3SBio Inc. — M&A Activity 2015

Jul 24, 2015

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 in reliance upon the whole or any part of the contents of this announcement.

3SBIO INC.

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1530)

DISCLOSEABLE TRANSACTION ACQUISITION OF THE ENTIRE EQUITY INTEREST IN ZHEJIANG WANSHENG PHARMACEUTICAL CO., LTD.

THE ACQUISITION

On July 24, 2015, the Purchaser, a wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Sellers and the Target, pursuant to which the Sellers have agreed to sell and the Purchaser has agreed to acquire the entire equity interest in the Target for an aggregate consideration of RMB528 million.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios in respect of the transaction contemplated under the Equity Transfer Agreement calculated under Rule 14.07 of the Listing Rules is greater than 5%, and all of the applicable percentage ratios are less than 25%, the entering into of the Equity Transfer Agreement constitutes a discloseable transaction for the Company under the Listing Rules.

THE ACQUISITION

On July 24, 2015 after trading hours, the Purchaser entered into the Equity Transfer Agreement with the Sellers and the Target pursuant to which the Sellers have agreed to sell and the Purchaser has agreed to acquire the entire equity interest in the Target for an aggregate consideration of RMB528 million.

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THE EQUITY TRANSFER AGREEMENT

Date

July 24, 2015

Parties

• (a) Purchaser: Shenyang Sunshine Pharmaceutical Company Limited ( 瀋陽三生製藥有限 責任公司 )

• (b) Seller 1: CITIC Mezzanine (Shanghai) Investment Center (LP) ( 中信夾層 ( 上海 ) 投 資中心 ( 有限合夥 ))

• (c) Seller 2: Shanghai Rongyu Investment Management Center (LP) ( 上海鎔預投資管 理中心 ( 有限合夥 ))

• (d) Target: Zhejiang Wansheng Pharmaceutical Co., Ltd. ( 浙江萬晟藥業有限公司 )

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the Sellers, the Target and their respective ultimate beneficial owner(s) are Independent Third Parties and are independent of the connected persons of the Company.

Equity Interest to be Acquired

The entire equity interest in the Target.

Consideration and Payment Terms

The aggregate consideration for the Acquisition is RMB528 million, RMB520 million of which will be payable in full by the Purchaser to the respective accounts of the Sellers. RMB514.8 million shall be payable to Seller 1 and RMB5.2 million shall be payable to Seller 2. The Purchaser will satisfy the remainder of the consideration by assuming the outstanding debt of RMB8 million owed by Seller 1 to the Target.

The Target shall submit the information necessary for the registration in relation to the Acquisition to the relevant PRC government authorities within 2 working days after the signing of the Equity Transfer Agreement. Payment of the consideration shall be made within 5 working days after the Target obtains a notice of acceptance for registration from the relevant PRC government authorities. Registration with the relevant PRC government authorities in relation to the Acquisition shall be completed within 10 working days after the signing of the Equity Transfer Agreement.

The consideration was determined based on arm’s length negotiations between the Company and the Sellers with reference to the prevailing market price for comparable companies and recent comparable transactions. The Directors consider that the consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Completion

Completion of the Acquisition will take place when the registrations with the relevant PRC government authorities in relation to the Acquisition are completed.

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With effect from Completion, the Sellers will no longer hold any interest in the Target. The Target will become a wholly-owned subsidiary of the Company and its financial results will be consolidated into the accounts of the Company.

INFORMATION ABOUT THE SELLERS

Seller 1 is a limited partnership registered in the PRC which holds 99% of the equity interest in the Target. Seller 1 is an investment vehicle principally engaged in equity investments, industrial investments, investment management and investment consultancy.

Seller 2 is a limited partnership registered in the PRC which holds 1% of the equity interest in the Target. Seller 2 is an investment vehicle principally engaged in equity investments, industrial investments and investment consultancy.

INFORMATION ABOUT THE TARGET

The Target is a pharmaceutical company engaged in the research and development, production and sales of chemically synthesized pharmaceuticals. The Target offers dermatological drugs, anti-cancer drugs and pharmaceuticals related to the treatment of diabetes complication. Their product portfolios include Qiming Keli ( 芪明顆粒 ), Rosiglitazone Hydrochloride Tablets ( 鹽酸 羅格列酮片 ), Minoxidil Tincture ( 米諾地爾酊 ), Tacrolimus Ointment ( 他克莫司軟膏 ), BCG Polysaccharide and Nucleic Acid Injection ( 卡介菌多醣核酸注射液 ), Fexofenadine Hydrochloride Tablets ( 鹽酸非索非那定片 ), Liranaftate Spray ( 利拉萘酯噴霧劑 ), Amikacin Lotion ( 阿米卡星 洗劑 ), Docetaxel Injection ( 多西他賽注射液 ), Anastrozole Tablets ( 阿那曲唑片 ) and Azasetron Hydrochloride Injection ( 鹽酸阿扎司瓊注射液 ).

Based on the financial statements of the Target prepared under PRC GAAP1 by the local PRC auditors of the Target, (i) the turnover of the Target for the years ended December 31, 2013 and 2014 was approximately RMB226.8 million and RMB279.4 million, respectively; (ii) the total assets of the Target as at December 31, 2013 and 2014 were approximately RMB414.9 million and RMB333.4 million, respectively; (iii) the net assets of the Target as at December 31, 2013 and 2014 were approximately RMB109.9 million and RMB118.3 million, respectively; (iv) the net profits (before taxation) of the Target for the years ended December 31, 2013 and 2014 were approximately RMB22.4 million and RMB28.9 million, respectively; and (v) the net profits (after taxation) of the Target for the years ended December 31, 2013 and 2014 were approximately RMB21.4 million and RMB26.6 million, respectively.

1 Certain adjustments would need to be made to present the financial information accurately in accordance with IFRS. In particular, (i) the turnover of the Target for the year ended December 31, 2014 under IFRS would have been approximately RMB248.5 million, reflecting downward adjustments for undelivered and returned goods and a deduction of certain distribution fees; (ii) the total assets of the Target as at December 31, 2014 under IFRS would have been approximately RMB319.3 million, primarily reflecting downward adjustments for undelivered goods and provision for bad debts; (iii) the net assets of the Target as at December 31, 2014 under IFRS would have been approximately RMB88.5 million, impacted by the same adjustments noted above and adjustments for unpaid social insurance premiums and provident funds; (iv) the net profits (before taxation) of the Target for the year ended December 31, 2014 under IFRS would have been approximately RMB29.4 million, impacted by the same adjustments noted above as well as adjustments for unpaid social insurance premiums and provident funds, partially offset by a reduction in selling expenses due to cut-off issue; and (v) the net profits (after taxation) of the Target for the year ended December 31, 2014 under IFRS would have been approximately RMB28.1 million, reflecting the aforementioned factors.

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INFORMATION ABOUT THE COMPANY

The Company is a leading biotechnology company in China offering biopharmaceuticals with a primary focus on two areas, namely nephrology and oncology. The Company has extensive expertise in developing, manufacturing, and marketing biopharmaceuticals.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Target is a pharmaceutical company engaged in research and development, production and sales of chemically synthesized drugs and is known to have expertise in developing and marketing dermatological products and drugs related to the treatment of diabetes complications. The Target offers a wide range of pharmaceutical products including three anti-cancer drugs, namely docetaxel marketed under the trade name Si Qu Di ( 斯曲帝 ), anastrozole marketed under the trade name Rui Si Yi ( 瑞斯意 ) and azasetron marketed under the trade name Wan Wei ( 萬唯 ), which the Company had previously obtained exclusive distribution rights in October 2014 through in-licensing arrangements (as disclosed in the Company’s prospectus dated June 1, 2015). The Target currently has 13 GMP-compliant production lines.

The Acquisition establishes the Company’s capability in the research and development, production and sales of chemically synthesized pharmaceuticals. It also expands the Company’s product offering in various areas, in particular the diabetes complication and dermatology area where the Target’s expertise lies. The Acquisition strengthens the Company’s ability to address unmet medical needs and to offer innovative treatments for a wider array of human diseases, and bolsters the Company’s position as a market leader in the PRC pharmaceutical industry. The Company expects that the Acquisition will: (i) enhance the cost competitiveness of the Company’s chemically synthesized products by terminating the contract manufacturing arrangement in respect of Iron Sucrose and the in-licensing arrangement of the three in-licensed anti-cancer drugs after the Acquisition; and (ii) enable the Company to proceed with the clinical development of its smallmolecule pipeline candidates by leveraging on the Target’s facilities and expertise.

The Directors, including the independent non-executive Directors, consider that the Acquisition has been entered into on normal commercial terms, and is fair and reasonable and in the interests of the Company and its Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios in respect of the transactions contemplated under the Equity Transfer Agreement, as calculated under Rule 14.07 of the Listing Rules, is greater than 5%, and all of the applicable percentage ratios are less than 25%, the entering into of the Equity Transfer Agreement constitutes a discloseable transaction on the part of the Company and is subject to the reporting and announcement under the Listing Rules.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following meanings:

• “Acquisition” the acquisition of the entire equity interest in the Target by the Purchaser pursuant to the terms of the Equity Transfer Agreement

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

• “Completion” Completion of the Acquisition in accordance with the terms of the Equity Transfer Agreement

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

• “Director(s)” the director(s) of the Company “Equity Transfer Agreement” the Equity Transfer Agreement dated July 24, 2015 entered into among the Purchaser, the Sellers and the Target in relation to the sale and purchase of the entire equity interest in the Target

• “GMP” abbreviation of “Good Manufacturing Practice”, guidelines and regulations from time to time issued pursuant to the PRC Law on the Administration of Pharmaceuticals ( 中華人民共和國藥品管理 法 ) as part of 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

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC “IFRS” International Financial Reporting Standards in effect as modified from time to time

• “Independent Third Party” a person or entity who is not considered as a connected person or an associate of a connected person of the Company under the Listing Rules

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

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“PRC”	the People’s Republic of China excluding Hong Kong, Macau
	Special Administration Region of the PRC and Taiwan for the
	purpose of this announcement
“PRC GAAP”	generally accepted accounting principles of the PRC in effect as
	modified from time to time
“Purchaser”	Shenyang Sunshine Pharmaceutical Company Limited (瀋陽三生製
	藥有限責任公司), a limited liability company incorporated in the
	PRC and a wholly-owned subsidiary of the Company
“RMB”	Renminbi, the lawful currency of the PRC
“Seller 1”	CITIC Mezzanine (Shanghai) Investment Center (LP) (中信夾層
	(上海)投資中心(有限合夥)), a limited partnership registered in
	the PRC which holds 99% of the equity interest in the Target and is
	an Independent Third Party
“Seller 2”	Shanghai Rongyu Investment Management Center (LP) (上海鎔預
	投資管理中心(有限合夥)), a limited partnership registered in the
	PRC which holds 1% of the equity interest in the Target and is an
	Independent Third Party
“Sellers”	Seller 1 and Seller 2
“Shares”	ordinary share(s) in the share capital of the Company with a par
	value of US$0.00001 each
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Target”	Zhejiang Wansheng Pharmaceutical Co., Ltd. (浙江萬晟藥業有限
	公司), a limited liability company incorporated in the PRC and an
	Independent Third Party
“US$”	United States dollars, the lawful currency of the United States
“%”	percent
	By Order of the Board
	3SBio Inc.
	Mr. LOU Jing
	Chairman

Hong Kong, July 24, 2015

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

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