Lee's Pharm Announces 2018 Annual Results

The Group generated a revenue contribution of HK$1,137,626,000 from the sales of pharmaceutical products in 2018, representing a growth of 12.8% as compared to that of in 2017. Major six products contributed 94.0% of revenue in 2018, keeping up the trend of sales growth of other products. Sales of licensed-in products was HK$618,069,000 (2017: HK$544,402,000) and accounted for 54.3% (2017: 54.0%) of the Group's revenue while sales of proprietary products was HK$519,557,000 (2017: HK$464,120,000) and contributed 45.7% (2017: 46.0%) of the Group's revenue. In one of the proprietary products, Yallaferon achieved an encouraging growth in its revenue of 22.8% and surpassed the HK$100 million mark for the first time.

Overall gross profit margin of the Group was held at 65.6% in 2018. In addition, the Group's R&D in new drugs remains at full throttle and HK$290,177,000 was spent in R&D activities during 2018 (2017: HK$184,605,000), representing 25.5% (2017: 18.3%) to the corresponding yearly revenue, which is among the highest in domestic pharmaceutical companies. The Group continued to transform its sales team and streamline its sales and marketing efficiency in 2018 and the selling expenses to revenue ratio has further lowered to 19.5% (2017: 21.2%). Net profit attributable to the owners of the Company was HK$418,269,000 (2017: HK$232,559,000), increased by 79.9% as compared to that of in 2017, and recorded net profit margin of 36.8% (2017: 23.1%). The board of Directors recommends the payment of final dividend of HK$0.084 (2017: HK$0.070) per ordinary share for the year ended 31 December 2018.

Dr. Benjamin Li, Executive Director and Chief Executive Officer of the Group, said, "In 2018, the transformation of the Group's direct and indirect sales team has enhanced the efficiency and brought the revenue growth of the Group back on track with double digit increase. In the meantime, the Group accelerated in research and development and innovation, from licensing of new compound to conducting clinical trials of new drugs in various therapeutic areas, in the expectation of improving profitability of the Group in the longer term has kept going during the year under review. The Group succeeded to unlock the value of certain pharmaceutical investments in the capital market and made an extra profit to the shareholders. Together with the efforts made during the year under review for expansion in manufacturing capability and strengthening in regulatory ability, overall, it was a transcendent year for the Group."

From the aspect of quality system, production and manufacturing facilities, the Group continued to upgrade and enhance the production capability in Nansha and Hefei during the year under review. In Nansha site, solid dosage production facilities are fully operational with valid manufacturing licenses for various kinds of oral dosage products. Ophthalmic drug production facilities are also fully operational with valid manufacturing licenses, from topical formulations, multi-dose eyedrops, and mono-dose eyedrops utilised blow-fill-seal technology. In Hefei site, the aseptic facility has undergone successful renovation and expansion. The construction of liposome production line and biologics drug substance production facilities have been completed. Along with the operation of production facilities, the development and core competitiveness of the Group will be further enhanced.

With respect to New Drug Application ("NDA"), one of the Group's licensing products had obtained the approval from the China National Medical Products Administration ("NMPA", formerly CFDA). In July 2018, Sancuso (Granisetron Transdermal System), which the Group obtained its exclusive license rights for commercialisation and promotion in China (excluding Beijing, Shanghai and Guangzhou), has been approved for launch by the NMPA. Sancuso is the world's first and only transdermal patch of the 5-HT3 receptor antagonist used for the prevention of nausea and vomiting in patients receiving moderately or highly emetogenic chemotherapy regimens. The launch of Sancuso will further enhance the Group's position in the oncology space.

During the year under review and up to date, the Group has submitted 3 applications for Import Drug License ("IDL"), namely Trazodone, Prulifloxacin and INOMax. Among the three submissions, Prulifloxacin has completed the clinical audit by NMPA with success and INOMax has been granted a waiver of clinical study. In addition, the Group has completed 4 registration enabling clinical studies, namely Azilsartan Phase III clinical study, Azilsartan bioequivalence study, Natulan clinical study and Leuprorelin Pharmacokinetic/Pharmacodynamic ("PK/PD") study.

In terms of medical device development, the NMPA, for the first time in the last 25 years, approved the Group to conduct R&D on Staccato Fentanyl for Inhalation in China for treatment of cancer breakthrough pain. The product integrates the latest IT technology with a unique drug delivery technology, ensuring efficacy while deterring abuse and preventing overdose.

With respect to international partnership, in-licensing strategy is still the preferred mode of the Group's business development. In December 2018, the Group via China Oncology Focus Limited, a 65% owned subsidiary of the Group, made an exclusive licensing agreement with Auransa, Inc. for the development and commercialisation of AU018 in China and other countries of Southeast Asia.

Regarding corporate development, the Group also succeeded to unlock the value of certain pharmaceutical investments in the capital market and made an extra profit to the shareholders during the year. In December 2018, the Group has successfully facilitated a biotech alliance between its investment in Windtree Therapeutics, Inc. (OTCQB: WINT) and CVie Therapeutics Limited. Following the merger, the product portfolio of the enlarged Windtree Therapeutics, Inc. has been enhanced by having three Phase III enabling assets in pulmonary and cardiovascular disease areas, which in turn attracted strong interest from certain investors and had successfully raised additional funding of approximately US$39 million (approximately HK$302 million) by mean of the issuance of new shares of Windtree Therapeutics, Inc. to support its clinical developments.

Looking forward, Dr. Li said, "policies on drug pricing and reimbursement constraints will continue to be the key challenges facing the Group in 2019. Nevertheless, following the gradual separation of its earlier stage R&D arms by means of additional fund raising under these biotech vehicles, the Group will be able to reallocate the resources and to revamp the Group's business strategy by sharpening our focus on those near term opportunities in other therapeutic areas such as cardiovascular, woman health, paediatric and rare diseases. The Group remains confident that the actions we are taking, such as the R&D activities on innovative products in various therapeutic areas, will eventually drive strong and sustainable growth for the future. The Group is well positioned to create value for the shareholders and to face the coming challenging year."

About Lee's Pharmaceutical Holdings LimitedLee's Pharm is a research-based biopharmaceutical company listed in Hong Kong with over 20 years' operation in China's pharmaceutical industry. It is fully integrated with strong infrastructures in drug development, manufacturing, sales and marketing. It has established extensive partnership with over 20 international companies and currently has 17 products in the market place. Lee's Pharm focuses on several key disease areas such as cardiovascular diseases, oncology, gynecology, dermatology and ophthalmology. Lee's Pharm's development program is lauded with more than 50 products stemming from both internal R&D efforts and collaborations with US, European and Japanese companies and aspires to combat diseases such as liver cancer and pulmonary hypertension. The mission of Lee's Pharm is to become a successful biopharmaceutical group in Asia providing innovative products to fight diseases and improve health and quality of life.

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