director of our Company

“Fohan Capital” Fohan Capital Limited, one of our Pre-IPO Investors, the details of which are set out in the section headed “History, Development and Corporate Structure”

“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a global market research and consulting company, which is an Independent Third Party

“Frost & Sullivan Report” the industry report issued by Frost & Sullivan

“General Rules of CCASS” General Rules of CCASS published by the Stock Exchange and as amended from time to time

“Global Offering” the Hong Kong Public Offering and the International Offering

“GREEN application form(s)” the application form(s) to be completed by the HK eIPO White Form Service Provider

“Group”, “our Group”, “our”, our Company and its subsidiaries or, where the context so requires, “we” or “us” in respect of the period before our Company became the holding company of our present subsidiaries, the business operated by such subsidiaries or their predecessors (as the case may be)

13 DEFINITIONS

“HK eIPO White Form” the application for Hong Kong Offer Shares to be issued in the applicant’s own name by submitting applications online through the designated website at www.hkeipo.hk

“HK eIPO White Form Service the HK eIPO White Form Service Provider designated by our Provider” Company, as specified on the designated website at www.hkeipo.hk

“HKSCC” Hong Kong Securities Clearing Company Limited

“HKSCC Nominees” HKSCC Nominees Limited, a wholly owned subsidiary of HKSCC

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Hong Kong Branch Share Tricor Investor Services Limited Registrar”

“Hong Kong dollars” or “HK Hong Kong dollars and cents respectively, the lawful currency of dollars” or “HK$” Hong Kong

“Hong Kong Offer Shares” the 34,500,000 Offer Shares initially being offered by us for subscription pursuant to the Hong Kong Public Offering, subject to reallocation as described in the section headed “Structure of the Global Offering”

“Hong Kong Public Offering” the offer for subscription of the Hong Kong Offer Shares to the public in Hong Kong (subject to reallocation as described in the section headed “Structure of the Global Offering”) at the Offer Price (plus brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%) on the terms and subject to the conditions described in this prospectus and the Application Forms, as further described in section headed “Structure of the Global Offering — The Hong Kong Public Offering”

“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering as listed in the section headed “Underwriting — Hong Kong Underwriters”

“Hong Kong Underwriting the underwriting agreement dated April 24, 2019 relating to the Agreement” Hong Kong Public Offering and entered into by, among others, our Company, Mr. Mao, the Joint Representatives, the Joint Global Coordinators and the Hong Kong Underwriters

“ICH” The International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use, an international association and a legal entity established under Swiss law which aims at bringing together the regulatory authorities and pharmaceutical industry to discuss scientific and technical aspects of drug registration. The participating jurisdictions include Europe,

14 DEFINITIONS

the United States, Japan, Canada, Switzerland, Brazil, Republic of Korea, Singapore, China, Chinese Taipei, India, Cuba, Mexico, Colombia, Moldova, Kazakhstan, Malaysia, Iran, Russia, South Africa, Armenia, Australia and Turkey

“IFRS” International Financial Reporting Standards, as issued from time to time by the International Accounting Standards Board

“independent third party(ies)” a person or entity who/which is not a connected person or associate of a connected person of our Company under the Listing Rules

“International Offer Shares” the 310,500,000 Offer Shares initially being offered by us for subscription under the International Offering together, which does not include any additional Shares that may be allotted and issued pursuant to the exercise of the Over-allotment Option, and subject to reallocation as described in the section headed “Structure of the Global Offering”

“International Offering” the conditional placing by the International Underwriters of the International Offer Shares at the Offer Price (a) in the United States to persons who are both (i) QIBs and (ii) Qualified Purchasers, in reliance on an exemption from registration under the U.S. Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another exemption from the registration requirements of the U.S. Securities Act; and (b) outside the United States to persons who are neither (i) U.S. Persons (as defined in Regulation S) nor (ii) U.S. residents (as defined for purposes of the U.S. Investment Company Act) in offshore transactions in accordance with Regulation S, as further described in the section headed “Structure of the Global Offering”

“International Underwriters” the underwriters of the International Offering

“International Underwriting the underwriting agreement relating to the International Offering Agreement” and expected to be entered into on or about April 30, 2019 by, among others, our Company and the International Underwriters

“Jiaxing Viva” Jiaxing Viva Biotech Limited (嘉興維亞生物科技有限公司), a limited liability company established in the PRC on March 19, 2014, and an indirect wholly-owned subsidiary of our Company

“JMCR” JMCR Partners Limited, one of our Pre-IPO Investors, the details of which are set out in the section headed “History Development and Corporate Structure”

“Joint Bookrunners” China International Capital Corporation Hong Kong Securities Limited, J.P. Morgan Securities plc (in relation to the International Offering only) and J.P. Morgan Securities (Asia Pacific) Limited (in relation to the Hong Kong Public Offering

15 DEFINITIONS

only), Nomura International (Hong Kong) Limited, BOCI Asia Limited, China Renaissance Securities (Hong Kong) Limited and Haitong International Securities Company Limited

“Joint Global Coordinators” China International Capital Corporation Hong Kong Securities Limited, J.P. Morgan Securities (Asia Pacific) Limited and Nomura International (Hong Kong) Limited

“Joint Lead Managers” China International Capital Corporation Hong Kong Securities Limited, J.P. Morgan Securities plc (in relation to the International Offering only) and J.P. Morgan Securities (Asia Pacific) Limited (in relation to the Hong Kong Public Offering only), Nomura International (Hong Kong) Limited, BOCI Asia Limited, China Renaissance Securities (Hong Kong) Limited, Haitong International Securities Company Limited, Daiwa Capital Markets Hong Kong Limited and First Shanghai Securities Limited

“Joint Representatives” in relation to the Hong Kong Public Offering only, China International Capital Corporation Hong Kong Securities Limited (for itself and on behalf of the Hong Kong Underwriters other than J.P. Morgan Securities (Asia Pacific) Limited) and J.P. Morgan Securities (Asia Pacific) Limited; and in relation to the International Offering only, China International Capital Corporation Hong Kong Securities Limited (for itself and on behalf of the International Underwriters other than J.P. Morgan Securities plc), J.P. Morgan Securities (Asia Pacific) Limited and J.P. Morgan Securities plc

“Latest Practicable Date” April 15, 2019, being the latest practicable date for the purpose of ascertaining certain information contained in this prospectus prior to its publication

“Listing” listing of the Shares on the Stock Exchange

“Listing Committee” the listing committee of the Stock Exchange

“Listing Date” the date, expected to be on or about Thursday, May 9, 2019, on which the Shares are listed on the Stock Exchange and from which dealings in the Shares are permitted to commence on the Stock Exchange

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended, supplemented or otherwise modified from time to time)

“Mao and Sons” Mao and Sons Limited, a company incorporated in the BVI on January 23, 2018, which is indirectly wholly owned by the trustee of the Z&M Trust, a revocable family trust set up by Ms. Mao as settlor and protector

16 DEFINITIONS

“Memorandum of Association” the memorandum of association of our Company, conditionally or “Memorandum” adopted on April 14, 2019 and will come into effect upon Listing (as amended from time to time)

“MOFCOM” Ministry of Commerce of the PRC (中華人民共和國商務部)

“Morning Star” Morning Star Resources Limited, one of our Pre-IPO Investors, the details of which are set out in the section headed “History, Development and Corporate Structure”

“Mr. Hua” Mr. Hua Fengmao, one of our founders, the chief financial officer and executive Director of the Company

“Mr. Mao” Mr. Mao Chen Cheney, one of our founders, the Chairman, chief executive officer and executive Director of the Company

“Mr. Wu” Mr. Wu Ying, one of our founders, the executive vice president and executive Director of the Company

“Ms. Mao” Ms. Mao Jun, a non-executive Director of the Company and the sister of Mr. Mao

“NMPA” National Medical Products Administration of the PRC (formerly known as CFDA)

“Offer Price” the final HK dollar price per Offer Share (exclusive of brokerage fee of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%), which will be not more than HK$4.41 and not less than HK$3.42, to be determined as described in the section headed “Structure of the Global Offering — Pricing of the Global Offering”

“Offer Shares” the Hong Kong Offer Shares and the International Offer Shares

“Over-allotment Option” the option expected to be granted by us to the International Underwriters exercisable by the Joint Representatives under the International Underwriting Agreement, to require us to allot and issue up to additional 51,750,000 Shares at the Offer Price, representing up to 15% of the total number of Offer Shares initially available under the Global Offering to cover over- allocations in the International Offering, if any

“PBOC” People’s Bank of China (中國人民銀行)

“Pre-IPO Investment” the pre-IPO investment in the Company undertaken by the Pre- IPO Investors pursuant to the Series B Preferred Share Purchase Agreement and the Shareholders Agreement, the details of which are set out in the section headed “History, Development and Corporate Structure”

17 DEFINITIONS

“Pre-IPO Investors” Absolute Ventures, Zhang and Sons, T&C Biotech, FengHe Canary, Wu and Sons, Morning Star, Shanghai Wisdomont, Tian Hsin Bio-Medical, JMCR and Fohan Capital

“Pre-IPO Share Incentive the 2009 Stock Incentive Plan, the 2018 Stock Incentive Plan and Schemes” the Pre-IPO Stock Incentive Plan, the principal terms of which are summarized in “Statutory and General Information — D. Share Incentive Schemes — 1. Pre-IPO Share Incentive Schemes” in Appendix IV to this prospectus

“Pre-IPO Stock Incentive Plan” the pre-IPO stock incentive plan approved and adopted by the Company on June 21, 2018, the principal terms of which are summarized in “Statutory and General Information — D. Share Incentive Schemes — 1. Pre-IPO Share Incentive Schemes” in Appendix IV to this prospectus

“Price Determination Date” the date, expected to be on or about Tuesday, April 30, 2019 (Hong Kong time) and in any event no later than Wednesday, May 8, 2019, on which the Offer Price is to be fixed by an agreement among the Company and the Joint Representatives

“QIBs” qualified institutional buyers within the meaning of Rule 144A

“Qualified Purchaser” any person that, at the time of acquisition, purported acquisition or proposed acquisition of Shares or an interest therein, is a qualified purchaser as defined in Section 2(a)(51)(A) of the U.S. Investment Company Act

“Qualifying Investment Vehicle” a fund that is relying on Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act whose beneficial owners have consented to such fund’s treatment as a Qualified Purchaser in accordance with the consent procedures in Section 2(a)(51)(C) of the U.S. Investment Company Act

“R&D” research and development

“Regulation S” Regulation S under the U.S. Securities Act

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

“Rule 144A” Rule 144A under the U.S. Securities Act

“SAFE” State Administration of Foreign Exchange of the PRC (中華人民共 和國外匯管理局)

“SAIC” State Administration for Industry and Commerce of the PRC (中華 人民共和國國家工商行政管理總局)

“SAT” State Administration of Taxation of the PRC (中華人民共和國國家 稅務總局)

18 DEFINITIONS

“SEC” United States Securities and Exchange Commission

“Series B Preferred Share the series B preferred share purchase agreement dated June 21, Purchase Agreement” 2018 among the Company, Viva Biotech HK, Viva Biotech Shanghai, Jiaxing Viva, Viva Incubator Shanghai, Viva Incubator HK, Mr. Mao and the Pre-IPO Investors, the details of which are set forth in the section headed “History, Development and Corporate Structure”

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong (as amended, supplemented or otherwise modified from time to time)

“Shanghai Wisdomont” Shanghai Wisdomont Xingqian Investment Center (Limited Partnership) (上海盛山興錢創業投資中心（有限合夥）), one of our Pre-IPO Investors, the details of which are set out in the section headed “History Development and Corporate Structure”

“Share(s)” ordinary share(s) in the share capital of our Company with a par value of US$0.000025 each

“Shareholder(s)” holder(s) of the Share(s)

“Shareholders Agreement” The shareholders agreement dated June 21, 2018 among the Company, Viva Biotech HK, Viva Biotech Shanghai, Jiaxing Viva, Viva Incubator Shanghai, Viva Incubator HK, the ordinary shareholders of the Company, including Mr. Mao, MZFT, LLC, Mao and Sons, Zhang and Sons, Fenghe Harvest, Wu and Sons, China Finance Strategies, Tian Hsin Bio-Medical, Chi Lik Yim, James Qun Mi and the Pre-IPO Investors, the details of which are set forth in the section headed “History, Development and Corporate Structure”

“Share Split” the subdivision of each authorized issued and unissued share of a par value of US$0.0001 each in the Company into 4 shares of a par value of US$0.000025 each pursuant to the resolutions passed by our Shareholders on April 14, 2019, the details of which are set out in “Statutory and General Information — A. Further Information about the Group — 4. Resolutions of the Shareholders of our Company Passed on April 14, 2019” in Appendix IV to this prospectus

“Sichuan Viva” Sichuan Viva Benyuan Biotech Limited (四川維亞本苑生物科技有 限公司), a limited liability company established in the PRC on October 30, 2018, and an indirect wholly-owned subsidiary of our Company

19 DEFINITIONS

“Sole Sponsor” China International Capital Corporation Hong Kong Securities Limited

“Stabilizing Manager” China International Capital Corporation Hong Kong Securities Limited

“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered into between the Stabilizing Manager and Mr. Mao

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary” has the meaning ascribed thereto under section 15 of the Companies Ordinance

“substantial shareholder(s)” has the meaning ascribed thereto under the Listing Rules

“T&C Biotech” T&C Biotech L.P., one of our Pre-IPO Investors, the details of which are set out in the section headed “History, Development and Corporate Structure”

“Takeovers Code” the Code on Takeovers and Mergers and Share Buy-backs, as published by the SFC (as amended, supplemented or otherwise modified from time to time)

“Tian Hsin Bio-Medical” Tian Hsin Bio-Medical Investment Limited, a company incorporated in Hong Kong on March 15, 2016, which is wholly owned by Mr. Hua Zhengmao, the brother of Mr. Hua

“Track Record Period” the years ended December 31, 2016, 2017 and 2018

“Underwriters” the Hong Kong Underwriters and the International Underwriters

“Underwriting Agreements” the Hong Kong Underwriting Agreement and the International Underwriting Agreement

“United States” or “U.S.” the United States of America, its territories, its possessions and all areas subject to its jurisdiction

“U.S. dollars” or “US$” United States dollars, the lawful currency of the United States

“U.S. Investment Company Act” United States Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder

“U.S. Securities Act” United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder

“Viva Biotech HK” Viva Biotech Limited (維亞生物科技有限公司), a limited company incorporated in Hong Kong on June 17, 2008, and a direct wholly- owned subsidiary of the Company

20 DEFINITIONS

“Viva Biotech Shanghai” Viva Biotech (Shanghai) Ltd. (維亞生物科技（上海）有限公司), a limited liability company established in the PRC on August 14, 2008, and an indirect wholly-owned subsidiary of the Company

“Viva Incubator HK” Viva Incubator Investment Management Limited (維亞孵化器投資 管理有限公司), a limited company incorporated in Hong Kong on March 20, 2017, and an indirect wholly-owned subsidiary of the Company

“Viva Incubator Shanghai” Shanghai Benyuan Entrepreneurship Incubator Management Limited (上海本苑創業孵化器管理有限公司), a limited liability company established in the PRC on December 7, 2015, and an indirect wholly-owned subsidiary of the Company

“WHITE Application Form(s)” the application form(s) for the Hong Kong Offer Shares for use by the public who require such Hong Kong Offer Shares to be issued in the applicant’s own name

“Wu and Sons” Wu and Sons Limited, a company incorporated in the BVI on January 23, 2018, which is wholly owned by Mr. John Wu Jiong, our non-executive Director

“YELLOW Application the application form(s) for the Hong Kong Offer Shares for use by Form(s)” the public who require such Hong Kong Offer Shares to be deposited directly into CCASS

“Zhang and Sons” Zhang and Sons Limited, a company incorporated in the BVI on January 23, 2018, which is indirectly wholly owned by the trustee of the Z&M Trust, a revocable family trust set up by Ms. Mao as settlor and protector

“%” per cent

“2009 Stock Incentive Plan” The stock incentive plan approved and adopted by the Company on July 1, 2009 and as amended and restated on June 8, 2018, the principal terms of which are summarized in “Statutory and General Information — D. Share Incentive Schemes — 1. Pre-IPO Share Incentive Schemes” in Appendix IV to this prospectus

“2018 Stock Incentive Plan” The stock incentive plan approved and adopted by the Company on January 1, 2018 and as amended and restated on June 8, 2018, the principal terms of which are summarized in “Statutory and General Information — D. Share Incentive Schemes — 1. Pre-IPO Share Incentive Schemes” in Appendix IV to this prospectus

The English names of the PRC entities or companies established in the PRC, PRC laws or regulations, and the PRC governmental authorities referred to in this prospectus are translations from their Chinese names and are included for identification purposes. In the event of inconsistency, the Chinese names shall prevail.

21 GLOSSARY

This glossary contains definitions of certain terms used in this prospectus in connection with our Company and our business. Some of these may not correspond to standard industry definitions. affinity selection mass Affinity selection mass spectrometry(ASMS) refers to experiments spectrometry (ASMS) designed to measure the binding of compounds to a protein. In ASMS a mixture of compounds are incubated with a protein target, the bound and free compounds are separated by certain separation methods (i.e. selection) and are analyzed by LCMS to detect binding and to measure binding affinity of compounds. allosteric binders In biochemistry and pharmacology, an allosteric binder is a substance which indirectly influences (modulates) the effects of a primary ligand that directly activates or deactivates the function of a target protein. It usually binds to a site distinct from that of the orthosteric binding site.

ALS (Australia) ALS is an abbreviation of Australian Light Source. ALS is a 3 GeV national synchrotron radiation facility located in Clayton, in the south-eastern suburbs of Melbourne, Victoria, which opened in 2007. antibody An antibody (Ab), also known as an immunoglobulin (Ig), is a large, Y-shaped protein produced mainly by plasma cells that is used by the immune system to neutralize pathogens such as pathogenic bacteria and viruses. The antibody recognizes a unique molecule of the pathogen, called an antigen, via the Fab’s variable region. antibody humanization Antibody humanization is the process of developing antibodies from non-human species whose protein sequences have been modified to increase their similarity to antibody variants produced naturally in humans. antibody maturation Antibody maturation, also called antibody affinity maturation, is the process to improve antibody affinity for an antigen. In vivo, natural affinity maturation by the immune system takes place by somatic hypermutation and clonal selection. In vitro, in the laboratory affinity maturation, can be obtained by mutation and selection. anti-C. difficile infection small Anti-C. difficile infection small molecule drug is a chemical drug molecule drug for the treatment of the infection of C. difficile, a species of Gram- positive spore-forming bacterium. anti-tumor agonist An anti-tumor agonist is a chemical that binds to a receptor and activates the receptor to produce a biological response of anti- tumor in human body.

22 GLOSSARY antitumor inhibitor Antitumor inhibitor refers to a molecule that binds to a protein target and decreases its bioactivity and produces anti-tumor efficacy in human body.

APS (US) The Advanced Photon Source (APS) at Argonne National Laboratory (in Argonne, Illinois, USA) is a national synchrotron- radiation light source research facility funded by the United States Department of Energy Office of Science. binding and kinetic Binding and kinetic measurements refer to the process of measurements measuring the binding affinity of a molecule to the protein target and the chemical kinetics of the molecule-binding to the protein target. bioassays A bioassay is an analytical method to determine concentration or potency of a substance by its effect on a model system including purified proteins, living cells or tissues. Bioassays were used to estimate the potency of agents by observing their effects on living animals (in vivo) or tissues/cells/purified proteins (in vitro). bispecific antibody technology A bispecific antibody is an artificial protein that can simultaneously bind to two different types of antigen. Bispecific antibody can be manufactured in several structural formats, and current applications have been explored for cancer immunotherapy and drug delivery. botulinum toxin Botulinum toxin (BTX) or Botox is a neurotoxic protein produced by the bacterium Clostridium botulinum and related species. cGMP CGMP refers to the Current Good Manufacturing Practice regulations enforced by the FDA. CGMPs provide for systems that assure proper design, monitoring, and control of manufacturing processes and facilities. Adherence to the CGMP regulations assures the identity, strength, quality, and purity of drug products by requiring that manufacturers of medications adequately control manufacturing operations. This includes establishing strong quality management systems, obtaining appropriate quality raw materials, establishing robust operating procedures, detecting and investigating product quality deviations, and maintaining reliable testing laboratories. chemiluminescence Chemiluminescence is the generation of electromagnetic radiation as light by the release of energy from a chemical reaction. While the light can, in principle, be emitted in the ultraviolet, visible or infrared region, those emitting visible light are the most common.

CLS (Canada) CLS is Canada’s national synchrotron light source facility, located on the grounds of the University of Saskatchewan in Saskatoon,

23 GLOSSARY

Saskatchewan, Canada. The CLS has a third-generation 2.9 GeV storage ring, and the building occupies a footprint the size of a football field.

Cryo-Em Electron cryomicroscopy (cryo-Em) is an electron microscopy technique where the sample is cooled to cryogenic temperatures.

DNA encoded libraries (DEL) DNA encoded libraries (DEL) is a technology for the synthesis and screening on unprecedented scale of collections of small molecule compounds. In DEL technology compounds are synthesized with DNA tags and are screened by binding assay as mixtures. The binding components are decoded by DNA sequencing to reveal the identity of the binders and confirmed by re-synthesizing and testing the compounds without the initial DNA tag.

Epigenetics targets Epigenetics targets refers to a group of drug target proteins that can regulate the genomic functions, including gene expression, by changes in DNA methylation and/or histone tail modifications.

Flp-in technology The Flp-In technology allows integration and expression of your gene of interest in mammalian cells at a specific genomic location. The Flp-In technology involves introduction of a Flp Recombination Target (FRT) site into the genome of the mammalian cell line of choice. fluorescence Fluorescence is the emission of light by a substance that has absorbed light or other electromagnetic radiation. It is a form of luminescence. Fluorescence is used in the life sciences generally as a non-destructive way of tracking or analyzing biological molecules by means of fluorescence. Some proteins or small molecules in cells are naturally fluorescent, which is called intrinsic fluorescence or autofluorescence. Alternatively, specific or general proteins, nucleic acids, lipids or small molecules can be “labeled” with an extrinsic fluorophore, a fluorescent dye which can be a small molecule, protein or quantum dot. fluorescence polarization Fluorescence polarization also known as fluorescence anisotropy. If a fluorescent molecule is stationary and exposed to plane- polarized light, it will become excited and consequently emit radiation back to the polarized-plane. Because polarization is a general property of fluorescent molecules (with certain exceptions such as lanthanide chelates), fluorescence polarization-based readouts are somewhat less dye dependent and less susceptible to environmental interferences such as pH changes than assays based on fluorescence intensity measurements. fragment-based drug discover Fragment-based drug discovery (FBDD) is a technique for (FBDD) identifying low molecular weight (Mw < 300 Da)chemical starting points for drug discovery.

24 GLOSSARY

FRET fluorescence resonance energy transfer (FRET) is a mechanism describing energy transfer between two light-sensitive molecules (chromophores). A donor chromophore, initially in its electronic excited state, may transfer energy to an acceptor chromophore through nonradiative dipole–dipole coupling. global synchrotron radiation light Global synchrotron radiation light source refers to the synchrotron source radiation facilities around the world, especially the third generation synchrotron radiation facilities such as APS, SSRF, ESRF, Photon factory, CLS, ALS etc.

GPCRs G protein-coupled receptors (GPCRs), also known as seven- transmembrane domain receptors, constitute a large protein family of receptors that detect molecules outside the cell and activate internal signal transduction pathways and, ultimately, cellular responses. GPCRs are an important drug target and approximately 34% of all Food and Drug Administration (FDA) approved drugs target this family. hit-to-lead and lead optimization Hit-to-lead (H2L) also known as lead generation is a stage in early drug discovery where small molecule hits from screening are evaluated and undergo limited optimization to identify promising lead compounds. These lead compounds undergo more extensive optimization in a subsequent step of drug discovery called lead optimization. homogeneous solution binding Homogeneous solution binding refers to the process of a molecule binds to another molecule, for example, a small molecule binds to a protein in homogeneous solution.

HTS High-throughput screening (HTS) is a method for scientific experimentation especially used in drug discovery and relevant to the fields of biology and chemistry. Using robotics, data processing/control software, liquid handling devices, and sensitive detectors, high-throughput screening allows a researcher to quickly conduct millions of chemical, genetic, or pharmacological tests. Through this process one can rapidly identify active compounds, antibodies, or genes that modulate a particular biomolecular pathway.

Hybridoma Hybridoma technology is a method for producing large numbers of identical antibodies (also called monoclonal antibodies). This process starts by injecting a mouse (or other mammal) with an antigen that provokes an immune response. A type of white blood cell, the B cell that produces antibodies that bind to the antigen are then harvested from the mouse. These isolated B cells are in turn fused with immortal B cell cancer cells, a myeloma, to produce a

25 GLOSSARY

hybrid cell line called a hybridoma, which has both the antibody- producing ability of the B-cell and the exaggerated longevity and reproductivity of the myeloma. hydrophobic domain Hydrophobic domain refers to the region of a protein that have hydrophobic amino acids (such as glycine, alanine, valine, leucine, isoleucine, phenylalanine, tryptophan and methionine) clustered together. Structures of water-soluble proteins have a hydrophobic core in which side chains are buried from water, which stabilizes the folded state.

IDH2 IDH2 is a mitochondrial NADP-dependent isocitrate dehydrogenase (EC 1.1.1.42) that catalyzes oxidative decarboxylation of isocitrate to alpha-ketoglutarate, producing NADP.

Immuno-oncology targets Immune oncology targets refer to a group of drug targets which is related with the immune recognition of immune systems to cancer cells in human body. in vitro pharmacology In vitro pharmacology, also called bioassay, is an analytical method to determine concentration or potency of a substance by its effect on living cells or tissues. influenza virus polymerase Influenza virus polymerase protein inhibitor is a new therapeutic protein inhibitor agent for treatment of influenza virus infection.

Interleukin 15 Interleukin-15 (IL-15) is a cytokine with structural similarity to Interleukin-2 (IL-2). Like IL-2, IL-15 binds to and signals through a complex composed of IL-2/IL-15 receptor beta chain (CD122) and the common gamma chain (gamma-C, CD132). IL-15 is secreted by mononuclear phagocytes (and some other cells) following infection by virus(es). ion channels Ion channels are pore-forming membrane proteins that allow ions to pass through the channel pore. Their functions include establishing a resting membrane potential, shaping action potentials and other electrical signals by gating the flow of ions across the cell membrane, controlling the flow of ions across secretory and epithelial cells, and regulating cell volume.

Kinases A kinase is an enzyme that catalyzes the transfer of phosphate groups from high-energy, phosphate-donating molecules to specific substrates. This process is known as phosphorylation, where the substrate gains a phosphate group and the high-energy ATP molecule donates a phosphate group. This transesterification produces a phosphorylated substrate and ADP. lentivirus method Lentivirus method here refers to a method of delivery of genetic materials into cells to generate stable cell lines.

26 GLOSSARY liposome A liposome is a spherical vesicle having at least one lipid bilayer. As liposome can easily merge with the cell membrane since they are both made of a phospholipid bilayer, it can be used to transfect genetic material into a cell to generate stable cell line. mass spec detection Mass spectrometry (MS) is an analytical technique that ionizes chemical species and sorts the ions based on their mass-to-charge ratio. In simpler terms, a mass spectrum measures the masses within a sample. Mass spectrometry is used in many different fields and is applied to pure samples as well as complex mixtures.

MAT2A Methionine adenosyltransferase 2A (MAT2A) is an enzyme that catalyzes the formation of S-adenosylmethionine (SAMe) by joining methionine and ATP. medicinal chemistry research Medicinal chemistry in its most common practice — focusing on small organic molecules — encompasses synthetic organic chemistry and aspects of natural products and computational chemistry in close combination with chemical biology, enzymology and structural biology, together aiming at the discovery and development of new therapeutic agents.

Membrane protein Membrane proteins are proteins that interact with, or are part of, biological membranes. They include integral membrane proteins that are permanently anchored or part of the membrane and peripheral membrane proteins that are only temporarily attached to the lipid bilayer or to other integral proteins. membrane protein targeted drug Membrane protein targeted drug discovery is a drug discovery discovery platform process that starts with a membrane protein target.

MOR1 MOR1 is one of isoforms of μ-opioid receptors (MOR). MOR are members of the G-protein-coupled receptor (GPCR) family with a high affinity for enkephalins and beta-endorphin, but a low affinity for dynorphins. The prototypical μ-opioid receptor agonist is morphine, the primary psychoactive alkaloid in opium. It is an inhibitory G-protein coupled receptor that activates the Gi alpha subunit, inhibiting adenylate cyclase activity, lowering cAMP levels. Mu opioid receptors play an important role in mediating the actions of a class of opioids including morphine and heroin.

MOR2 MOR2 is one of isoforms of μ-opioid receptors (MOR). See MOR1 above for reference. nano-SPR technology Nano SPR is a nanomaterials enhanced Surface Plasma Resonance technology which significantly increased the sensitivities of the traditional SPR and therefore be able to detect trace amounts of

27 GLOSSARY

small molecular weight molecules such as cancer biomarkers, hormones, antibiotics, insecticides, and explosive materials which are respectively important for early-stage disease diagnosis, food quality control, environmental monitoring, and homeland security protection. natural product library Natural product library is composed of chemical compound or substance produced by a living organism — that is, found in nature.

Nuclear receptors In the field of molecular biology, nuclear receptors are a class of proteins found within cells that are responsible for sensing steroid and thyroid hormones and certain other molecules. In response, these receptors work with other proteins to regulate the expression of specific genes, thereby controlling the development, homeostasis, and metabolism of the organism.

PA/PB1 Small Molecule PA/PB1 Small Molecule Inhibitors are new therapeutic agents that Inhibitors can interfere with the interaction between PA and PB1 subunit. phage display library Phage display is the technology that allows expression of exogenous (poly)peptides on the surface of phage particles. A phage display library is a library of phage particles expressing a wide diversity of peptides or antibodies and is used to select those that bind the desired target. protease A protease (also called a peptidase or proteinase) is an enzyme that performs proteolysis: protein catabolism by hydrolysis of peptide bonds.

RIP RIP is the abbreviation of Receptor-interacting protein (RIP) kinases which are a group of threonine/serine protein kinases with a relatively conserved kinase domain but distinct non-kinase regions. A number of different domain structures, such as death and caspase activation and recruitment domain (CARD) domains, were found in different RIP family members, and these domains should be keys in determining the specific function of each RIP kinase. size exclusion chromatography Size-exclusion chromatography (SEC), also known as molecular size chromatography, is a chromatographic method in which molecules in solution are separated by their size, and in some cases molecular weight. It is usually applied to large molecules or macromolecular complexes such as proteins and industrial polymers.

SPR Surface plasmon resonance (SPR) is an optical effect that can be utilized to measure the binding of molecules in real-time without

28 GLOSSARY

the use of labels. SPR instruments are primarily used to measure the binding kinetics and affinity of molecular interactions. structure-aided SAR analysis The structure–activity relationship (SAR) is the relationship between the chemical or 3D structure of a molecule and its biological activity. SAR analysis facilitated with the structure information of a molecule interacting with its macromolecule target is called structure-aided SAR analysis. structure-based drug discovery Structure-Based Drug Discovery (SBDD) is a drug discovery (SBDD) process utilizing knowledge of the 3-dimensional structure of the target protein, the architecture of the active site environment where the substrate binds, and the structural aspects of the drug interaction with the protein target. synchrotron time Synchrotron time, also called beam time, is the machine time used for collecting crystal diffraction data in synchrotron beam station. targeted enzymatic hydrolysis Targeted enzymatic hydrolysis (TED) technology uses the (TED) PROTAC molecules which are bifunctional small molecules that simultaneously bind a target protein and an E3-ubiquitin ligase, thus causing ubiquitination and degradation of the target protein by the proteasome. thermoshift Thermal shift assays measure the thermal stability of a target protein and the increase in protein melting temperature upon the binding of a ligand to the protein. Protein melting is useful for identifying ligands, buffer conditions, cofactors and drugs affecting protein stability. time-resolved fluorescence Time-Resolved Fluorescence (TRF) detection uses long-lifetime fluorophores, known as lanthanides, such as europium, terbium, samarium and dysprosium. Unlike fluorescence intensity measurements, where emission occurs within nanoseconds upon excitation, lanthanides emit light over a longer period of time after excitation (microseconds as opposed to nanoseconds). This helps to reduce background noise by delaying the start of the measurement until after the background signal has decayed. This results in better performance in time-resolved fluorescence assays. transporters Transporter is a membrane protein involved in the movement of ions, small molecules, or macromolecules, such as another protein, across a biological membrane. transporters in detergent and in Transporters in detergent and in nanodisc is a description of a nanodisc purified transporter protein that is solubilized in a detergent contained solution or assembled in nanodisc which is composed of a lipid bilayer of phospholipids with the hydrophobic edge surrounded by two amphipathic proteins.

29 GLOSSARY ultracentrifugation-ASMS Ultracentrifugation-ASMS is an ASMS technology where the bound and free compounds are separated with ultracentrifugation method. ultrafiltration-ASMS Ultrafiltration-ASMS is an ASMS technology where the bound and free compounds are separated with ultrafiltration method. unbiased screening method Unbiased screening method refers to a screening method where there is no discrimination (bias) with regard to the location on the protein target to which a hit compound can bind. As such an unbiased screening method can discover allosteric binders as well as orthosteric binders.

UV/Vis Ultraviolet-visible spectrophotometry (UV/Vis) refers to absorption spectroscopy or reflectance spectroscopy in the ultraviolet-visible spectral region.

Viva libraries Viva libraries refer to the collection of small molecules for lead screening at Viva Biotech. x-ray crystallography The study of molecular structure by examining diffraction patterns made by x-rays passing through a crystalline form of the molecules. X-ray crystallography is used extensively in biochemistry to examine the molecular structure of such molecules as proteins and DNA.

30 FORWARD-LOOKING STATEMENTS

Certain statements in this prospectus are forward looking statements that are, by their nature, subject to significant risks and uncertainties. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will”, “expect”, “anticipate”, “estimate”, “believe”, “going forward”, “ought to”, “may”, “seek”, “should”, “intend”, “plan”, “projection”, “could”, “vision”, “goals”, “aim”, “aspire”, “objective”, “target”, “schedules” and “outlook”) are not historical facts, are forward-looking and may involve estimates and assumptions and are subject to risks (including but not limited to the risk factors detailed in this prospectus), uncertainties and other factors some of which are beyond our Company’s control and which are difficult to predict. Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

Our forward-looking statements have been based on assumptions and factors concerning future events that may prove to be inaccurate. Those assumptions and factors are based on information currently available to us about the businesses that we operate. The risks, uncertainties and other factors, many of which are beyond our control, that could influence actual results include, but are not limited to: Š our operations and business prospects; Š our business and operating strategies and our ability to implement such strategies; Š our ability to develop and manage our operations and business; Š our ability to attract and retain our customers; Š general economic political and business conditions in the markets in which we operate; Š our ability to attract and retain qualified employees and key personnel; Š our capital expenditure programs and future capital requirements; Š our ability to control costs; Š our dividend policy; Š capital market development; Š the actions and developments of our competitors; and Š all other risks and uncertainties described in the section headed “Risk Factors” in this prospectus.

Since actual results or outcomes could differ materially from those expressed in any forward- looking statements, we strongly caution investors against placing undue reliance on any such forward- looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by the Listing Rules, we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. Statements of or references to our intentions or those of any of our Directors are made as of the date of this prospectus. Any such intentions may change in light of future developments.

All forward-looking statements in this prospectus are expressly qualified by reference to this cautionary statement.

31 RISK FACTORS

Potential investors should consider carefully all the information set out in this prospectus and, in particular, should evaluate the following risks associated with the investment in our Shares. Any of the risks and uncertainties described below could have a material adverse effect on our business, results of operations, financial condition, future prospects or on the trading price of our Shares, and could cause you to lose all or part of your investment.

We believe there are certain risks and uncertainties involved in our operations, some of which are beyond our control. We have categorized these risks and uncertainties into: (i) risks relating to our business and our industry; (ii) risks relating to doing business in China; and (iii) risks relating to the Global Offering.

RISKS RELATING TO OUR BUSINESS AND OUR INDUSTRY Our business largely depends on our customers’ demand for outsourced services and their R&D budget, and any reduction in our customers’ demand or budget could have a material adverse effect on our business, financial condition, results of operations and prospects. The success of our business primarily depends on the number and size of drug discovery service contracts that we obtain from pharmaceutical and biotechnology companies. Over the past few years, our business has benefited from the increased outsourcing levels of drug discovery by pharmaceutical and biotechnology companies. While we believe the upward outsourcing trend is expected to continue for the next several years, a reversal or slowing down of such trend could result in diminished growth in our business and therefore materially and adversely affect our business, financial condition, results of operations and prospects.

Fluctuations in the R&D budgets of pharmaceutical and biotechnology industry participants could also significantly affect the demand for our service. Our customers determine their R&D budgets based on several factors, including the need to develop new products, the availability of internal and external funding, competition and the general availability of resources. Our customers’ R&D budgets could also fluctuate due to, among other things, negative trend in general economic condition or global pharmaceutical and biotechnology market, consolidation of pharmaceutical and biotechnology companies, spending priorities and internal budgetary policies. There is no assurance that our customers will maintain the level of their R&D budgets sufficient to purchase our services. If our customers reduce their spending on our services as a result of any of the above or other factors, we may not be able to locate sufficient number of customers for the continuous growth of our business, and our business, financial condition, results of operations and prospects may be materially and adversely affected.

Our success depends on our ability to attract, train and retain highly skilled scientists and other technical personnel. Our strong technical capability and ability to quickly adapt to the latest technologies in the industry allow us to provide comprehensive and customized preclinical drug discovery services to our customers. Highly skilled and talented scientists help us keep pace with changes in pharmaceutical and biotechnology R&D technologies and methodologies and are therefore critical to our success. Our business operations also rely on personnel possessing highly technical skills for our quality control, safety and compliance, information technology and marketing.

32 RISK FACTORS

We intend to continue attracting and retaining highly skilled scientists and other technical personnel. However, as there is a limited supply of qualified scientists and technical personnel with necessary experience and expertise, and we compete with pharmaceutical companies, biotechnology companies, contract research firms and other academic and research institutions in recruiting such qualified talents, we have to provide competitive compensation and benefits packages to attract and retain talents. We cannot assure you that we will always be able to hire and retain sufficient number of qualified personnel to keep pace with our anticipated growth while maintaining consistent quality of our services. In addition, we may not be successful in training our professionals to quickly adapt to technological changes, evolving standards and changing customer preferences, and the quality of our services may therefore be severely affected. Any failure to attract, train or retain highly skilled scientists and other technical personnel may materially and adversely affect our reputation, business, financial condition, results of operations and prospects.

We may not be able to realize our anticipated investment returns from our incubation portfolio companies.

In general, CROs charge cash for the services they provide. Our business model combines the conventional CFS model pursuant to which we receive cash service fees from our non-investee customers, and our unique EFS model pursuant to which we provide drug discovery and/or incubation services to selected customers in exchange for equity or economic interest in them, and to certain promising biotech companies which we invested in. In addition, we may also make strategic investments in biotechnology startup companies that we think are of potential for future cooperation. Our incubation portfolio companies includes our EFS customers and strategic investees. In 2018, approximately 75.4% of our profit and total comprehensive income for the year was derived from fair value gains from our incubation portfolio companies. As a result, we face risks relating to our equity investments in such incubation portfolio companies.

Our incubation portfolio companies are primarily startups that engage in new drug development. Given that they are growth companies still in the development stages, such companies may have a higher failure rate. These companies may also have relatively short operating histories and are in need of a significant amount of capital to grow their business as well as to gain traction. Moreover, they may not have sufficient financial resources to meet their financial obligations, particularly during economic slowdowns. Our investments at this stage of a company’s development are therefore speculative and entail a number of risks, as discussed in detail below. Accordingly, we may fail to realize our anticipated returns on investments in such incubation portfolio companies, and may even experience a total loss on such investments.

If capital markets become more active and cause potential incubation portfolio candidates to be valued higher, anticipated investment returns from such candidates will likely diminish because we may need to contribute more investment to obtain the same equity or economic interest in such candidates or we may receive less equity or economic interest in such candidates. Furthermore, we have limited influence over the management and operations of our incubation portfolio companies when we acquire minority interest in such companies. We are subject to the risk that the majority shareholders or the management of our incubation portfolio companies may act in a manner that does not serve our interests. The general operational risks, such as inadequate or failed internal control of our incubation portfolio companies, may also expose our investments to risks. Furthermore, our incubation portfolio companies may fail to abide by their agreements with us, for which we may have

33 RISK FACTORS limited or no recourse. If any of the foregoing was to occur, our business, reputation, financial condition and results of operations could be materially and adversely affected.

In addition, if any of our incubation portfolio companies were to go bankrupt, such incubation portfolio companies’ debts would first be paid off to its creditors and any remaining assets would be divided among the shareholders. We cannot assure you that there would be any remaining assets for the shareholders after the repayment of debts and we could lose all the resources and expenses we contributed to such entity. Any such event could materially and adversely affect our business, financial condition and results of operations.

Valuation methodologies for our investments can involve subjective judgments, and our financial condition and results of operations may be materially impacted by gains or losses arising from changes in the fair value of the equity interest that we hold in our incubation portfolio companies. The incubation portfolio companies that we invest in under our EFS model are privately-held companies for which there are often no readily ascertainable market prices. As such, we are required to reassess the fair value of the equity interest in these incubation portfolio companies. After initial recognition, such equity interest we hold are carried at fair value, representing fair market value determined on each of our balance sheet dates by external valuers. The fair value of our investments are determined by reference to recent transaction price, backsolve from the most recent transaction price, comparable companies’ price or cost of services we provide. The determination of fair value using such methodologies takes into consideration a range of factors, including but not limited to the price at which the equity interest was acquired, market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to our acquisition of the investment. In addition, the fair value of our investments may vary depending on the appraiser and valuation method employed, as well as other factors. Because there is significant uncertainty in the valuation of, or in the stability of the value of, illiquid investments, the fair market value itself may not necessarily reflect the actual, liquidated value of our equity interest in the incubation portfolio company that could be obtained by us when such investments are realized. As such, our revenue recognition under EFS model is subject to high uncertainty in terms of the amount of revenue to be recognized and the timing of recognition.

Furthermore, gains or losses arising from changes in the fair value of any such invested equity interest will affect our results of operations in the period in which they arise and the impact may be significant. We recorded gains arising from financial assets designated as at FVTPL of RMB14.7 million and RMB68.3 million for the year ended December 31, 2017 and 2018, respectively, which represented a significant portion of our profit for such periods. We cannot assure you that we can recognize comparable fair value gains in our invested equity interest in the future and we may also recognize fair value losses, which would impact our results of operations for future periods. Fair value gains in our invested equity securities would not change our cash position as long as these equity securities are held by us, and thus would not increase our liquidity in spite of the increased profit. On the other hand, fair value losses in our invested equity securities would have a negative effect on our results of operations, even though such losses would not change our cash position as long as these equity securities are held by us. As the valuation of our Company is substantially based on the fair value of our incubation portfolio companies, the price of our Shares may be subject to fluctuations that are unrelated to our business performance, and any material decreases in the fair value of our investments may have a negative impact on our own valuation and the price of our Shares.

34 RISK FACTORS

The due diligence process that we undertake in connection with investments in our incubation portfolio companies may not reveal all facts that may be relevant in connection with an investment.

Before offering our drug discovery services under our EFS model, we conduct due diligence that we deem reasonable and appropriate on each of our incubation portfolio companies based on facts and circumstances applicable to each investment. In the course of conducting such due diligence, we rely on the resources available to us, including information provided by the potential incubation portfolio company. However, we cannot guarantee that the due diligence investigations carried out by us with respect to any incubation portfolio company will reveal or identify any instances of fraud, accounting irregularities and other improper, illegal or deceptive practices that such company may have engaged in. Accordingly, we can give no assurance that our due diligence investigations will result in investments being successful, and any failure to identify such risks through our due diligence processes could result in the actual financial performance of an investment falling short of our expectations or result in unsuccessful investments.

We face liquidity risks relating to our incubation portfolio companies.

Our ability to realize our anticipated investment returns may depend on the incubation portfolio companies’ ability to complete a domestic or overseas initial public offering or trade sale, which in turns relies on, among other things, the business and financial performance of our incubation portfolio companies. Our incubation portfolio companies’ ability to achieve satisfactory business and financial performance is affected by a variety of factors beyond our control, including the general economic condition, the global pharmaceutical and biotechnology market condition, the availability in their resources, their ability to develop products/services that meet the evolving market demands. Therefore, we face liquidity risks relating to our incubation portfolio companies and we may be unable to receive any dividend from our incubation portfolio companies or to exit our investment due to a lack of market for the shares of our incubation portfolio companies. We also face concentration risks given that all of our incubation portfolio companies are engaged in pharmaceutical and biotechnology sector. Any significant negative trend in global pharmaceutical and biotechnology market could materially diminish the value of our investments.

If we or our incubation portfolio companies fail to obtain additional funding in a timely manner or on acceptable terms or at all, our expansion of our EFS model will be materially and adversely affected.

We plan to continue to expand our EFS model by providing our CRO services to a larger amount of promising biotechnology start-ups and emerging pharmaceutical companies in China and overseas. The expansion of our EFS model requires significant amount of capital resources. If our internally generated capital resources and available credit facilities are insufficient to finance our existing and new incubation projects, our other capital expenditure and growth plans, we may need to seek additional financing from third parties, including banks or other financial institutions. Our ability to obtain additional capital is subject to a variety of factors, including our future financial condition, results of operations and cash flows, general market conditions for capital-raising activities by biologics related companies, and economic, political and other conditions in China, the United States and other countries. We cannot assure you that we will be able to secure additional funding on terms acceptable to us or in a timely manner, or at all.

35 RISK FACTORS

Our business expansion may also be negatively affected if our incubation portfolio companies fail to secure sufficient funding required for their business operations, which could result in a slowing down or even a failure of their business developments. As a result, we could lose all the resources and expenses we contributed to such companies. For more details, please see “— We may not be able to realize our anticipated investment returns from our incubation portfolio companies” of this section.

We may not be successful in developing, enhancing or adapting to new technologies and methodologies. The global pharmaceutical and biotechnology outsourcing services market is constantly evolving, and we must keep pace with new technologies and methodologies to maintain our competitive position. For the three years ended December 31, 2016, 2017 and 2018, our research and development expenditure amounted to RMB16.8 million, RMB17.3 million and RMB25.3 million, respectively. It is critical for us to continue investing significant amounts of human and capital resources to develop or acquire new technologies in order to enhance the scope and quality of our services. We may also decide to continue expanding our business by entering into new markets and new therapeutic areas, and therefore may need to develop or adapt to new technologies and methodologies. We cannot assure you that we will be able to develop, enhance or adapt to new technologies and methodologies in a timely manner or at all. Any failure to do so could significantly reduce demand for our services and harm our business and prospects.

Furthermore, to develop and market our new technologies and methodologies successfully, we are required to accurately assess and meet customers’ needs, make significant capital expenditures, optimize our drug discovery and development process to predict and control costs, hire, train and retain qualified personnel, obtain required regulatory clearances or approvals, increase customer awareness and acceptance of our services, provide high-quality services in a timely manner, price our services competitively and effectively integrate customer feedback into our business planning. If we fail to create demand for our new technologies or methodologies, our business, financial condition, results of operations and prospects could be materially and adversely affected.

In addition, technology innovations, which our current and potential customers might have access to, could create alternatives to our services and reduce or even eliminate the demand for our services. Our failure to develop, introduce or enhance our services able to compete with new technologies in a cost-effective and timely manner could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our business growth could be severely disrupted if we lose service of our senior management, key employees and business partners. The continued service of our senior management, key employees and business partners is critical to the success of our business. In particular, we are highly dependent on Dr. Mao, our founder and Chairman, for his management, supervision and planning of our business. The loss of service with respect to any of our senior management, key employees and business partners may have a material adverse effect on our business and operations. If we lose the services of any senior management member, key employee or business partners, we may be unable to identify and retain a suitable qualified replacement and may incur additional expenses and time to recruit and train new personnel, which could severely disrupt our business operations. In addition, although each of our senior management member and key employee has signed a non-compete agreement with us, we may not be

36 RISK FACTORS able to enforce these provisions should any of them leaves us to join a competitor or to start his/her own business which competes with us, and our business operations and prospects could be materially and adversely affected.

We face risks relating to the new and innovative nature of our EFS model. We believe our combination of CFS and EFS model is a new business model which is not proven. Our creation of such a new business model was generally based on our knowledge and assumptions of market participants’ behaviors, general economic condition, the competitive environment, the return levels, operating costs, and the market acceptance level, among others. Our assumptions may turn out to be incorrect or inaccurate during the course of our operations. Furthermore, we are unable to test and validate the effectiveness and profitability of the EFS model prior to its implementation. We also expect that our business model will continue to evolve in conjunction with the evolution of the pharmaceutical and biotechnology R&D outsourcing market in China and around the world. We cannot assure you that we will be successful in implementing our EFS model and other future business model inventions in an effective manner or at all.

In addition, we only have limited operating history of our EFS model. We commenced our EFS model in a more systematic manner since 2016. Accordingly, it could be difficult for you to evaluate the viability and sustainability of our business and its profitability potential. As of the Latest Practicable Date, 11 of our incubation portfolio companies had closed private financing. However, we cannot assure you that our invested entities will be able to continue growing their business in a sustainable manner and you should not rely on the historic growth rate of us or our invested entities as an indication of our future performance.

The success of our incubation portfolio companies largely depends on the capability, reputation and reliability of our business partners. The capability, reputation and reliability of our business partners, which are composed of the founder or senior management of the entities we invested under our incubation model, our employees specialized in project management and external professional managing our incubation portfolio companies, is critical to the success of our business.

The continued growth of our incubation portfolio companies’ businesses is significantly dependent on the capability, reputation, persistence and vision of their respective founders and senior management. If their senior management fail to adapt to the evolving market demands, unable to develop and adopt new technologies and methodologies, suffer reputational damages or negative publicity, or choose to quit the business, the business, financial condition and prospects of our incubation portfolio companies and us could be materially and adversely affected. Furthermore, we have limited control over our incubation portfolio companies and are subject to the risk that the management of our incubation portfolio companies may act in a manner that does not serve our interests. For more details, please see “— We may not be able to realize our anticipated investment returns from our incubation portfolio companies” of this section.

We also rely on our external professional to identify potential targets for our incubation portfolio companies and our investment committee to manage, supervise and provide valuable support for the business operations and development of our invested entities. If any such Business Partner fails to maintain or improve their professional capabilities, suffers reputational damages or negative

37 RISK FACTORS publicity, decides to terminate his or her cooperation with us, or becomes unwillingly to serve our best interests due to conflict of interests, could all materially and adversely affect our business, reputation, financial condition and results of operations.

We may face disputes from time to time relating to the intellectual property rights of third parties. We may be exposed to intellectual property right infringement or misappropriation claims by third parties when we develop and use any of our own technology, know-how and brand. As of the Latest Practicable Date, we had not received notices of any material claims or complaints against us for intellectual property infringement. However, there is no assurance that we will not be subject to third parties’ claims of infringement of their proprietary intellectual property rights in the future. Although we plan to defend ourselves vigorously in any such litigations or legal proceedings, there is no assurance that we will prevail in these matters. Participation in such litigations and legal proceedings may also cause us to incur substantial expenses and divert the time and attention of our management. An adverse determination in any such litigations or proceedings could subject us to significant liability to third parties, require us to obtain licenses from third parties, pay ongoing royalties, or subject us to injunctions prohibiting the distribution and marketing of our services. Any similar claim against us, even without any merit, could also damage our reputation and brand image. Any such event could have a material and adverse effect on our business, financial condition and results of operations.

We generally agree to indemnify our customers from and against all losses and liabilities (including reasonable attorney’s fees) they may suffer in connection with any claim or lawsuit arising from, among others, our negligence or willful misconduct or breach of contract, including our infringement or misappropriation to third parties’ intellectual property rights. As a result, if any aspect of a deliverable created by us and thereafter used by our customers infringes a third party’s intellectual property rights due to our negligence, and particularly if such deliverable ultimately becomes a commercially successful product, we could be exposed to substantial liability. Any material intellectual property infringement claim, if raised against us or our customers due to our negligence, could have a material adverse impact on our reputation, business, financial condition and results of operations.

If we fail to protect our intellectual property rights, we may lose our competitive edge and our brand image, reputation and operations may be materially and adversely affected. Unauthorized use of any of our intellectual property rights may materially and adversely affect our business and reputation. We are endeavored to protect our intellectual property rights by various means including registering our trademarks, copyrights and patents and filing patent applications in accordance with applicable laws and regulations both in China, the U.S. and worldwide. Nevertheless, third parties may obtain and use our intellectual property rights without due authorization.

The validity, enforceability and scope of protection available under the relevant intellectual property laws in the PRC are uncertain and still evolving. Implementation and enforcement of PRC intellectual property-related laws have historically been deficient and ineffective. Accordingly, intellectual property and confidentiality legal regimes in China may not afford protection to the same extent as in the United States or other countries. 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 operations, which could harm our business, financial condition and results of operations. An adverse

38 RISK FACTORS determination in any such litigation could materially impair our intellectual property rights and may harm our business, prospects and reputation.

In addition, we may encounter significant problems in protecting and defending our intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our intellectual property rights and proprietary rights generally. Proceedings to enforce our intellectual property rights and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents and other intellectual property rights at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

If we are unable to maintain the confidentiality of our trade secrets, our business and competitive position may be harmed. In addition to the protection afforded by our registered intellectual property, we rely upon unpatented trade secret protection, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and know-how can be difficult to protect. We also seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with parties that have access to them, such as our collaborators, employees and other third parties, and invention assignment agreements with our consultants and employees. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. We may not be able to prevent the unauthorized disclosure or use of our 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, employees and consultants who are parties to these agreements breaches or violates the terms of any of these agreements or otherwise discloses our proprietary information, we 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 disclosed or misappropriated our trade secrets, including through intellectual property litigation or other proceedings, is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts in China and other jurisdictions inside and outside the United States are less prepared, less willing or unwilling to protect trade secrets.

If we fail to protect the intellectual property rights or confidential information of our customers, our reputation may be damaged and we may be subject to legal liabilities. The protection of intellectual property rights and confidential information associated with pharmaceutical and biotechnology outsourcing R&D services is critical to all our customers. Our customers generally retain ownership of associated intellectual property rights, including those they provide to us and those arising from the services we provide. We are also required to exercise all reasonable precautions to protect the integrity and confidentiality of our customers’ confidential information. Our success therefore depends in substantial part on our ability to protect the intellectual

39 RISK FACTORS property rights and confidential information of our customers. Notwithstanding our efforts to protect our customers’ intellectual property rights and confidential information, unauthorized parties may still attempt to obtain and use such information that we regard as proprietary and confidential. Any unauthorized disclosure of our customers’ proprietary rights or confidential information could subject us to liability for breach of contract and significantly damage our reputation, which could materially harm our business, financial condition, results of operations and prospects.

Changes in government regulations or in practices relating to the pharmaceutical and biotechnology industries could decrease demand for the services we provide, and compliance with new regulations may result in additional costs.

The pharmaceutical and biotechnology market is heavily regulated globally, including in the United States and China. Changes in government regulations or in practices relating to the pharmaceutical and biotechnology industries, including a relaxation in regulatory requirements or the introduction of simplified biologics approval procedures which will lower the entry barrier for potential competitors, or an increase in regulatory requirements which may increase the difficulty and expenses for us to satisfy such requirements or may make our services less competitive, could all eliminate or substantially reduce the demand for our services. The U.S. government may become particularly tough on business transactions that involve high tech or sensitive information about Americans, and therefore may restrict or even prohibit foreign companies from providing drug discovery and development services for U.S. pharmaceutical and biotechnology companies due to national security or other concerns. Any such event could materially and adversely affect our business, financial condition, results of operations and prospects.

In the future, we plan to strategically develop the CMO business based on our existing CRO service platform of early stage R&D so as to provide integrated R&D, manufacturing and other ancillary services for our customers. In order to conduct the new CMO business, we have to comply with applicable practice requirements such as GLP, GCP and GMP standards, and such regulatory requirements could materially and adversely affect our business, financial condition, results of operations and prospects.

Changes in laws relating to the social insurance may affect our operations.

According to the Institutional Reform Plan of the State Council (2018) (《國務院機構改革方 案(2018)》) promulgated by the NPC on March 18, 2018 and the Reform Plan on the National and Local Taxation Collection and Management System (《國稅地稅徵管體制改革方案》) promulgated by the Central Committee of the Communist Party of China and the State Council on July 20, 2018 and will become effective as from January 1, 2019, the tax authority will be in charge of collecting the social insurance including basic old-aged pension, medical insurance and unemployment insurance. Therefore, we will be subject to periodic examinations on fulfillment of our social insurance payment obligations by the tax authority under the PRC social insurance laws and regulations from January 1, 2019. In despite of that we reasonably believe that in the past we had acted in compliance with the requirements under the relevant social insurance laws and regulations in all material aspects, we cannot assure you that future examinations by PRC tax authorities would not result in fines, other penalties or actions that could adversely affect our business, financial condition and results of operations, as well as our reputation.

40 RISK FACTORS

Any accidental contamination, biological hazards or personal injury could materially and adversely affect our business. We cannot fully eliminate the risks relating to accidental contamination, biological hazards or personal injury at our facilities during our drug discovery and development process. In the event of such accident, we could be held liable for damages and clean-up costs which, to the extent not covered by existing insurance or indemnification, could harm our financial condition. Other adverse effects could result from such liability, including reputational damage leading to loss of business from customers. We may also be forced to close or suspend operations at certain of our affected facilities temporarily or even permanently. As a result, any accidental contamination, biological hazards or personal injury could have a material and adverse impact on our business, financial condition, results of operations and prospects.

Our insurance coverage may not be sufficient. We maintain various insurance policies to safeguard against certain risks and unexpected events, such as insurance for key employees and health insurance. We consider our insurance coverage to be in line with what we believe to be customary practice in our industry. For more details, please see “Business — Insurance” of this prospectus. However, we cannot assure you that our insurance coverage in terms of amount, scope and benefit is sufficient. In addition, the insurance industry in China is still at an early stage of development. Insurance companies in China generally offer limited business-related insurance products and such products typically command a high premium that may not be justifiable from a cost- benefit perspective. We do not have any business disruption insurance, product liability insurance or key-man life insurance. Therefore, we are exposed to various risks associated with our business and operations. Such risks include but are not limited to, accidents, fires, explosions, loss of key management and personnel, business interruption, litigation or legal proceedings, natural disasters such as epidemics, pandemics or earthquakes, terrorist attacks and social instability or any other events beyond our control. Our business, financial condition and results of operations may be materially and adversely affected as a result.

Failure to comply with environmental regulations could harm our operating results, financial condition and reputation. We are required to comply with various environmental protection, health and safety laws and regulations in the PRC and any other jurisdictions in which we are operating or may operate in the future. In general, we are required to go through environmental impact assessment procedures before we commence the construction of an operating facility. When the construction project is completed, we must pass environmental protection completion inspection and obtain completion inspection certificate for such construction project. Historically, however, certain laboratories and offices in our Shanghai and Jiaxing sites commenced operations prior to completing relevant environmental impact assessment procedures or prior to the completion inspection certificates for these laboratories and offices were obtained. Besides, according to the environmental impact assessment approval we obtained in August 2018 in respect to the construction of laboratories and offices in one of our Shanghai sites (occupying 2,800 sq.m.), we are required to move from such site prior to the December 31, 2018, as of the date of this prospectus, however, we are still operating such site for our laboratories and offices.

Although (i) we eventually passed the environmental protection completion inspection and obtained the completion inspection certificates with respect to our laboratories and offices in our headquarter and Jiaxing site in which we are operating our business and (ii) we do not receive any

41 RISK FACTORS order of moving from one of our Shanghai sites from relevant government authority and we entered into a lease agreement in respect of alternative laboratories and offices and engaged a service provider to prepare the report of environmental impact assessment in respect of the alternative site, which will commence operation after the completion of environmental protection procedure, we cannot assure you that the relevant authority will not impose any fines or other penalties on us for such historical and present non-compliance. Any penalties, allegations or proceedings due to such defects may have an adverse effect on our business, financial condition, reputation, results of operations and prospects. As of the date of this prospectus, we have not been subject to any findings of material non-compliance or fines regarding the aforementioned laws and regulations by the relevant authority. However, there is no assurance that our Group will not be subject to adverse findings under future inspections.

If we fail to comply with any of the relevant environmental laws and regulations, depending on the type and severity of any violation, we may be subject to, among other things, further warnings from relevant authorities, imposition of fines and/or criminal liability, being ordered to close down our business operations and suspension of relevant permits. Our reputation may be also be harmed and our business, financial condition and results of operations and prospects could be materially and adversely affected. In addition, because these laws and regulations are becoming increasingly more stringent both within the PRC, there can be no assurance that we will not be required to incur additional expenses to comply with such laws and regulations in the future.

Our business may be materially and adversely affected by the increasing trade tensions between U.S. and China. As trade tensions increase between the United States and China in recent years, concerns exist among PRC enterprises transacting with U.S. companies that a possible trade war between the two countries could leave them caught in the crossfire. A breakdown in trade relations between the United States and China could also delay the global economic recovery in recent years, threatening the ongoing economic expansion and the increasing cross-border transactions trend. Given that a majority of our customers are U.S. pharmaceutical and biotechnology companies and that we hold equity interest in certain U.S. companies, the demands of our services are significantly influenced by U.S. government’s attitude towards Chinese service providers in pharmaceutical and biotechnology industries. We cannot assure you that we will not be negatively influenced by the increasing trade tensions between the United States and China as well as by adverse changes in U.S. laws and regulations towards diplomatic relations. As a result, our business, financial condition, results of operations and prospects could be materially and adversely affected as a result.

Changes to U.S. foreign investment and export control laws and regulations may restrict our ability to acquire technologies and assets in the United States that are material to our commercial success. Foreign investments in U.S. companies and exports from the United States of technology and technical data (including disclosures of technology and technical data to foreign persons in the United States) are potentially subject to restrictions under U.S. laws and regulations. Such restrictions may apply to our business with U.S. customers under our CRO and EFS business models. The United States recently enacted the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) and the Export Control Reform Act of 2018 (“ECRA”), which together made significant changes to this legal framework.

42 RISK FACTORS

In general, FIRRMA broadened the authorities of the President of the United States and the Committee on Foreign Investment in the United States (“CFIUS”) to determine whether foreign investments present a threat to U.S. national security, and to impose restrictions on or to block such investments. FIRRMA and ECRA also established new authorities to identify “emerging” or “foundational” technologies that should be subject to greater foreign investment and export controls. The U.S. administration is currently engaged in rulemakings to implement the requirements of these statutes.

As an initial step, effective in November 2018, CFIUS instituted a pilot program (“Pilot Program”) applicable to certain foreign investments in U.S. businesses that (i) are involved in “critical technologies” and (ii) are classified within one of 27 industry sectors defined by North American Industry Classification System code numbers (“Pilot Program U.S. Businesses”). In addition, in December 2018, the U.S. Department of Commerce initiated a rulemaking process, required by ECRA, to identify “emerging” and “foundational” technologies, and to impose appropriate export controls on items so identified. The Pilot Program rules also deem such technologies to be “critical technologies.” U.S. agencies are continuing the rulemaking processes to implement FIRRMA and ECRA.

Businesses of our U.S. customers and prospective portfolio companies may have “critical technology,” and they may fall within NAICS 541714 (“Research and Development in Biotechnology (except Nanobiotechnology)”) or one of the other Pilot Program specified sectors. Our Company’s ability to adopt the SFE charge method when we provide drug discovery services to such customers, or to make future strategic investments in an incubation portfolio company in the United States, may be adversely impacted if such a customer or portfolio company is a Pilot Program U.S. Business (or if it otherwise possesses export-controlled technology). While the Pilot Program currently applies only to controlling and certain non-controlling investments made by foreign persons in Pilot Program U.S. businesses, through new or amended rules the Pilot Program and U.S. export regulations may constrain our Company’s ability to invest in U.S. entities and opportunities to acquire technologies that are material to our business operations, which in turn could detrimentally affect our capacity to acquire foreign assets in the Unites States that may be material to our commercial success.

We may not be able to compete effectively, which could materially and adversely affect our business, financial position, results of operations and prospects. The global pharmaceutical and biotechnology outsourcing R&D services market is rapidly evolving and highly competitive. We primarily compete with other drug discovery services providers in the global drug discover outsourcing services market. We compete with our competitors across a range of factors, including quality and scope of service, competitiveness of our service price, the ability to be responsive and efficient with respect to customers’ request, the ability to protect intellectual property or other confidential information of our customers.

Some of our competitors may have greater financial, research and other resources, broader scope of service, greater pricing flexibility, more extensive technical capabilities, greater sales and marketing efforts and longer operating history than us, and therefore may be able to respond more quickly than we do to changes in market demands. Our competitors may also improve the quality of their services, introduce new services at lower prices and with improved performance characteristics, or adapt more quickly to new or emerging technologies. Furthermore, consolidation within the global pharmaceutical and biotechnology R&D outsourcing markets may create stronger competitors than those we are facing today.

43 RISK FACTORS

We also expect increased competition as new companies enter into our market and more advanced technologies become available. Our services and expertise may be rendered obsolete or uneconomical by technological advances or new approaches or technologies. Increased competition may subject us to increasing pricing pressure and reduce demand for our services, which could decrease our profitability. As such, we may be required to further improve the quality of our service, reduce our services fee or increase spending in response to competition in order to attract and retain customers or pursue new market opportunities. We cannot assure you that we will be able to compete effectively with existing competitors or new competitors, and such failure to compete could materially and adversely affect our business, financial position, results of operations and prospects.

Some of our service contracts are contingent on successful completion of mutually agreed milestones, and we may bear financial risks related to our failure to accomplish such milestones on schedule. Some of our service contracts are based on fee-for-services arrangements, and are contingent on successful completion of certain mutually agreed milestones. As a result, if we fail to accomplish milestones in a timely manner in accordance with our contractual obligations, we could be subject to significant costs or liability and our reputation could be harmed, which could have an adverse effect on our business, financial condition and results of operations.

Furthermore, in pricing our service contracts, we take into consideration the market positioning of our services, prices of comparable services offered by our competitors, degree of saturation of the current market, market trends, complexities of the services required, costs and expenses of our services and the timeline of the service contract. However, our evaluation of these factors may be inaccurate or incorrect. If we underprice our service contracts or overrun cost estimates, we would incur losses from our service contracts, and our business, financial condition, results of operations, cash flows and prospects would be adversely affected.

We face foreign exchange risk, and fluctuations in exchange rates could have a material adverse effect on our financial condition and results of operations. Changes in exchange rates have in the past, and could in the future continue to, materially and adversely affect our financial condition and results of operations. We recorded a net foreign exchange gain of RMB1.3 million and RMB14.6 million, respectively, in 2016 and 2018, while we recorded a net foreign exchange loss of RMB1.2 million in 2017. Our foreign currency exposure is mainly respect to U.S. dollars. During the Track Record Period, a significant portion of our revenue was generated from sales denominated in U.S. dollars. However, a significant portion of cost of services and operating costs and expenses are denominated in Renminbi. As a result, our margins are pressured when the Renminbi appreciates against the U.S. dollars, and we may not be able to price our service contracts, in particular those with our U.S. customers, in currencies other than the U.S. dollars. Fluctuations in exchange rates between the Renminbi and the U.S. dollar and other currencies may be affected by, among other things, changes in China’s political and economic conditions, as well as international economic and political developments. The value of the Renminbi has been under pressure of appreciation in recent years. Due to international pressures on the PRC to allow more flexible exchange rates for the Renminbi and the economic situation and financial market developments in the PRC and abroad, the PRC government has decided to proceed further with reform of the Renminbi exchange rate regime and to enhance the Renminbi exchange rate flexibility. At this moment, we do not use any derivative contracts or hedge against our exposure to currency risks. While we may decide

44 RISK FACTORS 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 successfully hedge our exposure to currency risks.

Payment delay by our customers or any other failure for us to receive service fee could significantly affect our cash flows and profitability. We generally grant our customers credit terms ranging from 30 days to 90 days. As of December 31, 2016, 2017 and 2018, our trade and other receivables were RMB24.1 million, RMB36.9 million and RMB68.4 million, respectively. We recorded impairment loss on financial assets measured at amortized cost of RMB0.1 million and RMB0.1 million in the years ended December 31, 2017 and 2018, respectively, while we recorded reversed impairment loss on financial assets measured at amortized cost of RMB0.03 million in 2016. If any of our customers’ cash flow, working capital, financial condition or results of operations deteriorate, it may be unable, or it may otherwise be unwilling, to pay account receivables owed to us promptly or at all. Any substantial default or delay of a customer’s payment obligations may materially and adversely affect our working capital, financial condition and results of operations.

In addition, we may not be able to receive our anticipated service fee generated from our FFS/ FTE service contracts for a variety of reasons, including any party’s material breach of the contracts, the early termination of the contracts, our failure to accomplish mutually agreed milestones and payment delay or failure by our customers. For more details on risks relating to our failure to accomplish mutually agreed milestones, please see “— Some of our service contracts are contingent on successful completion of mutually agreed milestones, and we may bear financial risks related to our failure to accomplish such milestones on schedule” of this section. Our business, financial position, results of operations and prospects could be materially and adversely affected if we fail to receive a large amount of our anticipated service fee due to any of the aforementioned reason or other reasons.

Our financial conditions and results of operations may be materially and adversely impacted by different valuation methods or accounting treatments. Some of the equity interests in our incubation portfolio companies held by us are treated as financial assets at FVTPL, which require to be valued at each of our balance sheet date. There are a number of valuation methods in which the value of minority equity interests acquired and held by us under our EFS model may be determined. We have a discretion to decide on the most appropriate and applicable methods to determine the value of our equity interests acquired and held under our EFS model. If we choose or change the methods of valuation used in determining the fair value of equity interests acquired and held by us depending on the changing industry practice and specific circumstances, respectively, there could be an impact on our revenue, net profits and the value of our non-controlling interests acquired and held under our EFS model could be impaired.

In addition, our results of operations may be materially impacted due to different accounting treatments. For example, we recorded other gains arising from deemed disposal of interests in an associate for the year ended December 31, 2017 of RMB20.4 million due to the deemed disposal of equity interest in Shanghai Epican Gene Technology Co., Ltd. and (ii) deemed disposal of interests in a joint venture for the year ended December 31, 2018 of RMB11.4 million due to the deemed disposal of equity interest in Weimou Biotech (Shanghai) Ltd. The deemed disposals were attributable to the fact that our Group was no longer able to exercise significant influence or joint control over our associate Shanghai Epican Gene Technology Co., Ltd. and our joint venture Weimou Biotech (Shanghai) Ltd.,

45 RISK FACTORS which led to a one-off change in accounting treatments of the equity interest held by us in these companies from equity method to FVTPL, which is non-recurring in nature.

We may not be able to execute our growth strategies or manage our growth effectively. We intend to continue to invest in cutting-edge technologies, expand our incubation portfolio companies, develop CMO business, attract and retain quality talents and further enlarge our customer base. For more details, please see “Business — Our Strategies” of this prospectus. Pursuing our growth strategies has resulted in, and will continue to result in, substantial demands on capital and other resources. In addition, managing our growth and executing our growth strategies will require, among other things, our ability to continue to innovate and develop advanced technology in the highly competitive global pharmaceutical and biotechnology outsourcing R&D services market, locate suitable start-ups and emerging growth companies for our EFS model, effectively coordinate and integrate our facilities and teams across different sites, hire, train and retain qualified personnel, implement effective cost control and quality control, maintain sufficient liquidity, maintain effective and efficient financial and management control, carry out increased marketing and customer support activities, and manage our suppliers to leverage our purchasing power. If we fail to successfully execute our growth strategies, we may not be able to maintain our growth rate and, as a result, our business, financial condition, results of operations and prospects may be materially and adversely affected.

If we are unable to successfully develop our CMO business or expand in new geographic markets, our growth, results of operations and financial condition could be adversely affected. In the future, we plan to strategically develop the CMO business based on our existing CRO service platform of early stage R&D to provide integrated R&D, manufacturing and other ancillary services for our customers. For more details, please see “Business — Our Strategies” of this prospectus. CMO business is more capital intensive than drug R&D business, and we have limited experience in manufacturing biologic/chemical drugs at a commercial scale. We may encounter various issues regarding commercial manufacturing of biologics/chemical drugs, such as low success rate of manufacturing products that meet regulatory requirements or our customers’ quality standards. There is no assurance that we will be able to resolve such issues cost-effectively and in a timely manner. If our business expansion is not successful or sufficient or does not earn a satisfactory return on investment, our business, financial condition, results of operations and prospects could be materially and adversely affected.

During the Track Record Period, we generated a substantial portion of our revenue from customers headquartered in the United States and China. We intend to further diversify our customer geographic mix to increase revenue generated from customers in Europe or other new markets as our management considers appropriate. The legal and regulatory frameworks, competitive landscapes and customer preferences of such foreign market may be different from the U.S. and China markets. We have limited experience working in markets other than the U.S. and China, and we may encounter unforeseeable barriers and challenges, which may result in a delay to or failure of our expansion plans. In addition, we may invest significant time and resources on promoting brand awareness and acquiring market shares in foreign markets. We may not be able to manage our costs or generate sufficient revenue to justify the time and resources spent. If our geographic expansion is unsuccessful, our business operation and financial condition could be materially and adversely affected.

46 RISK FACTORS

Our business may be materially and adversely affected if our competitors imitate our EFS model.

When a new business idea is incubated and executed successfully, cloners naturally emerge and imitate. As our EFS model is proven to generate a much higher profit per employee than the conventional CFS model, our competitors may copy us and develop their own incubation business or similar business models. As a result, we may face increasing competition for our EFS model going forward. We cannot assure you that we will be able to compete successfully, and we may face risks relating to higher incubation costs, unfavorable terms and conditions for cooperation, or failure to locate sufficient number of qualified and promising biotechnology start-ups or emerging pharmaceutical companies. Any such failure or risk could materially and adversely affect our business, financial condition and prospects.

Any failure to comply with applicable regulations and industry standards or obtain various licenses and permits could harm our reputation and materially and adversely affect our business and prospects.

We are subject to extensive and stringent laws, regulations and industry standards governing our drug discovery and development activities. We cannot assure you that we will be able to comply with all applicable legal and industrial requirements and obtain all necessary approvals in relation to our business operations in a timely manner or at all. We are also required to obtain and maintain various licenses and permits in order to conduct and operate our business in China. While we intend to use our best efforts to comply with all legal and industrial requirements and obtain all requisite licenses and permits on a timely basis for our business operations, there is no assurance that we will be able to do so. Any failure to comply with applicable laws, regulations or industry standards could result in failure or delay to obtain or maintain such licenses and permits, administrative fines and other penalties imposed by regulatory bodies, incurrence of additional costs of compliance, termination of ongoing research projects, disqualification of data for submission to regulatory authorities, or governmental order to cease our business operations, each of which could have a material adverse impact on our reputation, business, financial condition, results of operations and prospects.

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in significant monetary damages, fines and other penalties.

Our business operations are subject to extensive national and local laws and regulations of the PRC pertaining to protection of the environment and health and safety, including without limitation the treatment and discharge of pollutants and the use of toxic and hazardous chemicals during our drug discovery and development process. For the years ended December 31, 2016, 2017 and 2018, our total cost of compliance with environmental protection and health and safety laws and regulations was approximately RMB0.2 million, RMB0.4 million and RMB2.3 million, respectively. Given that the requirements imposed by such laws and regulations may change and more stringent laws or regulations may be adopted, we may not be able to comply with, or to accurately predict the potential cost of complying with, such laws and regulations. If we fail to comply with environmental protection and health and safety laws and regulations, we may be subject to rectification orders, substantial fines, potentially significant monetary damages, suspend production or suspensions in our business operations.

47 RISK FACTORS

Any significant increase in our and administrative expenses may materially and adversely affect our financial results. We compete with pharmaceutical companies, biotechnology companies, contract research firms and other academic and research institutions in recruiting highly skilled scientists and other technical personnel. Given the limited supply of qualified scientists and technical personnel with necessary experience and expertise, we have to provide competitive compensation and benefits packages to attract and retain talents. For more details, please see “— Our success depends on our ability to attract, train and retain highly skilled scientists and other technical personnel” of this section. We expect our expenses to recruit and retain talents will continue to increase along with the growth of the pharmaceutical and biotechnology R&D outsourcing market in China and around the world.

Furthermore, we may also experience increases in other general and administrative expenses, including the growth in rental expenses. We currently lease three office premises in Shanghai with a total gross floor area of 8,167 sq.m. Our annual rental expenses for our office lease amounted to RMB8.6 million for the year ended December 31, 2018. We expect our administrative expenses, including our rental expenses, will continue to increase given the increasing popularity of Shanghai as a commercial center in China to enterprises in China and worldwide. Any such significant increase in our general and administrative expenses could have a material and adverse effect to our financial condition and results of operations.

We may not be able to continue serving our customers if we fail to meet our customers’ standards in audits and inspections. Our customers are entitled to, during normal business hours, review our standard operating procedures and records pertaining to our services and inspect the facilities used to render our services to such customers. However, we cannot assure you that we will be able to pass all the customer audits and inspections. Failure to pass any of these audits or inspections to our customers’ satisfaction could significantly harm our reputation and result in the termination of ongoing drug discovery and development projects by our customers, which could materially and adversely affect our business, financial condition, results of operations and prospects.

Our business may be materially and adversely affected if we fail to acquire a new parcel of land. To meet the increasing demand for our CRO services and for developing our CMO business, we plan to construct new laboratories and production facilities in Chengdu, China to enhance our capacity. We have entered into an investment agreement with People’s Government of Wenjiang District of Chengdu to acquire a parcel of land with a total site area of 50 mu located in Wenjiang District of Chengdu. We expect to complete all the necessary procedures and acquire the title of such land use rights in the next 6 months. However, we cannot assure you that we will be able to acquire the land use rights of such land parcel as scheduled or at all, due to a variety of factors including changes in governmental land planning policies, our failure to secure sufficient funding, or severe natural disasters. If we fail to acquire the land use rights of such land parcel, we may not be able to locate and acquire a suitable replacement, and our business and prospects could be materially and adversely affected.

48 RISK FACTORS

We may undertake acquisitions or joint ventures that may have a material adverse effect on our ability to manage our business and may not be successful. To pursue our growth strategy, we may acquire new technologies, businesses or services or enter into strategic alliances with third parties. We may not be able to identify attractive targets, and we have limited experience in acquisitions. In addition, we may not be able to successfully acquire the targets identified despite spending significant amount of time and resources on pursuing such acquisition. Furthermore, integration of an acquired company, its personnel, intellectual property or technology into our own operations is a complex, time-consuming and expensive process. The geographic distance between companies, the complexity of the technologies and operations being integrated and the disparate corporate cultures being combined may increase the difficulties of integrating an acquired company or technology.

Our available cash and stock may be used for our future acquisitions, which will possibly result in significant acquisition-related charges to earnings and dilution to our shareholders. Future acquisitions will likely present challenges and could require that our management develop expertise in new areas, manage new business relationships and attract new types of customers. The diversion of our management’s attention and any difficulties encountered in these acquisitions could have an adverse effect on our ability to effectively manage our own business. These acquisitions or other collaborations or investments may also expose us to other potential risks, including loss of the invested amounts, inability to earn an adequate return, unforeseen liabilities, diversion of resources from our existing businesses and potential harm to relationships with employees or customers.

We depend on a stable and adequate supply of quality raw materials from our suppliers, and interruptions of such supply could have an adverse impact on our business. Stable and adequate supply of quality raw materials, including reagents and consumables in connection with our drug discovery services, is important to our business operations. Although we believe that we have stable relationships with our existing suppliers, we cannot assure you that we will be able to secure a stable supply of qualified raw materials going forward. Our suppliers may not be able to keep up with our fast-growing business, may not be able to adapt to new technologies and methodologies to produce qualified raw materials, or may reduce or cease their supply of raw materials to us at any time. In addition, we cannot assure you that our suppliers have obtained and will be able to renew all licenses, permits and approvals necessary for their operations or comply with all applicable laws and regulations, and failure to do so may lead to interruptions in their business operation, which in turn may result in shortage of raw materials supplied to us. If the supply of raw materials to us is interrupted, our business operation and financial position may be adversely affected.

Negative publicity may adversely affect our reputation, business and growth prospect. Any negative publicity concerning us or our affiliates that share the “VIVA” name, even if untrue, could adversely affect our reputation and business prospects. We cannot assure you that negative publicities about us or any of our affiliates that share the “VIVA” name would not damage our brand image or have a material adverse effect on our business, results of operations and financial condition. In addition, in light of our specialized customer base, customer referrals and word-of-mouth marketing have significantly contributed to our ability to acquire customers. As a result, any negative publicity about us or any of our affiliates that share the “VIVA” name could materially and adversely affect our ability to retain our existing customers or attract new customers.

49 RISK FACTORS

The discontinuation of any of the financial incentives currently available to us could adversely affect our financial condition, results of operations, cash flows and prospects. We have benefited from a number of government grants and subsidies since our inception. For the years ended December 31, 2016, 2017 and 2018, we recorded under other income RMB5,944,000, RMB5,738,000 and RMB3,810,000 of government grants and subsidies, respectively. We also enjoy preferential tax treatment during the Track Record Period. For more details, please see “Financial Information — Critical Accounting Policies and Estimates — Government Grants” of this prospectus. The financial incentives we received are subject to the discretion of the central government or relevant local government authorities. There can be no assurance that we will be able to enjoy and receive the same level of financial incentives in the future, if at all. Any loss of or reduction in financial incentives or other form of government support could have a material and adverse effect on our business, financial condition, results of operations and prospects.

Fair value changes for our financial liabilities measured at fair value through profit and loss may materially affect our financial condition and results of operations. We have raised approximately RMB199.9 million in 2018 from private equity financing through the issuance of convertible redeemable preferred shares. We classified these financial instruments as financial liabilities at fair value though profit and loss, or FVTPL. The fair value of the financial instruments is established by using valuation techniques. These techniques include probability-weighted expected return method and option-pricing method. Some unobservable inputs, such as the timing of the liquidation, redemption or IPO event as well as the probability of the various scenarios, discount for lack of marketability and volatility, require management best estimates. Management estimates and assumptions are reviewed periodically and are adjusted when necessary. Should any of the estimates and assumptions change, it may lead to a change in the fair value of the financial liabilities at FVTPL. Although our preferred shares will be automatically converted to Shares upon the closing of the Global Offering, to the extent we need to revalue the preferred shares prior to the closing of the Global Offering, any change in fair value of these preferred shares could materially affect our financial positions and performance. We recorded a loss on fair value changes of financial liabilities at FVTPL of RMB20.7 million for the year ended December 31, 2018. We expect to recognize additional loss from the fair value changes of the preferred shares from January 1, 2019 to the Listing Date. After the automatic conversion of all preferred shares into Shares upon the closing of the Global Offering, we do not expect to recognize any further (loss) gain on fair value changes from preferred shares in the future.

Any future litigation, legal disputes, claims or administrative proceedings against us could be costly and time-consuming. We may be subject, from time to time, to legal proceedings and claims that arise in the ordinary course of business or pursuant to governmental or regulatory enforcement activity. While we do not believe that the resolution of any lawsuits against us will, individually or in the aggregate, have a material adverse effect on our business, financial condition and results of operations, litigation to which we are a party might result in substantial costs and divert management’s attention and resources. Furthermore, any litigations, legal disputes, claims or administrative proceedings which are initially not of material importance may escalate and become important to us due to a variety of factors, such as the facts and circumstances of the cases, the likelihood of loss, the monetary amount at stake and the parties involved. Our insurance might not cover claims brought against us, might not provide sufficient payments to cover all of the costs to resolve one or more such claims and might not continue to be

50 RISK FACTORS available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs and could have a material adverse effect on our financial condition, results of operations and reputation.

The Company is not registered as an “investment company” under the U.S. Investment Company Act, and may have to constrain its business activities to qualify for an exemption from such registration or otherwise avoid being deemed an “investment company”. If the Company were found to have failed to register as an “investment company” despite being required to, there could be material adverse consequences for the Company and the price of its Shares. In general, a person would be deemed to be an “investment company” for purposes of the U.S. Investment Company Act if: Š it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or Š absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

Our subsidiaries hold a significant number of equity interests in our incubation portfolio companies, and we expect to receive additional equity interests under our EFS model and to make strategic investments from time to time. However, the Company has not registered with the SEC as an “investment company” pursuant to the U.S. Investment Company Act, in reliance on an exemption for investment companies (a) whose securityholders that are U.S. Persons (as defined in Regulation S) are all Qualified Purchasers and (b) which do not make a public offering of their securities in the United States, and there are provisions, procedures and restrictions designed to maintain compliance with such exemption. No opinion or no-action position has been requested from the SEC with respect to whether the Company is required to register as an “investment company” pursuant to the U.S. Investment Company Act.

If the SEC or a court of competent jurisdiction were to find that the Company is required, but in violation of the U.S. Investment Company Act had failed, to register as an “investment company”, possible consequences include, but are not limited to, the following: (i) the SEC could apply to a district court to enjoin the violation; (ii) investors in the Company could sue the Company and attempt to recover damages caused by the violation; and (iii) any contract to which the Company is party that is made in, or whose performance involves a violation of the U.S. Investment Company Act, would be unenforceable by any party to the contract unless a court were to find that under the circumstances enforcement would produce a more equitable result than non-enforcement and would not be inconsistent with the purposes of the U.S. Investment Company Act. Should the Company be subjected to any or all of the foregoing, the Company would be materially adversely affected. Furthermore, in order to avoid being deemed an “investment company”, we may be forced to forego otherwise attractive business opportunities, potentially limiting our growth and profitability, and our business may be materially adversely affected as a result.

Our facilities may be vulnerable to natural disasters or other unforeseen catastrophic events. We conduct our business primarily at our facilities located in Shanghai and Jiaxing, Zhejiang province. We depend on these facilities for business operations. Natural disasters or other

51 RISK FACTORS unanticipated catastrophic events, including power interruptions, water shortage, storms, fires, earthquakes, terrorist attacks and wars could significantly impair our ability to operate our business in ordinary course. Our facilities and certain equipment located in these facilities would be difficult to replace in any such event and could require substantial replacement time. The occurrence of any such event may materially and adversely affect our business, financial condition, results of operations and prospects.

We rely on our information technology system and may face security risks. We rely on a variety of information technology and automated operating systems to manage and support our business operations. The proper functioning of these systems is critical to the efficient operation and management of our business. In addition, these systems may require modifications or upgrades as a result of technological changes or growth in our business. These changes may be costly and disruptive to our operations and could impose substantial demands on management time. Our systems and those of third-party providers may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access, cyber-attacks and thefts. We cannot assure you that the measures and steps we take to secure our systems and electronic information are adequate. Any significant disruption to our systems could materially and adversely affect our business and operating results.

We face risks related to health epidemics or other outbreaks in China. Our business could be materially and adversely affected by the outbreaks of health epidemics such as avian influenza and severe acute respiratory syndrome, or SARS, and Influenza A virus, such as H5N1 subtype and H5N2 subtype flu viruses, as well as terrorist attacks, other acts of violence or war or social instability in the region in which we operate or those generally affecting China. If any of these epidemics or outbreaks and so forth occur, our facilities may suffer damage or be required to temporarily or permanently close and our operation businesses may be suspended or even terminated. Our personnel may also be negatively affected by such events. In addition, any of these could adversely affect the PRC economy and demographics of the affected region, which could adversely affect our business. If this takes place, our business, financial condition and results of operations could be materially adversely affected.

RISKS RELATING TO DOING BUSINESS IN CHINA Adverse changes in the PRC economic, political and social conditions as well as laws and government policies, may materially and adversely affect our business, financial condition, results of operations and prospects. The economic, political and social conditions in the PRC differ from those in more developed countries in many respects, including structure, government involvement, level of development, growth rate, control of foreign exchange, capital reinvestment, allocation of resources, rate of inflation and trade balance position. Before the adoption of its reform and opening up policies in 1978, the PRC was primarily a planned economy. In recent years, the PRC government has been reforming the PRC economic system and government structure. For example, the PRC government has implemented economic reform and measures emphasizing the utilization of market forces in the development of the PRC economy. Economic reform measures, however, may be adjusted, modified or applied inconsistently from industry to industry or across different regions of the country.

52 RISK FACTORS

We cannot predict whether the ongoing evolution of economic condition in China would have any adverse effect on our current or future business, financial condition or results of operations. Despite these economic reforms and measures, the PRC government continues to play a significant role in regulating industrial development, allocation of natural and other resources, production, pricing and management of currency, and there can be no assurance that the PRC government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market friendly.

Our ability to successfully expand our business operations in the PRC depends on a number of factors, including macro-economic and other market conditions, and credit availability from lending institutions. Stricter credit or lending policies in the PRC may affect our ability to obtain external financing, which may reduce our ability to implement our expansion strategies. We cannot assure you that the PRC government will not implement any additional measures to tighten credit or lending standards, or that, if any such measure is implemented, it will not adversely affect our future results of operations or profitability.

Demand for our services and our business, financial condition and results of operations may be materially and adversely affected by the following factors: (i) political instability or changes in social conditions of the PRC; (ii) changes in laws, regulations, and administrative directives or the interpretation thereof; (iii) measures which may be introduced to control inflation or deflation; and (iv) changes in the rate or method of taxation. These factors are affected by a number of factors which are beyond our control.

PRC’s legal system embodies inherent uncertainties that may affect the protection afforded to our business and our Shareholders. Our business and operations in the PRC are governed by the PRC legal system that is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC government has promulgated laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade with a view of developing a comprehensive system of commercial law. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. In particular, because these laws and regulations are relatively new and continue to evolve, interpretation and enforcement of these laws and regulations involve significant uncertainties and different degrees of inconsistency. Some of the laws and regulations are still in the developmental stage and are therefore subject to policy changes. In addition, the PRC legal system is based in part on government policies and internal rules (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 violation of these policies and rules until some time after having violated them. Many laws, regulations, policies and legal requirements have only been recently adopted by PRC central or local government agencies, and their implementation, interpretation and enforcement may involve uncertainty due to the lack of established practice available for reference. We cannot predict the effect of future legal developments in the PRC, including the promulgation of new laws, changes in existing laws or their interpretation or enforcement, or the pre-emption of local regulations by national laws. As a result, there is substantial uncertainty as to the legal protection available to us and our Shareholders. Furthermore, due to the limited volume of published cases and the non-binding nature of prior court decisions, the outcome of dispute resolution may not be as consistent or predictable as in other more developed jurisdictions, which may limit the legal protection available to us. In addition,

53 RISK FACTORS any litigation in the PRC may be protracted and result in substantial costs the diversion of resources and management attention.

As our Shareholder, you hold an indirect interest in our operations in China. Our operations in the PRC are subject to PRC laws and regulations governing PRC companies. These regulations contain provisions that are required to be included in the articles of association of PRC companies and are intended to regulate the internal affairs of these companies. PRC company law and regulations, in general, and the provisions for the protection of shareholders’ rights and access to information, in particular, may be considered less developed than those applicable to companies incorporated in Hong Kong, the United States and other developed countries or regions. In addition, PRC laws, regulations and rules applicable to companies listed overseas do not distinguish among minority and controlling shareholders in terms of their rights and protections. As such, our minority shareholders may not have the same protections afforded to them by companies incorporated under the laws of the United States and certain other jurisdictions.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China against us or our management named in the documents based on Hong Kong or other foreign laws.

We are an exempted company incorporated under the laws of the Cayman Islands, while we conduct most of our operations in China. In addition, substantially all of our senior executive officers reside within China for a significant portion of the time. As a result, it may be difficult for our Shareholders to effect service of process upon us or those persons inside mainland China. In addition, our PRC Legal Advisor has advised us that China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. For more details, please see “Appendix III — Summary of the Constitution of our Company and Cayman Islands Companies Law” of this prospectus.

On July 14, 2006, Hong Kong and the PRC entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (最高人民法院關於內地與香港特別 行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排) (the “Arrangement”) and revised on July 3, 2008, pursuant to which a party with a final court judgment rendered by a Hong Kong court requiring payment of money in a civil and commercial case pursuant to a choice of court agreement in writing may apply for recognition and enforcement of the judgment in the PRC. Similarly, a party with a final judgment rendered by a PRC court requiring payment of money in a civil and commercial case pursuant to a choice of court agreement in writing may apply for recognition and enforcement of the judgment in Hong Kong. A choice of court agreement in writing is defined as any agreement in writing entered into between parties after the effective date of the Arrangement in which a Hong Kong court or a PRC court is expressly designated as the court having sole jurisdiction for the dispute. Therefore, it is not possible to enforce a judgment rendered by a Hong Kong court in the PRC if the parties in dispute have not agreed to enter into a choice of court agreement in writing. Although the Arrangement became effective on August 1, 2008, the outcome and effectiveness of any action brought under the Arrangement may still be uncertain.

54 RISK FACTORS

We rely principally on dividends and other distributions on equity paid by our operating subsidiaries in the PRC to fund cash and financing requirements. Limitations on the ability of our operating subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business. We are a holding company, and we rely principally on dividends and other distributions on equity paid by our subsidiaries in the PRC for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If any of our subsidiaries in the PRC incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Moreover, despite we may record a significant fair value gain in connection with the equity interests of our customers acquired by us via our EFS model, we are unable to realize such gains until the exit of our minority interest upon the occurrence of certain events, such as a trade sale or an initial public offering. Therefore, the distributable net profits of our Company and our subsidiaries could be far below the level of net profits shown on our financial statements.

Furthermore, relevant PRC laws and regulations permit payments of dividends by our subsidiary in the PRC only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC laws and regulations, each of our operating subsidiaries in the PRC is required to set aside a portion of its net profit each year as statutory reserve. These reserves are not distributable as cash dividends. A wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits of the preceding year, after making up previous years’ accumulated losses, if any, as its reserve funds. It may stop contributing if the aggregate amount of the reserve funds has already accounted for more than 50% of its registered capital. Moreover, at the discretion of the wholly-owned enterprise, it may set aside certain amounts from its after-tax profits of the preceding year as bonus and welfare funds for staff and workers. As a result of these PRC laws and regulations, each of our PRC subsidiaries is restricted in its ability to transfer its net profit to us in the form of dividends. Limitations on the ability of our operating subsidiaries in the PRC to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions, pay dividends or otherwise fund and conduct our business.

Under China’s Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. This classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法》), or the EIT Law and the related regulations, an enterprise established outside of the PRC with “de facto management bodies” within the PRC may be considered a PRC “resident enterprise”, meaning that it can be treated in a manner similar to a Chinese enterprise for PRC enterprise income tax purposes and will be generally subject to the uniform 25% enterprise income tax. A tax circular issued by the SAT on April 22, 2009, or Circular 82, sets out the standards and procedures for determining whether the “de facto management body” of an enterprise registered outside of the PRC and controlled by the PRC enterprises or the PRC enterprise groups is located within the PRC. This circular also subjects such resident enterprises to various reporting requirements with the PRC tax authorities. The implementing rules of the EIT Law define “de facto management bodies” as “management bodies that exercise substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. In addition, Circular 82 specifies that certain China- invested enterprises controlled by the PRC enterprises or the PRC enterprise groups will be classified

55 RISK FACTORS as resident enterprises if all of the following apply: (i) the senior management and core management departments that are responsible for daily production, operation and management are located mainly within the PRC; (ii) financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (iii) major assets, accounting books, company seals, and minutes and files of board meetings and shareholders’ meetings are located or kept within the PRC; and (iv) half or more of senior management or directors having voting rights reside within the PRC. Further to Circular 82, on July 27, 2011, the SAT issued the Administrative Measures of Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial) (《境外註冊中資控股居民企業 所得稅管理辦法（試行）》), or Bulletin 45, which became effective on September 1, 2011, to provide more guidance on the implementation of Circular 82. Bulletin 45 clarifies certain issues related to determining PRC resident enterprise status, including which competent tax authorities are responsible for determining offshore incorporated PRC resident enterprise status, as well as post-determination administration. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate issued by the competent tax authorities of the PRC controlled offshore incorporated enterprise, the payer should not withhold 10% income tax when paying Chinese-sourced dividends, interest and royalties to the PRC controlled offshore incorporated enterprise. In 2014, SAT, released the Announcement of the SAT on Issues Concerning the Recognition of Chinese-Controlled Enterprises Incorporated Overseas as Resident Enterprises on the Basis of Their Actual Management Bodies, or Bulletin 9 and supplemented some provisions on the administrative procedures for the recognition of resident enterprise, while the standards used to classify resident enterprises in Circular 82 remain unchanged.

Currently, most of the members of our management team are located in China. However, Circular 82 and Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by foreign individuals or foreign corporations like us. We do not currently consider our Company or any of our overseas subsidiaries to be a PRC resident enterprise.

Despite the foregoing, the SAT may take the view that the determining criteria set forth in Circular 82 and Bulletin 45 reflect the general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. Additional implementing regulations or guidance may be issued determining that our Cayman Islands holding company is a “resident enterprise” for PRC enterprise income tax purposes. If the PRC tax authorities determine that our Cayman Islands holding company is a resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to enterprise income tax at a rate of 25% on our worldwide taxable income, as well as to PRC enterprise income tax reporting obligations. Second, although under the EIT Law and its implementing rules and Bulletin 45 dividends paid by a PRC tax resident enterprise to an offshore incorporated PRC tax resident enterprise controlled by a PRC enterprise or enterprise group would qualify as tax-exempted income, we cannot assure that dividends paid by our PRC subsidiaries to us will not be subject to a 10% withholding tax, as the PRC foreign-exchange control authorities and tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes but not controlled by a PRC enterprise or enterprise group like us. Finally, the EIT Law and its implementing rules issued by PRC tax authorities suggest that dividends paid by us to our non-PRC shareholders and, while less clear, capital gains recognized by them with respect to the sale of our stock may be subject to a withholding tax of 10% for non-PRC enterprise shareholders and potentially 20% for non-PRC individual shareholders. Similarly,

56 RISK FACTORS these unfavorable consequences could apply to other offshore companies if they are classified as a PRC resident enterprise.

We face uncertainty relating to PRC laws and regulations relating to transfers by a non-resident enterprise of assets of a PRC resident enterprise. On February 3, 2015, the PRC State Administration of Taxation issued the Public Announcement on Several Issues Concerning Enterprise Income Tax for Indirect Transfer of Assets by Non-Resident Enterprises (《關於非居民企業間接轉讓財產企業所得稅若干問題的公告》), or Circular 7, which supersedes certain provisions in the Notice on Strengthening the Administration of Enterprise Income Tax on non-Resident Enterprises (《關於加强非居民企業股權轉讓企業所得稅管理的通知》), or Circular 698, which was previously issued by the State Administration of Taxation on December 10, 2009 with retroactive effect from January 1, 2008, as well as certain other rules providing clarification on Circular 698. Circular 7 provides comprehensive guidelines relating to, and heightened the PRC tax authorities’ scrutiny over, indirect transfers by a non-resident enterprise of assets (including equity interests) of a PRC resident enterprise, or PRC Taxable Assets.

For example, Circular 7 specifies that when a non-resident enterprise transfers PRC Taxable Assets indirectly by disposing of equity interests in an overseas holding company which directly or indirectly holds such PRC Taxable Assets, the PRC tax authorities are entitled to reclassify the nature of an indirect transfer of PRC Taxable Assets by disregarding the existence of such overseas holding company and considering the transaction to be a direct transfer of PRC Taxable Assets, if such transfer is deemed to have been conducted for the purposes of avoiding PRC enterprise income taxes and without any other reasonable commercial purpose.

Except as provided in Circular 7, transfers of PRC Taxable Assets under the following circumstances shall be automatically deemed as having no reasonable commercial purpose, and are subject to PRC enterprise income tax: (i) more than 75% of the value of the equity interest of the overseas enterprise is directly or indirectly attributable to the PRC Taxable Assets; (ii) more than 90% of the total assets (cash excluded) of the overseas enterprise are directly or indirectly composed of investment in China at any time during the year prior to the indirect transfer of PRC Taxable Assets, or more than 90% of the income of the overseas enterprise is directly or indirectly from China during the year prior to the indirect transfer of PRC Taxable Assets; (iii) the overseas enterprise and its subsidiaries directly or indirectly hold PRC Taxable Assets and have registered with the relevant authorities in the host countries (regions) in order to meet the local legal requirements in relation to organization forms, yet prove to be inadequate in their ability to perform their intended functions and withstand risks as their alleged organization forms suggest; or (iv) the income tax from the indirect transfer of PRC Taxable Assets payable abroad is lower than the income tax in China that may be imposed on the direct transfer of such PRC Taxable Assets.

Although Circular 7 contains certain exemptions (including, (i) where a non-resident enterprise derives income from the indirect transfer of PRC Taxable Assets by acquiring and selling shares of a listed overseas holding company which holds such PRC Taxable Assets on a public market; and (ii) where there is an indirect transfer of PRC Taxable Assets, but if the non-resident enterprise had directly held and disposed of such PRC Taxable Assets, the income from the transfer would have been exempted from enterprise income tax in the PRC under an applicable tax treaty or arrangement), it remains unclear whether any exemptions under Circular 7 will be applicable to the transfer of our Shares or to any future acquisition by us outside of the PRC involving PRC Taxable Assets, or whether

57 RISK FACTORS the PRC tax authorities will reclassify such transaction by applying Circular 7. Therefore, the PRC tax authorities may deem any transfer of our Shares by our Shareholders that are non-resident enterprises, or any future acquisition by us outside of the PRC involving PRC Taxable Assets, to be subject to the foregoing regulations, which may subject our Shareholders or us to additional PRC tax reporting obligations or tax liabilities.

On October 17, 2017, the SAT issued the Circular on the Source of Deduction of Income Tax for Non-resident Enterprises (《國家稅務總局關於非居民企業所得稅源泉扣繳有關問題的公告》), or Circular 37, which became effective on December 1, 2017 and abolish Circular 698 as well as certain provisions in Circular 7. In accordance with the Circular 37, where the party responsible to deduct such income tax did not or was unable to make such deduction, the non-resident enterprise receiving such income should declare and pay the taxes that should have been deducted to the relevant tax authority.

Provisions of Circular 7, which impose PRC tax liabilities and reporting obligations, do not apply to “non-resident enterprise acquiring and disposing of the equity interests of the same offshore listed company in a public market”, or the Public Market Safe Harbor, which is determined by whether the parties, number and price of the shares acquired and disposed are not previously agreed upon, but determined in accordance with general trading rules in the public securities markets, according to one implementing rule for Circular 698. In general, transfers of the Shares by Shareholders on the Stock Exchange or other public market would not be subject to the PRC tax liabilities and reporting obligations imposed under the Circular 7 if the transfers fall under the Public Market Safe Harbor. As stated in the section headed “Information about this Prospectus and the Global Offering”, potential investors should consult their professional advisors if they are in any doubt as to the tax implications of subscribing for, purchasing, holding, disposing of and dealing in the Shares.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. In utilizing the proceeds of this offering in the manner described in the section headed “Future Plans and Use of Proceeds”, as an offshore holding company, we may extend loans to our PRC subsidiaries, establish new subsidiaries, make additional capital contributions to our PRC subsidiaries or acquire, in offshore transactions, offshore entities with business operations inside China. Any loans to our PRC subsidiaries are subject to PRC regulations and approvals. For example, loans we extended to our PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the SAFE or its local counterpart.

In August 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign Invested Enterprises (《國家外匯管理局綜合司關於完善外商投資企業外匯資本金支付結匯管理 有關業務操作問題的通知》), or SAFE Circular 142, providing that the RMB capital converted from foreign-currency-registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC.

On March 30, 2015, SAFE released the Circular on the Reform of the Management Method for the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises (《國家外匯管理局關於

58 RISK FACTORS

改革外商投資企業外匯資本金結匯管理方式的通知》), or SAFE Circular 19, which came into force and superseded SAFE Circular 142 from June 1, 2015. On June 9, 2016, SAFE further promulgated the Circular on the Reform and Standardization of the Management Policy of the Settlement of Capital Projects (《關於改革和規範資本專案結匯管理政策的通知》), or SAFE Circular 16. SAFE Circular 19 has made certain adjustments to some regulatory requirements on the settlement of foreign exchange capital of foreign-invested enterprises, and some foreign exchange restrictions under SAFE Circular 142 are expected to be lifted. Under SAFE Circular 19 and SAFE Circular 16, the settlement of foreign exchange by foreign invested enterprises shall be governed by the policy of foreign exchange settlement on a discretionary basis. However, SAFE Circular 19 and SAFE Circular 16 also reiterate that the settlement of foreign exchange shall only be used for its own operation purposes within the business scope of the foreign invested enterprises and following the principles of authenticity. Considering that SAFE Circular 19 and SAFE Circular 16 are relatively new, it is unclear how they will be implemented, and there exists high uncertainties with respect to its interpretation and implementation by authorities. For example, under SAFE Circular 19 and SAFE Circular 16, we may still not be allowed to convert foreign currency-registered capital of our PRC subsidiaries which are foreign-invested enterprises into RMB capital for securities investments or other finance and investment except for principal-guaranteed bank products. Further, SAFE Circular 19 and SAFE Circular 16 restrict a foreign-invested enterprise from using Renminbi converted from its registered capital to provide loans to its non-affiliated companies.

In addition, any capital contributions to our existing PRC subsidiaries or to any new PRC subsidiaries that we may establish in the future must be filed with the MOFCOM or its local counterpart. Violations of SAFE Circular 19 and SAFE Circular 16 could result in severe penalties. There can be no assurance that we will be able to obtain these government registrations or approvals on a timely basis, if at all. If we fail to receive such registrations or approvals, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

Failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. 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 Company (《國家外匯管理局關於境內個人參與境外上市公司股權激勵計畫外匯管理有關 問題的通知》), or the Stock Option Rules, which replaced the earlier rules promulgated by the SAFE in March 2007. Under the Stock Option Rules, PRC residents who participate in stock incentive plans in an overseas publicly listed company are required, through a PRC agent or PRC subsidiary of such overseas publicly listed company, to register with the SAFE and complete certain other procedures. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes.

We and our PRC resident employees who have been granted stock options will be subject to the Stock Option Rules upon completion of this offering. Failure of the PRC resident holders of our share options to complete their SAFE registrations may subject these PRC residents to fines and legal

59 RISK FACTORS sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limited our PRC subsidiaries’ ability to distribute dividends to us, or otherwise materially adversely affect our business.

Any failure by the shareholders or beneficial owners of our Shares who are PRC residents to comply with certain PRC foreign exchange regulations relating to offshore investment activities by such PRC residents could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC laws. On October 21, 2005, the SAFE issued the Circular Regarding Certain Administrative Measures on Financing and Round-trip Investment by PRC Residents through Offshore Special Purpose Vehicles (《關於境內居民通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知》), or SAFE Circular 75, which became effective on November 1, 2005.

On July 4, 2014, SAFE Circular 75 was superseded by the Circular Regarding Certain Administrative Measures on Offshore Investing and Financing and Round-trip Investment by PRC Residents through Special Purpose Vehicles (《關於境內居民通過特殊目的公司境外投融資及返程投資 外匯管理有關問題的通知》), or SAFE Circular 37, issued by SAFE. SAFE Circular 37 requires PRC residents, including both legal and natural persons, to register with the local SAFE branch before making capital contribution to any company outside of China (an “offshore SPV”) with onshore or offshore assets and equity interests legally owned by PRC residents. In addition, any PRC resident who is the shareholder of an offshore SPV is required to update its SAFE registration with the local SAFE branch with respect to that offshore SPV in connection with change of basic information of the offshore SPV, such as its company name, business term, shareholding by PRC resident, merger, division and, with respect to the PRC resident, in case of any increase or decrease of capital in the offshore SPV, or transfer of shares or swap of shares by the PRC resident. Failure to comply with the required SAFE registration or update requirements described above may result in restrictions being imposed on the foreign exchange activities of the PRC subsidiaries of such offshore SPV, including increasing the registered capital of, making payment of dividends and other distributions to, and the receipt of capital inflows from, the offshore SPV. Failure to comply with SAFE Circular 37 by relevant PRC resident may also subject such resident to penalties under PRC foreign exchange administration regulations for evasion of applicable foreign exchange restrictions. Furthermore, in the event of non- compliance of SAFE Circular 37, the PRC subsidiary of such offshore SPV may be subject to restrictions on settlement of capital in foreign exchange or distribution of the dividend to its shareholder.

On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment (《國家外匯管理局關於進一步 簡化和改進直接投資外匯管理政策的通知》), or SAFE Circular 13, which came into effect on June 1, 2015, pursuant to which, local banks shall review and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration under SAFE Circular 37, while the application for remedial registrations shall still be submitted to, reviewed and handled by the relevant local branches of SAFE.

There remains uncertainty as to the interpretation and implementation of the latest SAFE rules at practice level. We are committed to complying with and to ensuring that our shareholders who are subject to the regulations will comply with the relevant SAFE rules and regulations, however, due to the inherent uncertainty in the implementation of the regulatory requirements by PRC authorities, such

60 RISK FACTORS registration might not be always practically available in all circumstances as prescribed in those regulations. In addition, we may not always be able to compel them to comply with SAFE Circular 37 or other related regulations. We cannot assure you that the SAFE or its local branches will not release explicit requirements or interpret the relevant PRC laws and regulations otherwise. Failure by any such shareholders to comply with SAFE Circular 37 or other related regulations could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions, pay dividends or other payments to us or affect our ownership structure, which could adversely affect our business and prospects.

RISKS RELATING TO THE GLOBAL OFFERING No public market currently exists for our Shares; an active trading market for our Shares may not develop and the market price for our Shares may decline or become volatile. No public market currently exists for our Shares. The initial Offer Price for our Shares to the public will be the result of negotiations between our Company and the Joint Representatives, and the Offer Price may differ significantly from the market price of the Shares following the Global Offering. We have applied to the Stock Exchange for the listing of, and permission to deal in, the Shares. A listing on the Stock Exchange, however, does not guarantee that an active and liquid trading market for our Shares will develop, or if it does develop, that it will be sustained following the Global Offering, or that the market price of the Shares will not decline following the Global Offering.

In addition, the trading price and trading volume of the Shares may be subject to significant volatility in responses to various factors, including: Š changes in our operating results; Š changes in financial estimates by securities analysts; Š announcements made by us or our competitors; Š regulatory developments in China affecting us or our industry; Š investors’ perception of us and of the investment environment in Asia, including Hong Kong and China; Š changes in the economic performance or market valuations of other service providers in our industry; Š the depth and liquidity of the market for our Shares; Š additions to or departures of, members of our senior management; Š release or expiry of lock-up or other transfer restrictions on our Shares; Š sale or anticipated sale of additional Shares; and Š the general economy and other factors.

Moreover, shares of other companies listed on the Stock Exchange with significant operations and assets in China have experienced price volatility in the past. It is, therefore, possible that our Shares may be subject to changes in price not directly related to our performance.

61 RISK FACTORS

You will incur immediate and significant dilution and may experience further dilution if we issue additional Shares or other equity securities in the future, including pursuant to the Post-IPO Share Option Scheme. The Offer Price of the Offer Shares is higher than the net tangible asset value per Share immediately prior to the Global Offering. Therefore, purchasers of the Offer Shares in the Global Offering will experience an immediate dilution in pro forma net tangible asset value. In order to expand our business, we may consider offering and issuing additional Shares in the future. Purchasers of the Offer Shares may experience dilution in the net tangible asset value per share of their Shares if we issue additional Shares in the future at a price which is lower than the net tangible asset value per Share at that time. Furthermore, we may issue Shares pursuant to the Post-IPO Share Option Scheme, which would further dilute Shareholders’ interests in our Company.

Dividend distributed in the past may not be indicative of our future dividend policy. During the Track Record Period, we did not declare or distribute any dividends to our equity holders. Any future dividend declaration and distribution by our Company will be at the discretion of our Directors and subject to our Articles of Association and the PRC laws, including (where required) the approvals from our shareholders and our Directors. Our Directors will consider our operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors when they determine the distribution of dividend. For more details of our dividend policy, please see “Financial Information — Dividends” of this prospectus. In addition, our future dividend payments will depend upon the availability of dividends received from our subsidiary. As a result of the above, we cannot assure you that we will make any dividend payments on our Shares in the future with reference to our historical dividends.

We have significant discretion as to how we will use the net proceeds of the Global Offering, and you may not necessarily agree with how we use them. Our management may utilize the net proceeds from the Global Offering in ways you may not agree with or that do not yield a favorable return to our Shareholders. We plan to use the net proceeds from the Global Offering, including but not limited to: (i) expanding our EFS model to add more promising biotechnology startups in China and overseas into our incubation portfolio; (ii) building up our commercial and research manufacturing capabilities and capacities both in biologics CMO and chemistry CMO areas, (iii) purchasing laboratory equipment and materials in accordance with our expansion plans; (iv) hiring, training and retaining biologics and chemical drug research and development personnel; (v) expanding our CMO business; and (vi) our general corporate and working capital purposes. For more details, please see “Future Plans and Use of Proceeds — Use of Proceeds” of this prospectus. However, our management will have discretion as to the actual application of our net proceeds. You are entrusting your funds to our management, whose judgment you must depend on, for the specific uses we will make of the net proceeds from this Global Offering.

Future sales or perceived sales of our Shares in the public market by major Shareholders following the Global Offering could materially and adversely affect the price of our Shares. Prior to the Global Offering, there has not been a public market for our Shares. Future sales or perceived sales by our existing Shareholders of our Shares after the Global Offering could result in a significant decrease in the prevailing market price of our Shares. Only a limited number of the Shares currently outstanding will be available for sale or issuance immediately after the Global Offering due

62 RISK FACTORS to contractual and regulatory restrictions on disposal and new issuance. Nevertheless, after these restrictions lapse or if they are waived, future sales of significant amounts of our Shares in the public market or the perception that these sales may occur could significantly decrease the prevailing market price of our Shares and our ability to raise equity capital in the future.

Our Controlling Shareholders have significant influence over our Company and their interests may not be aligned with the interests of our other Shareholders. Immediately following the Capitalization and the Global Offering, our Controlling Shareholders, Mr. Mao and Concord Trust Company, LLC will control in aggregate approximately 30.75% of our Shares, assuming the Over-allotment Option is not exercised at all and without taking into account any Shares which may be issued upon the exercise of any options granted under the Pre- IPO Share Option Schemes. Our Controlling Shareholders will, through their voting power at the Shareholders’ meetings and their position on the Board, have significant influence over our business and affairs, including decisions in respect of mergers or other business combinations, acquisition or disposition of assets, issuance of additional shares or other equity securities, timing and amount of dividend payments, amendment to our Memorandum and Articles of Association and our management. Our Controlling Shareholders may not act in the best interests of our minority Shareholders. In addition, without the consent of our Controlling Shareholders, we could be prevented from entering into transactions that could be beneficial to us. This concentration of ownership may also discourage, delay or prevent a change in control of our Company, which could deprive our Shareholders of an opportunity to receive a premium for the Shares as part of a sale of our Company and may significantly reduce the price of our Shares.

There will be a gap of several days between pricing and trading of our Shares, and the price of our Shares when trading begins could be lower than the offer price. The initial price to the public of our Shares sold in the Global Offering is expected to be determined on the Price Determination Date. However, the Shares will not commence trading on the Stock Exchange until they are delivered, which is expected to be six Business Days after the Price Determination Date. As a result, investors may not be able to sell or otherwise deal in the Shares during that period. Accordingly, holders of our Shares are subject to the risk that the price of the Shares when trading begins could be lower than the Offer Price as a result of adverse market conditions or other adverse developments that may occur between the time of sale and the time trading begins.

We are a Cayman Islands exempted company and, because judicial precedent regarding the rights of shareholders is more limited under the laws of the Cayman Islands than other jurisdictions, you may have difficulties in protecting your Shareholder rights. Our corporate affairs are governed by our Memorandum and Articles and by the Companies Law and common law of the Cayman Islands. The rights of Shareholders to take legal action against our Directors and us, actions by minority Shareholders and the fiduciary responsibilities of our Directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests of minority shareholders differ in some respects from those established under statutes and judicial precedent in existence in the jurisdictions where minority Shareholders may be located. For more details, please see “Appendix III — Summary of the Constitution of our Company and Cayman Islands Companies Law” of this prospectus.

63 RISK FACTORS

As a result of all of the above, minority Shareholders may have difficulties in protecting their interests under the laws of the Cayman Islands through actions against our management, Directors or Controlling Shareholder, which may provide different remedies to minority Shareholders when compared to the laws of the jurisdiction such shareholders are located in.

Facts, forecasts and statistics in this prospectus relating to the PRC economy and healthcare industry may not be fully reliable. Facts, forecasts and statistics in this prospectus relating to the PRC, the PRC economy and healthcare industry in China are obtained from various sources including official government publications that we believe are reliable. However, we cannot guarantee the quality or reliability of these sources. Neither we nor our affiliates or advisers have verified the facts, forecasts and statistics nor ascertained the underlying economic assumptions obtained from these sources. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice and other problems, the statistics in this prospectus relating to the PRC economy and the healthcare industry in China may be inaccurate or may not be comparable to statistics produced for other economies and should not be unduly relied upon. As such, no representation as to the accuracy of such facts, forecasts and statistics obtained from various sources is made. Moreover, these facts, forecasts and statistics involve risk and uncertainties and are subject to change based on various factors and should not be unduly relied upon. Further, there can be no assurance that they are stated or compiled on the same basis or with the same degree of accuracy, as may be the case in other countries.

You should read the entire document carefully, and we strongly caution you not to place any reliance on any information contained in press articles or other media regarding us or the Global Offering. There may be, subsequent to the date of this document but prior to the completion of the Global Offering, press and media coverage regarding us and the Global Offering, which may contain, among other things, certain financial information, projections, valuations and other forward-looking information about us and the Global Offering. We have not authorized the disclosure of any such information in the press or media and do not accept responsibility for the accuracy or completeness of such press articles or other media coverage. We make no representation as to the appropriateness, accuracy, completeness or reliability of any of the projections, valuations or other forward-looking information about us. To the extent such statements are inconsistent with, or conflict with, the information contained in this document, we disclaim responsibility for them. Accordingly, prospective investors are cautioned to make their investment decisions on the basis of the information contained in this document only and should not rely on any other information.

You should rely solely upon the information contained in this document, the Global Offering and any formal announcements made by us in Hong Kong in making your investment decision regarding our Shares. We do not accept any responsibility for the accuracy or completeness of any information reported by the press or other media, nor the fairness or appropriateness of any forecasts, views or opinions expressed by the press or other media regarding our Shares, the Global Offering or us. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such data or publication. Accordingly, prospective investors should not rely on any such information, reports or publications in making their decisions as to whether to invest in our Global Offering. By applying to purchase our Shares in the Global Offering, you will be deemed to have agreed that you will not rely on any information other than that contained in this document and the Global Offering.

64 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

In preparation for the Global Offering, our Company has sought the following waivers from strict compliance with the relevant provisions of the Listing Rules and exemptions from compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance:

MANAGEMENT PRESENCE IN HONG KONG Pursuant to Rule 8.12 of the Listing Rules, an issuer must have sufficient management presence in Hong Kong. This normally means that at least two of its executive directors must be ordinarily resident in Hong Kong.

We do not have sufficient management presence in Hong Kong for the purposes of satisfying the requirements under Rule 8.12 of the Listing Rules. Our Group’s management, business operations and assets are primarily based outside Hong Kong. Except for Mr. Hua, our executive Director and chief financial officer, who is ordinarily resident in Hong Kong, the headquarters and senior management of our Group are primarily based in mainland China. The Directors consider that the appointment of additional executive Directors who will be ordinarily resident in Hong Kong would not be beneficial to, or appropriate for, our Group and therefore would not be in the best interests of our Company and the Shareholders as a whole. Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has agreed to grant, a waiver from strict compliance with the requirements under Rule 8.12 of the Listing Rules. We will ensure that there is an effective channel of communication between us and the Stock Exchange by way of the following arrangements: (a) pursuant to Rule 3.05 of the Listing Rules, we have appointed and will continue to maintain two authorized representatives, namely Mr. Hua, our executive Director, and Ms. Chau Hing Ling, our joint company secretary, to be the principal communication channel at all times between the Stock Exchange and our Company. Each of our authorized representatives will be readily contactable by the Stock Exchange by telephone, facsimile and/or e-mail to deal promptly with enquiries from the Stock Exchange. Both of our authorized representatives are authorized to communicate on our behalf with the Stock Exchange; (b) we will implement a policy to provide the contact details of each Director (such as mobile phone numbers, office phone numbers, residential phone numbers, email addresses and fax numbers) to each of the authorized representatives and to the Stock Exchange. This will ensure that each of the authorized representatives and the Stock Exchange will have the means to contact all the Directors (including the independent non-executive Directors) promptly as and when required, including means to communicate with the Directors when they are traveling; (c) we will ensure that all Directors who are not ordinarily resident in Hong Kong have valid travel documents to visit Hong Kong and will be able to come to Hong Kong to meet with the Stock Exchange within a reasonable period of time when required; (d) we have retained the services of a compliance adviser, being Guotai Junan Capital Limited (the “Compliance Adviser”), in accordance with Rule 3A.19 of the Listing Rules. The Compliance Adviser will serve as an alternative channel of communication with the Stock Exchange in addition to the authorized representatives of our Company. The Compliance Adviser will provide our Company with professional advice on ongoing compliance with

65 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

the Listing Rules. We will ensure that the Compliance Adviser has prompt access to our Company’s authorized representatives and Directors who will provide to the Compliance Adviser such information and assistance as the Compliance Adviser may need or may reasonably request in connection with the performance of the Compliance Adviser’s duties. The Compliance Adviser will also provide advice to us in compliance with Rule 3A.23 of the Listing Rules; and (e) meetings between the Stock Exchange and the Directors could be arranged through the authorized representatives or the Compliance Adviser, or directly with the Directors within a reasonable time frame.

Our Company will inform the Stock Exchange as soon as practicable in respect of any change in the authorized representatives and/or the Compliance Adviser in accordance with the Listing Rules.

JOINT COMPANY SECRETARIES Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary must be an individual who, by virtue of his academic or professional qualifications or relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of the company secretary. Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Stock Exchange considers the following academic or professional qualifications to be acceptable: (a) a Member of The Hong Kong Institute of Chartered Secretaries; (b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159 of the Laws of Hong Kong); or (c) a certified public accountant as defined in the Professional Accountants Ordinance (Chapter 50 of the Laws of Hong Kong).

Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant experience”, the Stock Exchange will consider the individual’s: (a) length of employment with the issuer and other issuers and the roles he or she played; (b) familiarity with the Listing Rules and other relevant law and regulations including the Securities and Futures Ordinance, the Companies Ordinance, Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Takeovers Code; (c) relevant training taken and/or to be taken in addition to the minimum requirement under Rule 3.29 of the Listing Rules; and (d) professional qualifications in other jurisdictions.

Our Company has appointed Ms. Fei Xiaoyu and Ms. Chau Hing Ling as joint company secretaries of our Company on July 10, 2018. Ms. Chau Hing Ling is a fellow member of the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries and therefore meets the qualification requirements under Note 1 to Rule 3.28 of the Listing Rules and is in compliance with Rule 8.17 of the Listing Rules.

Ms. Fei Xiaoyu joined our Group in July 2009 as assistant to president in Viva Biotech Shanghai, our principal operating subsidiary, and has remained employed with our Group since then.

66 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

For more details of Ms. Fei Xiaoyu’s biographical information, please see the section headed “Directors and Senior Management — Joint Company Secretaries” in this prospectus. Our Company believes that Ms. Fei Xiaoyu, by virtue of her knowledge and experience in handling corporate administrative matters, is capable of discharging her functions as a joint company secretary. Further, our Company believes that it would be in the best interests of our Company and the corporate governance of our Group to have as its joint company secretary a person such as Ms. Fei Xiaoyu who is familiar with the Group’s operational matters.

Accordingly, while Ms. Fei Xiaoyu does not possess the formal qualifications required of a company secretary under Rule 3.28 of the Listing Rules, we have applied to the Stock Exchange for, and the Stock Exchange has agreed to grant, a waiver from strict compliance with the requirements under Rules 3.28 and 8.17 of the Listing Rules such that Ms. Fei Xiaoyu may be appointed as a joint company secretary of our Company. The waiver was granted for a three-year period on the condition that Ms. Chau Hing Ling, as joint company secretary, will work closely with, and provide assistance to, Ms. Fei Xiaoyu, in the discharge of her duties as our joint company secretary for an initial period of three years from the date of the Listing. In addition, Ms. Fei Xiaoyu will comply with the annual professional training requirement under Rule 3.29 of the Listing Rules and will enhance her knowledge of the Listing Rules during the three-year period from the Listing Date. We will further ensure that Ms. Fei Xiaoyu has access to the relevant training and support that would enhance her understanding of the Listing Rules and the duties of a company secretary of an issuer listed on the Stock Exchange. The waiver will be revoked immediately if Ms. Chau Hing Ling ceases to provide assistance to Ms. Fei Xiaoyu as the joint company secretary during the three years after the Listing. At the end of the three- year period, we will liaise with the Stock Exchange to enable it to assess whether Ms. Fei Xiaoyu, having had the benefit of Ms. Chau Hing Ling’s assistance for three years, will have acquired the skills necessary to carry out the duties of company secretary and the relevant experience within the meaning of Note 2 to Rule 3.28 of the Listing Rules so that a further waiver will not be necessary.

See the section headed “Directors and Senior Management — Joint Company Secretaries” in this prospectus for further information regarding the qualifications of Ms. Fei Xiaoyu and Ms. Chau Hing Ling.

WAIVER IN RESPECT OF ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR ACQUISITIONS OF SUBSIDIARIES AND BUSINESSES CONDUCTED AFTER THE TRACK RECORD PERIOD Pursuant to Rules 4.04(2) and 4.04(4)(a) of the Listing Rules, the accountant’s report to be included in a listing document must include the income statements and balance sheets of any subsidiary or business acquired, agreed to be acquired or proposed to be acquired since the date to which its latest audited financial statements have been made up in respect of each of the three financial years immediately preceding the issue of the listing document.

Pursuant to Guidance Letter HKEx-GL32-12 issued by the Stock Exchange (“GL32-12”), acquisitions of business include acquisitions of associates and any equity interest in another company. Pursuant to GL32-12, the Stock Exchange may consider granting a waiver of the requirements under Rules 4.04(2) and 4.04(4) of the Listing Rules on a case-by-case basis, and having regard to all relevant facts and circumstances. Pursuant to GL32-12, the Stock Exchange will ordinarily grant a

67 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE waiver in relation to acquisitions of equity securities in the ordinary and usual course of business subject to the following conditions: (i) the percentage ratios (as defined under Rule 14.04(9) of the Listing Rules) of each acquisition are all less than 5% by reference to the most recent financial year of the applicant’s trading record period; (ii) the applicant is neither able to exercise any control, nor has any significant influence, over the underlying company or business; and (iii) the listing document should include the reasons for the acquisitions and a confirmation that the counterparties and the ultimate beneficial owners of the counterparties are independent third parties of the applicant and its connected persons. In addition, for those acquisitions not in the ordinary and usual course of business, the Stock Exchange will ordinarily grant a waiver in relation to acquisitions of a business or subsidiary subject to the following conditions: (i) the percentage ratio (as defined under Rule 14.04(9) of the Listing Rules) of the acquired or to be acquired business or subsidiary are all less than 5% by reference to the most recent financial year of the applicant’s trading record period; (ii) the historical financial information of the acquired or to be acquired business or subsidiary is not available or would be unduly burdensome to obtain or prepare; and (iii) the listing document should include at least the information that would be required for a disclosable transaction under Chapter 14 of the Listing Rules on each acquisition.

Acquisitions of Equity Securities in the Ordinary and Usual Course of Business

As disclosed in the Business section, our Group has developed a unique EFS model for its business. Under the EFS model, our Group provides drug discovery and/or incubation services to (i) selected customers in exchange for equity or economic interests in them; and (ii) certain investees in exchange for cash, both of these selected customers and investees are promising biotechnology startup companies. By holding equity/economic interests in these selected customers or investees, our Group can effectively foster the development of these promising biotech startups and enjoy the upside of their IP value. For more details on these selected customers or investee customers, please refer to “Business — Our Incubation Program and Business Partners — Our Incubation Portfolio Companies.”

In particular, pursuant to the pre-agreed development milestones under respective service or investment agreements, we expect to acquire additional minority interests in certain incubation portfolio companies as set forth in the table below after the Track Record Period. The table below sets forth our current shareholding and the maximum shareholding to be received under relevant agreements with relevant incubation portfolio companies:

Shareholding Shareholding % to be received Company Name % received under agreement Dogma Therapeutics, Inc.(1) ...... 8.64% 14.40% Flash Therapeutics, Inc...... 16.00% 20.00% Tabomedex Biosciences, Inc...... 9.60% 20.00% Twin Lanterns Bio, LLC ...... Nil 40.00% Riparian Pharmaceuticals, Inc...... Nil 30.16% Trio Bio, LLC(2) ...... Nil 74.00% Livati Therapeutics, LLC ...... Nil 22.00%

Notes: (1) As of the Latest Practicable Date, we held 7.01% in the company as we disposed of part of the equity interest we received in April 2018. (2) Although we are entitled to a maximum of 74.00% equity interest in Trio Bio, LLC, the shares to be acquired by us only carry 1/3 voting right.

68 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

Save for Ms. Mao, who is indirectly interested in 18.00% in Flash Therapeutics, Inc., 10.80% in Dogma Therapeutics, Inc., 9.60% in Tabomedex Biosciences, Inc. and 13.51% in Riparian Pharmaceuticals, Inc., other shareholders and the ultimate beneficial owners of these incubation portfolio companies are independent third parties of our Company and our connected persons.

We have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with Rules 4.04(2) and 4.04(4)(a) of the Listing Rules on the following grounds:

(a) Ordinary and usual course of business As disclosed in the Business section, acquiring equity interests in the incubation portfolio companies, including both (i) certain selected customers and (ii) certain investees which are promising biotechnology startup companies, under our unique EFS model, is part of our ordinary and usual course of business. For more details on these selected customers or investee customers and our unique EFS model, please refer to “Business — Our Incubation Program and Business Partners — Our Incubation Portfolio Companies.”

(b) Absence of control As we only hold or expect to hold minority equity interest or non-controlling voting right in each of these incubation portfolio companies under the EFS model, we do not control their board of directors and are neither able to exercise any control nor have any significant influence over each of the incubation portfolio company, which situation is expected to continue in the event that we acquire additional equity interests under the EFS model either pursuant to the pre-agreed milestones under the existing service contracts or when we identify and acquire equity interests in any new investee customers.

(c) Percentage ratio Based on the unaudited financial information of relevant incubation portfolio companies as at December 31, 2018 and assuming we acquired the maximum shareholding pursuant to relevant EFS contracts or the investment agreements entered into with each of these incubation portfolio companies, the assets ratio of each acquisition was less than 1.0%. The revenue ratio and profits ratio under the size tests under Rules 14.07 and 14.26 of the Listing Rules of each acquisition was either less than 1.0% or not applicable where the relevant incubation companies had not generated any revenue or profit.

(d) Disclosure in this prospectus The Business section in this prospectus contains detailed disclosure on the EFS model and our incubation portfolio companies, which includes: Š a general description of the background of the incubation portfolio companies; Š our shareholding held in each of such incubation portfolio companies; and Š our shareholding expected to be received under relevant agreements.

69 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

For further details, please refer to “Business — Our Incubation Program and Business Partners — Our Incubation Portfolio Companies.” We have included in this section a confirmation as to whether other shareholders and the ultimate beneficial owners of these incubation portfolio companies are independent third parties to our Company and our connected persons.

Acquisitions of Equity Securities Not in the Ordinary and Usual Course of Business In addition to acquiring equity interests in our incubation portfolio companies under our unique EFS model, we may also make strategic investments in biotechnology startup companies that we think are of potential for future cooperation. We have made below investment (the “Acquisition”) in order to further expand our portfolio of incubation companies since the date to which the latest audited financial statements have been made up: Š In January 2019, we entered into an agreement to acquire approximately 15.88% equity interest in Mediar Therapeutics, Inc. (“Mediar Therapeutics”) at a total investment amount of US$1.25 million (the “First Closing”). Under the investment agreement, we also agreed to invest an additional US$1.25 million in the company upon pre-agreed milestone achievement, following the completion of which we will hold approximately 20.28% equity interest in Mediar Therapeutics (without considering any potential subsequent dilution) (the “Second Closing”). The consideration was determined based on the arm’s length negotiations between us and Mediar Therapeutics based on future prospect of the market for the product being developed by Mediar Therapeutics. We have fully settled the consideration for the First Closing in January 2019. The proceeds from the Global Offering will not be used to fund the Second Closing of the Acquisition. As Mediar Therapeutics was incorporated in December 2018, it only had minimal assets as at December 31, 2018. Mediar Therapeutics did not generate any revenue or profit for the year ended December 31, 2018.

The Directors believe that the terms of the Acquisition are fair and reasonable and in the interests of the Shareholders as a whole. To the best of the Directors’ knowledge, information and belief, other shareholders and the ultimate beneficiary owners of Mediar Therapeutics are independent third parties of the Company and its connected persons.

We have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with Rules 4.04(2) and 4.04(4)(a) of the Listing Rules on the following grounds: (a) Percentage ratio Applying the relevant size tests under Rules 14.07 and 14.26 of the Listing Rules, the acquisition of 20.28% equity interest in Mediar Therapeutics represented less than 1.0% of our total assets as at December 31, 2018. As Mediar Therapeutics did not generate any revenue or profit for the year ended December 31, 2018, the profits and revenue ratios were not applicable. Accordingly, the Acquisition would not constitute a disclosable transaction under Chapter 14 of the Listing Rules which requires a 5% threshold. Further, the Acquisition will not be significant enough to require our Company to prepare pro-forma accounts under Rule 4.28 of the Listing Rules. We therefore consider the Acquisition immaterial and do not expect it to have any material effect on our business, financial conditions and operations.

70 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

(b) Unduly burdensome to prepare the financial information Strict compliance with Rules 4.04(2) and 4.04(4)(a) of the Listing Rules would generate an excessive amount of work and would be unduly burdensome for the Group considering the timetable of the proposed Listing. As we currently hold and expect to hold minority interest in Mediar Therapeutics after the Second Closing, and taking into account the unaudited management accounts provided by Mediar Therapeutics, our Directors are of the view that the financial positions of Mediar Therapeutics will not have any material impact on those of our Group.

(c) Alternative disclosure Having regard to the guidance under GL32-12, we have disclosed the information that would be required for a disclosable transaction under Chapter 14 of the Listing Rules on the Acquisition in this section. Please refer to “Business — Our Incubation Program and Business Partners — Our Incubation Portfolio Companies — Mediar Therapeutics, Inc.”

71 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS This prospectus, for which our Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing Rules for the purpose of giving information to the public with regard to our Group. Our Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this prospectus is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in this prospectus misleading.

GLOBAL OFFERING This prospectus is published solely in connection with the Hong Kong Public Offering, which forms part of the Global Offering. For applicants under the Hong Kong Public Offering, this prospectus and the Application Forms contain the terms and conditions of the Hong Kong Public Offering.

The Hong Kong Offer Shares are offered solely on the basis of the information contained and representations made in this prospectus and the Application Forms and on the terms and subject to the conditions set out herein and therein. No person is authorized to give any information in connection with the Global Offering or to make any representation not contained in this prospectus and the relevant Application Forms, and any information or representation not contained herein and therein must not be relied upon as having been authorized by our Company, the Sole Sponsor, Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and any of the Underwriters, any of their respective directors, agents, employees or advisers or any other party involved in the Global Offering.

The Listing is sponsored by the Sole Sponsor and the Global Offering is managed by the Joint Representatives. Pursuant to the Hong Kong Underwriting Agreement, the Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement, subject to agreement on the Offer Price to be determined between the Joint Representatives and our Company on the Price Determination Date. The International Offering is expected to be fully underwritten by the International Underwriters subject to the terms and conditions of the International Underwriting Agreement, which is expected to be entered into on or about the Price Determination Date.

The Offer Price is expected to be fixed among the Joint Representatives and our Company on the Price Determination Date. The Price Determination Date is expected to be on or around Tuesday, April 30, 2019 and, in any event, not later than Wednesday, May 8, 2019. If, for whatever reason, the Offer Price is not agreed between the Joint Representatives and our Company on or before Wednesday, May 8, 2019, the Global Offering will not become unconditional and will lapse immediately.

See the section headed “Underwriting” in this prospectus for further information about the Underwriters and the underwriting arrangements.

72 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

RESTRICTIONS ON OFFER AND SALE OF THE OFFER SHARES Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will be required to, or be deemed by his/her acquisition of the Hong Kong Offer Shares to, confirm that he/ she is aware of the restrictions on offers and sales of the Shares described in this prospectus and the relevant Application Forms.

No action has been taken to permit a public offering of the Offer Shares in any jurisdiction other than Hong Kong, and no action has been taken to permit the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, without limitation to the following, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not authorized or to any person to whom it is unlawful to make such an offer or invitation. The distribution of this prospectus and the offering and sales of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom. In particular, the Hong Kong Offer Shares have not been publicly offered or sold, directly or indirectly, in the PRC or the United States.

Any person acquiring the Offer Shares understands that the Shares have not been and will not be registered under the U.S. Securities Act and, therefore, cannot be resold unless they are registered under the U.S. Securities Act or unless an exemption from registration is available. Such person understands that the Company will not register the Shares under the U.S. Securities Act and cannot guarantee that an exemption from the registration requirements of the U.S. Securities Act will be available in the future. Any person acquiring the Offer Shares also understands that the Company has not been registered under the U.S. Investment Company Act, in reliance on the exemption from registration thereunder provided by Section 3(c)(7) thereof, and that each U.S. Person (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) acquiring Shares must be a QIB and a Qualified Purchaser.

Any person acquiring the Offer Shares is aware that the Shares may be offered, sold, pledged or otherwise transferred to a transferee that is an “investment company” (within the meaning of the U.S. Investment Company Act) relying on the exemption from registration under the U.S. Investment Company Act provided by Section 3(c)(1) or Section 3(c)(7) thereof only if such transferee is a Qualifying Investment Vehicle.

Any person acquiring the Offer Shares agrees that no sale, pledge or other transfer of Shares may be made if such transfer would have the effect of requiring the Company to register as an “investment company” under the U.S. Investment Company Act.

Any person acquiring Offer Shares who is a U.S. Person (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) will be required to, or be deemed by his/her acquisition of the Offer Shares to, confirm the following: (i) such person and each account for which such person is acquiring Offer Shares is a QIB and a Qualified Purchaser; and (i) such person (or if such person is acquiring Offer Shares for any account, each such account) is acquiring the Offer Shares as principal for its own account for investment and

73 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

without a view to the resale, distribution or other disposition thereof in violation of the U.S. Securities Act.

Any person, and any account for which such person is acting, who is acquiring the Offer Shares and is a U.S. Person (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) or a U.S. resident (as defined for purposes of the U.S. Investment Company Act) agrees and confirms, or by his/her acquisition of the Offer Shares is deemed to agree and confirm, the following: (i) such person or account was not formed, reformed, operated, capitalized or recapitalized for the specific purpose of investing in the Company (except when each beneficial owner of such person or such account is a Qualified Purchaser); (ii) to the extent such person or account is a private investment company formed before April 30, 1996, it has received the necessary consent from its beneficial owners to be treated as a Qualified Purchaser; (iii) such person or account is not a pension, profit sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made; (iv) such person or account is not a participant-directed employee plan, such as a 401(k) plan, or any other type of plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, unless investment decisions with respect to the plan are made solely by the fiduciary, trustee or sponsor of such plan; (v) such person or account is not a broker-dealer that owns and invests on a discretionary basis less than US$25,000,000 in securities of unaffiliated issuers; (vi) such person or account will not to hold Shares for the benefit of any other person and will be the sole beneficial owner thereof for all purposes; (vii) such person or account will not sell participation interests in the Shares or enter into any other arrangement pursuant to which any other person will be entitled to a beneficial interest in the payments on the Shares; (viii) the Shares subscribed for directly or indirectly by such person or account, and/or other securities issued by the Company and held by the Company, constitute an investment of no more than 40% of such person’s or account’s assets (except when each beneficial owner of such person or such account is a Qualified Purchaser); (ix) such person or account will provide notice of the transfer restrictions described herein to any subsequent transferees, who will be deemed to make the same confirmations and agreements contained herein; and (x) any purported transfer of Shares to a person or account that does not comply with the requirements of this section will be null and void ab initio.

Any person acquiring the Offer Shares in an offshore transaction in reliance on Regulation S will be required to, or be deemed by his/her acquisition of the Offer Shares to, confirm that such person is neither (i) a U.S. Person (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) nor (ii) a U.S. resident (as defined for purposes of the U.S. Investment Company Act).

74 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

APPLICATION FOR LISTING ON THE STOCK EXCHANGE We have applied to the Listing Committee for the granting of the listing of, and permission to deal in, the Shares in issue immediately before the Global Offering, the Offer Shares to be issued by us pursuant to the Global Offering (including any Shares which may be issued pursuant to the exercise of the Over-allotment Option) and Shares which may be issued pursuant to the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or any option that may be granted under the Post-IPO Share Option Scheme. Dealings in the Shares on the Stock Exchange are expected to commence on Thursday, May 9, 2019. Save as disclosed in this prospectus, no part of our Shares or loan capital is listed or dealt in on any other stock exchange and no such listing or permission to list is being or proposed to be sought on any other stock exchange as of the date of this prospectus. All the Offer Shares will be registered on the Hong Kong register of members of our Company in order to enable them to be traded on the Stock Exchange. Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, any allotment made in respect of any application will be invalid if the listing of, and permission to deal in, our Shares on the Stock Exchange is refused before the expiration of three weeks from the date of the closing of the application lists, or such longer period (not exceeding six weeks) as may, within the said three weeks, be notified to our Company by or on behalf of the Stock Exchange.

PROFESSIONAL TAX ADVICE RECOMMENDED Potential investors in the Global Offering are recommended to consult their professional advisers as to the taxation implications of subscribing for, purchasing, holding or disposal of, and/or dealing in the Offer Shares or exercising rights attached to them. None of us, the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, any of their respective directors, officers, employees, partners, agents, advisers or representatives or any other person or party involved in the Global Offering accepts responsibility for any tax effects on, or liabilities of, any person resulting from the subscription, purchasing, holding, disposition of, or dealing in, the Offer Shares or exercising any rights attached to them.

OVER-ALLOTMENT OPTION AND STABILIZATION Details of the arrangements relating to the Over-allotment Option and stabilization are set out under the sections headed “Underwriting” and “Structure of the Global Offering” in this prospectus. Assuming that the Over-allotment Option is exercised in full, our Company may be required to issue up to an aggregate of 51,750,000 additional new Shares.

SHARE REGISTRAR AND STAMP DUTY Our principal register of members will be maintained in the Cayman Islands by our principal share registrar, Maples Fund Services (Cayman) Limited, in the Cayman Islands, and our Hong Kong branch register of members will be maintained by the Hong Kong Branch Share Registrar in Hong Kong. All Offer Shares issued pursuant to applications made in the Hong Kong Public Offering and the International Offering will be registered on the Hong Kong branch register of members of our Company in Hong Kong. Dealings in the Shares registered in our Hong Kong branch register of members will be subject to Hong Kong stamp duty. For further details of Hong Kong stamp duty, please seek professional tax advice.

75 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS Subject to the granting of the listing of, and permission to deal in, the Shares on the Stock Exchange and compliance with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares on the Stock Exchange or on any other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second Business Day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. All necessary arrangements have been made enabling the Shares to be admitted into CCASS.

Investors should seek the advice of their stockbrokers or other professional advisers for details of the settlement arrangements as such arrangements may affect their rights and interests.

PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES The procedures for applying for Hong Kong Offer Shares are set out in the section headed “How to Apply for Hong Kong Offer Shares” in this prospectus and on the Application Forms.

STRUCTURE OF THE GLOBAL OFFERING Details of the structure of the Global Offering, including its conditions, are set out in the section headed “Structure of the Global Offering” in this prospectus.

EXCHANGE RATE CONVERSION Solely for convenience purposes, this prospectus contains translations among certain amounts denominated in Renminbi, Hong Kong dollars and U.S. dollars. No representation is made that the amounts denominated in one currency could actually be converted into the amounts denominated in another currency at the rates indicated or at all. Unless indicated otherwise, (i) the translations between Renminbi and U.S. dollars were made at the rate of RMB6.7112 to US$1.00, being the PBOC rate prevailing on the Latest Practicable Date, and (ii) the translations between U.S. dollars and Hong Kong dollars were made at the rate of HK$7.8427 to US$1.00, being the noon buying rate on April 12, 2019, the latest available rate as set forth in the H.10 weekly statistical release of the Federal Reserve Board on the Latest Practicable Date.

LANGUAGE If there is any inconsistency between this prospectus and the Chinese translation of this prospectus, this prospectus shall prevail. However, the English names of the PRC nationals, entities, departments, facilities, certificates, titles, laws, regulations and the like are translations of their Chinese names and are included for identification purposes only. If there is any inconsistency, the Chinese name prevails.

ROUNDING Certain amounts and percentage figures included in this prospectus have been subject to rounding adjustments. Any discrepancies in any table, chart or elsewhere between totals and sums of amounts listed therein are due to rounding.

76 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

DIRECTORS

Name Residential Address Nationality Executive Directors Mr. MAO Chen Cheney (毛晨) Room 1002, No. 35, Lane 99 American Qiai Road Pudong New District Shanghai, PRC

Mr. WU Ying (吳鷹) Room 802 Chinese No. 20, Lane 1799, East Huaxia Road Pudong New District Shanghai, PRC

Mr. HUA Fengmao (華風茂) Flat A, 48/F, BLK T1, The Legend Chinese (Hong Kong) 23 Tai Hang Drive Tai Hang Hong Kong

Mr. REN Delin (任德林) Room 2802, No. 9, Lane 188 American Mingyue Road Pudong New District Shanghai, PRC

Non-executive Directors Ms. MAO Jun (毛隽)* Room 1201 British No. 1, Lane 15, Guoquanhou Road Yangpu District Shanghai, PRC

Mr. John WU Jiong (吳炯)* No. 340 Singaporean Lane 999, Huajing Road Xuhui District Shanghai, PRC

Independent Non-executive Directors Mr. FU Lei (傅磊) Room 2203 American No. 565, Guilin Road Minhang District Shanghai, PRC

Ms. LI Xiangrong ( ) Room 101, No. 40, Lane 287, Chinese Gulong Road Minhang District Shanghai PRC

Mr. WANG Haiguang (王海光) Room 401, Unit 3, Building 14 Chinese Nandu Dejia Apartment West Zone Xihu District, Hangzhou Zhejiang, PRC

For further information regarding our Directors, please see the section headed “Directors and Senior Management”.

* For identification purpose only

77 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

PARTIES INVOLVED IN THE GLOBAL OFFERING

Sole Sponsor China International Capital Corporation Hong Kong Securities Limited 29/F, One International Finance Centre 1 Harbour View Street Central, Hong Kong

Joint Global Coordinators China International Capital Corporation Hong Kong Securities Limited 29/F, One International Finance Centre 1 Harbour View Street Central, Hong Kong

J.P. Morgan Securities (Asia Pacific) Limited 28/F Chater House 8 Connaught Road Central Hong Kong

Nomura International (Hong Kong) Limited 30/F, Two International Finance Center 8 Finance Street Central, Hong Kong

Joint Bookrunners China International Capital Corporation Hong Kong Securities Limited 29/F, One International Finance Centre 1 Harbour View Street Central, Hong Kong

J.P. Morgan Securities (Asia Pacific) Limited (in relation to the Hong Kong Public Offering only) 28/F Chater House 8 Connaught Road Central Hong Kong

J.P. Morgan Securities plc (in relation to the International Offering only) 25 Bank Street, Canary Wharf London E14 5JP United Kingdom

Nomura International (Hong Kong) Limited 30/F, Two International Finance Center 8 Finance Street Central, Hong Kong

BOCI Asia Limited 26/F, Bank of China Tower 1 Garden Road Central, Hong Kong

China Renaissance Securities (Hong Kong) Limited Units 8107-08, Level 81, International Commerce Centre 1 Austin Road West Kowloon, Hong Kong

78 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Haitong International Securities Company Limited 22/F Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Joint Lead Managers China International Capital Corporation Hong Kong Securities Limited 29/F, One International Finance Centre 1 Harbour View Street Central, Hong Kong

J.P. Morgan Securities (Asia Pacific) Limited (in relation to the Hong Kong Public Offering only) 28/F Chater House 8 Connaught Road Central Hong Kong

J.P. Morgan Securities plc (in relation to the International Offering only) 25 Bank Street, Canary Wharf London E14 5JP United Kingdom

Nomura International (Hong Kong) Limited 30/F, Two International Finance Center 8 Finance Street Central, Hong Kong

BOCI Asia Limited 26/F, Bank of China Tower 1 Garden Road Central, Hong Kong

China Renaissance Securities (Hong Kong) Limited Units 8107-08, Level 81, International Commerce Centre 1 Austin Road West Kowloon, Hong Kong

Haitong International Securities Company Limited 22/F Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Daiwa Capital Markets Hong Kong Limited Level 28, One Pacific Place 88 Queensway Hong Kong

First Shanghai Securities Limited 19/F, Wing On House 71 Des Voeux Road Central, Hong Kong

79 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Joint Representatives In relation to the Hong Kong Public Offering only: China International Capital Corporation Hong Kong Securities Limited 29/F, One International Finance Centre 1 Harbour View Street Central, Hong Kong (for itself and on behalf of the Hong Kong Underwriters other than J.P. Morgan Securities (Asia Pacific) Limited)

J.P. Morgan Securities (Asia Pacific) Limited 28/F Chater House 8 Connaught Road Central Hong Kong

In relation to the International Offering only: China International Capital Corporation Hong Kong Securities Limited 29/F, One International Finance Centre 1 Harbour View Street Central, Hong Kong (for itself and on behalf of the International Underwriters other than J.P. Morgan Securities plc)

J.P. Morgan Securities (Asia Pacific) Limited 28/F Chater House 8 Connaught Road Central Hong Kong

J.P. Morgan Securities plc 25 Bank Street, Canary Wharf London E14 5JP United Kingdom

Legal Advisers to our Company As to Hong Kong and United States laws: O’Melveny & Myers 31/F, AIA Central 1 Connaught Road Central Hong Kong

As to PRC law: JunHe LLP 26/F HKRI Centre One HKRI Taikoo Hui 288 Shimen Road (No. 1) Shanghai, China

As to Cayman Islands law: Maples and Calder (Hong Kong) LLP 53rd Floor, The Center 99 Queen’s Road Central Hong Kong

Legal Advisers to the Sole Sponsor and As to Hong Kong and United States laws: the Underwriters Sidley Austin 39/F, Two International Finance Centre 8 Finance Street Central Hong Kong

80 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

As to PRC law: Zhong Lun Law Firm Level 10 & 11, Two IFC No. 8 Century Avenue, Pudong New Area Shanghai, PRC

Auditor and Reporting Accountants Deloitte Touche Tohmatsu Certified Public Accountants 35th Floor, One Pacific Place 88 Queensway Hong Kong

Equity Valuer ValueLink Management Consultants Limited Room 1201, Jing Guang Centre Business Building 1 Chaoyangmen Outer Street, Chaoyang District Beijing, PRC

Industry Consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. 1018, Tower B Green Center 500 Yunjin Road Shanghai PRC

Receiving Bank Bank of China (Hong Kong) Limited 1 Garden Road Hong Kong

81 CORPORATE INFORMATION

Registered office PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands Corporate headquarters 334 Aidisheng Road, Zhangjiang High-Tech Park, Pudong New District, Shanghai, PRC Principal place of business in Room 1901, 19/F, Lee Garden One, 33 Hysan Avenue, Hong Kong Causeway Bay, Hong Kong Company’s website www.vivabiotech.com (The contents on this website do not form part of this prospectus) Compliance adviser Guotai Junan Capital Limited (a licensed corporation to carry on type 6 (advising on corporate finance) regulated activity as defined in the SFO) 26/F - 28/F Floor, Low Block Grand Millennium Plaza 181 Queen’s Road Central Hong Kong

Joint company secretaries Ms. FEI Xiaoyu (費曉玉) No. 15, Gujia Zhai Daxing Village, Heqing Town Pudong New District Shanghai, PRC

Ms. CHAU Hing Ling (周慶齡) (a fellow member of the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries) Room 1901, 19/F Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong

Authorized representatives Mr. HUA Fengmao (華風茂) Flat A, 48/F, BLK T1, The Legend 23 Tai Hang Drive Tai Hang Hong Kong

Ms. CHAU Hing Ling (周慶齡) (a fellow member of the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries) Room 1901, 19/F Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong

82 CORPORATE INFORMATION

Audit Committee Ms. LI Xiangrong ( ) (Chairman) Mr. WANG Haiguang (王海光) Mr. FU Lei (傅磊)

Remuneration Committee Ms. LI Xiangrong ( ) (Chairman) Mr. WANG Haiguang (王海光) Mr. FU Lei (傅磊)

Nomination Committee Mr. MAO Chen Cheney (毛晨) (Chairman) Mr. FU Lei (傅磊) Mr. WANG Haiguang (王海光)

Principal share registrar Maples Fund Services (Cayman) Limited PO Box 1093, Boundary Hall Cricket Square Grand Cayman, KY1-1102 Cayman Islands

Hong Kong branch share registrar Tricor Investor Services Limited and transfer office Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong

Principal bankers Agricultural Bank of China Shanghai Branch 26 Zhong Shan Road, Shanghai, PRC

OCBC Bank 65 Chulia Street, OCBC Center Singapore

83 INDUSTRY OVERVIEW

Certain information and statistics set out in this section and elsewhere in the prospectus have been derived from various government publications, publicly available sources, and a market research report prepared by Frost & Sullivan and commissioned by our Group. We believe that the sources of such information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false and misleading. The information has not been independently verified by us, the Sole Sponsor, the Underwriters or any other party involved in the Global Offering and no representation is given as to its accuracy.

SOURCE AND RELIABILITY OF INFORMATION In connection with the Global Offering, we have commissioned Frost & Sullivan to conduct a detailed analysis and prepare an industry report on the global drug discovery outsourcing market. Frost & Sullivan is an independent global market research and consulting company which was founded in 1961 and is based in the United States. We incurred a total of RMB750,000 in fees and expenses for the preparation of the Frost & Sullivan Report. The payment of such amount was not contingent upon our successful Listing or on the results of the Frost & Sullivan Report. Except for the Frost & Sullivan Report, we did not commission any other industry report in connection with the Global Offering. We have included certain information from the Frost & Sullivan Report in this prospectus because we believe such information facilitates an understanding of the global drug discovery outsourcing services market for potential investors. Frost & Sullivan prepared its report based on its in-house database, independent third- party reports and publicly available data from reputable industry organizations. Where necessary, Frost & Sullivan contacts companies operating in the industry to gather and synthesize information in relation to the market, prices and other relevant information. Frost & Sullivan believes that the basic assumptions used in preparing the Frost & Sullivan Report, including those used to make future projections, are factual, correct and not misleading. Frost & Sullivan has independently analyzed the information, but the accuracy of the conclusions of its review largely relies on the accuracy of the information collected. Frost & Sullivan research may be affected by the accuracy of these assumptions and the choice of these primary and secondary sources.

OVERVIEW OF INNOVATIVE DRUG MARKET Global Pharmaceutical Market As a result of the growing elderly population and the trend for increasing healthcare expenditure, global pharmaceutical market has increased from US$998.5 billion in 2013 to US$1,209.0 billion in 2017, representing a CAGR of 4.9%. The market is estimated to reach US$1,596.6 billion by 2022 with a CAGR of 5.7% from 2017 to 2022. As the top two pharmaceutical markets, both the U.S. and Chinese markets show higher growth rates than the rest of the world, primarily due to rising drug demand and increasing number of innovative drugs entering into the market. Each of the U.S. and Chinese pharmaceutical markets grew at a CAGR of 6.9% from 2013 to 2017, and the two markets are expected to further grow to US$622.6 billion and US$330.5 billion, respectively, with CAGRs of 6.1% and 9.3%, respectively, for the same period. Breakdown of Global Pharmaceutical Market by Region, 2013-2022E CAGR CAGR 13-17 17-22E 1,596.6 1,506.2 Global 4.9% 5.7% Billion US$ 1,418.3 1,340.5 352.6 Others 3.7% 4.0% 1,270.7 330.2 1,209.0 1,153.6 310.4 1,105.0 295.8 107.2 1,042.5 283.9 104.1 Japan 2.7% 3.2% 998.5 290.2 100.6 280.6 183.6 271.7 97.5 177.9 236.5 94.6 171.9 250.8 91.7 88.7 165.6 86.7 159.2 330.5 EU5 0.6% 3.8% 84.6 152.4 306.6 82.3 145.7 283.9 153.7 140.6 262.4 148.6 243.0 200.1 211.7 182.2 194.3 China 6.9% 9.3% 161.8 622.6 519.3 551.5 587.4 438.5 463.1 489.9 355.0 385.5 411.7 US 6.9% 6.1%

2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

*EU5 includes the regions of UK, France, Germany, Spain and Italy. Source: Frost & Sullivan Report

84 INDUSTRY OVERVIEW

Global Patented Drug Market The global patented drug market grew at a CAGR of 3.5% from 2013 to 2017, and is expected to grow at a CAGR of 4.8% from 2017 to 2022, reaching US$1,037.9 billion by 2022. In comparison, the Chinese patented drug market grew at a CAGR of 5.8% from 2013 to 2017, and is expected to grow at a CAGR of 8.6% from 2017 to 2022, reaching US$178.4 billion by 2022. Driven by a number of positive factors, including increased talent pool, rapid development in technology, growing capital investment and favorable government policies, the global and Chinese patented drug markets are expected to continue to increase at a faster growth rate. Key Drivers of Patented Drug Market The booming global patented drug market is largely attributable to the following factors: Growing talent pool: A greater pool of pharmaceutical talents can encourage the development of innovative drug R&D. Historically, most of the sophisticated drug discovery R&D is completed in developed western countries with a mature education system. China is now rapidly becoming a hotspot for global innovative drug discovery because it boasts a growing pool of experienced talents trained abroad as well as home-grown professionals. China’s growing pharmaceutical talents will facilitate the development of patented drugs globally. Rapid development in technology: Technology upgrades in the pharmaceutical industry create a requisite technical foundation for innovative drug R&D. Drug discovery and development rely on new technologies, such as SABB, stem cell technology, novel genome editing technologies and advances in next-generation sequencing (NGS). These novel methods can facilitate the validation of new drug targets and the identification of safe and efficacious candidates that proceed to the clinical stage, which remains one of the major challenges in drug discovery. Favorable policies: In order to encourage the development of innovative drugs, many countries have adopted favorable policies to accelerate drug application, review and approval processes, as well as to enhance patent protection. For example, FDA has developed four distinct approaches, namely fast track, breakthrough therapy, accelerated approval and priority review, to expedite the process for commercialization of innovative drugs. In addition, the U.S. Congress enacted the Hatch-Waxman Act which adopts a patent linkage system and a patent term extension, both of which are aimed to protect patent owners’ intellectual property regarding innovative drugs. In China, the issue of Opinions on Deepening the Reform of the Evaluation and Approval Systems and Encouraging Innovation on Drugs and Medical Devices (《關於深化審評審批制度改革鼓勵藥品醫療 器械創新的意見》) has demonstrated that accelerating clinical trial application and speeding up new drug review are an ongoing task. Meanwhile, this policy provides a patent linkage system and a drug patent term compensation system, protecting the intellectual property rights of innovative companies. Capital investment and M&A: The pharmaceutical industry has become a hotspot in the global capital markets. The overall investment value in this industry worldwide increased from RMB35.0 billion to RMB112.2 billion from 2013 to 2017, while investment value in China’s capital market increased from RMB5.3 billion to RMB24.9 billion during the same period. Meanwhile, the value of global M&A deals in pharmaceutical industry increased to RMB533.8 billion in 2017. Since there is abundant capital injection to meet the intensive needs of funds for innovative drug R&D, more biotechnology startups and small to medium enterprises were able to turn into developers of new drugs. OVERVIEW OF INNOVATIVE DRUG RESEARCH AND DEVELOPMENT Structural Biology for Drug Discovery Since the first protein structure was determined in the 1950s, many three-dimensional structures of disease relevant drug target proteins have been determined, which accelerated drug discovery process. Advances in structural biology have facilitated early drug discovery methods in recent years, such as structure-based drug discovery (SBDD), fragment-based drug discovery (FBDD), and membrane protein targeted drug discovery. Nowadays, structure-based rational design plays an important role not only for discovering drugs that can progress to the clinical and regulatory approval stages, but also for seeking potent, selective and cell-permeant chemical probes that can be used with confidence to explore the mechanistic biology of healthy and diseased cells. With the understanding of the three-dimensional structure information of target proteins, SBDD can help researchers (i) precisely examine the interactions between protein targets and potential drug candidates that bind to the proteins, (ii) increase the success rate of drug R&D and (iii) save the costs of drug discovery, making SBDD one of the most powerful methods in drug discovery. The progress of SBDD also powers FBDD, which has generated over 30 clinical drug candidates and three FDA-approved drugs in oncology, namely vemurafenib, venetoclax, and ribociclib as of 2017. Through a better understanding of the interactions of the drug molecules with the protein target, SBDD facilitates the hit-to-lead and lead optimization process, after the hits are discovered by library screening

85 INDUSTRY OVERVIEW techniques such as HTS and ASMS. ASMS techniques do not rely on radioactive or fluorescent reporters or enzyme activities, and scientists can now screen targets that may not be easily amenable to other methods such as traditional biochemical and cell-based screening assays. As an unbiased screening technique, ASMS can also facilitate the discovery of allosteric binders to the protein targets. Membrane proteins are proteins that can be integrated into cell membranes or intracellular organelle membranes. Membrane proteins are vital for the maintenance of normal cell physiology because they perform a variety of vital functions such as (i) transducing signals into cells, (ii) transporting molecules and (iii) binding the cell to the surface or substrate. Mutations and aberrant activity in membrane proteins will cause various disorders and diseases. Therefore, membrane proteins became one of the key targets for drug discovery. However, integral membrane proteins are very difficult to crystallize due to their large hydrophobic areas which are embedded in the membrane and also because their structural and functional integrity is often dependent on their surrounding membrane. Progresses in sample handling, stabilization, modification and crystallization as well as powerful micro-focus synchrotron beamlines have (i) enabled the structure elucidation of many membrane proteins, including therapeutically relevant ion channels and G-protein coupled receptors (GPCRs), and (ii) spawned subsequent SBDD and FBDD approaches for those target classes. Membrane protein targeted drugs accounted for roughly 50% of all FDA-approved drugs from 2013 to 2017. More specifically, FDA approved 22 membrane protein targeted drugs in 2017, which represented 48% of the total FDA- approved drugs and reached the highest number of approved membrane protein targeted drugs since 2013. OVERVIEW OF DRUG DEVELOPMENT OUTSOURCING MARKET Overview of Pharmaceutical Outsourcing Industry Since developing and manufacturing a new drug is normally time consuming and capital intensive, pharmaceutical outsourcing services can provide certain advantages for biotechnology and pharmaceutical companies to achieve efficiency in the drug development projects. The size of the global pharmaceutical outsourcing market increased from US$51.4 billion in 2013 to US$74.1 billion in 2017 and is expected to grow to US$127.0 billion in 2022, representing a CAGR of 11.4% over the period 2017 to 2022. The pharmaceutical outsourcing market can be further divided into contract research organization (CRO) and contract manufacturing organization (CMO). Due to (i) a growing demand for generic medicines and biologics, (ii) the capital intensive nature of the business and (iii) complex manufacturing requirements, many pharmaceutical companies are seeing the benefit in contracting with a CRO or CMO for drug discovery, preclinical and clinical development or commercial stage manufacturing. The global CRO market is expected to grow from US$50.3 billion in 2017 to US$83.9 billion in 2022 with a CAGR of 10.8%. The global CMO market is expected to grow from US$23.8 billion in 2017 to US$43.2 billion in 2022 with a CAGR of 12.7%, which is 3.2% greater than the CAGR from 2013 to 2017. The market for CRO and CMO services has significant market potentials. In particular, both the CRO and CMO markets in China are expected to be more than doubled in 2022 as compared to 2017. Breakdown of Global Outsourcing Market, 2013- Breakdown of China Outsourcing Market, 2013- 2022E 2022E

CAGR CRO CMO Total CAGR CRO CMO Total 2013-2017E 9.6% 9.5% 9.6% 2013-2017E 24.4% 20.2% 23.0% 2017E-2022E 10.8% 12.7% 11.4% 2017E-2022E 27.7% 20.4% 25.6%

Billion USD 127.0 Billion USD

43.2 19.4

4.9 74.1

23.8 51.4

16.6 83.9 6.2 14.4 50.3 2.0 34.8 2.7 0.9 4.2 1.8 2013 2017 2022E 2013 2017 2022E

CRO CMO CRO CMO Source: Frost & Sullivan Report

86 INDUSTRY OVERVIEW

The diagrams below demonstrate the breakdown of global and China CRO/CMO markets by biologics and chemical drugs from 2013 to 2017, as well as the estimated growth from 2017 to 2022. Breakdown of Global CMO Market Breakdown of Global CRO Market by Drug Types, 2013-2022E by Drug Types, 2013-2022E

CAGR Biologics Chemical Total CAGR Biologics Chemical Total Drug Drug 13-17 16.5% 8.2% 9.5% 13-17 21.9% 7.8% 9.6% 17-22E 22.1% 10.2% 12.7% 17-22E 19.9% 8.5% 10.8%

Billion USD Billion USD

83.9

76.0

43.2 68.3 21.0 17.6 38.5 60.9 14.8 34.3 11.3 55.0 9.5 50.3 12.2 30.1 46.6 9.9 7.8 26.6 42.2 8.4 23.8 6.4 38.2 7.2 21.4 5.1 34.8 5.9 19.5 4.2 4.8 17.9 3.5 3.8 62.9 16.6 3.0 58.4 2.5 31.8 53.5 2.3 29.1 48.7 26.4 41.8 45.1 23.6 39.5 21.5 33.4 36.3 17.9 19.6 31.0 14.3 15.4 16.4

2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E Chemical Drug Biologics Chemical Biologics Source: Frost & Sullivan analysis Breakdown of China CMO Market Breakdown of China CRO Market by Drug Types, by Drug Types, 2013-2022E 2013-2022E

CAGR Biologics Chemical Total Drug CAGR Biologics Chemical Total Drug 13-17 49.7% 19.0% 20.2% 13-17 43.1% 22.3% 24.4% 17-22E 42.5% 18.2% 20.4% 17-22E 42.3% 24.6% 27.7%

Billion USD Billion USD

14.4 4.9

4.2 0.7 3.5 11.6 0.5 3.5 2.5 0.4 9.2 2.9 0.2 1.7 2.4 7.1 0.2 2.0 4.2 1.3 1.6 0.1 3.7 5.5 11.0 1.4 0.1 3.2 0.9 1.2 4.2 9.1 0.9 0.1 2.6 0.1 2.2 3.3 0.6 7.5 0.0 1.8 2.6 0.4 1.3 1.5 2.1 5.9 0.9 1.1 1.8 0.3 4.6 0.1 0.2 3.6 2.3 2.9 1.6 2.0 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E Chemical Drug Biologics Chemical Biologics Source: Frost & Sullivan analysis

Market Size of Pharmaceutical R&D Outsourcing Industry Contract outsourcing service is a vital component of the overall pharmaceutical market. The global CRO market accounted for 36.5% of the total drug R&D expenditure in 2017, and this proportion is expected to increase to 45.8% by 2022. In comparison, the Chinese CRO market accounted for 30.6% of the total Chinese drug R&D expenditure in 2017, and this proportion is expected to increase to 40.3% in 2022 as we expect the penetration rate of CRO outsourcing services in China to catch up with the global level.

87 INDUSTRY OVERVIEW

Comparison of In-house and Outsourcing Services Comparison of In-house and Outsourcing Services Expenditure in Global Pharmaceutical R&D Expenditure in China Pharmaceutical R&D Market, 2013-2022E Market, 2013-2022E

54.2% 59.7% 67.8% 63.5% 74.2% 69.4%

45.8% 40.3% 32.2% 36.5% 25.8% 30.6%

2013 2017 2022E 2013 2017 2022E Outsourcing In-house Outsourcing In-house

Source: Frost & Sullivan Report

Overview of Drug Discovery Outsourcing Market Starting with over 10,000 compounds on average for each approved drug, early drug discovery is fundamental to drug research and development, and characterized by high risk with high investment. The process of early drug discovery is described as below:

Outsourcing Services in Drug Discovery Value Chain

Early Preclinical Clinical Clinical Clinical Manufacturing Drug Discovery Studies Phase I Phase II Phase III

Phase Target Identification Target Validation Lead Generation Lead Optimization

 Chemical Synthesis  Discovery of Target Genes  Functional Genomics  Medicinal Chemistry  Biometrics Primary  Chemiformatics  Biochemistry  SAR Assessment  Analytical Chemistry  Bioinformatics  Molecular Biology  DMPK in vitro Domain  High Throughout  Molecular Biology  Pathological  Toxicity Assays in vitro Screening

Source: Frost & Sullivan Report

The global CRO market is composed of (i) drug discovery, (ii) preclinical research and (iii) clinical research. The changing spectrum of diseases from life-threatening diseases to chronic diseases significantly increase the demand for new drugs and drug discovery services. The market of drug discovery outsourcing shows an upward trend from 2017 to 2022. In particular, the drug discovery outsourcing market is estimated to grow from US$10.2 billion in 2017 to US$15.6 billion 2022. In China, the drug discovery outsourcing market reached US$137.3 million in 2017, and it is expected to increase to US$484.8 million by 2022, which represents a CAGR of 28.7%.

88 INDUSTRY OVERVIEW

Global Drug Discovery Outsourcing Market China Drug Discovery Outsourcing Market

CAGR Global Drug Discovery Outsourcing Market CAGR Drug Discovery Outsourcing in China 2013-2017 9.5% 2013-2017 30.7% 2017-2022E 8.9% 2017-2022E 28.7%

21.8% 12.7% 12.4% 11.7%

US$ Billion 20.2% US$ Million

19.5% 15.6 484.8

10.2 7.1 137.3 47.1

2013 2017 2022E 2013 2017 2022E Global Drug Discovery Outsourcing Market Size China Drug Discovery Outsourcing Market Size % Global Drug Discovery Investment % China Durg Discovery Investment

Source: Frost & Sullivan Report

Drivers and Trends of Drug Discovery Outsourcing Market The emergence of innovative biotechnology companies is a key driver for the drug discovery outsourcing market. Biologics R&D is turning into a focus area in the global pharmaceutical market. The lists of the top 15 promising biotechnology companies published by FiercePharma from 2013 to 2017 illustrate the rapidly changing and expanding landscape of global biologics industry. However, the biologics R&D industry requires a high level of expertise and experience, which are not easy to accumulate and thus can severely limit the process of research and manufacturing for biotechnology startups. As a result, the shortfall in research ability or production capability will help to boost the growth in the pharmaceutical outsourcing market.

In addition, according to Frost & Sullivan, the share of the top 10 companies in total new drug pipelines is 12.4% in 2018, while the share of companies with 1 or 2 pipelines, by contrast, increased to 19.3% in 2018, much higher than that of the top 10 companies. The booming of small companies in new drug research and development indicates growth potential for CROs. The following chart shows the proportion of accumulated pipelines by big pharmaceutical and small biotech companies from 2013 to 2018:

Proportion of Accumulated Pipelines by Big Companies and Small Companies, 2013-2018

30.0%

25.0% 19.4% 19.7% 19.7% 18.2% 18.8% 19.3% 20.0%

15.0% 18.1% 17.1% 16.2% 15.0% 13.9% 12.4% 10.0% % of total pipelines % of total 10.7% 10.6% 10.1% 9.8% 9.5% 8.8% 5.0%

0.0% 2013 2014 2015 2016 2017 2018

Top 10 to 25 companies Top 10 companies Companies with 1 or 2 drugs

Note: Top 25 companies are ranked by number of pipelines. Small companies refer to companies with one or two pipelines.

Source: Frost & Sullivan Analysis

89 INDUSTRY OVERVIEW

OVERVIEW OF DRUG DISCOVERY INCUBATION Risk-Reward Model of Drug Development Drug development activities include multiple stages, each of which entails different level of costs and risks of failure. The success rate of new drug development made from the completion of preclinical study through Phase II clinical trial (proof of concept) varies on targets and diseases of choice historically. For example, projects with genetic linkage of drug targets to diseases or with efficacy biomarkers are much more likely to be active or successful in Phase II clinical trial. An analytical study from the U.S. Department of Health and Human Services indicated that the expected net present value (ENPV) and return rate of investment of a hypothetical new molecule depend on the failure rate set at each phase of drug development. A molecule’s ENPV would gradually increase with the progression of its drug development process because the success rate is also increasing as drug development advances to a later phase. Conversely, the return rate of investment is higher in the early phase of drug development than in the later stage because the ENPV is increasing.

The ENPV for a new molecule could be as low as US$62 million on average for the preclinical stage, with over 2,300% rate of return if its IP owner could develop it to the FDA approval stage. The return rate would be even higher than the preclinical average if the investment is made in the earliest stage of drug discovery. In this study, preclinical phase represents all R&D activities before Investigation New Drug (IND) is obtained.

In contrast, if investors make investment at the NDA/Biologics License Application (BLA) stage, they can only secure a 19% return rate of investment. Therefore, investors’ timing for funding a pipeline drug significantly affects the potential gains they may obtain. The earlier they enter into an investment in new drug R&D, the higher return rate of investment they are likely to reap.

Expected Net Present Value (ENPV) of Private Returns for a Hypothetical New Molecule

ENPV Return Rate of Investment 2,334%

Million US$

537% 225% 87% 19% 1,509 1,265

809 465 62 237

Pre-Clinical Phase I Phase II Phase III NDA/BLA Approval

* The Expected NPV and return rate is calculated based on an assumption from U.S. DHHS Analytical Framework for Examining the Value of Antibacterial Products. Source: DHHS, Frost & Sullivan Report

The preclinical phase offers the most rapid value growth, and the value of a pipeline drug increases most from the first day of target identification to IND approval. According to the Frost & Sullivan Report, the average valuation of a biotechnology startup company with only one validated target is approximately US$5 million, and such valuation for the same company could increase to an average of US$150 million once the company obtains the IND approval for such validated target. The diagram below illustrates the correlation between the timing and valuation growth of early stage drug discovery investment. If investors can better manage their risks associated with early stage of drug R&D, they will be well-positioned to obtain a higher return rate of investment.

90 INDUSTRY OVERVIEW

Incubation-Based Drug Discovery Investment Timing versus Value Growth

Discovery Preclinical Development Clinical Development

Changes in the value of new drugs Period 2-3years 1year 1-2years 1-2years 1-2years

New drug IND Phase I Phase II Phase III Milestones of valuation Target Determination H I H L LO PCC syndrome

IP value growth of the new drug* (Pre-investment valuation, million USD) 5 15 35 75 >120 >230 >460 >800 >1500

VC investment timing

Incubation investment timing

The annual return rate of drug discovery is more than 300%

Source: Frost & Sullivan Analysis

Incubation Model for Drug Discovery Drug discovery, which requires substantial capital investment in the whole process, has traditionally been operated in-house by large pharmaceutical companies. Driven by increasing R&D costs and climbing failure rates, pharmaceutical industry has chosen to outsource R&D activities to specialized CROs. Additionally, the emergence of biotechnology companies and virtual pharmaceutical companies have boosted the demand of R&D outsourcing services. The incubation model-based drug discover outsourcing services have recently emerged as industry practices continue to evolve. Faced with limited budget, biotechnology companies have increasingly relied on outsourcing service providers to extract maximum value from drug discovery programs. Leveraging their research and discovery capability, service providers, namely CROs, can have deeper involvement in drug R&D projects. Under the incubation model, CROs provide services for selected potential companies in exchange for an equity stake. The incubation model-based drug discovery outsourcing services have strong technical barriers. In comparison to financial investors such as private equity or venture capital funds, outsourcing service providers can leverage their drug discovery technology to establish a systematic, scientific and modularized mechanism to use their capital efficiently and to manage associated risks. Compared to the traditional incubation model developed by pharmaceutical companies, drug discovery outsourcing service providers have a greater chance to access early stage R&D projects, which provides a large pool of candidate projects for future incubation. The incubation model which focuses on early stage opportunities could generate higher returns from incubation portfolio companies than other investors and provide greater flexibility on exit strategies. Future trends for the incubation model-based drug discovery are set forth as below: From Investor to Intellectual Property (IP) Builder: Investors in the biotechnology industry is changing their roles from traditional financial investors to IP builders. The IP builders not only invest but also actively cultivate biotechnology companies by providing technical assistance for customers with insufficient in-house capabilities. Compared to the traditional cash-for-service (CFS) model, the equity-for-service (EFS) model would be more attractive for investors with R&D expertise as they may serve as an IP builder and enjoy the upside of their customers’ IP value. Platform-based Incubation: Investors with a platform-based incubation program can work closely with incubation portfolio companies because they have established a systematic, scientific and modularized system to ensure scalability and sustainability when developing innovative drugs. Unlike financial investors, CROs can provide value-adding services for their potential incubation candidates. Through an integrated platform, a platform-based incubation program is able to attract more leading scientists, business partners, reputable biotechnology startups and pharmaceutical companies, and continue to add more promising biotechnology startups into the incubation portfolio. As the total number of small biotechnology companies continues to increase both in China and globally, there is a greater demand for the platform-based incubation model to support such companies. Early Stage Incubation: The return rate of investment is as high as 2,300% when making an investment at the drug discovery stage, which is nearly four times of that when making an investment in the same drug during its Phase III clinical trial stage. The correlation between high risk and high return can incentivize investors to become more involved in a drug R&D project at its early stage and therefore incubate candidate projects as early as possible.

91 INDUSTRY OVERVIEW

Capital Investment for Drug Development Driven by the increasing unmet needs and expanding pharmaceutical market, the innovative drug industry is highly valued by capital markets. Global capital investment in the pharmaceutical market rose from RMB35.0 billion in 2013 to RMB112.2 billion in 2017. The active market could also be seen at the pipeline transactions. Pharmaceutical companies are trying to expand their capacity and augment their pipelines through merger and acquisitions. In 2016, Pfizer acquired Anacor for US$5.2 billion, including two lead products, and in 2018, Eli Lilly has announced a proposed acquisition of AurKa Pharma for US$575 million to obtain its AK-01 pipeline product, which has been shown to be highly selective for Aurora A kinase. Big pharmaceutical companies generally prefer to look for target companies focusing on research and development of innovative drugs. Therefore, current market is favorable for small sized innovative biotechnology companies.

An innovative drug industry also encourages active trading in the secondary market. The iShares Nasdaq Biotechnology ETF (IBB ETF), which is the largest ETF that tracks the Nasdaq Biotechnology Index globally, is composed of over 140 biotechnology and pharmaceutical listed equities. Over the past five years from January 2013 to January 2018, the IBB ETF increased its net assets of the invested portfolio from US$2.3 billion to US$10.4 billion, which represents a growth of 358.0% and reflected the rapid expansion in the biotechnology industry.

Net Asset of iShares Nasdaq Biotechnology ETF (IBB)

Period Total 2013.01-2018.01 358.0% Million US$

10,375

12,000

10,000

8,000

6,000 2,266

4,000

2,000

0 2013.01 2014.01 2015.01 2016.01 2017.01 2018.01

Source: Bloomberg, Frost & Sullivan Report

COMPETITIVE LANDSCAPE Under the traditional CFS model, the market for early stage drug discovery outsourcing services is highly competitive. A number of large multinational CROs, such as Charles River, WuXi AppTec, Pharmaron and QuintilesIMS, provide a range of services, including drug discovery. In China, the drug discovery market is an oligopoly market with several leading players sharing a large proportion of total market. According to the Frost & Sullivan Report, the China-based drug discovery market in terms of revenue in 2017 was approximately US$698.3 million, and the leading players in the market are as follows:

China-based Revenue Market Ranking China-based Drug Discovery CROs (USD millions) Share 1 CROC...... 372.1 53.3% 2 CROF ...... 206.5 29.6% 3 CROG...... 21.8 3.1% 4 Viva Biotech ...... 18.0 2.6% 5 CROH...... 15.9 2.3% 6 CROI ...... 9.3 1.3% 7 CROJ ...... 2.9 0.4%

Source: Frost & Sullivan Analysis

92 INDUSTRY OVERVIEW

In addition, a substantial number of small and medium-sized CROs also deliver specialized services for structure-based drug discovery. Scientists can use structural biological research for discovering advanced biologicals which can directly impact human health. These biologicals are crucial for developing new drugs. In addition, the use of synchrotron radiation in structural biology has been growing rapidly over the past few years. Like X-Ray, beam is a main research method in structure biology and is generated from specific source facility. As it is required to be conducted using the large scale equipment, such as accelerator, such research method is typically provided by external service providers with such equipment. Shanghai Synchrotron Radiation Facility (SSRF) is one of the third-generation medium-energy synchrotron radiations with the best performance in the world. To demonstrate our leading position in drug target protein structure research in China, we used more than 67% of industrial beam time at Shanghai Light Source from 2016 to 2018, which is one of the four third generation synchrotron centers (SSRF, APS, Diamond and ALS) accessible to global pharmaceutical industrial users.

Beam Time (hours) Rank Company 2016 2017 2018 1 Viva Biotech ...... 291 250 375.5 2 Company A ...... 30 25 65 3 Company B ...... 16 5 62 4 CROC ...... 808 5 CROD ...... 4 17 7 6 CROE ...... 10 38 74 7 CROF ...... 0 24 —

Source: Shanghai Light Source, Frost & Sullivan Report

The industry for structure-based drug discovery outsourcing services is labor intensive. The average profit per employee at a typical early stage competitor providing drug discovery outsourcing services in 2018 was approximately USD12,581.

The business model which combines the conventional CFS model and the innovative EFS model can enable a company to be differentiated from its conventional CFS competitors. Under this combined model, a company not only fosters the development of promising biotechnology startups while obtaining equity or economic interest but also sustains adequate cash inflow from its drug discovery outsourcing services.

Systematic incubation programs, in particular incubation-based early stage drug discovery services, are a pioneer model. Such programs establish a systematic, scientific and modularized incubation program to improve capital utilization while managing risks. By incubating and fostering promising customers, incubation programs can share the economic or equity interests to enjoy the upside of IP value in incubation projects. The incubation model based on early stage drug discovery is infrequent in the Chinese pharmaceutical market. Based on our rich experience and core technology for structural biology, our technical platforms help us to identify promising pipelines and thus decrease the failure risks of our incubating projects.

93 REGULATORY OVERVIEW

This section sets forth a summary of the significant aspects of PRC laws and regulations that affect and govern our current major business activities in the PRC.

LAWS AND REGULATIONS RELATING TO FOREIGN INVESTMENT Companies established and operating in the PRC shall be subject to Company Law of the PRC (《中華人民共和國公司法》) (the “PRC Company Law”), which was promulgated on December 29, 1993 and newly amended on October 26, 2018. The PRC Company Law provides general regulations for companies’ set up and operation in the PRC including the foreign-invested companies. Unless otherwise provided in the PRC foreign investment laws, the provisions in the PRC Company Law shall prevail.

The establishment procedures, examination and approval procedures, registered capital requirement, foreign exchange restriction, accounting practices, taxation and labor matters of a wholly foreign-owned enterprise are governed by the Wholly Foreign-owned Enterprise Law of the PRC (《中 華人民共和國外資企業法》, the “Wholly Foreign-owned Enterprise Law”), which was promulgated on April 12, 1986 and newly amended on September 3, 2016. The implementation regulations under the Wholly Foreign-owned Enterprise Law (《中華人民共和國外資企業法實施細則》) was promulgated on December 12, 1990 and newly amended on February 19, 2014, which took effective as from March 1, 2014.

Investments in the PRC by foreign investors and foreign-invested enterprises are regulated by the Catalog of Industries for Guiding Foreign Investment (《外商投資產業指導目錄(2017年修訂)》, the “Foreign Investment Catalog”), the latest version of which was promulgated by the National Development and Reform Commission (the “NDRC”) and the MOFCOM on June 28, 2017 and became effective as from July 28, 2017. The Foreign Investment Catalog categorizes the industries into four categories including “encouraged”, “restricted”, “prohibited” and “permitted” (all industries that are not listed under one of “encouraged”, “restricted” or “prohibited” categories are deemed to be permitted). The Foreign Investment Catalog is subject to review and update by the Chinese government from time to time. Moreover, the NDRC and the MOFCOM promulgated the Special Management Measures (Negative List) for the Access of Foreign Investment (2018 version) (《外商投 資准入特別管理措施(負面清單) (2018年版)》 (the “Negative List”) on June 28, 2018 and became effective as from July 28, 2018. The Negative List repeals the “restricted” and “prohibited” categories stipulated in the Foreign Investment Catalog.

Pursuant to Interim Provisions on the Investment of Foreign-invested Enterprise in China (《關 於外商投資企業境內投資的暫行規定》) implemented on September 1, 2000 and amended on May 26, 2006 and October 28, 2015, foreign investment enterprises may invest in encouraged and permitted projects in the PRC, but shall not invest in prohibited projects. Pursuant to the Interim Administrative Measures on the Record-filing of the Incorporation and Changes of Foreign-invested Enterprises (2017 Revision) (《外商投資企業設立及變更備案管理暫行辦法(2018修訂)》) implemented on June 30, 2018 and the Foreign Investment Catalog, the foreign-invested enterprises, whose incorporation and changes involve no approval under the special entry management measures stipulated by the State, shall be subject to the administrative measures on registration and within 30 days of the occurrence of the following change events, complete the registration of changes online procedure: (i) changes of basic information of foreign-invested enterprises; (ii) changes of basic information of investors of foreign- invested enterprises; (iii) changes of equity (share) on cooperation interest; (iv) merger, division and termination; and (v) pledge or transfer of property interests of foreign-invested enterprises to external

94 REGULATORY OVERVIEW parties. The changes of foreign-invested enterprises which subject to the approval under the special entry management measures, shall apply for approval procedures in accordance with relevant foreign investment laws and regulations.

LAWS AND REGULATIONS RELATING TO BIO INDUSTRY For the purpose of promoting the development of bio-industry, a series of industry policies have been promulgated by the PRC government in recent years. The General Office of the State Council promulgated the Circular on Printing and Issuing Certain Policies for Promotion of Accelerated Development of Bio-industry (《關於印發促進生物產業加快發展若干政策的通知》)on June 2, 2009, clearly indicating that accelerating the development of bio-industry is a major initiative for China to grasp the strategic opportunity of the revolution of new scientific technology and to build an innovation-oriented country in an all-round way in the new century. On October 9, 2010, the Guidance on the Acceleration of the Structural Adjustment of the Pharmaceutical Industry 《關於加快 醫藥行業結構調整的指導意見》was promulgated which is intended to (i) encourage innovation of biological technologies and increase in the investment in medical research and development, (ii) encourage carrying out fundamental research and development system, significant medical research and development projects, (iii) support the enterprise strengthening its technical center construction and (iv) promote the enterprise to become the subject of innovation of biological technologies.

On October 10, 2010, the State Council issued the Decision of the State Council on Accelerating the Fostering and Development of Strategic Emerging Industries《國務院關於加快培育和 發展戰略性新興產業的決定》, categorizing the bio-industry as a strategic emerging industry and calling for strong supports to not only develop biotechnology-derived pharmaceuticals, new types of vaccines, diagnostic reagents, chemical drugs and other large varieties of innovative pharmaceuticals used for the prevention and control of critical diseases, but also raise standards of biomedical industry. According to which, the key technology development, demonstration and application of bio-manufacturing will be promoted.

According to the Notice of the State Council on Issuing the “13th Five-Year Plan” for Hygiene and Health (《國務院關於印發 “十三五” 衛生與健康規劃的通知》) (Guo Fa [2016] No. 77), which became effective on December 27, 2016, the development target of Chinese government is to (1) improve the hygiene and health institution and system; (2) continually perfect the health service system; (3) make a progress on the illness prevention and control; (4) realize a shift on the health service model; (5) maintain the moderate fertility level. Meanwhile, the Chinese government intends to (1) increase the medical services level by improving the medical quality safety level; and (2) accelerate the development of health industry by innovatively developing drug and medical equipment industry.

According to the Notice of the NDRC on Outline of the “13th Five-Year Plan” for Biological Industry (《發展和改革委員會關於印發 “十三五” 生物產業發展的通知》), the Chinese government, among others, intends to cultivate new industry format in bio-pharma industry by (1) establishing professional specialization services platform and (2) promoting specialization division level, including prioritizing the pharmaceutical services, which are in conformity with international standards, covering translational medicine, CRO, CMO, third-party detection institution, and health management, to research and develop a batch of world-leading innovative drugs, particularly in treatment of malignant tumors and fatal infectious diseases.

95 REGULATORY OVERVIEW

The Draft Revised Pharmaceutical Administration Law of the PRC

The Pharmaceutical Administration Law (《中華人民共和國藥品管理法》) was last revised in 2015 and came into effect on April 24, 2015, which provides that any units or individual engaged in research, production, trade, use, supervision and management of pharmaceuticals in the PRC shall comply with the Pharmaceutical Administration Law. However, the Pharmaceutical Administration Law only generally governs the administration of pharmaceutical producing enterprises, administration of pharmaceutical trading enterprises, administration of pharmaceuticals at medical organizations, pharmaceutical administration, administration of the packaging of pharmaceuticals, administration of the prices and advertising of pharmaceuticals and supervision over pharmaceuticals, but does not specifically provides for the liabilities assumed by the CROs.

On October 23, 2017, the NMPA circulated the Revised Pharmaceutical Administration Law of the PRC (Draft for comment) (《<中華人民共和國藥品管理法>(草案徵求意見稿) 修正案》), which was submitted to the standing committee of 13th NPC for its review and deliberation, and also for the first time stipulated that the CRO should be held liable for its failure to conform to the Good Clinical Practice and material or data fraud, or other illegal behaviors and such illegal behavior may lead to warning, suspension of business, fines and prohibition of CRO services on the CROs in the violation of the aforesaid regulation in the coming five years.

However, after internal discussions and deliberations, the Standing Committee of the 13th NPC had not adopted the aforesaid provisions setting forth the liabilities on the CROs in the up-to date draft of the Revised Pharmaceutical Administration Law of the PRC (Draft for comment). On November 1, 2018, the Standing Committee of the 13th NPC promulgated a Request for Comments on Pharmaceutical Administration Law (Amendment Bill) (藥品管理法(修正草案)徵求意見), which had clearly deleted the specific liabilities imposed on CRO.

According to the Good Laboratory Practices for Nonclinical Drug Research (《中華人民共和國 藥物非臨床研究質量管理規範》), “GLP” or “Good Laboratory Practices” is a quality system of management controls for how nonclinical safety research organizations are operated and how the experiment protocols of nonclinical safety research projects are designed, implemented, executed, inspected, recorded, archived and reported. This quality system is only applicable to nonclinical drug safety evaluation and research conducted for the purpose of drug registration.

According to the Good Clinical Practice of Pharmaceutical Products (《中華人民共和國藥物臨 床試驗質量管理規範》), “GCP” or “Good Clinical Practice” is a regulation on the standardization of the whole process of a clinical trial, including protocol designing, organizing, performing, monitoring, auditing, recording, analyzing, summarizing and reporting.

According to the Good Manufacturing Practice for Drugs (《中華人民共和國藥品生產質量管理 規範》), “GMP” or “Good Manufacturing Practices” is a quality assurance which aims to minimize the risks of contamination, cross contamination, confusion and errors during the manufacture process of pharmaceutical products and to ensure that pharmaceutical products subject to these guidelines and regulations are consistently produced and controlled in conformity to quality and standard appropriate for their intended use.

96 REGULATORY OVERVIEW

LAWS AND REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION Environmental Protection According to the Environmental Protection Law of the PRC (2014 Revision) (《中華人民共和 國環境保護法 (2014修訂)》), promulgated on April 24, 2014, the Environmental Impact Assessment Law of the PRC (2018 Revision) (《中華人民共和國環境影響評價法 (2018修訂)》), promulgated on December 29, 2018, the Administrative Regulations on the Environmental Protection of Construction Project (2017 Revision) (《建設項目環境保護管理條例 (2017修訂)》), promulgated on July 16, 2017 and other relevant environmental laws and regulations, entities generating environmental pollution and other public hazards must incorporate environmental protection measures into their plans and set up a responsibility system of environmental protection. Construction projects shall go through environmental impact assessment procedure. The construction projects which may have significant impact on the environment shall prepare an environmental impact report with full assessment of their impact on the environment while those projects which have less severe environmental impact are not required to conduct environment impact assessment but need to complete the environmental impact registration form. Pollution prevention facilities for construction projects must be designed, constructed and launched into production and use at the same time with the main part of the projects. Construction projects can only be put into operation after the pollution prevention facilities has been examined and approved. Enterprises and public institutions discharging pollutants must report to and register with relevant authorities in accordance with the provisions of the environmental protection administrative authority under the State Council. Relevant authorities have the authority to impose penalties on individuals or entities breaching environmental regulations. The penalties that can be imposed include issuing a warning, the suspension of operation of pollution prevention facilities for construction projects where such facilities are uncompleted or fail to meet the prescribed requirements but are put into operation, reinstallation of pollution prevention facilities which have been dismantled or left idle, administrative sanctions against the officer-in-charge, suspension of business operations or the shut-down of an enterprise or public institution. Fines could also be imposed together with these penalties.

Prevention and Control of Air Pollution According to the Atmospheric Pollution Prevention and Control Law of the PRC (2015 Revision) (《中華人民共和國大氣污染防治法(2015修訂)》), promulgated on August 29, 2015 and amended on October 26, 2018, construction, renovation and expansion projects which discharge air pollutants shall comply with regulations regarding environmental protection of construction projects. The environmental impact assessment report regarding a construction project, which is subject to the approval of the environmental protection administrative authorities, shall include an assessment on the air pollution the project is likely to produce and its potential impact on the ecological environment. No construction projects may be put into operation before adequate facilities for prevention and control of air pollution have been inspected and accepted by the environmental protection administrative authorities. Construction projects which have an impact on the atmosphere environment shall conduct the environmental impact assessment, and that discharge of pollutants to the atmosphere shall conform to the atmospheric pollutant discharge standards and abide by the total quantity control requirements for the discharge of key atmospheric pollutants.

Prevention and Control of Environmental Pollution by Solid Waste The Law of PRC on the Prevention and Control of Environmental Pollution by Solid Waste (2016 Revision) (《中華人民共和國固體廢物污染環境防治法(2016修訂)》), promulgated on

97 REGULATORY OVERVIEW

November 7, 2016, stipulates that construction projects where solid waste are generated or projects for storage, utilization or disposal of solid waste shall be subject to environmental impact assessment. Facilities for the prevention and control of solid waste are required to be designed, constructed and put into use or operation simultaneously with the main part of the construction project. No construction projects may be put into operation before its facilities for the prevention and control of solid waste have been inspected and accepted by the environmental protection administrative authorities.

Prevention and Control of Water Pollution According to the Water Pollution Prevention and Control Law of the PRC (2017 Revision) (《中華人民共和國水污染防治法(2017修訂)》) promulgated on June 27, 2017, construction, renovation and expansion projects and other upper-water facilities that directly or indirectly discharge pollutants to water are subject to environmental impact assessment. In addition, water pollution prevention facilities are required to be designed, constructed and put into operation simultaneously with the main part of the project. No construction projects may be put into operation until the relevant environmental protection administrative authorities inspect and accept their water pollution prevention facilities.

Pollutant Discharge The Environmental Protection Law of the PRC stipulates that the government shall implement the pollutant emission license administration system. Pollutant discharge by enterprises, public institutions and other producers and business operators is subject to relevant pollutant emission license. The Environmental Protection Law of the PRC requires any entity operating a facility that produces pollutants or other hazardous materials to adopt environmental protection measures in its operations, and to establish an environmental protection responsibility management system. Effective measures to control and properly dispose of waste gas, waste water, waste residue, dust or other waste materials shall be adopted. Any entity operating a facility that discharges pollutants shall report to and register with the competent authority pursuant to applicable regulations. According to the Environmental Protection Law of the PRC, in the event that an entity discharges pollutants in violation of the pollutant discharge standards or volume control requirement, the entity would be subject to administrative penalties, including order to suspend business for rectification, and even order to terminate or close down business under severe circumstances.

LAWS AND REGULATIONS RELATING TO INTELLECTUAL PROPERTY The Copyright Law China has enacted various laws and regulations relating to the protection of copyright. China is a signatory to some major international conventions on protection of copyright and became a member of the Berne Convention for the Protection of Literary and Artistic Works in October 1992, the Universal Copyright Convention in October 1992, and the Agreement on Trade-Related Aspects of Intellectual Property Rights upon its accession to the World Trade Organization in December 2001.

The Copyright Law of the PRC (2010 Revision) (《中華人民共和國著作權法(2010年修訂)》) (the “Copyright Law”) which was promulgated on September 7, 1990 and subsequently amended on October 27, 2001 and February 26, 2010 and the Implementation Regulation of the Trademark Law of the PRC promulgated by the State Council on August 2, 2002 and further amended on January 8, 2011 and January 30, 2013 (《中華人民共和國著作權法實施條例》) provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, enjoy copyright in their works, which

98 REGULATORY OVERVIEW include, among others, works of literature, art, natural science, social science, engineering technology and computer software. The purpose of the Copyright Law aims to encourage the creation and dissemination of works which is beneficial for the construction of socialist spiritual civilization and material civilization and promote the development and prosperity of Chinese culture.

The Trademark Law Trademarks are protected by the Trademark Law of the PRC (2013 Revision) (《中華人民共和 國商標法》(2013年修訂)) which was promulgated on August 23, 1982 and subsequently amended on February 22, 1993, October 27, 2001 and August 30, 2013 respectively as well as the Implementation Regulation of the PRC Trademark Law adopted by the State Council on August 3, 2002 and further amended on April 29, 2014 (《中華人民共和國商標法實施條例》). In China, registered trademarks include commodity trademarks, service trademarks, collective trademarks and certification trademarks.

The Trademark Office under the SAIC handles trademark registrations and grants a term of ten years to registered trademarks. Trademarks are renewable every ten years where a registered trademark needs to be used after the expiration of its validity term. A registration renewal application shall be filed within twelve months prior to the expiration of the term. A trademark registrant may license its registered trademark to another party by entering into a trademark license contract. Trademark license agreements must be filed with the Trademark Office to be recorded. The licensor shall supervise the quality of the commodities on which the trademark is used, and the licensee shall guarantee the quality of such commodities. As with trademarks, the PRC Trademark Law has adopted a “first come, first file” principle with respect to trademark registration. Where trademark for which a registration application has been made is identical or similar to another trademark which has already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use.

Domain Names On May 29, 2012, the China Internet Network Information Center (the “CNNIC”) issued the Implementing Rules for China Internet Network Information Center Domain Name Registration (2012 Revision) （《中國互聯網絡信息中心域名註冊實施細則(2012修訂)》） setting forth detailed rules for registration of domain names. The Ministry of Industry and Information Technology of the PRC (the “MIIT”) promulgated the Administrative Measures on Internet Domain Name (《互聯網域名管理辦 法》) (the “Domain Name Measures”) on August 24, 2017, which became effective on November 1, 2017. According to the Domain Name Measures, domain name owners are required to register their domain names and the MIIT is in charge of the administration of PRC Internet domain names. The domain name services follow a “first come, first file” principle. Applicants for registration of domain names shall provide their true, accurate and complete information of such domain names to and enter into registration agreements with domain name registration service institutions. The applicants will become the holders of such domain names upon the completion of the registration procedure.

The Patent Law According to the Patent Law of the PRC (2008 Revision) (《中華人民共和國專利法(2008年修 訂)》) promulgated by the SCNPC, and its Implementation Rules (2010 Revision) (《中華人民共和

99 REGULATORY OVERVIEW

國專利法實施細則(2010年修訂)》) promulgated by the State Council, the State Intellectual Property Office of the PRC is responsible for administering patents in the PRC. The patent administration departments of provincial or autonomous regions or municipal governments are responsible for administering patents within their respective jurisdictions. The Patent Law of the PRC and its implementation rules provide for three types of patents, “invention”, “utility model” and “design”. Invention patents are valid for twenty years, while design patents and utility model patents are valid for ten years, from the date of application. The Chinese patent system adopts a “first come, first file” principle, which means that where more than one person files a patent application for the same invention, a patent will be granted to the person who files the application first. To be patentable, invention or utility models must meet three criteria: novelty, inventiveness and practicability. Except under certain specific circumstances provided by law, any third-party user must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use constitutes an infringement of the patent rights.

REGULATIONS RELATING TO HAZARDOUS CHEMICALS

Regulation on Safety Administration of Hazardous Chemicals (2013 Revision) (《危險化學品安 全管理條例 (2013修訂)》, the “Hazardous Chemicals Regulation”) was promulgated by the State Council on December 7, 2013. The Hazardous Chemicals Regulation provides regulatory requirements on the safe production, storage, use, operation and transportation of hazardous chemicals. The PRC government exerts strict control over, and adopts an examination and approval system of, the manufacture and storage of hazardous chemicals.

An enterprise that stores and uses hazardous chemicals is required to appoint a qualified institution to conduct safety evaluation of its safety production conditions once every three years and to prepare the safety evaluation report accordingly. Such report shall set out the rectification measures and plans for problem solution as to the safety production. The safety evaluation report and the implementation of the rectification measure shall be filed with the safety supervision regulatory authority.

The Regulation on the Administration of Precursor Chemicals (2016 Amendment) (《易製毒化 學品管理條例 (2016修改)》), promulgated on February 6, 2016 and amended on September 18, 2018, stipulates and regulates the production, operation, purchase, transportation, import and export of precursor chemicals. The classified administration and licensing system have been applied on the production, operation, purchase, transportation, import and export of precursor chemicals. No individual is allowed to purchase any precursor chemicals in category I or II. An enterprise shall obtain the purchase license in advance for purchasing the precursor chemicals in category I and shall report the variety and quantity in demand to the public security bureau of the local people’s government at the county level for filing in advance for purchasing the precursor chemicals in category II and III.

REGULATION ON PATHOGENIC MICROORGANISM LABORATORIES According to the Regulations on Administration of Bio-safety in Pathogenic Microorganism Laboratories (2018 Revision) (《病原微生物實驗室生物安全管理條例 (2018修訂)》), promulgated on March 19, 2018, the pathogenic microorganism laboratory is classified into four levels, namely bio-safety level 1, 2, 3 and 4 in terms of the national standard on biosafety of the laboratory. A laboratory of bio-safety level 1 or 2 shall not conduct laboratory activities related to highly pathogenic microorganisms. The construction, alteration or extension of a laboratory of bio-safety level 1 or 2

100 REGULATORY OVERVIEW shall be reported for the record to competent health authorities. The establisher of a laboratory shall develop a scientific and strict management system, regularly inspect the implementation of the regulations on bio-safety, and regularly inspect, maintain and update the facilities, equipment and materials in the laboratory, to ensure its compliance with the national standards. Currently, we only have one pathogenic microorganism laboratory of bio-safety level 2.

REGULATION ON RADIATION SAFETY According to the Regulations on the Safety and Protection of Radioisotopes and Radiation Devices (2014 Revision) (《放射性同位素與射線裝置安全和防護條例 (2014修訂)》), which was effective on December 1, 2005 and was amended on July 29, 2014, in accordance with the degree of potential harm of radioactive sources and radiation devices to human health and environment, radioactive sources may be divided into Class I, Class II, Class III, Class IV and Class V; radiation devices may be divided into Class I, Class II and Class III. An entity producing, selling or using radioisotopes or radiation devices shall apply, in advance, for a license to the competent department of specified conditions. An entity producing, selling or using radioisotopes or radiation devices shall provide the education and training on safety and protection knowledge for its personnel engaged in relevant works, make assessment, and conduct personal dose monitoring and occupational health examination of its personnel engaged in relevant works; shall conduct annual assessment of the status of safety and protection of its radioisotopes or radiation devices.

REGULATION ON LABORATORY ANIMALS

According to the Regulations on the Administration of Laboratory Animals (《實驗動物管理條 例》), which was effective on November 14, 1988 and newly amended on March 1, 2017, enterprise that are engaged in feeding and breeding laboratory animals shall, in accordance with relevant standards, conduct regular quality monitoring on laboratory animals. Feeding and breeding rooms and laboratories for laboratory animals shall be built in different areas and each shall be kept in strict isolation. Laboratory animals that are newly introduced shall be subject to quarantine inspection in isolation. The laboratory animals are categorized into four classes, the first being ordinary animals, the second, clean animals, the third, animals carrying no specific pathogens and the fourth, animals carrying no bacteria. Enterprises that are engaged in working with laboratory animals shall regularly organize physical check-ups for personnel who are in direct contact with the laboratory animals.

REGULATIONS RELATING TO IMPORT AND EXPORT Import and Export of Goods According to the Administrative Provisions on the Registration of Customs Declaration Entities of the PRC (2018 Revision) (《中華人民共和國海關報關單位註冊登記管理規定(2018修訂)》), promulgated on May 29, 2018, import and export of goods shall be declared by the consignor or consignee itself, or by a customs declaration enterprise entrusted by the consignor or consignee and duly registered with the customs authority. Consignors and consignees of imported and exported goods shall go through customs declaration entity registration formalities with the competent customs departments in accordance with the applicable provisions. After completion of the registration formalities with the customs, consignors and consignees of the imported and exported goods may handle their own customs declarations at customs ports or localities where customs supervisory affairs are concentrated within the customs territory of the PRC.

101 REGULATORY OVERVIEW

Import and Export of Special Articles According to the Administrative Provisions on the Sanitation and Quarantine of Entry/Exit Special Articles (《出入境特殊物品衛生檢疫管理規定》), which became effective as of March 1, 2015 and was last amended on November 23, 2018, import or export of special medical articles, including biological products, microbes and blood must be inspected by the relevant inspection and quarantine authorities.

LAWS AND REGULATIONS RELATING TO FOREIGN EXCHANGE General Administration of Foreign Exchange Foreign currency exchange in PRC is primarily governed by the Foreign Exchange Control Regulations of the PRC (《中華人民共和國外匯管理條例》)(“Foreign Exchange Administration Rules”), promulgated by the State Council on January 29, 1996 and last amended on August 5, 2008, and various regulations issued by the SAFE and other relevant PRC government authorities. Under the Foreign Exchange Administration Rules, the Renminbi is freely convertible into other currencies for routine current account items, including distribution of dividends, payment of interest, trade and service-related foreign exchange transactions. The conversion of Renminbi into other currencies for most capital account items, such as direct equity investment, overseas loan, and repatriation of investment, however, is still regulated. Payments for transactions that take place within the PRC must be made in Renminbi. Unless otherwise approved, PRC companies may repatriate foreign currency payments received from abroad or retain the same abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign exchange banks under the current account items subject to a cap set by the SAFE or its local office. Foreign exchange proceeds under the current accounts may be either retained or sold to a financial institution engaging in settlement and sale of foreign exchange pursuant to relevant rules and regulations of the State. For foreign exchange proceeds under the capital accounts, approval from the SAFE is required for its retention or sale to a financial institution engaging in settlement and sale of foreign exchange, except where such approval is not required under the relevant rules and regulations of the PRC.

Pursuant to the Notice of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment (《國家外匯管理局關於進一步改進和調整直接投資外匯管 理政策的通知》) (the “SAFE Notice No. 59”) promulgated by SAFE on November 19, 2012 and further amended on May 4, 2015 and October 10, 2018, approval is not required for the opening of an account entry in foreign exchange accounts under direct investment, for domestic transfer of the foreign exchange under direct investment. SAFE Notice No. 59 also simplified the capital verification and confirmation formalities for foreign invested entities, the foreign exchange registration formalities required for the foreign investors to acquire the equities and foreign exchange registration formalities required for the foreign investors to acquire the equities of Chinese party, and further improve the administration on exchange settlement of foreign exchange capital of foreign invested entities.

On February 13, 2015, SAFE promulgated the Notice on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment (《國家外匯管理局關於進一步簡化和改 進直接投資外匯管理政策的通知》) (the “SAFE Notice No. 13”) effective as from June 1, 2015, which cancels the administrative approvals of foreign exchange registration of direct domestic investment and direct overseas investment. In addition, it simplifies the procedure of registration of foreign exchange and investors shall register with banks to have the registration of foreign exchange with respect to direct domestic investment and direct overseas investment.

102 REGULATORY OVERVIEW

The Notice of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise (《國家外匯管理局關於改革外商投資企業外匯資本金 結匯管理方式的通知》) (the “SAFE Notice No. 19”) was promulgated on March 30, 2015 and became effective on June 1, 2015. According to the SAFE Notice No. 19, a foreign-invested enterprise may, in response to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant foreign exchange bureau has confirmed monetary contribution rights and interests (or for which the bank has registered the account-crediting of monetary contribution). For the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within its scope of business; where an ordinary foreign- invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and open a corresponding Account for Foreign Exchange Settlement Pending Payment with the foreign exchange bureau (bank) at the place of registration. The Notice of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (《國家外匯管理局關於 改革和規範資本項目結匯管理政策的通知》) (the “SAFE Notice No. 16”) was promulgated and became effective on June 9, 2016. According to the SAFE Notice No. 16, enterprises registered in PRC may also convert their foreign debts from foreign currency into Renminbi on self-discretionary basis. The SAFE Notice No. 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on self- discretionary basis, which applies to all enterprises registered in the PRC. The SAFE Notice No. 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope and may not be used for investments in securities or other investment with the exception of bank financial products that can guarantee the principal within the PRC unless otherwise specifically provided. Besides, the converted Renminbi shall not be used to make loans for related enterprises unless it is within the business scope or to build or to purchase any real estate that is not for the enterprise own use with the exception for the real estate enterprise.

On January 26, 2017, SAFE promulgated the Notice on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification （《國家外匯管理 局關於進一步推進外匯管理改革完善真實合規性審核的通知》）(the “SAFE Notice No. 3”), which stipulates several capital control measures with respect to the outbound remittance of profits from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall cover losses in the previous years prior to remittance of profits. Moreover, pursuant to the SAFE Notice No. 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.

LAWS AND REGULATIONS RELATING TO OFFSHORE INVESTMENTS On October 21, 2005, SAFE promulgated the Circular Concerning Relevant Issues on the Foreign Exchange Administration of Raising Funds through Overseas Special Purpose Vehicle and Investing Back in China by Domestic Residents (《關於境內居民通過境外特殊目的公司融資及返程投資 外匯管理有關問題的通知》), which became effective on November 1, 2005 (the “Circular No. 75”). The Circular No. 75 requires PRC domestic resident natural persons to register or file with the local

103 REGULATORY OVERVIEW

SAFE branch in the following circumstances: (i) before establishing or controlling any company outside the PRC for the purpose of capital financing, (ii) after contributing their assets or shares of a domestic enterprise into overseas special purpose vehicles, or raising funds overseas after such contributions, and (iii) after any major change in the share capital of the special purpose vehicle without any round-trip investment being made. On July 4, 2014, SAFE promulgated the Circular Concerning Relevant Issues on the Foreign Exchange Administration of Offshore Investing and Financing and Round-Trip Investing by Domestic Residents through Special Purpose Vehicles (《關於 境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》) (the “Circular No. 37”), for the purpose of simplifying the approval process, and for the promotion of the cross-border investment. The Circular No. 37 supersedes the Circular No. 75 and revises the regulations on the relevant matters involving foreign exchange registration for round-trip investment. Under the Circular No. 37, in the event the change of basic information of the registered offshore special purpose vehicle such as the individual shareholder, name, operation term, etc., or if there is a capital increase, decrease, equity transfer or swap, merge, spin-off or other amendment of the material items, the domestic resident shall complete the change of foreign exchange registration formality for offshore investment. In addition, according the procedural guideline as attached to the Circular No. 37, the principle of review has been changed to “the domestic individual resident only needs to register the SPV directly established or controlled (first level)”. At the same time, the SAFE has issued the Operation Guidance for the Issues Concerning Foreign Exchange Administration over Round-trip Investment (《返程投資外 匯管理所涉業務操作指引》) with respect to the procedures for SAFE registration under the Circular No. 37, which became effective on July 4, 2014 as an attachment to Circular No. 37.

Under the relevant rules, failure to comply with the registration procedures set forth in the Circular No. 37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, and may be also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations. PRC residents who hold any shares in the company from time to time are required to register with the SAFE in connection with their investments in the company.

LAWS AND REGULATIONS RELATING TO DIVIDEND DISTRIBUTION The principal laws and regulations regulating the distribution of dividends by foreign-invested enterprises in the PRC include the PRC Company Law, the Wholly Foreign-owned Enterprise Law and its implementation regulations promulgated in 1990 and subsequently amended in 2001 and 2014, the Equity Joint Venture Law of the PRC (《中華人民共和國中外合資經營企業法》) promulgated in 1979 and last amended in 2016 and its implementation regulations promulgated in 1983 and last amended in 2014, and the Cooperative Joint Venture Law of the PRC (《中華人民共和國中外合作經營企業法》) promulgated in 1988 and last amended in 2017 and its implementation regulations promulgated in 1995 and last amended in 2017. Under the current regulatory regime in the PRC, foreign-invested enterprises in the PRC may pay dividends only out of their accumulated profit, if any, determined in accordance with PRC accounting standards and regulations. A PRC company is required to set aside as statutory reserve funds (法定公積金) at least 10% of its after-tax profit, until the cumulative amount of such reserves reaches 50% of its registered capital unless the provisions of laws regarding foreign investment otherwise provided. A PRC company shall not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

104 REGULATORY OVERVIEW

LAWS AND REGULATIONS RELATING TO M&A AND OVERSEAS LISTING On August 8, 2006, six PRC governmental and regulatory agencies, including the MOFCOM and the CSRC, promulgated the Rules on Acquisition of Domestic Enterprises by Foreign Investors (《關於外國投資者併購境內企業的規定》) (the “M&A Rules”), a new regulation with respect to the mergers and acquisitions of domestic enterprises by foreign investors that became effective on September 8, 2006 and revised on June 22, 2009. Foreign investors shall comply with the M&A Rules when they purchase equity interests of a domestic company or subscribe for the increased capital of a domestic company, and thus changing the nature of the domestic company into a foreign-invested enterprise; or when the foreign investors establish a foreign-invested enterprise in the PRC for the purpose of purchasing the assets of a domestic company and operating the asset; or when the foreign investors purchase the asset of a domestic company, establish a foreign-invested enterprise by injecting such assets, and operate the assets. The M&A Rules, among other things, purport to require that an offshore special vehicle, or a special purpose vehicle, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals, shall obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

LAWS AND REGULATIONS RELATING TO EMPLOYMENT AND SOCIAL WELFARE Labor Protection

The main PRC employment laws and regulations include the Labor Law of the PRC (《中華人 民共和國勞動法》) (the “Labor Law”), the Labor Contract Law of the PRC (《中華人民共和國勞動合 同法》) (the “Labor Contract Law”) and the Implementing Regulations of the Employment Contract Law of the PRC (《中華人民共和國勞動合同法實施條例》).

The Labor Contract Law was promulgated on June 29, 2007, revised on December 28, 2012 and came into force on July 1, 2013. This law governs the establishment of employment relationships between employers and employees, and the execution, performance, termination of, and the amendment to, labor contracts. The Labor Contract Law is primarily aimed at regulating employee/ employer rights and obligations, including matters with respect to the establishment, performance and termination of labor contracts. Pursuant to the Labor Contract Law, labor contracts shall be concluded in writing if labor relationships are to be or have been established between enterprises or institutions and the laborers. Enterprises and institutions are forbidden to force laborers to work beyond the time limit and employers shall pay laborers for overtime work in accordance with national regulations. In addition, labor wages shall not be lower than local standards on minimum wages and shall be paid to laborers in a timely manner. Moreover, according to the Labor Contract Law: (i) employees must comply with regulations in the labor contracts concerning commercial confidentiality and non-competition; (ii) employees may terminate their labor contracts with their employers if their employers fail to make social insurance contributions in accordance with the law; and (iii) enterprises and institutions shall establish and improve their system of workplace safety and sanitation, strictly abide by state rules and standards on workplace safety, educate laborers in labor safety and sanitation in the PRC.

The Labor Contract Law imposes more stringent requirements on labor dispatch. According to the Labor Contract Law, (i) it is strongly emphasized that dispatched contract workers shall be entitled to equal pay for equal work as an employee of an employer; (ii) dispatched contract workers may only be engaged to perform temporary, auxiliary or substitute works; and (iii) an employer shall strictly control the number of dispatched contract workers so that they do not exceed certain percentage of

105 REGULATORY OVERVIEW total number of employees and the specific percentage shall be prescribed by the Ministry of Human Resources and Social Security. Under the law, “temporary work” means a position with a term of less than six months; “auxiliary work” means a non-core business position that provides services for the core business of the employer; and “substitute work” means a position that can be temporarily replaced with a dispatched contract worker for the period that a regular employee is away from work for vacation, study or for other reasons. According to the Interim Provisions on Labor Dispatch (《勞 務派遣暫行規定》) promulgated by the Ministry of Human Resources and Social Security on January 24, 2014, which became effective on March 1, 2014, (i) the number of dispatched contract workers hired by an employer should not exceed 10% of the total number of its employees (including both directly hired employees and dispatched contract workers); and (ii) in the case that the number of dispatched contract workers exceeds 10% of the total number of its employees at the time when the Interim Provisions on Labor Dispatch became effective, the employer must formulate a plan to reduce the number of its dispatched contract workers to comply with the aforesaid cap requirement prior to March 1, 2016. In addition, such plan shall be filed with the local administrative authority of human resources and social security. Nevertheless, the Interim Provisions on Labor Dispatch do not invalidate the labor contracts and dispatch agreements entered into prior to December 28, 2012 and such labor contracts and dispatch agreements may continue to be performed until their respective dates of expiration. The employer may also not hire any new dispatched contract worker before the number of its dispatched contract workers is reduced to below 10% of the total number of its employees. In case of violation, the labor administrative department shall order rectification within a specified period of time; if the situation is not rectified within the specified period, a fine from RMB5,000 to RMB10,000 for each person shall be imposed, and the staffing company’s business license shall be revoked. If a placed worker suffers any harm or loss caused by the receiving entity, the staffing company and the receiving entity shall be jointly and severally liable for damages.

Social Insurance and Housing Fund

As required under the Regulation of Insurance for Labor Injury (《工傷保險條例》) implemented on January 1, 2004 and amended in 2010, the Provisional Measures for Maternity Insurance of Employees of Corporations (《企業職工生育保險試行辦法》) implemented on January 1, 1995, the Decisions on the Establishment of a Unified Program for Basic Old-Aged Pension Insurance of the State Council (《國務院關於建立統一的企業職工基本養老保險制度的决定》) issued on July 16, 1997, the Decisions on the Establishment of the Medical Insurance Program for Urban Workers of the State Council (《國務院關於建立城鎮職工基本醫療保險制度的决定》) promulgated on December 14, 1998, the Unemployment Insurance Measures (《失業保險條例》) promulgated on January 22, 1999 and the Social Insurance Law of the PRC (《中華人民共和國社會保險法》) implemented on July 1, 2011 and amended on December 29, 2018, enterprises are obliged to provide their employees in the PRC with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, labor injury insurance and medical insurance. These payments are made to local administrative authorities and any employer that fails to contribute may be fined and ordered to make up within a prescribed time limit.

In accordance with the Regulations on the Management of Housing Funds (《住房公積金管理條 例》) which was promulgated by the State Council in 1999 and amended in 2002, enterprises must register at the competent managing center for housing funds and upon the examination by such managing center of housing funds, these enterprises shall complete procedures for opening an account at the relevant bank for the deposit of employees’ housing funds. Enterprises are also required to pay and deposit housing funds on behalf of their employees in full and in a timely manner.

106 REGULATORY OVERVIEW

According to the Institutional Reform Plan of the State Council (2018) (《國務院機構改革方 案(2018)》), the tax authority will be in charge of collecting the social insurance including basic old- aged pension, medical insurance and unemployment insurance. On July 20, 2018, the Central Committee of the Communist Party of China and the State Council released the Reform Plan on the National and Local Taxation Collection and Management System (《國稅地稅徵管體制改革方案》), according to which, the tax authority places the responsibility of calculating and collecting social insurance premiums from January 1, 2019.

Protection and Control of Occupational Diseases According to the Prevention and Control of Occupational Diseases Law of the PRC (2017 Revision) (《中華人民共和國職業病防治法 (2017修訂)》), promulgated on December 29, 2018, the protection and control of occupational diseases shall follow the principle of “focusing on prevention and combining prevention with control”. An employer shall: (i) establish and improve the responsibility management system of occupational disease prevention and treatment, strengthen the administration of, and improve the capability of, occupational disease prevention and treatment, and bear responsibility for the harm of occupational diseases caused by it; (ii) contribute to occupational injury insurance; (iii) provide facilities for the effective prevention and protection of occupational diseases, and provide materials to employees for personal use against occupational diseases; (iv) provide alarm equipment, allocate on-spot emergency treatment materials, washing equipment, emergency safety exits and necessary safety zones for work places where acute occupational injuries are likely to take place due to poisonous and harmful elements therein; and (v) inform the employees of, and specify in the labor contracts with the employees the potential harm of, occupational disease as well as the consequences thereof, and the prevention and protection measures and treatment against occupational diseases when signing the labor contracts with employees.

The Occupational Diseases Classified Catalog (《職業病分類和目錄》), promulgated on December 23, 2013, classifies the occupational diseases into 10 categories. The Occupational Diseases Classified Catalog is subject to review and update by the relevant administrative authority from time to time.

LAWS AND REGULATIONS RELATING TO TAX Enterprise Income Tax On March 16, 2007, the National People’s Congress promulgated the Law of the PRC on Enterprise Income Tax (《中華人民共和國企業所得稅法》) which was amended on February 24, 2017 and December 29, 2018, and on December 6, 2007, the State Council enacted The Regulations for the Implementation of the Law on Enterprise Income Tax (《中華人民共和國企業所得稅法實施條例》) (collectively, the “EIT Law”). The EIT Law came into effect on January 1, 2008. According to the EIT Law, taxpayers consist of resident enterprises and non-resident enterprises. Resident enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but whose actual or de facto control is administered from within the PRC. Non-resident enterprises are defined as enterprises that are set up in accordance with the laws of foreign countries and whose actual administration is conducted outside the PRC, but have established institutions or premises in the PRC, or have no such established institutions or premises but have income generated from inside the PRC. Under the EIT Law and relevant implementing regulations, a uniform corporate income tax rate of 25% is applicable. However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they

107 REGULATORY OVERVIEW have formed permanent establishment institutions or premises in the PRC but there is no actual relationship between the relevant income derived in the PRC and the established institutions or premises set up by them, the enterprise income tax is, in that case, set at the rate of 10% for their income sourced from inside the PRC. Enterprises that are recognized as high and new technology enterprises in accordance with the Notice of the Ministry of Science, the Ministry of Finance (the “MOF”) and the SAT on Amending and Issuing the Administrative Measures for the Determination of High and New Tech Enterprises (《科技部、財政部、國家稅務總局關於修訂印發<高新技術企業認定管 理辦法>的通知》) are entitled to enjoy the preferential enterprise income tax rate of 15%. The validity period of the high and new technology enterprise qualification shall be three years from the date of issuance of the certificate of high and new technology enterprise. The enterprise can re-apply for such recognition as a high and new technology enterprise before or after the previous certificate expires.

The Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies (《關 於境外註冊中資控股企業依據實際管理機構標準認定為居民企業有關問題的通知》) promulgated by the SAT on April 22, 2009 and amended on December 29, 2017 sets out the standards and procedures for determining whether the “de facto management body” of an enterprise registered outside of the PRC and controlled by PRC enterprises or PRC enterprise groups is located within the PRC.

The EIT Law provide that an income tax rate of 10% will normally be applicable to dividends payable to investors that are “non-resident enterprises”, and gains derived by such investors, which (a) do not have an establishment or place of business in the PRC or (b) have an establishment or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place of business to the extent such dividends and gains are derived from sources within the PRC. Such income tax on the dividends may be reduced pursuant to a tax treaty between China and the jurisdictions in which our non-PRC shareholders reside. Pursuant to an 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 Tax on Income (《內地和香港特別行政 區關於對所得避免雙重徵稅和防止偷漏稅的安排》) (the “Double Tax Avoidance Arrangement”), and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon receiving approval from in-charge tax authority. However, based on the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties (《關於執行稅收協定股息條款有關問題的通 知》) (the “Notice No. 81”) issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. In addition, the Announcement of the SAT on Issues concerning “Beneficial Owners” in Tax Treaties (《國家稅務總局關於稅收協定中“受益所有人”有關問題的公告》) promulgated on February 3, 2018 regulates the relevant elements to be considered with respect to determining the status of “beneficial owner”.

According to the EIT Law, the EIT tax rate of a high and new technology enterprise is 15%. Pursuant to the Administrative Measures for the Recognition of High and New Technology Enterprises (《高新技術企業認定管理辦法》), effected on January 1, 2008 and amended on January 29, 2016, the certificate of a high and new technology enterprise is valid for three years. An enterprise shall, after being accredited as a high-tech enterprise, fill out and submit the statements on annual conditions

108 REGULATORY OVERVIEW concerning the intellectual property rights, scientific and technical personnel, expenses on research and development and operating income for the previous year on the “website for the administration of accreditation of high-tech enterprises”. Besides, when any high-tech enterprise has changed its name or has undergone any major change concerning the accreditation conditions (such as a division, merger, reorganization or change of business), it shall report the change to the accreditation institution within three months upon occurrence of the change. If the high-tech enterprise is qualified upon review by the accreditation institution, it continues to have the qualification as a high-tech enterprise, and in case of change in the name, a new accreditation certificate will be issued with the number and term of validity remaining the same as the previous certificate; otherwise, the qualification as a high-tech enterprise shall be canceled as of the year of change in the name or any other condition.

Value Added Tax

The Provisional Regulations of the PRC on Value-added Tax (2017 Revision) (《中華人民共和 國增值稅暫行條例(2017修訂)》) were promulgated by the State Council on November 19, 2017. The Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-added Tax (2011 Revision) (《中華人民共和國增值稅暫行條例實施細則》(2011年修訂)) were promulgated by the Ministry of Finance and the SAT on December 15, 2008 which were subsequently amended on October 28, 2011 and came into effect on November 1, 2011 (collectively, the “VAT Law”). According to the VAT Law, all enterprises and individuals engaged in the sale of goods, the provision of processing, repair and replacement services, and the importation of goods within the territory of the PRC must pay value-added tax. For general VAT taxpayers selling services or intangible assets other than those specifically listed in the VAT Law, the value-added tax rate is 6%.

Dividend Withholding Tax The EIT Law provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident investors who do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC.

Pursuant to the Double Tax Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on the Notice No. 81, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.

DRAFT FOREIGN INVESTMENT LAW On January 2015, the MOFCOM published the Draft Foreign Investment Law and accompanying explanatory notes which contain important information about the Draft Foreign Investment Law, including its drafting philosophy and principles, main content, plans to transit to the new legal regime and treatment of business in the PRC controlled by foreign invested enterprises. On December 23, 2018, the 7th meeting of the 13th Standing Committee of the National People’s

109 REGULATORY OVERVIEW

Congress reviewed the Draft Foreign Investment Law, which was promulgated by the National People’s Congress on its official website on December 26, 2018 for public consultation until February 24, 2019. If enacted, the Draft Foreign Investment Law will replace the Sino-Foreign Equity Joint Ventures Law, the Wholly Foreign-owned Enterprise Law and the Sino-Foreign Contractual Joint Ventures Law to become the legal foundation for foreign investment in the PRC.

110 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

OUR HISTORY Overview We operate a leading structure-based, integrated drug discovery platform in terms of revenue in 2018 and beam time for synchrotron radiation in 2018 with a number of world-leading technologies and a scalable business model to share the upside of our customers’ IP value. We provide structure- based drug discovery services to our biotechnology and pharmaceutical customers worldwide for their pre-clinical stage innovative drug development.

The history of our Group can be traced back to 2008 when our founder Mr. Mao, together with Mr. Wu, initiated a plan to launch and develop a CRO business. In June 2008, Viva Biotech HK, a limited company incorporated in Hong Kong, was established with personal funds from Ms. Mao, Mr. John Wu Jiong and Mr. Hua, each contributing US$1,000,000, US$500,000 and US$500,000, representing 50.00%, 25.00% and 25.00%, respectively, of the total issued share capital of Viva Biotech HK. For further background information of each of Mr. Mao, Mr. Wu, Mr. Hua, Ms. Mao and Mr. John Wu Jiong, please refer to the section headed “Directors and Senior Management.”

On August 14, 2008, Viva Biotech HK established Viva Biotech Shanghai as its wholly foreign-owned enterprise in the PRC and the principal operating entity of the Group, following which we commenced our operation. At that time, Mr. Mao joined our Group as the chief executive officer of Viva Biotech Shanghai and has been responsible for the overall operation and strategic planning of our Group since then. Mr. Wu was appointed as the chairman of the board of directors of Viva Biotech Shanghai at its establishment and has been responsible for the daily operation (except for research related matters) of Viva Biotech Shanghai since then.

Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on August 27, 2008 to serve as the holding company of our Group. On November 20, 2008, our Company acquired the entire shareholding in Viva Biotech HK at nil consideration.

Milestones of Development The following table sets forth the key milestones of our business development:

Time Key Milestones and Achievements August 2008 Viva Biotech Shanghai was established in the PRC and we commenced our operation in an office with a gross floor area of approximately 10,000 sq.ft. and approximately 50 laboratory technicians. April 2009 We moved to our current headquarters with a gross floor area of approximately 50,000 sq.ft. and developed gene-to-structure program. July 2009 Within one year of the establishment of Viva Biotech Shanghai, Avenue Capital Group became our strategic investor through its subsidiary LGR (Barbados) SRL (“LGR”). September 2009 We established the Department of Chemistry and Department of in vitro Assay and started to provide structure-based drug discovery services. December 2010 Viva Biotech Shanghai was recognized as a Technically Advanced Service Enterprise (技術 先進型服務企業). August 2011 We developed a proprietary fragment compound library and the ASMS screening technology and integrated to SBDD services. March 2012 We developed GPCRs membrane protein targets technology platform. November 2013 Viva Biotech Shanghai was recognized as a High-tech Enterprise (高新技術企業).

111 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Time Key Milestones and Achievements We filed three patents on fusion expression of membrane proteins and ASMS screening methodology with purified membrane proteins. January 2014 Viva Biotech Shanghai was selected to participate in the Shanghai Municipality Tech-Giant Program (上海市科技小巨人工程) initiated by the Science and Technology Commission of Shanghai Municipality (上海市科學技術委員會). April 2014 We developed a 6,000-membered library targeting GPCRs and started to offer screening services. We received government fund from the Science and Technology Commission of Shanghai Municipality (上海市科學技術委員會) for the international collaboration with an overseas company. July 2014 Viva Biotech Shanghai received government fund from the Science and Technology Commission of Shanghai Municipality (上海市科學技術委員會) for a research project with respect to certain application of the ten-eleven translocation (TET) enzymes.

July 2015 We obtained pathogenic microorganism laboratory filing certificate (病原微生物實驗室備案 憑證), a requisite license for cell culture in support of gene-to-protein related services. October 2015 Viva Biotech Shanghai was granted High-tech Industry Funding for Biopharmaceuticals Projects (高技術服務業資助資金生物醫藥項目) by the Science and Technology Commission of Pudong New District of Shanghai Municipality (上海市浦東新區科學技術委員會) for a project concerning ASMS drug screening technology. May 2016 We commenced the construction of a research center with a gross floor area of approximately 32,000 sq.ft. in Jiaxing, Zhejiang Province. August 2016 Viva Biotech Shanghai was recognized as China (Shanghai) Pilot Free Trade Zone Offshore Entrepreneurial Base for Overseas Professionals (中國(上海)自由貿易試驗區海外 人才離岸創新創業基地) by China Association for Science and Technology (中國科學技術協 會). November 2016 Viva Biotech Shanghai was granted government subsidy in the amount of RMB10.0 million by Zhangjiang Management Bureau of the Management Committee of the China (Shanghai) Pilot Free Trade Zone (中國(上海)自由貿易試驗區管理委員會張江管理 局) for the development of an incubation platform for innovative drugs. March 2017 Viva Biotech Shanghai was recognized as Pudong New District Enterprise Research Institution (浦東新區企業研發機構). April 2017 We separated the operation of our start-up incubation business to an office in Pudong New District, Shanghai, with a gross floor area of approximately 28,000 sq.ft.

October 2017 Viva Biotech Shanghai was approved as an Innovation Incubator (創新型孵化器) by the Technology and Economy Commission of Pudong New District of Shanghai Municipality (上海市浦東新區科技和經濟委員會). December 2017 A record of 1,000 new drug target proteins were studied by us with over 7,000 independent crystal structures delivered. March 2018 One of our clients announced the phase I study in patients of a compound developed from scratch with SBDD to clinical trial, along with three other compounds in clinical trials with the same strategy with considerable effort from our scientists. In line with our exit strategy for incubation projects to maximize our return while minimizing relevant risks, we entered into an agreement to dispose of 10,000,000 series seed preferred shares, representing 4.25% interest in Epican Technology Limited. April 2018 In line with our exit strategy for incubation projects, we entered into an agreement to dispose of 20,833 shares of non-voting common stock, representing 1.70% equity interest in Dogma Therapeutics, Inc. as at the date of the agreement.

112 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Time Key Milestones and Achievements July 2018 We entered into an agreement with the People’s Government of Wenjiang District of Chengdu City for the development of an additional incubation center. December 2018 We entered into a strategic cooperation agreement with China Resources Life Science Industry Development Co., Ltd. (華潤生命科學產業發展有限公司)(“China Resources”) to explore long-term cooperation in novel drug R&D services and incubation business, pursuant to which we may jointly establish an incubator company to invest in promising biotechnology startups and use China Resources’s facilities in Beijing for our future incubation projects. April 2019 We were granted the 2018 Innovative Startup Award by the People’s Government of Pudong New Area, Shanghai and we were the only biotech company that received this award in 2019. Our Subsidiaries Viva Biotech Shanghai is our principal operating subsidiary which had made a material contribution to our Group’s results during the Track Record Period. We have four other subsidiaries in addition to Viva Biotech Shanghai. The table below sets forth certain details of our subsidiaries. Date of Date of commencement Place of Direct Name of Subsidiary Incorporation of business Principal Business Incorporation Shareholder Interest Viva Biotech HK June 17, June 2008 Investment Hong Kong Our 100.00% 2008 holding Company Viva Biotech Shanghai August 14, August 2008 Primarily PRC Viva Biotech 100.00% 2008 providing research HK services Jiaxing Viva March 19, March 2014 Primarily PRC Viva Biotech 100.00% 2014 providing research Shanghai services Viva Incubator December 7, December Business PRC Viva Biotech 100.00% Shanghai 2015 2015 incubator Shanghai Viva Incubator HK March 20, March 2017 Investment Hong Kong Viva Biotech 100.00% 2017 holding HK Sichuan Viva October 30, November Business PRC Viva Biotech 100.00% 2018 2018 incubator HK Our History Development Our Company Incorporation of our Company and historical changes in shareholding On August 27, 2008, our Company was incorporated in the Cayman Islands as an exempted company with limited liability with an authorized share capital of US$50,000.00 divided into 50,000,000 shares of a par value of US$0.001 each. Upon its incorporation, one share was allotted and issued to the initial subscriber who immediately transferred such share to Mr. John Wu Jiong at a par value of US$0.001 per share on the same day. On May 8, 2009, our Company issued 2,499,999 ordinary shares to Mr. John Wu Jiong at a total consideration of US$499,999, 7,000,000 ordinary shares to Mr. Mao for his services rendered to the Group, 1,500,000 ordinary shares to Mr. Mao at a total consideration of US$300,000, 500,000 ordinary shares to Ms. Mao for her services rendered to the Group, 3,500,000 ordinary shares to Ms. Mao at a total consideration of US$700,000, and 2,500,000 ordinary shares to China Finance Strategies at a total consideration of US$500,000, respectively, which were properly and legally completed and the considerations were fully settled on the same day. Upon completion of the foregoing

113 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE share allotments, each of Mr. Mao, Ms. Mao, Mr. John Wu Jiong and Mr. Hua (through China Finance Strategies) was interested in 48.57%, 22.86%, 14.29% and 14.29% of our Company, respectively. For the 14.29% equity interest held by China Finance Strategies, 2.86% was held by Mr. Hua through China Finance Strategies on behalf of his brother, Mr. Hua Zhengmao.

On July 27, 2009, the Company and LGR, among others, entered into a subscription agreement, which stipulated, among others, the issuance by the Company, and the subscription by LGR of 7,191,781 redeemable series A1 preferred shares of the Company (the “Series A1 Preferred Shares”) at the subscription price of US$3,000,000, which was agreed based on arm’s length negotiation between the parties with reference to future prospects of our Group. LGR was a subsidiary of Avenue Capital Group, a global investment firm focusing on distressed securities and private equity. The consideration was fully settled and the allotment of the Series A1 Preferred Shares was properly and legally completed on September 9, 2009, following which our Company was held as to 34.42% by Mr. Mao, 29.13% by LGR, 16.20% by Ms. Mao, 10.12% by Mr. John Wu Jiong and 10.12% by Mr. Hua (through China Finance Strategies).

On September 7, 2009, the Company increased its authorized share capital to US$200,000 divided into 151,808,219 ordinary shares of a par value of US$0.001 each and 48,191,781 redeemable preferred shares of a par value of US$0.001 each.

On January 26, 2010, the Company subdivided its authorized share capital, immediately following which the authorized share capital of the Company was US$200,000 divided into 1,518,082,190 ordinary shares of a par value of US$0.0001 each and 481,917,810 redeemable preferred shares of a par value of US$0.0001 each.

On December 31, 2014, Mr. John Wu Jiong transferred his entire shareholding in our Company to Fenghe Harvest at nil consideration.

On April 23, 2015, the Company and LGR, among others, entered into an exit agreement, pursuant to which the Company agreed to redeem 71,917,810 Series A1 Preferred Shares held by LGR. The exit of LGR was driven by the change of the overall investment strategy of Avenue Capital Group, which decided to exit from its previous investments in Asia, including China, starting from 2013. The redemption amount was US$5.5 million, which represented the aggregate of (i) 100% of the original subscription price of the Series A1 Preferred Shares paid by LGR; (ii) an internal rate of return of 18% (compound annually) on LGR’s investment in each redeemed share calculated from the date of subscription; and (iii) the non-cumulative dividends at the simple rate of 5% of the original subscription price per annum for each preferred share. Pursuant to the shareholders’ resolutions of the Company dated April 12, 2015, the ordinary shareholders would subscribe for a total of 71,917,810 ordinary shares of the Company at a price of US$0.0765 per share with a total consideration of US$5.5 million. The redemption amount of Series A1 Preferred Shares was fully settled by the subscription price paid by shareholders on April 25, 2015. Following the redemption of the Series A1 Preferred Shares, our Company was held by Mr. Mao as to 48.57%, Ms. Mao as to 22.86%, Fenghe Harvest as to 14.29% and Mr. Hua (through China Finance Strategies) as to 14.29%, respectively.

On March 2, 2017, the Company reduced its authorized share capital to US$50,000.00 divided into 500,000,000 shares of a par value of US$0.0001 each.

On March 28, 2018, the Company issued 30,205,480 ordinary shares, 10,273,973 ordinary shares, 10,273,973 ordinary shares, and 21,164,384 ordinary shares, respectively, to Ms. Mao, China

114 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Finance Strategies, Fenghe Harvest (wholly-owned by Mr. John Wu Jiong) and Wu and Sons (wholly- owned by Mr. John Wu Jiong) at a purchase price of US$0.0765 per share for a total consideration of US$5.5 million, which was fully offset by the prepayment of the subscription price in April 2015. Among the 30,205,480 ordinary shares issued to Ms. Mao, 20,116,438 ordinary shares representing 8.15% of the enlarged share capital of the Company upon the completion of the above share allotments were subscribed by Ms. Mao for her brother, Mr. Mao. The above share allotments were properly and legally completed. On the same day, as part of the internal restructuring, (i) Mr. Hua, through China Finance Strategies, transferred 7,054,795 ordinary shares representing 2.86% of the then issued share capital of our Company to Tian Hsin Bio-Medical, a company wholly-owned by his brother, Mr. Hua Zhengmao, at nil consideration to restore the entrustment arrangement of shares held by Mr. Hua on behalf of Mr. Hua Zhengmao; (ii) Ms. Mao transferred 34,931,507 ordinary shares and 35,273,973 ordinary shares of our Company, respectively, to her wholly-owned Mao and Sons and Zhang and Sons, respectively, at nil consideration. The above share transfers were properly and legally completed. Immediately upon the completion of the above share subscription and transfers, our Company was held by Mr. Mao as to 34.42%, Mao and Sons as to 14.15%, Zhang and Sons as to 14.29%, Fenghe Harvest as to 14.29%, China Finance Strategies as to 11.43%, Wu and Sons as to 8.57% and Tian Hsin Bio-Medical as to 2.86%.

On April 12, 2018, Mao and Sons transferred 20,116,438 ordinary shares representing 8.15% of the then issued share capital of the Company to Mr. Mao at nil consideration so as to restore the entrustment arrangement of the ordinary shares held by Ms. Mao on behalf of Mr. Mao. On May 4, 2018, Mr. Mao transferred 4,938,356 ordinary shares representing 2.00% of the then issued share capital of the Company to MZFT, LLC, a company wholly-owned by his spouse, Mrs. Zhou Min, at nil consideration. The above share transfers were properly and legally completed, following which Mr. Mao was interested in 40.57% of the then issued share capital of our Company.

On May 28, 2018, Mao and Sons transferred 788,492 ordinary shares and 823,059 ordinary shares, respectively, for a consideration of US$1.5 million (approximately US$1.902366 per share) and approximately US$1,565,760 (approximately US$1.902366 per share), respectively, with reference to the valuation of the Pre-IPO Investment, to each of Mr. James Qun Mi and Ms. Chi Lik Yim, who are independent third parties of the Group. The consideration were paid to Ms. Mao and were fully settled in May 2018 and the foregoing share transfers were properly and legally completed. The cost per share paid by each of Mr. James Qun Mi and Ms. Chi Lik Yim represents 13.28% discount to the mid-point of the Offer Price range of HK$3.42 to HK$4.41, on the basis of our enlarged share capital immediately upon completion of the Global Offering (assuming the Over-allotment Option is not exercised and without taking into account any Shares to be issued upon the exercise of options granted under the Pre-IPO Share Incentive Schemes). On June 21, 2018 and March 3, 2019, respectively, Mr. James Qun Mi and Ms. Chi Lik Yim, together with our Company and the Pre-IPO Investors, amongst others, entered into the Shareholders Agreement and the amendment agreement to the Shareholders Agreement, pursuant to which they are not entitled to any special rights as the Pre-IPO Investors, being the holders of Series B Preferred Shares (as defined below), except for information rights and drag-along rights which are more specifically described in “— Pre-IPO Investment — Principal terms of the Pre-IPO Investment — Special Rights” below.

Min Zhou 2018 Family Trust Min Zhou 2018 Family Trust is an irrevocable family trust governed by the laws of the State of South Dakota set up by Mrs. Zhou Min as settlor on April 1, 2018. The beneficiaries of the Min Zhou

115 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

2018 Family Trust are certain family members of Mrs. Zhou Min. The trustee of the Min Zhou 2018 Family Trust is Concord Trust Company, LLC. Pursuant to the terms of the trust, Concord Trust Company, LLC has the power customarily granted to a trustee, including power to pay or apply the whole or any part of the income or capital of the trust fund to or for the maintenance or benefit of all or any one or more of the beneficiaries. Pursuant to the terms of the Min Zhou 2018 Family Trust, Mr. Mao, being the investment director, has the sole and exclusive power and authority to direct the trustee as to the investment of trust property, as well as the exclusive authority to direct the trustee in the exercise of any voting or management rights over any security, including any interest in a limited liability company or other business entity, held in trust. On May 9, 2018, Mrs. Zhou Min transferred her entire shareholding in MZFT, LLC to the trustee. Accordingly, Mr. Mao, as the investment director of the trust and the manager of MZFT, LLC, is entitled to exercise the voting power attached to the shares in our Company directly held by MZFT, LLC.

Family trusts set up by Ms. Mao On February 18, 2019, for asset planning purpose, Ms. Mao (through her wholly-owned Mao and Sons) transferred 604,160 ordinary shares, 389,612 ordinary shares and 604,160 ordinary shares of the Company to JL and JSW Holding Limited, MENGL Holding Limited and TIANL Holding Limited, respectively, at nil consideration. Each of JL and JSW Holding Limited, MENGL Holding Limited and TIANL Holding Limited is indirectly wholly-owned by Intertrust (Singapore) Ltd., the trustee of the VVBI Trust. The VVBI Trust is a revocable family trust governed by the laws of the Republic of Singapore set up by Ms. Mao as settlor and protector on February 21, 2019. The beneficiaries of the VVBI Trust are Ms. Mao and certain of her family members. Pursuant to the terms of the trust, Intertrust (Singapore) Ltd. has the power customarily granted to a trustee, including power to pay or apply the whole or any part of the income or capital of the trust fund to or for the maintenance or benefit of all or any one or more of the beneficiaries. Ms. Mao, as the protector of the trust, has the power to appoint and remove the trustee.

The Z&M Trust is a revocable family trust set up by Ms. Mao as settlor and protector on February 21, 2019 with substantially the same terms as the VVBI Trust, including the governing law and the powers of the trustee. The trustee of the Z&M Trust is Intertrust (Singapore) Ltd. and the beneficiaries of the Z&M Trust are Ms. Mao and certain of her family members. On February 22, 2019, Ms. Mao transferred her entire shareholdings in Mao and Sons and Zhang and Sons to a wholly- owned subsidiary of the trustee at nominal value.

The Mao Investment Trust On April 9, 2019, Mr. Mao, as the settlor, established the Mao Investment Trust by way of declaration of trust. The Mao Investment Trust is an irrevocable grantor retained annuity trust governed by the laws of the State of Texas. The trustee of the Mao Investment Trust is Mr. Mao and the beneficiaries include Mr. Mao’s children and Ms. Mao. Pursuant to the declaration of trust, Mr. Mao shall manage and dispose of 20,000,000 ordinary shares in our Company in accordance with the provisions of the declaration of trust. Mr. Mao, as the trustee, has the power to exercise rights of any nature appurtenant to the ownership of such shares, including the voting rights attached to such shares. At the end of the two-year term of the Mao Investment Trust, the value representing appreciation on the original shares will be received by the beneficiaries while the original value of the shares plus 3% per annum will be reverted back to Mr. Mao.

116 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Our Subsidiaries Viva Biotech HK Viva Biotech HK was incorporated by Ms. Mao, Mr. John Wu Jiong, and China Finance Strategies as a limited company under the laws of Hong Kong on June 17, 2008, with a total issued share capital of US$2,000,000. Ms. Mao, Mr. John Wu Jiong and Mr. Hua (through China Finance Strategies) each contributed US$1,000,000, US$500,000 and US$500,000 using their own personal funds, representing 50%, 25% and 25%, respectively, of the total issued share capital of Viva Biotech HK, which were fully paid up on June 17, 2008. On November 20, 2008, each of Ms. Mao, Mr. John Wu Jiong and China Finance Strategies transferred its entire shareholding in Viva Biotech HK at nil consideration to our Company.

Viva Biotech Shanghai Viva Biotech Shanghai was established in the PRC on August 14, 2008 as a wholly foreign- owned enterprise of Viva Biotech HK. Viva Biotech Shanghai had an initial registered capital of US$160,000, the entire amount of which was contributed in cash by Viva Biotech HK and fully paid up. On July 7, 2009, the registered capital of Viva Biotech Shanghai was increased by Viva Biotech HK to US$5,000,000 and was fully paid up. On June 28, 2018, the registered capital of Viva Biotech Shanghai was increased by Viva Biotech HK to US$25,000,000, which was fully paid up. There has been no change in its shareholdings since such registered capital increase.

Jiaxing Viva Jiaxing Viva was established in the PRC on March 19, 2014 as a wholly-owned subsidiary of Viva Biotech Shanghai. Jiaxing Viva had an initial registered capital of RMB10,000,000, the entire amount of which was contributed in cash by Viva Biotech Shanghai and was fully paid up. On August 10, 2018, the registered capital of Jiaxing Viva was increased by Viva Biotech Shanghai to RMB30,000,000 and was fully paid up. There has been no change in its shareholdings since its establishment.

Viva Incubator Shanghai Viva Incubator Shanghai was established in the PRC on December 7, 2015 as a wholly-owned subsidiary of Viva Biotech Shanghai. Viva Incubator Shanghai had an initial registered capital of RMB10,000,000, the entire amount of which was contributed in cash by Viva Biotech Shanghai and was fully paid up.

Viva Incubator HK Viva Incubator HK was incorporated in Hong Kong as a limited company on March 20, 2017 as a wholly-owned subsidiary of Viva Incubator Shanghai, with an issued share capital of US$5,000,000. On August 2, 2017, Viva Incubator Shanghai transferred the entire equity interest of Viva Incubator HK to Viva Biotech Shanghai at nil consideration. On October 22, 2018, Viva Biotech Shanghai transferred the entire equity interest of Viva Incubator HK to Viva Biotech HK at a total consideration of approximately US$2.7 million.

Sichuan Viva Sichuan Viva was established in the PRC on October 30, 2018 as a wholly foreign-owned enterprise of Viva Biotech HK. The registered capital of Sichuan Viva is US$30,000,000, which will

117 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE be fully paid up by October 2023. There has been no change in its shareholdings since its establishment.

Dissolution of Viva Biotech (USA) Inc. In September 2008, Viva Biotech (USA) Inc. was incorporated in the State of Illinois as a wholly-owned subsidiary of our Company for the purpose of primarily providing logistics service for the delivery of samples between us and our customers. As we later switched to third party logistics service providers which are more cost-effective, Viva Biotech (USA) Inc. ceased operation and was dissolved by a written shareholder’s consent in August 2015.

PRE-IPO INVESTMENT Overview of the Pre-IPO Investment On June 21, 2018, our Company and the Pre-IPO Investors, among others, entered into the Series B Preferred Share Purchase Agreement, pursuant to which the Pre-IPO Investors agreed to subscribe for an aggregate of 16,233,532 series B redeemable convertible preferred shares at a par value of US$0.0001 each (the “Series B Preferred Shares”) for a total consideration of US$30,900,000. The consideration was determined based on arm’s length negotiations with reference to the financial performance of the Company at the time of subscription. The consideration was properly and legally settled by June 21, 2018. The table below sets forth certain details of the Pre-IPO Investment:

Number of Series B Preferred Amount of Consideration Name of the Pre-IPO Investor Shares acquired Paid Morning Star ...... 4,202,856 US$8,000,000 JMCR ...... 2,626,785 US$5,000,000 Fohan Capital ...... 1,786,214 US$3,400,000 T&C Biotech ...... 1,576,071 US$3,000,000 FengHe Canary ...... 1,576,071 US$3,000,000 Shanghai Wisdomont ...... 1,576,071 US$3,000,000 Absolute Ventures ...... 1,050,714 US$2,000,000 Zhang and Sons ...... 1,050,714 US$2,000,000 Tian Hsin Bio-Medical ...... 525,357 US$1,000,000 Wu and Sons ...... 262,679 US$500,000 Total ...... 16,233,532 US$30,900,000

In addition, our Company and the Pre-IPO Investors, among others, executed the Shareholders Agreement together with the ancillary agreements on June 21, 2018, pursuant to which the Pre-IPO Investors were granted a number of special rights, for details, please refer to “— Principal terms of the Pre-IPO Investment.” On March 3, 2019, our Company and the Pre-IPO Investors, among others, executed an amendment agreement to the Shareholders Agreement mainly to amend the definition of a Qualified IPO and to remove lock-up restrictions on non-controlling ordinary shareholders.

Background of the Pre-IPO Investors

Morning Star, a company ultimately controlled by Mr. Andrew Y. Yan (閻焱), a well-known private equity and venture capital investor in the PRC and an independent third party, is an investment holding company incorporated in the BVI which focuses on high-tech companies. Upon completion of the Global Offering, Morning Star will hold approximately 1.23% of our total issued and outstanding

118 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Shares (assuming the Over-allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised). As such, Morning Star will not be a core connected person of our Company upon completion of the Global Offering and the Shares held by Morning Star will be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

JMCR is an investment holding company incorporated in the BVI which focuses on biotechnology, artificial intelligence, real estate and financial services. JMCR is wholly-owned by Ms. Mao, our non- executive Director, therefore a core connected person. On February 18, 2019, JMCR transferred all of its shareholding in the Company to VVBI Limited at nil consideration. VVBI Limited is an investment holding company incorporated in the BVI and indirectly wholly-owned by Intertrust (Singapore) Ltd., the trustee of the VVBI Trust, which is a revocable family trust set up by Ms. Mao as settlor and protector. Upon completion of the Global Offering, VVBI Limited will hold approximately 0.77% of our total issued and outstanding Shares (assuming the Over-allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised), which will not be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

Fohan Capital, a limited company incorporated in Hong Kong, is a special purpose vehicle with a primary purpose of investing in our Company. Fohan Capital is wholly-owned by Mr. Hua Zhengmao, the brother of our chief financial officer and executive Director, Mr. Hua. Upon completion of the Global Offering, Fohan Capital will hold approximately 0.52% of our total issued and outstanding Shares (assuming the Over-allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised). As Fohan Capital will not be a core connected person of our Company upon completion of the Global Offering, the Shares held by Fohan Capital will be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

T&C Biotech is an exempted limited partnership registered in the Cayman Islands primarily focusing on investment in biotechnology industry, in particular, the research and development of innovative drugs for unmet clinical needs. The general partner of T&C Biotech is T&C Biotech Inc., which is owned by independent third parties. Upon completion of the Global Offering, T&C Biotech will hold approximately 0.46% of our total issued and outstanding Shares (assuming the Over- allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised). As such, T&C Biotech will not be a core connected person of our company upon completion of the Global Offering and the Shares held by T&C Biotech will be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

FengHe Canary is an investment holding company incorporated in the BVI primarily focusing on investment in start-up companies. FengHe Canary is indirectly owned by Mr. John Wu Jiong as to 45.00%, with the rest being held by an independent third party. Upon completion of the Global Offering, FengHe Canary will hold approximately 0.46% of our total issued and outstanding Shares (assuming the Over-allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised). As FengHe Canary will be a core connected person of our Company upon completion of the Global Offering, the Shares held by FengHe Canary will not be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

119 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Shanghai Wisdomont is a limited partnership established in the PRC which primarily invests in healthcare and artificial intelligence industries. The general partner and managing partner of Shanghai Wisdomont is Wisdomont Capital Management (Shanghai) Limited (盛山資產管理(上海)有限公司), an independent third party. Upon completion of the Global Offering, Shanghai Wisdomont will hold approximately 0.46% of our total issued and outstanding Shares (assuming the Over-allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised). As Shanghai Wisdomont will not be our core connected person upon completion of the Global Offering, the Shares held by Shanghai Wisdomont will be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

Absolute Ventures, a company owned by an independent third party, is an investment holding company incorporated in the BVI primarily focusing on investment in retail, technology and healthcare industries. Upon completion of the Global Offering, Absolute Ventures will hold approximately 0.31% of our total issued and outstanding Shares (assuming the Over-allotment Option and the options granted under the Pre-IPO Share Incentive Schemes are not exercised). As Absolute Ventures will not be our core connected person upon completion of the Global Offering, the Shares held by Absolute Ventures will be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

For background information of Zhang and Sons, Wu and Sons and Tian Hsin Bio-Medical, please refer to “— Group Structure before Listing” above.

As (i) Zhang and Sons is indirectly wholly-owned by the trustee of the Z&M Trust, a family trust set up by Ms. Mao, our non-executive Director, as the settlor and protector, (ii) Wu and Sons is wholly-owned by Mr. John Wu Jiong, our non-executive Director, therefore each of Zhang and Sons and Wu and Sons will be a core connected person of our Company upon completion of the Global Offering and the Shares held by each of them will not be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

Tian Hsin Bio-Medical is wholly-owned by Mr. Hua Zhengmao, the brother of Mr. Hua. As such, Tian Hsin Bio-Medical will not be our core connected person upon completion of the Global Offering, and the Shares held by Tian Hsin Bio-Medical will be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules.

Principal terms of the Pre-IPO Investment The table below summarizes the principal terms of the Pre-IPO Investment:

Cost per Preferred Share paid US$1.903467 by the Pre-IPO Investors Discount to the Offer Price A discount of approximately 13.23% to the midpoint of the indicative Offer Price range of HK$3.42 to HK$4.41, on the basis of our enlarged share capital immediately upon completion of the Global Offering (assuming the Over-allotment Option is not exercised and without taking into account any Shares to be issued upon the exercise of options which were granted under the Pre- IPO Share Incentive Schemes).

120 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Use of Proceeds and whether We intend to primarily use the proceeds to further invest into they have been fully utilized EFS projects, improve our facilities and as working capital. As of the Latest Practicable Date, the proceeds from the Pre-IPO Investment had not been fully utilized.

Strategic benefits Our Directors believe that the Pre-IPO Investment can strengthen the share capital base and diversify the shareholders’ portfolio of our Company and we could benefit from the Pre-IPO Investors’ knowledge and experience in the healthcare industry.

Qualified IPO Means an initial public offering (the “IPO”) in the internationally recognized stock exchange in the United States, Hong Kong or in PRC (other than the National Equities Exchange and Quotations (全國中小企業股份轉讓系統)) where the pre-IPO market value of the Group (based upon the price at which securities are offered in the IPO) is no less than an agreed amount.

Lock-up on Mr. Mao Unless with prior written approvals of the Pre-IPO Investors, any equity securities of the Company held by Mr. Mao and his close associates are subject to lock-up until 18 months after the consummation of a Qualified IPO. Such lock-up is not applicable to transfer of equity securities of the Company by Mr. Mao to his immediate family member or trust for tax planning purposes or to a trustee, executor, or other fiduciary for the benefit of his immediate family member for bona fide estate planning purposes (the “Permitted Transfer”).

Lock-up on the Pre-IPO Š From the closing date until the first anniversary thereof, Investors none of the Pre-IPO Investors shall transfer any equity securities of the Company owned or held by it; provided however, in the event one or more shareholders of ordinary shares of the Company as of the date of the Series B Preferred Share Purchase Agreement other than Mr. Mao (the “Non-controlling Ordinary Shareholders”) transfer at least an aggregate of one-third (1/3) of the equity securities of the Company held or beneficially owned by them as of the date of the closing, the lock-up of the Pre-IPO Investors shall become void and of no force thereafter.

Š From the first anniversary of the closing date until the second anniversary of the closing date, and if and only when the Company is in the listing application process, none of the Pre-IPO Investors shall transfer any equity securities of the Company owned or held by it, unless and until any ordinary shareholder transfers any equity securities of the Company, in which case such transfer restrictions on the Pre-IPO Investors shall become void and of no force thereafter;

121 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Š From and after the consummation of a Qualified IPO, none of the Pre-IPO Investors shall transfer any equity securities of the Company owned or held by it within a time period required by the joint global coordinator(s) and sponsor(s) of the Company, which shall normally be not more than six months. Š The foregoing lock-up provisions on the Pre-IPO Investors shall not apply to a transfer of any equity securities of the Company by any Pre-IPO Investor to its affiliate(s) or a transfer of the equity interest in any Pre-IPO Investor by its limited partners or equity interest holders; provided however, such proposed third party transferee shall not be an “Adverse Person”, which means any pharmaceutical company or new drug contract research service provider that is (i) a competitor or a potential competitor of any Group company, or (ii) a customer, distributor or supplier of any Group company that such transfer would result in such customer, distributor or supplier receiving information that would place such Group company at a competitive disadvantage with respect to such customer, distributor or supplier. Š The Pre-IPO Investors shall not be allowed to transfer any equity securities of the Company to an Adverse Person at any time. Special rights The Series B Preferred Shares will be converted into the Shares upon the completion of the Global Offering. Together with such conversion, the following special rights, which have been granted to the Pre-IPO Investors, will be terminated automatically upon the completion of the Global Offering: Š Voting right. Series B Preferred Shares carry voting rights equal to such number of ordinary shares as convertible on the date the vote is to be taken. Š Conversion rights. (i) Optional conversion: each Series B Preferred Share may be converted into fully paid and non-assessable ordinary shares at a ratio calculated by dividing the Series B Preferred Shares issue price by the then applicable conversion price. The conversion price is initially equal to the Series B Preferred Shares issue price and is subject to anti-dilution adjustment. (ii) Automatic conversion: the Series B Preferred Shares held by each holder shall be automatically converted into ordinary shares by the Qualified IPO completion date at a ratio calculated by dividing the Series B Preferred Shares issue price by the then applicable conversion price.

122 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

(iii) Anti-dilution protection: the initial conversion ratio for each Series B Preferred Share is 1:1 and shall be adjusted from time to time by customary events such as share dividends, subdivisions, combinations or consolidations of ordinary shares, other distribution, reclassification, exchange and substitutions, including, among others, in the event of an issuance of new securities below the then applicable conversion price. For the avoidance of doubt, the anti-dilution protection clause does not apply to issuance of Shares under the Global Offering.

Š Information right. The Pre-IPO Investors are entitled to receive, among others, our quarterly and annual financial information, annual operating budget and key operating information of the Company.

Š Pre-emptive right. The Pre-IPO Investors have a pre-emptive right to purchase up to a pro rata share of any new securities which the Company may from time to time issue after the date of the Shareholders Agreement at the same price and subject to the same terms and conditions as the purchaser(s). Š Right of first refusal. Save for Permitted Transfer, in the event that Mr. Mao and his close associates propose to transfer his/her/its direct or indirect equity securities (the “Offered Shares”) of the Company or any interest therein to the Pre-IPO Investors or any third parties, the Pre-IPO Investors have the right of first refusal to purchase all or a portion of its respective pro rata share of the Offered Shares at the same price and subject to the same terms and conditions.

Š Right of Co-Sale. Save for Permitted Transfer, to the extent that the Pre-IPO Investors do not exercise their respective rights of first refusal as to all of the Offered Shares, they have the right to participate in the sale of shares to the third party transferee on the same terms and conditions.

Š Drag-along rights. If the holders of at least 40% of the voting power of the issued and outstanding ordinary shares and Series B Preferred Shares (voting as a single class and on an as converted to ordinary shares basis) (the “Drag Holders”) approve a Trade Sale (as defined below) of the Company to any bona fide person (the “Offeror”), provided that the overall valuation of the Company from such Trade Sale is no less than US$900 million, or as otherwise approved by all Pre-IPO

123 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Investors if less than US$900 million, then all other shareholders shall give their consent to the sale of all the shares in the Company held by them or the same percentage of its equity securities of the Company as the Drag Holders sell. Trade Sale means (i) any consolidation, amalgamation, scheme of arrangement or merger of any Group company with or into any other person or other reorganization in which the shareholders of the Company or shareholders of such Group company immediately prior to such consolidation, amalgamation, merger, scheme of arrangement or reorganization own less than 50% of such Group company’s voting power in the aggregate immediately after such consolidation, merger, amalgamation, scheme of arrangement or reorganization, or any transaction or series of related transactions to which such Group company is a party in which in excess of 50% of such Group company’s voting power is transferred; (ii) a sale, lease, transfer or other disposition of a majority of the issued and outstanding share capital of the Company or a majority of the voting power of the Company; (iii) a sale, transfer, lease or other disposition of all or substantially all of the assets of any Group company (or any series of related transactions resulting in such sale, transfer, lease or other disposition of all or substantially all of the assets of such Group company); or (iv) the exclusive licensing of all or substantially all of any Group company’s intellectual property to a third party. Š Liquidation preference. The holders of the Series B Preferred Shares are entitled to receive an amount equal to the Series B Redemption Price (as defined in the Shareholders Agreement) on parity with each other and in preference to any other shareholders in the event of any liquidation event, such as (i) a liquidation, dissolution or winding up of the Group companies holding all or substantially all of the Company’s assets, (ii) a merger or consolidation of the Company in which the Company is a party and its shareholders do not retain a majority of the voting power, directly or indirectly, in the surviving or acquiring entity, (iii) the exclusive licensing of substantially all of the Company’s intellectual property, or (iv) the sale of all or substantially all the Company’s assets, whether voluntary or involuntary.

124 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Š Matters requiring the approval of the majority series B preferred shareholders. Matters requiring the approval of the majority series B preferred shareholders include, among others: (i) any adverse amendment or change to the rights of Series B Preferred Shares; (ii) issuance of equity securities having rights or restrictions superior to or on a parity with Series B Preferred Shares; (iii) any issuance of new securities by the Company at a purchase price lower than the amount equal to the product of the issue price, plus a 15% compounded annual interest accrued thereon until the date of issuance of such new securities; (iv) any action that re-designates or reclassifies any issued and outstanding shares into shares having rights or restrictions superior to or on a parity with Series B Preferred Shares; (v) any merger, amalgamation, consolidation or other corporate reorganization, or any transaction or series of transactions in which more than 50% of the Company’s voting power is transferred or in which all or substantially all of the assets of any of the Group companies are disposed, or all or substantially all of the intellectual properties are exclusively licensed; (vi) sell or dispose of the whole or a substantial part of the undertaking goodwill or the assets of any of the Group companies other than a Trade Sale; (vii) cease to conduct or carry on or change the primary business of the Company; (viii) increase, reduce or cancel the authorized or issued share capital of the Company and/or any subsidiary or allot, issue, purchase or redeem any shares or securities convertible into or carrying a right of subscription in respect of shares or any share warrants or grant or issue any options rights or warrants or which may require the issue of shares in the future or do any act which has the effect of diluting or reducing the effective shareholding of any Pre-IPO Investor in the Company; (ix) approve any new employee stock incentive scheme and profit sharing scheme that represent more than 5% of the equity securities of the Company, on a fully diluted basis, in any fiscal year;

125 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

(x) approve or make adjustments or modifications to the terms of any transaction of any kind in excess of US$1,000,000 involving the interest of any officer, director or shareholder of the Company and/or its subsidiaries; (xi) pass any resolution for the winding up of the Company and /or any subsidiary or undertake any merger, reconstruction, dissolution or liquidation exercise concerning the Company and/or any subsidiary or apply for the appointment of a receiver, manager or judicial manager or like officer; and (xii) conduct any IPO of any Group company other than a Qualified IPO.

Sponsor’s Confirmation The Sole Sponsor confirmed that the terms of the Pre-IPO Investment are in compliance with the Interim Guidance on Pre-IPO Investment issued by the Stock Exchange on October 13, 2010 and as updated in March 2017, Guidance Letter HKEx-GL44-12 issued in October 2012 by the Stock Exchange and as updated in March 2017 and Guidance Letter HKEx-GL43-12 issued by the Stock Exchange in October 2012 and as updated in July 2013 and March 2017.

CAPITALIZATION ISSUE Pursuant to the resolutions passed by our Shareholders passed on April 14, 2019, subject to the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the issue of the Offer Shares pursuant to the Global Offering, our Directors shall be authorized to allot and issue a total of 102,394,632 Shares credited as fully paid at par value to the Shareholders on the register of members of our Company at the close of business on the date immediately preceding the date on which the Global Offering becomes unconditional (or as it/they may direct) in proportion to their respective shareholdings in the Company (as nearly as possible without fractions) by way of capitalization of the sum of US$2,559.87 standing to the credit of the share premium account of our Company, and the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the then existing issued Shares.

126 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

GROUP STRUCTURE BEFORE LISTING The corporate and shareholding structure of our Group immediately upon the completion of the Pre-IPO Investment (assuming all Series B Preferred Shares are converted into the Shares at the conversion ratio at 1:1 and without taking into account the Shares to be allotted and issued under the Pre-IPO Share Incentive Schemes) but before the Capitalization Issue and the Global Offering is as follows:

Min Zhou 2018 Family Trust(2)

JL and JSW MENGL TIANL China Mao and Zhang and VVBI Fenghe Tian Hsin (4) (6) (7) MZFT, LLC (3) (3) (3) Holding Holding Holding (4) Finance FengHe Canary (7) Fohan Capital Other (1) Sons Sons Limited Harvest Wu and Sons Bio-Medical (8) Mr. Mao (Delaware) Limited(3) Limited(3) Limited(3) Strategies(5) (HK) shareholders (BVI) (BVI) (BVI) (BVI) (BVI) (BVI) (HK) (BVI) (BVI) (BVI) (BVI)

38.07% 1.88% 4.41% 13.80% 1.00% 0.23% 0.15% 0.23% 13.40% 8.14% 10.72% 0.60% 2.88% 0.68% 3.81%

Our Company (Cayman)

100.00%

Viva Biotech HK (HK)

100.00% 100.00% 100.00%

Sichuan Viva (PRC) Viva Biotech Shanghai (PRC) Viva Incubator HK (HK)

100.00% 100.00%

Jiaxing Viva (PRC) Viva Incubator Shanghai (PRC)

Notes: (1) Mr. Mao is the Chairman, chief executive officer and an executive Director of our Company. Shares owned by Mr. Mao include shares owned by him individually and as the trustee of the Mao Investment Trust. In addition, Mr. Mao, as the investment director of the Min Zhou 2018 Family Trust and the manager of MZFT, LLC, is entitled to exercise the voting power attached to the Shares in our Company directly held by MZFT, LLC. For more details, please refer to the paragraph headed “— Min Zhou 2018 Family Trust” above. Mr. Mao is the brother of Ms. Mao and cousin-in-law of Mr. John Wu Jiong. (2) For the description of the Min Zhou 2018 Family Trust, please refer to the paragraph headed “— Min Zhou 2018 Family Trust” and note (1) above. (3) Each of Mao and Sons and Zhang and Sons is indirectly wholly-owned by Intertrust (Singapore) Ltd. as the trustee of the Z&M Trust. Each of JL and JSW Holding Limited, MENGL Holding Limited, TIANL Holding Limited and VVBI Limited is indirectly wholly- owned by Intertrust (Singapore) Ltd. as the trustee of the VVBI Trust. Each of the Z&M Trust and the VVBI Trust is a revocable family trust set up by Ms. Mao as settlor and protector. For more details of the Z&M Trust and the VVBI Trust, please refer to the paragraph headed “— Family trusts set up by Ms. Mao.” Ms. Mao is a non-executive Director of our Company, the sister of Mr. Mao and cousin-in-law of Mr. John Wu Jiong. (4) Each of Fenghe Harvest and Wu and Sons is wholly-owned by Mr. John Wu Jiong, a non-executive Director of our Company and the cousin-in-law of Mr. Mao and Ms. Mao. Fenghe Harvest is an investment holding company primarily investing in biopharmaceutical companies and big data service providers. (5) China Finance Strategies is an investment holding company incorporated in the BVI and wholly-owned by Mr. Hua, the chief financial officer and executive Director of our Company. (6) FengHe Canary is owned by Mr. John Wu Jiong as to 45.00%, with the remaining equity interest being held by an independent third party. (7) Each of Tian Hsin Bio-Medical and Fohan Capital is an investment holding company incorporated in Hong Kong and wholly-owned by Mr. Hua Zhengmao, the brother of Mr. Hua. (8) Other shareholders include Mr. James Qun Mi, Ms. Chi Lik Yim, Absolute Ventures, T&C Biotech, Morning Star and Shanghai Wisdomont, the shareholdings of which will be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the Global Offering.

GROUP STRUCTURE UPON LISTING The corporate and shareholding structure of our Group immediately upon the completion of the Capitalization Issue and the Global Offering (assuming the Over-allotment Option is not exercised and

127 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE without taking into account any Shares to be issued upon the exercise of options granted under the Pre-IPO Share Incentive Schemes) is as follows:

Min Zhou 2018 Family Trust(2)

China Mao and VVBI JL and JSW MENGL TIANL Zhang and Fenghe FengHe Tian Hsin Fohan Shareholders MZFT, LLC Holding Holding Holding (4) Finance Other (1) Sons(3) Limited(3) Sons(3) Harvest(4) Wu and Sons Canary(6) Bio-Medical(7) Capital(7) in the Global Mr. Mao (Delaware) (3) (3) (3) Strategies(5) shareholders(8) (BVI) (BVI) Limited Limited Limited (BVI) (BVI) (BVI) (BVI) (HK) (HK) Offering (BVI) (BVI) (BVI) (BVI)

29.31% 1.44% 3.40% 0.77% 0.18% 0.11% 0.18% 10.63% 10.32% 6.27% 8.26% 0.46% 2.22% 0.52% 2.93% 23.00%

Our Company (Cayman)

100.00%

Viva Biotech HK (HK) 100.00% 100.00% 100.00%

Sichuan Viva (PRC) Viva Biotech Shanghai (PRC) Viva Incubator HK (HK)

100.00% 100.00%

Jiaxing Viva (PRC) Viva Incubator Shanghai (PRC)

Notes: (a) See notes (1) to (8) on previous page for details. (b) Based on the assumption that each Series B Preferred Share will be converted into one Share each upon the Global Offering becoming unconditional, all Series B Preferred Shares will automatically be converted into the same number of Shares upon Listing. (c) denotes public float.

PRC LEGAL COMPLIANCE M&A Rules

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors (關 於外國投資者併購境內企業的規定) (the “M&A Rules”), which were jointly promulgated by MOFCOM, SASAC, SAT, SAIC, CSRC and SAFE on August 8, 2006, came into effect on September 8, 2006 and subsequently amended on June 22, 2009, require that foreign investors acquiring domestic companies by means of asset acquisition or equity acquisition shall comply with relevant foreign investment industry policies and shall be subject to approval by the relevant commerce authorities. Article 11 of the M&A Rules stipulates that if a PRC company or individual intends to acquire its/his/her related domestic company through an offshore company which it/he/she lawfully established or controls, such acquisition shall be subject to the examination and approval of MOFCOM. The M&A Rules, among others, also require that an offshore special purpose vehicle, or a SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals, shall obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange, especially in the event that the SPV acquires shares of or equity interests in the PRC companies in exchange for the shares of offshore companies.

As advised by our PRC legal advisor, the proposed Listing is not subject to approval from MOFCOM under the M&A Rules and our listing on the Stock Exchange is not subject to a prior approval from CSRC under the M&A Rules.

Circular 37 SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special

128 HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

Purpose Vehicles (《關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》, the “SAFE Circular 37”) on July 4, 2014, which replaced the former circular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle”. SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or swap, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

On February 13, 2015, SAFE released the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment (《國家外匯管理局關於進一步 簡化和改進直接投資外匯管理政策的通知》, the “SAFE Circular 13”), which became effective from June 1, 2015. According to SAFE Circular 13, local banks shall examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration under SAFE Circular 37. However, since the notice is relatively new, there exists high uncertainties with respect to its interpretation and implementation by governmental authorities and banks.

As advised by our PRC legal advisor, each of Mr. Mao, Ms. Mao, Mr. John Wu Jiong, Mr. Hua Fengmao and Mr. Hua Zhengmao is not a PRC citizen or an overseas individual who does not hold any PRC identity documents but has habitual residences in the PRC due to the relationship of economic interests, thus he/she is not required to make registration under SAFE Circular 37 or SAFE Circular 13.

Our PRC legal advisor has confirmed that all relevant material registrations, approvals and permits required under PRC laws and regulations in relation to the establishment and increase of registered capital in respect of the PRC subsidiaries of our Group as described above have been completed and obtained.

129 BUSINESS

OVERVIEW We operate a leading structure-based, integrated drug discovery platform in terms of revenue in 2018 and beam time for synchrotron radiation in 2018 with a number of world-leading technologies and a scalable business model to share the upside of our customers’ IP value. We provide structure- based drug discovery services to our biotechnology and pharmaceutical customers worldwide for their pre-clinical stage innovative drug development. Our services cover the full spectrum of our customers’ needs for early stage drug discovery, including target protein expression and structure research, hit screening, lead optimization and the drug candidate determination. Our patented core technologies, as well as our proprietary know-how which enables us to effectively shorten the average time required for drug discovery, are widely recognized by our customers. According to Frost & Sullivan, we provide world-leading structure-based drug discovery (SBDD) services. SBDD has resulted in faster definition of drug-binding properties and has made it easier to identify hit compounds through screening programs. We have provided drug discovery services to nine of the ten largest global pharmaceutical companies (in term of revenues in 2018), as well as hundreds of biotechnology companies and research institutes worldwide including 23 companies named in the Fierce Biotech Top 15 Promising Biotechs. As of the Latest Practicable Date, we had provided drug discovery services to over 370 biotechnology and pharmaceutical customers worldwide, worked on over 1,000 independent drug targets and delivered over approximately 9,500 independent protein structures.

Our mission is to become a cradle for promising biotechnology startups around the world. We have developed a scalable business model combining the conventional cash-for-service (CFS) model, pursuant to which we receive cash service fees from our non-investee customers, and our unique equity-for-service (EFS) model. Under the EFS model, we provide drug discovery and/or incubation services to selected customers in exchange for equity or economic interest in them, and to certain promising biotechnology companies which we have invested in. By holding equity/economic interest in these selected customers or investees, we can effectively foster the development of these promising biotechnology startups and enjoy the upside of their IP value, while maintaining the steady cash inflow generated from services provided to our CFS customers. In addition, we may also make strategic investments in biotechnology startup companies that we think are of potential for future cooperation. According to the Frost & Sullivan Report, CRO industry is conventionally a labor intensive industry and the average profit per employee of CRO service providers globally in 2018 was approximately US$12,581. In contrast, our profit per employee in 2018 was US$51,880, which was 312% higher than the global average (or profit per employee in 2018 of US$20,709 that was 65% higher than the global average after deducting the fair value gains on financial assets at FVTPL of RMB68.3 million, share of loss from associate/joint venture of RMB3.2 million and gains on deemed/actual disposal of interests in an associate of RMB16.4 million, without taking into account relevant income tax implications), reflecting the advantages of our technology driven platform that allows us to enjoy a higher gross margin and our unique EFS model that enables us to enjoy the fair value gains in the equity interest acquired by us.

Our management team and key business partners comprise of top scientists and top talents from renowned global pharmaceutical companies and prestigious biomedical research institutes, such as Pfizer Inc., Merck & Co., Abbott and Novartis, and are specialized in innovative drug R&D in diversified therapeutic fields. For example, certain members of our management team and business partners have committed to diverse areas, such as immunology, oncology, metabolism and ophthalmology and have been deeply involved in the research and development of certain marketed drugs, such as Lifitegrast for the treatment of dry eye syndrome, Sutent for the treatment of metastatic

130 BUSINESS renal cell carcinoma and Venetoclax for the treatment of chronic lymphocytic leukemia. Led by these top scientists, we have established a scalable and reliable technology platform for innovative drug R&D. We have also introduced a “business partners” system to identify business partners from external sources and our incubation portfolio companies. With the help of the specialty and experience of our business partners, we have established a systematic, scientific and modularized incubation program which helps ensure the scalability and sustainability of our unique business model. Leveraging on our world-leading and integrated platform, we are able to successfully maintain a high customer stickiness and build up an ecosystem comprising of top scientists, talents, biotechnology startups, large pharmaceutical companies, research institutes and other industry participants. We believe that our strong value propositions to the customers and our ecosystem partners strengthen our leading position and create entry barriers for potential competitors.

We have established an excellent reputation in the industry and have accumulated a diversified and growing quality customer base via word of mouth referrals. Our customers include nine out of the top 10 global pharmaceutical companies (in terms of revenues in 2018), as well as 23 biotechnology companies named in the Fierce Biotech Top 15 Promising Biotechs. We also provide services to scientific research institutes such as Shanghai Jiaotong University.

Since 2014, we had established two incubation centers and incubated 31 early stage R&D projects as of the Latest Practicable Date, and plan to establish several additional modularized incubation centers in Shanghai, Jiaxing and Chengdu, China. We expanded our incubation portfolio by continuously screening new projects. We added six, four and 11, respectively, incubation portfolio companies in 2016, 2017 and 2018, respectively. In addition, after the Track Record Period, we added additional four incubation portfolio companies as of the Latest Practicable Date, and plan to incubate approximately 21, 35 and 50 additional incubation projects in 2019, 2020 and 2021, respectively. As of the Latest Practicable Date, 11 of our incubation portfolio companies had completed private financing rounds. As of the Latest Practicable Date, we had realized gains from disposal of equity interest in four of our incubation portfolio companies with return rates of 212%, 494%, 200% and 315%, respectively.

We experienced significant growth during the Track Record Period. Our revenue increased significantly from RMB96.5 million in 2016 to RMB148.2 million in 2017, and further to RMB210.0 million in 2018. Our net profit also increased significantly from RMB24.5 million in 2016 to RMB76.3 million in 2017, and further to RMB90.6 million in 2018. The increases in our net profit in 2017 and 2018 were primarily due to the increases in the fair value and the gains from disposal of equity interests in certain of our incubation portfolio companies.

OUR STRENGTHS We believe the following strengths have contributed to our success and differentiate us from our competitors:

World-leading structure-based technologies that enable us to stand at the gateway for first-in-class drug discovery We provide world-leading structure-based drug discovery services to our biotechnology and pharmaceutical customers worldwide for their pre-clinical stage innovative drug development. We specialize in the structure-based drug discovery (SBDD), fragment-based drug discovery (FBDD), affinity selection mass spectrum (ASMS) screening technologies and membrane protein targeted drug

131 BUSINESS discovery, which serves as a gateway of the innovative drug R&D especially in the area of first-in-class drugs’ research. Our structure-based technologies enable us to tap into a broad range of diseases and therapeutic areas. In addition, our services cover the full spectrum of our customers’ needs for early stage drug discovery, including target protein expression and structure research, hit screening, lead optimization and the determination of drug candidates. With the long development history of modern target-based new drug, we believe that the screening of new drugs and the validation of new targets have become increasingly challenging, in particular regarding the hit screening for many newly identified targets. Therefore, our world-leading structure-based drug discovery services allow us to excel in this rapidly changing field.

Our four core technologies are supported by our in vitro pharmacology, medicinal chemistry research, antibody generation and molecular cloning platforms. We had seven registered patents in the United States and China in connection with our membrane protein targeted drug discovery technology, with three additional patents pending upon application. Our ASMS screen platform has also been widely recognized by our customers. Based on our research results, several of our customers made significant breakthroughs in their respective research and therapeutic areas and published articles in prestigious journals such as Science, Nature Communication, Journal of Medicinal Chemistry, Journal of Organic Chemistry and Chemistry & Biology.

Research on target protein has been increasingly important in novel drug research and development, according to the Frost & Sullivan Report, and in 2015, 2016 and 2017, the number of FDA approved new drug applications were 45, 22 and 46, respectively, of which 22, 8 and 22 in the respective years were based on membrane proteins. We enjoy a world-leading position in drug target protein structure research and according to the statistics on beam time of global synchrotron radiation light source, we used more than 67% of average industrial beam time from 2016 to 2018 at Shanghai Light Source, one of the four third-generation synchrotron centers accessible to global pharmaceutical industrial users, according to the Frost & Sullivan Report. As of the Latest Practicable Date, we had provided drug discovery services to over 370 biotechnology and pharmaceutical customers, worked on over 1,000 independent drug targets and delivered approximately 9,500 independent protein structures. Leveraging on our proprietary technologies, we are able to attract more new customers while benefitting from a profit margin that is higher than our peers.

Innovative and unique business model to tap into vast pharmaceutical market We have developed a scalable business model combining the conventional CFS model and our unique EFS model. Under the EFS model, we provide drug discovery and/or incubation services to selected customers in exchange for equity or economic interest in them, and to certain promising biotechnology companies which we invested in. By holding equity or economic interest in these selected customers or investees, we can effectively foster the development of these promising biotechnology startups and enjoy the upside of their IP value, while maintaining the steady cash inflow generated from services provided to our CFS customers. In addition, we may also make strategic investments in biotechnology startup companies that we think are of potential for future cooperation. According to the Frost & Sullivan Report, CRO industry is conventionally a labor intensive industry and the average profit per employee of CRO service providers globally in 2018 was approximately US$12,581. In contrast, our profit per employee in 2018 was US$51,880, which was 312% higher than the global average (or profit per employee in 2018 of US$20,709 that was 65% higher than the global average after deducting the fair value gains on financial assets at FVTPL of RMB68.3 million, share of loss from associate/joint venture of RMB3.2 million and gains on deemed/actual disposal of interests

132 BUSINESS in an associate of RMB16.4 million, without taking into account relevant income tax implications), reflecting the advantages of our technology driven platform that allows us to enjoy a higher gross margin and our unique EFS model that enables us to enjoy the fair value gains in the equity interest acquired by us.

Our expertise in the less competitive structure-based drug discovery sector, proprietary technologies and quality services contribute to a strong demand from our customers. Under the EFS model, we are able to acquire equity or economic interests in our selected customers or investees that stand in the frontier of vast pharmaceutical market, including those developing first-in-class drugs for gastric and liver cancers, acute myelocytic leukemia, diabetes and hypercholesterolemia. Since 2018, we have strategically shifted our focus from CFS model to EFS model, and selectively increased the number of our incubation portfolio companies while maintaining steady growth and revenue stream under our CFS model. Leveraging our strong technical capabilities and deep industry knowledge, we are very well-positioned to benefit from the EFS model as we have access to a large number of early stage R&D projects, which provides us a large pool of high-quality candidates to choose from before venture capital investors approach them. Through our innovative and unique business model, we are able to tap into the vast pharmaceutical market and maximize our shareholders’ value by sharing the upside of our customers’ IP value and significantly increase our profit per employee to a higher level than our peers.

Integrated drug discovery platform attracting top scientists and talents worldwide Our management team and key business partners comprise of top scientists and top talents from renowned global pharmaceutical companies and other prestigious biomedical research institutes, such as Pfizer Inc., Merck & Co., Abbott and Novartis, and are specialized in innovative drug R&D in diversified therapeutic fields. For example, certain members of our management team and business partners have committed to diverse areas, such as immunology, oncology, metabolism and ophthalmology and have been deeply involved in the research and development of certain marketed drugs, such as Lifitegrast for the treatment of dry eye syndrome, Sutent for the treatment of metastatic renal cell carcinoma and Venetoclax for the treatment of chronic lymphocytic leukemia. With an average of more than ten years’ experience of new drug R&D in multi-national pharmaceutical companies, these scientists and professionals in our senior management team are familiar with the entire process and management of new drug R&D projects, possess a clear and differentiated development strategy and business philosophy, and have accurate experience-based judgment on the development trend of innovative drug R&D. Among the members of our management team, one was awarded as a member to the “National Thousand Talents Program” and two were awarded as members to the “Shanghai Thousand Talents Program”. Led by these top scientists, we have established a stable and reliable technology platform for innovative drug R&D and set up a professional and efficient technical team. As of the Latest Practicable Date, we had 427 biomedical and chemical drug research personnel, accounting for 83.7% of our total number of employees. We had a good mix of technical service professionals, substantially all of which have a bachelor or higher degree, with 41.9% of them hold master’s degree and 8.0% of them hold doctorate degrees.

Through our integrated platform, we are able to attract more reputable scientists to join us. We have introduced an innovative “business partners” system to identify business partners from external sources and our incubation portfolio companies. At present, we have a team of 17 business partners consisting of top scientists from China and overseas, of which 14 are from our incubation portfolio companies. Our business partners have made achievements in their respective fields of academic

133 BUSINESS research and, in an aggregate, led the research and development of nearly 50 clinical stage drugs and five approved drugs, and published over 300 papers. In the meantime, they have complementary professional backgrounds and experience of founding outstanding biopharmaceutical companies or a good track record of venture investment management. Based on their respective specialty and experience, we have established a systematic and scientific incubation program to effectively evaluate and manage returns and associated risks by crafting of milestone terms, provision of technical services and periodic assessment of project progress. We believe that the business partner system is crucial to our incubation program as it not only enhances the quality of our incubation portfolio companies to generate additional return, but also in turn continues to develop and attract more top scientists to join our team as business partners, thereby ensuring the scalability and sustainability of our business model.

Systematic incubation program to capture the highest return of the biotechnology value chain Timing of entry significantly affects the potential gains from an investment in a drug candidate. In general, the return rate of investments in new drugs in their early stage is higher than the later stage investments, according to the Frost & Sullivan Report. For a hypothetical new molecule, the estimated average value of such molecule in the pre-clinical stage is as low as US$62 million in the U.S. market, which, once such molecule is developed into an approved and marketed drug, will increase to US$1.5 billion, thereby leading to a return rate of over 2,300%, according to the Frost & Sullivan Report. Our strong pre-clinical drug discovery services platform and the deep knowledge and extensive industry experience of our management team enables us to secure opportunities to participate in innovative drug R&D projects through our EFS model and share the upside of their IP value. In addition, our gateway role in the drug discovery process provides us with access to a significant number of first-in-class drug R&D projects in their earliest stage, where the value of relevant intellectual property in terms of percentages increases most. Compared to venture capital firms that only address the financial needs of these startup projects, we enjoy unique advantages in our ability to provide the drug discovery services, experienced technicians and well-equipped laboratory. As such, aside from participating in innovative drug R&D projects through providing services to our selected customers or investees, we may from time to time make strategic investments in biotechnology startup companies that we consider to be of potential for future cooperation.

Unlike the venture capital firms, we focus on early stage opportunities and therefore by the time the venture capital firms invest in an customer of ours, we are ready to exit with anticipated returns and have greater flexibility on exit strategies. Furthermore, our management has the expertise to assess systematically and scientifically the respective success rates of these R&D projects, and minimize the associated risks of our incubation portfolio companies through diversification. In the meantime, we actively participate in the drug discovery process of these incubation portfolio companies, which enables us to benefit from the growth of the portfolio companies and to track real-time progress of these projects to minimize our risks. With the value of the intellectual property owned by these portfolio companies continue to increase, we realize gains in our equity interest in these portfolio companies at the time and manner that our management considers to be appropriate to generate a higher return on the drug discovery services we provided.

According to the Frost & Sullivan Report, the incubation model based on early stage drug discovery services has strong technical barriers. As a pioneer of this model and to leverage on our gateway role in the drug discovery process, we have established a systematic, scientific and modularized program that enables us to effectively improve our capital utilization while managing associated risks. Since 2014, we established two incubation centers and have incubated 31 early stage

134 BUSINESS

R&D projects as of the Latest Practicable Date. We plan to establish several additional modularized incubation centers in Shanghai, Jiaxing and Chengdu, China. We also plan to add additional 21, 35 and 50 additional incubation projects in 2019, 2020 and 2021, respectively. We have built an investment and incubation team comprised of senior management, founders of our incubation portfolio companies, our employees specialized in project management and certain external professionals to evaluate and supervise our incubation program. As of the Latest Practicable Date, 11 of our incubation portfolio companies had closed private financing rounds. As of the Latest Practicable Date, we had realized gains from disposal of equity interest in four of our incubation portfolio companies with return rates of 212%, 494%, 200% and 315%, respectively. We expect to have more exits of our incubation portfolio companies in 2019 as market condition permits.

Growing ecosystem open to global industry participants We have always been focusing on our leading technologies and capabilities to provide high- quality drug discovery services to over 370 innovative biotechnology startups, which are mainly located in the United States, and major pharmaceutical customers worldwide as well as a number of domestic or foreign research institutes. For example, Enasidenib (also known as Idhifa) which was developed based on the structure we delivered and was approved by the FDA in August 2017 for relapsed or refractory acute myeloid leukemia (AML) in people with specific mutations of the IDH2 gene. In addition, one of our major customers has developed a MAT2A inhibitor based on our FBDD technology and has entered into Phase I clinical trial for this drug candidate. Through years of development, we have established an excellent reputation in the industry, are widely recognized by our customers and have accumulated a diversified and growing quality customer base via word of mouth. As of December 31, 2016, 2017 and 2018, we had provided services to, an aggregate of 219, 271 and 356 customers, respectively. During the Track Record Period, over 60% of our existing customers used our service for more than once, while the dollar value of orders from these repeated customers showed an increasing trend.

Our customers include nine out of the top 10 global pharmaceutical companies (in terms of revenues in 2017), as well as 23 biotechnology companies named in the Fierce Biotech Top 15 Promising Biotechs. We also provide services to scientific research institutes such as Shanghai Jiaotong University. Leveraging on our world-leading and proprietary technologies, we were able to successfully maintain a high stickiness of our customers and to build up an ecosystem comprising of top scientists, biotechnology startups, large pharmaceutical companies research institutes and other industry participants. We believe that our strong value propositions to the customers and our ecosystem partners strengthen our leading position and create entry barriers for potential competitors. We believe that our scalable business model and strong technology capabilities position us at the forefront of the evolution of the biotechnology value chain. With our scalable business model and our ecosystem open to diversified industry participants, we believe that we are well-positioned to expand beyond early stage drug discovery market to provide a comprehensive suite of services and drive further growth.

135 BUSINESS

OUR STRATEGIES Our mission is to become a cradle for promising biotechnology companies around the world. We aim to leverage on our leading drug discovery capability to scalably participate in our customers’ early stage R&D activities, thereby driving and capitalizing the value of our customers’ intellectual property. We plan to execute the following key strategies to achieve our goal:

Continue to invest in cutting-edge technologies through both in-house research and development and potential acquisitions We believe that our core competency is our advanced technologies and platforms that allow us to offer more efficient and effective solutions to our customers. Leveraging on our world-leading technologies, we are able to acquire more high-quality biotechnology and pharmaceutical customers, generate higher revenues, and further invest to advance our R&D capabilities, thereby creating a virtuous circle.

Going forward, we will continue to invest in cutting-edge technologies to stay at the forefront of the drug discovery service industry. We will further strengthen our in-house research and development, in particular in the Cryo-EM area. This will enable us to further enhance our R&D capabilities and provide more comprehensive services to our customers and business partners. In addition to organic growth, we will also actively seek opportunities to acquire or invest in technologies or companies that complement and strengthen our existing platforms.

Further expand our incubation portfolios Our unique EFS model enables us to identify and participate in quality innovative drug R&D projects at their early stage. In 2018, over 130 of our scientists and professionals were designated to take charge of our incubation portfolio companies. As we continue to expand our incubation program to include more incubation portfolio companies, we plan to further expand our scientist and professional team and to establish several additional modularized incubation centers in Shanghai, Jiaxing and Chengdu, China. We also plan to add approximately 21, 35 and 50 additional early stage R&D projects under EFS model in 2019, 2020 and 2021, respectively, by utilizing our well-established incubation program and participating in more early stage R&D projects. In addition, we plan to allocate additional resources for our incubation portfolio companies to expedite their R&D progress and drive the values of IPs owned by them. We believe the return generated from our incubation portfolio companies not only enables to maximize our shareholders’ interest, but also further strengthens our leading position in the early stage drug discovery industry.

Develop CMO business to achieve vertical integration of a discovery, development and manufacturing platform With the increasing demand from pharmaceutical companies for cost control and efficiency improvement, we believe drug discovery service providers with vertical integration capabilities will have greater market competitiveness. We plan to strategically develop the CMO business to provide R&D, manufacturing and other ancillary services to global biotechnology and pharmaceutical companies. We believe this will help our customers to further improve the efficiency of their R&D of new drugs, effectively control their manufacturing costs, expand our service offerings and enhance our market competitiveness.

136 BUSINESS

We plan to acquire a parcel of land of 50 mu in Wenjiang District, Chengdu for the construction of a biologics CMO project, and to expand into the chemical CMO business through potential acquisitions of high-quality assets. Once completed, our CMO business will enable us to provide process development, process optimization and trial manufacturing services required for drug production to our pharmaceutical customers. By complementing our proprietary, technology driven R&D capabilities with mass production capabilities, we will be able to better adapt to various needs of our pharmaceutical customers and provide them with more comprehensive, end-to-end service offerings.

Continue to attract and train quality talents and further strengthen our R&D team We have established a talent platform comprised of management team and top scientists with outstanding capabilities and abundant resources, as well as a seasoned service team. Since our establishment in 2008, we have recruited talents from top colleges and universities for our R&D divisions and provide them with professional training under the supervision of our top scientists. In addition to home grown talents through our own internal trainings, we have also recruited talents from multinational biotechnology or pharmaceutical companies to optimize our existing research and development team.

With the continued expansion of our operations, we plan to further strengthen our professional R&D team through our own internal trainings and introduction of talents to satisfy our increasing demand for professionals. We believe that the booming Chinese biopharmaceutical market will continue to attract more quality talents to participate in the market. In addition, we have adopted various measures to attract and retain promising talents in our industry. The higher profitability resulted from our EFS model provide us with more resources and enable us to offer competitive compensation package to employees, which consists of salary, other employee benefits, and share-based award, as the case may be. With our recruiting measures and competitive compensation package, we believe we will effectively secure our demand for the talents in the near term.

Further expand our customer base As a leading brand in the global early stage drug discovery service industry, we have provided high-quality services to over 370 biotechnology and pharmaceutical companies worldwide as well as a number of domestic and foreign research institutes. Most of our new customers come to us as a result of word of mouth referrals from our existing customers and our reputation in the industry. Our large base of loyal customers enables us to maintain a steady growth and stable returns accompanying our customers’ growth. We are also committed to further strengthening our relationship with, and to increasing the stickiness of, our existing customers, thereby leveraging on our existing market position and reputation to deepen our market penetration.

Going forward, we will continue to improve and enhance our service offerings to further expand our customer base, which provides us with access to more potential incubation portfolio candidates. In addition, we have set up a dedicated sales and marketing team in North America to actively develop marketing and promotion channels and increase our brand promotion efforts. We will also improve the capabilities of marketing personnel via internal and external training to further enhance the company’s influence and reputation in the market to attract more new customers. We also plan to obtain real-time industry intelligence and develop business opportunities through cooperation

137 BUSINESS with selected universities, industry associations and research institutes, as well as to identify quality start-up companies via reputable venture capital investors.

OUR LEADING TECHNOLOGY PLATFORMS We operate a leading structure-based, integrated drug discovery platform with a number of world-leading technologies. We provide structure-based drug discovery services to our biotechnology and pharmaceutical customers worldwide for their pre-clinical stage innovative drug development. Our core technologies include SBDD platform, FBDD platform, ASMS screening platform and membrane protein targeted drug discovery platform. In addition, we have in vitro pharmacology, medicinal chemistry research, antibody generation and molecular cloning platforms. Our technology platforms provide us with strong competitive edge and allow us to offer comprehensive services for our customers’ drug discovery projects. We have been granted seven patents in the United States and in China in connection with our proprietary membrane protein targeted drug discovery technology, and our ASMS screening and FBDD platforms have been widely recognized by our customers. With our technical support, several of our customers made significant breakthroughs in their respective research/ therapeutic areas and published articles on prestigious journals such as Science, Nature Communication, Journal of Medicinal Chemistry, Journal of Organic Chemistry and Chemistry & Biology.

SBDD Platform Structure-based drug discovery (SBDD) is a commonly used technology in modern drug discovery. The critical step for SBDD is to understand the structure information of the target protein. There are several structure biology technologies that can help obtain the structure information at atomic level such as NMR, X-ray or EM. Among them, X-ray is the most widely used technology. The process of obtaining the structure information of the target protein is similar to taking a photo of the target protein at atomic level, which provides the chemists with a direct view of where and how their compound bind to the target protein and guide the chemists to optimize their compound efficiently and effectively.

We are one of the world’s top brand drug discovery service companies in the area of protein sciences and structure biology. We have four different protein expression systems including E.Coli, yeast, insect and mammalian cell culture systems. For protein expression, we design constructs with all commercial available vectors, use tags, and make protein sequence mutation/insertion/deletion when appropriate. We use a variety of purification technologies and protein refolding technologies, and can make stable isotope labeled proteins. We have 10 commercial crystallization screening kits with up to 960 screening conditions, while two of the 10 screening kits are dedicated to membrane protein crystallization. We also developed three additional membrane protein crystallization screening kits in- house. Over the past 10 years, we have supported our customers with researches on more than 1,000 target proteins and delivered approximately 9,500 protein structures which evidenced our industry leading position in this field.

ASMS Screening Platform Library compound screening is an important part in drug discovery and is the start point of modern drug discovery. ASMS is one of the powerful screening methods developed in late 20th century which measure the binding of the compound to the target protein. In ASMS, the library

138 BUSINESS compounds are ranked according to their affinity to the target protein in homogeneous solution conditions. The top ranked compounds which are above the experiment cutoff are considered as hits for further testing. To date, we have developed a unique screening technology platform combining three affinity selection mass spectrometry (ASMS) screening technologies, including ultrafiltration- ASMS, ultracentrifugation-ASMS and size exclusion chromatography (SEC)-ASMS. With this ASMS screening platform, we are able to screen any soluble protein targets (including GPCRs, ion channels, transporters in detergent and in nanodisc), and any compound libraries (including our proprietary Viva libraries, natural product libraries and customers’ libraries). ASMS detects homogeneous solution binding and is an unbiased screening method, suitable for finding allosteric binders. ASMS can accommodate wide selection of screening formats and conditions, and is fast, flexible, label-free, high throughput and more cost-effective when compared to other screening technologies such as HTS, SPR and DNA encoded libraries (DEL). We have provided screening services for many customers in the past and there is increasing interest from new customers. Many of the compounds discovered using our ASMS have advanced to leads and clinical candidates.

Membrane Protein Targeted Drug Discovery Technology Membrane protein is an important class of drug targets. Approximately 50% of the marketed drugs and a considerable portion of drugs under development modulate membrane proteins. However, membrane protein is one of the most challenging target classes for drug discovery. Membrane proteins are extensively associated with cellular membranes in living systems through hydrophobic domain interactions. These hydrophobic domains may cause protein aggregation and mis-folding during expression and purification of full length membrane proteins. To overcome these and other technical challenges, Viva has developed proprietary membrane protein expression and screening technologies. These patented technologies allow production of soluble full length and functioning membrane proteins for antibody drug discovery, for small molecule drug discovery by ASMS, and for SBDD applications.

FBDD Platform Fragment based drug discovery (FBDD) is an alternative strategy compared to traditional drug discovery. FBDD uses library compounds with diverse structure and lower molecular weight. Hits from fragment library have weaker activity or affinity and are generally discovered with biophysical screening technologies. Compounds discovered from screening of fragment library may bind to allosteric binding sites and there may have more broad options for optimization. Structure-based drug discovery is more critical for advancing compounds from FBDD. For example, some compounds discovered from Viva fragment library against a novel enzyme target behave as allosteric inhibitors, binding to a site remote from the enzyme active site but also inhibiting the enzyme activity. These compounds were successfully optimized to leads and candidate drugs and are now in clinical trials. We have developed our FBDD platform combining a proprietary FBDD compound library with our ASMS screening technology. Our FBDD library was designed with structural diversity as well as the need for mass spec detection. Hits from ASMS screening of FBDD library are confirmed by orthogonal methods such as SPR, thermoshift, x-ray crystallography and bioassays. Our advanced structure biology capabilities also provide synergy for advancing hits from FBDD library screening for our customers. We have successfully provided FBDD services for a number of our customers’ projects, and many of the compounds discovered have advanced to leads and clinical candidates.

139 BUSINESS

In Vitro Pharmacology In Vitro pharmacology refers to the enzyme and cell-based bioactivity test of compounds. We have excellent bioassay capabilities with experienced teams. We generate stable cell line for cell based assay using both conventional liposome, lentivirus method and Flp-in technology, determine compound profiling using 96 well or 384 well format and develop assay for various of protein targets such as GPCR, transporters, ion channels, kinases, epigenetics targets, protease, nuclear receptors and immune oncology targets. We have all common bioassay detection technologies including UV/Vis, fluorescence, fluorescence polarization, FRET, time-resolved fluorescence and chemiluminescence. We also have SPR technology to provide biding and kinetic measurements. Our in vitro pharmacology platform provides us with critical and timely support for hit follow-up, hit to lead and lead optimization efforts.

Medicinal Chemistry Research Our experienced medicinal chemistry teams provide hit-to-lead and lead optimization support for our customers. Over the years, our medicinal chemistry teams and their drug discovery achievements have supported our customers with four first-in-class drugs that had entered into clinical trials.

Antibody Generation We have a number of antibody discovery technologies including hybridoma, phage display library, antibody humanization and antibody maturation, based on which we can provide antibody drug discovery and optimization services for our customers.

Molecular Cloning Platform Molecular cloning is the foundation of modern molecular biology. We can provide gene cloning services from animal/plant tissue or microorganisms through our molecular cloning platform, as well as providing subclone, mutation, insertion, deletion and other related services.

OUR SERVICES We provide a wide range of high-quality, integrated services across the pre-clinical drug discovery and development process to pharmaceutical and biotechnology companies worldwide. Leveraging on our world-leading structure-based drug discovery capabilities, our service offerings cover discovery biology, discovery chemistry and pre-clinical development. Our customers recognize our ability to offer a wide range of quality services to meet their early stage drug R&D needs, and we expect to capitalize on our strong customer base and expand our service offerings along the drug discovery and development value chain.

According to Frost & Sullivan, we are one of the world’s top branded pre-clinical drug discovery service provider specialized in SBDD. We have provided drug discovery services to nine of the ten largest global pharmaceutical companies (in term of revenues in 2017), as well as hundreds of biotechnology companies and research institutes worldwide including 23 companies named in the Fierce Biotech Top 15 Promising Biotechs. As of the Latest Practicable Date, we had provided drug discovery services to over 370 biotechnology and pharmaceutical customers, worked on over 1,000 independent drug targets and delivered approximately 9,500 independent protein structures.

140 BUSINESS

The following chart sets forth the structure-based drug discovery process and our services:

Gene

SBDD Cloning FBDD Gene-to- Protein expressing Protein Purification

Purified protein

Viva Compounds Library Gene-to- X-ray crystallography Viva Fragment Library Structure Structure

ASMS SPR X-ray Compounds Assay Fragments Novel hits

X-ray crystallography in vitro pharmacology(assay) Lead compounds

X-ray crystallography in vitro and in vivo pharmacology,etc. Drug candidate

Note: Schematics of our structure based drug discovery services: Starting from a disease relevant gene, a target protein is produced through gene cloning, protein expression and purification. Purified proteins can be used for x-ray crystallography and bioassay developments. Hits are discovered from screening of compound or fragment libraries with affinity screening mass spectrometry (ASMS) against purified target protein and are developed into drug leads and candidates through hit-to-lead and lead optimization processes. If the hits are discovered from the fragment library, then the process is called fragment based drug discovery (FBDD). In addition, if the gene expresses a membrane protein, then the process is called membrane protein targeted drug discovery. During hit-to-lead and lead optimization, structure information from X-ray crystallography allows a better understanding of the molecular interactions of the compound with the target protein, while data from bioassay facilitate the establishment of SAR of the compounds. This SBDD capability can significantly reduce the cost of drug discovery and speed up the process.

Gene-to-Protein & Gene-to-Structure We provide gene-to-protein (G2P) and gene-to-structure (G2S) services. Based on our customers’ needs, we perform construct design, pilot expression, select better constructs for scale-up expression, and finally protein purification and crystallization. We collaborate with a number of synchrotron light sources in the world including Shanghai (China), APS (US), CLS (Canada), and ALS (Australia). We have on average over 17 hour per week available synchrotron time to provide fast turnaround crystal data collection services for our customers. We enjoy a world-leading position in drug target protein structure research and according to the statistics on beam time of global synchrotron radiation light source, we used more than 67% of average industrial beam time from 2016 to 2018 at Shanghai Light Source, one of the four third-generation synchrotron centers (SSRF, APS, Diamond, ALS) accessible to global pharmaceutical industrial users, according to the Frost & Sullivan Report.

Viva Engine for Lead Discovery Lead discovery is an important early step in drug discovery projects. We provide lead discovery services for our customers with our proprietary Viva Engine for Lead Discovery platform based on ASMS screening technologies and several compound libraries. We have designed a unique fragment library, a GPCR related compound library and a large diversity compound library, which is comprised of approximately 114,000 compounds in total. We provide fast turnaround and flexible lead discovery

141 BUSINESS services for any soluble proteins, and we can also screen compound libraries of our customers. In addition, we provide hit confirmation and characterized services using thermoshift, SPR, X-ray, and bio-assay technologies.

Membrane Protein Targeted Discovery We provide comprehensive services on small molecule and antibody drug discovery with membrane protein targets based on world class, patented membrane protein expression and screening technologies. In general, our customers only provide the target names, and we will support our customers with drug discovery process leading to developmental candidate selection.

Medicinal Chemistry Our medicinal chemistry services include hit-to-lead and lead optimization. We focus on a traditional medicinal chemistry approach, a process through which a series of compounds are carefully designed with the structure-aided SAR analysis, followed by chemical synthesis and evaluations of biological activities. We also design and synthesize focused libraries to support SAR analysis.

In Vitro Pharmacology Our in vitro pharmacology profiling services include generating stable cell line, developing assay, screening compounds with the developed assay, determining compound profiling using 96 well or 384 well plate and binding affinity and kinetics with SPR for small compound and antibody.

Antibody Discovery Service Our antibody drug discovery services include, among others, antigen preparation, antibody discovery, optimization, humanization, maturation, affinity measurement, lab-sale and large scale purification, and epitope characterization by antibody-antigen complex structural determination.

OUR INCUBATION PROGRAM AND BUSINESS PARTNERS According to the Frost & Sullivan Report, the incubation business model based on early stage drug discovery services has strong technical barriers. As a pioneer of this model and to leverage on our gateway role in the structure-based drug discovery process, we have established a systematic, scientific and modularized incubation program that enables us to effectively improve our capital utilization while managing associated risks. Since our inception, we had incubated 31 early stage R&D projects as of the Latest Practicable Date. We expanded our incubation portfolio by continuously screening new projects, and plan to incubate approximately 21, 35 and 50 additional incubation projects in 2019, 2020 and 2021, respectively.

142 BUSINESS

Accumulated Number of Incubation Projects 160

140 137

120 50 100 87 80 35 60 52

40 21 87 52 20 27 31 12 16 0 6 2015 2016 2017 2018 2019 2020 2021 (expected) (expected) (expected) Average investment per project is approximately US$1.5 million, while average service period is approximately two years.

Since 2014, we established two incubation centers and plan to establish several additional modularized incubation centers in Shanghai, Jiaxing and Chengdu, China. Our modularized incubation center is approximately 3,000 sq.m. in size, and is expected to incubate 12 early stage R&D projects per year with an average turnover time of one to two years. In general, for each of our incubation projects under the EFS model, we plan to contribute an average of US$1.5 million in cash or via drug discovery services we provide, with an aim to exit 50% of our equity/economic interest in 2.5 years (being the average time that a typical discovery process would take from initial hit compound to the PCC-IND filing stage) and the remaining interest in 5.5 years (being the average time that it typically takes for a quality biotech company to reach Phase II clinical trial and ready for an IPO or an acquisition by large pharmaceutical companies). In addition, we aim to receive a 10% to 30% equity/ economic interest in such incubation portfolio companies through our EFS model. Under our respective incubation/service agreements, upon completion of all pre-agreed milestones, we are entitled to receive an average of 24.47% equity/economic interest in our incubation portfolio companies that we have incubated since 2014 (excluding equity interests we may receive from our investments in the form of convertible instruments). While we expect to follow the 2.5 and 5.5 year strategy as mentioned above, we also maintain certain flexibility and may adjust such strategy in accordance with the market conditions and other factors such as new round of financing or merger/ acquisition of the incubation portfolio companies. We may also transfer all or a portion of its equity interests in these incubation portfolio companies to third parties as we consider appropriate and if the terms and valuation are attractive. When disposing the equity interest held by us, we identify potential transferees primarily through privately negotiated transactions and, to a lesser extent, we may exit though acquisitions (in the event the incubation portfolio company is acquired by a third party) or sale in the open market (in the event the incubation portfolio company becomes listed).

While it takes around 10 years in total for a new drug candidate to fulfill commercialization, we believe the value of equity interests in these incubation portfolio companies increase along with the respectively development stages of their pipeline products. As we specialize in the drug discovery area, we mainly aim to enjoy the incubation portfolio companies’ value growth in their drug discovery and early phases of clinical trial stages. By deeply involved in the incubation portfolio companies’ R&D

143 BUSINESS processes, we are in a better position to assess the potential of the pipeline products. Furthermore, by investing in the earliest stage of our incubation portfolio companies and exiting during the development process of their new drug candidates before they obtain NDAs or market approvals from the FDA or other regulators, we are able to enjoy a more flexible exit strategy and to prevent the risk of low success rates in the later stages of new drug development.

In addition, we have built an investment and incubation team comprised of our founders/senior management, our employees specialized in project management and our “business partners” to evaluate and supervise our incubation program. Our investment and incubation team is responsible for identifying, evaluating and supervising our incubation portfolio companies and potential incubation targets to be invested by us. Leveraging on their respective specialty and experience, we have established a systematic, scientific and modularized incubation program to effectively evaluate and manage returns and associated risks by crafting of milestone terms, provision of technical services and periodic assessment of project progress. Our systematic incubation program makes our EFS model highly scalable and sustainable. Supported by our large number of experienced professionals and technicians, we can easily allocate additional resources to our incubation portfolio companies and to include more incubation portfolio companies as the management of our Company deems fit, thereby enhancing our capital efficiency and further increasing our profit per employee.

In evaluating the potential incubation targets, we focus on first-in-class drugs and consider the following criteria, among others: Š scientific achievements and execution capabilities of the founder and management team; Š the mechanism of the drug target and druggability; Š projected market size of the indications; Š competitive landscape of similar drugs in the market; Š uniqueness and scarcity of the drug; Š suitability to our Company’s technology platforms; and Š likelihood for potential exit within three years.

We believe our incubation program and EFS model are difficult for our competitors to replicate for a number of reasons, including, among others: Š technology: Our proprietary technologies enable us to provide drug discovery services to incubation projects that other competitors cannot deliver; Š screening capability: While there are many biotechnology startup candidate projects that can be considered, it is crucial to have an experienced team with deep industry knowledge and network to screen and identify candidates with potential; and Š risk management: By participating in innovative drug R&D projects in their earliest stage and being deeply involved in their development process, we are able to enjoy more exit opportunities and to track real-time progress of these projects, thereby minimizing our risks.

Our Board has adopted an internal policy regarding the investment in and management of our incubation portfolio companies, pursuant to which, among others: (i) Six pre-screening work groups comprised of members from our incubation execution team and our business partners are set up to identify and pre-screen potential incubation

144 BUSINESS

portfolio companies. Each group has a different area of expertise and our incubation execution team members in such group consult our business partners and make recommendations to the Board based on the advices and feedback of our business partners; (ii) Once a potential incubation portfolio company is identified, a Scientist Committee comprised of six to ten internal and external scientists will evaluate the technology and potential of such candidate. A candidate will be presented to the Management Investment Committee for approval only if (a) no less than two affirmative votes (after netting off any negative votes) from the members of the Scientist Committee and (b) none of the members in the Scientist Committee has major concerns on such candidate, otherwise the project will be rejected. (iii) After the review by our Scientist Committee, relevant due diligence processes will be conducted to before such potential incubation portfolio company is presented to the Management Investment Committee; (iv) A Management Investment Committee comprised of our chief executive officer, general manager, chief science officer, chief financial officer and chief business officer is set up to evaluate the proposed investment. We only approve an investment in an incubation portfolio company after unanimous consent by the Management Investment Committee is obtained; and (v) In the event an incubation portfolio company becomes listed or is being acquired, or if we approach or are approached by potential buyers, the Management Investment Committee will consider and decide if it is appropriate for us to exit and relevant terms, such as deal structure, percentage of equity interest to be disposed and transfer prices. A simple majority approval by our Management Investment Committee members is required for any such exit. If the dollar value of the proposed exit exceeds US$5.0 million, the Management Investment Committee needs to report such exit to our Board. If the dollar value of the proposed exit exceeds US$10.0 million, a simple majority approval by our Board is required in additional to the Management Investment Committee approval.

Following the Global Offering, we may make amendments to the above-mentioned internal policy from time to time or adopt a new policy regarding the investment in and management of our incubation portfolio companies.

We have established a project management methodology to manage the potential risks associated with our incubation portfolio companies. Once we approve an incubation project, it enters the project management stage where our incubation management team is responsible for tracking its day-to-day operations and reporting its progress to the Investment Committee on a weekly basis. We also delegate a project management team to each incubation project. The project management team will set the schedule of the project and liaise with other departments to determine the staffing of the project team. If any issue arises during the R&D process of the incubation project, the project management team will report to the Investment Committee for us to determine whether such issues have a material effect on the operating results, business, financial condition and reputation of the incubation portfolio company and whether we should terminate the incubation project. This project management methodology ensures that we can detect potential risks early and thus increase the success rate of our incubation portfolio companies.

While our revenue derived from CFS model continued to grow during the Track Record Period, which provided us with a steady cash inflow, we have strategically and selectively increased the

145 BUSINESS number of customers under the EFS model to create greater value for our shareholders. Our EFS model allows us to share the upside of our customers’ IP values, which is primarily reflected by the gains from the fair value change of the equity interest in our incubation portfolio companies. Such fair value gains are recorded as “fair value gain on financial assets at fair value through profit or loss in our financial statements.

We are well-positioned to benefit from the EFS model as we have access to a large number of early stage drug R&D projects, which provides us a large pool of high-quality candidates to choose from before venture capital investors have access to them. Our strong technical capabilities and deep industry knowledge allow us to identify projects that we think of the most potential. Through our unique EFS model and, to a lesser extent, through our proprietary technologies for drug discovery, we are able to share the increase in our customers’ intellectual property value and significantly increase our profit per employee to a higher level than our peers. According to the Frost & Sullivan Report, the average profit per employee of CRO service providers globally in 2018 was approximately US$12,581. Based on our 2018 net profit of RMB90.6 million and weighted average of employee count of 381, our profit per employee in 2018 was US$51,880, which was 312% higher than the global average (or profit per employee in 2018 of US$20,709 that was 65% higher than the global average after deducting the fair value gains on financial assets at FVTPL of RMB68.3 million, share of loss from associate/joint venture of RMB3.2 million and gains on deemed/actual disposal of interests in an associate of RMB16.4 million, without taking into account relevant income tax implications), reflecting the advantages of our technology driven platform that allows us to enjoy a higher gross margin and our unique EFS model that enables us to enjoy the fair value gains in the equity interest acquired by us.

Our Business Partners and Incubation Team We have introduced an innovative “business partners” system and identify business partners from our incubation portfolio companies and external sources. As of the Latest Practicable Date, we had over 17 business partners consisting of top scientists from China and overseas, of which 14 were from our incubation portfolio companies, as well as external professionals specialized in investment or project management. Our business partners have made achievements in their respective fields of academic research and, in an aggregate, led the research and development of nearly 50 clinical stage drugs and five approved drugs, and published over 300 papers. In the meantime, they have diverse professional backgrounds and experience of founding successful biopharmaceutical companies or a good track record of venture investment management.

Our business partners play a leading role in our incubation program. Their duties primarily include: (i) in the project analysis and screening stage, our business partners will assist us in analyzing and screening potential candidates; (ii) after the project has been approved by our investment committee or our Board, our business partners will advise us on the due diligence of the project; (iii) once a project becomes our incubation portfolio company, our business partners will advise such incubation portfolio company on its R&D activities; and (iv) supervision and guidance for the incubation portfolio companies. Meanwhile, along with the growth of an incubation enterprise, our business partners will offer various resources to such incubation portfolio company as it may need. Our business partners only involve in the project screening process and provide advisory services. Once an incubation project commences, the incubation services that involve the daily operations of an incubation portfolio company will be provided by our in-house project management team and technicians.

146 BUSINESS

In selecting our business partners who will be in charge of evaluating and supervising our incubation program, we take into account a number of criteria, including the business partners’ credentials, R&D achievements of their research projects in their respective scientific fields, biotechnology/pharmaceutical industry experience and execution capabilities. In order to prevent any potential conflict of interest, such as studying same indications or in similar therapeutic areas as the potential incubation portfolio companies, our business partners involved in the due diligence process will be asked to enter into a confidentiality agreement with us before they can obtain the access to confidential technology and target information, and if conflict of interest is identified and declared upon review of non-confidential materials during pre-screening process, such business partner will be excused from participating in the project assessment. Such abstention shall last until relevant incubation portfolio company ceases to be our incubation portfolio company or our exit. We also conduct a check on conflict of interest as part of the standard operating procedures of our investment approval process.

For our business partners who are the senior management of our existing incubation portfolio companies, they may serve as the chief scientists of our incubation project candidates or to co-invest in such candidates. For our business partners who are external professionals, we may provide a cash bonus to our business partners upon a successful exit of our equity interest in our incubation portfolio companies. The bonus to be paid to our business partners are discretionary and will be determined only upon the exit of an incubation project. As of the Latest Practicable Date, we have paid cash bonus of RMB1.3 million to our business partners in connection with our exit of equity interest in Bonti, Inc. As we only consider whether to pay any cash bonus and the amount to be paid upon the exit of an incubation project, which is discretionary and not an obligation of ours, we do not accrue any such bonus as expenses.

We believe that the business partner system is crucial to our incubation program as it not only enhances the quality of our incubation portfolio companies to generate additional return, but also attract more top scientists to join us, thereby ensuring the scalability and sustainability of our incubation program and EFS model.

Our business partners, together with our senior management team and in-house scientists, form our incubation management team. Scientists in our incubation management team (other than our senior management) and their respective credentials are set forth in the table below:

Approximate Internal/ Number of Name External Education Experience Publications(1) Areas Xueheng Cheng Internal Ph.D., Harvard University Harvard University 50 SBDD Pacific Northwest ASMS Laboratory Abbott Laboratories Qiang Zhao Internal Ph.D., Birbeck College, Crown Bioscience 20 Inflammatory University of London Cal State University SBDD Fullerton FBDD Anadys Pharmaceuticals Lingqiao Zhu Internal Ph.D., Shanghai Institutes for Mabgeek Biotech 5 Immunology Biological Science, Chinese 3S Guojian Pharmaceutical Oncology Academy of Science University of Michigan Postdoctoral Research Fellow Medical School in University of Michigan Medical School

147 BUSINESS

Approximate Internal/ Number of Name External Education Experience Publications(1) Areas

Xin Wen Internal Ph.D., Colorado State Purdue University 5 Cardiovascular University Metabolic Analgetic David D Xu Internal Ph.D. in University of Novartis 28 Neurology California, Los Angeles; Sandoz Oncology M.B.A. in Wharton School of Purdue Dolorology Business, University of Jiuzhou Pharmaceutical Immunology Pennsylvania; Postdoctoral Research in The Scripps Research Institute Brian Hubbard External Ph.D., University of IL Urbana Broad Institute 80 Metabolic Champaign Merck & Co. Cardiovascular Novartis Institutes for Endocrinology Biochemical Research Oncology Tabomedex Twin Lantern Dogma Flash Zing Yiwei Zong External Ph.D. in University of Tao Capital 5 Metabolic Pennsylvania Anji Zengquan Wang External Ph.D. in Washington State Technoderma 20 Immunology University Xiaodong Cao External Ph.D. in University Konstanz Syrrx 70 Oncology Takeda Pharmaceutical Cerep (Shanghai) Zova Biotherapeutics Eubulus Wang Shen External Ph.D., University of Pittsburgh Abbott 85 Immunology Kanion Anti-virus Amgen Ophthalmology Sunesis Weimou Weiqing Shunqi Yan External Ph.D., State University of New ChemPartner 40 Metabolic Jersey Ignyta Inflammatory Schrodinger ArQule Arthrosi Michael H. External Ph.D., Harvard University Broad Institute 40 Metabolic Serrano-Wu Novartis Bristol-Myers Squibb Dogma Tabo Anji Jianhua Cai External Ph.D., Shanghai Institute of Viva 5 SBDD Madica, CAS Yinglaiteng Daniel Meyers External Doctor of Medicine, University Janssen 25 Metabolic of Washington Anji Diplomate in the American Board of Internal Medicine Senior Fellow in the Department of Medicine in the University of Washington

148 BUSINESS

Approximate Internal/ Number of Name External Education Experience Publications(1) Areas Cho Tang External Ph.D., University of Chicago Hengrui 140 Oncology Roche Metabolic Haisco Cardiovascular Sugen Sunshine Lake Hawaii Biotech Glycomed Clues Xiangdong Qu External Master, Cornell University Hengrui 10 Oncology Amgen Baylor and MD Anderson Cancer Center Columbia University College of Physician and Surgeons Litain Yeh External Ph.D., Case Western Reserve Ardea Bioscience 40 Metabolic University Ignyta Arthrosi Chen Chen External Ph.D., Shanghai Institutes of Sundia MediTech 127 Organic Organic Chemistry, Chinese Neurocrine Biosciences Chemistry Academy of Science Cytel Cooperation Metabolic Postdoctoral Associate in Oncology University of Illinois Neurology Yimin Zou External Ph.D. in University of VersaPeutics 45 Neurobiology California, San Diego; Versachem Postdoctoral Research in University of Chicago University of California; University of California, Postdoctoral Research in San Diego University of California

Note: (1) Number of publications include publications, filed patents and book chapters.

Our Incubation Portfolio Companies Our incubation portfolio consists of selected customers under our EFS model, to whom we provide drug discovery and/or incubation services in exchange for equity or economic interest in them, as well as promising biotechnology startup companies that we think are of potential and in which we strategically invest in. In providing our drug discovery services to our incubation portfolio companies, the founders and scientists of our incubation portfolio companies come up with the innovative ideas or drug targets, drive their R&D projects and control the timelines, and we provide preclinical drug discovery services which include, among others, construct design, protein expression, protein purification and crystallization, assay development, compound/hit screening and lead optimization. As of the Latest Practicable Date, we have incubated a total of 31 incubation portfolio companies, a summary of which is set forth below:

Dogma Therapeutics, Inc. Dogma Therapeutics, Inc. is a biotechnology startup company developing a small molecule compound to lower cholesterol (first-in-class). The company became our incubation portfolio company in January 2017. Under our incubation agreement, we may receive a total of 2.88%, 5.76%, 8.64%,

149 BUSINESS

11.52% and 14.4% equity interest in the company when the value of drug discovery services provided by us under SFE charge model (which reflects the service fees we would be entitled to as if the drug discovery services were provided under the FTE charge method) reaches US$400,000, US$800,000, US$1.2 million, US$1.6 million and US$2.0 million, respectively. In addition, if the pre-agreed milestone is achieved prior to the value of the services we provide reaches US$2.0 million, we will be entitled to 14.4% equity interest in the company regardless the value of services provided. As of the Latest Practicable Date, we had received 8.64% equity interest in the company under the incubation agreement. The company’s leading pipeline product is currently under early drug discovery stage.

Under our SFE charge method, we recognized revenue of RMB4.6 million and RMB11.0 million in 2017 and 2018, respectively, representing 3.1% and 5.2% of our revenue for such periods, respectively.

Pursuant to an equity transfer agreement dated April 22, 2018 between we, as transferor, and T&C Biotech, as transferee, we agreed to sell, and T&C Biotech agreed to purchase, 20,833 shares of common stock of Dogma (representing 1.7% of the company’s equity interest as at the date of the agreement) for a total consideration of US$500,000. T&C Biotech is an Independent Third Party and one of our pre-IPO investors, the consideration was determined based on the arm’s length negotiation between T&C Biotech and us. After the share transfer, we currently hold 7.01% equity interest in the company.

Flash Therapeutics, LLC Flash Therapeutics, LLC is a biotechnology startup company developing a novel dual kinase inhibitor to treat acute myelocytic leukemia (first-in-class). The company became our incubation portfolio company in August 2016. Under our incubation agreement, we may receive a total of 4%, 8%, 12% and 16% equity interest in the company when the value of drug discovery services provided by us under SFE charge model (which reflects the service fees we would be entitled to as if the drug discovery services were provided under the FTE charge method) reaches US$375,000, US$750,000, US$1.1 million and US$1.5 million, respectively. In addition, if the pre-agreed milestone is achieved prior to the value of the services we provide reaches US$1.5 million, we will be entitled to 16% equity interest in the company regardless of the value of services provided. In the event we produce novel molecules that become the clinical candidates in pursuit of the pre-agreed project milestone, we will be entitled to a 4% milestone bonus and receive an aggregate of 20% equity interest in the company. As of the Latest Practicable Date, we had received 16% equity interest in the Company. The company’s leading pipeline product is currently under early drug discovery stage.

Under our SFE charge method, we recognized revenue of RMB2.0 million, RMB8.5 million and RMB5.2 million in 2016, 2017 and 2018, respectively, representing 2.1%, 5.7% and 2.5% of our revenue for such periods, respectively. Under our FTE charge method, we recognized revenue of RMB1.9 million in 2018, representing 0.9% of our revenue in 2018.

Tabomedex Biosciences, Inc. Tabomedex Biosciences, Inc. is a biotechnology startup company developing new mechanism allosteric kinase inhibitor as paradigm changers for new diabetes (first-in-class) and heart failure medications. The company became our incubation portfolio company in January 2017. Under our incubation agreement, we may receive a total of 3.2%, 6.4%, 9.6%, 12.8% and 16% equity interest in

150 BUSINESS the company when the value of drug discovery services provided by us under SFE charge model (which reflects the service fees we would be entitled to as if the drug discovery services were provided under the FTE charge method) reaches US$400,000, US$800,000, US$1.2 million, US$1.6 million and US$2.0 million, respectively. In addition, if the pre-agreed milestone is achieved prior to the value of the services we provide reaches US$2.0 million, we will be entitled to 16% equity interest in the company regardless the value of services provided. In the event we produce novel molecules that become the clinical candidates in pursuit of the pre-agreed project milestone, we will be entitled to a 4% milestone bonus and receive an aggregate of 20% equity interest in the company. As of the Latest Practicable Date, we had received 9.6% equity interest in the Company. The company’s leading pipeline product is currently under early drug discovery stage.

Under our SFE charge method, we recognized revenue of RMB3.6 million and RMB3.7 million in 2017 and 2018, respectively, representing 2.4% and 1.8% of our revenue for such periods, respectively.

Arthrosi Therapeutics, Inc. Arthrosi Therapeutics, Inc. is a biotechnology startup company developing new best-in-class drugs to treat gout. The company became our incubation portfolio company in January 2018. Pursuant to our investment agreement, we have acquired a total of 4.77% equity interest in the company for an investment amount of approximately US$250,000. In October 2018, we invested an additional US$6.0 million in the company to participate in the company’s Series B round financing. As of the Latest Practicable Date, we held 14.54% equity interest in the company. The company’s leading pipeline product is currently under clinical stage I.

We provide drug discovery services to the company pursuant to our FFS and FTE service agreements. Under our FFS and FTE charge methods, we recognized revenue of RMB1.4 million in 2018, representing 0.7% of our revenue for such period.

Epican Technology Limited Epican Technology Limited is a biotechnology startup company developing tumor epigenetic diagnostic technology. We first added this project to our incubation portfolio in August 2015. Pursuant to our incubation agreement, we invested RMB8.0 million in the company and provided drug discovery and incubation services to the company for a term of up to two years. In consideration for our incubation and drug discovery services, we acquired a total of 10.5% equity interest in the company pursuant to the incubation agreement. In addition, under the incubation agreement, we had the right to appoint one directors in the company. On December 31, 2017, in connection with the company’s private equity financing, we agreed to relinquished our right to appoint a director under the Articles of Association of the company, and were no longer able to exercise significant influence over the company. The company’s leading pipeline product is currently under clinical study stage for kit registration.

We provided drug discovery services to the company pursuant to our FTE service agreement. Under our FTE charge method, we recognized revenue of RMB4.7 million and RMB0.1 million in 2016 and 2017, respectively, representing 4.9% and 0.04% of our revenue for such periods, respectively.

Pursuant to an equity transfer agreement dated March 26, 2018 between we, as transferor, and CFS Healthcare Investment Fund Limited (“CFS Healthcare”), as transferee, we agreed to sell, and

151 BUSINESS

CFS Healthcare agreed to purchase, 4.25% equity interest in Epican Technology Limited for a total consideration of US$2.5 million (representing a total valuation of Epican Technology Limited at US$58.8 million). CFS Healthcare is an investment fund managed by Mr. Fengmao Hua, our executive Director, Chief Financial Officer and a connected person of the Company. The consideration for such share transfer was determined based on the fair market value of Epican Technology Limited with reference to its recent financing, as well as the arm’s length’s negotiations between the parties. The transaction was closed in June 2018. After the share transfer, we currently hold 6.25% equity interest in the company.

Weimou Biotech (Shanghai) Co., Ltd. Weimou Biotech (Shanghai) Co., Ltd. is a biotechnology startup company focused on developing topical drugs for unmet medical needs for the treatment of dry eye syndrome and chronic eczema skin disease in children. The company became our incubation portfolio company in June 2016. Pursuant to our joint venture agreement, we have acquired a total of 15.67% equity interest in the company for an investment amount of RMB4.0 million. As of the Latest Practicable Date, we held 11.75% equity interest in the Company as a result of the company’s recent financing. As part of the incubation services provided by the Company, Weimou Biotech uses the address of the Company for its company registration purposes. In addition, under the joint venture agreement, we had the right to appoint two directors in the company. On January 8, 2018, in connection with the company’s private equity financing, we agreed to relinquished our right to appoint any director under the Articles of Association of the company, and are no longer able to exercise joint control over the company. The company’s leading pipeline product is currently under early drug discovery stage.

We provide drug discovery services to the company pursuant to both FFS and FTE service agreements. Under our FFS charge method, we recognized revenue of RMB1.8 million and RMB3.0 million in 2016 and 2017, respectively, representing 1.9% and 2.0% of our revenue for such periods, respectively. Under our FTE charge model, we recognized revenue of RMB4.3 million, RMB6.2 million and RMB3.1 million in 2016, 2017 and 2018, respectively, representing 4.4%, 4.2% and 1.5% of our revenue for such periods, respectively.

In determining the fee rates under both charge methods, we take into consideration all relevant costs and expenses relating to our operations with proper profit margin. The fee rates were determined on an arm’s length basis and are consistent with the fee rates for our Independent Third Party customers. During the Track Record Period, all service fees incurred by the company were borne and paid by it.

Jiaxing Tekeluo Biotech Co., Ltd. Jiaxing Tekeluo Biotech Co., Ltd. is a biotechnology startup company developing first-in-class drugs targeting a nuclear receptor for hair growth and skin diseases. The company became our incubation portfolio company in October 2016. Pursuant to our incubation agreement, we invested approximately RMB540,000 in the company and provided drug discovery and incubation services to the company. In consideration for our incubation and drug discovery services, we acquired a total of 12.5% equity interest in the company. As of the Latest Practicable Date, we hold a total of 8.84% equity interests in the company. The company’s leading pipeline product is currently under early drug discovery stage.

152 BUSINESS

We provided drug discovery services to the company pursuant to our FFS and FTE service agreements. Under our FFS charge method, we recognized revenue of RMB0.3 million, RMB0.2 million and RMB0.1 million in 2016, 2017 and 2018, respectively, representing 0.3%, 0.1% and 0.05% of our revenue for such periods, respectively. Under our FTE charge method, we recognized revenue of RMB1.1 million in 2018, representing 0.5% of our revenue for such period.

QureBio Limited QureBio Limited is a biotechnology startup company developing antibody drugs for autoimmune, cancer and metabolic diseases. We added this project to our incubation portfolio in January 2017, and the project company was established in July 2017. Pursuant to our incubation agreement, we invested RMB7.0 million in the company and provided drug discovery and incubation services to the company. In consideration for our incubation and drug discovery services, we acquired a total of 28% equity interest in the company as of the Latest Practicable Date. The company’s leading pipeline product is currently under early drug discovery stage.

We provided drug discovery services to the company pursuant to our FTE service agreement. Under our FTE charge method, we recognized revenue of RMB0.7 million and RMB3.5 million in 2017 and 2018, respectively, representing 0.5% and 1.7% of our revenue for such periods, respectively.

Pursuant to an equity transfer agreement and a supplemental transfer agreement dated August 2018 and September 2018, respectively between we, as transferor, and a person designated by Xiangdong Qu, as transferee, we agreed to sell, and the designated person agreed to purchase, 14% of the company’s outstanding shares for a total consideration of RMB7.0 million. Xiangdong Qu is the controlling shareholder of the company, and the consideration for such share transfer was determined based on an arm’s length negotiation between the parties. Upon completion of the share transfer and a new round of financing closed by the company, we held 10.99% equity interest in the company as of the Latest Practicable Date.

Jiaxing Youbo Biotech Co., Ltd. Jiaxing Youbo Biotech Co., Ltd. is a biotechnology startup company developing the targeted enzymatic hydrolysis (TED) technology based innovative drugs to treat cancers, inflammation and autoimmune suppressant. The company became our incubation portfolio company in April 2018. Pursuant to our incubation agreement, we agreed to invest RMB7.0 million in the company and provide drug discovery and incubation services to the company for a term of up to two years. In consideration for our incubation and drug discovery services, we acquired a total of 30% equity interest in the company as of the Latest Practicable Date. The company’s leading pipeline product is currently under early drug discovery stage.

We provided drug discovery services to the company pursuant to our FTE service agreement. Under our FTE charge method, we recognized revenue of RMB2.2 million in 2018, representing 1.0% of our revenue for such period.

Sichuan Haoyisheng Viva Biotech Co., Ltd.

Sichuan Haoyisheng Viva Biotech Co., Ltd. is a biotechnology startup company aims to identify the effective ingredients from a traditional Chinese medicine and develop an innovative new

153 BUSINESS drug for wound repair. The company became our incubation portfolio company in December 2015. Pursuant to our joint venture agreement, we agreed to invest RMB4.9 million in the company and provide drug discovery and incubation services to the company. In consideration for our incubation and drug discovery services, we acquired a total of 49% equity interest in the company. We disposed our entire equity interest in the company in October 2018 and recorded insignificant loss from such disposal. The company’s leading pipeline product is currently under early drug discovery stage.

We provided drug discovery services to the company pursuant to our FTE and FFS service agreement. Under our FTE charge method, we recognized revenue of RMB0.6 million and RMB1.1 million in 2017 and 2018, representing 0.6% and 0.5% of our revenue for the same periods. Under our FFS charge method, we recognized revenue of RMB1.1 million and RMB0.1 million in 2017 and 2018, representing 0.7% and 0.1% of our total revenue in the same year.

Calira Therapeutics, LLC Calira Therapeutics, LLC aims to develop drug candidate that targets the same signal pathway as Tabomedex Biosciences, Inc. but uses a different kinase for diabetes and heart failure medications. We added this project to our incubation portfolio company in December 2015. Under our incubation agreement, we may receive a total of 10%, 25% and 40% economic interest in the company under SFE charge method when the pre-agreed R&D milestones are achieved. In the event that the company or all or substantially all of its assets were acquired by any third party, we will be entitled to 40% of the consideration of such acquisition. The company’s leading pipeline product is currently under early drug discovery stage. As of the Latest Practicable Date, we had not received any equity interest in the company under the SFE charge method and had not yet recognized any revenue as we have not yet achieved any R&D milestones.

Twin Lanterns Bio, LLC Twin Lanterns Bio, LLC is a biotechnology startup company developing small molecule inhibitors of nuclear polymerase for flu treatment. The company became our incubation portfolio company in December 2014. Under our incubation agreement, we may receive a total of 6%, 25% and 40% equity interest in the company under SFE charge model when the pre-agreed R&D milestones are achieved among which we may use 2%, 10%, 20%, respectively, to incentivize the project management team. The company’s leading pipeline product is currently under early drug discovery stage. As of the Latest Practicable Date, we had not received any equity interest in the company under the SFE charge method and had not yet recognized any revenue as we have not yet achieved any R&D milestones.

Weiqing Biotech (Shanghai) Ltd. Weiqing Biotech (Shanghai) Ltd. is a biotechnology startup company developing new drugs for treating flu. We added this project to become one of our incubation portfolio in August 2016 and the project company was set up in August 2018. Pursuant to our incubation agreement, we agreed to invest RMB7.0 million in the company and provide drug discovery and incubation services to the company for a term of up to two years. In consideration for our incubation and drug discovery services, we acquired a total of 30% equity interest in the company as of the Latest Practicable Date. The company’s leading pipeline product is currently under early drug discovery stage.

154 BUSINESS

We provided drug discovery services to the company pursuant to our FTE service agreement. Under our FTE charge method, we recognized revenue of RMB12.1 million in 2018, representing 5.8% of our total revenue in the same year.

Clues Therapeutics Inc. Clues Therapeutics Inc. is a biotechnology startup company developing new drugs focusing on 10 drug targets including RIP, MOR1 and MOR2. We added this project to our incubation portfolio in April 2018, and the project company was established in July 2018. Pursuant to our incubation agreement and a supplemental agreement entered into among relevant parties, we invested approximately US$0.3 million in the company, provide drug discovery and incubation services to the company and facilitate the company’s Series A financing. As of the Latest Practicable Date, we held 30.00% equity interest in the company. The company’s leading pipeline product is currently under early drug discovery stage.

We provided drug discovery services to the company pursuant to our FTE service agreement. Under our FTE charge method, we recognized revenue of RMB8.2 million in 2018, representing 3.9% of our revenue for such period.

Project Z1 Project Z1 aims to develop first-in-class bispecific antibody for treatment of gastric and liver cancers. We added this project to become one of our incubation portfolio in September 2015 and is currently in the process of setting up the project company. Pursuant to our incubation agreement, we agreed to invest RMB7.0 million in the company and provide drug discovery and incubation services to the company. In consideration for our incubation and drug discovery services, we will be entitled to receive a total of 30.00% equity interest once the project company is set up. Prior to the establishment of the project company, we will be entitled to receive a total of 30.00% economic interest in the project’s future earnings under incubation agreement. As of the Latest Practicable Date, we are in the process of negotiating and setting up the project company.

The company’s leading pipeline product is currently under early drug discovery stage. We provided drug discovery services to the company pursuant to our FTE service agreement. Under our FTE charge method, we did not recognize any revenue during the Track Record Period.

Project Z2

Project Z2 aims to develop a new generation Interleukin based biotherapeutic with prolonged half life. We added this project to become one of our incubation portfolio in April 2018 and is currently in the process of setting up the project company. Pursuant to our incubation agreement, we agreed to invest RMB7.0 million in the company and provide drug discovery and incubation services to the company for a term of up to two years. In consideration for our incubation and drug discovery services, we will be entitled to receive a total of 30.00% equity interest once the project company is set up. Prior to the establishment of the project company, we will be entitled to receive a total of 30.00% economic interest in the project’s future earnings under incubation agreement. As of the Latest Practicable Date, we are in the process of negotiating and setting up the project company.

The company’s leading pipeline product is currently under early drug discovery stage. We provided drug discovery services to the company pursuant to our FTE service agreement.

155 BUSINESS

Riparian Pharmaceuticals, Inc. Riparian Pharmaceuticals, Inc. is a biotechnology company that aims to develop small molecule pathway activators for the treatment of pulmonary arterial hypertension and other vascular dysfunctions as well as organ preservation for transplant. We added this project to our incubation portfolio company in September 2018. Under our incubation agreement, we may receive up to a total of 24.94% under the SFE charge method when the pre-agreed R&D milestones are achieved. In addition, we may receive additional equity interest in the company of up to 5.22% as a bonus provided that the company closes and receives investments from investors referred by us. The company’s leading pipeline product is currently under early drug discovery stage. As of the Latest Practicable Date, we had not received any equity interest in the company. Under our SFE charge method, we recognized revenue of RMB0.5 million in 2018, representing 0.2% of our total revenue in the same year.

Trio Bio, LLC Trio Bio, LLC is a biotechnology company that aims to develop small molecule activators for treatment of cardiovascular diseases. The company became our incubation portfolio company in October 2018. Under our incubation agreement, we may receive a total of 20%, 50% and 64% equity interest in the company when the value of drug discovery services provided by us under SFE charge method reaches US$500,000, US$2.0 million and US$3.5 million, respectively. In the event we produce novel molecules that become validated hits, achieve proof of concept criteria in animals and become the clinical candidates in pursuit of each of the pre-agreed project milestones, we will be entitled to an additional 2%, 4% and 4% milestone bonus, respectively, and receive an aggregate of up to 74% equity interest in the company. If the pre-agreed milestone is achieved prior to the value of the services we provide reaches US$3.5 million, we will still be entitled to 74% equity interest in the company regardless of the value of services provided. As of the Latest Practicable Date, we have not received any equity interest in the company. Under our SFE charge method, we recognized revenue of RMB40,000 in 2018, representing 0.02% of our total revenue in the same year.

Livati Therapeutics, LLC Livati Therapeutics, LLC is a biotechnology company focusing on the development of small molecule inhibitors interaction for the treatment of diabetes and metabolic diseases. We added the company to our incubation portfolio in October 2018. Under our incubation agreement, we may receive a total of 20.00% equity interest when the value of drug service discovery services provided by us under SFE charge method reaches US$500,000. If the pre-agreed milestone is achieved prior to the value of the services we provide reaches US$500,000, we will still be entitled to 20.00% equity interest in the company regardless of the value of services provided. In addition, in the event that we produce inhibitors that become the validated hits, we will be entitled to an additional 2.00% equity interest in the company. As of the Latest Practicable Date, we have not received any equity interest in the company. Under our SFE charge method, we recognized revenue of RMB13,000 in 2018, representing 0.01% of our total revenue in the same year.

ABM Therapeutics, Inc. ABM Therapeutics, Inc. is a biotechnology company focusing on development of an innovative research platform to revolutionize targeted-therapy for the treatment of brain cancers and various related cancers. The company became our incubation portfolio company in January 2019. We invested

156 BUSINESS

US$1.5 million to acquire a total of 4.87% equity interest in the company. As of the Latest Practicable Date, we had not started to provide any drug discovery service to the company.

Forkhead Bio Therapeutics, Inc. Forkhead Bio Therapeutics, Inc. is a biotechnology company focusing on treatment of insulin- dependent diabetes by restoring normal insulin production and normalizing glucose metabolism. The company became our incubation portfolio company in January 2019. We invested US$500,000 in the company in the form of convertible bond. The equity interest we may acquire in the company will be determined pursuant to the terms of the convertible bond. Under the investment agreement, we also agreed to invest in additional convertible bond issued by the company with a face value of US$500,000 by providing drug discovery services worth US$500,000 to the company. As of the Latest Practicable Date, we had not started to provide any drug discovery service to the company.

Anji Pharmaceuticals Inc. Anji Pharmaceuticals Inc. is a clinical stage biopharmaceutical company focusing on development and commercialization of innovative therapies for unmet medical needs in metabolic disease area. The company became our incubation portfolio company in April 2018. We invested US$0.84 million and acquired a total of 22.36% equity interest in the company under the investment agreement. In March 2019, we further invested US$1.0 million in the company in the form of convertible note, pursuant to which we are entitled to convert the note into equity interest in the company based on the valuation of the company’s next round of financing. We currently provide drug discovery service to the company but had not yet recognized any revenue as of the Latest Practicable Date.

QurAlis Corporation QurAlis Corporation is a preclinical stage biopharmaceutical company focusing on combining genetic and clinical discoveries with stem cell technologies to develop precision therapies for ALS and FTD patients. The company became our incubation portfolio company in October 2018. We invested US$0.5 million in the company in the form of convertible promissory note. The equity interest we may acquire in the company will be determined pursuant to the terms of the convertible promissory note. We recognized revenue of RMB0.1 million from the company in 2018 under our FTE charge method, representing 0.04% of our revenue in the same year.

Bonti, Inc. Bonti, Inc. is a clinical-stage biotechnology company focused on the development and commercialization of novel, fast-acting neurotoxin products for therapeutic and esthetic applications. The company became our portfolio company in December 2016. We invested US$2.0 million and acquired a total 3.45% equity interest in the company under the investment agreement to date. As of the Latest Practicable Date, we did not provide any drug discovery service to the company. In September 2018, Allergan plc, a leading global pharmaceutical company, issued a public announcement regarding its planned acquisition of the company for an upfront payment of US$195.0 million and additional potential commercial milestone payments, subject to certain adjustments and other customary closing conditions, which transaction was closed in November 2018. We received approximately US$6.3 million and realized gains with return rate of 315% from disposal of all of our equity interest in Bonti, Inc. Following the closing, contingent payments totaling US$90 million in the

157 BUSINESS aggregate may also be payable by Allergan plc upon the achievement of certain milestones, which include the first U.S. sale of a milestone product that is labeled for the treatment of an aesthetic or therapeutic indication to a third party end user or third party distributor and the achievement of pre- agreed aggregate net sales amount of milestone products.

Liangzhun (Shanghai) Industrial Limited Liangzhun (Shanghai) Industrial Limited is a biotechnology startup company engaged in research, development and application of Nano-SPR technology in healthcare sector. The company became our incubation portfolio company in April 2017. We invested RMB4.0 million and acquired a total of 3.57% equity interest in the company under the investment agreement. We currently hold 4.03% equity interest in the company after taking into account the additional shares we subscribed in the company and the dilution resulted from the subsequent financing of the company. As of the Latest Practicable Date, we did not provide any drug discovery service to the company.

VersaPeutics, Inc. VersaPeutics, Inc. is a preclinical stage biopharmaceutical company focusing on development of first-in-class therapeutic for acute and recent spinal cord injury (SCI). The company became our incubation portfolio company in October 2018. We invested US$3.0 million and acquired 9.05% equity interest in the company. Under the investment agreement, we also agreed to invest an additional US$3.0 million in the company upon pre-agreed milestone achievement. As of the Latest Practicable Date, we did not provide any drug discovery service to the company.

AmacaThera, Inc., AmacaThera, Inc., is a preclinical stage biopharmaceutical company focusing on development of a sustained anesthetic product for post-surgical analgesia based on a novel hyaluronan and methyl cellulose (HAMC) delivery platform. We added the company to our incubation portfolio in December 2018. We invested US$750,000 in the company in the form of convertible note. Pursuant to the investment agreement, we also agreed to invest an additional US$750,000 in the form of convertible note upon the pre-agreed milestone in the company. The equity interest in the company that we are entitled to will be calculated by dividing (i) the entire principal amount plus accrued but unpaid interest of the notes by (ii) the then effective conversion price pursuant to the terms of the notes.

Totient, Inc. Totient, Inc. is a preclinical stage biopharmaceutical company focusing on drug discovery in immuno-oncology, enabled by a better understanding of cancer as a diverse array related diseases. We added the company to our incubation portfolio in March 2019. We invested US$500,000 in the company in the form of convertible note. The equity interest in the company that we are entitled to will be calculated by dividing (i) the entire principal amount plus accrued but unpaid interest of the notes by (ii) the then effective conversion price pursuant to the terms of the notes. As of the Latest Practicable Date, we did not provide any drug discovery service to the company.

Mediar Therapeutics, Inc. Mediar Therapeutics, Inc is a biopharmaceutical company focusing on the role of myofibroblast in fibrotic disease and developing first-in-class medicines for patient with organic fibrosis. The

158 BUSINESS company became our incubation portfolio company in January 2019. We invested US$1.25 million and acquired 15.88% equity interest in the company. Under the investment agreement, we also agreed to invest an additional US$1.25 million in the company upon pre-agreed milestone achievement. As of the Latest Practicable Date, we did not provide any drug discovery service to the company.

Shanghai Yinglaiteng Medical Research Ltd. Shanghai Yinglaiteng Medical Research Ltd. is a biotechnology startup company developing healthy food supplement. The company became our incubation portfolio company in December 2015. Pursuant to our incubation agreement, we invested RMB0.6 million in the company and provided drug discovery and incubation services to the company for a term of up to three years. In consideration for our incubation and drug discovery services, we acquired a total of 20% equity interest in the company as of the Latest Practicable Date. The company encountered obstacles at the early stage of target validation, therefore we currently suspend the project waiting for innovative breakthrough on related researches. The company’s leading pipeline product is currently under early drug discovery stage.

We provided drug discovery services to the company pursuant to our FTE service agreement. Under our FTE charge method, we recognized revenue of RMB0.2 million in 2016, representing 0.3% of our revenue for such year.

ZingBio, LLC ZingBio, LLC. is a biotechnology startup company developing the small molecule inhibitor for diabetes treatment. The company became our incubation portfolio company in January 2016. The company encountered obstacles at the early stage of target validation, therefore we currently suspend the project waiting for innovative breakthrough on related researches. Under our incubation agreement, we may receive a total of 6%, 25% and 40% economic interest in the company under SFE charge model when the pre-agreed R&D milestones are achieved among which we may use 2%, 10%, 20%, respectively, to incentivize the project management team. The company’s leading pipeline product is currently under early drug discovery stage. As of the Latest Practicable Date, we had not received any equity interest in the company under the SFE charge method and had not yet recognized any revenue as we have not yet achieved any R&D milestones.

The following table sets forth a summary of our incubation portfolio companies as of the Latest Practicable Date:

Shareholding or Economic Time of Interest Company Name/ Investment/ Current % to be Received Place of Incubation Indications/Primary Stage of Stage of under Shareholding Shareholding Incorporation Type Agreement Technology/Business Entry Funding Agreement(9) % received % sold Dogma EFS 2017/01 Small molecule Seed Series A 14.40% 8.64% 1.63% Therapeutics, compound for lowering Inc. (USA) cholesterol (first-in-class)

Flash EFS 2016/08 Dual kinase inhibitor for Seed Series A 20.00% 16.00% — Therapeutics, treating acute myelocytic LLC (USA) leukemia (first-in-class)

Tabomedex EFS 2017/01 Diabetes (first-in-class) Seed Series A 20.00% 9.60% — Biosciences, Inc. (USA)

159 BUSINESS

Shareholding or Economic Time of Interest Company Name/ Investment/ Current % to be Received Place of Incubation Indications/Primary Stage of Stage of under Shareholding Shareholding Incorporation Type Agreement Technology/Business Entry Funding Agreement(9) % received % sold Arthrosi EFS 2018/01 Treatment of gout Seed Series B 14.54% 14.54% — Therapeutics, Inc. (USA)

Epican EFS 2015/08 Development of tumor Seed Series B 10.50% 10.50% 4.25% Technology epigenetic diagnostic Limited technology (Cayman Islands)

Weimou Biotech EFS 2016/06 Dry eye syndrome and Seed Series B 15.67% 15.67%(5) — (Shanghai) chronic eczema skin Co., Ltd. (PRC) disease in children

Jiaxing Tekeluo EFS 2016/10 First-in-class drugs Seed Series A 12.50% 12.50%(8) — Biotech targeting a nuclear Co., Ltd.(1) receptor for hair growth (PRC) and skin diseases

QureBio Limited(1) EFS 2017/01 antibody drugs for Seed Series A 28.00% 28.00%(10) 14.00% (PRC) autoimmune, cancer and metabolic diseases

Jiaxing Youbo EFS 2018/04 Targeted enzymatic Seed Seed 30.00% 30.00% — Biotech hydrolysis (TED) Co., Ltd.(1) technology based drugs (PRC) for treatment of cancer

Sichuan EFS 2015/12 Development of Seed Seed 49.00% 49.00% 49.00% Haoyisheng innovative new drug for Viva Biotech wound repair Co., Ltd.(1) (PRC)

Calira EFS 2015/12 Diabetes (first-in-class) Seed Seed 40.00%(4)* Nil — Therapeutics, LLC (USA)

Twin Lanterns EFS 2014/12 Small molecule Seed Seed 40.00% Nil — Bio, LLC inhibitors of nuclear (USA) polymerase for flu treatment

Weiqing Biotech EFS 2016/08 New drugs for treating Seed Seed 30.00% 30.00% — (Shanghai) Ltd. flu (PRC)

Clues EFS 2018/04 New drug development Seed Seed 30.00% 30.00% — Therapeutics focusing on 10 drug Inc. (Cayman targets including RIP, Islands) MOR1, MOR2

Project Z1(2) EFS 2015/09 Bispecific antibody for Seed Seed 30.00%(3) 30.00%(4) — treatment of gastric and liver cancers (first-in-class)

Project Z2(2) EFS 2018/04 Interleukin 15 (IL 15) Seed Seed 30.00%(3) 30.00%(4) — technology

Riparian EFS 2018/09 Small molecule pathway Series A Series A 30.16% Nil — Pharmaceuticals, activators for the Inc. (USA) treatment of pulmonary arterial hypertension and other vascular dysfunctions

160 BUSINESS

Shareholding or Economic Time of Interest Company Name/ Investment/ Current % to be Received Place of Incubation Indications/Primary Stage of Stage of under Shareholding Shareholding Incorporation Type Agreement Technology/Business Entry Funding Agreement(9) % received % sold Trio Bio, LLC EFS 2018/10 Small molecule Seed Seed 74.00% Nil — (USA) activators for treatment of cardiovascular diseases Livati EFS 2018/10 Small molecule Seed Seed 22.00% Nil — Therapeutics, inhibitors interaction for LLC (USA) treatment of diabetes and metabolic diseases ABM EFS 2019/01 research platform for the Seed Seed 4.87% 4.87% — Therapeutics, treatment of brain Inc. (Cayman cancers and various Islands) related cancers Forkhead Bio EFS 2019/01 Treatment of insulin- Seed Seed To be Nil — Therapeutics, dependent diabetes determined Inc. (USA) pursuant to the terms of the convertible promissory note Anji EFS 2018/04 Metabolic disease Seed Series 22.36% 22.36% — Pharmaceuticals Pre-A Inc. (Cayman Islands) QurAlis EFS 2018/10 Combining genetic and Seed Seed No less Nil — Corporation clinical discoveries with than 5% (USA) stem cell technologies to upon develop precision conversion therapies for ALS and FTD patients Bonti, Inc. (USA) Strategic 2016/12 Neurotoxin products for Series B Series C N/A N/A 3.45% investment therapeutic and aesthetic applications Liangzhun Strategic 2017/04 Research, development Seed Series A 4.19% 4.19%(11) — (Shanghai) investment and application of Industrial Nano-SPR technology Limited (PRC) VersaPeutics, Inc. Strategic 2018/10 Acute and recent spinal Series A Series A 9.05% 9.05% — (USA) investment cord injury (SCI) (first- in-class) AmacaThera, Inc. Strategic 2018/12 sustained anesthetic Seed Seed To be Nil — (USA) investment product for post-surgical determined analgesia pursuant to terms of the convertible notes Mediar Strategic 2019/01 First-in-class medicines Seed Seed 20.28% 15.88% — Therapeutics, investment for patient with organic Inc. (USA) fibrosis Totient, Inc. Strategic 2019/03 Immuno-oncology Seed Seed To be Nil — (USA) investment determined pursuant to terms of the convertible notes

161 BUSINESS

Shareholding or Economic Time of Interest Company Name/ Investment/ Current % to be Received Place of Incubation Indications/Primary Stage of Stage of under Shareholding Shareholding Incorporation Type Agreement Technology/Business Entry Funding Agreement(9) % received % sold Shanghai EFS 2015/12 Healthy food supplement Seed Seed 20.00% 20.00% — Yinglaiteng Medical Research Ltd.(1) (PRC) ZingBio, LLC EFS 2016/01 Diabetes Seed Seed 40.00%* Nil — (USA)

Notes: (1) The English names are for indication purpose only. (2) The Company is in the process of negotiating and setting up project companies with respective business partners. (3) According to the incubation agreement, we will not receive equity interest in the company and will be entitled economic interest of agreed types of its future earnings. (4) Prior to the establishment of the project company, we will be entitled to a total of 30% economic interest in the project’s future earnings. (5) As of the Latest Practicable Date, we held 11.75% equity interest in Weimou Biotech (Shanghai) Co., Ltd. as a result of the dilution in connection with the company’s subsequent financing. (6) The respective products developed by these investment portfolio companies may not be successful and we may not be able to realize our anticipated returns on the equity interest we hold in these investment portfolio companies. (7) Please refer to Note 17 to the accountants’ report set out in Appendix I to this prospectus for details of the fair values of relevant equity interests in the incubation portfolio companies held by us as of each balance sheet date. (8) As of the Latest Practicable Date, we held 8.84% equity interest in Jiaxing Tekeluo Biotech Co., Ltd. as a result of the dilution in connection with the company’s subsequent financing and its adoption of employee stock option plan. (9) Shareholding percentages to be received under relevant agreements are subject to potential dilution resulting from subsequent financing, granting and exercise of options under employee incentive schemes and other events. (10) As of the Latest Practicable Date, we held 10.99% equity interest in QureBio Limited as a result of the dilution in connection with the company’s subsequent financing. (11) As of the Latest Practicable Date, we held 4.03% equity interest in Liangzhun (Shanghai) Industrial Limited as a result of the dilution in connection with the company’s subsequent financing. * Indicates economic interests instead of equity interests.

As of the Latest Practicable Date, 11 of our incubation portfolio companies had closed private financing. As of the Latest Practicable Date, we had realized gains from disposal of a portion of our equity interest in Dogma Therapeutics, Inc., Epican Technology Limited and QureBio Limited with return rates of 212%, 494% and 200%, respectively. We also realized gains from disposal of all of our equity interest in Bonti, Inc. with return rate of 315%. Our return rate in connection with the exits of our incubation portfolio companies is calculated by dividing (i) the consideration for transferring respective equity interest held by us with (ii) our original investment costs. We expect to have more exits of our incubation portfolio companies in 2019 as market condition permits. Leveraging on our world-leading and proprietary technologies and our deep participation in our incubation portfolio’s research and development process, we believe we are able to minimize our risks and enjoy a high success rate in our incubation program. In order to keep our shareholders informed of the development of our incubation portfolio companies, to the extent permitted by applicable laws, rules and regulations and in compliance with our confidentiality obligations under our service agreements, we plan to (i) provide status updates of our incubation portfolio companies through public announcement on a quarterly basis and in our annual and interim reports, (ii) promptly disclose any material information that becomes available to us and (iii) disclose the valuation of equity interests held by us in these incubation portfolio companies in the notes to our audited financial statements. In addition, we will adopt an insider trading policy and forbid the trading by our insiders who possesses material non- public information in compliance with applicable laws, rules and regulations.

162 BUSINESS

OUR CHARGE METHODS We provide drug discovery services to our customers in exchange for cash under CFS model or for equity under EFS model. We charge our customers and recognize our revenue using the following methods, as applicable: Š Full-time-equivalent (FTE): Under the FTE method, we designate employees to the customers’ drug discovery projects at a fixed rate per FTE employee per period of time, and determine the amount of service fees based on the number of scientists and the amount of time required for completing the project, among others. Our FTE contracts generally have a term of one to two years and may be subject to annual review. We use the FTE method under both the CFS and EFS models. We generated revenue primarily from service fees charged under the FTE method during the Track Record Period. Š Fee-for-service (FFS): Under the FFS method, we generally receive payments in accordance with a pre-agreed payment schedule and milestones specified in the contract or work order. Our FFS contracts generally have a term of two to four months depending on the complexity of the projects. We use the FFS method under both the CFS and EFS models. Š Service-for-equity (SFE): Under the SFE method, we receive equity interests in our SFE customers in accordance with a pre-agreed development schedule set forth in the contract or work order. In this way, we can effectively foster the development of selected customers and enjoy the upside of their IP value. In addition to the pre-agreed payment schedule and milestones, our SFE contracts typically allow us to obtain additional bonus equity interests in relevant customers in the event that we produce novel molecules that will become the clinical candidates in pursuit of the project milestones. We recognize revenue based on the fair value of an EFS customer’s equity interest that we are entitled to receive upon satisfying related performance obligations. We use the SFE method under the EFS model.

In addition, under our FFS and SFE charge models, we may enter into milestone bonus arrangements with our customers on an ad hoc basis to provide incentives to us to achieve scientific breakthrough. As of the Latest Practicable Date, we have entered into milestone bonus arrangements with six customers, among which one is our FFS customer and five are our incubation portfolio companies. The key terms of our respective milestone bonus arrangements are as follows: Customer A: If, within five years from the date of the restated work order effective date, a development candidate is declared by Customer A, then we will be paid a milestone bonus that equals to 50% of the pre-agreed Phase I/Phase II program budgets with an aggregate amount of approximately RMB14.0 million, provided the development candidate is derived from a compound we developed for Customer A. The milestone bonus is due only once even if more than one development candidate is declared by Customer A, and, even if a compound satisfies criteria set forth by Customer A for a development candidate, Customer A has no obligation to declare it a development candidate. Incubation portfolio companies: In addition to the equity interest (up to 64.0%) in the customers that we may be entitled to receive in accordance with the drug discovery services we provide, in the event that we produce novel molecules that become the clinical candidates in pursuit of the pre-agreed project milestones, we shall be issued up to 10.0% additional equity interest in such customers to the effect that, following such issuance, we shall own an aggregate of up to 74.0% of the then-issued equity interest in the customers on a fully-diluted basis.

163 BUSINESS

In determining the fair value of equity interests received by us under our SFE charge method, as well as the equity interests in our incubation portfolio companies held by us as of each balance sheet date, we engaged Valuelink, an independent third party valuer, to perform valuation analyses on the equity interests we hold. Valuelink performed the valuation analysis for the incubation portfolio companies based on International Private Equity and Venture Capital Valuation Guidelines, Edition December 2015, issued by IPEV Board, and the valuation methodologies adopted by Valuelink primarily included the “price of recent investment”, “market multiple” and “cost of investment” methods.

ValueLink Group, a financial service provider in China that provides valuation and other financial advisory services for clients across a wide range of industries. Valuelink’s clients include public companies listed on the major stock exchanges in China, Hong Kong and the United States and private companies that intend to go public. Professionals at Valuelink possess a variety of professional qualifications including Chartered Financial Analyst (CFA), Certified Public Accountant of the American Institute of Certified Public Accountants (AICPA), the Chinese Institute of Certified Public Accountants (CICPA), the Association of Chartered Certified Accountants (ACCA), Valuer Accredited in Business Valuation (ABV), Certified Public Valuer (CPV) and Financial Risk Manager (FRM). In the first seven months of 2018, ValueLink has provided valuation services to a number of companies listed in the Hong Kong Stock Exchange. Valuelink’s core team members assigned to conduct and supervise valuation services for our Company has over ten years of experience and has served many clients in pharmaceutical industry.

As the in charge personnel to conduct the valuation analyses on the Group’s incubation portfolio companies, Mr. Chuan Sun is the managing partner of Shanghai Branch of Valuelink with over ten years of relevant experience in finance and valuation industry. Before he joined Valuelink, he worked as a senior manager in the valuation department of Big Four accounting firms where he provided services to large stated-owned enterprises, transnational companies and listed companies. Throughout the year, Mr. Chuan Sun participated in and led a series of valuation projects for listed or IPO candidates in stock exchanges in the U.S. and Hong Kong. In addition, Mr. Chuan Sun is also experienced in valuation in biotech and pharmaceutical industry and has provided valuation services for clients, including a research and manufacturing service provider headquartered in Shanghai which primarily focuses on the discovery, development and manufacturing of small molecule drugs, a PRC- established fund specialized in investing in healthcare industry and certain other biotech and pharmaceutical companies. Mr. Chuan Sun obtained a master’s degree (MSc) in finance and a master’s degree in business administration from EDHEC Business School, and a bachelor’s degree in economies of Zhongnan University of Economics and Law. Mr. Chuan Sun is also a CFA Charterholder of CFA Institute.

164 BUSINESS

During the Track Record Period, revenue generated from our CFS and EFS models reflected revenue generated from services to our non-investee and investee customers, respectively. The following table sets forth a breakdown of our revenue by respective charge methods under our CFS/ EFS models during the Track Record Period:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from services to non-investees (CFS model): —FTE...... 55,168 65,334 117,358 —FFS...... 26,289 56,119 37,317 81,457 121,453 154,675 Revenue from services to investees (EFS model): —FTE...... 9,809 6,979 33,593 —FFS...... 3,221 3,192 1,365 —SFE...... 2,005 16,621 20,400 15,035 26,792 55,358 96,492 148,245 210,033

During the Track Record Period, our benchmark charge rate for biologics drug discovery services was approximately US$85,000 per FTE per year, as compared to approximately US$75,000 per FTE per year for chemical drug discovery services. The total working hours of our biologics drug discovery technicians were 152,636 hours, 190,828 hours and 331,872 hours in 2016, 2017 and 2018, respectively, while the total working hours of our chemical drug discovery technicians were 52,048 hours, 81,196 hours and 253,972 hours, respectively, during the same periods.

OUR FACILITIES We currently conduct our operations primarily at our headquarters in Shanghai Zhangjiang High-Tech Park and our facility in Jiaxing, Zhejiang province.

Shanghai Sites Our Shanghai sites mainly consist of three leased properties. The primary building is approximately 4,180 sq.m., which houses our headquarters, drug discovery and pre-clinical development facilities. Our two other sites in Shanghai are approximately 1,180 sq.m. and 2,800 sq.m., respectively, which are mainly used for our laboratories to develop cell lines, purify protein, and analyze and test compounds and biologics, and for our international incubator center. We entered into long term lease agreements for our Shanghai sites with respective landlords, which have terms ranging from four years to six years.

Jiaxing Site Our Jiaxing site houses our incubation center, as well as our biological laboratory, cell culture laboratory and medicinal chemistry laboratory. Our Jiaxing site primarily focuses on developing cell lines, purifying protein, and analyzing and testing compounds and biologics. We acquired our Jiaxing site in April 2015 for a total consideration of approximately RMB6.6 million.

165 BUSINESS

Sichuan Sites The primary building in our Sichuan sites has a total GFA of 1,780.71 sq.m. and is expected to house our chemical laboratory. It is currently subject to a two-year lease term.

For further details of our facilities, see “— Properties.”

FUTURE EXPANSION As part of our strategy to become an integrated services provider, in addition to our continued expansion of our pre-clinical drug discovery team, we plan to build up our commercial and research manufacturing capabilities and capacities both in biologics CMO and chemistry CMO areas in the future. As a result, we expect to further enlarge our scientist and R&D professional team in the coming years, which is expected to reach up to 850 technicians by the end of 2019, respectively, among which 10%, 40% and 50% are with a Ph.D., master’s and bachelor’s degree, respectively. With the additional technicians joining us, we also expect to further expand our office space, laboratories and relevant facilities and equipment in accordance with our expansion plans. We plan to (i) lease additional office space in Zhangjiang High-Tech Park, Shanghai; (ii) acquire additional facility space of 3,000 sq.m. in Jiaxing, Zhejiang province; and (iii) acquire a land parcel of approximately 30 mu in Shanghai or Jiaxing, Zhejiang province for our planned expansion.

In addition, we plan to acquire a land parcel of 50 mu in Chengdu, Sichuan province to build new commercial drug substance cGMP manufacturing facilities and to set up additional laboratory facilities. In early 2018, we started preliminary discussions with a local government authority in Chengdu regarding potentially acquiring a land parcel for the purpose of constructing new biologics manufacturing facilities when the need arises, as well as establishing additional incubators for our incubation of innovative drug R&D projects. We entered into an investment agreement with the local government of Chengdu on July 12, 2018 in connection with our proposed acquisition of relevant land parcel. Under the investment agreement, we may conduct a total investment of up to US$100 million, which is pending on the completion of all necessary procedures set forth in the agreement. However, there is no guarantee we will be able to successfully acquire this land parcel. See “Risk Factors — Risks Relating to Our Business and Industry — Our business may be materially and adversely affected if we fail to acquire a new parcel of land.”

It is common for a company engaging early drug discovery extending its capability to production CMO. There are strong connections between drug discovery platforms and CMO. All the material production for pre-clinic studies and clinic studies (CMO) are developed based on its synthetic route in the early drug discovery and it is nature to extend the technical knowhow. According to the Frost & Sullivan Report, with the industry development and increasing demand of customers, vertical integration, expanding their services to manufacturing sector, becomes a strategic business option for some CROs. In China, Wuxi AppTech and Pharmaron have expanded their business from CRO to CMO in their developments.

Our drug discovery platform and ASMS screening platforms serve as an early drug discovery gateway. Structure-based drug discovery platform utilizes a broad range of our expertise of protein science, structure biology, in vitro assay, medicinal chemistry, etc., which are essential for CRO services. After the completion of the discovery study, a project moves into a later stage of pre-clinical development, which is IND enabling study. CMO is focused on process development and large scale production of drug candidates for safety and toxicity evaluation in IND-enabling studies and material

166 BUSINESS provision for clinical trial after completion of IND filing. Our discovery platform produces a steady pipeline of projects for the CMO business. Moreover, the ASMS screening platform, a highly efficient technology for hit identification, provides a pivotal entry point for every small molecule drug discovery programs; which laid a good foundation for chemical CMO technology.

We plan to develop our chemical CMO operations through acquisition and our biologics CMO operations via organic growth. We currently plan to identify chemical CMO candidates that are approximately US$30-50 million in size, and to commence its chemical CMO operations by the end of 2019. The Company currently estimated that building a biologics CMO may take around one and half years with up to approximately US$55 million. The Company anticipates that once the Company commences its biologics CMO operations, it may take up to five projects which are lined up based on the schedule of our portfolio companies’ respective biologics discovery progresses. We believe our strong position and expertise in protein expression and purification position us well to entry vertically into the CMO business and provide an integrated services for our customers.

Aside from organic growth, we will also actively seek opportunities to acquire or invest in technologies, facilities or companies with capabilities that complement and strengthen our existing operations in China. We believe our strong business execution capabilities will help us integrate the acquired business to create synergy with our existing business.

RESEARCH AND DEVELOPMENT We believe research and development is critical to our future growth and our ability to remain competitive in the global drug discovery outsourcing services market. Leveraging on our proprietary technology platforms, our research and development activities are mainly focused on target-based innovative drugs, in particular first-in-class drugs. Our core technologies include our drug target expression, purification and structure determination platform, ASMS screening platform, membrane protein targeted drug discovery technology and FBDD platform. Utilizing our proprietary technology platforms and based on our research results, several of our customers made significant breakthroughs in their respective research/therapeutic areas and published articles on prestigious journals such as Science, Nature Communication, Journal of Medicinal Chemistry, Journal of Organic Chemistry and Chemistry & Biology. As a result of our continued dedication to research and development, the People’s Government of Pudong New Area, Shanghai granted the 2018 Innovative Startup Award to us in April 2019, which is the only biotech company that received this award in 2019.

We designate employees in our business units to our research and development projects based on their credentials, areas of expertise and capacity. Our chief scientific officer, Zhixiong Ye, has extensive industry experience in drug discovery research and development and oversees our research and development activities. Going forward, we plan to continue to invest in developing new technologies in connection with drug discovery to further enhance our capabilities and provide better technologies to our customers.

For the years ended December 31, 2016, 2017 and 2018, our research and development expenditure was RMB16.8 million, RMB17.3 million and RMB25.3 million, respectively, representing 17.4%, 11.6% and 12.0%, respectively, of our total revenue for the same periods. We expect to experience an increase in our research and development expenses generally in line with the growth of our revenue going forward.

167 BUSINESS

EMPLOYEES As of the Latest Practicable Date, we had a total of 510 employees, of whom 424 were located in Shanghai, 62 were located in Jiaxing, Zhejiang Province, 23 were located in Chengdu, Sichuan Province and one was located overseas. As of the Latest Practicable Date, we had 34 employees who have obtained a Ph.D. degree, representing 8.0% of our research and development team; 179 employees who have obtained a master’s degree, representing 41.9% of our research and development team; and 190 employees who have obtained a bachelor’s degree, representing 44.5% of our research and development team.

The table below sets forth a breakdown of our employees by function as of the Latest Practicable Date.

Function Number of Employees Research and Development ...... 427 Sales and Marketing ...... 1 Customer Service ...... 6 Administration ...... 76 Total ...... 510

We believe that our ability to attract, recruit and retain quality employees is crucial to our long- term success. We provide our employees with opportunities to work on cutting-edge drug discovery projects with top scientists. We also aim to establish a collaborative work environment that encourages them to develop their career with us. In addition, we have an effective training system, including orientation and continuous on-the-job training, to accelerate the learning progress and improve the knowledge and skill levels of our workforce.

We enter into individual employment contracts with our employees to cover matters such as wages, benefits and grounds for termination. In general, we determine the remuneration package based on the qualifications, position and performance of our employees at market rate, and we regularly review and adjust our remuneration package in accordance with the market conditions. We also make contributions to social insurance fund, including basic pension insurance, medical insurance, unemployment insurance, childbirth insurance, work-related injury insurance funds, and housing reserve fund. In addition, we have adopted an employee share option plan to provide an additional means to attract, motivate, retain and reward our employees. See “Statutory and General Information — D. Share Incentive Schemes — 1. Pre-IPO Share Incentive Schemes” in Appendix IV to this prospectus for more details of our employee share option plan.

In support of our growth, we regularly hold on-campus recruiting events at prestigious universities and have launched an internship program that offers university students the opportunity to work at our Shanghai and Jiaxing sites. In addition, we actively seek talent from recent graduates of top universities in the PRC and recruit lateral employees from other reputable biotechnology or pharmaceuticals companies. We review our capabilities and make adjustments to our workforce periodically to ensure we have the right mix of expertise to meet the demand for our services. We believe that we maintain a good working relationship with our employees. We had not experienced any material labor disputes or any material difficulty in recruiting employees for our operations during the Track Record Period and up to the Latest Practicable Date.

168 BUSINESS

BUSINESS COLLABORATION Certain steps in some of our projects require testing procedures which we currently do not have the capabilities for or which we consider not cost efficient to conduct in-house, such as light source data, gene synthesis and sequencing. Such testing procedures normally form a minor part of the overall project and as such, we typically outsource such work to reputable vendors, the cost of which is directly passed on to our customers. We entered into service agreements with these vendors who are Independent Third Parties to our Group. We make payments to the vendors after receiving invoices from such vendors. For the years ended December 31, 2016, 2017 and 2018, we incurred expenses of RMB6.1 million, RMB8.9 million and RMB6.0 million, respectively, for outsourced testing or ancillary services provided by our external vendors.

PROJECT MANAGEMENT We believe that we have an established reputation among our customers for high quality and productivity, rapid turnaround and comprehensive customer support. We generally assume full project management responsibility for our projects. We strictly adhere to our internal quality and project management processes.

We have developed a project management methodology to ensure timely, consistent and accurate delivery of quality services. Upon receiving a new project from a customer, our project management team will set the schedule of the project and liaise with other departments, including the relevant business units, to determine the staffing of the project team. A leading scientist is usually appointed to oversee the entire project. Scientists assigned on a project team are typically divided into several groups based on the type of services to be provided. Each group is assigned a group leader who is responsible for supervising the services carried out by such group and reporting back to the leading scientist of the project team. Our project management team also works closely with the project team to monitor the progress of the project and to liaise with the customer. To ensure our service quality, each technical report will be reviewed by the head of the relevant business units before being submitted to the customer.

In addition, we have developed our Viva Project Management System to facilitate the customers’ and our project management needs, which contains the following functions: Š Display statistics in connection with each stage/phase of the project; Š List of projects, which shows the content of each project and the customers and our project manager may add, track and modify any such content in accordance with their respective authority; Š Prepare the progress report for each project; and Š Manage the users of the system and grant access/permissions.

We believe our processes, methodologies and knowledge management systems reduce the overall cost for our customers and enhance the quality and speed of delivery.

SALES AND MARKETING We market our services primarily through word-of-mouth marketing and referrals by our existing customers. As a result of the quality services we provide, our existing customers are willing to

169 BUSINESS refer us to other biotech and pharmaceutical companies seeking for a drug discovery service provider. A new customer typically assigns us a small project to test our capabilities. After we successfully complete the assignment, the customer often increases the size and duration of succeeding contracts and mandates us for more types of assignments. We also hold receptions in the United States regularly to maintain our relationships with our existing and potential customers.

In addition, we have set up a sales and marketing team in North America comprised of our employees and certain third-party business development and marketing specialists we engaged to help us to actively participate in trade conferences, trade shows and scientific conferences, and to build up direct contacts with pharmaceutical and biotechnology companies through regular meetings with their representatives and senior management. During those meetings, we highlight the advantages of our proprietary technology platform and how we can expedite the customers’ product development process. We believe by having our business development team in North America, which is close to many of our existing and potential customers, we will be able to generate more business opportunities.

Our well-trained sales and marketing specialists who are dedicated to understanding the demands of existing and potential customers and work closely with our technical experts to prepare quotes and to secure customer orders. In anticipation of our business expansion and increasing customer base, we plan to further expand our sales and marketing force in the next few years.

CUSTOMERS We have a diversified customer base. During the year ended December 31, 2018, we provided services to 94, 48, eight and two customers headquartered in the United States, PRC, Europe and the rest of the world, respectively, and revenue generated from these countries/regions accounted for approximately 76.5%, 23.0%, 0.3%, 0.2% of our revenue for the year ended December 31, 2018, respectively. Out of our five largest customers in the year ended December 31, 2018, four of which are headquartered in the United States. Most of our customers are pharmaceutical and biotechnology companies, including many renowned industry players. As of the Latest Practicable Date, we had worked with nine out of the ten largest pharmaceutical companies in the world as measured by their respective pharmaceutical sales in 2017, and we have provided drug discovery services to 23 biotech companies that were named as Top 15 Promising Biotechs by Fierce Biotech.

Global Pharmaceutical Company Place of Incorporation Key Business/Therapeutic Area(s) Company 1 United States Inflammation & Immunology, Internal Medicine, Oncology, Rare Disease, Vaccines Company 2 Switzerland Oncology, Neuroscience, Infectious diseases, Immunology, Cardiovascular and metabolism, Ophthalmology, Haematology, Haemophilia, Respiratory Company 3 United States Cardiovascular & Metabolism, Immunology, Infectious Diseases & Vaccines, Neuroscience, Oncology, Pulmonary Hypertension Company 4 United States Cancer, HIV, HPV, Hepatitis C, Cardio-metabolic disease, Antibiotic-resistant infection, Alzheimer’s disease, Vaccines Company 5 France Cardiovascular, Diabetes, Vaccines & Infectious Diseases, Immunology, Neurology, Oncology, Rare Diseases

170 BUSINESS

Global Pharmaceutical Company Place of Incorporation Key Business/Therapeutic Area(s)

Company 6 Switzerland Cardio Metabolic, Ophthalmology, Respiratory, Neuroscience, Immunology and Dermatology, Oncology, Cell and Gene Therapy Company 7 United Kingdom HIV and Infectious Diseases, Respiratory, Oncology, Immuno-inflammation, Vaccines Company 8 United States Immunology, Oncology, Neuroscience, Virology, Endometriosis, Uterine Fibroids, Cystic Fibrosis, Diabetic Nephropathy Company 9 Germany Cardiology, Hematology, Oncology, Gynecological indications, Ophthalmology, Radiology

Fierce Top 15 Promising Biotechs (Clients) Place of Incorporation Key Business /Therapeutic Area(s) Company 10 United States Previously undruggable, frequently mutated oncogenes Company 11 United States Oncology Company 12 United States Two monogenic diseases: fragile X syndrome and a form of muscular dystrophy called facioscapulohumeral muscular dystrophy Company 13 United States Immuno-oncology Company 14 United States Neurodegeneration Company 15 United States Heart failure Company 16 United States Autoimmune disease Company 17 United States Oncology and immunology Company 18 United States Provides comprehensive genomic analysis solutions Company 19 United States Cancer Company 20 United States Irritable bowel syndrome with chronic constipation Company 21 United States Cancer Company 22 United States Metabolic diseases Company 23 United States Cancer Company 24 United States Cancer Company 25 United States Cancer Company 26 United States Metabolic diseases Company 27 United States Messenger RNA therapies Company 28 United States Metabolic disorders, oncology and immunology Company 29 United States mTOR regulation Company 30 United States Infectious diseases Company 31 United States Genetic diseases caused by point mutations Company 32 United States Metabolite transporters

171 BUSINESS

As a result of our world-leading technology platforms and our quality services, we enjoy a high level of customer loyalty and have developed solid working relationships with many customers. We provided services to 107, 117 and 152 customers in the years ended December 31, 2016, 2017 and 2018, respectively. Many of our customers return to us for additional projects, and our customer base grew both in number and in average revenue per customer during the Track Record Period. Revenue generated from our repeated customers amounted to RMB67.2 million, RMB131.2 million and RMB170.2 million for the years ended December 31, 2016, 2017 and 2018, respectively, accounting for 69.6%, 88.5% and 81.0% of our total revenue in such periods. In 2016, 2017 and 2018, our five largest customers together accounted for 39.8%, 46.9% and 26.5%, respectively, of our revenue, and our largest customer accounted for 11.6%, 23.0% and 5.9%, respectively, of our revenue.

The following table sets forth certain information about our five largest customers in terms of revenue generated in 2016, 2017 and 2018, respectively:

Years of Relationship and Revenue No. of Customer charge method(s) Services Provided Revenue Contribution Projects For the Year ended December 31, 2016 (RMB’000) Customer A(1) ...... 10years (FTE & FFS) Biology, Chemistry 11,185 11.59% 21 Customer B(2) ...... 8years (FTE) Biology 8,026 8.32% 1 Customer C(2) ...... 10years (FTE) Biology 7,129 7.39% 1 Customer D ...... 3year (SFE) Biology, Chemistry 6,061 6.28% 2 Customer E(3) ...... 5years (FTE) Biology 6,041 6.26% 1 Total 38,442 39.84%

Years of Relationship and Revenue No. of Customer charge method(s) Services Provided Revenue Contribution Projects For the Year ended December 31, 2017 (RMB’000) Customer A(1) ...... 10years (FTE & FFS) Biology, Chemistry 34,147 23.03% 3 Customer B(2) ...... 8years (FTE) Biology 9,362 6.32% 1 Customer D ...... 3years (SFE) Biology 9,228 6.22% 2 Customer C(2) ...... 10years (FTE & FFS) Biology 8,268 5.58% 2 Customer F ...... 3years (SFE) Biology, Chemistry 8,485 5.72% 1 Total 69,490 46.88%

Years of Relationship and Revenue No. of Customer charge method(s) Services Provided Revenue Contribution Projects For the Year ended December 31, 2018 (RMB’000) Customer G ...... 3years (FTE & FFS) Biology 12,463 5.93% 2 Customer H ...... 1year (FTE) Biology & Chemistry 12,142 5.78% 1 Customer I ...... 1year (SFE) Biology & Chemistry 10,982 5.23% 1 Customer B(2) ...... 8years (FTE) Biology 10,666 5.08% 1 Customer J ...... 2years ( FTE & FFS) Biology 9,481 4.51% 40 Total 55,734 26.54%

Notes: (1) Such customer was named as one of the Fierce Biotech Top 15 Promising Biotechs in 2009. (2) Such customer is owned by one of the top 10 global pharmaceutical companies (in terms of revenue in 2017). (3) Such customer was named as one of the Fierce Biotech Top 15 Promising Biotechs in 2011.

This physical and operational separation of customer projects ensures enhanced security and protection of our customers’ intellectual property. The laboratory configuration and setup, research

172 BUSINESS plan, operating procedures, information technology and security protocols all can be tailored to our customers’ specifications.

The term of our service agreements with our customers for our integrated services mainly depends on the service model elected by such customer. Our FTE service agreements typically have a longer term of one to two years while our FFS contracts typically have a term ranging from two to four months. These contracts terminate upon the completion of the relevant projects and set forth project specifications and milestones, project management regime, project schedule and discovery and/or development steps, payment terms, confidentiality obligations of the parties, ownership of intellectual property rights, termination clause and other general terms and conditions. Our customers typically retain ownership of all intellectual property associated with their projects, including both intellectual property it provides to us and that arising from the services we provide, except for intellectual property created or developed in connection with the provision of our services that is derivative of our own intellectual property or that relates to manufacturing processes developed at our expense.

During the Track Record Period and up to the Latest Practicable Date, we did not encounter any material dispute with our customers or any material breach of our service contracts or agreements. To the best of our knowledge, as of the Latest Practicable Date, we were not aware of any information or arrangement that would lead to termination of our relationships with any of our key customers. None of our Directors, their respective associates, or Shareholders who, to the knowledge of our Directors, own 5% or more of our issued share capital had any interest in any of our five largest customers during the Track Record Period.

Payment Terms Under the FTE model, we typically require the customer to make monthly payments for services rendered with a credit term between 30 to 90 days. Under the FFS model, a contract or work order typically comprises a number of tasks, each including several discovery, development steps and/ or milestones. We bill our customers by task and typically give our customers a credit term between 30 to 90 days. We typically require our customers to make a portion of the corresponding payment upon the commencement of each task and the remaining payment after we complete such task to the satisfactory of our customers. In the event there is a milestone arrangement, we typically send our invoice to the customer shortly after the completion of each milestone, and require the customer to make milestone payment within 30 days to 90 days after the receipt of each invoice.

Customer Support Prior to entering into service agreements with our customers, we prepare proposals and fee quotations in accordance with the customers’ instructions and specifications. After the service agreement or a work order is executed, we commence our services in accordance with the agreed protocols, and our project manager will report the progress and status of the project to our customer via conference call or emails on a weekly or bi-weekly basis. To facilitate project management, we have developed an online system allowing a customer’s project manager to monitor and report on the progress of its projects through an encrypted website. Under the service agreement contract or work order, we are typically required to deliver a technical laboratory report, product samples and/or other deliverables and transfer the relevant data and rights to the customer upon completion of each discovery, development step or milestone. Upon the acceptance of such deliverables by our customers, the relevant discovery or development step is deemed to be completed and revenue is recognized.

173 BUSINESS

Additionally, our project team interacts regularly with a customer’s project-management team through emails, reports and regular conference calls. Our project management involves strict adherence to our strategic imperative to protect our customers’ intellectual property and other confidential information. See “— Intellectual Property Protection” below for more information.

We conduct frequent customer satisfaction surveys with certain key customers, which enable us to improve our planning, execution, evaluation and support. We focus internally on operational improvement and innovation to achieve lower direct costs, better use of assets, faster discovery and development time, increased accuracy, greater customization or precision of data, more added value and simplified processes. Dedicated to improving responsiveness to our customers’ needs and inquiries, our customer support department focuses on sales support and relationship management with our customers. Less-than-satisfactory remarks and comments are scrutinized for root causes and used to continuously improve operations and services.

SUPPLIERS To support our comprehensive service offerings, we procure a wide variety of raw materials, such as reagents and culture media, equipment and synchrotron radiation light source. These raw materials and equipment are generally available from various suppliers in quantities adequate to meet our needs. Many of our suppliers offer both equipment needed for our integrated services and the corresponding raw materials. We primarily source our raw materials and equipment from a variety of suppliers that are located in China or have branches or subsidiaries in China. We have maintained stable relationships with many of our key suppliers. A majority of our five largest suppliers in any given period during the Track Record Period had over five years of relationships with us.

The following table sets forth certain information about our five largest suppliers in terms of purchases in 2016, 2017 and 2018, respectively:

Background & Years Purchase Purchase Supplier of Relationship Goods Provided amount Contribution in the Year ended December 31, 2016 (RMB’000) Supplier A ...... 10years chemical &biological 1,870 10.60% reagents Supplier B ...... 2year analytical instruments 1,410 7.99% Supplier C ...... 11years chemical &biological 1,239 7.03% reagents Supplier D ...... 9years data collection and 1,019 5.78% reagents Supplier E ...... 5years chemical &biological 995 5.64% reagents Total 6,533 37.03%

174 BUSINESS

Background & Years Purchase Purchase Supplier of Relationship Goods Provided amount Contribution in the Year ended December 31, 2017 (RMB’000) Supplier C ...... 11years chemical &biological reagents 2,282 9.05% Supplier A ...... 10years chemical &biological 2,132 8.46% reagents Supplier D ...... 9years data collection and 1,218 4.83% reagents Supplier F ...... 3years parcels logistics, overseas 1,210 4.80% warehousing, and other services Supplier G ...... 2years chemical &biological 1,106 4.39% reagents Total 7,948 31.53%

Background & Years Purchase Purchase Supplier of Relationship Goods Provided amount Contribution in the Year ended December 31, 2018 (RMB’000) Supplier A ...... 10years chemical &biological 3,233 8.90% reagents Supplier H ...... 2years chemical &biological 2,613 7.19% reagents Supplier C ...... 11years chemical &biological 2,323 6.39% reagents Supplier I ...... 2years chemical & biological 1,560 4.29% reagents Supplier J ...... 2years chemical &biological 1,487 4.09% reagents Total 11,216 30.86%

The raw materials and equipment required for the provision of our services are generally readily available in the market through a number of suppliers. We have established detailed internal rules governing the selection of raw material suppliers and raw material quality control. We carefully select our suppliers based on various factors, including their qualifications, product selection, quality, reputation, pricing, business scale, technological strengths, quality management capabilities and overall services. We regularly monitor and review the performance of our suppliers and conduct annual on-site audit for our key suppliers. For more information about raw material quality control, see “— Quality Assurance — Raw Material Quality Control”.

Our procurement team manages the raw materials’ inventory level by monitoring the status of our ongoing projects and incoming new projects and places orders with suppliers for any inventory that is expected to decline below targeted levels. Our procurement team procures raw materials and equipment in accordance with our business expansion plan or to replace obsolete equipment on an as-need basis.

We generally enter into long-term framework supply agreements with our suppliers, which typically have a term of one to six years. For purchase of raw materials under a long-term supply agreement, we typically agree on the purchase price of the raw material for each calendar year with the supplier and send a separate purchase order with quantity and delivery requirements for each purchase.

175 BUSINESS

Given that we have long-term supply agreements in place with a majority of our key raw material suppliers, we believe our supply arrangements enable us to largely manage fluctuations of raw material prices. Typically there are no minimum purchase obligations under the long-term supply agreements. We also enter into one-off supply contracts with some suppliers. Our suppliers typically extend to us credit terms ranging between 30 days to 90 days.

Generally, under a long-term supply agreement or a one-off supply contract, the supplier undertakes to provide products made of the best materials with first class workmanship according to our specifications and bears shipping and insurance costs. If equipment is procured, the supplier is typically also responsible for installing and debugging the equipment and providing trainings to our equipment operators. Generally, our suppliers are subject to monetary penalties for failing to deliver products on time, and we have the right to terminate a long-term supply agreement or one-off supply contract if the supplier fails to make delivery within a specific period after the agreed delivery date. In addition, each party generally has the right to terminate a long-term supply agreement or a purchase order under the long-term supply agreement immediately upon notice to the other party if a material breach by the other party is not curable or remains uncured for a period of time (ranging from 15 days to 30 days) after notice of the material breach is received by the other party.

In 2016, 2017 and 2018, our five largest suppliers together accounted for 37.0%, 31.5% and 30.9% respectively, of our total purchases, and our largest supplier accounted for 10.6%, 9.1% and 8.9% respectively, of our total purchases for the same periods. During the Track Record Period and up to the Latest Practicable Date, we did not encounter any material dispute with our suppliers or any material breach of our supply contracts or agreements. To the best of our knowledge, as of the Latest Practicable Date, we were not aware of any information or arrangement that would lead to termination of our relationships with any of our major suppliers. None of our Directors, their respective associates, or Shareholders who own 5% or more of our issued share capital had any interest in any of our five largest suppliers during the Track Record Period. During the Track Record Period, none of our major suppliers was also our customer.

QUALITY ASSURANCE We believe that an effective quality management system for our raw materials, equipment and services is critical to ensure the quality of our services and maintain our reputation and success. We have established our Viva Project Management System and devote significant attention to quality control. We seek to ensure that our services consistently meet high industry standards and requirements. Our procurement department is responsible for supervising the implementation of the quality strategies for raw materials and equipment.

Raw Material Quality Control For each of our projects, our procurement team or our customer compiles a list of required raw materials in accordance with our internal policies and procedures. We assess the material risks associated with such raw materials and determine their specifications. We carefully select raw material suppliers and conduct background checks on supplier candidates. Each step of our raw material procurement is documented for our internal records as well as customer audits. During the Track Record Period and up to the Latest Practicable Date, we did not experience any material quality issue relating to our raw materials.

176 BUSINESS

Equipment Quality Control We purchase equipment and spares only from selected reputable suppliers in accordance with our internal policies and procedures. For more information about our suppliers, see “— Suppliers”. We conduct inspections and relevant testing on the incoming equipment to ensure that the equipment is in satisfactory condition and fully functional before we accept delivery from our suppliers. We also communicate with the technical and customer support staff of our equipment suppliers regularly for the maintenance and upgrade of our equipment.

INTELLECTUAL PROPERTY We develop and use a number of proprietary methodologies, analytics, systems, technologies, trade secrets, know-hows and other intellectual property during the conduct of our business. As of the Latest Practicable Date, we had 17 registered patents in the PRC and the United States, three pending patent applications in the PRC and the United States, one registered trademarks in the PRC, one pending trademark applications in the PRC, and one registered domain name in the PRC and another one in the United Kingdom, which we believe are material to our business. See “Statutory and General Information — B. Further Information about the Business of our Company — 2. Material Intellectual Property Rights” in Appendix IV to this prospectus for further details of our material intellectual property rights.

Due to the nature of our services, we typically have access to a significant amount of intellectual property owned by our customers. In addition, our customers generally retain ownership of all intellectual property associated with their projects, including the intellectual property that they provide to us and the intellectual property arising from the services we provide. We enter into agreements with all of our employees under which they disown all intellectual property they create during their employment and waive all relevant intellectual property rights or claims. All of our employees have agreed to disclose and assign to us all inventions conceived by them during their term of employment.

INTELLECTUAL PROPERTY PROTECTION The protection of our customers’ intellectual property is essential to our businesses. In addition to protecting our customers’ intellectual property, our success also substantially depends on our ability to protect our own proprietary rights. Protecting the proprietary rights of our customers has been a top priority since our inception. This is particularly important for us because a substantial part of our operation is based in China, and China and Chinese companies have not traditionally enforced intellectual property protection to the same extent that the United States and U.S. companies have. Our employees are bound by confidentiality obligations under their employment contracts and are prohibited from disclosing the intellectual property of ours and our customers. During the Track Record Period and up to the Latest Practicable Date, none of our employees breached the confidentiality obligations under their employment contracts.

177 BUSINESS

In addition, prior to entering into any service agreement with a potential customer, our customer service staffs would discuss with such customer on their drug discovery project and conduct a search on our completed and pending projects for internal assessment on risks of potential IP infringement and conflict of interest. We also adopted the following measures to protect our customers’ intellectual property rights: Š for drug discovery projects on the same drug target, we will designate different teams to work on such projects; Š we have set up an internal screening system/firewall, and our R&D staffs; and Š we have set up access control systems in our laboratories and the laboratories can only be accessed by relevant scientists and laboratory technicians that work on relevant projects.

This physical and operational separation of customer projects ensures enhanced security and protection of our customers’ intellectual property. The laboratory configuration and setup, research plan, operating procedures, information technology and security protocols all can be tailored to our customers’ specifications.

Despite the measures and efforts we have taken to protect our own and our customers’ intellectual property, unauthorized parties may attempt to obtain and use information that we regard as proprietary. Under our contractual arrangements with our customers, we typically undertake to indemnify our customers for damages resulting from any third party intellectual property infringement claims that are solely based on our intellectual property; our customers typically undertake to indemnify us for damages resulting from any third party intellectual property infringement claims other than those that are solely based on our intellectual property. See “Risk Factors — Risks Relating to Our Business and Industry — If we fail to protect the intellectual property rights or confidential information of our customers, our reputation may be damaged and we may be subject to legal liabilities.” for more information. During the Track Record Period and up to the Latest Practicable Date, we were not subject to, nor were we party to, any intellectual property rights infringement claims or litigations and were not aware of any material infringement of our intellectual property rights that had a material adverse effect on our business. We had complied with all applicable intellectual property laws and regulations in all material respects during the Track Record Period and up to the Latest Practicable Date.

COMPETITION We have developed a scalable business model combining the conventional CFS model and our unique EFS model.

For our EFS model, we are not aware of other drug discovery or incubation service providers adopting similar model in a systematic, scalable and modularized manner. According to the Frost & Sullivan Report, the incubation model based on early stage drug discovery services has strong technical barriers. We compete with other drug discovery or incubation service providers on several factors, including expertise and capability in drug discovery, ability to provide integrated incubation services, project screening/risk management methodology and access to early stage drug R&D projects.

For our CFS model, we face competition from other drug discovery services providers, including large, established multinational CROs that are able to provide a wide range of services, as well as smaller to medium sized CROs that focus on structure based drug discovery services.

178 BUSINESS

According to the Frost & Sullivan Report, the global drug discovery outsourcing services market is highly fragmented. We compete with other CROs on several factors, including expertise and capability in drug discovery, quality and breadth of services, ability to protect our customers’ intellectual property or other confidential information, timeliness of delivery and price.

We believe our proprietary technology platforms, modularized incubation program and world- class scientists and business partners provide us with competitive advantage, which increase our profit per employee and improve the success rate of our incubation projects. Please see the section headed “Industry Overview” for details of the global drug discovery outsourcing services market.

INSURANCE Our Directors consider that the insurance policies maintained by us are sufficient to cover the potential losses and damages of our facilities. We do not maintain key-man life insurance for any members of our senior management or other key personnel or business disruption insurance. While we believe that our insurance coverage is adequate and in line with the industry norm in China and the United States, it may be insufficient to cover all claims for product liability or damage to our fixed assets. See “Risk Factors — Risks Relating to Our Business and Industry — We have limited insurance coverage, and any claims beyond our insurance coverage may result in us incurring substantial costs and a diversion of resources.” for more information.

PROPERTIES We own our laboratory facilities in Jiaxing, Zhejiang province and have leased six properties in Shanghai and three properties in Sichuan. The following table sets forth a summary of the properties leased or owned by us as of the Latest Practicable Date:

Gross Floor Location Type of Property Area (sq.m.) Lease Term Expiry Dates Shanghai ...... Headquarters(1) and laboratories 4,213.02 5 years 2022.4.19 Shanghai ...... Headquarters(1) and laboratories 4,918.01 10 years 2029.3.31 Shanghai ...... Incubation center 1,183.8 4 years 2022.4.19 Shanghai ...... Laboratories and office 2,800 6 years 2022.9.18 Shanghai ...... Laboratories 661 3 years 2021.5.31 Shanghai ...... Laboratories 623.5 3 years 2021.12.31 Jiaxing ...... Laboratories and incubation center 3,150.02 N/A 2060.6.11 Sichuan ...... Laboratories and office 1,780.71 2 years 2020.11.30 Sichuan ...... office(2) 45 1 year 2019.09.12 Sichuan ...... registered address 10 1 year 2019.10.31

Notes: (1) We plan to relocate our headquarters to a new address which we recently leased. (2) Not currently in use.

HEALTH, SAFETY AND ENVIRONMENTAL MATTERS Our operations and facilities are subject to extensive environmental protection and health and safety laws and regulations, which govern, among other things, the generation, storage, handling, use and transportation of hazardous materials and the handling and disposal of hazardous and biohazardous waste generated at our facilities. These laws and regulations generally impose liability regardless of the negligence or fault of a responsible party, unless it has legally defined immunities. These laws and regulations also require us to obtain permits from governmental authorities for certain operations. See “Regulatory Overview” for more details.

179 BUSINESS

Our environmental, safety and health department is responsible for overseeing the implementation of our measures and procedures to ensure our compliance with the applicable environmental protection and health and safety laws and regulations and the health and safety of our employees. These measures and procedures include (i) adopting protective measures at our facilities, (ii) promulgating safety operation procedures relating to various aspects of our integrated services, such as the use and storage of chemicals and operation of equipment, (iii) promulgating specific rules about the purchase, storage, handling, use and transportation of hazardous materials and the handling and disposal of hazardous and biohazardous waste generated at our facilities, (iv) engaging professional waste-disposal companies to manage the disposal of hazardous and biohazardous waste, (v) providing regular safety awareness training to our employees, and (vi) maintaining a system of recording and handling accidents and implementation of relevant policies, and a health and work safety compliance record.

For the years ended December 31, 2016, 2017 and 2018, our total cost of compliance with environmental protection and health and safety laws and regulations was approximately RMB0.2 million, RMB0.4 million and RMB2.3 million, respectively. We do not expect our costs of complying with current and future environmental protection and health and safety laws to increase significantly going forward. However, because we may consider establishing our proprietary CMO facilities and the requirements imposed by these laws and regulations may change, we may be unable to accurately predict the cost of complying with these laws and regulations. See “Risk Factors — Risks Relating to Our Business and Industry — Failure to comply with environmental regulations could harm our operating results, financial condition and reputation.” for more information.

There had not been any material accidents in the course of our operation or any material claims for personal or property damages in connection with environmental protection, health or work safety against us during the Track Record Period and up to the Latest Practicable Date.

CERTIFICATES, PERMITS AND LICENSES We are required to obtain and renew certain certificates, permits and licenses for providing our services. See “Regulatory Overview” for more information about the material certificates, permits and licenses required for our business operations in the PRC. During the Track Record Period and up to the Latest Practicable Date, we had obtained all requisite certificates, permits and licenses that are material for our operation, and all of such certificates, permits and licenses are within their respective effective periods. We had not experienced any material difficulty in renewing such certificates, permits and licenses during the Track Record Period and up to the Latest Practicable Date, and we currently do not expect to have any material difficulty in renewing them when they expire, if applicable. During the Track Record Period and up to the Latest Practicable Date, we had not been penalized by the relevant government authorities for any non-compliance relating to maintenance and renewal of our material certificates, permits and licenses.

180 BUSINESS

The following table sets forth a summary of the key licenses, permits and certificates that we hold:

Holder Certificate/Permit/License Issue Authority Issue Date Expiry Date Viva Biotech Shanghai Filing Certificate of Shanghai Shanghai Municipal Health 2015.07.29 N/A Pathogenic Microbe and Family Planning Laboratories (上海市病原微生物 Commission (中華人民共和國 實驗室備案憑證) 上海市浦東新區衛生和計劃生 育委員會) Viva Biotech Shanghai Usage License of Experimental Shanghai Science and 2014.12.29 2019.12.28 Animals (實驗動物使用許可證) Technology Committee (中華 人民共和國上海市科學技術委 員會) Viva Biotech Shanghai Certification of High and New Shanghai High and New 2016.11.24 2019.11.23 Technology Enterprises (高新技 Technology Enterprise 術企業證書) Certification Office (上海市高 新技術企業認定辦公室); 上海 市科學技術委員會; 上海市財 政局; 上海市國家稅務局; 上海 市地方稅務局) Viva Biotech Shanghai Advanced Technology Service Jiangsu Provincial 2015.01.14 2018.12.31 Enterprises (技術先進型服務企 Commission of Health and 業證書) Family Planning (上海市科學技術委員會, 上海 市商務委員會, 上海市財政局, 上海市國家稅務局, 上海市地方 稅務局, 上海市發展和改革委員 會) Viva Biotech Shanghai Certificate of Pudong New Shanghai Pudong District 2017.03 N/A District Research and Science and Technology Development Institutions Committee (中華人民共和國 Certification (浦東新區研發機構 上海市浦東新區科委) 認定證書) Viva Biotech Shanghai Certificate of Safety Shanghai Administration of 2014.12.24 2017.12.23* Standardization (安全標準化證 Work Safety (上海市安全 書) 生產監督管理局) Viva Biotech Shanghai The PRC Customs Declaration Shanghai Pudong Customs of 2015.07.09 N/A Registration Certificate (中華人 the PRC (中華人民共和國上海 民共和國海關報關單位註冊登記 浦東海關) 證書) Viva Biotech Shanghai ISO 9001:2015 certificate of TQCS International (Group) 2018.11.19 2021.11.19 registration for Quality Pty Ltd and TQCS Management System International Pty Ltd

* This certificate is pending renewal.

LEGAL PROCEEDINGS We may from time to time be involved in contractual disputes or legal proceedings arising out of the ordinary course of business. During the Track Record Period and up to the Latest Practicable Date, none of us or any of our subsidiaries was subject to any material claims, damages or losses. As of the Latest Practicable Date, no material litigation, arbitration or administrative proceedings had been threatened against us or any of our subsidiaries.

181 BUSINESS

LEGAL COMPLIANCE During the Track Record Period and up to the Latest Practicable Date, we did not have non-compliance incidents which our Directors believe would, individually or in the aggregate, have a material operational or financial impact on our Group as a whole.

INTERNAL CONTROL AND RISK MANAGEMENT We have engaged an internal control consultant, or the Internal Control Consultant, to perform certain agreed-upon procedures in connection with the internal control of our Company and our major operating subsidiaries and to report factual findings on our Group’s entity-level controls and internal assets and assets under construction, human resources and payroll management, cash and treasury management, inventory management, general controls of IT system, taxation management, research and development and intangible assets management. The Internal Control Consultant performed procedures in April 2018 and follow-up procedures in June 2018 on our Company’s system of internal control. As of the Latest Practicable Date, there was no material issue remaining in relation to the internal controls of our Group.

We have adopted a series of internal control policies, measures and procedures designed to provide reasonable assurance for achieving objectives, including effective and efficient operations, reliable financial reporting and compliance with applicable laws and regulations. Below is a summary of the internal control policies, measures and procedures we have implemented or plan to implement: Š We have formed a compliance office led by Mr. Xue Yanan, who has extensive experience in internal control and risk management in the CRO industry. The compliance office has another one member, including Gao Jin. Our compliance office is located in Shanghai in charge of the overall internal control, corporate governance and legal compliance matters of our Group. Š Our compliance department is responsible for promulgating and revising internal control policies, measures and procedures to ensure that we maintain sound and effective internal controls and compliance with applicable laws and regulations. Our compliance department also monitors the implementation of our internal control policies, measures and procedures and conduct regular compliance audits for each stage of our drug discovery and development process. Š The compliance office is responsible for implementing the relevant internal control policies, measures and procedures on the site and making regular inspections about the on-site implementation of such policies, measures and procedures. Š We have adopted various measures and procedures regarding each aspect of our business operation, such as project management, quality assurance, protection of intellectual property, environmental protection and occupational health and safety. For more information, see “— Project Management”, “— Quality Assurance”, “— Intellectual Property Protection” and “— Health, Safety and Environmental Matters”. We provide periodic training about these measures and procedures to our employees as part of our employee training program. We also constantly monitor the implementation of those measures and procedures through our compliance office for each stage of our drug discovery and development process. Š We have engaged Guotai Junan Capital Limited as our compliance adviser to provide advice to our Directors and management team for at least the period commencing from the

182 BUSINESS

Listing Date and ending on the date that our Company publishes its first full financial year results regarding matters relating to the Listing Rules. Š We plan to engage a PRC law firm to advise us on and keep us abreast with PRC laws and regulations after the Listing. We will continue to arrange various trainings to be provided by external legal advisors from time to time when necessary and/or any appropriate accredited institution to update our Directors, senior management, and relevant employees on the latest PRC laws and regulations.

Risk Management We recognize that risk management is critical to the success of our business operation. Key operational risks faced by us include changes in the general market conditions and the regulatory environment of the global CRO services market, our ability to offer quality drug discovery and development services, our ability to manage our anticipated growth and to execute on our growth strategies, and our ability to compete with other CRO services providers. See “Risk Factors” for a discussion of various risks and uncertainties we face. We also face various market risks, such as currency or liquidity risks that arise in the normal course of our business. See “Financial Information — Qualitative and Quantitative Disclosure about Market Risk” for a discussion of these market risks.

In order to meet these challenges, we have developed a risk management framework, which is summarized as follows: Š Each department in our Company (i) monitors and manages its day-to-day operational processes and procedures; and (ii) identifies, self-inspects and implements key control procedures for the main risks faced by such department. Š The risk compliance management department conducts independent, day-to-day monitoring and management of the main risks faced by each department in our Company. Š The audit department independently audits and inspects the operational process and results of each department in our Company. Š The management team is responsible for (i) leading the risk management and internal control of the Company’s day-to-day operations; (ii) establishing a risk prevention and internal control system that improves the Company’s business and management process, in order to effectively solve and reduce the Company’s overall operational risks. Š The risk and audit committee is responsible for (i) guiding the Company’s risk prevention; (ii) verifying the Company’s risk control system; and (iii) evaluating the Company’s risk status, management capabilities and levels. Š The Board of Directors is responsible for managing and monitoring the Company’s overall risks. Š The supervisory committee supervises the Company’s (i) risk prevention; (ii) monitoring system; and (iii) work progress and results.

183 BUSINESS

REGULATORY The following table shows the major guidelines and policies from the NMPA that encourage the uses of CRO and CMO services:

China’s Twelfth Five Year Plan for Pharmaceutical • To encourage the development of contract Industry research outsourcing services (《醫藥工業“十二五”發展規劃》) • To improve the research contract outsourcing services to be in line with international standards, including drug design, drug screening, safety evaluation, clinical development, process research, etc. • To promote innovative model of drug R&D, and to lift to a new level of specialization and internationalization

Notice on Construction of Pharmaceutical and • To carry out supply-side structural reform to Biological Contract Research Organization (CRO) construct a number of high-level and international Service and Contract Manufacturing Organization service outsourcing platforms to promote the (CMO) Platform capabilities of pharmaceutical R&D (《關於組織實施生物醫藥合同研發和生產服務平臺建設 • To focus on supporting preponderant research 專項的通知》) outsourcing enterprises with powerful influence and high standard quality assurance system, and giving priorities for integrated platforms who could provide multi-section services • To focus on supporting preponderant manufacturing outsourcing enterprises who support innovative drug manufacture during the product and process development phase, as well as industrialization

For a discussion of the material regulations that apply to us regarding our operations and the drug discovery services we provide, the intellectual property protection and other regulations material to our business, see the section entitled “Regulation” in this Prospectus.

184 FINANCIAL INFORMATION

You should read the following discussion and analysis in conjunction with our audited consolidated financial information as of and for the years ended December 31, 2016, 2017 and 2018 included in the accountants’ report set out in Appendix I to this prospectus, together with the respective accompanying notes. Our consolidated financial information has been prepared in accordance with IFRS.

The following discussion and analysis contain forward-looking statements that reflect our current views with respect to future events and financial performance that involve risks and uncertainties. These statements are based on assumptions and analysis made by us in light of our experience and perception of historical events, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. In evaluating our business, you should carefully consider the information provided in the section headed “Risk Factors” in this prospectus.

OVERVIEW We operate a leading structure-based, integrated drug discovery platform in terms of revenue in 2018 and beam time for synchrotron radiation in 2018 with a number of world-leading technologies and a scalable business model to share the upside of our customers’ IP value. We provide structure- based drug discovery services to our biotechnology and pharmaceutical customers worldwide for their pre-clinical stage innovative drug development. Our services cover the full spectrum of our customers’ needs for early stage drug discovery, including target protein expression and structure research, hit screening, lead optimization and the determination of drug candidates. Our patented core technologies, as well as our proprietary know-how which enables us to effectively shorten the average time required for drug discovery, are widely recognized by our customers. According to Frost & Sullivan, we provide world-leading structure-based drug discovery (SBDD) services. SBDD has resulted in faster definition of drug-binding properties and has made it easier to identify hit compounds through screening programs. We have provided drug discovery services to nine of the ten largest global pharmaceutical companies (in term of revenues in 2018), as well as hundreds of biotechnology companies and research institutes worldwide including 23 companies named in the Fierce Biotech Top 15 Promising Biotechs. As of the Latest Practicable Date, we had provided drug discovery services to over 370 biotechnology and pharmaceutical customers, worked on over 1,000 independent drug targets and delivered approximately 9,500 independent protein structures. As of December 31, 2018, over 60% of our existing customers have used our service for more than once, while the dollar value of orders from these repeated customers showed an increasing trend.

We have developed a scalable business model combining the conventional cash-for-service (CFS) model, pursuant to which we receive cash service fees from our non-investee customers, and our unique equity-for-service (EFS) model. Under the EFS model, we provide drug discovery and/or incubation services to selected customers in exchange for equity or economic interest in them, and to certain promising biotech companies which we invested in. By holding equity/economic interest in these selected customers or investees, we can effectively foster the development of these promising biotech startups and enjoy the upside of their IP value, while maintaining the steady cash inflow generated from services provided to our CFS customers. In addition, we may also make strategic investments in biotech startup companies that we think are of potential for future cooperation. According to the Frost & Sullivan Report, CRO industry is conventionally a labor intensive industry and the average profit per employee of CRO service providers globally in 2018 was approximately

185 FINANCIAL INFORMATION

US$12,581. In contrast, our profit per employee in 2018 was US$51,880, which was 312% higher than the global average (or profit per employee in 2018 of US$20,709 that was 65% higher than the global average after deducting the fair value gains on financial assets at FVTPL of RMB68.3 million, share of loss from associate/joint venture of RMB3.2 million and gains on deemed/actual disposal of interests in an associate of RMB16.4 million, without taking into account relevant income tax implications), reflecting the advantages of our technology driven platform that allows us to enjoy a higher gross margin and our unique EFS model that enables us to enjoy the fair value gains in the equity interest acquired by us.

We experienced significant growth during the Track Record Period. Our revenue increased significantly from RMB96.5 million in 2016 to RMB148.2 million in 2017 and further to RMB210.0 million in 2018. Our net profit also increased significantly from RMB24.5 million in 2016 to RMB76.3 million in 2017 and further to RMB90.6 million in 2018. The increases in our net profit in 2017 and 2018 were primarily due to the increases in the fair value and the gains from disposal of equity interests in certain of our incubation portfolio companies.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION Our results of operations, financial condition and the period-to-period comparability of our financial results are principally affected by the following factors:

Growth of Global Research and Development Expenditure and Rate of Outsourcing Our financial results are driven primarily by the growing demand for our world-leading structure-based drug discovery services, which in turn is a result of growth in global drug discovery R&D expenditure and increasing rate of outsourcing such work to external services providers like us. According to the Frost & Sullivan Report, the revenue of global CRO market accounts for 36.5% of the global drug R&D expenditure in 2017, and the proportion is expected to increase to 45.8% by 2022. In 2017, the global CRO service market for drug discovery reached US$10.2 billion, representing a CAGR of 9.5% from 2013 to 2017, far exceeding the CAGR for drug discovery R&D expenditure during the same period. This trend is expected to lead to further increases in demand for drug discovery outsourcing services like ours. We expect to benefit significantly from such market trend. Please see the section headed “Industry Overview” for a detailed discussion on the growth drivers of the drug discovery outsourcing services market.

Our Ability to Win New Projects from Existing and New Customers Our business and results of operations depend on our ability to secure contracts for new drug discovery projects from our existing and new customers. Continuous replenishing our backlog is crucial to our long-term success as it underpins the continued growth of our operations. Our ability to win new projects from existing and new customers is affected substantially by our service quality, price, range of services and capacity. Leveraging our world-leading and proprietary technologies, we have been able to successfully generate repeating business with our existing customers. During the Track Record Period, over 60% of our existing customers have used our service more than once, while the dollar value of orders from these repeat customers showed an increasing trend. In addition to our existing customers, we constantly seek new customers for business opportunities. In 2016, 2017 and 2018, we recorded contract value of new projects from existing and new CFS and investee customers of RMB76.6 million, RMB172.2 million and RMB203.2 million, respectively. As of December 31, 2018, our backlog

186 FINANCIAL INFORMATION reached RMB165.3 million. See “Risk Factors — Risks Relating to Our Business and Industry — Our business largely depends on our customers’ demand for outsourced services and their R&D budget, and any reduction in our customers’ demand or budget could have a material adverse effect on our business, financial condition, results of operations and prospects.”

Our Ability to Realize Our Anticipated Returns under Our EFS Model In general, CROs charge cash for the services they provide. Our business model combines the conventional CFS model under which we receive cash service fees from our non-investee customers, and the unique EFS model. Under the EFS model, we provide drug discovery and/or incubation services to selected customers in exchange for equity or economic interests in them and to certain promising biotechnology companies which we have invested in. By holding equity interest in these selected customers or investees, we can effectively foster the development of these promising biotechnology startups and enjoy the upside of their IP value, while maintaining the steady cash inflow generated from services provided to our CFS customers.

The value of the equity interest we receive under our EFS model is subject to valuation on each of our balance sheet dates. The ability to realize our anticipated returns may depend on the incubation portfolio companies’ ability to deliver satisfactory performance of its pipeline products and/or to complete an equity financing or a domestic or overseas initial public offering or trade sale. Our incubation portfolio companies’ ability to achieve satisfactory business and financial performance is affected by a variety of factors beyond our control, including the general economic condition, conditions in the global pharmaceutical and biotechnology industries and the ability of companies in these industries to develop products/services that meet the evolving market demands. Any significant negative trend in global pharmaceutical and biotechnology industries could materially diminish the value of the equity interest we receive under our EFS model. See “Risk Factors — Risks Relating to Our Business and Industry — We may not be able to realize our anticipated investment returns from our incubation portfolio companies” for more information.

Our Charge Method Mix We provide drug discovery services to our customers in exchange for cash under CFS model or for equity under EFS model. We charge our customers and recognize our revenue using the following methods, as applicable: Š Full-time-equivalent (FTE): Under the FTE method, we designate employees to the customers’ drug discovery projects at a fixed rate per FTE employee per period of time, and determine the amount of service fees based on the number of scientists and the amount of time required for completing the project, among others. Our FTE contracts generally have a term of one to two years and may be subject to annual review. We use the FTE method under both the CFS and EFS models. We generate revenue primarily from service fees charged under the FTE method during the Track Record Period. Š Fee-for-service (FFS): Under the FFS method, we generally receive payments in accordance with a pre-agreed payment schedule and milestones specified in the contract or work order. Our FFS contracts generally have a term of two to four months depending on the complexity of the projects. We use the FFS model under both the CFS and EFS models. Š Service-for-equity (SFE): Under the SFE method, we receive equity interests in our SFE customers in accordance with a pre-agreed development schedule set forth in the contract

187 FINANCIAL INFORMATION

or work order. In this way, we can effectively foster the development of selected customers and enjoy the upside of their IP value. In addition to the pre-agreed payment schedule and milestones, our SFE contracts typically allow us to obtain additional bonus equity interests in relevant customers in the event that we produce novel molecules that will become the clinical candidates in pursuit of the project milestones. We recognize revenue based on the fair value of an EFS customer’s equity interest that we are entitled to receive upon satisfying related performance obligations. We use the SFE method under the EFS model.

For services provided to our customers who elect to pay in cash, we charge the fees under FTE or FFS methods at the customers’ discretion. In addition, the gains or losses resulting from changes in fair market value of the equity interest we received under SFE method may fluctuate significantly from period to period, thereby affecting our profitability. As a result, our results of operations may vary depending on our charge method mix in any given period.

The Business and Financial Performance of Our Incubation Portfolio Companies Under our EFS model, we receive equity interest in our incubation portfolio companies in exchange for our services. The equity interest held by us are considered as financial assets and the fair value of which are measured at the end of each of our reporting periods, with any fair value gains or losses recognized in our profit or loss. As a result, the business or financial performance of our incubation portfolio companies, such as the development progresses of their pipeline products or any financing activities undertaken by these incubation portfolio companies would impact our results of operations. See “Risk Factors — Risks Relating to Our Business and Industry — We may not be able to realize our anticipated investment returns from our incubation portfolio companies” for more information. All transactions between we and our incubation portfolio companies in connection with drug discovery and incubation services provided by us were carried out in the normal course of business and at terms negotiated between us and the incubation portfolio companies on an arm’s length basis. There were no costs and expenses relating to our operations that were borne by any of our incubation portfolio companies or a third party without being recharged to our Group during the Track Record Period.

The General Economic and Market Conditions May Affect the Valuation of Our Incubation Portfolio Companies During the Track Record Period, we held financial assets at fair value through profit or loss as we received equity interest in our incubation portfolio companies. In addition, under our incubation program, we may from time to time invest in promising biotechnology startups as our incubation portfolio companies and hold equity interest in such companies as financial assets at fair value through profit or loss. As at December 31, 2018, we held financial assets at fair value through profit or loss (“FVTPL”) in the amount of RMB204.7 million. As a result, general economic and market conditions, in particular in the healthcare and biotechnology sector, may affect the value of our financial assets. Any material and adverse changes in the value of our financial assets may have a material and adverse effect on our business, financial condition and results of operations.

Increasing Direct Labor Costs Our direct labor costs, mainly comprising of salaries, bonus, welfare, share-based compensation and social security costs for our R&D employees (excluding costs allocated to R&D expenses or

188 FINANCIAL INFORMATION capitalized in contract costs), amounted to RMB14.1 million, RMB23.9 million and RMB52.8 million for the years ended December 31, 2016, 2017 and 2018, respectively. In recent years, our direct labor costs have increased as a result of our expanded operational scale, increase in our average salary and bonus, and employment of more scientists. Substantially all of our employees are employed in the PRC and in general, the average labor cost in the PRC has been steadily increasing during the Track Record Period, particularly for highly trained employees such as ours. Fluctuations in direct labor costs may lead to fluctuations in our cost of services.

Fluctuations in Foreign Exchange Rates During the Track Record Period, a majority of our revenue was generated from sales denominated in U.S. dollars. However, substantially all of our cost of services and operating costs and expenses are denominated in Renminbi, and our financial information is presented in Renminbi. For example, for the year ended December 31, 2018, 76.5% of our revenue was generated from the United States, while a majority of our cost of services and a vast majority of our operating costs and expenses were denominated in Renminbi. We are thus subject to foreign exchange risk. For example, if the U.S. dollar appreciates against the Renminbi after we enter into a U.S. dollar denominated project-based service contract or a work order with a customer, our cost of services as a percentage of our revenue attributable to such service contract or work order would decrease due to such appreciation, increasing both our gross profit and gross profit margin. Conversely, if the Renminbi appreciates against the U.S. dollar after we enter into a U.S. dollar denominated project-based service contract or a work order with a customer, our gross profit and gross profit margin would be adversely affected. We do not have a currency hedging policy in place, and large fluctuations in foreign exchange rates at any time could affect our financial condition and results of operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES We prepare our consolidated financial information in accordance with accounting policies which conform with IFRS, which requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the consolidated financial information and the reported amounts of revenue and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. We will continuously assess our assumptions and estimates going forward. We consider the policies and estimates discussed below to be critical to an understanding of our consolidated financial information as their application places the most significant demands on our management’s judgment. For details of our significant accounting policies and estimates, see Notes 3 and 4 in the accountants’ report set out in Appendix I to this prospectus.

Revenue Recognition Our revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Specifically, we use a 5-step approach for our revenue recognition: Š Step 1: Identify the contract(s) with a customer

189 FINANCIAL INFORMATION

Š Step 2: Identify the performance obligations in the contract Š Step 3: Determine the transaction price Š Step 4: Allocate the transaction price to the performance obligations in the contract Š Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

We recognize revenue when (or as) a performance obligation is satisfied (i.e., when “control” of the goods or services underlying the particular performance obligation is transferred to customers).

Control of the asset may be transferred over time or at a point in time. Control of the asset is transferred over time if: Š the customer simultaneously receives and consumes the benefits provided by our performance as we perform; Š our performance creates and enhances an asset that the customer controls as we perform; or Š our performance does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date.

If control of the asset transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset.

A contract asset represents our right to consideration in exchange for goods or services that we have transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with IFRS 9. In contrast, a receivable represents our unconditional right to consideration (i.e., only the passage of time is required before payment of that consideration is due).

A contract liability represents our obligation to transfer services to a customer for which we have received consideration (or an amount of consideration is due) from the customer.

We primarily earns revenue by providing drug discovery services to our customers under three charge methods: (i) Full-time-equivalent, or FTE method; (ii) Fee-for-service, or FFS method; or (iii) Service-for-equity, or SFE method.

Under the FTE method, we provides our customer with a project team of employees dedicated to the customer’s studies for a specific period of time and charges the customer at a fixed rate per employee. The customer therefore simultaneously receives and consumes benefits provided by our performances. In addition, FTE contracts require customer’s confirmation on the FTE billable amounts, which are calculated based on number of our employees assigned to the project and the time that our employees had worked under the project, and also specify that we has an enforceable right to payment for the FTE billable amounts. Therefore, under the FTE method, we has a right to consideration from our customer in an amount that corresponds directly with the value to the customers of our performance completed to date (i.e. FTE billable amounts). Under such arrangement, IFRS 15 provides a practical expedient whereby we may recognize revenue based on the amount we has a right to invoice to the customer. We elected to use the practical expedient and therefore recognized the FTE services revenue when we has right to invoice the customer, usually in the form of a monthly statement, and the customers confirmed the acceptance of the invoice or after the end of a confirmation period. The associated cost of services is recognized when incurred.

190 FINANCIAL INFORMATION

For the research services provided under FFS method, the contracts usually have multiple deliverable units, which are generally in the form of technical laboratory reports and/or samples, each with individual selling price specified within the contract. The total contract price is the aggregation of the individual selling prices of the deliverable units. We identifies each deliverable unit as a separate performance obligation, and recognizes FFS revenue of contractual elements at the point in time upon finalization, delivery and acceptance of the deliverable units or after the end of a confirmation period. The associated cost of services is recognized as contract costs when incurred, and are subsequently recognized as cost of services in profit or loss on a systematic basis.

For the research services provided under SFE method, We provides our customer with a project team of employees dedicated to the customer’s studies for a specific period of time at a pre-agreed fixed rate per employee in a way that is similar to the FTE model method, with the difference that we are entitled to receive the equity interests of the customer instead of a cash consideration for the service provided. We and our customers would agree on a total FTE service value that we would provide to our customers using the pre-agreed FTE rate, and upon reaching pre-set milestones of FTE service value, our customers would transfer certain number of their equity interests to us. We measure the progress of performance on the basis of FTE service value transferred to the customers to date relative to the remaining total FTE service value. The progress of performance corresponds directly to the number of customer’s equity interest that we are entitled to receive. We then recognizes revenue by measuring the fair value of these customer’s equity interest and at the same time recognizes a corresponding contract assets. Upon our cumulative FTE service value to our customers reach a pre-set milestone, we would receive the entitled equity interests, the corresponding contract assets are then subsequently transferred to financial assets at FVTPL, with any gains or losses arising on remeasurement being recognized in profit or loss. The associated cost of services is recognized when incurred.

Some of the service contracts contain variable consideration in the form of bonus payment (usually in the form of a milestone bonus when the service provided to the customer has reached into a certain stage or delivered a certain result). We estimate the amount of consideration to which we will be entitled using either (a) the expected value method or (b) the most likely amount, depending on which method better predicts the amount of consideration, to which we will be entitled.

The estimated amount of variable consideration is included in the transaction price only to the extent that it is highly probable that such an inclusion will not result in a significant revenue reversal in the future when the uncertainty associated with the variable consideration is subsequently resolved.

At the end of each reporting period, we update the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

We incur costs to fulfill a contract under FFS method prior to the pre-agreed milestones are achieved. We first assess whether these contract costs qualify for recognition as an asset in terms of other relevant IFRSs, failing which we recognize an asset for these costs only if they meet all of the following criteria: (a) the costs relate directly to a contract or to an anticipated contract that we can specifically identify;

191 FINANCIAL INFORMATION

(b) the costs generate or enhance our resources that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (c) the costs are expected to be recovered.

The asset so recognized is subsequently amortized to profit or loss on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. The asset is also subject to impairment review.

Investments in associates and joint ventures An associate is an entity over which we have significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The results and assets and liabilities of associates and joint ventures are incorporated in the historical financial information using the equity method of accounting. Appropriate adjustments have been made to conform the associates’ or joint ventures’ accounting policies to those of the Group. Under the equity method, an investment in an associate or a joint venture is initially recognized in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over our share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of our share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognized immediately in profit or loss in the period in which the investment is acquired.

The requirements of IAS 39 and IFRS 9 are applied to determine whether it is necessary to recognize any impairment loss with respect to our investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

192 FINANCIAL INFORMATION

We discontinue the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When we retain an interest in the former associate or a joint venture and the retained interest is a financial asset, we measure the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39 or IFRS 9, where applicable. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, we account for all amounts previously recognized in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, we reclassify the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.

When a group entity transacts with an associate or a joint venture of us, profits and losses resulting from the transactions with the associate or joint venture are recognized in the consolidated financial information only to the extent of interests in the associate or joint venture that are not related to us.

Financial assets Our financial assets are classified into the following specified categories: financial assets at FVTPL and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and derecognized on a trade day basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Financial assets at FVTPL Financial assets that do not meet the criteria for being measured at amortized cost or fair value through other comprehensive income (“FVTOCI”) are measured at FVTPL. Specifically: Š Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity investment that is neither held for trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition. Š Debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria are classified as at FVTPL. In addition, debt instruments that meet either the amortized cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. The Group has not designated any debt instruments as at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss. The net gain or loss recognized in profit or

193 FINANCIAL INFORMATION loss includes any dividend or interest earned on the financial asset and is included in the “Fair value gain on financial assets at fair value through profit or loss” line item.

Write-off policy We write off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over five years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under our recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.

Financial liabilities Our financial liabilities are classified into the following specified categories: financial liabilities at FVTPL and financial liabilities measured at amortized cost. The classification depends on the nature and purpose of the financial liabilities and is determined at the time of initial recognition.

Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is designated as at FVTPL.

A financial liability may be designated as at FVTPL upon initial recognition if: Š such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or Š the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or Š it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be designated as at FVTPL.

Because our convertible redeemable preferred shares contained multiple embedded derivatives, the convertible redeemable preferred shares are designated as at FVTPL. Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss includes any interest paid on the financial liabilities and is included in the “fair value gain or loss on financial liabilities at FVTPL” line item.

Government Grants Government grants are not recognized until there is reasonable assurance that we will comply with the conditions attaching to them and that the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which we recognize as expense the related costs for which the grants are intended to compensate. Specially, government grants that require us to purchase, construct or otherwise acquire non-current assets are designated as grants related to assets and recognized as deferred income in the consolidated statements of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related

194 FINANCIAL INFORMATION assets; while the government grants whose primary condition is to compensate for research projects or other than purchase, construct or otherwise acquire long-term assets are designated as grants related to income. Some of the grants related to income have future related costs expected to be incurred, and require us to comply with conditions attached to the grants and the government to acknowledge the compliance of these conditions. These grants related to income are recognized as deferred income in the consolidated statements of financial position and transferred to profit or loss when related costs are subsequently incurred and we received government acknowledge of compliance. Other government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to us with no future related costs are recognized in profit or loss in the period in which they become receivable.

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.

Current Tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from “profit before tax” as reported in our consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. Our liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period.

Deferred Tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, except where we are able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

195 FINANCIAL INFORMATION

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which we expect, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognized in profit or loss.

Property, plant and equipment Property, plant and equipment other than construction in progress are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Properties in the course of construction for production, supply or administrative purposes are carried at cost less any recognized impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalized in accordance with our accounting policy. Such properties are classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is recognized so as to write off the cost of assets other than construction in progress less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Inventories Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined on a weighted average method. Net realizable value represents the contracted selling price less all estimated costs of completion and costs necessary to make the sale.

Foreign Currencies In preparing the financial statements of each individual entity of our Group, transactions in currencies other than such entity’s functional currency (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items are recognized in profit or loss in the period in which they arise.

196 FINANCIAL INFORMATION

Equity-settled share-based payment transactions Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date.

The fair value of the equity-settled shared-based payments are determined at the grant date without taking into consideration all non-market vesting conditions is expensed on a straight-line basis over the vesting period, based on our estimate of equity instruments that will eventually vest, with a corresponding increase in equity (share option reserve). At the end of each reporting period, we revise its estimates of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimates, with a corresponding adjustment to the share option reserve.

When the share options are exercised, the amount previously recognized in share option reserve will continue to be held in the share option reserve. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognized in the share option reserve will continue to be held in share option reserve.

Our Group as Lessee Assets held under a finance lease are recognized as our assets at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss.

Application of IFRS 9 and IFRS 15 IFRS 9 “Financial Instruments” replaces IAS 39 “Financial Instruments” for recognition and measurement for financial assets and liabilities. The standard is effective for annual periods beginning on or after January 1, 2018. We have applied IAS 39 for the two years ended December 31, 2017 and applied IFRS 9 on January 1, 2018 in accordance with the transition provisions.

We have assessed the effects of the adoption of IFRS 9 on our financial statements and assessed the financial impact on the Group’s financial position and performance as compared to the requirements of IAS 39. Specifically: 1) The application of expected credit loss model under IFRS 9 would not cause a material impact on the impairment loss allowance for our financial assets measured at amortized cost during the Track Record Period as compared with the incurred loss model under IAS 39; and 2) The fair value changes of our financial assets/liabilities which we had designated as at FVTPL attributable to our credit risk change are insignificant during the Track Record Period and thus the measurement difference for the fair value changes of our financial liabilities designated as at FVTPL attributable to the credit risk change under IFRS 9 and IAS 39 has no significant impact on our profit or loss during the Track Record Period.

Please refer to the detailed financial impact of the adoption of IFRS 9 on our financial position and financial performance at the date of initial application on January 1, 2018 as set out in the Accountant’s Report to this prospectus.

197 FINANCIAL INFORMATION

IFRS 15 “Revenue from Contracts with Customers” replaces IAS 18 “Revenue” to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flow arising from a contract with a customer. The standard is effective for annual periods beginning on or after January 1, 2018 and earlier application is permitted. We have elected to early apply IFRS 15, which has been applied consistently in the Track Record Period.

We have assessed the effects of early adoption of IFRS 15 on our financial statements and concluded that there was no significant impact on the Group’s financial position and performance as compared to the requirements of IAS 18 except that contract assets are recognized for our right to consideration for work completed and contract liabilities are recognized for our obligation to transfer goods or provide services to customers for which we have received consideration from the customer under IFRS 15. The financial impact arising from recognition of contract assets and contract liabilities is insignificant.

DESCRIPTION OF KEY STATEMENT OF PROFIT OR LOSS ITEMS The following table sets forth our consolidated statements of profit or loss and other comprehensive income for the periods indicated:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue ...... 96,492 148,245 210,033 Cost of services(1) ...... (42,349) (62,056) (104,576) Gross profit ...... 54,143 86,189 105,457 Other income ...... 7,088 6,412 4,671 Other gains and losses ...... 1,808 18,953 30,934 Research and development expenses(1) ...... (16,794) (17,253) (25,251) Selling and marketing expenses(1) ...... (1,392) (2,017) (3,925) Administrative expenses ...... (12,827) (15,228) (25,576) Listing expenses ...... — — (24,274) Fair value gain on financial assets at fair value through profit or loss (“FVTPL”) ...... — 14,720 68,286 Share of loss of associates ...... (1,351) (2,418) (1,748) Share of loss of joint ventures ...... (2,052) (1,694) (1,498) Finance cost ...... (203) (853) (557) Profit before fair value loss on financial liabilities at FVTPL and tax ...... 28,420 86,811 126,519 Fair value loss on financial liabilities at FVTPL ...... — — (20,658) Profit before tax ...... 28,420 86,811 105,861 Income tax expense ...... (3,947) (10,551) (15,311) Profit and total comprehensive income for the year ...... 24,473 76,260 90,550

RMB RMB RMB Earnings per share — Basic ...... 0.02 0.07 0.08 — Diluted ...... 0.02 0.07 0.08

Note: (1) Cost of services, R&D expenses, selling and marketing expenses and administrative expenses include our share-based compensation, which are not tax deductible under the PRC Enterprise Income Tax Law. We recorded RMB16,000, nil, and RMB8.6 millions of our own share-based compensation for the years ended December 31, 2016, 2017 and 2018, respectively.

198 FINANCIAL INFORMATION

Revenue We operate our drug discovery outsourcing services business as a single operating segment. We primarily generate revenue from fee income for the services provided to our customers. We recorded revenue of RMB96.5 million, RMB148.2 million and RMB210.0 million for the years ended December 31, 2016, 2017 and 2018, respectively, primarily reflecting the continued expansion of our operations.

During the Track Record Period, revenue generated from our CFS and EFS models reflected revenue generated from services to our non-investee and investee customers, respectively. The following table sets forth a breakdown of our revenue by respective charge models during the Track Record Period:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from services to non-investees (CFS model): —FTE...... 55,168 65,334 117,358 —FFS...... 26,289 56,119 37,317 81,457 121,453 154,675 Revenue from services to investees (EFS model): —FTE...... 9,809 6,979 33,593 —FFS...... 3,221 3,192 1,365 —SFE...... 2,005 16,621 20,400 15,035 26,792 55,358 96,492 148,245 210,033

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue generated from customers located in PRC —FTE...... 9,813 7,439 37,650 —FFS...... 10,193 11,768 10,573 20,006 19,207 48,223 Revenue generated from customers located outside PRC —FTE...... 55,164 64,874 113,301 —FFS...... 19,317 47,543 28,109 —SFE...... 2,005 16,621 20,400 76,486 129,038 161,810

199 FINANCIAL INFORMATION

While our operations are located in China, we have a global customer base with a majority of our customers located in the United States of America (“USA”). An analysis of our revenue from external customers, analyzed by their respective country/region of operation, is detailed below:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue —USA ...... 74,680 128,393 160,723 —PRC ...... 20,006 19,207 48,223 — Europe ...... 1,306 431 676 — Rest of the world ...... 500 214 411 96,492 148,245 210,033

Our revenue increased by 53.6% from RMB96.5 million for the year ended December 31, 2016 to RMB148.2 million for the year ended December 31, 2017, and further increased by 41.7% to RMB210.0 million in 2018, primarily due to an increase in the revenue from our customers headquartered in the United States and China. This was mainly as a result of the growing demand in these countries for drug discovery outsourcing services from both established pharmaceutical and biotechnology companies and newly established biotechnology companies with limited in-house R&D capabilities. See “Industry Overview — Overview of Drug Discovery Outsourcing Market” for more information. Given our growing reputation and premium service quality, we were able to receive new projects from word-of-mouth referrals by existing customers. We also benefitted from the dollar’s appreciation against the Renminbi in 2016 and 2018.

Cost of Services Our cost of services primarily consists of direct labor costs, cost of materials and overhead. Direct labor costs primarily consist of salaries, bonus, welfare, social security costs and share-based compensation for our R&D talents, excluding the costs allocated to research and development expenses, as well as those capitalized in contract costs. Cost of materials primarily consists of costs incurred for the materials used in the rendering of our services, such as reagents and chromatograph columns. Overhead primarily consists of depreciation charges of the facilities and equipment used in the rendering of our services, testing service fees for certain testing work we outsourced to third party vendors, utilities and maintenance. For the years ended December 31, 2016, 2017 and 2018, our cost of services was RMB42.3 million, RMB62.1 million and RMB104.6 million, respectively.

The table below sets forth a breakdown of our cost of services for the periods indicated, both in actual terms and as a percentage of our revenue:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Direct labor costs ...... 14,093 14.6% 23,907 16.1% 52,762 25.1% Cost of materials ...... 14,871 15.4% 17,073 11.5% 24,791 11.8% Overhead ...... 11,636 12.1% 18,512 12.5% 19,852 9.5% Others ...... 1,749 1.8% 2,564 1.7% 7,171 3.4% Total ...... 42,349 43.9% 62,056 41.9% 104,576 49.8%

200 FINANCIAL INFORMATION

Direct Labor Costs Our direct labor costs increased by 69.5% from RMB14.1 million for the year ended December 31, 2016 to RMB23.9 million for the year ended December 31, 2017 and further increased by 120.7% to RMB52.8 million for the year ended December 31, 2018, primarily due to our increased headcount as a result of an increase in demand for our drug discovery services. Our direct labor costs as a percentage of our revenues were 14.6%, 16.1%, and 25.1% in 2016, 2017 and 2018, respectively, which reflected the continued increase in the salary to our employees in the PRC in respective periods.

Cost of Materials Our cost of materials increased by 14.8% from RMB14.9 million for the year ended December 31, 2016 to RMB17.1 million for the year ended December 31, 2017 and further increased by 45.2% to RMB24.8 million for the year ended December 31, 2018. Such increases were primarily a result of an increase in the demand for our services. Our cost of materials as a percentage of our revenue were 15.4%, 11.5% and 11.8% for the years ended December 31, 2016, 2017 and 2018, respectively. Our cost of materials as a percentage of our revenue decreased from 15.4% in 2016 to 11.5% in 2017, primarily because the growth rate of revenue is much larger than that of cost of materials. Our cost of materials as a percentage of our revenue in 2018 remained stable at 11.8% as compared to the ratio in 2017.

Overhead Our overhead cost was RMB11.6 million, RMB18.5 million and RMB19.9 million for the years ended December 31, 2016, 2017 and 2018, respectively. Increases in our overhead cost in 2016, 2017 and 2018 were primarily due to the expansion of our facilities and the growth of our business. During the Track Record Period, we continuously expanded the facilities at our Shanghai and Jiaxing sites and acquired certain equipment for our operations. We also experienced a significant increase in testing service fees paid to our third party vendors in recent years partly due to the strong market demand for testing services.

Our overhead as a percentage of our revenue were 12.1%, 12.5% and 9.5%, respectively, for the years ended December 31, 2016, 2017 and 2018, respectively. Our overhead as a percentage of our revenue decreased from 12.5% in 2017 to 9.5% in 2018 primarily because our overhead remained relatively stable while our revenue increased significantly.

Gross Profit and Gross Profit Margin For the years ended December 31, 2016, 2017 and 2018, our gross profit was RMB54.1 million, RMB86.2 million and RMB105.5 million, respectively. Our gross margins remained relatively stable in 2016 and 2017 at 56.1% and 58.1%, respectively. Our gross margin in 2018 dropped to 50.2% from 58.1% in 2017, primarily because we expanded our R&D team from 219 to 417 technicians, which increased our direct labor costs.

Other Income Our other income consists of government grants and subsidies and interest income. During the Track Record Period, we received various grants and subsidies from PRC local government authorities as an incentive for (i) our patent applications, (ii) the export of our drug discovery related technologies to countries outside China, (iii) our purchase of high-tech equipment and construction of facilities, and

201 FINANCIAL INFORMATION

(iv) our employment of certain skilled personnel recognized by the relevant PRC government authorities, such as from the “National Thousand Talents Program” and the “Shanghai Thousand Talents Program”. In addition, a portion of the government grants we received were granted to compensate for expenses related to of our internal research projects. For the years ended December 31, 2016, 2017 and 2018, our other income was RMB7.1 million, RMB6.4 million and RMB4.7 million, respectively.

The following table sets forth a breakdown of our other income for the periods indicated:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Interest income — banks ...... 76 496 861 — related party ...... 1,068 178 — 1,144 674 861 Government grants and subsidies related to — Income (i)(a) ...... 5,278 4,796 — — Income (i)(b) ...... 58 23 2,895 — Assets (ii) ...... 608 919 915 7,088 6,412 4,671

Notes: (i) a. The government grants related to income have been received to compensate for the expense of our research projects. Some of the grants related to income have future related costs expected to be incurred and require us to comply with conditions attached to the grants and the government to acknowledge the compliance of these conditions. These grants related to incomes were recognized in profit or loss when related costs are subsequently incurred and we received government acknowledge of compliance. b. Other government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to our Group with no future related costs are recognized in profit or loss in the period in which they become receivable. (ii) Our Group has received certain government grants related to assets to invest in laboratory equipment and plant. The grants related to assets were recognized in profit or loss over the useful lives of the relevant assets.

202 FINANCIAL INFORMATION

Other Gains and Losses Other gains and losses consist primarily of gain on deemed disposal of interests in an associate, gain on deemed disposal of interest in a joint venture, net foreign exchange gain or loss and impairment loss on financial assets measured at amortized cost and others. For the years ended December 31, 2016, 2017 and 2018, we recorded net other gains of RMB1.8 million, RMB19.0 million and RMB30.9 million, respectively. The following table sets forth a breakdown of our other gains and losses for the periods indicated:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Net foreign exchange gain (loss) ...... 1,277 (1,228) 14,632 Impairment losses (recognized) reserved on financial assets measured at amortized cost ...... 36 (118) (113) Gain (loss) on disposal of property, plant and equipment ...... 162 (52) 5 Gain on deemed disposal of interests in an associate ...... — 20,351 — Gain on deemed disposal of interests in a joint venture ...... — — 11,355 Gain on disposal of interests in an associate ...... — — 4,047 Gain on disposal of interests in a joint venture ...... — — 960 Others ...... 333 — 48 1,808 18,953 30,934

We recorded other gains arising from (i) deemed disposal of interests in an associate for the year ended December 31, 2017 of RMB20.4 million due to the deemed disposal of equity interest in Shanghai Epican Gene Technology Co., Ltd. and (ii) deemed disposal of interests in a joint venture for the year ended December 31, 2018 of RMB11.4 million due to the deemed disposal of equity interest in Weimou Biotech (Shanghai) Ltd. The deemed disposals were attributable to the fact that our Group was no longer able to exercise significant influence or joint control over our associate Shanghai Epican Gene Technology Co., Ltd. and our joint venture Weimou Biotech (Shanghai) Ltd., which led to a one- off change in accounting treatments of the equity interest held by us in these companies from interests in associate/joint venture to FVTPL.

In addition, we recorded net foreign exchange losses of RMB1.2 million in 2017, while we recorded a net foreign exchange gain of RMB1.3 million and RMB14.6 million in 2016 and 2018, respectively, which was mainly a result of the fluctuations of the foreign exchange rate of the Renminbi against the U.S. dollars.

Research and Development Expenses Our research and development expenses mainly consist of labor costs, cost of materials, overhead costs and fees paid to third parties that conduct certain research and development activities on our behalf, such as collection of crystal diffraction data, primer synthesis, nuclear magnetic resonance analysis, fluorescence quantitative PCR or mouse/rat PK study. For the years ended December 31, 2016, 2017 and 2018, our research and development expenses were RMB16.8 million, RMB17.3 million and RMB25.3 million, respectively. Our research and development expenses increased during the Track Record Period primarily as a result of the increase in the headcount of our R&D staffs.

203 FINANCIAL INFORMATION

Selling and Marketing Expenses Our selling and marketing expenses consist of staff costs, traveling expense and others. Staff costs mainly consist of salaries, bonus, welfare and social security costs for our sales and marketing staffs. For the years ended December 31, 2016, 2017 and 2018, our selling and marketing expenses were RMB1.4 million, RMB2.0 million and RMB3.9 million, respectively.

In 2017, our selling and marketing expenses increased by 42.9% from RMB1.4 million for the year ended December 31, 2016 to RMB2.0 million for the year ended December 31, 2017, and further increased by 95% to RMB3.9 million for the year ended December 31, 2018, primarily because we expanded our independent sales and marketing presence in North America in 2017 with senior business development experts to run marketing activities and to provide customer support for our customers based in the United States and participated in more trade exhibitions and conferences in the second half of 2017. With the continued growth of our Company, we expect that our selling and marketing expenses will continue to grow in accordance with our business expansion.

Administrative Expenses Our administrative expenses consist of administrative staff costs, audit and consultancy fees, office administration expenses, rental, depreciation, travelling and transportation expenses and others. Administrative staff costs consist primarily of salaries, bonus, welfare, social security costs and share- based compensation for our management, administrative, finance and accounting and other administrative personnel. Audit and consultancy fees primarily consist of fees paid for audit, legal and other professional services that are not related to the Global Offering. Office administration expenses primarily consist of office supplies, conference and meeting fees, stationeries and others. Rental reflects the allocation of office building rental for our administrative functions. Depreciation charges primarily consist of depreciation of facilities and equipment for administrative purposes. Travelling and transportation expenses primarily consist of flight fares, accommodations, travel and communication expenses incurred by management and administrative personnel. Others primarily include insurance expenses, bank charges and other miscellaneous fees for general administrative purposes.

For the years ended December 31, 2016, 2017 and 2018, our administrative expenses were RMB12.8 million, RMB15.2 million and RMB25.6 million, respectively. Our administrative expenses increased by 18.8% from RMB12.8 million for the year ended December 31, 2016 to RMB15.2 million for the year ended December 31, 2017 and further increased 68.4% to RMB25.6 million for the year ended December 31, 2018, primarily due to our increase headcounts and continued expansion, as well as our share-based compensation expense of RMB4.0 million incurred in 2018.

Listing expenses Our listing expenses reflected professional service fees related to the Global Offering and the Listing, which primarily consist of sponsor fees, underwriting commissions, and fees paid to legal, accounting and other professional services providers. We recorded listing expenses of RMB24.3 million in 2018 and not in any other periods during the Track Record Period.

Fair Value Gain on Financial Assets at FVTPL Our EFS model features sharing of the upside of our customers’ IP values, which is primarily reflected by the gains from the fair value change of the equity interest in our incubation portfolio

204 FINANCIAL INFORMATION companies. Such fair value gains are recorded as “fair value gain on financial assets at fair value through profit or loss” in our financial statements. We have engaged Valuelink, an Independent Third Party professional appraisal firm, to assess and determine the fair values of our financial assets as of each balance sheet date during the Track Record Period. As advised by Valuelink, the aggregate values of financial assets at FVTPL under the EFS model were RMB2.0 million, RMB53.0 million and RMB171.5 million as at December 31, 2016, December 31, 2017 and December 31, 2018, respectively.

We recorded gains arising from financial assets designated as at FVTPL of RMB14.7 million for the year ended December 31, 2017 primarily reflecting the increase in fair value of our equity interest in two incubation portfolio companies, Flash Therapeutics, LLC and Arthrosi Therapeutics, Inc. In addition, we recorded gains arising from financial assets at FVTPL of RMB68.3 million for the year ended December 31, 2018 primarily reflecting the increase in the fair value of equity interest of our incubation portfolio companies Anji Pharmaceuticals Inc., Epican Technology Limited and Bonti, Inc..

Share of Loss of Associates For the years ended December 31, 2016 and 2017 and 2018, we recorded share of loss of associates of RMB1.4 million, RMB 2.4 million and RMB1.7 million, respectively, which reflected our investments in associates since 2016 and our share of these associates’ results of operations under equity method of accounting. None of our associates was individually material to our Group for the years ended December 31, 2016, 2017 and 2018. As at December 31, 2016, 2017 and 2018, we had equity interests in the following associates established and operating in the PRC:

Shareholding Percentage as at December 31, 2016 2017 2018 Shanghai Yinlaiteng Medical Research Ltd. (上海英萊騰醫藥研究有限公司) ...... 20.00% 20.00% 20.00% Shanghai Epican Gene Technology Co., Ltd.* ...... 12.35% — — Jiaxing Tekeluo Biotech Co., Ltd. (嘉興特科羅生物科技有限公司) ...... 12.50% 12.50% 9.31% QureBio Limited (啓愈生物技術(上海)有限公司) ...... — 28.00% 14.00%

* Due to the deemed disposal of our equity interest in Shanghai Epican Gene Technology Co., Ltd. on December 15, 2017 in connection with the company’s group restructuring, we no longer share the losses of the company since 2017.

205 FINANCIAL INFORMATION

Share of Loss of Joint Venture For the years ended December 31, 2016, 2017 and 2018, we recorded share of loss of joint ventures of RMB2.1 million, RMB 1.7 million and RMB1.5 million, respectively, which reflected our investments in joint ventures since 2016 and our share of these joint ventures’ results of operations under equity method of accounting. None of our joint ventures was individually material to our Group for the years ended December 31, 2016, 2017 and 2018. As at December 31, 2016, 2017 and 2018, we had equity interests in the following joint ventures established and operating in the PRC:

Shareholding Percentage as at December 31, 2016 2017 2018 Sichuan Good Doctor Biotech Ltd. (四川好醫生維亞生物科技有限公司) ...... 49% 49% — Weimou Biotech (Shanghai) Ltd. (維眸生物科技(上海)有限公司)* ...... 15.67% 15.67% — Jiaxing Youbo Biotech Co., Ltd. (嘉興優博生物技術有限公司) ...... — — 30.00%

* In 2016 and 2017, although we held less than 20% of the equity interest in Weimou Biotech (Shanghai) Ltd. (“Weimou”), we exercised joint control by virtue of our contractual right to appoint three out of five directors to the board of directors of Weimou. In January 2018, in connection with the new round of financing of Weimou, we no longer exercised joint control over Weimou, which led to a one-off change in accounting treatments of the equity interest held by us from interests in joint venture to FVTPL.

Finance Cost Our finance cost primarily consists of interest expenses on loans from a bank and two of our related parties. For the years ended December 31, 2016, 2017 and 2018, our finance cost was RMB0.2 million, RMB0.9 million and RMB0.6 million, respectively. Our finance cost increased significantly in the year ended December 31, 2017, primarily due to the bridge loans of US$1.5 million in connection with our investment in Bonti, Inc., a clinical-stage biotechnology company focused on the development and commercialization of novel, fast-acting neurotoxin products for therapeutic and aesthetic applications.

Fair Value Loss on Financial Liabilities at FVTPL Our fair value loss on financial liabilities at FVTPL represents changes in fair value of the convertible redeemable preferred shares issued by us, which are designated by us as financial liabilities at fair value. In 2018, we recorded a fair value loss on financial liabilities at FVTPL of RMB20.7 million, which reflected the change in fair value of the series B preferred shares issued by us in connection with our pre-IPO financing. Prior to the Global Offering, our series B preferred shares were not traded in an active market and the fair value at the respective reporting dates was determined using valuation techniques. Please refer to Note 30 to the Accountant’s Report included in Appendix I to this prospectus for details of the key assumptions in the valuations. Upon the completion of the Global Offering, all of our series B preferred shares will be automatically converted to our Shares. The fair value of each series B preferred share will then be equivalent to the fair value of each of our ordinary shares on the conversion date, which is the Offer Price in the Global Offering.

Income Tax Expense Our income tax expense primarily consists of the current income tax at the statutory rates applicable to our assessable profit before taxation as determined under relevant laws and regulations. For the years ended December 31, 2016, 2017 and 2018, our income tax expense was RMB3.9 million,

206 FINANCIAL INFORMATION

RMB10.6 million and RMB15.3 million respectively. The following table sets forth a breakdown of our income tax expenses for the periods indicated:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Current tax: — PRC Enterprise Income Tax ...... 4,387 10,714 11,659 Under (over) provision in prior years ...... 92 (102) — 4,479 10,612 11,659 Deferred tax: — Current year ...... (532) (61) 3,652 3,947 10,551 15,311

Hong Kong Profits Tax for the Hong Kong subsidiaries is calculated at 16.5% of the estimated assessable profit for the period before April 1, 2018. On March 21, 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) which introduces the two-tiered profits tax rates regime. The Bill was signed into law on March 28, 2018 and was gazette on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of qualifying corporations will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The two-tiered profits tax rates regime will be applicable to the Group for its annual reporting periods ending on or after April 1, 2018.

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the EIT rate of the PRC subsidiaries is 25% unless subject to tax exemption set out below.

Viva Biotech Shanghai was accredited as a “High and New Technology Enterprise” in November 2013 and therefore is entitled to a preferential EIT rate of 15% for a three-year period commencing from the beginning of 2013. In 2016, Viva Biotech Shanghai renewed its High and New Technology Enterprise status, which has been approved by the relevant government authorities, and it is entitled to a preferential tax rate of 15% for a three-year period commencing from the beginning of 2016. The current High and New Technology Enterprise status will expire in November 2019, and Viva Biotech Shanghai will apply for renewal within six months before the expiration. As advised by our legal advisor as to PRC law, we do not foresee any legal obstacle for it to renew such status.

Effective Tax Rate Our effective tax rate, representing income tax expense divided by profit before taxation, was 13.9%, 12.2% and 14.5% for the years ended December 31, 2016, 2017 and 2018, respectively. Factors affecting our effective tax rate during the Track Record Period primarily include: (i) applicable EIT rate for each entity within our Group; (ii) fluctuations in R&D expenses, which resulted in additional tax deduction; (iii) size of income/expenses not taxable/deductible for tax purpose; and (iv) other tax adjustments.

207 FINANCIAL INFORMATION

DISCUSSION OF RESULTS OF OPERATIONS Year Ended December 31, 2018 Compared to Year Ended December 31, 2017 Revenue Our revenue increased by 41.7% from RMB148.2 million for the year ended December 31, 2017 to RMB210.0 million for the year ended December 31, 2018, primarily due to the growing demand for drug discovery outsourcing services from both pharmaceutical and biotechnology companies and newly established biotechnology companies with limited in-house research and development capabilities. For the year ended December 31, 2018, our revenue contributed by our FTE, FFS and SFE customers represented approximately 71.9%, 18.4% and 9.7% of our total revenue, respectively, as compared to 48.8%, 40.0% and 11.2%, respectively, of our total revenue for the year ended December 31, 2017. We expect our total revenue will continue to grow in the coming year and the revenue contributed by EFS customers as a percentage to our total revenue will increase as we gradually shift our focus to the EFS model.

Cost of Services Our cost of services increased by 68.5% from RMB62.1 million for the year ended December 31, 2017 to RMB104.6 million for the for the year ended December 31, 2018, primarily due to overall expansion of our business.

Our cost of materials increased by 45.2% from RMB17.1 million for the year ended December 31, 2017 to RMB24.8 million for the year ended December 31, 2018, primarily due to the overall expansion of our business.

Our direct labor costs increased by 120.7% from RMB23.9 million for the year ended December 31, 2017 to RMB52.8 million for the year ended December 31, 2018, primarily due to the increased demand for our drug discovery services from our customers and increasing headcount and salary of our employees.

Our overhead increased by 7.6% from RMB18.5 million for the year ended December 31, 2017 to RMB19.9 million for the year ended December 31, 2018, primarily due to the increase in depreciation of our property, plant and equipment.

Gross Profit and Gross Profit Margin Our gross profit increased by 22.4% from RMB86.2 million for the year ended December 31, 2017 to RMB105.5 million for the year ended December 31, 2018. Our gross profit margin decreased from 58.1% for the year ended December 31, 2017 to 50.2% for the year ended December 31, 2018, primarily because we significantly expanded our R&D team from 219 to 417 technicians, which increased our direct labor costs. In addition, we recognized RMB32.2 million in revenue in 2017 from the largest customer which included a RMB14.0 million milestone bonus, resulting in a higher margin.

Other Income Our other income decreased by 26.6% from RMB6.4 million for the year ended December 31, 2017 to RMB4.7 million for the year ended December 31, 2018, primarily due to an decrease in our government grant income of RMB1.9 million received during the year ended December 31, 2018.

208 FINANCIAL INFORMATION

Other Gains and Losses We recorded net other gains of RMB30.9 million for the year ended December 31, 2018, representing a 62.6% increase from RMB19.0 million for the year ended December 31, 2017, primarily due to a RMB14.6 million net foreign exchange gain recorded in 2018 as compared to a RMB1.2 million net foreign exchange loss recorded in 2017.

Research and Development Expenses Our research and development expenses increased by 46.2% from RMB17.3 million for the year ended December 31, 2017 to RMB25.3 million for the year ended December 31, 2018, primarily due to a RMB7.0 million increase in the salary expenses for our R&D staffs.

Selling and Marketing Expenses Our selling and marketing expenses increased by 95% from RMB2.0 million for the year ended December 31, 2017 to RMB3.9 million for the year ended December 31, 2018, primarily because we expanded our sales and marketing team in the second half of 2017, and actively participated in conferences, trade exhibitions and other marketing activities in the United States.

Administrative Expenses Our administrative expenses increased by 68.4% from RMB15.2 million for the year ended December 31, 2017 to RMB25.6 million for the year ended December 31, 2018, primarily due to a RMB4.0 million increase in our share-based compensation expenses as well as a RMB1.5 million in salary expenses as our headcounts and salary level increased in 2018.

Fair Value Gain on Financial Assets at FVTPL Our fair value gain on financial assets at FVTPL increased from RMB14.7 million for the year ended December 31, 2017 to RMB68.3 million for the year ended December 31, 2018, primarily due to (i) additional equity interests in nine incubation portfolio companies acquired by us in 2018 and (ii) increases in fair values of equity interests held by us in Anji pharmaceuticals Inc., Epican Technology Limited and Bonti Inc.

Share of loss of associates Our share of loss of associates decreased by 29.2% from RMB2.4 million for the year ended December 31, 2017 to RMB1.7 million for the year ended December 31, 2018. The decrease in our share of loss of associates was primarily because we disposed half of the equity interest held by us in QureBio Limited in 2018, and therefore we shared less losses of such associate in 2018.

Share of loss of joint ventures Our share of loss of joint ventures slightly decreased from RMB1.7 million for the year ended December 31, 2017 to RMB1.5 million for the year ended December 31, 2018. The accounting treatment of Weimou Biotech (Shanghai) Ltd., one of our joint ventures, changed from equity method to fair value through profit or loss in 2018 as we ceased to have significant influence over Weimou. As a result, we did not share the losses of Weimou for the year ended December 31, 2018. In addition, we disposed the equity interest held by us in Sichuan Good Doctor Biotech Ltd. in 2018, and therefore we shared less losses of such joint venture in 2018.

209 FINANCIAL INFORMATION

Finance Cost Our finance cost slightly decreased from RMB0.9 million for the year ended December 31, 2017 to RMB0.6 million for the year ended December 31, 2018, primarily due to the decreased interest expense in connection with our repayment of our related party loan.

Fair Value Loss on Financial Liabilities at FVTPL We recorded fair value loss on financial liabilities at FVTPL of RMB20.7 million in 2018, which represented changes in fair value of the series B convertible redeemable preferred shares issued by us in connection with our pre-IPO financing.

Income Tax Expense Our income tax expense increased by 44.3% from RMB10.6 million for the year ended December 31, 2017 to RMB15.3 million for the year ended December 31, 2018, primarily due to our increased profit before tax. In addition, our effective income tax rate increased from 12.2% for the year ended December 31, 2017 to 14.5% for the year ended December 31, 2018, primarily due to an increase in expenses not deductible for tax purpose.

Profit and Total Comprehensive Income for the Year and Net Profit Margin As a result of the foregoing, our profit and total comprehensive income for the year increased from RMB76.3 million for the year ended December 31, 2017 to RMB90.6 million for the year ended December 31, 2018. Our net profit margin decreased from 51.4% for the year ended December 31, 2017 to 43.1% for the year ended December 31, 2018, primarily due to a significant increase in our cost of sales in 2018 along with our rapid expansion, as well as the impact resulted from the share- based compensation expenses in 2018.

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 Revenue Our revenue increased by 53.6% from RMB96.5 million for the year ended December 31, 2016 to RMB148.2 million for the year ended December 31, 2017, primarily due to the growing demand for drug discovery outsourcing services from both established pharmaceutical and biotechnology companies and newly established biotechnology companies with limited in-house research and development capabilities. Leveraging our proprietary technology platforms and deep industry experience, we were able to win new projects from existing customers and attract new customers, in particular those headquartered in China. We provided drug discovery services to 117 customers in 2017, as compared to 107 customers in 2016.

For the year ended December 31, 2017, our revenue contributed by our FTE, FFS and SFE customers represented approximately 48.8%, 40.0% and 11.2% of our total revenue, respectively, as compared to 67.3%, 30.6% and 2.1%, respectively, of our total revenue for the year ended December 31, 2016.

Cost of Services Our cost of services increased by 46.8% from RMB42.3 million for the year ended December 31, 2016 to RMB62.1 million for the year ended December 31, 2017, primarily due to the growing demand for drug discovery outsourcing services from our customers.

210 FINANCIAL INFORMATION

Our cost of raw materials increased by 14.8% from RMB14.9 million for the year ended December 31, 2016 to RMB17.1 million for the year ended December 31, 2017, primarily due to an increase in the demand for our services.

Our direct labor costs increased by 69.5% from RMB14.1 million for the year ended December 31, 2016 to RMB23.9 million for the year ended December 31, 2017, primarily because (i) the employee headcount of our business units increased as a result of an increase in the demand for our services, and (ii) the average salary and compensation package of our employees increased in 2017.

Our overhead increased by 59.5% from RMB11.6 million for the year ended December 31, 2016 to RMB18.5 million for the year ended December 31, 2017, primarily due to an increase in our rent payment and an increase in depreciation and amortization in connection with our lab equipment.

Gross Profit and Gross Profit Margin Our gross profit increased by 59.3% from RMB54.1 million for the year ended December 31, 2016 to RMB86.2 million for the year ended December 31, 2017. Our gross profit margin increased from 56.1% for the year ended December 31, 2016 to 58.1% for the year ended December 31, 2017, primarily because we recognized RMB34.1 million in revenue in 2017 from a major customer which included a RMB14.0 million milestone bonus and led to higher margin.

Other Income Our other income decreased by 9.9% from RMB7.1 million for the year ended December 31, 2016 to RMB6.4 million for the year ended December 31, 2017, primarily due to (i) a RMB0.9 million decrease in other interest income in connection with and a related party loan, the principal had been repaid in full in 2017, and (ii) a RMB0.2 million decrease in government grants received by us in 2017.

Other Gains and Losses Our other gains and losses increased from RMB1.8 million for the year ended December 31, 2016 to RMB19.0 million for the year ended December 31, 2017, primarily attributable to a RMB20.4 million deemed disposal of interests in an associate for the year ended December 31, 2017 due to the deemed disposal of our equity interest in Shanghai Epican Gene Technology Co., Ltd., partially offset by a net foreign exchange losses of RMB1.2 million in 2017.

Research and Development Expenses Our research and development expenses increased from RMB16.8 million in 2016 to RMB17.3 million in 2017, which reflected our continuous investment in the development of our proprietary drug discovery technologies.

Selling and Marketing Expenses Our selling and marketing expenses increased by 42.9% from RMB1.4 million for the year ended December 31, 2016 to RMB2.0 million for the year ended December 31, 2017, primarily because we expanded our sales and marketing team, and actively participated in more conferences, trade exhibitions and other marketing activities in the United States in 2017.

211 FINANCIAL INFORMATION

Administrative Expenses Our administrative expenses increased by 18.8% from RMB12.8 million for the year ended December 31, 2016 to RMB15.2 million for the year ended December 31, 2017, primarily due to an increase in our administrative staff costs. Our administrative staff costs increased by 24.6% from RMB5.7 million for the year ended December 31, 2016 to RMB7.1 million for the year ended December 31, 2017, primarily attributable to an increase in the headcount of our administrative personnel in light of the growth of our business.

Fair Value Gain on Financial Assets at FVTPL Our fair value gain on financial assets at FVTPL increased from nil for the year ended December 31, 2016 to RMB14.7 million for the year ended December 31, 2017, primarily due to (i) a RMB5.4 million increase in fair value of the equity interest in Flash Therapeutics, LLC held by us and (ii) a RMB4.1 million increase in fair value of the equity interest in Arthrosi Therapeutics, Inc. held by us.

Share of loss of associates Our share of loss of associates increased by 71.4% from RMB1.4 million for the year ended December 31, 2016 to RMB2.4 million for the year ended December 31, 2017. The increase in our share of loss of associates was primarily attributable to the increased losses as we acquired equity interest in, and shared the losses of, one additional associate in 2017.

Share of loss of joint ventures Our share of loss of joint ventures decreased by 19.0% from RMB2.1 million for the year ended December 31, 2016 to RMB1.7 million for the year ended December 31, 2017. The decrease in our share of loss of joint ventures was primarily because our share of losses of one of our joint venture had exceeded our interest in such joint venture, and therefore we discontinue recognizing our share of its further losses in 2017.

Finance Cost Our finance cost increased from RMB0.2 million for the year ended December 31, 2016 to RMB0.9 million for the year ended December 31, 2017, primarily due to the increased interest expense in connection with our related party loan for our equity investment in two of our incubation portfolio companies.

Income Tax Expense Our income tax expense increased by 171.8% from RMB3.9 million for the year ended December 31, 2016 to RMB10.6 million for the year ended December 31, 2017, primarily due to an increase in PRC enterprise income tax. Our PRC enterprise income tax increased significantly from RMB4.4 million for the year ended December 31, 2016 to RMB10.7 million for the year ended December 31, 2017, primarily due to the growth of our business and the gains on deemed disposal of our equity interest in Shanghai Epican Gene Technology Co., Ltd. In addition, our effective income tax rate decreased from 13.9% for the year ended December 31, 2016 to 12.2% for the year ended December 31, 2017, primarily due to an increase in income not taxable for tax purpose in 2017.

212 FINANCIAL INFORMATION

Profit and Total Comprehensive Income for the Year and Net Profit Margin As a result of the foregoing, our profit and total comprehensive income for the year increased significantly by 211.4% from RMB24.5 million for the year ended December 31, 2016 to RMB76.3 million for the year ended December 31, 2017. Our net profit margin increased from 25.4% for the year ended December 31, 2016 to 51.4% for the year ended December 31, 2017, primarily due to the fair value gains from our incubation portfolio companies and deemed disposal of interests in our associates and joint ventures.

DISCUSSION OF SELECTED ITEMS FROM THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION The table below sets forth our current assets, current liabilities and net current assets for the dates indicated:

At At December 31, February 28, 2016 2017 2018 2019 RMB’000 RMB’000 RMB’000 RMB’000 Current Assets Inventories ...... 1,013 3,323 4,900 4,688 Contract costs ...... 6,265 3,459 4,261 5,998 Trade and other receivables ...... 24,064 36,875 68,410 72,971 Loans to a related party ...... 20,397 2,002 — — Restricted bank balances ...... — 8,022 8,045 3,393 Structured deposits ...... ———20,111 Cash and cash equivalents ...... 13,425 29,766 155,554 100,257 Total current assets ...... 65,164 83,447 241,170 207,418 Current Liabilities Trade and other payables ...... 10,932 15,571 25,578 20,257 Contract liabilities ...... 729 1,092 1,483 2,002 Income tax payables ...... 3,786 7,745 14,904 12,051 Loans from related parties ...... — 12,112 — — Bank borrowings ...... 447 471 497 502 Obligations under a finance lease ...... 226 — — — Deferred income ...... 200 — — — Lease liabilities ...... ———6,204 Total current liabilities ...... 16,320 36,991 42,462 41,016 Net Current Assets ...... 48,844 46,456 198,708 166,402

We recorded net current assets of RMB166.4 million as of February 28, 2019, compared with net current assets of RMB198.7 million as of December 31, 2018, primarily due to a RMB22.3 million investment in financial assets at FVTPL in early 2019 which reduced the balance of our cash and cash equivalents as of February 28, 2019.

We recorded net current assets of RMB198.7 million as of December 31, 2018, compared with net current assets of RMB46.5 million as of December 31, 2017, primarily due to a RMB125.8 million increase in cash and cash equivalents, partially offset by an increase in trade and other payables of RMB10.0 million as of December 31, 2018. The increase in cash and cash equivalents was primarily due to our pre-IPO financing closed in 2018.

213 FINANCIAL INFORMATION

We recorded net current assets of RMB46.5 million as of December 31, 2017, compared with net current assets of RMB48.8 million as of December 31, 2016, primarily due to a RMB12.8 million increase in trade and other receivables, partially offset by loans from related parties of RMB12.1 million as of December 31, 2017. The increase in trade and other receivables was primarily due to increased demand of our drug discovery services by our customers.

Inventories Our inventories include raw materials and consumables used for our drug discovery services, such as reagents and chromatograph columns. Our inventories increased from RMB1.0 million as of December 31, 2016 to RMB3.3 million as of December 31, 2017 and further to RMB4.9 million as of December 31, 2018, primarily as a result of the growth of our business.

Contracts Costs Our contract assets mainly comprises our services in progress and semi-finished deliverables. Our service work in progress decreased from RMB6.3 million as of December 31, 2016 to RMB3.5 million as of December 31, 2017 and increased to RMB4.3 million as of December 31, 2018, primarily attributable to the milestones in connection with our drug discovery services and the demand from customers on our services.

Financial Assets at FVTPL Our financial assets at FVTPL primarily consists of our investments in equity instruments in our incubation portfolio companies. As of December 31, 2016, 2017 and 2018, the valuation method and market multiples adopted for our financial assets at FVTPL in our incubation portfolio companies were as follows:

Initial Fair value at investment December 31, December 31, December 31, Investee costs 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 Flash Therapeutics, LLC ...... 15,664 2,005 14,212 21,503 Dogma Therapeutics, LLC ...... 12,044 — 4,208 10,700 Tabomedex Biosciences, Inc...... 5,555 — 3,458 5,835 Arthrosi Therapeutics, LLC ...... 43,275 — 5,764 51,750 Bonti, Inc...... 13,616 — 12,452 — Epican Technology Limited ...... 15,087 — 25,346 25,288 Liangzhun (Shanghai) Industrial Co., Ltd...... 6,000 — 5,619 7,549 Weimou Biotech (Shanghai) Ltd...... 12,589 — — 13,298 Anji Pharmaceuticals Inc...... 5,329 — — 26,220 Weiqing Biotech (Shanghai) Ltd...... 11,074 — — 11,074 QurAlis Corporation ...... 3,440 — — 3,432 AmacaThera, Inc...... 5,202 — — 5,148 VersaPeutics, Inc...... 20,901 — — 20,590 Clues Therapeutics Inc...... 2,389 — — 2,353

214 FINANCIAL INFORMATION

In determining the fair value of our financial assets at FVTPL as of each balance sheet date, we engaged Valuelink, an independent third party valuer, to perform valuation analyses on the financial assets we hold. The valuer performed the valuation analysis for the incubation portfolio companies based on International Private Equity and Venture Capital Valuation Guidelines, Edition December 2015, issued by IPEV Board, and the valuation methodologies adopted by the valuer primarily included the “price of recent investment”, “market multiple” and “cost of investment” methods.

If there is no recent investment in the incubation portfolio companies, the market multiple method, specifically the P/R&D expense, is adopted for valuation analysis. Such method and multiple are adopted with consideration of the following factors: Š the incubation portfolio companies have no revenue and profit except R&D activities; Š the R&D expenses is closely related to the development stage of the incubation portfolio companies, which is a key value driver in biotech/pharmaceutical industry; Š as drug discovery service provider, the Company has access to the information related to the R&D activities of the incubation portfolio companies; Š compared with obtaining financial projections and detailed operational plans of the incubation portfolio companies, the market information from comparable listed companies is relatively easier to collect in US market, although the number of such listed companies may be limited.

In addition, the assumptions used in the valuation analysis are based on financial performance and stage of development combined with management judgment, with inputs of numerous objective and subjective factors, to determine the fair value of the investments in incubation portfolio companies, including the following factors: Š the stage of development; Š the prices, rights, preferences and privileges of the investment instruments; Š any adjustment necessary to recognize a lack of marketability for the investment; Š the market performance of industry peers.

In relation to the valuation of financial assets at FVTPL, our Directors adopted the following procedures: (i) carried out independent and sufficient investigation and due diligence, including (a) understanding the nature of the investments to assess their merits; (b) carefully considering all information that is relevant to the assessment of the investments; (c) taking all reasonable steps to verify the accuracy and reasonableness of material information that is likely to affect the valuation of the investments; (ii) engaged Valuelink as independent external valuer and provided necessary financial and non-financial information to Valuelink for them to perform valuation procedures and discussed with Valuelink on relevant assumptions; (iii) reviewed the valuation working papers and results prepared by Valuelink; and (iv) participated in the due diligence and discussions with the Sole Sponsor, the Reporting Accountants and ValueLink with respect to valuation analysis performed by Valuelink. Our Directors are of the view that the valuation analysis performed by Valuelink is fair and reasonable, and the financial statements of our Group is correct and properly prepared.

Details of the fair value measurement of these financial assets at FVTPL, particularly the fair value hierarchy, the valuation techniques and key inputs, including the significant unobservable inputs, the relationship of unobservable inputs to fair value and reconciliation of level 3 measurements, are

215 FINANCIAL INFORMATION disclosed in note 34 (c) to the Historical Financial Information of Group for the Track Record Period as set out in the accountants’ report issued by the Reporting Accountants in accordance with Hong Kong Standard on Investment Circular Reporting Engagement 200 “Accountants’ Report on Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants in Appendix I. The Reporting Accountants’ opinion on the Historical Financial Information of the Group for the Track Record Period as a whole is set out on I-2 of Appendix I.

In relation to the valuation analysis performed by ValueLink on the incubation portfolio companies, the Sole Sponsor has (i) conducted due diligence to ensure the qualifications and competency of ValueLink; (ii) reviewed the relevant documents and information provided by the Group, the Reporting Accountants and ValueLink, (iii) engaged an independent third party valuer to perform review on the valuation reports issued by ValueLink, and (iv) participated in the due diligence and discussions with all parties mentioned above and have obtained necessary representations and confirmations from the Group, the Reporting Accountants, ValueLink and the third party valuer. Based on the above, nothing has come to the Sole Sponsor’s attention that would cause the Sponsor to question the valuation analysis performed by ValueLink on the incubation portfolio companies.

Trade and Other Receivables The following table shows a breakdown of our trade and other receivables by category as of the dates indicated:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Trade receivables — related parties ...... 6,767 12,316 1,921 — third parties ...... 13,413 16,882 50,433 Loss allowance for trade receivables ...... (443) (561) (893) 19,737 28,637 51,461 Other receivables — related parties ...... 1,098 78 — — third parties ...... 882 1,007 2,112 1,980 1,085 2,112

Deferred issue costs ...... — — 6,724 Prepayments ...... 517 375 525 Financial assets at amortized cost ...... — 3,500 — Prepaid expenses 1,405 1,968 2,908 Interest receivable ...... — 126 — Value added tax recoverable ...... 425 1,184 4,680 2,347 7,153 14,837 Total trade and other receivables ...... 24,064 36,875 68,410

Trade receivables from related parties primarily comprise of the outstanding amounts receivable by us from our related parties for services we provide. Depending on the charge method(s) the customers elect, our overseas customers enter into long-term or short-term service agreements with us. Trade receivables from third parties primarily represent the outstanding amounts receivable by us from our non-related party customers for services we provide. Our project/milestone-based service

216 FINANCIAL INFORMATION contract or work order typically comprises a number of tasks, each including several discovery and development steps.

Other receivables from third parties for 2016, 2017 and 2018 primarily comprise of the current portion of rental deposits and export tax refund.

During the Track Record Period and up to the Latest Practicable Date, we did not have any material dispute or disagreement with our customers in relation to the timing, amounts of billing or the collection of our trade receivables. Our trade receivables (including allowance for doubtful debts) increased by 45.2% from RMB19.7 million as of December 31, 2016 to RMB28.6 million as of December 31, 2017 and increased by 80.1% to RMB51.5 million as of December 31, 2018, which was primarily due to, and generally in line with, the growth of our business during the Track Record Period. Subsequent to the Track Record Period, we have settled trade receivables of RMB39.5 million as of February 28, 2019, representing 76.0% of our trade receivables as of December 31, 2018.

We allow a credit period of 30 to 90 days to our customers. The following is an age analysis of trade receivables (net of allowance for doubtful debts) presented based on the invoice dates, at the end of each year in Track Record Period, which approximated the respective revenue recognition dates:

As at December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Within 3 months ...... 15,167 19,787 46,580 3 months to 1 year ...... 791 3,093 4,810 1-2 years ...... 3,672 2,091 71 Over 2 years ...... 107 3,666 — 19,737 28,637 51,461

In determining the recoverability of the trade receivable, we consider any change in the credit quality of the trade receivable from the date on which the credit was initially granted up to the reporting date. The credit quality of trade receivables that were neither past due nor impaired had not changed during the Track Record Period.

We determine the allowance for bad debts based on the evaluation of collectability and ageing analysis of the receivables and on our management’s judgment including the assessment of change in credit quality and the past collection history of each customer. The following table sets forth the movement of allowance for doubtful debts as of the dates indicated:

As of December 31, 2016 2017 (RMB’000) Opening balance ...... (479) (443) Provided for the year ...... — (118) Reversed for the year ...... 36 — Closing balance ...... (443) (561)

217 FINANCIAL INFORMATION

Lifetime ECL Lifetime (non ECL credit- (credit- impaired) impaired) Total RMB’000 RMB’000 RMB’000 At December 31, 2017 under IAS 39 ...... — (561) (561) Adjustment upon application of IFRS 9 ...... (34) (521) (555) At January 1, 2018 — after adjustment ...... (34) (1,082) (1,116) Changes due to financial instruments recognized as at January 1: — Impairment losses recognized ...... (698) (698) — Impairment losses reversed ...... — 585 585 — Write-offs ...... — 336 336 At December 31, 2018 ...... (732) (161) (893)

For the years ended December 31, 2016, 2017 and 2018, our trade receivables turnover days were 66 days, 68 days and 78 days, respectively. We calculate the trade receivables turnover days using the average of the opening and closing balances of trade receivables for the relevant year (before adjustment of allowance for doubtful debts), divided by the corresponding revenue for the year, and then multiplied by 365 days.

Our trade receivables turnover days remained steady at 66 days for the year ended December 31, 2016 compared to 68 days for the year ended December 31, 2017. Our trade receivables turnover days increased from 68 days for the year ended December 31, 2017 to 78 days for the year ended December 31, 2018 primarily attributable to the increase in our trade receivables along with the increase in our revenue as our business continues to expand.

Trade and Other Payables The following table sets forth a breakdown of our trade and other payables by category as of the dates indicated:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Trade payables — third parties ...... 1,575 3,767 4,685 Other payables — related parties ...... 3,000 547 — — third parties ...... 1,483 4,458 3,124 4,483 5,005 3,124

Accrued listing expenses and issue costs ...... — — 11,516 Salary and bonus payables ...... 4,679 6,580 5,902 Other taxes payable ...... 195 219 351 10,932 15,571 25,578

Trade payables to third parties mainly represent the balances due to our suppliers for purchase of materials. Other payables to related parties mainly consist of the balances of an advance to a related party. See “Related Party Transactions” for more details. Other payables to third parties mainly represent payables for various operating expenses.

218 FINANCIAL INFORMATION

As at December 31, 2016, 2017 and 2018, our trade and other payables were RMB10.9 million, RMB15.6 and RMB25.6 million, respectively. The increases in our trade and other payables were primarily due to increases in trade payables to third parties in relation to our procurement of services or laboratory supplies. All our other payables due to related parties had been settled as of the Latest Practicable Date.

Payment terms with suppliers are mainly on credit within 30 days from the time when the goods and/or services are received from the suppliers. The following is an age analysis of trade payables presented based on the date of receipts of goods by the Group, at the end of each reporting period:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Within 3 months ...... 1,575 2,011 3,398 Over 3 months but within 1 year ...... — 1,607 597 Over 1 year ...... — 149 590 1,575 3,767 4,685

Trade and other payables that are denominated in currencies other than the functional currency of the respective group entities are set out below:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 US$ ...... — 1,245 337

LIQUIDITY AND CAPITAL RESOURCES Cash Flows Our primary uses of cash are to fund working capital, payment for the purchase of plant and equipment and other recurring expenses. During the Track Record Period, we funded our working capital and other capital expenditure requirements through a combination of cash generated from operations, loans from related parties, advances from shareholders and bank borrowings. We had settled all of the inter-company loans from/to our results of operations as of the Latest Practicable Date.

The following table sets forth selected cash flow data from our consolidated statements of cash flows for the periods indicated:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

OPERATING ACTIVITIES Profit before tax ...... 28,420 86,811 105,861 Adjustments for: Interest on bank borrowings ...... 189 168 143 Interest on loans from related parties ...... — 677 414 Interest on a finance lease ...... 14 8 — Interest income from banks ...... (76) (496) (861) Interest income from a related party ...... (1,068) (178) — Foreign exchange (gain) loss ...... (624) 314 (4,605)

219 FINANCIAL INFORMATION

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Depreciation of property, plant and equipment ...... 3,782 5,501 9,548 Impairment (reversed) losses recognized on financial assets measured at amortized cost ...... (36) 118 113 (Gain) loss on disposal of property, plant and equipment ...... (162) 52 (5) Income from government grants and subsidies related to assets ...... (608) (919) (915) Share-based payment expenses ...... 16 — 8,602 Fair value gain on financial assets at FVTPL ...... — (14,720) (68,286) Gain on deemed disposal of interests in a joint venture ...... — — (11,355) Gain on deemed disposal of interests in an associate ...... — (20,351) — Gain on disposal of interests in a joint venture ...... — — (960) Gain on disposal of interests in an associate ...... — — (4,047) Fair value loss on financial liabilities at FVTPL ...... — — 20,658 Share of loss of joint ventures ...... 2,052 1,694 1,498 Share of loss of associates ...... 1,351 2,418 1,748 Revenue from service-for-equity ...... (2,005) (16,621) (20,400) Operating cash flows before movements in working capital ...... 31,245 44,476 37,151 Increase in inventories ...... (441) (2,310) (1,577) (Increase) decrease in contract costs ...... (1,240) 3,119 (396) Increase in trade and other receivables ...... (7,394) (9,304) (29,105) Increase in trade and other payables ...... 1,190 1,640 10,796 Increase in rental deposits ...... (805) (40) (650) Increase in contract liabilities ...... 630 363 391 Increase (decrease) in deferred income ...... 100 (3,400) — Cash generated from operations ...... 23,285 34,544 16,610 Income taxes paid ...... (2,167) (6,653) (4,500) NET CASH FROM OPERATING ACTIVITIES ...... 21,118 27,891 12,110 INVESTING ACTIVITIES Interest received ...... 76 348 964 Proceeds from disposal of property, plant and equipment ...... 588 — 65 Purchases of property, plant and equipment ...... (7,341) (18,923) (46,903) Purchases of investments in financial assets at amortized cost ...... — (44,300) — Proceeds from disposal of investments in financial assets at amortized cost ..... — 40,800 3,500 Government grants and subsidies received related to assets ...... 608 240 477 Proceeds from disposal of interest in a joint venture ...... — — 960 Proceeds from disposal of interest in an associate ...... — — 7,000 Repayment from a related party ...... — 18,573 2,002 Acquisition of investment in joint ventures ...... (4,980) — (4,100) Acquisition of investment in associates ...... (8,540) (5,500) (2,100) Purchase of financial assets at FVTPL ...... — (1,000) (94,899) Proceed from disposal of financial assets at FVTPL ...... — — 63,085 NET CASH USED IN INVESTING ACTIVITIES ...... (19,589) (9,762) (69,949) FINANCING ACTIVITIES Repayment of bank borrowings ...... (423) (447) (471) Repayment to related parties ...... — — (14,922) Interest paid ...... (189) (168) (557) Issue costs paid ...... — — (4,513) Finance lease charges paid ...... (14) (8) — Repayment of obligations under a finance lease ...... (115) (226) —

220 FINANCIAL INFORMATION

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Proceeds from the issue of the Company’s convertible redeemable preferred shares ...... — — 199,942 NET CASH FROM (USED IN) FINANCING ACTIVITIES ...... (741) (849) 179,479 NET INCREASE IN CASH AND CASH EQUIVALENTS ...... 788 17,280 121,640 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ...... 12,013 13,425 29,766 Effect of foreign exchange rate changes ...... 624 (939) 4,148 CASH AND CASH EQUIVALENTS AT END OF YEAR ...... 13,425 29,766 155,554

Operating Activities Our cash inflow from operating activities primarily comprises service fees and advances from our customers for our services. Cash outflow from operating activities primarily comprises payments for direct labor costs and materials, income tax, administration and other operating expenses.

For the year ended December 31, 2018, our net cash generated from operations was RMB12.1 million, consisting of (i) RMB37.2 million of cash generated from operating before working capital movements and (ii) RMB10.8 million increase in trade and other payables, offset by a RMB29.1 million increase in trade and other receivables.

For the year ended December 31, 2017, our net cash generated from operations was RMB27.9 million, consisting of RMB44.8 million of cash generated from operating before working capital movements that was partially offset by (i) an increase in trade and other receivables of RMB9.3 million, (ii) a RMB3.4 million decrease in deferred income, and a RMB2.8 million decrease contract costs primarily resulting from the growth of our business.

For the year ended December 31, 2016, our net cash generated from operations was RMB 21.1 million, consisting of RMB31.2 million of cash generated from operating before working capital movements that was partially offset by (i) an increase in trade and other receivables of RMB7.4 million, (ii) a RMB1.2 million increase in contract costs primarily resulting from the growth of our business.

Investing Activities Our cash used in investing activities mainly reflects our cash used in payments for purchases of plant and equipment, and to a less extent, acquisition of investment in our associates or joint ventures.

For the year ended December 31, 2018, our net cash used in investing activities was RMB69.9 million, primarily attributable to (i) payments for purchase of plant and equipment of RMB46.9 million, which were mainly in connection with our expansion along with the growth of our business, and (ii) a RMB94.9 million purchase of financial asset at FVTPL, partially offset by a RMB63.1 million proceeds from disposal of financial assets at FVTPL.

For the year ended December 31, 2017, our net cash used in investing activities was RMB9.8 million, primarily attributable to (i) payments for purchase of plant and equipment of RMB18.9 million, which were mainly in connection with our expansion along with the growth of our business, and (ii) a RMB5.5 million investment in our associates, partially offset by a RMB18.6 million repayment of related party loan from one of our related parties.

221 FINANCIAL INFORMATION

For the year ended December 31, 2016, our net cash used in investing activities was RMB19.6 million, primarily attributable to (i) payments for purchase of plant and equipment of RMB7.3 million, which was mainly in connection with our expansion along with the growth of our business, (ii) a RMB8.5 million investment in our associates and (iii) a RMB5.0 million investment in our joint ventures.

Financing Activities Our cash from and used in financing activities mainly comprises advance from and repayment to related parties as well as bank borrowings.

For the year ended December 31, 2018, our net cash generated from financing activities was RMB179.5 million, primarily attributable to our issuance of convertible redeemable preferred shares of RMB199.9 million, partially offset by our repayment to a related party of RMB15.0 million in connection with our related party loan.

For the year ended December 31, 2017, our net cash used in financing activities was RMB0.8 million, primarily attributable to our repayment to a bank of RMB0.4 million in connection with our bank borrowings.

For the year ended December 31, 2016, our net cash used in financing activities was RMB0.7 million, primarily attributable to our repayment of bank borrowings of RMB0.4 million.

Working Capital As of December 31, 2016, 2017 and 2018, we had cash and cash equivalents of RMB13.4 million, RMB29.8 million and RMB155.6 million, respectively. Our cash and cash equivalents increased in 2017 primarily due to increases in cash generated from our operations, partially offset by an increase in cash used in investing activities. In addition, our cash and cash equivalents increased significantly in 2018 primarily due to increases in cash generated from our pre- IPO financing closed in 2018. As of the Latest Practicable Date, we did not enter into any banking facility arrangement. Taking into account the estimated net proceeds of the Global Offering, cash and cash equivalents on hand, available facilities and cash flows generated from our operations, our Directors believe that we have sufficient working capital to meet our present and future cash requirements for at least the next twelve months from the date of this prospectus. See “— Discussion of Selected Items from the Consolidated Statements of Financial Position” for more information.

CAPITAL EXPENDITURES Our principal capital expenditures relate primarily to purchases of plant and equipment in relation to facilities construction and equipment purchases. The following table sets forth a breakdown of our historical capital expenditures for the periods indicated:

Year ended December 31, 2016 2017 2018 (RMB’000) (RMB’000) (RMB’000) Plant and equipment ...... 7,341 18,923 42,513

We expect to incur approximately RMB90.1 million in capital expenditures in 2019, which we expect to fund primarily through cash generated from operations, bank facilities and net proceeds to be

222 FINANCIAL INFORMATION received from the Global Offering. Our current capital expenditure plans for any future period are subject to change, and we may adjust our capital expenditures according to our future cash flows, results of operations and financial condition, our business plans, the market conditions and various other factors we believe to be appropriate.

INDEBTEDNESS The following table sets out the breakdown of our financial indebtedness at the dates indicated:

At December 31, At February 28, 2016 2017 2018 2019 RMB’000 RMB’000 RMB’000 RMB’000 Unsecured and unguaranteed other financial liabilities . . — — 220,600 245,445 Secured and unguaranteed bank loans ...... 3,280 2,833 2,362 2,281 Unsecured and unguaranteed lease liabilities ...... ——— 16,902 Total ...... 3,280 2,833 222,962 264,628

Our unsecured and unguaranteed other financial liabilities relate to financial liabilities at FVTPL regarding the series B preferred shares issued by us in connection with our pre-IPO financing. Our outstanding series B preferred shares will automatically convert into ordinary shares upon the completion of the Global Offering. The bank loans bear a variable interest rate at 110% of the relevant benchmark interest rate published by the People’s Bank of China, which is at 5.39%, 5.39% and 5.39% per annum for 2016, 2017 and 2018, respectively. In addition, we entered into a 8-year syndicate term loan facility of RMB3,960,000 with Agricultural Bank of China on April 15, 2015, which is to be repaid by equal loan repayment. For details of our assets as at December 31, 2016, 2017 and 2018 that have been pledged as collateral to secure our bank loans, see Note 14 to the Accountant’s Report in Appendix I to this document. There is no change in our assets that have been pledged as collateral as of February 28, 2019.

Upon application of IFRS 16 since January 1, 2019, we recognized right-of-use and a corresponding lease liability in respect of all leases unless they qualify for low value or short-term leases. As at February 28, 2019, the Group, as a lessee, has outstanding unpaid contractual lease payments for the remainder of relevant lease terms in relation to the recognized lease liabilities amounting to RMB18,293,000 in aggregate (excluding contingent rental agreements). The lease liabilities represent payment for right of using underlying assets, which is unsecured and unguaranteed.

Our Directors confirm that as of the Latest Practicable Date, the agreements under our borrowings did not contain any covenant that would have a material adverse effect on our ability to make additional borrowings or issue debt or equity securities in the future. Our Directors further confirm that we had no material defaults in bank and other borrowings, nor did we breach any covenants during the Track Record Period and up to the Latest Practicable Date. Our Directors further confirm that during the Track Record Period and up to the Latest Practicable Date, we did not experience any material difficulty in obtaining credit facilities, or withdrawal of facilities or request for early repayment.

Save as otherwise disclosed under “— Indebtedness” and “— Contractual Obligations”, we did not have any outstanding loan, capital issued or agreed to be issued, debt securities, mortgages, charges, debentures, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, hire purchase commitments or other contingent liabilities as of February 28, 2019. As of the same date, we had not guaranteed the indebtedness of any independent third parties.

223 FINANCIAL INFORMATION

CONTRACTUAL OBLIGATIONS Capital Commitments Our capital commitments are related to purchase of equipment. We expect to satisfy our capital commitments using net proceeds to be received from the Global Offering, cash from operations and bank facilities available to us. The following table sets forth our capital commitments as of the date indicated:

As of December 31, 2016 2017 2018 (RMB’000) (RMB’000) (RMB’000) Contracted but not provided for ...... 4,258 493 346,262

Operating Lease Commitments We lease several office premises under non-cancellable operating lease agreements. The lease terms are from one to five years, and the majority of lease agreements are renewable at the end of the lease period at market rate.

At the end of each reporting period, our Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises as follows:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Within one year ...... 8,024 8,042 7,245 In the second to fifth year inclusive ...... 19,821 14,430 12,167 Over five years ...... 2,579 — — 30,424 22,472 19,412

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS Save for the contractual obligations disclosed under “— Indebtedness” and “— Contractual Obligations”, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our equity interests and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

RELATED PARTY TRANSACTIONS We enter into transactions with our related parties from time to time. During the Track Record Period, we have entered into a number of related party transactions pursuant to which: (i) we provided drug discovery research and development services to certain of our joint ventures and associates under our EFS model in connection with our incubation projects; (ii) we entered into certain interest-bearing loans with certain of our related parties; and (iii) we provided remuneration to the directors and other members of key management of our Group, including salary, insurance and housing fund, and

224 FINANCIAL INFORMATION performance-based bonuses. As of December 31, 2018, all amounts due to and due from our related parties in connection with the related party loans described above had been repaid in full and currently we do not have any outstanding related party loan. As of December 31, 2018, we had settled all non- trade nature balances. For more details about our related party transactions, see Note 39 to the Accountant’s Report in Appendix I to this document.

Our Directors believe that our transactions with related parties during the Track Record Period were conducted on an arm’s length basis, and they did not distort our results of operations or make our historical results not reflective of our future performance.

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK We are exposed to a variety of market risks, including currency risk, interest rate risk, other price risk, credit risk and liquidity risk, as set out below. We manage and monitor these exposures to ensure appropriate measures are implemented on a timely and effective manner. As of the Latest Practicable Date, we did not hedge or consider necessary to hedge any of these risks. For further details, including relevant sensitivity analysis, see Note 34 to the accountants’ report set out in Appendix I to this prospectus.

Currency Risk Certain entities in our Group have foreign currency sales and purchases, which exposes us to foreign currency risk. In addition, certain entities in our Group also have other payables and other receivables which are denominated in currencies other than their respective functional currencies. We recorded a net foreign exchange gain of RMB1.3 million and RMB14.6 million, respectively, in 2016 and 2018, while we recorded a net foreign exchange loss of RMB1.2 million in 2017. We are mainly exposed to the foreign currency of U.S. dollars and we did not use any derivative contracts to hedge against our exposure to currency risk during the Track Record Period and up to the Latest Practicable Date. For example, during the year ended December 31, 2017, approximately 87% of our revenue was generated from sales denominated in U.S. dollars, while a majority of our cost of services and a vast majority of our operating costs and expenses were denominated in RMB. We have conducted a sensitivity analysis to determine our exposure to changes in foreign currency exchange rate. Please refer to Note 34 to the accountants’ report set out in Appendix I to this prospectus for details.

Sensitivity analysis The following table demonstrates our sensitivity to a 5% change in the RMB against the U.S. dollar, the foreign currency with which we may have a material exposure. The sensitivity rate of 5% represents our management’s assessment of the reasonably possible change in foreign currency rate. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at each period end for a 5% change in foreign currency rate.

The Group

As at December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Impact on profit or loss after tax US$ ...... (703) (972) (7,979)

225 FINANCIAL INFORMATION

The Company

As at December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Impact on profit or loss after tax US$ ...... 57 54 (9,780)

Interest Rate Risk We are exposed to fair value interest rate risk in relation to a finance lease and financial liabilities at FVTPL. We are also exposed to cash flow interest rate risk in relation to variable-rate bank borrowings. We currently do not have an interest rate hedging policy to mitigate the interest rate risk. Our management monitors our interest rate exposure and will consider hedging significant interest rate risk should the need arise.

Our cash flow interest rate risk is mainly concentrated on the fluctuation of the People’s Bank of China benchmark rates. If the interest rate had been 50 basis points higher/lower and all other variables were held constant, our profit after tax would decrease/increase by RMB12,000, RMB11,000 and RMB9,000 for the years ended December 31, 2016, 2017 and 2018, respectively.

Other Price Risk We are also exposed to other price risk through financial assets at FVTPL and Series B Preferred Shares classified as financial liabilities at FVTPL.

Sensitivity analysis The sensitivity analyses below have been determined based on the exposure to equity price risk at the reporting date for financial assets at FVTPL.

If the prices of the respective equity instruments had been changed based on the 5% higher/ lower: Š post-tax profit for the year ended December 31, 2016 would increase by RMB100,000 and decrease by RMB100,000, as a result of the changes in fair value of financial assets at FVTPL; Š post-tax profit for the year ended December 31, 2017 would increase by RMB3,293,000 and decrease by RMB3,293,000, as a result of the changes in fair value of financial assets at FVTPL; and Š post-tax profit for the year ended December 31, 2018 would increase by RMB9,833,000 and decrease by RMB9,833,000, as a result of the changes in fair value of financial assets at FVTPL.

If the equity value of the ordinary shares of the Company had been changed based on the 5% higher/lower, the post-tax profit for the year ended December 31, 2018 would decrease by RMB6,804,000 and increase by RMB6,748,000, as a result of the changes in fair value of the ordinary shares of the company.

226 FINANCIAL INFORMATION

Credit Risk We are exposed to credit risk primarily arising from trade and other receivables. Our maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as of the end of each reporting period in relation to each class of recognized financial assets was the carrying amounts of those assets as stated in the consolidated statements of financial position. In order to minimize the credit risk, we review the recoverable amount of each individual trade debt periodically and our management has monitoring procedures to ensure that follow-up actions are taken to recover overdue debts. In this regard, our Directors are of the view that our credit risk is significantly reduced.

As at December 31, 2016, 2017 and 2018, we had concentration of credit risk as 19.76%, 29.21% and 21.65% of the total gross accounts receivables and amounts due from related parties of trade nature was due from our largest customer as at December 31, 2016, 2017 and 2018, respectively, and 49.00%, 57.92% and 49.28% of the total gross accounts receivables and amounts due from related parties of trade nature was due from the five largest customers as at December 31, 2016, 2017 and 2018, respectively.

We expect that there is no significant credit risk associated with our restricted bank balances and cash deposits at banks since they are substantially deposited at state-owned banks and other medium or large-sized listed banks. Our management does not expect that there will be any significant losses from non-performance by these counterparties.

Liquidity Risk As of December 31, 2016, 2017 and 2018, we recorded net current assets of RMB48.8 million, RMB46.5 million and RMB198.7 million, respectively. In the management of the liquidity risk, we monitor and maintain a level of cash and cash equivalents as our management deems adequate to finance our operations and mitigate the effects of fluctuations in our cash flows. For the contractual maturity profile of our financial liabilities based on our remaining undiscounted cash flows based on the estimated timing of the net cash outflows, see Note 32 to the Accountant’s Report in Appendix I to this document.

KEY FINANCIAL RATIOS The following table sets forth certain of our key financial ratios as of the dates for the periods indicated:

Year ended December 31, 2016 2017 2018 (%) Profitability ratios Gross profit margin(1) ...... 56.1 58.1 50.2 Net profit margin(2) ...... 25.4 51.4 43.1 Return on equity(3) ...... 38.1 66.5 44.8

Notes: (1) Gross profit margin is calculated using gross profit divided by revenue and multiplied by 100%. (2) Net profit margin is calculated using profit and total comprehensive income for the year divided by revenue and multiplied by 100%. (3) Return on equity is calculated using profit and total comprehensive income for the year attributable to equity shareholders of our Company divided by the average of the opening and closing balances of total equity in the relevant year and multiplied by 100%. (4) As we do not have significant outstanding bank and other borrowings, the current and gearing ratios are not meaningful indicators of our financial position.

227 FINANCIAL INFORMATION

See “— Discussion of Results of Operations” for a discussion of the factors affecting our gross profit margin and net profit margin during the respective periods.

Our return on equity decreased from 66.5% for the year ended December 31, 2017 to 44.8% for the year ended December 31, 2018 primarily due to the recognition of equity-settled share-based equity in connection with our pre-IPO financing closed in 2018. Our return on equity increased from 38.1% for the year ended December 31, 2016 to 66.5% for the year ended December 31, 2017, primarily due to a significant increase in our profit and total comprehensive income from RMB24.5 million for the year ended December 31, 2016 to RMB76.3 million for the year ended December 31, 2017 which was mainly attribute to the fair value gains on the equity interest we received under our EFS model.

Dividend Policy We may declare and pay dividends by way of cash or by other means that we consider appropriate in the future. Distribution of dividends shall be formulated by our Board at its discretion and will be subject to shareholders’ approval. A decision to declare or to pay any dividends in the future, and the amount of any dividends, will depend on, among other things, our results of operations, cash flows and financial condition, operating and capital expenditure requirements, distributable profits as determined under IFRS, our Articles of Association, the Companies Law and any other applicable law and regulations and other factors that our Directors may consider relevant. In addition, declaration and/or payment of dividends may be limited by legal restrictions and/or by financing agreements that we may enter into in the future.

Our Board currently intends, subject to the limitations described in this section, and in the absence of any circumstances which might reduce the amount of available distributable reserves, whether by losses or otherwise, to distribute to our shareholders up to 30% of any distributable profit of (excluding any unrealized fair value gains from our incubation portfolio companies) for the financial year ending December 31, 2019 and each year thereafter. There is, however, no assurance that dividends of such amount or any amount will be declared or distributed in such year or in any given year.

Planned Dividend Distribution Pursuant to a resolution passed by our Board on April 13, 2019, we declared a special dividend in the amount of RMB128,686,000 to the shareholders listed on our register of members on March 24, 2019, which amount was determined based on the accumulated distributable reserve for the period from the inception of the Group to December 31, 2018 (excluding any unrealized fair value gains from the equity interest of our incubation portfolio companies held by us) as determined based on the audited consolidated financial statements and unaudited management accounts prepared in accordance with IFRS. Such special dividend is expected to be paid out of our profits and share premium account prior to the completion of our Global Offering. Our Directors are of the view that we will have sufficient cash resources to pay such special dividend from (i) cash and cash equivalent held our Company, (ii) cash inflow from our operating activities and (iii) dividends received from our Subsidiaries. In the event our Company does not have sufficient cash for the proposed special dividend distribution, subject to the approval by our existing Shareholders, we may consider lowering the amount of the special dividends or paying off the special dividends with the proceeds received from our Pre-IPO Investment.

228 FINANCIAL INFORMATION

DISTRIBUTABLE RESERVES As of December 31, 2018, we had retained earnings of RMB128.7 million. Such retained earnings less any unrealized fair value gains from our incubation portfolio companies and other deductions, if necessary, were available for distribution to our equity shareholders.

LISTING EXPENSES Our listing expenses mainly include underwriting fees and commissions and professional fees paid to legal advisers and the Reporting Accountants for their services rendered in relation to the Listing and the Global Offering. Assuming full payment of the discretionary incentive fee, the estimated total listing expenses (based on the mid-point of our indicative price range for the Global Offering and assuming that the Over-allotment Option is not exercised) for the Global Offering are approximately RMB103.3 million. We incurred listing expenses of RMB24.3 million in 2018, which was recognized as listing expenses. We expect to further incur listing expenses and costs of RMB72.3 million in connection with the Global Offering, of which an estimated amount of RMB14.1 million is expected to be recognized as listing expenses and the remaining amount of RMB58.2 million is expected to be recognized directly as a deduction from equity upon the Listing. Our Directors do not expect such expenses would have a material adverse impact on our results of operations for the year ending December 31, 2019.

UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS The following unaudited pro forma statement of adjusted consolidated net tangible assets of our Group prepared in accordance with Rule 4.29 of the Listing Rules is to illustrate the effect of the Global Offering on the consolidated net tangible assets of the Group at December 31, 2018 as if the Global Offering had taken place on such date.

This unaudited pro forma statement of adjusted consolidated net tangible assets of our Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of our Group at December 31, 2018 following the Global Offering or at any subsequent dates. It is prepared based on the audited consolidated net tangible assets of our Group at December 31, 2018 as derived from the Accountants’ Report set out in Appendix I to this prospectus and adjusted as described below.

Unaudited pro Audited forma adjusted Unaudited pro forma consolidated net consolidated net adjusted tangible assets of Estimated net tangible assets of consolidated net the Group at proceeds from the Group at tangible assets of the December 31, the Global December 31, Group per Share at 2018 Offering 2018 December 31, 2018 RMB’000 RMB’000 RMB’000 RMB HK$ (Note 1) (Note 2) (Note 3) (Note 4) Based on an Offer Price of HK$3.42 per Offer Share ...... 251,442 932,106 1,183,548 0.83 0.97 Based on an Offer Price of HK$4.41 per Offer Share ...... 251,442 1,197,945 1,449,387 1.01 1.19

Notes: (1) The audited consolidated net tangible assets of the Group at December 31, 2018 is extracted from the consolidated statements of financial position set out in Appendix I to this prospectus. (2) The estimated net proceeds from the Global Offering are based on 345,000,000 Offer Shares at the indicative Offer Price of HK$3.42 (equivalent to RMB2.93) and HK$4.41 (equivalent to RMB3.77) per Offer Share, respectively, after deduction of underwriting fees and commissions and other listing related expenses paid/payable by the Company not yet recognized in profit or loss up to December 31,

229 FINANCIAL INFORMATION

2018, and without taking into account of any shares (i) which may be allotted and issued upon the exercise of the Over-allotment Option or (ii) which may be issued under Pre-IPO Share Incentive Schemes or the Post-IPO Share Option Scheme or (iii) which may be allotted and issued or repurchased by the Company under the general mandates for the allotment and issue or repurchase of shares granted to the directors of the Company. For the purpose of the estimated net proceeds from the Global Offering, the amounts denominated in Hong Kong dollar have been converted into RMB at the rate of HK$1 to RMB0.8557, which was the exchange rate prevailing on April 15, 2019 with reference to the rate published by the People’s Bank of China. No representation is made that the HK$ amounts have been, could have been or may be converted to RMB, or vice versa, at that rate or any other rates or at all. (3) The unaudited pro forma adjusted consolidated net tangible assets of the Group per Share is arrived at on the basis that 1,428,749,254 Shares were in issue assuming that Share Split, the Capitalization Issue and the Global Offering had been completed on December 31, 2018 and without taking into account of any shares (i) which may be allotted and issued upon the exercise of the Over-allotment Option or (ii) which may be issued under Pre-IPO Share Incentive Schemes or the Post-IPO Share Option Scheme or (iii) which may be allotted and issued or repurchased by the Company under the general mandates for the allotment and issue or repurchase of shares granted to the directors of the Company. (4) For the purpose of unaudited pro forma adjusted consolidated net tangible assets of the Group per Share, the amounts stated in RMB are converted into Hong Kong dollar at the rate of HK$1 to RMB0.8557, which was the exchange rate prevailing on April 15, 2019 with reference to the rate published by the People’s Bank of China. No representation is made that the RMB amounts have been, could have been or may be converted to Hong Kong dollar, or vice versa, at that rate or any other rates or at all. (5) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group as at December 31, 2018 to reflect any trading result or other transactions of the Group entered into subsequent to December 31, 2018. In particular, the unaudited pro-forma adjusted consolidated net tangible assets of the Group as shown on the table on II-1 have not been adjusted to illustrate the effect of the planned dividend distribution by the Group as detailed in Financial Information section of this Prospectus and the conversion of Series B Preferred Shares into ordinary shares upon IPO completion. The planned dividend distribution would have decreased the unaudited pro forma adjusted consolidated net tangible assets of the Group at December 31, 2018 by RMB128,686,000. The conversion of Series B Preferred Shares would have reclassified the Series B Preferred Shares amounting to RMB220,600,000 to equity and increased the unaudited proforma adjusted consolidated net tangible assets of the Group at December 31, 2018 by RMB220,600,000. The conversion of Series B Preferred Shares would also have increased the total share in issue assumption stated in note 3 by 71,250,746 shares to a total of 1,500,000,000 shares in issue. The adjustment to the unaudited pro forma adjusted consolidated net tangible assets of the Group after planned dividend distribution and conversion of Series B Preferred Shares would be as follows:

Unaudited pro forma adjusted Unaudited pro forma adjusted consolidated net tangible consolidated net tangible assets of the Group as at assets of the Group as at December 31, 2018 after December 31, 2018 per Share planned dividend distribution after planned dividend and conversion of the Series B distribution and conversion of Preferred Shares the Series B Preferred Shares RMB ’000 RMB HK$ (Note 4) Based on an Offer Price of HK$3.42 per Offer Share ...... 1,275,462 0.85 0.99 Based on an Offer Price of HK$4.41 per Offer Share ...... 1,541,301 1.03 1.20

NO MATERIAL ADVERSE CHANGE We confirm that there has been no material adverse change in our financial or trading position since December 31, 2018 (being the date of the latest audited consolidated statements of financial position of our Group as set out in the Accountant’s Report in Appendix I to this prospectus) and up to the date of this prospectus.

DISCLOSURE REQUIRED UNDER THE LISTING RULES We confirm that, as of the Latest Practicable Date, there were no circumstances that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

230 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

OUR CONTROLLING SHAREHOLDERS Immediately after the completion of the Capitalization Issue and the Global Offering (assuming the Over-allotment Option is not exercised and without taking into account any Shares to be issued upon the exercise of options granted under the Pre-IPO Share Incentive Schemes), Mr. Mao will be directly interested in approximately 29.31% of the total issued share capital of our Company, which includes interest held by him individually and as trustee of the Mao Investment Trust. In addition, Mr. Mao, as the investment director of the Min Zhou 2018 Family Trust as well as the manager of MZFT, LLC, is entitled to control and will continue to control the exercise of approximately 1.44% voting powers attached to the Shares in the Company directly held by MZFT, LLC upon completion of the Global Offering. By virtue of being the trustee of the Min Zhou 2018 Family Trust to which Mr. Mao is a beneficiary, Concord Trust Company, LLC and Mr. Mao are presumed to be a group of Controlling Shareholders of our Company. Accordingly, Mr. Mao and Concord Trust Company, LLC will be our Controlling Shareholders upon Listing as defined under the Listing Rules, with an aggregate of approximately 30.75% voting powers in our Company immediately upon completion of the Global Offering. For more details of Min Zhou 2018 Family Trust, please refer to the section headed “History, Development and Corporate Structure.”

Mr. Mao is one of our founders, as well as the Chairman, chief executive officer and executive Director of our Company. For further background information of Mr. Mao, see the section headed “Directors and Senior Management.”

OTHER BUSINESS INTERESTS OF OUR CONTROLLING SHAREHOLDERS Anji Pharmaceuticals Inc. Anji Pharmaceuticals Inc. (“Anji Pharmaceuticals”) was incorporated in the Cayman Islands on February 15, 2018. As of the Latest Practicable Date, Anji Pharmaceuticals was directly owned by our Company as to 22.36% and indirectly owned by each of Mr. Mao, Ms. Mao, Mr. Hua, Mr. John Wu Jiong and Mr. Hua Zhengmao (without taking into account the interests held through our Company) as to 17.40%, 21.22%, 7.85%, 12.02% and 1.96%, respectively. The remaining 17.19% equity interest in Anji Pharmaceuticals was held by independent third parties of the Group.

The core business of our Group is to provide preclinical drug discovery services leveraging on our R&D capability, whereas Anji Pharmaceuticals is a clinical stage biopharmaceutical company focusing on development and commercialization of innovative therapies for unmet medical needs in metabolic disease area. The business model of Anji Pharmaceuticals generally involves (i) obtaining licenses to develop innovative drugs in China from U.S. pharmaceutical and biotechnology companies; (ii) clinical trials of innovative drugs, which Anji Pharmaceuticals intends to outsource to independent third party CRO service provider; and (iii) commercialization of innovative drugs. Therefore, there will be a clear business delineation between our Group and Anji Pharmaceuticals, and the business of Anji Pharmaceuticals is not expected to compete with the existing business of our Group.

Except for Ms. Mao who currently serves as a non-executive director of both of our Company and Anji Pharmaceuticals, the day-to-day management and operation of Anji Pharmaceuticals and our Group is independent of each other.

231 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Clues Therapeutics Inc. Clues Therapeutics Inc. (“Clues Therapeutics”) is a biotechnology startup company developing new drugs focusing on 10 drug targets including RIP, MOR1 and MOR2 incorporated in the Cayman Islands on June 27, 2018. As of the Latest Practicable Date, Clues Therapeutics was directly owned by our Company as to 30.00%, and indirectly owned by each of Mr. Mao, Mr. Hua and his associate, Ms. Mao and Mr. John Wu Jiong (without taking into account the interests held through our Company) as to 14.00%, 7.00%, 7.00% and 12.00%, respectively. Therefore, Clues Therapeutics is not our connected person. Our Directors are of the view that there will be a clear business delineation between our Group and Clues Therapeutics, and the business of Clues Therapeutics is not expected to compete with the existing business of our Group. None of our Directors is involved in the daily operations of Clues Therapeutics.

Pursuant to the Deed of Non-Competition, Mr. Mao granted our Group certain rights of first refusal with respect to his interests in Anji Pharmaceuticals and Clues Therapeutics, see “— Non-competition Undertakings — Rights of First Refusal.” In addition, each of Ms. Mao, Mr. Hua and Mr. John Wu Jiong also granted our Group certain rights of first refusal with respect to their respective interests in Anji Pharmaceuticals and Clues Therapeutics.

Save as disclosed above, our Controlling Shareholders have confirmed that as of the Latest Practicable Date, they did not have any interest in a business, apart from the business of our Group, which competes or is likely to compete, directly or indirectly, with our business, and requires disclosure under Rule 8.10 of the Listing Rules.

NON-COMPETITION UNDERTAKINGS On April 16, 2019, Mr. Mao entered into the Deed of Non-Competition in favor of our Company. In accordance with the non-competition undertakings set out in the Deed of Non-Competition, Mr. Mao has undertaken to our Company (for himself and on behalf of his close associates) that during the period commencing from the Listing Date and ending on the occurrence of the earliest of (i) the day on which our Shares cease to be listed on the Stock Exchange; or (ii) the day on which Mr. Mao and/or his close associates (other than any member of our Group) cease to hold or otherwise be interested in, whether directly or indirectly, 30% or more of the voting rights of our Company (the “Restricted Period”): Š Save for the interests acquired in compliance with the terms of the Deed of Non-Competition, he will not and will procure that none of his close associates and persons to whom he provides financial assistance to set up and operate businesses (the “Controlled Persons”) will, except through his or its interests in our Company, whether as principal or agent and whether undertaken directly or indirectly through any person, body corporate, partnership, joint venture or other contractual arrangement and whether for profit or otherwise, participate, acquire or hold any right or interest or otherwise be interested, involved or engaged in or concerned with, directly or indirectly, any business which is in any respect in competition with or similar to or is likely to be in competition with the principal business of our Group as described in this prospectus and any other business from time to time conducted by any member of our Group or in which any member of our Group is engaged or has invested in, or which our Group has otherwise publicly announced its intention to enter into, engage in or invest in (whether as principal or agent and whether undertaken directly or through any body corporate, partnership, joint

232 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

venture, or other contractual or other arrangement), within the PRC or any of the territories where any member of our Group carries and/or will carry on business from time to time (the “Restricted Business”); and Š if he and/or any of his close associates and/or any of the Controlled Persons is offered or becomes aware of any potential business opportunity directly or indirectly to engage or become interested in the Restricted Business (the “New Business Opportunity”), he shall or cause his close associates or Controlled Persons shall: (a) promptly notify our Company in writing and refer the New Business Opportunity to our Company for consideration within 30 Business Days of identifying such opportunity and provide such information as may be reasonably required by our Company in order to make an informed assessment of such business opportunity, which information shall include but not limited to the nature of the New Business Opportunity and the investment or acquisition costs; and (b) not, invest or participate in the New Business Opportunity unless the New Business Opportunity shall have been rejected by our Company in writing and the principal terms of which Mr. Mao or his close associates and/or Controlled Persons invest(s) or participate(s) are no more favorable than those made available to our Company.

The undertakings under the Deed of Non-Competition are not applicable in the following circumstances: Š Mr. Mao, his close associates and/or Controlled Persons engage in the Restricted Business directly or indirectly through the ownership of equity interest in any member of our Group; or Š Mr. Mao, his close associates and/or Controlled Persons engage in the Restricted Business directly or indirectly through the ownership of equity interest in listed companies other than our Group, with the following conditions being satisfied: (a) the Restricted Business (and relevant assets) conducted or carried out by such company represents less than 10% of the revenue or total assets of such company according to the latest audited accounts of such company; and (b) Mr. Mao, his close associates and/or Controlled Persons hold in aggregate not more than 10% of the issued share capital of relevant class of shares of such company, and Mr. Mao, his close associates and/or Controlled Persons have no right to appoint the majority of directors of such company or participate in the management of such company.

Rights of First Refusal Pursuant to the Deed of Non-Competition, Mr. Mao irrevocably and unconditionally covenants and undertakes that, during the Restricted Period, in the event that he intends to dispose of any part or all of his interests in Anji Pharmaceuticals and Clues Therapeutics (the “Subject Interests”), he shall first offer to our Company the rights to acquire such part or all of the Subject Interests (the “Rights of First Refusal”). If our Company (i) elects to exercise the Right of First Refusal but the acquisition of the Subject Interests is not completed by our Group for any reason (for the avoidance of doubt such failure to complete by our Group does not include such failure by our Group caused by or which is

233 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS attributable to actions or lack of action on the part of Mr. Mao) or (ii) does not accept the offer or does not respond to the offer within 30 business days of receipt of the offer, Mr. Mao may proceed with disposal of the Subject Interests to third parties on terms not more favorable than those offered to our Company. Pursuant to the Deed of Non-Competition, Mr. Mao further irrevocably and unconditionally covenants and undertakes to our Company that, subject to the Rights of First Refusal granted to our Company, he shall dispose of the Subject Interests within 30 business days of being notified by our Company in the event that, during the Restricted Period, Anji Pharmaceuticals and Clues Therapeutics and/or its respective subsidiaries (if any) conducts or carries out business(es) other than its businesses set out in “— Other business interests of our Controlling Shareholders” above, and such business(es), in the opinion of our independent non-executive Directors, is likely to compete with our Group’s business.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS Having considered the following factors, our Directors are satisfied that we are capable of carrying on our business independently of our Controlling Shareholders and their respective close associates after the Listing.

Management Independence Notwithstanding the fact that the Controlling Shareholders have a controlling interest in our Company and Mr. Mao is the Chairman, chief executive officer and executive Director of our Company, our management and operational decisions are made by all our executive Directors and senior management, most of whom have served our Group for a long time and have substantial experience in the industry in which we are engaged and/or in their respective fields of expertise. Our Board comprises four executive Directors, two non-executive Directors and three independent non-executive Directors. The balance of power and authority is ensured by the operation of the senior management and our Board. See “Directors and Senior Management” for further details.

Each of our Directors is aware of his fiduciary duties as a Director which require, among others, that he must act for the benefit of and in the best interests of our Company and not allow any conflict between his duties as a Director and his personal interests. In the event that there is a potential conflict of interests arising out of any transaction to be entered into between our Group and our Directors or their respective close associates, the interested Director(s) shall abstain from voting at the relevant meeting of the Board in respect of such transaction and shall not be counted towards the quorum. Further, we believe our independent non-executive Directors will bring independent judgment to the decision-making process of our Board. See “— Corporate Governance Measures” for further details.

Based on the above, our Directors are satisfied that our Board as a whole together with our senior management team is able to perform the managerial role in our Group independently.

Operational Independence Our Company, through our subsidiaries, holds the requisite assets, licenses, trademarks and other intellectual property necessary to carry on our current business, and has sufficient capital, facilities, technology and employees to operate the business independently. Our Group has independent research team and other employees to carry out our operation and has not shared our

234 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS operational resources, such as customers, marketing, sale and general administration resources with our Controlling Shareholders’ business outside our Group. We have also established our own organizational structure which comprises individual departments, each with specific areas of responsibilities.

Based on the above, our Directors are satisfied that we will be able to function and operate independently from our Controlling Shareholders and their respective close associates.

Financial Independence We have established our own finance department with a team of financial staff, who are responsible for financial control, accounting, reporting, group credit and internal control functions of our Company. We have been and are capable of obtaining financing from third parties without relying on any guarantee or security provided by our Controlling Shareholders or their respective close associates. We make financial decisions according to our own business needs and do not share any finance functions with our Controlling Shareholders.

Based on the above, our Directors are of the view that they and our senior management are capable of carrying on our business independently of, and do not place undue reliance on, our Controlling Shareholders and their respective close associates after the Listing.

CORPORATE GOVERNANCE MEASURES Our Directors recognize the importance of good corporate governance in protecting our Shareholders’ interests. We have adopted the following measures to safeguard good corporate governance standards and to avoid potential conflict of interests between our Group and our Controlling Shareholders: (a) under the Articles of Association, where a Shareholders’ meeting is to be held for considering proposed transactions in which our Controlling Shareholders or their associates have a material interest, the Controlling Shareholders or their associates will not vote on the relevant resolutions; (b) our Company has established internal control mechanisms to identify connected transactions. Upon the Listing, if our Company enters into connected transactions with our Controlling Shareholders or any of their respective associates, our Company will comply with the applicable Listing Rules; (c) the independent non-executive Directors will review, on an annual basis, whether there are any conflicts of interests between our Group and our Controlling Shareholders and Mr. Mao’s compliance with and the enforcement of the Deed of Non-Competition (the “Annual Review”) and provide impartial and professional advice to protect the interests of our minority Shareholders; (d) Mr. Mao will undertake to provide all information necessary, including all relevant financial, operational and market information and any other necessary information as required by the independent non-executive Directors for the Annual Review; (e) our Company will disclose decisions with basis on matters reviewed by the independent non-executive Directors relating to the compliance with and enforcement of the Deed of

235 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Non-Competition either in its annual reports or by way of announcements as required by the Listing Rules; (f) the independent non-executive Directors shall be responsible for deciding, without attendance by any executive Directors of the Company (except as invited by the independent non-executive Directors of the Company to assist them or provide any relevant information and/or technical advice but in no circumstances shall the executive Directors participating in such meeting be counted towards the quorum or allowed to vote in such meeting), whether or not to take up a New Business Opportunity or to exercise the Rights of First Refusal; (g) the independent non-executive Directors will take into account such factors as they think appropriate and form their views based on the best interest of the Shareholders of the Company and the Company as a whole and may engage independent financial advisers, technical experts and/or legal advisers and/or any other professional advisors at the cost of the Company as they consider necessary to advise them on the terms of any New Business Opportunity or in assessing whether or not to exercise the Rights of First Refusal; (h) Mr. Mao will make an annual declaration on his compliance with the Deed of Non-Competition in our annual report; and (i) we have appointed Guotai Junan Capital Limited as our compliance adviser to provide advice and guidance to us in respect of compliance with the Listing Rules, including various requirements relating to corporate governance.

Based on the above, our Directors are satisfied that sufficient corporate governance measures have been put in place to manage conflicts of interests that may arise between our Group and our Controlling Shareholders, and to protect our minority Shareholders’ interests after the Listing.

DIRECTORS’ INTEREST IN COMPETING BUSINESS Our Directors have confirmed that to the best of their knowledge and belief, as of the Latest Practicable Date, none of our Directors is interested in or engaged in any business, which, competes or is likely to compete, either directly or indirectly, with our Group’s business and which requires disclosure pursuant to Rule 8.10 of the Listing Rules.

236 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

DIRECTORS’ INTERESTS IN OUR INCUBATION PORTFOLIO COMPANIES As of the Latest Practicable Date, certain of our Directors held equity interest in a number of our incubation portfolio companies, the details of which are set forth below.

Our Shareholding Company Name Primary Technology/Business Interest Our Director’s Shareholding Interest Anji Pharmaceuticals Metabolic disease 22.36% Please refer to “— Other Business Interests of Our Controlling Shareholders — Anji Pharmaceuticals Inc.” Clues Therapeutics RIP, MOR 1 and MOR 2 30.00% Please refer to “— Other Business Interests of Our Controlling Shareholders — Clues Therapeutics Inc.” Epican Technology Limited Development of tumor 6.25% 4.25% indirectly owned by epigenetic diagnostic Mr. Hua; and technology 2.25% indirectly owned by Ms. Mao. Flash Therapeutics, LLC Dual kinase inhibitor for 16.00% 18.00% indirectly owned by treating acute lymphoid Ms. Mao. leukemia (first in class) Dogma Therapeutics, Inc. Small molecule compound 7.01% 10.80% indirectly owned by for lowering cholesterol Ms. Mao. (first in class) Tabomedex Biosciences, LLC Diabetes (first in class) 9.60% 9.60% indirectly owned by Ms. Mao.

In addition, we added Riparian Pharmaceuticals, Inc. to our incubation portfolio companies in September 2018. We may receive up to 30.16% equity interest in Riparian Pharmaceuticals, Inc. pursuant to the agreement we entered into with Riparian Pharmaceuticals, Inc. For details, please refer to “Business — Our Incubation Program and Business Partners — Our Incubation Portfolio Companies —Riparian Pharmaceuticals, Inc.” As of the Latest Practicable Date, we had not received any equity interest in Riparian Pharmaceuticals, Inc. As of the Latest Practicable Date, Riparian Pharmaceuticals, Inc. was indirectly owned by Ms. Mao as to 13.51%. Ms. Mao, through JMCR, may acquire additional equity interest in Riparian Pharmaceuticals, Inc. subject to agreed milestones and other terms of the agreement.

As at the Latest Practicable Date, except for Anji Pharmaceuticals, our shareholding interests in the foregoing companies were acquired by way of our EFS model, please refer to “Business — Our Incubation Program and Business Partners — Our Incubation Portfolio Companies” for further details. On the other hand, our Directors invested in these companies by way of cash with their personal funds. We have adopted specific internal control measures to avoid potential conflict of interests between our Group and our Directors with respect to future investment in biopharmaceutical companies and investment companies, funds or limited partnerships primarily focusing on investment in biopharmaceutical companies (the “New Investment Opportunity”): Š On April 15, 2019, our Directors (except for independent non-executive Directors) executed the Deed of Undertakings in favor of our Company, pursuant to which he/she irrevocably and unconditionally undertakes to our Company that during the term of the Deed of Undertakings, in the event that he/she and/or any of his/her close associates is

237 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

offered or becomes aware of any business opportunity directly or indirectly to engage or become interested in a New Investment Opportunity, he/she will, and procure his/her close associates will (i) promptly notify the Company in writing and refer the New Investment Opportunity to the Company for consideration and provide such information as may be reasonably required by the Company in order to make an informed assessment of such business opportunity, which information shall include but not limited to the nature of the New Investment Opportunity and the investment or acquisition costs; and (ii) not invest or participate in the New Investment Opportunity unless the New Investment Opportunity shall have been rejected by the Company and the principal terms of which he/she or his/ her close associates invest(s) or participate(s) are no more favorable than those made available to the Company. Each Director (except for independent non-executive Directors) and/or his/her close associates have the right to engage in the New Investment Opportunity if and only if the Company rejects the New Investment Opportunity in writing. Pursuant to the Deed of Undertakings, each Director (except for independent non-executive Directors) further irrevocably and unconditionally covenants and undertakes that, in the event that he/ she and/or any of his/her close associates intends to dispose of any part or all of interests in his/her/its investments in biopharmaceutical companies and investment companies, funds or limited partnerships primarily focusing on investment in biopharmaceutical companies, including but not limited to their existing interests in our incubation portfolio companies (the “Subject Investment Interests”), he/she shall first offer or procure his/her close associate(s) to offer to the Company the rights to acquire such part or all of the Subject Investment Interests (the “Rights of First Refusal with respect to Subject Investment Interests”). If the Company (i) elects to exercise the Rights of First Refusal with respect to Subject Investment Interests but the acquisition of the Subject Investment Interests is not completed by the Group for any reason (for the avoidance of doubt such failure to complete by the Group does not include such failure by the Group caused by or which is attributable to actions or lack of action on the part of the Director and/or his/her close associates) or (ii) does not accept the offer or does not respond to the offer within 30 business days of receipt of the offer, each Director (except for independent non-executive Directors) and/or his/her close associates may proceed with disposal of the Subject Investment Interests on terms not more favorable than those offered to the Company. In addition, subject to the Rights of First Refusal with respect to Subject Investment Interests, each Director (except for independent non-executive Directors) irrevocably and unconditionally covenants and undertakes that he/she shall and shall procure his/her close associates to dispose of the Subject Investment Interests within 30 business days of being notified by the Company in the event that, during the term of the Deed of Undertakings, the business in which he/she invests, conducts or carries out, in the opinion of the independent non-executive Directors of the Company, is likely to compete with the Group’s business;

Š we have designated a special committee comprising of all our independent non-executive Directors to monitor the enforcement of the Deed of Undertakings;

Š the independent non-executive Directors shall be responsible for deciding, without attendance by any executive Directors of the Company (except as invited by the independent non-executive Directors of the Company to assist them or provide any relevant information and/or technical advice but in no circumstances shall the executive Directors participating in such meeting be counted towards the quorum or allowed to vote

238 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

in such meeting), whether or not to take up a New Investment Opportunity or to exercise the Rights of First Refusal with respect to Subject Investment Interests; Š the independent non-executive Directors will take into account such factors as they think appropriate and form their views based on the best interests of the Shareholders of the Company and the Company as a whole and may engage independent financial advisers, technical experts and/or legal advisers and/or any other professional advisors at the cost of the Company as they consider necessary to advise them on the terms of any New Investment Opportunity or to exercise the Rights of First Refusal with respect to Subject Investment Interests; and Š when executing our exit strategy with respect to our equity interests in the incubation portfolio companies, we may consider to dispose of all or part of such interests to our connected persons. In this regard, we will strictly comply with Chapter 14A of the Listing Rules, including, where applicable, the announcement, reporting, annual review and independent Shareholders’ approval requirements.

239 SHARE CAPITAL

AUTHORIZED AND ISSUED SHARE CAPITAL The following is a description of the authorized and issued share capital of our Company in issue and to be issued as fully paid prior to and immediately following the completion of the Global Offering:

Authorized Share Capital

Aggregate par value Number of Shares Description of shares (US$) As at the Latest Practicable Date 483,766,468 Ordinary shares of a par value of US$0.0001 each 48,376.6468 16,233,532 Series B Preferred Shares of a par value of US$0.0001 each 1,623.3532 Immediately after the Proposed Share Split 1,935,065,872 Shares of a par value of US$0.000025 each 48,376.6468 64,934,128 Series B Preferred Shares of a par value of US$0.000025 each 1,623.3532 Immediately prior to the Global Offering 2,000,000,000 Shares of a par value of US$0.000025 each 50,000.00

Issued and to be issued, fully paid or credited as fully paid immediately upon completion of the Global Offering

Shares in issue as at the date of this prospectus (as adjusted after the Proposed Share Split) 1,052,605,368 Shares of a par value of US$0.000025 each (assuming all Series B Preferred Shares are converted into ordinary shares) 26,315.13 Shares to be issued pursuant to the Capitalization Issue 102,394,632 Shares of a par value of US$0.000025 each 2,559.87 Shares to be issued under the Global Offering 345,000,000 Shares of a par value of US$0.000025 each 8,625.00 Immediately after the Global Offering 1,500,000,000 Shares of a par value of US$0.000025 each 37,500.00 Shares to be issued under the full exercise of Over-allotment Option 51,750,000 Shares of a par value of US$0.000025 each 1,293.75 1,551,750,000 Total (assuming the full exercise of Over-allotment Option) 38,793.75

ASSUMPTION The above table assumes that the Global Offering becomes unconditional and the Shares are issued pursuant to the Global Offering. The above table does not take into account any Shares which may be allotted and issued pursuant to the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or may be granted under the Post-IPO Share Option Scheme and any Shares which may be issued or repurchased by our Company pursuant to the general mandates granted to our Directors to issue or repurchase Shares as described below.

RANKING The Offer Shares are ordinary shares in the share capital of our Company and will rank pari passu in all respects with all Shares currently in issue or to be issued as mentioned in this prospectus, and will qualify and rank equally for all dividends or other distributions declared, made or paid on the Shares on a record date which falls after the date of this prospectus.

240 SHARE CAPITAL

SHARE INCENTIVE SCHEMES We have adopted the Pre-IPO Share Incentive Schemes and plan to adopt the Post-IPO Share Option Scheme. The principal terms of the Pre-IPO Share Incentive Schemes and the Post-IPO Share Option Scheme are summarized in the section headed “Appendix IV — Statutory and General Information — D. Share Incentive Schemes” of this prospectus.

CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS ARE REQUIRED Upon Listing and assuming all Preference Shares are converted into ordinary Shares, our Company has only one class of shares, namely Shares, and each ranks pari passu with the other Shares. Pursuant to the Companies Law and the terms of the Memorandum of Association and Articles of Association, our Company may from time to time by ordinary resolution of shareholders (i) increase its share capital; (ii) consolidate and divide its capital into shares of larger amount; (iii) divide its shares into several classes; (iv) subdivide its shares into shares of smaller amount; and (v) cancel any shares which have not been taken. In addition, our Company may subject to the provisions of the Companies Law reduce its share capital or capital redemption reserve by its shareholders passing a special resolution. See the section headed “Summary of the Constitution of our Company and Cayman Islands Companies Law — Summary of the Constitution of our Company — 2. Articles of Association — 2.5 Alteration of capital” in Appendix III to this prospectus for further details.

GENERAL MANDATE TO ISSUE SHARES Subject to the Global Offering becoming unconditional, our Directors have been granted a general unconditional mandate to allot, issue and deal with Shares and to make or grant offers, agreements or options which might require such Shares to be allotted and issued or dealt with at any time subject to the requirement that the aggregate nominal value of the Shares so allotted and issued or agreed conditionally or unconditionally to be allotted and issued, shall not exceed the sum of: (a) 20% of the aggregate nominal value of the share capital of our Company in issue immediately following completion of the Global Offering; and (b) the nominal amount of our share capital repurchased by our Company (if any) pursuant to the Repurchase Mandate (as mentioned below).

This mandate does not cover Shares to be allotted, issued, or dealt with under a rights issue or scrip dividend scheme or similar arrangements or a specific authority granted by our Shareholders or upon the exercise of the Over-allotment Option or the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or any option that may be granted under the Post-IPO Share Option Scheme.

This mandate to issue Shares will remain in effect until: (i) at the conclusion of our next annual general meeting; or (ii) the expiration of the period within which the next annual general meeting of our Company is required to be held under any applicable laws or the Articles of Association; or (iii) it is varied or revoked by an ordinary resolution of our Shareholders at a general meeting, whichever is the earliest.

241 SHARE CAPITAL

For further details of this general mandate, please see the section headed “Appendix IV — Statutory and General Information — A. Further Information about Our Group — 4. Resolutions of the Shareholders of our Company Passed on April 14, 2019”.

GENERAL MANDATE TO REPURCHASE SHARES Subject to the Global Offering becoming unconditional, our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with an aggregate nominal value of not more than 10% of the aggregate nominal value of our share capital in issue immediately following the Global Offering (excluding any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or any option that may be granted under the Post-IPO Share Option Scheme) (the “Repurchase Mandate”).

This mandate relates to repurchases made on the Stock Exchange, or on any other stock exchange which the Shares may be listed (and which is recognized by the SFC and the Stock Exchange for this purpose), and made in accordance with all applicable laws and regulations and the requirements of the Listing Rules. A summary of the relevant Listing Rules is set out in the section headed “Statutory and General Information — Repurchase of our own Shares”.

This general mandate to repurchase Shares will remain in effect until: (a) at the conclusion of our next annual general meeting; or (b) the expiration of the period within which the next annual general meeting of our Company is required to be held under any applicable laws or the Articles of Association; or (c) it is varied or revoked by an ordinary resolution of our Shareholders at a general meeting, whichever is the earliest.

For further details of this general mandate, please see the section headed “Appendix IV — Statutory and General Information — A. Further Information about Our Group — 4. Resolutions of the Shareholders of our Company Passed on April 14, 2019”.

242 SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware, immediately following the completion of the Global Offering and without taking into account any Shares which may be issued pursuant to the exercise of the Over- allotment Option or any Shares to be issued upon the exercise of options which were granted under the Pre-IPO Share Incentive Schemes, the following persons will have an interest or short position in the Shares or the underlying Shares which would fall to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the issued voting shares of our Company:

Approximate percentage of shareholding Approximate in the total percentage of issued shareholding Number of share capital in the total Shares held of our Company issued immediately immediately share capital following following of our completion of completion of Number of Company the the Shares held as of the Capitalization Capitalization as of the Latest Latest Issue and Issue and Capacity/nature Practicable Practicable the Global the Global Name of interest Date(5)(6) Date(6) Offering(5) Offering Mr.Mao...... Beneficial interest 80,178,082(L) 30.47% 351,910,365(L) 23.46% Trustee of a trust(1) 20,000,000(L) 7.60% 87,782,186(L) 5.85% Beneficiary of a trust(2) 4,938,356(L) 1.88% 21,674,984(L) 1.44% Ms. Mao(3) ...... Beneficiary of trusts 72,154,990(L) 27.42% 316,696,137(L) 21.11% Zhang and Sons ...... Beneficial interest 36,324,687(L) 13.80% 159,433,021(L) 10.63% Mr. John Wu Jiong(4) ..... Interest in controlled 58,277,107(L) 22.15% 255,784,592(L) 17.05% corporations Fenghe Harvest ...... Beneficial interest 35,273,973(L) 13.40% 154,821,323(L) 10.32% Wu and Sons ...... Beneficial interest 21,427,063(L) 8.14% 94,045,721(L) 6.27% Mr. Hua(5) ...... Interest in a controlled 28,219,178(L) 10.72% 123,857,056(L) 8.26% corporation China Finance Strategies . . Beneficial interest 28,219,178(L) 10.72% 123,857,056(L) 8.26%

Notes: (1) Mr. Mao is the settlor and trustee of the Mao Investment Trust and is interested in the Shares held by him in his capacity as trustee of the Mao Investment Trust. (2) Mr. Mao is the investment manager of the Min Zhou 2018 Family Trust and the manager of MZFT, LLC who exercises the voting rights of the Shares directly held by MZFT, LLC. Mr. Mao is also a beneficiary of Min Zhou 2018 Family Trust. For more details of Min Zhou 2018 Family Trust, please refer to the section headed “History, Development and Corporate Structure — Min Zhou 2018 Family Trust.” (3) Each of Mao and Sons, Zhang and Sons is indirectly wholly-owned by Intertrust (Singapore) Ltd. as the trustee of the Z&M Trust. Each of JL and JSW Holding Limited, MENGL Holding Limited, TIANL Holding Limited and VVBI Limited is indirectly wholly-owned by Intertrust (Singapore) Ltd. as the trustee of the VVBI Trust. Each of the Z&M Trust and the VVBI Trust is a revocable family trust set up by Ms. Mao as settlor and protector. Ms. Mao is also a beneficiary of the relevant family trusts. Therefore, Ms. Mao is deemed to be interested in the Shares directly held by each of Mao and Sons, Zhang and Sons, JL and JSW Holding Limited, MENGL Holding Limited, TIANL Holding Limited and VVBI Limited. For more details of the Z&M Trust and the VVBI Trust, please refer to the section headed “History, Development and Corporate Structure — Family trusts set up by Ms. Mao.” In addition, Ms. Mao is one of the beneficiaries of the Mao Investment Trust and is deemed to be interested in the Shares held by Mr. Mao in his capacity as the trustee of the Mao Investment Trust. (4) Mr. John Wu Jiong holds 100.00% equity interest in each of Fenghe Harvest and Wu and Sons. In addition, Mr. John Wu Jiong holds 45.00% equity interest in FengHe Canary. Therefore, Mr. John Wu Jiong is deemed to be interested in the Shares directly held by Fenghe Harvest, Wu and Sons and FengHe Canary. (5) Mr. Hua holds 100.00% equity interest in China Finance Strategies. Therefore, Mr. Hua is deemed to be interested in the Shares directly held by China Finance Strategies. (6) The letter “L” denotes the person’s long position in the Shares. (7) Assuming all Series B Preferred Shares are converted into ordinary Shares at the conversion ratio of 1:1.

Except as disclosed above, our Directors are not aware of any other person who will, immediately following the completion of the Global Offering, have any interest and/or short positions in the Shares or underlying shares of our Company that would fall to be disclosed to us and the Stock

243 SUBSTANTIAL SHAREHOLDERS

Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who are directly or indirectly, interested in 10% or more of the nominal value of any class of our share capital carrying rights to vote in all circumstances at general meetings of our Company. Our Directors are not aware of any arrangement which may at subsequent date result in a change of control of our Company.

244 CORNERSTONE INVESTORS

THE CORNERSTONE PLACING We have entered into cornerstone investment agreements with the cornerstone investors set out below (the “Cornerstone Investors”, and each a “Cornerstone Investor”), pursuant to which the Cornerstone Investors have agreed to subscribe, or cause their designated entities to subscribe, at the Offer Price for certain number of our Offer Shares (the “Cornerstone Placing”).

Based on the Offer Price of HK$3.42, being the low-end of the indicative Offer Price range set out in this Prospectus, the total number of Offer Shares to be subscribed by the Cornerstone Investors would be 102,944,000 Offer Shares, representing approximately 29.84% of the Offer Shares pursuant to the Global Offering and approximately 6.86% of our total issued share capital immediately upon completion of the Global Offering (assuming the Over-allotment Option is not exercised).

Based on the Offer Price of HK$3.92, being the mid-point of the indicative Offer Price range set out in this Prospectus, the total number of Offer Shares to be subscribed by the Cornerstone Investors would be 89,813,000 Offer Shares, representing approximately 26.03% of the Offer Shares pursuant to the Global Offering and approximately 5.99% of our total issued share capital immediately upon completion of the Global Offering (assuming the Over-allotment Option is not exercised).

Based on the Offer Price of HK$4.41, being the high-end of the indicative Offer Price range set out in this Prospectus, the total number of Shares to be subscribed by the Cornerstone Investors would be 79,834,500 Offer Shares, representing approximately 23.14% of the Offer Shares pursuant to the Global Offering and approximately 5.32% of our total issued share capital immediately upon completion of the Global Offering (assuming the Over-allotment Option is not exercised).

The Cornerstone Placing will form part of the International Offering, and none of the Cornerstone Investors will subscribe for any Offer Shares under the Global Offering other than pursuant to their respective cornerstone investment agreement. The Offer Shares to be subscribed by the Cornerstone Investors will rank pari passu in all respect with the fully paid Shares in issue and will be counted towards the public float of our Company under the Listing Rules. Immediately following the completion of the Global Offering, none of the Cornerstone Investors will have any Board representation in our Company, nor will any of them become a substantial shareholder of the Company. None of the Cornerstone Investors has any preferential rights in their respective cornerstone investment agreement compared with other public Shareholders.

The total number of Offer Shares to be subscribed by the Cornerstone Investors pursuant to the Cornerstone Placing may be affected by reallocation of the Offer Shares between the International Offering and the Hong Kong Public Offering in the event of over-subscription under the Hong Kong Public Offering as described in the section headed “Structure of the Global Offering—The Hong Kong Public Offering—Reallocation.”

To the best of the Company’s knowledge, each of the Cornerstone Investors is independent of our Company, our connected persons and their respective associates, and is making independent investment decisions. To the extent that the Shares will be subscribed by a qualified domestic institutional investor (the “QDII”) as the nominee of the relevant Cornerstone Investor, the relevant Cornerstone Investor will procure the QDII to comply with the terms of the QDII agreement entered into with the relevant Cornerstone Investor in order to ensure the Cornerstone Investor’s compliance with its undertakings under the relevant cornerstone investment agreement.

245 CORNERSTONE INVESTORS

THE CORNERSTONE INVESTORS The Company has entered into cornerstone investment agreements with each of the following Cornerstone Investors in respect of the Cornerstone Placing:

Approxi- Approxi- mate mate percentage of percentage of the Shares in the Shares in Approxi- Approxi- issue issue mate mate Approxi- Approxi- immediately immediately percentage of percentage of mate mate following following the Inter- the Inter- percentage of percentage of completion of completion of national Offer national Offer the Offer the Offer the Global the Global Shares Shares Shares Shares Offering Offering (assuming (assuming (assuming (assuming (assuming (assuming Number that the Over- that the Over- that the Over- that the Over- that the Over- that the Over- Hong Kong of Shares allotment allotment allotment allotment allotment allotment Cornerstone Investment Dollar Indicative to be Option is not Option is fully Option is not Option is fully Option is not Option is fully Investor Amount(1) Equivalent Offer Price subscribed for exercised) exercised) exercised) exercised) exercised) exercised) China National Pharmaceutical Investment Co., Ltd. (中 國醫藥投資有 限公司) (“CNP Low-end: Investment”) US$14,891,589.2 116,790,266.9 HK$3.42 34,149,000 11.00% 9.43% 9.90% 8.61% 2.28% 2.20% Mid-point: HK$3.92 28,793,000 9.60% 8.22% 8.64% 7.51% 1.99% 1.92% High-end: HK$4.41 26,483,000 8.53% 7.31% 7.68% 6.67% 1.77% 1.71% Gaotejia Investment Management Co., Ltd. (“Gaotejia US$12.0 Low-end: Investment”) million 94,112,400 HK$3.42 27,518,000 8.86% 7.60% 7.98% 6.94% 1.83% 1.77% Mid-point: HK$3.92 24,008,000 7.73% 6.63% 6.96% 6.05% 1.60% 1.55% High-end: HK$4.41 21,340,500 6.87% 5.89% 6.19% 5.38% 1.42% 1.38% Shenzhen Gaotejia Ruibao Investment Partnership (Limited Partnership) (深圳市高特佳 睿寶投資合夥 企業(有限合 夥) (“Shenzhen US$18.0 Low-end: Gaotejia”) . . million 141,168,600 HK$3.42 41,277,000 13.29% 11.39% 11.96% 10.40% 2.75% 2.66% Mid-point: HK$3.92 36,012,000 11.60% 9.94% 10.44% 9.08% 2.40% 2.32% High-end: HK$4.41 32,011,000 10.31% 8.84% 9.28% 8.07% 2.13% 2.06%

Note: (1) The investment amount is exclusive of brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005% which the Cornerstone Investors will pay in respect of such Offer Shares.

The information about our Cornerstone Investors set forth below has been provided by our Cornerstone Investors in connection with the Cornerstone Placing.

CNP Investment CNP Investment is a limited liability company established in the PRC and a wholly-owned subsidiary of China National Pharmaceutical Group Co., Ltd. (中國醫藥集團有限公司). CNP Investment primarily focuses on financial intermediation and equity investment in healthcare sector. CNP Investment had a registered capital of RMB0.96 billion with over RMB20.0 billion of assets under management as of December 31, 2018.

246 CORNERSTONE INVESTORS

Gaotejia Investment and Shenzhen Gaotejia Gaotejia Investment is an exempted company with limited liability incorporated in British Virgin Islands. Shenzhen Gaotejia is a limited partnership established under PRC laws. Both of Gaotejia Investment and Shenzhen Gaotejia are controlled by Shenzhen Gaotejia Investment Group Co. Ltd. (深圳市高特佳投資集團有限公司), a PRC company primarily focuses on investment in healthcare industry with over RMB20.0 billion of assets under management as of December 31, 2018.

CLOSING CONDITIONS The obligation of the Cornerstone Investor to acquire the Offer Shares under the Cornerstone Investment Agreement is subject to, among other things, the following closing conditions: (i) the Hong Kong Underwriting Agreement and the International Underwriting Agreement being entered into and having become effective and unconditional and not having been terminated by no later than the time and date as specified in those underwriting agreements, in accordance with their respective original terms, or as subsequently varied by agreement of the parties thereto or waived, to the extent it may be waived, by the relevant parties; (ii) the Listing Committee having granted the approval for the listing of, and permission to deal in, the Shares (including the Shares under the Cornerstone Placing) as well as other applicable waivers and approvals and such approval, permission or waiver having not been revoked prior to the commencement of dealings in the Shares on the Stock Exchange; (iii) the Offer Price having been agreed upon between the Company and the Joint Representatives; (iv) the respective representations, warranties, undertakings and confirmations of the Cornerstone Investors under the relevant cornerstone investment agreement are and will be (as of the closing of the cornerstone investment agreement) accurate and true in all respects and not misleading and that there is no breach of the relevant cornerstone investment agreements on the part of the Cornerstone Investors; and (v) no laws shall have been enacted or promulgated which prohibits the consummation of the transactions contemplated in the Global Offering or in the respective cornerstone investment agreements and there shall be no orders or injunctions from a court of competent jurisdiction in effect precluding or prohibiting consummation of such transactions.

RESTRICTIONS ON DISPOSALS BY THE CORNERSTONE INVESTORS Each of the Cornerstone Investors has agreed that, among other things, unless it has obtained prior written consent of each of the Company and the Sole Sponsor, it will not, whether directly or indirectly, at any time during the period of six months following the Listing Date (the “Lock-up Period”), (i) dispose of, in any way, any of the Offer Shares it has purchased or any interest in any company or entity holding any of the Offer Shares; or (ii) enter into any transactions directly or indirectly with the same economic effect as any aforesaid transactions, pursuant to the Cornerstone Investor Agreement.

247 DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS AND SENIOR MANAGEMENT The table below sets out certain information regarding our current Directors and senior management members.

Relationship Current position in with other Time of our Company and Directors and Date of joining primary senior Name Age appointment our Group responsibility management Mr. MAO Chen Cheney 57 July 3, 2018 August 2008 Chairman, chief executive officer Brother of Ms. Mao; cousin of (毛晨) and executive Director, Mr. Wu; cousin-in-law of responsible for the overall Mr. John Wu Jiong strategic planning and business development of the Group

Mr. WU Ying 56 September 7, 2009 August 2008 Executive Director and executive Cousin of Mr. Mao and Ms. Mao; (吳鷹) vice president, responsible for cousin-in-law of Mr. John Wu daily operation of the Group and Jiong customer relations

Mr. HUA Fengmao 50 July 3, 2018 June 2008 Executive Director and chief N/A (華風茂) financial officer, responsible for the overall finance management and capital investment of the Group

Mr. REN Delin 59 July 3, 2018 September 2009 Executive Director and president; N/A (任德林) responsible for the overall management of our CRO business

Ms. MAO Jun 55 July 3, 2018 June 2008 Non-executive Director Sister of Mr. Mao; cousin of (毛隽)* Mr. Wu; cousin-in-law of Mr. John Wu Jiong

Mr. John WU Jiong 51 July 3, 2018 August 2008 Non-executive Director Cousin-in-law of Mr. Mao, (吳炯)* Ms. Mao and Mr. Wu

Mr. FU Lei 56 April 14, 2018 April 14, 2018 Independent non-executive N/A (傅磊) Director

Ms. LI Xiangrong 46 April 14, 2018 April 14, 2018 Independent non-executive N/A ( ) Director

Mr. WANG Haiguang 56 April 14, 2018 April 14, 2018 Independent non-executive N/A (王海光) Director

Mr. YE Zhixiong 59 July 10, 2018 September 2009 Chief scientific officer, primarily N/A responsible for the research and development related matters

Mr. WANG Jie 53 July 10, 2018 January 2018 Vice president of the Department N/A of Biology, primarily responsible for bioassay development and platform management in drug discovery

Mr. LIU Rongqiang 54 July 10, 2018 March 2018 Vice president of the Department N/A of Chemistry, primarily responsible for the management of the Department of Chemistry

Ms. FEI Xiaoyu (費曉玉) 32 July 10, 2018 July 2009 Joint company secretary N/A

Ms. CHAU Hing Ling 44 July 10, 2018 July 2018 Joint company secretary N/A (周慶齡)

* For identification purpose only

248 DIRECTORS AND SENIOR MANAGEMENT

BOARD OF DIRECTORS Our Board consists of nine (9) Directors, comprising four (4) executive Directors, two (2) non-executive Directors and three (3) independent non-executive Directors. Our Board is responsible for the overall management and conduct of our business. For the residential address of each Director, please refer to the “Directors and Parties Involved in the Global Offering” section in this prospectus.

Executive Directors

Mr. MAO Chen Cheney (毛晨), aged 57, was appointed as the Chairman, chief executive officer and an executive Director of our Company on July 3, 2018, and is mainly responsible for the overall strategic planning and business development of the Group. Mr. Mao has over 20 years of experience in the CRO industry. Mr. Mao has served as the chief executive director of Viva Biotech Shanghai since joining our Group in August 2008 and currently serves as the chief executive officer of all our subsidiaries, except Viva Incubator Shanghai, where he serves as the chairman of the board of directors. Mr. Mao’s work experience prior to joining our Group is set forth below. Š From July 1997 to February 2003, he served as a director of the Department of Structural Biology of Parker Hughes Institute, a research institute devoted to structure-based drug discovery. Š From August 2002 to August 2003, he served as a reviewer on the U.S. National Institutes of Health Review Panel ZRG1 AARR-1 (50) in relation to AIDS-related structural biology projects grants. Š From August 2003 to May 2008, Mr. Mao served as the vice president of Medicilon Inc. and its subsidiary Shanghai Medicilon Inc., which are companies primarily engaged in biomedical research and development. Mr. Mao was also one of the founders of Medicilon Inc. and Shanghai Medicilon Inc. and was responsible for the overall operations of the group and leading research projects.

Mr. Mao obtained his bachelor’s degree in radiochemistry and master’s degree in physical chemistry from Fudan University (復旦大學) in the PRC in July 1983 and July 1986, respectively. He was a lecturer and an assistant researcher at Shanghai Institute of Organic Chemistry of the Chinese Academy of Sciences (中國科學院上海有機化學研究所) in the PRC from September 1986 and August 1987 and from September 1987 to August 1990, respectively. He obtained his Ph.D. degree in biochemistry from Cornell University in the U.S. in May 1995 and was a postdoctoral research associate at Cornell University in the U.S. from September 1991 to May 1995. He was a postdoctoral research associate in biochemistry at Duke University Medical Center in the U.S. from May 1995 to October 1997. Mr. Mao was selected to participate in the “The Thousand Talents Plan” initiated by Shanghai government in August 2012 and the PRC central government in March 2013, the purpose of which plan is to attract overseas top talents to China. Mr. Mao has published about 45 research papers on topics including structure-based drug design.

Mr. WU Ying (吳鷹), aged 56, was appointed as a Director of the Company in September 2009 and was redesignated as an executive Director and appointed as our executive vice president on July 3, 2018, and is mainly responsible for the daily operation of the Group and customer relations. Mr. Wu has approximately ten years of experience in the CRO industry. Mr. Wu joined our Group in August 2008 as a vice president of Viva Biotech Shanghai and currently serves as the chief operating officer

249 DIRECTORS AND SENIOR MANAGEMENT and general manager of Viva Biotech Shanghai. Mr. Wu also serves as a director of Viva Biotech HK, executive director of Jiaxing Viva, executive director and general manager of Viva Incubator Shanghai and Sichuan Viva. From August 1982 to February 2008, Mr. Wu worked at Shanghai Teachers College for Vocational Studies (上海成人教師進修學院). Mr. Wu obtained his college diploma in mathematics from Shanghai Normal University (上海師範大學) in the PRC in July 1982. Mr. Wu obtained his graduate diploma in business administration from Hong Kong International Business College in Hong Kong in June 2010. Mr. Wu attended the advanced training course for chief financial officer offered by Shanghai University of Finance and Economics (上海財經大學) in the PRC from October 2013 to September 2014.

Mr. HUA Fengmao (華風茂), aged 50, was appointed as an executive Director and the chief financial officer of our Company on July 3, 2018, mainly responsible for the overall finance management and capital investment of the Group. Mr. Hua has approximately 20 years of experience in the investment banking industry. Mr. Hua previously worked at a number of investment banking firms where he was mainly responsible for corporate finance, public offering, reorganization, merger and acquisitions as well as other financial consulting work, the details of which are set forth below. Š From May 1999 to November 1999, Mr. Hua served as a manager at ICEA Capital Limited (工商東亞融資有限公司). Š From December 1999 to July 2003, Mr. Hua served as a general manager of corporate finance at Cazenove Asia Limited. Š From July 2003 to October 2005, Mr. Hua served as a managing director of the investment banking team at CLSA Limited. Š From April 2008 to August 2014, Mr. Hua served as the head of direct investment department and the head of investment banking department in BOCOM International Holdings Company Limited.

Mr. Hua obtained his bachelor’s degree in English from Shanghai International Studies University (上海外國語大學) in the PRC in July 1989. He obtained master’s degree in business administration from the International University of Japan in Japan in June 1997. Mr. Hua is a responsible officer for Type 9 regulated activities under the SFO.

Mr. REN Delin (任德林), aged 59, was appointed as an executive Director and the president of our Company on July 3, 2018, mainly responsible for the overall management of our CRO business. Mr. Ren has approximately ten years of experience in the CRO industry. Mr. Ren served as the vice president of the Department of Biology of Viva Biotech Shanghai from May 2009 to August 2017 and has served as the general manager of Viva Biotech Shanghai since August 2017. Mr. Ren’s work experience prior to joining our Group is set forth below. Š From January 1999 to April 2001, Mr. Ren served as a research scientist in the Warner- Lambert Pharmaceuticals LLC, an American pharmaceutical company which merged with Pfizer Inc. in 2001. Š Mr. Ren worked at the Global Research and Development Center of Pfizer Inc., an American pharmaceutical company, and served as a research scientist in the Metabolic Disease Division from January 2000 to April 2001, a senior scientist focusing on research and development of innovative drugs for central nervous system diseases from April 2001 to December 2003, a principal scientist focusing on research and development of

250 DIRECTORS AND SENIOR MANAGEMENT

innovative drugs for dermatology therapeutics from December 2003 to June 2007 and a principal scientist focusing on research and development of innovative drugs for cardiovascular and metabolic diseases and exploratory diabetes from July 2007 to April 2009.

Mr. Ren obtained his bachelor’s degree in veterinary medicine from Shangxi Agricultural University (山西農業大學) in the PRC in July 1983. He obtained his master’s degree in microbiology from Beijing Agricultural University (北京農業大學) in the PRC in July 1989. Mr. Ren obtained his Ph.D. degree in animal science from Michigan State University in the U.S. in December 1996 and was a post-doctoral research associate at the Department of Biochemistry of Michigan State University in the U.S. from January 1997 to December 1998. Mr. Ren has published about 10 research papers on topics including adipogenesis and fat-cell function in obesity and diabetes, among others. Mr. Ren was selected to participate in the “Shanghai Thousand Talents Plan” in August 2015.

Non-executive Directors Ms. MAO Jun (毛隽)*, aged 55, was appointed as a non-executive Director of our Company on July 3, 2018. She is one of the co-founders of our Group and briefly served as a director of our Viva Biotech HK in June 2008. Ms. Mao is the founder and director of JMCR. She also serves as the legal representative of Shanghai Daidai Investment Consulting Co., Ltd. (上海岱岱投資諮詢有限公司) and is responsible for its overall management and operation. In addition, Ms. Mao serves as the investment manager in Hangzhou Qiandai Investment Management Partnership (Limited Partnership) (杭州千岱投 資管理合夥企業(有限合夥)) and the manager of and Beijing Qiandaidai Investment Management Co, Ltd. (北京千岱岱投資管理有限公司), and is responsible for the day-to-day operation of these two companies. Ms. Mao’s prior work experience is set forth below.

From November 1998 to January 2002, Ms. Mao served as an assistant vice president at Deutsche Bank. From April 2002 to February 2003, Ms. Mao worked at Nomura International plc. Ms. Mao was employed by UBS AG London Branch from November 2004 to January 2009, her last position with UBS AG London Branch was a director within the investment bank division. From June 2009 to January 2010, Ms. Mao served as a director at UBS AG Hong Kong Branch. From October 2010 to December 2012, Ms. Mao served as director in the wealth management department of UBS Securities Limited, and was mainly responsible for wealth management, financing and investment.

Ms. Mao obtained her bachelor’s degree in physics from Fudan University in the PRC in July 1985. She obtained her Ph.D. degree in science from University of Leicester in the United Kingdom in July 1998. Ms. Mao currently holds the Fund Management Qualification Certificate (中國證券投資基金 業從業證書) issued by the Asset Management Association of China (中國證券投資基金協會).

Mr. John WU Jiong (吳炯)*, aged 51, was appointed as a non-executive Director of our Company on July 3, 2018. Mr. Wu has served as a director of Viva Biotech Shanghai since August 2009. Mr. Wu also previously served as a director of our Company and Viva Biotech HK from August 2008 to May 2016 and from June 2008 to May 2016, respectively. Mr. Wu is a co-founder of and has served as a director of FengHe Fund Management Pte. Ltd. (“FengHe”) since July 2010. The principal business of FengHe is fund management and Mr. Wu is primarily responsible for the overall investment strategy of FengHe. Mr. Wu is a co-founder of and has served as a non-executive director providing strategic consultancy to Huazhu Hotels Group (華住酒店集團) (Nasdaq ticker: HTHT), a leading and fast-growing multi-brand hotel group in China, since January 2007. Mr. Wu obtained his bachelor’s degree in science from the University of Michigan in the U.S. in July 1989.

251 DIRECTORS AND SENIOR MANAGEMENT

Independent Non-executive Directors

Mr. FU Lei (傅磊), aged 56, was appointed as an independent non-executive Director on April 14, 2019. Mr. Fu has been a professor of medical chemistry in the School of Pharmacy of Shanghai Jiao Tong University since 2006. Mr. Fu was a lecturer at Fudan University and was an invited scientist at Free University from September 1990 to August 1993. From November 1998, Mr. Fu served as a principal investigator of Pharmacyclics, Inc., a U.S. company focusing on the developing and commercializing small-molecule medicines for the treatment of cancers and immune- mediated diseases. Mr. Fu obtained his bachelor’s degree in radiochemistry from Fudan University in the PRC in July 1984. He obtained his Ph.D. degree in chemistry from Stanford University in the U.S. in September 1997.

Ms. LI Xiangrong ( ), aged 46, was appointed an independent non-executive Director on April 14, 2019. Ms. Li was employed with Unilever for various positions from 1993 to 2010, including serving as the financial controller for greater China region from 2007 to 2010. Ms. Li served as the chief financial officer of Hengdeli Holdings Ltd (HK.3389) from 2010 to August 2014. Ms. Li served as the chief financial officer of Homeinns Hotel Group (previously listed on NASDAQ with stock ticker HMIN) from August 2014 to April 2016. Following merger of Homeinns Hotel Group and Beijing Tourist Hotel (Group) Co., Ltd. (北京首旅酒店（集團）股份有限公司) in April 2016, Ms. Li has served as the deputy general manager and financial controller of Beijing Tourist Hotel (Group) Co., Ltd. (北京首旅酒店（集團）股份有限公司) (600258) since then.

Ms. Li obtained a graduation certificate for her bachelor’s degree in international accounting jointly awarded by the Shanghai University of Finance and Economics (上海財經大學) and Shanghai International Studies Institute (上海外國語學院, now known as Shanghai International Studies University (上海外國語大學)) in July 1993. She obtained a master’s degree in executive management business administration from China Europe International Business School (中歐國際商學院)in September 2008 and is now a senior member of The Association of Chartered Certified Accountants and a member of The Chinese Institute of Certified Public Accountants (中國註冊會計師會).

Mr. WANG Haiguang,(王海光), aged 56, was appointed as an independent non-executive Director on April 14, 2019. Mr. Wang was a teacher at Hangzhou University (杭州大學) (now merged into Zhejiang University (浙江大學)) from April 1983 to April 1984. Mr. Wang worked at the Publicity Department of Zhejiang Province from May 1984 to January 1990 and the General Office of the Party School of the Central Committee of the Communist Party of China from February 1990 to July 1995, respectively. From July 1995 to April 1997, Mr. Wang served as deputy general manager of Zhejiang World Trade Center Co., Ltd. (浙江世界貿易中心有限公司), a trading company, and was primarily responsible for day-to-day operations of the company. From May 1997 to June 2006, Mr. Wang served as the executive president, primarily responsible for day-to-day operations of the company, at Nandu Group Holding Co., Ltd. (南都集團控股有限公司). Mr. Wang has served as the chairman of the board of directors of Zhejiang Nandu Power Source Co., Ltd. (浙江南都電源動力股份有限公司, stock code: 300068), Narada Hotel Group, Zhejiang World Trade Center Co., Ltd. (浙江世界貿易中心有限公司), the vice executive president and director of Shanghai Nandu Group Co., Ltd. (上海南都集團有限公司) since June 2006, as well as the chairman of the board of directors of Zhejiang Vanke Nandu Real Estate Co., Ltd. (浙江萬科南都房地產有限公司) since October 2006.

Mr. Wang obtained his bachelor’s degree in philosophy from Hangzhou University (杭州大學) (now merged into Zhejiang University) in the PRC in July 1983. Mr. Wang currently serves as the

252 DIRECTORS AND SENIOR MANAGEMENT deputy chairman of The Listed Company Association of Zhejiang (浙江上市公司協會) and The Zhejiang Province Real Estate Industry Association (浙江省房地產行業協會).

SENIOR MANAGEMENT Mr. MAO Chen Cheney (毛晨) was appointed as the chief executive officer of our Company on July 3, 2018. Please refer to “— Board of Directors — Executive Directors” for his biographical details.

Mr. WU Ying (吳鷹) was appointed as the executive vice president of our Company on July 3, 2018. Please refer to “— Board of Directors — Executive Directors” for his biographical details.

Mr. HUA Fengmao (華風茂) was appointed as the chief financial officer of our Company on July 3, 2018. Please refer to “— Board of Directors — Executive Directors” for his biographical details.

Mr. REN Delin (任德林) was appointed as the general manager of our Company on July 3, 2018. Please refer to “— Board of Directors — Executive Directors” for his biographical details.

Mr. YE Zhixiong, aged 59, was appointed as the chief scientific officer of our Company on July 10, 2018, and is mainly responsible for the research and development related matters. Mr. Ye served as the vice president of the Department of Chemistry in Viva Biotech Shanghai from September 2009 to July 1, 2017. Prior to joining our Group, Mr. Ye worked as a senior research fellow at Merck & Company, Inc. (NYSE: MRK), an American pharmaceutical company, for a period of over 13 years. During Mr. Ye’s employment with Merck & Company, Inc., he participated and directed drug research and development projects targeted at diabetes, obesity and endocrine related diseases.

Mr. Ye obtained his bachelor’s degree in chemistry from Fudan University (復旦大學) in the PRC in July 1982, and obtained his master’s degree in chemistry from the Montana State University in the U.S. in July 1991. Mr. Ye obtained his Ph.D. degree in chemistry from the University of Minnesota in the U.S. in July 1996. Mr. Ye was selected to participate in the “Shanghai Thousand Talents Plan” in August 2016, an initiative of Chinese government to attract skilled and talented artists, scientists, engineers and academics back to China.

Mr. WANG Jie, aged 53, was appointed as the vice president of the Department of Biology of our Company on July 10, 2018 and is mainly responsible for bioassay development and platform management in drug discovery. Mr. Wang joined our Group in January 2018 and has served as the vice president of the Department of Biology of Viva Biotech Shanghai since then, and is primarily responsible for bioassay development and platform management in drug discovery. Mr. Wang’s work experience prior to joining our Group is set forth below. Š From November 2003 to November 2006, Mr. Wang consecutively served as a research associate and research assistant professor in the Department of Biochemistry and Molecular Biology at the University of Chicago. Prior to this, Mr. Wang served as an associate in the Howard Hughes Institute of Medicine at the University of Chicago, and was mainly responsible for research on islet cell biology and diabetes. Š From November 2006 to June 2012, Mr. Wang served as an assistant professor (tenure- track) at the Division of Endocrinology, Diabetes and Metabolism in the Department of Internal Medicine at The Ohio State University, and was mainly responsible for research on islet cell biology and diabetes.

253 DIRECTORS AND SENIOR MANAGEMENT

Š From September 2012 to October 2017, he served as the principal scientist at the Lilly China Research and Development Co. Ltd, a U.S. pharmaceutical company primarily engaged in drug research and development, and was mainly responsible for reviewing potential drug targets, leading drug discovery and development projects for treatment of metabolic diseases such as diabetes, obesity and nonalcoholic steatohepatitis and leading pancreatic islet function and translational biomedicine platforms and sections.

Mr. Wang obtained his bachelor’s degree in animal science and his master’s degree in animal physiological and biochemical from Henan Agricultural University (河南農業大學) in the PRC in July 1986 and July 1991, respectively. He obtained a certificate of completion of the Ph.D. course in animal genetic engineering at China Agricultural University (中國農業大學, formerly known as Beijing Agricultural University (北京農業大學)) in the PRC in January 1995. Mr. Wang received his Ph.D. degree in physiological medical sciences from Japan Gunma University in Japan in March 2000. Mr. Wang has published over 20 research papers on topics including metabolic, beta-cell proinsulin structural biological processes, diabetes-related gene mutations and pathogenesis, development of new drugs for treatment of diabetes, among others.

Mr. LIU Rongqiang, aged 54, was appointed as the vice president of the Department of Chemistry of our Company on July 10, 2018 and is primarily responsible for the management of the Department of Chemistry. Mr. Liu joined our Group in March 2018 and has since served as the vice president of the Department of Chemistry of Viva Biotech Shanghai and the site head of Jiaxing Viva. From May 2001 to May 2008, Mr. Liu was a senior researcher at Pharmacopeia, Inc., a U.S. biopharmaceutical company which engages in the drug discovery and development and Mr. Liu’s research were primarily concerning inflammatory diseases, central nervous system and Oncology. From August 2008 to August 2012, Mr. Liu served as a senior director in Shanghai ChemPartner Co., Ltd. (上海睿智化學研究有限公司), a CRO based in China, and was mainly responsible for providing chemistry support for a number of pharmaceutical companies. From September 2012 to November 2016, he served as a director of external medicinal chemistry at Merk, Sharp & Dohme Co., a leading pharmaceutical company in the world. From December 2016 to February 2018, he served as the executive director of medicinal chemistry at Shanghai Bioduro Co., Ltd. (上海諾潤生物科技有限公司), a company engaged in the provision of contract research services for drug research and development, and was responsible for the overall management and operation of the chemistry division. Mr. Liu obtained his bachelor’s degree in chemistry and master’s degree in organic chemistry from Nankai University (南開大學) in the PRC in September 1987 and September 1990, respectively. He obtained his Ph.D. degree in science from the University of Lausanne in Switzerland in November 1996. Mr. Liu was a postdoctoral research associate in bioorganic chemistry and peptide chemistry at the University of Minnesota in the U.S. from February 1997 to May 2001. Mr. Liu has published about 15 research papers on topics including anemia and anti-tumor kinase inhibitors.

Save as disclosed herein, no Directors or members of our senior management held any directorship positions in any listed companies in Hong Kong and overseas within the three years immediately preceding the date of this prospectus. There is no other information relating to the relationship of any of our Directors with other Directors and senior management officers that should be disclosed pursuant to Rule 13.51(2) or paragraph 41(3) of Appendix 1A of the Listing Rules.

Save as disclosed herein, to the best of the knowledge, information and belief of our Directors, there was no other matter with respect to the appointment of our Directors that needs to be brought to the attention of the Shareholders and there was no other information relating to our Directors that is

254 DIRECTORS AND SENIOR MANAGEMENT required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules as of the Latest Practicable Date.

JOINT COMPANY SECRETARY

Ms. FEI Xiaoyu (費曉玉), aged 32, was appointed as a joint company secretary of our Company on July 10, 2018. Ms. Fei joined our Group as an assistant to president in Viva Biotech Shanghai in July 2009. Starting from November 2011, Ms. Fei has been concurrently serving as assistant to president and officer manager in Viva Biotech Shanghai. Since joining our Group, she has mainly been responsible for assisting the chairman and the chief executive officer of Viva Biotech Shanghai in the daily operations and administrative matters of Viva Biotech Shanghai and has participated in the discussions of material decisions of the Group. Ms. Fei obtained her bachelor’s degree in Japanese language from Shanghai Normal University (上海師範大學) in July 2009, and obtained her graduate diploma for completing the courses of master of business administration from Hong Kong International Business College in June 2012.

Ms. CHAU Hing Ling (周慶齡), aged 44, was appointed as a joint company secretary of our company on July 10, 2018. She joined Vistra Corporate Services (HK) Limited (“Vistra”) since June 2013 and now serves as a director of corporate services of Vistra, where she leads a team of professional staff to provide a full range of corporate services and listed company secretary services. Prior to joining Vistra, she was an associate director of corporate services of an international corporate services provider.

Ms. Chau has over 16 years of experience in the corporate services industry. She is currently the company secretary of several companies listed on the Stock Exchange. Ms. Chau received a Master of Laws degree majoring in corporate and financial law from The University of Hong Kong in November 2007. She has been a fellow member of the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries since May 2013.

BOARD COMMITTEES We have established the following committees in our Board: an audit committee, a remuneration committee and a nomination committee. The committees operate in accordance with terms of reference established by our Board.

Audit Committee Our Company has established an audit committee (with effect from the Listing Date) with written terms of reference in compliance with Rule 3.21 of the Listing Rules and paragraph C.3 and paragraph D.3 of the Corporate Governance Code. The audit committee consists of three independent non-executive Directors being Ms. Li Xiangrong, Mr. Wang Haiguang and Mr. Fu Lei. The chairman of the audit committee is Ms. Li Xiangrong. Ms. Li Xiangrong holds the appropriate professional qualifications as required under Rules 3.10(2) and 3.21 of the Listing Rules. The primary duties of the audit committee are to review of the effectiveness of the financial reporting process, internal control and risk management systems of our Group, overseeing the audit process and performing other duties and responsibilities as assigned by our Board.

255 DIRECTORS AND SENIOR MANAGEMENT

Remuneration Committee Our Company has established a remuneration committee (with effect from the Listing Date) with written terms of reference in compliance with Rule 3.25 of the Listing Rules and paragraph B.1 of the Corporate Governance Code. The remuneration committee consists of three independent non-executive Directors being Ms. Li Xiangrong, Mr. Wang Haiguang and Mr. Fu Lei. The remuneration committee is chaired by Ms. Li Xiangrong. The primary duties of the remuneration committee are to review and make recommendations to the Board regarding the terms of remuneration packages, bonuses and other compensation payable to the Directors and senior management.

Nomination Committee Our Company has established a nomination committee (with effect from the Listing Date) with written terms of reference in compliance with paragraph A.5 of the Corporate Governance Code. The nomination committee consists of one executive Director, being Mr. Mao, and two independent non-executive Directors, being Mr. Fu Lei and Mr. Wang Haiguang. The chairman of the Nomination Committee is Mr. Mao. The primary duties of the nomination committee include, without limitation, reviewing the structure, size and composition of our Board, assessing the independence of independent non-executive Directors and making recommendations to our Board on matters relating to the appointment of Directors.

CORPORATE GOVERNANCE Our Directors recognize the importance of good corporate governance in management and internal procedures so as to achieve effective accountability. To accomplish this, save as set out below, our Company intends to comply with the code provisions set out in the Corporate Governance Code in Appendix 14 to the Listing Rules after Listing.

Under paragraph A.2.1 of the Corporate Governance Code, the roles of chairman and chief executive should be separate and should not be performed by the same individual. Under the current organization structure of our Company, Mr. Mao is our Chairman and chief executive officer. With his extensive experience in the industry, our Board believes that vesting the roles of both chairman and chief executive officer in the same person provides our Company with strong and consistent leadership, allows for effective and efficient planning and implementation of business decisions and strategies, and is beneficial to the business prospects and management of our Group. Although Mr. Mao performs both the roles of chairman and chief executive officer, the division of responsibilities between the chairman and chief executive officer is clearly established. In general, the chairman is responsible for supervising the functions and performance of our Board, while the chief executive officer is responsible for the management of the business of our Group. The two roles are performed by Mr. Mao distinctly. We also consider that the current structure does not impair the balance of power and authority between our Board and the management of our Company given the appropriate delegation of the power of our Board and the effective functions of our independent non-executive Directors. However, it is the long-term objective of our Company to have these two roles performed by separate individuals when suitable candidates are identified.

For further information relating to our Company’s corporate governance measures, please see the section headed “Relationship with our Controlling Shareholders — Corporate Governance Measures.”

256 DIRECTORS AND SENIOR MANAGEMENT

COMPLIANCE ADVISER We have appointed Guotai Junan Capital Limited as our compliance adviser pursuant to Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the compliance adviser will advise us on the following circumstances: Š before the publication of any regulatory announcements, circulars or financial reports; Š where a transaction, which might be a notifiable or connected transaction under the Listing Rules is contemplated, including share issues and share repurchases; Š where we propose to use the proceeds of the Global Offering in a manner different from that detailed in this prospectus or where our business activities, developments or results deviate from any forecast, estimate or other information in this prospectus; and Š where the Stock Exchange makes an inquiry of our Company regarding unusual movements in the price and trading volume of our Shares or other issues under Rule 13.10 of the Listing Rules.

The terms of the appointment shall commence on the Listing Date and end on the date which we dispatch our annual report in respect of our financial results for the first full the financial year commencing after the Listing Date.

COMPENSATION OF DIRECTORS AND MANAGEMENT Our Directors receive compensation in the form of fees, salaries, bonuses, other allowances and benefits in kind, including our Company’s contribution to the pension scheme on their behalf. We determine the salaries of our Directors based on each Director’s responsibilities, qualification, position and seniority.

The aggregate amount of remuneration our Directors have received (including fees, salaries, contributions to pension schemes, discretionary bonuses, allowances and other benefits in kind) for the three years ended December 31, 2016, 2017 and 2018 were approximately RMB0.2 million, RMB0.4 million and RMB5.6 million, respectively.

It is estimated that remuneration and benefits in kind equivalent to approximately RMB8.0 million in aggregate will be paid and granted to our Directors by us in respect of the financial year ending December 31, 2019 under arrangements in force at the date of this prospectus.

The aggregate amount of remuneration which were paid by our Group to our five highest paid individuals (including both employees and Directors) for the three years ended December 31, 2016, 2017 and 2018 were approximately RMB2.0 million, RMB2.4 million and RMB4.0 million, respectively.

No remuneration was paid to our Directors or the five highest paid individuals as an inducement to join, or upon joining, our Group. No compensation was paid to, or receivable by, our Directors, past Directors or the five highest paid individuals for the Track Record Period for the loss of office as director of any member of our Group or of any other office in connection with the management of the affairs of any member of our Group. None of our Directors waived any emoluments during the same period.

257 DIRECTORS AND SENIOR MANAGEMENT

For additional information on Directors’ remuneration during the Track Record Period as well as information on the highest paid individuals, please see Note 11 of the Accountants’ Report set out in Appendix I to this prospectus.

PRE-IPO SHARE INCENTIVE SCHEMES We have adopted the Pre-IPO Share Incentive Schemes, the purpose of which is to incentivize and reward eligible participants by reason of their contribution or potential contribution to our Company and/or any of our subsidiaries. Please see the section headed “Appendix IV — Statutory and General Information — D. Share Incentive Schemes — 1. Pre-IPO Share Incentive Schemes” for a description of our Pre-IPO Share Incentive Schemes.

POST-IPO SHARE OPTION SCHEME We have conditionally adopted the Post-IPO Share Option Scheme on April 14, 2019. Please see the section headed “Appendix IV — Statutory and General Information — D. Share Incentive Schemes — 2. Post-IPO Share Option Scheme” for a description of our Post-IPO Share Option Scheme.

258 FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS For a detailed description of our future plans, see the sections headed “Business — Our Strategies” and “Business — Future Expansion” in this prospectus.

USE OF PROCEEDS We estimate that the aggregate net proceeds to our Company from the Global Offering (after deducting underwriting fees and estimated expenses in connection with the Global Offering payable by us and assuming that the Over-allotment Option is not exercised and an Offer Price of HK$3.92 per Share, being the mid-point of the indicative Offer Price range stated in this prospectus) will be approximately HK$1,231.7 million. We currently intend to apply such net proceeds for the following purposes: (a) approximately 30%, or HK$369.5 million, will be used for expanding our EFS model to add more promising biotechnology startups in China and overseas into our incubation portfolio, among which HK$258.6 million is expected to be used for drug discovery services provided to potential incubation portfolio companies adopting EFS model while HK$110.8 million is expected to be used for future strategic investments; (b) approximately 30%, or HK$369.5 million, will be used for building up our commercial and research manufacturing capabilities and capacities both in biologics CMO and chemistry CMO areas, which potentially includes acquiring land parcels, constructing relevant facilities, completing renovations and expanding our office spaces. In early 2018, we started preliminary discussions with a local government authority in Chengdu regarding potentially acquiring a land parcel for the purpose of constructing new biologics manufacturing facilities, which is pending on the completion of all necessary procedures set forth in the agreement. (c) approximately 10%, or HK$123.2 million, will be used for purchasing laboratory equipment and materials in accordance with our expansion plans, such as cell incubators, centrifuges, bioreactors, ultra-low degree freezer, ultrafiltration/diafiltration system, cell metric CLD, cedex bio HT analyzer and fill/finish system; (d) approximately 10%, or HK$123.2 million, will be used for hiring, training and retaining biologics and chemical drug research and development personnel, which is expected to reach 500 staffs by the end of 2019 and to consist of bachelors, masters and doctors with biology or chemistry related majors, and their respective annual salaries will be determined in accordance with their credentials and work experience; (e) approximately 10%, or HK$123.2 million, will be used for expanding our CMO business, which potentially includes acquiring new technologies, businesses or services, such as technologies for upstream process biologic development, downstream process biologics capability or a small molecule CMO facility, and/or entering into strategic alliances with third parties; and (f) approximately 10%, or HK$123.2 million, will be used for our general corporate and working capital purposes.

If the Offer Price is determined at the highest point of the stated range, the net proceeds to our Company would be increased by approximately HK$139.9 million. If the Offer Price is determined at the lowest point of the stated range, the net proceeds to our Company would be decreased by

259 FUTURE PLANS AND USE OF PROCEEDS approximately HK$170.8 million. The above allocation of the net proceeds will be adjusted on a pro rata basis in the event that the Offer Price is fixed at a higher or lower level compared to the mid-point of the indicative Offer Price range stated in this prospectus.

To the extent that our net proceeds are not sufficient to fund the purposes set out above, we intend to fund the balance through a variety of means, including cash generated from operations, bank loans and other borrowings.

To the extent that the net proceeds from the Global Offering are not immediately used for the purposes described above and to the extent permitted by the relevant laws and regulations, they will be placed in short-term demand deposits with banks in Hong Kong or the PRC and/or through money market instruments.

We will issue an appropriate announcement if there is any material change to the above proposed use of proceeds.

260 UNDERWRITING

HONG KONG UNDERWRITERS China International Capital Corporation Hong Kong Securities Limited J.P. Morgan Securities (Asia Pacific) Limited Nomura International (Hong Kong) Limited BOCI Asia Limited China Renaissance Securities (Hong Kong) Limited Haitong International Securities Company Limited Daiwa Capital Markets Hong Kong Limited First Shanghai Securities Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES Hong Kong Public Offering Hong Kong Underwriting Agreement Pursuant to the Hong Kong Underwriting Agreement, our Company is offering initially the Hong Kong Offer Shares (subject to adjustment) for subscription by the public in Hong Kong on the terms and subject to the conditions in this prospectus, the Application Forms and the Hong Kong Underwriting Agreement at the Offer Price.

Subject to the Listing Committee granting approval for the listing of, and permission to deal in, the Shares in issue and to be issued pursuant to the Global Offering as mentioned herein (including any additional Shares which may be issued pursuant to the exercise of the Over-allotment Option) and such approval not having been withdrawn, and to certain other conditions set out in the Hong Kong Underwriting Agreement (including the Joint Representatives and our Company agreeing upon the Offer Price), the Hong Kong Underwriters have agreed severally and not jointly to subscribe, or procure subscribers to subscribe for their respective applicable proportions of the Hong Kong Offer Shares being offered which are not taken up under the Hong Kong Public Offering on the terms and conditions as set out in this prospectus, the Application Forms and the Hong Kong Underwriting Agreement.

The Hong Kong Underwriting Agreement is conditional on and subject to, amongst other things, the International Underwriting Agreement having been signed and becoming unconditional and not having been terminated in accordance with its terms.

Grounds for termination The Joint Representatives may, in their sole and absolute discretion terminate the Hong Kong Underwriting Agreement with immediate effect upon the occurrence of any of the following events before 8:00 a.m. (Hong Kong time) on the Listing Date: (i) there develops, occurs, exists or comes into force: (a) any new law or regulation or any change or development involving a prospective change in existing law or regulation, or any change or development involving a prospective change in the interpretation or application thereof by any court or other

261 UNDERWRITING

competent authority in or affecting Hong Kong, the PRC, the United States, the United Kingdom, the European Union (or any member thereof) (each a “Relevant Jurisdiction”); or

(b) any change or development involving a prospective change or development, or any event or series of events likely to result in or representing a change or development, or prospective change or development, in local, national, regional or international financial, economic, political, military, industrial, economic, currency market, fiscal or regulatory or market conditions or any monetary or trading settlement system (including, without limitation, conditions in stock and bond markets, money and foreign exchange markets and inter-bank markets, a change in the system under which the value of the Hong Kong currency is linked to that of the currency of the U.S. or a change of Hong Kong dollars or of the RMB against any foreign currencies) in or affecting any Relevant Jurisdiction; or

(c) any event or series of events in the nature of force majeure (including, without limitation, acts of government, labor disputes, strikes, lock-outs, fire, explosion, earthquake, flooding, tsunami, civil commotion, riots, public disorder, acts of war, acts of terrorism (whether or not responsibility has been claimed), acts of God, accident or interruption in transportation, destruction of power plant, outbreak of diseases or epidemics including, but not limited to, SARS, swine or avian flu, H5N1, H1N1, H1N7, H7N9, Ebola virus, Middle East respiratory syndrome (MERS) and such related/mutated forms, economic sanction, any local, national, regional or international outbreak or escalation of hostilities (whether or not war is or has been declared) or other state of emergency or calamity or crisis in whatever form) in or directly or indirectly affecting any Relevant Jurisdiction; or

(d) any moratorium, suspension or restriction (including, without limitation, any imposition of or requirement for any minimum or maximum price limit or price range) in or on trading in securities of generally on the Stock Exchange, the New York Stock Exchange, the NASDAQ Global Market, the London Stock Exchange, the Tokyo Stock Exchange, the Taiwan Stock Exchange, the Shanghai Stock Exchange or the Shenzhen Stock Exchange; or

(e) any general moratorium on commercial banking activities in Hong Kong (imposed by the Financial Secretary or the Hong Kong Monetary Authority or other competent Governmental Authority (as defined in the Hong Kong Underwriting Agreement)), New York (imposed at Federal or New York State level or other competent Governmental Authority), or any Relevant Jurisdiction or any disruption in commercial banking or foreign exchange trading or securities settlement or clearance services, procedures or matters in any Relevant Jurisdiction; or

(f) any (A) change or prospective change in exchange controls, currency exchange rates or foreign investment regulations (including, without limitation, a change of the Hong Kong dollars or RMB against any foreign currencies, a change in the system under which the value of the Hong Kong dollars is linked to that of the U.S. dollars or RMB is linked to any foreign currency or currencies), or (B) any change or prospective change in Taxation in any Relevant Jurisdiction materially adversely affecting an investment in the Shares; or

262 UNDERWRITING

(g) the issue or requirement to issue by the Company of a supplemental or amendment to this Prospectus, Application Forms, preliminary offering circular or offering circular or other documents in connection with the offer and sale of the Shares pursuant to the Companies Ordinance or the Listing Rules or upon any requirement or request of the Stock Exchange or the SFC; or (h) any change or development involving a prospective change which has the effect of materialization of any of the risks set out in the section headed “Risk Factors” in this Prospectus; or (i) any litigation or claim being threatened or instigated against any member of the Group or any Director; or (j) any contravention by any member of the Group or any Director of the Companies Ordinance, the PRC Company Law, the Listing Rules or any other applicable Laws (as defined in the Hong Kong Underwriting Agreement); or (k) any executive Directors, the chief executive officer or the chief financial officer of the Company vacating his or her office; or (l) a Governmental Authority or a regulatory body or organization in any Relevant Jurisdiction commencing any investigation or other action or proceedings, or announcing an intention to investigate or take other action or proceedings, against any member of the Group or any Director, or any of them being charged with an indictable offence or prohibited by operation of Laws or otherwise disqualified from taking part in the management of a company or the commencement by any governmental, political, regulatory body of any action against any Director or any announcement by any governmental, political, regulatory body that it intends to take any such action; or (m) any adverse change or prospective adverse change in the earnings, results of operations, assets, business, general affairs, management, shareholder’s equity, profit, losses, properties, business prospects, financial or trading position, conditions (financial or otherwise) or prospects of any member of the Group; or (n) any demand by creditor for repayment of indebtedness prior to its stated maturity or any order or petition being presented for the winding-up or liquidation of any member of the Group, or any member of the Group making any composition or arrangement with its creditors or entering into a scheme of arrangement or any resolution being passed for the winding-up of any member of the Group or a provisional liquidator, receiver or manager being appointed over all or part of the assets or undertaking of any member of the Group or anything analogous thereto occurs in respect of any member of the Group; or (o) the investment commitments by any cornerstone investors after signing of agreements with such cornerstone investors, have been withdrawn, terminated or cancelled; or (p) a prohibition on our Company for whatever reason from allotting, issuing, or selling the Shares (including the Shares may be issued upon the exercise of the Over- allotment Option (if any)) pursuant to the terms of the Global Offering; or (q) the imposition of sanctions, in whatever form, directly or indirectly, by, or for, any Relevant Jurisdiction on the Company or any member of the Group; or

263 UNDERWRITING

which, in any such case individually or in the aggregate, in the sole and absolute opinion of the Joint Representatives: (a) is or will have a Material Adverse Effect on the Company or the Group as a whole; “Material Adverse Effect” means a material adverse effect or any development involving a prospective material adverse effect, on the assets, liabilities, general affairs, business, management, performance, prospects, shareholders’ equity, position or condition (financial or otherwise), results of operations, or prospects of the Group, taken as a whole; or (b) has or will have or may have a material adverse effect on the success of the Global Offering or the level of Offer Shares being applied for or accepted or subscribed for or purchased or the distribution of Offer Shares, which has made or is likely to make or may make it impracticable or inadvisable or incapable for any material part of the Hong Kong Underwriting Agreement, the Hong Kong Public Offering or the Global Offering to be performed or implemented as envisaged; or (c) makes or will make it or may make it impracticable or inadvisable or incapable to proceed with the Hong Kong Public Offering and/or the Global Offering or the delivery of the Offer Shares on the terms and in the manner contemplated by this Prospectus, the Application Forms, the Formal Notice, the preliminary offering circular or the offering circular or the processing of applications and/or payments pursuant to the Global Offering or pursuant to the underwriting thereof; or (d) would have or may have the effect of making a part of the Hong Kong Underwriting Agreement (including underwriting) incapable of performance in accordance with its terms; or (ii) there has come to the notice of the Joint Representatives: (a) that any statement contained in this Prospectus, the Application Forms, the Formal Notice, the Deed of Non-Competition and the Deed of Undertakings, the preliminary offering circular and/or any notices, announcements, advertisements, communications issued or used by or on behalf of the Company in connection with the Hong Kong Public Offering (including any supplement or amendment thereto) was or has become untrue, incomplete, incorrect or misleading or any forecasts, estimate, expressions of opinion, intention or expectation expressed in this Prospectus, the Application Forms, the Formal Notice and/or any notices, announcements, advertisements, communications so issued or used are not fair and honest and made on reasonable grounds or, where appropriate, based on reasonable assumptions, when taken as a whole; or (b) non-compliance of this Prospectus (or any other documents used in connection with the contemplated subscription and sale of the Offer Shares) or any aspect of the Global Offering with the Listing Rules or any other applicable Law; or (c) any matter has arisen or has been discovered which would, had it arisen or been discovered immediately before the date of this Prospectus, not having been disclosed in the Offering Documents (as defined in the Hong Kong Underwriting Agreement), constitutes an material omission therefrom; or (d) either (i) there has been a breach of any of the representations, warranties, undertakings or provisions of either the Hong Kong Underwriting Agreement or the

264 UNDERWRITING

International Underwriting Agreement by the Company and the Controlling Shareholder or (ii) any of the representations, warranties and undertakings given by the Company and the Controlling Shareholder in the Hong Kong Underwriting Agreement or the International Underwriting Agreement, as applicable, is (or would when repeated be) untrue, incorrect, incomplete or misleading; or (e) any event, act or omission which gives or is likely to give rise to any liability of the Company and the Controlling Shareholder pursuant to the indemnities given by the Company under the Hong Kong Underwriting Agreement; or (f) any breach of any of the obligations of the Company or the Controlling Shareholder under the Hong Kong Underwriting Agreement; or (g) a significant portion of the orders in the bookbuilding process at the time of the International Underwriting Agreement is entered into; or (h) any expert, whose consent is required for the issue of this Prospectus with the inclusion of its reports, letters or opinions and references to its name included in the form and context in which it respectively appears, has withdrawn its respective consent (other than the Sole Sponsor) prior to the issue of this Prospectus; or (i) the grant or agreement to grant by the Listing Committee of the Stock Exchange of the listing on the Main Board of, and permission to deal in, the Shares on the Main Board is refused or not granted, other than subject to customary conditions, on or before the Listing Date, or if granted, the Admission (as defined in the Hong Kong Underwriting Agreement) is subsequently withdrawn, cancelled, qualified (other than by customary conditions), revoked or withheld; or (j) the Company has withdrawn the Offering Documents (and/or any other documents issued or used in connection with the Global Offering) or the Global Offering; or

then the Joint Representatives may, in their sole and absolute discretion and upon giving notice orally or in writing to the Company, terminate the Hong Kong Underwriting Agreement with immediate effect. Undertakings to the Stock Exchange pursuant to the Listing Rules Undertakings by our Company Pursuant to Rule 10.08 of the Listing Rules, our Company has undertaken to the Stock Exchange that no further Shares or securities convertible into equity securities of our Company (whether or not of a class already listed) may be issued by us or form the subject of any agreement to such issue within six months from the Listing Date (whether or not such issue of Shares or securities will be completed within six months from the Listing Date), except: (a) in certain circumstances prescribed by Rule 10.08 of the Listing Rules; or (b) pursuant to the Global Offering (including the Over-allotment Option).

Undertakings by the Controlling Shareholders Pursuant to Rule 10.07(1) of the Listing Rules, the Controlling Shareholders have undertaken to the Stock Exchange that, except pursuant to the Global Offering (including pursuant to the Over- allotment Option and the Stock Borrowing Agreement), they will not, and shall procure that the

265 UNDERWRITING relevant registered holder(s) (if any) will not, without the prior written consent of the Stock Exchange or unless otherwise in compliance with applicable requirements of the Listing Rules: (a) in the period commencing on the date by reference to which disclosure of their respective shareholding is made in this prospectus and ending on the date which is six months from the Listing Date, dispose of, or enter into any agreement to dispose of or otherwise create, any options, rights, interests or encumbrances in respect of, any of those Shares or securities of our Company in respect of which Controlling Shareholders shown in this prospectus to be the beneficial owner; and (b) in the period of six months commencing on the date on which the period referred to in the preceding paragraph expires, dispose of, or enter into any agreement to dispose of or otherwise create, any options, rights, interests or encumbrances in respect of, any of the Shares or securities of our Company referred to in the preceding paragraph if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, they would cease to be a controlling shareholder (as defined in the Listing Rules) of our Company.

Pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, the Controlling Shareholders have further undertaken to each of the Stock Exchange and our Company that within the period commencing on the date by reference to which disclosure of its shareholding is made in this prospectus and ending on the date which is 12 months from the Listing Date, they will immediately inform the Stock Exchange and our Company in writing of: (a) any pledges or charges of any Shares or other securities of our Company beneficially owned by it in favor of an authorized institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial loan, together with the number of such Shares or other securities of our Company so pledged or charged; and (b) any indications, either verbal or written, from any pledgee or chargee that any of the pledged or charged Shares or securities of our Company will be disposed of.

We will inform the Stock Exchange as soon as we have been informed of the above matters (if any) by the Controlling Shareholders and disclose such matters by way of an announcement published in accordance with Rule 2.07 of the Listing Rules as soon as possible.

Undertakings pursuant to the Hong Kong Underwriting Agreement Undertakings by our Company Our Company has, pursuant to the Hong Kong Underwriting Agreement, undertaken to, inter alia, the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong Underwriters that except (i) pursuant to the Global Offering (including pursuant to the Over-allotment Option (if any)), (ii) the allotment and issue of Shares upon valid exercise of share options granted under the Pre-IPO Share Incentive Schemes, and (iii) in relation to the granting of share options under the Post-IPO Share Option Scheme and the allotment and issue of Shares upon valid exercise of such share options, at any time after the date of the Hong Kong Underwriting Agreement up to and including the date falling six months after the Listing Date (the “First Six Month Period”), it will not, and will procure that other members of the Group will not (and the Controlling Shareholder shall procure that the Company and other members of the Group not to)

266 UNDERWRITING without the prior written consent of the Sole Sponsor and the Joint Representatives and unless in compliance with the requirements of the Listing Rules: (a) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree to allot, issue or sell, assign, mortgage, charge, pledge, hypothecate, lend, grant or sell any option, warrant, contract or right to subscribe for or purchase, grant or purchase any option, warrant, contract or right to allot, issue or sell, or otherwise transfer or dispose of or create an Encumbrance (as defined in the Hong Kong Underwriting Agreement) over, or agree to transfer or dispose of or create an Encumbrance (as defined in the Hong Kong Underwriting Agreement) over, either directly or indirectly, conditionally or unconditionally, or repurchase, any legal or beneficial interest in the share capital or any other equity securities of our Company or any shares or other equity securities of such other member of the Group, as applicable, or any interest in any of the foregoing (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase any share capital or other equity securities of the Company, as applicable), or deposit any share capital or other equity securities of our Company, as applicable, with a depositary in connection with the issue of depositary receipts; or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership (legal or beneficial) of Shares or any other equity securities of our Company or any shares or other equity securities of such other member of the Group, as applicable, or any interest in any of the foregoing (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares or any shares of such other member of the Group, as applicable); or (c) enter into any transaction with the same economic effect as any transaction specified in paragraph (a) or (b) above; or (d) offer to or agree to do any of the foregoing or announce any intention to do so, in each case, whether any of the foregoing transactions is to be settled by delivery of share capital or such other equity securities, in cash or otherwise (whether or not the issue of such share capital or other equity securities will be completed within the First Six-Month Period).

In the event that our Company enters into any of the transactions specified in paragraph (a), (b) or (c) above or offers to or agrees to or announces any intention to effect any such transaction during the period of six months commencing on the date on which the First Six-Month Period expires (the “Second Six-Month Period”), our Company will take all reasonable steps to ensure that such an issue or disposal will not, and no other act of our Company will, create a disorderly or false market for any Shares or other securities of our Company.

Undertakings by Mr. Mao Mr. Mao undertakes to each of the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters that except pursuant to the Global Offering (including pursuant to the Over-allotment Option and the Stock Borrowing Agreement), at any time after the date of the Hong Kong Underwriting Agreement up to and including the date falling 12 months after the Listing Date, it will not, and will procure that none of

267 UNDERWRITING its close associates will, without the prior written consent of the Sole Sponsor or the Joint Representatives: (1) offer, accept subscription for, pledge, charge, allot, issue, sell, lend, mortgage, assign, contract to allot, issue or sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, conditionally or unconditionally, or repurchase any of its share capital or other securities of the Company or any interest therein (including but not limited to any securities convertible into or exercisable or exchangeable for or that represent the right to receive any such share capital or securities or any interest therein); or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership (legal or beneficial) of such share capital or securities or any interest therein, as applicable, or any interest in any of the foregoing (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares); or (3) enter into any transaction with the same economic effect as any transaction specified in paragraph (1) or (2) above; or (4) offer to or agree to do any of the foregoing or announce any intention to do so, in each case, whether any of the foregoing transactions is to be settled by delivery of share capital or such other securities, in cash or otherwise.

Notwithstanding the foregoing, for the avoidance of doubt, the lock-up provisions provided above shall not apply to: (1) pledge, charge or other security interests of Shares granted in favor of an authorized institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) for a bona fide commercial loan (the “Permitted Encumbrance”), provided that the relevant agreements concerning such Permitted Encumbrance shall be in a form satisfactory to the Sole Sponsor and shall not allow the charge or pledgee to (i) exercise their rights under the relevant agreements within the Lock-up Period; or (ii) dispose the Shares charged or pledged to them within the Lock-up Period); (2) exercise of options granted under the Pre-IPO Share Incentive Scheme; and (3) shares issued by the Company pursuant to the exercise of options granted under the Pre- IPO Share Incentive Schemes which are beneficially owned by employees other than Directors and senior management as disclosed in this prospectus, provided that the Company shall comply with the minimum public float requirement.

Undertakings by other existing Shareholders Other than the lock-up undertaking by Mr. Mao, certain existing Shareholders (including China Finance Strategies, Mao and Sons, Zhang and Sons, JL and JSW Holding Limited, MENGL Holding Limited, TIANL Holding Limited, VVBI Limited, Fenghe Harvest, Wu and Sons and FengHe Canary) which will in aggregate hold approximately 40.57% of the issued share capital of the Company upon Listing (assuming the Over-allotment Option is not exercised) (the “Covenantors”), have entered into

268 UNDERWRITING letters of lock-up undertaking (the “Lock-up Undertaking”) in favor of the Company and the Sole Sponsor. Pursuant to the Lock-up Undertaking entered into by each of the Covenantors, each of such Covenantors has undertaken to the Company and the Sole Sponsor that, during the period commencing on the date of the Lock-up Undertaking and ending on, and including, the First Six-Month Period, without the prior written consent of the Sole Sponsor (for itself and on behalf of the Underwriters) and unless in compliance with the requirements of the Listing Rules, it will not: (a) offer, pledge, charge, sell, contract to sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any option, warrant, contract or right to purchase, grant or purchase any option, warrant, contract or right to sell, or otherwise transfer or dispose of or create an encumbrance over, or agree to transfer or dispose of or create an encumbrance over, either directly or indirectly, conditionally or unconditionally, any Shares or other securities of the Company, as applicable, or any interest in any of the foregoing (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares or other equity securities of the Company) (the “Lock-up Securities”); or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Lock-up Securities; or (c) enter into any transaction with the same economic effect as any transaction specified in (a) or (b) above; or (d) offer to or agree to or announce any intention to effect any transaction specified in (a), (b) or (c) above, in each case, whether any of the transactions specified in (a), (b) or (c) above is to be settled by delivery of Shares or other securities of the Company or in cash or otherwise (whether or not the issue of such Shares or other securities will be completed within the First Six-Month Period).

Nothing in (a), (b), (c) and (d) above shall apply to the following, during the period commencing on the date of the Lock-up Undertaking and ending on, and including, the First Six- Month Period: (i) pledge, charge or other security interests of Shares granted in favor of an authorized institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) for a bona fide commercial loan, provided that the relevant agreements concerning such Permitted Encumbrance shall be in a form satisfactory to the Sole Sponsor and shall not allow the chargee or pledgee to (1) exercise their rights under the relevant agreements within the period commencing on the date of the Lock-up Undertaking and ending on, and including, the First Six-Month Period; or (2) dispose the Shares charged or pledged to them within the period commencing on the date of the Lock-up Undertaking and ending on, and including, the First Six-Month Period); or (ii) transfer of any Lock-up Securities from the Covenantors to (1) their respective spouse and children (the “Immediate Family Members”), (2) any companies or entities wholly- owned by the Covenantors and/or their respective Immediate Family Members, (3) a trust for tax planning purposes or to a trustee, executor, or other fiduciary for the benefit of the Covenantors and/or their respective Immediate Family Members for bona fide estate planning purposes, provided, that in each case, such transfer shall be effected in compliance with all applicable laws.

269 UNDERWRITING

For the avoidance of doubt, any Shares acquired by the existing Shareholders mentioned above in the open market after the commencement of dealings in the Shares on the Listing Date will not be subject to the above lock-up undertaking.

Commission and Expenses The Hong Kong Underwriters will receive an underwriting commission of 3% of the aggregate Offer Price payable for the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering. For unsubscribed Hong Kong Offer Shares reallocated to the International Offering, if any, we will pay an underwriting commission at the rate applicable to the International Offering as set out in the International Underwriting Agreement, and such commission will be paid to the International Underwriters, and not the Hong Kong Underwriters. It is agreed that notwithstanding anything to the contrary, the total underwriting commission payable by our company to the International Underwriters under the Global Offering shall consist of (i) underwriting commission of 3% of the aggregate Offer Price payable for the International Offer Share offered under the International Offering payable to all the International Underwriters (the minimum underwriting commission to each of the Joint Representatives is guaranteed according to their respective agreement with the Company, subject to the Offer Price to be determined as described in the section headed “Structure of the Global Offering — Pricing of the Global Offering”), and (ii) an additional incentive fee of up to 1% of the aggregate Offer Price in respect of all the Offer Shares offered under the Global Offering (including pursuant to the exercise of the Over-allotment Option) at the Company’s sole discretion.

We will pay the Sole Sponsor approximately US$1 million as the sponsor fee.

The aggregate commissions and fees (excluding the discretionary incentive fee), together with the sponsor fee, Stock Exchange listing fees, SFC transaction levy, the Stock Exchange trading fee, legal and other professional fees, printing and other expenses relating to the Global Offering payable by us, are estimated to amount to approximately HK$126.8 million, assuming an Offer Price per Share of HK$4.41, or approximately HK$99.4 million, assuming an Offer Price per Share of HK$3.42.

Indemnity Each of Our Company and Mr. Mao has agreed to, jointly and severally, indemnify, among others, the Joint Representatives and the Joint Global Coordinators, the Sole Sponsor and the Hong Kong Underwriters against certain losses which they may suffer, including losses arising from their performance of their obligations under the Hong Kong Underwriting Agreement and any breach by our Company and the Controlling Shareholders of the Hong Kong Underwriting Agreement.

Hong Kong Underwriters’ Interests in our Company Save as disclosed in this prospectus and save for their obligations under the Hong Kong Underwriting Agreement, as of the Latest Practicable Date, none of the Hong Kong Underwriters was interested, legally or beneficially, directly or indirectly, in any Shares or other securities in our Company or any other member of the Group or had any right or option (whether legally enforceable or not) to subscribe for, or to nominate persons to subscribe for, any Shares or other securities in our Company or any other member of the Group.

Following the completion of the Global Offering, the Hong Kong Underwriters and their affiliates may hold a certain portion of the Shares as a result of fulfilling their obligations under the Hong Kong Underwriting Agreement.

270 UNDERWRITING

International Offering International Underwriting Agreement In connection with the International Offering, it is expected that our Company will enter into the International Underwriting Agreement with, amongst others, the International Underwriters. Under the International Underwriting Agreement, subject to the conditions set out therein, the International Underwriters would severally and not jointly, agree to procure purchasers for, or to purchase, the International Offer Shares in accordance with the offer restrictions set forth under “Information About this Prospectus and the Global Offering — Restrictions on Offer and Sale of the Offer Shares”.

We will grant to the International Underwriters the Over-allotment Option, exercisable by the Joint Representatives during the 30-day period from the last day for the lodging of applications under the Hong Kong Public Offering, to require us to issue up to an aggregate of 51,750,000 additional Shares, representing approximately 15% of the Shares initially available under the Global Offering, at the Offer Price, to cover over-allocations in the International Offering, if any.

Potential investors are reminded that in the event that the International Underwriting Agreement is not entered into, the Global Offering will not proceed.

Over-allotment and Stabilization Details of the arrangements relating to the Over-allotment Option and stabilization are set forth in the section headed “Structure of the Global Offering” in this prospectus.

Sponsor’s Independence The Sole Sponsor satisfies the independence criteria applicable to sponsors as set out in Rule 3A.07 of the Listing Rules.

Activities by Syndicate Members The underwriters of the Hong Kong Public Offering and the International Offering (together, the “Syndicate Members”) and their affiliates may each individually undertake a variety of activities (as further described below) which do not form part of the underwriting or stabilizing process.

The Syndicate Members and their affiliates are diversified financial institutions with relationships in countries around the world. These entities engage in a wide range of commercial and investment banking, brokerage, funds management, trading, hedging, investing and other activities for their own account and for the account of others. In relation to the Shares, those activities could include acting as agent for buyers and sellers of the Shares, entering into transactions with those buyers and sellers in a principal capacity, proprietary trading in the Shares, and entering into over the counter or listed derivative transactions or listed and unlisted securities transactions (including issuing securities such as derivative warrants listed on a stock exchange) which have as their underlying assets, assets including the Shares. Those activities may require hedging activity by those entities involving, directly or indirectly, the buying and selling of the Shares. All such activity could occur in Hong Kong and elsewhere in the world and may result in the Syndicate Members and their affiliates holding long and/ or short positions in the Shares, in baskets of securities or indices including the Shares, in units of funds that may purchase the Shares, or in derivatives related to any of the foregoing.

271 UNDERWRITING

In relation to issues by Syndicate Members or their affiliates of any listed securities having the Shares as their underlying securities, whether on the Stock Exchange or on any other stock exchange, the rules of the exchange may require the issuer of those securities (or one of its affiliates or agents) to act as a market maker or liquidity provider in the security, and this will also result in hedging activity in the Shares in most cases.

All such activities may occur both during and after the end of the stabilizing period described in the section headed “Structure of the Global Offering” in this prospectus. Such activities may affect the market price or value of the Shares, the liquidity or trading volume in the Shares and the volatility of the price of the Shares, and the extent to which this occurs from day to day cannot be estimated.

It should be noted that when engaging in any of these activities, the Syndicate Members will be subject to certain restrictions, including the following: (a) the Syndicate Members (other than the Stabilizing Manager or any person acting for it) must not, in connection with the distribution of the Offer Shares, effect any transactions (including issuing or entering into any option or other derivative transactions relating to the Offer Shares), whether in the open market or otherwise, with a view to stabilizing or maintaining the market price of any of the Offer Shares at levels other than those which might otherwise prevail in the open market; and (b) the Syndicate Members must comply with all applicable laws and regulations, including the market misconduct provisions of the SFO, including the provisions prohibiting insider dealing, false trading, price rigging and stock market manipulation.

272 STRUCTURE OF THE GLOBAL OFFERING

THE GLOBAL OFFERING This prospectus is published in connection with the Hong Kong Public Offering as part of the Global Offering. The Global Offering comprises: (i) the Hong Kong Public Offering of 34,500,000 Offer Shares (subject to adjustment) in Hong Kong as described in the section headed “— The Hong Kong Public Offering” below; and (ii) the International Offering of an aggregate of initially 310,500,000 Shares (subject to adjustment and the Over-allotment Option), (a) in the United States to persons who are both (i) QIBs and (ii) Qualified Purchasers, in reliance on an exemption from registration under the U.S. Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another exemption from the registration requirements of the U.S. Securities Act; and (b) outside the United States to persons who are neither (i) U.S. Persons (as defined in Regulation S) nor (ii) U.S. residents (as defined for purposes of the U.S. Investment Company Act) in offshore transactions in accordance with Regulation S (including to professional and institutional investors in Hong Kong).

Investors may apply for Offer Shares under the Hong Kong Public Offering or apply for or indicate an interest for Offer Shares under the International Offering, but may not do both. The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors in Hong Kong. The International Offering will involve selective marketing of the International Offer Shares to institutional and professional investors and other investors expected to have a sizable demand for the International Offer Shares in Hong Kong and other jurisdictions outside the United States in accordance with Regulation S or in the United States to persons who are both (i) QIBs and (ii) Qualified Purchasers in reliance on Rule 144A or another available exemption from registration under the U.S. Securities Act. The International Underwriters are soliciting from prospective investors indications of interest in acquiring the International Offer Shares. Prospective investors will be required to specify the number of International Offer Shares under the International Offering they would be prepared to acquire either at different prices or at a particular price.

The number of Offer Shares to be offered under the Hong Kong Public Offering and the International Offering may be subject to reallocation as described in the section headed “— Reallocation” below, and in the case of the International Offering only, the Over-allotment Option as described in the section headed “— Over-allotment Option” below.

THE HONG KONG PUBLIC OFFERING Number of Offer Shares initially offered Our Company is initially offering 34,500,000 Offer Shares for subscription by the public in Hong Kong at the Offer Price, representing 10% of the total number of Offer Shares initially available under the Global Offering. Subject to the reallocation of Shares between (i) the International Offering; and (ii) the Hong Kong Public Offering, the Hong Kong Offer Shares will represent approximately 2.3% of our Company’s enlarged issued share capital immediately after completion of the Global Offering assuming that the Over-allotment Option is not exercised.

The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors. Professional investors generally include brokers, dealers,

273 STRUCTURE OF THE GLOBAL OFFERING companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities.

Completion of the Hong Kong Public Offering is subject to the conditions as set out in the section headed “— Conditions of the Hong Kong Public Offering” below.

Allocation Allocation of Offer Shares to investors under the Hong Kong Public Offering will be based solely on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly applied for by applicants. Such allocation could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of Hong Kong Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong Offer Shares.

The total number of Offer Shares initially available under the Hong Kong Public Offering (after taking account of any reallocation referred to below) is to be divided into two pools for allocation purposes: Š Pool A: The Offer Shares in pool A will be allocated on an equitable basis to applicants who have applied for Offer Shares with an aggregate price of HK$5 million (excluding the brokerage, SFC transaction levy and Stock Exchange trading fee payable) or less. Š Pool B: The Offer Shares in pool B will be allocated on an equitable basis to applicants who have applied for Offer Shares with an aggregate price of more than HK$5 million (excluding the brokerage, SFC transaction levy and Stock Exchange trading fee payable) and up to the total value in pool B.

Investors should be aware that applications in pool A and applications in pool B may receive different allocation ratios. If Offer Shares in one (but not both) of the pools are undersubscribed, the surplus Offer Shares will be transferred to the other pool to satisfy demand in this other pool and be allocated accordingly. For the purpose of this paragraph only, the “price” for Offer Shares means the price payable on application therefore (without regard to the Offer Price as finally determined). Applicants can only receive an allocation of Offer Shares from either pool A or pool B but not from both pools. Multiple or suspected multiple applications and any application for more than 17,250,000 Offer Shares being 50% of the 34,500,000 Offer Shares initially available under the Hong Kong Public Offering are liable to be rejected.

Reallocation Paragraph 4.2 of Practice Note 18 of the Listing Rules requires a clawback mechanism to put in place which would have the effect of increasing the number of Offer Shares under the Hong Kong Public Offering to a certain percentage of the total number of Offer Shares offered under the Global Offering if certain prescribed total demand levels are reached as further described below: Š If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents 15 times or more but less than 50 times the number of Offer Shares initially available for subscription under the Hong Kong Public Offering, then the Offer Shares will be reallocated to the Hong Kong Public Offering from the International Offering, so that

274 STRUCTURE OF THE GLOBAL OFFERING

the total number of Offer Shares available under the Hong Kong Public Offering will be 103,500,000 Offer Shares, representing 30% of the Offer Shares initially available under the Global Offering. Š If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents 50 times or more but less than 100 times the number of Offer Shares initially available for subscription under the Hong Kong Public Offering, then the Offer Shares will be reallocated to the Hong Kong Public Offering from the International Offering, so that the total number of Offer Shares available under the Hong Kong Public Offering will be 138,000,000 Offer Shares, representing 40% of the Offer Shares initially available under the Global Offering. Š If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents 100 times or more the number of Offer Shares initially available for subscription under the Hong Kong Public Offering, then the Offer Shares will be reallocated to the Hong Kong Public Offering from the International Offering, so that the total number of Offer Shares available under the Hong Kong Public Offering will be 172,500,000 Offer Shares, representing 50% of the Offer Shares initially available under the Global Offering.

In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be allocated between Pool A and Pool B and the number of Offer Shares allocated to the International Offering will be correspondingly reduced in such manner as the Joint Representatives deems appropriate.

In addition, the Offer Shares to be offered in the Hong Kong Public Offering and the International Offering may in certain circumstances be reallocated as between these offerings at the discretion of the Joint Representatives. In accordance with Guidance Letter HKEXGL91-18 issued by the Stock Exchange, if such reallocation is done other than pursuant to Practice Note 18 of the Listing Rules, the maximum total number of shares that may be allocated to the Hong Kong Public Offering shall be not more than 69,000,000 Offer Shares, representing double of the initial allocation to the Hong Kong Public Offering and the final Offer Price shall be fixed at HK$3.42 per Offer Share, the low-end of the Offer Price range stated in this Prospectus

Applications Each applicant under the Hong Kong Public Offering will be required to give an undertaking and confirmation in the application submitted by him that he and any person(s) for whose benefit he is making the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering, and such applicant’s application is liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or if he has been or will be placed or allocated Offer Shares under the International Offering.

The listing of the Offer Shares on the Stock Exchange is sponsored by the Sole Sponsor. Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum price of HK$4.41 per Offer Share in addition to any brokerage, SFC transaction levy and Stock Exchange trading fee payable on each Offer Share. If the Offer Price, as finally determined in the manner described in the section headed “— Pricing of the Global Offering” below, is less than the

275 STRUCTURE OF THE GLOBAL OFFERING maximum price of HK$4.41 per Offer Share, appropriate refund payments (including the brokerage, SFC transaction levy and Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Further details are set out below in the section headed “How to Apply for Hong Kong Offer Shares” in this prospectus.

References in this prospectus to applications, Application Forms, application monies or the procedure for application relate solely to the Hong Kong Public Offering.

THE INTERNATIONAL OFFERING Number of Offer Shares offered Subject to reallocation as described above, the International Offering will consist of 310,500,000 Offer Shares, assuming the Over-allotment Option is not exercised, representing 90% of the total number of Shares initially available under the Global Offering.

Allocation The International Offering will include selective marketing of Offer Shares to institutional and professional investors and other investors anticipated to have a sizeable demand for such Offer Shares. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities. Allocation of Offer Shares pursuant to the International Offering will be effected in accordance with the “book-building” process described in the section headed “— Pricing of the Global Offering” below and based on a number of factors, including the level and timing of demand, the total size of the relevant investor’s invested assets or equity assets in the relevant sector and whether or not it is expected that the relevant investor is likely to buy further Offer Shares, and/or hold or sell its Offer Shares, after the listing of the Offer Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the Offer Shares on a basis which would lead to the establishment of a solid professional and institutional shareholder base to the benefit of our Company and our Shareholders as a whole.

The Joint Representatives may require any investor who has been offered Offer Shares under the International Offering, and who has made an application under the Hong Kong Public Offering to provide sufficient information to the Joint Representatives so as to allow them to identify the relevant application under the Hong Kong Public Offering and to ensure that it is excluded from any application of Offer Shares under the Hong Kong Public Offering.

The Shares have not been and will not be registered under the U.S. Securities Act for offer or sale as part of their distribution and may not be offered or sold within the United States or to, or for the account or benefit of, a U.S. Person (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) or a U.S. resident (as defined for purposes of the U.S. Investment Company Act), except in certain transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act.

The Offer Shares will be offered in the United States to QIBs who are U.S. Persons (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) and/or in the United States purchasing for their own accounts or for the accounts of QIBs, each of which purchasers or accounts is a Qualified

276 STRUCTURE OF THE GLOBAL OFFERING

Purchaser, in reliance on an exemption from registration under the U.S. Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another exemption from the registration requirements of the U.S. Securities Act.

In addition, the Offer Shares will be offered outside the United States to persons who are neither (i) U.S. Persons (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) nor (ii) U.S. residents (as defined for purposes of the U.S. Investment Company Act) in offshore transactions in accordance with Regulation S.

The Underwriters have acknowledged and agreed that they will not offer or sell any Offer Shares that are to be sold pursuant to Regulation S to, or for the account or benefit of, any U.S. Person (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) or U.S. resident (as defined for purposes of the U.S. Investment Company Act) as part of the distribution at any time, and that the Underwriters will send to each distributor, dealer or person receiving a selling concession, fee or other remuneration to which they sell Offer Shares pursuant to Regulation S a confirmation or other notice setting forth the prohibition on offers and sales of Offer Shares sold pursuant to Regulation S within the United States or to, or for the account or benefit of, any U.S. Person (as defined in Regulation S including also any person that is not a U.S. person solely by reason of Rule 902(k)(1)(viii)(B) or 902(k)(2)(i) under Regulation S) or U.S. resident (as defined for purposes of the U.S. Investment Company Act).

Reallocation The total number of Offer Shares to be issued or sold pursuant to the International Offering may change as a result of the clawback arrangement described in the section headed “— The Hong Kong Public Offering — Reallocation” above, the exercise of the Over-allotment Option in whole or in part described in the section entitled “Over-allotment Option”, and any reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public Offering and/or any Offer Shares from the International Offering to the Hong Kong Public Offering at the discretion of the Joint Representatives.

Over-allotment Option In connection with the Global Offering, our Company is expected to grant an Over-allotment Option to the International Underwriters exercisable by the Joint Representatives.

Pursuant to the Over-allotment Option, the Joint Representatives have the right, exercisable at any time from the Listing Date until 30 days after the last date for the lodging of applications under the Hong Kong Public Offering, to require our Company to issue and allot up to 51,750,000 additional Offer Shares, representing 15% of the initial Offer Shares, at the same price per Offer Share under the International Offering to cover over-allocation in the International Offering, if any. If the Over- allotment Option is exercised in full, the additional Offer Shares will represent approximately 3.33% of our Company’s enlarged share capital immediately following the completion of the Global Offering and the exercise of the Over-allotment Option. In the event that the Over-allotment Option is exercised, a public announcement will be made.

Over-allocation Following any over-allocation of Shares in connection with the Global Offering, the Joint Representatives, their affiliates or any person acting for them may cover such over-allocation by

277 STRUCTURE OF THE GLOBAL OFFERING

(among other methods) using Shares purchased by the Joint Representatives, their affiliates or any person acting for them in the secondary market and/or exercising the Over-allotment Option in full or in part. Any such purchases will be made in accordance with the laws, rules and regulations in place in Hong Kong, including in relation to stabilization, the Securities and Futures (Price Stabilizing) Rules, as amended, made under the SFO. The number of Shares which can be over-allocated will not exceed the number of Shares which may be issued upon exercise of the Over-allotment Option, being 51,750,000 Shares, representing approximately 15% of the Offer Shares initially available under the Global Offering.

Stock Borrowing Agreement In order to facilitate the settlement of over-allocations in connection with the Global Offering, the Stabilizing Manager may choose to borrow up to 51,750,000 Shares (being the maximum number of Shares which may be issued upon exercise of the Over-allotment Option) from Mr. Mao pursuant to the Stock Borrowing Agreement.

If the Stock Borrowing Agreement is entered into, it will only be effected by the Stabilizing Manager or its agent for settlement of over-allocations in the International Offering, and the stock borrowing arrangement is not subject to the restrictions of Rule 10.07(1)(a) of the Listing Rules provided that the requirements set out in Rule 10.07(3) of the Listing Rules are complied with. The same number of Offer Shares so borrowed must be returned to our Company or its nominees on or before the third business day following the earlier of (a) the last day on which the Over-allotment Option may be exercised or (b) the day on which the Over-allotment Option is exercised in full and the relevant Offer Shares subject to the Over-allotment Option have been issued. The stock borrowing arrangement will be effected in compliance with all applicable laws, rules, and regulatory requirements. No payment will be made to our Company by the Stabilizing Manager or its agent in relation to such stock borrowing arrangement.

PRICING OF THE GLOBAL OFFERING Determining the Offer Price The International Underwriters will be soliciting from prospective investors indications of interest in acquiring Offer Shares in the International Offering. Prospective professional and institutional investors will be required to specify the number of Offer Shares under the International Offering they would be prepared to acquire either at different prices or at a particular price. This process, known as “book-building,” is expected to continue up to, and to cease on or around, the last day for lodging applications under the Hong Kong Public Offering.

Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering will be fixed on the Price Determination Date, which is expected to be on or around Tuesday, April 30, 2019 and in any event on or before Wednesday, May 8, 2019, by agreement between the Joint Representatives and our Company and the number of Offer Shares to be allocated under various offerings will be determined shortly thereafter.

Offer Price range The Offer Price will not be more than HK$4.41 per Share and is expected to be not less than HK$3.42 per Offer Share unless otherwise announced, as further explained below, not later than the

278 STRUCTURE OF THE GLOBAL OFFERING morning of the last day for lodging applications under the Hong Kong Public Offering. Prospective investors should be aware that the Offer Price to be determined on the Price Determination Date may be, but is not expected to be, lower than the indicative Offer Price range stated in this prospectus.

Price Payable on Application Applicants under the Hong Kong Public Offering are required to pay, on application, the Maximum Offer Price of HK$4.41 per each Hong Kong Offer Share (plus 1% brokerage, 0.0027% SFC transaction levy and 0.005% Stock Exchange trading fee). If the Offer Price is less than HK$4.41, appropriate refund payments (including the brokerage, SFC transaction levy and the Stock Exchange trading fee attributable to the surplus application monies, without any interest) will be made to successful applications. If, for any reason, our Company and the Joint Representatives are unable to reach agreement on the Offer Price on or before Wednesday, May 8, 2019, the Global Offering will not proceed and will lapse.

Reduction in indicative Offer Price range and/or number of Offer Shares

The Joint Representatives may, where considered appropriate, based on the level of interest expressed by prospective professional and institutional investors during the book-building process, and with the consent of our Company, reduce the number of Offer Shares offered in the Global Offering and/or the indicative Offer Price range below that stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, our Company will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering, cause there to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and to be posted on the website of the Stock Exchange (www.hkexnews.hk) and on the website of our Company (www.vivabiotech.com) notices of the reduction. Upon issue of such a notice, the number of Offer Shares offered in the Global Offering and/or the revised Offer Price range will be final and conclusive and the Offer Price, if agreed upon by the Joint Representatives and our Company, will be fixed within such revised Offer Price range.

Before submitting applications for the Hong Kong Offer Shares, applicants should have regard to the possibility that any announcement of a reduction in the number of Offer Shares being offered under the Global Offering and/or the indicative Offer Price range may not be made until the day which is the last day for lodging applications under the Hong Kong Public Offering. Such notice will also include confirmation or revision, as appropriate, of the Global Offering statistics as currently set out in this prospectus, and any other financial information which may change as a result of such reduction. In the absence of any such notice so published, the Offer Price, if agreed upon with our Company and the Joint Representatives, will under no circumstances be set outside the Offer Price range as stated in this prospectus. As soon as practicable of such reduction of the number of Offer Shares and/or the indicative Offer Price range, we will also issue a supplemental prospectus updating investors of such reduction together with an update of all financial and other information in connection with such change, where appropriate, extend the period under which the Hong Kong Public Offering was open for acceptance, and give potential investors who had applied for the Offer Shares under the Hong Kong Public Offering to withdraw their applications.

279 STRUCTURE OF THE GLOBAL OFFERING

In the event of a reduction in the number of Offer Shares being offered under the Global Offering, the Joint Representatives may, at their discretion, reallocate the number of Offer Shares to be offered under the Hong Kong Public Offering and the International Offering, provided that the number of Shares comprised in the Hong Kong Public Offering shall not be less than 10% of the total number of Offer Shares in the Global Offering. The Offer Shares to be offered in the International Offering and the Offer Shares to be offered in the Hong Kong Public Offering may, in certain circumstances, be reallocated as between these offerings at the discretion of the Joint Representatives. The net proceeds of the Global Offering accruing to our Company (after deduction of underwriting commissions, brokerage, SFC transaction levy, Stock Exchange trading fees and other expenses payable by our Company in relation to the Global Offering, assuming the Over-allotment Option is not exercised) are estimated to be approximately HK$1,371.5 million, assuming an Offer Price per Share of HK$4.41, or approximately HK$1,060.9 million, assuming an Offer Price per Share of HK$3.42.

Announcement of Offer Price and basis of allocations The final Offer Price, the indications of interest in the Global Offering, the results of applications and the basis of allotment of Offer Shares available under the Hong Kong Public Offering, are expected to be announced on Wednesday, May 8, 2019 in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and to be posted on the website of the Stock Exchange (www.hkexnews.hk) and on the website of our Company (www.vivabiotech.com).

HONG KONG UNDERWRITING AGREEMENT The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is conditional upon the International Underwriting Agreement being signed and becoming unconditional.

Our Company expects to enter into the International Underwriting Agreement relating to the International Offering on or around the Price Determination Date. These underwriting arrangements, and the respective Underwriting Agreements, are summarized in the section headed “Underwriting” in this prospectus.

Conditions of the Hong Kong Public Offering Acceptance of all applications for Offer Shares will be conditional on: (i) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Offer Shares being offered pursuant to the Global Offering (including the additional Offer Shares which may be made available pursuant to the exercise of the Over-allotment Option); (ii) the Offer Price having been fixed on or around the Price Determination Date; (iii) the execution and delivery of the International Underwriting Agreement on or around the Price Determination Date; and (iv) the obligations of the Underwriters under each of the respective Underwriting Agreements becoming and remaining unconditional and not having been terminated in accordance with the terms of the respective agreements, in each case on or before the dates and times specified in the Hong Kong Underwriting Agreement or the International Underwriting Agreement (unless and to the extent such conditions are validly waived on or before such dates and times).

280 STRUCTURE OF THE GLOBAL OFFERING

If, for any reason, the Offer Price is not agreed between our Company and the Joint Representatives, on or around 5:00 p.m. on Wednesday, May 8, 2019, the Global Offering will not proceed and will lapse.

The consummation of each of the Hong Kong Public Offering and the International Offering is conditional upon, among other things, the other offering becoming unconditional and not having been terminated in accordance with its terms.

If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of the Hong Kong Public Offering will be published by our Company in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and to be posted on the website of the Stock Exchange (www.hkexnews.hk) and on the website of our Company (www.vivabiotech.com)on the next day following such lapse. In such eventuality, all application monies will be returned, without interest, on the terms set out in the section headed “How to Apply for Hong Kong Offer Shares” in this prospectus. In the meantime, all application monies will be held in (a) separate bank account(s) with the receiving banker or other licensed bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended).

Share certificates for the Offer Shares are expected to be issued on Wednesday, May 8, 2019 but will only become valid certificates of title at 8:00 a.m. on Thursday, May 9, 2019 provided that (i) the Global Offering has become unconditional in all respects and (ii) neither of the Underwriting Agreements has been terminated in accordance with its terms.

STABILIZATION Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilize, the underwriters may bid for, or purchase, the securities in the secondary market, during a specified period of time, to retard and, if possible, prevent, any decline in the market price of the securities below the offer price. In Hong Kong and certain other jurisdictions, the price at which stabilization is effected is not permitted to exceed the Offer Price.

Following any over-allocation of Shares in connection with the Global Offering, the Joint Representatives, their affiliates or any person acting for them may cover such over-allocation by, among other methods, using Shares purchased by the stabilizing manager, its affiliates or any person acting for it in the secondary market, exercising the Over-allotment Option in full or in part, or by a combination of these means. Any such purchases will be made in accordance with the laws, rules and regulations in place in Hong Kong, including in relation to stabilization, the Securities and Futures (Price Stabilizing) Rules, as amended, made under the SFO. The number of Shares that may be over- allotted will not be greater than the number of Shares which may be made available upon exercise of the Over-allotment Option, being 51,750,000 Shares, which is 15% of our Offer Shares initially available under the Global Offering.

China International Capital Corporation Hong Kong Securities Limited has been appointed by us as the stabilizing manager for the purposes of the Global Offering in accordance with the Securities and Futures (Price Stabilizing) Rules made under the SFO. In connection with the Global Offering, China International Capital Corporation Hong Kong Securities Limited, its affiliates or any person acting for it, as stabilizing manager, on behalf of the Underwriters, may, to the extent permitted by applicable laws of Hong Kong or elsewhere, over-allot or effect transactions with a view to stabilizing

281 STRUCTURE OF THE GLOBAL OFFERING or maintaining the market price of our Shares at a level higher than that which might otherwise prevail for a limited period after the issue date. Such transactions may be effected in all jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Stabilizing Manager, its affiliates or any person acting for it to do this. Such stabilization, if commenced, will be conducted at the absolute discretion of the Stabilizing Manager, its affiliates or any person acting for it and may be discontinued at any time, and must be brought to an end after a limited period. The Stabilizing Manager, its affiliates or any person acting for it may take all or any of the following stabilizing actions in Hong Kong during the stabilization period: (i) purchase, or agree to purchase, any of our Shares or offer or attempt to do so for the sole purpose of preventing or minimizing any reduction in the market price of our Shares; (ii) in connection with any action described in paragraph (i) above: (A) (1) over-allocate our Shares; or (2) sell or agree to sell our Shares so as to establish a short position in them, for the sole purpose of preventing or minimizing any reduction in the market price of our Shares; (B) exercise the Over-allotment Option and purchase or subscribe for or agree to purchase or subscribe for our Shares in order to close out any position established under paragraph (A) above; (C) sell or agree to sell any of our Shares acquired by it in the course of the stabilizing action referred to in paragraph (i) above in order to liquidate any position that has been established by such action; or (D) offer or attempt to do anything as described in paragraphs (ii)(A)(2), (ii)(B) or (C) above.

The Stabilizing Manager, its affiliates or any person acting for it, may, in connection with the stabilizing action, maintain a long position in our Shares, and there is no certainty as to the extent to which and the time period for which it will maintain such a position. Investors should be warned of the possible impact of any liquidation of the long position by the Stabilizing Manager, its affiliates or any person acting for it, which may include a decline in the market price of our Shares.

Stabilization cannot be used to support the price of our Shares for longer than the stabilization period, which begins on the day on which trading of our Shares commences on the Stock Exchange and ends on the earlier of the thirtieth day after (i) the last day for lodging of applications under the Hong Kong Public Offering or (ii) the commencement of trading of our Shares. The stabilization period is expected to expire on Thursday, May 30, 2019, the 30th day after the last day for lodging applicants under the Hong Kong Public Offering, after which an announcement will be made pursuant to section 9 and schedule 3 of the Securities and Futures (Price Stabilizing) Rules made under the SFO. After this date, when no further stabilizing action may be taken, demand for our Shares, and therefore then market price, could fall.

Any stabilizing action taken by the Stabilizing Manager, its affiliates or any person acting for it, may not necessarily result in the market price of our Shares staying at or above the Offer Price either during or after the stabilization period. Stabilizing bids or market purchases effected in the course of the stabilization action may be made at any price at or below the Offer Price and can therefore be done at a price below the price the investor has paid in acquiring the Offer Shares.

282 STRUCTURE OF THE GLOBAL OFFERING

SHARES WILL BE ELIGIBLE FOR CCASS All necessary arrangements have been made enabling the Shares to be admitted into CCASS. If the Stock Exchange grants the listing of, and permission to deal in, our Shares and our Company complies with the stock admission requirements of HKSCC, our Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares on the Stock Exchange or any other date HKSCC chooses. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second Business Day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

DEALING ARRANGEMENTS Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on Thursday, May 9, 2019, it is expected that dealings in our Shares on the Stock Exchange will commence at 9:00 a.m. on Thursday, May 9, 2019. Our Shares will be traded in board lots of 500 Shares each.

283 HOW TO APPLY FOR HONG KONG OFFER SHARES

1. HOW TO APPLY If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an interest for International Offer Shares.

To apply for Hong Kong Offer Shares, you may: Š use a WHITE or YELLOW Application Form; Š online via the HK eIPO White Form Service Provider at www.hkeipo.hk;or Š electronically cause HKSCC Nominees to apply on your behalf.

None of you or your joint applicant(s) may make more than one application, except where you are a nominee and provide the required information in your application.

Our Company, the Joint Representatives, the HK eIPO White Form Service Provider and their respective agents may reject or accept any application in full or in part for any reason at their discretion.

2. WHO CAN APPLY You can apply for Hong Kong Offer Shares on a WHITE or YELLOW Application Form if you or the person(s) for whose benefit you are applying: Š are 18 years of age or older; Š have a Hong Kong address; Š are outside the U.S. and not a U.S. person (as defined in Regulation S) or a U.S. resident (as defined for purposes of the U.S. Investment Company Act); and Š are not a legal or natural person of the PRC.

If you apply online through the HK eIPO White Form service, in addition to the above, you must also: Š have a valid Hong Kong identity card number; and Š provide a valid e-mail address and a contact telephone number.

If you are a firm, the application must be in the individual members’ names. If you are a body corporate, the Application Form must be signed by a duly authorized officer, who must state his or her representative capacity, and stamped with your corporation’s chop.

If an application is made by a person under a power of attorney, our Company and the Joint Representatives may accept it at their discretion and on any conditions they think fit, including evidence of the attorney’s authority.

The number of joint applicants may not exceed four and they may not apply by means of HK eIPO White Form service for the Hong Kong Offer Shares.

Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer Shares if you are: Š an existing beneficial owner of Shares in our Company and/or any its subsidiaries;

284 HOW TO APPLY FOR HONG KONG OFFER SHARES

Š a Director or chief executive officer of our Company and/or any of its subsidiaries; Š a core connected person (as defined in the Listing Rules) of our Company or will become a core connected person of our Company immediately upon completion of the Global Offering; Š a close associate (as defined in the Listing Rules) of any of the above; or Š have been allocated or have applied for any International Offer Shares or otherwise participate in the International Offering.

The Company, the Joint Representatives and the designated HK eIPO White Form Service Provider (where applicable) or their respective agents have full discretion to reject or accept any application, in full or in part, without giving any reason.

3. APPLYING FOR HONG KONG OFFER SHARES Which Application Channel to Use For Hong Kong Offer Shares to be issued in your own name, use a WHITE Application Form or apply online through www.hkeipo.hk.

For Hong Kong Offer Shares to be issued in the name of HKSCC Nominees and deposited directly into CCASS to be credited to your or a designated CCASS Participant’s stock account, use a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you.

285 HOW TO APPLY FOR HONG KONG OFFER SHARES

Where to Collect the Application Forms You can collect a WHITE Application Form and a prospectus during normal business hours between 9:00 a.m. on Thursday, April 25, 2019 until 12:00 noon, Tuesday, April 30, 2019 from: (i) the following office of the Hong Kong Underwriters:

Hong Kong Underwriters Address China International Capital Corporation Hong Kong 29/F One International Finance Center, 1 Harbor Securities Limited View Street, Central, Hong Kong J.P. Morgan Securities (Asia Pacific) Limited 28/F Chater House 8 Connaught Road Central Hong Kong Nomura International (Hong Kong) Limited 30/F, Two International Finance Center 8 Finance Street Central, Hong Kong BOCI Asia Limited 26/F, Bank of China Tower 1 Garden Road Central, Hong Kong China Renaissance Securities (Hong Kong) Limited Units 8107-08, Level 81, International Commerce Centre 1 Austin Road West Kowloon, Hong Kong Haitong International Securities Company Limited 22/F Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong Daiwa Capital Markets Hong Kong Limited Level 28, One Pacific Place 88 Queensway Hong Kong First Shanghai Securities Limited 19/F, Wing On House 71 Des Voeux Road Central, Hong Kong (ii) any of the following branches of the receiving bank(s): District Branch Name Address Hong Kong Des Voeux Road West Branch 111–119 Des Voeux Road West, Hong Kong Johnston Road Branch 152–158 Johnston Road, Wan Chai, Hong Kong Kowloon Kwun Tong Plaza Branch G1 Kwun Tong Plaza, 68 Hoi Yuen Road, Kwun Tong, Kowloon Yu Chau Street Branch 42–46 Yu Chau Street, Sham Shui Po, Kowloon New Territories Shatin Branch Shop 20, Level 1, Lucky Plaza, 1-15 Wang Pok Street, Sha Tin, New Territories

You can collect a YELLOW Application Form and a prospectus during normal business hours from 9:00 a.m., Thursday, April 25, 2019 until 12:00 noon, Tuesday, April 30, 2019 from the Depository Counter of HKSCC at 1/F, One & Two Exchange Square, 8 Connaught Place, Central, Hong Kong or from your stockbroker.

286 HOW TO APPLY FOR HONG KONG OFFER SHARES

Time for Lodging Application Forms Your completed WHITE or YELLOW Application Form, together with a cheque or a banker’s cashier order attached and marked payable to “BANK OF CHINA (HONG KONG) NOMINEES LIMITED — VIVA BIOTECH PUBLIC OFFER” for the payment, should be deposited in the special collection boxes provided at any of the branches of the receiving banks listed above, at the following times:

Thursday, April 25, 2019 – 9:00 a.m. to 5:00 p.m. Friday, April 26, 2019 – 9:00 a.m. to 5:00 p.m. Saturday, April 27, 2019 – 9:00 a.m. to 1:00 p.m. Monday, April 29, 2019 – 9:00 a.m. to 5:00 p.m. Tuesday, April 30, 2019 – 9:00 a.m. to 12:00 noon

The application lists will be open from 11:45 a.m. to 12:00 noon on Tuesday, April 30, 2019, the last application day or such later time as described in “— 10. Effect of Bad Weather on the Opening of the Application Lists” below.

4. TERMS AND CONDITIONS OF AN APPLICATION Follow the detailed instructions in the Application Form carefully; otherwise, your application may be rejected.

By submitting an Application Form or applying through the HK eIPO White Form service, among other things, you: (i) undertake to execute all relevant documents and instruct and authorize our Company and/ or the Joint Representatives (or their agents or nominees), as agent of our Company, to execute any documents for you and to do on your behalf all things necessary to register any Hong Kong Offer Shares allocated to you in your name or in the name of HKSCC Nominees as required by the Articles of Association; (ii) agree to comply with the Companies Ordinance, Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Articles of Association; (iii) confirm that you have read the terms and conditions and application procedures set out in this prospectus and in the Application Form and agree to be bound by them; (iv) confirm that you have received and read this prospectus and have only relied on the information and representations contained in this prospectus in making your application and will not rely on any other information or representations except those in any supplement to this prospectus; (v) confirm that you are aware of the restrictions on the Global Offering in this prospectus; (vi) agree that none of our Company, the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective directors, officers, employees, partners, agents, advisors and any other parties involved in the Global Offering is or will be liable for any information and representations not in this prospectus (and any supplement to it); (vii) undertake and confirm that you or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not

287 HOW TO APPLY FOR HONG KONG OFFER SHARES

apply for or take up, or indicate an interest for, any Offer Shares under the International Offering nor participated in the International Offering; (viii) agree to disclose to our Company, our Hong Kong Branch Share Registrar, receiving bank(s), the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and/or their respective advisors and agents any personal data which they may require about you and the person(s) for whose benefit you have made the application; (ix) if the laws of any place outside Hong Kong apply to your application, agree and warrant that you have complied with all such laws and none of our Company, the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, and the Underwriters nor any of their respective officers or advisors will breach any law outside Hong Kong as a result of the acceptance of your offer to purchase, or any action arising from your rights and obligations under the terms and conditions contained in this prospectus and the Application Form; (x) agree that once your application has been accepted, you may not rescind it because of an innocent misrepresentation; (xi) agree that your application will be governed by the laws of Hong Kong; (xii) represent, warrant and undertake that (i) you understand that the Hong Kong Offer Shares have not been and will not be registered under the U.S. Securities Act; and (ii) you and any person for whose benefit you are applying for the Hong Kong Offer Shares are outside the U.S. (as defined in Regulation S) or are a person described in paragraph (h)(3) of Rule 902 of Regulation S and are not U.S. residents (as defined for purposes of the U.S. Investment Company Act; (xiii) warrant that the information you have provided is true and accurate; (xiv) agree to accept the Hong Kong Offer Shares applied for, or any lesser number allocated to you under the application; (xv) authorize our Company to place your name(s) or the name of the HKSCC Nominees, on our Company’s register of members as the holder(s) of any Hong Kong Offer Shares allocated to you, and our Company and/or its agents to send any share certificate(s) and/ or any e-Auto Refund payment instructions and/or any refund cheque(s) to you or the first-named applicant for joint application by ordinary post at your own risk to the address stated on the application, unless you have fulfilled the criteria mentioned in “Personal Collection” section in the Prospectus to collect the share certificate(s) and/or refund cheque(s) in person; (xvi) declare and represent that this is the only application made and the only application intended by you to be made to benefit you or the person for whose benefit you are applying; (xvii) understand that our Company and the Joint Representatives will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted for making a false declaration; (xviii) (if the application is made for your own benefit) warrant that no other application has been or will be made for your benefit on a WHITE or YELLOW Application Form or

288 HOW TO APPLY FOR HONG KONG OFFER SHARES

by giving electronic application instructions to HKSCC or to the HK eIPO White Form Service Provider by you or by any one as your agent or by any other person; and (xix) (if you are making the application as an agent for the benefit of another person) warrant that (i) no other application has been or will be made by you as agent for or for the benefit of that person or by that person or by any other person as agent for that person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; and (ii) you have due authority to sign the Application Form or give electronic application instructions on behalf of that other person as their agent.

Additional Instructions for YELLOW Application Form You may refer to the YELLOW Application Form for details.

5. APPLYING THROUGH THE HK eIPO WHITE FORM SERVICE General Individuals who meet the criteria in “— 2. Who Can Apply” section above, may apply through the HK eIPO White Form service for the Offer Shares to be allotted and registered in their own names through the designated website at www.hkeipo.hk.

Detailed instructions for application through the HK eIPO White Form service are on the designated website. If you do not follow the instructions, your application may be rejected and may not be submitted to our Company. If you apply through the designated website, you authorize the HK eIPO White Form Service Provider to apply on the terms and conditions in this prospectus, as supplemented and amended by the terms and conditions of the HK eIPO White Form service.

Time for Submitting Applications under the HK eIPO White Form You may submit your application to the HK eIPO White Form Service Provider at www.hkeipo.hk (24 hours daily, except on the last application day) from 9:00 a.m., Thursday, April 25, 2019 until 11:30 a.m., Tuesday, April 30, 2019 and the latest time for completing full payment of application monies in respect of such applications will be 12:00 noon, Tuesday, April 30, 2019 or such later time under the “— 10. Effect of Bad Weather on the Opening of the Application Lists” in this section.

No Multiple Applications If you apply by means of HK eIPO White Form, once you complete payment in respect of any electronic application instruction given by you or for your benefit through the HK eIPO White Form service to make an application for Hong Kong Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under HK eIPO White Form more than once and obtaining different application reference numbers without effecting full payment in respect of a particular reference number will not constitute an actual application.

If you are suspected of submitting more than one application through the HK eIPO White Form service or by any other means, all of your applications are liable to be rejected.

289 HOW TO APPLY FOR HONG KONG OFFER SHARES

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance For the avoidance of doubt, our Company and all other parties involved in the preparation of this prospectus acknowledge that each applicant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).

6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS General CCASS Participants may give electronic application instructions to apply for the Hong Kong Offer Shares and to arrange payment of the money due on application and payment of refunds under their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures.

If you are a CCASS Investor Participant, you may give these electronic application instructions through the CCASS Phone System by calling +852 2979 7888 or through the CCASS Internet System (https://ip.ccass.com) (using the procedures in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time).

HKSCC can also input electronic application instructions for you if you go to:

Hong Kong Securities Clearing Company Limited Customer Service Center 1/F, One & Two Exchange Square 8 Connaught Place Central Hong Kong and complete an input request form.

You can also collect a prospectus from this address.

If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf.

You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details of your application to our Company, the Joint Representatives and our Hong Kong Branch Share Registrar.

Giving Electronic Application Instructions to HKSCC via CCASS Where you have given electronic application instructions to apply for the Hong Kong Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf: (i) HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach of the terms and conditions of the WHITE Application Form or this prospectus;

290 HOW TO APPLY FOR HONG KONG OFFER SHARES

(ii) HKSCC Nominees will do the following things on your behalf: Š agree that the Hong Kong Offer Shares to be allotted shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS Participant’ stock account on your behalf or your CCASS Investor Participant’s stock account; Š agree to accept the Hong Kong Offer Shares applied for or any lesser number allocated; Š undertake and confirm that you have not applied for or taken up, will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering; Š (if the electronic application instructions are given for your benefit) declare that only one set of electronic application instructions has been given for your benefit; Š (if you are an agent for another person) declare that you have only given one set of electronic application instructions for the other person’s benefit and are duly authorized to give those instructions as their agent; Š confirm that you understand that our Company, the Directors and the Joint Representatives will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted if you make a false declaration; Š authorize our Company to place HKSCC Nominees’ name on our Company’s register of members as the holder of the Hong Kong Offer Shares allocated to you and to send share certificate(s) and/or refund monies under the arrangements separately agreed between us and HKSCC; Š confirm that you have read the term and conditions and application procedures set out in this prospectus and agree to be bound by them; Š confirm that you have received and/or read a copy of this prospectus and have relied only on the information and representations in this prospectus in causing the application to be made, save as set out in any supplement to this prospectus; Š agree that none of our Company, the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective directors, officers, employees, partners, agents, advisors and any other parties involved in the Global Offering, is or will be liable for any information and representations not contained in this prospectus (and any supplement to it); Š agree to disclose your personal data to our Company, the Hong Kong Branch Share Registrar, receiving banks, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and/or their respective advisors and agents; Š agree (without prejudice to any other rights which you may have) that once HKSCC Nominees’ application has been accepted, it cannot be rescinded for innocent misrepresentation; Š agree that any application made by HKSCC Nominees on your behalf is irrevocable before the fifth day after the time of the opening of the application lists (excluding

291 HOW TO APPLY FOR HONG KONG OFFER SHARES

any day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to take effect as a collateral contract with our Company and to become binding when you give the instructions and such collateral contract to be in consideration of our Company agreeing that it will not offer any Hong Kong Offer Shares to any person before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is a Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus; Š agree that once HKSCC Nominees’ application is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by our Company’s announcement of the Hong Kong Public Offering results; Š agree to the arrangements, undertakings and warranties under the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, for the giving electronic application instructions to apply for Hong Kong Offer Shares; Š agree with our Company, for itself and for the benefit of each Shareholder (and so that our Company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the Shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Articles of Association; and Š agree that your application, any acceptance of it and the resulting contract will be governed by the Laws of Hong Kong.

Effect of Giving Electronic Application Instructions to HKSCC via CCASS By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to our Company or any other person in respect of the things mentioned below: Š instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Hong Kong Offer Shares on your behalf; Š instructed and authorized HKSCC to arrange payment of the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per Offer Share initially paid on application, refund of the application monies (including brokerage, SFC transaction levy and the Stock Exchange trading fee) by crediting your designated bank account; and

292 HOW TO APPLY FOR HONG KONG OFFER SHARES

Š instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the things stated in the WHITE Application Form and in this prospectus.

Minimum Purchase Amount and Permitted Numbers You may give or cause your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions for a minimum of 500 Hong Kong Offer Shares. Instructions for more than 500 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Forms. No application for any other number of Hong Kong Offer Shares will be considered and any such application is liable to be rejected.

Time for Inputting Electronic Application Instructions(1) CCASS Clearing/Custodian Participants can input electronic application instructions at the following times:

Thursday, April 25, 2019 – 9:00 a.m. to 8:30 p.m. Friday, April 26, 2019 – 8:00 a.m. to 8:30 p.m. Monday, April 29, 2019 – 8:00 a.m. to 8:30 p.m. Tuesday, April 30, 2019 – 8:00 a.m. to 12:00 noon

Note: (1) These times in this sub-section are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/Custodian Participants and/or CCASS Investor Participants.

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Thursday, April 25, 2019 until 12:00 noon on Tuesday, April 30, 2019 (24 hours daily, except on Tuesday, April 30, 2019, the last application day).

The latest time for inputting your electronic application instructions will be 12:00 noon on Tuesday, April 30, 2019, the last application day or such later time as described in “—10. Effect of Bad Weather on the Opening of the Application Lists” below.

No Multiple Applications If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer Shares for which you have given such instructions and/or for which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance For the avoidance of doubt, our Company and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 (as applied by Section 342E) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.

293 HOW TO APPLY FOR HONG KONG OFFER SHARES

Personal Data The section of the Application Form headed “Personal Data” applies to any personal data held by our Company, the Hong Kong Branch Share Registrar, the receiving bank(s), the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and any of their respective advisors and agents about you in the same way as it applies to personal data about applicants other than HKSCC Nominees.

7. WARNING FOR ELECTRONIC APPLICATIONS The subscription of the Hong Kong Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the application for Hong Kong Offer Shares through the HK eIPO White Form service is also only a facility provided by the HK eIPO White Form Service Provider to public investors. Such facilities are subject to capacity limitations and potential service interruptions and you are advised not to wait until the last application day in making your electronic applications. Our Company, the Directors, the Sole Sponsor, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the Underwriters take no responsibility for such applications and provide no assurance that any CCASS Participant or person applying through the HK eIPO White Form service will be allotted any Hong Kong Offer Shares.

To ensure that CCASS Investor Participants can give their electronic application instructions, they are advised not to wait until the last minute to input their instructions to the systems. In the event that CCASS Investor Participants have problems in the connection to CCASS Phone System/CCASS Internet System for submission of electronic application instructions, they should either (i) submit a WHITE or YELLOW Application Form, or (ii) go to HKSCC’s Customer Service Center to complete an input request form for electronic application instructions before 12:00 noon on Tuesday, April 30, 2019.

8. HOW MANY APPLICATIONS CAN YOU MAKE Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees. If you are a nominee, in the box on the Application Form marked “For nominees” you must include: (i) an account number; or (ii) some other identification code, for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If you do not include this information, the application will be treated as being made for your benefit.

All of your applications will be rejected if more than one application on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or through HK eIPO White Form service, is made for your benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions).

If an application is made by an unlisted company and: (i) the principal business of that company is dealing in securities; and (ii) you exercise statutory control over that company,

294 HOW TO APPLY FOR HONG KONG OFFER SHARES then the application will be treated as being for your benefit.

“Unlisted company” means a company with no equity securities listed on the Stock Exchange.

“Statutory control” means you: (i) control the composition of the board of directors of the company; (ii) control more than half of the voting power of the company; or (iii) hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital).

9. HOW MUCH ARE THE HONG KONG OFFER SHARES The WHITE and YELLOW Application Forms have tables showing the exact amount payable for Shares.

You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee in full upon application for Shares under the terms set out in the Application Forms.

You may submit an application using a WHITE or YELLOW Application Form or through the HK eIPO White Form service in respect of a minimum of 500 Hong Kong Offer Shares. Each application or electronic application instruction in respect of more than 500 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Form, or as otherwise specified on the designated website at www.hkeipo.hk.

If your application is successful, brokerage will be paid to the Exchange Participants, and the SFC transaction levy and the Stock Exchange trading fee are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on behalf of the SFC).

Please see the section headed “Structure of the Global Offering — Pricing of the Global Offering” in this prospectus for further details regarding the Offer Price.

10. EFFECT OF BAD WEATHER ON THE OPENING OF THE APPLICATION LISTS The application lists will not open if there is: (i) a tropical cyclone warning signal number 8 or above; or (ii) a “black” rainstorm warning, in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, April 30, 2019. Instead they will open between 11:45 a.m. and 12:00 noon on the next business day which does not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and 12:00 noon.

If the application lists do not open and close on Tuesday, April 30, 2019 or if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in Hong Kong that may affect the dates mentioned in the section headed “Expected Timetable” in this prospectus, an announcement will be made in such event.

295 HOW TO APPLY FOR HONG KONG OFFER SHARES

11. PUBLICATION OF RESULTS Our Company expects to announce the final Offer Price, the level of indication of interest in the International Offering, the level of applications in the Hong Kong Public Offering and the basis of allocation of the Hong Kong Offer Shares on Wednesday, May 8, 2019 in South China Morning Post (in English) and Hong Kong Economic Times (in Chinese) and on our Company’s website at www.vivabiotech.com and the website of the Stock Exchange at www.hkexnews.hk.

The results of allocations and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering will be available at the times and date and in the manner specified below: (i) in the announcement to be posted on our Company’s website at www.vivabiotech.com and the Stock Exchange’s website at www.hkexnews.hk by no later than 9:00 a.m. on Wednesday, May 8, 2019; (ii) from the designated results of allocations website at www.tricor.com.hk/ipo/result (or www.hkeipo.hk/IPOResult) with a “search by ID” function on a 24-hour basis from 8:00 a.m. on Wednesday, May 8, 2019 to 12:00 midnight on Wednesday, May 15, 2019; (iii) by telephone enquiry line by calling +852 3691 8488 between 9:00 a.m. and 6:00 p.m. from Wednesday, May 8, 2019 to Tuesday, May 14, 2019 (excluding Saturday, Sunday and public holiday); (iv) in the special allocation results booklets which will be available for inspection during opening hours from Wednesday, May 8, 2019 to Friday, May 10, 2019 at all the receiving bank designated branches.

If our Company accepts your offer to purchase (in whole or in part), which it may do by announcing the basis of allocations and/or making available the results of allocations publicly, there will be a binding contract under which you will be required to purchase the Hong Kong Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is not otherwise terminated. Further details are contained in the section headed “Structure of the Global Offering” in this prospectus.

You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not affect any other right you may have.

12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED HONG KONG OFFER SHARES You should note the following situations in which the Hong Kong Offer Shares will not be allotted to you:

(i) If your application is revoked: By completing and submitting an Application Form or giving electronic application instructions to HKSCC or to HK eIPO White Form Service Provider, you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a collateral contract with our Company.

296 HOW TO APPLY FOR HONG KONG OFFER SHARES

Your application or the application made by HKSCC Nominees on your behalf may only be revoked on or before such fifth day if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus.

If any supplement to this prospectus is issued, applicants who have already submitted an application will be notified that they are required to confirm their applications. If applicants have been so notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked.

If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively.

(ii) If our Company or its agents exercise their discretion to reject your application: Our Company, the Joint Representatives, the HK eIPO White Form Service Provider and their respective agents and nominees have full discretion to reject or accept any application, or to accept only part of any application, without giving any reasons.

(iii) If the allotment of Hong Kong Offer Shares is void: The allotment of Hong Kong Offer Shares will be void if the Listing Committee does not grant permission to list the Shares either: Š within three weeks from the closing date of the application lists; or Š within a longer period of up to six weeks if the Listing Committee notifies our Company of that longer period within three weeks of the closing date of the application lists.

(iv) If: Š you make multiple applications or suspected multiple applications; Š you or the person for whose benefit you are applying have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Hong Kong Offer Shares and International Offer Shares; Š your Application Form is not completed in accordance with the stated instructions; Š your electronic application instructions through the HK eIPO White Form service are not completed in accordance with the instructions, terms and conditions on the designated website at www.hkeipo.hk; Š your payment is not made correctly or the cheque or banker’s cashier order paid by you is dishonored upon its first presentation; Š our Company or the Joint Representatives believe that by accepting your application, it or they would violate applicable securities or other laws, rules or regulations; or

297 HOW TO APPLY FOR HONG KONG OFFER SHARES

Š your application is for more than 50% of the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering.

13. REFUND OF APPLICATION MONIES If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the maximum offer price of HK$4.41 per Offer Share (excluding brokerage, SFC transaction levy and the Stock Exchange trading fee thereon), or if the conditions of the Hong Kong Public Offering are not fulfilled in accordance with the section headed “Structure of the Global Offering — Conditions of the Global Offering” in this prospectus or if any application is revoked, the application monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy and the Stock Exchange trading fee, will be refunded, without interest or the cheque or banker’s cashier order will not be cleared.

Any refund of your application monies will be made on or before Wednesday, May 8, 2019.

14. DISPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES You will receive one share certificate for all Hong Kong Offer Shares allotted to you under the Hong Kong Public Offering (except pursuant to applications made on YELLOW Application Forms or by electronic application instructions to HKSCC via CCASS where the share certificates will be deposited into CCASS as described below).

No temporary document of title will be issued in respect of the Shares. No receipt will be issued for sums paid on application. If you apply by WHITE or YELLOW Application Form, subject to personal collection as mentioned below, the following will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on the Application Form: Š share certificate(s) for all the Hong Kong Offer Shares allotted to you (for YELLOW Application Forms, share certificates will be deposited into CCASS as described below); and Š refund cheque(s) crossed “Account Payee Only” in favor of the applicant (or, in the case of joint applicants, the first-named applicant) for (i) all or the surplus application monies for the Hong Kong Offer Shares, wholly or partially unsuccessfully applied for; and/or (ii) the difference between the Offer Price and the maximum Offer Price per Offer Share paid on application in the event that the Offer Price is less than the maximum Offer Price (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest).

Part of the Hong Kong identity card number/passport number, provided by you or the first- named applicant (if you are joint applicants), may be printed on your refund cheque, if any. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque(s). Inaccurate completion of your Hong Kong identity card number/ passport number may invalidate or delay encashment of your refund cheque(s).

Subject to arrangement on dispatch/collection of share certificates and refund monies as mentioned below, any refund cheques and share certificates are expected to be posted on or before Wednesday, May 8, 2019. The right is reserved to retain any share certificate(s) and any surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).

298 HOW TO APPLY FOR HONG KONG OFFER SHARES

Share certificates will only become valid at 8:00 a.m. on Thursday, May 9, 2019 provided that the Global Offering has become unconditional and the right of termination described in the section headed “Underwriting” in this prospectus has not been exercised. Investors who trade shares prior to the receipt of share certificates or the Share certificates becoming valid do so at their own risk.

Personal Collection (i) If you apply using a WHITE Application Form If you apply for 1,000,000 or more Hong Kong Offer Shares and have provided all information required by your Application Form, you may collect your refund cheque(s) and/or share certificate(s) from the Hong Kong Branch Share Registrar, Tricor Investor Services Limited at Level 22, Hopewell, Hopewell Centre, 183 Queen’s Road East, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Wednesday, May 8, 2019 or such other date as notified by us in the newspapers.

If you are an individual who is eligible for personal collection, you must not authorize any other person to collect for you. If you are a corporate applicant which is eligible for personal collection, your authorized representative must bear a letter of authorization from your corporation stamped with your corporation’s chop. Both individuals and authorized representatives must produce, at the time of collection, evidence of identity acceptable to the Hong Kong Branch Share Registrar.

If you do not collect your refund cheque(s) and/or share certificate(s) personally within the time specified for collection, they will be dispatched promptly to the address specified in your Application Form by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) and/or share certificate(s) will be sent to the address on the relevant Application Form on or before Wednesday, May 8, 2019, by ordinary post and at your own risk.

(ii) If you apply using a YELLOW Application Form If you apply for 1,000,000 Hong Kong Offer Shares or more, please follow the same instructions as described above. If you have applied for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) will be sent to the address on the relevant Application Form on or before Wednesday, May 8, 2019, by ordinary post and at your own risk.

If you apply by using a YELLOW Application Form and your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your or the designated CCASS Participant’s stock account as stated in your Application Form on Wednesday, May 8, 2019, or upon contingency, on any other date determined by HKSCC or HKSCC Nominees.

Š If you apply through a designated CCASS participant (other than a CCASS investor participant) For Hong Kong Offer Shares credited to your designated CCASS participant’s stock account (other than CCASS Investor Participant), you can check the number of Hong Kong Offer Shares allotted to you with that CCASS participant.

299 HOW TO APPLY FOR HONG KONG OFFER SHARES

Š If you are applying as a CCASS investor participant Our Company will publish the results of CCASS Investor Participants’ applications together with the results of the Hong Kong Public Offering in the manner described in “Publication of Results” above. You should check the announcement published by our Company and report any discrepancies to HKSCC before 5:00 p.m. on Wednesday, May 8, 2019 or any other date as determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong Offer Shares to your stock account, you can check your new account balance via the CCASS Phone System and CCASS Internet System.

(iii) If you apply through the HK eIPO White Form service If you apply for 1,000,000 Hong Kong Offer Shares or more and your application is wholly or partially successful, you may collect your share certificate(s) from Hong Kong Branch Share Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Wednesday, May 8, 2019, or such other date as notified by our Company in the newspapers as the date of dispatch/collection of share certificates/e-Auto Refund payment instructions/refund cheque(s).

If you do not collect your share certificate(s) personally within the time specified for collection, they will be sent to the address specified in your application instructions by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your share certificate(s) (where applicable) will be sent to the address specified in your application instructions on or before Wednesday, May 8, 2019 by ordinary post at your own risk.

If you apply and pay the application monies from a single bank account, any refund monies will be dispatched to that bank account in the form of e-Auto Refund payment instructions. If you apply and pay the application monies from multiple bank accounts, any refund monies will be dispatched to the address as specified in your application instructions in the form of refund cheque(s) by ordinary post at your own risk.

(iv) If you apply via electronic application instructions to HKSCC Allocation of Hong Kong Offer Shares For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit instructions are given will be treated as an applicant.

Deposit of Share Certificates into CCASS and Refund of Application Monies Š If your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS Participant’s stock account or your CCASS Investor Participant stock account on Wednesday, May 8, 2019, or, on any other date determined by HKSCC or HKSCC Nominees. Š Our Company expects to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, our Company will include information

300 HOW TO APPLY FOR HONG KONG OFFER SHARES

relating to the relevant beneficial owner), your Hong Kong identity card number/passport number or other identification code (Hong Kong business registration number for corporations) and the basis of allotment of the Hong Kong Public Offering in the manner specified in “Publication of Results” above on Wednesday, May 8, 2019. You should check the announcement published by our Company and report any discrepancies to HKSCC before 5:00 p.m. on Wednesday, May 8, 2019 or such other date as determined by HKSCC or HKSCC Nominees. Š If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian. Š If you have applied as a CCASS Investor Participant, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Wednesday, May 8, 2019. Immediately following the credit of the Hong Kong Offer Shares to your stock account and the credit of refund monies to your bank account, HKSCC will also make available to you an activity statement showing the number of Hong Kong Offer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account. Š Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the maximum Offer Price per Offer Share initially paid on application (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest) will be credited to your designated bank account or the designated bank account of your broker or custodian on Wednesday, May 8, 2019.

15. ADMISSION OF THE SHARES INTO CCASS If the Stock Exchange grants the listing of, and permission to deal in, the Shares and we comply with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares or any other date HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the Listing Rules) is required to take place in CCASS on the second Business Day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Investors should seek the advice of their stockbroker or other professional advisor for details of the settlement arrangement as such arrangements may affect their rights and interests.

All necessary arrangements have been made enabling the Shares to be admitted into CCASS.

301 APPENDIX I ACCOUNTANTS’ REPORT

The following is the text of a report received from the Company’s reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF VIVA BIOTECH HOLDINGS AND CHINA INTERNATIONAL CAPITAL CORPORATION HONG KONG SECURITIES LIMITED Introduction We report on the historical financial information of Viva Biotech Holdings (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages I-1 to I-89, which comprises the consolidated statements of financial position of the Group at December 31, 2016, 2017 and 2018, the statements of financial position of the Company at December 31, 2016, 2017 and 2018, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Group for each of the three years ended December 31, 2018 (the “Track Record Period”) and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information forms an integral part of this report, which has been prepared for inclusion in the prospectus of the Company dated April 25, 2019 (the “Prospectus”) in connection with the initial listing of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

Directors’ responsibility for the Historical Financial Information The directors of the Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in Note 1.2 to the Historical Financial Information, and for such internal control as the directors of the Company determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in

I-1 APPENDIX I ACCOUNTANTS’ REPORT

Note 1.2 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Company, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the Historical Financial Information gives, for the purposes of the accountants’ report, a true and fair view of the Group’s and the Company’s financial position at December 31, 2016, 2017 and 2018 and of the Group’s financial performance and cash flows for the Track Record Period in accordance with the basis of preparation set out in Note 1.2 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on the Stock Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance Adjustments In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-3 have been made.

Dividends We refer to Note 13 to the Historical Financial Information which states that no dividends was declared or paid by the Company during the Track Record Period.

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

April 25, 2019

I-2 APPENDIX I ACCOUNTANTS’ REPORT

HISTORICAL FINANCIAL INFORMATION OF THE GROUP Preparation of Historical Financial Information Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The financial statements of the Group for the Track Record Period, on which the Historical Financial Information is based, have been prepared in accordance with the accounting policies which conform with International Financial Reporting Standards (“IFRSs”) issued by International Accounting Standards Board (the “IASB”) and were audited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”).

The Historical Financial Information is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

I-3 APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Year ended December 31, NOTES 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue ...... 5 96,492 148,245 210,033 Cost of services ...... (42,349) (62,056) (104,576) Gross profit ...... 54,143 86,189 105,457 Other income ...... 6 7,088 6,412 4,671 Other gains and losses ...... 7 1,808 18,953 30,934 Research and development expenses ...... (16,794) (17,253) (25,251) Selling and marketing expenses ...... (1,392) (2,017) (3,925) Administrative expenses ...... (12,827) (15,228) (25,576) Listing expenses ...... —— (24,274) Fair value gain on financial assets at fair value through profit or loss (“FVTPL”) ...... 17 — 14,720 68,286 Share of loss of associates ...... 15 (1,351) (2,418) (1,748) Share of loss of joint ventures ...... 16 (2,052) (1,694) (1,498) Finance cost ...... 8 (203) (853) (557) Profit before fair value loss on financial liabilities at FVTPL and tax ...... 28,420 86,811 126,519 Fair value loss on financial liabilities at FVTPL ...... 30 — — (20,658) Profit before tax ...... 9 28,420 86,811 105,861 Income tax expense ...... 10 (3,947) (10,551) (15,311) Profit and total comprehensive income for the year ...... 24,473 76,260 90,550

Earnings per share ...... 12 RMB RMB RMB —Basic ...... 0.02 0.07 0.08 —Diluted ...... 0.02 0.07 0.08

I-4 APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At December 31, NOTES 2016 2017 2018 RMB’000 RMB’000 RMB’000 Non-Current Assets Property, plant and equipment ...... 14 21,343 34,400 66,899 Interests in associates ...... 15 7,189 5,276 2,675 Interests in joint ventures ...... 16 2,928 1,234 2,602 Financial assets at FVTPL ...... 17 2,005 71,059 204,740 Contract assets ...... — 3,693 3,368 Rental deposits and prepayments ...... 1,792 1,832 6,872 Deferred tax assets ...... 18 1,400 1,461 1,013 36,657 118,955 288,169 Current Assets Inventories ...... 20 1,013 3,323 4,900 Contract costs ...... 21 6,265 3,459 4,261 Trade and other receivables ...... 22 24,064 36,875 68,410 Loans to a related party ...... 39(b) 20,397 2,002 — Restricted bank balances ...... 24 — 8,022 8,045 Cash and cash equivalents ...... 24 13,425 29,766 155,554 65,164 83,447 241,170 Current Liabilities Trade and other payables ...... 25 10,932 15,571 25,578 Contract liabilities ...... 26 729 1,092 1,483 Income tax payables ...... 3,786 7,745 14,904 Loans from related parties ...... 39(b) — 12,112 — Bank borrowings ...... 27 447 471 497 Obligations under a finance lease ...... 28 226 — — Deferred income ...... 29 200 — — 16,320 36,991 42,462 Net Current Assets ...... 48,844 46,456 198,708 Total Assets Less Current Liabilities ...... 85,501 165,411 486,877 Non-Current Liabilities Bank borrowings ...... 27 2,833 2,362 1,865 Deferred income ...... 29 6,166 10,287 9,849 Financial liabilities at FVTPL ...... 30 — — 220,600 Deferred tax liabilities ...... 18 — — 3,121 8,999 12,649 235,435 Net Assets ...... 76,502 152,762 251,442 Capital and Reserves Share capital ...... 31 120 120 164 Reserves ...... 76,382 152,642 251,278 Total Equity ...... 76,502 152,762 251,442

I-5 APPENDIX I ACCOUNTANTS’ REPORT

STATEMENTS OF FINANCIAL POSITION OF THE COMPANY

At December 31, NOTES 2016 2017 2018 RMB’000 RMB’000 RMB’000 Non-Current Assets Investment in a subsidiary ...... 19 45,582 45,582 54,184 Amount due from a subsidiary ...... 39 — — 139,676 Financial assets at FVTPL ...... 17 — 25,346 53,861 45,582 70,928 247,721 Current Assets Amounts due from subsidiaries ...... 39 129 1 28,009 Deferred issue costs and other receivables ...... 22 — — 6,744 Cash and cash equivalents ...... — 197 81,332 129 198 116,085 Current Liabilities Accrued listing expenses and issue costs ...... 25 — — 11,516 Income tax payables ...... —— 1,602 Amounts due to subsidiaries ...... 39 1,266 26,618 72,643 1,266 26,618 85,761 Net Current (Liabilities) Assets ...... (1,137) (26,420) 30,324 Total Assets Less Current Liabilities ...... 44,445 44,508 278,045 Non-Current Liabilities Financial liabilities at FVTPL ...... 30 — — 220,600 Deferred tax liabilities ...... 18 — — 1,020 — — 221,620 Net Assets ...... 44,445 44,508 56,425 Capital and Reserves Share capital ...... 31 120 120 164 Reserves ...... 41 44,325 44,388 56,261 Total Equity ...... 44,445 44,508 56,425

I-6 APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Accumulated losses) Share Share Statutory Share option Other retained capital premium reserve reserve reserve earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note i) (Note iii) At January 1, 2016 ...... 120 13,590 833 11,867 33,705 (8,102) 52,013 Profit and total comprehensive income for the year ...... ——— ——24,473 24,473 Recognition of equity-settled share- based payment (Note 32) ...... ——— 16——16 Transferred to statutory reserve ...... — — 2,672 — — (2,672) — At December 31, 2016 ...... 120 13,590 3,505 11,883 33,705 13,699 76,502 Profit and total comprehensive income for the year ...... ——— ——76,260 76,260 Transferred to statutory reserve ...... — — 6,239 — — (6,239) — At December 31, 2017 ...... 120 13,590 9,744 11,883 33,705 83,720 152,762 Adoption of IFRS 9 (Note ii) ...... ——— —— (472) (472) Adjusted balance at January 1, 2018 . . . 120 13,590 9,744 11,883 33,705 83,248 152,290 Profit and total comprehensive income for the year ...... ——— ——90,550 90,550 Recognition of equity-settled share- based payment (Note 32) ...... ———8,602 — — 8,602 Transferred to statutory reserve ...... — — 6,463 — — (6,463) — Issue of ordinary shares (Note iii) ..... 44 33,661 — — (33,705) — — At December 31, 2018 ...... 164 47,251 16,207 20,485 — 167,335 251,442

Notes: (i) In accordance with the Articles of Association of all subsidiaries established in the People’s Republic of China (the “PRC”), they are required to transfer 10% of the profit after taxation to the statutory reserve until the reserve reaches 50% of the registered capital. Transfer to this reserve must be made before distributing dividends to equity holders. The statutory reserve can be used to make up for previous years’ losses, expand the existing operations or convert into additional paid-in capital of the subsidiaries. (ii) Upon the adoption of IFRS 9 “Financial Instruments” on January 1, 2018, an accumulated impact of RMB472,000 was recorded as an adjustment to the retained earnings at January 1, 2018, which represented the impairment loss allowance, net of deferred tax impact. Details of the adjustment are set out in Note 2. (iii) Pursuant to the resolution of shareholders’ meeting dated April 12, 2015, the Company’s existing ordinary shareholders subscribed 71,917,810 ordinary shares of the Company (“Subscription Shares”) at a price of US$0.0765 per share with a total cash consideration of US$5,500,000 (equivalent to RMB33,705,000). The subscription money was intended to be used as payment for the redemption of the Series A1 Preferred Shares of the Company on April 25, 2015. Therefore, instead of receiving the cash from the capital contribution from the shareholders, the shareholders offered to settle the payment for the redemption of the redeemable preferred shares on behalf of the Company. Such amount was recognized in “other reserve” before the shares were issued by the Company on March 28, 2018. Upon the issue of these shares, the amount previously recognized in the “other reserve” is subsequently reclassified as share capital and share premium, respectively.

I-7 APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31, NOTE 2016 2017 2018 RMB’000 RMB’000 RMB’000

OPERATING ACTIVITIES Profit before tax ...... 28,420 86,811 105,861 Adjustments for: Interest on bank borrowings ...... 189 168 143 Interest on loans from related parties ...... — 677 414 Interest on a finance lease ...... 14 8 — Interest income from banks ...... (76) (496) (861) Interest income from a related party ...... (1,068) (178) — Foreign exchange (gain) loss ...... (624) 314 (4,605) Depreciation of property, plant and equipment ...... 3,782 5,501 9,548 Impairment (reversed) losses recognized on financial assets measured at amortized cost ...... (36) 118 113 (Gain) loss on disposal of property, plant and equipment ...... (162) 52 (5) Income from government grants and subsidies related to assets ...... (608) (919) (915) Share-based payment expenses ...... 16 — 8,602 Fair value gain on financial assets at FVTPL ...... — (14,720) (68,286) Gain on deemed disposal of interests in a joint venture ...... —— (11,355) Gain on deemed disposal of interests in an associate ...... — (20,351) — Gain on disposal of interests in a joint venture ...... —— (960) Gain on disposal of interests in an associate ...... —— (4,047) Fair value loss on financial liabilities at FVTPL ...... —— 20,658 Share of loss of joint ventures ...... 2,052 1,694 1,498 Share of loss of associates ...... 1,351 2,418 1,748 Revenue from service-for-equity ...... 42(b) (2,005) (16,621) (20,400) Operating cash flows before movements in working capital ..... 31,245 44,476 37,151 Increase in inventories ...... (441) (2,310) (1,577) (Increase) decrease in contract costs ...... (1,240) 3,119 (396) Increase in trade and other receivables ...... (7,394) (9,304) (29,105) Increase in trade and other payables ...... 1,190 1,640 10,796 Increase in rental deposits ...... (805) (40) (650) Increase in contract liabilities ...... 630 363 391 Increase (decrease) in deferred income ...... 100 (3,400) — Cash generated from operations ...... 23,285 34,544 16,610 Income taxes paid ...... (2,167) (6,653) (4,500) NET CASH FROM OPERATING ACTIVITIES ...... 21,118 27,891 12,110

I-8 APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Year ended December 31, NOTES 2016 2017 2018 RMB’000 RMB’000 RMB’000

INVESTING ACTIVITIES Interest received ...... 76 348 964 Proceeds from disposal of property, plant and equipment ...... 588 — 65 Purchases of property, plant and equipment ...... (7,341) (18,923) (46,903) Purchases of investments in financial assets at amortized cost ...... — (44,300) — Proceeds from disposal of investments in financial assets at amortized cost ...... — 40,800 3,500 Government grants and subsidies received related to assets ...... 608 240 477 Proceeds from disposal of interest in a joint venture ...... — — 960 Proceeds from disposal of interest in an associate ...... —— 7,000 Repayment from a related party ...... — 18,573 2,002 Acquisition of investment in joint ventures ...... (4,980) — (4,100) Acquisition of investment in associates ...... (8,540) (5,500) (2,100) Purchase of financial assets at FVTPL ...... 42(b) — (1,000) (94,899) Proceed from disposal of financial assets at FVTPL ...... —— 63,085 NET CASH USED IN INVESTING ACTIVITIES ...... (19,589) (9,762) (69,949) FINANCING ACTIVITIES Repayment of bank borrowings ...... (423) (447) (471) Repayment to related parties ...... — — (14,922) Interest paid ...... (189) (168) (557) Issue costs paid ...... —— (4,513) Finance lease charges paid ...... (14) (8) — Repayment of obligations under a finance lease ...... (115) (226) — Proceeds from the issue of the Company’s convertible redeemable preferred shares ...... —— 199,942 NET CASH FROM (USED IN) FINANCING ACTIVITIES ...... 42(a) (741) (849) 179,479 NET INCREASE IN CASH AND CASH EQUIVALENTS ...... 788 17,280 121,640 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . 12,013 13,425 29,766 Effect of foreign exchange rate changes ...... 624 (939) 4,148 CASH AND CASH EQUIVALENTS AT END OF YEAR ...... 13,425 29,766 155,554

I-9 APPENDIX I ACCOUNTANTS’ REPORT

NOTES TO HISTORICAL FINANCIAL INFORMATION 1. GENERAL INFORMATION, BASIS OF PREPARATION OF THE HISTORICAL FINANCIAL INFORMATION 1.1 General Information The Company was incorporated in the Cayman Islands as an exempted company with limited liability on August 27, 2008. The address of the registered office and the principal place of business of the Company are set out in the section headed “Corporate Information” to the Prospectus. At the date of this report, the ultimate controlling party of the Company is Mr. Mao Chen Cheney.

The Company is an investment holding company. The Group is principally engaged in providing the structure-based drug discovery services to biotechnology and pharmaceutical customers worldwide for their pre-clinical stage innovative drug development.

1.2 Basis of preparation of the Historical Financial Information The formation of the Group is as follows:

On June 17, 2008, Viva Biotech Limited (“Viva Biotech HK”) was incorporated in Hong Kong with an issued share capital of US Dollar (“US$”) 2,000,000. On August 14, 2008, Viva Biotech HK established Viva Biotech (Shanghai) Ltd. (“Viva Biotech Shanghai”) in the PRC with a paid-in capital of US$25,000,000. On November 20, 2008, the Company acquired Viva Biotech HK and Viva Biotech Shanghai by the allotment of 9,999,999 shares of the Company to the original shareholders of Viva Biotech HK. Since then, the Company became the holding company of the Group.

On September 26, 2008, the Company incorporated Viva Biotech (USA) Inc. (“Viva Biotech USA”) in the United States of America (the “USA”) with an issued share capital of US$1,000, which was dissolved voluntarily in August 2015.

On March 19, 2014, Viva Biotech Shanghai established Jiaxing Viva Biotech Limited (“Jiaxing Viva”) in the PRC with a paid-in capital of RMB30,000,000.

On December 7, 2015, Viva Biotech Shanghai established Shanghai Benyuan Entrepreneurship Incubator Management Limited (“Viva Incubator Shanghai”) in the PRC with a paid-in capital of RMB10,000,000.

On March 20, 2017, Viva Incubator Shanghai incorporated Viva Incubator Investment Management Limited (“Viva Incubator HK”) in Hong Kong with an issued share capital of US$5,000,000. On August 2, 2017, Viva Incubator Shanghai transferred the entire equity interest of Viva Incubator HK to Viva Biotech Shanghai at nil consideration. Pursuant to a share transfer agreement dated August 30, 2018, Viva Biotech Shanghai shall transfer the entire equity interest of Viva Incubator HK to Viva Biotech HK at a consideration of US$2,700,000. Such transfer was completed on October 22, 2018.

On October 30, 2018, Viva Biotech HK established Sichuan Viva Benyuan Biotech Limited (“Sichuan Viva”) in the PRC with a paid-in capital of US$30,000,000.

The Historical Financial Information has been prepared based on the accounting policies set out in Note 3 which conform with IFRSs issued by the IASB. In addition, the Historical Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and complied with the Hong Kong Companies Ordinance.

I-10 APPENDIX I ACCOUNTANTS’ REPORT

1. GENERAL INFORMATION, BASIS OF PREPARATION OF THE HISTORICAL FINANCIAL INFORMATION (Continued) 1.2 Basis of preparation of the Historical Financial Information (Continued) The functional currency of the Company is RMB, which is the same as the presentation currency of the Historical Financial Information.

No audited statutory financial statements of the Company were prepared since its date of incorporation as it is incorporated in a jurisdiction where there is no statutory audit requirements.

2. APPLICATION OF NEW AND REVISED IFRSs For the purpose of preparing the Historical Financial Information for the Track Record Period, the Group has consistently applied International Accounting Standards (“IASs”), IFRSs, amendments and the related Interpretations (“IFRICs”) (herein collectively referred to as the “IFRSs”) (including IFRS 15 “Revenue from Contracts with Customers”), which are effective for the accounting periods beginning on January 1, 2018 throughout the Track Record Period except that the Group adopted IFRS 9 “Financial Instruments” on January 1, 2018. The accounting policies for financial instruments which conform with IFRS 9 that are applicable from January 1, 2018 onwards and IAS 39 “Financial Instruments” which are applicable for each of the two years ended December 31, 2017, are set out in Note 3 below.

The Group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9. i.e. applied the classification and measurement requirements (including impairment) retrospectively to instruments that have not been derecognized at January 1, 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognized at January 1, 2018. The difference between carrying amounts at December 31, 2017 and the carrying amounts at January 1, 2018 are recognized in the opening retained earnings, without restating comparative information. Accordingly, certain comparative information may not be comparable as comparative information was prepared under IAS 39.

The table below illustrates the classification and measurement of financial assets and financial liabilities under IFRS 9 and IAS 39 at the date of initial application on January 1, 2018. New Additional loss Original measurement Original allowance New carrying measurement category category under carrying amount recognized under amount under under IAS 39 IFRS 9 under IAS 39 IFRS 9 IFRS 9 RMB’000 RMB’000 RMB’000 Debt/equity investment Financial assets Financial assets 71,059 — 71,059 at FVTPL at FVTPL Trade and other Loans and Financial assets 32,491 (555) 31,936 receivables receivables at amortized cost Loans to a related party Loans and Financial assets 2,002 — 2,002 (Note 39(b)) receivables at amortized cost Restricted bank Loans and Financial assets 8,022 — 8,022 balances (Note 24) receivables at amortized cost Cash and cash Loans and Financial assets 29,766 — 29,766 equivalents (Note 24) receivables at amortized cost Trade and other Financial liabilities Financial liabilities (8,400) — (8,400) payables at amortized cost at amortized cost Loans from related Financial liabilities Financial liabilities (12,112) — (12,112) parties (Note 39(b)) at amortized cost at amortized cost Bank borrowings Financial liabilities Financial liabilities (2,833) — (2,833) (Note 27) at amortized cost at amortized cost

I-11 APPENDIX I ACCOUNTANTS’ REPORT

2. APPLICATION OF NEW AND REVISED IFRSs (Continued) The additional impairment loss allowance upon the initial application of IFRS 9 as disclosed above resulted entirely from a change in the measurement attribute of the loss allowance relating to each financial asset.

There were no financial assets or financial liabilities which the Group had previously designated as at FVTPL or measured at amortized cost under IAS 39 that were subject to reclassification, or which the Group has elected to reclassify upon the application of IFRS 9.

The table below shows the amount of adjustment for each financial statement line item of the Group affected by the application of IFRS 9.

Impact on assets and equity as at January 1, 2018:

As previously IFRS 9 As reported adjustment restated RMB’000 RMB’000 RMB’000 Trade and other receivables ...... 32,491 (555) 31,936 Deferred tax assets ...... 1,461 83 1,544 Total effect on net assets ...... (472) Reserves ...... 152,642 (472) 152,170 Total effect on equity ...... (472)

New and amendments to IFRSs in issue but not yet effective The Group has not early applied the following new and amendments to IFRSs that have been issued but are not yet effective:

IFRS 16 Leases1 IFRS 17 Insurance Contracts3 IFRIC 23 Uncertainty over Income Tax Treatments1 Amendments to IFRS 3 Definition of a Business4 Amendments to IFRS 9 Prepayment Features with Negative Compensation1 Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture2 Amendments to IAS 1 and IAS 8 Definition of Material5 Amendments to IAS 19 Plan Amendment, Curtailment or Settlement1 Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures1 Amendments to IFRSs Annual Improvements to IFRSs 2015-2017 Cycle1

1 Effective for annual periods beginning on or after January 1, 2019 2 Effective for annual periods beginning on or after a date to be determined 3 Effective for annual periods beginning on or after January 1, 2021 4 Effective for business combinations and asset acquisitions for which the acquisition date is on or after the beginning of the first annual period beginning on or after January 1, 2020 5 Effective for annual periods beginning on or after January 1, 2020

Except as disclosed below, the directors of the Company anticipate that application of other new and amendments to IFRSs will have no material impact to the Group’s financial performance and consolidated financial positions and/or on the disclosures in future consolidated financial statements.

I-12 APPENDIX I ACCOUNTANTS’ REPORT

2. APPLICATION OF NEW AND REVISED IFRSs (Continued) New and amendments to IFRSs in issue but not yet effective (Continued) IFRS 16 Leases IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede IAS 17 “Leases” and the related interpretations when it becomes effective.

IFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer. In addition, IFRS 16 requires sales and leaseback transactions to be determined based on the requirements of IFRS 15 as to whether the transfer of the relevant asset should be accounted as a sale. IFRS 16 also includes requirements relating to sublease and lease modifications.

Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognized for all leases by lessees, except for short-term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. For the classification of cash flows, the Group currently presents operating lease payments as operating cash flows. Under the application of IFRS 16, lease payments in relation to lease liability will be allocated into a principal and an interest portion which will be presented as financing cash flows by the Group, upfront prepaid lease payments will continue to be presented as investing or operating cash flows in accordance to the nature, as appropriate.

Furthermore, extensive disclosures are required by IFRS 16.

At December 31, 2018, the Group has non-cancellable operating lease commitments of RMB19,412,000 as disclosed in Note 36. A preliminary assessment indicates that these arrangements will meet the definition of a lease. Upon application of IFRS 16, the Group will recognize a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases.

In addition, the Group currently considers refundable rental deposits paid of RMB2,482,000 at December 31, 2018 as rights under leases to which IAS 17 applies. Based on the definition of lease payments under IFRS 16, such deposits are not payments resulting to the right to use the underlying assets, accordingly, the carrying amounts of such deposits may be adjusted to amortized cost and such adjustments are considered as additional lease payments. Adjustments to refundable rental deposits paid would be included in the carrying amount of right-of-use assets.

Furthermore, the application of new requirements under IFRS 16 would result in changes in measurement, presentation and disclosure as indicated above. The management of the Group assessed that such changes would increase the consolidated assets and consolidated liabilities of the Group, but would not result in a significant impact on the financial performance of the Group upon adoption of IFRS 16.

I-13 APPENDIX I ACCOUNTANTS’ REPORT

2. APPLICATION OF NEW AND REVISED IFRSs (Continued) New and amendments to IFRSs in issue but not yet effective (Continued) IFRS 16 Leases (Continued) The Group elected the practical expedient to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 “Determining whether an Arrangement contains a Lease”, which already existed prior to the date of initial application. The Group applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment). The Group also used hindsight in determining the lease term if the contract contains options to extend or terminate the lease. Furthermore, the Group also elected the practical expedient not to apply for leases for which the lease term ends within 12 months at the date of initial application. Therefore, the Group didn’t reassess whether the contracts are, or contain a lease which already existed prior to the date of initial application. Furthermore, the Group elected the modified retrospective approach for the application of IFRS 16 as lessee and recognized the cumulative effect of initial application to opening accumulated losses without restating comparative information.

3. SIGNIFICANT ACCOUNTING POLICIES The Historical Financial Information has been prepared on the historical cost basis except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the Historical Financial Information is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 “Share-based Payment”, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 “Inventories” or value in use in IAS 36 “Impairment of Assets”.

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Š Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Š Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Š Level 3 inputs are unobservable inputs for the asset or liability.

I-14 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) The principal accounting policies are set out below.

Basis of consolidation The Historical Financial Information incorporates the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: Š has power over the investee; Š is exposed, or has rights, to variable returns from its involvement with the investee; and Š has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Investment in a subsidiary Investment in a subsidiary is stated in the statement of financial position of the Company at cost less any identified impairment loss.

Investments in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The results and assets and liabilities of associates and joint ventures are incorporated in the Historical Financial Information using the equity method of accounting. Appropriate adjustments have been made to conform the associates’ or joint ventures’ accounting policies to those of the Group. Under the equity method, an investment in an associate or a joint venture is initially recognized in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

I-15 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments in associates and joint ventures (Continued) An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognized immediately in profit or loss in the period in which the investment is acquired.

When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 28 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or a joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39 or IFRS 9, where applicable. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.

When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognized in the Historical Financial Information only to the extent of interests in the associate or joint venture that are not related to the Group.

Revenue recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Specifically, the Group uses a 5-step approach to revenue recognition: Š Step 1: Identify the contract(s) with a customer Š Step 2: Identify the performance obligations in the contract

I-16 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue recognition (Continued) Š Step 3: Determine the transaction price Š Step 4: Allocate the transaction price to the performance obligations in the contract Š Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Group recognizes revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to customers.

Control of the asset may be transferred over time or at a point in time. Control of the asset is transferred over time if: Š the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs; Š the Group’s performance creates and enhances an asset that the customer controls as the Group performs; or Š the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

If control of the asset transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset.

A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Group’s obligation to transfer services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

The Group primarily earns revenue by providing discovery services to its customers under three charge methods: 1) Full-time-equivalent, or FTE method; 2) Fee-for-service, or FFS method; or 3) Service-for-equity, or SFE method.

Under the FTE method, the Group provides its customer with a project team of employees dedicated to the customer’s studies for a specific period of time and charges the customer at a fixed rate per employee. The customer therefore simultaneously receives and consumes benefits provided by the Group’s performances. In addition, FTE contracts require customer’s confirmation on the FTE billable amounts, which are calculated based on number of the Group’s employees assigned to the project and the time that the Group’s employees had worked under the project, and also specify that the Group has an enforceable right to payment for the FTE billable amounts. Therefore, under the FTE method, the Group has a right to consideration from its customer in an amount that corresponds directly with the value to the customers of the Group’s performance completed to date (i.e. FTE billable amounts). Under such arrangement, IFRS 15 provides a practical expedient whereby the Group

I-17 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue recognition (Continued) may recognize revenue based on the amount it has a right to invoice to the customer. The Group elected to use the practical expedient and therefore recognized the FTE services revenue when it has right to invoice the customer, usually in the form of a monthly statement, and the customers confirmed the acceptance of the invoice or after the end of a confirmation period.

For the research services provided under FFS method, the contracts usually have multiple deliverable units, which are generally in the form of technical laboratory reports and/or samples, each with individual selling price specified within the contract. The total contract price is the aggregation of the individual selling prices of the deliverable units. The Group identifies each deliverable unit as a separate performance obligation, and recognizes FFS revenue of contractual elements at the point in time upon finalization, delivery and acceptance of the deliverable units or after the end of a confirmation period.

For the research services provided under SFE method, the Group provides its customer with a project team of employees dedicated to the customer’s studies for a specific period of time at a pre- agreed fixed rate per employee in a way that is similar to the FTE method, with the difference that the Group is entitled to receive the equity interests of the customer instead of a cash consideration for the service provided. The Group and the customer would agree on a total FTE service value that the Group would provide to the customer using the pre-agreed FTE rate, and upon reaching pre-set milestones of FTE service value, the customers would transfer certain number of their equity interests to the Group. The Group measures the progress of performance on the basis of FTE service value transferred to the customers to date relative to the remaining total FTE service value. The progress of performance corresponds directly to the number of customer’s equity interest that the Group is entitled to receive. The Group then recognizes revenue by measuring the fair value of these customer’s equity interest and at the same time recognizes a corresponding contract assets. Upon Group’s cumulative FTE service value to the customers reach a pre-set milestone, the Group would receive the entitled equity interests, the corresponding contract assets are then subsequently transferred to financial assets at FVTPL, with any subsequent gains or losses arising on remeasurement being recognized in profit or loss.

Some of the service contracts contain variable consideration in the form of bonus payment (usually in the form of a milestone bonus when the service provided to the customer has reached into a certain stage or delivered a certain result). The Group estimates the amount of consideration to which it will be entitled using either (a) the expected value method or (b) the most likely amount, depending on which method better predicts the amount of consideration, to which the Group will be entitled.

The estimated amount of variable consideration is included in the transaction price only to the extent that it is highly probable that such an inclusion will not result in a significant revenue reversal in the future when the uncertainty associated with the variable consideration is subsequently resolved.

At the end of each reporting period, the Group updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

I-18 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue recognition (Continued) The Group incurs costs to fulfill a contract under FFS method. The Group first assesses whether these contract costs qualify for recognition as an asset in terms of other relevant IFRSs, failing which it recognizes an asset for these costs only if they meet all of the following criteria: (a) the costs relate directly to a contract or to an anticipated contract that the Group can specifically identify; (b) the costs generate or enhance resources of the Group that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (c) the costs are expected to be recovered.

The asset so recognized is subsequently amortized to profit or loss on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. The asset is also subject to impairment review.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the gross carrying amount and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee Assets held under finance leases are recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statements of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss.

Operating lease payments are recognized as an expense on a straight-line basis over the term of the relevant lease.

Leasehold land and building When the Group makes payments for a property interest which include both leasehold land and building elements, the Group assesses the classification of each element separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group. When the payments cannot be allocated reliably between the leasehold land and building elements, the entire property is generally classified as if the leasehold land is under finance lease.

I-19 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchange prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognized in profit or loss in the period in which they arise.

Borrowing costs All borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government grants Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specially, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are designated as grants related to assets and recognized as deferred income in the consolidated statements of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets; while the government grants whose primary condition is to compensate for research projects or other than purchase, construct or otherwise acquire long-term assets are designated as grants related to income. Some of the grants related to income have future related costs expected to be incurred, and require the Group to comply with conditions attached to the grants and the government to acknowledge the compliance of these conditions. These grants related to income are recognized as deferred income in the consolidated statements of financial position and transferred to profit or loss when related costs are subsequently incurred and the Group received government acknowledge of compliance.

Other government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

Retirement benefit costs The Group participates in state-managed retirement benefit schemes, which are defined contribution schemes, pursuant to which the Group pays a fixed percentage of its qualifying staff’s wages as contributions to the plans. Payments to such retirement benefit schemes are charged as an expense when employees have rendered service entitling them to the contributions.

I-20 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Short-term employee benefits Short-term employee benefits are recognized at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognized as an expense unless another IFRS requires or permits the inclusion of the benefit in the cost of an asset.

A liability is recognized for benefits accruing to employees (such as wages and salaries, annual leave and sick leave) after deducting any amount already paid.

Equity-settled share-based payment transactions Share options granted to employees Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date.

The fair value of the equity-settled shared-based payments are determined at the grant date without taking into consideration all non-market vesting conditions is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity (share option reserve). At the end of each reporting period, the Group revises its estimates of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimates, with a corresponding adjustment to the share option reserve.

When the share options are exercised, the amount previously recognized in share option reserve will continue to be held in share option reserve. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognized in share option reserve will continue to be held in share option reserve.

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from “profit before tax” as reported in the consolidated statements of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the Historical Financial Information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

I-21 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Taxation (Continued) Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognized in profit or loss.

Property, plant and equipment Property, plant and equipment other than construction in progress, are stated in the consolidated statements of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Properties in the course of construction for production, supply or administrative purposes are carried at cost less any recognized impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Group’s accounting policy. Such properties are classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is recognized so as to write off the cost of assets other than construction in progress less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on

I-22 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, plant and equipment (Continued) the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Research and development expenditure Expenditure on research activities is recognized as an expense in the period in which it is incurred.

Impairment on tangible assets and contract costs At the end of the reporting period, the Group reviews the carrying amounts of its tangible assets and contract costs to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss, if any.

The recoverable amount of tangible assets are estimated individually, when it is not possible to estimate the recoverable amount of an asset individually, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Before the Group recognizes an impairment loss for assets capitalized as contract costs under IFRS 15, the Group assesses and recognizes any impairment loss on other assets related to the relevant contracts in accordance with applicable standards. Then, impairment loss, if any, for assets capitalized as contract costs is recognized to the extent the carrying amounts exceeds the remaining amount of consideration that the Group expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services that have not been recognized as expenses. The assets capitalized as contract costs are then included in the carrying amount of the cash-generating unit to which they belong for the purpose of evaluating impairment of that cash-generating unit.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit. An impairment loss is recognized immediately in profit or loss.

I-23 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment on tangible assets and contract costs (Continued) Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash- generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Inventories Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined on a first-in, first-out method. Net realizable value represents the contracted selling price less all estimated costs of completion and costs necessary to make the sale.

Financial instruments (before the adoption of IFRS 9 on January 1, 2018) Financial assets and financial liabilities are recognized in the consolidated statements of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

Financial assets The Group’s financial assets are classified into the following specified categories: financial assets at FVTPL and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and derecognized on a trade day basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid and points or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognized on an effective interest basis.

Financial assets at FVTPL Financial assets are classified as at FVTPL when the financial asset is designated as at FVTPL.

I-24 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (before the adoption of IFRS 9 on January 1, 2018) (Continued) Financial assets (Continued) Financial assets at FVTPL (Continued) A financial asset may be designated as at FVTPL upon initial recognition if: Š such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or Š the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or Š it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss is included in the “Fair value gain on financial assets at fair value through profit or loss” line item. Fair value is determined in the manner described in Note 34.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, loans to a related party, restricted bank balances and cash and cash equivalents) are carried at amortized cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For loans and receivables, objective evidence of impairment could include: Š significant financial difficulty of the issuer or counterparty; or Š breach of contract, such as default or delinquency in interest or principal payments; or Š it becoming probable that the borrower will enter bankruptcy or financial re-organization.

Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

I-25 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (before the adoption of IFRS 9 on January 1, 2018) (Continued) Financial assets (Continued) Impairment of financial assets (Continued) The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When a trade or other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

Financial liabilities and equity instruments Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group are recognized at the proceeds received, net of direct issue costs.

Effective interest method The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognized on an effective interest basis.

Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is designated as at FVTPL.

A financial liability may be designated as at FVTPL upon initial recognition if: Š such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

I-26 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (before the adoption of IFRS 9 on January 1, 2018) (Continued) Financial liabilities and equity instruments (Continued) Financial liabilities at FVTPL (Continued) Š the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or Š it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss includes any interest paid on the financial liabilities and is included in the “Fair value loss on financial liabilities at FVTPL” line item.

Financial liabilities at amortized cost Financial liabilities at amortized cost including bank borrowings, trade and other payables and loans from related parties are subsequently measured at amortized cost, using the effective interest method.

Derecognition The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

The Group derecognizes a financial liability when, and only when, the Group’s obligations are discharged, canceled or expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Financial instruments (under IFRS 9) Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with IFRS 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial

I-27 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (under IFRS 9) (Continued) recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

The effective interest method is a method of calculating the amortized cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets Classification and subsequent measurement of financial assets Financial assets that meet the following conditions are subsequently measured at amortized cost: Š the financial asset is held within a business model whose objective is to collect contractual cash flows; and Š the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (“FVTOCI”): Š the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling; and Š the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets are subsequently measured at FVTPL.

Amortized cost and interest income Interest income is recognized using the effective interest method for financial assets measured subsequently at amortized cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired, interest income is recognized by applying the effective interest rate to the amortized cost of the financial asset from the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognized by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit impaired.

I-28 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (under IFRS 9) (Continued) Financial assets (Continued) Financial assets at FVTPL Financial assets that do not meet the criteria for being measured at amortized cost or FVTOCI are measured at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss. The net gain or loss recognized in profit or loss includes any dividend or interest earned on the financial asset and is included in the “Fair value gain on financial assets at fair value through profit or loss” line item.

Impairment of financial assets The Group recognizes a loss allowance for ECL on financial assets which are subject to impairment under IFRS 9 (including trade receivables, loans to a related party, amounts due from subsidiaries, restricted bank balances, cash and cash equivalents) and contract assets. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

The Group always recognizes lifetime ECL for trade receivables. The ECL on these financial assets are assessed collectively using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognizes lifetime ECL. The assessment of whether lifetime ECL should be recognized is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

I-29 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (under IFRS 9) (Continued) Financial assets (Continued) Significant increase in credit risk (Continued) In particular, the following information is taken into account when assessing whether credit risk has increased significantly: Š an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating; Š significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor; Š existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor‘s ability to meet its debt obligations; Š an actual or expected significant deterioration in the operating results of the debtor; Š an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfill its contractual cash flow obligations. The Group considers a debt instrument to have low credit risk when it has an internal or external credit rating of ‘investment grade’ as per globally understood definition.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

Definition of default For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group).

Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

I-30 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (under IFRS 9) (Continued) Financial assets (Continued) Credit-impaired financial assets A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events: a) significant financial difficulty of the issuer or the borrower; b) a breach of contract, such as a default or past due event; c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; or d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganization.

Write-off policy The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over five years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognized in profit or loss.

Measurement and recognition of ECL The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights.

Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.

Where ECL is measured on a collective basis to cater for cases where evidence at the individual instrument level may not yet be available, the financial instruments are grouped on the following basis: Š Nature of financial instruments (i.e. the Group’s trade and other receivables are assessed as a separate group. Loans to related parties are assessed for ECL on an individual basis); Š Past-due status; Š Nature, size and industry of debtors; and Š External credit ratings where available.

I-31 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (under IFRS 9) (Continued) Financial assets (Continued) Measurement and recognition of ECL (Continued) The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortized cost of the financial asset.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount through a loss allowance account.

Derecognition of financial assets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Financial liabilities All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL.

Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is designated as at FVTPL.

I-32 APPENDIX I ACCOUNTANTS’ REPORT

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (under IFRS 9) (Continued) Financial liabilities and equity instruments (Continued) Financial liabilities at FVTPL (Continued) A financial liability may be designated as at FVTPL upon initial recognition if: Š such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or Š the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or Š it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be designated as at FVTPL.

Because the Group’s convertible redeemable preferred shares contained multiple embedded derivatives, the convertible redeemable preferred shares are designated as at FVTPL. Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss includes any interest paid on the financial liabilities and is included in the “Fair value loss on financial liabilities at FVTPL” line item.

However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The remaining amount of change in the fair value of liability is recognized in profit or loss. Changes in fair value attributable to a financial liability’s credit risk that are recognized in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred to retained earnings upon derecognition of the financial liability. Fair value is determined in the manner described in Note 30.

Financial liabilities at amortized cost Other financial liabilities including bank borrowings, loans from related parties, amounts due to subsidiaries and trade and other payables are subsequently measured at amortized cost, using the effective interest method.

Derecognition of financial liabilities The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, canceled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

I-33 APPENDIX I ACCOUNTANTS’ REPORT

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in Note 3, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumption are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if revision affects both current and future periods.

Critical Judgments in applying accounting policies The following is the critical judgments, apart from those involving estimations (see below), that the directors of the Company have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognized in the Historical Financial Information.

Judgments in determining the timing of satisfaction of performance obligations Note 3 describes the revenue recognition basis to each of the Group’s revenue stream. The recognition of each of the Group’s revenue stream requires judgement by the directors of the Company in determining the timing of satisfaction of performance obligations.

In making their judgement, the directors of the Company have considered the detailed criteria for recognition of revenue set out in IFRS 15 and in particular, whether the Group has satisfied all the performance obligations over time or at a point in time with reference to the detailed terms of transaction as stipulated in the contracts entered into with its customers.

For the services under FTE method, the directors of the Company have assessed that the customers simultaneously receive and consume benefit provided by the Group’s performances and the Group has an enforceable right to payment for performances completed to date. Therefore, the directors of the Company have satisfied that the performance obligation on FTE services is satisfied over time and recognized FTE revenue over the service period.

For the services under FFS method, the directors of the Company have assessed that the Group has a present right to payment from the customers for the services performed at a point in time upon finalization, delivery and acceptance of the deliverable units. Therefore, the directors of the Company have satisfied that the performance obligation of FFS is satisfied at a point in time and recognized FFS revenue at a point in time.

For the services under SFE method, the directors of the Company have assessed that the customers simultaneously receive and consume benefits provided by the Group’s performances. Therefore, the directors of the Company have satisfied that the performance obligation on SFE services is satisfied over time and recognized SFE revenue over the service period.

I-34 APPENDIX I ACCOUNTANTS’ REPORT

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Critical Judgments in applying accounting policies (Continued) Judgements in determining the significant influence or joint control in investments Where the Group holds less than 20% of ownership interests in investees but the Group has the power to exercise significant influence, such investments are treated as investments in associates. Details of the basis of such management judgement are set out in Note 15.

Where the Group holds less than 50% of ownership interests in investees but the Group has the power to exercise joint control, such investments are treated as investments in joint ventures. Details of the basis of such management judgement are set out in Note 16.

Where the Group holds more than 20% of ownership interests in an investee but the Group does not have the power to exercise significant influence, joint control or control, such investment is treated as financial assets at FVTPL. Details of the basis of such management judgement are set out in Note 17.

Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.

Useful lives and estimated impairment on property, plant and equipment The Group determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. The Group will increase the depreciation charge where useful lives are less than previously estimated lives, or will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

The Group regularly reviews whether there are any indications of impairment and recognizes an impairment loss if the carrying amount of an asset is lower than its recoverable amount. The Group tests for impairment for property, plant and equipment whenever there is an indication that the asset may be impaired. The recoverable amounts have been determined based on the higher of the fair value less costs of disposal and value in use. These calculations require the use of estimates, such as discount rates, future profitability and growth rates.

At December 31, 2016, 2017 and 2018, the carrying amount of property, plant and equipment (without impairment loss recognized) was RMB21,343,000, RMB34,400,000 and RMB66,899,000, respectively.

Estimated loss allowance of debt instruments measured at amortized cost Management estimates the amount of loss allowance for ECL on debt instruments that are measured at amortized cost based on the credit risk of the respective financial instrument. The loss allowance amount is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows after taking into consideration of expected future credit loss of the respective financial instrument. The assessment of the credit risk of the respective financial instrument involves high degree of estimation and uncertainty. When the actual future cash flows are different

I-35 APPENDIX I ACCOUNTANTS’ REPORT

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Key sources of estimation uncertainty (Continued) Estimated loss allowance of debt instruments measured at amortized cost (Continued) from expected, a material impairment loss or a material reversal of impairment loss may arise, accordingly.

Impairment loss on contract costs The Group assesses periodically if contract costs may be impaired based on an assessment of the recoverability of the contract costs. The amount of the impairment loss is measured as the difference between the carrying amount of the contract costs and the remaining amount of consideration that the Group expects to receive in exchange for the goods or services to which the asset relates (less the costs that relate directly to providing those goods or services and that have not been recognized as expenses). Where the remaining amount of consideration are less than expected, or being revised downward due to changes in facts and circumstances, a material impairment loss on contract costs may arise.

At December 31, 2016, 2017 and 2018, the carrying amount of contract costs was approximately RMB6,265,000, RMB3,459,000 and RMB4,261,000, respectively (without impairment of contract costs).

Fair value of financial instruments at FVTPL The fair value of financial assets at FVTPL that are not traded in an active market is determined using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. Further details are included in Note 34.

The financial liabilities at FVTPL represented the convertible redeemable preferred shares issued by the Company, which are not traded in an active market and of which the respective fair value is determined by using valuation techniques. The Group applied the discounted cash flow method to determine the underlying equity value of the Company and adopted the probability-weighted expected return method and the option-pricing method to determine the fair value of the convertible redeemable preferred shares. Key assumptions such as the timing of the liquidation, redemption or IPO event as well as the probability of the various scenarios were based on the Group’s best estimates. Further details are included in Note 30.

Should any of the estimates and assumptions changed, it may lead to a material change in the respective fair value of these financial assets and liabilities.

I-36 APPENDIX I ACCOUNTANTS’ REPORT

5. REVENUE AND SEGMENT INFORMATION Disaggregation of revenue The following amounts represent revenue arising from providing research services under the three charge methods to third parties and investees of the Group. The investees of the Group includes associates, joint ventures and companies that the Group has equity investments in (carry in the Historical Financial Information as financial assets at FVTPL).

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from services to non-investees: —FTE ...... 55,168 65,334 117,358 —FFS ...... 26,289 56,119 37,317 81,457 121,453 154,675 Revenue from services to investees: —FTE ...... 9,809 6,979 33,593 —FFS ...... 3,221 3,192 1,365 —SFE ...... 2,005 16,621 20,400 15,035 26,792 55,358 96,492 148,245 210,033

Timing of revenue recognition The following amounts represent revenue arising from providing research services over time and at a point in time:

Over time

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from FTE ...... 64,977 72,313 150,951 Revenue from SFE ...... 2,005 16,621 20,400 66,982 88,934 171,351

At a point in time

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from FFS ...... 29,510 59,311 38,682

Included in the revenue of year ended December 31, 2017 was a milestone bonus payment amounted to RMB14,247,000 of which performance obligations had already been satisfied.

I-37 APPENDIX I ACCOUNTANTS’ REPORT

5. REVENUE AND SEGMENT INFORMATION (Continued) Unsatisfied performance obligations The following table shows the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for the revenue from SFE at the end of the reporting period:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue from SFE ...... — 27,975 22,034

Management expects that the majority of the transaction price allocated to the unsatisfied performance obligations at each reporting date during the Track Record Period will be recognized as revenue within two years from the relevant reporting date.

Under FTE charge method, revenue is recognized at the amount to which the Group has the right to invoice for services performed, therefore, under practical expedients allowed by IFRS 15, the Group does not disclose the value of unsatisfied performance obligations under FTE charge method. Similarly, under FFS charge method, contracts are generally within an original expected length of one year or less, therefore, the practical expedients is also applied.

For the purpose of resources allocation and performance assessment, the chief operating decision maker (i.e. the chief executive officer of the Group) reviews the overall results and financial position of the Group as a whole prepared based on the same accounting policies as set out in Note 3. Accordingly, the Group has only one reportable segment and no further analysis of this single segment is present.

Geographical Information Substantially all of the Group’s operations and non-current assets are located in the PRC. An analysis of the Group’s revenue from external customers, analyzed by their respective country/region of operation, is detailed below:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Revenue —USA ...... 74,680 128,393 160,723 —PRC ...... 20,006 19,207 48,223 —Europe ...... 1,306 431 676 —Rest of the world ...... 500 214 411 96,492 148,245 210,033

I-38 APPENDIX I ACCOUNTANTS’ REPORT

5. REVENUE AND SEGMENT INFORMATION (Continued) Information about major customers Revenue from customers contributing over 10% of the total revenue of the Group during the Track Record Period is follows:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Customer A ...... 11,185 34,147 N/A*

* The corresponding revenue did not contribute over 10% of the total revenue of the Group for the year concerned.

6. OTHER INCOME Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Interest income ...... —banks ...... 76 496 861 —related party (Note 39(a)(iii)) ...... 1,068 178 — 1,144 674 861 Government grants and subsidies related to —Income (i)(a) ...... 5,278 4,796 — —Income (i)(b) ...... 58 23 2,895 —Assets (ii) ...... 608 919 915 7,088 6,412 4,671

Notes: (i) a. The government grants related to income have been received to compensate for the expense of Group’s research projects. Some of the grants related to income have future related costs expected to be incurred and require the Group to comply with conditions attached to the grants and the government to acknowledge the compliance of these conditions. These grants related to incomes were recognized in profit or loss when related costs are subsequently incurred and the Group received government acknowledge of compliance. Details of these grants related to income are set out in Note 29. b. Other government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable. (ii) The Group has received certain government grants related to assets to invest in laboratory equipment and plant. The grants related to assets were recognized in profit or loss over the useful lives of the relevant assets. Details of these grants related to assets are set out in Note 29.

I-39 APPENDIX I ACCOUNTANTS’ REPORT

7. OTHER GAINS AND LOSSES

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Net foreign exchange gain (loss) ...... 1,277 (1,228) 14,632 Impairment losses (recognized) reversed on financial assets measured at amortized cost ...... 36 (118) (113) Gain (loss) on disposal of property, plant and equipment ...... 162 (52) 5 Gain on deemed disposal of interests in an associate ...... — 20,351 — Gain on deemed disposal of interests in a joint venture ...... — — 11,355 Gain on disposal of interests in an associate ...... — — 4,047 Gain on disposal of interests in a joint venture ...... — — 960 Others ...... 333 — 48 1,808 18,953 30,934

8. FINANCE COST

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Interest expenses on —bank borrowings ...... 189 168 143 —loans from related parties (Note 39(a)(iii)) ...... — 677 414 Interest on a finance lease ...... 14 8 — 203 853 557

9. PROFIT BEFORE TAX Profit before tax has been arrived at after charging:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Depreciation for property, plant and equipment ...... 4,108 5,814 9,954 Less: capitalized in contract costs ...... 326 313 406 3,782 5,501 9,548 Staff cost (including directors’ emoluments): —Salaries and other benefits ...... 29,072 39,349 73,652 —Retirement benefits scheme contributions ...... 5,110 5,879 10,677 —Share-based payment expenses ...... 16 — 8,602 34,198 45,228 92,931 Less: capitalized in contract costs ...... 3,185 1,853 1,889 31,013 43,375 91,042

Auditors’ remuneration ...... 167 1,157 2,638 Minimum operating lease payment in respect of rented premises ...... 5,639 8,117 8,662 Cost of inventories recognized as expense ...... 14,871 17,073 24,791

I-40 APPENDIX I ACCOUNTANTS’ REPORT

10. INCOME TAX EXPENSE

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Current tax: —PRC Enterprise Income Tax (“EIT”) ...... 4,387 10,714 11,659 —Under (over) provision in prior years ...... 92 (102) — 4,479 10,612 11,659 Deferred tax: —Current year ...... (532) (61) 3,652 3,947 10,551 15,311

Hong Kong Profits Tax for the Hong Kong subsidiaries is calculated at 16.5% of the estimated assessable profit for the period before April 1, 2018. On March 21, 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) which introduces the two-tiered profits tax rates regime. The Bill was signed into law on March 28, 2018 and was gazette on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of qualifying corporations will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The two-tiered profits tax rates regime is applicable to the Group for its annual reporting periods ending on or after April 1, 2018.

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the EIT rate of the PRC subsidiaries is 25% unless subject to tax exemption set out below.

Viva Biotech Shanghai was accredited as a “High and New Technology Enterprise” in November 2013 which was subsequently renewed in November 2016, and therefore Viva Biotech Shanghai entitle to a preferential EIT rate of 15% for the Track Record Period. The qualification as a High and New Technology Enterprise is subject to review by the relevant tax authority in the PRC for every three years.

Pursuant to Caishui [2015] circular No. 119, Jiaxing Viva enjoys super deduction of 150% on qualifying research and development expenditures throughout the Track Record Period. Viva Biotech Shanghai also enjoys super deduction of 150% on qualifying research and development expenditures for the year ended December 31, 2016. Beginning from January 1, 2017, Viva Biotech Shanghai enjoys additional super deduction of 175% on qualifying research and development expenditures pursuant to Caishui [2017] circular No. 34.

I-41 APPENDIX I ACCOUNTANTS’ REPORT

10. INCOME TAX EXPENSE (Continued)

The income tax expense over the Track Record Period can be reconciled to profit before tax per the consolidated statements of profit or loss and other comprehensive income as follows:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Profit before tax ...... 28,420 86,811 105,861 Tax at the applicable tax rate of 25% ...... 7,105 21,703 26,465 Tax effect of expenses not deductible for tax purpose ...... 64 50 17,747 Tax effect of income not taxable for tax purpose ...... — (3,291) (17,084) Effect of intergroup transaction ...... — — 1,537 Effect of research and development expenses that are additionally deducted ...... (495) (670) (1,866) Under (over) provision in prior years ...... 92 (102) — Income tax at concessionary rate ...... (2,880) (7,028) (7,436) Effect of different tax rates of subsidiaries operating in other jurisdiction ...... 61 (111) (4,052) Income tax expense ...... 3,947 10,551 15,311

11. DIRECTORS’, CHIEF EXECUTIVE’S AND FIVE HIGHEST INDIVIDUALS’ EMOLUMENTS

Details of the emoluments paid or payable to the directors and the Chief Executive Officer of the Company during the Track Record Period are as follows:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Chief Executive Officer and executive director: Mr. Mao Chen Cheney (Note i) —director’s fee ...... ——— —salaries and other benefits ...... 240 405 752 —performance-based bonus (Note ii) ...... ——— —retirement benefits scheme contributions ...... ——— —share-based compensation ...... 5 — 316 245 405 1,068 Executive directors: Mr. Wu Ying (Note iii) —director’s fee ...... ——— —salaries and other benefits ...... 203 316 412 —performance-based bonus (Note ii) ...... 15 30 26 —retirement benefits scheme contributions ...... 25 29 46 —share-based compensation ...... 3 — 627 246 375 1,111

I-42 APPENDIX I ACCOUNTANTS’ REPORT

11. DIRECTORS’, CHIEF EXECUTIVE’S AND FIVE HIGHEST INDIVIDUALS’ EMOLUMENTS (Continued)

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Mr. Ren Delin (Note iv) —director’s fee ...... ——— —salaries and other benefits ...... — — 1,209 —performance-based bonus (Note ii) ...... ——— —retirement benefits scheme contributions ...... ——— —share-based compensation ...... — — 757 — — 1,966 Mr. Hua Fengmao (Note v) —director’s fee ...... ——— —salaries and other benefits ...... ——— —performance-based bonus (Note ii) ...... ——— —retirement benefits scheme contributions ...... ——— —share-based compensation ...... — — 1,498 — — 1,498 Non-executive directors: Mr. John Wu Jiong (Note vi) —director’s fee ...... ——— —salaries and other benefits ...... ——— —performance-based bonus (Note ii) ...... ——— —retirement benefits scheme contributions ...... ——— —share-based compensation ...... ——— ——— Ms. Mao Jun (Note vii) —director’s fee ...... ——— —salaries and other benefits ...... ——— —performance-based bonus (Note ii) ...... ——— —retirement benefits scheme contributions ...... ——— —share-based compensation ...... ——— ———

The executive director’s emoluments shown above were for his/her service in connection with the management of the affairs of the Company and the Group. Notes: (i) Mr. Mao Chen Cheney was appointed as a director of the Company on July 3, 2018. Mr. Mao Chen Cheney is also the Chief Executive Officer of the Company since 2009 and his emoluments disclosed above included those for services rendered by him as the Chief Executive Officer. (ii) The performance-based bonus is discretionary based on the Group’s financial results. (iii) Mr. Wu Ying was appointed as a director of the Company on September 7, 2009. (iv) Mr. Ren Delin was appointed as a director of the Company on July 3, 2018. (v) Mr. Hua Fengmao was appointed as a director and the Chief Financial Officer of the Company on July 3, 2018. Mr. Hua Fengmao held 14.29%, 14.29% and 11.43% common share in the Company through China Finance Strategies Investment DB Limited at December 31, 2016, 2017 and 2018, respectively. (vi) Mr. John Wu Jiong was appointed as a director of the Company on August 27, 2008, resigned on May 19, 2016 and reappointed as a director of the Company on July 3, 2018. Mr. John Wu Jiong held 14.29%, 14.29% and 22.86% common share in the Company through Fenghe Harvest Ltd. and Wu and Sons Limited at December 31, 2016, 2017 and 2018, respectively.

I-43 APPENDIX I ACCOUNTANTS’ REPORT

11. DIRECTORS’, CHIEF EXECUTIVE’S AND FIVE HIGHEST INDIVIDUALS’ EMOLUMENTS (Continued)

(vii) Ms. Mao Jun was appointed as a director of the Company on July 3, 2018. Ms. Mao Jun held 22.86%, 22.86% and 19.63% common share in the Company through Mao and Sons Limited and Zhang and Sons Limited at December 31, 2016, 2017 and 2018, respectively.

During the Track Record Period, no emoluments were paid by the Group to the directors of the Company as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors of the Company has waived any emoluments during the Track Record Period.

Chief executive officer and executive directors of the Company were granted share options in respect of their services to the Group under the Pre-IPO Share Incentive Schemes of the Company. Details of the Pre-IPO Share Incentive Schemes are set out in Note 32.

Five highest paid individuals The five individuals with the highest emoluments in the Group included nil, nil and two directors of the Company for the years ended December 31, 2016, 2017 and 2018 respectively. Details of whose emoluments are set out in the disclosures above. The emoluments of the remaining highest paid individuals during the Track Record Period were as follows:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Employees —salaries and other benefits ...... 1,840 2,229 3,030 —performance-based bonus ...... 22 103 — —retirement benefits scheme contributions ...... 86 92 — —share-based compensation ...... 4 — 1,009 1,952 2,424 4,039

The emoluments of the five highest paid employees (including the directors) were within the following bands:

Year ended December 31, 2016 2017 2018 No. of No. of No. of employees employees employees

Nil to Hong Kong Dollars (“HK$”) 1,000,000 ...... 5 5 — HK$1,000,001 to HK$1,500,000 ...... — — 2 HK$1,500,001 to HK$2,000,000 ...... — — 2 HK$2,000,001 to HK$2,500,000 ...... — — 1 555

I-44 APPENDIX I ACCOUNTANTS’ REPORT

12. EARNINGS PER SHARE The calculation of the basic and diluted earnings per share is based on the following data:

Year ended December 31, 2016 2017 2018

Earnings (RMB’000): Earnings for the purpose of calculating basic and diluted earnings per share ...... 24,473 76,260 90,550 Number of shares (’000): Weighted average number of ordinary shares for the purpose of calculating basic earnings per share ...... 1,083,749 1,083,749 1,083,749 Effect of dilutive potential ordinary shares: Pre-IPO Share Incentive Schemes of the Company ...... 66,461 79,663 106,825 Weighted average number of ordinary shares for the purpose of calculating diluted earnings per share ...... 1,150,210 1,163,412 1,190,574

The computation of basic earnings per share for the years ended December 31, 2016, 2017 and 2018 is based on weighted average number of shares assumed to be in issue after taking into account the retrospective adjustment of the Share Split and Capitalization Issue as disclosed in Note 43 and the 71,917,810 Subscription Shares subscribed in 2018.

The computation of diluted earnings per share for the years ended December 31, 2016, 2017 and 2018 is based on weighted average number of shares assumed to be in issue after taking into account of the Pre-IPO Share Incentive Schemes of the Company and the retrospective adjustment of the Share Split and the Capitalization Issue as disclosed in Note 43 and the 71,917,810 Subscription Shares subscribed in 2018. The diluted earnings per share for the year ended December 31, 2018 did not assume conversion of the Series B Preferred Shares as their inclusion would be anti-dilutive, nor the exercise of certain options granted under the Pre-IPO Share Incentive Schemes as the exercise price of those options was higher than the average fair value for shares of the Company during 2018.

13. DIVIDENDS No dividend was paid or declared by the Company during the Track Record Period.

I-45 APPENDIX I ACCOUNTANTS’ REPORT

14. PROPERTY, PLANT AND EQUIPMENT Leasehold Furniture, Construction land and fixtures and Transportation Leasehold in progress building equipment equipment improvements (“CIP”) Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 COST At January 1, 2016 ...... 6,804 23,981 1,528 401 2,186 34,900 Additions ...... — 4,236 200 — 2,905 7,341 Transfer ...... — 1,987 — 1,875 (3,862) — Disposals ...... — (1,961) (120) — — (2,081) At December 31, 2016 . . . 6,804 28,243 1,608 2,276 1,229 40,160 Additions ...... — 6,955 — 55 11,913 18,923 Transfer ...... — 6,340 — 6,238 (12,578) — Disposals ...... — (563) — — — (563) At December 31, 2017 . . . 6,804 40,975 1,608 8,569 564 58,520 Additions ...... 11,114 23,369 — 1,508 6,522 42,513 Transfer ...... — 1,311 — 3,429 (4,740) — Disposals ...... — (1,222) — — — (1,222) At December 31, 2018 . . . 17,918 64,433 1,608 13,506 2,346 99,811 DEPRECIATION AND IMPAIRMENT At January 1, 2016 ...... (215) (14,955) (793) (401) — (16,364) Provided for the year .... (323) (3,321) (154) (310) — (4,108) Eliminated on disposals ...... — 1,545 110 — — 1,655 At December 31, 2016 . . . (538) (16,731) (837) (711) — (18,817) Provided for the year .... (323) (4,112) (140) (1,239) — (5,814) Eliminated on disposals ...... — 511 — — — 511 At December 31, 2017 . . . (861) (20,332) (977) (1,950) — (24,120) Provided for the year .... (455) (6,854) (140) (2,505) — (9,954) Eliminated on disposals ...... — 1,162 — — — 1,162 At December 31, 2018 . . . (1,316) (26,024) (1,117) (4,455) — (32,912) CARRYING VALUES At December 31, 2016 . . . 6,266 11,512 771 1,565 1,229 21,343 At December 31, 2017 . . . 5,943 20,643 631 6,619 564 34,400 At December 31, 2018 . . . 16,602 38,409 491 9,051 2,346 66,899

The above items of property, plant and equipment except for CIP are depreciated on a straight- line basis after taking into account of the residual value as follows:

Leasehold land and building 4.75% per annum Furniture, fixtures and equipment 8% - 32% per annum Transportation equipment 19% per annum Leasehold improvements the shorter of the lease term or 6 years

At December 31, 2016, 2017 and 2018, the net book value of transportation equipment of RMB771,000, RMB631,000 and RMB491,000 included an amount of RMB284,000, Nil and Nil in respect of an asset held under finance lease (see Note 28).

I-46 APPENDIX I ACCOUNTANTS’ REPORT

14. PROPERTY, PLANT AND EQUIPMENT (Continued) At December 31, 2016, 2017 and 2018, the building with a carrying amount of approximately RMB6,266,000, RMB5,943,000 and RMB5,620,000, respectively, was pledged to secure borrowings of the Group (see Note 27).

15. INTERESTS IN ASSOCIATES/SHARE OF RESULTS OF ASSOCIATES At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Cost of investment in associates, unlisted ...... 8,540 6,040 4,640 Share of post-acquisition losses ...... (1,351) (764) (1,965) 7,189 5,276 2,675

No associate was individually material to the Group for the years ended December 31, 2016, 2017 and 2018. At December 31, 2016, 2017 and 2018, the Group had interests in the following associates established and operate in the PRC:

Fully Proportion of ownership interest held paid capital/ by the Group Principal Name of associates registered capital At December 31, activities Notes RMB’000 2016 2017 2018 Shanghai Epican 10,000 12.35% — — Pharmaceutical (i) Genetechnology Co., Ltd. research and (“Shanghai Epican”) (上 development 海易畢恩基因科技有限公 司) ...... Jiaxing Tekeluo Biotech 1,548 12.50% 12.50% 9.31% Pharmaceutical (ii) Co., Ltd. (“Jiaxing research and Tekeluo”) (嘉興特科羅生 development 物科技有限公司) ...... Shanghai Yinlaiteng 5,000 20% 20% 20% Pharmaceutical (iii) Medical Research Ltd. research and (“Yinlaiteng”) (上海英 development 萊騰醫藥研究有限公司).. QureBio Limited 25,000 — 28% 14% Pharmaceutical (iv) (“QureBio”) (啓愈生物技 research and 術(上海)有限公司) ...... development

Notes: (i) The Group was able to exercise significant influence over Shanghai Epican since the inception of this investment up to December 15, 2017 because it has the power to appoint one out of five directors under the Articles of Association of that company. Pursuant to an agreement entered into between Viva Biotech Shanghai and a PRC individual nominated by Shanghai Epican on December 4, 2017, the Group’s interests in the common shares of Shanghai Epican was transferred to that individual. Subsequently, an agreement entered into between the Company and Epican Technology Limited, which is the corporate shareholder of Shanghai Epican, on December 15, 2017, the Group obtained the interests in the preferred shares of Epican Technology Limited, Since December 15, 2017, the Group has no board seat in the board of directors and therefore is no longer able to exercise significant influence on Shanghai Epican and Epican Technology Limited. The Group recognized a fair value gain on deemed disposal of an associate upon the exchange of shares (Note 7), and the investment in Epican Technology Limited is subsequently classified as investment in unlisted equity instrument and accounted for as part of financial assets at FVTPL as disclosed in Note 17. (ii) The Group was able to exercise significant influence over Jiaxing Tekeluo since the inception of this investment in 2016 because it had the power to appoint one out of three directors under the Articles of Association of that company. In October 2018, the ownership interest held by the Group in Jiaxing Tekeluo was diluted by the investments from new investors. The Group is still able to exercise significant influence since the Group has the power to appoint one out of five directors.

I-47 APPENDIX I ACCOUNTANTS’ REPORT

15. INTERESTS IN ASSOCIATES/SHARE OF RESULTS OF ASSOCIATES (Continued) (iii) The interests in Yinlaiteng was acquired from Mr. Wu Ying on December 21, 2015 at no consideration given that the fair value of such interests was nil. Under the Articles of Association of Yinlaiteng, each share confers one vote, and the resolution of relevant activities and variable return shall be passed by more than 50% of the votes of shareholders. As such, the Group is able to exercise significant influence over Yinlaiteng since December 21, 2015. (iv) Pursuant to the Articles of Association of QureBio, the Group was entitled to subscribe for 28% interest in QureBio. The capital contribution was made in installments in 2016 and 2017. Pursuant to an equity transfer agreement and a supplemental transfer agreement dated August 13, 2018 and September 21, 2018, respectively, Viva Biotech Shanghai has disposed 14% equity interest in QureBio to an independent third party at a consideration of RMB7,000,000. The Group is able to exercise significant influence over QureBio since the inception of this investment in 2017 because it has the power to appoint one out of three directors under the Articles of Association of that company.

The movements in the carrying value of the interests in associates for the Track Record Period are as follows:

Shanghai Epican Jiaxing Tekeluo Yinlaiteng QureBio Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At January 1, 2016 ...... — ———— Capital injection ...... 8,000 540 — — 8,540 Share of loss for the year ...... (1,286) (65) — — (1,351) At December 31, 2016 ...... 6,714 475 — — 7,189 Capital injection ...... — — — 5,500 5,500 Share of loss for the year ...... (1,719) (425) — (274) (2,418) Deemed disposal of an associate ...... (4,995) — — — (4,995) At December 31, 2017 ...... — 50 — 5,226 5,276 Capital injection ...... — — 600 1,500 2,100 Disposal of an associate ...... — —— (2,953) (2,953) Share of loss for the year ...... — (50) (600) (1,098) (1,748) At December 31, 2018 ...... — —— 2,675 2,675

Information of unrecognized share of loss of associates:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

The unrecognized share of loss of associates for the year ...... — — (1,408) Cumulative unrecognized share of loss of associates ...... — — (1,408)

16. INTERESTS IN JOINT VENTURES/SHARE OF RESULTS OF JOINT VENTURES At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Cost of investment in joint ventures, unlisted ...... 4,980 4,980 3,500 Share of post-acquisition losses ...... (2,052) (3,746) (898) 2,928 1,234 2,602

No joint venture was individually material to the Group for the years ended December 31, 2016 and 2017 and 2018.

I-48 APPENDIX I ACCOUNTANTS’ REPORT

16. INTERESTS IN JOINT VENTURES/SHARE OF RESULTS OF JOINT VENTURES (Continued) At December 31, 2016, 2017 and 2018, the Group had interests in the following joint ventures established and operate in the PRC:

Proportion of ownership Fully interest held by the paid capital/ Group Principal Name of joint ventures registered capital At December 31, activities Notes RMB’000 2016 2017 2018 Sichuan Haoyisheng Viva Biotech 10,000 49% 49% — Pharmaceutical (i) Co., Ltd. (“Sichuan Haoyisheng”) research and (四川好醫生維亞生物科技有限公司) development Weimou Biotech (Shanghai) Ltd. 10,000 15.67% 15.67% — Pharmaceutical (ii) (“Weimou Biotech”) (維眸生物科 research and 技(上海)有限公司) ...... development Jiaxing Youbo Biotech Co., Ltd. 7,000 — — 30.00% Pharmaceutical (iii) (“Jiaxing Youbo”) (嘉興優博生物技 research and 術有限公司) ...... development

Notes: (i) According to the Articles of Association of Sichuan Haoyisheng, the resolution of relevant activities and variable return shall be passed by more than two-thirds of the votes of directors. The Group was entitled to appoint two out of five directors, and the other shareholder was entitled to appoint three out of five directors therein. As such, the two shareholders contractually agreed to share the control of Sichuan Haoyisheng. Therefore Sichuan Haoyisheng was a joint venture of the Group. Pursuant to an equity transfer agreement dated October 22, 2018, Viva Incubator Shanghai has disposed its entire equity interest in Sichuan Haoyisheng to an independent third party at a consideration of RMB960,000. The disposal was completed on November 2, 2018. (ii) According to the Articles of Association of Weimou Biotech, the resolution of relevant activities and variable return of Weimou Biotech shall be passed by more than four-fifths of the votes of directors. The Group had the power to appoint two out of five directors therein. As such, the shareholders of Weimou Biotech contractually agreed to share the control of Weimou Biotech. Therefore Weimou Biotech was a joint ventures of the Group. On January 8, 2018, after mutual agreement between the Group and JV partners, the Group relinquished its right to appoint director in the board of directors after an amendment to the Articles of Association of Weimou Biotech, afterwards the Group was no longer able to exercise joint control over Weimou Biotech. The Group recognized a fair value gain on the deemed disposal of a joint venture (Note 7), and the investment in Weimou Biotech was subsequently classified as investment in unlisted equity instrument and accounted for as part of financial assets at FVTPL as disclosed in Note 17. (iii) According to the Articles of Association of Jiaxing Youbo, the resolution of relevant activities and variable return of Jiaxing Youbo shall be passed by more than two-thirds of the votes of directors. The Group has the power to appoint one out of three directors therein. As such, the shareholders of Jiaxing Youbo contractually agree to share the control of Jiaxing Youbo. Therefore Jiaxing Youbo is a joint venture of the Group.

The movements in the carrying value of the interest in joint ventures for the Track Record Period are as follows:

Sichuan Haoyisheng Weimou Biotech Jiaxing Youbo Total RMB’000 RMB’000 RMB’000 RMB’000 At January 1, 2016 ...... — — — — Capital injection ...... 980 4,000 — 4,980 Share of loss for the year ...... (897) (1,155) — (2,052) At December 31, 2016 ...... 83 2,845 — 2,928 Share of loss for the year ...... (83) (1,611) — (1,694) At December 31, 2017 ...... — 1,234 — 1,234 Capital injection ...... 600 — 3,500 4,100 Share of loss for the year ...... (600) — (898) (1,498) Deemed disposal of a joint venture ...... — (1,234) — (1,234) At December 31, 2018 ...... — — 2,602 2,602

I-49 APPENDIX I ACCOUNTANTS’ REPORT

16. INTERESTS IN JOINT VENTURES/SHARE OF RESULTS OF JOINT VENTURES (Continued) Information of unrecognized share of loss of a joint venture:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

The unrecognized share of loss of a joint venture for the year ...... — (549) — Cumulative unrecognized share of loss of a joint venture ...... — (549) —

17. FINANCIAL ASSETS AT FVTPL The Group At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Unlisted investments designated as at FVTPL ...... 2,005 71,059 — Unlisted investments at FVTPL ...... — — 204,740 2,005 71,059 204,740

The Company At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Unlisted investments designated as at FVTPL ...... — 25,346 — Unlisted investments at FVTPL ...... — — 53,861 — 25,346 53,861

During the years ended December 31, 2016 and 2017, the Group and the Company managed and evaluated the performance of the unlisted investment on a fair value basis in accordance with the Group’s investment strategy, therefore, the unlisted debt/equity investments are designated as at FVTPL. Beginning on January 1, 2018, with the adoption of IFRS 9, the unlisted investments are mandatorily measured at FVTPL because the contractual terms of these financial assets do not give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

I-50 APPENDIX I ACCOUNTANTS’ REPORT Total Inc. Clues Therapeutics Inc. VersaPeutics, Inc. AmacaThera, QurAlis Corporation Ltd. Biotech Weiqing (Shanghai) — — — — — — 12,928 — — — — — — 16,060 —— — — — — — — — — — — 2,005 2,005 — — — — — — 25,346 — — — — — — 71,059 — — — — — — 14,720 — — — — — — 20,725 — — — — — — 12,589 — — — — — — (63,085) 5,329 11,074 3,440 5,202 20,901 2,389 95,166 Inc. Anji Pharmaceuticals 12,589 Biotech Weimou Limited Industrial Liangzhun (Shanghai) 25,346 — — Epican Limited Technology Inc. Bonti, Inc. 1,711 10,349 — 4,000 — 41,564 3,267 — 2,000 — (Note ii) (Note iii) (Note iv) (Note v) (Note vi) (Note vii) (Note vii) (Note viii) Arthrosi Therapeutics, Inc. Tabomedex Biosciences, Inc. (2,189) 382 4,422 28,177 15,961 (70) 709 20,891 — (8) (54) (311) (36) 68,286 (3,170) — — (43,896) (16,019) — — Dogma Therapeutics, 6,780 2,588 3,560 — — — — — 2,0052,005 — — — — — — — — — — — — — — 5,427 1,620 (102) 4,053 2,103 — 1,619 — 6,879 11,851 1,995 — — — — — LLC Flash 14,212 4,208 3,458 5,764 12,45221,503 25,346 10,700 5,619 5,835 — 51,750 — 25,288 7,549 13,298 26,220 11,074 3,432 5,148 20,590 2,353 204,740 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Therapeutics, ...... — — — — — — — — — — — — — — — ...... — — — — — — — ...... — — — — — The movements in the carrying value of the financial assets at FVTPL for the Track Record Period are as follows: ...... 412 ...... — — — ...... — — — ...... — disposal of an associate (Note 15 (i)) (Note i) (Note i) change (Note i) disposal of a joint venture (Note 16 (ii)) change Recognized from deemed Recognized from SFE revenue Acquired Recognized from SFE revenue 17. FINANCIAL ASSETS AT FVTPL (Continued) At January 1, 2016 At December 31, 2016 At December 31, 2017 At December 31, 2018 Gain (loss) on fair value Recognized from SFE revenue Acquired Recognized from deemed Gain (loss) on fair value Disposal

I-51 APPENDIX I ACCOUNTANTS’ REPORT — Inc. Clues Drug Discovery Therapeutics Hits-Organized Comprehensive repair injury Spinal Inc. VersaPeutics, —— Inc. Cell AmacaThera, Anesthetic and Transplantation 017 and January 2018, respectively, by JMCR and ALS FTD QurAlis Corporation flu for Ltd. drug New Biotech treating Weiqing (Shanghai) Inc. Anji disease Metabolic Pharmaceuticals and skin Biotech chronic eczema Weimou Dry eye children disease in syndrome and SPR Limited of Nano- Industrial Research, Liangzhun (Shanghai) application technology development Epican Limited of tumor epigenetic diagnostic Technology technology Development for and products aesthetic Bonti, Inc. therapeutic Neurotoxin applications Inc. of gout (Note ii) (Note iii) (Note iv) (Note v) (Note vi) (Note vii) (Note vii) (Note viii) Arthrosi Treatment Therapeutics, Inc. class) (first-in- Diabetes Tabomedex Biosciences, for Inc. class) Small Dogma (first-in- lowering molecule compound cholesterol Therapeutics, for 4.00% — — — — — — — — — — LLC Flash acute class) 12.00%16.00% 2.88% 6.40% 7.01% 9.60% N/A 14.54% 2.76% — 10.50% 6.25% 3.39% 4.19% — 11.75% 22.36% — 30.00% N/A — — N/A 9.05% — 30.00% — — kinase (first-in- treating inhibitor RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 leukemia lymphoid Therapeutics, ...... Partners Limited on behalf ofPursuant the to Group. JMCR an Partners agreement LimitedRMB43,896,000). dated is The on a transaction September fund was management 29, completed company 2018, on incorporated November the in 22, Group the 2018. British hasTechnology Virgin disposed Islands Limited its and entire for ultimately equity wholly acompleted owned interest in cash by in June Ms. consideration Bonti, 2018. Mao Inc. of Jun to (Note US$2,500,000 39(b)). an (equivalent independent to thirdthe RMB16,019,000). party votes at CFS of a directors. Healthcare The consideration Investment Group of Fund does US$6,000,000 not Limited (equivalent have to is boardcontrolling seat controlled shareholder. in by In the addition, board Mr. ofmore pursuant Hua directors than to Fengmao. and 50% the is of The Articles not equity transactionon of able interests. Weiqing to Association was The Biotech exercise of Group (Shanghai) significant and Weiqing Ltd. influence the Biotech or other (Shanghai) joint shareholder control Ltd., owns on the 30% Anji resolution and Pharmaceuticals of 70% Inc. equity relevant interests, activities respectively. andinfluence As or variable such, joint return the control shall Group on be is Clues not passed Therapeutics able by Inc. to the exercise votes significant of influence or joint control by receipt of equity interests, therefore, such balances were transferredon into behalf financial of assets the at FVTPL. Group.preferred Shanghai shares Daidai on January (Hong 24, Kong) 2018 Limited (Note is 39(b)). a limited liability company incorporated in Hong Kong and wholly owned by Ms. Mao Jun. Such convertible note was converted into Group: (iv) On March 26, 2018, the Company and CFS(v) Healthcare Investment Fund Limited Pursuant entered to into the a Articles share(vi) of transfer Association agreement, of pursuant Anji Weiqing to Pharmaceuticals Biotech Inc., which the (Shanghai) the resolution Group Ltd. of agreed was relevant to activities established sell and on 4.25% variable return equity August of interest 16, Anji in Pharmaceuticals 2018(vii) Epican Inc. with shall be a The passed investments(viii) sole at by December executive more Clues 31, than director Therapeutics 2018 three-quarters represented Inc. who of the was investments is on established responsible the in convertible for June note making of 2018. QurAlis the Pursuant Corporation and financial to AmacaThera, the and Inc. Articles operating of policy Association decision of on Clues behalf Therapeutics Inc., of the the Group does not have board seat and is not able to exercise significant At 31 December 2016 (ii) The investment acquired in 2017 on the convertible(iii) note of Arthrosi Therapeutics, The Inc. investments of on US$251,000 Bonti, (equivalent to Inc. RMB1,711,000) of was US$1,500,000 paid (equivalent in to July RMB10,349,000) 2017 by and Shanghai US$500,000 Daidai (equivalent (Hong to Kong) RMB3,267,000) Limited were paid in April 2 17. FINANCIAL ASSETS AT FVTPL (Continued) Proportion of ownership interest held by the At 31 December 2017 At 31 December 2018 Place of incorporation/establishmentPrincipal activities USA USA USA Dual USANotes: (i) USA During the three years ended December 31, Cayman 2016, 2017 and 2018, the corresponding contract assets of PRC RMB2,005,000, RMB12,928,000, and RMB20,725,000 in relation to SFE revenue PRC were settled Cayman PRC USA Canada USA Cayman

I-52 APPENDIX I ACCOUNTANTS’ REPORT

17. FINANCIAL ASSETS AT FVTPL (Continued) The Company Epican Anji Technology Pharmaceuticals Limited Inc. Clues Total RMB’000 RMB’000 RMB’000 RMB’000 At January 1, 2016 and 2017 ...... — — — — Recognized from deemed disposal of an associate .... 25,346 — — 25,346 At December 31, 2017 ...... 25,346 — — 25,346 Acquired ...... — 5,329 2,389 7,718 Gain (loss) on fair value change ...... 15,961 20,891 (36) 36,816 Disposal ...... (16,019) — — (16,019) At December 31, 2018 ...... 25,288 26,220 2,353 53,861

18. DEFERRED TAX ASSETS/LIABILITIES The Group For the purpose of presentation in the consolidated statements of financial position, certain deferred tax assets and liabilities have been offset. The following is a summary of the deferred tax balances for financial reporting purposes:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Deferred tax assets ...... 1,400 1,461 1,013 Deferred tax liabilities ...... — — (3,121) 1,400 1,461 (2,108)

The following are the major deferred tax assets (liabilities) recognized and movements thereon during the Track Record Period:

Impairment Fair losses on Share of value financial loss of change of assets at associates Accelerated financial amortized Deferred Tax Accrued and joint tax assets at cost income losses payroll ventures depreciation FVTPL Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At January 1, 2016 ...... 71 1,014 13 596 — (826) — 868 (Charged) credited to profit or loss ...... (5) 12 150 81 722 (428) — 532 At December 31, 2016 . . . 66 1,026 163 677 722 (1,254) — 1,400 Credited (charged) to profit or loss ...... 18 584 (162) 263 378 (615) (405) 61 At December 31, 2017 . . . 84 1,610 1 940 1,100 (1,869) (405) 1,461 Adoption of IFRS 9 ..... 83———— ——83 Adjusted balance at January 1, 2018 ...... 167 1,610 1 940 1,100 (1,869) (405) 1,544 (Charged) credited to profit or loss ...... (33) (70) 981 (180) (557) (2,684) (1,109) (3,652) At December 31, 2018 . . . 134 1,540 982 760 543 (4,553) (1,514) (2,108)

I-53 APPENDIX I ACCOUNTANTS’ REPORT

18. DEFERRED TAX ASSETS/LIABILITIES (Continued) The Group (Continued) At December 31, 2016, 2017 and 2018 the Group had unused tax losses of RMB913,000, RMB5,000 and RMB3,927,000, respectively, available to offset against future profits, which had been fully recognized in deferred tax assets as at the end of each reporting period.

Under the EIT Law of the PRC, withholding tax is imposed on dividends declared in respect of profits earned by the PRC subsidiaries from January 1, 2008 onwards. At December 31, 2016, 2017 and 2018, deferred taxation has not been provided for in the Historical Financial Information in respect of temporary differences attributable to retained earnings of the PRC subsidiaries amounting to RMB31,549,000, RMB87,694,000 and RMB144,463,000 respectively as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

The Company

Fair value change on financial assets at FVTPL RMB’000 At January 1, 2016, 2017 and 2018 ...... — Charged to profit or loss ...... (1,020) At December 31, 2018 ...... (1,020)

19. INVESTMENT IN SUBSIDIARIES The Company

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Unlisted shares, at cost (Note i) ...... 34,330 34,330 34,330 Deemed capital contribution to subsidiaries (Note ii) ...... 11,252 11,252 19,854 45,582 45,582 54,184

Notes: (i) The amount represents (i) initial costs of investment amounted to US$2,000,000 (equivalent to RMB13,658,000) in Viva Biotech HK, which was equal to the net asset value of Viva Biotech HK at the time of interspersing the Company on top of Viva Biotech HK, and (ii) additional US$3,000,000 (equivalent to RMB20,672,000) capital injection contributed in 2009. (ii) The amount represents the equity-settled share-based compensation in respect of the shares and share options granted by the Company to certain employees of the subsidiaries for employees’ service rendered to the subsidiaries under the Company’s Pre-IPO Share Incentive Schemes as disclosed in Note 32. Since the subsidiaries have no obligation to reimburse such expense, the amounts are treated as deemed capital contribution by the Company to the subsidiaries and included in the Company’s cost of investments in subsidiaries.

20. INVENTORIES At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Raw material and consumables ...... 1,013 3,323 4,900

I-54 APPENDIX I ACCOUNTANTS’ REPORT

21. CONTRACT COSTS At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Costs to fulfil contracts ...... 6,265 3,459 4,261

22. TRADE AND OTHER RECEIVABLES The Group

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Trade receivables —related parties ...... 6,767 12,316 1,921 —third parties ...... 13,413 16,882 50,433 Loss allowance for trade receivables ...... (443) (561) (893) 19,737 28,637 51,461 Other receivables —related parties ...... 1,098 78 — —third parties ...... 882 1,007 2,112 1,980 1,085 2,112

Deferred issue costs ...... — — 6,724 Prepayments ...... 517 375 525 Financial assets at amortized cost (Note) ...... — 3,500 — Prepaid expenses ...... 1,405 1,968 2,908 Interest receivable ...... — 126 — Value added tax recoverable ...... 425 1,184 4,680 2,347 7,153 14,837 Total trade and other receivables ...... 24,064 36,875 68,410

Note: At December 31, 2017, financial assets at amortized cost represented investments in guaranteed financial products issued by a bank, which carried interest at 3.75% per annum and with a maturity period within one year.

Details of the trade and other receivables due from related parties are set out in Note 39(b).

At January 1, 2016, trade receivables from contracts with customers amounted to RMB13,626,000.

The Group allows a credit period ranging from 30 to 90 days to its customers. The following is an age analysis of trade receivables (net of allowance for doubtful debts) presented based on the invoice dates, at the end of each reporting period:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Within 3 months ...... 15,167 19,787 46,580 3 months to 1 year ...... 791 3,093 4,810 1-2 years ...... 3,672 2,091 71 Over 2 years ...... 107 3,666 — 19,737 28,637 51,461

I-55 APPENDIX I ACCOUNTANTS’ REPORT

22. TRADE AND OTHER RECEIVABLES (Continued) The Group (Continued)

Before accepting any new customer, the Group assesses the potential customer’s credit quality and defines credit limits by customer. Credit limits attributed to customers and credit term granted to customers are reviewed regularly. The majority of the Group’s trade receivables have no history of defaulting on repayments.

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount of RMB7,672,000 and RMB14,862,000 at December 31, 2016 and 2017, respectively, which are past due at the reporting date for which the Group has not provided for impairment loss and RMB13,693,000 at December 31, 2018 which are past due but not impaired. The Group does not hold any collateral over these balances.

Overdue analysis of trade receivables which are past due but not impaired as at December 31, 2016 and 2017 is as follows:

At December 31, 2016 2017 RMB’000 RMB’000 Overdue by: Within 3 months ...... 3,748 6,278 3 months to 1 year ...... 145 2,827 1-2 years ...... 3,672 2,091 Over 2 years ...... 107 3,666 7,672 14,862

Movement of allowance for doubtful debts on trade receivables for the years ended December 31, 2016 and 2017:

At December 31, 2016 2017 RMB’000 RMB’000 Opening balance ...... (479) (443) Provided for the year ...... — (118) Reversed for the year ...... 36 — Closing balance ...... (443) (561)

Included in the allowance for doubtful debts are individually impaired trade receivables.

The Group determines the allowance for impaired debts based on the evaluation of collectability and aging analysis of the receivables and on management’s judgement including the assessment of change in credit quality and the past collection history of each customer.

I-56 APPENDIX I ACCOUNTANTS’ REPORT

22. TRADE AND OTHER RECEIVABLES (Continued) The Group (Continued)

Movement in lifetime ECL that has been recognized for trade receivables in accordance with the simplified approach set out in IFRS 9 for the year ended December 31, 2018:

Lifetime Lifetime ECL (non credit- ECL (credit- impaired) impaired) Total RMB’000 RMB’000 RMB’000 At December 31, 2017 under IAS 39 ...... — (561) (561) Adjustment upon application of IFRS 9 ...... (34) (521) (555) At January 1, 2018—after adjustment ...... (34) (1,082) (1,116) Changes due to financial instruments recognized at January 1: —Impairment losses recognized ...... (698) — (698) —Impairment losses reversed ...... — 585 585 —Write-offs ...... — 336 336 At December 31, 2018 ...... (732) (161) (893)

Trade and other receivables that are denominated in currencies other than functional currency of the respective group entities are set out below:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 US$...... 9,656 14,440 26,047

The Company

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Deferred issue costs ...... — — 6,724 Other receivables ...... ——20 — — 6,744

23. OVERVIEW OF THE GROUP’S EXPOSURE TO CREDIT RISK Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. At the end of each reporting period, the Group’s maximum exposure to credit risk which cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognized financial assets as stated in the consolidated statements of the financial position.

In order to minimize credit risk, the Group has tasked its finance team to develop and maintain the Group’s credit risk grading to categorize exposures according to their degree of risk of default. Management uses publicly available information and the Group’s own historical repayment records to rate its major customers and other debtors. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

I-57 APPENDIX I ACCOUNTANTS’ REPORT

23. OVERVIEW OF THE GROUP’S EXPOSURE TO CREDIT RISK (Continued) The Group’s internal credit risk grading assessment comprises the following categories:

Trade receivables/contract Internal credit rating Description assets Other financial assets Low risk ...... Thecounterparty has a low Lifetime ECL-no credit- 12-month ECL risk of default and does not impaired have any past due amounts Watch list ...... Debtor frequently repays Lifetime ECL-not credit- 12-month ECL after due dates but usually impaired settle after due date Doubtful ...... There has been a significant Lifetime ECL-not credit- Lifetime ECL-not increase in credit risk since impaired credit-impaired initial recognition through information developed internally or external resources Loss ...... There is evidence indicating Lifetime ECL- credit- Lifetime ECL-credit- the asset is credit-impaired impaired impaired Write-off ...... There is evidence indicating Amount is written off Amount is written off that the debtor is in severe financial difficulty and the Group has no realistic prospect of recovery

For trade receivables, the Group has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL. The Group determines the ECL on these items by using a provision matrix, estimated based on the financial quality of debtors and historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. The following table details the risk profile of trade receivables:

At December 31, 2018

Trade receivables—day past due Not past due Within 3 months Over 3 months Total (not credit impaired) Weighted average expected credit loss rate ...... 1.23% 2.41% 5.03%* 1.71% Total gross carrying amount (RMB’000) ...... 38,237 10,914 3,203 52,354 Lifetime ECL (RMB’000) ...... (469) (263) (161) (893) 37,768 10,651 3,042 51,461

* These financial assets were over 3-month past due but not credit impaired given that no historical credit loss experience on the past due status of these customers and no evidence indicating that these customers were in a significant financial difficulty.

For the purposes of impairment assessment, other receivables and other current assets are considered to have low credit risk as the counterparties to these financial assets have a high credit rating. Accordingly, for the purpose of impairment assessment for these financial assets, the loss allowance is measured at an amount equal to 12m ECL. In determining the ECL for other receivables and other current assets, the directors of the Company have taken into account the historical default experience and the future prospects of the industries and/or considering various external sources of actual and forecast economic information, as appropriate, in estimating the probability of default of

I-58 APPENDIX I ACCOUNTANTS’ REPORT

23. OVERVIEW OF THE GROUP’S EXPOSURE TO CREDIT RISK (Continued) each of the other receivables and other current assets occurring within their respective loss assessment time horizon, as well as the loss upon default in each case. The directors of the Company considered that the 12m ECL allowance is insignificant at January 1, 2018 and December 31, 2018.

Note 34 details the Group’s credit risk management policies.

24. RESTRICTED BANK BALANCES/CASH AND CASH EQUIVALENTS Restricted bank balances At December 31, 2017 and 2018, the restricted bank balances of RMB8,022,000 and RMB8,045,000, respectively, represented a government grant and subsidy received by the Group in 2017 as an award for the “Viva Incubator”, a research project, which is restricted for use till the Group complied with the conditions attached to the grants and the government acknowledged acceptance. A corresponding liability is recorded in deferred income. The restricted bank balances carried at a fixed interest rate of 0.30% per annum.

Cash and cash equivalents Cash and cash equivalents comprised bank balances and cash held by the Group and the Company. Bank balances carried interest at prevailing market interest rates which ranged from 0.30% to 0.35%, 0.3% to 3.5% and 0.3% to 3.5% per annum at December 31, 2016, 2017 and 2018, respectively.

Cash and cash equivalents and restricted bank deposits that are denominated in currencies other than the functional currency of the respective group entities are set out below:

The Group

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 US$...... 7,034 24,040 147,828 HK$ ...... ——67

The Company

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 US$...... — 197 81,266 HK$ ...... ——67

I-59 APPENDIX I ACCOUNTANTS’ REPORT

25. TRADE AND OTHER PAYABLES

The Group At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Trade payables —third parties ...... 1,575 3,767 4,685 Other payables —related parties ...... 3,000 547 — —third parties ...... 1,483 4,458 3,124 4,483 5,005 3,124 Accrued listing expenses and issue costs ...... — — 11,516 Salary and bonus payables ...... 4,679 6,580 5,902 Other taxes payable ...... 195 219 351 10,932 15,571 25,578

Details of the other payables due to related parties are set out in Note 39(b).

Payment terms with suppliers are mainly on credit within 30 days from the time when the goods and/or services are received from the suppliers. The following is an age analysis of trade payables presented based on the date of receipts of goods/services by the Group, at the end of each reporting period:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Within 3 months ...... 1,575 2,011 3,398 Over 3 months but within 1 year ...... — 1,607 697 Over 1 year ...... — 149 590 1,575 3,767 4,685

Trade and other payables that are denominated in currencies other than the functional currency of the respective group entities are set out below:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 US$...... — 1,245 337

The Company

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Accrued listing expenses and issue costs ...... — — 11,516

I-60 APPENDIX I ACCOUNTANTS’ REPORT

26. CONTRACT LIABILITIES

At January 1, At December 31, 2016 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 Amounts received in advance of delivery of research and development services ...... 99 729 1,092 1,483

Revenue of RMB99,000, RMB729,000 and RMB1,092,000 was recognized during the years ended December 31, 2016, 2017 and 2018 that was included in the contract liabilities at the beginning of the relevant years respectively.

27. BANK BORROWINGS

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Secured bank borrowings were repayable: Within one year ...... 447 471 497 Over one year but not exceeding two years ...... 471 497 525 Over two years but not exceeding five years ...... 1,576 1,663 1,340 Over five years ...... 786 202 — 3,280 2,833 2,362 Less: Amounts due within one year shown under current liabilities ..... 447 471 497 2,833 2,362 1,865

The bank borrowings bear variable interest rate at 110% of the relevant benchmark interest rate published by the People’s Bank of China, that is, at 5.39%, 5.39% and 5.39% per annum at December 31, 2016, 2017 and 2018, respectively.

Details of the assets of the Group at December 31, 2016, 2017 and 2018 that have been pledged as collateral to secure the bank borrowings of the Group are set out in Note 14.

28. OBLIGATIONS UNDER A FINANCE LEASE During 2015, the Group acquired a transportation equipment under a finance lease with lease term of two years. Interest imputed in the finance lease at the lease inception date is at the rate of 4.75% per annum. The Group has option to purchase the equipment for a nominal amount at the end of the lease terms.

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Analyzed for the reporting purpose as: Current portion ...... 226 — — Non-current portion ...... ——— 226——

I-61 APPENDIX I ACCOUNTANTS’ REPORT

28. OBLIGATIONS UNDER A FINANCE LEASE (Continued) Present Value of Minimum Lease Minimum lease payments Payments 12/31/2016 12/31/2017 12/31/2018 12/31/2016 12/31/2017 12/31/2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Obligations under a finance lease payable Within one year ...... 234 — — 226 — — Over one year but no more than two years ....—————— 234——226—— Less: future finance charges ...... 8 — — Present value of lease obligations ...... 226 — —

29. DEFERRED INCOME

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Income related government grants ...... 3,640 240 240 Assets related government grants ...... 2,726 10,047 9,609 6,366 10,287 9,849 Less: current portion ...... 200 — — Non-current portion ...... 6,166 10,287 9,849

Movement of income related government grants:

RMB’000 At January 1, 2016 ...... 3,540 Government grants received ...... 5,378 Credited to profit or loss ...... (5,278) At December 31, 2016 ...... 3,640 Government grants received ...... 1,396 Credited to profit or loss ...... (4,796) At December 31, 2017 and December 31, 2018 ...... 240

Movement of assets related government grants:

RMB’000 At January 1, 2016 ...... 2,726 Government grants received ...... 608 Credited to profit or loss ...... (608) At December 31, 2016 ...... 2,726 Government grants received ...... 8,240 Credited to profit or loss ...... (919) At December 31, 2017 ...... 10,047 Government grants received ...... 477 Credited to profit or loss ...... (915) At December 31, 2018 ...... 9,609

During the years ended December 31, 2016, 2017 and 2018, the Group received government grants of RMB5,986,000, RMB9,636,000 and RMB477,000, respectively for its investment in

I-62 APPENDIX I ACCOUNTANTS’ REPORT

29. DEFERRED INCOME (Continued) laboratory plant and equipment, and other scientific researches. The grants related to income were recognized in profit or loss upon the Group complied with the conditions attached to the grants and the government acknowledged acceptance. The grants related to assets were recognized in profit or loss over the remaining useful lives of the relevant assets upon the Group complied with the conditions attached to the grants and the government acknowledged acceptance.

30. FINANCIAL LIABILITIES AT FVTPL On June 21, 2018, the Company issued 16,233,532 Series B redeemable convertible preferred shares at a par value of US$0.0001 each (the “Series B Preferred Shares”) for a total consideration of US$30,900,000 (equivalent to approximately RMB199,942,000).

The key terms of the Series B Preferred Shares are as follows:

Conversion Rights Each holder of Series B Preferred Shares shall be entitled to exercise its right to convert its Series B Preferred Shares at any time after the issuance date into a certain number of fully paid and non-assessable ordinary shares at a ratio calculated by dividing the Series B issue price by the then applicable conversion price (the “Conversion Price”). The Conversion Price is initially equal to the Series B Preferred Shares issue price and is subject to adjustment from time to time for any split, subdivision, combination, reduction, reclassification or merger.

The Series B Preferred Shares will be automatically converted into ordinary shares at the then applicable conversion price upon the earlier of (i) the closing of a qualified initial public offering (“Qualified IPO”), or (ii) the date specified by written consent or agreement of majority holders of preferred shares.

Qualified IPO means an IPO in the stock exchange where the pre-IPO market value of the Group companies (based upon the price at which securities are offered in the IPO) is no less than US$1.1 billion or its equivalent in another currency as estimated by a qualified investment bank by applying either the means of the valuation range obtained after the valuation or the average of the means of various valuation ranges obtained from different valuation methodologies.

Redemption Rights In the event that (a) the Company fails to consummate a Qualified IPO on or prior to the second anniversary of the issuance of the Series B Preferred Shares; or (b) any warrantor materially breaches its or his representations, warranties, covenants or obligations (the “Redemption Events”), commencing from the business day immediately following the occurrence of any Redemption Event, at the written request of any holder of the Series B Preferred Shares, the Company shall redeem all or part of the outstanding issued Series B Preferred Shares.

The redemption price for each outstanding Series B Preferred Share redeemed shall be the amount equal to the Series B Preferred Shares issue price, plus an eleven percent (11%) compounded annual interest accrued thereon until the date when the redemption price is fully paid to the holder of such Series B Preferred Shares, and any declared but unpaid dividends thereon, and minus any paid dividends thereon (the “Redemption Price”).

I-63 APPENDIX I ACCOUNTANTS’ REPORT

30. FINANCIAL LIABILITIES AT FVTPL (Continued) Liquidation preference In the event of any liquidation event, such as (i) a liquidation, dissolution or winding up of the Group companies holding all or substantially all of the Company’s assets, (ii) a merger or consolidation of the Company in which the Company is a party and its shareholders do not retain a majority of the voting power, directly or indirectly, in the surviving or acquiring entity, (iii) the exclusive licensing of substantially all of the Company’s intellectual property, or (iv) the sale of all or substantially all the Company’s assets, whether voluntary or involuntary, all assets and funds of such group companies legally available for distribution (after satisfaction of all creditors’ claims and claims that may be preferred by law) shall be distributed as follows: (a) each holder of the Series B Preferred Shares shall be entitled to receive for each Series B Preferred Share held by such holder, on parity with each other and prior and in preference to any distribution of any of the assets or funds of the Company to the holders of any other class or series of shares by reason of their ownership of such shares, the amount equal to Series B Redemption Price (the “Series B Preference Amount”). If the assets and funds thus distributed among the holders of the Series B Preferred Shares shall be insufficient to permit the payment to such holders of the full Series B Preference Amount, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Series B Preferred Shares in proportion to the aggregate Series B Preference Amount each such holder is otherwise entitled to receive. (b) If there are any assets or funds remaining after the aggregate Series B Preference Amount have been distributed or paid in full to the applicable holders of the Series B Preferred Shares (a) above, the remaining assets and funds of the Company available for distribution shall be distributed ratably among all holders of the ordinary shares of the Company (the “Shares”) according to the relative number of the Shares held by such holder (including Series B Preferred Shares on an as-converted basis).

Dividends Subject to applicable laws, prior to the Qualified IPO, the Board of the Company shall declare and pay dividends in an aggregate amount not less than thirty percent (30%) of the Company’s net income under a consolidated account basis each year. After the Qualified IPO, unless otherwise required by applicable laws and subject to the approval of the shareholders of the Company, the Board of the Company shall declare and pay dividends in an aggregate amount not more than thirty percent (30%) of the Company’s distributable profits under a consolidated account basis each year, provided that the Company shall have sufficient working capital for business operations.

All shareholders of the Company shall be entitled to receive dividends declared by the Board in proportion to the number of ordinary shares held by them, with Series B Preferred Shares treated on an as-converted basis.

Voting Rights Each holder of Series B Preferred Shares shall be entitled to votes equal to the number of votes attaching to the number of Shares to which such Series B Preferred Shares held by such holder could be converted then.

I-64 APPENDIX I ACCOUNTANTS’ REPORT

30. FINANCIAL LIABILITIES AT FVTPL (Continued) Presentation and classification The Company have designated the Series B Preferred Shares as whole as financial liabilities carried at FVTPL. The change in fair value of the Series B Preferred Shares is charged to profit or loss except for the portion attributable to credit risk change of the Series B Preferred Shares that shall be charged to other comprehensive income, if any. The net gain or loss recognized in profit or loss includes any interest paid on the financial liabilities and is included in fair value loss on financial liabilities at FVTPL line item. Management of the Group considered that there is no credit risk of the financial liability drives the change of the fair value of the financial liabilities.

The fair value of the Series B Preferred Shares at the end of each reporting period is as follows:

RMB’000 At January 1, 2016, December 31, 2016 and 2017 ...... — Issuance of Series B Preferred Shares ...... 199,942 Change in fair value (Note) ...... 20,658 At December 31, 2018 ...... 220,600

Note: Change in fair value presented in RMB includes effect of exchange on translation from US$ balances.

The Company has used the probability-weighted expected return method and the option-pricing method to determine the underlying share value of the Company and adopted equity allocation model to determine the fair value of the Series B Preferred Shares at the end of each reporting period.

Key valuation assumptions used to determine the fair value of Series B Preferred Shares are as follows:

At December 31, 2018 Fair value of ordinary shares of the Company ...... US$1.46 Possibilities under liquidation scenario ...... 15% Possibilities under redemption scenario ...... 20% Possibilities under initial public offering scenario ...... 65% Risk-free interest rate ...... 2.6% Discount for lack of marketability ...... 5% Volatility ...... 33%

31. SHARE CAPITAL The Company was incorporated and registered as an exempted company in the Cayman Islands on August 27, 2008 with an authorized share capital of US$50,000 divided into 50,000,000 shares of a par value of US$0.001 each. On September 7, 2009, the Company increased its authorized share capital to US$200,000 divided into 151,808,219 ordinary shares of a par value of US$0.001 each and 48,191,781 redeemable preferred shares of a par value of US$0.001 each. On January 26, 2010, the Company subdivided its authorized share capital, immediately following which the authorized share capital of the Company was US$200,000 divided into 1,518,082,190 ordinary shares of a par value of US$0.0001 each and 481,917,810 redeemable preferred shares of a par value of US$0.0001 each.

On March 2, 2017, 481,917,810 authorized redeemable preferred shares of a par value of US$0.0001 each and 1,018,082,190 authorized ordinary shares of a par value of US$0.0001 each in the

I-65 APPENDIX I ACCOUNTANTS’ REPORT

31. SHARE CAPITAL (Continued) capital of the Company were cancelled, and the amount of the authorized share capital of the Company was diminished by the amount of cancelled shares.

On June 21, 2018, the authorized share capital of the Company in the amount of US$50,000 is divided into 483,766,468 ordinary shares of a par value of US$0.0001 each and 16,233,532 Series B redeemable convertible preferred shares of a par value of US$0.0001 each.

The share capital represents the issued share capital of the Company.

The details of the change of the Company’s authorized and issued ordinary shares during the Track Record Period are set out as below:

Authorized number of shares US$ Ordinary shares of US$0.0001 each At January 1, 2016 and December 31, 2016 ...... 1,518,082,190 151,808 Decrease ...... (1,018,082,190) (101,808) At December 31, 2017 ...... 500,000,000 50,000 Reclassification and re-designation on issuance of Series B Preferred Shares (Note30)...... (16,233,532) (1,623) At December 31, 2018 ...... 483,766,468 48,377

Shown in the consolidated Issued and fully paid statements of number of shares US$ financial position as RMB’000 Ordinary shares of US$0.0001 each At January 1, 2016, December 31, 2016 and 2017 ..... 175,000,000 17,500 120 Ordinary shares issued (Note) ...... 71,917,810 7,200 44 At December 31, 2018 ...... 246,917,810 24,700 164

Note: Pursuant to the resolution of shareholders’ meeting dated April 12, 2015, the existing ordinary shareholders would subscribe 71,917,810 ordinary shares of the Company at a price of US$0.0765 per share with a total cash consideration of US$5,500,000. This capital contribution obligation was satisfied by the ordinary shareholders through payment on behalf of the Company for the redemption of the Series A1 Preferred Shares of the Company on April 25, 2015. On March 28, 2018, the Company issued the 71,917,810 ordinary shares to the relevant shareholders.

32. SHARE-BASED PAYMENT TRANSACTIONS Equity-settled share option schemes of the Company The Company’s Pre-IPO Share Incentive Schemes (the “Schemes”) were adopted pursuant to resolutions passed on August 1, 2009, January 2, 2018 and June 21, 2018, respectively, for the primary purpose of providing incentives to directors of the Company and eligible employees of the Group. Under the Schemes, the Board of Directors of the Company may grant options to eligible employees, including directors of the Company, to subscribe for shares in the Company.

Each employee share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

I-66 APPENDIX I ACCOUNTANTS’ REPORT

32. SHARE-BASED PAYMENT TRANSACTIONS (Continued) Equity-settled share option schemes of the Company (Continued) Details of specific categories of options granted are as follows: Exercise price Grant date Number of options Expiry date per share Notes August 1, 2009 ...... 788,500 June 22, 2018 ~ July 27, 2019 US$0.20 (i) (iii) (iv) August 3, 2010 ...... 4,040,000 June 30, 2019 ~ April 14, 2020 US$0.05 (i) June 15, 2011 ...... 14,400,000 June 22, 2018 ~ June 26, 2021 US$0.05 (i) (iii) January 2, 2018 ..... 1,125,000 January 1, 2028 US$0.54 (i) January 2, 2018 ..... 12,065,000 January 1, 2022 US$0.54 (ii) June 21, 2018 ...... 500,000 June 20, 2022 US$1.90 (v)

Notes: (i) 40%, 20%, 20% and 20% of the total number of the options granted shall vest on the second, third, fourth and fifth anniversary of grant date, respectively. (ii) 100% of the total number of the options granted shall vest on the second anniversary of grant date. (iii) Pursuant to a board resolution dated January 1, 2018, the expiry dates of 454,500 and 2,800,000 of options granted on August 1, 2009 and June 15, 2011, respectively, were extended to June 30, 2019. There was no significant change in the fair value of the option before and after the modification in connection with the extension of such expiry date. (iv) The number and the exercise price per share for the options granted on August 1, 2009 represented the unadjusted number and price before the share split incurred on January 26, 2010. (v) 100% of the total number of the options granted shall vest upon the completion of the IPO.

The following table discloses details of the movements of the outstanding options granted under the Schemes during the Track Record Period: Outstanding Outstanding at January 1, Granted Exercised Forfeited at December 31, Category Option type 2016 during year during year during year 2016 Category 1: Chief Executive Mr. Mao Chen Cheney June 15, 2011 4,000,000 — — — 4,000,000 Subtotal Chief Executive 4,000,000 — — — 4,000,000 Category 2: Director Mr. Wu Ying August 1, 2009 1,215,000 — — — 1,215,000 June 15, 2011 2,000,000 — — — 2,000,000 Subtotal Director 3,215,000 — — — 3,215,000 Category 3: Employees August 1, 2009 4,980,000 — — — 4,980,000 August 3, 2010 2,410,000 — — (150,000) 2,260,000 June 15, 2011 5,800,000 — — — 5,800,000 Total Employees 13,190,000 — — (150,000) 13,040,000 Total 20,405,000 — — (150,000) 20,255,000

Exercisable at the end of the year 17,895,000 20,255,000 Weighted average exercise price US$ 0.04 N/A N/A US$ 0.05 US$ 0.04

Outstanding Outstanding at January 1, Granted Exercised Forfeited at December 31, Category Option type 2017 during year during year during year 2017 Category 1: Chief Executive Mr. Mao Chen Cheney June 15, 2011 4,000,000 — — — 4,000,000 Subtotal Chief Executive 4,000,000 — — — 4,000,000 Category 2: Director Mr. Wu Ying August 1, 2009 1,215,000 — — — 1,215,000 June 15, 2011 2,000,000 — — — 2,000,000 Subtotal Director 3,215,000 — — — 3,215,000

I-67 APPENDIX I ACCOUNTANTS’ REPORT

32. SHARE-BASED PAYMENT TRANSACTIONS (Continued) Equity-settled share option schemes of the Company (Continued) Outstanding Outstanding at January 1, Granted Exercised Forfeited at December 31, Category Option type 2017 during year during year during year 2017 Category 3: Employees August 1, 2009 4,980,000 — — — 4,980,000 August 3, 2010 2,260,000 — — — 2,260,000 June 15, 2011 5,800,000 — — — 5,800,000 Total Employees 13,040,000 — — — 13,040,000 Total 20,255,000 — — — 20,255,000 Exercisable at the end of the year 20,255,000 20,255,000 Weighted average exercise price US$ 0.04 N/A N/A N/A US$ 0.04

Outstanding Outstanding at January 1, Granted Exercised Forfeited at December 31, Category Option type 2018 during year during year during year 2018 Category 1: Chief Executive and Directors Mr. Mao Chen Cheney June 15, 2011 4,000,000 — — — 4,000,000 January 2, 2018 — 500,000 — — 500,000 Subtotal 4,000,000 500,000 — — 4,500,000 Mr. Wu Ying August 1, 2009 1,215,000 — — — 1,215,000 June 15, 2011 2,000,000 — — — 2,000,000 January 2, 2018 — 993,000 — — 993,000 Subtotal 3,215,000 993,000 — — 4,208,000 Mr. Ren Delin (Note vii) August 1, 2009 1,450,000 — — — 1,450,000 June 15, 2011 1,000,000 — — — 1,000,000 January 2, 2018 — 1,200,000 — — 1,200,000 Subtotal 2,450,000 1,200,000 — — 3,650,000 Mr. Hua Fengmao (Note vii) January 2, 2018 — 1,900,000 — — 1,900,000 June 21, 2018 — 500,000 — — 500,000 Subtotal — 2,400,000 — — 2,400,000 Total Chief Executive and Directors 9,665,000 5,093,000 — — 14,758,000 Category 2: Employees August 1, 2009 3,530,000 — — — 3,530,000 August 3, 2010 2,260,000 — — — 2,260,000 June 15, 2011 4,800,000 — — — 4,800,000 January 2, 2018 — 8,597,000 — (60,000) 8,537,000 Total Employees 10,590,000 8,597,000 — (60,000) 19,127,000 Total 20,255,000 13,690,000 — (60,000) 33,885,000

Exercisable at the end of the year 20,255,000 20,255,000 Weighted average exercise price US$ 0.04 US$ 0.59 N/A US$ 0.54 US$ 0.26

Notes: (vi) The number of options granted on August 1, 2009 has been proportionately adjusted for the increase in the number of issued shares resulting from a share split referred in Note 31. (vii) Mr. Ren Delin and Mr. Hua Fengmao were appointed as directors of the Company on July 3, 2018, therefore the share options outstanding at January 1, 2018 and granted during year for them were reclassified from Category 2: Employees to Category 1: Chief Executive and Directors.

I-68 APPENDIX I ACCOUNTANTS’ REPORT

32. SHARE-BASED PAYMENT TRANSACTIONS (Continued) Equity-settled share option schemes of the Company (Continued) These fair values of the options granted were determined using the binomial pricing model. These fair values and corresponding inputs into the model were as follows:

August 1, 2009(Note viii) April 3, 2010 June 15, 2011 January 2, 2018 June 21, 2018 Grant date option fair value per share ...... US$0.15 US$0.01 US$0.01 US$0.19 ~ US$0.28 US$0.14 Grant date share price ...... US$0.24 US$0.02 US$0.03 US$0.58 US$1.10 Exercise price .... US$0.20 US$0.05 US$0.05 US$0.54 US$1.90 Expected volatility ...... 56.8% ~ 57.6% 52% ~ 54% 46.1% ~ 47.7% 35.8% ~ 38.5% 35.4% Expected life .... 9~10years 9 ~ 10 years 7 ~10 years 4 ~ 10 years 4 years Risk-free rate .... 3.37% ~3.48% 3.64% ~ 3.87% 2.49% ~ 3.15% 2.14% ~ 2.46% 2.71% Expected dividend yield ...... 0% 0% 0% 0% 0%

Note: (viii) The option fair value, share price and the exercise price per share for the options granted on August 1, 2009 represented the unadjusted option fair value, share price and exercise price before considering the share split incurred on January 26, 2010.

Expected volatility was determined by using the historical volatility of the comparable companies. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations. The Group recognized the total expense of RMB16,000, Nil and RMB8,602,000 for the year ended December 31, 2016, 2017 and 2018, respectively, in relation to share options granted by the Company.

33. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group’s overall strategy remains unchanged throughout the Track Record Period.

The capital structure of the Group consists of net debts, which includes financial liabilities at FVTPL, loans from related parties, bank borrowings (net of cash and cash equivalents), obligations under a finance lease and equity attributable to owners of the Company (comprising share capital and reserves).

The management of the Group reviews the capital structure on a continuous basis taking into account the cost of capital and the risks associated with each class of capital. Based on recommendations of the management of the Group, the Group will balance its overall capital structure through the new share issues as well as the issue of new debts or the redemption of existing debts.

I-69 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (a) Categories of financial instruments The Group

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Financial assets Loans and receivables (including cash and cash equivalents) ...... 54,668 72,281 — Financial assets at amortized cost ...... — — 215,186 Financial assets designated as at FVTPL ...... 2,005 71,059 — Financial assets at FVTPL ...... — — 204,740 56,673 143,340 419,926 Financial liabilities Financial liabilities measured at amortized cost ...... 9,033 23,345 20,922 Financial liabilities at FVTPL ...... — — 220,600 Obligations under a finance lease ...... 226 — — 9,259 23,345 241,522

The Company

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Financial assets Loans and receivables (including cash and cash equivalents) ...... 129 198 — Financial assets at amortized cost ...... — — 249,037 Financial assets designated as at FVTPL ...... — 25,346 — Financial assets at FVTPL ...... — — 53,861 129 25,544 302,898 Financial liabilities Financial liabilities measured at amortized cost ...... 1,266 26,618 84,159 Financial liabilities at FVTPL ...... — — 220,600 1,266 26,618 304,759

(b) Financial risk management objectives and policies The Group’s major financial assets and liabilities include financial assets at FVTPL, trade and other receivables, loans to a related party, restricted bank balances, cash and cash equivalents, trade and other payables, loans from related parties and bank borrowings and financial liabilities at FVTPL. Details of the financial assets and liabilities are disclosed in respective notes. The risks associated with these financial assets and liabilities and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

I-70 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk The Group’s and the Company’s activities expose it primarily to currency risk, interest rate risk and other price risk. There has been no change in the Group’s and the Company’s exposure to these risks or the manner in which it manages and measures the risks.

(i) Currency risk Certain group entities have foreign currency sales and purchases, which expose the Group to foreign currency risk. The carrying amounts of relevant group entities’ foreign currency denominated monetary assets and liabilities other than their functional currency are disclosed in the respective notes.

The Group mainly exposes to foreign currency of US$. The Group does not use any derivative contracts to hedge against its exposure to currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of each reporting period are as follows:

The Group At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Assets: US$...... 16,690 38,480 173,875 HK$ ...... ——66

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Liabilities: US$...... — 13,357 337

The Company At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Assets: US$...... 129 198 248,971 HK$ ...... ——66

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Liabilities: US$...... 1,266 1,272 53,435

Sensitivity analysis The following table details the Group’s and the Company’s sensitivity to a 5% increase and decrease in RMB against US$, the foreign currency with which the Group and the Company may have

I-71 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (i) Currency risk (Continued) Sensitivity analysis (Continued) a material exposure. 5% represents management’s assessment of the reasonably possible change in foreign exchange rate. The sensitivity analysis uses outstanding foreign currency denominated monetary items as a base and adjusts their translation at the end of each reporting period for a 5% change in foreign currency rate. A negative/positive number below indicates a decrease/an increase in profit where RMB strengthens 5% against US$. For a 5% weakening of RMB against US$, there would be an equal and opposite impact on profit.

The Group

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Impact on profit or loss after tax US$...... (703) (972) (7,979)

The Company

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Impact on profit or loss after tax US$...... 57 54 (9,780)

In the opinion of the directors of the Company, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposures do not reflect the exposure during the year.

(ii) Interest rate risk The Group and the Company are exposed to fair value interest rate risk in relation to obligation under a finance lease and financial liabilities at FVTPL. The Group is also exposed to cash flow interest rate risk in relation to variable rate bank balances and bank borrowings. The Group currently does not have an interest rate hedging policy to mitigate interest rate risk; nevertheless, the management monitors interest rate exposure and will consider hedging significant interest rate risk should the need arise.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note.

If the interest rate of bank borrowings had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit after tax would decrease/increase by RMB12,000, RMB11,000 and RMB9,000 for the years ended December 31, 2016, 2017 and 2018, respectively. Bank balances are excluded from sensitivity analysis as the directors of the Company consider that the exposure of cash flow interest rate risk arising from variable-rate bank balances is insignificant.

I-72 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (ii) Interest rate risk (Continued) For the exposure of fair value interest rate risk in relation to financial liabilities at FVTPL, if the market interest rate had been 100 basis points higher/lower and all other variables were held constant, the Group’s profit after tax would increase by RMB1,181,000 or decrease by RMB1,211,000 for the year ended December 31, 2018.

(iii) Other price risk The Group and the Company are also exposed to other price risk through financial assets at FVTPL and Series B Preferred Shares classified as financial liabilities at FVTPL.

Sensitivity analysis The sensitivity analyzes below have been determined based on the exposure to equity price risk at the reporting date for financial assets at FVTPL and financial liabilities at FVTPL.

If the prices of the equity investments held by the Group had been changed based on the 5% higher/lower: Š post-tax profit for the year ended December 31, 2016 would increase by RMB100,000 and decrease by RMB100,000, as a result of the changes in fair value of financial assets at FVTPL; Š post-tax profit for the year ended December 31, 2017 would increase by RMB3,293,000 and decrease by RMB3,293,000, as a result of the changes in fair value of financial assets at FVTPL; and Š post-tax profit for the year ended December 31, 2018 would increase by RMB9,833,000 and decrease by RMB9,833,000 as a result of the changes in fair value of financial assets at FVTPL.

If the equity value of the ordinary shares of the Company had been changed based on the 5% higher/lower, the post-tax profit for the year ended December 31, 2018 would decrease by RMB6,804,000 and increase by RMB6,748,000, as a result of the changes in fair value of the ordinary shares of the Company.

Credit risk At December 31, 2016, 2017 and 2018, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is the carrying amount of the respective recognized financial assets measured at amortized cost as stated in the consolidated statements of financial position.

Note 23 details the Group’s maximum exposure to credit risk and the measurement bases used to determine expected credit losses since January 1, 2018.

Credit terms are granted to customers which are good credit quality customers. In order to minimize the credit risk, the Group reviews the recoverable amount of each individual trade debt

I-73 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk (Continued) periodically and the management also has monitoring procedures to ensure the follow-up action is taken to recover overdue debts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

At December 31, 2016, 2017 and 2018, the Group had concentration of credit risk as 19.76%, 29.21% and 21.65%, respectively, of the total gross trade receivables was due from the Group’s largest customer and 49.00%, 57.92% and 49.28%, respectively, of the total gross trade receivables was due from the five largest customers.

The Group expects that there is no significant credit risk associated with restricted bank balances and cash deposits at banks since they are substantially deposited at state-owned banks and other medium or large-sized listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.

The Group also expects that there is no significant credit risk associated with loans to a related party and other receivables since counterparties to these financial assets have a high credit rating.

Liquidity risk In the management of the liquidity risk, the Group and the Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

The following table details the Group’s and the Company’s remaining contractual maturity for its non-derivative financial liabilities based on the agreed repayment terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the Company can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate at the end of the reporting period.

Liquidity and interest risk tables The Group

On Weighted demand average or less Total interest than 1to5 over 5 undiscounted Carrying rate 1 year years years cash flows amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At December 31, 2016 Trade and other payables ...... N/A 5,753 — — 5,753 5,753 Bank borrowings — variable interest rate ...... 5.39% 612 2,449 816 3,877 3,280 Obligations under a finance lease . . . 4.80% 234 — — 234 226 Total ...... 6,599 2,449 816 9,864 9,259

I-74 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Liquidity risk (Continued) Liquidity and interest risk tables (Continued) The Group (Continued) On Weighted demand average or less Total interest than 1to5 over 5 undiscounted Carrying rate 1 year years years cash flows amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At December 31, 2017 Trade and other payables ...... N/A 8,400 — — 8,400 8,400 Bank borrowings — variable interest rate ...... 5.39% 612 2,449 204 3,265 2,833 Loans from related parties — Fixed rate ...... 8.82% 12,112 — — 12,112 12,112 Total ...... 21,124 2,449 204 23,777 23,345

On Weighted demand average or less Total interest than 1to5 over 5 undiscounted Carrying rate 1 year years years cash flows amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At December 31, 2018 Trade and other payables ...... N/A 18,560 — — 18,560 18,560 Bank borrowings — variable interest rate ...... 5.39% 612 2,041 — 2,653 2,362 Financial liabilities at FVTPL ...... 11% — 243,929 — 243,929 220,600 Total ...... 19,172 245,970 — 265,142 241,522

The Company Weighted average On demand Total interest or less than undiscounted Carrying rate 1 year 1 to 5 years over 5 years cash flows amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At December 31, 2016 Amounts due to subsidiaries . . . N/A 1,266 — — 1,266 1,266

Weighted average On demand Total interest or less than undiscounted Carrying rate 1 year 1 to 5 years over 5 years cash flows amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At December 31, 2017 Amounts due to subsidiaries . . . N/A 26,168 — — 26,168 26,168

I-75 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Liquidity risk (Continued) Liquidity and interest risk tables (Continued) The Company (Continued) Weighted average On demand Total interest or less than undiscounted Carrying rate 1 year 1 to 5 years over 5 years cash flows amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At December 31, 2018 Amounts due to subsidiaries . . . N/A 72,643 — — 72,643 72,643 Accrued listing expenses and issue costs ...... N/A 11,516 — — 11,516 11,516 Financial liabilities at FVTPL ...... 11% — 243,929 — 243,929 220,600 Total ...... 84,159 243,929 — 328,088 304,759

(c) Fair value measurements of financial instruments This note provides information about how the Group determines fair values of various financial assets and financial liabilities.

(i) Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis The Group’s financial assets and financial liabilities at FVTPL which are measured at fair value (details refer to Notes 17 and 30) at December 31, 2016, 2017 and 2018 are grouped under Level 2 and Level 3 hierarchy. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used).

Fair value at Fair Valuation Significant Relationship of December 31, December 31, value techniques unobservable unobservable Financial assets 2016 2017 2018 hierarchy and key inputs inputs inputs to fair value RMB’000 RMB’000 RMB’000 1) Flash N/A 14,212 21,503 Level 3 Comparable The ratio of The higher the ratio of Therapeutics, company method P/R&D P/R&D, the higher the LLC* ...... valuation (Note a) Discount for The higher the discount lack of for lack of marketability marketability, the lower the valuation (Note b) 2,005 N/A N/A Level 3 Backsolve from IPO The higher the most recent Probability probability, the higher transaction price the valuation (Note c) 2) Dogma N/A 4,208 10,700 Level 3 Comparable The ratio of The higher the ratio of Therapeutics, company method P/R&D P/R&D, the higher the LLC...... valuation (Note a) Discount for The higher the discount lack of for lack of marketability marketability, the lower the valuation (Note b)

I-76 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) (i) Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis (Continued) Fair value at Fair Valuation Significant Relationship of December 31, December 31, value techniques unobservable unobservable Financial assets 2016 2017 2018 hierarchy and key inputs inputs inputs to fair value RMB’000 RMB’000 RMB’000 3) Tabomedex N/A 3,458 5,835 Level 3 Backsolve from IPO The higher the Biosciences, most recent Probability probability, the higher Inc...... transaction price the valuation (Note c) 4) Arthrosi N/A 5,764 N/A Level 2 Most recent N/A N/A Therapeutics transaction price LLC***...... N/A N/A 10,570 Level 3 Backsolve from IPO The higher the most recent Probability probability, the higher transaction price the valuation (Note c) N/A N/A 41,180 Level 2 Cost method N/A N/A 5) Bonti, Inc...... N/A 12,452 N/A Level 3 Backsolve from IPO The higher the most recent Probability probability, the higher transaction price the valuation (Note c) 6) Epican N/A 25,346 N/A Level 3 Backsolve from IPO The higher the Technology most recent Probability probability, the higher Limited** ..... transaction price the valuation (Note c) N/A N/A 25,288 Level 2 Most recent N/A N/A transaction price 7) Liangzhun N/A 5,619 7,549 Level 3 Backsolve from IPO The higher the (Shanghai) most recent Probability probability, the higher Industrial Co., transaction price the valuation (Note c) Ltd...... 8) Weimou N/A N/A 13,298 Level 3 Backsolve from IPO The higher the Biotech ...... most recent Probability probability, the higher transaction price the valuation (Note c) 9) Anji N/A N/A 26,220 Level 3 Backsolve from IPO The higher the Pharmaceuticals most recent Probability probability, the higher Inc...... transaction price the valuation (Note c) 10) QurAlis N/A N/A 3,432 Level 2 Cost method N/A N/A Corporation**** 11) AmacaThera, N/A N/A 5,148 Level 2 Cost method N/A N/A Inc.**** ...... 12) VersaPeutics, N/A N/A 20,590 Level 2 Cost method N/A N/A Inc.**** ...... 13) Weiqing N/A N/A 11,074 Level 2 Cost method N/A N/A Biotech (Shanghai) Ltd.**** ...... 14) Clues N/A N/A 2,353 Level 2 Cost method N/A N/A Therapeutics Inc.**** ...... Notes: * During the year ended December 31, 2017, there was no recent transaction, which resulted in a change in the valuation techniques from backsolve from most recent transaction price method to comparable company method. ** Pursuant to a share transfer agreement dated March 26, 2018, the Group agreed to transfer its equity interest in Epican Technology Limited to CFS Healthcare Investment Fund Limited which is controlled by Mr. Hua Fengmao. The transaction was completed in June 2018, which resulted in a change in the valuation techniques from backsolve from most recent transaction price method to most recent transaction price method.

I-77 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) (i) Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis (Continued) *** During the year ended December 31, 2018, there was no recent transaction for the series A investment, which resulted in a change in the valuation techniques from most recent transaction price method to backsolve from most recent transaction price method. The new investment of Series B was acquired in the fourth quarter 2018. No significant operating milestone was achieved since the acquisition. Hence, cost method was used as the best estimate of the fair value of the Series B investment. **** The investments were acquired in the fourth quarter 2018. No significant operating milestone were achieved since the acquisitions. Hence, cost method was used as the best estimate of the fair value of the relevant investments Note a: A 10% increase/decrease in the ratio of P/R&D while holding all other variables constant would increase the fair value of the unlisted companies by RMB1,820,000 and RMB3,117,000 or decrease the fair value of the unlisted companies by RMB1,631,000 and RMB4,397,000 at December 31, 2017 and December 31, 2018, respectively. Note b: A 5% increase/decrease in the discount for lack of marketability while holding all other variables constant would decrease the fair value of the unlisted companies by RMB1,051,000 and RMB2,582,000 or increase the fair value of the unlisted companies by RMB1,318,000 and RMB2,104,000 at December 31, 2017 and December 31, 2018, respectively. Note c: A 5% increase/decrease in the IPO probability while holding all other variables constant would increase the fair value of the unlisted companies by RMB110,000, RMB1,027,000 and RMB2,517,000 or decrease the fair value of the unlisted companies by RMB107,000, RMB1,099,000 and RMB2,561,000 at December 31, 2016, 2017 and 2018, respectively.

In addition, the Group’s financial liabilities at FVTPL are measured at fair value at December 31, 2018 and are grouped under Level 3 hierarchy. The fair values estimated based on the probability-weight expected return method and the option pricing method, details of valuation parameters and major assumptions used in the valuation are disclosed in Note 30. Fair value of Series B Preferred Shares is most significantly affected by volatility and probability of IPO. A decrease in volatility and probability of IPO would cause decrease in the fair value of Series B Preferred Shares. A 5% increase/decrease in the volatility while holding all other variables constant would increase the fair value of the redeemable convertible preferred shares by RMB471,000 or decrease the fair value of the convertible redeemable preferred shares by RMB571,000 at December 31, 2018. A 5% increase/ decrease in the IPO probability while holding all other variables constant would increase the fair value of the convertible redeemable preferred shares by RMB7,307,000 or decrease the fair value of the redeemable convertible preferred shares by RMB7,315,000 at December 31, 2018.

There were no transfers between level 1 and level 2 during the Track Record Period.

I-78 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) (ii) Reconciliation of Level 3 fair value measurements Details of reconciliation of financial assets at FVTPL measured at Level 3 fair value measurement are set out as below:

The Group Total RMB’000 At January 1, 2016 ...... — Recognized from SFE revenue ...... 2,005 At December 31, 2016 ...... 2,005 Acquired ...... 14,349 Recognized from SFE revenue ...... 12,928 Recognized from deemed disposal of an associate ...... 25,346 Gain on fair value changes ...... 10,667 At December 31, 2017 ...... 65,295 Acquired ...... 10,596 Recognized from SFE revenue ...... 20,725 Recognized from deemed disposal of a joint venture ...... 12,589 Gain on fair value change ...... 64,273 Disposal ...... (63,085) Transfer from level 2 ...... 10,570 Transfer to level 2 ...... (25,288) At December 31, 2018 ...... 95,675

The Company Total RMB’000 At January 1, 2016 and 2017 ...... — Recognized from deemed disposal of an associate ...... 25,346 At December 31, 2017 ...... 25,346 Acquired ...... 5,329 Gain on fair value change ...... 36,852 Disposal ...... (16,019) Transfer to level 2 ...... (25,288) At December 31, 2018 ...... 26,220

Details of reconciliation of financial liabilities at FVTPL measured at Level 3 fair value measurement are set out in Note 30.

Of the total gains or losses for the years ended December 31, 2016, 2017 and 2018 included in profit or loss, RMB2,005,000, RMB10,667,000 and RMB36,399,000 was unrealized fair value gains related to financial assets at FVTPL held at December 31, 2016, 2017 and 2018, respectively. Fair value gains or losses on financial assets at FVTPL are included in “Fair value gain on financial assets at fair value through profit or loss”.

I-79 APPENDIX I ACCOUNTANTS’ REPORT

34. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) (ii) Reconciliation of Level 3 fair value measurements (Continued) The Company (Continued) Of the total gains or losses for the year ended December 31, 2018 included in profit or loss, RMB20,658,000 was unrealized fair value loss related to financial liabilities at FVTPL held at December 31, 2018. Fair value gains or losses on financial liabilities at FVTPL are included in “Fair value loss on financial liabilities at FVTPL”.

(iii) Fair value of financial assets and financial liabilities that are not measured at fair value The directors of the Company consider that the carrying amount of the Group’s and the Company’s financial assets and financial liabilities recorded at amortized cost in the Historical Financial Information approximate their fair values. Such fair values have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis.

35. RETIREMENT BENEFITS PLANS The employees of the Group’s subsidiaries in the PRC are members of the state-managed retirement benefits schemes operated by the PRC government. The PRC subsidiaries are required to contribute a certain percentage of payroll costs to the retirement benefits schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefits schemes is to make the specified contributions.

The total cost charged to profit or loss in respect of the above-mentioned schemes amounted to approximately RMB5,008,000 and RMB6,076,000, and RMB10,672,000 for the years ended December 31, 2016, 2017 and 2018, respectively.

36. OPERATING LEASES The Group leases various office premises under non-cancellable operating lease agreements. The lease terms are from 1 to 5 years, and the majority of lease agreements are renewable at the end of the lease period at market rate.

At the end of each reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises as follows:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Within one year ...... 8,024 8,042 7,245 In the second to fifth year inclusive ...... 19,821 14,430 12,167 Over five years ...... 2,579 — — 30,424 22,472 19,412

I-80 APPENDIX I ACCOUNTANTS’ REPORT

37. CAPITAL COMMITMENTS The Group had capital commitments in respect of the acquisition of property, plant and equipment and construction of laboratory facilities under contracts as follows:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Contracted but not provided for ...... 4,258 493 346,262

38. CONTINGENT LIABILITIES At the end of each reporting period, the Group had no significant contingent liability.

39. RELATED PARTY DISCLOSURES (a) Transactions with related parties In addition to the equity transaction with related parties disclosed in note 17, the Group also entered into the following transactions with related parties during the Track Record Period: i. Provision of research and development services to joint ventures

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Sichuan Haoyisheng (Note 1) ...... 1,688 — N/A Weimou Biotech (Note 2) ...... 6,061 9,228 N/A Jiaxing Youbo ...... — — 2,191 7,749 9,228 2,191 ii. Provision of research and development services to associates

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Shanghai Epican (Note 3) ...... 4,743 62 N/A Jiaxing Tekeluo ...... 296 192 1,118 Yinlaiteng ...... 243 — — QureBio ...... — 688 3,495 5,282 942 4,613 iii. Interest income/expenses arising from related parties’ loans

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Interest income Mr. John Wu Jiong ...... 1,068 178 —

I-81 APPENDIX I ACCOUNTANTS’ REPORT

39. RELATED PARTY DISCLOSURES (Continued) (a) Transactions with related parties (Continued) iii. Interest income/expenses arising from related parties’ loans (Continued)

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Interest expenses Shanghai Daidai (Hong Kong) Limited ...... — 101 42 JMCR Partners Limited ...... — 576 372 — 677 414

Notes: (1) Since November 2, 2018, Sichuan Haoyisheng is no longer a related party of the Group. (2) Since January 8, 2018, Weimou Biotech is no longer a related party of the Group. (3) Since December 15, 2017, Shanghai Epican is no longer a related party of the Group.

(b) Related party balances The Group At the end of the reporting periods, the Group had balances with related parties as follows:

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Trade receivables from related parties Sichuan Haoyisheng ...... 1,067 — — Weimou Biotech ...... 1,800 8,366 — Yinlaiteng ...... 3,900 3,900 — Jiaxing Tekeluo ...... — 50 326 Jiaxing Youbo ...... — — 882 QureBio ...... — — 713 6,767 12,316 1,921

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Other receivables from related parties (non-trade) Shanghai Daidai (Hong Kong) Limited ...... 78 78 — Mr. Mao Chen Cheney ...... 20 — — Yinlaiteng ...... 1,000 — — 1,098 78 —

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Loans to a related party Mr. John Wu Jiong ...... 20,397 2,002 —

The loans to Mr. John Wu Jiong were unsecured, repayable on demand and carried at the fixed rates of 5.75% per annum for the years ended December 31, 2016 and 2017.

I-82 APPENDIX I ACCOUNTANTS’ REPORT

39. RELATED PARTY DISCLOSURES (Continued) (b) Related party balances (Continued) The Group (Continued) At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Other payables to related parties (non-trade) Mr. Wu Ying ...... 3,000 — — Mr. Hua Fengmao ...... — 547 — 3,000 547 —

At December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Loans from related parties Shanghai Daidai (Hong Kong) Limited ...... — 1,741 — JMCR Partners Limited ...... — 10,371 — — 12,112 —

The loan from Shanghai Daidai (Hong Kong) Limited represented settlement of the Group’s investments in the convertible note of Arthrosi Therapeutics, Inc. in July 2017 by Shanghai Daidai (Hong Kong) Limited on the Group’s behalf. The loans were unsecured, repayable on demand and carried interest at a fixed rate of 12% per annum for the year ended December 31, 2017 and 2018. Details of these investments are set out in Note 17 (ii).

The loan from JMCR Partners Limited represented settlement of the Group’s investments in Bonti, Inc. in April 2017 and January 2018 by JMCR Partners Limited on the Group’s behalf. The loans were secured by the Group’s investments in Bonti, Inc., repayable on demand and carried interest at a fixed rate of 8% per annum for the year ended December 31, 2017 and 2018. Details of these investments are set out in Note 17 (iii).

The maximum amount outstanding of the non-trade related amounts due from directors during the Track Record Period are as follow:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Other receivables from related parties (non-trade) Mr. Wu Ying ...... 30 — —

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Loans to a related party Mr. John Wu Jiong ...... 20,397 20,575 2,002

I-83 APPENDIX I ACCOUNTANTS’ REPORT

39. RELATED PARTY DISCLOSURES (Continued) (b) Related party balances (Continued) The Company As December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Amounts due from subsidiaries Viva Biotech HK ...... — — 167,684 Viva Biotech Shanghai ...... 129 1 1 129 1 167,685 Current ...... 129 1 28,009 Non-current ...... — — 139,676 129 1 167,685

The loan to Viva Biotech HK is unsecured, repayable within two years and carries at the fixed rate of 3.6% per annum.

As December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000 Amounts due to subsidiaries Viva Biotech HK ...... 486 — — Viva Incubator HK ...... — 735 37,816 Viva Biotech Shanghai ...... 780 25,883 34,516 Viva Incubator Shanghai ...... — — 311 Current ...... 1,266 26,618 72,643

Excepted otherwise stated, all the non-trade balances due from/to related parties were unsecured, interest free and repayable on demand.

(c) Compensation of key management personnel The remuneration of the directors of the Company and other members of key management of the Group during the three years ended December 31, 2016, 2017 and 2018 were as follows:

Year ended December 31, 2016 2017 2018 RMB’000 RMB’000 RMB’000

Salaries and other benefits ...... 1,778 2,324 6,679 Performance-based bonus ...... 25 66 48 Retirement benefits scheme contributions ...... 45 52 78 Share-based compensation ...... 12 — 4,339 1,860 2,442 11,144

I-84 APPENDIX I ACCOUNTANTS’ REPORT Notes Principal activities Primarily providing research services (b) Primarily providing research services (c) report At the date of this 2018 2017 Shareholding/equity interest attributable to the Company At December 31, 2016 paid capital/ Issued and fully registered capital Place and establishment PRC, December 7, 2015 RMB10,000,000Hong Kong, 100%March 100% 20, 100% 2017 US$5,000,000 N/A 100% 100% Business 100% incubator (c) 100% Investment holding (b) PRC, August 14, 2008 US$25,000,000 100% 100% 100% 100% PRC, March 19, 2014 RMB30,000,000 100% 100% 100% 100% October 30, 2018 US$30,000,000 N/A N/A 100% 100% Business incubator (b) Hong Kong, June 17, 2008 US$2,000,000 100% 100% 100% 100% Investment holding (a) date of incorporation/ ) ) ) ...... 有限公司 ) ...... 上海 四川維亞本苑生物科技有限公 ...... ( ) ...... PRC, 司 維亞生物科技 嘉興維亞生物科技有限公司 上海本苑創業孵化器管理有限公司 Viva Incubator HK Sichuan Viva ( Jiaxing Viva ( Viva Incubator Shanghai ( Name of subsidiaries Directly held: Viva Biotech HK Notes: (a) Viva Biotech(b) HK is directly Viva held Biotech by(c) Shanghai, the Sichuan Company. Viva and These Viva companies Incubator are HK indirectly are held indirectly by held the by Company the through Company Viva through Biotech Viva Shanghai. Biotech HK. Indirectly held: Viva Biotech Shanghai ( During the Track Record Period and as at the date of this report, the Company has direct and indirect shareholders’ interests in the following subsidiaries: 40. PARTICULARS OF SUBSIDIARIES

I-85 APPENDIX I ACCOUNTANTS’ REPORT

40. PARTICULARS OF SUBSIDIARIES (Continued) All of the subsidiaries adopted December 31 as financial year end.

The statutory financial statements of Viva Biotech HK for each of the two years ended December 31, 2017 were prepared in accordance with Hong Kong Financial Reporting Standards and were audited by Gary Cheng CPA Limited, certified public accountants registered in Hong Kong. As of the date of this prospectus, the statutory audited financial statements of Viva Biotech HK for the year ended December 31, 2018 have not been issued.

The statutory financial statements of Viva Biotech Shanghai for each of the three years ended December 31, 2018 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC and were audited by Shanghai Tripod Certified Public Accountants, certified public accountants registered in the PRC.

The statutory financial statements of Jiaxing Viva for each of the three years ended December 31, 2018 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC and were audited by Shanghai Xuanhe Certified Public Accountants, certified public accountants registered in the PRC.

The statutory financial statements of Viva Incubator Shanghai for each of the three years ended December 31, 2018 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC and were audited by Shanghai Xuanhe Certified Public Accountants, certified public accountants registered in the PRC.

The statutory financial statements of Sichuan Viva for the period from October 30, 2018 to December 31, 2018 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC and were audited by Shanghai Xuanhe Certified Public Accountants, certified public accountants registered in the PRC.

The statutory financial statements of Viva Incubator HK for the period from March 20, 2017 to December 31, 2017 were prepared in accordance with Hong Kong Financial Reporting Standards and were audited by Gary Cheng CPA Limited, certified public accountants registered in Hong Kong. As of the date of this prospectus, the statutory audited financial statements of Viva Incubator HK for the year ended December 31, 2018 have not been issued.

I-86 APPENDIX I ACCOUNTANTS’ REPORT

41. RESERVES MOVEMENT OF THE COMPANY The reserves movement of the Company is as follows:

(Accumulated losses) Share Share option Other retained premium reserve reserve earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At January 1, 2016 ...... 13,590 11,867 33,705 (14,780) 44,382 Loss and total comprehensive expense for the year ...... — — — (73) (73) Recognition of equity-settled share based payment ...... — 16 — — 16 At December 31, 2016 ...... 13,590 11,883 33,705 (14,853) 44,325 Profit and total comprehensive income for the year ...... — — — 63 63 At December 31, 2017 ...... 13,590 11,883 33,705 (14,790) 44,388 Profit and total comprehensive income for the year ...... — — — 3,315 3,315 Recognition of equity-settled share based payment ...... — 8,602 — — 8,602 Issue of ordinary shares ...... 33,661 — (33,705) — (44) At December 31, 2018 ...... 47,251 20,485 — (11,475) 56,261

I-87 APPENDIX I ACCOUNTANTS’ REPORT

42. NOTE TO CONSOLIDATED STATEMENTS OF CASH FLOWS (a) Reconciliation of liabilities arising from financing activities The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statements of cash flows as cash flows from financing activities.

Payable Obligations Loans from Financial for listing under a related liabilities expenses finance parties at and issue Borrowings lease (non-trade) FVTPL costs Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 January 1, 2016 ...... 3,703 341 — — — 4,044 Financing cashflow (Note i) ...... (612) (129) — — — (741) Interest on borrowings ...... 189 14 — — — 203 December 31, 2016 ...... 3,280 226 — — — 3,506 Financing cashflow (Note i) ...... (615) (234) — — — (849) Acquisition of financial assets at FVTPL ...... — — 12,060 — — 12,060 Interest on borrowings ...... 168 8 677 — — 853 Exchange gain on borrowings ...... — — (625) — — (625) December 31, 2017 ...... 2,833 — 12,112 — — 14,945 Financing cashflow (Note i) ...... (614) — (15,336) 199,942 (4,513) 179,479 Operating cashflow (Note ii) ...... — — — — (14,969) (14,969) Listing expenses ...... — — — — 24,274 24,274 Deferred issue costs ...... — — — — 6,724 6,724 Acquisition of financial assets at FVTPL ...... — — 3,267 — — 3,267 Fair value loss on financial liability at FVTPL ...... — — — 20,658 — 20,658 Interest on borrowings ...... 143 — 414 — — 557 Exchange gain ...... — — (457) — — (457) December 31, 2018 ...... 2,362 — — 220,600 11,516 234,478

Notes: (i) The financing cash flows represent 1) the proceeds and repayment of bank borrowings and interest paid, 2) the repayment of obligations under a finance lease and the finance lease charges paid, 3) the repayment to related parties, 4) the proceeds from the issue of the Company’s convertible redeemable preferred shares, and 5) the payment of the issue costs that are attributable to proposed issue of new shares. (ii) The operating cash flow represents the payment of the listing expenses charged to profit or loss.

(b) Major non-cash transactions 1) During the Track Record Period, the Group provides research services under SFE method to its customer in exchange for equity interests of the customer. Further details were set out in Note 17. 2) Part of the consideration for the investments on Arthrosi Therapeutics, Inc. and Bonti, Inc. was paid by the Group’s related parties on the behalf of the Group. Further details of the were set out in Note 17(ii) and 17(iii).

I-88 APPENDIX I ACCOUNTANTS’ REPORT

43. SUBSEQUENT EVENTS Except as disclosed elsewhere of the Historical Financial Information, the Group has following significant events subsequent to December 31, 2018: a. Pursuant to a shareholders’ resolution passed on April 14, 2019, the authorized share capital of the Company is expected to be split on a 1-to-4 basis and as a result, the par value will be changed from US$0.0001 per each share to US$0.000025 per each share and the authorized share capital of US$50,000.00 of the Company will be divided into (1) 1,935,065,872 Shares of US$0.000025 each share; and (2) 64,934,128 Series B Preferred Shares of US$0.000025 each share (the “Share Split”). b. Pursuant to a shareholders’ resolution passed on April 14, 2019, a total of 102,394,632 shares of the Company is expected to be allotted and issued to both ordinary and preferred shareholders on the register of members of the Company at the close of business on the date immediately preceding the date on which the Global Offering becomes unconditional (or as it/they may direct) in proportion to their respective shareholdings in the Company by way of capitalization of the sum of US$2,559.87 standing to the credit of the share premium account of the Company. These shares shall rank pari passu in all respects with the then existing issued shares of the Company (the “Capitalization Issue”). c. Pursuant to a shareholders’ resolution passed on April 13, 2019, the Company declared special dividends of RMB128,686,000.00 to both ordinary and preferred shareholders listed on the register of members on March 24, 2019, being the date one month prior to the commencement of the international offering and the Hong Kong public offering of the Company (together the “Global Offering”), which is expected to be paid out prior to the completion of the Global Offering.

44. SUBSEQUENT FINANCIAL STATEMENTS No audited financial statements of the Group, the Company or any of its subsidiaries have been prepared in respect of any period subsequent to December 31, 2018 and up to the date of this report.

*****

I-89 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set forth in this Appendix does not form part of the accountants’ report on the historical financial information of the Group for the Track Record Period (the “Accountants’ Report”) prepared by Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants of the Company, as set out in Appendix I to this document, and is included herein for information only. The unaudited pro forma financial information should be read in conjunction with the section headed “Financial Information” in this prospectus and the Accountants’ Report set out in Appendix I to this prospectus.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP The following unaudited pro forma statement of adjusted consolidated net tangible assets of the Group prepared in accordance with Rule 4.29 of the Listing Rules is to illustrate the effect of the Global Offering on the consolidated net tangible assets of the Group at December 31, 2018 as if the Global Offering had taken place on such date.

This unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Group at December 31, 2018 following the Global Offering or at any subsequent dates. It is prepared based on the audited consolidated net tangible assets of the Group at December 31, 2018 as derived from the Accountants’ Report set out in Appendix I to this prospectus and adjusted as described below.

Unaudited pro Audited forma adjusted Unaudited pro forma consolidated net consolidated net adjusted tangible assets of Estimated net tangible assets of consolidated net the Group at proceeds from the Group at tangible assets of the December 31, the Global December 31, Group per Share at 2018 Offering 2018 December 31, 2018 RMB’000 RMB’000 RMB’000 RMB HK$ (Note 1) (Note 2) (Note 3) (Note 4) Based on an Offer Price of HK$3.42 per Offer Share ...... 251,442 932,106 1,183,548 0.83 0.97 Based on an Offer Price of HK$4.41 per Offer Share ...... 251,442 1,197,945 1,449,387 1.01 1.19

Notes: (1) The audited consolidated net tangible assets of the Group at December 31, 2018 is extracted from the consolidated statements of financial position set out in Appendix I to this prospectus. (2) The estimated net proceeds from the Global Offering are based on 345,000,000 Offer Shares at the indicative Offer Price of HK$3.42 (equivalent to RMB2.93) and HK$4.41 (equivalent to RMB3.77) per Offer Share, respectively, after deduction of underwriting fees and commissions and other listing related expenses paid/payable by the Company not yet recognized in profit or loss up to December 31, 2018, and without taking into account of any shares (i) which may be allotted and issued upon the exercise of the Over-allotment Option or (ii) which may be issued under Pre-IPO Share Incentive Schemes or the Post-IPO Share Option Scheme or (iii) which may be allotted and issued or repurchased by the Company under the general mandates for the allotment and issue or repurchase of shares granted to the directors of the Company. For the purpose of the estimated net proceeds from the Global Offering, the amounts denominated in Hong Kong dollar have been converted into RMB at the rate of HK$1 to RMB0.8557, which was the exchange rate prevailing on April 15, 2019 with reference to the rate published by the People’s Bank of China. No representation is made that the HK$ amounts have been, could have been or may be converted to RMB, or vice versa, at that rate or any other rates or at all. (3) The unaudited pro forma adjusted consolidated net tangible assets of the Group per Share is arrived at on the basis that 1,428,749,254 Shares were in issue assuming that Share Split, the Capitalization Issue and the Global Offering had been completed on December 31, 2018 and without taking into account of any shares (i) which may be allotted and issued upon the exercise of the Over-allotment Option or (ii) which may be issued under Pre-IPO Share Incentive Schemes or the Post-IPO Share Option Scheme or (iii) which may be allotted and issued or repurchased by the Company under the general mandates for the allotment and issue or repurchase of shares granted to the directors of the Company or (iv) the conversion of Series B Preferred Shares into ordinary shares. (4) For the purpose of unaudited pro forma adjusted consolidated net tangible assets of the Group per Share, the amounts stated in RMB are converted into Hong Kong dollar at the rate of HK$1 to RMB0.8557, which was the exchange rate prevailing on April 15, 2019 with

II-1 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

reference to the rate published by the People’s Bank of China. No representation is made that the RMB amounts have been, could have been or may be converted to Hong Kong dollar, or vice versa, at that rate or any other rates or at all. (5) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group as at December 31, 2018 to reflect any trading result or other transactions of the Group entered into subsequent to December 31, 2018. In particular, the unaudited pro forma adjusted consolidated net tangible assets of the Group as shown on the table on II-1 have not been adjusted to illustrate the effect of the planned dividend distribution by the Group as detailed in Financial Information section of this Prospectus and the conversion of Series B Preferred Shares into ordinary shares upon IPO completion. The planned dividend distribution would have decreased the unaudited pro forma adjusted consolidated net tangible assets of the Group at December 31, 2018 by RMB128,686,000. The conversion of Series B Preferred Shares would have reclassified the Series B Preferred Shares amounting to RMB220,600,000 to equity and increased the unaudited pro forma adjusted consolidated net tangible assets of the Group at December 31, 2018 by RMB220,600,000. The conversion of Series B Preferred Shares would also have increased the total share in issue assumption stated in note 3 by 71,250,746 shares to a total of 1,500,000,000 shares in issue. The adjustment to the unaudited pro forma adjusted consolidated net tangible assets of the Group after planned dividend distribution and conversion of Series B Preferred Shares would be as follows:

Unaudited pro forma adjusted Unaudited pro forma adjusted consolidated net tangible consolidated net tangible assets of the Group as at assets of the Group as at December 31, 2018 after December 31, 2018 per Share planned dividend distribution after planned dividend and conversion of the Series B distribution and conversion of Preferred Shares the Series B Preferred Shares RMB ’000 RMB HK$ (Note 4) Based on an Offer Price of HK$3.42 per Offer Share ...... 1,275,462 0.85 0.99 Based on an Offer Price of HK$4.41 per Offer Share ...... 1,541,301 1.03 1.20

II-2 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

B. ASSURANCE REPORT FROM THE REPORTING ACCOUNTANTS ON UNAUDITED PROFORMA FINANCIAL INFORMATION The following is the text of the independent reporting accountants’ assurance report received from Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants of our Company, in respect of the Group’s unaudited pro forma financial information prepared for the purpose of incorporation in this prospectus.

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION To the Directors of Viva Biotech Holdings We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Viva Biotech Holdings (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted consolidated net tangible assets as at December 31, 2018 and related notes as set out on page II-1 to II-2 of Appendix II to the prospectus issued by the Company dated April 25, 2019 (the “Prospectus”). The applicable criteria on the basis of which the Directors have compiled the unaudited pro forma financial information are described on page II-1 to II-2 of Appendix II to the Prospectus.

The unaudited pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed Global Offering (as defined in the Prospectus) on the Group’s financial position as at December 31, 2018 as if the proposed Global Offering had taken place at December 31, 2018. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s historical financial information for each of the three years ended December 31, 2018, on which an accountants’ report set out in Appendix I to the Prospectus has been published.

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information The Directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

Our Independence and Quality Control We have complied with the independence and other ethical requirements of the “Code of Ethics for Professional Accountants” issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services

II-3 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the unaudited pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

The purpose of unaudited pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction as at December 31, 2018 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether: Š the related pro forma adjustments give appropriate effect to those criteria; and Š the unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

II-4 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion: (a) the unaudited pro forma financial information has been properly compiled on the basis stated; (b) such basis is consistent with the accounting policies of the Group; and (c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

April 25, 2019

II-5 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

Set out below is a summary of certain provisions of the Memorandum and Articles of Association of the Company and certain aspects of Cayman company law.

SUMMARY OF THE CONSTITUTION OF THE COMPANY 1 Memorandum of Association The Memorandum of Association of the Company was conditionally adopted on April 14, 2019 and states, inter alia, that the liability of the members of the Company is limited, that the objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Law or any other law of the Cayman Islands. The Memorandum of Association is available for inspection at the address specified in Appendix V in the section headed “Documents available for inspection”.

2 Articles of Association The Articles of Association of the Company were conditionally adopted on April 14, 2019 and include provisions to the following effect:

2.1 Classes of Shares The share capital of the Company consists of ordinary shares. The capital of the Company at the date of adoption of the Articles is US$50,000.00 divided into 2,000,000,000 shares of US$0.000025 each.

2.2 Directors (a) Power to allot and issue Shares Subject to the provisions of the Companies Law and the Memorandum and Articles of Association, the unissued shares in the Company (whether forming part of its original or any increased capital) shall be at the disposal of the Directors, who may offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration, and upon such terms, as the Directors shall determine. Subject to the provisions of the Articles of Association and to any direction that may be given by the Company in general meeting and without prejudice to any special rights conferred on the holders of any existing shares or attaching to any class of shares, any share may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise, and to such persons at such times and for such consideration as the Directors may determine. Subject to the Companies Law and to any special rights conferred on any shareholders or attaching to any class of shares, any share may, with the sanction of a special resolution, be issued on terms that it is, or at the option of the Company or the holder thereof, liable to be redeemed.

(b) Power to dispose of the assets of the Company or any subsidiary The management of the business of the Company shall be vested in the Directors who, in addition to the powers and authorities by the Articles of Association expressly conferred

III-1 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

upon them, may exercise all such powers and do all such acts and things as may be exercised or done or approved by the Company and are not by the Articles of Association or the Companies Law expressly directed or required to be exercised or done by the Company in general meeting, but subject nevertheless to the provisions of the Companies Law and of the Articles of Association and to any regulation from time to time made by the Company in general meeting not being inconsistent with such provisions or the Articles of Association, provided that no regulation so made shall invalidate any prior act of the Directors which would have been valid if such regulation had not been made.

(c) Compensation or payment for loss of office Payment to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must first be approved by the Company in general meeting.

(d) Loans to Directors There are provisions in the Articles of Association prohibiting the making of loans to Directors or their respective close associates which are equivalent to the restrictions imposed by the Companies Ordinance.

(e) Financial assistance to purchase Shares Subject to all applicable laws, the Company may give financial assistance to Directors and employees of the Company, its subsidiaries or any holding company or any subsidiary of such holding company in order that they may buy shares in the Company or any such subsidiary or holding company. Further, subject to all applicable laws, the Company may give financial assistance to a trustee for the acquisition of shares in the Company or shares in any such subsidiary or holding company to be held for the benefit of employees of the Company, its subsidiaries, any holding company of the Company or any subsidiary of any such holding company (including salaried Directors).

(f) Disclosure of interest in contracts with the Company or any of its subsidiaries No Director or proposed Director shall be disqualified by his office from contracting with the Company either as vendor, purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company with any person, company or partnership of or in which any Director shall be a member or otherwise interested be capable on that account of being avoided, nor shall any Director so contracting or being any member or so interested be liable to account to the Company for any profit so realized by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship thereby established, provided that such Director shall, if his interest in such contract or arrangement is material, declare the nature of his interest at the earliest meeting of the board of Directors at which it is practicable for him to do so, either specifically or by way of a general notice stating that, by reason of the facts specified in the notice, he is to be regarded as interested in any contracts of a specified description which may be made by the Company.

III-2 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

A Director shall not be entitled to vote on (nor shall be counted in the quorum in relation to) any resolution of the Directors in respect of any contract or arrangement or any other proposal in which the Director or any of his close associates (or, if required by the Listing Rules, his other associates) has any material interest, and if he shall do so his vote shall not be counted (nor is he to be counted in the quorum for the resolution), but this prohibition shall not apply to any of the following matters, namely: (i) the giving to such Director or any of his close associates of any security or indemnity in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries; (ii) the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or any of his close associates has himself/themselves assumed responsibility in whole or in part and whether alone or jointly under a guarantee or indemnity or by the giving of security; (iii) any proposal concerning an offer of shares, debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase where the Director or any of his close associates is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer; (iv) any proposal or arrangement concerning the benefit of employees of the Company or any of its subsidiaries including: (A) the adoption, modification or operation of any employees’ share scheme or any share incentive scheme or share option scheme under which the Director or any of his close associates may benefit; or (B) the adoption, modification or operation of a pension or provident fund or retirement, death or disability benefits scheme which relates both to Directors, their close associates and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or any of his close associates, as such any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and (v) any contract or arrangement in which the Director or any of his close associates is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company.

(g) Remuneration The Directors shall be entitled to receive by way of remuneration for their services such sum as shall from time to time be determined by the Directors, or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst the Directors in such proportions and in such manner as they may agree, or failing agreement, equally, except that in such event any Director holding office for less than the whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time

III-3 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

during such period for which he has held office. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office. The Directors shall also be entitled to be paid all expenses, including travel expenses, reasonably incurred by them in or in connection with the performance of their duties as Directors including their expenses of traveling to and from board meetings, committee meetings or general meetings or otherwise incurred whilst engaged on the business of the Company or in the discharge of their duties as Directors. The Directors may grant special remuneration to any Director who shall perform any special or extra services at the request of the Company. Such special remuneration may be made payable to such Director in addition to or in substitution for his ordinary remuneration as a Director, and may be made payable by way of salary, commission or participation in profits or otherwise as may be agreed. The remuneration of an executive Director or a Director appointed to any other office in the management of the Company shall from time to time be fixed by the Directors and may be by way of salary, commission or participation in profits or otherwise or by all or any of those modes and with such other benefits (including share option and/or pension and/or gratuity and/or other benefits on retirement) and allowances as the Directors may from time to time decide. Such remuneration shall be in addition to such remuneration as the recipient may be entitled to receive as a Director.

(h) Retirement, appointment and removal The Directors shall have power at any time and from time to time to appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until the next general meeting of the Company and shall then be eligible for re-election at that meeting. The Company may by ordinary resolution remove any Director (including a Managing Director or other executive Director) before the expiration of his period of office notwithstanding anything in the Articles of Association or in any agreement between the Company and such Director (but without prejudice to any claim for compensation or damages payable to him in respect of the termination of his appointment as Director or of any other appointment of office as a result of the termination of this appointment as Director). The Company may by ordinary resolution appoint another person in his place. Any Director so appointed shall hold office during such time only as the Director in whose place he is appointed would have held the same if he had not been removed. The Company may also by ordinary resolution elect any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until the next following general meeting of the Company and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at such meeting. No person shall, unless recommended by the Directors, be eligible for election to the office of Director at any general meeting unless, during the period, which shall be at least seven days, commencing no earlier than the day after the dispatch of the notice of the meeting appointed for such election and ending no later than seven days prior to the date of such meeting, there has been given to the

III-4 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

Secretary of the Company notice in writing by a member of the Company (not being the person to be proposed) entitled to attend and vote at the meeting for which such notice is given of his intention to propose such person for election and also notice in writing signed by the person to be proposed of his willingness to be elected. There is no shareholding qualification for Directors nor is there any specified age limit for Directors. The office of a Director shall be vacated: (i) if he resigns his office by notice in writing to the Company at its registered office or its principal office in Hong Kong; (ii) if an order is made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs and the Directors resolve that his office be vacated; (iii) if, without leave, he is absent from meetings of the Directors (unless an alternate Director appointed by him attends) for 12 consecutive months, and the Directors resolve that his office be vacated; (iv) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally; (v) if he ceases to be or is prohibited from being a Director by law or by virtue of any provision in the Articles of Association; (vi) if he is removed from office by notice in writing served upon him signed by not less than three-fourths in number (or, if that is not a round number, the nearest lower round number) of the Directors (including himself) for the time being then in office; or (vii) if he shall be removed from office by an ordinary resolution of the members of the Company under the Articles of Association. At every annual general meeting of the Company one-third of the Directors for the time being, or, if their number is not three or a multiple of three, then the number nearest to, but not less than, one-third, shall retire from office by rotation, provided that every Director (including those appointed for a specific term) shall be subject to retirement by rotation at least once every three years. A retiring Director shall retain office until the close of the meeting at which he retires and shall be eligible for re-election thereat. The Company at any annual general meeting at which any Directors retire may fill the vacated office by electing a like number of persons to be Directors.

(i) Borrowing powers The Directors may from time to time at their discretion exercise all the powers of the Company to raise or borrow or to secure the payment of any sum or sums of money for the purposes of the Company and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof.

III-5 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(j) Proceedings of the Board The Directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings as they think fit in any part of the world. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote.

2.3 Alteration to constitutional documents No alteration or amendment to the Memorandum or Articles of Association may be made except by special resolution.

2.4 Variation of rights of existing shares or classes of shares If at any time the share capital of the Company is divided into different classes of shares, all or any of the rights attached to any class of shares for the time being issued (unless otherwise provided for in the terms of issue of the shares of that class) may, subject to the provisions of the Companies Law, be varied or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. To every such separate meeting all the provisions of the Articles of Association relating to general meetings shall mutatis mutandis apply, but so that the quorum for the purposes of any such separate meeting and of any adjournment thereof shall be a person or persons together holding (or representing by proxy or duly authorized representative) at the date of the relevant meeting not less than one-third in nominal value of the issued shares of that class. The special rights conferred upon the holders of shares of any class shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

2.5 Alteration of capital The Company may, from time to time, whether or not all the shares for the time being authorized shall have been issued and whether or not all the shares for the time being issued shall have been fully paid up, by ordinary resolution, increase its share capital by the creation of new shares, such new capital to be of such amount and to be divided into shares of such respective amounts as the resolution shall prescribe. The Company may from time to time by ordinary resolution: (a) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares. On any consolidation of fully paid shares and division into shares of larger amount, the Directors may settle any difficulty which may arise as they think expedient and in particular (but without prejudice to the generality of the foregoing) may as between the holders of shares to be consolidated determine which particular shares are to be consolidated into each consolidated share, and if it shall happen that any person shall become entitled to fractions of a consolidated share or shares, such fractions may be sold by some person appointed by the Directors for that purpose and the person so appointed may transfer the shares so sold to the purchaser thereof and the validity of such transfer shall not be questioned, and so that the net proceeds of such sale (after deduction of the

III-6 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

expenses of such sale) may either be distributed among the persons who would otherwise be entitled to a fraction or fractions of a consolidated share or shares ratably in accordance with their rights and interests or may be paid to the Company for the Company’s benefit; (b) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so canceled subject to the provisions of the Companies Law; and (c) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association, subject nevertheless to the provisions of the Companies Law, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred or other special rights, over, or may have such deferred rights or be subject to any such restrictions as compared with the others as the Company has power to attach to unissued or new shares. The Company may by special resolution reduce its share capital or any capital redemption reserve in any manner authorized and subject to any conditions prescribed by the Companies Law.

2.6 Special resolution — majority required A “special resolution” is defined in the Articles of Association to have the meaning ascribed thereto in the Companies Law, for which purpose, the requisite majority shall be not less than three-fourths of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorized representatives or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given and includes a special resolution approved in writing by all of the members of the Company entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of such members, and the effective date of the special resolution so adopted shall be the date on which the instrument or the last of such instruments (if more than one) is executed. In contrast, an “ordinary resolution” is defined in the Articles of Association to mean a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorized representatives or, where proxies are allowed, by proxy at a general meeting held in accordance with the Articles of Association and includes an ordinary resolution approved in writing by all the members of the Company aforesaid.

2.7 Voting rights Subject to any special rights, privileges or restrictions as to voting for the time being attached to any class or classes of shares, at any general meeting on a poll every member present in person (or, in the case of a member being a corporation, by its duly authorized representative) or by proxy shall have one vote for each share registered in his name in the register of members of the Company. Where any member is, under the Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution,

III-7 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted. In the case of joint registered holders of any share, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at any meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding. A member of the Company in respect of whom an order has been made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs may vote by any person authorized in such circumstances to do so and such person may vote by proxy. Save as expressly provided in the Articles of Association or as otherwise determined by the Directors, no person other than a member of the Company duly registered and who shall have paid all sums for the time being due from him payable to the Company in respect of his shares shall be entitled to be present or to vote (save as proxy for another member of the Company), or to be reckoned in a quorum, either personally or by proxy at any general meeting. At any general meeting a resolution put to the vote of the meeting shall be decided by way of a poll save that the chairman of the meeting may allow a resolution which relates purely to a procedural or administrative matter as prescribed under the Listing Rules to be voted on by a show of hands. If a recognized clearing house (or its nominee(s)) is a member of the Company it may authorize such person or persons as it thinks fit to act as its proxy(ies) or representative(s) at any general meeting of the Company or at any general meeting of any class of members of the Company provided that, if more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such person is so authorized. A person authorized pursuant to this provision shall be entitled to exercise the same rights and powers on behalf of the recognized clearing house (or its nominee(s)) which he represents as that recognized clearing house (or its nominee(s)) could exercise as if it were an individual member of the Company holding the number and class of shares specified in such authorization, including, where a show of hands is allowed, the right to vote individually on a show of hands.

2.8 Annual general meetings The Company shall hold a general meeting as its annual general meeting each year, within a period of not more than 15 months after the holding of the last preceding annual general meeting (or such longer period as the Stock Exchange may authorize). The annual general meeting shall be specified as such in the notices calling it.

2.9 Accounts and audit The Directors shall cause to be kept such books of account as are necessary to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions and otherwise in accordance with the Companies Law.

III-8 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

The Directors shall from time to time determine whether, and to what extent, and at what times and places and under what conditions or regulations, the accounts and books of the Company, or any of them, shall be open to the inspection by members of the Company (other than officers of the Company) and no such member shall have any right of inspecting any accounts or books or documents of the Company except as conferred by the Companies Law or any other relevant law or regulation or as authorized by the Directors or by the Company in general meeting.

The Directors shall, commencing with the first annual general meeting, cause to be prepared and to be laid before the members of the Company at every annual general meeting a profit and loss account for the period, in the case of the first account, since the incorporation of the Company and, in any other case, since the preceding account, together with a balance sheet as at the date to which the profit and loss account is made up and a Director’s report with respect to the profit or loss of the Company for the period covered by the profit and loss account and the state of the Company’s affairs as at the end of such period, an auditor’s report on such accounts and such other reports and accounts as may be required by law. Copies of those documents to be laid before the members of the Company at an annual general meeting shall not less than 21 days before the date of the meeting, be sent in the manner in which notices may be served by the Company as provided in the Articles of Association to every member of the Company and every holder of debentures of the Company provided that the Company shall not be required to send copies of those documents to any person of whose address the Company is not aware or to more than one of the joint holders of any shares or debentures.

The Company shall at every annual general meeting appoint an auditor or auditors of the Company who shall hold office until the next annual general meeting. The remuneration of the auditors shall be fixed by the Company at the annual general meeting at which they are appointed provided that in respect of any particular year the Company in general meeting may delegate the fixing of such remuneration to the Directors.

2.10 Notice of meetings and business to be conducted thereat

An annual general meeting shall be called by not less than 21 days’ notice in writing and any extraordinary general meeting shall be called by not less than 14 days’ notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and shall specify the time, place and agenda of the meeting, particulars of the resolutions and the general nature of the business to be considered at the meeting. The notice convening an annual general meeting shall specify the meeting as such, and the notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as a special resolution. Notice of every general meeting shall be given to the auditors and all members of the Company (other than those who, under the provisions of the Articles of Association or the terms of issue of the shares they hold, are not entitled to receive such notice from the Company).

Notwithstanding that a meeting of the Company is called by shorter notice than that mentioned above, it shall be deemed to have been duly called if it is so agreed:

(a) in the case of a meeting called as an annual general meeting, by all members of the Company entitled to attend and vote thereat or their proxies; and

III-9 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving that right.

2.11 Transfer of shares Transfers of shares may be effected by an instrument of transfer in the usual common form or in such other form as the Directors may approve which is consistent with the standard form of transfer as prescribed by the Stock Exchange. The instrument of transfer shall be executed by or on behalf of the transferor and, unless the Directors otherwise determine, the transferee, and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members of the Company in respect thereof. All instruments of transfer shall be retained by the Company. The Directors may refuse to register any transfer of any share which is not fully paid up or on which the Company has a lien. The Directors may also decline to register any transfer of any shares unless: (a) the instrument of transfer is lodged with the Company accompanied by the certificate for the shares to which it relates (which shall upon the registration of the transfer be canceled) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer; (b) the instrument of transfer is in respect of only one class of shares; (c) the instrument of transfer is properly stamped (in circumstances where stamping is required); (d) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (e) the shares concerned are free of any lien in favor of the Company; and (f) a fee of such amount not exceeding the maximum amount as the Stock Exchange may from time to time determine to be payable (or such lesser sum as the Directors may from time to time require) is paid to the Company in respect thereof. If the Directors refuse to register a transfer of any share they shall, within two months after the date on which the transfer was lodged with the Company, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 10 business days’ notice (or on 6 business days’ notice in the case of a rights issue) being given by advertisement published on the Stock Exchange’s website, or, subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of Association or by advertisement published in the newspapers, be suspended and the register of members of the Company closed at such times for such periods as the Directors may from time to time determine, provided that the registration of transfers shall not be suspended or the register closed for more than 30 days in any year (or such longer period as the members of the Company may by ordinary resolution determine provided that such period shall not be extended beyond 60 days in any year).

III-10 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

2.12 Power of the Company to purchase its own shares The Company is empowered by the Companies Law and the Articles of Association to purchase its own shares subject to certain restrictions and the Directors may only exercise this power on behalf of the Company subject to the authority of its members in general meeting as to the manner in which they do so and to any applicable requirements imposed from time to time by the Stock Exchange and the Securities and Futures Commission of Hong Kong. Shares which have been repurchased will be treated as canceled upon the repurchase.

2.13 Power of any subsidiary of the Company to own shares There are no provisions in the Articles of Association relating to the ownership of shares by a subsidiary.

2.14 Dividends and other methods of distribution Subject to the Companies Law and the Articles of Association, the Company in general meeting may declare dividends in any currency but no dividends shall exceed the amount recommended by the Directors. No dividend may be declared or paid other than out of profits and reserves of the Company lawfully available for distribution, including share premium. Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. For these purposes no amount paid up on a share in advance of calls shall be treated as paid up on the share. The Directors may from time to time pay to the members of the Company such interim dividends as appear to the Directors to be justified by the profits of the Company. The Directors may also pay half-yearly or at other intervals to be selected by them any dividend which may be at a fixed rate if they are of the opinion that the profits available for distribution justify the payment. The Directors may retain any dividends or other monies payable on or in respect of a share upon which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. The Directors may also deduct from any dividend or other monies payable to any member of the Company all sums of money (if any) presently payable by him to the Company on account of calls, installments or otherwise. No dividend shall carry interest against the Company. Whenever the Directors or the Company in general meeting have resolved that a dividend be paid or declared on the share capital of the Company, the Directors may further resolve: (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up on the basis that the shares so allotted are to be of the same class as the class already held by the allottee, provided that the members of the Company entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment; or (b) that the members of the Company entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the

III-11 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

dividend as the Directors may think fit on the basis that the shares so allotted are to be of the same class as the class already held by the allottee. The Company may upon the recommendation of the Directors by ordinary resolution resolve in respect of any one particular dividend of the Company that notwithstanding the foregoing a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid without offering any right to members of the Company to elect to receive such dividend in cash in lieu of such allotment. Any dividend, interest or other sum payable in cash to a holder of shares may be paid by cheque or warrant sent through the post addressed to the registered address of the member of the Company entitled, or in the case of joint holders, to the registered address of the person whose name stands first in the register of members of the Company in respect of the joint holding or to such person and to such address as the holder or joint holders may in writing direct. Every cheque or warrant so sent shall be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register of members of the Company in respect of such shares, and shall be sent at his or their risk and the payment of any such cheque or warrant by the bank on which it is drawn shall operate as a good discharge to the Company in respect of the dividend and/or bonus represented thereby, notwithstanding that it may subsequently appear that the same has been stolen or that any endorsement thereon has been forged. The Company may cease sending such cheques for dividend entitlements or dividend warrants by post if such cheques or warrants have been left uncashed on two consecutive occasions. However, the Company may exercise its power to cease sending cheques for dividend entitlements or dividend warrants after the first occasion on which such a cheque or warrant is returned undelivered. Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders. Any dividend unclaimed for six years from the date of declaration of such dividend may be forfeited by the Directors and shall revert to the Company. The Directors may, with the sanction of the members of the Company in general meeting, direct that any dividend be satisfied wholly or in part by the distribution of specific assets of any kind, and in particular of paid up shares, debentures or warrants to subscribe securities of any other company, and where any difficulty arises in regard to such distribution the Directors may settle it as they think expedient, and in particular may disregard fractional entitlements, round the same up or down or provide that the same shall accrue to the benefit of the Company, and may fix the value for distribution of such specific assets and may determine that cash payments shall be made to any members of the Company upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Directors.

2.15 Proxies Any member of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person who must be an individual as his proxy to attend and vote instead of him and a proxy so appointed shall have the same right as the member to speak at the meeting. A proxy need not be a member of the Company. Instruments of proxy shall be in common form or in such other form as the Directors may from time to time approve provided that it shall enable a member to instruct his proxy to vote in

III-12 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

favor of or against (or in default of instructions or in the event of conflicting instructions, to exercise his discretion in respect of) each resolution to be proposed at the meeting to which the form of proxy relates. The instrument of proxy shall be deemed to confer authority to vote on any amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates provided that the meeting was originally held within 12 months from such date. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney authorized in writing or if the appointor is a corporation either under its seal or under the hand of an officer, attorney or other person authorized to sign the same. The instrument appointing a proxy and (if required by the Directors) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered at the registered office of the Company (or at such other place as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case, in any document sent therewith) not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less than 48 hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of 12 months from the date named in it as the date of its execution. Delivery of any instrument appointing a proxy shall not preclude a member of the Company from attending and voting in person at the meeting or poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

2.16 Calls on shares and forfeiture of shares The Directors may from time to time make calls upon the members of the Company in respect of any monies unpaid on their shares (whether on account of the nominal amount of the shares or by way of premium or otherwise) and not by the conditions of allotment thereof made payable at fixed times and each member of the Company shall (subject to the Company serving upon him at least 14 days’ notice specifying the time and place of payment and to whom such payment shall be made) pay to the person at the time and place so specified the amount called on his shares. A call may be revoked or postponed as the Directors may determine. A person upon whom a call is made shall remain liable on such call notwithstanding the subsequent transfer of the shares in respect of which the call was made. A call may be made payable either in one sum or by installments and shall be deemed to have been made at the time when the resolution of the Directors authorizing the call was passed. The joint holders of a share shall be jointly and severally liable to pay all calls and installments due in respect of such share or other monies due in respect thereof. If a sum called in respect of a share shall not be paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate, not exceeding 15% per annum, as the Directors may determine, but the Directors shall be at liberty to waive payment of such interest wholly or in part.

III-13 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

If any call or installment of a call remains unpaid on any share after the day appointed for payment thereof, the Directors may at any time during such time as any part thereof remains unpaid serve a notice on the holder of such shares requiring payment of so much of the call or installment as is unpaid together with any interest which may be accrued and which may still accrue up to the date of actual payment. The notice shall name a further day (not being less than 14 days from the date of service of the notice) on or before which, and the place where, the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call was made or installment is unpaid will be liable to be forfeited. If the requirements of such notice are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls or installments and interest due in respect thereof has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends and bonuses declared in respect of the forfeited shares and not actually paid before the forfeiture. A forfeited share shall be deemed to be the property of the Company and may be re-allotted, sold or otherwise disposed of. A person whose shares have been forfeited shall cease to be a member of the Company in respect of the forfeited shares but shall, notwithstanding the forfeiture, remain liable to pay to the Company all monies which at the date of forfeiture were payable by him to the Company in respect of the shares, together with (if the Directors shall in their discretion so require) interest thereon at such rate not exceeding 15% per annum as the Directors may prescribe from the date of forfeiture until payment, and the Directors may enforce payment thereof without being under any obligation to make any allowance for the value of the shares forfeited, at the date of forfeiture.

2.17 Inspection of register of members The register of members of the Company shall be kept in such manner as to show at all times the members of the Company for the time being and the shares respectively held by them. The register may, on 10 business days’ notice (or on 6 business days’ notice in the case of a rights issue) being given by advertisement published on the Stock Exchange’s website, or, subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of Association or by advertisement published in the newspapers, be closed at such times and for such periods as the Directors may from time to time determine either generally or in respect of any class of shares, provided that the register shall not be closed for more than 30 days in any year (or such longer period as the members of the Company may by ordinary resolution determine provided that such period shall not be extended beyond 60 days in any year). Any register of members kept in Hong Kong shall during normal business hours (subject to such reasonable restrictions as the Directors may impose) be open to inspection by any member of the Company without charge and by any other person on payment of a fee of such amount not exceeding the maximum amount as may from time to time be permitted under the Listing Rules as the Directors may determine for each inspection.

III-14 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

2.18 Quorum for meetings and separate class meetings No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman which shall not be treated as part of the business of the meeting. Two members of the Company present in person or by proxy shall be a quorum provided always that if the Company has only one member of record the quorum shall be that one member present in person or by proxy. A corporation being a member of the Company shall be deemed for the purpose of the Articles of Association to be present in person if represented by its duly authorized representative being the person appointed by resolution of the directors or other governing body of such corporation or by power of attorney to act as its representative at the relevant general meeting of the Company or at any relevant general meeting of any class of members of the Company. The quorum for a separate general meeting of the holders of a separate class of shares of the Company is described in paragraph 2.4 above.

2.19 Rights of minorities in relation to fraud or oppression There are no provisions in the Articles of Association concerning the rights of minority shareholders in relation to fraud or oppression.

2.20 Procedure on liquidation If the Company shall be wound up, and the assets available for distribution amongst the members of the Company as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members of the Company in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. If in a winding up the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the members of the Company in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. The foregoing is without prejudice to the rights of the holders of shares issued upon special terms and conditions. If the Company shall be wound up, the liquidator may with the sanction of a special resolution of the Company and any other sanction required by the Companies Law, divide amongst the members of the Company in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members of the Company. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the members of the Company as the liquidator, with the like sanction and subject to the Companies Law, shall think fit, but so that no member of the Company shall be compelled to accept any assets, shares or other securities in respect of which there is a liability.

III-15 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

2.21 Untraceable members The Company shall be entitled to sell any shares of a member of the Company or the shares to which a person is entitled by virtue of transmission on death or bankruptcy or operation of law if: (a) all cheques or warrants, not being less than three in number, for any sums payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (b) the Company has not during that time or before the expiry of the three month period referred to in (d) below received any indication of the whereabouts or existence of the member; (c) during the 12 year period, at least three dividends in respect of the shares in question have become payable and no dividend during that period has been claimed by the member; and (d) upon expiry of the 12 year period, the Company has caused an advertisement to be published in the newspapers or subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of Association, giving notice of its intention to sell such shares and a period of three months has elapsed since such advertisement and the Stock Exchange has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds it shall become indebted to the former member for an amount equal to such net proceeds.

SUMMARY OF CAYMAN ISLANDS COMPANIES LAW AND TAXATION 1 Introduction The Companies Law is derived, to a large extent, from the older Companies Acts of England, although there are significant differences between the Companies Law and the current Companies Act of England. Set out below is a summary of certain provisions of the Companies Law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of corporate law and taxation which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar.

2 Incorporation The Company was incorporated in the Cayman Islands as an exempted company with limited liability on August 27, 2008 under the Companies Law. As such, its operations must be conducted mainly outside the Cayman Islands. The Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the size of its authorized share capital.

3 Share Capital The Companies Law permits a company to issue ordinary shares, preference shares, redeemable shares or any combination thereof. The Companies Law provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premia on those shares shall be transferred to an account called the “share premium account”. At the option of a company, these provisions may not apply to premia on shares of that company allotted pursuant to any arrangement in consideration of the acquisition or cancelation of shares in any other company and issued at a premium. The Companies Law provides that the share premium

III-16 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

account may be applied by a company, subject to the provisions, if any, of its memorandum and articles of association, in such manner as the company may from time to time determine including, but without limitation: (a) paying distributions or dividends to members; (b) paying up unissued shares of the company to be issued to members as fully paid bonus shares; (c) in the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Law); (d) writing-off the preliminary expenses of the company; (e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; and (f) providing for the premium payable on redemption or purchase of any shares or debentures of the company. No distribution or dividend may be paid to members out of the share premium account unless immediately following the date on which the distribution or dividend is proposed to be paid the company will be able to pay its debts as they fall due in the ordinary course of business. The Companies Law provides that, subject to confirmation by the Grand Court of the Cayman Islands, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorized by its articles of association, by special resolution reduce its share capital in any way. Subject to the detailed provisions of the Companies Law, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorized by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a shareholder. In addition, such a company may, if authorized to do so by its articles of association, purchase its own shares, including any redeemable shares. The manner of such a purchase must be authorized either by the articles of association or by an ordinary resolution of the company. The articles of association may provide that the manner of purchase may be determined by the directors of the company. At no time may a company redeem or purchase its shares unless they are fully paid. A company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any member of the company holding shares. A payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business. There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company for the purchase of, or subscription for, its own or its holding company’s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and to act in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. Such assistance should be on an arm’s-length basis.

III-17 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

4 Dividends and Distributions With the exception of section 34 of the Companies Law, there are no statutory provisions relating to the payment of dividends. Based upon English case law which is likely to be persuasive in the Cayman Islands in this area, dividends may be paid only out of profits. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see paragraph 3 above for details).

5 Shareholders’ Suits The Cayman Islands courts can be expected to follow English case law precedents. The rule in Foss v. Harbottle (and the exceptions thereto which permit a minority shareholder to commence a class action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority where the wrongdoers are themselves in control of the company, and (c) an action which requires a resolution with a qualified (or special) majority which has not been obtained) has been applied and followed by the courts in the Cayman Islands.

6 Protection of Minorities In the case of a company (not being a bank) having a share capital divided into shares, the Grand Court of the Cayman Islands may, on the application of members holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the Grand Court shall direct. Any shareholder of a company may petition the Grand Court of the Cayman Islands which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up. Claims against a company by its shareholders must, as a general rule, be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the company’s memorandum and articles of association. The English common law rule that the majority will not be permitted to commit a fraud on the minority has been applied and followed by the courts of the Cayman Islands.

7 Disposal of Assets The Companies Law contains no specific restrictions on the powers of directors to dispose of assets of a company. As a matter of general law, in the exercise of those powers, the directors must discharge their duties of care and to act in good faith, for a proper purpose and in the interests of the company.

8 Accounting and Auditing Requirements The Companies Law requires that a company shall cause to be kept proper books of account with respect to: (a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;

III-18 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(b) all sales and purchases of goods by the company; and (c) the assets and liabilities of the company. Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

9 Register of Members An exempted company may, subject to the provisions of its articles of association, maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as its directors may from time to time think fit. There is no requirement under the Companies Law for an exempted company to make any returns of members to the Registrar of Companies of the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection.

10 Inspection of Books and Records Members of a company will have no general right under the Companies Law to inspect or obtain copies of the register of members or corporate records of the company. They will, however, have such rights as may be set out in the company’s articles of association.

11 Special Resolutions The Companies Law provides that a resolution is a special resolution when it has been passed by a majority of at least two-thirds of such members as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given, except that a company may in its articles of association specify that the required majority shall be a number greater than two-thirds, and may additionally so provide that such majority (being not less than two-thirds) may differ as between matters required to be approved by a special resolution. Written resolutions signed by all the members entitled to vote for the time being of the company may take effect as special resolutions if this is authorized by the articles of association of the company.

12 Subsidiary Owning Shares in Parent The Companies Law does not prohibit a Cayman Islands company acquiring and holding shares in its parent company provided its objects so permit. The directors of any subsidiary making such acquisition must discharge their duties of care and to act in good faith, for a proper purpose and in the interests of the subsidiary.

13 Mergers and Consolidations The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the

III-19 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of each constituent company and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

14 Reconstructions There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing 75% in value of shareholders or creditors, depending on the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by the Grand Court of the Cayman Islands. Whilst a dissenting shareholder would have the right to express to the Grand Court his view that the transaction for which approval is sought would not provide the shareholders with a fair value for their shares, the Grand Court is unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management and if the transaction were approved and consummated the dissenting shareholder would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of his shares) ordinarily available, for example, to dissenting shareholders of United States corporations.

15 Take-overs Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offer or may at any time within two months after the expiration of the said four months, by notice require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Grand Court of the Cayman Islands within one month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the Grand Court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority shareholders.

16 Indemnification Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision

III-20 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

may be held by the Cayman Islands courts to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime).

17 Liquidation A company may be placed in liquidation compulsorily by an order of the court, or voluntarily (a) by a special resolution of its members if the company is solvent, or (b) by an ordinary resolution of its members if the company is insolvent. The liquidator’s duties are to collect the assets of the company (including the amount (if any) due from the contributories (shareholders)), settle the list of creditors and discharge the company’s liability to them, ratably if insufficient assets exist to discharge the liabilities in full, and to settle the list of contributories and divide the surplus assets (if any) amongst them in accordance with the rights attaching to the shares.

18 Stamp Duty on Transfers No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

19 Taxation Pursuant to section 6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, the Company may obtain an undertaking from the Financial Secretary of the Cayman Islands: (a) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and (b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable: (i) on or in respect of the shares, debentures or other obligations of the Company; or (ii) by way of the withholding in whole or in part of any relevant payment as defined in section 6(3) of the Tax Concessions Law (2018 Revision). The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are not party to any double tax treaties that are applicable to any payments made by or to the Company.

20 Exchange Control There are no exchange control regulations or currency restrictions in the Cayman Islands.

21 General Maples and Calder (Hong Kong) LLP, the Company’s legal advisers on Cayman Islands law, have sent to the Company a letter of advice summarizing aspects of Cayman Islands company

III-21 APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

law. This letter, together with a copy of the Companies Law, is available for inspection as referred to in the section headed “Documents available for inspection” in Appendix V. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he/she is more familiar is recommended to seek independent legal advice.

III-22 APPENDIX IV STATUTORY AND GENERAL INFORMATION

A. FURTHER INFORMATION ABOUT OUR GROUP

1. Incorporation of Our Company

We were incorporated in the Cayman Islands on August 27, 2008 under the Companies Law as an exempted company with limited liability. On March 27, 2018, our Company adopted the Chinese name of “ ” as our dual foreign name. Our registered office address is at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Accordingly, our Company’s corporate structure and Memorandum and Articles of Association are subject to the relevant laws of the Cayman Islands. A summary of our Memorandum and Articles of Association is set out in Appendix III to this prospectus.

Our registered place of business in Hong Kong is at Room 1901, 19/F, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong. We were registered as a non-Hong Kong company under Part 16 of the Companies Ordinance on April 23, 2018. Ms. Chau Hing Ling has been appointed as the authorized representative of our Company in Hong Kong under Part 16 of the Companies Ordinance to accept service of process and any notices on behalf of the Company. The address for service of process is Room 1901, 19/F, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong.

2. Changes in the Share Capital of Our Company

On August 27, 2008, our Company was incorporated in the Cayman Islands as an exempted company with limited liability with an authorized share capital of US$50,000 divided into 50,000,000 shares of par value of US$0.001 each.

The following alterations in the share capital of our Company have taken place within the two years immediately preceding the date of this prospectus:

(a) On March 28, 2018, our Company allotted and issued 30,205,480 ordinary shares, 10,273,973 ordinary shares, 10,273,973 ordinary shares, and 21,164,384 ordinary shares, respectively, to Ms. Mao, China Finance Strategies, Fenghe Harvest and Wu and Sons.

(b) On March 28, 2018, (i) China Finance Strategies transferred 7,054,795 ordinary shares in our Company to Tian Hsin Bio-Medical; (ii) Ms. Mao transferred 34,931,507 ordinary shares and 35,273,973 ordinary shares in our Company, respectively, to Mao and Sons and Zhang and Sons, respectively.

(c) On April 12, 2018, Mao and Sons transferred 20,116,438 ordinary shares in our Company to Mr. Mao.

(d) On May 4, 2018, Mr. Mao transferred 4,938,356 ordinary shares in our Company to MZFT, LLC.

(e) On May 28, 2018, Mao and Sons transferred 788,492 Shares and 823,059 Shares, respectively, to Mr. James Qun Mi and Ms. Chi Lik Yim.

(f) On June 21, 2018, the authorized share capital of the Company in the amount of US$50,000.00 is divided into 483,766,468 ordinary shares of a par value of US$0.0001 each and 16,233,532 Series B Preferred Shares of a par value of US$0.0001 each.

IV-1 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(g) On June 21, 2018, our Company allotted and issued a total of 16,233,532 Series B Preferred Shares to the Pre-IPO Investors. (h) On February 18, 2019, Mao and Sons transferred 604,160 ordinary shares, 389,612 ordinary shares and 604,160 ordinary shares in our Company to JL and JSW Holding Limited, MENGL Holding Limited and TIANL Holding Limited, respectively. (i) On February 18, 2019, JMCR transferred 2,626,785 Series B Preferred Shares in our Company to VVBI Limited.

Save as disclosed above, there has been no alteration in our share capital within two years immediately preceding the date of this prospectus.

Assuming that the Global Offering becomes unconditional and the Offer Shares are issued, immediately following the Capitalization Issue and before the Global Offering (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option and the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or may be granted under the Post-IPO Share Option Scheme), the issued share capital of our Company will be US$28,875.00 divided into 1,155,000,000 Shares, all fully paid or credited as fully paid and 845,000,000 Shares will remain unissued.

3. Changes in the Share Capital of Our Subsidiaries Our subsidiaries are set out in the Accountants’ Report, the text of which is set out in Appendix I to this prospectus. The following alterations in the share capital of our subsidiaries have taken place within the two years immediately preceding the date of this prospectus: (a) On August 2, 2017, Viva Incubator Shanghai transferred the whole equity interest of Viva Incubator HK to Viva Biotech Shanghai. (b) On June 28, 2018, the registered share capital of Viva Biotech Shanghai was increased from US$5,000,000 to US$25,000,000. (c) On August 10, 2018, the registered share capital of Jiaxing Viva was increased from RMB10,000,000 to RMB30,000,000. (d) On October 22, 2018, Viva Biotech Shanghai transferred the entire equity interest of Viva Incubator HK to Viva Biotech HK.

4. Resolutions of the Shareholders of our Company Passed on April 14, 2019 Pursuant to the resolutions passed at a duly convened general meeting of our Shareholders on April 14, 2019, it was resolved, among others: (a) conditional and immediately upon the Listing, the Memorandum and Articles of Association be approved with effect upon Listing; (b) conditional on (1) the Listing Committee granting the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus; (2) the obligations of the Underwriters under the Underwriting Agreements becoming unconditional and not being terminated in accordance with the terms of the Underwriting Agreements or otherwise: (i) the Global Offering was approved and our Directors were authorized to effect the same and to allot and issue the Offer Shares pursuant to the Global Offering;

IV-2 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(ii) the grant of the Over-allotment Option by our Company to the International Underwriters to allot and issue up to 15% of the Offer Shares initially available under the Global Offering to cover the over-allocations in the International Offering was approved; and (iii) the proposed Listing was approved and our Directors were authorized to implement such Listing; (iv) the subdivision of each authorized issued and unissued share of a par value of US$0.0001 each in the Company into 4 shares of a par value of US$0.000025 each (the “Share Split”) such that immediately following the share subdivision, the authorized share capital of the Company will be US$50,000 divided into 1,935,065,872 ordinary shares of US$0.000025 each and 64,934,128 series B preferred shares of a par value of US$0.000025 each; (v) the re-designation and re-classification of each authorized issued and unissued series B preferred shares of a par value of US$0.000025 each, as Shares (“Variation of Share Capital”), such that immediately following the re-designation and re-classification, the authorized share capital of the Company will be US$50,000 divided into 2,000,000,000 Shares, were approved and adopted; (vi) immediately following the Share Split and Variation of Share Capital of the Company referred to in sub-paragraphs (iv) and (v) above and subject to the share premium account of the Company having sufficient balance, or otherwise being credited as a result of the allotment and issue of the Offer Shares pursuant to the Global Offering, our Directors be authorized to allot and issue a total of 102,394,632 Shares credited as fully paid at par value to the Shareholders on the register of members of the Company at the close of business on the date immediately preceding the date on which the Global Offering becomes unconditional (or as it/they may direct) in proportion to their respective shareholdings in the Company (as nearly as possible without fractions) by way of capitalization of the sum of US$2,559.87 standing to the credit of the share premium account of the Company, and the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the then existing issued Shares, in each case to be effective on the Listing Date. (vii) a general unconditional mandate was granted to our Directors to allot, issue and deal with Shares, and to make or grant offers, agreements or options which might require such Shares to be allotted and issued or dealt with at any time subject to the requirement that the aggregate nominal value of the Shares so allotted and issued or agreed conditionally or unconditionally to be allotted and issued, shall not exceed 20% of the aggregate nominal value of the share capital of our Company in issue immediately following completion of the Global Offering (excluding any Shares which may fall to be issued pursuant to the exercise of the Over-allotment Option or the options which were granted under the Pre- IPO Share Incentive Schemes or may be granted under the Post-IPO Share Option Scheme). This mandate does not cover Shares to be allotted, issued, or dealt with under a rights issue or scrip dividend scheme or similar arrangements or a specific authority granted by our Shareholders or upon the exercise of the Over-allotment Option or the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or may be granted

IV-3 APPENDIX IV STATUTORY AND GENERAL INFORMATION

under the Post-IPO Share Option Scheme. This general mandate to issue Shares will remain in effect until: (i) the conclusion of the next annual general meeting of our Company; (ii) the expiration of the period within which the next annual general meeting of our Company is required to be held under the applicable laws or the Articles of Association; or (iii) it is varied or revoked by an ordinary resolution of our Shareholders at a general meeting of our Company, whichever is the earliest; (viii) a general unconditional mandate was granted to our Directors to exercise all powers of our Company to repurchase Shares with an aggregate nominal value of not more than 10% of the aggregate nominal or par value of the share capital of our Company in issue immediately following completion of the Global Offering (excluding Shares which may be allotted and issued upon the exercise of the Over-allotment Option or the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or may be granted under the Post-IPO Share Option Scheme). This mandate only relates to repurchase made on the Stock Exchange or on any other stock exchange on which the Shares may be listed (and which is recognized by the SFC and the Stock Exchange for this purpose) and made in accordance with all applicable laws and regulations and the requirements of the Listing Rules. This general mandate to repurchase Shares will remain in effect until: (i) the conclusion of the next annual general meeting of our Company; (ii) the expiration of the period within which the next annual general meeting of our Company is required to be held under any applicable laws or the Articles of Association; or (iii) it is varied or revoked by an ordinary resolution of our Shareholders at a general meeting of our Company; whichever is the earliest; and (ix) the general unconditional mandate as mentioned in paragraph (h) above would be extended by the addition to the aggregate nominal value of the Shares which may be allotted and issued or agreed to be allotted and issued by our Directors pursuant to such general mandate of an amount representing the aggregate nominal value of the Shares purchased by our Company pursuant to the mandate to repurchase Shares referred to in paragraph (i) above (up to 10% of the aggregate nominal value of the Shares in issue immediately following completion of the Global Offering, excluding any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or may be granted under the Post-IPO Share Option Scheme).

5. Repurchase of our own Shares This section sets out, among others, certain information required by the Stock Exchange to be included in this prospectus concerning the repurchase by us of our own Shares.

IV-4 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(a) Provisions of the Listing Rules The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their own Shares on the Stock Exchange subject to certain restrictions, the more important of which are summarized below:

(i) Shareholders’ Approval All proposed repurchase of Shares (which must be fully paid up in the case of shares) by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of the shareholders, either by way of general mandate or by specific approval of a particular transaction.

(ii) Source of Funds Repurchases must be funded out of funds legally available for the purpose in accordance with the constitutive documents of a listed company, the laws of the jurisdiction in which the listed company is incorporated or otherwise established. A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time. Subject to the foregoing, under the Cayman Companies Law, any repurchases by a listed company may be made out of the funds which would otherwise be available for dividend or distribution or out of the proceeds of a new issue of shares made for the purpose of the repurchase. Under the Cayman Companies Law, any amount of premium payable on the purchase over the par value of the shares to be purchased must be out of the funds which would otherwise be available for dividend or distribution or from sums standing to the credit of our share premium account.

(iii) Trading Restrictions The total number of shares which a listed company may repurchase on the Stock Exchange is the number of shares representing up to a maximum of 10% of the aggregate number of shares in issue. A company may not make a new issue or announce a proposed new issue of shares for a period of 30 days after any repurchase (other than an issue of securities pursuant to an exercise of warrants, share options or similar instruments requiring the listed company to issue securities which were outstanding prior to such repurchase) without the prior approval of the Stock Exchange. In addition, a listed company is prohibited from repurchasing its shares on the Stock Exchange if the purchase price is 5% or more than the average closing market price for the five preceding trading days on which its shares were traded on the Stock Exchange. The Listing Rules also prohibit a listed company from repurchasing its securities which are in the hands of the public falling below the relevant prescribed minimum percentage as required by the Stock Exchange. A company is required to procure that the broker appointed by it to effect a repurchase of securities discloses to the Stock Exchange such information with respect to the repurchase made on behalf of the listed company as the Stock Exchange may require.

IV-5 APPENDIX IV STATUTORY AND GENERAL INFORMATION

A listed company may not make any repurchase of shares after inside information has come to its knowledge until the information is made publicly available. In particular, during the period of one month immediately preceding the earlier of: (i) the date of the board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of a listed company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and (ii) the deadline for a listed company to announce its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules) and ending on the date of the results announcement, the listed company may not repurchase its shares on the Stock Exchange other than in exceptional circumstances.

(iv) Status of Repurchased Shares All repurchased securities (whether effected on the Stock Exchange or otherwise) will be automatically canceled and the certificates for those securities must be canceled and destroyed.

(v) Reporting Requirements Certain information relating to repurchases of shares on the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the following business day on which the listed company makes a purchase of its shares. The report must state the total number of shares purchased by the listed company the previous day, the purchase price per share or the highest and lowest prices paid for such purchases. In addition, a listed company’s annual report is required to disclose details regarding repurchases of shares made during the year, including the number of shares repurchased each month (whether on the Stock Exchange or otherwise), the purchase price per share or the highest and lowest price paid for all such purchases, where relevant, and the aggregate price paid.

(vi) Core Connected Persons A listed company is prohibited from knowingly repurchasing its shares from a “core connected person,” that is, a director, chief executive or substantial shareholder of the company or any of its subsidiaries or their close associates and a core connected person is prohibited from knowingly selling its shares to the company.

(b) Reasons for Repurchase Our Directors believe that it is in the best interest of us and our Shareholders for our Directors to have general authority from the Shareholders to enable us to repurchase Shares in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be made where our Directors believe that such repurchases will benefit us and our Shareholders.

(c) Funding of Repurchases In repurchasing securities, we may only apply funds legally available for such purpose in accordance with the Memorandum of Association and Articles of Association, the Companies Law or other applicable laws of Cayman Islands and the Listing Rules. On the basis of our current financial

IV-6 APPENDIX IV STATUTORY AND GENERAL INFORMATION condition as disclosed in this prospectus and taking into account our current working capital position, the Directors consider that, if the Repurchase Mandate were to be exercised in full, it might have a material adverse effect on our working capital and/or our gearing position as compared with the position disclosed in this prospectus. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on our working capital requirements or the gearing levels which in the opinion of our Directors are from time to time appropriate for us.

(d) General The exercise in full of the current Repurchase Mandate, on the basis of Shares in issue after completion of the Global Offering (without taking into account of the Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or may be granted under the Post-IPO Share Option Scheme), could accordingly result in up to 150,000,000 Shares being repurchased by us during the period prior to: (i) the conclusion of our next annual general meeting; (ii) the expiration of the period within which the next annual general meeting of our Company is required by any applicable law or the Articles of Association to be held; or (iii) the date on which the Repurchase Mandate is varied or revoked by an ordinary resolution of our Shareholders in general meeting, whichever is the earliest.

None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their close associates (as defined in the Listing Rules) currently intends to sell any Shares to us or our subsidiaries. Our Directors have undertaken with the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, the Memorandum of Association and Articles of Association, the Companies Law or any other applicable laws of Cayman Islands.

If, as a result of a repurchase of our Shares pursuant to the Repurchase Mandate, a Shareholder’s proportionate interest in our voting rights is increased, such increase will be treated as an acquisition for the purpose of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain or consolidate control of us and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate.

No core connected person, as defined in the Listing Rules, has notified us that he/she or it has a present intention to sell his/her or its Shares to us, or has undertaken not to do so, if the Repurchase Mandate is exercised.

IV-7 APPENDIX IV STATUTORY AND GENERAL INFORMATION

B. FURTHER INFORMATION ABOUT THE BUSINESS OF OUR COMPANY

1. Summary of Material Contracts

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by our Group within the two years preceding the date of this prospectus and are or may be material:

(a) an investment agreement dated April 28, 2017 among Shanghai Fengying Management Consultancy Partnership (Limited Partnership) (上海風瀠管理諮詢合夥企業(有限合夥)) and Shanghai Benyuan Entrepreneurship Incubator Management Limited (上海本苑創業孵化器 管理有限公司), Liangzhun (Shanghai) Industrial Limited (量准(上海)實業有限公司) (“Liangzhun”), Gang Liu (劉鋼), Hao Xu (許浩), Kunjin Entrepreneurship Investment Center (Limited Partnership) (坤進創業投資中心(有限合夥)), Shanghai Junhe Investment Partnership (Limited Partnership) (上海隽鶴投資合夥企業(有限合夥)) with respect to capital increase of Liangzhun, pursuant to which, among other things, Shanghai Benyuan Entrepreneurship Incubator Management Limited (上海本苑創業孵化器管理有限公司) agreed to contribute RMB4.0 million to acquire 3.57% equity interests in Liangzhun;

(b) a share transfer agreement dated March 26, 2018 between the Company, as transferor, and CFS Healthcare Investment Fund Limited, as transferee, pursuant to which the Company agreed to sell, and CFS Healthcare Investment Fund Limited agreed to purchase 10,000,000 series seed preferred shares in Epican Technology Limited for a total consideration of US$2.5 million;

(c) an equity transfer agreement dated April 22, 2018 between Viva Biotech Limited, as transferor, and T&C Biotech, L.P., as transferee, pursuant to which Viva Biotech Limited agreed to sell, and T&C Biotech, L.P. agreed to purchase 20,833 shares of common stock of Dogma Therapeutics, Inc. for a total consideration of US$500,000;

(d) a note purchase agreement dated July 30, 2018 among Totient, Inc., BioInnovation Capital I LP, Techammer Living Trust, Amit Garg, WS Investment Company, LLC (2018A), Sanjay Goel, David-Andrew Wallach, Carb One Ltd, Perlman Gardner Family Trust UDT Aug 1996, Joseph Kevin O’Donohue Revocable Trust dated 10/24/2008, O’Donohue 2009 Family Trust and Viva Biotech Limited, pursuant to which, among others, Viva Biotech Limited agreed to purchase, and Totient, Inc. agreed to issue to Viva Biotech Limited a convertible promissory note in the principal amount of US$500,000.

(e) an equity transfer agreement dated August 13, 2018 between Viva Biotech (Shanghai) Ltd. (維亞生物科技(上海)有限公司), as transferor, and Xiangdong Qu, as transferee, pursuant to which Viva Biotech (Shanghai) Ltd. (維亞生物科技(上海)有限公司) agreed to sell, and Xiangdong Qu agreed to purchase 14.00% equity interest in Qiyu Biotech (Shanghai) Ltd. (啓愈生物技術(上海)有限公司) for a total consideration of RMB7.0 million;

(f) a series A preferred stock purchase agreement dated October 29, 2018 among VersaPeutics, Inc., Viva Biotech Limited, Connie Zhao, Zaijin Guan & Fang Chen, pursuant to which, among others, Viva Biotech Limited agreed to invest (i) US$3.0 million to acquire 1,145,038 series A preferred stocks in VersaPeutics, Inc., and (ii) US$3.0 million upon the pre-agreed milestone to acquire additional 1,145,038 series A preferred stocks in VersaPeutics, Inc.;

IV-8 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(g) an investors’ rights agreement dated October 29, 2018 entered into among VersaPeutics, Inc., Viva Biotech Limited, Connie Zhao, Zaijin Guan & Fang Chen, The Entrust Group, Inc., FBO HUIQING ZHU IRA # 10111=SD, Sangel Capital Corp. and Yimin Zou with respect to, among others, the rights of the investors to cause VersaPeutics, Inc. to register common stock issuable to the investors, to receive certain information from VersaPeutics, Inc., and to participate in future equity offerings by VersaPeutics, Inc.; (h) the second amended and restated right of first refusal and co-sale agreement dated October 29, 2018 entered into among Viva Biotech Limited, Connie Zhao, Zaijin Guan & Fang Chen, The Entrust Group, Inc., FBO HUIQING ZHU IRA # 10111=SD, Sangel Capital Corp. (collectively, the “VersaPeutics Investors”), Yimin Zou (the “VersaPeutics Key Holder”) and VersaPeutics, Inc., pursuant to which, among others, the VersaPeutics Key Holder granted a secondary right of refusal and right of co-sale to the VersaPeutics Investors with respect to transfer of stock in VersaPeutics, Inc. owned by the VersaPeutics Key Holder; (i) a voting agreement dated October 29, 2018 entered into among VersaPeutics, Inc., Viva Biotech Limited, Connie Zhao, Zaijin Guan & Fang Chen, The Entrust Group, Inc., FBO HUIQING ZHU IRA # 10111=SD, Sangel Capital Corp. and Yimin Zou with respect to, among others, the election of board of directors of VersaPeutics, Inc. and voting on certain corporate matters; (j) a convertible note purchase agreement dated December 19, 2018 among AmacaThera, Inc., Viva Biotech Limited and Gearbox, LLC, pursuant to which, among others, Viva Biotech Limited agreed to purchase (i) a convertible promissory note in the principal amount of US$750,000 to be issued by AmacaThera, Inc. at initial closing, and (ii) an additional convertible promissory note in the principal amount of US$750,000 to be issued by AmacaThera, Inc. at second closing; (k) a series seed preferred stock purchase agreement of Mediar Therapeutics, Inc. dated January 29, 2019 among Mediar Therapeutics, Inc., Partners Innovation Fund, LLC, Partners Innovation Fund II, LP, Viva Biotech Limited, BioInnovation Capital I LP, Shangpharma Investment Group, Ltd., ShangBay Capital LLC, Agent Capital Fund I, LP, pursuant to which, among others, Viva Biotech Limited agreed to invest (i) approximately US$1.25 million to acquire 3,729,117 series seed preferred stocks of Mediar Therapeutics, Inc. at initial closing, and (ii) approximately US$1.25 million to acquire additional 3,729,117 series seed preferred stock of Mediar Therapeutics, Inc. at second closing; (l) an investors’ rights agreement of Mediar Therapeutics, Inc. dated January 29, 2019 entered into among Mediar Therapeutics, Inc., Partners Innovation Fund, LLC, Partners Innovation Fund II, LP, Viva Biotech Limited, BioInnovation Capital I LP, Shangpharma Investment Group, Ltd., ShangBay Capital LLC and Agent Capital Fund I, LP with respect to, among others, the rights of the investors to cause Mediar Therapeutics, Inc. to register common stock issuable to the investors, to receive certain information from Mediar Therapeutics, Inc., and to participate in future equity offerings by Mediar Therapeutics, Inc.; (m) a right of first refusal and co-sale agreement of Mediar Therapeutics, Inc. dated January 29, 2019 entered into among Partners Innovation Fund, LLC, Partners Innovation Fund II, LP, Viva Biotech Limited, BioInnovation Capital I LP, Shangpharma Investment Group, Ltd., ShangBay Capital LLC and Agent Capital Fund I, LP, (collectively, the “Mediar Investors”), David Lagares and Michael Choi (collectively, the “Mediar Key

IV-9 APPENDIX IV STATUTORY AND GENERAL INFORMATION

Holders”) and Mediar Therapeutics, Inc., pursuant to which, among others, the Mediar Key Holders granted a secondary right of refusal and right of co-sale to the Mediar Investors with respect to transfer of stock in Mediar Therapeutics, Inc. owned by the Mediar Key Holders; (n) a voting agreement of Mediar Therapeutics, Inc. dated January 29, 2019 entered into among Mediar Therapeutics, Inc., Partners Innovation Fund, LLC, Partners Innovation Fund II, LP, Viva Biotech Limited, BioInnovation Capital I LP, Shangpharma Investment Group, Ltd., ShangBay Capital LLC and Agent Capital Fund I, LP, David Lagares and Michael Choi with respect to, among others, the election of board of directors of Mediar Therapeutics, Inc. and voting on certain corporate matters; (o) the Series B Preferred Share Purchase Agreement; (p) the Shareholders Agreement; (q) an amendment agreement to shareholders’ agreement dated March 3, 2019 among Viva Biotech Holdings ( ), Viva Biotech Limited, Viva Biotech (Shanghai) Ltd. (維亞生物科技（上海）有限公司), Jiaxing Viva Biotech Limited (嘉興維亞生物科技有 限公司), Shanghai Benyuan Entrepreneurship Incubator Management Limited (上海本苑創 業孵化器管理有限公司), Viva Incubator Investment Management Limited, Sichuan Viva Benyuan Biotech Limited (四川維亞本苑生物科技有限公司), Chen Cheney Mao, MZFT, LLC, Mao and Sons Limited, Zhang and Sons Limited, JL and JSW Holding Limited, MENGL Holding Limited, TIANL Holding Limited, Fenghe Harvest Ltd, Wu and Sons Limited, China Finance Strategies Investment DB Limited, Tian Hsin Bio-Medical Investment Limited, Chi Lik Yim, James Qun Mi, Absolute Ventures Limited, T&C Biotech L.P., FengHe Canary Limited, Morning Star Resources Limited, Shanghai Wisdomont Xingqian Investment Center (Limited Partnership) (上海盛山興錢創業投資中 心（有限合夥）), VVBI Limited and Fohan Capital Limited to amend certain terms of the Shareholders Agreement; (r) a cornerstone investment agreement dated April 10, 2019 entered into among our Company, China International Capital Corporation Hong Kong Securities Limited (中國國 際金融香港證券有限公司) and China National Pharmaceutical Investment Co., Ltd. (中國 醫藥投資有限公司), pursuant to which, China National Pharmaceutical Investment Co., Ltd. (中國醫藥投資有限公司) agreed to subscribe for our Shares in the amount of US$14,891,589.2304; (s) a cornerstone investment agreement dated April 17, 2019 entered into among our Company, China International Capital Corporation Hong Kong Securities Limited (中國國 際金融香港證券有限公司 ), Gaotejia Investment Management Co., Ltd. and Shenzhen Gaotejia Ruibao Investment Partnership (Limited Partnership) (深圳市高特佳睿寶投資合夥 企業(有限合夥)) and Shenzhen Gaotejia Investment Group Co., Ltd. (深圳市高特佳投資集 團有限公司), pursuant to which each of Gaotejia Investment Management Co., Ltd. and Shenzhen Gaotejia Ruibao Investment Partnership (Limited Partnership) (深圳市高特佳睿 寶投資合夥企業(有限合夥)) agreed to subscribe for our Shares in the amount of US$12.0 million and US$18.0 million, respectively; (t) the Deed of Undertakings; (u) the Deed of Non-Competition; and (v) the Hong Kong Underwriting Agreement.

IV-10 APPENDIX IV STATUTORY AND GENERAL INFORMATION

2. Material Intellectual Property Rights (a) Trademarks As of the Latest Practicable Date, we had registered the following trademarks which we consider to be or may be material to our business:

Registration No. Trademark Place of registration Registered owner number Class Expiry date

1. PRC Viva Biotech Shanghai 17633872 42 September 27, 2026 2. Hong Kong Viva Biotech Holdings 304478266 35, 42 March 28, 2028

(b) Patents As of the Latest Practicable Date, we had registered the following patents in the PRC which we consider to be material to our business:

Type of Name of patent Date of Patent No. Patent description patent holder publication Valid period ZL201010174652.9 A low-cost insect cell serum-free medium Invention Viva Biotech Shanghai July 3, 2013 May 13, 2010 - (一種低成本的昆蟲細胞無血清培養基) May 12, 2030 ZL201320333208.6 A bacterial culture bottle conducive to Utility Viva Biotech Shanghai December 11, 2013 June 9, 2013 - bacterial growth Model June 8, 2023 (一種利於細菌生長的細菌培養瓶) ZL201320335741.6 A new cryogenic device for protein Utility Viva Biotech Shanghai December 11, 2013 June 9, 2013- purification Model June 8, 2023 (一種新型用於蛋白純化的低溫裝置) ZL201320335755.8 A gravity type membrane filtration device Utility Viva Biotech Shanghai December 11, 2013 June 9, 2013- for collecting bacteria Model June 8, 2023 (一種用於菌體收集的重力型膜過濾裝置) ZL201310278238.6 A method for production of recombinant Invention Viva Biotech Shanghai March 4, 2015 July 3, 2013- coagulation factor XIIa July 2, 2033 (一種重組人凝血因子XIIa的生產方法) ZL201310244864.3 A method for large-scale purification of Invention Viva Biotech Shanghai June 3, 2015 June 19, 2013- recombinant proteins in a laboratory June 18, 2033 (一種實驗室大規模純化重組蛋白的方法) ZL201310577902.7 A mixture screening method based on LC- Invention Viva Biotech February 1, 2017 November 18, 2013- MS detection membrane protein and Shanghai, November 17, 2033 ligand affinity (基於液質聯用檢測膜蛋白與 Institute of Biophysics, 配體親和力的混合物篩選方法) Chinese Academy of Sciences

ZL201310577289.9 Fusion expression of G-protein-coupled Invention Viva Biotech Shanghai February 6, 2018 November 18, 2013- receptor (G蛋白偶聯受體融合表達蛋白) November 17, 2033 201610757097.X Improve the in vitro expression Invention Viva Biotech Shanghai December 4, 2018 November 18, 2013- method of the fusion expression of G- November 17, 2033 protein coupled receptor (提高 G 蛋白偶聯 受體體外表達方法) 201610755793.7 Genetic recombination expression of G- Invention Viva Biotech Shanghai January 4, 2019 November 18, 2013- protein coupled receptor (基因重組表達 G November 17, 2033 蛋白偶聯受體方法) 201510824261.X Method for preparing phospholipid free Invention Viva Biotech Shanghai December 4, 2018 November 24, 2015- nano disk (一種無磷脂納米盤的製備方法) November 23, 2035 ZL201820756012.0 A type of multi-specification heating Utility Viva Biotech Shanghai April 2, 2019 May 21, 2018- stirrer for biotechnological laboratory use Model May 20, 2028 (一種多規格生物實驗室用加熱攪拌器)

IV-11 APPENDIX IV STATUTORY AND GENERAL INFORMATION

Type of Name of patent Date of Patent No. Patent description patent holder publication Valid period ZL201820638745.4 A type of portable incubator for pandemic Utility Viva Biotech Shanghai April 9, 2019 May 2, 2018- testing and detection (一種便攜式檢驗檢疫 Model May 1, 2028 培養箱)

ZL2018209033733 A type of biosafety cabinet (一种生物安全 Utility Viva Biotech Shanghai April 19, 2019 June 12, 2018- 柜) Model June 11, 2028

As of the Latest Practicable Date, we had registered the following patents in the United States which we consider to be material to be our business:

Type of Patent No. Patent description patent Name of patent holder Valid period US 9,670,252 B2 Fusion expression of G-protein coupled receptor Invention Viva Biotech Shanghai February 27, 2015 to January 13, 2034 US10106595B2 Nucleic acid sequence encoding a fusion protein Invention Viva Biotech Shanghai January 13, 2014 to March 20, 2034

US10,221,231 B2 Method of expressing a g-protein coupled Invention Viva Biotech Shanghai March 5, 2019 to receptor protein January 17, 2034

As of the Latest Practicable Date, we had filed application for the following patents which we consider to be material to our business:

Type of Application No. Patent description patent Place of application Name of applicant Date of application

15/362,826 Method for fusion expression of ion Invention United States Viva Biotech November 29, 2016 channel protein and transport protein Shanghai and protein fragment used therefor (融 合表達離子通道蛋白及運輸蛋白的方法 及其使用的蛋白片斷) 201410247582.3 Method for fusion expression of ion Invention PRC Viva Biotech June 5, 2014 channel protein and transport protein Shanghai and protein fragment used therefor (融 合表達離子通道蛋白及運輸蛋白的方法 及其使用的蛋白片斷) 201710528178.7 Application of benzyl barbiturates as Invention PRC Viva Biotech July 1, 2017 PCSK9 antagonists and low-density Shanghai lipoproteins (苄撑巴比妥類化合物在 作為PCSK9拮抗劑和降低低密度脂蛋 白中的應用)

(c) Domain Names As of the Latest Practicable Date, we owned the following domain names which we consider to be material to be or may be material to our business:

No. Domain name Registrant Date of registration Expiry date 1. vivabiotech.com.cn Viva Biotech Shanghai July 18, 2008 July 18, 2022 2. vivabiotech.com Viva Biotech Shanghai May 25, 2008 May 25, 2025

IV-12 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(d) Copyrights As of the Latest Practicable Date, we had registered the following copyrights which we consider to be material to be or may be material to our business:

Date of Place of Registration initial No. Copyright registration Registered owner number publication 1. Viva Project Management System V1.0 PRC Viva Biotech Shanghai 2013SR101375 May 8, 2014 (維亞項目管理系統V1.0)

Save as aforesaid, as of the Latest Practicable Date, there were no other trade or service marks, patents, intellectual or industrial property rights which were material in relation to our business.

C. FURTHER INFORMATION ABOUT DIRECTORS AND SUBSTANTIAL SHAREHOLDERS 1. Disclosure of Interests (a) Interests and short positions of our Directors and the chief executive of our Company in the Shares, underlying Shares and debentures of our Company and our associated corporations The following table sets out the interests and short positions of the Directors and chief executive of our Company immediately upon completion of the Capitalization Issue and the Global Offering (without taking into account the Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option and the exercise of options which were granted under the Pre-IPO Share Incentive Schemes) in the Shares, underlying Shares or debentures of our Company or any of our associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they are taken or deemed to have under such provisions of the SFO), or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which will be required to be notified to us and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, once the Shares are listed:

(i) Interest in our Company Approximate percentage of shareholding interest immediately following the Number of completion of the Name of Director or chief executive Nature of interest Shares(1) Global Offering(2) Mr.Mao...... Beneficial interest 351,910,365 (L) 23.46% Trustee of a trust(3) 87,782,186 (L) 5.85% Beneficiary of a trust(4) 21,674,984 (L) 1.44% Mr.Hua ...... Interest in a controlled corporation(5) 123,857,056 (L) 8.26% Ms.Mao...... Beneficiary of trusts(6) 316,696,137 (L) 21.11% Mr. John Wu Jiong ...... Interest in controlled corporations(7) 255,784,592 (L) 17.05%

Notes: (1) The letter “L” denotes the person’s long position in the Shares. (2) The calculation is based on the total number of 1,500,000,000 Shares in issue immediately upon completion of the Global Offering. (3) Mr. Mao is the settlor and trustee of the Mao Investment Trust and is interested in the shares held by him in his capacity as trustee of the Mao Investment Trust.

IV-13 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(4) Mr. Mao is the investment manager of the Min Zhou 2018 Family Trust and the manager of MZFT, LLC who exercises the voting rights of the Shares directly held by MZFT, LLC. Mr. Mao is also a beneficiary of the Min Zhou 2018 Family Trust. For more details of Min Zhou 2018 Family Trust, please refer to the section headed “History, Development and Corporate Structure — Min Zhou 2018 Family Trust.” (5) Mr. Hua holds 100.00% equity interest in China Finance Strategies. Therefore, Mr. Hua is deemed to be interested in the Shares directly held by China Finance Strategies. (6) Each of Mao and Sons, Zhang and Sons is indirectly wholly-owned by Intertrust (Singapore) Ltd. as the trustee of the Z&M Trust. Each of JL and JSW Holding Limited, MENGL Holding Limited, TIANL Holding Limited and VVBI Limited is indirectly wholly-owned by Intertrust (Singapore) Ltd. as the trustee of the VVBI Trust. Each of the Z&M Trust and the VVBI Trust is a revocable family trust set up by Ms. Mao as settlor and protector. Ms. Mao is also a beneficiary of the relevant family trusts. Therefore, Ms. Mao is deemed to be interested in the Shares directly held by each of Mao and Sons, Zhang and Sons, JL and JSW Holding Limited, MENGL Holding Limited, TIANL Holding Limited and VVBI Limited. For more details of the Z&M Trust and the VVBI Trust, please refer to the section headed “History, Development and Corporate Structure — Family Trusts set up by Ms. Mao.” In addition, Ms. Mao is one of the beneficiaries of the Mao Investment Trust and is deemed to be interested in the Shares held by Mr. Mao in his capacity as the trustee of the Mao Investment Trust. (7) Mr. John Wu Jiong holds 100.00% equity interest in each of Fenghe Harvest and Wu and Sons. In addition, Mr. John Wu Jiong holds 45.00% equity interest in FengHe Canary. Therefore, Mr. John Wu Jiong is deemed to be interested in the Shares directly held by Fenghe Harvest, Wu and Sons and FengHe Canary.

(ii) Interest in associated corporations of our Company Approximate percentage of shareholding in Number of the associated Name of Director Name of associated corporation Nature of interest Shares(1) corporation Mr.Mao ...... Anji Pharmaceuticals Inc. (“Anji Interest in controlled corporation(2) Pharmaceuticals”) 12,398,500(L) 17.40%(7) Mr.Hua...... Anji Pharmaceuticals Interest in controlled corporation(3) 5,593,500(L) 7.85%(7) Ms.Mao ...... Anji Pharmaceuticals Beneficiary of trusts(4) 15,117,000(L) 21.22%(7) Mr. John Wu Jiong .... Anji Pharmaceuticals Interest in controlled corporation(5) 8,562,500(L) 12.02%(7) Mr.Mao ...... Clues Therapeutics Inc. (“Clues Interest in controlled corporations(2) Therapeutics”) 16,000,000(L) 14.00% Mr.Hua...... Clues Therapeutics Interest in controlled corporations(3) 6,400,000(L) 5.60% Ms.Mao ...... Clues Therapeutics Beneficiary of a trust(6) 8,000,000(L) 7.00% Mr. John Wu Jiong .... Clues Therapeutics Interest in controlled corporations(5) 13,714,286(L) 12.00%

Notes: (1) The letter “L” denotes the person’s long position in the Shares. (2) Mr. Mao holds 100.0% equity interest in Chencheney Ltd. Therefore, Mr. Mao is deemed to be interested in the shares of Anji Pharmaceuticals and Clues Therapeutics directly held by Chencheney Ltd. (3) Mr. Hua holds 100.0% equity interest in H&D Biotech Investment Limited. Therefore, Mr. Hua is deemed to be interested in the shares of Anji Pharmaceuticals and Clues Therapeutics directly held by H&D Biotech Investment Limited. (4) Each of Mao and Sons, Zhang and Sons is indirectly wholly-owned by Intertrust (Singapore) Ltd. as the trustee of the Z&M Trust. Ms. Mao is the settlor, protector and a beneficiary of the Z&M Trust. Therefore, Ms. Mao is deemed to be interested in the shares of Anji Pharmaceuticals directly held by Zhang and Sons and Mao and Sons. For more details of the Z&M Trust, please refer to the section headed “History, Development and Corporate Structure — Family trusts set up by Ms. Mao.” (5) Mr. John Wu Jiong holds 100.0% equity interest in each of Fenghe Harvest and Wu and Sons. Therefore, Mr. John Wu Jiong is deemed to be interested in the shares of Anji Pharmaceuticals and Clues Therapeutics directly held by Fenghe Harvest and Wu and Sons. (6) Zhang and Sons is indirectly wholly-owned by Intertrust (Singapore) Ltd. as the trustee of the Z&M Trust. Ms. Mao is the settlor, protector and a beneficiary of the Z&M Trust. Therefore, Ms. Mao is deemed to be interested in the shares of Clues Therapeutics directly held by Zhang and Sons. For more details of the Z&M Trust, please refer to the section headed “History, Development and Corporate Structure — Family trusts set up by Ms. Mao.” (7) Assuming the series seed preferred shares of Anji Pharmaceuticals are converted into ordinary shares at the conversion ratio of 1:1.

(b) Interests of the substantial shareholders Save as disclosed in the section headed “Substantial Shareholders” in this prospectus, immediately following the completion of the Global Offering and without taking into account any Shares which may be issued pursuant to the exercise of the Over-allotment Option and the exercise of options which were granted under the Pre-IPO Share Incentive Schemes, our Directors are not aware of any other person (not being a Director or chief executive of our Company) who will have an interest or short position in the Shares or the underlying Shares which would fall to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or

IV-14 APPENDIX IV STATUTORY AND GENERAL INFORMATION indirectly, interested in 10% or more of the issued voting shares of our Company or any other member of our Group.

2. Particulars of Directors’ Service Contracts and Letters of Appointment Each of the executive Directors has entered into a service contract with us for an initial term of three years or until the third general meeting of the Company commencing from the Listing Date (whichever is earlier), which may be terminated by not less than three months’ notice in writing served by either the executive Director or our Company.

Each of the non-executive Directors and independent non-executive Directors has signed a letter of appointment with us for an initial term of three years or until the third general meeting of the Company commencing from the Listing Date (whichever is earlier), which may be terminated by not less than three months’ notice in writing served by either the non-executive Director/independent non-executive Director or our Company.

Save as disclosed in this prospectus, none of the Directors has entered into any service agreement or letter of appointment with any member of our Group (excluding agreements expiring or determinable by any member of our Group within one year without payment of compensation other than statutory compensation).

3. Remuneration of Directors The aggregate amount of remuneration which was paid to our Directors for the three years ended December 31, 2016, 2017 and 2018 were approximately RMB0.2 million, RMB0.4 million and RMB5.6 million, respectively.

It is estimated that remuneration and benefits in kind equivalent to approximately RMB8.0 million in aggregate will be paid and granted to our Directors by us in respect of the financial year ending December 31, 2019 under arrangements in force at the date of this prospectus.

The aggregate amount of remuneration which were paid by our Group to our five highest paid individual (including both employees and Directors) for the three years ended December 31, 2016, 2017 and 2018 were approximately RMB2.0 million, RMB2.4 million and RMB4.0 million, respectively.

None of our Directors or any past directors of any member of our Group has been paid any sum of money during the Track Record Period as (a) an inducement to join or upon joining our Company; or (b) for loss of office as a director of any member of our Group or of any other office in connection with the management of the affairs of any member of our Group.

There has been no arrangement under which a Director has waived or agreed to waive any emoluments during the Track Record Period.

4. Disclaimers Save as disclosed in this prospectus: (a) none of our Directors or our chief executive has any interest or short position in the Shares, underlying Shares or debentures of us or any of our associated corporations (within the meaning of Part XV the SFO) which will have to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or which will be

IV-15 APPENDIX IV STATUTORY AND GENERAL INFORMATION

required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which will be required to be notified to us and the Stock Exchange pursuant to Model Code for Securities Transactions by Directors of Listed Issuers once the Shares are listed; (b) none of our Directors is aware of any person (not being a Director or chief executive of our Company) who will, immediately following completion of the Global Offering (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option and the exercise of options which were granted under the Pre-IPO Share Incentive Schemes), have an interest or short position in the Shares or underlying Shares which would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO or who is interested, directly or indirectly, in 10% or more of the issued voting shares of any member of our Group; and (c) so far as is known to our Directors, none of our Directors, their respective close associates (as defined under the Listing Rules) or Shareholders who own more than 5% of the number of issued shares of our Company have any interests in the five largest customers or the five largest suppliers of our Group.

D. SHARE INCENTIVE SCHEMES 1. Pre-IPO Share Incentive Schemes (a) Purpose and Principal Terms The purposes of the 2009 Stock Incentive Plan, the 2018 Stock Incentive Plan and the Pre-IPO Stock Incentive Plan are to enable our Group to grant options or awards to eligible persons (as determined by our Board or any committee designated by the Board to administer the scheme the “Administrator”) including employees, directors and consultants of our Company or any related entity for purpose of attracting and retaining the best available personnel. The principal terms of the 2009 Stock Incentive Plan, the 2018 Stock Incentive Plan and the Pre-IPO Stock Incentive Plan are substantially the same, except for the maximum number of Shares which may be issued under each plan. The principal terms of the Pre-IPO Share Incentive Schemes are as follows: (i) Subject to any alterations set out under the Pre-IPO Share Incentive Schemes in the event of any share split, reverse share split, share dividend, combination or reclassification of Shares, increase or decrease of issued Shares effected without receipt of consideration by the Company and certain corporate transactions, the maximum number of Shares in respect of which options or awards may be granted under the 2009 Stock Incentive Plan, the 2018 Stock Incentive Plan and the Pre-IPO Stock Incentive Plan shall be 270,937,302 Shares (as adjusted for the increase in the number of issued shares resulting from a share split in January 2010 and adjusted after the Share Split and the Capitalization Issue), 57,892,351 Shares (adjusted after the Share Split and the Capitalization Issue) and 2,194,555 Shares (adjusted after the Share Split and the Capitalization Issue), respectively, in an aggregate representing approximately 28.7% of the issued share capital of our Company immediately before completion of the Global Offering but after completion of the Share Split and the Capitalization Issue; (ii) No option or award under the Pre-IPO Share Incentive Schemes will be granted after Listing; (iii) No consideration were paid by the grantees for the options and awards granted under the Pre-IPO Share Incentive Schemes;

IV-16 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(iv) Subject to the terms of the Pre-IPO Share Incentive Schemes and the terms set out in the notice of stock option award and the stock option award agreement entered into at the time of grant (the “Stock Option Award Agreements”), (i) if the option (“Qualified Incentive Share Option”) is intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986 (as amended) (the “Code”), it may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the grantee, only by the grantee; (ii) if the option is not intended to qualify as a Qualified Incentive Share Option (“Non-qualified Incentive Share Option”), it shall be transferable (a) by will and by the laws of descent and distribution and (b) during the lifetime of the grantee, to the extent and in the manner authorized by the Administrator. Notwithstanding the foregoing, the grantee may designate one or more beneficiaries of the grantee’s award in the event of the grantee’s death; (v) Subject to the terms of the Pre-IPO Share Incentive Schemes and the terms set out in the Stock Option Award Agreements, the options and awards under the Pre-IPO Share Incentive Schemes shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value) for all of awards outstanding or to the extent not assumed or replaced (as applicable) in the event of change of control or certain corporate transactions as defined under the Pre-IPO Share Incentive Schemes; (vi) Subject to the terms of the Pre-IPO Share Incentive Schemes and the terms set out in the Stock Option Award Agreements, the options and awards under the Pre-IPO Share Incentive Schemes, (i) in the case of a Qualified Incentive Share Option, (a) if granted to an employee who, at the time of the grant of such Qualified Incentive Share Option owns shares representing more than 10% of the voting power of all classes of shares of the Company or any parent or subsidiary of the Company, the per Share exercise price shall be not less than 110% of the fair market value per Share on the date of grant; (b) if granted to any employee other than an employee described in the preceding paragraph, the per Share exercise price shall be not less than 100% of the fair market value per Share on the date of grant; (ii) in the case of a Non-qualified Incentive Share Option, the per Share exercise price shall be not less than 85% of the fair market value per Share on the date of grant unless otherwise determined by the Administrator; (iii) In the case of other awards, such price as is determined by the Administrator; (vii) Each grantee to whom an option or award has been granted shall be entitled to the Shares they are awarded in accordance with the terms (including any restrictions and vesting requirement that may be imposed) of the Pre-IPO Share Incentive Schemes and the Stock Option Award Agreements, provided, however, that the term of a Qualified Incentive Share Option shall be no more than ten years from the date of grant thereof; (viii) An award may be exercised following the termination of a grantee’s continuous service only to the extent provided in the Stock Option Award Agreements; (ix) The Board may at any time amend, suspend or terminate the Pre-IPO Share Incentive Schemes; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by applicable laws. No suspension or termination of the Pre-IPO Share Incentive Schemes shall adversely affect any rights under awards already granted to a grantee.

IV-17 APPENDIX IV STATUTORY AND GENERAL INFORMATION 3.93% 0.97% 1.20% 0.64% 1.12% 0.12% 0.64% 0.91% 0.16% Pre-IPO Options Pre-IPO Offering after full following the Global the Company completion of Percentage of exercise of the share capital of enlarged issued 0.00456 0.00456 0.43368 0.011392 0.123032 0.011392 0.123032 0.011392 0.011392 0.123032 0.011392 0.123032 0.123032 Share Split and the Exercise Price (US$) Capitalization Issue) (as adjusted after the Issue) Shares 6,364,208 4,389,109 5,266,931 2,194,555 5,266,931 3,511,287 1,755,644 5,332,768 8,778,219 4,358,386 8,339,308 2,194,555 Pre-IPO the Share 64,774,475 17,556,437 15,076,590 Number of Options (as Split and the subject to the adjusted after Capitalization Period Vesting (Note 1) (Note 1) (Note 2) (Note 1) (Note 2) (Note 1) (Note 1) (Note 2) (Note 1) (Note 1) (Note 2) (Note 2) (Note 4) June 15, 2011 June 15, 2011 June 15, 2011 June 15, 2011 June 21, 2018 August 1, 2009 August 3, 2010 August 1, 2009 Date of Grant January 2, 2018 January 2, 2018 January 2, 2018 January 2, 2018 January 2, 2018 (Note 3) 1,975,099 0.123032 January 2, 2018 January 2, 2018 (Note 3) 2,567,629 0.123032 Address Room 2802, No. 9, Lane 188,Road, Mingyue Pudong New District, Shanghai, PRC Room 1002, No. 35, Lane 99,Pudong Qiai New Road, District, Shanghai, PRC Road, Zhangjiang High-Tech Park, Pudong New District, Shanghai, PRC Room 802, No. 20, Lane 1799,Road, East Pudong Huaxia New District, Shanghai, PRC 5722 S Stony Island Avenue, ApartmentChicago, 1, 1L60637, U.S. Room 503, No. 19, Lane 409, Qingtong Flat A, 48/F, BLK T1, TheHang Legend, Drive, 23 Tai Tai Hang, Hong Kong Room 403, Building No. 7, LaneHuanqiao 1137, Road, Pudong New District, Shanghai, PRC Position Chairman, Chief Executive Officer and Executive Director Chief Scientific Officer Executive Director and Executive Vice President Vice President of the Department of Biology Executive Director and Chief Financial Officer Vice President of the Department of Chemistry ) . . . Executive Director and President ...... 任德林 ...... ”) for an aggregate of 148,724,968 Shares (as adjusted after the Share Split and the Capitalization Issue) have been granted to a total of 80 As of the date of this prospectus, the outstanding options which have been granted under the Pre-IPO Share Incentive Schemes (the “ ...... (b) Outstanding Grants Grantee Directors Mr.Mao...... eligible persons by our Company under the Pre-IPO Share Incentive Schemes, the details of which are set forth below: Options Senior Management Mr. Ye Zhixiong Subtotal Mr.Wu...... Mr. Wang Jie rHa...... Mr.Hua Mr. Liu Rongqiang Mr. Ren Delin ( Subtotal

IV-18 Percentage of enlarged issued IV APPENDIX Number of share capital of Shares the Company subject to the after full Pre-IPO exercise of the Options (as Pre-IPO adjusted after Options the Share Exercise Price (US$) following Split and the (as adjusted after the completion of Vesting Capitalization Share Split and the the Global Grantee Position Address Date of Grant Period Issue) Capitalization Issue) Offering Connected Persons Mrs. Zhao Huixin (趙慧 Associate Director, Procurement Room 802, No. 20, Lane 1799, East Huaxia August 1, 2009 (Note 1) 658,366 0.00456 0.25% 新)(5) ...... Road, Pudong New District, Shanghai, PRC June 15, 2011 (Note 1) 658,366 0.011392 January 2, 2018 (Note 2) 2,852,921 0.123032 Subtotal ...... 4,169,654 0.25% Employees Cheng Xueheng Chief Technology Officer 1212 Brian Circle Libertyville, IL 60048, USAAugust 3, 2010 (Note 1) 3,072,377 0.011392 0.19% (程學恒) ...... June 15, 2011 (Note 1) 3,511,287 0.011392 0.21% INFORMATION GENERAL AND STATUTORY January 2, 2018 (Note 2) 658,366 0.123032 0.04% Wen Xin (文新) ...... Executive Director, Discovery Chemistry Room 101, No. 50, Lane 200, Songtao January 2, 2018 (Note 2) 2,633,466 0.123032 0.16% IV-19 Road, Pudong New District, Shanghai Zhao Qiang (趙強) ...... Executive Director, Biology 12786 Isocoma Street, San Diego CA 92129 January 2, 2018 (Note 2) 2,194,555 0.123032 0.13% Cai Jianhua (蔡建華) ..... Vice President, New Technology Room 301, No. 25, Lane 1636, Qishan August 1, 2009 (Note 1) 3,511,287 0.00456 0.21% Development Road, Pudong New District, Shanghai June 15, 2011 (Note 1) 1,755,644 0.011392 0.11% Wang Lishan (王立山) .... Associate Director, Customer Services Room 403, No. 3, Lane 951, Zhangyang August 1, 2009 (Note 1) 658,366 0.00456 0.04% Road, Shanghai June 15, 2011 (Note 1) 658,366 0.011392 0.04% January 2, 2018 (Note 2) 1,975,099 0.123032 0.12% Gao Jin (高進) ...... Associate Director, Human Resources Yubei District Vocational Education Center, August 1, 2009 (Note 1) 658,366 0.00456 0.04% Yubei District, Chongqing June 15, 2011 (Note 1) 658,366 0.011392 0.04% Fei Xiaoyu (費曉玉) ...... Assistant to the Chief Executive Officer and No. 15, GujiaZhai, Daxing Village, Heqing August 1, 2009 (Note 1) 131,673 0.00456 0.01% Manager of the Executive Office Town, Pudong New District, Shanghai June 15, 2011 (Note 1) 1,755,644 0.011392 0.11% January 2, 2018 (Note 2) 877,822 0.123032 0.05% Xia Yu (夏煜)...... Director, Biology Room 601, No. 41, Lane 2101, Banquan August 1, 2009 (Note 1) 3,072,377 0.00456 0.19% Road, Sanlin Town, Pudong New District, June 15, 2011 (Note 1) 1,316,733 0.011392 0.08% Shanghai January 2, 2018 (Note 2) 307,238 0.123032 0.02% Shen Jian (沈堅) ...... Director, Biology No. 119, Lane 1382, Jiuting Street, August 1, 2009 (Note 1) 658,366 0.00456 0.04% Songjiang District, Shanghai June 15, 2011 (Note 1) 1,316,733 0.011392 0.08% January 2, 2018 (Note 2) 526,693 0.123032 0.03% Qian Dongming Director, Biology Room 101, No. 41, Lane 550, Wanxia August 1, 2009 (Note 1) 658,366 0.00456 0.04% (錢冬明) ...... Road, Jichang Town, Pudong New District, June 15, 2011 (Note 1) 1,316,733 0.011392 0.08% Shanghai January 2, 2018 (Note 2) 526,693 0.123032 0.03% APPENDIX IV STATUTORY AND GENERAL INFORMATION 0.01% 0.04% 0.08% 0.03% 0.01% 0.01% 0.02% 0.01% 0.02% 0.02% 0.04% 0.01% 0.01% 0.02% 0.01% 0.04% 0.03% 0.01% 0.04% 0.04% 0.02% Options Pre-IPO Offering after full following the Global the Company completion of Percentage of exercise of the share capital of enlarged issued 0.00456 0.011392 0.123032 Share Split and the Exercise Price (US$) Capitalization Issue) (as adjusted after the Issue) 351,129 658,366 175,564 Shares Pre-IPO the Share Number of Options (as Split and the subject to the adjusted after Capitalization Period Vesting (Note 1) (Note 1) (Note 2) June 15, 2011 (Note 1) 1,316,733 0.011392 June 15, 2011 (Note 1)June 658,366 15, 2011 (Note 1) 658,366 0.011392 0.011392 0.04% 0.04% June 15, 2011 June 15, 2011 (Note 1) 658,366 0.011392 June 15, 2011 (Note 1) 658,366 0.011392 August 1, 2009 (Note 1) 131,673 0.00456 August 1, 2009 (Note 1) 658,366 0.00456 August 1, 2009 (Note 1) 658,366 0.00456 0.04% August 1, 2009 (Note 1) 131,673 0.00456 0.01% August 1, 2009 (Note 1)August 658,366 1, 2009 (Note 1) 658,366 0.00456August 1, 2009 (Note 1) 0.00456 131,673 0.04% August 1, 2009 (Note 1)August 1, 2009 0.04% (Note 0.00456 131,673 1) 131,673 0.00456 0.00456 August 1, 2009 August 1, 2009 (Note 1) 131,673 0.00456 0.01% August 1, 2009 (Note 1) 131,673 0.00456 August 1, 2009 (Note 1) 131,673 0.00456 August 1, 2009 (Note 1) 131,673 0.00456 August 1, 2009 (Note 1) 658,366 0.00456 Date of Grant January 2, 2018 (Note 2) 526,693 0.123032 January 2, 2018 (Note 2) 175,564 0.123032 0.01% January 2, 2018 (Note 2) 131,673 0.123032 0.01% January 2, 2018 (Note 2)January 2, 2018 (Note 395,020 2) 307,238 0.123032 0.123032 January 2, 2018 (Note 2) 307,238 0.123032 0.02% January 2, 2018 January 2, 2018 (Note 2) 307,238 0.123032 0.02% January 2, 2018 (Note 2) 307,238 0.123032 January 2, 2018 (Note 2) 526,693 0.123032 January 2, 2018 (Note 2) 307,238 0.123032 Address Room 601, No. 16, LaneRoad, 337, Pudong Lianzhong New District, Shanghai County, Heilongjiang Province Jingtai Building, No. 1175, Xietu Road, Shanghai Street, Xuhui District, Shanghai Pudong New District, Shanghai Town, Xihua County, Henan Province Baoshan District, Shanghai No. 5 Road, Pudong New District, Shanghai Pudong New District, Shanghai Room 502, No. 25, LaneRoad, 916, Pudong Fanghua New District, Shanghai Road, Pudong New District, Shanghai Room 302, No. 71, LaneRoad, 86, Pudong Hangchengsan New District, Shanghai Room 902, No. 165, LaneRoad, 158, Pudong West Tailin New District, Shanghai Room 502, Jiashu Building, Audit Bureau, Zhaonan City, Jilin Province Room 602, No. 17, LaneRoad, 1555, Pudong Banquan New District, Shanghai Position Project Manager, Biology Team 13, Hongwei Village, Hexiang, Lanxi Lab Head, Biology Room 501, Building 89, Lane 345, Baihua Associate Director, BiologyProject Manager, Biology Room 401, No. 1, Lane 226, Qingxia Road, Project Manager, Biology Team No. 1, Lizhuang Village, Zhifang Project Manager, BiologyProject Manager, Biology Room 604, No. 96, Sitangsan Village, Room 601, No. 19, Lane 151, Hangcheng RoomProject 403, Manager, No. Biology 11, Lane 299, Yijiang Road, Project Manager, Biology Room 302, No. 71, Lane 86, Hangchengsan Project Manager, Biology Associate Director, Biology Scientist, Biology Associate Director, Biology ) . . . Project Manager, Biology ) . . . Director, Biology ) .... )..... )..... ) ..... )...... ) ...... ) ...... ) ...... 楊玥珵 趙岩龍 ) ...... 周立宏 ) ...... 譚恩旺 魏文韜 ) ...... 蘇曉燕 房麗燕 李衛華 ) ...... 許依華 李子娟 魏蘋 ) ...... 杜娟 薛飛 李娜 王筱虹 ( Fang Liyan ( Grantee Zhao Yanlong ( Li Na ( Li Zijuan ( Wei Ping ( Du Juan ( Wang Xiaohong Xue Fei ( Yang Yuecheng ( Tan Enwang ( Li Weihua ( Zhou Lihong ( Su Xiaoyan ( Wei Wentao ( Xu Yihua (

IV-20 APPENDIX IV STATUTORY AND GENERAL INFORMATION 0.01% 0.01% 0.03% 0.01% 0.02% 0.01% 0.02% 0.02% 0.01% 0.02% 0.01% 0.02% 0.01% 0.02% 0.01% 0.03% 0.08% 0.02% Options Pre-IPO Offering after full following the Global the Company completion of Percentage of exercise of the share capital of enlarged issued 0.00456 0.00456 0.123032 0.123032 0.011392 0.123032 0.011392 0.123032 0.011392 0.123032 Share Split and the Exercise Price (US$) Capitalization Issue) (as adjusted after the Issue) 131,673 526,693 131,673 276,514 131,673 263,347 131,673 526,693 307,238 Shares Pre-IPO 1,316,733 the Share Number of Options (as Split and the subject to the adjusted after Capitalization Period Vesting (Note 1) (Note 2) (Note 1) (Note 2) (Note 1) (Note 2) (Note 1) (Note 2) (Note 1) (Note 2) August 1, 2009 (Note 1) 131,673 0.00456 August 1, 2009 August 1, 2009 (Note 1) 131,673August 1, 2009 0.00456 0.01% August 3, 2010 August 1, 2009 (Note 1) 131,673 0.00456 August 3, 2010 August 3, 2010 Date of Grant January 2, 2018 January 2, 2018 (Note 2) 395,020 0.123032 0.02% January 2, 2018 January 2, 2018 January 2, 2018 (Note 2) 395,020 0.123032 January 2, 2018 (Note 2) 395,020 0.123032 January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 395,020 0.123032 January 2, 2018 January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 395,020 0.123032 January 2, 2018 Address Gaoling Community, Tongguan Town, Wangcheng County, Hunan Province No. 143, Lingxing House, ZhijuHeqing Village, Town, Pudong New District, Shanghai Baoshan District, Shanghai Road, Xuhui District, Shanghai Road, Caolu Town, Pudong NewShanghai District, District, Ningbo, Zhejiang Province New Village, Nicheng Town, Nanhui District, Shanghai Room 101, No. 6, LanePudong 580, New Qianhui District, Road, Shanghai Room 502, No. 58, HuacaoHuacao New Town, Village, Minxing District, Shanghai District, Shanghai Room 203, No. 1, BuildingJianzhong 2, Road, Lane Zhangjiang 461, Town, Pudong New District, Shanghai Room 501, No. 52, LaneHuinan 698, Town, Gongle Pudong Road, New District, Shanghai Room 401, No. 59, LaneRoad, 258, Xuhui Tiandeng District, Shanghai Room 202, No. 20, LaneRoad, 2110, Pudong East New Huaxia District, Shanghai Room 901, No. 4, LaneRoad, 2500, Zhangjiang Zhongke Town, Pudong New District, Shanghai Position Scientist, Biology Head of Logistics Deputy Manager of Import and Export Room 502, No. 28, Songnansi Village, Project Manager, Biology Room 401, No. 59, Lane 258, Tiandeng Purchasing Specialist Room 402, No. 26, Lane 176, Mintong Scientist, Biology Room 401, Gate 17, Building 9, Wenwei Project Manager, Biology Project Manager, Discovery Chemistry No. 1996, Zhangyang Road, Pudong New Manager of Lab, Biology Senior Scientist, Biology Project Manager, Biology Project Manager, Biology Director, Biology ) . . . Associate Director, Biology ) . . . Project Manager, Discovery Chemistry No. 37, Shiqiaotou, Xiapu Street, Beicang ).... ) ..... ) ..... )...... )...... )...... )...... 童水龍 ) ...... )...... )...... 王聰娜 ) ...... ) ...... 趙慧鋒 ) ...... 李勝斌 田為宇 安治星 張涵 曹勇 陸瑞欣 鄒洋 方芳 薑帆 胡亮 汪傑 倪思未 Zhao Huifeng ( Grantee Zou Yang ( Wang Jie ( Zhang Han ( Jiang Fan ( Tian Weiyu ( Ni Siwei ( An Zhixing ( Hu Liang ( Lu Ruixin ( Fang Fang( Tong Shuilong ( Cao Yong ( Wang Congna ( Li Shengbin (

IV-21 APPENDIX IV STATUTORY AND GENERAL INFORMATION 0.01% 0.02% 0.01% 0.01% 0.02% 0.05% 0.02% 0.01% 0.05% 0.03% 0.02% Options Pre-IPO Offering after full following the Global the Company completion of Percentage of exercise of the share capital of enlarged issued Share Split and the Exercise Price (US$) Capitalization Issue) (as adjusted after the Issue) Shares Pre-IPO the Share Number of Options (as Split and the subject to the adjusted after Capitalization Period Vesting Date of Grant January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 263,347 0.123032 January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 131,673 0.123032 January 2, 2018 (Note 3) 395,020 0.123032 January 2, 2018 (Note 2) 263,347 0.123032 January 2, 2018 (Note 2) 175,564 0.123032 0.01% January 2, 2018 (Note 2) 877,822 0.123032 January 2, 2018 (Note 2) 1,536,188 0.123032 0.09% January 2, 2018 (Note 2) 395,020 0.123032 0.02% January 2, 2018 (Note 2) 131,673January 2, 2018 0.123032 (Note 2)January 2, 2018 (Note 790,040 2) 526,693 0.123032 0.123032 January 2, 2018 (Note 2) 395,020 0.123032 0.02% January 2, 2018 (Note 2) 395,020 0.123032 Address Room 382, No. 37, LaneRoad, 1978, Pudong Yuqiao New District, Shanghai Room 302, No. 60, LaneRoad, 436, Pudong Jianghui New District, Shanghai 2437, East Remin Road, Huinan Town, Shanghai Hangchengsan Road, Pudong, Shanghai Room 6002, Ziwei Apartment, No. 689, Zhangjiang Road, Pudong New District, Shanghai Road, Pudong New District, Shanghai Road, Putuo District, Shanghai Road, Pudong New District, Shanghai Road, Pudong New District, Shanghai Langxuan, Jindou Jiuyue, Xiuzhou District, Jiaxing City, Zhejiang Shanghai Road, Yangpu District, Shanghai Zhangjiang Town, Pudong New District, Shanghai Road, Pudong New District, Shanghai Room 1203, No. 10, LaneRoad, 580, Kangqiao Kanghong Town, Pudong New District, Shanghai Position Chemistry Project Manager, Biology Room 501, No. 23, Branch Lane 1, Lane Group Leader, Discovery Chemistry Room 401, No. 27, Lane 518, Director, Biology Project Manager, Discovery Chemistry Room 1401, No. 18, Lane 1679, Yuqiao Project Manager, Biology Room 301, No. 10, Lane 1680, Tongpu Associate Director, Discovery Chemistry Room 703, No. 21, Lane 409, Qingtong Director, Discovery Chemistry Room 801, No. 2, Lane 358, Qingtong Project Manager, BiologyAssociate Director, Discovery Chemistry No. 407, Zhaojiabang Road, Xuhui District, Associate Room Director, 1502, Discovery Chemistry No. 9, Lane 365, Central Yanji Room 501, No. 26, Lane 396, Yijiang Road, Project Manager, Discovery Chemistry Room 201, No. 21, Lane 1166, Guanglan Project Manager, Biology ) . . Manager of Scaleup Lab, Discovery ) . . . Project Manager, Biology ) . . . Project Manager, Discovery Chemistry Room 501, Unit 2, Building 1, Yangfang ).... ) .... ) .... ) ...... ) ...... ) ...... 鄭運平 ) ...... ) ...... 曾秀紅 )...... )...... 黨奎峰 楊晶晶 焦國慶 姜啟陽 張萌 王勝 )...... 丁克家 董婧 張科 丁悅 ) ...... 李偉繼 任博 鄭衛紅 ( Grantee Jiang Qiyang ( Li Weiji ( Zhang Ke ( Zeng Xiuhong ( Zhang Meng ( Ding Kejia ( Dong Jing ( Jiao Guoqing ( Zheng Weihong Ren Bo ( Ding Yue ( Wang Sheng ( Zheng Yunping ( Dang Fengkui ( Yang Jingjing (

IV-22 APPENDIX IV STATUTORY AND GENERAL INFORMATION 0.01% 0.01% 0.01% 0.01% 0.01% 0.07% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.07% Options Pre-IPO Offering after full following the Global the Company completion of Percentage of exercise of the share capital of enlarged issued Share Split and the Exercise Price (US$) Capitalization Issue) (as adjusted after the Issue) Shares Pre-IPO the Share Number of Options (as Split and the subject to the adjusted after Capitalization Period Vesting Date of Grant January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 131,673 0.123032 January 2, 2018 (Note 2)January 2, 2018 87,782 (Note 2) 131,673 0.123032 0.123032 January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 175,564January 2, 2018 (Note 2) 0.123032 131,673 0.123032 0.01% 0.01% January 2, 2018 (Note 2) 1,097,277January 2, 2018 (Note 2) 0.123032 131,673 0.123032 January 2, 2018 (Note 2) 131,673 0.123032 January 2, 2018 (Note 2) 131,673 0.123032 January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 175,564 0.123032 January 2, 2018 (Note 2) 131,673 0.123032 January 2, 2018 (Note 2) 1,097,277 0.123032 Address District, Shanghai No. 26, Pailouzhu, Hepu Village, Tianhua Town, Taihu County, Anqing City, Anhui Chuansha Town, Pudong New District, Shanghai Caoying Road, Qingpu District, Shanghai Pudong New District, Shanghai Road, Pudong New District, Shanghai Township, Guangshan County, Henan No. 1, Team 9, Baozhuangju, Banjing Town, Rugao City, Jiangsu No. 280, Zhishuling North House, Heqing Town, Pudong New District, Shanghai Huoxiang Road, Pudong New District, Shanghai Room 1102, No. 17, LaneNo. 1255, Huaxia 2 Road, Pudong New District, Shanghai Room 604, Building 4, Youan MeilinLongsheng Yuan, Huacheng, Xiuqing Road, Xiuzhou District, Jiaxing, Zhejiang Room 402, No. 16 Wanxin Jiayuan,207, Lane West Xinde Road, Chuansha Town, Pudong New District, Shanghai No. 31, Gujiazhai, Team 4, Qingxing Village, Heqing Town, Pudong New District, Shanghai Room 301, No. 25, LaneRoad, 1636, Pudong Qishan New District, Shanghai Position Chemistry Purchasing SpecialistFinance Supervisor Room 602, No. 3, Lane 602, Xinde Road, Room 102, Building 109, Lane 555, Project Manager, Discovery Chemistry Room 204, No. 28, Lane 89, Weifang Road, Project Manager, Discovery Chemistry Room 101, No. 25, Lane 118, Zhoukang Associate Director of the Finance Department Maintenance Supervisor Deputy Manager of Human Resources Room 801, No. 13, Tomson 4th, Lane 238, Accountant Assistant to the Chief Executive OfficerJiaxing of Viva Audit Associate Director Administrator Warehouse Supervisor ) . . . Project Manager, Discovery Chemistry Lane 508, West Xinde Road, Pudong New ) . . . Manager of Analytical Lab, Discovery ) . . . Project Manager, Discovery Chemistry Village Street, Changxing Town, Xianju ).... ).... ) .... )..... )...... )...... ) ...... )...... ) ...... )...... 陳修全 章嶽軍 徐永剛 錢華龍 劉勁強 張瓊 施嶽宏 夏丹櫻 ) ...... ) ...... 胡文慧 薛亞南 蔣瑩 薑浩 吳佳妮 杜偉 吳燁 Grantee Chen Xiuquan ( Liu Jingqiang ( Xu Yonggang ( Xia Danying ( Wu Jiani ( Hu Wenhui ( Jiang Hao ( Zhang Yuejun ( Jiang Ying ( Xue Yanan ( Zhang Qiong ( Wu Ye ( Du Wei ( Shi Yuehong ( Qian Hualong (

IV-23 APPENDIX IV STATUTORY AND GENERAL INFORMATION 0.01% 9.02 % 3.92% 0.01% Options Pre-IPO Offering after full following the Global the Company completion of Percentage of exercise of the share capital of enlarged issued Share Split and the Exercise Price (US$) Capitalization Issue) (as adjusted after the , 20% of the options shall vest on the fourth , another 20% of the options shall vest on the fourth Issue) Shares Pre-IPO 64,704,249 the Share Number of Options (as 148,724,968 Split and the subject to the adjusted after Capitalization Period Vesting Date of Grant January 2, 2018 (Note 2) 131,673 0.123032 January 2, 2018 (Note 2) 83,393 0.123032 Address Road, Pudong New District, Shanghai New District, Shanghai Position ) is an employee of the Group and the spouse of Mr. Wu. Accountant Room 501, No. 7, Lane 7788, Shangnan Accountant Huicheng Jiayuan, Heyong Road, Pudong

趙慧新 ) ..... ) ...... 徐韻婷 石榴懿 In November 2018, certain grantees transferred their share optionsSave as to disclosed Vesop above, Limited no for other options administrative or purpose. awards The have been numberApplication granted has of and been shares remained made to outstanding the or Listing agreed Committee to for be the granted listing of by and the permission Company to deal in the 148,724,968 Shares (as adjusted after the ...... anniversary of the date of grant, and the remaining 20% of the options shall vest onanniversary the of fifth the anniversary date of of the grant, date and of the grant. remaining 20% of the options shall vest on the fifth anniversary of the date of grant. underlying such transferred options are 146,530,413 (as adjusted after the Capitalization Issue). under the Pre-IPO Share Incentive Schemes. Capitalization Issue) that may be allotted and issued pursuant to the options granted under the Pre-IPO Share Incentive Schemes. Grantee Xu Yunting ( Notes: (1) 40% of the options shall vest on the second anniversary of the date of grant, 20% of the options shall vest on the third anniversary of the date of grant (2) 100% of(3) the options shall be 40% fully of vested the and exercisable options on shall the(4) second vest anniversary on of the the 100% date of second(5) of the anniversary grant. options of shall vest Mrs. the upon Zhao date completion Huixin of ( of the grant, Global Offering. 20% of the options shall vest on the third anniversary of the date of grant (6) The number of options granted on August 1, 2009 has been proportionately adjusted for the increase in the number of issued shares resulting from a share split in January 2010. Shi Liuyi ( Total Subtotal

IV-24 APPENDIX IV STATUTORY AND GENERAL INFORMATION

We will not allot and issue any Shares pursuant to the options granted under the Pre-IPO Share Incentive Schemes if as a result of such issue we would not be able to comply with the minimum public float requirement of the Listing Rules.

(c) Effect on Earnings per Share as a Result of the Pre-IPO Share Incentive Schemes

Subject to any alterations set out under the Pre-IPO Share Incentive Schemes in the event of any capitalization issue, rights issue, open offer, sub-division, consolidation of shares, or reduction of capital that may take place after the Listing, the total number of shares subject to the Pre-IPO Share Options shall be no more than 148,724,968 Shares (as adjusted after the Capitalization Issue), representing approximately 9.91% of the issued share capital of our Company immediately upon completion of the Global Offering (excluding any Share which may be allotted and issued upon the exercise of the Over-allotment Option or the Options granted under the Pre-IPO Share Incentive Schemes), or approximately 9.02% of the enlarged issued share capital of our Company upon taking into account the Shares to be allotted and issued under the Pre-IPO Share Incentive Schemes on completion of the Global Offering (assuming the Over-allotment Option is not exercised). As such, taking into account the Shares to be allotted and issued under the Pre-IPO Share Incentive Schemes, the shareholding of our Shareholders immediately following completion of the Global Offering (assuming the Over-allotment Option is not exercised) will be diluted by approximately 9.02%. Further, assuming that (i) our Company had been listed on the Stock Exchange since December 31, 2018 with 1,500,000,000 Shares in issue; and (ii) all the options and awards granted under the Pre-IPO Share Incentive Schemes in respect of 148,724,968 Shares were exercised and granted in full on December 31, 2018, the earnings per Share on a pro forma diluted basis would be approximately RMB0.06 for the period ended December 31, 2018.

2. Post-IPO Share Option Scheme

The following is a summary of the principal terms of the Post-IPO Share Option Scheme which was conditionally adopted pursuant to the resolutions of the Shareholders dated April 14, 2019:

1. Purpose of the Post-IPO Share Option Scheme

The purpose of the Post-IPO Share Option Scheme is to provide Eligible Participants (as defined below) with the opportunity to acquire proprietary interests in the Company and to encourage Eligible Participants to work towards enhancing the value of the Company and its Shares for the benefit of the Company and its Shareholders as a whole.

2. Who may join and basis of eligibility

The Board of Directors may subject to and in accordance with the provisions of the Post-IPO Share Option Scheme and the Listing Rules, at its discretion grant options to any directors (including executive directors, non-executive directors and independent non-executive directors) and employees of any member of the Group and any advisors, consultants, distributors, contractors, customers, suppliers, agents, business partners, joint venture business partners, services providers of any member of the Group who, in the absolute discretion of the Board, has contributed or will contribute to our Group (collectively, the “Eligible Participants”).

IV-25 APPENDIX IV STATUTORY AND GENERAL INFORMATION

3. Status of the Post-IPO Share Option Scheme (a) Conditions of the Post-IPO Share Option Scheme The Post-IPO Share Option Scheme shall take effect subject to and is conditional upon: (i) the passing of the necessary resolutions to adopt the Post-IPO Share Option Scheme by our Shareholders and the Board of Directors; (ii) the Listing Committee approving the listing of and permission to deal in any Shares to be allotted and issued pursuant to the exercise of options under the Post-IPO Share Option Scheme; and (iii) the commencement of dealing in the shares on the Stock Exchange (the “Conditions”).

(b) Life of the Post-IPO Share Option Scheme The Post-IPO Share Option Scheme shall be valid and effective for a period of ten years commencing on the date on which the last of the conditions set out in paragraph 3(a) above is fulfilled (the “Scheme Period”), after which time no further option shall be offered or granted but the provisions of the Post-IPO Share Option Scheme shall remain in full force and effect in all other respects to the extent necessary to give effect to the exercise of any options granted prior thereto or otherwise as may be required in accordance with the provisions of the Post-IPO Share Option Scheme.

4. Grant of Options (a) Making of offer An offer shall be made to an Eligible Participant by a letter in duplicate (the “Offer Document”) in such form as the Board may from time to time determine which requires the Eligible Participant to undertake to hold the option on the terms on which it is to be granted and to be bound by the provisions of the Post-IPO Share Option Scheme. Each offer shall remain open for acceptance for a period of not more than 10 business days from the date on which the Offer Document is delivered to the Eligible Participant provided that no such offer shall be open for acceptance after the expiry of the Scheme Period or after the termination of the Post-IPO Share Option Scheme.

(b) Acceptance of an offer An option shall be deemed to have been accepted and the option to which the offer relates shall be deemed to have been granted and to have taken effect when the duplicate Offer Document comprising acceptance of the option Eligible Participant (the “Grantee”) duly signed by the Grantee together with a remittance in favor of our Company of HK$1.00 by way of consideration for the grant of the option shall have been received by our Company on or before the last day for acceptance set out in paragraph 4(a) above. The remittance shall not be refundable in any circumstances.

(c) Restrictions on time of grant No offer shall be made and no option shall be granted to any Eligible Participant in circumstances prohibited by the Listing Rules or at a time when the Eligible Participant would or might be prohibited from dealing in the Shares by the Listing Rules or by any applicable rules, regulations or laws. No offer shall be made and no option shall be granted to any Eligible Participants after inside information has come to the knowledge of the Company until such inside information has been

IV-26 APPENDIX IV STATUTORY AND GENERAL INFORMATION published in an announcement in accordance with the Listing Rules. In particular, during the period commencing one month immediately preceding the earlier of: i. the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the requirements of the Listing Rules) for the approval of the Company’s quarterly, interim or annual results or its results for any other interim period (whether or not required under the Listing Rules); and ii. the deadline for the Company to publish an announcement of its quarterly, interim or annual results or its results for any other interim period (whether or not required under the Listing Rules), and ending on the date of the results announcement, no option may be granted. Such period will also cover any period of delay in the publication of any results announcement.

(d) Terms of an option The Offer Document may include any minimum period(s) for which an Option must be held and/or any minimum performance target(s) that must be achieved, before the Option can be exercised in whole or in part, and may include at the discretion of the Board such other terms either on a case by case basis or generally.

(e) Grant to directors, chief executives and substantial shareholders Each grant of options to any director, chief executive or substantial shareholder of our Company or any of their respective associates shall be subject to prior approval of the independent non-executive directors of the Company (excluding any independent non-executive director who is a proposed recipient of the grant of options). Where any grant of options to a substantial shareholder or an independent non-executive director of the Company (or any of their respective associates) would result in the number of Shares issued and to be issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12 months period up to and including the date of such grant: i. representing in aggregate over 0.1 per cent, or such other percentage as may from time to time be specified by the Stock Exchange, of the Shares in issue; and ii. having an aggregate value, based on the closing price of the Shares as stated in the daily quotation sheets of the Stock Exchange on the Date of Grant, in excess of HK$5 million (or such other higher amount as may from time to time be specified by the Stock Exchange). such further grant of options shall be subject to prior approval by the Shareholders (voting by way of poll) in general meeting. The Company shall send a circular to its Shareholders no later than the date on which the Company gives notice of the general meeting to approve such grant. The relevant Eligible Participant, his associates and all core connected persons of the Company shall abstain from voting at such general meeting, except that such person may vote against the relevant resolution at the general meeting provided that his/her intention to do so has been stated in the circular to be sent to the Shareholders in connection therewith. The circular to be issued by the Company shall contain (i) the details of the number and terms (including the Subscription Price) of the options to be granted to each Eligible Participant which must be fixed before the Shareholders’ meeting and the date of board meeting for proposing such further grant is to be taken as the Date of Grant for the purpose of

IV-27 APPENDIX IV STATUTORY AND GENERAL INFORMATION calculating the exercise price; and (ii) a recommendation from the independent non-executive directors of the Company (excluding the independent non-executive director who is the relevant Eligible Participant) to the independent Shareholders stating their recommendation as to whether to vote for or against the resolution relating to the grant of the options; and (iii) other information required under relevant Listing Rules.

(f) Proceedings in general meeting to approve the grant of option At the general meeting to approve the proposed grant of options under paragraph (d), the relevant director, chief executive, substantial shareholder, his associates and all core connected persons of our Company must abstain from voting. At such general meeting, the vote to approve the grant of such options must be taken on a poll.

5. Subscription price The price per Share at which a Grantee may subscribe for Shares upon exercise of an option (the “Subscription Price”) shall be a price determined by the Board in its sole discretion and notified to the Grantee and shall be no less than the highest of: i. the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets on the date on which the Board resolves to make the offer of the option (the “Date of Grant”); ii. the average closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the Date of Grant (provided that in the event that any option is proposed to be granted within a period of less than five business days after the trading of the Shares first commences on the Stock Exchange, the final issue price of the Shares for the Global Offering shall be used as the closing price for any business day falling within the period before listing of the Shares on the Stock Exchange); and iii. the nominal value of a Share on the Date of Grant.

6. Maximum number of Shares available for subscription (a) Scheme Limit The Shares which may be issued upon exercise of all options granted under the Post-IPO Share Option Scheme and any other share option schemes of our Company shall not in aggregate exceed 10% of the total number of Shares in issue as at the date dealings in Shares on the Stock Exchange commence (excluding any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or the exercise of options which were granted under the Pre-IPO Share Incentive Schemes or may be granted under the Post-IPO Share Option Scheme) (the “Scheme Limit”) which is expected to be 150,000,000 Shares. For the purposes of calculating the Scheme Limit, options which have lapsed in accordance with the terms of the relevant Scheme shall not be counted.

(b) Renewal of Scheme Limit Subject to the terms of the Post-IPO Share Option Scheme, the Company may refresh the Scheme Limit at any time subject to prior approval of the Shareholders in general meeting and/or such other requirements prescribed under the Listing Rules from time to time. However, the renewed

IV-28 APPENDIX IV STATUTORY AND GENERAL INFORMATION scheme limit as refreshed shall not exceed 10% of the Shares in issue as at the date of the aforesaid approval by the Shareholders in general meeting. Options previously granted under the Post-IPO Share Option Scheme, whether outstanding, canceled, lapsed in accordance with its applicable terms or already exercised, will not be counted for the purpose of calculating the limit as renewed. A circular in accordance with the requirements of the Listing Rules shall be sent to the Shareholders in connection with the meeting at which their approval will be sought.

(c) Grant of options beyond Scheme Limit Our Company may seek separate approval by our Shareholders in general meeting for granting options beyond the Scheme Limit or the renewed scheme limit provided that the options in excess of the Scheme Limit are granted only to Eligible Participants who are specifically identified before the Shareholders’ meeting where such approval is sought.

For the purpose of seeking the approval of our Shareholders under this paragraph (6)(c), our Company must send a circular to our Shareholders containing a generic description of the identified Eligible Participants, the number and terms of the options to be granted, the purpose of granting such options how those options serve such purpose and all other information required under the Listing Rules.

(d) Maximum number of Shares issued pursuant to options Notwithstanding anything to the contrary in the Post-IPO Share Option Scheme, the overall limit on the number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Post-IPO Share Option Scheme and any other schemes of our Company must not in aggregate exceed 30% of the Shares in issue from time to time. No options may be granted if such grant will result in this 30% limit being exceeded.

(e) Grantee’s maximum holding Unless approved by our Shareholders in general meeting, the Board shall not grant options to any Eligible Participant if the acceptance of those options would result in the total number of shares issued and to be issued to that Grantee on exercise of his option during any 12 months period up to the offer date exceeding 1% of the total Shares then in issue.

Where any further grant of options to a Eligible Participant, if exercised in full, would result in the total number of Shares already issued or to be issued upon exercise of all options granted and to be granted to such Eligible Participant (including exercised, canceled and outstanding options) in any 12- month period up to and including the date of such further grant exceeding 1% of the total number of Shares in issue, such further grant must be separately approved by our Shareholders in general meeting with such Grantee and his close associates (or his associates of the Eligible Participant is a connected person) abstaining from voting. Our Company must send a circular to our Shareholders and the circular must disclose the identity of the Grantee, the number and terms of the options to be granted and options previously granted to such Grantee and all other information required under the Listing Rules. The number and terms (including the Subscription Price) of the options to be granted to such Eligible Participant must be fixed before the Shareholders’ approval. The date of the meeting of the Board for proposing such further grant of option should be taken as the date of grant for the purpose of calculating the Subscription Price.

IV-29 APPENDIX IV STATUTORY AND GENERAL INFORMATION

(f) Adjustment The number of Shares subject to the options and to the Post-IPO Share Option Scheme shall be adjusted, in such manner as our Company’s auditors or the independent financial advisor of the Company retained for such purpose shall certify to be appropriate, fair and reasonable in the event of any alteration in the capital structure of the Company by way of capitalization of profits or reserves, rights issue, subdivision or consolidation of Shares, or reduction of the share capital of the Company.

7. Capital Restructuring (a) Adjustment of options In the event of any capitalization issue, rights issue, sub-division or consolidation of Shares, or reduction of the share capital of the Company in accordance with applicable laws and regulatory requirements, such corresponding alterations (if any) shall be made (except on an issue of securities of the Company as consideration in a transaction which shall not be regarded as a circumstance requiring alteration or adjustment) in: 1) the number or nominal amount of Shares subject to any outstanding option so far as unexercised; and/or 2) the Subscription Price; and/or 3) the method of exercise of the option; or any combination thereof, as the auditors or the independent financial adviser of the Company shall at the request of the Company, certify in writing either generally or as regards any particular Grantee, to be in their opinion fair and reasonable provided that any such adjustments shall give each Grantee the same proportion of the equity capital of the Company as that to which the Grantee was previously entitled to subscribe prior to such adjustments, but not so that the effect would be to enable any Share to be issued to a Grantee at less than its nominal value.

(b) Independent financial advisor confirmation In respect of any adjustment under sub-paragraph (a) above, auditors or independent financial advisor of the Company shall confirm in writing to the Board that the adjustments satisfy the requirements set out in Rule 17.03(13) of the Listing Rules and the note thereto and the supplementary guidance attached to the letter from the Stock Exchange dated September 5, 2005 to all issuers relating to share option schemes and/or such other requirement prescribed under the Listing Rules from time to time.

8. Cancelation of options Any option granted but not exercised may be canceled if the Grantee so agrees. Issuance of new options to the same Grantee may only be made if there are unissued options available under the Post- IPO Share Option Scheme (excluding the canceled options) and in compliance with the terms of the Post-IPO Share Option Scheme.

9. Assignment of options An option is personal to the Grantee and shall not be transferable or assignable. No Grantee shall sell, transfer, charge, mortgage, encumber or create any interest in favor of or enter into any

IV-30 APPENDIX IV STATUTORY AND GENERAL INFORMATION agreement with any third party over or in relation to any option, except for the transmission of an Option on the death of the Grantee to his personal representative(s) on the terms of the Post-IPO Share Option Scheme. Any breach of the foregoing shall entitle the Company to cancel any outstanding option or part thereof granted to such Grantee without incurring any liability on the part of the Company.

10. Rights attached to the Shares The Shares to be allotted and issued upon exercise of an option will be subject to all the provisions of our memorandum of association and articles of association for the time being in force and will rank pari passu with the fully paid Shares in issue on the date the name of the Grantee is registered on the register of members of the Company or if that date falls on a day when the register of members of the Company is closed, the first day of the re-opening of the register of members, save that the Grantee shall not have any voting rights, or rights to participate in any dividends or distributions (including those arising on a liquidation of the Company) declared or recommended or resolved to be paid to the Shareholders on the register on a date prior to such registration.

11. Exercise of options (a) General The Offer Document may include any minimum period(s) for which an Option must be held and/or any minimum performance target(s) that must be achieved, before the Option can be exercised in whole or in part, and may include at the discretion of the Board such other terms either on a case by case basis or generally.

An option may, subject to its terms, be exercised in whole or in part by the Grantee giving notice in writing to the Company in such form as the Board may from time to time determine stating that the Option is thereby exercised and the number of Shares in respect of which it is exercised. Each such notice must be accompanied by a remittance for the aggregate amount of the Subscription Price multiplied by the number of Shares in respect of which the notice is given. Within 15 business days after receipt of the notice and the remittance and, where appropriate, receipt of the certificate issued by the auditors or the independent financial advisor of the Company, the Company shall allot, and shall instruct the share registrar to issue, the relevant Shares to the Grantee (or his personal representative(s)) credited as fully paid and issue to the Grantee (or his estate in the event of an exercise by his personal representative(s) as aforesaid) a share certificate in respect of the Shares so allotted and issued.

Subject to the terms and conditions upon which such option was granted, an option may be exercised by the Grantee at any time during the Option Period, provided that:

(i) in the event the Grantee ceases to be an Eligible Participant for reason of his or her death, ill-health or retirement in accordance with his or her contract of employment before exercising the option in full and none of the events for termination of employment specified in paragraph 12 (iv) below with respect to such Grantee, the personal representative(s) of the Grantee or the Grantee (as the case may be) shall be entitled to exercise the option (to the extent not already exercised), in whole or in part, up to the entitlement of such Grantee as at the date of death or the date of cessation due to ill-health or retirement within a period of 12 months from such date of death or cessation;

(ii) in the event a Grantee (being an employee or a director of any member of our Group) ceases to be an Eligible Participant for any reason other than (i) his or her death, ill-health or retirement in

IV-31 APPENDIX IV STATUTORY AND GENERAL INFORMATION accordance with his or her contract of employment or (ii) on one or more of the grounds of termination of employment or engagement specified in paragraph 12 (iv) below, the Grantee shall have the right to exercise those options then already vested in accordance with the terms of the Post-IPO Share Option Scheme (to the extent not already exercised) at any time prior to or on the date of expiry of one (1) month period after the date of cessation unless the Board otherwise determines, in which event the option shall be exercisable, in whole or in part, to the extent and within such period as the Board may determine. The date of cessation of employment of a Grantee (being an employee and who may or may not be a director of any member of the Group) shall be the last actual working day on which the Grantee was physically at work with the relevant member of the Group, whether salary is paid in lieu of notice or not;

(iii) in the event of a general offer and voluntary winding-up of the Company, the Grantee shall have the rights as specified in paragraphs (b) to (d) below.

(b) Rights on a takeover In the event of a general offer, by way of takeover or otherwise (other than by way of scheme of arrangement), is made to all the Shareholders (other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror and such offer becomes or is declared unconditional prior to the expiry date of the relevant option), our Company shall forthwith give notice thereof to the Grantee and the Grantee shall be entitled to exercise the option to its full extent or to the extent notified by the Company, at any time within such period as shall be notified by the Company.

In the event of a general offer by way of scheme of arrangement and has been approved by the necessary number of Shareholders at the requisite meetings, the Company shall forthwith give notice thereof to the Grantee, and the Grantee may at any time thereafter (but before such time as shall be notified by the Company) exercise the option to its full extent or to the extent notified by the Company.

(c) Rights on a voluntary winding up In the event a notice is given by our Company to our Shareholders to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up our Company, our Company shall forthwith give notice to all Grantees. Each Grantee (or in the case of the death of the Grantee, his personal representative(s)) may at any time within such period as shall be notified by the Company, subject to the provisions of all applicable laws, exercise the option to its full extent or to the extent notified by the Company, and the Company shall as soon as possible and in any event no later than three (3) days prior to the date of the proposed general meeting, allot, issue and register in the register of members of the Company the name of the Grantee as holder of such number of fully paid Shares which fall to be issued on exercise of such option.

(d) Rights on a compromise or arrangement If a compromise or arrangement (other than a scheme of arrangement) between our Company and our Shareholders and/or creditors is proposed in connection with a scheme for the reconstruction of our Company or its amalgamation with any other companies, our Company shall give notice (together with a notice of the existence of the provisions of this paragraph) to all the Grantees on the same day as it gives notice of the meeting to its shareholders and/or creditors to consider the compromise or arrangement. The Grantee may exercise all or any of his options in whole or to the

IV-32 APPENDIX IV STATUTORY AND GENERAL INFORMATION extent notified by the Company, and the Company shall as soon as possible and in any event no later than three (3) days prior to the date of the proposed meeting, allot, issue and register in the register of members of the Company the name of the Grantee as holder of such number of fully paid Shares which fall to be issued on exercise of such option.

12. Lapse of options An option shall lapse automatically and not be exercisable (to the extent not already exercised) on the earliest of: (i) the expiry of the Option Period; (ii) the expiry of the periods referred to in paragraphs 11(a) to (d) above; (iii) the date of which the Grantee commits a breach under the Post-IPO Share Option Scheme; (iv) the date on which the Grantee (being an employee or a director of any member of the Group) ceases to be an Eligible Participant by reason of the termination of his or her employment or engagement on the grounds that he or she has been guilty of serious misconduct, or appears either to be unable to pay or to have no reasonable prospect of being able to pay his or her debts or has become bankrupt or has made any arrangement or composition with his or her creditors generally, or has been convicted of any criminal offence involving his or her integrity or honesty or on any other ground on which an employer would be entitled to terminate his or her employment summarily; (v) the date on which the Grantee joins a company which the Board believes in its sole and reasonable opinion to be a competitor of the Company, unless the Board otherwise determines; (vi) the date on which the Grantee (being a corporation) appears either to be unable to pay or to have no reasonable prospect of being able to pay its debts when they fall due or has become insolvent or has made any arrangement or composition with its creditors generally; and (vii) unless the Board otherwise determines, and other than in the circumstances referred to in sub-paragraphs (i) and (ii) above.

13. Amendment of the Post-IPO Share Option Scheme (a) Amendments requiring Board approval Any amendment to the Post-IPO Share Option Scheme other than those set out in paragraph 13(b) below must be approved by the Board.

(b) Amendments requiring shareholder approval The following matters require the prior sanction of a resolution of the Shareholders in general meeting: 1) any change to the provisions relating to: a. the matters set out in Rule 17.03 of the Listing Rules; b. any alterations to the terms and conditions of the Post-IPO Share Option Scheme which are of a material nature;

IV-33 APPENDIX IV STATUTORY AND GENERAL INFORMATION

c. any change to the terms of options granted; and d. any change to the authority of the director of the Company or scheme administrators in relation to any alternation to the terms of the Post-IPO Share Option Scheme.

14. Termination Our Company may at any time terminate the operation of the Post-IPO Share Option Scheme by resolution of the Board or ordinary resolution of the Shareholders in general meeting and in such event no further options will be offered but the provisions of the Post-IPO Share Option Scheme shall remain in force in all other respects to the extent necessary to give effect to the exercise of the options (to the extent not already exercised) granted prior to the termination or otherwise or may be required in accordance with the provisions of the Post-IPO Share Option Scheme. All options granted prior to the termination and yet to be exercised shall continue to be valid and exercisable in accordance with the terms of the Share Option Scheme

15. Administrator The Post-IPO Share Option Scheme shall be administered by the Board, and the decision of the Board shall be final and binding on all parties.

As of the Latest Practicable Date, no option had been granted by our Company under the Post-IPO Share Option Scheme.

E. OTHER INFORMATION 1. Estate duty Our Directors have been advised that no material liability for estate duty is likely to fall on our Company or any of our subsidiaries.

2. Litigation Except as disclosed in this prospectus, as of the Latest Practicable Date, we were not engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to our Directors to be pending or threatened by or against any member of our Group, that would have a material adverse effect on our Group’s results of operations or financial condition, taken as a whole.

3. Preliminary expenses Our Company’s preliminary expenses are approximately US$5,335 and have been paid by our Company.

4. Promoter Our Company has no promoter for the purpose of the Listing Rules. Save as disclosed in this prospectus, within the two years preceding the date of this prospectus, no cash, securities or other benefit has been paid, allotted or given or is proposed to be paid, allotted or given to any promoter in connection with the Global Offering and the related transactions described in this prospectus.

IV-34 APPENDIX IV STATUTORY AND GENERAL INFORMATION

5. Application for Listing The Sole Sponsor has made an application on behalf of our Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus. All necessary arrangements have been made to enable the securities to be admitted into CCASS.

6. No Material Adverse Change Our Directors confirm that there has been no material adverse change in the financial or trading position or prospect of our Group since December 31, 2018 (being the date to which the latest audited consolidated financial statements of our Group were prepared) up to the date of this prospectus.

7. Agency Fees and Commissions Received The Underwriters will receive an underwriting commission as referred to in the section headed “Underwriting — Underwriting Arrangements and Expenses — Commission and Expenses.”

8. Qualifications of Experts The qualifications of the experts (as defined under the Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance) who have given their opinion and/or advice in this prospectus are as follows:

Name Qualifications China International Capital Corporation Hong Kong Securities Limited ...... Licensed corporation under the SFO to conduct Type 1 (dealing in securities), Type 2 (dealing in future contracts), Type 4 (advising on securities), Type 5 (advising on future contracts) and Type 6 (advising on corporate finance) regulated activities as defined under the SFO Deloitte Touche Tohmatsu ...... Certified public accountants JunHe LLP ...... PRClegal advisers Maples and Calder (Hong Kong) LLP ...... Cayman Islands legal advisers Frost & Sullivan (Beijing) Inc., Shanghai Branch Co...... Industry consultant Valuelink Management Consultants Limited ...... Independent equity valuer

9. Consents Each of China International Capital Corporation Hong Kong Securities Limited, Deloitte Touche Tohmatsu, JunHe LLP, Maples and Calder (Hong Kong) LLP, Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. and Valuelink Management Consultants Limited has given and has not withdrawn their respective written consents to the issue of this prospectus with the inclusion of their reports, opinions and/or letters (as the case may be) and the references to its name included in the form and context in which it respectively appears.

10. Sole Sponsor The Sole Sponsor satisfies the independence criteria applicable to sponsors set out in Rule 3A.07 of the Listing Rules.

The Sole Sponsor’ fees payable by us in respect of the Sole Sponsor’ services as sponsors for the Listing are US$1.0 million.

IV-35 APPENDIX IV STATUTORY AND GENERAL INFORMATION

11. Binding Effect This prospectus shall have the effect, if an application is made in pursuance of it, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance insofar as applicable.

12. Bilingual Prospectus The English language and Chinese language versions of this prospectus are being published separately, in reliance upon the exemption provided by section 4 of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

13. Taxation of Holders of Our Shares (a) Hong Kong Dealings in Shares registered on our Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty. The sale, purchase and transfer of Shares are subject to Hong Kong stamp duty. The current rate charged on each of the purchaser and seller is 0.1% of the consideration or, if higher, the value of the Shares being sold or transferred. Dividends paid on Shares will not be subject to tax in Hong Kong and no tax is imposed in Hong Kong in respect of capital gains. However, profits from dealings in the Shares derived by persons carrying on a business of trading or dealings in securities in Hong Kong arising in or derived from Hong Kong may be subject to Hong Kong profits tax. The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate duty is payable and no estate duty clearance papers are needed for a grant of representation in respect of holders of Shares whose death occurs on or after February 11, 2006.

(b) Cayman Islands There is no stamp duty payable in the Cayman Islands on transfers of shares of Cayman Islands companies save for those which hold interests in land in the Cayman Islands.

(c) Consultation with professional advisers Potential investors in the Global Offering are urged to consult their professional tax advisors if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of, and dealing in our Shares (or exercising rights attached to them). None of us, the Sole Sponsor, Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners or any other person or party involved in the Global Offering accept responsibility for any tax effects on, or liabilities of, any person, resulting from the subscription, purchase, holding or disposal of, dealing in or the exercise of any rights in relation to our Shares.

14. Miscellaneous Save as otherwise disclosed in this prospectus: (i) none of our Directors or experts referred to in the section headed “— E. Other Information — 8. Qualifications of Experts” of this appendix has any direct or indirect

IV-36 APPENDIX IV STATUTORY AND GENERAL INFORMATION

interest in the promotion of us, or in any assets which have within the two years immediately preceding the date of this prospectus been acquired or disposed of by or leased to any member of our Group, or are proposed to be acquired or disposed of by or leased to any member of our Group; (ii) none of the Directors or experts referred to in the section headed “— E. Other Information — 8. Qualifications of Experts” of this appendix is materially interested in any contract or arrangement subsisting at the date of this prospectus which is significant in relation to the business of our Group taken as a whole; (iii) save for the Underwriting Agreements, none of the experts referred to under the section headed “— E. Other Information — 8. Qualifications of Experts” of this appendix has any shareholding in any member of our Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group; (iv) within the two years preceding the date of this prospectus, no share or loan capital of our Company or of any of our subsidiaries has been issued, agreed to be issued or is proposed to be issued fully or partly paid either for cash or for a consideration other than cash; (v) within the two years preceding the date of this prospectus, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of any member of our Group; (vi) within the two years preceding the date of this prospectus, no commission has been paid or is payable (except commissions to sub-underwriters) for subscribing or agreeing to subscribe, or procuring or agreeing to procure the subscriptions, for any Shares in our Company; (vii) neither our Company nor any of our subsidiaries have issued or agreed to issue any founder shares, management shares or deferred shares; (viii) our Company has no outstanding convertible debt securities or debentures; (ix) no capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option; (x) there is no arrangement under which future dividends are waived or agreed to be waived; (xi) there has not been any interruption in the business of our Group which may have or has had a significant effect on the financial position of our Group in the 12 months preceding the date of this prospectus; and (xii) no member of our Group is presently listed on any stock exchange or traded on any trading system, and no listing or permission to deal is being or proposed to be sought.

IV-37 APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES The documents attached to a copy of this prospectus and delivered to the Registrar of Companies in Hong Kong for registration were: (a) copies of the WHITE, YELLOW and GREEN Application Forms; (b) copies of each of the material contracts referred to in the section headed “Appendix IV — Statutory and General Information — B. Further Information about the Business of our Company — 1. Summary of material contracts”; and (c) the written consents issued by each of the experts and referred to in section headed “Appendix IV — Statutory and General Information — E. Other information — 8. Qualifications of Experts”.

DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection at the office of O’Melveny & Myers at 31/F, AIA Central, 1 Connaught Road Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this prospectus: (a) the Memorandum of Association and Articles of Association; (b) the accountants’ report for our Group for the three years ended December 31, 2018 prepared by Deloitte Touche Tohmatsu, the text of which is set out in Appendix I to this prospectus; (c) the report received from Deloitte Touche Tohmatsu on the unaudited pro forma financial information of our Group, the text of which is set out in Appendix II to this prospectus; (d) the audited consolidated financial statements of the Group for the three years ended December 31, 2018; (e) the valuation report prepared by ValueLink Management Consultants Limited, our equity valuer, with respect to the fair value of equity interests received by our Group under our SFE charge method; (f) the PRC legal opinions issued by JunHe LLP, our legal advisers on PRC law, in respect of our general matters and property interests; (g) the letter issued by Maples and Calder (Hong Kong) LLP, our legal advisers on Cayman Islands laws, summarizing certain aspects of Companies Law referred to in the section headed “Appendix III — Summary of the Constitution of our Company and Cayman Islands Companies Law”; (h) the Companies Law; (i) the industry report prepared by Frost & Sullivan, our industry consultant; (j) the material contracts referred to in the section headed “Appendix IV — Statutory and General Information — B. Further Information about the Business of our Company — 1. Summary of Material Contracts”; (k) the service agreements and letters of appointment referred to in “Appendix IV — Statutory and General Information — C. Further Information about Directors and Substantial

V-1 APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

Shareholders — 2. Particulars of Directors’ Service Contracts and Letters of Appointment”; (l) the written consents referred to in the section headed “Appendix IV — Statutory and General Information — E. Other Information — 9. Consents”; (m) the rules of the Pre-IPO Share Incentive Schemes; and (n) the rules of the Post-IPO Share Option Scheme.

V-2 707448 Edison_Fancy Cover Eng_HR.pdf 1 22/4/2019 10:53:00 AM

(Incorporated in the Cayman Islands as an exempted company with limited liability)

Sole Sponsor

Joint Global Coordinators, Joint Bookrunners, Joint Lead Managers

Joint Bookrunners, Joint Lead Managers

Joint Lead Managers