3SBio Inc. — Capital/Financing Update 2019

Jul 2, 2019

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or on reliance upon the whole or any part of the contents of this announcement.

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 1530)

ADOPTION OF EMPLOYEE SHARE OWNERSHIP PLAN AND

GRANT OF AWARDED SHARES BY A SUBSIDIARY OF THE COMPANY

Adoption of ESOP by Sunshine Guojian

As part of the Group’s initiatives to incentivise the performance of its directors, senior management and employees, on 19 June 2019, the shareholders of Sunshine Guojian, an indirect non-wholly owned subsidiary of the Company, approved the adoption of the ESOP to further promote the productivity, creativity and continuous growth in performance of the directors, senior management and employees of the Group. The ESOP does not constitute a share option scheme or an arrangement analogous to a share option scheme for the purpose of Chapter 17 of the Listing Rules. No Shareholders’ approval is therefore required to adopt the ESOP.

Grant of Awarded Shares

On 19 June 2019, the shareholders of Sunshine Guojian resolved and increased its total issued share capital by a total of 44,367,221 shares, representing not more than 8% of the enlarged issued share capital of Sunshine Guojian, for the purpose of granting and allotting the Awarded Shares to the Selected Participants. The total consideration for the Awarded Shares involved for the Grant is RMB44,367,221, representing RMB1.00 per Awarded Share (being the par value of each Guojian Share) payable by the Selected Participants.

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Pursuant to the shareholders’ resolutions of Sunshine Guojian on 19 June 2019 and the Board’s resolutions on 20 June 2019, it was resolved that out of the 8% of the enlarged share capital of Sunshine Guojian that are to be allotted and issued:

• (1) approximately 5.35% of which, representing 29,672,221 Awarded Shares, are to be allotted and issued to Connected Grantees, comprising Dr. Lou, Ms. Su and three other directors/ supervisors of the Company’s subsidiaries including Sunshine Guojian; and

• (2) approximately 2.65% of which, representing 14,695,000 Awarded Shares, are to be allotted and issued to Non-connected Grantees, comprising independent employees of the Group.

After the Grant, the Company’s equity interest in Sunshine Guojian will reduce from 96.22% to 88.52% in Sunshine Guojian, and Sunshine Guojian will remain as a subsidiary of the Company.

The Awarded Shares, when issued and fully paid, will rank pari passu among themselves and with the Guojian Shares in issue, with the right to receive all dividends and other distributions declared, made or paid after the date of allotment and in respect of the financial period after the date of allotment only.

The Subscription Agreement and the ESOP Agreements

For purposes of granting and allotting the Awarded Shares to the Selected Participants under the ESOP and the Grant, Sunshine Guojian has entered into (i) the Subscription Agreement with its existing shareholders, Achieve Well and the Fund (both as new shareholders); and (ii) the ESOP Agreements with the Selected Participants.

The Subscription Agreement

Under the Subscription Agreement, the parties have agreed, among other things, that (i) Achieve Well, which is wholly-owned by Dr. Lou, shall subscribe for 25,160,657 Guojian Shares (representing approximately 4.54% of the enlarged total issued share capital of Sunshine Guojian); and (ii) the Fund will subscribe for 19,206,564 Guojian Shares (representing approximately 3.46% of the enlarged total issued share capital of Sunshine Guojian), in cash. The aforementioned Guojian Shares to be subscribed by Achieve Well and the Fund, respectively, are the Awarded Shares which will be allotted and issued to the Selected Participants for the purpose of the ESOP.

Dr. Lou ESOP Agreement

On 30 June 2019, in connection with the Awarded Shares to be granted and allotted to Dr. Lou, Achieve Well entered into the Dr. Lou ESOP Agreement, pursuant to which Achieve Well agreed to subscribe for 25,160,657 Awarded Shares (representing approximately 4.54% of the enlarged issued share capital of Sunshine Guojian) at a subscription price of RMB1.00 for each Awarded Share to be granted and allotted by Sunshine Guojian to Dr. Lou in accordance with the ESOP.

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The Guojian ESOP Agreement and the Non-Guojian ESOP Agreement

On 30 June 2019, in connection with the Awarded Shares to be granted and allotted to the Grantees other than Dr. Lou, Sunshine Guojian and each of the Other Selected Participants (including Ms. Su) signed the Guojian ESOP Agreement and the Non-Guojian ESOP Agreement (as the case may be), pursuant to which the parties have agreed, among other things, that the Other Selected Participants shall hold the Awarded Shares through the Fund by way of investing indirectly in the Fund as limited partners. The Fund will directly hold the corresponding number of Awarded Shares to be granted and allotted by Sunshine Guojian to the Fund for the ultimate benefit of the respective Other Selected Participants in accordance with the ESOP.

Listing Rules Implications

The grant of the Awarded Shares to each of the Connected Grantees constitutes a connected transaction under Chapter 14A of the Listing Rules. As all applicable percentage ratios (as specified in the Listing Rules) are more than 0.1% but less than 5%, the grant of the Awarded Shares to the Connected Grantees is subject to announcement requirement but exempt from shareholders’ approval requirement. Each of the respective Connected Grantees has abstained from voting on the resolution approving the grant of the Awarded Shares to them under the ESOP at the board meeting of the Company in accordance with the requirements of the articles of association of the Company and applicable rules and regulations. The Board (including the independent non-executive directors of the Company) has approved the Grant and is of the view that the terms of Grant are fair and reasonable, and that the Grant is on normal commercial terms and in the interests of the Company and its shareholders as a whole.

ADOPTION OF ESOP BY SUNSHINE GUOJIAN

As part of the Group’s initiatives to incentivise the performance of its directors, senior management and employees, on 19 June 2019, the shareholders of Sunshine Guojian, an indirect non-wholly owned subsidiary of the Company, approved the adoption of the ESOP, in which Eligible Participants (which includes directors, senior management and employees of the Group) are eligible to participate.

Purposes and objectives

The purposes and objectives of the ESOP are to further promote the productivity, creativity and continuous growth in performance by the directors, senior management and employees of the Group.

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GRANT OF AWARDED SHARES

On 19 June 2019, the shareholders of Sunshine Guojian resolved and increased its total issued share capital by a total of 44,367,221 shares, representing not more than 8% of the enlarged issued share capital of Sunshine Guojian, for the purpose of granting and allotting the Awarded Shares to the Selected Participants. The total consideration for the Awarded Shares involved for the Grant is RMB44,367,221, representing RMB1.00 per Awarded Share (being the par value of each Guojian Share) payable by the Selected Participants.

Grantees

Pursuant to the shareholders’ resolutions of Sunshine Guojian on 19 June 2019 and the Board’s resolutions on 20 June 2019, it was resolved that out of the 8% of the enlarged share capital of Sunshine Guojian that are to be allotted and issued:

• (1) approximately 5.35% of which, representing 29,672,221 Awarded Shares, are to be allotted and issued to Connected Grantees, comprising Dr. Lou, Ms. Su and three other directors/ supervisors of the Company’s subsidiaries including Sunshine Guojian; and

• (2) approximately 2.65% of which, representing 14,695,000 Awarded Shares, are to be allotted and issued to Non-connected Grantees, comprising independent employees of the Group.

The details of the Awarded Shares to be allotted and issued under the Grant are as follows:

	Number of	Approximate
	Awarded	percentage out of
	Shares	the enlarged
		share capital of
		Sunshine Guojian
Connected Grantees	29,672,221	5.35%
— Dr. Lou	25,160,657	4.54%
— Ms. Su	200,000	0.03%
— three other directors/supervisors of the Company’s subsidiaries	4,311,564	0.78%
including Sunshine Guojian	(in aggregate)	(in aggregate)
Non-connected Grantees (i.e. 53 independent employees of the Group)	14,695,000	2.65%
Total	44,367,221	8%

After the Grant, the Company’s equity interest in Sunshine Guojian will reduce from 96.22% to 88.52% in Sunshine Guojian, and Sunshine Guojian will remain as a subsidiary of the Company.

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Awarded Shares

The Awarded Shares will be allotted and issued for the purpose of the ESOP in accordance with the ESOP Agreements. The Awarded Shares, when issued and fully paid, will rank pari passu among themselves and with the Guojian Shares in issue, with the right to receive all dividends and other distributions accrued, declared, made or paid after the date of allotment and in respect of the financial period after the date of allotment only.

THE SUBSCRIPTION AGREEMENT AND THE ESOP AGREEMENTS

For purposes of granting and allotting the Awarded Shares to the Selected Participants under the ESOP and the Grant, Sunshine Guojian has entered into (i) the Subscription Agreement with its Existing Shareholders, Achieve Well and the Fund (both as new shareholders); and (ii) the ESOP Agreements with the Selected Participants.

The Subscription Agreement

Under the Subscription Agreement, the parties have agreed, among other things, that, (i) Achieve Well, a company wholly-owned by Dr. Lou, shall subscribe for 25,160,657 Guojian Shares (representing approximately 4.54% of the enlarged total issued share capital of Sunshine Guojian); and (ii) the Fund will subscribe for 19,206,564 Guojian Shares (representing approximately 3.46% of the enlarged total issued share capital of Sunshine Guojian), in cash. The aforementioned Guojian Shares to be subscribed by Achieve Well and the Fund, respectively, are the Awarded Shares which will be allotted and issued to the Selected Participants for the purpose of the ESOP.

The ESOP Agreements

Under the ESOP Agreements, the Awarded Shares, once allotted and issued, will be held by (i) Achieve Well, a company wholly-owned by Dr. Lou and will subscribe for the relevant Awarded Shares directly; and (ii) the Fund for the ultimate benefit of the other Eligible Participants who are connected persons of the Group (such as directors of the Group other than Dr. Lou), and the other Eligible Participants who are independent from the Group and its connected persons (such as independent employees of Sunshine Guojian) (the “ Other Selected Participants ”).

Dr. Lou ESOP Agreement

On 30 June 2019, in connection with the Awarded Shares to be granted and allotted to Dr. Lou, Achieve Well entered into Dr. Lou ESOP Agreement, pursuant to which Achieve Well agreed to subscribe for 25,160,657 Awarded Shares (representing approximately 4.54% of the enlarged issued share capital of Sunshine Guojian) at a subscription price of RMB1.00 (being the par value of the Guojian Shares) for each Awarded Share to be granted and allotted by Sunshine Guojian to Dr. Lou in accordance with the ESOP.

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Guojian ESOP Agreement and Non-Guojian ESOP Agreement

In connection with the Awarded Shares to be granted and allotted to the Grantees other than Dr. Lou, Sunshine Guojian and each of the Other Selected Participants (including Ms. Su) signed the Guojian ESOP Agreement and the Non-Guojian ESOP Agreement (as the case may be), pursuant to which the parties have agreed, among other things, that the Other Selected Participants shall hold the Awarded Shares through the Fund by way of investing indirectly in the Fund as limited partners. The Fund will directly hold the corresponding number of Awarded Shares to be granted and allotted by Sunshine Guojian to the Fund for the ultimate benefit of the respective Other Selected Participants in accordance with the ESOP.

For purposes of the Other Selected Participants’ indirect investment into the Fund, each of the Other Selected Participants (each as a limited partner) will also sign partnership agreements with the General Partner of the Fund.

The total number of Awarded Shares subscribed by the Fund is 19,206,564 Awarded Shares, representing the total number of Awarded Shares to be granted and allotted for the ultimate benefit of the Other Selected Participants and representing approximately 3.46% of the enlarged issued share capital of Sunshine Guojian. The subscription price for each Awarded Share to be granted and allotted by Sunshine Guojian to the Fund for the ultimate benefit of each of the Other Selected Participants is RMB1.00 (being the par value of each Guojian Share) and is payable by the relevant Other Selected Participant.

Other key terms of the Guojian ESOP Agreement and Non-Guojian ESOP Agreement

Other key terms of the Guojian ESOP Agreement and Non-Guojian ESOP Agreement are summarised as follows:

Cessation of employment

Under the Guojian ESOP Agreement and Non-Guojian ESOP Agreement, save for written consent by the General Partner having been obtained, any Other Selected Participants shall cease to be an ultimate beneficiary of the Fund, and hence cease to be interested in the relevant Awarded Shares; and shall cooperate to transfer the relevant Awarded Shares to a transferee as designated by the General Partner, if certain events shall occur, including, for example, he/she has been dismissed and/or subject to compulsory measures taken by the PRC authority against him/her for reasons of violating any national law, regulation or materially breached the management policy of the relevant Group company (including the employees’ handbook), employment contract(s) (including the breach of confidentiality terms/agreements and non-competition terms/agreements) during his/her employment with the relevant Group company.

Upon ceasing to be an ultimate beneficiary of the Fund, subject to any restrictions or requirements under the PRC laws and regulations, the relevant Other Selected Participant shall:

• (i) enter into all necessary documents for the transfer of the Awarded Shares it indirectly holds, as directed or required by Sunshine Guojian; and

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• (ii) shall pay the transfer price based on the investment amount it has contributed indirectly to the Fund as stipulated under the Guojian ESOP Agreement and the Non-Guojian ESOP Agreement (as the case may be).

Lock-up Period

The lock-up period for the Awarded Shares to be issued and allotted to the Other Selected Participants shall be 36 months starting from the date of the registration of the subscription of the Awarded Shares by the Fund with the relevant PRC government authority (the “ Lock-up Period ”).

During the Lock-up Period, pursuant to the Guojian ESOP Agreement and the Non-Guojian ESOP Agreement, save for written consent from the General Partner having been obtained, the Other Selected Participants are not allowed to transfer nor pledge their respective proportion of the assets in the Fund.

Upon the expiry of the Lock-up Period, the Other Selected Participant may reduce the amount of Awarded Shares that he/she holds or cease to be an ultimate beneficiary of the Fund by instructing the Fund to sell part or all of the relevant Awarded Shares (as the case may be). The proceeds received by the Fund from such sale (after deducting tax) shall be paid to the relevant Other Selected Participant who has instructed to sell his/her Awarded Shares. If any Other Selected Participant is no longer under the employment of the relevant Group company after the Lock-up Period expires, such Other Selected Participant must not transfer or cause to transfer the Awarded Shares that he/she indirectly holds within six months from the date of his/her termination of office or service.

Voting Rights

The Fund shall only exercise the voting rights in respect of the Awarded Shares in accordance with the instructions of the General Partner for the benefit of the Other Selected Participants.

IMPLICATIONS UNDER THE LISTING RULES

The ESOP does not constitute a share option scheme or an arrangement analogous to a share option scheme for the purpose of Chapter 17 of the Listing Rules. No Shareholders’ approval is therefore required to adopt the ESOP, and this announcement regarding the adoption of the ESOP is made on a voluntary basis.

Awarded Shares may be granted by Sunshine Gujian, which is an indirect non-wholly owned subsidiary of the Company, to Eligible Participants who are connected persons of the Group. If Awarded Shares are granted to the connected persons of the Group, those grants shall constitute connected transactions under Chapter 14A of the Listing Rules and where they do, the Company shall comply with the relevant reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

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The grant of the Awarded Shares to each of the Connected Grantees constitutes a connected transaction under Chapter 14A of the Listing Rules. As all applicable percentage ratios (as specified in the Listing Rules) are more than 0.1% but less than 5%, the grant of the Awarded Shares to the Connected Grantees is subject to announcement requirement but exempt from shareholders’ approval requirement. Each of the respective Connected Grantees has abstained from voting on the resolution approving the grant of the Awarded Shares to them under the ESOP at the board meeting of the Company in accordance with the requirements of the articles of association of the Company and applicable rules and regulations. The Board (including the independent non-executive directors of the Company) has approved the Grant and is of the view that the terms of Grant are fair and reasonable, and that the Grant is on normal commercial terms and in the interests of the Company and its shareholders as a whole.

INFORMATION ON THE COMPANY AND SUNSHINE GUOJIAN

The Company is a leading biotechnology company in the PRC founded in 1993. As a pioneer in the PRC biotechnology industry, the Group has extensive expertise in developing, manufacturing and commercializing biopharmaceuticals, including principally non-monoclonal antibody biopharmaceutical products. Sunshine Guojian is a non-wholly owned subsidiary of the Company, which is principally engaged in the development, manufacture and sale of monoclonal antibody therapeutics in the PRC.

DEFINITIONS

• “Achieve Well”

• Achieve Well International Limited (達佳國際有限公司), a company incorporated in the British Virgin Islands and is whollyowned by Dr. Lou

• “Awarded Share(s)”

• such number of Guojian Shares that are to be granted and allotted by Sunshine Guojian pursuant to the ESOP

• “Board” the board of directors of the Company

• “Company” 3SBio Inc. 三生制药, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange

• “Connected Grantees” Grantees who are connected persons (as specified in the Listing Rules) of the Company

• “connected person(s)” has the meaning ascribed to it in the Listing Rules

• “Dr. Lou” Dr. Lou Jing, chairman of the boards of the Company and Sunshine Guojian, a connected person of the Company within the meaning ascribed to it under the Listing Rules

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“Dr. Lou ESOP Agreement”	the ESOP Agreement dated 30 June 2019 entered into between
	Achieve Well and Sunshine Guojian in relation to the grant and
	allotment of Awarded Shares to Dr. Lou and the subscription of
	Awarded Shares by Achieve Well relating thereto
“Eligible Participants”	include directors, senior management and employees of the Group
	and (if applicable) their nominees
“ESOP”	the employee stock ownership plan, the adoption of which was
	approved by the shareholders of Sunshine Guojian on 19 June 2019,
	whereby award of Shares may be made to the directors, senior
	management and employees of the Group
“ESOP Agreements”	collectively, Dr. Lou ESOP Agreement, the Guojian ESOP
	Agreement and the Non-Guojian ESOP Agreement
“ESOP Rules”	the rules relating to the ESOP
"Existing Shareholders"	the existing direct shareholders of Sunshine Guojian, six of which
	are subsidiaries of the Company and one of which is independent
	from the Group
“Fund”	the fund that is used for the purpose of holding the Awarded Shares
	for the ultimate benefit of the Other Selected Participants that is
	currently held by the General Partner and a limited partner, neither
	of whom is a connected party of the Group
“General Partner”	the general partner of the Fund, who is independent to the Group
“Grant”	44,367,221 Awarded Shares that are to be granted and allotted by
	Sunshine Guojian to the Selected Participants as approved by the
	shareholders of Sunshine Guojian on 19 June 2019 and by the Board
	on 20 June 2019
“Grantee(s)”	58 Selected Participants to whom the Awarded Shares are to be
	granted and allotted under the Grant
“Group”	the Company and its subsidiaries
“Guojian Shares”	ordinary shares of RMB1.00 each in the issued share capital of
	Sunshine Guojian
“Guojian ESOP Agreement”	the ESOP agreement dated 30 June 2019 entered into between
	Sunshine Guojian and each of the Other Selected Participants
	who are employees of Sunshine Guojian in relation to the grant of
	Awarded Shares to such Other Selected Participants

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“Listing Rules”

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• “Lock-up Period” 36 months starting from the date of the registration of the subscription of the Awarded Shares by the Fund with the relevant PRC government authority, the details of which can be found in the section titled “The Subscription Agreement And The ESOP Agreements — Other key terms of the Guojian ESOP Agreement and Non-Guojian ESOP Agreement — Lock-up Period ” in this announcement

• “Ms. Su” Ms. Su Dongmei, an executive director of the Company and of one of its subsidiaries, a connected person of the Company within the meaning ascribed to it under the Listing Rules

• “Non-connected Grantees” Grantees other than the Connected Grantees who are independent employees of the Group

• “Non-Guojian the ESOP agreement dated 30 June 2019 entered into between ESOP Agreement” Sunshine Guojian and each of the Other Selected Participants who are employees of the Group (other than Sunshine Guojian) in relation to the grant of Awarded Shares to such Other Selected Participants

• “Other Selected the Selected Participants other than Dr. Lou, the details of which Participant(s)” can be found in the section titled “The Subscription Agreement and the ESOP Agreements” in this announcement

• “PRC” People’s Republic of China, and for the purpose of this announcement, excludes Hong Kong, Macau and Taiwan

• “RMB” Renminbi, the lawful currency of the PRC “Selected Participants” participant(s) who have been selected, in Sunshine Guojian’s absolute discretion, for participation in the ESOP pursuant to the ESOP Rules

• “Shareholder(s)” holder(s) of shares of the Company “Subscription Agreement” the subscription agreement dated 30 June 2019 entered into between Sunshine Guojian, its Existing Shareholders, Achieve Well and the Fund (as new shareholders) in relation to the subscription of the Guojian Shares in accordance with the Grant under the ESOP

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“Sunshine Guojian”

Sunshine Guojian Pharmaceutical (Shanghai) Co., Ltd.* 三生國健 藥業 (上海) 股份有限公司, a company incorporated in the PRC with limited liability and an indirect non-wholly owned subsidiary of the Company

“%”

per cent

By order of the Board 3SBio Inc. Dr. LOU Jing Chairman

Shenyang, the PRC 2 July 2019

As at the date of this announcement, the Board comprises Dr. LOU Jing, Mr. TAN Bo and Ms. SU Dongmei as executive Directors; Mr. HUANG Bin, Mr. LIU Dong and Mr. WANG Steven Dasong as non-executive Directors; and Mr. PU Tianruo, Mr. David Ross PARKINSON and Mr. WANG Rui as independent non-executive Directors.

• For identification only

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