THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW The information and statistics set out in this section and other sections of this document were extracted from different official government publications, available sources from public market research and other sources from independent suppliers. In addition, we engaged Frost & Sullivan for preparing the F&S Report, an independent industry report in respect of the [REDACTED]. We believe that the sources of the information in this section and other sections of this document are appropriate sources for such information, and we 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 or misleading. The information from official and non-official sources has not been independently verified by us, the [REDACTED], Joint Sponsors, [REDACTED], [REDACTED], any of the [REDACTED], any of their respective directors and advisers, or any other persons or parties involved in the [REDACTED], except Frost & Sullivan, and no representation is given as to its accuracy. Accordingly, the information from official and non-official sources contained herein may not be accurate and should not be unduly relied upon. Our Directors confirm that, after making reasonable enquiries, there is no adverse change in the market information since the date of the F&S Report that would qualify, contradict or have a material impact on the information in this section.1 OVERVIEW OF VACCINES Vaccines are biological preparations that provide active acquired immunity against a particular disease. A vaccine typically contains one or several antigens from, or similar to, a disease-causing microorganism and improves immunity to a particular disease upon administration by inducing specific immune responses. Generally, vaccines can be categorized into whole pathogen vaccines and subunit vaccines. Whole pathogen vaccines are traditional vaccines consisting of virus particles, bacteria or other pathogens that have been grown in culture, in an attenuated form or being killed to destroy disease-producing capacity. Subunit vaccines mainly include recombinant protein vaccines, viral vector vaccines, and nucleic acid vaccines, among others. Subunit vaccines are generally categorized as innovative vaccines. 1 The contract sum to Frost & Sullivan is RMB780,000 for the preparation and use of the F&S Report, and we believe that such fees are consistent with the market rate. Frost & Sullivan is an independent global consulting firm, which was founded in 1961 in New York. In compiling and preparing the F&S Report, Frost & Sullivan has adopted the following assumptions: (i) the social, economic and political environments of the PRC will remain stable during the forecast period, which will ensure a sustainable and steady development of the PRC healthcare industry; (ii) the PRC healthcare market will grow as expected due to rising healthcare demand and supply; and (iii) the PRC government will continue to support healthcare reform. Frost & Sullivan has conducted detailed primary research which involved discussing the status of the industry with leading industry participants and industry experts. Frost & Sullivan has also conducted secondary research which involved reviewing company reports, independent research reports and data based on its own research database. Frost & Sullivan has obtained the figures for the projected total market size from historical data analysis plotted against macroeconomic data as well as specific related industry drivers. Due to the uncertainty presented in COVID-19 vaccines, unless otherwise indicated, vaccine market size has not taken into account the emergence of the COVID-19 vaccines. – 120 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW Among all of the innovative, the recombinant protein vaccines is one of the most efficacious, safest and relatively inexpensive options. It uses genetic engineering techniques to produce a certain part of the pathogen. Currently, it has been used in a number of disease areas, such as hepatitis B, cervical cancers and shingles. However, the level of immune response may be lower than other types of vaccines and therefore it often requires the incorporation of adjuvants to elicit a strong protective immune response. Adjuvants Adjuvants are substances that can assist in antigen response and stimulate or suppress immune response. The functions of adjuvants mainly include: (i) improving the immunogenicity of the vaccine; (ii) changing the nature of immune response; and (iii) reducing the amount of antigen and the required number of shots of immunization. Traditionally, alum adjuvants have been used in vaccine development. In recent decades, emerging subunit vaccines, especially recombinant protein vaccines, have significantly driven the development of innovative and more effective adjuvants, such as AS04, AS01 and CpG1018. Generally, vaccine adjuvants are not approved independently as a drug but a component of a vaccine. However, these novel adjuvants are generally difficult to manufacture, for example, AS01, a liposome-based adjuvant system, is manufactured through complex processes and quality control standards which only a few companies can achieve. Since the adjuvants formulated in vaccine are designed to be used in healthy population, it requires higher manufacturing techniques and more stringent regulatory standards. There are only five novel adjuvants applied in FDA-approved vaccines to date. The following table summarizes the adjuvants that have been applied in FDA-approved vaccines as of the Latest Practicable Date. Licensed Adjuvanted Pediatric and Adult Vaccines Adjuvant Vaccines (disease) Vaccine Type Company First Use Since Daptacel (DTaP), Gardasil 9 (HPV), Alum Various Various 1926 Prevnar 13 (pneumococcal), etc. Licensed Adjuvanted Adult Vaccines Adjuvant Adjuvant Composition Vaccines (disease)Difficulty in Manufacturing FDA Approval Separation and purification of Monophosphoryl lipid A (MPL) and aluminum salt Cervarix AS04 lipopolysaccharide (MPL’s raw 2009 (HPV 16/18 caused disease) material) is difficult Natural sources of -tocopherol and Oil in water emulsion composed of α-tocopherol, Q-Pan H5N1 squalene are limited, while artificial AS03 2013 squalene and surfactant Tween 80 (Influenza A H5N1 infection) synthesis is either cumbersome or with low yield Natural sources of squalene are Squalene and Tween 80 and Span 85 (two surfactants) FLUAD MF -59 limited, while artificial synthesis is 2015 in an oil-in-water emulsion (Influenza disease) either cumbersome or with low yield Natural sources of QS-21 are limited; Monophosphoryl lipid A (MPL) and QS-21, a natural Shingrix® Separation and purification of AS01 compound extracted from the Chilean soapbark tree, 2017 (Herpes Zoster) lipopolysaccharide (MPL’s raw combined in a liposomal formulation material) is difficult CpG-ODN (cytosine phosphoguanosine Heplisav-B CpG 1018 Synthesis and purification of nucleic 2017 oligodeoxynucleotide, microbial derivations) (HBV infection) acid are required in production – 121 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW Due to the complexity in developing and manufacturing of adjuvants, currently most vaccine companies do not have commercial manufacturing capability for adjuvants and have to rely on a limited number of qualified suppliers, which they procure approved adjuvants from. As such, vaccine companies with adjuvant manufacturing capability generally can enjoy advantages in terms of scalability. In addition, growing awareness of vaccination to address other diseases also calls for the increasing demand to develop novel and innovative adjuvants. Global Vaccine Market The global vaccine market plays an important role in the global pharmaceutical market. The size of the global vaccine market has reached US$36.5 billion in 2020 in terms of sales revenue, accounting for 2.8% of the total global pharmaceutical market, growing from US$27.5 billion in 2016 at a CAGR of 7.3% from 2016 to 2020. Driven by the emergence of innovative vaccines and market growth in developing countries, global vaccine market is expected to reach US$126.8 billion in 2030 at a CAGR of 13.3% from 2020 to 2030. The following chart illustrates the global market size of vaccines in terms of sales revenue for the period indicated: Global Vaccine Market Size, 2016-2030E Period CAGR 2016-2020 7.3% 2020-2030E 13.3% Billion USD 6.0% 5.6% 5.8% 5.3% 5.1% 4.7% 4.4% 4.0% 3.6% 3.2% 2.8% 2.8% 2.4% 2.5% 126.8 2.3% 117.4 108.7 99.7 90.6 80.9 71.3 62.0 53.0 44.5 37.2 36.5 27.5 27.7 31.8 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Global Vaccine Market Percentage of Global Pharmaceutical Market Source: Expert interview, company annual reports, F&S Report – 122 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT INDUSTRY OVERVIEW Innovative vaccines have presented