SinoMab BioScience Limited — Capital/Financing Update 2020

Jul 22, 2020

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.

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SinoMab BioScience Limited 中國抗體製藥有限公司

(Incorporated in Hong Kong with limited liability)

(Stock code: 3681)

COLLABORATION AND SHARES PURCHASE AGREEMENT WITH D2M AND CHANGE IN USE OF PROCEEDS

The Company is pleased to announce that on 22 July 2020 (after trading hours of the Stock Exchange), the Company and D2M entered into the Collaboration Agreement regarding novel drug targets identification. The Company also entered into the Shares Purchase Agreement and the Shareholders Agreement with D2M, among others, pursuant to which the BVI Company, a wholly-owned subsidiary of the Company, shall purchase from D2M 27,780,000 Series Pre-A1 Preferred Shares, representing 38.17% of the immediate post-Closing share percentage in D2M, at an aggregate purchase price of US$5,000,000.

The Company is of the view that, through the Collaboration Agreement and subscription of the Series Pre-A1 Preferred Shares by the BVI Company, a strategic collaboration will be established by the parties, where both parties can combine their strengths and resources to create greater business value. Accordingly, the Board considers it would be more suitable and practical for the Group to reallocate approximately 3.84% the Unutilised Net Proceeds to subscribe to the Series Pre-A1 Preferred Shares pursuant to the Collaboration.

COLLABORATION AGREEMENT

The Company is pleased to announce that on 22 July 2020 (after trading hours of the Stock Exchange), the Company and D2M entered into the Collaboration Agreement regarding novel drug targets identification. D2M is a company specialised in the development of a genetics-driven targets identification platform and the discovery, development and commercialisation of therapeutics and therapies against those targets for treatment or prevention of human diseases. Subject to the completion of the Shares Purchase Agreement, the Company and D2M will enter into a long-term collaboration where the Company is entitled to conduct subsequent researches, development and commercialisation with regards to qualified drug targets which are chosen by the Company from the original results of D2M’s target identification works according to a prioritised target-selection mechanism (the “ Collaboration ”). D2M shall identify novel drug targets for the Company to evaluate the scientific and commercial value of such discovery.

Prior to the entering into the Shares Purchase Agreement, D2M is indirectly wholly-owned by the D2M Founders through their respective wholly-owned subsidiaries. Dr. Nan BING, one of the D2M Founders, served as a Senior Director of Immunogenetics of Pfizer Inc., (U.S.A.) (“ Pfizer ”). Dr. BING was a founder team member of the genetic data department of Pfizer and has extensive experience in discovering biomarkers through clinical data and discovering drug treatment targets through various genetic data.

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Under the Collaboration Agreement and subject to any applicable laws, D2M undertakes, unconditionally and irrevocably, to transfer and assign all the intellectual property rights relating to such any qualified drug target chosen by the Company, together with the entire rights, titles and interest attached to the Company exclusively. The Company shall also have the exclusive and absolute rights to apply for and obtain all the necessary regulatory approval and other necessary licence in any jurisdiction worldwide for the Collaboration. D2M will in turn be entitled to receive development and commercial milestone payments as well as a percentage of the future net sales of the products relating to a qualified drug target.

The initial term of the Collaboration agreement shall be three years, and shall be automatically renewed for two consecutive three-year terms unless terminated by either party by way of written notice for not less than 30 days.

SHARES PURCHASE AGREEMENT

Additionally, pursuant to the Collaboration, the BVI Company, on 22 July 2020 (after trading hours of the Stock Exchange), as investor, entered into the Shares Purchase Agreement for the purposes of subscribing for 27,780,000 Series Pre-A1 Preferred Shares and investing in the D2M Group.

Set out below is a summary of the major terms of the Shares Purchase Agreement:

Date

22 July 2020

Parties

(i) D2M (ii) D2M HK Co

(iii) D2M Founders

(iv) SB LLC

(v) BNDC

(vi) BVI Company

(vii) The Company

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, D2M, D2M HK Co, D2M Founders, SB LLC and BNDC are Independent Third Parties.

The Subscription

Subject to the terms and conditions of the Shares Purchase Agreement, D2M agrees to issue and sell to the BVI Company, and the BVI Company shall purchase from D2M 27,780,000 Series Pre-A1 Preferred Shares, representing 38.17% of the immediate post-Closing share percentage in D2M, at an aggregate purchase price of US$5,000,000 (“ Purchase Price ”).

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Payment of Purchase Price

The payment of the Purchase Price will be divided into two tranches, subject to the fulfillment of certain prerequisites on the part of D2M Group.

Closing

Closing is subject to the fulfilment of certain customary conditions, which among others, include all approvals, consents or waivers being obtained.

SHAREHOLDERS AGREEMENT

As part of the Collaboration and in connection with the consummation of the transactions contemplated by the Shares Purchase Agreement, the Company has also entered into the Shareholders Agreement for the governance, management and operations of the D2M Group and for the rights and obligations between the Company and the other shareholders of D2M.

REASONS AND BENEFITS FOR THE COLLABORATION

The Company is of the view that, with the additional value created by D2M on the upstream R&D process in the biotech industry, such as targets identification and therapeutics and therapies discovery, contributed to the Company, through the Collaboration Agreement and the subscription of the Series Pre-A1 Preferred Shares by the BVI Company, a strategic collaboration will be established by the parties, where both parties can combine their strengths and resources to create greater business value. The Board believes that the Collaboration marks a major step forward for the Company to fulfil the Company’s commitment to research, development, manufacturing and commercialisation of therapeutics for the treatment of immunological and other debilitating diseases.

The terms of the Agreements were arrived at after arm’s length negotiations between the respective parties. Having considered the foregoing, the Board is of the view that the terms thereof are on normal commercial terms, which are fair and reasonable and are in the best interests of the Company and its Shareholders as a whole.

LISTING RULES IMPLICATION

As all of the relevant applicable percentage ratios in respect of the Agreements are less than 5%, the foregoing transactions did not constitute a notifiable transaction for the Company under Chapter 14 of the Listing Rules.

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CHANGE IN USE OF PROCEEDS

Planned Use of Proceeds

Reference is made to the announcement of offer price and allotment results dated 11 November 2019 and the 2019 Annual Report, the Company raised proceeds of HK$1,272.80 million from the listing of the Shares on the Stock Exchange (“ Net Proceeds ”), and the Net Proceeds would be applied to the following purposes:

• (1) approximately 50.00% of the Net Proceeds, would be allocated to the R&D and commercialization of the Group’s drug candidates:

• approximately 15.00% of the Net Proceeds used for the R&D and commercialisation of the Group’s core product, SM03, to fund clinical trials for SM03 including ongoing and planned clinical trials in the PRC, additional clinical trials to be initiated in the PRC for additional indications, clinical trials in Australia and the United States, and new drug application registration filings and the commercial launch of SM03;

• approximately 25.00% of the Net Proceeds, would be used to fund pre-clinical research, clinical trials, production, preparation for registration filings and potential commercial launches of the other drug candidates in the Group’s pipeline;

• approximately 3.33% of the Net Proceeds would be used to further advance the Group’s R&D programmes, expand the Group’s R&D team, build the Group’s commercialisation team, develop the Group’s proprietary technology and enhance its full spectrum platform;

• approximately 6.67% of the Net Proceeds would be used for the discovery and development of new drug candidates not currently in the Company’s pipeline to diversify its product portfolio;

• (2) approximately 40.00% of the Net Proceeds would be used for the construction of the Group’s Suzhou production base primarily for the commercial scale production of the Group’s core product SM03:

• approximately 11.43% of the Net Proceeds the purchase of laboratory equipment:

  • approximately 6.74% of the Net Proceeds would be used for the purchase of laboratory equipment, primarily for the R&D of SM03 and potentially for the R&D of other products in the Group’s pipeline;

  • approximately 4.69% of the Net Proceeds would be used for the purchase of manufacturing equipment, primarily for the production of SM03;

• approximately 15.38% of the Net Proceeds would be used for the construction of the Suzhou production base:

  • approximately 8.45% of the Net Proceeds would be used for the construction of additional R&D facilities to aid the ongoing R&D of SM03, its commercialization and the development of other products in the Group’s pipeline;

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  - approximately 6.93% of the Net Proceeds would be used for the construction of an upstream production facility and downstream purification facility;

• approximately 13.19% of the Net Proceeds would be used for the purchase of land from the Suzhou Dushu Lake Higher Education Down and other expenses related to the expansion of the Group’s Suzhou production base; and

• (3) approximately 10.00% of the Net Proceeds would be used for the Group’s working capital, expanding internal capabilities and other general corporate purposes.

Change of Use of Proceeds

As at the date of this announcement, the Group had utilised approximately HK$262.7 million of the Net Proceeds. The amount of Net Proceeds which remains unutilised (the “ Unutilised Net Proceeds ”) up to the date of this announcement amounted to HK$1,010.1 million. The Board has resolved to change the use of the Unutilised Net Proceeds as set out below:

				Utilised Net	Unutilised Net
				Proceeds as of	Proceeds as of
		Original	Revised	the date of this	the date of this
Use	of the Net Proceeds	allocation	allocation	announcement	announcement
		HK$ million	HK$ million	HK$ million	HK$ million
(1)	R&D and commercialization of
	the Group’s drug candidates
	R&D and commercialisation of
	the Company’s core product	190.9	190.9	55.2	135.7
	Fund pre-clinical research,
	clinical trials, production,
	preparation for registration
	filings and potential
	commercial launches of
	the other drug candidates	318.2	279.4	45.8	233.6
	Further advance the Company’s
	R&D programmes	42.4	42.4	–	42.4
	Discovery and development of
	new drug candidates	84.9	84.9	49.5	35.4
(2)	Construction of the Suzhou
	production base
	Purchase of laboratory
	equipment, primarily for
	the R&D of SM03	85.8	85.8	1.4	84.4
	Purchase of manufacturing
	equipment, primarily for
	the production of SM03	59.7	59.7	–	59.7
	Construction of additional
	R&D facilities	107.6	107.6	–	107.6

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Use of the Net Proceeds Construction of an upstream production facility and downstream purification facility Purchase of land from the Suzhou Dushu Lake Higher Education Town (3) Company’s working capital, expanding internal capabilities and other general corporate purposes (4) Collaboration with D2M Group Total	Original allocation HK$ million 88.2 167.9 127.2 – 1,272.8	Revised allocation HK$ million 88.2 167.9 127.2 38.8 1,272.8	Utilised Net Proceeds as of the date of this announcement HK$ million – 19.3 91.5 – 262.7	Unutilised Net Proceeds as of the date of this announcement HK$ million 88.2 148.6 35.7 38.8
				1,010.1

Reasons for Change in Use of Proceeds

The Company is of the view that, through the Collaboration Agreement and subscription of the Series Pre-A1 Preferred Shares by the BVI Company, a strategic collaboration will be established by the parties, where both parties can combine their strengths and resources to create greater business value. In light of the foregoing, the Board considers it would be more suitable and practical for the Group to reallocate approximately 3.84% the Unutilised Net Proceeds to subscribe to the Series Pre-A1 Preferred Shares pursuant to the Collaboration. The Board confirms that there is no material change in the business of the Company. The Board is of the view that this change in the use of Unutilised Net Proceeds is fair and reasonable, and is in line with the business strategy of the Group and will not materially adversely affect the operation and business of the Group and is in the best interest of the Company and the Shareholders as a whole.

The Board confirms that, save as disclosed in this announcement, there are no other changes to the use of Unutilised Net Proceeds.

DEFINITIONS

2019 Annual Report the annual report of the Company for the year ended 31 December 2019

Agreements Collaboration Agreement, Shares Purchase Agreement and Shareholders Agreement Board the board of directors of the Company

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BNDC	BNDC Holdings Limited, a company organized and existing
	under the laws of the British Virgin Islands, is wholly-owned by
	Dr. Nan BING, an Independent Third Party, as at the date of this
	announcement
Closing	the closing of the sale of the Series Pre-A1 Preferred Shares, as
	set forth in the Shares Purchase Agreement
Collaboration Agreement	the research, development and commercialisation agreement
	entered into between D2M and the Company on 22 July 2020
Company	SinoMab BioScience Limited (中國抗體製藥有限公司)
D2M	D2M Biotherapeutics Limited, an exempted company with limited
	liability organized and existing under the laws of the Cayman
	Islands, is wholly-owned by BNDC and SB LLC immediately
	prior to the entering into the Shares Purchase Agreement
D2M Founder 2	an Independent Third Party and one of the founders of D2M
D2M Founders	Dr. Nan BING and D2M Founder 2, the founders of the D2M
	Group, both of them are Independent Third Parties
D2M HK Co	D2M Biotherapeutics Limited, a company organized and existing
	under the laws of Hong Kong, is a wholly-owned subsidiary of
	D2M as at the date of this announcement
D2M Group	D2M and D2M HK Co
Group	the Company and the subsidiaries of the Company
Independent Third Party(ies)	person(s) or company(ies) and their respective ultimate beneficial
	owner(s), who/which, to the best of our directors’ knowledge,
	information and belief, having made all reasonable enquiries, is/
	are not connected persons (has the meaning ascribed to it under
	the Listing Rules) of the Company
BVI Company	Ingenious Sino Limited, a company organized and existing under
	the laws of the British Virgin Islands, and is wholly-owned by the
	Company as at the date of this announcement
Listing Rules	Rules Governing the Listing of Securities on the Stock Exchange,
	as amended, supplemented or otherwise modified from time to
	time
PRC	the People’s Republic of China
R&D	research and development

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Series Pre-A1 Preferred Shares series pre-A1 preferred shares of par value US$0.0001 in the capital of D2M, having the rights, privileges and restrictions as set forth in the memorandum and articles of association of D2M Share(s) ordinary share(s) in the share capital of the Company Shareholder(s) holder(s) of the Shares Shareholders Agreement the shareholders agreement entered into between the shareholders of D2M on 22 July 2020 Shares Purchase Agreement the Series Pre-A1 Preferred Shares purchase agreement entered into between D2M, D2M HK Co, D2M Founders, SB LLC, BNDC and the Company on 22 July 2020 Stock Exchange the Stock Exchange of Hong Kong Limited

SB LLC Synerapy Bioscience LLC, a company organized and existing under the laws of Commonwealth of Massachusetts, is whollyowned by D2M Founder 2, an Independent Third Party, as at the date of this announcement

By Order of the Board SinoMab BioScience Limited Dr. Shui On LEUNG Executive Director, Chairman and Chief Executive Director

Hong Kong, 22 July 2020

As at the date of this announcement, the executive Directors are Dr. Shui On LEUNG and Mr. Jing QIANG, the non-executive Directors are Ms. Wenyi LIU, Dr. Haigang CHEN, Mr. Senlin LIU, Mr. Huiyuan MA and Mr. Xun DONG, and the independent non-executive Directors are Mr. Dylan Carlo TINKER, Mr. Michael James Connolly HOGAN, Mr. Ping Cho Terence HON and Mr. George William Hunter CAUTHERLEY.

Cautionary Statement required by Rule 18A.05 of the Listing Rules : The Company cannot guarantee that it will be able to develop, or ultimately market, any of its drugs candidates successfully. Shareholders and potential investors of the Company are advised to exercise due care when dealing in the shares of the Company.

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