Genscript Biotech Corporation — Annual Report 2015

Mar 29, 2016

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) 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.

Genscript Biotech Corporation 金斯瑞生物科技股份有限公司 *

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1548)

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED DECEMBER 31, 2015

ANNUAL RESULTS HIGHLIGHTS

• For the year ended December 31, 2015, the revenue of the Group was approximately US$86.7 million, representing an increase of 23.9% as compared with approximately US$70.0 million for the year ended December 31, 2014.

• For the year ended December 31, 2015, the gross profit increased by 29.5% from approximately US$44.1 million in 2014 to approximately US$57.1 million.

• For the year ended December 31, 2015, the profit of the Group increased by 182.3% from approximately US$6.2 million in 2014 to approximately US$17.5 million. After deducting non-recurring one-off gains and expenses (including listing expenses and the substantial gain arising from the settlement of the dispute in connection with the U.S. Lawsuit (as defined and disclosed in the prospectus of the Company dated December 17, 2015, (the “ Prospectus ”)), the adjusted net profit was approximately US$14.3 million, representing a year-on-year increase of 130.6% from approximately US$6.2 million in 2014.

• For the year ended December 31, 2015, profit attributable to owners of the Company increased by 182.3% from approximately US$6.2 million recorded in 2014 to approximately US$17.5 million. After deducting the aforesaid two items of non-recurring one-off gains and expenses, the adjusted net profit increased by 130.6% from approximately US$6.2 million in 2014 to approximately US$14.3 million.

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The board of directors (the “ Directors ”) (the “ Board ”) of Genscript Biotech Corporation (the “ Company ”) is pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively, the “ Group ”) for the year ended 31 December 2015 (the “ Reporting Period ”), together with the comparative figures for the year 2014 as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

Notes REVENUE 4 Cost of sales Gross profit Other income and gains 4 Selling and distribution expenses Administrative expenses Other expenses Finance costs 6 PROFIT BEFORE TAX 5 Income tax expense 7 PROFIT FOR THE YEAR Attributable to: Owners of the parent EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT 9 Basic Diluted	Year ended December 31, 2015 2014 US$’000 US$’000 86,709 69,994 (29,631) (25,896) 57,078 44,098 12,371 1,468 (17,642) (15,538) (28,535) (21,446) (296) (335) – (411) 22,976 7,836 (5,472) (1,661) 17,504 6,175 17,504 6,175 US1.47 cents US0.52 cents US1.43 cents US0.51 cents

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME Other comprehensive income to be reclassified to profit or loss in subsequent periods: Available-for-sale investments: Changes in fair value Exchange differences on translation of foreign operations Net other comprehensive income to be reclassified to profit or loss in subsequent periods OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX TOTAL COMPREHENSIVE INCOME FOR THE YEAR Attributable to: Owners of the parent

Year ended December 31, 2015 2014 US$’000 US$’000 17,504 6,175 4 (9) (5,642) (266) (5,638) (275) (5,638) (275) 11,866 5,900 11,866 5,900

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CONSOLIDATED BALANCE SHEET

Notes NON-CURRENT ASSETS Property, plant and equipment 10 Advance payments for property, plant and equipment Prepaid land lease payments 11 Other intangible assets 12 Deferred tax assets Total non-current assets CURRENT ASSETS Inventories 14 Trade and notes receivables 15 Prepayments, deposits and other receivables 16 Due from the ultimate holding company Available-for-sale investments 13 Pledged short-term deposits Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade payables 17 Other payables and accruals 18 Tax payable Due to the ultimate holding company Due to related parties Government grants 19 Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	Year ended December 31, 2015 2014 US$’000 US$’000 37,719 37,530 122 185 7,581 8,220 901 349 2,737 2,304 49,060 48,588 2,025 1,777 16,914 12,157 10,153 1,316 – 34 – 2,526 202 345 103,720 25,637 133,014 43,792 2,414 2,869 24,661 15,132 3,786 49 – 2,570 – 8,173 33 395 30,894 29,188 102,120 14,604 151,180 63,192	Year ended December 31, 2015 2014 US$’000 US$’000 37,719 37,530 122 185 7,581 8,220 901 349 2,737 2,304 49,060 48,588 2,025 1,777 16,914 12,157 10,153 1,316 – 34 – 2,526 202 345 103,720 25,637 133,014 43,792 2,414 2,869 24,661 15,132 3,786 49 – 2,570 – 8,173 33 395 30,894 29,188 102,120 14,604 151,180 63,192
		48,588
		1,777 12,157 1,316 34 2,526 345 25,637
		43,792
		2,869 15,132 49 2,570 8,173 395
		29,188
		14,604
		63,192

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Notes TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Government grants 19 Total non-current liabilities NET ASSETS EQUITY Equity attributable to owners of the parent Share capital 20 Reserves Non-controlling interests Total equity	Year ended December 31, 2015 2014 US$’000 US$’000 151,180 63,192 1,932 1,445 1,932 1,445 149,248 61,747 1,600 50 147,648 61,664 149,248 61,714 – 33 149,248 61,714	Year ended December 31, 2015 2014 US$’000 US$’000 151,180 63,192 1,932 1,445 1,932 1,445 149,248 61,747 1,600 50 147,648 61,664 149,248 61,714 – 33 149,248 61,714
		1,445
		1,445
		61,747
		50 61,664
		61,714 33
		61,714

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of the parent

At January 1, 2014 Profit for the year Other comprehensive income for the year: Change in fair value of available-for-sale investments, net of tax Exchange differences on translation of foreign operations Total comprehensive income for the year Equity-settled share option arrangements Transfer from retained earnings At December 31, 2014	Share capital US$’000 50 – – – – – – 50	Merger reserve* US$’000 15,002 – – – – – – 15,002	Share option reserves* US$’000 1,729 – – – – 3,284 – 5,013	Statutory surplus reserves* US$’000 2,997 – – – – – 1,001 3,998	Retained earnings Available- for-sale investment revaluation reserves Exchange fluctuation reserves* US$’000 US$’000 US$’000 28,430 5 4,317 6,175 – – – (9) – – – (266) 6,175 (9) (266) – – – (1,001) – – 33,604 (4) 4,051	Total Non- controlling interests US$’000 US$’000 52,530 33 6,175 – (9) – (266) – 5,900 – 3,284 – – – 61,714 33	Total equity US$’000 52,563 6,175 (9) (266)
							5,900 3,284 –
							61,747

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Attributable to owners of the parent

			Attributable	to owners of	the parent
At January 1, 2015 Profit for the year Other comprehensive income for the year: Change in fair value of available-for-sale investments, net of tax Exchange differences on translation of foreign operations Total comprehensive income for the year: Liquidation of a subsidiary Issue of shares Issue of shares for acquisition of GS USA and GS HK Shares repurchased Issue of new shares upon Global Offering Share issue expenses Capitalisation issue Equity-settled share option Arrangements Transfer from retained earnings At December 31, 2015	Share capital Share premium US$’000 US$’000 (note 20) (note 20) 50 – – – – – – – – – – – 595 8,602 559 35,326 (617) – 400 67,208 – (3,868) 613 (613) – – – – 1,600 106,655*	Merger reserve US$’000 15,002 – – – – – – (35,885) – – – – – – (20,883)*	Share option reserves US$’000 5,013 – – – – – – – – – – – 3,348 – 8,361*	Statutory surplus reserves US$’000 3,998 – – – – – – – – – – – – 2,419 6,417*	Retained earnings Available- for-sale investment revaluation reserves Exchange fluctuation reserves *US$’000 US$’000 US$’000 33,604 (4) 4,051 17,504 – – – 4 – – – (5,642) 17,504 4 (5,642) – – – – – – – – – – – – – – – – – – – – – – – – (2,419) – – 48,689 – (1,591)	Total Non- controlling interests US$’000 US$’000 61,714 33 17,504 – 4 – (5,642) – 11,866 – – (33) 9,197 – – – (617) – 67,608 – (3,868) – – – 3,348 – – – 149,248 –	Total equity US$’000 61,747 17,504 4 (5,642)
							11,866 (33) 9,197 – (617) 67,608 (3,868) – 3,348 –
							149,248

• These reserve accounts comprise the consolidated reserves of US$147,648,000 (2014: US$61,664,000) in the consolidated statement of financial position.

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CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Net cash flows from operating activities Net cash flows used in investing activities Net cash flows from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Net foreign exchange difference Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR	Year ended December 31, 2015 2014 US$’000 US$’000 19,636 12,206 (4,099) (9,114) 65,168 395 80,705 3,487 (2,622) (307) 25,637 22,457 103,720 25,637

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NOTES:

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands on May 21, 2015 as an exempted company with limited liability under the laws of the Cayman Islands. The address of its registered office was P.O. Box 1350, Clifton House, 75 Fort Street, Grand Cayman KY1-1108, Cayman Islands.

The Company’s shares have been listed on the Main Board of the Stock Exchange since December 30, 2015.

The Group is a life sciences research and application service and product provider. The services and products include (i) life sciences research services, (ii) life sciences research catalog products, (iii) preclinical drug development services, and (iv) industrial synthetic biology products (the “ Listing Business ”).

These consolidated financial statements are presented in US dollars (“ US$ ”), unless otherwise stated, and were approved for issue by the Board on March 25, 2016.

2. BASIS OF PREPARATION

2.1. Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRS ”) (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. The consolidated financial statements have been prepared under the historical cost convention, except for available-for-sale investments which have been measured at fair value. These financial statements are presented in United States dollars (“ US$ ”) and all values are rounded to the nearest thousand except when otherwise indicated.

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2.2. Changes in accounting policy and disclosures

The Group has adopted the following revised standards for the first time for the current year’s financial statements.

Amendments to HKAS 19 Defined Benefit Plans : Employee Contributions Annual Improvements to HKFRSs 2010–2012 Cycle Annual Improvements to HKFRSs 2011–2013 Cycle

The adoption of the above revised standards has had no significant financial effect on these financial statements.

In addition, the Company has adopted the amendments to the Listing Rules issued by the Hong Kong Stock Exchange relating to the disclosure of financial information with reference to the Hong Kong Companies Ordinance (Cap. 622) during the current financial year. The main impact to the financial statements is on the presentation and disclosure of certain information in the financial statements.

3. SEGMENT INFORMATION

The segment information for the year ended December 31, 2015 is as follows:

Life sciences research services Life sciences research catalog products Preclinical drug development services US$’000 US$’000 US$’000 Segment sales 76,918 2,469 5,967 Segment cost of sales 25,394 878 2,078 Segment gross profit 51,524 1,591 3,889	Industrial synthetic biology products US$’000 1,355 1,281 74	Total US$’000 86,709 29,631
		57,078

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The segment information for the year ended December 31, 2014 is as follows:

Life sciences research services Life sciences research catalog products US$’000 US$’000 Segment sales 63,220 2,044 Segment cost of sales 23,277 685 Segment gross profit 39,943 1,359	Preclinical drug development services US$’000 4,382 1,586 2,796	Industrial synthetic biology products US$’000 348 348 –	Total US$’000 69,994 25,896
			44,098

4. REVENUE, OTHER INCOME AND GAINS

Revenue, which is also the Group’s turnover, represents the net invoiced value of services provided and goods sold, after allowances for returns and trade discounts during the year.

An analysis of revenue, other income and gains is as follows:

Revenue Rendering of services Sale of goods Other income and gains Gain from the settlement of a dispute on intellectual property infringement Foreign currency exchange gain Government grants Investment income Bank interest income Others	Year ended December 31, 2015 2014 US$’000 US$’000 82,885 67,602 3,824 2,392 86,709 69,994 8,500 – 3,106 – 511 1,167 188 207 60 86 6 8 12,371 1,468	Year ended December 31, 2015 2014 US$’000 US$’000 82,885 67,602 3,824 2,392 86,709 69,994 8,500 – 3,106 – 511 1,167 188 207 60 86 6 8 12,371 1,468
		69,994
		– – 1,167 207 86 8
		1,468

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5. PROFIT BEFORE TAX

Cost of inventories sold Cost of services provided Depreciation of items of property plant and equipment Amortisation of other intangible assets* Amortisation of prepaid land lease payments Provision provided for impairment of trade receivables Provision (reversed)/provided for impairment of other receivables Minimum lease payments under operating leases: – Land and buildings Auditors’ remuneration Employee benefit expenses (excluding directors’ remuneration): Wages and salaries Pension scheme contributions (defined contribution schemes) Equity-settled share option expense Research and development costs Listing expenses Foreign currency exchange loss Loss on disposal of items of property, plant and equipment Write-down of inventories to net realisable value	Year ended December 31, 2015 2014 US$’000 US$’000 2,159 1,033 27,472 24,863 4,681 4,703 166 76 170 122 249 17 (164) 22 885 680 308 195 31,792 27,362 3,697 2,821 2,231 1,243 37,720 31,426 7,109 5,589 5,270 – – 307 120 26 347 –	Year ended December 31, 2015 2014 US$’000 US$’000 2,159 1,033 27,472 24,863 4,681 4,703 166 76 170 122 249 17 (164) 22 885 680 308 195 31,792 27,362 3,697 2,821 2,231 1,243 37,720 31,426 7,109 5,589 5,270 – – 307 120 26 347 –
		31,426
		5,589 – 307 26 –

• The amortisation of other intangible assets for the year is included in “Administrative expenses” on the face of the consolidated statement of profit or loss.

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6. FINANCE COST

Finance costs – Interest expense on bank borrowings INCOME TAX EXPENSE Current income tax expense Deferred income tax expense Income tax expense	Year ended December 31, 2015 2014 US$’000 US$’000 – 411 Year ended December 31, 2015 2014 US$’000 US$’000 5,999 2,184 (527) (523) 5,472 1,661

7. INCOME TAX EXPENSE

8. DIVIDENDS

No dividend has been paid or declared by the Company for the year ended December 31, 2015.

9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average numbers of ordinary shares in issue during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

The Company has only one category of dilutive potential ordinary shares, which is the share option plan.

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For the share option plan, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Company’s shares during the period when the options are outstanding) based on the monetary value of the subscription rights attached to outstanding options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the options.

Profit attributable to equity holders of the Company Weighted average number of ordinary shares in issue Adjustments for share option plan Weighted average number of ordinary shares for diluted earnings per share Basic earnings per share Diluted earnings per share	Year ended December 31, 2015 2014 US$’000 US$’000 17,504 6,175 1,192,553,021 1,183,326,316 35,466,939 31,727,867 1,228,019,960 1,215,054,183 US1.47 cents US0.52 cents US1.43 cents US0.51 cents	Year ended December 31, 2015 2014 US$’000 US$’000 17,504 6,175 1,192,553,021 1,183,326,316 35,466,939 31,727,867 1,228,019,960 1,215,054,183 US1.47 cents US0.52 cents US1.43 cents US0.51 cents
		1,183,326,316 31,727,867
		1,215,054,183
		US0.52 cents
		US0.51 cents

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10. PROPERTY, PLANT AND EQUIPMENT

At January 1, 2014: Cost Accumulated depreciation and impairment Net carrying amount At January 1, 2014, net of accumulated depreciation and impairment Additions Disposals Depreciation provided during the year Impairment Exchange realignment Transfers At 31 December 2014 and at January 1, 2015, net of accumulated depreciation and impairment At December 31, 2014 and at January 1, 2015: Cost Accumulated depreciation and impairment Net carrying amount At January 1, 2015, net of accumulated depreciation and impairment Additions Disposals Depreciation provided during the year Exchange realignment Transfers At December 31, 2015, net of accumulated depreciation and impairment At December 31, 2015: Cost Accumulated depreciation and impairment Net carrying amount	Buildings Machinery and equipment US$’000 US$’000 28,384 17,867 (1,100) (9,329) 27,284 8,538 27,284 8,538 67 10 – (27) (623) (3,546) – (75) (98) (23) – 2,942 26,630 7,819 28,347 20,578 (1,717) (12,759) 26,630 7,819 26,630 7,819 130 – (118) – (683) (3,310) (1,509) (357) 2,568 3,372 27,018 7,524 29,259 22,032 (2,241) (14,508) 27,018 7,524	Motor vehicles US$’000 331 (102) 229 229 – – (31) – – – 198 330 (132) 198 198 – – (30) (10) – 158 311 (153) 158	Computer and office equipment US$’000 2,777 (1,101) 1,676 1,676 24 (2) (503) – (5) 208 1,398 2,984 (1,586) 1,398 1,398 – (2) (658) (61) 467 1,144 3,269 (2,125) 1,144	Construction in progress US$’000 544 – 544 544 4,115 – – – (24) (3,150) 1,485 1,485 – 1,485 1,485 7,391 – – (594) (6,407) 1,875 1,875 – 1,875	Total US$’000 49,903 (11,632) 38,271 38,271 4,216 (29) (4,703) (75) (150) – 37,530 53,724 (16,194) 37,530 37,530 7,521 (120) (4,681) (2,531) – 37,719 56,746 (19,027) 37,719

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11. PREPAID LAND LEASE PAYMENTS

Carrying amount at January 1 Additions Recognised Exchange realignment Carrying amount at end of year Current portion included in prepayments, deposits and other receivables Non-current portion	2015 US$’000 8,395 – (170) (479) 7,746 (165) 7,581	2014 US$’000 4,520 4,012 (122) (15) 8,395 (175) 8,220

At December 31, 2015 and 2014, the Group has not obtained certificates of ownership in respect of certain leasehold lands of the Group in China with aggregate net carrying amounts of US$3,679,000 and US$3,985,000. The directors are of the view that the Group is entitled to lawfully and validly occupy and use the above-mentioned leasehold lands. All the land-use rights of the Group are located in China and are held on leases of 50 years.

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12. OTHER INTANGIBLE ASSETS

December 31, 2014 Cost at January 1, 2014, net of accumulated amortisation Additions Amortisation provided during the year_(note 5) Exchange realignment At December 31, 2014 At December 31, 2014: Cost Accumulated amortisation Net carrying amount December 31, 2015 Cost at January 1, 2015, net of accumulated amortisation Additions Amortisation provided during the year(note 5)_ Exchange realignment At December 31, 2015 At December 31, 2015: Cost Accumulated amortisation Net carrying amount	Software US$’000 264 162 (76) (1) 349 671 (322) 349 349 696 (162) (9) 874 1,339 (465) 874	Patents and licenses US$’000 – – – – – – – – – 31 (4) – 27 31 (4) 27	Total US$’000 264 162 (76) (1) 349 671 (322) 349 349 727 (166) (9) 901 1,370 (469) 901

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13. AVAILABLE-FOR-SALE INVESTMENTS

	2015	2014
	US$’000	US$’000
Current
Investment in wealth management products,
at fair value	–	2,526

The available-for-sale investments were investments in wealth management products issued by banks with expected interest rates ranging from 4.20% to 5.90% per annum with a maturity period of 30 to 84 days in China. The fair value of the financial products approximates to their cost plus expected interest.

14. INVENTORIES

Raw materials Work in progress Finished goods Less: Provision for inventories TRADE AND NOTES RECEIVABLES Trade and notes receivables Less: provision for impairment of trade receivables Trade and notes receivables – Net	2015 US$’000 1,228 395 749 2,372 (347) 2,025 2015 US$’000 18,023 (1,109) 16,914	2014 US$’000 896 409 472 1,777 – 1,777 2014 US$’000 13,017 (860) 12,157

15. TRADE AND NOTES RECEIVABLES

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As at December 31, 2014 and 2015, the ageing analysis of the trade receivables based on invoice date was as follows:

2015 US$’000 Within 3 months 14,771 3 to 6 months 1,510 6 to 12 months 634 Over 12 months 979 17,894 PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES 2015 US$’000 Other receivables 8,927 Prepayments 798 VAT recoverable 277 Prepaid expense 207 Advance to employees 87 10,296 Less: Impairment of other receivables (143) 10,153	2014 US$’000 10,055 1,339 565 957 12,916 2014 US$’000 591 444 217 214 157 1,623 (307) 1,316

16. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

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17. TRADE PAYABLES

As at December 31, 2014 and 2015, the ageing analysis of the trade payables based on invoice date is as follows:

Within 3 months 3 to 6 months 6 to 12 months Over 1 year	2015 US$’000 2,340 21 20 33 2,414	2014 US$’000 2,813 10 19 27
		2,869

Trade payables are non-interest bearing and are generally on terms of 60 days.

18. OTHER PAYABLES AND ACCRUALS

Accrued payroll Advances from customers Other payables Accrued expenses Payables for purchases of machinery and construction of buildings Taxes payable other than corporate income tax	2015 US$’000 7,603 6,696 4,923 2,477 2,150 812 24,661	2014 US$’000 5,657 5,197 973 1,101 1,403 801
		15,132

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19. GOVERNMENT GRANTS

At January 1, Grants received during the year Amount released Exchange realignment At end of year Current Non-current	2015 US$’000 1,840 616 (397) (94) 1,965 33 1,932 1,965	2014 US$’000 2,207 459 (818) (8) 1,840 395 1,445 1,840

The grants were related to the subsidies received from local government authorities for the purpose of compensation for expenditure on certain facilities and were credited to a deferred income account. The grants were released to the statement of profit or loss over the expected useful lives of the relevant assets. The Group also received certain financial subsidies from local government authorities to support local business. There were no unfulfilled conditions and other contingencies attached to these government grants. These government grants were recognised in the statement of profit or loss upon receipt.

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20. SHARE CAPITAL AND SHARE PREMIUM

Shares

	2015	2014
	US$’000	US$’000
Issued and fully paid:
1,600,000,000 (2014: nil) ordinary shares	1,600	–

A summary of movements in the Company’s share capital and share premium is as follows:

At January 1, 2015 Issuance of shares Shares repurchased Capitalisation issue Issuance of shares for the IPO Share issuance expenses At December 31, 2015	Number of shares in issue – 1,204,125,000 (617,500,000) 613,375,000 400,000,000 – 1,600,000,000	Share capital US$’000 – 1,204 (617) 613 400 – 1,600	Share premium account US$’000 – 43,928 – (613) 67,208 (3,868) 106,655	Total US$’000 – 45,132 (617) – 67,608 (3,868) 108,255

POSITIONING OF THE COMPANY

The Group is a well-recognized life sciences research and application service and product provider with comprehensive portfolio coverage in the world. It has achieved world market leadership in the global gene synthesis service market with recognized stature in synthetic biology. The broad and integrated life sciences research and application service and product portfolio comprises four segments, namely, (i) life sciences research services, (ii) life sciences research catalog products, (iii) preclinical drug development services, and (iv) industrial synthetic biology products.

“Genscript” is a well-known and trusted brand underpinned by its high quality life sciences research and application services and products. The Company has established a highly diversified customer base, including pharmaceutical and biotech companies, colleges and universities, research institutes, government bodies (including government testing and diagnostic centers), and distributors.

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SUCCESSFUL LISTING IN DECEMBER 2015

2015 is a milestone year for the Group. The shares of the Company (the “ Shares ”) have been listed on the Main Board of the Stock Exchange since December 30, 2015 (the “ Listing Date ”). The successful listing marked a huge step of the Group towards capital internationalization, enhanced the capital strength and corporate governance of the Company, and laid a solid foundation for its future development.

During the Reporting Period, the Group achieved sound operation performance and maintained a stable growth primarily due to (i) the Group’s continuous investment in research and development activities which enabled the continuous launch of new services and products to meet the market demand, such as Geneplus services and gene synthesis related bundled services, and allowed further customization of services, and (ii) the enhanced key accounts management program that resulted into better customer experience and satisfaction and improved customer loyalty.

BUSINESS REVIEW

During the Reporting Period, the overall revenue of the Group was approximately US$86.7 million, representing an increase of 23.9% as compared with US$70.0 million for 2014. The gross profit was approximately US$57.1 million, representing an increase of 29.5% as compared with approximately US$44.1 million for the year ended December 31, 2014. The increase in both revenue and gross profit margin was primarily attributable to (i) continuous research and development activities, which enabled the launch of more advanced or improved services and products to meet customers’ requirements on one hand, and the adoption of advanced technologies that significantly improved production efficiency and lowered production cost on the other hand, and (ii) the increase of the number of large orders and repeated orders received as a result of the enhanced key accounts management program.

During the Reporting Period, the profit was approximately US$17.5 million, representing an increase of 182.3% as compared with approximately US$6.2 million for the year ended December 31, 2014. After deducting non-recurring one-off gains and expenses (including listing expenses and the substantial gain arising from the settlement of the dispute in connection with the U.S. Lawsuit (as defined and disclosed in the Prospectus)), the adjusted net profit was approximately US$14.3 million, representing a year-to-year increase of 130.6% from approximately US$6.2 million for the year ended December 31, 2014.

The profit attributable to owners of the Company was approximately US$17.5 million, representing an increase of 182.3% as compared with approximately US$6.2 million for the year ended December 31, 2014. After deducting the aforesaid two items of non-recurring one-off gains and expenses, the adjusted net profit was approximately US$14.3 million, representing an increase of 130.6% from approximately US$6.2 million for the year ended December 31, 2014.

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During the Reporting Period, the Company generated approximately US$76.9 million, US$2.5 million, US$6.0 million, and US$1.3 million from the four segments, namely, (i) life sciences research services, (ii) life sciences research catalog products, (iii) preclinical drug development services, and (iv) industrial synthetic biology products, representing approximately, 88.7%, 2.8%, 6.9%, and 1.6% of total revenue, respectively.

Results Analysis of the Four Business Segments

1. Life sciences research services

Results

During the Reporting Period, the revenue generated from life sciences research services was approximately US$76.9 million, representing an increase of 21.7% as compared with approximately US$63.2 million for the year ended December 31, 2014. During the same period, the gross profit margin was approximately US$51.5 million, representing an increase of 29.1% as compared with approximately US$39.9 million for the year ended December 31, 2014. The increase in both revenue and gross profit margin was primarily attributable to (i) the leading technology in molecular biology which allowed the offer of high put-through gene synthesis services and other bundled services, (ii) the increased marketing activities in expanding the customer base of the gene synthesis services and other service packages, such as mammalian cell line services and products, which well consolidated customers’ loyalty and greatly increased the competitiveness of the Group’s services and products, and (iii) the continuous improvement of production process, which significantly improved the utilization of raw materials and thereby reduced the cost of raw materials.

Development Strategies

The Company intends to: (a) increase its research and development force, develop in-house and in licensing new technologies, and implement novel instruments for the faster provision of gene synthesis services; (b) provide more diverse synthetic biology services and products and expand the applications of synthetic biology technology in pathway assembly, microbial knock-out and knock-in, genome modification, and protein/antibody engineering for biologics drug development application; (c) develop cutting-edge technologies and improve production processes for industry cell line engineering, and the antibody and protein production; and (d) invest in strengthening the technical capabilities in providing such services and products.

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2. Life sciences research catalog products

Results

During the Reporting Period, the revenue generated from life sciences research catalog products was approximately US$2.5 million, representing an increase of 25.0% as compared with approximately US$2.0 million for the year ended December 31, 2014. During the same period, the gross profit margin was approximately US$1.6 million, representing a slight increase of 14.3% as compared with approximately US$1.4 million for the year ended December 31, 2014. The increase in both the revenue and the gross profit margin was primarily attributable to (i) the increase of numbers of the bulk orders from customers, and (ii) the integration and optimization of the production and sales teams which significantly improved production efficiency and lowered production cost.

Development Strategies

The Company intends to: (a) expand the off-the-shelf products by leveraging the strength of the life sciences research service segment and build on the current growing product lines in protein expression and analysis, including precast gels, protein purification reagents, and recombinant proteins; and (b) invest in new product development to differentiate from other competitors by offering cutting edge products.

3. Preclinical drug development services

Results

During the Reporting Period, the revenue generated from preclinical drug development services was approximately US$6.0 million, representing an increase of 36.4% as compared with approximately US$4.4 million for the year ended December 31, 2014. During the same period, the gross profit margin was approximately US$3.9 million, representing an increase of 39.3% as compared with approximately US$2.8 million for the year ended December 31, 2014. The increase in both revenue and gross profit margin was primarily attributable to (i) the rapid growth of the large molecular drug market, (ii) the increasing demand for preclinical drug development services from large pharmaceutical companies, particularly in the PRC and Japan, (iii) the strengthened communication with strategic customers, and (iv) the application of improved technology which shortened the order delivery time and allowed more value-added services to be developed.

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Development Strategies

The Company is upgrading its capability in biologics drug discovery to keep abreast of the standards of the global pharmaceutical community for target validation, lead identification and optimization, and candidate recommendation. It is also constantly acquiring cutting-edge technologies to strengthen its service platform. For example, in addition to humanization of rodent antibodies, it is pursuing technologies that allow it to generate human antibodies directly. In addition, it will continue to extend its platform to multi-targeting therapies with its single domain antibody technology. Furthermore, it is building comprehensive capability in cancer immunotherapy, including the construction of libraries of antibodies and cell lines, and the development of well validated in vitro and in vivo assays.

4. Industrial synthetic biology products

Results

During the Reporting Period, the revenue generated from industrial synthetic biology products was approximately US$1.3 million, representing an increase of 225.0% as compared with approximately US$0.4 million for the year ended December 31, 2014. During the same period, the gross profit margin was approximately US$0.1 million, as compared with nil for the year ended December 31, 2014. The increase in both revenue and gross profit margin was primarily attributable to (i) the focus on building direct relationship with strategic customers, (ii) the development and sales of new series of products, and (iii) the enhanced cooperation with suppliers to ensure the production efficiency of industrial synthetic biology products.

Development Strategies

The Company intends to apply synthetic biology principles and techniques to modify and improve the industrial enzyme producing microorganisms, such that the microbes are able to produce industrial enzymes with a higher yield and/or better performance properties. It intends to continue research and development on industrial enzymes applied in the food industry, as well as to expand into other fields of applications, such as the feed, pharmaceutical, and chemical industries.

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FINANCIAL REVIEW

	2015	2014	Change
	US$’000	US$’000
Revenue	86,709	69,994	16,715
Gross profit	57,078	44,098	12,980
Profit after income tax	17,504	6,175	11,329
Net profit excluding investment income,
listing and share-based payment expenses	25,934	9,252	16,682
Profit attributable to shareholders
of the Company	17,504	6,175	11,329
Profit attributable to shareholders of the
Company, excluding investment income,
listing and share-based payment expenses	25,934	9,252	16,682
Earnings per share_(US cent per share)_	1.47	0.52	0.95

Revenue

In 2015, the Group recorded revenue of US$86.7 million, representing an increase of 23.9% from US$70.0 million in 2014. This is primarily attributable to continuous research and development activities, which enabled the launch of more advanced or improved services and products to meet customers’ requirements, and (ii) the increase of the number of large orders and repeated orders received as a result of the enhanced key accounts management program.

Gross Profit

In 2015, the Group’s gross profit increased by 29.5% to US$57.1 million from US$44.1 million in 2014. This is primarily attributable to the adoption of advanced technologies which improved production efficiency and reduced production cost.

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Selling and distribution expenses

The selling and distribution expenses increased by 13.5% to US$17.6 million in 2015 from US$15.5 million in 2014. This is mainly attributable to (i) the continuous investment in training and maintaining the top talents in the Company and further streamlining their functionalities, (ii) the expansion of the direct sales network dedicated to serving the industrial synthetic biology products segment, and (iii) the increased business development activities for the industrial synthetic biology products.

Administrative expenses

In 2015, the administrative expenses increased by 33.2% to US$28.5 million (including the research and development expenses) from US$21.4 million (including the research and development expenses) in 2014. This is mainly due to the listing expenses of US$5.3 million, the increase of approximately US$1.5 million in research and development expenses, and the improved compensation packages for employees.

Research and development expenses

The research and development expenses increased by 26.8% to US$7.1 million from US$5.6 million in 2014. This is mainly due to the continuous investment in securing and maintaining top research and development talents which significantly strengthened the competitiveness of the preclinical drug development services and the industrial synthetic biology products, given their respective immense potential in further business development.

Income tax expenses

The income tax expenses increased from US$1.7 million in 2014 to US$5.5 million in 2015. The actual tax rate increased from 21.2% in 2014 to 23.8% in 2015, mainly because the total expenses of approximately US$3.3 million for share-based payment are not likely to be deductible for income tax and no deferred income tax asset was recognized on tax losses of certain subsidiaries.

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Net profit and unaudited adjusted net profit

Due to the aforementioned reasons, the net annual profit of the Group amounted to US$17.5 million in 2015, representing an increase of 182.3% from US$6.2 million in 2014. To supplement the consolidated financial statements which are presented in accordance with the HKFRS, the Group also used the unaudited adjusted net profit as an additional financial measure to evaluate the Group’s financial performance by eliminating the impact of items that the Group does not consider indicative of the Group’s business performance. The Group’s unaudited adjusted net profit for the Reporting Period, derived by excluding non-recurring and one-off items comprising the listing expenses of US$5.3 million and the substantial gain arising from the settlement of the dispute in connection with the U.S. Lawsuit, representing an increase of 130.6% from the adjusted net profit in 2014.

Trade receivables

	2015	2014
Trade receivables turnover_(day)_	65	59

The trade receivables of the Group remained stable under the ongoing control and management of the Company.

Inventories

	2015	2014
Inventory turnover_(day)_	26	22

The inventory turnover of the Group remained stable with constant control and management.

Property, plant and equipment

Property, plant and equipment include buildings, machinery equipment and construction in progress. As at December 31, 2015, the property, plant and equipment of the Group amounted to US$37.7 million, representing an increase of US$0.2 million from the property, plant and equipment of US$37.5 million as at December 31, 2014. This is mainly due to improvement works for a newly rented plant, certain pile foundation engineering, and additions of machinery and equipment.

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Intangible assets

Intangible assets include software, patents and license. As at December 31, 2015, the Group’s net intangible assets amounted to US$0.9 million, representing an increase of US$0.6 million from US$0.3 million as at December 31, 2014. The increase in intangible assets is mainly due to the adoption of SAP system by the Company.

Working capital and financial resources

As at December 31, 2015, the cash and cash equivalents of the Group amounted to US$103.7 million (2014: US$25.6 million). There is no restricted fund or loan.

Cash flow analysis

For the Reporting Period, the Group recorded an annual net cash inflow of US$19.6 million generated from operating activities.

For the Reporting Period, the annual cash outflow used in investing activities of the Group was US$4.1 million. This is mainly due to (i) purchases of property, plant, and equipment and other intangible assets for the purpose of enlarging production capability of US$7.4 million, (ii) purchases of available-for-sale investments of US$4.1 million, (iii) proceeds from disposal of available-for-sale investments of US$6.8 million, and (iv) the receipt of government grants of US$0.6 million.

For the Reporting Period, the cash inflow in financing activities of the Group was US$65.2 million. This is mainly due to the net proceeds of approximately US$58.5 million from the initial public offering. All of the remaining amount generated from the initial public offering was remitted to the Company’s account on December 30, 2015.

Capital expenditure

For the Reporting Period, the expenditure of purchasing intangible assets, namely software, patents and license, was US$0.7 million, while the expenditure of purchasing property, plant and equipment amounted to US$6.7 million.

Material acquisitions and disposals

For the Reporting Period, the Company did not have any material acquisitions.

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Contingent liabilities and guarantees

As at December 31, 2015, the Group did not have any material contingent liabilities or guarantees.

Foreign exchange risk

The Group mainly operates in the PRC and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to United States dollar. Foreign exchange risk arises from foreign currencies held in certain overseas subsidiaries. The Group did not hedge against any fluctuation in foreign currency during the Reporting Period. The management of the Group may consider entering into currency hedging transactions to manage the Group’s exposure towards fluctuations in exchange rates in the future.

Cash flow and fair value interest rate risk

Other than bank balances with variable interest rate, the Group has no other significant interest-bearing assets. The management of the Group does not anticipate any significant impact to interest-bearing assets resulting from the changes in interest rates, because the interest rates of bank balances are not expected to change significantly.

Credit risk

The carrying amounts of cash and cash equivalents, trade and other receivables are the Group’s maximum exposure to credit risk in relation to its financial assets. The objective of the Group’s measures to manage credit risk is to control potential exposure to recoverability problems.

In respect of trade and other receivables, individual credit evaluations are performed on all customers and counterparties. These evaluations focus on the counterparty’s financial position, past history of making payments and take into account information specific to the counterparty as well as pertaining to the economic environment in which the counterparty operates. Monitoring procedures have been implemented to ensure that follow-up actions will be taken to recover overdue debts. Credit limits were granted to certain customers in consideration of their payment history and business performance. Prepayment agreements were sometimes entered into with certain of customers from colleges, universities, and research institutes in China, and occasionally with other customers in the United States and Europe. In addition, the Group reviews the recoverable amount of each individual trade and other receivable balance at the end of the year to ensure adequate impairment losses are made for irrecoverable amounts.

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Prospects

The Year is a year of heightened biotech activities. In 2015, the Food and Drug Administration (“ FDA ”) of the United States approved 45 novel drugs as new molecular entities (“ NMEs ”) under new drug applications (“ NDAs ”) or as new therapeutic biologics under biologics license applications. This was the second highest number of approvals, just behind the approvals numbers in 1996. According to the FDA, novel drugs are often innovative products that serve previously unmet medical needs or otherwise significantly help to advance patient care and public health, and NMEs have chemical structures that have never been approved before.

In the United States, there were 59 biotech IPOs, raising a total amount of funds of approximately US$4,950 million in 2015. An average biotech company raised 14% more proceeds than last year. There were approximately 160 biotech IPOs in the last three years, nearly 30% more than the biotech IPOs in the prior 13 years combined. With the inspiring performance in the capital markets, there were a lot of exciting developments, such as the immune oncology therapy development. In China, there is a boom in biotech. The growth in China was about twice that of the overseas market.

In December 2015, President Barack Obama, the president of the United States, has requested a US$2 billion boost for the National Institutes of Health’s (“ NIH ”) budget to US$33.1 billion and a supplemental request for US$1.8 billion in emergency funds to fight the Zika virus. This is the most encouraging budget outcome in 12 years. In particular, the Zika epidemic issue has raised the public awareness for healthcare. There are funds which are flowing into the biotech space from the government and private sectors.

Future Development Strategies

Looking forward to 2016, the Group remains focused on implementing the following business strategies:

• increase investment in research and development projects to expand the research and application service and product portfolio;

• enhance production capacity to capitalize on the strong demand for the life sciences research and application services and products;

• increase penetration into the overseas and PRC markets by expanding and strengthening the sales and marketing team; and

• pursue strategic acquisitions to complement organic growth.

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EMPLOYEES

As of December 31, 2015, the Group had a total of approximately 1,300 employees. The Group had entered into employment contracts covering positions, employment conditions and terms, salary, employees’ benefits, responsibility for breach of contractual obligations, and reason for termination with its employees. The remuneration package of the Group’s employees includes basic salary, subsidies, and other employees’ benefits, which are determined with reference to experience, number of years with the Group, and other general factors.

USE OF THE NET PROCEEDS FROM LISTING

The Company was successfully listed on the Main Board of the Stock Exchange on the Listing Date by way of International Offer Shares (the “ International Offering ”) and Hong Kong Public Offer Shares (the “ Hong Kong Public Offering ”, together with the International Offering, the “ Global Offering ”) of a total of 400,000,000 Shares at the offer price of HK$1.31 per Offer Share. On January 26, 2016, the over-allotment option in relation to the Global Offering was fully exercised by the Joint Global Coordinators, on behalf of the International Underwriters of the Global Offering, in which an aggregate of 60,000,000 Shares, representing 15% of the total number of Offer Shares initially available under the Global Offering before any exercise of the over-allotment option, have been allotted and issued by the Company at HK$1.31 per Share. The net proceeds from the Global Offering are intended to be applied in the manner consistent with that set out in the section headed “Future Plans and Use of Proceeds” in the Prospectus. As at December 31, 2015, no such proceeds has been utilised.

FINAL DIVIDEND

The Board did not recommend the payment of final dividend for the year ended December 31, 2015.

CORPORATE GOVERNANCE PRACTICES

The Group is committed to maintaining high standards of corporate governance to safeguard the interests of the shareholders and to enhance corporate value and accountability. The Company has adopted the Corporate Governance Code and the Corporate Governance Report (the “ CG Code ”) contained in Appendix 14 to The Rules Governing the Listing of Securities on the Stock Exchange (the “ Listing Rules ”) as its own code of corporate governance.

Save as the deviation from A.1.8 and A.2.1 of the CG Code, respectively, the Company has complied with the applicable code provisions as set out in the CG Code since the Listing Date and up to the date of this announcement.

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A.1.8 of the CG Code provides that the Company should arrange appropriate insurance coverage in respect of legal action against the Directors. The Company deviated from this provision for the period from the Listing Date to December 31, 2015. However, the Company has arranged an insurance commencing from January 1, 2016 in respect of potential legal actions against the Directors and officers.

Code provision A.2.1 of the CG Code provides that the roles of chairman and chief executive officer should be separate and performed by different individuals.

The Company deviates from this provision because Dr. Zhang Fangliang has been assuming the roles of both the chairman of the Board and the chief executive officer of the Company since the Listing Date. The Board believes that resting the roles of both the chairman and the chief executive officer in the same person has the benefit of ensuring consistent leadership within the Group and enables more effective and efficient overall strategic planning for the Group. Although these two roles are performed by the same individual, certain responsibilities are shared with the executive Directors to balance power and authority. In addition, all major decisions are made in consultation with members of the Board, as well as with the senior management. The Board has three independent non-executive Directors who offer different independent perspectives. Therefore, the Board is of the view that the balance of power and safeguards in place are adequate. The Board would review and monitor the situation on a regular basis and would ensure that the present structure would not impair the balance of power in the Group.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted its own Code for Securities Transaction by Directors and Specified Individual (the “ Code ”) on terms no less exacting than the required standard set out in the Model Code as set out in Appendix 10 of the Listing Rules. Specific inquiry has been made to all the Directors and each of the Directors has confirmed that he/she has complied with the Code from the Listing Date to December 31, 2015.

The Code is also applicable to the Company’s relevant employees who are likely to be in possession of unpublished inside information of the Company in respect of their dealings in the Company’s securities. No incident of non-compliance with the Code by the Directors and the relevant employees of the Company were noted by the Company from the Listing Date up to December 31, 2015.

SHARE OPTION SCHEMES

The Board has reviewed the matters in relation to the exercise of share options granted/to be granted to the grantees under the share option scheme (the “ Share Option Scheme ”) adopted on July 15, 2015 and the post-IPO share option scheme (the “ Post-IPO Share Option Scheme ”) adopted on December 7, 2015, details of the said Share Option Scheme and Post-IPO Share Option Scheme as disclosed in the prospectus dated December 17, 2015 of the Company.

As at the date of this announcement, options to subscribe for 302,260,940 Shares had been granted under the Share Option Scheme.

– 34 –

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

From the Listing Date to December 31, 2015, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities.

AUDIT COMMITTEE

The Company has established an audit committee (the “ Audit Committee ”). The Audit Committee currently comprises three members, namely, Mr. Dai Zumian (chairman of the Audit Committee), Ms. Zhang Min, and Mr. Guo Hongxin, all being independent non-executive Directors. The principal duties of the Audit Committee are (i) to review and monitor the Company’s financial reporting system, risk management, and internal control systems, (ii) to maintain the relations with the external auditor of the Company, and (iii) to review the financial information of the Company.

The Audit Committee has, together with the management and external auditors, reviewed the accounting principles and practices adopted by the Group and the annual results for the year ended December 31, 2015.

ANNUAL GENERAL MEETING

The forthcoming annual general meeting (the “ AGM ”) of the Company is scheduled to be held on June 1, 2016. A notice convening the AGM will be issued and disseminated to the shareholders of the Company in due course.

CLOSURE OF REGISTER OF MEMBERS

In order to determine the entitlement of shareholders to attend and vote at the AGM to be held on June 1, 2016, the register of members of the Company will be closed from May 30, 2016 to June 1, 2016 (both dates inclusive), during which period no transfer of shares will be registered. All transfer documents, accompanied by the relevant share certificates, shall be lodged with the Company’s share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4:30 p.m. on May 27, 2016.

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PUBLICATION OF THE ANNUAL RESULTS ANNOUNCEMENT AND 2015 ANNUAL REPORT

This annual results announcement is published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.genscript.com), and the 2015 annual report containing all the information required by the Listing Rules will be despatched to the shareholders of the Company and published on the respective websites of the Stock Exchange and the Company in due course.

By Order of the Board Genscript Biotech Corporation Dr. Zhang Fangliang Chairman

Hong Kong, March 28, 2016

As at the date of this announcement, the executive Directors are Dr. ZHANG Fangliang, Ms. WANG Ye and Mr. MENG Jiange; the non-executive Directors are Dr. WANG Luquan, Mr. HUANG Zuie-Chin and Mr. PAN Yuexin; and the independent non-executive Directors are Mr. GUO Hongxin, Mr. DAI Zumian and Ms. ZHANG Min.

• For identification purposes only

– 36 –