Mabpharm Limited — Interim / Quarterly Report 2019

Aug 30, 2019

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

This announcement contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, some of which are beyond the Company’s control, that may cause the actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Mabpharm Limited 邁博葯業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2181)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED JUNE 30, 2019

The board of directors (the “ Board ” or “ Directors ”) of Mabpharm Limited (the “ Company ”) is pleased to announce the unaudited consolidated financial results of the Company and its subsidiaries (collectively, the “ Group ”, “ we ”, “ our ” or “ us ”) for the six months ended June 30, 2019, together with the comparative figures for the six months ended June 30, 2018.

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FINANCIAL HIGHLIGHTS

	For the six months ended June 30,	For the six months ended June 30,	For the six months ended June 30,
	2019	2018	Change
	RMB’000	RMB’000	(%)
	(unaudited)	(unaudited)	(unaudited)
Other income	3,726	10,187	(63.4)
Other expenses	–	(5,502)	(100.0)
Other gains and losses	(1,322)	(1,586)	(16.6)
Research and development expenses	(58,703)	(26,322)	123.0
Administrative expenses	(27,882)	(12,702)	119.5
Finance cost	(3,973)	(1,899)	109.2
Listing expenses	(27,527)	(5,282)	421.1
Loss before tax	(115,681)	(43,106)	168.4
Income tax expense	–	–	–
Loss and total comprehensive expense
for the period	(115,681)	(43,106)	168.4
Total comprehensive expense attributable to:
Owners of the Company	(115,681)	(28,066)	312.2
Non-controlling interests	–	(15,040)	(100.0)
	RMB	RMB
Loss per share
– Basic	(0.03)	(0.02)
– Diluted	(0.03)	N/A

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	At June 30,	At December 31,
	2019	2018	Change
	RMB’000	RMB’000	(%)
	(unaudited)	(audited)	(unaudited)
Non-current assets	344,013	212,469	61.9
Current assets	1,063,289	260,753	307.8
Current liabilities	231,878	156,450	48.2
Net current assets	831,411	104,303	697.1
Non-current liabilities	41,677	67,200	(38.0)
Net assets	1,133,747	249,572	354.3

CORPORATE PROFILE

We are a leading biopharmaceutical company in China, focusing on the research, development and production of new drugs and biosimilar for cancers and autoimmune diseases. We strive to bring to market high quality and affordable innovative biologics through our efficient research and development (“ R&D ”) system and low-cost pharmaceutical production capability, and develop differentiated therapeutic products by fully utilizing our extensive R&D experience. Our pipeline of drug candidates currently consists of nine monoclonal antibody drugs, three of which are our Core Products under phase III clinical trials: CMAB007 (omalizumab), CMAB009 (cetuximab) and CMAB008 (infliximab). Among our other drug candidates, CMAB809 (trastuzumab) entered phase I clinical trials and CMAB819 (nivolumab) will soon be put into clinical trials.

We have strong in-house capabilities in research, pre-clinical and clinical development, and manufacturing, and are building our sales and marketing team to prepare for the commercialization of our product candidates. We focus on the R&D of monoclonal antibodies. Our core R&D team members have more than 16 years of experience in this area, and have led three major projects under the “863” Program, among other national-level scientific research projects. In addition, one of our core R&D team members is also a member of the 11th Session of the Chinese Pharmacopoeia Commission. As disclosed in the Prospectus, our production site in Taizhou, currently equipped with a 3×1,500L monoclonal antibody bioreactor system, is one of the largest antibody drug production facilities in China in terms of production capacity.

We believe that we are well positioned to seize China’s substantial market opportunities, in particular those resulting from China’s recent healthcare regulatory reforms, including new medical insurance measures. The primary focus of our R&D – monoclonal antibody drugs targeting cancers and autoimmune diseases – has substantial untapped clinical demand in China.

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MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

Research and development of our drug candidates

Set out below is an overview of our drug candidates and their R&D status as of June 30, 2019:

Field	Target	Indication	Drug candidate code	Classification	Pre- clinical	Phase I	Phase II or Phase II/III	Phase III	Expected time to reach the next regulatory milestone	Anticipated completion of regulatory review	Commercial rights	Competitive marketed drugs
Respiratory Disease	IgE	Asthma	CMAB007 (INN name: Omalizumab)	New Drug/ Core Product					NDA submission (Quarter 1, 2020)	Quarter 4, 2020	PRC and overseas (excluding Japan, North America and Europe)	Xolair®
Cancer	EGFR	Colorectal Cancer	CMAB009 (INN name: Cetuximab)	New Drug/ Core Product					NDA submission (Quarter 4, 2021)	Quarter 2, 2022	PRC and overseas (excluding Japan, North America and Europe)	Erbitux®
Autoimmune Disease	TNF-α	Rheumatoid Arthritis	CMAB008 (INN name: Infliximab)	New Drug/ Core Product					NDA submission (Quarter 4, 2019)	Quarter 2, 2020	PRC and overseas (excluding Japan, North America and Europe)	Remicade®、 Humira®、 Enbrel®、 Simponi®、 Yisaipu® and Anbainuo®
Cancer	PD1	Non-small cell lung cancer and hepatocellular carcinoma	CMAB819 (INN name: Nivolumab)	New Drug					Phase III (Quarter 1, 2020)	Quarter 2, 2026	Global	Opdivo®、 Keytruda®、 Tyvyt®、 JS001
Cancer	HER2	Breast Cancer/ Gastric Cancer	CMAB809 (INN name: Trastuzumab)	Biosimilar					Phase III (Quarter 4, 2019)	Quarter 4, 2022	Global	Herceptin®

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Field	Target	Indication	Drug candidate code	Classification	Pre- clinical	Phase I	Phase II or Phase II/III	Phase III	Expected time to reach the next regulatory milestone	Anticipated completion of regulatory review	Commercial rights	Competitive marketed drugs
Autoimmune Disease	TNF-α	Rheumatoid Arthritis	CMAB815 (INN name: Adalimumab)	Biosimilar					Phase III (Quarter 2, 2020)	Quarter 2, 2022	Global	Qiangke®
Cancer	HER2	Breast Cancer	CMAB810 (INN name: Pertuzumab)	Biosimilar					Phase III (Quarter 3, 2021)	Quarter 2, 2024	Global	Perjeta®
Respiratory Disease	RSV	Prevention of severe lower respiratory tract disease caused by RSV	CMAB813 (INN name: Palivizumab)	Biosimilar					Phase III (Quarter 3, 2021)	Quarter 4, 2024	Global	Synagis®
Autoimmune Disease	IL-1β	Periodic Fever Syndromes/ Systemic Juvenile Idiopathic Arthritis	CMAB816 (INN name: Canakinumab)	Biosimilar					Phase III (Quarter 1, 2021)	Quarter 4, 2023	Global	ILaris®

Cautionary Statement required by Rule 18A.08(3) of the Listing Rules: We may not be able to ultimately develop and market our drug candidates (including Core Products) successfully.

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Core Product Candidates

CMAB007 (omalizumab)

CMAB007 (omalizumab), a recombinant humanized anti-IgE monoclonal antibody, is our new drug candidate for treatment of asthma patients who remain inadequately controlled despite med/high dose of ICS plus LABA. As of June 30, 2019, CMAB007 was the only mAb asthma therapy developed in China by a local Chinese company that had reached phase III clinical trial, and we believe that, once approved by the National Medical Products Administration (the “ NMPA ”), it will be the first mAb asthma therapy developed by a local Chinese company marketed in China. CMAB007 combines with free IgE to form an anti-IgE complex that inhibits the high affinity IgE receptor and thereby prevents the allergic response. The safety and efficacy of CMAB007 have been confirmed by the results of two completed clinical trials of a total of 665 subjects, which were the largest clinical trials of mAb treating asthma in China. Based on our clinical trial results, CMAB007 can improve asthma patients’ conditions with lower-dose inhaled corticosteroids and reduce the incidence of acute asthma attacks.

During the period from January to June 2019, CMAB007 was under phase III clinical trials for allergic asthma. As of June 30, 2019, we had completed case recruitment for the clinic trials. We expect to file the drug marketing application with the NMPA at the beginning of 2020 upon completion of clinical observation and data analysis of all cases. We are also preparing for clinical trials of other indications of CMAB007. Currently, we expect that CMAB007 may be approved by the NMPA for marketing in the fourth quarter of 2020.

CMAB009 (cetuximab)

CMAB009 (cetuximab), a recombinant anti-EGFR chimeric monoclonal antibody, is our new drug candidate based on cetuximab for first-line treatment of metastatic colorectal cancer (“ mCRC ”) in combination with FOLFIRI. CMAB009 is the first NMPA approved chimeric anti-EGFR antibody for clinical trial developed in China by a local Chinese company. CMAB009 uses the Chinese hamster ovary cell (“ CHO ”) expression system, which is different from the mouse myeloma cell SP2/0 expression system used in marketed cetuximab product. The safety and efficacy of CMAB009 have been confirmed from the results of two completed clinical trials of a total of 530 subjects, which were the largest clinical trials of anti-EGFR mAb developed in China by a local Chinese company. Based on our clinical trial results compared to published clinical trial results for the currently marketed cetuximab products, CMAB009 significantly reduces immunogenicity and decreases the incidence of adverse reactions, such as severe hypersensitivity. We believe that CMAB009 is safer than, and as effective as, the currently marketed cetuximab drugs for treatment of mCRC.

During the period from January to June 2019, CMAB009 was under phase III clinical trials for colorectal cancer.We expect to file the drug marketing application with the NMPA in 2021 upon completion of clinical observation and data analysis of all cases. We are also preparing for clinical trials of other indications of CMAB009. Currently, we expect that CMAB009 may be approved by the NMPA for marketing in the second quarter of 2022.

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CMAB008 (infliximab)

CMAB008 (infliximab), a recombinant anti-TNF-alpha chimeric monoclonal antibody, is our new drug candidate based on infliximab for moderate to severe active rheumatoid arthritis and is potentially one of the best in class of chimeric anti-TNF-alpha antibody in China. CMAB008 was the first NMPA approved chimeric anti-TNF-alpha antibody for clinical trial developed in China by a local Chinese company. CMAB008 uses the CHO expression system which reduces immunogenicity, according to our clinical results compared to published results of the currently marketed infliximab products. The safety and efficacy of CMAB008 have been confirmed by the results of three completed clinical trials of a total of 588 subjects, which were the largest clinical trials of infliximab in China. Based on our clinical results compared to published clinical results of currently marketed infliximab products, we believe that CMAB008 is safer than, and as effective as, the marketed infliximab products for treatment of moderate to severe active rheumatoid arthritis as of June 30, 2019. We are conducting a head-to-head study versus the currently marketed infliximab product to confirm better safety profile and immunogenicity of CMAB008 and its non-inferior efficacy.

During the period from January to June 2019, CMAB008 was under phase III clinical trials for rheumatoid arthritis. We expect to file the drug marketing application with the NMPA in late 2019 upon completion of clinical observation and data analysis of all cases. Currently, we expect that CMAB008 may be approved by the NMPA for marketing in the second quarter of 2020.

Other Product Candidates

CMAB819 (nivolumab) is our new drug candidate pending phase I clinical trial. CMAB819 was approved by the NMPA for clinical trial in September 2017. As of June 30, 2019, we have completed the preparation of clinical samples and are preparing the initiation of phase I clinical trial. CMAB819 is indicated for the treatment of metastatic non-small cell lung cancer and hepatocellular carcinoma.

CMAB809 (trastuzumab) is our phase I clinical trial biosimilar drug candidate. CMAB809 was approved by the NMPA for clinical trial in April 2017. As of June 30, 2019, we had launched subjects engagement and drug introduction of phase I clinical trial. CMAB809 is indicated for the (adjuvant) treatment of HER2 overexpressing breast cancer or metastatic gastric cancer.

CMAB815 (adalimumab) is our IND-filing-stage biosimilar drug candidate. It is under evaluation for clinical trial approval by China’s Center for Drug Evaluation, which we expect to receive by December 2019. CMAB815 is indicated for the treatment of rheumatoid arthritis.

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CMAB810 (pertuzumab) is our pre-clinical trial biosimilar drug candidate. The related screening processes, the establishment of a cell bank, and a lab-scale process for CMAB810 have been completed. The pilot processes have been completed and the pre-clinical animal experiments will commence shortly. CMAB810 is indicated for the treatment of breast cancer.

CMAB813 (palivizumab) is our pre-clinical trial biosimilar drug candidate. The related screening processes and the establishment of a cell bank have been completed. The pilot processes are being developed. CMAB813 is indicated for the prevention of severe lower respiratory tract disease caused by RSV in pediatric patients.

CMAB816 (canakinumab) is our pre-clinical trial biosimilar drug candidate. The related screening processes and the establishment of cell bank have been completed. The pilot processes are being developed. CMAB816 is indicated for the treatment of periodic fever syndrome and systemic juvenile idiopathic arthritis.

Research and development of new drug candidates

We have launched a series of follow-up R&D of new antibody drugs for the treatment of autoimmune diseases and/or tumor diseases. We expect to successfully complete the screening of several new antibody drugs, cell banking and even start pre-clinical animal experiments within the next year, thus further expanding our product line and providing sufficient drug candidate pipeline expansion for our long-term development.

Research and development system

We have developed efficient R&D capabilities, broad and advanced preparation technologies, and low-cost drug production capabilities that will allow us to offer high quality and affordable innovative biopharmaceutical products to patients in China and other emerging markets. Within our product pipeline, we currently have three Core Products under phase III clinical development and two other products approved for clinical trials. We own a number of patents for our core technologies, including antibody engineering and humanization technologies, efficient expression vector construction technologies, efficient clone screening technologies, as well as a proprietary R&D animal model. Our R&D activities are carried out by three core teams: basic R&D, clinical trials, and industrialized good manufacturing practices (“ GMP ”). The operations, design, and construction needs of these three core teams are supported by an assisting engineering team. Our R&D teams consist of professionals who have extensive industry experience in biologics R&D and have gained valuable work experience at global pharmaceutical companies. Employees on our R&D teams possess strong academic background from leading institutions in immunology, molecular biology, oncology or monoclonal antibody development.

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DRUG CANDIDATES COMMERCIALIZATION AND PRODUCTION FACILITIES CONSTRUCTION

Existing production facilities

Our production site in Taizhou has two buildings of 15,000 square meters each and houses our mAb production facilities. The first building is equipped with production facilities currently in operation, including (i) a 3×1,500L antibody bioreactor system and related purification lines, (ii) an injection vial filling line capable of manufacturing four million units per annum and (iii) a pre-filled syringes production line capable of manufacturing one million units per annum. We have not commenced commercial manufacturing at our production facilities.

Construction of new production facilities

We plan to construct new production facilities in the second building of our Taizhou production site and on the parcel of industrial land of approximately 100,746 square meters in Taizhou Hi-tech Zone. Our expansion plan includes the construction of (i) three cGMP-certified workshops, each with a 3×1,500L stainless steel bioreactor system, and corresponding purification lines, which has kicked off construction and is expected to be put into operation in the first half of 2020; (ii) two large-scale monoclonal antibody drug substance production lines with production capacities of 2×18,000L and 3×7,500L, respectively, and (iii) two drug product filling lines which have obtained construction approval and kicked off construction.

Marketing and distribution

We are in the process of building our sales and marketing strategy. We expect our marketing strategies to focus on precision marketing through academic promotion and center around increasing knowledge and awareness of the clinical benefits of our pharmaceuticals among medical professionals. We intend to focus on hospitals with potential clinical demand for our products as our primary customer base. We intend to continue to communicate frequently with major hospitals in China to understand the hospitals and their doctors’ academic views on antibody drugs and patient demands. We also intend to continue to meet industry experts regularly to understand industry trends. We will continue to participate in academic conferences, seminars and symposia, which include large-scale national and provincial conferences organized by the Chinese Medical Association or its local chapters, as well as smaller events tailored to specific cities and hospital departments to promote our brand awareness.

Half of our current core sales team members have over a decade of experience in sales and management of antibody drugs, including the first antibody drug produced by a local Chinese company marketed in China. Our sales team has maintained direct relationships with hospitals through its participation in and support of our clinical trials. In anticipation of the launch of our products, we have been expanding our sales and marketing force. In line with our sales and marketing strategy, we will focus on the recruitment of sales and marketing personnel who has notable academic profile in medicine and pharmacy, and who has over three years’ clinical experience in therapeutic areas of cancers and autoimmune diseases. We expect to implement certain procedures to ensure that our academic promotion and general marketing efforts are in compliance with applicable laws and regulations.

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We expect to sell our products to (i) distributors that sell our products to hospitals and (ii) direct-to-patient pharmacies and others. We plan to build our network of distributors future when our products are approved to be marketed by the NMPA. We anticipate that our distribution model will be consistent with customary industry practice and serves to ensure efficient coverage of our sales network while controlling our cost of distribution and account receivables. We intend to select our distributors based on their qualifications, reputation, market coverage and sales experience. To distribute our products in the future, a distributor must maintain its business license and other requisite licenses and permits. A distributor must also maintain extensive hospital coverage in the designated region. A distributor must be capable of delivering our products to covered hospitals in a safe and timely manner. We plan to actively monitor the inventory levels of our distributors to increase the efficiency of our distribution network. To date, we have not entered into any distribution agreement with distributors.

Quality assurance

We believe that an effective quality management system for our raw materials, equipment and finished products is critical to ensure the quality of our services and maintain our reputation and success. To ensure that our products and services consistently meet high industry standards and requirements, we have also established a company-level quality assurance department to inspect the quality of our products and services that are responsible for the approval, organization and coordination of quality control and quality assurance procedures within each subsidiary. Facilities and equipment are subject to inspection measures such as united registrar systems, factory acceptance testing, site acceptance testing, installation qualification, operator qualification, performance qualification, and regular maintenance throughout their entire life cycles. Our manufacturing business lines are inspected in accordance with the PRC national laboratory quality control standard and the GMP management requirements; our research and development business lines are also inspected in accordance with GMP management requirements.

Future and outlook

Continue to advance the clinical research and commercialization of our drug candidates

Over the short-term, we intend to focus on completing clinical trials and the eventual commercialization of our current pipeline of drug candidates, particularly our Core Products, CMAB007, CMAB009 and CMAB008. We are expected to file the drug marketing application for CMAB008 with the NMPA in late 2019. To bring our Core Products to market, we aim to reinforce our R&D teams, particularly the clinical medicine team, through the provision of regular professional training and pushing ahead with the clinical trials for CMAB007, CMAB009 and CMAB008. We are also in the process of establishing a sales team consisting of staff with strong academic promotion experience and capabilities. Our goal is to generate stable revenue and profits in the future by creating our own sales team in China and strengthening our commercialization capabilities by further building our sales team.

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Continue to maintain investments in advanced technologies and product development

We believe R&D is the key element to support our future growth and our ability to maintain our competitiveness in a global biopharmaceutical market. We plan to upgrade the development of our integrated technological platforms from molecular design to commercialized production, and focus on the R&D of biologics with huge clinical demand and the potential for sustained and rapid growth in China. In order to capture new opportunities in the biopharmaceutical market, we plan to continue increasing our investment into innovative technologies for the development of drugs with improved curative effects and less toxic side effects in order to maintain our industry leading position. We also expect to invest in talent to expand and enhance our R&D team. It is expected that pre-clinical experiments will be launched for one to two antibody new drugs in late 2019.

Continue to attract and nurture high quality talent to support our rapid growth

Recruiting and retaining high quality scientific and technological talent as well as other leaders in R&D technology will be key to our success. We plan to leverage our close cooperation with elite universities in China and internationally to recruit and develop outstanding R&D personnel. We also plan to provide systematic and sophisticate training and development programs to our research teams in order to enhance and optimize their scientific and technical abilities to benefit our Company. Part of this strategy involves the creation of an incentive scheme to retain and motivate high-performing team members.

Establish global brand awareness and foster deeper and more extensive cooperative relationship with domestic and overseas renowned pharmaceutical companies

To build our brand internationally and to support our sustainable growth, we plan to in-license products from global pharmaceutical companies for sales in China and/or to transfer or out-license overseas product rights to certain of our drug candidates to other pharmaceutical companies. We may also consider developing collaborative partnerships with global pharmaceutical companies in order to enter and expand our market share in markets outside of China and to further broaden the geographic coverage of our business. As part of this strategy, we may take advantage of strategic opportunities for merger and acquisition internationally to expand our pipeline of products for R&D development and sales in overseas markets.

FINANCIAL INFORMATION

The financial information set out below in this announcement represents an extract from the interim condensed consolidated financial information, which is unaudited but has been reviewed by the Audit Committee of the Company.

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FINANCIAL REVIEW

The following table summarizes our results of operations for the six months ended June 30, 2019 and 2018:

	For the six months ended	For the six months ended
	June 30,
	2019	2018	Change	Change
	RMB’000	RMB’000	RMB’000	(%)
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Other income	3,726	10,187	(6,461)	(63.4)
Other expenses	–	(5,502)	5,502	(100.0)
Other gains and losses	(1,322)	(1,586)	264	(16.6)
Research and development
expenses	(58,703)	(26,322)	(32,381)	123.0
Administrative expenses	(27,882)	(12,702)	(15,180)	119.5
Finance cost	(3,973)	(1,899)	(2,074)	109.2
Listing expenses	(27,527)	(5,282)	(22,245)	421.1
Loss before tax	(115,681)	(43,106)	(72,575)	168.4
Income tax expense	–	–	–	–
Loss and total comprehensive
expense for the period	(115,681)	(43,106)	(72,575)	168.4
Total comprehensive expense
attributable to:
Owners of the Company	(115,681)	(28,066)	(87,615)	312.2
Non-controlling interests	–	(15,040)	15,040	(100.0)
	RMB	RMB
Loss per share
– Basic	(0.03)	(0.02)
– Diluted	(0.03)	N/A

OTHER INCOME

Other income of the Group decreased by 63.4% from RMB10.2 million for the six months ended June 30, 2018 to RMB3.7 million for the six months ended June 30, 2019, which was primarily due to the lack of income from provision of preparation process services during the Reporting Period as the Company was committed to the R&D of self-owned products and ceased to provide preparation process services to other companies.

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Income from provision of preparation process services primarily represents the income from contract manufacturing, which provides support to the pharmaceutical industry in the form of manufacturing services outsourced on a contract basis.

Set out below are the components of other income for the periods indicated:

Bank interest income Government grants Income from preparation process service – Related parties – Third parties	For the six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 187 19 3,539 3,920 – 5,983 – 265 3,726 10,187	For the six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 187 19 3,539 3,920 – 5,983 – 265 3,726 10,187
		10,187

OTHER EXPENSES

The Group did not incur other expenses for the six months ended June 30, 2019 (compared to RMB5.5 million for the six months ended June 30, 2018), which was primarily due to the Group ceased to provide preparation process services to other companies during the Reporting Period and therefore no corresponding cost was incurred.

Other expenses of the Group primarily represent cost from preparation process services to other companies.

OTHER GAINS AND LOSSES

Other losses of the Group decreased by 16.6% from RMB1.6 million for the six months ended June 30, 2018 to RMB1.3 million for the six months ended June 30, 2019, which was primarily due to foreign exchange losses denominated in U.S. dollars as a result of the significant depreciation of U.S. dollars against RMB held by the Group at the beginning of 2019.

Other gains and losses of the Group primarily represent foreign exchange gains and losses.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses of pipelines of the Group increased by 123.0% from RMB26.3 million for the six months ended June 30, 2018 to RMB58.7 million for the six months ended June 30, 2019, which was primarily due to the increase in expenses on clinical trials, staff cost and depreciation of equipment with the progress of clinical trials.

The Group’s research and development expenses mainly include contract costs, raw materials and consumables, staff costs and depreciation and amortization.

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Set out below are the components of research and development expenses for the periods indicated:

Contracting costs Raw materials and consumables Staff Cost Depreciation and amortization Others Total	For the six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 21,935 10,492 11,833 9,390 15,619 4,272 4,028 418 5,288 1,750 58,703 26,322	For the six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 21,935 10,492 11,833 9,390 15,619 4,272 4,028 418 5,288 1,750 58,703 26,322
		26,322

ADMINISTRATIVE EXPENSES

Administrative expenses of the Group increased by 119.5% from RMB12.7 million for the six months ended June 30, 2018 to RMB27.9 million for the six months ended June 30, 2019, which was primarily due to the increase in staff salary and benefits as well as depreciation and amortization as a result of the continuous expansion of the Group’s business.

Administrative expenses of the Group primarily comprise staff salary and benefit costs of our non-R&D personnel, utilities, rental and general office expenses, depreciation and agency and consulting fees.

Set out below are the components of administrative expenses for the periods indicated:

Staff Cost Building rental fees Depreciation Others Total	For the six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 16,000 5,562 17 717 7,022 3,927 4,843 2,496 27,882 12,702	For the six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 16,000 5,562 17 717 7,022 3,927 4,843 2,496 27,882 12,702
		12,702

FINANCE COSTS

Finance costs of the Group increased by 109.2% from RMB1.9 million for the six months ended June 30, 2018 to RMB4.0 million for the six months ended June 30, 2019, which was primarily due to a higher interest rate on bank loans when compared it with the interest rate of related party loans.

The Group’s finance costs mainly include interests on related party loans, bank loans and lease liabilities.

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LISTING EXPENSES

Listing expenses of the Group increased by 421.1% from RMB5.3 million for the six months ended June 30, 2018 to RMB27.5 million for the six months ended June 30, 2019 in line with the progress of Listing and it is expected that no such expenses will be incurred in future.

LIQUIDITY AND CAPITAL RESOURCES

Our bank balances and cash increased by RMB811.2 million from RMB198.2 million at December 31, 2018 to RMB1,009.4 million at June 30, 2019, which was primarily due to the listing of our shares on the Stock Exchange on May 31, 2019 and the net proceeds from Global Offering of approximately HK$1,144.5 million.

Set out below is an analysis of the liquidity and capital resources at the dates indicated:

Prepayments and other receivables Amounts due from related parties Inventories Contract costs Pledged bank deposits Bank balances and cash Total	At June 30, 2019 At December 31, 2018 RMB’000 RMB’000 (unaudited) (audited) 18,482 20,826 9 668 22,429 27,551 12,991 12,991 – 522 1,009,378 198,195 1,063,289 260,753	Change (%) (unaudited) (11.3) (98.7) (18.6) 0 (100.0) 409.3 307.8

INDEBTEDNESS

As of June 30, 2019, we had total borrowings of RMB95.2 million (inclusive of interest), non-trade amount due to a related party of RMB0.8 million and lease liabilities of RMB46.7 million. As of the same date, none of our existing indebtedness included any material covenants or covenants that could potentially limit our ability to incur new indebtedness.

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Set out below is a breakdown of our outstanding borrowings, non-trade payables to related parties and lease liabilities at the dates indicated:

	At June 30,	At December 31,
	2019	2018
	RMB’000	RMB’000
	(unaudited)	(audited)
Unsecured and unguaranteed loans from Biomabs	–	40,000
Unsecured and unguaranteed loan from Ms. Guo Xiaoxin	–	65,000
Unsecured and unguaranteed amount due to Biomabs	830	13,051
Lease liabilities	46,702	–
Secured borrowings from the bank	95,235	–

As at June 30, 2019, we have repaid all principal and corresponding interests to Biomabs and Ms. Guo Xiaoxin with the proceeds from our drawdowns from April 2019 to June 2019 of an aggregate amount of RMB95.1 million under a RMB100.0 million bank facility, which we entered into in January 2019.

Upon application of International Financial Reporting Standards (“ IFRS ”) 16 since January 1, 2019, we recognized right-of-use assets and corresponding lease liabilities in respect of all leases, except for short-term leases and leases of low value assets. As at June 30, 2019, we, as a lessee, had outstanding lease liabilities for the remaining terms of relevant lease agreements (excluding our contingent rental agreements) in an aggregate amount of RMB46.7 million.

As of June 30, 2019, we did not have any outstanding debt securities, charges, mortgages, or other similar indebtedness, hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits, which are guaranteed, unguaranteed, secured or unsecured, any guarantees or other material contingent liabilities.

CAPITAL STRUCTURE

On April 8, 2019, in preparing for the Global Offering, the then existing shareholders of the Company passed resolutions to conditionally approve, among other things, (i) to increase in the authorized share capital of the Company from 500,000,000 ordinary shares of US$0.0001 par value each to 50,000,000,000 ordinary shares of US$0.0001 par value each; (ii) to allot and issue at par 3,265,500,000 shares as fully paid, which shall rank pari passu in all respects with the then existing shares for allotment and issue, to the persons whose names appear on the register of members of the Company on the day preceding the Listing Date in proportion to their respective shareholdings (as nearly as possible without involving fractions) in the Company by way of capitalization of an amount of US$326,550 standing to the credit of the share premium account of the Company. On May 30, 2019, 3,265,500,000 shares of the Company were issued under the Capitalization Issue.

Subsequently, 783,580,000 shares of the Company were issued under the Global Offering and the shares of the Company were listed on the Main Board of the Stock Exchange on May 31, 2019. There were no changes in the capital structure of the Group since then. The share capital of the Group only comprises ordinary shares. As at June 30, 2019, the total issued share capital of the Company was US$412,408 divided into 4,124,080,000 shares.

– 16 –

The capital structure of the Group was 19.4% debt and 80.6% equity as at June 30, 2019, compared with 47.3% debt and 52.7% equity as at December 31, 2018.

FOREIGN EXCHANGE

Foreign currency risk refers to the risk of loss resulting from changes in foreign currency exchange rates. Fluctuations in exchange rates between RMB and other currencies in which our 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 Hong Kong dollars and the U.S. dollars. The conversion of foreign currencies into RMB, including Hong Kong dollars and the U.S. dollars, 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 foreign exchange loss denominated in foreign currencies represented 100% of other losses for the six months ended June 30, 2018 and the Reporting Period, respectively.

GEARING RATIO

Gearing ratio is calculated using total liabilities divided by total assets and multiplied by 100%. As at June 30, 2019, the gearing ratio of the Group was 19.4% (unaudited) (as at December 31, 2018: 47.3% (audited)).

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

	At June 30,	At December 31,
	2019	2018
	(unaudited)	(audited)
	%	%
Current ratio(1)	458.6	166.7
Quick ratio(2)	448.9	149.1

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 166.7% as of December 31, 2018 to 458.6% as of June 30, 2019, and our quick ratio increased from 149.1% as of December 31, 2018 to 448.9% as of June 30, 2019, primarily due to a significant increase in bank balances and cash as a result of proceeds from the offering of ordinary shares.

– 17 –

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE EXPENSE

For the six months ended June 30, 2019

Notes Other income 4 Other expenses Other gains and losses 5 Research and development expenses Administrative expenses Finance cost 6 Listing expenses Loss before tax 7 Income tax expense 8 Loss and total comprehensive expense for the period Total comprehensive expense attributable to: Owners of the Company Non-controlling interests Loss per share 9 – Basic – Diluted	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 3,726 10,187 – (5,502) (1,322) (1,586) (58,703) (26,322) (27,882) (12,702) (3,973) (1,899) (27,527) (5,282) (115,681) (43,106) – – (115,681) (43,106) (115,681) (28,066) – (15,040) (115,681) (43,106) RMB RMB (0.03) (0.02) (0.03) N/A

– 18 –

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At June 30, 2019

Notes Non-current assets Plant and equipment 11 Right-of-use assets 11 Other non-current assets 12 Rental deposit to a related party 20 Pledged bank deposits 14 Current assets Prepayments and other receivables 13 Amounts due from related parties 20 Inventories Contract costs Pledged bank deposits 14 Bank balances and cash 14 Current liabilities Trade and other payables 15 Amounts due to related parties 20 Lease liabilities Lease liabilities to a related party 20 Contract liabilities Borrowings 16 Loans from a related party 20 Net Current Assets Total Assets Less Current Liabilities	At June 30, 2019 RMB’000 (unaudited) 132,635 81,141 59,027 411 70,799 344,013 18,482 9 22,429 12,991 – 1,009,378 1,063,289 66,599 2,882 2,754 5,746 58,662 95,235 – 231,878 831,411 1,175,424	At December 31, 2018 RMB’000 (audited) 122,833 – 89,225 411 –
		212,469
		20,826 668 27,551 12,991 522 198,195
		260,753
		38,262 19,526 – – 58,662 – 40,000
		156,450
		104,303
		316,772

– 19 –

Notes Non-current liabilities Deferred income Loan from a related party 20 Lease liabilities Lease liabilities to a related party 20 Net Assets Capital and reserves Share capital 17 Reserves Total Equity	At June 30, 2019 RMB’000 (unaudited) 3,475 – 31,733 6,469 41,677 1,133,747 2,804 1,130,943 1,133,747	At December 31, 2018 RMB’000 (audited) 2,200 65,000 – –
		67,200
		249,572
		51 249,521
		249,572

– 20 –

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended June 30, 2019

			Attributable to owners of the	Attributable to owners of the	Company
					Share			Non-
	Share	Share	Paid-in	Other	option	Accumulated		controlling	Total
	capital	premium	capital	reserve	reserve	losses	Subtotal	interests	equity
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
At January 1, 2019 (audited)	51	410,433	–	(32,763)	5,445	(133,594)	249,572	–	249,572
Shares issued upon initial public offerings	541	1,032,727	–	–	–	–	1,033,268	–	1,033,268
Transaction costs attributable to issue of
new shares	–	(40,444)	–	–	–	–	(40,444)	–	(40,444)
Capitalization Issue (Note 17 (b))	2,212	(2,212)	–	–	–	–	–	–	–
Recognition of equity-settled share-based
compensation	–	–	–	–	7,032	–	7,032	–	7,032
Loss and total comprehensive expense for
the period	–	–	–	–	–	(115,681)	(115,681)	–	(115,681)
At June 30, 2019 (unaudited)	2,804	1,400,504	–	(32,763)	12,477	(249,275)	1,133,747	–	1,133,747
At January 1, 2018 (audited)	–	–	126,608	5,910	–	(32,705)	99,813	53,476	153,289
Net contribution by Biomabs (Note a)	–	–	–	7,775	–	–	7,775	4,165	11,940
Loss for the period from the Clinical Business
transfer to other reserve (Note b)	–	–	–	(14,242)	–	14,242	–	–	–
Contribution from a related party (Note c)	–	–	–	10,418	–	–	10,418	5,582	16,000
Issue of ordinary shares (Note 1.2)	34	–	–	–	–	–	34	–	34
Loss and total comprehensive expense for
the period	–	–	–	–	–	(28,066)	(28,066)	(15,040)	(43,106)
At June 30, 2018 (unaudited)	34	–	126,608	9,861	–	(46,529)	89,974	48,183	138,157

Notes:

• (a) The net contribution from Shanghai Biomabs Pharmaceuticals Co., Ltd. (“ Biomabs ”) represents the funding used in the clinical research and development activities carried out by Biomabs (“ Clinical Business ”), which was provided by Biomabs prior to the Business Transfer (as defined in Note 1.2).

• (b) The loss in respect of the operations of the Clinical Business carried out by Biomabs prior to the Business Transfer legally belonged to Biomabs. Therefore, the net loss in respect of the Clinical Business was transferred to other reserve as such loss is non-distributable.

• (c) The contribution represented the amounts paid by Biomabs to Taizhou Mabtech Pharmaceutical Limited ( 泰州邁博太科 藥業有限公司 ) (“ Taizhou Pharmaceutical ”) for the service rendered by Taizhou Pharmaceutical to the Clinical Business prior to the completion of the Business Transfer. Since the Clinical Business had been consolidated into the Group, these payments were accounted for as contribution from a related party to the Group.

– 21 –

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended June 30, 2019

Prior to the Business Transfer in August 2018, the Clinical Business was operated under Biomabs and no separate bank accounts were maintained by the Clinical Business. The treasury and cash disbursement functions of the Clinical Business were centrally administrated by Biomabs. The net cash flows generated by the Clinical Business were kept in the bank accounts of Biomabs, which is reflected in “Cash injected for the Clinical Business by Biomabs” under the condensed consolidated statement of cash flows for the six months ended June 30, 2018. Accordingly, the funds provided for or withdrawn from Biomabs were presented as movements in the equity while there are no cash and cash equivalents balance for the Clinical Business.

For the purpose of presenting a completed set of condensed consolidated financial statements of the Group, the following comprises the information of cash inflow/outflow of the Group and the Clinical Business received/paid by Biomabs prior to the Business Transfer.

NET CASH USED IN OPERATING ACTIVITIES NET CASH USED IN INVESTING ACTIVITIES: Interest received from bank Purchase of plant and equipment Payment for acquisition of a land use right Deposit paid for construction of production facilities Advance to a related party Repayment from a related party Withdraw of pledged bank deposits Placement of pledged bank deposits NET CASH FROM FINANCING ACTIVITIES: Interest paid Loans obtained from a bank Loans obtained from related parties Repayments of loans from related parties Repayments to a related party Repayments of lease liabilities Proceeds from the issue of the Company’s ordinary shares Issue costs paid Contribution from a related party

Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) (74,229) (48,178) 187 19 (17,958) (16,960) – (38,110) – (3,000) (9) (3,384) 42 – 522 6,624 (70,799) (7,133) (88,015) (61,944) (5,437) – 95,071 – – 30,000 (105,000) – (12,221) – (2,732) – 1,033,268 34 (28,200) – – 16,000 974,749 46,034

– 22 –

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash injected for the Clinical Business by Biomabs CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD Effects of exchange rate changes on the balances of cash held in foreign currencies CASH AND CASH EQUIVALENTS AT END OF THE PERIOD, REPRESENTED BY BANK BALANCES AND CASH	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 812,505 (64,088) – 11,940 198,195 76,443 (1,322) (1,586) 1,009,378 22,709

– 23 –

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended June 30, 2019

1. GENERAL INFORMATION, GROUP REORGANIZATION AND BASIS OF PREPARATION AND PRESENTATION OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.1 General Information

Mabpharm Limited (the “ Company ”) was incorporated in the Cayman Islands as an exempted company with limited liability on June 1, 2018, and its shares are listed on The Stock Exchange of Hong Kong Limited on May 31, 2019 (the “ Listing Date ”). The address of the registered office and the principal place of business of the Company are set out in the section headed “Corporate Information” to the interim report.

The Company is an investment holding company. The Company and its subsidiaries (collectively referred to as the “ Group ”) are principally engaged in research, development and production of monoclonal antibody drugs for cancers and autoimmune diseases.

The immediate holding company of the Company is Asia Mabtech Limited, a limited liability company incorporated in the British Virgin Islands, which is ultimately controlled by Mr. Guo Jianjun.

1.2 Group reorganization and basis of preparation and presentation of the condensed consolidated financial statements

The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” issued by the International Accounting Standards Board as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The functional currency of the Company is Renminbi (“ RMB ”), which is the same as the presentation currency of the condensed consolidated financial statements.

The companies and business comprising the Group underwent a group reorganization as described below (the “ Group Reorganization ”).

The major steps of the Group Reorganization comprised the following steps:

• On June 1, 2018, the Company was incorporated in the Cayman Islands with an authorized share capital of US Dollar (“ US$ ”) 50,000 divided into 500,000,000 shares of US$0.0001 each and 1 share of which was issued to a nominal shareholder and was subsequently transferred to Asia Mabtech Limited.

• On June 8, 2018, the Company incorporated Mabpharm Holdings Limited (“ Mabpharm Holdings ”) in the British Virgin Islands with an issued capital of US$1.

• On June 27, 2018, the Company issued 46,249,999 and 3,750,000 shares to Asia Mabtech Limited and United Circuit Limited which are ultimately controlled by Mr. Guo Jianjun at US$0.0001 per share, respectively. The total cash consideration of such issue is US$5,000 (equivalent to RMB34,000).

• On July 5, 2018, Mabpharm Holdings incorporated Mabpharm (HK) Limited (“ Mabpharm HK ”) in Hong Kong with an issued capital of Hong Kong Dollars (“ HK$ ”) 1.

• On July 20, 2018, the Company issued 25,000,000 shares to a group of non-controlling shareholders of the Company at a total cash consideration of approximately US$60.0 million (equivalent to RMB410,450,000).

– 24 –

• On July 25, 2018, Mabpharm HK entered into a share transfer agreement with Mabtech Holdings Limited, which is ultimately controlled by Mr. Guo Jianjun through the trust arrangement with Ms. Gu Nana. Pursuant to the agreement, Mabpharm HK acquired the entire equity interests of Taizhou Pharmaceutical and Taizhou Mabtech Biotechnology Limited ( 泰州邁博太科生物技術有限公司 ) (“ Taizhou Biotech ”) from Mabtech Holdings Limited at a cash consideration of US$20,000,000 and US$8,700,000, respectively (totaling US$28,700,000 which is equivalent to RMB194,993,000). Such consideration was funded by the Company through a loan to Mabpharm HK.

• On August 13, 2018, the Company and Taizhou Pharmaceutical entered into a business spin-off agreement with Sinomab Limited and its subsidiary, Biomabs, pursuant to which, Biomabs transferred its Clinical Business, which was principally engaged in clinical research and development of monoclonal antibody drugs, namely CMAB007 (omalizumab) and CMAB008 (infliximab) to the Company and Taizhou Pharmaceutical (“ Business Transfer ”) at nil consideration. The transfer of the operations of the Clinical Business was completed on August 18, 2018.

• On August 13, 2018, the Company entered into an exclusive licensing agreement with Sinomab Limited, pursuant to which, Sinomab Limited exclusively licensed its interests in CMAB007 and CMAB008 in the People’s Republic of China (the “ PRC ”) to the Company at nil consideration.

• On August 13, 2018, the Company entered into a drug technology transfer agreement with Sinomab Limited, pursuant to which, Sinomab Limited shall transfer its rights and interests in CMAB007, CMAB008 and CMAB009 (cetuximab) in the overseas areas (excluding North America, Japan and Europe) to the Company at nil consideration.

• On August 28, 2018, Taizhou Pharmaceutical established Shanghai Shengheng Biotechnology Limited ( 上海晟珩 生物技術有限公司 ) (“ Shengheng Biotech ”) in the PRC with a paid-in capital of RMB5,000,000.

Taizhou Pharmaceutical, Taizhou Biotech, the Clinical Business and the Company are under common control of Mr. Guo Jianjun before and after the Group Reorganization. Therefore, the acquisition of Taizhou Pharmaceutical, Taizhou Biotech, the Clinical Business and the Company are accounted for as business combination under common control by applying the principles of merger accounting.

The condensed consolidated statement of profit or loss and other comprehensive expense, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows of the Group for six months ended June 30, 2018 include the results, changes in equity and cash flows of the entities comprising the Group and of the Clinical Business, on the basis stated below, as if Taizhou Pharmaceutical, Taizhou Biotech, the Clinical Business and the Company had been operated under a group since January 1, 2018 or the respective date of incorporation, where it is a shorter period with consideration of the controlling interest of Mr. Guo Jianjun in these entities and business.

To the extent the assets, liabilities, income and expenses that are specifically identified to the Clinical Business, such items are included in the condensed consolidated financial statements throughout the six months ended June 30, 2018. To the extent the assets, liabilities, income and expenses that are impracticable to identify specifically, these items are allocated to the Clinical Business on the basis set out below (such items include certain administrative expenses). Items that do not meet the criteria above are not included in the condensed consolidated financial statements of the Group.

Expenses which are impracticable to identify specifically to the Clinical Business are determined on the following basis: (1) included in the administrative expenses are administrative and support department staff salaries and staff welfare which were allocated based on the percentage of headcount of the Clinical Business to the total headcount of Biomabs; (2) income tax expense was calculated based on the tax rate of Biomabs as if the Clinical Business is a separate tax reporting entity. The directors of the Company believe that the method of allocation of the above expense items presents a reasonable basis of estimating what the Clinical Business’s operating results would have been on a stand-alone basis for the six months ended June 30, 2018. Other than those items mentioned above, all other items of assets and liabilities, income and expenses of the Clinical Business are specifically identified.

– 25 –

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis.

Other than changes in accounting policies resulting from application of new and amendments to International Financial Reporting Standards (“ IFRSs ”), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended June 30, 2019 are the same as those followed in the preparation of the Group’s financial statements for each of the two years ended December 31, 2018 underlying the preparation of historical financial information included in the Accountants’ Report presented in the prospectus of the Company dated May 20, 2019 (the “ Prospectus ”).

Application of new and amendments to IFRSs

In the current interim period, the Group has applied, for the first time, the following new and amendments to IFRSs issued by the International Accounting Standards Board which are mandatory effective for the annual period beginning on or after January 1, 2019 for the preparation of the Group’s condensed consolidated financial statements:

IFRS 16	Leases
IFRIC 23	Uncertainty over Income Tax Treatments
Amendments to IFRS 9	Prepayment Features with Negative Compensation
Amendments to IAS 19	Plan Amendment, Curtailment or Settlement
Amendments to IAS 28	Long-term Interests in Associates and Joint Ventures
Amendments to IFRSs	Annual Improvements to IFRSs Standard 2015 – 2017 Cycle

Except as disclosed below, the application of the new and amendments to IFRSs in the current period has had no material impact on the Groups financial positions and performance for the current and prior periods and/or on the disclosures set out in theses condensed consolidated financial statements.

2.1 Impacts and changes in accounting policies of application on IFRS 16 Leases

The Group has applied IFRS 16 for the first time in the current interim period. IFRS 16 superseded IAS 17 Leases (“ IAS 17 ”), and the related interpretations.

2.1.1 Key changes in accounting policies resulting from application of IFRS 16

The Group applied the following accounting policies in accordance with the transition provisions of IFRS16.

Definition of a lease

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

For contracts entered into or modified on or after the date of initial application, the Group assesses whether a contract is or contains a lease based on the definition under IFRS 16 at inception or modification date. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.

– 26 –

As a lessee

Short-term leases

The Group applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. Lease payments on short-term leases are recognized as expense on a straight-line basis over the lease term.

Right-of-use assets

Except for short-term leases and leases of low value assets, the Group recognizes right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.

The cost of right-of-use asset includes:

• the amount of the initial measurement of the lease liability;

• any lease payments made at or before the commencement date, less any lease incentives received;

• any initial direct costs incurred by the Group; and

• an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

The Group presents right-of-use assets as a separate line item on the condensed consolidated statement of financial position.

Refundable rental deposits

Refundable rental deposits paid are accounted under IFRS 9 Financial Instruments (“ IFRS 9 ”) and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments and included in the cost of right-of-use assets.

Lease liabilities

At the commencement date of a lease, the Group recognizes and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

The lease payments include:

• fixed payments (including in-substance fixed payments) less any lease incentives receivable;

• variable lease payments that depend on an index or a rate;

• amounts expected to be paid under residual value guarantees;

• the exercise price of a purchase option reasonably certain to be exercised by the Group; and

• payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate.

– 27 –

After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.

The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever:

• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date of reassessment.

• the lease payments change due to changes in market rental rates following a market rent review/expected payment under a guaranteed residual value, in which cases the related lease liability is remeasured by discounting the revised lease payments using the initial discount rate.

Lease modifications

The Group accounts for a lease modification as a separate lease if:

• the modification increases the scope of the lease by adding the right to use one or more underlying assets; and

• the consideration for the leases increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.

For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

Taxation

For the purposes of measuring deferred tax for leasing transactions in which the Group recognizes the right-of-use assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities.

For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies IAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately. Temporary differences relating to right-of-use assets and lease liabilities are not recognized at initial recognition and over the lease terms due to application of the initial recognition exemption.

2.1.2 Transition and summary of effects arising from initial application of IFRS 16

Definition of a lease

The Group has elected the practical expedient to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 “Determining whether an Arrangement contains a Lease” and not apply this standard to contracts that were not previously identified as containing a lease. Therefore, the Group has not reassessed contracts which already existed prior to the date of initial application.

For contracts entered into or modified on or after January 1, 2019, the Group applies the definition of a lease in accordance with the requirements set out in IFRS 16 in assessing whether a contract contains a lease.

– 28 –

As a lessee

The Group has applied IFRS 16 retrospectively with the cumulative effect recognized at the date of initial application, January 1, 2019. Any difference at the date of initial application is recognized in the opening accumulated losses and comparative information has not been restated.

When applying the modified retrospective approach under IFRS 16 at transition, the Group applied the following practical expedients to leases previously classified as operating leases under IAS 17, on lease-by-lease basis, to the extent relevant to the respective lease contracts:

• i. relied on the assessment of whether leases are onerous by applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets as an alternative of impairment review;

• ii. elected not to recognize right-of-use assets and lease liabilities for leases with lease term ends within 12 months of the date of initial application;

• iii. excluded initial direct costs from measuring the right-of-use assets at the date of initial application; and

• iv. applied a single discount rate to a portfolio of leases with a similar remaining terms for similar class of underlying assets in similar economic environment.

On transition, the Group has made the following adjustments upon application of IFRS 16:

At January 1, 2019, the Group recognised additional lease liabilities and right-of-use assets at amounts equal to the related lease liabilities adjusted by any prepaid or accrued lease payments by applying IFRS 16.C8(b)(ii) transition.

The Group recognized lease liabilities of RMB43,840,000 (unaudited) and right-of-use assets of RMB42,611,000 (unaudited) at January 1, 2019.

When recognising the lease liabilities for leases previously classified as operating leases, the Group has applied incremental borrowing rates of the relevant group entities at the date of initial application. The lessee’s incremental borrowing rates applied for the lease contract is from 7.13% to 7.35%.

Note Operating lease commitments disclosed at December 31, 2018 Less: Value added tax (“VAT”) included in operating lease commitments Operating lease commitments excluded VAT at December 31, 2018 Lease liabilities discounted at relevant incremental borrowing rates Add: Accrued lease liabilities at January 1, 2019 (a) Less: Recognition exemption – short-term lease Lease liabilities at January 1, 2019 Analysed as Current Non-current

At January 1, 2019 RMB’000 (unaudited) 67,711 (6,154) 61,557 42,633 1,229 (22) 43,840 7,095 36,745 43,840

– 29 –

The carrying amount of right-of-use assets at January 1, 2019 comprises the following:

				Right-of-use assets
			Note	RMB’000
				(unaudited)
Right-of-use assets relating to operating leases recognized		upon application of
IFRS 16				43,840
Less: Accrued lease liabilities at January 1, 2019			(a)	(1,229)
				42,611
By class:
Buildings				42,611
Note:
a. Accrued lease liabilities at January 1, 2019 were		reclassified from amounts due to related parties and trade
and other payables relating to accrued	lease payments recognised in the statement			of financial position
immediately before the date of initial application.
The following adjustments were made to the amounts		recognized in the condensed consolidated statement of
financial position at January 1, 2019. Line items	that were	not affected by the changes have not		been included.
Carrying amounts				Carrying amounts
previously reported				under IFRS 16 at
	at December 31,			January 1,
		2018	Adjustments	2019
	RMB’000		RMB’000	RMB’000
	(audited)		(unaudited)	(unaudited)
Non-current assets
Right-of-use assets		–	42,611	42,611
Current Liabilities
Amounts due to related parties		19,526	(374)	19,152
Trade and other payables		38,262	(855)	37,407
Lease liabilities		–	2,664	2,664
Lease liabilities to a related party		–	4,431	4,431
Non-current Liabilities
Lease liabilities		–	32,399	32,399
Lease liabilities to a related party		–	4,346	4,346

Note: For the purpose of reporting cash flows from operating activities under indirect method for the six months ended June 30, 2019, movements in working capital have been computed based on opening statement of financial position at January 1, 2019 as disclosed above.

– 30 –

3. REVENUE AND SEGMENT INFORMATION

Intellectual property transfer agreement with a customer

In December 2016, the Group entered into an agreement with a third party customer for transferring of an intellectual property in relation to CMAB806 at a consideration of RMB65,180,000 (“ Intellectual Property Transfer Agreement ”). Upon the Group transfers the control of rights of the intellectual property to the customer, the Group will recognize revenue. The Group did not recognize revenue from this contract during the reporting period since the control of rights of the intellectual property had not been transferred to the customer. The research and development cost amounting to RMB10,407,000 incurred on this intellectual property before the Group entered into the Intellectual Property Transfer Agreement with the customer were all charged to profit or loss. While, after the inception of the Intellectual Property Transfer Agreement, the research and development cost incurred on this intellectual property, amounting to RMB12,991,000 at June 30, 2019 and December 31, 2018, were capitalized as cost to fulfil the contract and were included in contract costs in the condensed consolidated statement of financial position.

Unsatisfied performance obligations

The following table shows the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied at June 30, 2019 and December 31, 2018:

	At June 30,	At December 31,
	2019	2018
	RMB’000	RMB’000
	(unaudited)	(audited)
Intellectual property transfer	65,180	65,180

The Group expects that 100% of the transaction price allocated to the unsatisfied contract at June 30, 2019 will be recognized as revenue within one and a half year from June 30, 2019.

For the purpose of resources allocation and performance assessment, the key management of the entities and business comprising the Group, being the chief operating decision maker, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group has only one reportable segment and no further analysis of this single segment is presented.

The Group did not record any revenue during the six months ended June 30, 2019 and 2018 and the Group’s non-current assets are substantially located in the PRC, accordingly, no analysis of geographical segment is presented.

– 31 –

4. OTHER INCOME

Bank interest income Government grants and subsidies related to income Income from preparation process service (Note a) – related parties (Note b) – third party	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 187 19 3,539 3,920 – 5,983 – 265 3,726 10,187	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 187 19 3,539 3,920 – 5,983 – 265 3,726 10,187
		10,187

Notes:

• (a) Preparation process includes process parameters, process formulation and sample products prepared through the established process for drug manufacturing. The Group provided preparation process service to its related parties and a third party. Such income is recognized at a point in time upon the delivery of the process report and sample products to the counterparties and recorded in the “Other income” line item in profit or loss; and the relevant costs were included in “Other expenses” line item.

• (b) Details of the related party service income are set out in Note 20.

5. OTHER GAINS AND LOSSES

Net foreign exchange loss FINANCE COSTS Interest on related party loans (Note 20) Interest on bank loans Interest on lease liabilities	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) (1,322) (1,586) Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 1,639 1,899 900 – 1,434 – 3,973 1,899	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) (1,322) (1,586) Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 1,639 1,899 900 – 1,434 – 3,973 1,899
		1,899

6. FINANCE COSTS

– 32 –

7. LOSS BEFORE TAX

Loss before tax for the period has been arrived at after charging:

Depreciation for plant and equipment Depreciation for right-of-use assets Less: capitalized in contract costs Write downs of inventories recognized as an expense Staff cost (including directors’ emoluments): – Salaries and other benefits – Retirement benefit scheme contributions – Share-based payment expenses – Consultation fee Less: capitalized in construction in progress/contract costs Auditors’ remuneration Minimum operating lease payment in respect of rented premises Short-term lease payment Less: capitalized in contract costs Cost of inventories recognized as expense (included in research and development cost)

Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 7,143 5,967 3,888 – – (1,504) 11,031 4,463 119 – 20,395 13,527 2,229 1,278 7,032 – 244 240 29,900 15,045 (321) (3,779) 29,579 11,266 600 1,078 – 979 17 – – (401) 17 578 11,833 9,390

– 33 –

8. INCOME TAX EXPENSE

The Company was incorporated in the Cayman Islands and is exempted from income tax.

No Hong Kong profit tax was provided for as there was no estimated assessable profit of the Group’s Hong Kong subsidiary that was subject to Hong Kong profit tax during the periods presented in the condensed consolidated financial statements.

Under the Law of the PRC of Enterprise Income tax (the “ EIT Law ”) and Implementation Regulation of the EIT Law, the estimated tax rate of the Group’s PRC subsidiaries (other than Taizhou Pharmaceutical stated below) is 25% during the periods presented in the condensed consolidated financial statements. No PRC Enterprise Income tax was provided for as there was no estimated assessable profit of the Group’s PRC subsidiaries during the periods presented in the condensed consolidated financial statements.

The enterprise income tax of the Clinical Business is estimated by treating the Clinical Business as a separate tax payer using the tax rate of Biomabs at 25% throughout the six months ended June 30, 2018.

Taizhou Pharmaceutical was accredited as a “High and New Technology Enterprise” in November 2018 and therefore is entitled to a preferential tax rate of 15% for a three-year period since 2018. The qualification as a High and New Technology Enterprise will be subject to review by the relevant tax authority in the PRC for every three years.

Deferred taxation had not been recognized on the unused tax losses and deductible temporary differences due to the unpredictability of future profit streams.

9. LOSS PER SHARE

The calculation of the basic and diluted loss per share is based on the following data:

Loss for the purpose of calculating basic and diluted loss per share Number of shares (’000): Weighted average number of ordinary shares for the purpose of calculating basic and diluted loss per share	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) (115,681) (28,066) Six months ended June 30, 2019 2018 (unaudited) (unaudited) 3,474,704 1,450,100

The computation of basic loss per share for the six months ended June 30, 2018 and basic and diluted loss per share for the six months ended June 30, 2019 is based on weighted average number of shares assumed to be in issue after taking into account the retrospective adjustments on the assumption that the Group Reorganization as disclosed in Note 1.2 and the Capitalization Issue as disclosed in Note 17(b) had been in effect on January 1, 2018.

No diluted loss per share was presented for the six months ended June 30, 2018 as there were no potential dilutive ordinary shares in issue. The computation of diluted loss per share for the six months ended June 30, 2019 did not assume the exercise of the pre-IPO share options or the over-allocation option since their inclusion would be anti-dilutive.

– 34 –

10. DIVIDENDS

No dividends were paid, declared or proposed during the interim period.

11. MOVEMENTS IN PLANT AND EQUIPMENT, RIGHT-OF-USE ASSETS

During the six months ended June 30, 2019, the Group acquired RMB16,946,000 (unaudited) (six months ended June 30, 2018: RMB6,314,000 (unaudited)) of plant and equipment.

During the six months ended June 30, 2019, the Group obtained the title of land use right for 50 years. On lease commencement, the Group recognized RMB38,173,000 (unaudited) of right-of-use asset.

12. OTHER NON-CURRENT ASSETS

Prepayment for acquisition of plant and equipment Prepayment for acquisition of land use right (Note) Deposit for construction of production facilities (Note) VAT recoverable Others	At June 30, 2019 RMB’000 (unaudited) 29,607 – 3,000 26,420 – 59,027	At December 31, 2018 RMB’000 (audited) 28,239 38,110 3,000 19,813 63
		89,225

Note: In March 2018, the Group entered into a purchase agreement with the land and resources bureau in Taizhou, the PRC to obtain a land use right located in Taizhou, with a total area of 100,746 square meters, for a total cash consideration of RMB37,000,000. Accordingly, the Group made a prepayment of RMB37,000,000 and relevant tax of RMB1,110,000 to secure the land use right. In addition, the Group paid a deposit of RMB3,000,000 related to the construction of production facilities. In January 2019, the Group obtained the title of land use right and therefore transferred the total sum of RMB38,110,000 to right-of-use asset.

13. PREPAYMENTS AND OTHER RECEIVABLES

Other receivables Prepayments for research and development services Other deposits and prepayments VAT recoverable Deferred issue costs	At June 30, 2019 RMB’000 (unaudited) 1,942 13,478 2,404 658 – 18,482	At December 31, 2018 RMB’000 (audited) 1,604 12,924 1,845 – 4,453
		20,826

– 35 –

14. PLEDGED BANK DEPOSITS/BANK BALANCES AND CASH

Pledged bank deposits

The deposits at June 30, 2019 are pledged to a bank as collateral for the issue of euro letter of credit by the bank in connection with the purchase of plant and equipment by the Group, which carry interest at a fixed rate of 0.05% per annum (December 31, 2018: at a fixed rate of 0.01% per annum).

Bank balances and cash

Bank balances and cash comprise of cash held by the Group and short-term bank deposits with an original maturity of three months or less. The bank deposits carry interest at market rates which ranged from 0.05% to 0.35% per annum at June 30, 2019 (December 31, 2018: from 0.01% to 0.35% per annum).

15. TRADE AND OTHER PAYABLES

Trade payables Other payables Salary and bonus payables Other taxes payable Accrued listing expenses and issue costs	At June 30, 2019 RMB’000 (unaudited) 18,453 4,627 6,836 247 36,436 66,599	At December 31, 2018 RMB’000 (audited) 11,677 5,669 9,046 1,755 10,115
		38,262

Payment terms with suppliers are mainly on credit with 60 days from the time when the goods and/or services are received from the suppliers. The aging analysis of the trade payables presented based on the receipt of goods/services by the Group at June 30, 2019 and December 31, 2018 is as follows:

Within 60 days Over 60 days but within 1 year Over 1 year	At June 30, 2019 RMB’000 (unaudited) 16,757 1,696 – 18,453	At December 31, 2018 RMB’000 (audited) 10,939 668 70
		11,677

– 36 –

16. BORROWINGS

During the six months ended June 30, 2019, the Group obtained bank loans amounting to RMB95,071,000 (unaudited) (December 31, 2018: nil (audited)). The loans carry interest at upfloat 30% over the benchmark interest rate published by the People’s Bank of China and are repayable within one year. The loans are secured by the land use right amounting to RMB38,173,000 (unaudited).

17. SHARE CAPITAL

The details of the movement of the Company’s authorized and issued ordinary shares during the six months ended June 30, 2019 are set out as below:

Ordinary shares of US$0.0001 each At December 31, 2018 (audited) Increase (Note a) At June 30, 2019 (unaudited) Ordinary shares of US$0.0001 each At December 31, 2018 (audited) Issue of shares pursuant to Capitalization Issue (Note b) Issue of shares upon initial public offering (Note c) At June 30, 2019 (unaudited)	Authorized number of shares 500,000,000 49,500,000,000 50,000,000,000 Issued and fully paid number of shares US$ 75,000,000 7,500 3,265,500,000 326,550 783,580,000 78,358 4,124,080,000 412,408	US$ 50,000 4,950,000
		5,000,000
		Shown in the condensed consolidated statement of financial position as RMB’000 51
		2,212 541
		2,804

Notes:

• (a) On April 8, 2019, a shareholders’ resolution was passed under which the authorized share capital of the Company was increased from 500,000,000 ordinary shares of US$0.0001 par value each to 50,000,000,000 ordinary shares of US$0.0001 par value each.

• (b) In accordance with a shareholders’ resolution passed on April 8, 2019, 3,265,500,000 ordinary shares of the Company were allotted and issued to the shareholders on the register of members of the Company on the day preceding the Listing Date in proportion to their then existing shareholdings in the Company by capitalizing the sum of US$326,550, equivalent to RMB2,212,000 from the share premium account of the Company (the “ Capitalization Issue ”).

• (c) On May 31, 2019, the Company issued a total of 783,580,000 ordinary shares of US$0.0001 each at the price of HK$1.5 per share by means of Global Offering (as defined in Note 18).

All these new shares shall rank pari passu in all respects with the then existing issued shares of the Company.

– 37 –

18. SHARE-BASED PAYMENT TRANSACTIONS

Equity-settled share option scheme of the Company

The Company’s Pre-IPO Share Option Scheme (the “ Scheme ”) were adopted pursuant to resolution passed on August 10, 2018 for the primary purpose of providing incentives to directors of the Company and eligible employees of the Group. Under the Scheme, 1,875,000 options were granted on August 18, 2018 to directors of the Company and eligible employees of the Group to subscribe for shares in the Company, which will expire on August 17, 2028.

The Scheme has a service condition that shall vest over an 8 year period, with 20%, 20%, 20%, 20% and 20% of the total number of the options granted to be vested on the fourth, fifth, sixth, seventh and eighth anniversary of the Listing Date, respectively.

The exercise price in relation to each option granted shall be the final offer price per share (“ Final Offer Price ”) at which the shares are to be acquired by the investors pursuant to the Hong Kong Public Offering and the International Offering (the “ Global Offering ”), which shall not be less than the par value of the shares, provided that the exercise price shall be adjusted in the event of any capitalization issue, rights issue, open offer, sub-division, consolidation of shares, or reduction of capital of the Company.

On April 8, 2019, a shareholders’ resolution about Capitalization Issue was passed and after taking into account of the Capitalization Issue, the numbers of share options granted were changed to 83,512,500.

The following table discloses details of the movements of the outstanding options granted under the Scheme during the six months ended June 30, 2019:

Category Option type Category 1: Directors Dr. Qian Weizhu August 18, 2018 Dr. Wang Hao August 18, 2018 Mr. Li Yunfeng August 18, 2018 Dr. Li Jing August 18, 2018 Total Directors Category 2: Employees August 18, 2018 Total Exercisable at the end of the period Weighted average exercise price (Note)	Outstanding at January 1, 2019 665,518 557,409 72,659 72,659 1,368,245 506,755 1,875,000 – HK$154.42	Capitalization issue 28,976,619 24,269,597 3,163,575 3,163,575 59,573,366 22,064,134 81,637,500	Granted/ exercised during period – – – – – – –	Forfeited during period – – – – – (274,719) (274,719)	Outstanding at June 30, 2019 29,642,137 24,827,006 3,236,234 3,236,234
					60,941,611
					22,296,170
					83,237,781
					– HK$1.5

Note: The exercise price as of January 1, 2019 represented the estimated Final Offer Price which was determined based on management’s best estimate as of the grant date. The exercise price as of June 30, 2019 represented the Final Offer Price of the Global Offering.

– 38 –

The fair value of the options granted was determined using the Binomial pricing model. The fair value and corresponding inputs into the model were as follows:

Grant date option fair value per share	RMB60.67
Grant date share price	RMB127.15 equivalent to HK$145.15
Estimated exercise price at grant date	HK$154.42
Expected volatility	40%
Expected life	10 years
Risk-free rate	2.19%
Expected dividend yield	0%

Estimated exercise price at grant date was determined based on management’s best estimate. Volatility was estimated at grant date based on median of historical volatilities of the comparable companies with length commensurable to the time to maturity of the share option. Risk-free interest rate was determined based on the yield of Hong Kong Government debt with a maturity life close to the option life of the share option. Dividend yield is based on management estimation at the grant date.

The Group recognized the total expense of RMB7,032,000 for the six months ended June 30, 2019 in relation to share options granted by the Company.

19. CAPITAL COMMITMENTS

The Group had capital commitments for equipment purchase and building construction under contracts as follows:

	At June 30,	At December 31,
	2019	2018
	RMB’000	RMB’000
	(unaudited)	(audited)
Contracted but not provided for	273,117	239,017

20. RELATED PARTY TRANSACTIONS

(a) Related party transactions

• i. Preparation Process service to related parties

	Six months ended June 30,	Six months ended June 30,
	2019	2018
	RMB’000	RMB’000
	(unaudited)	(unaudited)
Shanghai Sinomab Biotechnology Co., Ltd. (“MTJA”)
(Note 1)	–	5,983

– 39 –

ii. Purchase of raw materials, research and development services from related parties

MTJA Biomabs iii. Interest on related party loans Ms. Guo Xiaoxin (Note 2) Biomabs iv. Interest on lease liabilities to a related party Biomabs v. Rental paid to a related party Biomabs Notes:	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 414 5,987 375 – 789 5,987 Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 1,066 1,552 573 347 1,639 1,899 Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 250 – Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 747 140	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 414 5,987 375 – 789 5,987 Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 1,066 1,552 573 347 1,639 1,899 Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 250 – Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 747 140

1. MTJA is ultimately controlled by Mr. Guo Jianjun.

2. Ms. Guo Xiaoxin is a supervisor of Taizhou Pharmaceutical and Taizhou Biotech.

– 40 –

(b) Related party balances

At June 30, 2019, the Group had balances with related parties as follows:

i. Amounts due from related parties

Non-trade receivables Ms. Guo Xiaoxin MTJA ii. Rental deposit to a related party Biomabs iii. Amounts due to related parties Trade payables MTJA Biomabs Non-trade payables Biomabs Interest payables Ms. Guo Xiaoxin Biomabs	At June 30, 2019 RMB’000 (unaudited) 9 – 9 At June 30, 2019 RMB’000 (unaudited) 411 At June 30, 2019 RMB’000 (unaudited) 740 1,312 2,052 830 – – – 2,882	At December 31, 2018 RMB’000 (audited) 626 42
		668
		At December 31, 2018 RMB’000 (audited) 411
		At December 31, 2018 RMB’000 (audited) 2,938 1,123
		4,061
		13,051
		875 1,539
		2,414
		19,526

– 41 –

Payment terms with suppliers are mainly on credit with 60 days from the time when the goods and/or services are received from the suppliers. The aging analysis of the trade payables presented based on the receipt of goods/services by the Group at June 30, 2019 and December 31, 2018 is as follows:

		At June 30,	At December 31,
		2019	2018
		RMB’000	RMB’000
		(unaudited)	(audited)
	Within 60 days	486	1,277
	Over 60 days but within 1 year	826	2,784
	Over 1 year	740	–
		2,052	4,061
iv.	Short-term loans from a related party
		At June 30,	At December 31,
		2019	2018
		RMB’000	RMB’000
		(unaudited)	(audited)
	Biomabs	–	40,000

The short-term loans from Biomabs are unsecured, repayable on demand and carry interest at the benchmark interest rate published by the People’s Bank of China. The Group has repaid the short-term loans from Biomabs in 2019.

v. Long-term loan from a related party

	At June 30,	At December 31,
	2019	2018
	RMB’000	RMB’000
	(unaudited)	(audited)
Ms. Guo Xiaoxin	–	65,000

The amount represented a five-year unsecured entrusted loan facility from Ms. Guo Xiaoxin from October 27, 2016 onwards and carries interest at the benchmark interest rate published by the People’s Bank of China. The Group has early repaid the long-term loan from Ms. Guo Xiaoxin in 2019.

– 42 –

vi. Lease liabilities to a related party

Biomabs-current Biomabs-non-current	At June 30, 2019 RMB’000 (unaudited) 5,746 6,469 12,215	At December 31, 2018 RMB’000 (audited) – –
		–

The amount represented capitalization of a forty-month secured building lease entered with Biomabs, which commenced from September 1, 2018 with the monthly lease payment of RMB374,000.

(c) Compensation of key management personnel

The remuneration of the directors of the Company and other members of key management of the Group during the reporting period were as follows:

Salaries and other benefits Retirement benefit scheme contributions Share-based compensation Consultation fee	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 2,290 1,688 172 139 5,628 – 244 240 8,334 2,067	Six months ended June 30, 2019 2018 RMB’000 RMB’000 (unaudited) (unaudited) 2,290 1,688 172 139 5,628 – 244 240 8,334 2,067
		2,067

– 43 –

OTHER INFORMATION

Interim Dividend

No dividend was paid, declared or proposed during the Reporting Period.

Use of Net Proceeds from Listing

With the Shares of the Company listed on the Stock Exchange on May 31, 2019, the net proceeds from the Global Offering were approximately HK$1,144.5 million. As at the date of this announcement, the Company used a total of approximately RMB14.2 million of the proceeds, including RMB8.6 million for research and development of our Core Products, RMB5.6 million for working capital and general purpose. The Company intends to apply such net proceeds in accordance with the purposes as set out in the Prospectus.

Significant Investments, Material Acquisitions and Disposals

Save as disclosed in this announcement, as at the date of this announcement, there were no significant investments held by the Group or future plans regarding significant investment or capital assets. For the six months ended June 30, 2019, we did not have material acquisitions or disposals of subsidiaries, associates and joint ventures.

Employee and Remuneration Policy

As of June 30, 2019, we had a total of 262 employees, of which 85 are located in Shanghai and 177 are located in Taizhou. The table below sets forth a breakdown of our employees by function:

Function Business units R&D personnel(1) Sales and marketing(2) Administration Management Total	Number of Employees 41 148 9 21 43 262

Notes:

(1) The number of R&D personnel here excludes 21 R&D team members who have been included in our management.

• (2) The number of sales and marketing personnel here excludes our seven core sales and marketing team members, who have been included in our management.

– 44 –

Our success depends on our ability to attract, recruit and retain qualified employees. We provide our employees with opportunities to work on cutting-edge biologics projects with world-class scientists. We aim to attract qualified employees with overseas educational backgrounds and relevant experience gained from global pharmaceutical or biotechnology companies. As of the date of this announcement, 89, 12 and 5 of our scientists held a bachelor’s degree or equivalent, a master’s degree or equivalent, and a Ph.D. degree or equivalent in fields that are highly relevant to our business. In addition, as of the same date, 106 out of our 169 R&D personnel (including those who are our management) held a bachelor’s degree or above.

Our employment agreements typically cover matters such as wages, benefits and grounds for termination. The remuneration package of our employees generally includes salary and bonus elements. In general, we determine the remuneration package based on the qualifications, position and performance of our employees. We also make contributions to the social insurance fund, including basic pension insurance, medical insurance, unemployment insurance, childbirth insurance, work-related injury insurance funds, and housing reserve fund. In addition, we have adopted an employee share option plan to provide an additional means to attract, motivate, retain and reward our employees.

We have established a labor union at Taizhou that represents employees with respect to the promulgation of bylaws and internal protocols. As of June 30, 2019, all of our employees at Taizhou were members of the labor union. We believe that we maintain a good working relationship with our employees. We had not experienced any material labor disputes or any material difficulty in recruiting employees for our operations during the period under review and up to the date of this announcement.

COMPLIANCE WITH THE CG CODE

The Group 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’s corporate governance practices are based on the principles and code provisions as set out in the CG Code contained in Appendix 14 to the Listing Rules and the Company has adopted the CG code as its own code of corporate governance. The CG Code has been applicable to the Company with effect from the Listing Date. The Board is of the view that the Company has complied with the applicable code provisions as set out in the CG Code since the Listing Date up to the date of this announcement. The Board will periodically review and enhance its corporate governance practices to ensure that the Company continues to meet the requirements of the CG Code.

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Companies as set out in Appendix 10 to the Listing Rules (the “ Model Code ”) as the guidelines for the directors’ dealings in the securities of the Company since the Listing Date. Specific enquiry has been made to each Director and all Directors have confirmed that they have complied with the applicable standards set out in the Model Code since the Listing Date and up to the date of this announcement.

– 45 –

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

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s securities listed on the Stock Exchange during the Reporting Period.

AUDIT COMMITTEE AND REVIEW OF FINANCIAL REPORT

The independent auditors of the Company, namely Deloitte Touche Tohmatsu, have carried out a review of the interim financial information in accordance with the Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants.

The Audit Committee reviews the adequacy of our internal control to ensure that our internal control system is effective in identifying, managing and mitigating risks involved in our business operations. The Audit Committee consists of two independent non-executive Directors, namely Dr. Liu Linqing and Mr. Guo Liangzhong and one non-executive Director namely Mr. Jiao Shuge. Dr. Liu Linqing is the chairman of the Audit Committee.

The Audit Committee has reviewed the interim consolidated financial statements of the Group for the six months ended June 30, 2019. The Audit Committee has also discussed matters with respect to the accounting principles and policies adopted by the Company and internal control with members of senior management and the external auditor of the Company, Deloitte Touche Tohmatsu.

PUBLICATION OF INTERIM REPORT

The interim report of the Company for the six months ended June 30, 2019 will be despatched to the Shareholders and published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (http://www.mabpharm.cn) in due course.

IMPORTANT EVENTS AFTER THE REPORTING DATE

Save as disclosed in this announcement, no important events affecting the Company occurred since June 30, 2019 and up to the date of this announcement.

APPRECIATION

On behalf of the Board, I wish to express my sincere gratitude to our Shareholders and business partners for their continued support, and to our employees for their dedication and hard work.

– 46 –

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.

“Audit Committee”	the audit committee of the Board
“Biomabs”	Shanghai Biomabs Pharmaceuticals Co., Ltd. (上海百邁博
	製藥有限公司), a limited liability company incorporated
	in the PRC on October 16, 2009 and a direct wholly-owned
	subsidiary of Sinomab as of the date of this announcement
“Board” or	the board of Directors of the Company
“Board of Directors”
“CG Code”	the Corporate Governance Code as set out in Appendix 14 to
	the Listing Rules
“cGMP”	current good manufacturing practice
“Company”	Mabpharm Limited (邁博药业有限公司), an exempted
	company incorporated under the laws of the Cayman Islands
	with limited liability on June 1, 2018 and whose Shares are
	listed on the Stock Exchange
“connected person(s)”	has the meaning ascribed to it under the Listing Rules
“Core Product(s)”	has the meaning ascribed to it in Chapter 18A of the Listing
	Rules; for the purpose of this announcement, our Core Products
	include CMAB007, CMAB009 and CMAB008
“Director(s)”	the director(s) of our Company
“Global Offering”	has the meaning ascribed to it under the Prospectus
“Group”, “our Group”,	the Company and its subsidiaries from time to time
“the Group”, “we”, “us”,
or “our”
“Hong Kong” or “HK”	the Hong Kong Special Administrative Region of the PRC
“Hong Kong dollars” or	Hong Kong dollars, the lawful currency of Hong Kong
“HK dollar” or “HK$”

– 47 –

“independent third party(ies)” any entity or person who is not a connected person of the Company within the meaning ascribed thereto under the Listing Rules “IPO” initial public offering

“Listing” the listing of our Shares on the Main Board of the Stock Exchange on May 31, 2019 “Listing Date” May 31, 2019, being the date on which the Shares were listed on the Main Board of the Stock Exchange “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “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

• “PRC” the People’s Republic of China, excluding, for the purposes of this announcement, the Hong Kong Special Administrative Region of the People’s Republic of China, the Macau Special Administrative Region of the People’s Republic of China and Taiwan

• “Prospectus” the prospectus issued by the Company on May 20, 2019 in connection with the Hong Kong public offering of the Shares

• “Reporting Period” the six-month period from January 1, 2019 to June 30, 2019 “RMB” Renminbi, the lawful currency of the PRC

• “Shares” ordinary share(s) in the capital of the Company with nominal value of US$0.0001 each

• “Shareholder(s)” holder(s) of Share(s)

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“Sinomab”

Sinomab Limited (formerly known as Mabtech Limited), a limited liability company incorporated in the Cayman Islands on September 4, 2014, and a company which an associate of the controlling shareholder of the Company indirectly controls 66.67% voting rights as of the date of this announcement

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

By Order of the Board Mabpharm Limited Jiao Shuge Chairman

Hong Kong, August 30, 2019

As at the date of this announcement, the executive Directors are Dr. Qian Weizhu, Dr. Wang Hao, Mr. Li Yunfeng and Dr. Li Jing; the non-executive Directors are Mr. Guo Jianjun and Mr. Jiao Shuge; and the independent non-executive Directors are Mr. Guo Liangzhong, Dr. Zhang Yanyun and Dr. Liu Linqing.

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