Ascletis Pharma Inc. - Annual Report 2020

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Ascletis Pharma Inc. 歌禮製藥有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1672)

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED DECEMBER 31, 2020

The Board hereby announces the audited condensed consolidated annual results of the Group for the year ended December 31, 2020, together with the comparative figures for the year ended December 31, 2019 as follows.

FINANCIAL HIGHLIGHTS

Revenue Sales of products Promotion service revenue Collaboration revenue Total(1) Gross (loss)/profit (2) Loss before tax Loss for the year Loss attributable to the owners of the Group Net loss margin Loss per share – Basic and diluted	Year ended December 31, 2020 2019 Changes RMB’000 RMB’000 % (29,602) 124,419 (123.8) 64,603 47,638 35.6 – 1,386 (100.0) 35,001 173,443 (79.8) (23,497) 124,283 (118.9) (209,241) (95,969) (118.0) (209,241) (95,969) (118.0) (209,241) (95,969) (118.0) (597.8%) (55.3%) – RMB RMB (20.12) cents (9.10)cents –	Year ended December 31, 2020 2019 Changes RMB’000 RMB’000 % (29,602) 124,419 (123.8) 64,603 47,638 35.6 – 1,386 (100.0) 35,001 173,443 (79.8) (23,497) 124,283 (118.9) (209,241) (95,969) (118.0) (209,241) (95,969) (118.0) (209,241) (95,969) (118.0) (597.8%) (55.3%) – RMB RMB (20.12) cents (9.10)cents –
	2020 RMB’000 (29,602) 64,603 – 35,001 (23,497) (209,241) (209,241) (209,241) (597.8%) RMB (20.12) cents	2019 RMB’000 124,419 47,638 1,386 173,443 124,283 (95,969) (95,969) (95,969) (55.3%) RMB (9.10)cents

Notes:

(1) The total revenue will amount to RMB67.5 million eliminating the sales return of GANOVO[®] (Danoprevir).
(2) The gross profit will amount to RMB30.0 million eliminating the sales return and impairment provision of GANOVO[®] (Danoprevir) and its materials.

CORPORATE PROFILE

Our Vision

Ascletis’ vision is to become the most innovative world-class biomedical company addressing global unmet medical needs in the areas of NASH, cancer lipid metabolism and oral checkpoint inhibitors, viral hepatitis, and HIV/AIDS.

Overview

Ascletis is an innovative R&D driven biotechnology company focusing on developing and commercializing innovative drugs in the four therapeutic areas, namely NASH, cancer lipid metabolism and oral checkpoint inhibitors, viral hepatitis and HIV/AIDS globally. Led by a management team with deep expertise and a proven track record, Ascletis has developed a fully integrated platform covering the entire value chain from discovery and development to manufacturing and commercialization.

During the Reporting Period and up to the date of this announcement, the Group has made remarkable progresses as summarized below:

NASH

As of the date of this announcement, the Group has obtained two U.S. FDA IND approvals (ASC41 and ASC42), one NMPA IND approval (ASC41) and two U.S. FDA Fast Track Designations (ASC42 and ASC40). The Group has completed four Phase I/Ib clinical studies (three for ASC41 and one for ASC40) and one Phase II clinical study (ASC40). Our NASH pipeline is shown below:

Single Agent and Combo Therapy Pipeline[1]

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Target CParnoddiudcatt/e ComRimghetrscial Pre - IND IND Phas e I PhII aase PII b/IIIhase NDA Marketed
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T a r g e t	P r o d u c t / C a n d i d a t e	C o m m e r c i a l R i g h t s	P r e ~~-~~ I N D	I N D	P h a s eI	P h a s e II a
FASN	ASC40	Greater China2
					U.S. FDA	Fast Track

THR-β	ASC41	Global


FXR	ASC42	Global			k
			U.S.	FDA Fast Trac

FASN + FXR	ASC40/ASC42 Combo Therapy	Global2
THR-β + FXR	ASC41/ASC42 Combo Therapy	Global
FASN + THR-β	ASC40/ASC41 Combo Therapy	Global2

Notes: 1. Our NASH pipeline is owned by Gannex.
ASC40 is licensed from Sagimet Biosciences Inc. (“ Sagimet ”), (previously known as 3-V Biosciences, Inc.) for the exclusive rights in the Greater China.

Cancer lipid Metabolism and Oral Checkpoint Inhibitors

The Group has been focused on cancer lipid metabolism and oral checkpoint inhibitors for unmet medical needs in oncology since we have unique competitive edges: oral fatty acid synthase (FASN) small molecule inhibitors target cancer lipid metabolism as an attractive cancer therapeutic option; oral PD-L1 small molecule inhibitors are next generation checkpoint inhibitors versus PD-1/PD-L1 antibodies. Our cancer lipid metabolism and oral checkpoint inhibitors pipeline is shown below:

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Target CParnoddiudcatt/e Indication ComRimghetrscial Pre - IND IND Phase � POC Pivotal NDA Marketed
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T a r g e t	P r o d u c t / C a n d i d a t e	I n d i c a t i o n	C o m m e r c i a l R i g h t s	I N D	P h a s e	� P O C
FASN+VEGF	ASC40�Oral� +Bevacizumab	Glioblastoma	Greater China1
				I	ST Phase I	I Completed

FASN	ASC40 �Oral�	Multiple Solid Tumors	Greater China1


FASN	ASC60 �Oral�	Multiple Solid Tumors	Greater China1


PD-L1	ASC61 �Oral�	Multiple Tumors	Global


PD-L1	ASC63 �Oral�	Multiple Tumors	Global

Note: 1. ASC40 and ASC60 are licensed from Sagimet for the exclusive rights in the Greater China.

Viral Hepatitis

Hepatitis B Virus (HBV) Clinical Cure

As a marketed drug of clinically curing chronic Hepatitis B (CHB), Pegasys[®] promotion revenue increased 35.6% from approximately RMB47.6 million for the year ended December 31, 2019 to approximately RMB64.6 million for the year ended December 31, 2020.

ASC22 (Envafolimab), a first-in-class, subcutaneously administered PD-L1 antibody, has completed Phase IIa trial and initiated the multi-dose Phase IIb study in CHB patients. Our HBV clinical cure pipeline is shown below:

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Target CParnoddiudcatt/e ComRimghetrscial Pre - IND IND Phase I PhII aase PII b/IIIhase NDA Marketed
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T a r g e t	P r o d u c t / C a n d i d a t e	C o m m e r c i a l R i g h t s
Interferon receptor	Pegasys® (Peginterferon alfa-2a)	Mainland China1


PD-L1	ASC22	Greater China2


Undisclosed	Candidate identified	Global


FXR	ASC42	Global

Notes: 1. Pegasys[®] is licensed from Shanghai Roche Pharmaceuticals Ltd.（上海羅氏製藥有限公司）for the exclusive rights in the Mainland China.
ASC22 is licensed from Suzhou Alphamab Co., Ltd. （蘇州康寧傑瑞生物科技有限公司）, (“ Alphamab ”) for the exclusive rights in the Greater China.

Hepatitis C Virus (HCV)

The NDA of the all-oral regimen of ASCLEVIR[®] (Ravidasvir) in combination with GANOVO[®] (Danoprevir) (the “RDV/DNV Regimen”) was approved by the NMPA on July 29, 2020. Phase II/ III clinical trial has shown that the RDV/DNV Regimen demonstrated a cure rate of 99 % (SVR12) with a short treatment duration of 12 weeks in genotype 1 patients. In patients with baseline NS5A resistance mutations, the RDV/DNV Regimen demonstrated a cure rate of 100% (SVR12). Our HCV pipeline is shown below:

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Target CParnoddiudcatt/e ComRimghetrscial Pre - IND IND Phase I PhII aase PII b/IIIhase NDA Marketed
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T a r g e t	P r o d u c t / C a n d i d a t e	C o m m e r c i a l R i g h t s
NS3/4A	GANOVO® Danoprevir ( )	Greater China1


NS5A	ASCLEVIR® (Ravidasvir)	Greater China2


Dual Targeted FDC	ASC18	Greater China

Notes: 1. GANOVO[®] is licensed from Roche (F. Hoffmann-La Roche AG) for the exclusive rights in the Greater China.

ASCLEVIR[®] is licensed from Presidio Pharmaceuticals, Inc. for the exclusive rights in the Greater China.

HIV/AIDS

Our HIV/AIDS pipeline is shown below:

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Target CParnoddiudcatt/e ComRimghetrscial Pre - IND IND Phase I PhII aase PII b/IIIhase NDA Marketed
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T a r g e t	P r o d u c t / C a n d i d a t e	C o m m e r c i a l R i g h t s
Protease	ASC09F (ASC09/Ritonavir FDC)	Mainland China and Macau1


PD-L1	ASC22	Greater China2

Notes: 1. ASC09 is licensed from Jassen R&D Ireland for the exclusive rights in Mainland China and Macau.
ASC22 is licensed from Alphamab for the exclusive rights in the Greater China.
The tablet formulation of Ritonavir that the Group develops has completed bioequivalence (BE) studies of the tablets on healthy volunteers. ANDA of Ritonavir was accepted by the NMPA on August 22, 2019.

In-House Discovery

The in-house discovery team of the Group has delivered two U.S. FDA IND approvals (ASC41 and ASC42) and one NMPA IND approval (ASC41) for NASH in 2020. In addition, the in-house discovery team made significant progress for the oral PD-L1 small molecule inhibitor program for cancer immune modulation.

MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

During the Reporting Period and up to the date of this announcement, the Group made the following progresses with respect to its business.

NASH

2020 was an exciting year for the Group as we made significant progress in NASH pipeline with three potential first/best-in-class assets against three complementary targets (FASN, THR-β and FXR) and combination therapies of these complementary targets. The Group has obtained two U.S. FDA IND approvals (ASC41 and ASC42), one NMPA IND approval (ASC41); and two U.S. FDA Fast Track Designations (ASC42 and ASC40) as of the date of this announcement. The Group has also completed four Phase I/Ib clinical studies (three for ASC41 and one for ASC40) and one Phase II clinical study (ASC40).

ASC40

ASC40 is a novel, first-in-class, FASN inhibitor. The Company and its partner Sagimet have completed the global Phase II trials of 129 NASH patients in China and U.S. cohorts. The preliminary data showed that ASC40 meaningfully reduced liver fat, the primary efficacy endpoint of this trial, with the responder rates ranging 50% to 61% (percentage of patients achieving ≥30% liver fat reduction).

The China cohort of the global Phase II trials evaluated the safety and efficacy of an oral, once-daily dosing of 50 mg of ASC40 or matching placebo for 12 weeks in 30 patients with NASH. Trial participants were required to have at least 8% liver fat at baseline, as measured by magnetic resonance imaging-proton density fat fraction (MRI-PDFF), and evidence of stage F1 to F3 liver fibrosis on liver biopsy or characteristics of metabolic syndrome. The study demonstrated a relative reduction in liver fat of 28.2% in the ASC40 group versus a reduction of 11.1% in the placebo group. ASC40 also showed a statistically significant decrease in ALT by 29.8% (P=0.0499) (mean decrease of 33 U/L at week 12), which indicates reduction of liver inflammation. In 63% of patients on ASC40, ALT decreased by 17 U/L or greater, which has been shown to correlate with liver biopsy response in NASH patients.

ASC40 was well tolerated with no serious adverse events. All treatment emergent adverse events were grade one or two and there were no statistically significant changes in serum triglycerides.

Based on the positive Phase II data, we have selected doses for the pivotal Phase IIb/III NASH patient trial of ASC40 in China.

ASC41

ASC41 is a liver-targeted prodrug. The active metabolite of ASC41 is a potent and selective thyroid hormone receptor beta (THR-β) agonist. The Company achieved remarkable milestones with IND approvals by both the U.S. FDA and NMPA for ASC41. The Company has completed Phase I trial in 65 subjects with elevated low-density lipoprotein cholesterol (LDL-C) (> 110 mg/ dL), a population characteristic of non-alcoholic fatty liver disease (NAFLD). The preliminary data suggest that after 14 days of once daily oral dosing, subjects demonstrate clinically meaningful and statistically significant reduction in LDL-C and triglycerides compared to placebo. At a low dose of 1 mg, placebo-adjusted relative triglyceride reduction from baseline was 39% after 14 days of once daily oral dosing, differentiating from our competitors. ASC41 had a benign adverse event profile at all doses following 14-day treatment, with no grade three or above adverse events, no serious adverse events or premature discontinuations. Furthermore, ASC41 tablet formulation displayed a dose-proportional pharmacokinetic profile from 1 mg to 5 mg following once daily, 14-day dosing.

The Company has further completed Phase Ib trial in 20 overweight and obese subjects with positive clinical results.

Based on the positive clinical results, doses were selected for Phase II trial in patients with NASH. Furthermore, the commercially ready oral tablets developed in-house using proprietary technology will accelerate our clinical development to market.

ASC42

ASC42 is a novel non-steroidal, potent and selective FXR agonist with the best-in-class potential. The Company also achieved remarkable milestones for ASC42 with IND approval and Fast Track Designation by U.S. FDA. The U.S. FDA’s Fast Track development program is designed to facilitate the development and expedite the review of drugs that have ability to treat serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs with additional clinical benefits to patients. There are no FDA approved medicines for NASH indication yet. This Fast Track designation represents FDA’s recognition of ASC42’s potential in addressing these unmet medical needs for NASH patients.

Combination Therapies

With three single agents against three distinct but complementary targets, the Company has initiated formulation development of fixed dose combinations (FDCs) and preclinical toxicology studies of three combination therapies to take advantage of synergies among these targets (see below).

Combination Therapies: Synergies among ASC40, ASC41 and ASC42

		Monotherapy			Combination therapy	Combination therapy
Treatment Goals	ASC40	ASC41	ASC42	ASC40/ASC42	ASC41/ASC42	ASC40/ASC41
	FASN	THR-β	FXR	FASN+FXR	THR-β+FXR	FASN+THR-β
Liver fat reduction
Anti-inflammation
Anti-fibrosis
Lowering LDL-C and TG

Cancer Lipid Metabolism and Oral Checkpoint Inhibitors

The Group has been focused on discovery and development of therapeutics in the areas of cancer lipid metabolism and oral checkpoint inhibitors since we have unique competitive edges against our competitors. In 2017, U.S. FDA approved Agios’ and Celgene’s enasidenib for acute myeloid leukaemia (AML) as the first-in-class cancer lipid metabolism drug, validating metabolism-modulating drugs as a means of killing cancer cells.

Lipid metabolism has been reported to play a critical role in various cancers. Fatty acid synthase (FASN) is one of the most important proteins which regulates lipid metabolism. Many solid and hematopoietic tumors overexpress FASN, including glioblastoma (GBM, Grade IV astrocytoma), non-small cell lung, breast, ovarian, prostate, colon, pancreatic cancers and non-Hodgkin lymphoma.

GBM represents the most common and devastating primary brain tumor. There is no standard of care after patients have progressed on chemo-radiation. An investigator sponsored Phase II trial of ASC40 (TVB-2640) in combination with bevacizumab in patients with first relapse of high-grade astrocytoma (including GBM) was completed in the U.S.. The data have shown that the overall response rate (ORR) for TVB-2640/bevacizumab was 65% including the complete response (CR) of 20% and partial response (PR) of 45%. Furthermore, the data indicate that the progression-free survival at six months (PFS6) observed for ASC40 (TVB-2640) plus bevacizumab was 47%, representing a statistically significant improvement in PFS6 over historical bevacizumab monotherapy (BELOB 16%, P=0.01). ASC40 (TVB-2640) in combination with bevacizumab was safe and well tolerated in such patient population.

Based on such positive Phase II data, the Company plans to initiate a pivotal randomized, double-blind, placebo-controlled Phase II trial of ASC40 (TVB-2640) in combination with bevacizumab in China for the same patient population (first relapse of high-grade astrocytoma) as in the U.S.. The Company is also considering additional clinical trials for (i) ASC40 in combination with chemotherapies for high-grade astrocytoma immediately followed by the surgery and radiation therapy; (ii) ASC40 in combination with other therapies for various solid tumors.

ASC60 is a next generation oral FASN inhibitor which may be combined with other therapies for various solid tumors.

Our oral PD-L1 small molecule inhibitors discovered in-house have shown favorable anti-tumor activities in animal model compared to a marketed anti-PD-L1 antibody. The Company believes that oral PD-L1 small molecule inhibitors will be the next generation checkpoint inhibitors as cancer immune therapies and have the potential to be combined with oral FASN small molecule inhibitors

Viral Hepatitis

HBV

There are 257 million people worldwide, including 86 million people in China, infected by HBV.

Pegasys[®]

As a marketed drug of clinically curing CHB, Pegasys[®] promotion income increased 35.6% from approximately RMB47.6 million for the year ended December 31, 2019 to approximately RMB64.6 million for the year ended December 31, 2020.

ASC22

In August 2020, the Company dosed first HBV patient in Phase IIa single dose escalation clinical trial to explore the safety and tolerability of ASC22 (Envafolimab) in the CHB patients. The data from Phase IIa study indicated that ASC22 (Envafolimab) is safe and well tolerated in the CHB patients receiving nucleos(t)ides as the background therapy. All adverse effects were grade one and no grade two or above adverse effects were observed to date. Based on such data, a multi-dose Phase IIb study of ASC22 (Envafolimab) has been initiated. As T cell exhaustion in HBV infections is an important factor in immune tolerance, blocking the PD-1/PD-L1 pathway could be an effective immunotherapy approach to improve specific T cell function and lead to an effective clinical cure for CHB.

HCV

The NDA of the all-oral regimen of ASCLEVIR[®] (Ravidasvir) in combination with the GANOVO[®] (Danoprevir) was approved by the NMPA on July 29, 2020. However, due to the impact of the low pricing strategy of our competitors for all-oral HCV regimens in China, the Group made the strategic decision to focus on the promotion of Pegasys[®] for CHB and has initiated the process to seek external partners to promote the RDV/DNV Regimen for chronic Hepatitis C.

HIV/AIDS

The Group received IND approval from the NMPA for ASC09F, an ASC09/Ritonavir FixedDose Combination (FDC). ASC09 has an unprecedented high genetic barrier to resistance and has completed Phase I and Phase IIa clinical trials, which have shown potent anti-viral activity. Previous clinical trials have also shown that ASC09 is safe and well-tolerated. After two weeks of treatment of mono-therapy, ASC09 demonstrated up to a 1.79 log viral load decrease (62fold reduction of viral load in blood samples of patients). Our studies have shown that ASC09 requires seven mutations before HIV develops resistance to ASC09, indicating ASC09 to have high genetic barrier to resistance compared to other approved protease inhibitors. These characteristics make ASC09 a promising HIV drug therapy candidate for both treatment-naïve and treatmentexperienced patients.

Capability of Commercialization

With the successful launch of GANOVO[®] , the Group has demonstrated potent development capability and established a solid commercial presence in China in the area of hepatitis. As of December 31, 2020, the Group has built a commercialization team of approximately 110 members, covering approximately 1,000 hospitals and pharmacies strategically located in regions where Hepatitis C and B are prevalent in China. Our commercial team has identified and educated approximately 5,400 specialists and KOLs in the hepatitis field. We have entered into 22 distribution agreements with different distributors that cover approximately 310 direct-to-patient (DTP) pharmacies, hospital-linked pharmacies and other pharmacies through our distributors, either directly or through their sub-distributors.

The Group’s Facilities

We have one manufacturing facility located in Shaoxing, Zhejiang Province with a total gross floor area of 17,000 square meters. Our manufacturing facility has one production line with a designed annual production capacity of 130 million tablets. As substantially all of our drug candidates are administered in tablet form, we are able to manufacture our drugs using the same production line. We have obtained the drug production license for our manufacturing facility. Our manufacturing facility is equipped with state-of-the-art production equipment with cutting-edge technology capabilities such as hot-melt extrusion and high-speed press to ensure the high quality of our products.

As of December 31, 2020, we had 10 wholly-owned subsidiaries. Our business was mainly conducted through three operating subsidiaries in China, namely Ascletis BioScience Co., Ltd. (歌禮生物科技（杭州）有限公司), Ascletis Pharmaceuticals Co., Ltd. (歌禮藥業（浙江）有限公司) and Gannex.

Impact of COVID-19

During the Reporting Period, COVID-19 pandemic had limited impacts on the Group’s business, such as research and development and sales activities. The Group took various measures to minimize negative impacts of COVID-19 pandemic on our operations and business activities. As a result, the Pegasys[®] promotion still increased 35.6% from approximately RMB47.6 million for the year ended December 31, 2019 to approximately RMB64.6 million for the year ended December 31, 2020.

The initiation and patient enrollment of some of our clinical trials were slowed down in the first half 2020 under the impact of COVID-19 pandemic. As a result, the Group’s R&D expenses decreased by 13.5% from approximately RMB126.0 million for the year ended December 31, 2019 to approximately RMB109.1 million for the year ended December 31, 2020.

Future and Outlook

In 2021 and beyond, we will focus on four therapeutic areas: NASH, cancer lipid metabolism and oral checkpoint inhibitors, HBV clinical cure and HIV/AIDS.

Over the last few years, we have built a global leading NASH pipeline with three single agents and three combination therapies. We are planning to advance ASC40 and ASC41 into pivotal clinical trials in 2021 and beyond for NASH indication registration purposes. We are also planning to advance ASC42 into proof-of concept Phase II clinical trials in 2021.

Over the last few years, we have built an oncology pipeline focusing on cancer lipid metabolism and oral checkpoint inhibitors. In 2021, we are planning to advance ASC40 in combination with bevacizumab into a pivotal randomized, double-blind, placebo-controlled Phase II trial in China for the same patient population (first relapse of high-grade astrocytoma) as in the U.S.. We are also considering additional clinical trials of ASC40 for (i) combination with chemotherapies for highgrade astrocytoma immediately followed by the surgery and radiation therapy; and (ii) combination with other therapies for various solid tumors. In 2021, we are planning to file an IND of our next generation FASN inhibitor ASC60 (TVB-3567) for oncology indications.

In December 2020, we reported that Phase IIa data demonstrated that ASC22 (Envafolimab), a first-in-class, subcutaneously administered PD-L1 antibody, is safe and well tolerated in CHB patients and Phase IIb clinical trial has been initiated. In 2021, we will focus on advancing ASC22 Phase IIb clinical trials with the goal to achieve clinical cure of CHB.

Financial Review

Revenue

The Group have commercialized three products, namely GANOVO[®] (Danoprevir) in China on June 8, 2018, Pegasys[®] on December 1, 2018, and ASCLEVIR[®] (Ravidasvir) in China on July 29, 2020. The revenue generated during the Reporting Period consisted of (i) the promotion services of Pegasys[®] ； and (ii) sales of products from the all-oral regimen of ASCLEVIR[®] (Ravidasvir) in combination with GANOVO[®] (Danoprevir).

Despite the impact of COVID-19, the revenue generated from promotion services of Pegasys[®] increased 35.6% from approximately RMB47.6 million for the year ended December 31, 2019 to approximately RMB64.6 million for the year ended December 31, 2020.

The total revenue of the Group decreased by 79.8% from approximately RMB173.4 million for the year ended December 31, 2019 to approximately RMB35.0 million for the year ended December 31, 2020. The decrease was mainly because (i) termination of promotion and sales of GANOVO[®] (Danoprevir) in combination with pegylated interferon and ribavirin (the “GANOVO Regimen”) in 2020 due to all-oral regimens have become the standard for HCV treatment in 2020 in China, the GANOVO Regimen is no longer an option for HCV patients; and (ii) we recalled the stocks in the sales channel at the end of 2020 and adjusted down the sales price of GANOVO[®] (Danoprevir) since January 1, 2021. Therefore, the relative negative impacts offset the revenue of RMB32.6 million in 2020.

Cost of Sales

The cost of sales of the Group increased by 19.0% from approximately RMB49.2 million for the year ended December 31, 2019 to approximately RMB58.5 million for the year ended December 31, 2020. The increased cost of sales was attributable to (i) the additional impairment provision of GANOVO[®] (Danoprevir) and its materials amounted to RMB24.3 million, reflecting that GANOVO[®] (Danoprevir) in combination with pegylated interferon is no longer an option for HCV patients since all-oral regimens have become the standard for HCV treatment in 2020 in China; and (ii) the costs of inventories sold decreased in line with the sales result on GANOVO[®] (Danoprevir) compared with that in 2019 and the costs were reversed due to the recalled GANOVO[®] (Danoprevir).

The cost of sales of the Group consisted of direct labor costs, cost of raw materials, overheads, royalty fees, costs of rendering promotion services and the write-down of inventories to net realizable value.

Direct labor costs primarily consisted of salaries, bonus and social security costs for our employees.

Costs of raw materials represented the costs in relation to the purchase of raw materials. We own technologies and intellectual properties to manufacture APIs for GANOVO[®] (Danoprevir) and Ravidasvir. We have engaged third party CMOs to manufacture APIs for GANOVO[®] (Danoprevir) to maintain continuity in our source of APIs in the production of GANOVO[®] (Danoprevir). We manufacture the APIs and tablet formulation for ASCLEVIR[®] (Ravidasvir) in-house.

Overheads primarily consisted of depreciation expenses on our facilities and equipment and other manufacturing expenses.

We agreed to pay Roche and Presidio tiered royalties in the mid-single digits based on net sales of GANOVO[®] (Danoprevir) and ASCLEVIR[®] (Ravidasvir) in any and all regimens in the Greater China.

Gross Profit

The gross profit of the Group decreased by 118.9% from approximately RMB124.3 million for the year ended December 31, 2019 to approximately RMB(23.5) million for the year ended December 31, 2020. The decreased in the gross profit was mainly due to (i) we recognized RMB30.2 million impairment provision of inventories including the additional impairment provision of GANOVO[®] (Danoprevir) and its materials; and (ii) the recalled sales of GANOVO[®] (Danoprevir).

Other Income and Gains

The other income and gains of the Group decreased by 29.0% from approximately RMB126.6 million for the year ended December 31, 2019 to approximately RMB89.9 million for the year ended December 31, 2020, primarily due to (i) the decrease of RMB31.6 million from approximately RMB72.2 million for the year ended December 31, 2019 to approximately RMB40.6 million for the year ended December 31, 2020 in our bank interest income in line with the decreased market bank interest rate; and (ii) we did not incur any foreign exchange gain for the year ended December 31, 2020 compared with RMB4.5 million for the year ended December 31, 2019.

The government grants mainly represented the subsidies we received from the local governments for compensating our expenses from research activities and clinical trials, awarding our new drug development and capital expenditure incurred on certain projects.

The following table sets forth the components of our other income and gains for the years indicated:

Year ended December 31,	Year ended December 31,	Year ended December 31,
2020 RMB’000 % 48,861 54.4 40,626 45.2 290 0.3 – – 79 0.1 89,856 100	2019
RMB’000 48,861 40,626 290 – 79 89,856	RMB’000 49,869 72,239 – 4,485 – 126,593	% 39.4 57.1 – 3.5 –
		100

Selling and Distribution Expenses

The selling and distribution expenses of the Group mainly consisted of staff costs for our sales personnel and the expenses for our marketing promotion activities.

The selling and distribution expenses represented 78.2% of our revenue for the year ended December 31, 2020, primarily because the sales return of GANOVO[®] (Danoprevir) offset our Group’s total revenue.

Administrative Expenses

The administrative expenses of the Group decreased significantly by 14.5% from RMB49.0 million for the year ended December 31, 2019 to RMB41.8 million for the year ended December 31, 2020, primarily due to (i) a decrease in utilities, rent and general office expenses of RMB3.9 million as a result of our cost saving strategies; and (ii) a decrease in staff salary and welfare of RMB3.0 million, which is in line with the reduced headcount.

The following table sets forth the components of our administrative expenses for the years indicated:

Year ended December 31,	Year ended December 31,	Year ended December 31,
2020 RMB’000 % 21,408 51.2 15,217 36.4 4,315 10.3 905 2.1 41,845 100	2019
RMB’000 21,408 15,217 4,315 905 41,845	RMB’000 24,419 19,159 4,411 973 48,962	% 49.9 39.1 9.0 2.0
		100

Research and Development Expenses

Our Group’s research and development expenses primarily consisted of clinical trial expenses, staff costs and third-party contracting costs.

The research and development expenses of the Group for developing our drug candidates decreased by 13.4% from approximately RMB126.0 million for the year ended December 31, 2019 to approximately RMB109.1 million for the year ended December 31, 2020. This was primarily because of the delay of initiation and patient enrollment of some of our clinical trials in the first half 2020 under the impact of COVID-19 pandemic.

The following table sets forth the components of our research and development costs for the years indicated:

Clinical trial expenses Staff costs Depreciation and amortization Third-party contracting costs Others Total	Year ended December 31,	Year ended December 31,
	2020 RMB’000 49,960 33,829 18,067 536 6,707 109,099	2019
		RMB’000 62,711 30,559 15,893 4,012 12,787
		125,962

The following table sets forth the components of our research and development costs by product pipeline for the years indicated:

NASH HBV HCV HIV/AIDS Others(Note) Total	Year ended December 31,	Year ended December 31,
	2020 RMB’000 42,642 24,963 24,936 8,698 7,860 109,099	2019
		RMB’000 21,040 13,571 73,637 17,156 558
		125,962

Note: “Others” includes research and development costs of pre-clinical programs.

Finance Costs

The Group recorded finance costs amounted to approximately RMB0.1 million for the year ended December 31, 2020, as a result of the amount of the remaining lease liabilities decreased as the term of the lease contract decreased.

The following table sets forth the components of our finance costs for the years indicated:

Year ended December 31,	Year ended December 31,	Year ended December 31,
2020 RMB’000 % 135 100 135 100	2019
RMB’000 135 135	RMB’000 182 182	% 100
		100

Other Expenses

Our other expenses primarily included donations and foreign exchange loss. Our other expenses increased by 39.7% from approximately RMB59.7 million in 2019 to approximately RMB83.4 million in 2020, mainly due to (i) we recognized foreign exchange loss of RMB30.4 million in 2020 in line with the fluctuation in foreign currency exchange rates, primarily with respect to the exchange rate between USD and RMB; (ii) the write-down of inventories to net realisable value caused a total expense of RMB15.3 million in 2020; (iii) we recognized impairment of intangible asset on ASC21 IP upfront payment amounted to RMB5.8 million as business strategic plan change; and (iv) the decrease of RMB26.1 million in our donation in 2020 compared with that in 2019.

The following table sets forth the components of other expenses for the years indicated:

Donation Foreign exchange loss, net Write-down of inventories to net realisable value Impairment of an intangible asset Loss on disposal of items of property, plant and equipment Impairment of trade receivables Others Total	Year ended December 31,	Year ended December 31,
	2020 RMB’000 31,789 30,425 15,315 5,771 92 – 20 83,412	2019
		RMB’000 57,871 – – – 1,388 88 369
		59,716

Income Tax

The Group is subject to income tax on an entity basis on profits arising in or derived from the jurisdictions in which members of the Group are domiciled and operated.

The Group calculates the income tax expense by using the tax rate that would be applicable to the expected total annual earnings. For the years ended December 31, 2019 and 2020, the Group did not incur any income tax expense as we did not generate any taxable income. We recorded loss before tax of RMB96.0 million for the year ended December 31, 2019 and loss before tax of RMB209.2 million for the year ended December 31, 2020, respectively.

We had tax losses arising in the PRC of RMB563.6 million and RMB762.9 million for the year ended December 31, 2019 and 2020, respectively, which are expected to expire in one to five years for offsetting our future taxable profits.

Inventories

The inventories of the Group consisted of raw materials used in the commercial manufacturing, work in progress, finished goods and research materials. The inventories decreased by 31.5% from approximately RMB86.0 million as at December 31, 2019 to approximately RMB58.9 million as at December 31, 2020, primarily due to the recognition of RMB30.2 million impairment provision of inventories mainly for GANOVO[®] (Danoprevir) and its APIs.

The following table sets forth the inventory balances as of the dates indicated:

Raw materials Work in progress Finished goods Total	December 31, 2020 RMB’000 32,601 7,871 18,422 58,894	December 31, 2019 RMB’000 60,468 20,408 5,163 86,039

Trade Receivables

The Group had RMB68.4 million trade receivables as at December 31, 2019 and RMB26.6 million as at December 31, 2020.

Trade receivables Less: Impairment of trade receivables Total	December 31, 2020 RMB’000 26,629 9 26,620	December 31, 2019 RMB’000 68,485 88 68,397

The trading terms of our Group with its customers are mainly on credit. The credit period is generally from 30 days to 180 days. The Group seeks to maintain strict control over its outstanding receivables and overdue balances are regularly reviewed by relevant senior management. In view of the before mentioned and the fact that our Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Our trade receivables are non-interest-bearing.

An aging analysis of the trade receivables as at the dates indicated, based on the invoice date and net of loss allowance, is as follows:

Less than 3 months	December 31, 2020 RMB’000 26,620	December 31, 2019 RMB’000 68,397

Prepayments, Other Receivables and Other Assets

The following table sets forth the components of prepayment, other receivables and other assets as at the dates indicated:

Value-added tax recoverable Prepayments Deposits and other receivables Interest receivable Prepaid expenses Prepaid income tax Total	December 31, 2020 RMB’000 19,703 3,437 2,209 1,904 1,846 1,363 30,462	December 31, 2019 RMB’000 13,225 7,686 4,788 18,899 1,885 1,363 47,846

Our value-added tax recoverable represented the value-added taxes paid with respect to our procurement that can be credited against future value-added tax payables. Our value-added tax recoverable increased from RMB13.2 million as of December 31, 2019 to RMB19.7 million as of December 31, 2020, which was in line with our increased purchases of service.

Our prepayments mainly included our purchase of services. Our prepayments decreased by 55.3% from RMB7.7 million as of December 31, 2019 to RMB3.4 million as of December 31, 2020. Prepayments to supplier as at the end of December 31, 2020 are due within one year. None of the above assets is past due or impaired.

We had RMB18.9 million and RMB1.9 million interest receivable as of December 31, 2019 and December 31, 2020, respectively, which represented the expected interest to be received on time deposits.

Other receivables and prepaid expenses are miscellaneous expenses including other administrative related expenses.

Fair Value and Fair Value Hierarchy of Financial Instruments

We did not have financial instruments other than those with carrying amounts that reasonably approximate to fair values, as at December 31, 2019 and 2020, respectively.

Cash and Cash Equivalents

The following table sets forth the components of our Group’s cash and cash equivalents and time deposits as of the dates indicated:

Cash and bank balances Time deposits Total	December 31, 2020 RMB’000 1,256,267 1,457,744 2,714,011	December 31, 2019 RMB’000 167,982 2,821,182 2,989,164

Cash at banks earns interest at floating rates based on daily bank deposit rates. Time deposits are made for varying periods between one day and 12 months depending on our immediate cash requirements, and earn interest at the respective time deposit rates. The bank balances and time deposits are deposited with creditworthy banks with no recent history of default.

Trade and Other Payables

Trade and bills payables of the Group primarily consisted of payments to raw materials suppliers. The following table sets forth the components of trade payables as at the dates indicated:

Trade payables Bills payable Total	December 31, 2020 RMB’000 334 596 930	December 31, 2019 RMB’000 3,961 2,682 6,643

An aging analysis of the trade and bills payables as at the end of the Reporting Period, based on the invoice date, is as follows:

– Within 1 month – 1 to 3 months – 3 to 6 months	December 31, 2020 RMB’000 334 596 – 930	December 31, 2019 RMB’000 3,933 28 2,682 6,643

The following table sets forth the components of other payables and accruals outstanding as at the dates indicated:

Other payables Payroll payable Accrued expenses Refund liabilities Taxes other than income tax Total	December 31, 2020 RMB’000 36,760 19,122 11,960 1,473 659 69,974	December 31, 2019 RMB’000 33,276 23,387 14,347 4,432 1,617 77,059

Our other payables increased by 10.5% from RMB33.3 million as of December 31, 2019 to RMB36.8 million as of December 31, 2020 as a result of the extended payment term in the contract.

The payroll payable are the bonus of 2020 accrued and salary accrued of December 2020, which are due within one year.

The accrued expenses as at December 31, 2020 mainly represented the accrued R&D expenses actually incurred but not yet invoiced, which are non-interest-bearing and due within one year.

Deferred Income

The deferred income of the Group represented government grants which have been awarded, but we have yet to meet the conditions of the grants as of the relevant dates. The following table sets forth the deferred income as of the dates indicated:

Government grants – Current – Non-current Total	December 31, 2020 RMB’000 1,724 11,207 12,931	December 31, 2019 RMB’000 1,724 12,931 14,655

Other Intangible Assets

The intangible assets of the Group primarily represented (i) a patent that was transferred from Presidio to the Group in relation to the development and license agreement entered between the Group and Presidio in September, 2014, under which we made upfront and milestone payments to Presidio; and (ii) a patent that was transferred from Alphamab to the Group in relation to the exclusive license and development agreement entered between the Group and Alphamab in January,2019, under which we made upfront payments to Alphamab.

The useful economic lives of these intangible assets are 10 to 17 years, which we consider to be reasonable considering that the duration of the patent right is shorter than the anticipated duration of sales of product. The amortization of intangible assets begins on the transfer date of patent because it is the date from which the intangible assets are available for use by us.

We recognized an impairment loss for ASC21 with RMB5.8 million due to the change of our business strategic plan throughout the Reporting Period. ASC21 is an IND-approved NS5B polymerase nocleot(s)ide inhibitor licensed from Medivir AB under the exclusive licensing agreement executed in June 2017. The Group currently has another IND-approved HCV dual-targeted fixed-dose combination (FDC) candidate in its pipeline, ASC18, which is in-house developed, one-pill once-a-day FDC as the complete treatment of Hepatitis C. Since ASC21 is also an NS5B polymerase nocleot(s)ide inhibitor, which intended to be combined with Ravidavir as FDC, ceasing cooperation with Medivir AB does not have material impact on the Company’s HCV pipeline.

Because our other intangible assets primarily represented a patent transferred to us from Presidio, which related to the development, manufacture and commercialization of Ravidasvir in the Greater China. The NDA for Ravidasvir has been approved by the NMPA on July 29, 2020. The IND of ASC22 was approved by the NMPA on January 22, 2020 to conduct clinical trials in Hepatitis B patients. Therefore, we do not foresee any indicators of impairment for these two intangible assets.

Liquidity and Capital Resources

The primary uses of cash of the Group are to fund research and development, clinical trials, purchase of equipment and raw materials and other recurring expenses. During the Reporting Period, the Group funded our working capital and other capital expenditure requirements through capital injections from Shareholders at the Listing.

The following table sets forth a condensed summary of our Group’s consolidated statement of cash flows for the periods indicated and analysis of balances of cash and cash equivalents for the years indicated:

Net cash used in operating activities Net cash from investing activities Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of year Effect of foreign exchange rate changes, net Cash and cash equivalents at the end of year	December 31, 2020 RMB’000 (84,911) 132,297 (21,670) 25,716 2,295,044 (110,256) 2,210,504	December 31, 2019 RMB’000 (74,341) 602,269 (48,217) 479,711 1,781,892 33,441 2,295,044

As at December 31, 2020, our cash and cash equivalents were mainly denominated in Renminbi, USD and HKD.

Operating Activities

Our cash inflows from operating activities mainly consisted of trade and bills receivables from customers, government grants and bank interests. Our cash outflow from operating activities mainly consisted of selling and distribution expenses, research and development costs, and administrative expenses.

For the year ended December 31, 2020, we had net cash flows used in operating activities of RMB84.9 million, primarily as a result of operating loss before changes in working capital of RMB153.0 million. The negative changes in working capital are mainly due to (i) an increase in bank interest received of RMB57.6 million; (ii) a decrease of RMB42.9 million in trade and bills receivables in relation to our product sales; and (iii) a decrease in trade and bills payables and other payables and accruals of RMB12.8 million.

Investing Activities

Our cash used in investing activities mainly consisted of investment in an associate, purchase of property, equipment and construction in progress and purchase of intangible assets.

For the year ended December 31, 2020, our net cash from investing activities was RMB132.3 million, primarily attributable to a decrease in time deposits with original maturity of over three months of RMB190.6 million, which were offset by purchases of intangible assets RMB34.0 million, and investment in an associate of RMB19.7 million.

Financing Activities

Our cash inflow from financing activities primarily related to our corporate financings during the Reporting Period.

For the year ended December 31, 2020, our net cash flows used in financing activities was RMB21.7 million, primarily attributable to repurchase of Shares in an aggregate consideration of RMB19.6 million.

Capital Expenditures

The principal capital expenditures of the Group primarily consisted of plant and machinery, expenditures for construction in progress, leasehold improvements and the purchase of office equipment. The following table sets forth our net capital expenditures as at the dates indicated:

Plant and machinery Motor vehicles Office equipment Leasehold improvements Construction in progress Total	December 31, 2020 RMB’000 852 – 720 – 3,350 4,922	December 31, 2019 RMB’000 4,348 121 2,383 1,284 11,006 19,142

Significant Investments, Material Acquisitions and Disposals

In 2019, AP11 Limited, a wholly-owned subsidiary of the Company, entered into a capital increase agreement with 3-V Biosciences (currently known as Sagimet), pursuant to which AP11 Limited agreed to invest US$8,100,000.00 in cash at the initial closing and US$1,899,999.95 in cash at the second closing into Sagimet. On December 21, 2020, AP11 Limited increased investment US$2,999,999.92 in cash into Sagimet. As at the year ended December 31, 2020, AP11 Limited holds approximately 10.56% of the equity interest in Sagimet. The Group recognizes such investment as an investment in an associate to which the equity method is applied.

Indebtedness

Borrowings

As of December 31, 2020, the Group did not have any indebtedness, and the undrawn bank facilities was RMB50 million as of the same date.

As of December 31, 2020, the Group did not have any outstanding mortgages, charges, debentures, other issued debt capital, bank overdrafts, borrowings, liabilities under acceptance or other similar indebtedness, any guarantees or other material contingent liabilities.

Contingent Liabilities, Charges of Assets and Guarantees

As of December 31, 2020, the Group was not involved in any material legal, arbitration or administrative proceedings, or any contingent liabilities or charges of assets and guarantees, that, if adversely determined, would materially adversely affect our business, financial position or results of operations.

Contractual Commitments

We lease certain of our properties and warehouse under operating lease arrangements. Leases for properties and warehouse are negotiated for terms ranging mainly from one to five years.

The Group had nil operating lease commitments as at December 31, 2020 and nil as at December 31, 2019, respectively.

The Group had nil the capital commitments as at December 31, 2020 and RMB3.5 million as at December 31, 2019, respectively.

Gearing Ratio

Gearing ratio is calculated by dividing total liabilities by total assets and multiplying it by 100%. As at December 31, 2020, the gearing ratio of the Group was 2.8% (as at December 31, 2019: 3.0%).

The following table sets forth our key financial ratios as of the dates indicated:

Current ratio(1) Quick ratio(2)	December 31, 2020 38.4 37.6	December 31, 2019 36.4 35.4

Notes:

(1) Current ratio represents current assets divided by current liabilities as of the same date.
(2) Quick ratio represents current assets less inventories and divided by current liabilities as of the same date.

Our current ratio increased from 36.4 as of December 31, 2019 to 38.4 as of December 31, 2020, and our quick ratio increased from 35.4 as of December 31, 2019 to 37.6 as of December 31, 2020, primarily due to a decrease in current liabilities.

Foreign Exchange

Foreign currency risk refers to the risk of loss resulting from changes in foreign currency exchange rates. Fluctuations in exchange rates between Renminbi and other currencies in which the Group conducts business may affect our financial condition and results of operation.

The Group mainly operates in the PRC and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. Foreign exchange risk arises from recognized assets and liabilities in foreign operations. The conversion of Renminbi from foreign currencies, including the USD, has been based on rates set by the People’s Bank of China. The Group seeks to limit our exposure to foreign currency risk by closely monitoring and minimizing its net foreign currency position. During the Reporting Period, the Group did not enter into any currency hedging transactions. The revenue denominated in USD represented 0.8% and 0.0% of the total revenue of the Company for the year ended December 31, 2019 and 2020, respectively.

Employees and Remuneration Policies

As at December 31, 2020, the Group had a total of 256 employees, 253 of which were located in the PRC while one employee and two consultants were located abroad. Over 62% of our employees obtained a bachelor’s degree or higher. The table below sets forth our Group’s employees by function as disclosed:

Management Research and development Commercialization Manufacturing(Note) Operations Total	Numbers of employees 6 76 106 26 42 256	% of total
		2 30 42 10 16
		100

Note: reclassified 20 employees who in charge of Chemistry, Manufacturing and Control function from Manufacturing to Research and development.

Our Group’s total staff costs for the year ended December 31, 2020 was RMB94.1 million, compared to RMB115.1 million for the year ended December 31, 2019.

We recruits employees through recruitment websites, recruiters, internal referral and job fairs. The Group conducts new employee training, as well as professional and compliance training programs for employees of the commercialization team.

The Group enters into employment contracts with employees to cover matters such as wages, benefits and grounds for termination. The remuneration package of our employees includes salary and bonus, which are generally determined by the qualifications, industry experience, position and performance. The Group makes contributions to social insurance and housing provident funds for our employees as required by the PRC laws and regulations.

The Group also has adopted a Restricted Stock Unit Scheme, a Restricted Stock Unit Option Incentive Scheme and a Share Option Scheme.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

Year ended 31 December 2020

Notes REVENUE 4 Cost of sales including royalties Gross (loss)/profit Other income and gains 4 Selling and distribution expenses Research and development costs Administrative expenses Other expenses Finance costs Share of loss of an associate LOSS BEFORE TAX 4 Income tax credit 6 LOSS FOR THE YEAR Attributable to: Owners of the parent LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT Basic and diluted 8	2020 RMB’000 35,001 (58,498) 1,322 (23,497) 89,856 (27,356) (109,099) (41,845) (83,412) (135) (13,753) (209,241) – (209,241) (209,241) RMB (20.12) cents	2019 RMB’000 173,443 (49,160) (4,966) 124,283 126,593 (100,500) (125,962) (48,962) (59,716) (182) (11,523) (95,969) – (95,969) (95,969) RMB (9.10) cents

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December 2020

LOSS FOR THE YEAR OTHER COMPREHENSIVE INCOME Other comprehensive income that may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations Other comprehensive (loss)/income that will not be reclassified to profit or loss in subsequent periods: Exchange differences on translation of the Company’s financial statements into presentation currency OTHER COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR, NET OF TAX TOTAL COMPREHENSIVE LOSS FOR THE YEAR Attributable to: Owners of the parent	2020 RMB’000 (209,241) 45,677 (164,014) (118,337) (327,578) (327,578)	2019 RMB’000 (95,969) 2,305 33,614 35,919 (60,050) (60,050)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2020

Notes NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Other intangible assets Investment in an associate Long-term deferred expenditure Total non-current assets CURRENT ASSETS Inventories 9 Trade and bills receivables 10 Prepayments, other receivables and other assets 11 Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade and bills payables 12 Other payables and accruals Lease liabilities Deferred income 13 Total current liabilities	2020 RMB’000 82,556 2,023 90,702 60,915 889 237,085 58,894 26,620 30,462 2,714,011 2,829,987 930 69,974 1,144 1,724 73,772	2019 RMB’000 94,494 4,233 75,614 58,109 1,363
		233,813
		86,039 69,525 47,846 2,989,164
		3,192,574
		6,643 77,059 2,226 1,724
		87,652

⋯ continued/

Note NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Lease liabilities Deferred income 13 Total non-current liabilities Net assets EQUITY Equity attributable to owners of the parent Share capital Reserves Total equity	2020 RMB’000 2,756,215 2,993,300 443 11,207 11,650 2,981,650 750 2,980,900 2,981,650	2019 RMB’000 3,104,922
		3,338,735
		1,587 12,931
		14,518
		3,324,217

		754 3,323,463
		3,324,217

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2020

At 1 January 2019 Loss for the year Other comprehensive income for the year: Exchange differences Total comprehensive income/(loss) for the year Shares repurchased Shares cancelled Equity-settled share award and option arrangements At 31 December 2019		Attributable to owners of theparent	Attributable to owners of theparent	Attributable to owners of theparent	Attributable to owners of theparent	Accumulated losses* RMB’000 (210,618) (95,969) – (95,969) – – – (306,587)	Total equity RMB’000 3,427,412 (95,969) 35,919 (60,050) (46,269) – 3,124 3,324,217
	Share capital RMB’000 764 – – – – (10) – 754	Treasury shares* RMB’000 – – – – (46,269) 46,269 – –	Share premium account* RMB’000 2,959,390 – – – – (46,259) – 2,913,131	Capital reserve* RMB’000 649,804 – – – – – 3,124 652,928	Exchange fluctuation reserve* RMB’000 28,072 – 35,919 35,919 – – – 63,991

⋯ continued/

At 1 January 2020 Loss for the year Other comprehensive loss for the year: Exchange differences Total comprehensive loss for the year Shares repurchased Shares cancelled Equity-settled share award and option arrangements At 31 December 2020		Attributable to owners of theparent Share Exchange Treasury premium Capital fluctuation Accumulated shares account reserve reserve losses* RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 – 2,913,131 652,928 63,991 (306,587) – – – – (209,241) – – – (118,337) – – – – (118,337) (209,241) (19,601) – – – – 15,079 (15,075) – – – – – 4,612 – – (4,522) 2,898,056 657,540 (54,346) (515,828)**	Attributable to owners of theparent Share Exchange Treasury premium Capital fluctuation Accumulated shares account reserve reserve losses* RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 – 2,913,131 652,928 63,991 (306,587) – – – – (209,241) – – – (118,337) – – – – (118,337) (209,241) (19,601) – – – – 15,079 (15,075) – – – – – 4,612 – – (4,522) 2,898,056 657,540 (54,346) (515,828)**	Attributable to owners of theparent Share Exchange Treasury premium Capital fluctuation Accumulated shares account reserve reserve losses* RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 – 2,913,131 652,928 63,991 (306,587) – – – – (209,241) – – – (118,337) – – – – (118,337) (209,241) (19,601) – – – – 15,079 (15,075) – – – – – 4,612 – – (4,522) 2,898,056 657,540 (54,346) (515,828)**	Total equity RMB’000 3,324,217 (209,241) (118,337) 327,578 (19,601) – 4,612 2,981,650
	Share capital RMB’000 754 – – – – (4) – 750	Treasury shares RMB’000 – – – – (19,601) 15,079 – (4,522)*	Share premium account RMB’000 2,913,131 – – – – (15,075) – 2,898,056*	Capital reserve RMB’000 652,928 – – – – – 4,612 657,540*

These reserve accounts comprise the consolidated reserves of RMB2,980,900,000 (2019: RMB3,323,463,000) in the consolidated statement of financial position.

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 December 2020

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Finance costs Share of loss of an associate Bank interest income 4 Investment income from financial assets at fair value through profit or loss 4 Loss on disposal of items of property, plant and equipment 5 Depreciation of items of property, plant and equipment 5 Depreciation of right-of-use assets 5 Covid-19-related rent concessions from lessors 5 Amortisation of intangible assets 5 Amortisation of long-term deferred expenditure Write-down of inventories to net realisable value 5 Impairment of an intangible asset 5 Equity-settled share award and option expense 5 Increase in inventories Increase in long-term deferred expenditure Decrease/(increase) in trade and bills receivables Decrease in prepayments, other receivables and other assets Decrease in trade and bills payables (Decrease)/increase in other payables and accruals (Decrease)/increase in deferred income Interest received Net cash flows used in operating activities	2020 RMB’000 (209,241) 135 13,753 (40,626) (290) 92 12,611 2,210 (292) 12,342 447 45,518 5,771 4,612 (152,958) (18,373) – 42,905 416 (5,713) (7,085) (1,724) 57,621 (84,911)	2019 RMB’000 (95,969) 182 11,523 (72,239) – 1,388 10,928 1,838 – 9,382 162 – – 3,124 (129,681) (2,162) (1,250) (11,902) 8,730 (7,548) 4,003 1,711 63,758 (74,341)

⋯ continued/

Net cash flows used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property, plant and equipment and construction in progress Proceeds from disposal of items of property, plant and equipment Purchases of intangible assets Purchase of a shareholding in an associate Purchases of financial assets at fair value through profit or loss Proceeds from sales of financial assets at fair value through profit or loss Receipt of investment income from financial assets at fair value through profit or loss Decrease in time deposits with original maturity of over three months Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Principal portion of lease payments Shares repurchased Net cash flows used in financing activities	2020 RMB’000 (84,911) (4,922) 6 (34,038) (19,652) (75,418) 75,418 290 190,613 132,297 (2,069) (19,601) (21,670)	2019 RMB’000 (74,341) (18,885) 665 (9,348) (67,400) – – – 697,237 602,269 (1,948) (46,269) (48,217)

⋯ continued/

NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and cash equivalents as stated in the consolidated statement of financial position Non-pledged time deposits with original maturity of over three months when acquired Cash and cash equivalents as stated in the consolidated statement of cash flows	2020 RMB’000 25,716 2,295,044 (110,256) 2,210,504 2,714,011 (503,507) 2,210,504	2019 RMB’000 479,711 1,781,892 33,441 2,295,044 2,989,164 (694,120) 2,295,044

NOTES TO FINANCIAL STATEMENTS 31 December 2020

1. CORPORATE AND GROUP INFORMATION

The Company is a limited liability company incorporated in the Cayman Islands on 25 February 2014. The registered office address of the Company is located at 190 Elgin Avenue, George Town, Grand Cayman KY19008, Cayman Islands. The principal place of business in Hong Kong of the Company is located at 40th Floor, Dah Sing Financial Centre, No. 248 Queen’s Road East, Wanchai, Hong Kong.

The Company is an investment holding company. The Company’s subsidiaries are principally engaged in the research and development, production, marketing and sale of pharmaceutical products.

The shares of the Company were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) on 1 August 2018.

2.1 BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“ HKASs ”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention. These financial statements are presented in RMB and all values are rounded to the nearest thousand except when otherwise indicated.

2.2 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

Amendments to HKFRS 3 Reference to the Conceptual Framework[2] Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 Interest Rate Benchmark Reform – Phase 2[1] Amendments to HKFRS 10 Sale or Contribution of Assets between an Investor and and HKAS 28 (2011) its Associate or Joint Venture[4] HKFRS 17 Insurance Contracts[3] Amendments to HKFRS 17 Insurance Contracts[3,6] Amendments to HKAS 1 Classification of Liabilities as Current or Non-current[3,5] Amendments to HKAS 16 Property, Plant and Equipment: Proceeds before Intended Use[2] Amendments to HKAS 37 Onerous Contracts – Cost of Fulfilling a Contract[2] Annual Improvements to Amendments to HKFRS 1, HKFRS 9, Illustrative HKFRSs 2018-2020 Examples accompanying HKFRS 16, and HKAS 41[2]

1 Effective for annual periods beginning on or after 1 January 2021
2 Effective for annual periods beginning on or after 1 January 2022
3 Effective for annual periods beginning on or after 1 January 2023
4 No mandatory effective date yet determined but available for adoption
5 As a consequence of the amendments to HKAS 1, Hong Kong Interpretation 5 Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause was revised in October 2020 to align the corresponding wording with no change in conclusion
6 As a consequence of the amendments to HKFRS 17 issued in October 2020, HKFRS 4 was amended to extend the temporary exemption that permits insurers to apply HKAS 39 rather than HKFRS 9 for annual periods beginning before 1 January 2023

3. OPERATING SEGMENT INFORMATION

Management monitors the operating results of the Group’s operating segment as a whole for the purpose of making decisions about resource allocation and performance assessment.

Geographical information

(a) Revenue from external customers

Mainland China Other country Total	2020 RMB’000 35,001 – 35,001	2019 RMB’000 172,057 1,386
		173,443

The revenue information above is based on the locations of the customers.

(b) Non-current assets

Mainland China British Virgin Islands Cayman Islands Total	2020 RMB’000 164,360 60,915 11,810 237,085	2019 RMB’000 161,123 58,109 14,581
		233,813

The non-current asset information above is based on the locations of assets.

Information about a major customer

Revenue of RMB64,603,000 (2019: RMB47,638,000) was derived from the rendering of promotion services to a single customer during the year.

4. REVENUE, OTHER INCOME AND GAINS

An analysis of revenue is as follows:

Revenue from contracts with customers Revenue from contracts with customers (i) Disaggregation of revenue information Types of goods or services – Sale of products – Rendering of promotion services – Collaboration revenue Total revenue from contracts with customers	2020 RMB’000 35,001 2020 RMB’000 (29,602) 64,603 – 35,001	2019 RMB’000 173,443

		2019 RMB’000 124,419 47,638 1,386
		173,443

(i) Disaggregation of revenue information

Timing of revenue recognition At a point in time – Sale of products – Rendering of promotion services – Collaboration revenue Total revenue from contracts with customers Geographical markets Mainland China – Sale of products – Rendering of promotion services Other country – Collaboration revenue Total revenue from contracts with customers	2020 RMB’000 (29,602) 64,603 – 35,001 2020 RMB’000 (29,602) 64,603 – 35,001	2019 RMB’000 124,419 47,638 1,386
		173,443

		2019 RMB’000 124,419 47,638
		1,386
		173,443

The following table shows the amount of revenue recognised during the reporting period that was included in the contract liabilities at the beginning of the reporting period and recognised from performance obligations satisfied in previous periods:

	2020	2019
	RMB’000	RMB’000
Revenue recognised that was included in contract
liabilities at the beginning of the reporting period:
Sale of products	–	230

(ii) Performance obligations

Information about the Group’s performance obligations is summarised below:

Sale of products

The performance obligation is satisfied upon acceptance of the products and payment is generally due within 30 to 180 days from acceptance.

Promotion services

The performance obligation is satisfied at a point in time when the customer’s sales occur and payment is generally due within 60 days from the date of billing.

Collaboration revenue

The performance obligation is satisfied over time or at a point in time as output generated from the development activities is supplied to the collaboration partner or upon completion of services, and payment is generally due within 30 to 60 days from the date of billing.

Other income and gains Government grants* Bank interest income Investment income from financial assets at fair value through profit or loss Foreign exchange gain, net Others	2020 RMB’000 48,861 40,626 290 – 79 89,856	2019 RMB’000 49,869 72,239 – 4,485 –
		126,593

The government grants mainly represent subsidies received from the local governments for the purpose of compensation for expenses arising from research activities and clinical trials, award for new drug development and capital expenditure incurred on certain projects.

5. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging/(crediting):

Cost of inventories sold Cost of services provided Depreciation of items of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Write-down of inventories to net realisable value* Lease payments not included in the measurement of lease liabilities Auditor’s remuneration Research and development costs Government grants Covid-19-related rent concessions from lessors Donation Foreign exchange differences, net Impairment of an intangible asset Impairment of trade receivables, net Loss on disposal of items of property, plant and equipment Employee benefit expenses (excluding directors’ and chief executive’s remuneration) Wages and salaries Pension scheme contributions Staff welfare expenses Equity-settled share award and option expense	2020 RMB’000 27,734 30,764 12,611 2,210 12,342 45,518 19 2,190 109,099 (48,861) (292) 31,789 30,425 5,771 (79) 92 62,835 9,077 3,876 4,612 80,400	2019 RMB’000 18,802 30,358 10,928 1,838 9,382 5,153 235 2,180 125,962 (49,869) – 57,871 (4,485) – 88 1,388 78,352 16,018 4,361 3,124
		101,855

The amortisation of intangible assets is included in “Administrative expenses” and “Research and development costs” in the consolidated statement of profit or loss.
** The write-down of inventories to net realisable value of RMB45,518,000 for the year ended 31 December 2020 (2019: RMB5,153,000) is included in “Cost of sales” and “Other expenses” in the consolidated statement of profit or loss.

6. INCOME TAX

The Group is subject to income tax on an entity basis on profits arising in or derived from the jurisdictions in which members of the Group are domiciled and operate.

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax is imposed.

British Virgin Islands

Under the current laws of the British Virgin Islands (“ BVI ”), PowerTree Investment (BVI) Ltd. is not subject to tax on income or capital gains. In addition, upon payments of dividends by PowerTree to its shareholder, no BVI withholding tax is imposed.

Hong Kong

Under the current laws of the Hong Kong, the subsidiary in Hong Kong is subject to profit tax at a rate of 16.5% (2019: 16.5%) on the estimated assessable profits arising in Hong Kong. During the year, no provision for profit tax has been made as the subsidiary did not generate any assessable profits in Hong Kong.

Mainland China

Pursuant to the Corporate Income Tax Law of the PRC and the respective regulations (the “ CIT Law ”), the subsidiaries which operate in Mainland China are subject to CIT at a rate of 25% (2019: 25%) on the taxable income. Preferential tax treatment is available to Ascletis Pharmaceuticals Co., Ltd. since it was recognised as a High and New Technology Enterprises, and it was entitled to a preferential tax rate of 15% (2019: 15%) during the year. Gannex Pharma Co., Ltd., Ascletis Biopharmaceutical (Hangzhou) Co., Ltd. and Ascletis XinNuo Medicine (Hangzhou) Co., Ltd. are qualified as Small and Micro Enterprises and were subject to a preferential tax rate of 5% (2019: 5%) during the year.

The income tax credit of the Group for the year is analysed as follows:

Current tax: Charge for the year Deferred tax Total tax credit for the year	2020 RMB’000 – – –	2019 RMB’000 – –
		–

A reconciliation of the tax credit applicable to loss before tax at the statutory rate in Mainland China to the tax credit at the effective tax rate is as follows:

Loss before tax At the PRC’s statutory income tax rate of 25% Effect of tax rate differences in other countries Preferential income tax rates enacted by local authority Effect of tax concessions and allowances Tax losses not recognised Expenses not deductible for tax Tax credit at the Group’s effective rate	2020 RMB’000 (209,241) (52,310) 371 21,257 (10,625) 39,161 2,146 –	2019 RMB’000 (95,969) (23,992) (1,877) 7,529 (17,054) 34,297 1,097 –

7. DIVIDENDS

The board does not recommend the payment of any dividend in respect for the year ended 31 December 2020 (2019: Nil).

8. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic earnings per share amounts is based on the loss for the year attributable to ordinary equity holders of the parent of RMB209,241,000 (2019: RMB95,969,000), and the weighted average number of ordinary shares of 1,040,055,731 (2019: 1,054,545,974) in issue during the year. The number of shares for the current period has been arrived at 1,100,662,000 after eliminating the shares repurchased.

No adjustment has been made to the basic loss per share amounts presented for the years ended 31 December 2019 and 2020 in respect of a dilution as the impact of the share award had an anti-dilutive effect on the basic loss per share amount presented.

The calculation of basic loss per share is based on:

Loss Loss attributable to ordinary equity holders of the parent Shares Weighted average number of shares in issue during the year	2020 2019 RMB’000 RMB’000 (209,241) (95,969) Number of shares 2020 2019 1,040,055,731 1,054,545,974

9. INVENTORIES

Raw materials Work in progress Finished goods	2020 RMB’000 32,601 7,871 18,422 58,894	2019 RMB’000 60,468 20,408 5,163
		86,039

10. TRADE AND BILLS RECEIVABLES

Trade receivables Bills receivable Impairment	2020 RMB’000 26,629 – 26,629 (9) 26,620	2019 RMB’000 68,485 1,128
		69,613 (88)
		69,525

The Group’s trading terms with its customers are mainly on credit. The credit period is generally 30 days to 180 days. The Group seeks to maintain strict control over its outstanding receivables and overdue balances are reviewed regularly by senior management. In view of the before mentioned and the fact that the Group’s trade receivables relate to large number of diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest-bearing.

An ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:

			2020	2019
			RMB’000	RMB’000
Less than	3	months	26,620	68,397

The Group’s bills receivable were aged within six months and were neither past due nor impaired.

The movement in the loss allowance for impairment of trade receivables is as follows:

At beginning of year Impairment losses, net At end of year	2020 RMB’000 88 (79) 9	2019 RMB’000 – 88
		88

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:

As at 31 December 2020

Current Expected credit loss rate 0.03% Gross carrying amount (RMB’000) 26,629 Expected credit losses (RMB’000) 9	Past due Less than 3 to 6 over 3 months months 6 months Total – – – 0.03% – – – 26,629 – – – 9

As at 31 December 2019

Current Expected credit loss rate 0.13% Gross carrying amount (RMB’000) 68,485 Expected credit losses (RMB’000) 88	Past due Less than 3 to 6 over 3 months months 6 months Total – – – 0.13% – – – 68,485 – – – 88

11. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS

Value-added tax recoverable Prepayments Deposits and other receivables Interest receivable Prepaid expenses Prepaid income tax	2020 RMB’000 19,703 3,437 2,209 1,904 1,846 1,363 30,462	2019 RMB’000 13,225 7,686 4,788 18,899 1,885 1,363
		47,846

Other receivables mainly represent rental and other deposits. An impairment analysis is performed at each reporting date by applying an expected credit loss rate approach with reference to the historical loss record of the Group. The loss rate is adjusted to reflect the current conditions and forecasts of future economic conditions. As at 31 December 2020 and 2019, the expected credit loss rate was close to zero.

The financial assets included in the above balances are non-interest-bearing, unsecured and repayable on demand and relate to receivables for which there was no recent history of default and past due amounts. As at 31 December 2020 and 2019, the loss allowance was assessed to be minimal.

12. TRADE AND BILLS PAYABLES

Trade payables Bills payable	2020 RMB’000 334 596 930	2019 RMB’000 3,961 2,682
		6,643

An ageing analysis of the trade and bills payables as at the end of the reporting period, based on the invoice date, is as follows:

Within 1 month 1 to 3 months 3 to 6 months	2020 RMB’000 334 596 – 930	2019 RMB’000 3,933 28 2,682
		6,643

The trade payables are non-interest-bearing and are normally settled within three months.

The maturity of the bills payable is within six months.

13. DEFERRED INCOME

Government grants Current Non-current The movements in government grants during the year are as follows: At beginning of year Grants received during the year Amount released At end of year Current Non-current	2020 RMB’000 1,724 11,207 12,931 2020 RMB’000 14,655 – (1,724) 12,931 1,724 11,207 12,931	2019 RMB’000 1,724 12,931
		14,655

		2019 RMB’000 12,944 12,020 (10,309)
		14,655

		1,724 12,931
		14,655

The grants are related to the subsidies received from the government for the purpose of compensation for expenses arising from research activities and clinical trials, award for its new drug development and capital expenditure incurred on certain projects.

14. DEFERRED TAX

The movements in deferred tax liabilities and assets during the year are as follows:

2020

Deferred tax liabilities

At 1 January 2020 Deferred tax credited to profit or loss during the year Gross deferred tax liabilities at 31 December 2020 Deferred tax assets At 1 January 2020 Deferred tax charged to profit or loss during the year Gross deferred tax assets at 31 December 2020 2019 Deferred tax liabilities At 31 December 2018 Effect of adoption of HKFRS 16 At 1 January 2019 (restated) Deferred tax charged to profit or loss during the year Gross deferred tax liabilities at 31 December 2019	Right-of-use assets RMB’000 785 (389) 396 Lease liabilities RMB’000 785 (389) 396 Right-of-use assets RMB’000 – 231 231 554 785	Total RMB’000 785 (389) 396 Total RMB’000 785 (389) 396 Total RMB’000 – 231 231 554 785

Deferred tax assets

At 31 December 2018 Effect of adoption of HKFRS 16 At 1 January 2019 (restated) Deferred tax credited to profit or loss during the year Gross deferred tax assets at 31 December 2019	Lease liabilities RMB’000 – 231 231 554 785	Total RMB’000 – 231
		231 554
		785

For presentation purposes, certain deferred tax assets and liabilities have been offset in the statement of financial position. The following is an analysis of the deferred tax balances of the Group for financial reporting purposes:

	2020	2019
	RMB’000	RMB’000
Net deferred tax recognised in consolidated
statement of financial position	–	–

The Group has tax losses arising in Mainland China of RMB762,867,000 (2019: RMB563,635,000) that will expire in one to five years for offsetting against future taxable profits.

Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries that have been loss-making for some time and it is not considered probable that taxable profits will be available against which the tax losses can be utilised.

OTHER INFORMATION

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Company is committed to maintaining high standard of corporate governance to safeguard the interests of the Shareholders, enhance corporate value, formulate its business strategies and policies, and enhance its transparency and accountability.

The Company has adopted the code provisions of the CG Code as its own code of corporate governance.

The Board is of the view that the Company has complied with all applicable code provisions of the CG Code during the Reporting Period, except for a deviation from the code provision A.2.1 of the CG Code, the roles of chairman and chief executive officer of the Company are not separate and are both performed by Dr. Jinzi Jason WU. The Company is an investment holding company with a professional management team to monitor the operations of the subsidiaries. The Board considers that vesting the roles of chairman and chief executive officer in the same person is more efficient in the direction and management of the Company and does not impair the balance of power and authority of the Board and the management of the business of the Company. The Board will review the corporate governance structure and practices from time to time and shall make necessary arrangements when the Board considers appropriate.

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Written Guidelines on no less exacting terms than the Model Code as its own code of conduct regarding securities transactions by the Directors.

Having made specific enquiry of all Directors, all of them have confirmed that they have complied with the Model Code and the Written Guidelines throughout the Reporting Period and to the date of this announcement. No incident of non-compliance of the Written Guidelines by the employees who are likely to be in possession of inside information of the Company was noted by the Company.

PURCHASE, SALE OR REDEMPTION OF THE LISTED SECURITIES OF THE COMPANY

The Company repurchased a total of 7,554,000 Shares on the Stock Exchange during the year ended December 31, 2020 pursuant to the repurchase mandate approved by the Shareholders at the annual general meeting held on June 15, 2020. Such repurchased shares have already been cancelled and the total number of Shares in issue has been reduced accordingly as at the date of this announcement.

Save for the above, neither the Company nor any of its subsidiaries purchased, sold or redeemed interest in any of the Company’s listed Shares for the year ended December 31, 2020.

REVIEW OF ANNUAL RESULTS

The Audit Committee comprises three independent non-executive Directors, namely, Mr. Jiong GU, Dr. Yizhen WEI, and Ms. Lin HUA. The chairman of the Audit Committee is Mr. Jiong GU. The Audit Committee has reviewed the annual results of the Group for the year ended December 31, 2020 and has recommended for the Board’s approval thereof.

The Audit Committee has reviewed together with the management the accounting principles and policies adopted by the Group and the consolidated financial statements for the year ended December 31, 2020. The Audit Committee considered that the annual results are in compliance with the applicable accounting standards, laws and regulations, and the Company has made appropriate disclosures thereof.

ANNUAL DIVIDEND

The Board does not recommend any payment of an annual dividend for the year ended December 31, 2020.

ANNUAL GENERAL MEETING AND CLOSURE OF REGISTER OF MEMBERS

The Company will announce the date of the AGM and the period of closure of register of members in due course.

PUBLICATION OF ANNUAL RESULTS AND ANNUAL REPORT

This announcement is published on the website of the Stock Exchange (www.hkexnews.hk) and the Company’s website (www.ascletis.com). The annual report for the year ended December 31, 2020 containing all the information in accordance with the requirements under the Listing Rules will be despatched to the Shareholders and published on the respective websites of the Stock Exchange and the Company in due course.

APPRECIATION

The Board would like to express its sincere gratitude to the Shareholders, management team, employees, business partners and customers of the Group for their support and contribution to the Group.

DEFINITIONS

“ANDA”	abbreviated new drug application
“Ascletis”, “Company”,	Ascletis Pharma Inc.（歌禮製藥有限公司）, (an exempted company
“the Company” or	incorporated in the Cayman Islands with limited liability on February
“We”	25, 2014
“AGM”	annual general meeting of the Company
“Audit Committee”	the audit committee of the Board of the Company
“Board”	the board of Directors of the Company
“CG Code”	the Corporate Governance Code as set out in Appendix 14 to the
	Listing Rules
“Chairman”	the Chairman of the Board
“China”,	the People’s Republic of China, excluding, for the purpose of this
“Mainland China” or	announcement, Hong Kong, Macau Special Administrative Region and
“the PRC”	Taiwan
“CMO(s)”	contract manufacturing organization, a company that manufactures drug
	products for pharmaceutical companies on a contract basis
“Controlling	has the meaning ascribed thereto under the Listing Rules and unless the
Shareholder(s)”	context requires otherwise, refers to Dr. Wu, Mrs. Wu, JJW12 Limited,
	Lakemont Holding LLC and Lakemont Remainder Trust, as a group, or
	any member of them
“COVID-19”	an infectious disease caused by a newly discovered coronavirus (severe
	acute respiratory syndrome coronavirus)
“Director(s)”	the director(s) of the Company
“Dr. Wu”	Dr. Jinzi Jason WU（吳勁梓）, chairman of the Board, chief executive
	officer, an executive Director of the Company, one of our Controlling
	Shareholders
“FDA” or “U.S. FDA”	U.S. Food and Drug Administration
“Gannex”	Gannex Pharma Co., Ltd (甘萊製藥有限公司), a limited liability
	company incorporated under the laws of the PRC on September 3,
	2019, a wholly-owned subsidiary of the Company

“Group”, “our Group” or	the Company and its subsidiaries
“the Group”
“Greater China”	Mainland China, Hong Kong, Macau and Taiwan
“HK$” or “HKD”	Hong Kong dollars, the lawful currency of Hong Kong
“HKFRS”	the Hong Kong Financial Reporting Standards
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“IFRS”	International Financial Reporting Standards
“IND”	investigational new drug, an experimental drug for which a
	pharmaceutical company obtains permission to ship across jurisdictions
	(usually to clinical investigators) before a marketing application for the
	drug has been approved
“KOL(s)”	Key opinion leader(s)
“Listing”	the listing of the Shares on the Main Board of the Stock Exchange on
	August 1, 2018
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange,
	as amended or supplemented from time to time
“Main Board”	the Main Board of the Stock Exchange
“Model Code”	the Model Code for Securities Transactions by Directors of Listed
	Issuers contained in Appendix 10 to the Listing Rules
“NASH”	non-alcoholic steatohepatitis
“NDA”	new drug application
“NMPA”	China National Medical Products Administration（中國國家藥品監督
	管理局）
“R&D”	research and development
“Reporting Period”	the one-year period from January 1, 2020 to December 31, 2020
“Renminbi” or “RMB”	Renminbi Yuan, the lawful currency of China
“Shareholder(s)”	holder(s) of Shares
“Share(s)”	ordinary shares in the share capital of our Company of US$0.0001 each

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“U.S. dollar(s)”, United States dollars, the lawful currency of the United States of “USD” or “US$” America

“Written Guidelines” the Guidelines for Securities Transactions by Directors adopted by the Company

In this announcement, the terms “associate”, “connected person”, “controlling shareholder” and “subsidiary” shall have the meanings given to such terms in the Listing Rules, unless the context otherwise requires.

By order of the Board Ascletis Pharma Inc. 歌禮製藥有限公司 Jinzi Jason WU Chairman

Hangzhou, the People’s Republic of China, March 30, 2021

As at the date of this announcement, the Board of Directors of the Company comprises Dr. Jinzi Jason WU and Mrs. Judy Hejingdao WU, as executive Directors; and Dr. Yizhen WEI, Mr. Jiong GU and Ms. Lin HUA, as independent non-executive Directors.

AI assistant

Ascletis Pharma Inc. — Annual Report 2020

50081_rns_2021-03-30_d2b68021-19af-4063-9599-a7fdbffdf7b0.pdf

Ascletis Pharma Inc. 歌禮製藥有限公司

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED DECEMBER 31, 2020

FINANCIAL HIGHLIGHTS

CORPORATE PROFILE

Our Vision

Overview

NASH

Single Agent and Combo Therapy Pipeline[1]

Cancer lipid Metabolism and Oral Checkpoint Inhibitors

Viral Hepatitis

Hepatitis B Virus (HBV) Clinical Cure

Hepatitis C Virus (HCV)

HIV/AIDS

In-House Discovery

MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

NASH

ASC40

ASC41

ASC42

Combination Therapies

Viral Hepatitis

HBV

Pegasys[®]

ASC22

HCV

HIV/AIDS

Capability of Commercialization

The Group’s Facilities

Impact of COVID-19

Future and Outlook

Financial Review

Revenue

Cost of Sales

Gross Profit

Other Income and Gains

Selling and Distribution Expenses

Administrative Expenses

Research and Development Expenses

Finance Costs

Other Expenses

Income Tax

Inventories

Trade Receivables

Prepayments, Other Receivables and Other Assets

Fair Value and Fair Value Hierarchy of Financial Instruments

Cash and Cash Equivalents

Trade and Other Payables

Deferred Income

Other Intangible Assets

Liquidity and Capital Resources

Operating Activities

Investing Activities

Financing Activities

Capital Expenditures

Significant Investments, Material Acquisitions and Disposals

Indebtedness

Borrowings

Contingent Liabilities, Charges of Assets and Guarantees

Contractual Commitments

Gearing Ratio

Foreign Exchange

Employees and Remuneration Policies

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

1. CORPORATE AND GROUP INFORMATION

2.1 BASIS OF PREPARATION

2.2 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

3. OPERATING SEGMENT INFORMATION

Geographical information

(a) Revenue from external customers

(b) Non-current assets

Information about a major customer

4. REVENUE, OTHER INCOME AND GAINS

(i) Disaggregation of revenue information

Ascletis Pharma Inc. Annual Report 2020