(Incorporated in the Cayman Islands with limited liability) (Stock Code: 0775) Agriculture-related ENHANCING EVERYDAY LIVING Annual Report 2020 Nutraceutical Pharmaceutical ABOUT CK LIFE SCIENCES CK Life Sciences Int’l., (Holdings) Inc. is listed on The Stock Exchange of Hong Kong Limited. Bearing the mission of improving the quality of life, CK Life Sciences is engaged in the business of research and development, manufacturing, commercialisation, marketing, sale of, and investment in products and assets which fall into three core categories – nutraceuticals, pharmaceuticals and agriculture-related. CK Life Sciences is a member of the CK Hutchison Group. Contents 2 Chairman’s Statement 6 Business Review Agriculture-related Business Nutraceutical Business Pharmaceutical Research 24 Long Term Development Strategy 25 Financial Summary 26 Financial Review 28 Directors and Key Personnel 36 Report of the Directors 48 Independent Auditor’s Report 54 Consolidated Income Statement 55 Consolidated Statement of Comprehensive Income 56 Consolidated Statement of Financial Position 58 Consolidated Statement of Changes in Equity 59 Consolidated Statement of Cash Flows 61 Notes to the Consolidated Financial Statements 121 Principal Subsidiaries 125 Principal Joint Venture 126 Schedule of Major Investment Properties 127 Corporate Governance Report 163 Risk Factors 170 Corporate Information and Key Dates Chairman's Statement 2 CK Life Sciences Int'l., (Holdings) Inc. For the year ended 31 December 2020, CK Life took the opportunity to restructure the organisation Sciences Int’l., (Holdings) Inc. (“CK Life Sciences” or the and implement improvements which could facilitate “Company”) reported profit attributable to shareholders post-pandemic growth, including the commissioning of a of HK$125 million, a decrease of about 31% as compared new production facility, installation of new machines and to that of 2019 mainly due to the impact caused by implementation of software to streamline and promote COVID-19. While the pandemic affected all facets of customer relationship management. our business, some of our diverse portfolio of assets withstood the impact better than others. Nevertheless, all SNAG is one of the largest and longest established subsidiaries took timely action to streamline operations, natural health companies in Québec, Canada. adapt to new operating conditions and improve Unfortunately, the province recorded a higher number of efficiency. As a result, our fundamentals remain strong. confirmed COVID-19 cases than the rest of Canada and implemented lockdown measures, including curfews, The Board of Directors has recommended a final dividend which reduced access to retail stores. Although our of HK$0.01 per share for the year ended 31 December 2020 retail pharmacy customers remained open, reduced foot (2019: HK$0.01 per share). The proposed dividend will traffic through the stores impacted sales. Nevertheless, be paid on Monday, 31 May 2021 following approval at our ability to maintain the supply of immunity-related the 2021 Annual General Meeting to those shareholders products strengthened our position with customers. We whose names appear on the Register of Members expedited online sales development and devised plans for of the Company at the close of business on Thursday, market penetration into other parts of Canada and other 20 May 2021. regions of North America. We also continued the launch of new products, an important source of future growth. Nutraceutical Business Lipa is one of the largest contract manufacturers of CK Life Sciences’ nutraceutical business comprises complementary healthcare medicines, vitamins and (i) Vitaquest International Holdings LLC (“Vitaquest”) in nutritional supplements in Australia. Limited availability the United States; (ii) Santé Naturelle A.G. Ltée (“SNAG”) of international freight, higher shipping charges and in Canada; as well as (iii) Lipa Pharmaceuticals Limited congestion at ports in New South Wales exacerbated (“Lipa”) in Australia. disruptions to the supply of raw materials and drove up their cost. Shrinkage in sales of retailers, and therefore In 2020, COVID-19 infections in the countries where high trade stock, translated into slower manufacturing our nutraceutical business is concentrated were high, orders for Lipa during the year, at one point necessitating and lockdown measures of various levels of severity a four-day week operation to control costs in the face were in place throughout the year. Since our operations of lower volume. Despite COVID-19 pressure, Lipa is are involved in the physical manufacturing and delivery successful in securing new supply relationships with of products, working from home was not practical. brands leveraging the demand for high quality Australian Although our line of business was considered “essential” made products across Asia and the Middle East. and allowed to continue operating, the infections and In addition, investments were made for new equipment associated lockdown measures not only reduced and which will deliver efficiencies, and management disrupted the availability of labour and timeliness of implemented cost saving and capacity optimisation attendance, but also upended the secure supply and measures. Lipa won the “2020 High Quality Manufacturer pricing of raw materials globally. Profit generated from of the Year” award presented by the Complementary this segment decreased 56% as compared with 2019. Medicines Australia. Vitaquest is an industry-leading development and commercialisation partner for the nutraceutical and Agriculture-related Business functional food markets. COVID-19 infections in the The agriculture-related business consists of three main state of New Jersey, United States, where Vitaquest streams – (i) Australian Agribusiness (Holdings) Pty Ltd has its main facilities, were higher than in many other (“Australian Agribusiness”); (ii) Cheetham Salt Group states. A proportion of Vitaquest’s staff contracted (“Cheetham”); and (iii) a vineyard portfolio. COVID-19, but effective human resources strategies prevented an outbreak on the premises and helped Although the same disruptions affecting the avoid a shutdown. With the state imposing a “Stay nutraceutical business also challenged the Company’s at Home” order between mid-March and early June, agriculture-related business, the impact was mitigated many members of staff were unable to report for duty, by more favourable climatic conditions after three significantly curtailing output at one point. A focus on years of drought, and performance improvement of the margin and cost control enabled us to achieve reasonable vineyard portfolio. Profit generated from this segment financial performance under the circumstances. We also increased 21% versus 2019. Annual Report 2020 3 Chairman's Statement (Cont'd) Australian Agribusiness comprises businesses in the Cancer Vaccines R&D manufacturing, wholesale and retail of agriculture-related products. Although COVID-19 disrupted global supply The Company is engaged in the research and development chains across the industry, overall volume of plant of cancer vaccines which stimulate the immune system protection products rose on the back of improved climatic to fight cancer. The US subsidiary, Polynoma LLC conditions bringing relief from the prolonged and severe (“Polynoma”), is developing seviprotimut-L, a proprietary droughts of the previous three years. In addition, it polyvalent therapeutic cancer vaccine for the treatment focused on expanding, streamlining and consolidating of melanoma. Although COVID-19 had a limited impact capability across its four manufacturing plants strategically on our cancer vaccine research and development activities located in key growing areas and on improvements to in 2020, the worldwide scramble for manufacturing meet the high standards of multinational customers. The capacity for COVID-19 vaccines has made it difficult to Home Garden business grew sales as consumers invested accelerate production of clinical trial material. in home improvements during lockdown restrictions, In 2020, the Company reached two significant milestones but COVID-19 severely disrupted the Professional Turf in its melanoma vaccine research: and Pest Management businesses. Nevertheless, we maintained leadership positions in many of the markets (i) Data Presentation at ASCO Conference in which we operate. In May 2020, we presented data from the MAVIS Performance of the Company’s vineyard portfolio (Melanoma Antigen Vaccine Immunotherapy Study) strengthened during the period under review. The fact clinical trial of seviprotimut-L at the American that all the properties are rented on long-term leases to Society of Clinical Oncology (ASCO)’s ASCO20 leading wine companies or growers protected the steady Virtual Scientific Program. Subgroup analysis income stream against the disruptions of COVID-19. suggested enhanced recurrence-free survival (RFS) During the year, the Company acquired two more for seviprotimut-L among patients with resected vineyards in South Australia, bringing the total size of our Stage IIB/IIC melanoma, especially those under the vineyard and agricultural portfolio in Australia and New age of 60. Seviprotimut-L was well-tolerated with Zealand to almost 8,000 hectares. We also upgraded treatment-emergent adverse events (AEs) similar to irrigation works in select properties. Contribution from patients given placebo. vineyards acquired in 2019 and early 2020 and annual rent increases enabled the portfolio to report satisfactory