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XtalPi_PPTUS Cover
Cover Size: 210 x 280 mm / Open Size: 460 x 280 mm / Spine: 40 mm


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IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should seek independent professional advice.
QuantumPharm Inc.
(Incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the
Global Offering
: 187,373,000 Shares (subject to the
Over-allotment Option)
Number of Hong Kong Offer Shares : 9,369,000 Shares (subject to reallocation)
Number of International Offer Shares : 178,004,000 Shares (subject to reallocation and
the Over-allotment Option)
Maximum Offer Price : HK$6.03 per Share, plus brokerage of 1.0%,
SFC transaction levy of 0.0027%, Stock
Exchange trading fee of 0.00565% and AFRC
transaction levy of 0.00015% (payable in full
on application in Hong Kong dollars and
subject to refund)
Nominal Value : US$0.00001 per Share
Stock Code : 2228
Sole Sponsor, Overall Coordinator, Joint Global Coordinator
Joint Bookrunner and Joint Lead Manager
Overall Coordinators, Joint Global Coordinators, Joint Bookrunners
and Joint Lead Managers
Sole Financial Advisor
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents of this prospectus, 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 prospectus.
A copy of this prospectus, having attached thereto the documents specified in “Appendix V—Documents Delivered to the Registrar of Companies and Docu ments on Display–Documents Delivered to the Registrar of Companies,” has
been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordi nance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures
Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document referred to abo ve.
The Offer Price is expected to be fixed by agreement between the Overall Coordinators (for themselves and on behalf of the Underwriters and the CMIs) an d us on the Price Determination Date. The Price Determination Date is expected
to be on or around Tuesday, June 11, 2024 (Hong Kong time) and, in any event, not later than 12:00 noon on Tuesday, June 11, 2024 (Hong Kong time). The Offer Price will be not more than HK$6.03 per Offer Share and is currently
expected to be not less than HK$5.03 per Offer Share, unless otherwise announced. Applicants for Hong Kong Offer Shares may be required to pay, on appli cation (subject to application channels), the maximum Offer Price of HK$6.03
for each Hong Kong Offer Share together with brokerage fee of 1%, SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565% and AFRC trans action levy of 0.00015%, subject to refund if the Offer Price as finally
determined is less than HK$6.03. If, for any reason, the Offer Price is not agreed by 12:00 noon on Tuesday, June 11, 2024 (Hong Kong time) between the Ove rall Coordinators (for themselves and on behalf of the Underwriters and
the CMIs) and us, the Global Offering will not proceed and will lapse.
The Overall Coordinators (for themselves and on behalf of the Underwriters and the CMIs) may, with the consent of our Company, reduce the number of Offe r Shares and/or the indicative Offer Price range below that stated in this
prospectus (which is HK$5.03 to HK$6.03) at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. I n such a case, a notice of the reduction in the number of Offer Shares and/or
the indicative Offer Price range will be published on our website at www.xtalpi.com and the Stock Exchange’s website at www.hkexnews.hk not later than the morning of the last day for lodging applications under the Hong Kong
Public Offering. Further details are set forth in “Structure of the Global Offering–Pricing of the Global Offering” and “How to Apply for Hong Kong Off er Shares.”
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure applicants for the subscrip tion for, the Hong Kong Offer Shares, are subject to termination
by the Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the day that trad ing in the Shares commences on the Stock Exchange. Such grounds
are set out in “Underwriting—Hong Kong Underwriting Arrangements—Hong Kong Public Offering—Grounds for termination.” It is important that you ref er to that section for further details.
Prior to making an investment decision, prospective investors should consider carefully all the information set forth in this prospectus, includin g but not limited to the risk factors set forth in “Risk Factors” in this prospectus.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offe red, sold, pledged, or transferred within the United States, except pursuant
to an available exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. The Offer Shares are being offered and sold solely (i) to qualified
institutional buyers as defined in Rule 144A under the U.S. Securities Act pursuant to Rule 144A or another available exemption from registration req uirements under the U.S. Securities Act and (ii) outside the United States in offshore
transactions in reliance on Regulation S under the U.S. Securities Act. No public Offering of the Offer Shares will be made in the United States.
Our Company is a Specialist Technology Company (as defined in Chapter 18C of the Listing Rules). The securities of Specialist Technology Companies ca rry high investment risks including risks of share price volatility
and inflated valuation due to the difficulty in valuing such companies. Investors should fully understand the investment risks of a Specialist Techn ology Company and the risks disclosed by our Company before making their
investment decisions. In addition, our Company is a Pre-Commercial Company (as defined in Chapter 18C of the Listing Rules). Pre-Commercial Compani es are Specialist Technology Companies that cannot meet the revenue
requirement as set out in Rule 18C.03(4) of the Listing Rules, and so are subject to a higher risk of corporate failure if they are unable to secure suffic ient external funding and/or cannot generate sufficient revenue to sustain
their operations after listing.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this prospectus to the p ublic in relation to the Hong Kong Public Offering.
This prospectus is available at the websites of the Stock Exchange ( www.hkexnews.hk ) and our Company ( www.xtalpi.com ).If you require a printed copy of this prospectus, you may download and print from the website addresses
above.
IMPORTANT
June 4, 2024


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IMPORTANT NOTICE TO INVESTORS
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering. We will not provide printed copies of this Prospectus to the public
in relation to the Hong Kong Public Offering.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing
Information” section, and our website at www.xtalpi.com. If you require a printed
copy of this Prospectus, you may download and print from the website addresses
above.
To apply for the Hong Kong Offer Shares, you may use one of the following
application channels:
Application
Channel Platform Target Investors Application Time
HK eIPO White
Form service
IPO App (which can be
downloaded by searching “ IPO
App” in App Store or Google
Play or downloaded at
www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp )
or www.hkeipo.hk .
Investors who would like to
receive a physical Share
certificate. Hong Kong Offer
Shares successfully applied
for will be allotted and issued
in your own name.
From 9:00 a.m. on
Tuesday, June 4,
2024 to 11:30 a.m.
on Friday, June 7,
2024. The latest
time for completing
full payment of
application monies
will be 12:00 noon
on Friday, June 7,
2024.
HKSCC EIPO
channel
Y our broker or custodian who is
a HKSCC Participant will submit
an EIPO application on your
behalf through HKSCC’s FINI
system in accordance with your
instruction.
Investors who would not like
to receive a physical Share
certificate. Hong Kong Offer
Shares successfully applied
for will be allotted and issued
in the name of HKSCC
Nominees, deposited directly
into CCASS and credited to
your designated HKSCC
Participant’s stock account.
Contact your
broker or
custodian for the
earliest and latest
time for giving such
instructions, as this
may vary by broker
or custodian.
We will not provide any physical channels to accept any application for the Hong
Kong Offer Shares by the public. The contents of the electronic version of this
Prospectus are identical to the printed prospectus as registered with the Registrar of
Companies in Hong Kong pursuant to Section 342C of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients
or principals, as applicable, that this Prospectus is available online at the website
addresses above.
See “How to Apply for Hong Kong Offer Shares” for further details on the
procedures through which you can apply for the Hong Kong Offer Shares electronically.
IMPORTANT


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Y our application through the HK eIPO White Form service or the HKSCC EIPO
channel must be for a minimum of 1,000 Hong Kong Offer Shares and in one of the numbers
set out in the table. If you are applying through the HK eIPO White Form service, you may
refer to the table below for the amount payable for the number of Shares you have selected.
Y ou must pay the respective maximum amount payable on application in full upon application
for Hong Kong Offer Shares. If you are applying through the HKSCC EIPO channel, you are
required to prefund your application based on the amount specified by your broker or
custodian, as determined based on the applicable laws and regulations in Hong Kong.
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
1,000 6,090.81 20,000 121,816.25 100,000 609,081.25 2,000,000 12,181,625.10
2,000 12,181.63 25,000 152,270.32 200,000 1,218,162.51 2,500,000 15,227,031.38
3,000 18,272.44 30,000 182,724.37 300,000 1,827,243.76 3,000,000 18,272,437.66
4,000 24,363.25 35,000 213,178.44 400,000 2,436,325.02 3,500,000 21,317,843.93
5,000 30,454.06 40,000 243,632.50 500,000 3,045,406.28 4,000,000 24,363,250.20
6,000 36,544.87 45,000 274,086.57 600,000 3,654,487.54 4,684,000
(1) 28,529,365.99
7,000 42,635.68 50,000 304,540.62 700,000 4,263,568.79
8,000 48,726.50 60,000 365,448.75 800,000 4,872,650.05
9,000 54,817.32 70,000 426,356.88 900,000 5,481,731.30
10,000 60,908.13 80,000 487,265.00 1,000,000 6,090,812.56
15,000 91,362.19 90,000 548,173.12 1,500,000 9,136,218.83
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is approximately 50% of the
Hong Kong Offer Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) or to the HK eIPO White Form Service Provider (for
applications made through the application channel of the HK eIPO White Form Service Provider)
while the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy will be
paid to the SFC, the Stock Exchange and the AFRC, respectively.
No application for any other number of the Hong Kong Offer Shares will be considered
and any such application is liable to be rejected.
IMPORTANT


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If there is any change in the following expected timetable of the Hong Kong Public
Offering, we will issue an announcement in Hong Kong to be published on the websites
of the Stock Exchange at www.hkexnews.hk and our Company at www.xtalpi.com.
Date (1)
Hong Kong Public Offering commences ...................... .9:00 a.m. on Tuesday,
June 4, 2024
Latest time to complete electronic applications
under the HK eIPO White Form service through
one of the below ways (2) .................................. 1 1:30 a.m. on Friday,
June 7, 2024
(1) the IPO App , which can be downloaded
by searching “ IPO App ” in App Store
or Google Play or downloaded at
www.hkeipo.hk/IPOApp or www.tricorglobal.com/IPOApp
(2) the designated website at www.hkeipo.hk
Application lists open (3) .................................... 1 1:45 a.m. on Friday,
June 7, 2024
Latest time for (a) completing payment of HK eIPO White Form
applications by effecting internet banking transfer(s)
or PPS payment transfer(s) and (b) giving electronic
application instructions to HKSCC
(4) ...................... .12:00 noon on Friday,
June 7, 2024
If you are instructing your broker or custodian who is a CCASS Clearing Participant or
a CCASS Custodian Participant to give electronic application instructions via FINI to apply
for the Hong Kong Offer Shares on your behalf, you are advised to contact your broker or
custodian for the latest time for giving such instructions which may be different from the latest
time as stated above.
Application lists close (3) .................................. .12:00 noon on Friday,
June 7, 2024
Expected Price Determination Date (5) ........................ T uesday, June 11, 2024
Announcement of the Offer Price, the level of applications
in the Hong Kong Public Offering; the level of indications
of interest in the International Offering; and the basis of
allocation of the Hong Kong Offer Shares to be published
on our website at www.xtalpi.com
(6) and the website of
the Stock Exchange at www.hkexnews.hk on or before (10) ...............W ednesday,
June 12, 2024
EXPECTED TIMETABLE
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The results of allocations in the Hong Kong Public Offering (with successful applicants’
identification document numbers, where appropriate) to be available through a variety of
channels, including:
 in the announcement to be posted on our website
and the website of the Stock Exchange at
www.xtalpi.com
(6) and
www.hkexnews.hk , respectively .................... W ednesday, June 12, 2024
 from the “IPO Results” function in the IPO App or
the designated results of allocation
at www.hkeipo.hk/IPOResult or
www.tricor.com.hk/ipo/result
with a “search by ID” function from ................. 1 1:00 p.m. on Wednesday,
June 12, 2024 to
12:00 midnight on Tuesday,
June 18, 2024
 from the allocation results telephone enquiry line
by calling +852 3691 8488 between 9:00 a.m. and
6:00 p.m. from ................................ .Thursday, June 13, 2024 to
Tuesday, June 18, 2024
(excluding Saturday, Sunday and public
holiday in Hong Kong)
For those applying through HKSCC EIPO channel,
you may also check with your broker or custodian from ........ .6:00 p.m. on Tuesday,
June 11, 2024
Share certificates in respect of wholly or partially
successful applications to be dispatched or deposited
into CCASS on or before
(7)(9) .......................... W ednesday, June 12, 2024
HK eIPO White Form e-Auto Refund payment instructions/
refund cheques in respect of wholly or partially successful
applications if the final Offer Price is less than the maximum
Offer Price per Offer Share initially paid on application
(if applicable) or wholly or partially unsuccessful
applications to be dispatched on or before
(8)(9) .............. .Thursday, June 13, 2024
Dealings in the Shares on the Hong Kong Stock Exchange
expected to commence at 9:00 a.m. on .................... .Thursday, June 13, 2024
Notes:
(1) All dates and times refer to Hong Kong local dates and times, except as otherwise stated. Details of the
structure of the Global Offering, including conditions of the Hong Kong Public Offering, are set forth in the
section headed “Structure of the Global Offering” in this prospectus.
(2) If you have already submitted your application through the IPO App or the designated website at
www.hkeipo.hk and obtained a payment reference number from the IPO App or the designated website prior
to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application
monies) until 12:00 noon on the last day for submitting applications, when the application lists close. Y ou will
not be permitted to submit your application through the IPO App or the designated website at www.hkeipo.hk
after 11:30 a.m. on the last day for submitting applications.
EXPECTED TIMETABLE
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(3) If there is/are a tropical cyclone warning signal number 8 or above, or a “black” rainstorm warning and/or
Extreme Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, June 7,
2024, the application lists will not open or close on that day. See “How to Apply for Hong Kong Offer
Shares—E. Severe Weather Arrangements” for details.
(4) Applicants who apply for the Hong Kong Offer Shares by giving electronic application instructions to
HKSCC via CCASS or instructing your broker or custodian to apply on your behalf via CCASS should see
“How to Apply for Hong Kong Offer Shares—A. Application for Hong Kong Offer Shares” for details.
(5) The Price Determination Date is expected to be on or around Tuesday, June 11, 2024 and, in any event, not
later than 12:00 noon on Tuesday, June 11, 2024. If, for any reason, we do not agree with the Overall
Coordinators (for themselves and on behalf of the Underwriters and the CMIs) on the pricing of the Offer
Shares by 12:00 noon on Tuesday, June 11, 2024, the Global Offering will not proceed and will lapse.
(6) None of the website or any of the information contained on the website forms part of this Prospectus.
(7) The Share certificates will only become valid evidence of title provided that the Global Offering has become
unconditional in all respects and neither of the Hong Kong Underwriting Agreement nor the International
Underwriting Agreement is terminated in accordance with its respective terms prior to 8:00 a.m. on the Listing
Date. The Listing Date is expected to be on or about Thursday, June 13, 2024. Investors who trade the Shares
on the basis of publicly available allocation details prior to the receipt of Share certificates or prior to the Share
certificates becoming valid evidence of title do so entirely at their own risk.
(8) e-Auto Refund payment instructions/refund checks will be issued in respect of wholly or partially unsuccessful
applications.
(9) Applicants who have applied for Hong Kong Offer Shares through the HKSCC EIPO channel should refer to
“How to Apply for Hong Kong Offer Shares—D. Despatch/Collection of Share Certificates and Refund of
Application Monies” for details.
Applicants who have applied through the HK eIPO White Form service and paid their applications monies
through single bank accounts may have refund monies (if any) dispatched to the bank account in the form of
e-Auto Refund payment instructions. Applicants who have applied through the HK eIPO White Form service
and paid their application monies through multiple bank accounts may have refund monies (if any) dispatched
to the address as specified in their application instructions in the form of refund checks in favor of the
applicant (or, in the case of joint applications, the first-named applicant) by ordinary post at their own risk.
Further information is set out in the section headed “How to Apply for Hong Kong Offer Shares—D.
Despatch/Collection of Share Certificates and Refund of Application Monies.”
The above expected timetable is a summary only. For details of the structure of the
Global Offering, including its conditions, and the procedures for applications for Hong
Kong Offer Shares, please refer to the sections headed “Structure of the Global Offering”
and “How to Apply for Hong Kong Offer Shares” in this prospectus, respectively.
If the Global Offering does not become unconditional or is terminated in accordance with
its terms, the Global Offering will not proceed. In such a case, our Company will publish an
announcement as soon as practicable thereafter.
EXPECTED TIMETABLE
– iii –


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IMPORTANT NOTICE TO INVESTORS
This prospectus is issued by us solely in connection with the Hong Kong Public
Offering and does not constitute an offer to sell or a solicitation of an offer to buy any
security other than the Hong Kong Offer Shares offered by this prospectus pursuant to
the Hong Kong Public Offering. This prospectus may not be used for the purpose of,
and does not constitute, an offer or a solicitation of an offer to subscribe for or buy,
any security in any other jurisdiction or in any other circumstances. No action has been
taken to permit a public offering of the Offer Shares or the distribution of this
prospectus in any jurisdiction other than Hong Kong. The distribution of this
prospectus and the offering and sale of the Offer Shares in other jurisdictions are
subject to restrictions and may not be made except as permitted under the applicable
securities laws of such jurisdictions pursuant to registration with or authorization by
the relevant securities regulatory authorities or an exemption therefrom.
This prospectus may make references to certain published research papers. Such
research papers do not form part of this prospectus, except to the extent that certain
information from the research papers are explicitly included in this prospectus. Y ou
should rely only on the information contained in this prospectus to make your
investment decision. We have not authorized anyone to provide you with information
that is different from what is contained in this prospectus. Any information or
representation not made in this prospectus must not be relied on by you as having been
authorized by us, the Sole Sponsor, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, any of the
Underwriters or Capital Market Intermidiaries, any of our or their respective directors,
officers or representatives, or any other person or party involved in the Global
Offering.
Page
EXPECTED TIMETABLE ............................................ i
CONTENTS ....................................................... i v
SUMMARY ....................................................... 1
DEFINITIONS AND ACRONYMS ..................................... 4 3
GLOSSARY OF TECHNICAL TERMS ................................. 6 3
FORW ARD-LOOKING STATEMENTS ................................. 7 6
RISK FACTORS ................................................... 7 8
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING
RULES AND EXEMPTION FROM STRICT COMPLIANCE WITH
THE COMPANIES (WINDING UP AND MISCELLANEOUS
PROVISIONS) ORDINANCE ....................................... 1 5 7
CONTENTS
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INFORMATION ABOUT THIS PROSPECTUS AND
THE GLOBAL OFFERING ........................................ 1 7 2
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING ..... 1 7 7
CORPORATE INFORMATION ....................................... 1 8 8
INDUSTRY OVERVIEW ............................................ 1 9 1
REGULATORY OVERVIEW ......................................... 2 2 5
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE ............ 2 8 7
BUSINESS ........................................................ 3 4 5
CONNECTED TRANSACTIONS ...................................... 4 9 1
RELATIONSHIP WITH OUR CO-FOUNDERS .......................... 4 9 3
SHARE CAPITAL .................................................. 4 9 8
SUBSTANTIAL SHAREHOLDERS .................................... 5 0 4
CORNERSTONE INVESTORS ........................................ 5 1 3
DIRECTORS AND SENIOR MANAGEMENT ........................... 5 2 3
FINANCIAL INFORMATION ........................................ 5 3 9
FUTURE PLANS AND USE OF PROCEEDS ............................ 6 0 0
UNDERWRITING ................................................. 6 0 7
STRUCTURE OF THE GLOBAL OFFERING ........................... 6 2 4
HOW TO APPLY FOR HONG KONG OFFER SHARES ................... 6 3 6
APPENDIX I — ACCOUNTANT’S REPORT ....................... I - 1
APPENDIX II — UNAUDITED PRO FORMA FINANCIAL
INFORMATION .............................. II-1
APPENDIX III — SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN ISLANDS COMPANY
LA W ....................................... III-1
APPENDIX IV — STATUTORY AND GENERAL INFORMATION ....... I V - 1
APPENDIX V — DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND DOCUMENTS ON DISPLAY .... V - 1
CONTENTS
–v–


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This summary aims to give you an overview of the information contained in this
prospectus. As this is a summary, it does not contain all the information that may be
important to you. Y ou should read the entire document before you decide to invest in
the Offer Shares. In particular, we are a Pre-Commercial Company seeking to list on
the Main Board of the Hong Kong Stock Exchange under Chapter 18C of the Listing
Rules on the basis that we are unable to meet the requirements under Rule 8.05(1), (2)
or (3) of the Listing Rules. There are unique challenges, risks and uncertainties
associated with investing in companies such as ours. In addition, we have incurred net
losses since our inception, and we may incur net losses for the foreseeable future. We
had negative net cash flow from operating activities during the Track Record Period.
We did not declare or pay any dividends during the Track Record Period and may not
pay any dividends in the foreseeable future. Y our investment decision should be made
in light of these considerations.
There are risks associated with any investment. Some of the particular risks in
investing in the Offer Shares are set out in the section headed “Risk Factors” in this
prospectus. Y ou should read that section carefully before you decide to invest in the
Offer Shares.
OVERVIEW
We are a quantum physics-based, AI-powered, and robotics-driven, innovative R&D
platform. We adopt a combination of quantum physics-based first-principles calculation
1, AI,
high performance cloud computing, and scalable and standardized robotic automation to
provide drug and material science R&D solutions and services to global and domestic
companies in the pharmaceutical and material science (including agritech, energy and new
chemicals, and cosmetics) industries and beyond.
In 2014, cloud-based computing power started growing exponentially, when our
Co-founders immediately realized that would make large-scale high precision and fast
computation a reality. Established in 2015 by three postdoctoral physicists at MIT, underpinned
by our quantum physics-based first-principles calculation and AI capabilities, we seek to
transform the way drugs and new materials are designed and discovered at a pace and scale
beyond traditional alternatives. In 2016, we participated in a global crystal structure prediction
(“CSP”) blind test held by Pfizer and achieved accurate prediction, which led to our long-term
strategic master partnership in technological innovation and drug R&D with Pfizer. Since then,
we gradually became a global leader in terms of technological advantages in providing
computational solid-state R&D services. Our CSP capability and long-lasting cooperation with
1 Quantum physics is the study of matter and energy at the most fundamental level, aiming to uncover the
properties and behaviors of the very building blocks of nature. First-principles calculation is a method to
calculate physical properties directly from basic physical quantities, such as the mass and charge, and the
electrostatic force of an electron, based on the principle of quantum mechanics.
SUMMARY
–1–


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Pfizer eventually enabled us to help shorten the time needed to confirm the optimal crystalline
drug form for use in the development and production of Paxlovid, the world’s first
FDA-approved oral treatment for COVID-19 at a critical juncture of the global fight against
SARS-CoV-2.
As CSP and drug design and discovery share similar fundamental methodologies and
problem-solving patterns where target functions are deployed to search for solutions within a
vast array of possible outcomes, we naturally expanded into the drug R&D industry driven by
our customers’ evolving needs. To validate the compounds generated from our drug R&D
activities, we built our wet lab experimental capabilities. Along with our rapid business growth,
we had increasing customer demand for compound synthesis, which is one of the most
time-consuming and costly parts of the entire drug R&D process. To expedite our synthesis
process and further scale our business, we further developed robotic automation in our wet lab
to enable scalable, flexible, multi-project, faster, and more cost-efficient experiment cycles. As
we function as a molecular search engine, we have been able to explore the applicability of
novel molecular-level material design and discovery in a wide array of industries.
We have established a proprietary integrated technology platform, which integrates high
performance cloud computing-powered in silico tools, including quantum physics-based
first-principles calculation and AI, for dry lab calculation and evaluation, and wet lab
experimentation with robotic automation. Our platform is designed to improve dry lab
calculations with experimental data generated by our wet lab and to enhance the efficiency of
our wet lab by insights derived from dry lab calculations. In the meantime, our wet lab
accumulates large-scale, high-quality and consistent data to provide the foundation for the
formation of our closed-loop large models, containing perception, generation, prediction,
decision-making, planning and execution. We are one of the few drug and material science
R&D companies in the world with quantum physics-based first-principles calculation, AI
technologies, and automated wet lab capabilities, according to Frost & Sullivan. As such, we
believe that we are well positioned at this moment to capture the opportunities arising from the
increasing importance of the combination of AI, computing power, data analysis, and scalable
and standardized automation for the design and discovery of novel drugs and materials. We
believe that quantum physics-based computation, AI, and robotic automation technologies will
play indispensable roles as basic infrastructure components underpinning drug and material
science R&D in the AI-age, like water and electricity in the industrial age.
SUMMARY
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The following diagram illustrates the structure of our closed-loop integrated technology
platform combining our dry lab and wet lab capabilities:
Quantum physics-based
 computation
Advanced
generative AI
In silico tools together with human input Wet lab experimentation with robotic automation
Inform
Synthesis lab
Intelligent robotic
wet lab
Analysis and
testing lab
Validate & Train
Crystallization
lab
Human Input and Expertise
Support
Data assets
High performance
cloud computing
We have made significant contributions in the field of drug design and discovery by
improving speed, scale, novelty and success rate since 2018. We have recently expanded our
business into the field of material science (such as the design and discovery of bio-based
materials, novel chemical compounds for agritech applications, new chemical surfactants and
catalysts, and cosmetics products) and automation (such as automated chemical synthesis) and
are focused on continuing to expand this business going forward.
We have a diverse customer base, ranging from start-ups to global biotechnology and
pharmaceutical companies. Our customer base includes 16 of the top 20 global biotechnology
and pharmaceutical companies ranked by revenue in 2022 according to Frost & Sullivan, which
we believe is an indicator of the caliber of our solutions and services. With operations in both
China and the U.S., we strive to take advantage of the best capabilities and resources available
to us in each region to meet the evolving needs of our customers and collaborators and
academic partners. We have well-established and longstanding relationship with many of the
world’s leading biotechnology and pharmaceutical conglomerates, such as Pfizer Inc.
(“Pfizer ”), Johnson & Johnson, and Merck KGaA, Darmstadt, Germany, many of which are our
repeat customers. Since our founding, we have received substantial investments and support
from world-renowned private equity and strategic investors, including HongShan, Mirae Asset,
Google, Tencent, China Life Chengda, and 5Y Capital. We believe our blue-chip shareholder
base and prominent customer base is a testament to our capabilities and prospects.
SUMMARY
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As of December 31, 2023, we had more than 500 scientists and technologists, including
engineers, medicinal chemists, and programmers, with experience in leading global academic
institutions and well-recognized industry participants, a majority of whom have a master’s
degree or above. We also had more than 160 granted patents, approximately 39 ongoing drug
discovery programs, and four R&D facilities with more than 10,000 sq.m. of lab space, as of
the same date. Our talents, operational infrastructure, and scientific and commercial
achievements have contributed to, and in turn demonstrated, our strong R&D capabilities.
During the Track Record Period, we generated revenue from providing drug discovery
solutions to biotechnology and pharmaceutical companies and intelligent automation solutions
to companies in the pharmaceutical industry and beyond. Our revenue experienced rapid
growth from RMB62.8 million in 2021 to RMB133.4 million in 2022, and further to RMB174.4
million in 2023, representing a CAGR of 66.7%. The substantial increase in our revenue and
our rapid business growth during the Track Record Period demonstrates our commercialization
capability and business sustainability. Although we generated meaningful revenue during the
Track Record Period, we are a Pre-Commercial Company as defined under Chapter 18C of the
Listing Rules. We recorded net loss of RMB2,137.3 million in 2021, RMB1,438.6 million in
2022, and RMB1,906.3 million in 2023. As of the Latest Practicable Date, we had served more
than 300 biotechnology and pharmaceutical companies and research institutions globally; at
the same time, centering on our key upstream and downstream industry chains and
technologies, we have incubated and invested in a number of innovative companies, including
Geode Therapeutics Inc. (“ Geode ”), META Pharmaceuticals Inc. (“ META”), Signet
Therapeutics (Shenzhen) Co., Ltd. (߅(ଉέ)ʮ̡)( “ Signet ”), and Leman Biotech
Co., Ltd (ʮ̡)( “ Leman ”).
OUR BUSINESS AND REVENUE MODEL
Our business primarily comprises (i) drug discovery solutions providing modular
solutions spanning the full spectrum of the drug discovery and research process, and (ii)
intelligent automation solutions consisting primarily of solid-state R&D services and
automated chemical synthesis services. We have diverse revenue streams, including (i)
transaction-based upfront payments, milestone payments, contingent payments, and/or
royalties from our drug discovery collaborations, (ii) transaction-based service fees from our
drug discovery solutions and solid-state R&D services, and (iii) subscription-based service fees
from our automated chemical synthesis services.
Our drug discovery solutions focus on identifying and developing molecules that exhibit
pharmaceutically active functions on particular disease-related targets. Our drug discovery
solutions span the whole drug discovery and research process, from target validation, hit
identification, lead generation, lead optimization to pre-clinical candidate (“ PCC”)
nomination, covering various modalities, including small molecules, antibodies, peptides,
antibody-drug conjugates (“ ADC”), and proteolysis-targeting chimera (“ PROTAC ”). We also
collaborate with certain drug developers (“ collaborators ”) to jointly work on various
therapeutic targets (“ collaboration programs ”), from which we expect to receive royalty,
SUMMARY
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milestone or contingent payments if such collaboration programs reach milestones or events
specified in the respective contracts, such as successful commercialization in particular
regions. See “Business—Our Drug Discovery Solutions.”
Our intelligent automation solutions consists primarily of solid-state R&D services and
automated chemical synthesis services. Our solid-state R&D services focus on analyzing the
physical and chemical properties of solid materials, which are key to drug and material science
R&D. We began leveraging our automation technology and capabilities to provide automated
chemical synthesis services in 2021, aiming to accelerate the chemical synthesis process,
where chemical reactions are performed to convert a reactant or starting materials into
compound and which is time-consuming and costly. We are also leveraging our robotic
automation capability and expertise to scale our intelligent automation solutions business by
providing standard or customized automation solutions to customers in the pharmaceutical and
material science industries and beyond. See “Business—Our Intelligent Automation
Solutions.”
We provide either standalone solutions or services or a combination of our solutions or
services, depending on our customers’ needs. For our drug discovery solutions, we typically
charge our customers under transaction-based model in accordance with our agreed-upon
pricing and payment terms. See “Business—Significant Cooperations and Collaborations” for
details. For our solid-state R&D services, we typically charge our customers under transaction-
based model, or through a master service agreement which allows our customers to place work
orders for services as and when needed. For our automated chemical synthesis services, we
typically charge our customers under subscription-based model, which allows our customers to
place work orders during the subscription term and make monthly or quarterly payment based
on the full-time equivalent rates specified in the relevant subscription agreement.
As our business has evolved, we have launched our XtalPi R&D Solutions program to
provide R&D solutions to other high-value industries, such as material science (including
agritech, energy and new chemicals, and cosmetics), leveraging our proprietary in-house
technologies and expertise derived from our drug discovery and intelligent automation
businesses.
We aim to enable synergies across our business lines and technologies to better serve the
different and evolving R&D needs of, and cross sell our diversified service offerings to, our
customers and collaborators in a wide array of industries. For example, our joint venture with
a bio-materials designer has been able to leverage our quantum physics-based computation and
AI capabilities to develop a new type of furan-based bio-based surfactant. As of the Latest
Practicable Date, we had entered into several contracts to provide customized R&D solutions
but were still in the early stage of exploring the use of our technologies and expertise in our
XtalPi R&D Solutions. See “Business—Our Future Development” for future developments
regarding our XtalPi R&D Solutions.
SUMMARY
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The chart below illustrates our business and revenue models in general:
Specialist Technology Product Type of customers Revenue model
Accumulated number
and duration of
contracts during the
Track Record Period Payment schedules Ownership of IP rights
Drug discovery
solutions
(including drug
discovery
solutions and
drug discovery
collaborations)
Pharmaceutical or
biotechnology
companies,
whether
established or
start-up
Customers and
collaborator customers :
 Fee-for-service
 Transaction-based
Collaborator-investee
customers :
 Fee-for-service or
equity-for-service
 Transaction-based
Number : 150;
Duration : One-off,
typically ranging
from one to
three years
One-stop drug discovery solutions :
(i) upfront payment upon signing
of contract; (ii) milestone
payments when specified milestone
events are reached, such as
delivery of research results or
desired hits, leads, and PCCs; (iii)
contingent payments, depending on
the development stages of the drug
candidates, such as IND and
clinical trials; and/or (iv) single-
to low double-digit tiered royalties
depending on the levels of the
commercialization revenue of the
relevant drugs
Modular drug discovery solutions :
one-off payment
 We typically have sole ownership
of background IP and IP
developed in the relevant
programs related to AI/ML
technologies;
 Our customers typically have sole
ownership of IP developed in the
relevant programs related to
target compounds
SUMMARY
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Specialist Technology Product Type of customers Revenue model
Accumulated number
and duration of
contracts during the
Track Record Period Payment schedules Ownership of IP rights
Intelligent
automation
solutions
Solid-state R&D
services
Pharmaceutical or
biotechnology
companies
 Fee-for-service
 Transaction-based
Number : 398;
Duration : One-off,
typically within six
months
(i) Upfront payment or initiation
payment upon signing of contract,
and (ii) final payment upon
completion of the relevant research
program designed by us for our
customers
 We typically have sole ownership
of background IP and IP
developed in the relevant
programs related to AI
technologies;
 Our customers typically have sole
ownership of IP developed in the
relevant programs related to
target compounds
Automated
chemical
synthesis
services
Pharmaceutical or
biotechnology
companies
 Fee-for-service
 Subscription-based
Number : 242;
Duration : Recurring,
typically ranging
from half a year to
one year
Monthly or quarterly payment under
a master service agreement
 We typically have sole ownership
of background IP and IP
developed in the relevant
programs related to AI/ML
technologies;
 Our customers typically have sole
ownership of IP developed in the
relevant programs related to
target compounds
XtalPi R&D
Solutions
1
R&D solutions
for various
industries
Companies that are
in need of our
technologies in a
wide array of
industries, such
as automation and
material science
 Fee-for-service
 Transaction-based
Number :3 ;
Duration : One-off,
typically ranging
from several months
to three years
(i) Upfront payment or initiation
payment upon signing of contract,
and (ii) milestone payments when
specified milestone events are
reached
Where applicable, our customers are
entitled to the IP developed under
the solutions
1. Currently under development and planned for future commercialization
SUMMARY
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OUR MAIN TECHNOLOGIES AND CLOSED-LOOP INTEGRATED TECHNOLOGY
PLATFORM
Our Main Technologies
We are one of the leaders in the adoption of quantum physics-based first-principles
calculation, AI, and robotic automation in drug and material science R&D, according to Frost
& Sullivan. We believe that we have become one of the most well-reputed drug and material
science R&D companies in China and globally with combined capabilities of quantum
physics-based first-principles calculation, AI, and robotic automation.
Fundamentally, quantum physics-based computation methods form the core of our
technology platform. Quantum physics-based first-principles calculation enables us to model
drug properties ab initio , which helps us to design and discover promising drug candidates
promptly without having to first accumulate empirical data. The data we generate from our
quantum physics-based computation in turn help us to train our AI models to predict critical
properties at various levels of complexity, from atomic, molecular, crystal, biological target, to
in vitro and in vivo . Such capabilities allow us to identify hits, leads and eventually candidate
compounds and crystal forms suitable for drug R&D. We consider that the fundamental
approaches and technologies underlying our quantum physics-based computation capability
can equally be applied in the field of material science R&D, naturally extending our services
to cover material science R&D.
We integrate our AI capabilities into many of our core technologies, including automated
chemical synthesis, crystal structure screening, and our multiple-modality drug discovery
platforms covering small molecule, peptide, ADC, PROTAC, and antibody, to optimize the
efficiency and performance of these technologies. Unlike some of our competitors whose
primary technology is either quantum physics-based computation or AI, we combine our
quantum physics-based first-principles calculation with our AI technologies. The quantum
physics-based first-principles calculation method is difficult and time-consuming to develop
for R&D purpose; while AI on its own has significant limitations and has therefore on its own
had a limited effect on improving the efficiency of drug and material science R&D, because
AI models are expected to accurately predict molecular properties similar to the training set,
but are incapable of extrapolating molecules that are not similar to the training set. In contrast,
by combining quantum physics-based computation with AI, we are able to enjoy both the
benefits of rapid processing of data at scale and computing molecular properties that are
beyond existing industry capabilities and data. Moreover, we have developed our proprietary
ProteinGPT, an AI-based biomedical generative tool, designed to predict and screen protein
sequences and generate protein drug candidates that meet specific pre-set criteria by
incorporating large language model (“ LLM”) into our algorithms.
SUMMARY
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Our wet lab with robotic automation can validate the predictions generated by our in
silico tools, while the data produced at scale from our wet lab experimentation function as the
feedback to further train our in silico tools, creating a mutually reinforcing cycle of learning.
The improved in silico tools then produce better insights into the design and performance of
wet lab experimentation. Therefore, the iteration of in silico and wet lab experimentation
creates a virtuous cycle where data generation, learning and confirmation enhance each other
and continually strengthen our integrated technology platform with real world experimental
data on molecules and chemical synthesis.
For more details regarding our core technologies, see “Business—Our Technologies and
Closed-loop Integrated Technology Platform.”
Our Closed-Loop Integrated Technology Platform
Our technology platform is designed to efficiently search chemical and material space for
the rapid identification and analysis of lead molecules and materials with desired functional
properties for applications in various areas, including drug and material science, as well as to
provide insights and assistance to our customers and collaborators in their drug and new
materials discovery processes.
Our technology platform integrates (i) high performance cloud computing-powered in
silico tools, including quantum physics-based computation and AI, for dry lab calculation and
evaluation, and (ii) wet lab experimentation with robotic automation, backed up by our domain
expertise, to develop R&D solutions with the potential to accelerate the process, expand the
scale, address challenging targets, and improve success rate over traditional alternatives. The
combination of in silico tools and robotic wet lab experimentation brings benefits over the
traditional manual methods, where our dry lab and wet lab are informed and reinforced by each
other creating a closed-loop technology platform. In addition to constantly improving our in
silico tools by fine-tuning our algorithms and training our AI with data accumulated in our wet
lab, we have recently enhanced our wet lab capabilities with the aim of replacing manual
experiments with robotic automation, to the largest extent applicable, to improve the speed,
scale and efficiency of our wet lab experimentation. See “Business—Our Technologies and
Closed-loop Integrated Technology Platform—Our Drug Discovery Solutions—Our Intelligent
Automation Solutions” for details regarding our technological capabilities.
SUMMARY
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Our AI and automation technologies underpinning our drug discovery solutions, intelligent automation solutions, and XtalPi R&D Solutions
fall under the acceptable sectors of “next-generation information technology” and “advanced hardware and software,” respectively, that are inclu ded
in the list of Specialist Technology Industries set out in Chapter 2.5 of the HKEX Guide. The table below sets out the analysis of how our solutions
and services and technologies fall within their respective acceptable sectors:
Specialist Technology Products
Specialist
Technology Acceptable Sectors Applications Timeframe of delivery
Drug discovery solutions (one-stop
drug discovery solutions or
standalone solutions spanning our
drug discovery solutions)
AI Next-generation information technology
- Artificial intelligence (“ AI”) - AI
solutions: the design and provision of
AI solutions used in different industry
verticals
We develop proprietary AI algorithms to automatically search through the
chemical space of novel drugs and materials to identify (i) new compounds
with novel modes of action or with new chemical scaffolds for targets with
existing therapeutics and (ii) compounds for new targets with desired
pharmacological effects.
Our customizable AI algorithms and models can also be embedded into our
quantum physics-based computation algorithms to enable more accurate
and faster design and discovery of desired molecules.
Overall, our AI-powered drug discovery solutions enable the design and
discovery of drug candidates at scale and with higher novelty, speed, and
success rate, as compared to traditional manual method.
See “Business—Overview—The Advantages of Our Solutions” and
“Business—Our Technologies and Closed-loop Integrated Technology
Platform—Our Advanced Generative AI Capabilities.”
We develop proprietary AI algorithms and models to enable faster screening
of molecules.
One-stop drug discovery
solutions/drug discovery
collaborations
Typically two to eight milestones within
one to three years
Modular drug discovery solutions
One or several steps of the one-stop
drug discovery solutions, including hit
identification, lead generation, lead
identification and lead optimization,
and the generation of high-quality
PCC molecules
SUMMARY
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Specialist Technology Products
Specialist
Technology Acceptable Sectors Applications Timeframe of delivery
Intelligent
automation
solutions
(representing our
solid-state R&D
services and
automated
chemical
synthesis
services as
standalone
services)
Solid-state
R&D
services
AI Next-generation information technology
- Artificial intelligence (“ AI”) - AI
solutions: the design and provision of
AI solutions used in different industry
verticals
Our AI-powered virtual screening only needs to synthesize and test a few
hundred molecular candidates to identify the viable ones, while manual
screening needs to synthesize and test approximately 5,000 molecules to
achieve comparable results. Our AI-powered virtual screening can also
screen billions of potential molecules and compounds from the vast
chemical space of novel drugs and materials and efficiently rank them by
drug properties, while manual screening can only screen a small fraction of
the vast chemical space of novel drugs and materials and usually are
subject to human biases and idiosyncrasies.
See “Business—Overview—The Advantages of Our Solutions.”
Delivery of the result report on the
solid-state analysis is typically within
six months.
Automation Advanced hardware and software -
Robotics and automation - Robot
technology: the engineering of robots,
computer software and machines for
the improved performance of tasks
and/or automation processes
We equip our wet lab with robotic automation. Our robotic workstation can
autonomously conduct sample loading, particle targeting, photograph, and
real-time data monitoring for crystallization and crystal structure
determination processes.
Overall, our AI-powered, robotics-driven solid-state R&D can accelerate and
scale the chemical synthesis and wet lab experimentation in drug and
material science R&D.
See “Business—Our Technologies and Closed-loop Integrated Technology
Platform—Intelligent Robotic Wet Lab Infrastructure.”
SUMMARY
–1 1–


--- page 21 ---
Specialist Technology Products
Specialist
Technology Acceptable Sectors Applications Timeframe of delivery
Automated
chemical
synthesis
services
Automation Advanced hardware and software -
Robotics and automation - Robot
technology: the engineering of robots,
computer software and machines for
the improved performance of tasks
and/or automation processes
We apply automated robotic workstations to conduct chemical synthesis,
including autonomous reaction conditions screening and optimization and
synthesis of intermediaries, to accelerate the process of and enable higher
throughput of chemical synthesis.
See “Business—Our Technologies and Closed-loop Integrated Technology
Platform—Intelligent Robotic Wet Lab Infrastructure.”
Delivery of the target compounds every
week or at any time upon our
customers’ request and the result
report on compound synthesis
typically in half a year or one year.
XtalPi R&D
Solutions
A I
 Automation
 Next-generation information
technology – Artificial intelligence
(“AI”) – AI solutions: the design and
provision of AI solutions used in
different industry verticals
 Advanced hardware and software –
Robotics and automation – Robot
technology: the engineering of robots,
computer software and machines for
the improved performance of tasks
and/or automation processes
Leveraging our technological capabilities in AI, quantum physics and
automation as well as our expertise and experiences accumulated in our
drug discovery solutions and intelligent automation solutions businesses,
we provide R&D solutions to customers beyond the pharmaceutical
industry, such as material science and automation, to unleash the potential
of our integrated technology platform and R&D capacity.
See “Business—Our Future Development.”
Delivery of the solutions typically
within several months to three years
SUMMARY
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--- page 22 ---
The table below sets out the timeframe of operations for each of our solutions and services:
Specialist Technology Products Timeframe of Operations
Drug discovery solutions Small molecule discovery Commencement of R&D: second quarter of 2017
Proof-of-concept (“ PoC”): first quarter of 2019
Commercial-ready: fourth quarter of 2019
Revenue generation: fourth quarter of 2019
Antibody discovery Commencement of R&D: first quarter of 2021
PoC: second quarter of 2022
Commercial-ready: second quarter of 2022
Revenue generation: fourth quarter of 2022
Intelligent automation solutions Solid-state R&D services Commencement of R&D: fourth quarter of 2015
PoC: fourth quarter of 2016
Commercial-ready: first quarter of 2017
Revenue generation: second quarter of 2017
Automated chemical synthesis services Commencement of R&D: second quarter of 2021
PoC: fourth quarter of 2021
Commercial-ready: fourth quarter of 2021
Revenue generation: fourth quarter of 2021
XtalPi R&D solutions Commencement of R&D: fourth quarter of 2022
PoC: second quarter of 2023
Commercial-ready: third quarter of 2023
Revenue generation: fourth quarter of 2023
SUMMARY
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Most of our technology platforms and the related technologies are proprietary technologies developed in-house, except for XFF. The table
below sets out a summary of a non-exhaustive list of our main technologies and platforms:
Technologies Platform Applications Functions Origins and Ownership Acceptable Sectors
AI1 ID4Inno
(including
ID4Idea and
ID4Gibbs)
Small molecule drug
discovery
Designed for exploring a broader chemical space of novel drugs and materials with higher
efficiency and lower cost. Through ID4Inno, our intelligent computing designs the process for
and analyses the outcome of automated experimentation, which provides data feedback to
experts, and these experts set specific metrics for smart computing, to achieve a closed-loop AI
drug R&D process.
ID4Idea is used for the generation, selection, and evaluation of small molecules with over 200 AI
models. ID4Gibbs is a high-precision quantum physics-based computational platform based
upon physical modeling and first-principles calculation, enabling high-precision prediction of
drug-target interactions.
See “Business—Our Drug Discovery Solutions—Small Molecule Discovery.”
Self-developed since 2018
Proprietary
Next-generation information
technology - Artificial
intelligence (“ AI”) - AI
solutions: the design and
provision of AI solutions
used in different industry
verticals
ProteinGPT Large molecule design
and antibody drug
discovery
A generative algorithmic drug and new materials design tool, which can be applied in (i)
generation of binder proteins given a specific target protein sequence, (ii) generation of
antibody libraries according to specific pre-set criteria, and (iii) optimization of certain
antibodies given specific improvement requirements. ProteinGPT has been upgraded by
incorporating LLM into its algorithms.
See “Business—Our Technologies and Closed-loop Integrated Technology Platform—Our
Advanced Generative AI Capabilities—Protein Design.”
Self-developed since 2022
Proprietary
Next-generation information
technology - Artificial
intelligence (“ AI”) - AI
solutions: the design and
provision of AI solutions
used in different industry
verticals
1. Quantum physics-anchored AI technology.
SUMMARY
–1 4–


--- page 24 ---
Technologies Platform Applications Functions Origins and Ownership Acceptable Sectors
XupremAb
(including
Xtalfold and
XpeedPlay)
Antibody drug
discovery
Contains different critical functions across the antibody drug discovery process, including
AI-powered hybridoma, AI-powered repertoire NGS discovery, AI-powered phage display, de
novo design, super humanization, AI-powered affinity modulation, developability assessment
and optimization, bispecific design, and ADC design.
XtalFold is an antigen-antibody complex structure prediction algorithm with unprecedented
probability and accuracy. XpeedPlay is an AI-powered phage display platform, capable of
generating hit antibodies at ultra-high speed.
See “Business—Our Drug Discovery Solutions—Antibody Discovery.”
Self-developed since 2021
Proprietary
Next-generation information
technology - Artificial
intelligence (“ AI”) - AI
solutions: the design and
provision of AI solutions
used in different industry
verticals
Quantum physics-based
computation
2
XFF Drug discovery Next-generation general molecular force field, designed for global optimization of design
parameters.
See “Business—Our Technologies and Closed-loop Integrated Technology Platform—Our
Quantum Physics-based Computation Capabilities—Force Field.”
Jointly-developed with Pfizer
since 2018
Joint ownership
N/A
XFEP Drug discovery An AI-powered, high accuracy and high-throughput binding affinity prediction platform, designed
to evaluate the binding affinity between candidate molecules and their biological target at scale.
See “Business—Our Technologies and Closed-loop Integrated Technology Platform—Our
Quantum Physics-based Computation Capabilities—Binding Affinity and Pose Prediction.”
Self-developed since 2018
Proprietary
N/A2. AI-powered quantum physics-based computation.
SUMMARY
–1 5–


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Technologies Platform Applications Functions Origins and Ownership Acceptable Sectors
XPose Drug discovery A binding pose prediction platform, which is able to combine the advantages of different
sampling and evaluation algorithms to predict the binding pose of small molecule target-ligand
more accurately.
See “Business—Our Technologies and Closed-loop Integrated Technology Platform—Our
Quantum Physics-based Computation Capabilities—Binding Affinity and Pose Prediction.”
Self-developed since 2021
Proprietary
N/A
XtalCSP Solid-state R&D A crystal structure prediction platform, which is equipped with a global searching algorithm and
covers all theoretical stable forms. XtalCSP is experiment independent, and can cross-validate
the experiments and de-risk the polymorphic system.
See “Business—Our Technologies and Closed-loop Integrated Technology Platform—Our
Quantum Physics-based Computation Capabilities—Crystal Structure Prediction.”
Self-developed since 2015
Proprietary
N/A
Automation
3 ChemPlus Solid-state R&D and
automated chemical
synthesis
An AI-powered automatic solid sampling robot, enabling smart parameter adjustment and
supporting data tracking throughout the process. ChemPlus provides flexible, high-throughput
processing of a wide range of solid samples.
See “Business—Our Future Development—Intelligent Automation.”
Self-developed since 2022
Proprietary
Advanced hardware and
software - Robotics and
automation - Robot
technology: the engineering
of robots, computer software
and machines for the
improved performance of
tasks and/or automation
processes
See “Business—Overview—Our Mutually Informing and Reinforcing In Silico Tools and Wet Lab” for details regarding the functions of our
technology platforms.
3. AI-powered automation technology.
SUMMARY
–1 6–


--- page 26 ---
OUR STRENGTHS
We believe that we have the following competitive strengths:
 A globally leading quantum physics-based, AI-powered drug and material science
R&D platform in terms of technological advantages
 Quantum physics-based, AI-powered, and robotics-driven integrated technology
platform
 A suite of well-known customers and collaborators as well as reputable investors
 Meaningful value to our customers and collaborators and synergies within our
ecosystem
 Our visionary senior management team and talented key employees with scientific
expertise
OUR MARKET OPPORTUNITIES
We primarily operate in the drug discovery and solid-state R&D service markets, and plan
to continue to expand our business to cover automation and material science, leveraging our
established technologies, including quantum physics-based computation, AI, high performance
cloud computing, and standardized and automated wet lab capabilities. Driven by the efficient,
time-saving, low cost, and accurate new technologies, the markets we operate and plan to
operate in are expected to grow significantly, according to Frost & Sullivan.
The global drug and material science R&D market has grown steadily in recent years, and
is expected to further grow in the future. Although some regions, such as the U.S. and the UK,
have been ahead of the others in adopting new technologies, regulating, and encouraging the
drug and material science R&D, driven by technological advancement, robust governmental
support, and strategic emphasis on fostering innovation, China’s drug and material science
R&D market is also expected to grow rapidly and significantly. As a leader in the AI-powered
drug R&D industry and as we have been strategically focusing on material science R&D since
2023, we believe that we will benefit from the significant market opportunities globally and in
China. In addition, we plan to devote more resources internationally, particularly in the U.S.
and Europe, to further expand our global footprint.
In particular, (i) the projected size of global drug R&D outsourcing service market for
drug discovery is expected to increase at a CAGR of 14.9% from US$12.3 billion in 2023 to
US$32.5 billion in 2030, and the projected size of drug R&D outsourcing service market for
drug discovery in China is expected to increase at a CAGR of 19.6% from US$3.5 billion in
2023 to US$12.2 billion in 2030; (ii) the projected size of the global solid-state R&D service
market is expected to increase at a CAGR of 27.7% from US$3.8 billion in 2023 to US$20.9
billion in 2030, and the projected size of the solid-state R&D service market in China is
expected to increase at a CAGR of 32.1% from US$0.8 billion in 2023 to US$5.9 billion in
2030; (iii) the projected size of the global automated R&D lab market is expected to increase
at a CAGR of 39.6% from US$5.9 billion in 2023 to US$60.7 billion in 2030, and the projected
size of the automated R&D lab market in China is expected to increase at a CAGR of 39.6%
from US$1.2 billion in 2023 to US$17.4 billion in 2030; and (iv) the projected global material
science R&D expenditure is expected to increase at a CAGR of 12.8% from US$76.3 billion
in 2023 to US$177.9 billion in 2030, and the projected material science R&D expenditure in
China is expected to increase at a CAGR of 18.5% from US$17.8 billion in 2023 to US$58.5
billion in 2030, according to Frost & Sullivan.
SUMMARY
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OUR GROWTH STRATEGIES
We plan to implement the following growth strategies:
 Enhance our service capabilities and expand our service offerings in the
biotechnology and pharmaceutical industries and beyond
 Advance the science underpinning our integrated technology platform
 Broaden customer base, and deepen relationships with customers and collaborators
and enable cross-selling
 Create more value within our ecosystem, and further grow our business through
global expansion and selective mergers and acquisitions
SIGNIFICANT COOPERATIONS AND COLLABORATIONS
We have formed several strategic cooperations and collaborations with leading global
biotechnology and pharmaceutical conglomerates and research institutions on the R&D of
novel technologies, advanced discovery platform, and drug candidates with huge unmet
medical needs. We believe that these strategic cooperations and collaborations are testament to
our market leadership, technological capabilities, and prospect. See “Business—Significant
Cooperations and Collaborations” for details.
OUR CUSTOMERS AND SUPPLIERS
Our Customers and Suppliers
Our customers comprise (i) ordinary customers to which we provide solutions and charge
service fees, (ii) collaborators with which we jointly work on various therapeutic targets and
share economic interests, and (iii) collaborator-investees, which we invest in and provide
solutions to. For details regarding our collaborators and collaborator-investees, see
“Business—Our Drug Discovery Solutions—Strategic Collaborations.” During the Track
Record Period, our customers consisted primarily of China- and U.S.-based biotechnology and
pharmaceutical companies. The revenue generated from our five largest customers in 2021,
2022 and 2023 was RMB38.8 million, RMB66.1 million and RMB63.3 million, respectively,
representing approximately 61.8%, 49.6% and 36.3% of our total revenue in the same years,
respectively.
We had 75, 120 and 187 customers in 2021, 2022 and 2023, respectively. We believe that
our cutting-edge technologies, strong R&D capabilities, and cost-efficient solutions and
services enable us to retain repeat customers, including Pfizer, Johnson & Johnson, Chia Tai
Tianqing Pharmaceutical Group Co., Ltd. (ʮ̡)( “ CTTQ
Pharma ”), Daewoong Pharmaceutical Co., Ltd. (“ Daewoong Pharma ”), and Merck KGaA,
Darmstadt, Germany. Our customer retention rate was approximately 67.5%, 51.4% and 64.9%,
respectively, in 2021, 2022 and 2023.
SUMMARY
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The table below sets forth the number of programs which generated revenue for our
different business segment for the years indicated:
Y ear ended December 31,
2021 2022 2023
Drug discovery solutions 18 47 81
Intelligent automation solutions 168 246 423
Total 186 293 504
The table below sets forth the movement of the total number of our customers (including
collaborators and collaborator-investees) which contributed revenue for the years indicated:
Y ear ended December 31,
2021 2022 2023
At the beginning of the year (1) 43 75 120
Addition 63 82 105
Cessation due to completion of
programs 8 26 33
Less:
Existing customers without revenue
contribution in the relevant year 23 11 5
As of the end of the year
(1) 75 120 187
Note:
(1) Including overlapping customers in both business lines of drug discovery solutions and intelligent
automation solutions.
SUMMARY
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The table below sets forth our revenue by type of customers and business segment for the
years indicated:
Y ear Ended December 31,
2021 2022 2023
RMB’000
Drug discovery solutions
Collaborator and collaborator-investee
customers 38,186 79,379 78,955
Customers 1,160 8,287 8,773
Subtotal 39,346 87,666 87,728
Intelligent automation solutions
Collaborator and collaborator-investee
customers 3,014 807 4,575
Customers 20,439 44,880 82,117
Subtotal 23,453 45,687 86,692
Total 62,799 133,353 174,420
The table below sets forth the number of drug discovery solutions and collaboration
programs which generated revenue for the years indicated:
Y ear Ended December 31,
2021 2022 2023
Drug discovery collaboration 10 31 36
Drug discovery solutions 81 64 5
Total 18 47 81
During the Track Record Period, our suppliers for our main business operations consisted
primarily of R&D equipment suppliers and R&D service providers. Our suppliers also included
property owners, renovation services providers and travel management services providers
during the Track Record Period. Purchases from our five largest suppliers in 2021, 2022 and
2023 amounted to RMB116.2 million, RMB77.1 million and RMB122.7 million, respectively,
representing approximately 33.7%, 17.6% and 27.1% of our total purchases in the same years,
respectively.
SUMMARY
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Pricing
We price our solutions and services considering a variety of factors, such as our contract
fulfillment costs, the value of our solutions or services to the customer, the scarcity of our
solutions or services in the market, the urgency and certainty of the delivery of our solutions
or services, our delivery capacity, competition in the market, market’s willingness to pay, the
overall market condition, and competitors’ pricing strategies. Taking these factors into account,
we may adopt either cost-driving pricing or target-return pricing for different solutions or
services. For further details regarding pricing, see “Business—Business Development and
Marketing—Pricing” and “Financial Information—Material Accounting Policy Information
and Estimates—Revenue Recognition.”
RESEARCH AND DEVELOPMENT
Our R&D team possesses multi-disciplinary expertise and is led by our three Co-
founders, Dr. Wen, Dr. Ma, and Dr. Lai, who gained postdoctoral trainings at MIT. Dr. Wen,
our Co-founder, Chairman of the Board and executive Director, leads our global strategies and
contributes to our cooperation with world-leading research institutes and biotechnology and
pharmaceutical companies. Dr. Wen is a quantum physicist with over 14 years of research
experience in the field of computational physics and quantum chemistry, and has published 36
papers with more than 2,100 citations. Dr. Ma, our Co-founder, Chief Executive Officer and
executive Director, has extensive experience in quantum information and numerical simulation.
Dr. Lai, our Co-founder, Chief Innovation Officer and executive Director, has extensive
research experience in AI and quantum physics applications in pharmacology.
During the Track Record Period, we invested significant amounts of resources, financial
or otherwise, in our R&D activities, and expect to continue to focus our R&D upgrade and
innovations. In 2021, 2022 and 2023, our R&D expenditure was RMB214.4 million,
RMB359.0 million and RMB480.3 million, accounting for approximately 52.4%, 53.5% and
49.8% of our total operating expenditure in the same years, respectively.
INTELLECTUAL PROPERTY
Our commercial success depends, in large part, on our ability to obtain, maintain and
defend our patents and other IP portfolios. We rely upon unpatented trade secrets, confidential
know-how, and continuing technological innovation to develop, strengthen, and maintain our
competitive position. We also file patent applications that cover our key software and
programs, AI-, calculation-, and automation-related methods, systems and technologies, among
others, that underlie our integrated technology platform and our drug discovery programs, to
secure and protect our IP rights. As of December 31, 2023, we were granted 163 patents,
including 12 in the U.S., 147 in China, two in Japan, and two in Taiwan, and filed 312 patent
applications, including 24 in the U.S., 210 in China, eight in Taiwan, four in Europe, and 66
under the Patent Cooperation Treaty (“ PCT”), based on which we plan to file for applications
in the U.S., China and other jurisdictions, as well as other priority PCT applications. As of
December 31, 2023, of all the 475 patents and patent applications, 472 were internally
developed and three were co-developed and co-owned under research programs with academic
SUMMARY
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institutions. Each of the three co-owners has full title to such patents, and there are no
contractual tenure and material payment obligations associated with such co-owned patents.
Our patents are expected to expire between 2031 and 2043, absent any adjustments or
extensions. We seek to protect our proprietary information, in part, using confidentiality
agreements with customers, scientific advisors, service providers, employees, and consultants,
and invention assignment agreements with our employees and selected consultants, scientific
advisors, and collaborators. For more details, see “Business—Intellectual Property.”
During the Track Record Period and up to the Latest Practicable Date, we had not been
involved in any material proceedings in respect of IP right infringement claims against us or
initiated by us. However, there are risks if we fail to protect our IP rights in the future. For
details, see “Risk Factors—Risks Related to Our Intellectual Property.”
COMPETITIVE LANDSCAPE
The global markets for drug and material science R&D and solid-state R&D are rapidly
evolving and subject to intense competition as a result of technology innovation and shifting
customer needs. Given our presence in China and globally, we face potential competition from
many different sources both locally and globally, while the solutions and applications offered
by our competitors, including both AI-powered and traditional drug discovery solutions
providers, vary in size, breadth, and scope.
Our proprietary integrated in silico and wet lab platform, technical expertise and
technology innovation provide us with significant competitive advantages over existing and
new entrants. According to Frost & Sullivan, we are one of the leaders in the adoption of
quantum physics-based computation, AI, and automation technologies in drug R&D. While we
compete competently on the basis of these factors, many emerging and established companies
have also built upon their technologies and competencies in the business areas we operate.
For our drug discovery solutions, we face competition from many sources, including
major pharmaceutical companies, specialist biotechnology and pharmaceutical companies,
technology companies, academic institutions and government agencies, and public and private
research institutions. Some of our competitors possess well-established capabilities in drug
R&D and have long-standing relationships with many of our existing and potential
collaborators and customers. However, only a few competitors possess both dry lab and wet lab
capabilities, like us, who are more capable of further accelerating the drug discovery process.
In addition, according to Frost & Sullivan, some CROs have begun to purchase standard
third-party AI tools to conduct drug R&D; however, most CROs principally focus on drug
development, such as clinical research and trials, while we focus on drug discovery, which is
an earlier stage of drug R&D.
For our solid-state R&D, we face competition from specialized solid-state CROs, other
large CROs, AI-focused CROs, as well as pharmaceutical companies that develop solid-state
R&D internally. However, only a few competitors incorporate both in silico prediction and wet
lab experiment, like us, which are capable of offering more efficient solid-state R&D services.
Although the current market is still dominant by the traditional manual method providers, like
SUMMARY
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specialized solid-state CROs and other large CROs, the market share of AI-focused service
providers is expected to grow due to the advantages of AI-based solid-state R&D services in
terms of higher R&D efficiency and better quality.
We believe the following capabilities differentiate us from our competitors:
 our AI capabilities anchored by quantum physics calculations;
 our quantum physics-based first-principles calculation supported by high
performance cloud computing;
 our flexible and extensive AI capabilities backed by our various multi-modality,
customer-driven, scenario-based algorithms and models;
 clusters of intelligent robot scientists with AI brain driving wet lab automation,
scalability, standardization and high throughput;
 iterative and mutually informing and reinforcing feedback loop between dry lab and
wet lab;
 accumulated meaningful and extensive data assets generated through synergistic dry
lab and wet lab; and
 our domain expertise, creative thinking, and entrepreneurial mindset.
See “Business—Competition.”
RISK FACTORS
Although we generated meaningful revenue during the Track Record Period, we are a
Pre-Commercial Company seeking to list on the Main Board of the Stock Exchange under
Chapter 18C of the Listing Rules. There are certain risks and uncertainties involved in our
operations and the investing in our Offer Shares, some of which are beyond our control. We
have categorized these risks and uncertainties into: (i) risks related to our research and
development, (ii) risks related to the commercialization of our solutions and services, (iii) risks
related to our operations, (iv) risks related to our intellectual property, (v) risks related to our
financial prospects and need for additional capital, (vi) risks related to doing business in the
jurisdictions we operate, and (vii) risks related to the Global Offering.
SUMMARY
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If any of such risks and uncertainties materializes, the market price of our Shares could
decline, and you may lose all or part of your investments. See “Risk Factors” for details of our
risk factors, which we urge you to read in its entirety before making an investment in our
Shares. Some of the major risks that we face include:
 Our commercial success depends on our closed-loop integrated technology platform
and technological capabilities, and their acceptance by our customers and
collaborators. Failure to maintain our technological advantages or gain market
acceptance of our platform or technology may have a material and adverse impact
on our commercial success.
 The industries that we operate in are characterized by constant changes. If we are not
able to upgrade, enhance or innovate our technologies and solutions, our business
could be adversely affected.
 We intend to continue investing significantly in R&D, which may adversely impact
our profitability and operating cash flow in the short-term and may not generate the
results we expect to achieve. If our key R&D employees terminate their
relationships with us or develop relationships with a competitor, our R&D activities
could be adversely affected. If our R&D results are inaccurate or incomplete, our
business and reputation could be harmed.
 We have a limited operating history and limited experience in the commercialization
of our solutions and services, which may make it difficult to evaluate our current
business and predict our future performance.
 Our historical performance may not be indicative of our future growth, and we may
not be able to sustain similar growth or manage our growth in the future.
 The size of our addressable markets and the demand for our solutions and services
may not increase as rapidly as we anticipate, which could materially and adversely
affect our business and prospects. In addition, the markets in which we participate
are competitive, and if we do not compete effectively, our business and results of
operations could be adversely affected.
 The markets in which we participate are competitive, and if we do not compete
effectively, our business and results of operations could be adversely affected.
 If we fail to retain existing customers or attract new customers, our business,
financial condition and results of operation will suffer.
 Our commercial success depends significantly on our ability to operate without
infringing upon, misappropriating or otherwise violating the IP rights of third
parties.
SUMMARY
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 We may become involved in lawsuits to protect or enforce our patents or other IP ,
which could be expensive, time consuming and unsuccessful, and any unfavorable
outcome from such litigation could limit our R&D activities and/or our ability to
commercialize our solutions and services.
OUR CO-FOUNDERS
As of the date of this prospectus, our Co-founders, namely Dr. Wen, Dr. Ma and Dr. Lai,
through their aggregated interests in 13.45% of the total number of issued Shares, are
collectively entitled to control the exercise of 60.68% of the voting rights at our general
meetings.
Immediately following the completion of the Global Offering (assuming the Over-
allotment Option is not exercised and no Shares will be issued under the ESOPs), the
Co-founder Group, namely Dr. Wen, Dr. Ma, Dr. Lai, QuantumPharm Holdings, SSBL
Holdings Limited, Crete Helix, Jian Guo Pai, SeveningBAlpha and Sevening B Holdings, will
control 17.25% of the voting power at our general meetings and will continue to be the group
of Shareholders with the largest voting power at our general meetings.
For further details, see “Relationship with Our Co-founders.”
VOTING PROXY ARRANGEMENTS
Pursuant to the powers of attorney dated July 19, 2021 executed by (i) Dr. Ma, Jian Guo
Pai and Crete Helix; and (ii) Dr. Lai, Sevening B Holdings and SeveningBAlpha (collectively,
the “ Co-founder Grantors ”), QuantumPharm Holdings is unconditionally, indefinitely and
irrevocably authorized and appointed to exercise all the voting rights attached to the Shares
held by them at any time and from time to time which they are entitled to under the laws of
the Cayman Islands and the Memorandum and the Articles on all matters submitted to a vote
of Shareholders at a meeting of Shareholders or through the solicitation of a written consent
of Shareholders, except for any matter the outcome of the vote on which will
disproportionately, materially and adversely affect the Co-founder Grantors, as compared to
QuantumPharm Holdings or any other Shareholder. The powers of attorney shall be valid from
the date of execution for an indefinite term and the terms and arrangements under the powers
of attorney will not be affected upon the completion of the unwinding of the WVR Structure.
The Co-founder Grantors believe that by authorizing QuantumPharm Holdings to exercise their
voting rights on their behalf, the voting proxy arrangement allows the Co-founders to
consolidate and maintain the Co-founder Group’s overall control over more than 50% of the
voting rights of our Company prior to the Listing, which ensures that the Co-founders are in
a position to continually contribute to our Company with their vision and leadership, and
benefit the overall growth, strategic planning, decision-making process and prospects of our
Group as a whole, thereby leading to better investment return to all the Shareholders including
the Co-founders.
SUMMARY
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PRE-IPO INVESTMENTS
We completed eight rounds of Pre-IPO Investments and had raised funds of
approximately US$732 million. See “History, Development and Corporate Structure—Major
Corporate Developments of Our Group” and “History, Development and Corporate
Structure—Pre-IPO Investments” for the identities of Pre-IPO Investors and further details
regarding Pre-IPO Investments.
SHARE INCENTIVE SCHEMES
As of the Latest Practicable Date, we had one share incentive scheme subsisting, being
the Pre-IPO ESOP , and had granted outstanding options to purchase an aggregate of
298,041,143 underlying Shares, representing 8.75% of the total number of issued Shares
immediately following the completion of the Global Offering (assuming the Over-allotment
Option is not exercised and no Shares will be issued under the ESOPs), to a total of 208
grantees. All Shares underlying the outstanding options are held by QuantumPharm Roc, a
shareholding platform for the Pre-IPO ESOP which holds such Shares for the benefit of the
grantees. Upon the exercise of the options, for the purpose of settlement, QuantumPharm Roc
is required to transfer the relevant Shares held by it to the grantees.
For the purpose of the Listing, we have adopted the Post-IPO Share Option Scheme and
the Post-IPO RSU Scheme, which will take effect upon the Listing and will replace the Pre-IPO
ESOP in its entirety. The principal terms of the ESOPs are summarized in “Appendix
IV—Statutory and General Information—D. Share Incentive Schemes.”
For further details, see “History, Development and Corporate Structure—Share Incentive
Schemes.”
PREVIOUS LISTING ATTEMPT
In May 2021, we considered the possibility of seeking an initial public offering in the
United States (the “ Contemplated U.S. Listing ”). As part of the process of the Contemplated
U.S. Listing, we submitted the listing application documents on a confidential basis to the SEC
for its review. In light of the introduction of the listing regime under Chapter 18C of the Listing
Rules, our Directors decided to pursue a listing in Hong Kong instead. Based on the due
diligence conducted by the Sole Sponsor, nothing material has come to the attention of the Sole
Sponsor in relation to the Contemplated U.S. Listing that would cast doubt on the Company’s
suitability for listing in Hong Kong or that should be brought to the attention of the Stock
Exchange or potential investors. For further details, see “History, Development and Corporate
Structure—Previous Listing Attempt.”
SUMMARY
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SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables set forth summary financial data from our consolidated financial
information for the Track Record Period, extracted from the Accountant’s Report set out in
Appendix I. Y ou should read this summary in conjunction with our consolidated financial
information included in the Accountant’s Report in Appendix I, including the accompanying
notes, and the information set forth in “Financial Information.”
Summary of Consolidated Statements of Profit or Loss
Y ear ended December 31,
2021 2022 2023
RMB’000
%o f
revenue RMB’000
%o f
revenue RMB’000
%o f
revenue
Revenue 62,799 100.0 133,353 100.0 174,420 100.0
R&D expenses (212,603) (338.5) (358,952) (269.2) (480,664) (275.6)
General and administrative expenses (137,035) (218.2) (204,401) (153.3) (295,986) (169.7)
Contract fulfillment costs (30,014) (47.8) (67,266) (50.4) (126,178) (72.3)
Selling and marketing expenses (27,413) (43.7) (40,427) (30.3) (62,482) (35.8)
Impairment losses on financial assets (673) (1.1) (874) (0.7) (217) (0.1)
Other income 8,625 13.7 21,367 16.0 27,513 15.8
Other gains/(losses), net 36,882 58.7 (8,114) (6.1) 41,282 23.7
Operating loss (299,432) (476.8) (525,314) (393.9) (722,312) (414.1)
Finance income 14,055 22.4 50,478 37.9 102,693 58.9
Finance expenses (3,575) (5.7) (5,746) (4.3) (9,575) (5.5)
Finance income, net 10,480 16.7 44,732 33.5 93,118 53.4------- -------- -------- -------- -------- --------
Changes in fair value of CRPS and other
financial liabilities (1,843,883) (2,936.2) (957,799) (718.2) (1,275,165) (731.1)
Share of net losses of investments accounted for
using equity method (4,497) (7.2) (236) (0.2) (1,964) (1.1)
Loss before income tax (2,137,332) (3,403.4) (1,438,617) (1,078.8) (1,906,323) (1,092.9)
Income tax expense ––––––
Loss for the year (2,137,332) (3,403.4) (1,438,617) (1,078.8) (1,906,323) (1,092.9)
Loss for the year attributable to:
Equity holders of the Company (2,137,288) (3,403.4) (1,438,507) (1,078.7) (1,914,384) (1,097.6)
Non-controlling interests (44) (0.1) (110) (0.1) 8,061 4.6
SUMMARY
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Non-IFRS Measure
In evaluating our business, we consider and use adjusted net loss, a non-IFRS financial
measure, to supplement the review and assessment of our operating performance. We believe
such non-IFRS measure facilitates comparisons of our operating performance from period to
period by eliminating the potential impact of certain items. We believe that the measure
provides useful information to investors in understanding and evaluating our consolidated
results of operations in the same manner as they help our management. The use of the
non-IFRS measure has limitations as an analytical tool, and you should not consider them in
isolation from, as a substitute for analysis of, or superior to, our results of operations or
financial conditions as reported under IFRS. In addition, the non-IFRS financial measure may
be defined differently from similar terms used by other companies, and may not be comparable
to other similarly titled measures used by other companies.
We define adjusted net loss (non-IFRS measure) as net loss adjusted by adding back (i)
changes in fair value of CRPS and other financial liabilities, (ii) share-based compensation
expenses and (iii) listing expenses. Share-based compensation expenses mainly represent
expenses incurred in connection with our Pre-IPO ESOP . In addition, our other financial
liabilities, being our Series C Warrants issued in 2020, were converted into CRPSs in 2021.
Upon completion of Listing, all of our CRPS will be automatically converted into Ordinary
Shares and we do not anticipate recording further gains or losses related to valuation changes
in these instruments after the Listing. These two reconciling items are non-cash items. Listing
expenses are expenses related to the Global Offering. The following table sets forth our
adjusted net loss for the years indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Net loss for the year (2,137,332) (1,438,617) (1,906,323)
Add:
Changes in fair value of CRPS and other
financial liabilities 1,843,883 957,799 1,275,165
Share-based compensation expenses 22,482 43,384 88,426
Listing expenses – – 20,575
Adjusted net loss
(non-IFRS measure) (270,967) (437,434) (522,157)
SUMMARY
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The table below sets forth our revenue by business segment for the years indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000, except for %)
Drug discovery solutions 39,346 62.7 87,666 65.7 87,728 50.3
Intelligent automation solutions 23,453 37.3 45,687 34.3 86,692 49.7
Solid-state R&D services 23,296 37.1 27,756 20.8 42,184 24.2
Automated chemical synthesis services 55 0.1 17,931 13.4 43,715 25.1
Others 102 0.2 – – 793 0.5
Total 62,799 100.0 133,353 100.0 174,420 100.0
Our total revenue increased at a CAGR of 66.7% during the Track Record Period, among
which our revenue from drug discovery solutions increased at a CAGR of 49.3% and our
revenue from intelligent automation solutions increased at a CAGR of 92.3%. We experienced
strong revenue growth during the Track Record Period from both business lines, benefiting
from, among others, our quality service and customer acquisition and retention efforts which
have contributed to the increase in the number of our customers, number of transactions and
our high customer retention rate. Meanwhile, we recorded fair value loss of CRPS and other
financial liabilities throughout the Track Record Period driven by the increase in the valuation
of our Company continuously, while our R&D expenses, general and administrative expenses,
contract fulfillment costs and selling and marketing expenses increased as our business grew,
we recorded net losses during the Track Record Period. See “Financial
Information—Description of Selected Items from Consolidated Statements of Profit or Loss”
for more detailed discussions in this regard.
We believe that we possess sufficient working capital for our business operations and
expansion, including sufficient cash and liquidity assets, after taking into account the financial
resources available to us. In addition, we have entered into two strategic collaboration
agreements with reputable financial institutions, including two commercial banks in China.
Our collaboration partners will provide financial services and support to us for our business
operations and expansion. In particular, each of the two commercial banks intends to grant us
banking facilities of up to RMB5 billion, which we believe will further strengthen our working
capital sufficiency. We have also formed a concrete plan to achieve the revenue requirement for
a Commercial Company and to turn around our loss-making position in the future, details of
which are set forth in “Business—Commercialization and Business Sustainability.”
SUMMARY
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Summary of Consolidated Balance Sheets
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Current assets 3,919,564 3,596,665 2,945,363
Non-current assets 462,207 719,441 1,060,338
Total assets 4,381,771 4,316,106 4,005,701
Equity
Equity attributable to equity holders of the
Company (3,609,356) (5,327,671) (7,267,409)
Non-controlling interests 5,388 17,878 26,167
Total deficits (3,603,968) (5,309,793) (7,241,242)
Current liabilities 160,868 197,645 297,376
Non-current liabilities 7,824,871 9,428,254 10,949,567
Total liabilities 7,985,739 9,625,899 11,246,943
Net current assets 3,758,696 3,399,020 2,647,987
Total deficits and liabilities 4,381,771 4,316,106 4,005,701
Our net current assets gradually decreased from RMB3,758.7 million as of December 31,
2021 to RMB3,399.0 million as of December 31, 2022 and RMB2,648.0 million as of
December 31, 2023, primarily due to the decrease of our ready-for-use capital, being the sum
of cash and cash equivalents, current portion of term deposits, current portion of financial
assets at fair value through profit or loss (“ FVTPL ”) and restricted cash, since we were still
loss-making during the Track Record Period, combined with the impact of an increase of our
contract liabilities and lease liabilities as our business grew. See “Financial Information—Net
Current Assets” for details regarding our net current assets.
SUMMARY
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Our total deficits increased from RMB3,604.0 million as of December 31, 2021 to
RMB5,309.8 million as of December 31, 2022, primarily due to our net loss of RMB1,438.6
million and negative currency translation differences of RMB456.8 million in 2022. Our total
deficits increased to RMB7,241.2 million as of December 31, 2023, primarily due to our net
loss of RMB1,906.3 million.
As of December 31, 2021, 2022 and 2023 and April 30, 2024, we had liabilities in relation
to CRPS of RMB7,701.3 million, RMB9,320.8 million, RMB10,780.3 million and
RMB10,816.1 million, respectively, reflecting our increasing valuation. All the CRPS which
were accounted for as liabilities will be converted into Ordinary Shares and accounted as an
increase in equity upon the Listing such that our net liabilities position will turn into net assets
position.
Summary of Consolidated Statements of Cash Flows
The following table sets forth a summary of our cash flows for the years indicated:
Y ears ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Net loss (2,137,332) (1,438,617) (1,906,323)
Operating loss before movements in
working capital (273,475) (406,697) (554,099)
Working capital changes 19,729 (22,407) (13,465)
Net cash used in operating activities (253,746) (429,104) (567,564)
Net cash (used in)/generated from
investing activities (70,466) (2,757,786) 735,583
Net cash generated from/(used in)
financing activities 2,476,013 57,988 (25,886)
Net increase/(decrease) in cash and
cash equivalents 2,151,801 (3,128,902) 142,133
Cash and cash equivalents at beginning
of the year 1,430,913 3,523,647 574,219
Effects of exchange rate changes on
cash and cash equivalents (59,067) 179,474 (5,591)
Cash and cash equivalents at end of
the year 3,523,647 574,219 710,761
SUMMARY
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We recorded net cash used in operating activities of RMB253.7 million, RMB429.1
million and RMB567.6 million in 2021, 2022 and 2023, respectively. Our increased net cash
used in operating activities during the Track Record Period was primarily due to our increased
operating expenses, reflecting the continuous upgrade and innovation of our technological
capabilities and our rapid business expansion.
See “Financial Information—Liquidity and Capital Resources—Cash Flows” for details
regarding our cash flows.
Key Financial Ratios
The following table sets forth certain of our key financial ratios as of the dates or for the
years indicated:
Y ear ended December 31,
2021 2022 2023
Revenue growth rate (1) 76.2% 112.3% 30.8%
As of December 31,
2021 2022 2023
Current ratio (2) 24.4 18.2 9.9
Cash ratio (3) 23.9 17.6 9.5
Notes:
(1) Revenue growth rate is calculated by dividing revenue growth for the relevant year by revenue for the
previous year and multiplied by 100%.
(2) Current ratio is calculated by dividing total current assets by total current liabilities as of the year end.
(3) Cash ratio is calculated by dividing the sum of cash and cash equivalents, term deposits, restricted cash,
and current portion of financial assets at FVTPL by total current liabilities as of the year end.
See “Financial Information—Key Financial Ratios” for details regarding the above ratios.
Burn Rate
Our cash burn rate refers to the average monthly aggregate amount of (i) net cash used
in operating activities, (ii) capital expenditures, and (iii) lease payment. Our historical monthly
average cash burn rate was RMB37.1 million, RMB53.0 million and RMB62.2 million in 2021,
2022 and 2023, respectively. We had cash and cash equivalents, current portion of term
deposits, current portion of financial assets at FVTPL and restricted cash of RMB2,827.8
million in aggregate as of December 31, 2023. We estimate that we will receive net proceeds
of approximately HK$941.1 million after deducting the listing expenses payable by us in the
SUMMARY
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Global Offering, assuming no Over-allotment Option is exercised and assuming an Offer Price
of HK$5.53 per Offer Share, being the mid-point of the indicative Offer Price range stated in
this prospectus. Assuming that the average cash burn rate going forward will be similar to the
cash burn rate level in the year ended December 31, 2023, we estimate that our cash and cash
equivalents, current portion of term deposits, current portion of financial assets at FVTPL and
restricted cash as of December 31, 2023 will be able to maintain our financial viability for
approximately 45.5 months or, if we take into account 10% of the estimated net proceeds from
the Global Offering (namely, the portion allocated for our working capital and other general
purposes), approximately 46.9 months or, if we take into account 100% of the estimated net
proceeds (based on the mid-point of the indicative Offer Price) from the Global Offering, for
approximately 59.3 months. See “Financial Information—Working Capital Sufficiency” for
detailed discussion of our bases of assumptions. Our Directors and our management will
continue to monitor our working capital, cash flows, and our business development status.
We have no immediate plan for future financing in the next 12 months after the Listing
for purpose of our commercialization plan as disclosed in this prospectus taking into account
our available cash, proceeds from the Global Offering and based on our cash burn rate.
However, with the continuing expansion of our business and development of our solutions or
services, or if we discover suitable targets for acquisition or business collaboration, we could
not exclude the possibility to require further funding through public or private equity offerings,
debt financing and other sources. We will comply with applicable laws and regulations,
including requirements under the Listing Rules, when we proceed with such financings.
We expect our costs and expenses will continue to increase as our business grows, but we
do not expect such increase to outpace our revenue increase in the foreseeable future.
COMMERCIALIZATION AND BUSINESS SUSTAINABILITY
Commercialization
We believe our commercialization efforts have and will continue to contribute to our rapid
growth in China and globally. Our revenue generated from China accounted for the largest
portion of our total revenue, while according to Frost & Sullivan, the U.S. and Europe still
dominate the biotechnology and pharmaceutical industries and have the largest market shares
in the world. Therefore, to further our growth and commercialize our solutions or services
more efficiently, our short-term commercialization plan is to invest more efforts and
resources to expand our business globally, particularly in the U.S. and Europe, while
maintain our established business in China. Our main commercialization efforts will focus
on scaling our existing business, expanding into more modalities and business
scenarios, and global expansion. See “Business—Commercialization and Business
Sustainability—Commercialization” for detail of our short-term commercialization plan.
SUMMARY
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As of the Latest Practicable Date, we had served more than 300 biotechnology and
pharmaceutical companies and research institutions globally, including 16 of the top 20 global
biotechnology and pharmaceutical companies in terms of revenue in 2022 according to Frost
& Sullivan. In addition, we have been and will continue to explore collaborative opportunities
with global biotechnology and pharmaceutical conglomerates to sustain our growth. For
example, we had well-established long-term relationship with Pfizer and Johnson & Johnson,
which showcases our superiority and demonstrates our prospects.
Path to Commercialization
We primarily provide drug discovery solutions and intelligent automation solutions to
pharmaceutical or biotechnology companies worldwide.
Drug discovery solutions : We enter into contracts for our drug discovery solutions and
drug discovery collaborations, where we receive upfront payments, milestone payments and/or
royalties.
 Drug discovery solutions : We generally receive service fees which are typically
recognized as revenue within one year upon signing of the relevant contracts.
 Drug discovery collaborations : We generally receive around 15% of the contract
value (excluding contingent payments and royalties) as upfront payment upon the
signing of contracts and the remaining will be paid and recognized upon achieving
certain milestones, such as the delivery of desired hits, leads, PCCs or the
completion of toxicity studies. The upfront and milestone payments we receive
under our drug discovery collaborations are typically recognized as revenue within
18 months upon signing of the relevant contracts. Under our drug discovery
collaborations, we may also be entitled to (i) contingent payments, depending on the
development stages of the drug candidates, such as IND and clinical trials, and/or
(ii) single- to low double-digit tiered royalties depending on the levels of the
commercialization revenue of the relevant drugs.
Intelligent automation solutions : We enter into contracts for our solid-state R&D
services and automated chemical synthesis services where we receive service fees.
 Solid-state R&D services : We generally receive an upfront payment upon signing of
contract and a final payment upon completion of the relevant research program. The
payments we receive under our solid-state R&D services are typically recognized as
revenue within six months.
 Automated chemical synthesis services : We generally receive and recognize as
revenue monthly or quarterly payments. The duration of our automated chemical
synthesis contracts in general ranges from half a year to one year.
SUMMARY
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See “Business—Overview—Our Business and Revenue Model” and
“Business—Significant Cooperations and Collaborations—Salient Terms of Our Collaboration
and Cooperations Agreements.”
From time to time, we may also (i) offer our solutions in exchange for equity interests in
our collaborators which are at an early development stage, short of fundings, and have great
growth potential, or (ii) make equity investments in selected collaborators which develop
complementary technologies to ours and who we consider are compatible with our strategic
position. See “Business—Our Drug Discovery Solutions—Strategic Collaborations.”
Robust Program Pipeline and Expected Revenue
We have robust ongoing programs and expect to experience continuous rapid growth in
the near future. In particular, as of the Latest Practicable Date, we had a number of existing
significant collaborations and cooperations in a wide array of industries, including
pharmaceutical, petrochemical, and battery, which are expected to generate significant
revenue. In addition, we were in the process of negotiating various programs for both drug
discovery solutions business and intelligent automation solutions business, as of the same date.
Furthermore, given (i) certain of our contracts, in particular those for our solid-state R&D
services, are typically short term with a contract performance period of less than six months;
(ii) our demonstrated ability during the Track Record Period to secure revenue-generating
contracts throughout the course of a financial year; (iii) our high customer retention rates
during the Track Record Period; and (iv) our success in securing new contracts shortly after the
beginning of 2024 and our plan to continue to allocate resources to securing short term and
other contracts throughout 2024 and beyond, we expect we will be able to enter into more
revenue-generating contracts in the remaining period of 2024.
According to the payment terms of our existing revenue-generating contracts as of
February 29, 2024 (“ Existing Contracts ”), which provide for monthly or quarterly payments,
upfront payments, milestone payments and contingent payments, among others, our total
contract value (excluding potential royalties under our collaboration programs) is not less than
US$280 million (equivalent to HK$2,188 million). In addition, we had contract liabilities of
RMB25.7 million as of December 31, 2023, representing advance payments from our
collaborators/customers for purchases of our solutions and/or services which have not yet been
rendered to the collaborators/customers. Based on the payment schedules as set out in our
Existing Contracts as well as our revenue pattern during the Track Record Period, we expect
that the majority of our revenue to be generated in 2024 would be attributable to contracts
awarded in 2024 rather than to contracts entered into prior to 2024, as our contracts are
generally program-based and in particular, for our solid-state R&D services, are typically short
term with a contract performance period of less than six months. Taking into account our
Existing Contracts and other contracts we expect to enter into in 2024, we believe that our
revenue in 2024 (“ 2024 Revenue ”) is expected to be largely similar to the revenue threshold
of a Commercial Company, and we expect that our revenue in 2025 would achieve such
revenue threshold, assuming that there will be at least a low level of growth in our revenue in
2025. In particular, we expect that a minority of our 2024 Revenue is to be derived from our
Existing Contracts (“ High Confidence Revenue ”), of which approximately 32.1% is expected
SUMMARY
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to be generated from our drug discovery solutions business and approximately 67.9% is
expected to be generated from our intelligent automation solutions business. We believe that
our High Confidence Revenue will be achieved, as it mostly represents upfront payments and
monthly or quarterly payments, which will be recognized by lapse of time. In addition, we
expect that a majority of our 2024 Revenue is to be derived from both our Existing Contracts
and other contracts to be entered into in 2024 (“ Expected Revenue ”), subject to the realization
and satisfaction of all related assumptions and conditions (as further described below), of
which approximately 54.3% is expected to be generated from our drug discovery solutions
business and approximately 45.7% is expected to be generated from our intelligent automation
solutions business. Our Expected Revenue will be derived from (i) expected contracts and (ii)
milestone payments under our Existing Contracts, which will be recognized upon achieving
certain milestones, such as delivery of desired hits, leads, PCCs or the completion of toxicity
studies.
Fast-growing Industry and V ast Market Opportunities
As a leader in the AI-powered drug R&D industry and as we have been strategically
focusing on material science R&D since 2023, we believe that we will benefit from the
significant market opportunities globally and in China, leveraging our technological
advantages, prominent and broad customer base, continuous efforts in business development
and commercialization, and a visionary management team. According to Frost & Sullivan, drug
and material science R&D, featured by the combination of AI and robotic automation, is
expected to flourish in 2024 and onwards.
In particular, (i) the projected size of global drug R&D outsourcing service market for
drug discovery is expected to increase at a CAGR of 14.9% from US$12.3 billion in 2023 to
US$32.5 billion in 2030; (ii) the projected size of the global solid-state R&D service market
is expected to increase at a CAGR of 27.7% from US$3.8 billion in 2023 to US$20.9 billion
in 2030; (iii) the projected size of the global automated R&D lab market is expected to increase
at a CAGR of 39.6% from US$5.9 billion in 2023 to US$60.7 billion in 2030; and (iv) the
projected global material science R&D expenditure is expected to increase at a CAGR of
12.8% from US$76.3 billion in 2023 to US$177.9 billion in 2030, according to Frost &
Sullivan.
Financial Viability
We have experienced rapid growth since our inception. During the Track Record Period,
our revenue increased significantly from RMB62.8 million in 2021 to RMB133.4 million in
2022 and further to RMB174.4 million in 2023, representing a CAGR of approximately 66.7%.
Several of the drug discovery programs developed for our customers and our drug discovery
collaboration programs have achieved remarkable progress, entering into the IND-enabling or
IND-submission stage. The substantial increase in our revenue and our rapid business growth
during the Track Record Period demonstrate our commercialization capability and business
sustainability. We believe that due to our development strategies and commercialization efforts
and plans, our revenue will continue to grow in consistency with our track record.
SUMMARY
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Based on our development strategies, commercialization plans and the above analysis, we
anticipate that we will be able to qualify as a Commercial Company by 2025. However, our
anticipation to qualify as a Commercial Company by 2025 depends on our reasonable estimate
and belief as of the Latest Practicable Date and various assumptions, many of which are beyond
our control, including but not limited to the following assumptions: (i) there will be no material
delays or obstacles to our commercialization plan and development strategies; (ii) we will be
able to deliver our solutions and services in the manner and quality anticipated; (iii) we will
be able to fulfill the contractual undertakings relating to our solutions and services and ensure
they are performed in accordance with the relevant contractual terms; (iv) our counterparties
will perform their obligations and cooperate with us in accordance with the relevant contractual
terms; (v) our counterparties can successfully develop and commercialize the drug candidates
under the relevant contracts, including completion of clinical trials, obtaining of regulatory
approvals, and manufacturing and marketing of the relevant drug candidates in a timely and
cost-efficient manner; (vi) our operations and our business relationships with major customers
and collaborators, suppliers and other business partners will not be materially affected; (vii)
there will be no regulatory regime undermining our business; (viii) there will be no material
changes in the conditions under which we operate; (ix) there will be no other material adverse
effect that would undermine our business and financial performance; (x) our business and
financial performance will be better in 2025 and our expected revenue in 2025 will be growing
at a pace similar to or higher than that during the Track Record Period; and (xi) there will be
no occurrence of any event as disclosed in “Risk Factors.” See “Risk Factors—Risks Related
to the Commercialization of Our Solutions and Services” for relevant risks associated with the
commercialization of our solutions and services. Benefiting from the solid foundation we have
built, the momentum we have seized, as well as our pipeline programs, we believe that we are
able to maintain the sustainable growth of our business.
For a thorough and detailed discussion of our path to commercialization, see
“Business—Commercialization and Business Sustainability—Path to Commercialization.”
IMPACT OF COVID-19
Our business operations faced certain challenges due to the COVID-19 pandemic. During
the Track Record Period, the COVID-19 pandemic led to primarily logistical inconvenience for
our Shanghai operations, but did not materially and adversely affect our overall performance.
For example, during the COVID-19 pandemic, our contract processing was delayed, primarily
attributable to our dealings with Shanghai-based customers, who were slow to process
contracts in early 2022 due to the city-wide lock-down measures. In addition, the construction
progress of our Shanghai Zhangjiang site experienced delays during the lockdown.
Nevertheless, we contributed to fight against the COVID-19 pandemic, during which we
participated in the development of Paxlovid, a critical therapeutic that helped alleviate severe
COVID-19 symptoms and accelerate recovery for global patients. For more details regarding
the development of Paxlovid, see “Business—Our Technologies and Closed-loop Integrated
Technology Platform—Our Quantum Physics-based Computation Capabilities—Crystal
Structure Prediction—Case Study—Crystal Structure Prediction: Development of Paxlovid.”
Furthermore, our value chain did not experience any material disruption during the COVID-19
SUMMARY
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pandemic, given that we are an R&D platform company and do not require large amounts of
raw materials. Our operations and logistics have resumed normal since June 2022 after the
COVID-19-related restrictions have been lifted in the PRC. During the Track Record Period
and up to the Latest Practicable Date, the COVID-19 pandemic had no material adverse effect
to our operational and financial performance.
RECENT DEVELOPMENTS
Expected Loss in 2024
We expect that we will continue to be loss-making in 2024 primarily due to the
anticipated costs and expenses associated with (i) the implementation of our commercialization
plan, particularly in the U.S. and Europe, and (ii) increased share-based payment expenses.
Recent Developments on Our Regulatory Environment
Regulations on Proposed Customer Identification Program
On January 29, 2024, the U.S. Department of Commerce published proposed regulations
that would, if passed as proposed, require U.S. Infrastructure as a Service (“ IaaS ”) providers,
including certain U.S. cloud computing service providers, to, among other requirements, verify
the identities and ownerships of their foreign customers. If passed, the proposal will require
U.S. IaaS providers and their resellers to collect “know your customer” information from
foreign customers about their foreign account owners and beneficial owners to verify foreign
customers’ identities and notify customers about the disclosure of identifying information to
the federal government. The proposed regulations could include prohibitions on use of U.S.
IaaS products by persons or entities in specific jurisdictions that the U.S. Department of
Commerce determines have a significant number of foreign persons who either offer or use
U.S. IaaS products for malicious cyber activities. See “Regulatory Overview—Other
Healthcare Laws and Compliance Requirements—Proposed Customer Identification Program.”
We use U.S. cloud computing service providers that may be characterized as U.S. IaaS
providers under the proposed regulations. If the proposed regulations pass in their current
form, we may be required to provide additional information about our owners to allow such
providers to verify our ownership structure. In addition, the U.S. Department of Commerce
may take action under such regulations to restrict our use of U.S. cloud computing resources.
Nevertheless, we have established relationships with several other leading cloud computing
service providers in China, which are also competitive, competent and commonly used in the
market according to Frost & Sullivan, and we can also engage other cloud computing service
providers outside the U.S. and China. Therefore, we believe that we will be able to replace the
U.S. cloud computing service providers in a timely manner and without unreasonable costs, if
such proposed regulations were passed and our use of U.S. cloud computing resources were
restricted, which we believe would not materially adversely affecting our business, operations,
and financial performance. See “Risk Factors—Risks Related to Our Operations—We use
SUMMARY
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third-party providers of cloud-based infrastructure to enable our AI-powered drug and material
science R&D. Any disruption in the operations of these third-party providers, limitations on
capacity, or interference with our use could adversely affect our business, financial condition,
and results of operations.”
Regulations on Overseas Listing
Pursuant to the Overseas Listing Trial Measures, domestic companies that seek to list
overseas, both directly and indirectly, should fulfill the filing procedure and report relevant
information to the CSRC. See “Regulatory Overview—Other Government Regulations—PRC
Regulations on Overseas Listing.” According to the Overseas Listing Trial Measures, we are
required to complete the filing procedures with the CSRC in connection with the Listing. We
submitted a filing to the CSRC for application for the Listing on December 5, 2023. The CSRC
confirmed completion of such filing on April 22, 2024.
Generative AI
On July 10, 2023, the CAC released the Interim Measures on Administration of
Generative AI Services (), which came into effect on
August 15, 2023 and imposed compliance requirements on providers of generative AI services.
See “Regulatory Overview—Other Government Regulations—Regulations on Data Privacy
and Cybersecurity—PRC—Generative AI.”
Pursuant to Article 2 thereof, the Generative AI Measures do not apply where a company
researches, develops, or applies generative AI technology but does not provide relevant
generative AI services to the public within the PRC. During the Track Record Period, although
we used generative AI technology in our business, we did not provide generative AI services
to the public. Specifically, (i) our generative AI technology is only offered to internal R&D
team for the purpose of preliminary work products generation; (ii) our customers and
collaborators will not be allowed to access a platform supported by the generative AI
technology or use the relevant generative AI services by themselves; and (iii) in most
programs, we will not provide such generative AI-based preliminary work products to our
customers and collaborators directly, but will conduct manual improvement and refinement
before delivering the semi-finished or finished products. Based on the above, with the support
of our PRC Legal Advisor’ view, we are of the view that we are not subject to the Generative
AI Measures.
Regulations on Cross-Border Data Transfer
On March 22, 2024, the CAC promulgated the Provisions on Promoting and Regulating
Cross-Border Data Flows (), effective on the date of
promulgation. The provisions provide several exemptions from undergoing security
assessment, obtaining personal information protection certification, or entering into prescribed
SUMMARY
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agreement for cross-border transfer of personal information for businesses. See “Regulatory
Overview—Other Government Regulations—Regulations on Data Privacy and
Cybersecurity—PRC—Information Security and Censoryship.”
Our business does not require processing of personal data in general and we only need to
process and transfer personal information of contact persons of our corporate clients and our
employees outside of China for business and employee management purpose. The estimated
number of these individuals whose personal data may be transferred outside China is less than
100,000 within one year. Therefore, with the support of our PRC Legal Advisor’s view, we are
of the view that we are exempted from the relevant PRC cross-border data transfer regulations.
No Material Adverse Change
Our Directors confirm that up to the date of this prospectus, there has been no material
adverse change in our financial or trading position or prospects since December 31, 2023,
being the end of the period reported on as set out in the Accountant’s Report included in
Appendix I to this prospectus, and up to the date of this prospectus.
APPLICATION FOR THE LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the approval of the listing of, and permission
to deal in, the Shares in issue and to be issued pursuant to (i) the Global Offering, (ii) the
exercise of the Over-allotment Option, and (iii) the Shares which may be issued under the
ESOPs on the basis that, among other things, we satisfy the requirements under Rule 18C.03
of the Listing Rules as a Pre-Commercial Company with reference to our expected market
capitalization at the time of Listing, which, based on the mid-point of the indicative Offer Price
range stated in this prospectus, exceeds HK$10 billion.
OFFERING STATISTICS
Based on an
Offer Price of
HK$5.03 per
Offer Share
Based on an
Offer Price of
HK$6.03 per
Offer Share
Market capitalization of our Shares upon completion of
the Global Offering assuming the Over-allotment
Option is not exercised and no Shares will be issued
under the ESOPs
(1)
HK$17,136.1
million
HK$20,542.8
million
Unaudited pro forma adjusted net tangible assets per
Offer Share (2) HK$1.52 HK$1.58
SUMMARY
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Note:
(1) The calculation of market capitalization is based on 3,406,772,761 Shares expected to be in issue immediately
upon completion of the Global Offering (assuming the Over-allotment Option is not exercised and no Shares
will be issued under the ESOPs).
(2) The unaudited pro forma adjusted net tangible assets per share is arrived at after the adjustment referred to in
Appendix II to this prospectus and on the basis that 3,108,731,618 Shares were in issue (being 3,406,772,761
Shares in issue assuming that the Global Offering and the conversion of the convertible redeemable preferred
shares to ordinary shares had been completed on December 31, 2023 but take no account of any Shares which
may fall to be issued upon the exercise of the Over-allotment Option, any Shares which may be issued under
the Pre-IPO ESOP or any Shares which may be issued or repurchased by the Company under the general
mandate to issue Shares and general mandate to repurchase Shares as described in the section headed “Share
Capital” in this prospectus less 298,041,143 treasury shares owned by the Company as at December 31, 2023).
LISTING EXPENSES
Based on the mid-point of the indicative Offer Price of HK$5.53 per Share, the total
estimated listing expenses in relation to the Global Offering are RMB86.6 million (HK$95.1
million), assuming the Over-allotment Option is not exercised, which constitute approximately
9.2% of the gross proceeds. Our total estimated listing expenses consist of (i) underwriting-
related expenses of RMB37.7 million (HK$41.4 million), and (ii) non-underwriting-related
expenses of RMB48.9 million (HK$53.7 million), including (a) fees payable to our legal
advisors and Reporting Accountant of RMB26.6 million (HK$29.3 million) and (b) other fees
and expenses, including fees payable to the sponsor and the fees of other professional parties
such as financial printers, industry consultant, background search agent and share registrar, of
RMB22.2 million (HK$24.4 million). During the Track Record Period, RMB20.6 million
(HK$22.6 million) had been recognized as expenses in our consolidated statements of profit or
loss. Subsequent to the Track Record Period, we expect RMB25.2 million (HK$27.7 million)
will be recognized as expenses in our consolidated statements of profit or loss, and RMB40.7
million (HK$44.8 million) is to be accounted for as a deduction from equity upon the Listing.
The listing expenses above are the latest practicable estimate for reference only, and the actual
amount may differ from this estimate.
DIVIDENDS
As we are a holding company incorporated under the laws of the Cayman Islands, the
payment and amount of any future dividends will be subject to our constitutional documents
and the Cayman Companies Act, pursuant to which a company may declare and pay a dividend
out of either profits or share premium account. Any dividends we pay will be determined at the
recommendation of our Board at its absolute discretion, taking into account factors including
our actual and expected results of operations, cash flow and financial position, general business
conditions and business strategies, expected working capital requirements and future expansion
plans, legal, regulatory and other contractual restrictions, and other factors that our Board
deems to be appropriate. Our Shareholders may approve, in a general meeting, any declaration
of dividends, which must not exceed the amount recommended by our Board. No dividend has
been proposed, paid or declared by us during and after the Track Record Period. Currently, we
do not have a formal dividend policy or a fixed dividend payout ratio and we do not have a plan
to set up such policy. See “Financial Information—Dividends.” As advised by our Cayman
SUMMARY
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legal advisors, we are a holding company incorporated under the laws of the Cayman Islands,
pursuant to which, the financial position of accumulated losses does not prohibit us from
declaring and paying dividends to our Shareholders, as dividends may still be declared and paid
out of our share premium account notwithstanding our profitability, provided that our Company
satisfies the solvency test set out in the Cayman Companies Act.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$941.1 million, assuming an Offer Price of HK$5.53 per Offer Share (being the mid-point
of the Offer Price range stated in this prospectus), after deducting the underwriting
commissions, and estimated expenses paid or payable by us in connection with the Global
Offering and assuming that the Over-allotment Option is not exercised.
We intend to use the net proceeds from the Global Offering for the following purposes:
Percentage of
Net Proceeds Future Plans
Approximately
HK$ in
millions
75.0% To continuously enhance our R&D capabilities
and solutions provision
705.8
15.0% To improve our commercialization capability in
and beyond China
141.2
10.0% Working capital and general corporate purposes 94.1
To the extent that the net proceeds of the Global Offering are not immediately used for
the purposes described above, and to the extent permitted by the relevant laws and regulations,
we intend to deposit the proceeds in short-term interest-bearing accounts at licensed
commercial banks and/or other authorised financial institutions (as defined under SFO or
applicable laws and regulations in the other jurisdictions). See “Future Plans and Use of
Proceeds” for further details regarding use of proceeds.
SUMMARY
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In this prospectus, unless the context otherwise requires, the following terms shall
have the meanings set out below. Certain other terms are explained in the section
headed “Glossary of Technical Terms” in this prospectus.
“Accountant’s Report” the accountant’s report for the years ended December 31,
2021, 2022 and 2023, details of which is set out in
Appendix I to this prospectus
“AFRC” the Accounting and Financial Reporting Council of Hong
Kong
“Articles of Association” or
“Articles”
the amended and restated articles of association of our
Company adopted on May 28, 2024, which will come into
effect upon the Listing, a summary of which is set out in
“Appendix III—Summary of the Constitution of the
Company and Cayman Islands Company Law—Summary
of the Constitution of the Company,” as amended,
supplemented or otherwise modified from time to time
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Audit Committee” the audit committee of our Board
“Beijing Jingtai” Beijing Jingtai Technology Co., Ltd. (ࠢ
ʮ̡), a company established in the PRC with limited
liability on March 14, 2016 and an indirect wholly-owned
subsidiary of our Company
“Board” the board of Directors
“Business Day” a day on which banks in Hong Kong are generally open
for normal banking business to the public and which is
not a Saturday, Sunday or public holiday in Hong Kong
“BVI” the British Virgin Islands
“CAGR” compounded annual growth rate, which is calculated by
dividing the amount at the end of the period by the
amount of the beginning of that period, raising the result
to an exponent of one divided by the number of years in
the period, and subtracting one from the subsequent
result
DEFINITIONS AND ACRONYMS
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“Capital Market
Intermediary(ies)” or “CMI(s)”
the Overall Coordinators, the Joint Global Coordinators,
the Joint Bookrunners and the Joint Lead Managers,
being the syndicate capital market intermediaries (within
the meaning ascribed thereto under the Listing Rules)
participating in the Global Offering
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“China” or “PRC” the People’s Republic of China, but for the purpose of
this prospectus and for geographical reference only and
except where the context requires otherwise, references
in this prospectus to “China” and the “PRC” do not apply
to Hong Kong, the Macao Special Administrative Region
and Taiwan
“CK Life Sciences” CK Life Sciences Int’l., (Holdings) Inc. and its
subsidiaries, one of our collaborators
“Class A Ordinary Share(s)” the class A ordinary share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, the holder of which is entitled to
one vote per Share at our Company’s general meetings
prior to the Listing, which will be re-designated as the
Ordinary Share(s) upon the Listing
“Class B Ordinary Share(s)” the class B ordinary share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, the holder of which is entitled to
super-voting rights of ten votes per Share at our
Company’s general meetings prior to the Listing, which
will be re-designated as the Ordinary Share(s) upon the
Listing
“close associate(s)” has the meaning ascribed to it under the Listing Rules
“Commercial Company” has the meaning ascribed to it under Chapter 18C of the
Listing Rules
“Companies Act” or “Cayman
Companies Act”
the Companies Act, Cap. 22 (Law 3 of 1961, as
consolidated and revised) of the Cayman Islands, as
amended, supplemented or otherwise modified from time
to time
DEFINITIONS AND ACRONYMS
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“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong) as amended, supplemented or otherwise
modified from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong
Kong) as amended, supplemented or otherwise modified
from time to time
“Company” or “our Company” QuantumPharm Inc., an exempted company incorporated
in the Cayman Islands with limited liability on April 28,
2017
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“Consolidated Affiliated
Entity(ies)”
the entities we control, the financial results of which have
been consolidated and accounted for as subsidiaries of
our Company through the Former Contractual
Arrangements, namely Shenzhen Jingtai and its then
subsidiaries, prior to the termination of the Former
Contractual Arrangements
“Co-founder Group” the group comprising Dr. Wen, Dr. Ma, Dr. Lai,
QuantumPharm Holdings, SSBL Holdings, Crete Helix,
Jian Guo Pai, Sevening B Holdings and SeveningBAlpha
“Co-founders” the co-founders of our Company, namely Dr. Wen, Dr. Ma
and Dr. Lai
“core connected person(s)” has the meaning ascribed to it under the Listing Rules
“Corporate Governance Code” the Corporate Governance Code set out in Appendix C1
to the Listing Rules
“Crete Helix” Crete Helix Ltd., a company incorporated in the BVI with
limited liability on May 25, 2021, which is owned as to
1% by Jian Guo Pai and 99% by MH International
“CRPS” convertible redeemable preferred shares
“CSRC” the China Securities Regulatory Commission ( ʕ਷ᗇՎ
ึ)
“Designated Bank” HKSCC Participant’s EIPO Designated Bank
DEFINITIONS AND ACRONYMS
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“Director(s)” or “our Director(s)” the director(s) of our Company
“Dr. Lai” Dr. Lai Lipeng ( ፠ɢᘄ), one of our Co-founders, an
executive Director and our chief innovation officer
“Dr. Ma” Dr. Ma Jian ( ৵਄), one of our Co-founders, an executive
Director and our chief executive officer
“Dr. Wen” Dr. Wen Shuhao (Ⴔ), one of our Co-founders, the
chairman of the Board and an executive Director
“Drug Discovery Solutions” one of our Specialist Technology Products as defined
under Chapter 18C of the Listing Rules, which utilizes AI
and quantum physics-based computation technologies to
more quickly and accurately identify and develop
molecules that exhibit pharmaceutically active functions
on particular disease-related targets. Our drug discovery
solutions span the whole drug discovery and research
process, from target validation, hit identification, lead
generation, lead optimization to PCC nomination,
covering various modalities, including small molecules,
antibodies, peptides, ADC, and PROTAC
“EIT Law” the Enterprise Income Tax Law of the PRC ( ʕശɛ͏
), as enacted by the NPC on
March 16, 2007 and effective on January 1, 2008, as
amended, supplemented or otherwise modified from time
to time
“ESOPs” the Pre-IPO ESOP , the Post-IPO Share Option Scheme
and the Post-IPO RSU Scheme
“Extreme Conditions” the occurrence of “extreme conditions” as announced by
any government authority of Hong Kong due to serious
disruption of public transport services, extensive
flooding, major landslides, large-scale power outage or
any other adverse conditions before Typhoon Signal No.
8 or above is replaced with Typhoon Signal No. 3 or
below
“FDA” the U.S. Food and Drug Administration
DEFINITIONS AND ACRONYMS
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“FINI” Fast Interface for New Issuance, an online platform
operated by HKSCC for admission to trading and, where
applicable, the collection and processing of specified
information on subscription in and settlement for all
initial public offerings
“Former Contractual
Arrangements”
the series of contractual arrangements entered into by,
among others, Shenzhen Zhiyao, Shenzhen Jingtai and its
registered shareholders on November 6, 2017, and
terminated on July 12, 2021, further details of which are
described in “History, Development and Corporate
Structure—Former Contractual Arrangements”
“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., our
industry consultant, which is an Independent Third Party
“Frost & Sullivan Report” an independent market research report commissioned by
us and prepared by Frost & Sullivan for the purpose of
this prospectus
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Group,” “our Group,” “we,”
“our,” “us,” or “XtalPi”
our Company, its subsidiaries and the Consolidated
Affiliated Entities from time to time or, where the context
so requires, in respect of the period prior to our Company
becoming the holding company of its present subsidiaries
and Consolidated Affiliated Entities, such subsidiaries
and Consolidated Affiliated Entities (or their
predecessors) as if they were subsidiaries of our
Company at the relevant time
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“HKEX Guide” the “Guide for New Listing Applicants” published by the
Stock Exchange in November 2023 which took effect on
January 1, 2024
“HKICPA” Hong Kong Institute of Certified Public Accountants
“HK eIPO White Form ” the application for Hong Kong Offer Shares to be issued
in the applicant’s own name, submitted online through
the IPO App or on designated website at www.hkeipo.hk
DEFINITIONS AND ACRONYMS
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“HK eIPO White Form
Service Provider”
the HK eIPO White Form service provider designated
by our Company as specified in the IPO App and on the
designated website at www.hkeipo.hk
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC EIPO ” the application for the Hong Kong Offer Shares to be
issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your designated
HKSCC Participant’s stock account through causing
HKSCC Nominees to apply on your behalf, by instructing
your broker or custodian who is a HKSCC Participant to
give electronic application instructions through
HKSCC’s FINI system to apply for the Hong Kong Offer
Shares on your behalf
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary
of HKSCC
“HKSCC Operational
Procedures”
the Operational Procedures of HKSCC, containing the
practices, procedures and administrative or other
requirements relating to HKSCC’s services and the
operations and functions of CCASS, FINI or any system
established, operated and/or otherwise provided by or
through HKSCC
“HKSCC Participant” a participant admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a
custodian participant
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the
PRC
“Hong Kong Offer Shares” the 9,369,000 Ordinary Shares being initially offered by
our Company for subscription at the Offer Price pursuant
to the Hong Kong Public Offering, subject to reallocation
as described in “Structure of the Global Offering”
DEFINITIONS AND ACRONYMS
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“Hong Kong Public Offering” the offer for subscription of the Hong Kong Offer Shares
to the public in Hong Kong at the Offer Price, (plus
brokerage of 1%, SFC transaction levy of 0.0027%, Stock
Exchange trading fee of 0.00565% and AFRC transaction
levy of 0.00015%) on and subject to and in accordance
with the terms and conditions set out in this prospectus,
as further described in “Structure of the Global
Offering—The Hong Kong Public Offering”
“Hong Kong Share Register” the register of members of our Shares maintained by the
Hong Kong Share Registrar
“Hong Kong Share Registrar” Tricor Investor Services Limited
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering
whose names are set out in “Underwriting—Hong Kong
Underwriters”
“Hong Kong Underwriting
Agreement”
the Hong Kong underwriting agreement dated June 2,
2024 relating to the Hong Kong Public Offering entered
into by our Company, the Co-founder Group, the Sole
Sponsor, the Overall Coordinators, the Hong Kong
Underwriters and the Capital Market Intermediaries
“IASB” International Accounting Standards Board
“IFRSs” IFRS Accounting Standards, which include standards,
amendments and interpretations promulgated by the
International Accounting Standards Board and the
International Accounting Standards and Interpretation
issued by the International Accounting Standards
Committee
“Independent Third Party(ies)” individual(s) or company(ies) which, to the best of our
Directors’ knowledge, information, and belief, having
made all reasonable enquiries, is/are not our connected
persons
DEFINITIONS AND ACRONYMS
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“Intelligent Automation
Solutions”
one of our Specialist Technology Products as defined
under Chapter 18C of the Listing Rules, which consists
primarily of (i) solid-state R&D services, which applies
AI and automation technologies in analyzing the physical
and chemical properties of solid materials, and (ii)
automated chemical synthesis services, which applies
automation technology to enable faster and more accurate
production of chemical compounds
“International Offer Shares” the 178,004,000 Ordinary Shares being offered for
subscription at the Offer Price under the International
Offering, together, where relevant, with any additional
Shares which may be issued pursuant to the exercise of
the Over-allotment Option, subject to reallocation as
described in “Structure of the Global Offering”
“International Offering” the offer of the International Offer Shares at the Offer
Price (plus brokerage of 1%, SFC transaction levy of
0.0027%, Stock Exchange trading fee of 0.00565% and
AFRC transaction levy of 0.00015%) outside the United
States in offshore transactions in accordance with
Regulation S and in the United States to QIBs in reliance
on Rule 144A or any other available exemptions from the
registration requirements under the U.S. Securities Act,
in each case on and subject to the terms and conditions of
the International Underwriting Agreement, as further
described in “Structure of the Global Offering”
“International Underwriters” the group of international underwriters expected to enter
into the International Underwriting Agreement relating to
the International Offering
“International Underwriting
Agreement”
the international underwriting agreement relating to the
International Offering to be entered into by, among other
parties, our Company, the Co-founder Group, the Overall
Coordinators and the International Underwriters on or
about the Price Determination Date, as further described
in “Underwriting”
“IP” intellectual property
DEFINITIONS AND ACRONYMS
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“IPO App ” the mobile application for the HK eIPO White Form
service which can be downloaded by searching
“IPO App ” in App Store or Google Play or
downloaded at www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp
“Jian Guo Pai” Jian Guo Pai Ltd., a company incorporated in the BVI
with limited liability on April 20, 2017, which is wholly
owned by Dr. Ma
“Joint Bookrunners” CLSA Limited, China International Capital Corporation
Hong Kong Securities Limited, Jefferies Hong Kong
Limited, Deutsche Bank AG, Hong Kong Branch, CMB
International Capital Limited, SPDB International
Capital Limited, Guosen Securities (HK) Capital
Company Limited, Fosun International Securities
Limited, ABCI Capital Limited, BOCI Asia Limited,
CCB International Capital Limited and ICBC
International Securities Limited
“Joint Global Coordinators” CLSA Limited, China International Capital Corporation
Hong Kong Securities Limited, Jefferies Hong Kong
Limited, Deutsche Bank AG, Hong Kong Branch, CMB
International Capital Limited, SPDB International
Capital Limited and Guosen Securities (HK) Capital
Company Limited
“Joint Lead Managers” CLSA Limited, China International Capital Corporation
Hong Kong Securities Limited, Jefferies Hong Kong
Limited, Deutsche Bank AG, Hong Kong Branch, CMB
International Capital Limited, SPDB International
Capital Limited, Guosen Securities (HK) Capital
Company Limited, Fosun International Securities
Limited, ABCI Securities Company Limited, BOCI Asia
Limited, CCB International Capital Limited, ICBC
International Securities Limited, Futu Securities
International (Hong Kong) Limited, Livermore Holdings
Limited and TradeGo Markets Limited
“Latest Practicable Date” May 29, 2024, being the latest practicable date for the
purpose of ascertaining certain information contained in
this prospectus prior to its publication
“Listing” the listing of our Shares on the Main Board
DEFINITIONS AND ACRONYMS
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--- page 61 ---
“Listing Date” the date, expected to be on or about June 13, 2024, on
which the Shares become listed and from which dealings
in our Shares are permitted to take place on the Main
Board
“Listing Rules” the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited, as amended,
supplemented or otherwise modified from time to time
“LPHappy Family Trust” the discretionary trust established on June 28, 2021 by
Dr. Lai as the settlor with TMF (Cayman) Ltd. as the
trustee
“LPHappy Holding” LPHappy Holding Limited, a company incorporated in
the BVI with limited liability on June 28, 2021, which is
a holding vehicle wholly owned by TMF (Cayman) Ltd.,
the trustee of the LPHappy Family Trust
“M&A Rules” the Regulations on Mergers and Acquisitions of Domestic
Companies by Foreign Investors (Իᒅ
), which were jointly promulgated by
MOFCOM, the State-owned Assets Supervision and
Administration Commission, the STA, the SAMR, the
CSRC, and the SAFE on August 8, 2006, and came into
effect on September 8, 2006 and subsequently amended
on June 22, 2009, as amended, supplemented or
otherwise modified from time to time
“Main Board” the stock exchange (excluding the option market)
operated by the Stock Exchange which is independent
from and operated in parallel with GEM of the Stock
Exchange
“Memorandum” or
“Memorandum of Association”
the amended and restated memorandum of association
adopted on May 28, 2024, a summary of which is set out
in “Appendix III—Summary of the Constitution of the
Company and Cayman Islands Company Law—Summary
of the Constitution of the Company,” as amended,
supplemented or otherwise modified from time to time
“MH Fund Trust” the discretionary trust established on June 29, 2021 by
Dr. Ma as the settlor with TMF (Cayman) Ltd. as the
trustee
DEFINITIONS AND ACRONYMS
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“MH International” MH International Holdings Limited, a company
incorporated in the BVI with limited liability on June 28,
2021, which is a holding vehicle wholly owned by TMF
(Cayman) Ltd., a trustee of MH Fund Trust
“MOF” the Ministry of Finance of the PRC (݁
௅)
“MOFCOM” or “Ministry of
Commerce”
the Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷
ਠਕ௅)
“MOST” the Ministry of Science and Technology of the PRC ( ʕശ
ኪҦஔ௅)
“NDRC” the National Development and Reform Commission of
the State Council of the PRC
“NMPA” the National Medical Products Administration of the PRC
(္ຖ၍ଣ҅)
“Nomination Committee” the nomination committee of our Board
“NPC” the National People’s Congress of the PRC ( ʕശɛ͏΍
ɽึ)
“Offer Price” the final offer price per Offer Share (exclusive of
brokerage fee of 1.0%, SFC transaction levy of 0.0027%,
Stock Exchange trading fee of 0.00565% and AFRC
transaction levy of 0.00015%) of not more than HK$6.03
and expected to be not less than HK$5.03, to be
determined in the manner as described in “Structure of
the Global Offering—Pricing of the Global Offering”
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer
Shares, being the Shares of our Company, together, where
relevant, with any additional Shares to be issued by our
Company pursuant to the exercise of the Over-allotment
Option
“Ordinary Share(s)” the ordinary share(s) of US$0.00001 each (or such par
value as adjusted from time to time) in the share capital
of our Company, including the Class A Ordinary Share(s)
and the Class B Ordinary Share(s) prior to the Listing
DEFINITIONS AND ACRONYMS
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“Over-allotment Option” the option to be granted by our Company to the
International Underwriters and exercisable by the Overall
Coordinators (on behalf of the International
Underwriters), pursuant to which our Company may be
required to allot and issue up to an aggregate of
28,105,000 additional Ordinary Shares (representing
approximately 15% of our Ordinary Shares initially being
offered under the Global Offering) at the Offer Price to
cover over-allocations in the International Offering, if
any, details of which are described in “Structure of the
Global Offering—The International Offering—Over-
allotment Option”
“Overall Coordinators” CLSA Limited, China International Capital Corporation
Hong Kong Securities Limited, Jefferies Hong Kong
Limited, Deutsche Bank AG, Hong Kong Branch and
CMB International Capital Limited
“Overseas Listing Trial
Measures”
the Trial Administrative Measures of Overseas Securities
Offering and Listing by Domestic Companies ( ྤʫΆ
) and five
supporting guidelines promulgated by the CSRC on
February 17, 2023 and effective on March 31, 2023
“Pathfinder SII(s)” has the meaning ascribed to it in Chapter 2.5 of the
HKEX Guide, and unless the context otherwise requires,
refers to the Pre-IPO Investor(s) the details of which are
set out in “History, Development and Corporate
Structure—Pre-IPO Investments—Information about the
Pre-IPO Investors—Our Pathfinder SIIs and
Sophisticated Independent Investors”
“PBOC” the People’s Bank of China ( ʕ਷ɛ͏ვБ), the central
bank of the PRC
“Post-IPO RSU Scheme” the restricted share unit scheme conditionally adopted by
our Shareholders on May 28, 2024 which will come into
effect upon Listing, principal terms of which are set out
in “Appendix IV—Statutory and General
Information—D. Share Incentive Schemes—3. Post-IPO
RSU Scheme”
DEFINITIONS AND ACRONYMS
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“Post-IPO Share Option Scheme” the share option scheme conditionally adopted by our
Shareholders on May 28, 2024 which will come into
effect upon Listing, principal terms of which are set out
in “Appendix IV—Statutory and General
Information—D. Share Incentive Schemes—2. Post-IPO
Share Option Scheme”
“PRC Legal Advisor” Fangda Partners, our legal advisors as to PRC law
“Pre-Commercial Company” has the meaning ascribed to it under Chapter 18C of the
Listing Rules
“Preferred Share(s)” the Series Pre-A Preferred Share(s), the Series A-1
Preferred Share(s), the Series A-2 Preferred Share(s), the
Series B Preferred Share(s), the Series B+ Preferred
Share(s), the Series B++ Preferred Shares, the Series C
Preferred Shares and the Series D Preferred Shares
“Pre-IPO ESOP” the QuantumPharm Inc. 2021 Omnibus Incentive Plan as
adopted by our Shareholders on July 14, 2021 and
amended on August 5, 2021, principal terms of which are
set out in “Appendix IV—Statutory and General
Information—D. Share Incentive Schemes—1. Pre-IPO
ESOP”
“Pre-IPO Investment(s)” the pre-IPO investment(s) in our Company, the details of
which are set out in “History, Development and
Corporate Structure—Pre-IPO Investments”
“Pre-IPO Investor(s)” the investor(s) of the Pre-IPO Investments
“Price Determination Agreement” the agreement to be entered into between our Company
and the Overall Coordinators (for themselves and on
behalf of the Underwriters and the CMIs) on the Price
Determination Date to record and fix the Offer Price
“Price Determination Date” the date, expected to be on or about June 11, 2024, on
which the Offer Price is to be fixed by agreement
between our Company and the Overall Coordinators (for
themselves and on behalf of the other Underwriters and
the CMIs)
“Principal Share Registrar” Maples Fund Services (Cayman) Limited
“prospectus” this prospectus being issued in connection with the Hong
Kong Public Offering
DEFINITIONS AND ACRONYMS
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“QIBs” qualified institutional buyers within the meaning of Rule
144A
“QuantumPharm Employee
Benefit Trust”
the discretionary trust established on June 28, 2021 with
TMF Trust (HK) Limited as trustee and 13 employees of
our Group as beneficiaries for the purpose of managing
and administering the options granted to them under the
Pre-IPO ESOP
“QuantumPharm Employee
Holdings”
QuantumPharm Employee Holdings, a company
incorporated in the BVI with limited liability on June 25,
2021, which is a holding vehicle wholly owned by TMF
Trust (HK) Limited as trustee of the QuantumPharm
Employee Benefit Trust
“QuantumPharm HK” QuantumPharm Limited, a company incorporated in
Hong Kong with limited liability on May 19, 2017 and a
direct wholly-owned subsidiary of our Company
“QuantumPharm Holdings” QuantumPharm Holdings Limited, a company
incorporated in the BVI with limited liability on April 25,
2017, which is owned as to 1% by SSBL Holdings and
99% by WSH Family Holdings
“QuantumPharm Roc” QuantumPharm Roc Holdings Limited, a company
incorporated in the BVI with limited liability on April 12,
2019, which is wholly owned by QuantumPharm
Holdings
“Regulation S” Regulation S under the U.S. Securities Act
“Remuneration Committee” the remuneration committee of our Board
“Renminbi” or “RMB” the lawful currency of the PRC
“RSU(s)” the restricted share unit award(s) to be granted to
participants under the Post-IPO RSU Scheme
“Rule 144A” Rule 144A under the U.S. Securities Act
“SAFE” the State Administration of Foreign Exchange of the PRC
(̮ි၍ଣ҅)
DEFINITIONS AND ACRONYMS
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“SAMR” the State Administration for Market Regulation of
the PRC (̹ఙ္ຖ၍ଣᐼ҅), the
predecessors of which is the State Administration of
Industry and Commerce of the PRC ( ʕശɛ͏΍ձ਷਷
၍ଣᐼ҅)
“SEC” the Securities and Exchange Commission of the United
States
“Series A-1 Preferred Share(s)” the series A-1 preferred share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, which will be converted to the
Ordinary Share(s) on a one-for-one basis upon the Listing
“Series A-2 Preferred Share(s)” the series A-2 preferred share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, which will be converted to the
Ordinary Share(s) on a one-for-one basis upon the Listing
“Series B Preferred Share(s)” the series B preferred share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, which will be converted to the
Ordinary Share(s) on a one-for-one basis upon the Listing
“Series B+ Preferred Share(s)” the series B+ preferred share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, which will be converted to the
Ordinary Share(s) on a one-for-one basis upon the Listing
“Series B++ Preferred Share(s)” the series B++ preferred share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, which will be converted to the
Ordinary Share(s) on a one-for-one basis upon the Listing
“Series C Preferred Share(s)” the series C preferred share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, which will be converted to the
Ordinary Share(s) on a one-for-one basis upon the Listing
“Series D Preferred Share(s)” the series D preferred share(s) of US$0.00001 each (or
such par value as adjusted from time to time) in the share
capital of our Company, which will be converted to the
Ordinary Share(s) on a one-for-one basis upon the Listing
DEFINITIONS AND ACRONYMS
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“Series Pre-A Preferred Share(s)” the series pre-A preferred share(s) of US$0.00001 each
(or such par value as adjusted from time to time) in the
share capital of our Company, which will be converted to
the Ordinary Share(s) on a one-for-one basis upon the
Listing
“Sevening B Holdings” Sevening B Holdings Limited, a company incorporated in
the BVI with limited liability on April 20, 2017, which is
wholly owned by Dr. Lai
“SeveningBAlpha” SeveningBAlpha Limited, a company incorporated in the
BVI with limited liability on May 20, 2021, which is
owned as to 1% by Sevening B Holdings and 99% by
LPHappy Holding
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Shanghai Jingtai” Jingtai Zhiyao Technology (Shanghai) Co., Ltd. ( ౺इ౽
ᖹҦஔ(ɪऎ)ʮ̡), a company established in the
PRC with limited liability on September 21, 2022 and an
indirect wholly-owned subsidiary of our Company
“Shanghai Zhiyao” Shanghai Zhiyao Technology Co., Ltd. (ҦϞ
ʮ̡), a company established in the PRC with limited
liability on December 2, 2019 and an indirect wholly-
owned subsidiary of our Company
“Share(s)” the Ordinary Share(s), including the Class A Ordinary
Share(s), the Class B Ordinary Share(s) and the Preferred
Share(s), which will be converted or re-designated to
Ordinary Share(s) upon the Listing
“Shareholder(s)” holder(s) of our Share(s)
“Shenzhen Jingtai” Shenzhen Jingtai Technology Co., Ltd. (ҦϞ
ʮ̡), a company established in the PRC with limited
liability on September 11, 2015 and an indirect wholly-
owned subsidiary of our Company
DEFINITIONS AND ACRONYMS
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“Shenzhen Zhiyao” Shenzhen Zhiyao Technology Co., Ltd. (ҦϞ
ʮ̡), a company established in the PRC with limited
liability on July 5, 2017 and an indirect wholly-owned
subsidiary of our Company
“Shenzhen Zhongge” Shenzhen Zhongge Biotechnology Co., Ltd. (͛
ʮ̡), a company established in the PRC with
limited liability on January 20, 2022 and an indirect
wholly-owned subsidiary of our Company
“Signet Group” Signet Therapeutics (Shenzhen) Co., Ltd. (߅(ଉ
έ)ʮ̡) and Signet Therapeutics Inc., two of our
collaborator-investees
“Sole Sponsor” CITIC Securities (Hong Kong) Limited
“Sophisticated Independent
Investor(s)” or “SII(s)”
has the meaning ascribed to it under Chapter 18C.05 of
the Listing Rules and in Chapter 2.5 of the HKEX Guide,
and unless the context otherwise requires, refers to the
Pre-IPO Investor(s) the details of which are set out in
“History, Reorganization and Corporate Structure—Pre-
IPO Investments—Information about the Pre-IPO
Investors—Our Pathfinder SIIs and Sophisticated
Independent Investors”
“Specialist Technology
Company”
has the meaning ascribed to it under Chapter 18C of the
Listing Rules
“Specialist Technology Industry” has the meaning ascribed to it under Chapter 18C of the
Listing Rules
“Specialist Technology
Product(s)”
has the meaning ascribed to it under Chapter 18C of the
Listing Rules
“Sponsor-OC” CLSA Limited
“SSBL Holdings” SSBL Holdings Limited, a company incorporated in the
BVI with limited liability on April 20, 2017, which is
wholly owned by Dr. Wen
“STA” the State Taxation Administration of the PRC ( ʕശɛ͏
೼ਕᐼ҅)
“Stabilizing Manager” CLSA Limited, acting as the stabilizing manager of the
Global Offering
DEFINITIONS AND ACRONYMS
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“State Council” the State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“Stock Borrowing Agreement” the stock borrowing agreement to be entered into between
the Stabilizing Manager and QuantumPharm Holdings on
or about the Price Determination Date
“Stock Exchange” The Stock Exchange of Hong Kong Limited, a wholly-
owned subsidiary of Hong Kong Exchange and Clearing
Limited
“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules
“substantial shareholder(s)” has the meaning ascribed to it under the Listing Rules
“Takeovers Code” the Code on Takeovers and Mergers approved by the
SFC, as amended, supplemented or otherwise modified
from time to time
“Track Record Period” the years ended December 31, 2021, 2022 and 2023
“Treasury Shares” Shares repurchased and held by the Company in treasury
(which include Shares repurchased by the Company and
held or deposited in CCASS for sale on the Stock
Exchange) from time to time
“Undertaking Providers” our Pathfinder SIIs and HCHP Holdco, Ltd.
“Underwriter(s)” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“U.S.” or “United States” the United States of America, its territories and
possessions, any State of the United States, and the
District of Columbia
“U.S. Securities Act” the United States Securities Act of 1933, as amended,
supplemented or otherwise modified from time to time
“US$,” “USD” or “U.S. dollars” United States dollars, the lawful currency of the United
States
“V A T” value-added tax; all amounts are exclusive of V A T in this
prospectus except where indicated otherwise
DEFINITIONS AND ACRONYMS
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“VIE” variable interest entity
“WSH Family Holdings” WSH Family Holdings Limited, a company incorporated
in the BVI with limited liability on August 27, 2021,
which is a holding vehicle wholly owned by TMF
(Cayman) Ltd., a trustee of the WSH Family Trust
“WSH Family Trust” the discretionary trust established on June 28, 2021 by
Dr. Wen as the settlor with TMF (Cayman) Ltd. as the
trustee
“WVR Structure” the weighted voting rights structure adopted by our
Company on November 17, 2017, which confers the
holder of each Class B Ordinary Share the right to
exercise ten votes at our Company’s general meetings
prior to the Listing, which will be terminated upon the
Listing
“XtalPi Investment” XtalPi Investment Inc., an exempted company
incorporated in the Cayman Islands with limited liability
on December 22, 2021 and a non-wholly owned
subsidiary of our Company, which is owned as to 87.69%
by our Company
“XtalPi R&D solutions” one of our Specialist Technology Products as defined
under Chapter 18C of the Listing Rules, which applies
AI, quantum physics-based computation and automation
technologies combined with our expertise derived from
our drug discovery and intelligent automation solutions
business to provide R&D solutions beyond the
pharmaceutical industries, such as material science
(including agritech, energy and new chemicals, and
cosmetics)
“XtalPi US” XtalPi Inc., a company incorporated in Delaware, the
United States, on February 10, 2016 and a direct wholly-
owned subsidiary of our Company
Unless the content otherwise requires, references to “2021”, “2022” and “2023” in this
prospectus refer to our financial year ended December 31 of such year , respectively.
Certain amounts and percentage figures included in this prospectus were subjected to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures preceding them.
DEFINITIONS AND ACRONYMS
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For ease of reference, the names of Chinese laws and regulations, governmental
authorities, institutions, natural persons or other entities (including certain of our
subsidiaries) have been included in the prospectus in both the Chinese and English languages
and in the event of any inconsistency, the Chinese versions shall prevail. English translations
of company names and other terms from the Chinese language are provided for identification
purposes only.
For the purpose of this prospectus, references to “provinces” of China include provinces,
municipalities under direct administration of the central government and provincial-level
autonomous regions.
DEFINITIONS AND ACRONYMS
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In this prospectus, unless the context otherwise requires, explanations and
definitions of certain terms used in this prospectus in connection with our Group and
our business shall have the meanings set out below. The terms and their meanings may
not correspond to standard industry meaning or usage of these terms.
“ab initio ” starting from or based on first principles
“ADC” antibody-drug conjugates, a rapidly emerging class of
therapeutic agents that combine the target specificity of a
monoclonal antibody with the lethality of cytotoxic
cellular poison, which are widely used for the
management or treatment of cancer
“ADMET” absorption, distribution, metabolism, excretion and
toxicity, five key processes to describe the disposition of
a pharmaceutical compound within an organism
“ADMET properties” including properties such as absorption, distribution,
metabolism, excretion and toxicity of drugs, which allow
drug developers to understand the safety and efficacy of
a drug candidate, and are necessary for regulatory
approval
“affinity” the extent or fraction to which a drug binds to receptors
at any given drug concentration or the firmness with
which the drug binds to the receptor. Affinity describes
the strength of the attraction between two chemicals, or
an antigen and an antibody
“AGV” automated guided vehicle, automated, custom-made
vehicles that are able to transport packets, materials
and/or products in logistical or production factory
environment
“AI” artificial intelligence, simulation of human intelligence
processes by machines, especially computer systems
“algorithm” a finite sequence of well-defined instructions, typically
used to solve a class of specific problems or to perform
a computation
GLOSSARY OF TECHNICAL TERMS
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“antibody” also known as an immunoglobulin, a protective Y -shaped
protein produced by immune system in response to
invading foreign particles (antigens), such as bacteria and
viruses
“assay” an investigative or analytic procedure in laboratory
medicine and molecular biology for qualitatively
assessing or quantitatively measuring the presence,
amount, or functional activity of a target entity (the
analyte)
“API” active pharmaceutical ingredient, the component of a
drug product that is intended to furnish pharmacological
activity or other direct effect in the diagnosis, cure,
mitigation, treatment, or prevention of disease, or to
affect the structure or any function of the body
“B-cell” B lymphocyte, a type of white blood cell that produces
antibodies
“binding free energy” the free energy difference between the bound and
completely unbound states
“binding sites” one of the key elements in drug discovery, being hot spots
in the pharmacological targets, where the designed drug-
like molecule should bind
“CAGR” compound annual growth rate
“catalyst” a substance that increases the rate of a chemical reaction
without itself undergoing any permanent chemical
change
“automated catalyst R&D” automated R&D activities to discover and develop new
catalysts with advanced properties
“CDMO” contract development and manufacturing organization
“cGMP” current Good Manufacturing Practice regulations
enforced by the FDA
“ChatGPT” chat generative pre-trained transformer, an AI chatbot
that uses natural language processing to create humanlike
conversational dialogue developed by OpenAI
GLOSSARY OF TECHNICAL TERMS
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“chemical space” a concept in cheminformatics referring to the property
space spanned by all possible molecules and chemical
compounds adhering to a given set of construction
principles and boundary conditions, containing millions
of compounds which are readily accessible and available
to researchers. Chemical space suggests a representation
in form of a geographical map to illustrate the
distribution of molecules and their properties
“chemical synthesis” the process by which one or more chemical reactions are
performed with the aim of converting a reactant or
starting material into a product or multiple products
“clinical trial/study” a research study for finding or validating the therapeutic
and protective effects and side-effects of test drugs to
determine the safety and efficacy of such drugs
“cloud” the computers and connections that support cloud
computing
“cloud computing” the practice of storing computer data and programs on
multiple servers that can be accessed through the internet
“CMC” chemistry, manufacturing and controls
“CMO” contract manufacturing organization
“collaborator” our drug developer customers for drug discovery
collaboration programs
“collaborator-investee” our collaborators that we offer solutions to in exchange
for their equity interests or our investees that we make
equity investments in, which we consider to have
potential first-in-class or best-in-class pipelines or
cutting-edge technologies
“compound” a substance formed by two or more ingredients in union
“conformation” any spatial arrangement of the atoms in a molecule which
can be interconverted by rotations about formally single
bonds
GLOSSARY OF TECHNICAL TERMS
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“conformation constraint” introducing some specific structural constraints in a lead
candidate to reduce the overall number of possible
conformations in order to favor the adoption of a
bioactive conformation and, as a consequence, molecular
recognition by the target receptor, which can be used to
improve potency and/or selectivity of the molecule
candidates
“counterion” an ion having a charge opposite to that of the substance
with which it is associated that can affect the
crystallization of coordination polymers, leading to
different coordination structures
“CRO” contract research organization, a company that provides
support to the pharmaceutical, biotechnology, and
medical device industries in the form of research services
outsourced on a contract basis
“cryo-EM” cryogenic electron microscopy, a cryomicroscopy
technique for structure determination applied on samples
cooled to cryogenic temperatures, which could reveal the
high-resolution structure of biological drug targets, such
as membrane proteins, ion channels, enzymes and
hormone receptors, and is crucial to reveal the structure
of the virus binding sites
“crystal morphology” a key element in many industrial processes and has an
enormous impact at the processing and postprocessing
stages of pharmaceuticals, agrochemicals,
petrochemicals, and cements
“customer retention rate” the percentage of our existing customers in the
immediately preceding period which remain as our
customers in the current period
“crystal structure prediction” or
“CSP”
the ability to identify the correct crystal structure(s) that
will form from a given molecule, based on its molecular
structure
“data lake” a centralized repository designed to store, process, and
secure large amounts of structured, semi-structured, and
unstructured data, which can store data in its native
format and process any variety of it, ignoring size limits
GLOSSARY OF TECHNICAL TERMS
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“de novo ” from the beginning
“digital twin” a digital representation of a physical object, person, or
process that is contextualized in a digital version of its
environment
“dihydrochloride” a chemical compound consisting of two molecules of
hydrochloric acid components that associated with the
same chemical species
“dry lab” a laboratory for making computer simulations or for data
analysis especially by computers
“dynamic cluster” a server cluster that uses weights and workload
management to balance the workloads of its cluster
members dynamically and automatically, based on the
workload requirements and performance information that
is collected from the cluster members, which is
particularly useful for machine learning workloads that
may have variable resource demands
“ECL” electrogenerated chemiluminescence, the process where
species generated at electrodes undergo electron-transfer
reactions to form excited states that emit light
“efficacy” the beneficial change resulted from a given intervention
(vaccination and medicine)
“fast-follower” synthesizing analogs of an existing drug in the hope of
obtaining a compound with at better profile than the
starting drug
“FEP” free energy perturbation, the approach to predict the
binding strength between the candidate molecules and
their biological target
“first-principles” the fundamental concepts or assumptions on which a
theory, system, or method is based
“first-principles calculation” a method to calculate physical properties directly from
basic physical quantities, such as the mass and charge,
and the electrostatic force of an electron, based on the
principle of quantum mechanics
GLOSSARY OF TECHNICAL TERMS
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“force field” a collection of equations and associated constants
designed to reproduce molecular geometry and selected
properties of tested structures
“fragment growth” the most commonly used strategy to grow fragments into
compounds with higher molecular weights and higher
potencies
“fragment linkage” a popular strategy where two fragments binding to
different sub-pockets of a target are linked together
“GLP” Good Laboratory Practice, a quality management system
concerned with the organizational process and the
conditions under which non-clinical health and
environmental safety studies are planned, performed,
monitored, recorded, archived and reported
“GMP” Good Manufacturing Practice, the practices required in
order to conform to the guidelines recommended by
agencies that control the authorization and licensing of
the manufacture and sale of products
“GPCR” G protein-coupled receptors, integral membrane proteins
containing an extracellular amino terminus, seven
transmembrane /H9251-helical domains, and an intracellular
carboxy terminus, which recognize a wide variety of
signals ranging from photons to ions, proteins,
neurotransmitters, and hormones
“GPU” graphic processing unit, a specialized electronic circuit
designed to rapidly manipulate and alter memory to
accelerate the creation of images
“generative AI” a form of AI capable of generating new content, such as
text, images, or other media, using generative models.
Generative AI models learn the patterns and structure of
their input training data and then generate new data that
has similar characteristics
“hERG” human ether-a-go-go-related gene, a gene (KCNH2) that
codes for a protein known as Kv11.1, the alpha subunit of
a potassium ion channel
GLOSSARY OF TECHNICAL TERMS
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“high-throughput” describing a process that is scaled up, usually via
increased levels of automation using robots
“High-throughput screening” or
“HTS”
a drug discovery process that uses automated equipment
to rapidly test thousands to millions of samples for
biological activity at the model organism, cellular,
pathway, or molecular level
“hit” or “hit molecules” the output of a compound screen, which has been
demonstrated to have specific activity at the target
protein
“homologous isoforms” isoforms that are generated from the same gene but with
distinct amino acid sequences and biological roles
“hybridoma” a culture of hybrid cells that results from the fusion of B
cells and myeloma cells
“hygroscopicity” the tendency of a solid substance to absorb moisture from
the surrounding atmosphere
“immunogenicity” the ability of a particular substance, such as an antigen, to
provoke an immune response in the body of a human and
other animal
“immunometabolism” an emerging field that focuses on the role of cellular
metabolism in the regulation of immune cells
“immunotherapy” use of the immune system to treat disease
“indication” a valid reason to use a specific test, drug, device,
procedure or surgery
“intelligent robot scientists with
AI brain”
AI-powered robots that can reason like a human scientist
and perform independent experiments to test hypotheses
and interpret findings with minimal human guidance
“in situ ” in the original place, or the place where something should
be
“in silico ” conducted or produced by means of computer modeling
or computer simulation
GLOSSARY OF TECHNICAL TERMS
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“in vitro ” within in the glass, studies that are conducted using
components of an organism that have been isolated from
their usual biological surroundings, such as
microorganisms, cells, or biological molecules
“in vivo ” within the living, studies in which the effects of various
biological entities are tested on whole, living organisms
or cells, usually animals, including humans, and plants,
as opposed to a tissue extract or dead organism
“IND” investigational new drug, the application for which is the
first step in the drug review process by regulatory
authorities to decide whether to permit clinical trials
“IRAK4” interleukin-1 receptor-associated kinase 4, an essential
component of the signal transduction complex
downstream of the IL-1- and Toll-like receptors
“isoforms” any of two or more functionally similar proteins that have
a similar but not identical amino acid sequence and are
either encoded by different genes or by RNA transcripts
from the same gene which have had different exons
removed
“kJ/mol” kilojoule per mole
“LaaS” or “Lab-as-a-Service” a service that enables test teams to conduct research and
development experiments in virtual labs without having
to buy lab infrastructure
“lead” or “lead molecule” chemical compound that exhibits biological or
pharmacological properties with therapeutic
characteristics
“LIMS” laboratory information management system, a software-
based system that enables companies to effectively
manage laboratory and associated data in order to
improve lab efficiency
“large language model” or
“LLM”
large language machine learning model, an AI algorithm
that uses deep learning techniques and massively large
data sets to understand, summarize, generate and predict
new content
GLOSSARY OF TECHNICAL TERMS
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“machine learning” or “ML” the scientific study of algorithms and statistical models
that computer systems use to effectively perform specific
tasks without being explicitly programmed to do so
“MD” molecular dynamics, a computational simulation method
to understand the movement of particles in a system
“mg/L” milligrams per liter
“MicroED” microcrystal electron diffraction, an emerging technique
in structural biology in which micro- or nanosized
crystals are studied in the transmission electron
microscope under cryogenic conditions
“molecular hybrid” a new concept in drug design and development based on
the combination of pharmacophoric moieties of different
bioactive substances to produce a new hybrid compound
with improved affinity and efficacy, and reduced
undesired side effects
“molecular mechanics” or “MM” an empirical method for calculation of properties of
molecules which goes beyond molecular geometry,
involving heat of formation, strain energy, dipole
moment, and vibrational frequencies
“molecular simulations” computer simulation with atoms and/or molecules
interacting using some basic laws of physics
“monotherapy” therapy that uses a single drug to treat a disease or
condition
“NGS” next-generation sequencing, a technology for
determining the sequence of DNA or RNA to study
genetic variation associated with diseases or other
biological phenomena
“new materials” any new or significantly improved material that provides
a distinct advantage in (physical or functional)
performance when compared to conventional materials
“node pool” a group of nodes within a cluster that share the same
configuration, which can be used to quickly create,
manage, and destroy nodes without affecting the cluster
GLOSSARY OF TECHNICAL TERMS
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“orthogonal validation” an enhanced validation method where the antibody
staining is verified by a non-antibody based method
“PCC” pre-clinical candidate
“PCT” Patent Cooperation Treaty
“pharmacodynamic” or “PD” the branch of pharmacology concerned with the effect of
drugs and their action on the body
“pharmacokinetics” or “PK” the branch of pharmacology concerned with the
movement of drugs within the body, including bodily
absorption, distribution, metabolism, and excretion of
drugs, which, together with pharmacodynamics,
influences dosing, benefit, and adverse effects of the drug
“Phase I clinical trial” study in which a drug is introduced into healthy human
subjects or patients with the target disease or condition
and tested for safety, dosage tolerance, absorption,
metabolism, distribution, excretion, and if possible, to
gain an early indication of its effectiveness
“Phase II clinical trial” study in which a drug is administered to a limited patient
population to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product
for specific targeted diseases, and to determine dosage
tolerance and optimal dosage
“PI3K” one or more phosphoinositide 3-kinase enzymes, which
are part of the PI3K/AKT/mTOR pathway, an important
signaling pathway for many cellular functions, such as
growth control, metabolism and translation initiation
“polymorphic risk” the risk of unanticipated late-appearing polymorphs
“polymorphism” the phenomenon in which a solid chemical compound
exists in more than one crystalline form, which such
forms have identical solutions and vapours but have
slightly different physical and, in some cases, chemical
properties
“PoC” proof-of-concept
GLOSSARY OF TECHNICAL TERMS
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“PROTAC” Proteolysis-targeting chimera, a heterobifunctional small
molecule composed of two active domains and a linker,
which is capable of removing specific unwanted proteins
“pre-clinical studies” studies or programs testing a drug on non-human
subjects, to gather efficacy, toxicity, pharmacokinetics
and safety information and to decide whether the drug is
ready for clinical trials
“protein sequence” the arrangement of amino acids in a protein
“PTEN” phosphatase and tensin homolog gene, one of the most
frequently inactivated tumor suppressor genes in cancer
“QSAR” quantitative structure-activity relationship, a way of
mapping the way a molecule is linked with a process,
such as biological activity or chemical reactivity
“quantum computer(s)” a new type of computers, which directly utilize quantum
mechanics in the design and construction of the hardware
and the algorithms of the supercomputers, with the
intended benefits of vastly increasing the speed and
efficiency of computing
“quantum computing” a multidisciplinary field comprising aspects of computer
science, physics, and mathematics that utilizes quantum
mechanics to solve complex problems faster than on
classical computers
“Quantum Mechanics” or “QM” the branch of physics that deals with the mathematical
description of the behaviors of particles at the atomic and
subatomic levels, providing a framework for
understanding the behaviors of atoms, molecules, and
subatomic particles, which is a key component of
quantum computing
“quantum physics” the study of matter and energy at the most fundamental
level, aiming to uncover the properties and behaviors of
the very building blocks of nature, including various
subfields such as quantum mechanics, quantum field
theory, and quantum electrodynamics
GLOSSARY OF TECHNICAL TERMS
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“quantum physics-based
computation”
the computational method that utilizes quantum physics
to study and predict the properties and behaviors, ab
initio , of materials at atomic or molecule level
“R&D” research and development
“R-group substitution” the substitution of any group in which a carbon or
hydrogen atom is attached to the rest of the molecule
“RNA” ribonucleic acid, a polymeric molecule essential in
various biological roles in coding, decoding, regulation
and expression of genes
“scaffold” the core structure of a molecule, compound or series
“scaffold hopping” computer-aided search for active compounds containing
different core structures
“selectivity” the ability of a drug to affect a particular cell population
in preference to others
“SMILES” simplified molecular-input line-entry system, a chemical
notation that allows a user to represent a chemical
structure in a way that can be used by the computer
“solvent” any substance, usually liquid, which is capable of
dissolving one or several substances, thus creating a
solution
“sq.m.” square meter
“structure-activity relationships”
or “SAR”
a method to investigate the qualitative association
between pharmacophore or chemical moieties or
functional groups present in the active ligand compound
and their desired pharmacological activity
“swarm robotics” a novel approach to the coordination of large numbers of
relatively simple robots which takes its inspiration from
social insects
“solid-state R&D” the research and development of the physical and
chemical properties of solid-state materials
GLOSSARY OF TECHNICAL TERMS
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“vaccine” a biological preparation that provides active acquired
immunity to a particular disease
“wet lab” a laboratory equipped with appropriate plumbing,
ventilation, and equipment to allow for hands-on
scientific research and experimentation
“XFEP” an FEP prediction platform that can evaluate the binding
affinity between candidate molecules and their biological
target at scale, from which false positives can be filtered
out before conducting wet lab experiments
“XFF” XForce Field, a next-generation general molecular force
field platform for drug or new materials discovery and
development
“XPose” a binding pose prediction technique combining with the
advantages of different sampling and evaluation
algorithms to predict the binding pose of small molecule
target-ligand more accurately
GLOSSARY OF TECHNICAL TERMS
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We have included in this prospectus forward-looking statements. Statements that
are not historical facts, including statements about our intentions, beliefs, expectations
or predictions for the future, are forward-looking statements.
This prospectus and the documents incorporated by reference herein may contain certain
forward-looking statements and information relating to our Company and our subsidiaries that
are based on the beliefs of our management as well as assumptions made by and information
currently available to our management. When used in this prospectus, the words “aim,”
“anticipate,” “believe,” “could,” “expect,” “going forward,” “intend,” “may,” “ought to,”
“plan,” “project,” “seek,” “should,” “will,” “would” and the negative of these words and other
similar expressions, as they relate to our Group or our management, are intended to identify
forward-looking statements. Such statements reflect the current views of our management with
respect to future events, operations, liquidity and capital resources, some of which may not
materialize or may change. These statements are subject to certain risks, uncertainties and
assumptions, including the other risk factors as described in this prospectus. Y ou are strongly
cautioned that reliance on any forward-looking statements involves known and unknown risks
and uncertainties. The risks and uncertainties facing our company which could affect the
accuracy of forward-looking statements include, but are not limited to, the following:
 our business prospects;
 future developments, trends and conditions in the industries and markets in which
we operate;
 our strategies, plans, objectives and goals and our ability to successfully implement
these strategies, plans, objectives and goals;
 general economic, political and business conditions in the markets in which we
operate;
 changes to the regulatory environment and general outlook in the industries and
markets in which we operate;
 our financial condition and operating results and performance;
 the effects of the global financial markets and economic crisis;
 our ability to reduce costs and offer competitive prices;
 our ability to attract customers and build our brand image;
 our dividend policy;
FORW ARD-LOOKING STATEMENTS
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 our ability to attract and retain senior management and key employees;
 the amount and nature of, and potential for, future development of our business;
 capital market developments;
 the actions and developments of our competitors;
 change or volatility in interest rates, foreign exchange rates, equity prices, volumes,
operations, margins, risk management and overall market trends;
 certain statements in “Business” and “Financial Information” with respect to trends
in prices, operations, margins, overall market trends, and risk management; and
 other statements in this prospectus that are not historical facts.
This prospectus also contains market data and projections that are based on a number of
assumptions. The markets may not grow at the rates projected by the market data, or at all. The
failure of the markets to grow at the projected rates may materially and adversely affect our
business and the market price of our Shares. In addition, due to the rapidly changing nature of
the PRC economy and the AI-powered drug and materials R&D service industry, projections
or estimates relating to the growth prospects or future conditions of the markets are subject to
significant uncertainties. If any of the assumptions underlying the market data prove to be
incorrect, actual results may differ from the projections based on these assumptions. Y ou
should not place undue reliance on these forward-looking statements.
We do not guarantee that the transactions and events described in the forward-looking
statements in this prospectus will happen as described, or at all. Actual outcomes may differ
materially from the information contained in the forward-looking statements as a result of a
number of factors, including, without limitation, the risks and uncertainties set forth in “Risk
Factors” in this prospectus. Y ou should read this prospectus in its entirety and with the
understanding that actual future results may be materially different from what we expect. The
forward-looking statements made in this prospectus relate only to events as of the date on
which the statements are made or, if obtained from third-party studies or reports, the dates of
the respective studies or reports. Since we operate in an evolving environment where new risks
and uncertainties may emerge from time to time, you should not rely upon forward-looking
statements as predictions of future events. We undertake no obligation, beyond what is required
by law, to update any forward-looking statement to reflect events or circumstances after the
date on which the statement is made, even when our situation may have changed.
FORW ARD-LOOKING STATEMENTS
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An investment in our Shares involves significant risks. Y ou should carefully
consider all of the information set out in this prospectus, including the risks and
uncertainties described below, before making an investment in our Shares.
Particularly, we are a Pre-Commercial Company seeking to list on the Main Board of
the Stock Exchange under Chapter 18C of the Listing Rules. Our operations and the
specialist technology industry in which we operate involve certain risks and
uncertainties, some of which are beyond our control and may cause you to lose all your
investments in our Shares.
The following is a description of what we consider to be our material risks. Our
business, financial condition and results of operations could be materially and
adversely affected by any of these risks and uncertainties. The trading price of our
Shares could decline due to any of these risks, and you may lose all or part of your
investment. These factors are contingencies that may or may not occur, and we are not
in a position to express a view on the likelihood of any such contingency occurring. The
information given is as of the Latest Practicable Date unless otherwise stated, will not
be updated after the date hereof, and is subject to the cautionary statements in
“Forward-looking Statements.”
There are certain risks and uncertainties involved in our operations, some of which are
beyond our control. We have categorized these risks and uncertainties into: (i) risks related to
our research and development, (ii) risks related to the commercialization of our solutions and
services, (iii) risks related to our operations, (iv) risks related to our intellectual property, (v)
risks related to our financial prospects and need for additional capital, (vi) risks related to
doing business in the jurisdictions we operate, and (vii) risks related to the Global Offering.
Additional risks and uncertainties that are presently not known to us or not expressed or
implied below or that we currently deem immaterial could also harm our business, financial
condition and results of operations. Y ou should consider our business and prospects in light of
the challenges we face, including those discussed in this section.
RISKS RELATED TO OUR RESEARCH AND DEVELOPMENT
Our commercial success depends on our closed-loop integrated technology platform and
technological capabilities, and their acceptance by our customers and collaborators.
Failure to maintain our technological advantages or gain market acceptance of our
platform or technology may have a material and adverse impact on our commercial
success.
We utilize our closed-loop integrated technology platform to facilitate our R&D
activities, such as computational predictions and experimental assessments on the
physiochemical and pharmaceutical properties of small- and large-molecule candidates,
solid-form selection, and other critical aspects of drug and material science R&D. As a result,
the quality, sophistication and efficiency of our platform and technologies is critical to our
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ability to conduct discovery and research activities, deliver more promising molecules, perform
accurate solid-state R&D studies, and ultimately to accelerate and lower the costs of drug and
material science R&D as compared to traditional manual methods. In particular, the successful
performance of our platform and technologies depends, among other things, on:
 the relative reliability and robustness of our platform;
 whether our platform reliably provides advantages over legacy and other alternative
technologies and is perceived by customers and collaborators to be cost-effective;
 our platform’s ability to successfully identify molecules with the optimal properties
in given conditions on the desired timeframes that can ultimately be used for basis
of drug and material science R&D and patent protection;
 our ability to develop new solutions for our customers and collaborators;
 our ability to constantly upgrade, advance and innovate our platform and
technologies;
 our ability to keep abreast of technology and industry trends and continue to
advance our integrated platform;
 our ability to enhance the capabilities of our AI-powered intelligent robotic wet lab,
boost automation and increase the throughput, improve efficiency and enhance
reproducibility of the wet lab experimentation;
 if our competitors can develop a platform that performs AI-powered computational
predictions at a greater accuracy and efficiency than us;
 our ability to increase brand awareness of the capabilities of our technology and
solutions;
 our customers’ and collaborators’ willingness to adopt our new technologies,
solutions and services;
 the rate of adoption of our solutions by pharmaceutical companies, biotechnology
companies of all sizes, academic and research institutions and others; and
 market sentiment regarding the accuracy and security of our technologies and data.
There can be no assurance that we will successfully address any of these or other factors
that may affect the market acceptance of our platform or technologies. If we are unsuccessful
in achieving and maintaining market acceptance of our platform and technological capabilities,
our business, financial condition, results of operations and prospects could be adversely
affected.
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The industries that we operate in are characterized by constant changes. If we are not
able to upgrade, enhance or innovate our technologies and solutions, our business could
be adversely affected.
Our businesses operate in industries that are subject to rapid technological advancements,
regulatory changes, and evolving customer needs and preferences. In order to remain
competitive and responsive to customer demands, we continually upgrade, enhance, and
innovate our existing technologies and solutions. If we fail to respond successfully to
technological challenges and customer needs and preferences, the demand for our solutions and
services may diminish. We will also need to enhance and create new features and
functionalities of our technologies and solutions to enhance their utility to our customers and
adapt to evolving customer preferences, in order to retain existing customers and attract new
customers. If we are unable to provide new features or applications for our technologies and
solutions, our solutions or services may lose market acceptance or fail to keep pace with rapid
technological developments, which could have material adverse effect on our business,
financial condition, results of operations, and reputation. In addition, the success of our
enhancements and innovation depends on several factors, such as continuous investment,
timely introduction and completion of such enhancements or innovations. Failure to do so may
significantly impair our business and future growth.
We intend to continue investing significantly in R&D, which may adversely impact our
profitability and operating cash flow in the short-term and may not generate the results
we expect to achieve.
To compete successfully, we must maintain successful R&D efforts, upgrade and innovate
our technologies, and improve or develop new solutions and services, all ahead of any
competitors. We are focusing our R&D efforts across several technologies, including quantum
physics-based computation, AI, high performance cloud computing, and automation
technologies. We have been investing heavily in our R&D efforts, with R&D expenditure
increasing from RMB214.4 million in 2021 to RMB359.0 million in 2022 and further to
RMB480.3 million in 2023, accounting for approximately 52.4%, 53.5% and 49.8% of our total
operating expenditure in the same years, respectively. The industries in which we operate are
subject to rapid technological changes and are evolving quickly in terms of technological
innovation. We need to invest significant resources, including financial and human resources,
in R&D to achieve technological advancements in order to improve and expand our services
to keep us innovative and competitive in the markets in which we operate. As a result, there
is no assurance that our R&D expenses will not continue to increase significantly, which may
adversely impact our profitability and operating cash flow in the short-term.
Furthermore, we cannot guarantee that our R&D efforts will deliver the benefits we
anticipate or be recognized as expected. R&D activities are inherently uncertain, and we may
not be able to obtain and retain sufficient resources, including qualified R&D personnel. Even
if we succeed in our R&D efforts and generate the results we expect, we may still encounter
practical difficulties in commercializing our R&D results. Given the fast pace of development
in the markets in which we operate, we may not be able to timely upgrade or innovate our
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technologies in an efficient and cost-effective manner, or at all. New technologies in the
industry could render our technologies and the technological infrastructure or services that we
are developing or expect to develop in the future obsolete or unattractive, thereby limiting our
ability to recover the related R&D costs, which could result in a decline in our revenue,
profitability and market share.
Additionally, our R&D efforts may not contribute to our future results of operations for
several years, if at all, and such contributions may not meet our expectations or even cover the
costs of the R&D efforts, which would materially and adversely affect our business, results of
operations, financial condition and competitive position.
We may not be able to identify or discover new product candidates, and may allocate our
limited resources to pursue a particular product candidate and fail to capitalize on
product candidates that may later prove to be more profitable, or for which there is a
greater likelihood of success.
As we will continue to focus part of our R&D efforts on drug discovery and pre-clinical
studies, our success depends in part upon our ability to identify, discover and design new
product candidates for our customers and collaborators. Research programs to identify,
discover and design new product candidates require substantial technical, financial, and human
resources, among others. Our research programs may initially show promise in identifying
potential product candidates, yet fail to yield product candidates for clinical development for
a number of reasons, including that potential product candidates may not be effective in
treating their targeted diseases.
Because we have limited financial and managerial resources, we focus on research
programs and product candidates for specific targets. As a result, we may forgo or delay pursuit
of opportunities with other product candidates that later may be proved to have greater
commercial potential or a greater likelihood of success. On the other hand, if we do not
prioritize the allocation of our resources and conduct research programs that cover a broad
range of targets or engage research programs that are overly expansive, we may be subject to
significant risk of loss. Our resource allocation decisions may cause us to fail to capitalize on
viable commercial products or profitable market opportunities. Accordingly, there can be no
assurance that we will be able to develop suitable potential product candidates, which could
materially and adversely affect our future growth and prospects.
In addition, our scientific approach focuses on using our integrated platform technology
and leveraging our deep understanding of quantum physics modeling and computation to
design molecules and predict their critical properties to prioritize a small set of molecules with
potentially optimal property profile for time-consuming and expensive chemical synthesis and
physical experiments. While the results of certain of our drug discovery customers’ or
collaborators’ programs suggest that our platform is capable of accelerating drug discovery and
identifying high quality product candidates, these results do not assure future market viability
and commercial success.
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Even if our drug discovery customers or collaborators are able to develop product
candidates that demonstrate potential in pre-clinical studies, such product candidates may not
succeed in demonstrating their safety and efficacy in clinical trials by our customers or
collaborators. Moreover, pre-clinical and clinical data are often susceptible to varying
interpretations and analyses, and many companies that have believed their product candidates
performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to
obtain marketing approval of their product candidates. Failure to obtain approval for such
product candidates could render our R&D efforts futile, affect the commercial viability of our
customers or collaborators’ product candidates, and may in turn materially and adversely affect
our business, financial condition, results of operations and prospects.
If our current research collaborators or key R&D employees terminate their relationships
with us or develop relationships with a competitor or delay their delivery of adequate
research results, our ability to conduct R&D, the progress of our R&D programs, and our
ability to protect our IP could be adversely affected.
In advancing our integrated technology platform and improving our capabilities in
providing drug and material science R&D and intelligent automation solutions, we work with
a number of research collaborators and key R&D employees. There can be no assurance that
there will not be a detrimental impact on us if one or more of these research collaborators and
key R&D employees were to cease their relationship with us or as a result of their collaboration
with competitors. As a result, this may adversely affect our ability to advance our integrated
technology platform and further develop our drug and material science R&D and intelligent
automation solutions.
Furthermore, our ability to continue to conduct and expand operations depends on our
ability to attract and retain a large and growing number of key R&D personnel. The ability to
meet our expertise needs, including the ability to find qualified personnel to fill positions that
become vacant in our R&D department, while controlling our costs, is generally subject to
numerous external factors, including the availability of a sufficient number of qualified persons
in the market, prevailing wage rates, changing demographics, health and other insurance costs,
and the adoption of new or revised employment and labor laws and regulations. If we are
unable to locate, attract or retain qualified R&D personnel, our technological capabilities and
quality of services provided to customers or collaborators may decrease, our competitive
advantage may be impaired, and our financial performance may be adversely affected.
In addition, collaborative relationships in our industry can be complex, particularly with
respect to IP rights. Although our research collaborators are generally bound by agreements
with us not to disclose our confidential information, any breach of such confidentiality
obligation could cause leakage of valuable proprietary knowledge to the public, third parties
or even our competitors, which would compromise our competitive advantage and adversely
affect our results of operations in a significant manner. Disputes may arise in the future
regarding ownership rights to technology developed by or with other parties. These and other
possible disagreements between us and third parties with respect to our IP rights or our
collaborative relationships could lead to delays in the research, development or
commercialization of the product candidates we design or discover. These disputes could also
result in litigation or arbitration, both of which are time-consuming and costly.
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There is also no assurance that our research collaborators or key R&D employees would
deliver adequate research results to support our R&D. In particular, although the contracts with
our research collaborators generally set out research goals and specific program requirements,
it is possible that the research partners may face significant delays or difficulties in conducting
research or may be unable or unwilling to complete the research due to the limit of their
research capabilities, the unpredictability of research results, and other potential restraints in
research programs. As a result, they may not be able to deliver the anticipated R&D results,
leading to a partial or complete failure of the research program. Failure to complete such
research as planned may delay the product developments by our customers or collaborators,
which could harm our competitive strength as well as results of operations.
In addition, if costs of labor to attract or retain key R&D personnel or related costs to
maintain relationships with research collaborators increase for other reasons, or if new or
revised labor laws, rules or regulations or healthcare laws are adopted or implemented that
further increase labor costs, our business, financial condition and results of operations could
be materially adversely affected.
The data and information that we gather in our R&D process could be inaccurate or
incomplete, which could harm our business, reputation, financial condition and results of
operations.
We collect, aggregate, process, and analyze data and information from our drug and
material science R&D activities. Because data in the AI-powered drug and material science
R&D is fragmented in origin, inconsistent in format, and often incomplete, the overall quality
of data collected or accessed in the healthcare industry is often subject to challenge, the degree
or amount of data which is knowingly or unknowingly absent or omitted can be material, and
we may discover data issues and errors when monitoring and auditing the quality of our data.
If we make mistakes in the capture, input, or analysis of these data, our ability to provide
high-quality drug and material science R&D services may be materially harmed and our
business, prospects and reputation may suffer.
In addition, we may collaborate with other third parties to monitor and manage data for
some of our ongoing pre-clinical studies and other future programs and control only certain
aspects of their activities. If any of these third parties does not perform to our standards in
terms of data accuracy or completeness, data from those pre-clinical studies and other future
programs may be compromised as a result, and our reliance on these parties may expose us to
regulatory or other liabilities, which may materially and adversely affect our business,
reputation, financial condition and results of operations.
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RISKS RELATED TO THE COMMERCIALIZATION OF OUR SOLUTIONS AND
SERVICES
We have a limited operating history, which may make it difficult to evaluate our current
business and predict our future performance.
We have a limited operating history. Since our inception in 2015, we have been focused
on building our closed-loop integrated technology platform with both dry lab and automated
robotic wet lab capabilities, and establishing our capability in AI-powered drug and material
science R&D. We generate revenue primarily from the provision of (i) drug discovery solutions
and (ii) intelligent automation solutions, comprising primarily solid-state R&D services and
automated chemical synthesis services.
Our operations to date have focused on providing drug and material science R&D,
enhancing our integrated technology platform, and building our IP portfolio. These operations
provide a limited basis for you to assess our ability to successfully market and commercialize
our solutions and services. Consequently, predictions about our future success or viability may
not be as accurate as they could be if we had a longer operating history. We will encounter risks
and difficulties frequently experienced by early-stage companies in rapidly evolving fields. If
we do not address these risks and difficulties successfully, we may not be successful in our
future business and operations.
In addition, we have a limited operating history compared to some of our competitors, and
certain of our solutions and services are still at various stages of development. As a result of
our limited operating history, and particularly in light of the rapidly evolving and competitive
nature of our industries, it may be difficult to evaluate our current business and reliably predict
our future performance based on our historical performance. Our historical results may not
provide a meaningful basis for evaluating our business, results of operations, financial
condition, or prospects. We may encounter unforeseen expenses, difficulties, complications,
delays and other known and unknown factors, and may not be able to achieve promising results
in future periods. If we cannot address these risks and overcome these difficulties successfully,
our business and prospects will suffer.
Our historical performance may not be indicative of our future growth, and we may not
be able to sustain similar growth in the future.
We have experienced rapid growth since our inception in 2015. Our revenue increased
from RMB62.8 million in 2021 to RMB133.4 million in 2022, and further to RMB174.4
million in 2023. However, you should not rely on the revenue growth of any prior period as
an indication of our future performance, as our growth in a relatively short period of time is
not necessarily indicative of results that we may achieve in the future. There are a wide array
of factors that will affect our performance and growth, including our customers’ budget and
R&D demand, the overall economy, market acceptance of our solutions and services,
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competitive differentiated technologies in the market, and pricing pressures exerted by our
competitors, many of which are beyond our control. We cannot assure you that we will be able
to maintain our growth at the same rate as we did in the past, or avoid any decline in the future.
The size of our addressable markets and the demand for our solutions and services may
not increase as rapidly as we anticipate due to a variety of factors, which could materially
and adversely affect our business, results of operations, financial condition and prospects.
We are pursuing opportunities in markets that are undergoing rapid changes, including
technological and regulatory changes, and it is difficult to predict the timing and size of the
opportunities for our key specialist technology services. See “—Risks Related to Our Research
and Development—The industries that we operate in are characterized by constant changes. If
we are not able to upgrade, enhance or innovate our technologies and solutions, our business
could be adversely affected.”
This prospectus contains estimates and forecasts concerning our industries, including
estimates of the addressable markets of our current and anticipated future solutions and
services, that are based on industry publications and reports or other publicly available
information as well as our internal estimates and expectations. These estimates and forecasts
involve a number of assumptions and limitations, and are subject to significant uncertainty, and
you are cautioned not to give them undue weight. Industry surveys and publications generally
state that the information contained therein has been obtained from sources believed to be
reliable, but there can be no assurance as to the accuracy and completeness of the included
information. We have not independently verified this third-party information. Similarly, our
internal estimates and forecasts are based on a variety of assumptions, including assumptions
regarding market acceptance of the various technologies and solutions in connection with drug
and material science R&D as well as intelligent automation. While we believe our assumptions
and the data underlying our estimates and forecasts are reasonable, these assumptions and
estimates may not be correct and the conditions supporting our assumptions or estimates may
change at any time, thereby reducing the predictive accuracy of these underlying factors. As
a result, our estimates and forecasts may prove to be incorrect. If third-party or internally
generated data prove to be inaccurate or we make errors in our assumptions based on that data,
the addressable markets for our solutions and services may be smaller than we have estimated,
our future growth opportunities and sales growth may be smaller than we estimate, and our
future business, results of operations and financial condition may be materially and adversely
affected.
Our future financial performance will depend on our ability to make timely investments
to seize the correct market opportunities. If one or more of these markets experience a shift in
customer demand, our solutions and services may not compete as effectively, or at all. Given
the evolving nature of the markets in which we operate, it is difficult to predict customer
demand for or market acceptance of our solutions and services or the future growth of the
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markets in which we operate. Even if our addressable markets grow substantially, there is no
guarantee that demand for our solutions and services will correlate with that growth. There is
also no guarantee that our business will be successful simply because of the growing trends of
our addressable markets.
The markets in which we participate are competitive, and if we do not compete effectively,
our business and results of operations could be adversely affected.
The global markets for AI-powered drug and material science R&D are rapidly evolving
and subject to intense competition as a result of changing technology innovation and shifting
customer needs. Given our presence in China and globally, we face potential competition from
many different sources both locally and globally, while the solutions and applications offered
by our competitors vary in size, breadth, and scope, including both AI-powered and traditional
drug and material science R&D service providers.
Our drug discovery solutions business faces competition from many sources, including
major pharmaceutical, specialty biotechnology companies, technology companies, academic
institutions and government agencies, and public and private research institutions. In
particular, we face competition from competitors in the business of conducting AI-powered
early-stage drug design and discovery. In some cases, these competitors possess well-
established capabilities in drug R&D and have long-standing relationships with many of our
current and potential customers and collaborators, including large biotechnology and
pharmaceutical companies and academic institutions. We also face competition from
biotechnology and pharmaceutical companies that develop AI-powered drug R&D solutions
internally, smaller companies that offer drug R&D solutions directed at more specific markets
than we target, as well as a large number of market entrants with the goal of applying AI and
computational technologies to drug R&D.
Our intelligent automation solutions business faces competition from competitors
providing solid-state R&D services and automated chemical synthesis services, including
AI-focused technology company, like us, specialized solid-state CROs, or other large CROs.
We also face competition from pharmaceutical companies that develop solid-state R&D
internally. We may also face competition from companies engaged in automation business in
the future.
Many of our competitors may be able to devote greater resources to the development,
promotion, and sale of their solutions and services. In addition, third parties with greater
available resources and the ability to initiate or withstand substantial price competition could
acquire our current or potential competitors. Our competitors may also establish cooperative
relationships among themselves or with third parties that may further enhance their solutions
and/or service offerings or resources. If (i) our competitors’ solutions, services, or technologies
become more accepted than ours; (ii) our competitors are successful in bringing their solutions
or services to market earlier than ours; (iii) our competitors are able to respond more quickly
and effectively to new or changing opportunities, technologies, or customer requirements; or
(iv) their solutions or services are more technologically capable than ours, then our revenue
could be adversely affected.
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We may also be required to decrease our prices or modify our pricing practices in order
to attract new customers or retain customers due to increased competition. Pricing pressures
and increased competition could result in reduced sales or margins, losses, or a failure to
maintain or improve our competitive market position, any of which could adversely affect our
business.
We have limited experience in the commercialization of our solutions and services.
We have relatively limited experience in launching, commercializing, sales and marketing
of our solutions and services. For example, we have limited experience in building a
commercial team, conducting comprehensive market analysis, obtaining licenses and
approvals, or managing the sales force for our solutions and services. Therefore, our ability to
successfully commercialize our solutions and services may involve more inherent risks, take
longer, and cost more than it would if we were a company with more experience in sales and
marketing. In particular, the commercialization of new solutions and services requires
additional resources. The success of our sales and marketing efforts depends on our ability to
attract, motivate and retain qualified and professional employees in our commercialization
team who have, among other things, adequate industry knowledge to communicate effectively
with industry professionals, sufficient experience in sales and marketing of our cutting-edge
solutions and services, and extensive industry connections with biotechnology and
pharmaceutical companies as well as academic and research institutions. Furthermore, along
with our market expansion after the commercialization of our solutions and services, we expect
to hire more employees with relevant industry experience and knowledge to strengthen our
marketing and sales workforce. However, competition for experienced sales and marketing
personnel is intense. If we are unable to attract, motivate and retain a sufficient number of
qualified sales and marketing personnel to support our business, the commercialization of our
solutions and services may be adversely affected. Our business, results of operations, and
prospects may also be adversely affected if our investment and efforts to expand our sales force
do not generate a corresponding increase in revenue.
We may not be able to manage our growth, and failure to do so may adversely and
materially affect our business, financial condition, results of operations, and reputation.
We expect to further grow our business by expanding our service offerings, broadening
our customer base and strengthening our technological capabilities, among others. Our growth
requires significant financial, human and other resources and will continue to place significant
demands on our management. Our current and planned staffing, systems, policies, procedures
and controls may not be adequate to support our future operations. To effectively manage the
expected growth of our business and operations, we will be required to refine our operational,
financial and management controls and reporting systems and procedures. We may not be able
to implement improvements to our systems and procedures in an efficient or timely manner or
at all, and may discover deficiencies in existing systems and controls. In addition, as our
development and commercialization plans and strategies evolve, and as we transition into
operating as a public company, we expect to devote more resources on management,
operational, financial and other related functions. In the future, we also expect to enter into
additional relationships with collaborators or partners, suppliers and other organizations, and
expand our business development team, marketing team and market analysis team in
preparation for commercialization activities. The expansion of our operations or hiring of
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additional personnel may lead to significant costs and divert our management attentions and
development resources. We will also need to purchase additional equipment, some of which can
take several months or more to procure, set up, and validate, and increase our software and
computing capacity to support our growth. There is no assurance that any of these increases in
scale, expansion of personnel, equipment, software and computing capacities or process
enhancements will be successfully implemented.
We are also continually executing a number of growth initiatives, strategies and operating
plans designed to enhance our business, including growing the scale, comprehensiveness and
depth of our existing business, and investing in R&D to build digitalized infrastructure. The
anticipated benefits from these efforts are based on assumptions that may prove to be
inaccurate later.
If we fail to efficiently manage the expansion of our business, our costs and expenses may
increase faster than planned, and we may not successfully attract a sufficient number of
customers in a cost-effective manner, respond timely to competitive challenges, provide quality
services, or otherwise execute our business strategies. A failure in any of these areas could
make it difficult for us to meet market expectations for our solutions and services, and could
damage our reputation and business prospects. Our inability to successfully manage our growth
and expand our operations could have a material and adverse effect on our business, financial
condition, results of operations and prospects.
If we fail to retain existing customers or attract new customers, our business, financial
condition and results of operation will suffer.
We had served more than 300 biotechnology and pharmaceutical companies and academic
and research institutions globally since our inception. We expect to continue to maintain
business relationship with these existing customers by not only providing the current services
but also exploring their evolving needs to cross sell our other services. Our customer retention
rate was approximately 67.5%, 51.4% and 64.9%, respectively, in 2021, 2022 and 2023. We
also intend to further grow our business by attracting new customers, by expanding our global
footprint. As a result, retaining our existing customers and engaging new customers are critical
to our future operating results. Factors that may affect our ability to retain, and cross sell
additional services to, our customers include:
 the demand of our customers for drug discovery solutions and intelligent automation
solutions. In particular, our customers may develop their in-house AI platforms
related to drug discovery and intelligent automation;
 the price, performance, and functionality of our drug discovery solutions and
intelligent automation solutions;
 the availability, price, performance, and functionality of competing solutions and
services;
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 the stability, performance, and security of our technological infrastructure;
 our ability to develop complementary solutions, applications, and services that
combine both computational services and experimental services that are tailored to
our customers’ needs;
 the effectiveness of our solutions and services;
 the success of our upgraded or innovative services or technologies;
 the financial performance, the budget of the R&D activities and the overall business
environment of our customers; and
 the overall business environment of the industry.
We deliver our drug discovery solutions and intelligent automation solutions on a
program-by-program basis. Therefore, our customers have no obligation to enter into new
service agreements after the specified programs are completed. In addition, many of our
service agreements may be terminated or reduced in scope either immediately or upon notice
due to changed plans. In addition, our customers may negotiate terms less advantageous to us
when procuring new services from us, which may reduce our profitability. Factors that are not
within our control may result in a reduction in our revenue or profitability. The loss, reduction
in scope, or delay of large or multiple contracts, could materially and adversely affect our
business.
Our future growth also depends, in part, on our ability to enter into new program
agreements or generate more purchase orders under the existing agreements, which is in turn
dependent on our ability to scale and adapt our drug discovery solutions and intelligent
automation solutions to meet our customers’ evolving needs.
In addition, we generate large unique data sets from our computation and wet lab
experimentation during the provision of our solutions and services. Wherever appropriate, we
use the computation results to inform wet lab experimentation and use the wet lab results as
the basis for training our AI models. As a result, in addition to reduced revenue, the loss of one
or more of these relationships or our inability to render innovative or effective solutions and
services may reduce our access to meaningful data assets, thus hindering our ability to further
our technological differentiation and improve our platform.
We engage in conversations with biotechnology and pharmaceutical companies and
academic and research institutions regarding potential drug discovery solutions and intelligent
automation solutions on an ongoing basis. These conversations may not result in a commercial
agreement. Even if an agreement is reached, the resulting relationship may not be successful,
due to a number of factors, including our customers’ inability to advance the research,
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regulatory fairs or commercialization of such drug product candidates. In such circumstances,
we may not be able to generate substantial revenue from such unsuccessful collaboration,
including service fees, upfront fee, milestone payments, and contingent payments.
Failure of our customers or collaborators to meet their contractual obligations to us could
adversely affect our business.
We have entered into a number of service and collaboration agreements with
biotechnology and pharmaceutical companies, start-ups, and academic and research institutions
under which our customers and collaborators are pursuing research in a number of therapeutics
areas. Such relationships pose a number of risks, including the risk that they may not perform
their contractual obligations to our standards, in compliance with applicable legal or
contractual requirements, in a timely manner or at all; they may not maintain the
confidentiality of our proprietary information; and disagreements or disputes could arise that
could cause delays in, or termination of, the research, development or commercialization of the
relevant technologies or products using our technologies or result in litigation or arbitration.
In addition, certain of our customers and collaborators run many programs concurrently,
and we are dependent on their ability to accurately track and make milestone payments to us
pursuant to the terms of our agreements with them. Any failure by them to inform us when
milestones are reached and make related payments to us could adversely affect our results of
operations. Our financial success depends upon the creditworthiness and ultimate collection of
amounts due from our customers and collaborators, including our smaller-scale counterparties
with fewer financial resources. If we are not able to collect amounts due from our customers
and collaborators, we may be required to write-off significant accounts receivable and
recognize bad debt expenses, which could materially and adversely affect our operating results.
Moreover, some of our customers and collaborators are located in markets that may be
subject to political and social risk, corruption, infrastructure problems and natural disasters,
and are often subject to country-specific privacy and data security risk as well as burdensome
legal and regulatory requirements. Any of these factors could adversely impact their financial
condition and results of operations, which could impair their ability to meet their contractual
obligations to us, which may have a material adverse effect on our business, financial condition
and results of operations.
If our customers or collaborators are unable to successfully complete clinical
development, obtain regulatory approval for, or commercialize any product candidates,
or experience delays in doing so, our business may be materially harmed.
The success of our customers’ and collaborators’ development and commercialization
programs will depend on several factors, including:
 successful completion of our pre-clinical studies to enable the initiation of clinical
trials;
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 successful enrollment of patients in, and the completion of, the clinical trials;
 acceptance by the FDA, NMPA or other regulatory agencies of regulatory filings for
any product candidates that we discover and design and our customers or
collaborators may develop;
 expanding and maintaining a workforce of experienced scientists and others to
continue to develop any product candidates;
 obtaining and maintaining IP protection and regulatory exclusivity for any product
candidates that we discover and design and our customers or collaborators may
develop;
 making arrangements with third-party manufacturers for, or establishing, clinical
and commercial manufacturing capabilities;
 establishing sales, marketing, and distribution capabilities for drug products and
successfully launching commercial sales, if and when approved;
 acceptance of any product candidates that we discover and design and our customers
or collaborators may develop, if and when approved, by patients, the medical
community, and third-party payors;
 effectively competing with other therapies;
 obtaining and maintaining coverage, adequate pricing, and adequate reimbursement
from third-party payors, including government payors;
 patients’ willingness to pay out-of-pocket in the absence of coverage and/or
adequate reimbursement from third-party payors; and
 maintaining a continued acceptable safety profile following receipt of any
regulatory approvals.
Many of these factors are beyond our control, including clinical outcomes, the regulatory
review process, potential threats to our IP rights, and the manufacturing, marketing, and sales
efforts of any customers or collaborators. Clinical drug development involves a heavily
regulated, lengthy and expensive process, with an uncertain outcome. If our customers or
collaborators are unable to develop, receive marketing approval for, and successfully
commercialize any product candidates that we discover and design, or if they experience delays
as a result of any of these factors or otherwise, we may not be able to receive milestone
payments and royalties, which would adversely affect our business, prospects, financial
condition, and results of operations.
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If we are unable to increase the sales of our solutions and services, or if our customers and
collaborators are unable to commercialize their drug products, our revenue may be
insufficient for us to achieve or maintain profitability.
To achieve and maintain profitability, we must succeed in significantly increasing sales
of our solutions and services, or our customers and collaborators must succeed in developing
and eventually commercializing their drug products. We generated a significant portion of
revenue from the provision of our drug discovery solutions and intelligent automation solutions
during the Track Record Period, and expect to continue to derive a large percentage of our
revenue from such business in the near future. As such, increasing sales of our solutions and
services to our existing customers and successfully marketing such services to new customers
are critical to our success. Demand for our solutions and services may be affected by a number
of factors, including but not limited to continued market acceptance by the biotechnology and
pharmaceutical industries and other high-value industries we desire to enter into, the accuracy
and efficiency of our computational services and compound synthesis, the quality and costs of
our experimental services, upgrade of our dry lab and wet lab, timing of development and
release of new offerings by our competitors, technological change, and the rate of growth in
our target markets. If we are unable to continue to meet the demands of our customers, our
business operations, financial condition, results of operations, and prospects will be adversely
affected.
Achieving success in drug and material science R&D will require us to further enhance
our service capabilities to our customers and to foster additional collaborations, from which we
expect to generate multiple types of revenue, or require us or our customers and collaborators
to be effective in a range of challenging activities, such as molecule discovery and optimization
and pre-clinical testing. We and our customers and collaborators may never succeed in these
activities. Even if we are successful in our R&D activities, we may never generate revenue that
are significant enough to achieve profitability. Even if our collaborators are successful in
developing and commercializing the product candidates, we may not receive enough milestone
or contingent payments from them to achieve profitability. Because of the intense competition
in the market for our solutions and services and the numerous risks and uncertainties associated
with product development, we are unable to accurately predict when, or if, we will be able to
achieve or sustain profitability.
Even if we achieve profitability, we may not be able to sustain or increase profitability
on an annual basis. Our failure to become and remain profitable would depress the value of our
company and could impair our ability to raise capital, expand our business, maintain our R&D
efforts, increase sales of our solutions and services, enter into collaborations, or even continue
our operations. A decline in the value of our Company could also cause you to lose all or part
of your investment.
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The industries we operate in are heavily regulated internationally, and we are subject to
changing laws and regulations and non-compliance with such laws and regulations
subjects us to sanctions and other adverse regulatory actions.
All jurisdictions in which we conduct our drug R&D activities regulate these activities in
great depth and detail. We focus our activities in the major markets such as the U.S., the
Europe, and China. These jurisdictions strictly regulate the biotechnology and pharmaceutical
industries, and in doing so they employ broadly similar regulatory strategies, including
regulation and approval of drug R&D. However, there are differences in the regulatory regimes
that make for a more complex and costly regulatory compliance burden for companies like
many of our customers and collaborators and us that plan to operate in these regions.
The process of obtaining regulatory approvals and compliance with appropriate laws and
regulations require the expenditure of substantial time and financial resources. Failure to
comply with the applicable requirements at any time during the drug R&D process and
approval process, or after approval, may subject an applicant to administrative or judicial
sanctions. These sanctions could include: refusal to approve pending applications; withdrawal
of an approval; license revocation; clinical hold; voluntary or mandatory product recalls;
product seizures; total or partial suspension of production or distribution; injunctions; fines;
refusals of government contracts; providing restitution; undergoing disgorgement; or other
civil or criminal penalties. Failure to comply with these regulations could have a material
adverse effect on the business and operations of our customers and collaborators and us.
Moreover, because these laws, regulations and standards are subject to varying
interpretations, their application in practice may evolve over time as new guidance becomes
available. This evolution may result in additional costs necessitated by ongoing revisions to our
disclosure and governance practices. If we fail to address and comply with these regulations
and any subsequent changes, we and our customers or collaborators may be subject to penalties
and/or regulatory actions, and such failure may significantly affect our customers’ or
collaborators’ ability to commercialize their products which will in turn adversely affect our
ability to generate revenue from our solutions and services. Further, any government
investigation of alleged violations of laws or regulations could require our customers or
collaborators to expend significant time and resources in response, and could generate negative
publicity. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value
of our company and our operating results will be adversely affected.
If the commercialization of AI and automation technologies does not meet our
expectation, our business, growth and prospects may be significantly affected.
Commercialization of AI and automation technologies and solutions and services
powered by our AI and automation technologies depends on a number of factors, including the
technological upgrade and innovation of our technologies, the accuracy and reliability of our
technologies and related solutions and services, the increasing application of AI and
automation in R&D, the performance and perceived value of our technologies and the related
solutions and services, and laws and regulations governing our technologies and the related
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solutions and services. If AI and automation technologies and related solutions and services do
not achieve widespread acceptance, or if there is a reduction in demand for AI and automation
technologies and related solutions or services caused by weakening economic conditions,
decreases in R&D spending, technical challenges, data security or privacy concerns,
governmental regulation, and competing technologies, among others, our business, growth
prospects and results of operations will be materially and adversely affected. In addition, we
cannot assure you that the trend of adopting and utilizing AI and automation technologies and
related solutions and services will continue in the future, which could materially and adversely
affect the AI technology and automation industries, and in turn, our business, growth and
sustainability.
Any flaws or misuse of AI technologies, whether actual or perceived, intended or
inadvertent, committed by us or by other third parties, could have a material adverse
effect on our reputation, business, financial condition, results of operations and prospects.
AI technologies are at early stages of development and continue to evolve. Similar to
many innovations, AI technologies present risks and challenges, such as potential misuse by
third parties for inappropriate purposes or biased applications which breach public confidence
or violate applicable laws and regulations in China and other jurisdictions or litigation or other
proceedings initiated by certain individuals claiming for infringement of legitimate rights,
including privacy or personality rights. Such misuse could affect customer perception, public
opinions, views of policymakers and regulators and result in decreased adoption of AI
technologies.
In addition, flaws or deficiencies in AI technologies could undermine the accuracy and
thoroughness of the decisions and analyses made on the relevant solutions and services. There
can be no assurance that we will be able to detect and remedy such flaws or deficiencies in a
timely manner, or at all. Any flaws or deficiencies in AI technologies and the related solutions
and services, whether actual or perceived, could materially and adversely affect our business,
reputation, results of operations and prospects.
RISKS RELATED TO OUR OPERATIONS
If we fail to manage our technology infrastructure, our customers and collaborators may
experience service outages and delays in the deployment of our solutions and services.
We have experienced rapid growth in the number of research programs that our
technology infrastructure supports. As a result, we need to maintain sufficient excess capacity
in our technology infrastructure to meet the needs of our customers and collaborators, and to
facilitate the rapid provision of solutions and services in anticipation of new customers and
collaborators. In addition, we need to properly manage our technology infrastructure in order
to support version control, changes in hardware and software parameters and the evolution of
our solutions. However, updating our technology infrastructure requires adequate lead-time.
We have experienced, and may in the future experience, website disruptions, outages, and other
performance problems. These types of problems may be caused by a variety of factors,
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including infrastructure changes, human or software errors, viruses, security attacks, fraud,
spikes in usage, and denial of service issues. In some instances, we may not be able to identify
the cause of these performance problems within an acceptable period of time. If we cannot
accurately anticipate and prepare for additional requirements on our technology infrastructure,
we may experience service outages that may delay the deployment of our solutions and services
and the delivery of our work products, which may subject us to financial penalties and
liabilities, reputation damages, and customer losses.
Our international operations are subject to a variety of costs and legal, regulatory,
political and economic risks.
Our business and results of operations are affected by our ability to execute our
globalization strategy, which primarily involves expanding into new international markets,
particularly the U.S. and Europe. Operating internationally subjects us to additional risks and
challenges such as:
 limited brand recognition globally (compared with our presence in China);
 costs and expenses in connection with global expansion, including recruitment of
local personnel and lease or establishment of new premise or lab;
 ability to anticipate international consumers’ and collaborators’ needs and
preferences;
 burdens of complying with a wide variety of local laws and regulations;
 wars, political and economic instability, including trade tensions; and
 technological and trade restrictions.
Our international expansion plans will place increased demands on our operational,
managerial and administrative resources. In particular, we face regulatory uncertainties and
may incur substantial compliance costs when we enter into a new overseas market. Regulations
in different overseas markets could vary significantly. Being compliant with laws and
regulations in one jurisdiction does not necessarily mean our business practice would comply
with laws and regulations in another jurisdiction and we may need to make adjustments to our
business accordingly to comply with local laws. Non-compliance may subject us to sanctions
by regulatory authorities, to monetary penalties, or to restrictions on our activities or
revocation of our licenses, which may result in a material adverse effect on our business,
financial condition and results of operations in the relevant overseas market. We also have to
closely monitor changes in local laws and complete all necessary procedures and filings
accordingly.
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We, our customers or our research partners may become subject to the BIOSECURE Act.
If the BIOSECURE Act is enacted in the proposed form, and if we, our customers or our
research partners were to be listed as or designated as “biotechnology companies of
concern,” our ability and our customers’ ability to engage in business with the U.S.
government or with companies that engage in business with the U.S. government may be
limited, which could disrupt or diminish our business activities.
We, our customers or our research partners may become subject to the BIOSECURE Act
that was proposed in the U.S. Senate on December 20, 2023 (the “ Senate version ”), or an
analogous version of this legislation that was proposed in the U.S. House of Representatives
on January 24, 2024 (the “ House version ”). On March 6, 2024, the Senate version of the
legislation advanced to the full U.S. Senate. The BIOSECURE Act, if enacted in the proposed
form, would prohibit the U.S. government from procuring biotechnology equipment or services
from so-called “biotechnology companies of concern.” The BIOSECURE Act, if enacted in the
proposed form, would also prohibit U.S. federal loans and grants to, and federal contracts
(including contract extensions and renewals) with, any entity that uses biotechnology
equipment or services from one of these “biotechnology companies of concern.” The most
recent version of the House version from May 10, 2024 names five specific Chinese biotech
companies as “biotechnology companies of concern,” and gives the U.S. government the
authority to identify other entities for inclusion as “biotechnology companies of concern,”
specifically any entity that is subject to the control or jurisdiction or acts on behalf of a
“foreign adversary” (defined by law to be China, Iran, North Korea, and Russia), provided that
the entity is involved in the manufacturing, distribution, provision, or procurement of a
biotechnology equipment or service, and poses a risk to the national security of the U.S., based
on: (i) engaging in joint research with, being supported by, or being affiliated with a foreign
adversary’s military, internal security forces, or intelligence agencies; (ii) providing multiomic
data obtained via biotechnology equipment or services to the government of a foreign
adversary; or (iii) obtaining human multiomic data via the biotechnology equipment or services
without express and informed consent. The most recent House version of the legislation would
delay the application of the BIOSECURE Act’s provisions (i) until January 1, 2032, with
respect to biotechnology equipment or services provided or produced by one of the named
biotechnology companies of concern under a contract or agreement entered before the effective
date of the legislation; and (ii) for a period of five years after the identification of new
biotechnology companies of concern, with respect to biotechnology equipment and services
provided or produced by an entity that the government identifies in the future as a
biotechnology company of concern. On May 15, 2024, the House version of the legislation
advanced to the full U.S. House of Representatives. If the BIOSECURE Act is enacted in the
proposed form, and if we, our customers or our research partners were to be listed as or
designated as “biotechnology companies of concern,” our ability and our customers’ ability to
engage in business with the U.S. government or with companies that engage in business with
the U.S. government may be limited, which could disrupt or diminish our business activities.
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We use third-party providers of cloud-based infrastructure to enable our AI-powered
drug and material science R&D. Any disruption in the operations of these third-party
providers, limitations on capacity, or interference with our use could adversely affect our
business, financial condition, and results of operations.
We outsource our infrastructure relating to our high performance cloud computing to
multiple third-party service providers. Therefore, our cloud computing infrastructure, which
enables our high performance computational algorithms and AI models, depends on third-party
service providers to maintain the configuration, architecture, features, and interconnection
specifications of the virtual cloud infrastructure, as well as protect the information stored in the
system, which is transmitted by third-party internet service providers. Any limitation on the
capacity of our third-party service providers could impede our ability to deliver services or
study results in a timely manner, onboard new customers or expand the usage by our customers,
which could adversely affect our business, financial condition, and results of operations. In
addition, any incident affecting our third-party service providers’ infrastructure that may be
caused by cyber-attacks, natural disasters, fire, flood, severe storm, earthquake, power loss,
telecommunications failures, terrorist or other attacks, and other similar events beyond our
control could negatively affect our cloud-based solutions. A prolonged service disruption
affecting our cloud-based solutions for any of the foregoing reasons would adversely impact
our ability to serve our customers, damage our reputation, expose us to liability, cause us to
lose customers, or otherwise harm our business. We may also incur significant costs for using
alternative equipment or taking other actions in preparation for, or in reaction to, events that
damage the third-party services we use.
In the event that our service agreements with our third-party services providers are
terminated, or there is a lapse of service, elimination of services or features that we utilize,
interruption of internet service provider connectivity, or damage to such facilities, we could
experience interruptions in access to our platform as well as significant delays and additional
expense in arranging or creating new facilities and services and/or re-architecting our software
solutions for deployment on a different cloud infrastructure service provider, which could
adversely affect our business, financial condition, and results of operations.
Moreover, our cloud computing service providers may become subject to regulations that
could interfere with our use to such services. On January 29, 2024, the U.S. Department of
Commerce published proposed regulations that would, if passed as proposed, require U.S. IaaS
providers, including certain U.S. cloud computing service providers, to, among other
requirements, verify the identities and ownerships of their foreign customers. If passed, the
proposal will require U.S. IaaS providers and their resellers to collect “know your customer”
information from foreign customers about their foreign account owners and beneficial owners
to verify foreign customers’ identities and notify customers about the disclosure of identifying
information to the federal government. The proposed regulations also outline procedures for
the U.S. Department of Commerce to authorize measures to deter foreign malicious cyber
actors’ use of U.S. IaaS products. These measures could include prohibitions on use of U.S.
IaaS products by persons or entities in specific jurisdictions that the U.S. Department of
Commerce determines have a significant number of foreign persons who either offer or use
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U.S. IaaS products for malicious cyber activities. The proposed regulations would also require
IaaS providers and their resellers to report to the U.S. Department of Commerce when they
have knowledge that a transaction with a foreign person results in or could result in training
large AI models with capabilities that could be used in malicious cyber-enabled activities. Our
U.S. cloud computing service providers may be characterized as U.S. IaaS providers under the
proposed regulations. If the proposed regulations pass in their current form, we may be
required to provide additional information about our owners to allow such providers to verify
our ownership structure. In addition, the U.S. Department of Commerce may take action under
such regulations to restrict our use of such cloud computing service providers. If we are
restricted from using such services, we may need to identify new cloud computing service
providers to support our business, which could increase costs for our business or entail a
disruption of our business activities. We also may be unable to find alternative services that
provide equivalent levels of service or functionality to the U.S. cloud computing service
providers that we currently engage, which could disrupt or diminish our business activities.
Data corruption, cyber-based attacks or network security breaches may materially and
adversely affect our reputation, business, financial condition, results of operations and
prospects.
In the ordinary course of our business, we collect, store and transmit pre-clinical study
data and other confidential data, including R&D information, IP , and proprietary business
information owned or controlled by ourselves or other parties. We manage and maintain our
applications and data utilizing a combination of on-site systems and cloud-based application
systems. We utilize external security and infrastructure vendors to maintain our information
security management system. We face a number of risks relative to protecting these critical
data and information, including material system failure or security breach, loss of access and
data, inappropriate use or disclosure, inappropriate modification, and the risk of inability to
adequately monitor, audit, and modify our controls over our critical data and information. This
risk extends to our vendors and subcontractors we use to manage our sensitive data and our
collaborators who share with us sensitive data.
The secure processing, storage, maintenance, and transmission of this critical information
are vital to our operations, and we devote significant resources to protecting such information.
Although we take measures to protect sensitive data from unauthorized access, use or
disclosure, our information technology and infrastructure may be vulnerable to attacks by
hackers or viruses or breached due to employee error, malfeasance, or other malicious or
inadvertent disruptions. In addition, while we have implemented security measures and a
formal, dedicated enterprise security program to prevent unauthorized access to confidential
data, such data is accessible through multiple channels, and there is no guarantee we can
protect our data from breach. Failures in our information technology infrastructure may result
in delays in our drug R&D efforts, which may in turn materially and adversely affect our
reputation, business, financial condition, results of operations and prospects.
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If our wet labs or R&D facilities fail to comply with applicable regulatory requirements,
or become damaged or inoperable, our ability to perform chemical compound synthesis
and other experiments may be jeopardized.
Our wet labs are subject to extensive regulations in China. For example, the operation of
our labs for pathogenic microorganism experiments requires approvals and accreditation from
the NHC or their respective local offices, which we have already obtained. See
“Business—Licenses, Permits and Approvals” for details. If we build new wet labs to further
grow our experimental services, we may be required to obtain additional NHC approvals and
accreditation. We cannot guarantee that we will be able obtain such approvals and accreditation
in a timely manner, or at all, as the NHC approval and accreditation process may be costly and
lengthy. If we fail to maintain or renew any major license, permit, certificate, approval or
accreditations for all or any of our wet labs, or if we or our labs are found to be non-compliant
with any applicable laws or regulations, we may face penalties, suspension of operations or
even revocation of operating licenses, depending on the nature of the findings, any of which
could materially and adversely affect our business, financial condition and results of
operations.
In addition, if a wet lab or R&D facility or equipment becomes damaged or inoperable,
including due to technical issues, accidents and injuries, we may not be able to replace our
experiment capacity quickly or at all. In the event of a temporary or protracted loss of a lab,
facility or equipment, we may face delays that could impact the delivery of our solutions and
services and we might not be able to rebuild any of them in a timely manner. Even if we could
rebuild them, it would likely be time-consuming, particularly since any new lab would need to
comply with the necessary regulatory requirements and we would need to receive certain
regulatory approvals. Any damage or interruption of our lab operations could result in our
inability to satisfy the demand of our intelligent automation solutions and could materially
harm our business, financial condition and results of operations.
If our security measures are breached or unauthorized access to our own, customers’ or
collaborators’ data is otherwise obtained, our solutions may be perceived as not being
secure, customers and collaborators may reduce the use of or stop using our solutions and
services, and we may incur significant liabilities.
Our solutions and services involve the collection, analysis, and storage of our own and
our customers’ and collaborators’ proprietary information and sensitive proprietary data related
to the R&D efforts of our customers and collaborators. As a result, unauthorized access or
security breaches, as a result of third-party action, employee error, malfeasance, or otherwise
could result in the loss of information, litigation, indemnity obligations, damage to our
reputation, and other liability. We have built a comprehensive information security
management system that has received the ISO27001 certification, which is a widely accepted
and applied system certification standard in the field of information security. However, because
the techniques used to obtain unauthorized access or sabotage systems change frequently and
generally are not identified until they are launched against a target, we may be unable to
anticipate these techniques or to implement adequate preventative measures. In addition, if our
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employees fail to adhere to practices we have established to maintain a firewall and proper
access control on a need-to-know basis among our teams that work with our customers and
collaborators on drug discovery programs, and our teams that work with intelligent automation
customers, or if the technical solutions we have adopted malfunction, our customers and
collaborators may lose confidence in our ability to maintain the confidentiality of their IP , we
may have trouble attracting new customers and collaborators, we may be subject to breach of
contract claims by our customers and collaborators, and we may suffer reputational and other
harm as a result. Any of these issues could adversely affect our ability to attract new customers
and collaborators, cause existing customers or collaborators to elect to not to procure
additional services from us or enter into new collaborations with us, result in reputational
damage or subject us to third-party lawsuits or other action or liability, which could adversely
affect our operating results.
We are subject to complex and evolving laws, regulations and governmental policies
regarding privacy, data protection and cybersecurity. Actual or alleged failure to comply
with existing or future laws and regulations related to privacy, data protection and
cybersecurity could lead to government enforcement actions, which could include civil,
administrative or criminal fines or penalties, investigation or sanction by regulatory
authorities, private litigation, other legal liabilities, and/or adverse publicity. Compliance
or failure to comply with such laws could increase the costs of our solutions and services,
limit their use or adoption, and otherwise negatively affect our operating results and
business.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and
other processing of personal information and important data worldwide is evolving. Regulatory
authorities in virtually every jurisdiction in which we operate have implemented and are
considering a number of legislative and regulatory proposals concerning data protection.
Regulatory authorities in China have implemented and are considering a number of
legislative and regulatory proposals concerning data protection. For example, the
Cybersecurity Law of the PRC (), or the Cybersecurity Law,
which became effective in June 2017, established the PRC’s first national-level cybersecurity
and data protection framework for “network operators,” which may include all organizations
in the PRC that connect to or provide services over the internet or other information network.
The Cybersecurity Law requires network operators to perform certain obligations related to
cybersecurity protection. In addition, the Cybersecurity Law imposes certain requirements on
critical information infrastructure operators, or the CIIOs. For example, the CIIOs generally
shall, during their operations in the PRC, store the personal information and important data
collected and generated within the territory of PRC, and shall perform certain security
obligations as required under the Cybersecurity Law, including that the CIIOs shall apply for
the cybersecurity review when purchasing network product or service which affects or may
affect national security. In addition, the Data Security Law of the PRC ( ʕശɛ͏΍ձ਷ᅰ
), or the Data Security Law, which was promulgated by the Standing Committee of
PRC National People’s Congress, or the SCNPC, on June 10, 2021 and came into effect on
September 1, 2021, outlines the main framework of data security protection. For example, the
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Data Security Law introduces a data classification and hierarchical protection system based on
the importance of data in economic and social development, as well as the degree of harm it
will cause to national security, public interests, or legitimate rights and interests of individuals
or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or
used. Processors of “important data” are further required to conduct periodic risk assessment
and submit assessment report to relevant regulatory authorities. In addition, the Data Security
Law provides a national security review procedure for those data activities which affect or may
affect national security. Furthermore, Regulations on the Security Protection of Critical
Information Infrastructure (ᚐૢԷ), or the CII Protection
Regulations, which was promulgated by the State Council of PRC on July 30, 2021 and came
into effect on September 1, 2021, stipulates the obligations and liabilities of the regulators,
society and CIIOs in protecting the security of critical information infrastructure, or the CII.
According to the CII Protection Regulations, regulators supervising specific industries shall
formulate detailed guidance to identify and determine the CII in the respective sectors, and
CIIOs shall take the responsibility to protect the CII’s security by performing certain
prescribed obligations. For example, CIIOs are required to conduct network security test and
risk assessment, report the assessment results to relevant regulatory authorities, and timely
rectify the issues identified at least once a year.
Furthermore, on December 28, 2021, the CAC and other twelve PRC regulatory
authorities jointly promulgated the revised Measures for Cybersecurity Review ( ၣഖτΌᄲ
), or the Cybersecurity Review Measures, which became effective on February 15,
2022. The Cybersecurity Review Measures provides that, among others, network platform
operators processing personal information of more than one million users that seek listing in
a foreign country are obliged to apply for a cybersecurity review by the Cybersecurity Review
Office. Member authorities of the Cybersecurity Review mechanism may also initiate a
cybersecurity review against the operators if the authorities believe that the network
product or service or data processing activities of such operators affect or may affect
national security. See “Regulatory Overview—Regulations on Data Privacy and
Cybersecurity—PRC—Information security and censorship” for detailed discussion.
As of the Latest Practicable Date, although the exact scope of important data in medical
and healthcare, AI and automation sectors under the current laws, regulations and regulatory
regime remains unclear, and we have not been designated as a CIIO by any PRC governmental
authorities, it is difficult for us to foresee the outcome of the implementation and enforcement
of the related laws and regulations. If we are designated as a CIIO, or deemed as processing
any important data according to the Cybersecurity Law, Data Security Law and other relevant
laws and regulations, we may need to perform or be subject to certain prescribed obligations,
and if we were found to be in violation of these applicable laws and regulations, we may be
subject to administrative penalties, including fines and service suspension. We also cannot rule
out the possibility that certain of our customers may constitute CIIOs, in which case our
provision of network solutions or services, if being deemed as affecting or may affect national
security, will be subject to cybersecurity review before we can enter into agreements with such
customers, and before the conclusion of such procedure, the customers will not be allowed to
use our solutions or services. If the reviewing authority considers that the use of our solutions
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or services by certain of our customers involves risk of disruption, is vulnerable to external
attacks, or may negatively affect, compromise, or weaken the protection of national security,
we may not be able to provide our solutions or services to such customers, which could have
a material adverse effect on our results of operations and business prospects.
As of the Latest Practicable Date, we have not been involved in any investigations on
cybersecurity review initiated by the Cyberspace Administration of China, and we have not
received any formal inquiry, notice, warning, sanctions in such respect or any regulatory
objections from the Cyberspace Administration of China with respect to the Global Offering.
As the further enactment of new laws and regulations as well as the revision, interpretation and
implementation of those existing laws and regulations are still evolving, we cannot assure you
that we will be able to comply with such regulations in all respects, and we may be ordered
to rectify, suspend or terminate any actions or services that are deemed illegal or incompliance
by the regulatory authorities and become subject to fines and/or other penalties. If we are
unable to address such issue in a timely manner or at all, we may be required to suspend or
terminate our related businesses or face other penalties, our business, financial condition,
results of operations, and prospects could be materially harmed.
In addition, certain newly enacted or industry-specific laws and regulations may also
affect the collection and transfer of personal information in China. For example, (i) the SCNPC
promulgated the Personal Information Protection Law of the PRC (ࢹڦ
) (effective on November 1, 2021), which outlines the main framework and
comprehensive requirements of personal information protection and processing (including but
not limited to cross-border transfer); and (ii) the PRC State Council promulgated the
Regulations on the Administration of Human Genetic Resources of the PRC ( ʕശɛ͏΍ձ
਷ɛᗳ፲ෂ༟๕၍ଣૢԷ) (effective in July 2019) and Implementation Rules of Regulations
on the Administration of Human Genetic Resources ()
(effective in July 2023), and the Biosecurity Law of the PRC (τΌ
) (effective in April 2021) which require approval from the science and technology
administration department of the State Council where human genetic resources, or the HGR,
are involved in any international collaborative program and additional approval for any export
or cross-border transfer of the HGR samples or associated data.
It is difficult for us to foresee the outcome of the application and enforcement of privacy,
data protection and cybersecurity laws in China and elsewhere. It is possible that these laws
may be interpreted and applied in a manner that is inconsistent with our future practices,
potentially resulting in confiscation of HGR samples and associated data that we may collect
in our future practices and administrative fines. Any change in laws and regulations relating to
privacy, data protection and information security, and any enhanced and scrutinized
governmental enforcement action of such laws and regulations, could greatly increase our cost
in providing our solutions and services, limit their use or adoption or require certain changes
to be made to our operations.
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In the U.S., we are subject to laws and regulations that address privacy, personal
information protection and data security at both the federal and state levels. Numerous laws
and regulations, including security breach notification laws, health information privacy laws,
and consumer protection laws, govern the collection, use, disclosure and protection of
health-related and other personal information. Given the variability and evolution of these
laws, the exact interpretation of the new requirements is subject to the views of the competent
governmental agencies, amongst others, and we may be unsuccessful in implementing all
measures required by regulators or courts in their interpretation.
Any failure or perceived failure by us to comply with applicable laws and regulations
could result in reputational damage or proceedings or actions against us by governmental
entities, individuals or others. These proceedings or actions could subject us to significant
civil, administrative or criminal penalties and negative publicity, require us to change, or even
suspend our business practices, increase our costs and materially harm our business, prospects,
financial condition and results of operations. In addition, our relationships with customers,
vendors, collaborators and other third parties could be negatively affected by any proceedings
or actions against us or data protection obligations imposed on them under applicable law.
We may not be able to attract and retain senior management members and other key
personnel.
Our future success depends upon the continuing services of members of our senior
management team and other key personnel. Although we typically require our senior
management and other key personnel to enter into non-compete and confidentiality agreements
with us, they may elect to join our competitors after the non-compete periods have lapsed. The
loss of their services could adversely impact our ability to achieve our business objectives. If
one or more of our senior management and other key personnel are unable or unwilling to
continue in their present positions, joins a competitor, or forms a competing business, we may
not be able to replace them in a timely manner or at all, which will have a material and adverse
effect on our business, financial condition and results of operations. There is no guarantee that
we can attract or retain our senior management and other key personnel at terms not
disadvantageous to us, or at all.
In addition, the continued growth of our business depends on our ability to hire additional
qualified personnel with expertise in AI, quantum physics-based computation, automation,
molecular biology, chemistry, biological information processing, software, engineering, and
technical support. We compete for qualified management and scientific personnel with other
life science and technology companies, universities, and research institutions in China and
overseas. Competition for these individuals is intense, and the turnover rate can be high.
Failure to attract and retain management and R&D personnel could prevent us from pursuing
collaborations, developing our technologies, or growing our business.
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If we engage in future acquisitions or strategic collaborations, this may increase our
capital requirements, dilute our shareholders’ shareholding, cause us to incur debt or
assume contingent liabilities and subject us to other risks.
We may evaluate various acquisitions and strategic collaborations, including licensing in
or acquiring complementary IP rights, technologies or businesses. Any potential acquisition or
strategic collaboration may entail numerous risks, including:
 increased operating expenses and cash requirements;
 the assumption of additional indebtedness or contingent liabilities;
 assimilation of operations, IP and products of an acquired company, including
difficulties associated with integrating new personnel;
 the diversion of our management’s attention from our existing business and
initiatives in pursuing such a strategic merger or acquisition;
 the costs associated with identifying investment, acquisition or collaboration
targets;
 retention of key employees, the loss of key personnel, and uncertainties in our
ability to maintain key business relationships;
 risks and uncertainties associated with the other party to such a transaction,
including the prospects of that party and their existing services or technologies;
and/or
 our inability to generate sufficient revenue from acquired technologies and/or
businesses to meet our objectives in undertaking the acquisition or even to offset the
associated acquisition and maintenance costs.
In addition, if we undertake acquisitions, we may issue dilutive securities, assume or
incur debt obligations, incur large one-time expenses and acquire intangible assets that could
result in significant future amortization expense. Moreover, we may not be able to locate
suitable acquisition opportunities and this inability could impair our ability to grow or obtain
access to technology or businesses that may be important to the development of our business.
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We have engaged and may continue to pursue collaborations or licensing arrangements,
joint ventures, strategic alliances, partnerships or other strategic investment or
arrangements, which may fail to produce anticipated benefits and adversely affect our
operations.
We have invested in companies that we think share synergies with our business. We may
continue to pursue opportunities for collaborations, out-license, joint ventures, acquisitions of
business or technology, strategic alliances, or partnerships that we believe would advance our
development. We may consider pursuing growth through the acquisition of technology, assets
or other businesses that may enable us to enhance our technologies and capabilities. For more
details regarding our strategic collaborations, acquisitions and investments, see
“Business—Significant Cooperations and Collaborations” and “Business—Our Drug
Discovery Solutions—Strategic Collaborations.” Proposing, negotiating and implementing
these opportunities may be a lengthy and complex process. Our competitors, including those
with substantially greater financial, marketing, technology, or other business resources, may
compete with us for these opportunities or arrangements. We may not be able to identify,
secure, or complete any such transactions or arrangements in a timely manner, on a
cost-effective basis and acceptable terms, or at all.
To the extent that we are successful in entering into such commercial arrangements, the
management and integration required of a licensing arrangement, collaboration, joint venture
or other strategic arrangements may disrupt our current operations, result in significant
expenses, decrease our profitability, or divert management resources that otherwise would be
available for our existing business. We may not realize the anticipated benefits of any or all of
our collaborations or licensing arrangements, joint ventures, strategic alliances, partnerships or
other strategic investment or arrangements in the time frame expected or at all.
In addition, valuations supporting our acquisitions and strategic investments could change
rapidly. Following any such transaction, there could be impairments in valuations or
other-than-temporary declines in fair value, which could materially adversely affect our
business, financial condition and operating results through the write-off of goodwill and other
impairment charges.
Furthermore, partners, collaborators, or other parties to such transactions or arrangements
may fail to fully perform their obligations or meet our expectations or cooperate with us
satisfactorily for various reasons and subject us to potential risks, including that partners,
collaborators, or other parties:
 have significant discretion in determining the efforts and resources that they will
apply to a transaction or arrangement;
 could independently develop, or develop with third parties, services and products
that compete directly or indirectly with the product candidates developed under the
collaboration with us;
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 may stop, delay or discontinue clinical trials as well as repeat clinical trials or
conduct new clinical trials by using our IP or proprietary information;
 may not properly maintain or defend our IP rights, or may use our IP or proprietary
information in a way that gives rise to actual or threatened litigation that could
jeopardize or invalidate our IP or proprietary information, or expose us to potential
liabilities;
 may have disputes with us that cause the delay or termination of the research,
development, or commercialization of the product candidates developed under the
collaboration with us, or that result in costly litigation or arbitration that diverts
management’s attention and resources; and
 may own or jointly own IPs covering the product candidates developed under the
collaboration with us, and in such cases, deny us the exclusive right to
commercialize such IPs.
Any such transactions or arrangements may also require actions, consents, approval,
waiver, participation or involvement of various degrees from third parties, such as regulators,
government authorities, creditors, licensors or licensees, related individuals, suppliers,
distributors, shareholders, or other stakeholders or interested parties. There is no assurance that
such third parties will be cooperative as we desire, or at all, in which case we may be unable
to carry out the relevant transactions or arrangements.
Furthermore, as we own minority interests in most of the drug candidates that are
developed under collaborations, we do not have control over most of those drug candidates and
our drug discovery collaborators have significant discretion in determining when to make
announcements about the status of our collaborations, including about pre-clinical and clinical
developments and timelines for advancing the collaborative programs. Our drug discovery
collaborators, and in particular, the privately-held collaborators, may wish to report such
information more or less frequently than we intend to or may not wish to report such
information at all. The price of our Shares may decline as a result of the public announcement
of unexpected results or adverse developments in our collaborations, or as a result of our
collaborators withholding such information.
We partner with third parties to monitor, support and conduct our on-going pre-clinical
studies. Therefore, we may not be able to directly control the timing, conduct, expense and
quality of our pre-clinical studies and we cannot assure these third parties can duly
perform their obligations as agreed and expected.
We partner with research organizations that are beyond our control to monitor, support,
and conduct our on-going pre-clinical studies. For instance, we utilize third parties to
synthesize certain molecules, such as peptides, with therapeutic potential that we discover. If
these third parties do not successfully carry out their contractual duties, meet expected
deadlines, or comply with regulatory requirements, if there are disagreements between us and
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such parties, or if such parties are unable to expand capacities, we may not be able to fulfill,
or may be delayed in providing services or producing sufficient product candidates to meet our
customers’ or collaborators’ supply requirements. These third parties may also be affected by
natural disasters, such as floods or fire, or geopolitical developments, or such third parties
could face production issues, such as contamination or regulatory concerns following a
regulatory inspection of facilities of the third parties, which would cause delay and increased
expense and have a material adverse effect on our business. As a result, we have less control
over the quality, timing and cost of these studies. We cannot assure you that these third parties
can meet expected quality and timetable or can always be in compliance with regulatory
requirements. Any failures of these third parties to duly perform their obligations may result
in a delay or termination of our solutions or services. In addition, if we are unable to maintain
or enter into agreements with these third parties on acceptable terms, or if any such engagement
is terminated, we may be unable to complete the pre-clinical studies on a timely basis or
otherwise conduct the pre-clinical studies in the manner we anticipate.
We are dependent on a stable and adequate supply of quality raw materials, equipment
and other supplies. Any price increases and/or supply interruptions could adversely affect
our margins and results of operations.
We procure R&D equipment, raw materials, reagent consumables, and other goods and
services from third-party suppliers and service providers for our operations. Unsatisfactory
performance by these third parties, including their failure to provide supplies according to the
applicable legal and regulatory requirements, the terms of our contracts, or our standards, could
adversely affect the quality of our services and damage our reputation.
Furthermore, prices of goods and services procured from such third parties may increase
in the future. The prices of our supplies may be affected by a number of factors, including
market supply and demand, the PRC or international environmental and regulatory
requirements, natural disasters and economic conditions in China and around the world. In the
event of significant price increases for such supplies, we may have to pass the increased costs
to our consumers. However, we cannot assure you that we will be able to raise the prices of
our solutions and services sufficiently to cover such increased costs. As a result, any significant
increase in the prices of our supplies may have an adverse effect on our profitability and results
of operations.
We may also encounter shortages in our supplies necessary to synthesize molecules we
may discover in the quantities needed for pre-clinical studies or other experiments, as a result
of capacity constraints or delays or disruptions in the market, in particular in light of supply
chain disruptions due to global pandemic, natural disasters, and international trade tensions,
among others. In particular, we have an internal supply chain management policy to mitigate
the risks caused by potential intensified international trade tensions, including maintaining an
alternative list of competitive suppliers that can provide comparable products. Even if our
required supplies are available, we may be unable to obtain sufficient quantities at an
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acceptable cost or quality. Our failure to obtain supplies in sufficient amounts and at
commercially acceptable terms could delay, prevent, or impair our R&D efforts, and may have
a material adverse effect on our business, financial condition, results of operation, and
prospects.
Our reputation is important to our business success. Negative publicity about us, our
management, employees, affiliates, and third-party collaborators and partners may
adversely affect our brand, reputation and business prospects.
Our brand is important to attracting and retaining customers and collaborators and our
success depends on our ability to maintain and enhance our brand image and reputation.
Maintaining, promoting and growing our brands depend largely on the success of our ability
to provide consistent, high-quality services, our marketing efforts and our ability to
successfully secure, maintain, and defend our rights to use our brands and tradenames. Our
brand could be harmed if we fail to achieve these objectives.
Our brand value also depends on our ability to maintain a positive customer perception
of our corporate integrity, purpose and brand culture. Any negative publicity concerning us, our
management, employees, affiliates and third-party collaborators and partners, or any entity that
shares the “XtalPi” name, even if untrue, could adversely affect our reputation and business
prospects. There can be no assurance that negative publicity about us or any of our
management, employees or affiliates and collaborators and partners or any entity that shares
the “XtalPi” name would not damage our brand image or have a material adverse effect on our
business, results of operations and financial condition.
Failure to make full contributions to social insurance and housing provident funds for our
employees in accordance with the relevant PRC laws and regulations may subject us to
penalties.
Companies operating in China are required to participate in various employee benefit
plans, including social insurance, housing provident funds and other welfare-oriented payment
obligations. The amounts of contributions should be equal to prescribed percentages of
salaries, including bonuses and allowances, of our employees up to a maximum amount
specified by the local governments from time to time, at the locations where we operate our
businesses. The requirement of employee benefit plans has not been implemented consistently
by the local governments in China given the different levels of economic development in
different locations. The relevant government authorities may examine whether an employer has
made adequate payments of the requisite employee benefit payments, and employers who fail
to make adequate payments may be subject to late payment fees, fines and/or other penalties.
During the Track Record Period and up to the Latest Practicable Date, we had not made full
contributions to the social insurance plan and housing provident fund based on the actual salary
level of some of our employees as prescribed by relevant laws and regulations. The total
shortfall during the Track Record Period was approximately RMB4.8 million, which we
believed would not have a materially adverse impact on our business, operations and financial
condition. According to the relevant PRC laws and regulations, we may be requested by
relevant PRC authorities to pay the outstanding social insurance and housing provident fund
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contributions within a prescribed period, and we may be liable for a late payment fee equal to
0.05% of the outstanding contribution amount for each day of delay. If we fail to repay the
outstanding social insurance contribution within the stipulated period, we may be liable to a
fine of one to three times the outstanding contribution amount. If we fail to pay housing fund
contributions within the prescribed deadline, we may be subject to an order by the relevant
people’s court to make such payments.
As of the Latest Practicable Date, we had not made provisions for the shortfall of our
social insurance and housing provident fund contributions or the potential penalties. Pursuant
to the Urgent Notice on Implementing the Spirit of the Executive Meeting of the State Council
in Stabilizing the Collection of Social Security Contributions (஫࿏ໝྼ਷ਕ৫੬ਕึ
) issued by the Ministry of Human
Resources and Social Security on September 21, 2018, it is strictly prohibited for the relevant
authorities to collectively initiate and proactively collect historical outstanding social security
contributions from enterprises. As of the Latest Practicable Date, we have not received any
notices, complaints or demand for payment of these outstanding contributions from the
relevant government authorities. We have obtained the written confirmations from the relevant
government authorities in charge of social insurance and housing provident fund that, during
the Track Record Period, there was no record indicating that we violated any laws, regulations
or rules in relation to social insurance and housing provident fund, and there was no record of
any administrative penalty against us for such violation. We will, upon the request of the
competent authority, settle the full outstanding amounts of our social insurance and housing
provident fund contributions in a timely manner, adjust the payment base for all employees’
social insurance and housing provident funds contributions as soon as practical, and pay the
full amounts of our social insurance and housing provident fund contributions for all
employees in accordance with applicable laws and regulations.
We will take the following measures attempting to mitigate the impact in connection
therewith, including that we will (i) communicate with our employees, when necessary and
feasible, to seek their understanding and cooperation in the adjustment of the payment base; (ii)
enhance our internal policies and procedures, including internal trainings to our labor and
human resource department; (iii) adjust the payment base for all employees’ social insurance
and housing provident funds contributions as soon as practical upon the request of the
competent authority in compliance with the applicable laws and regulations; and (iv) regularly
review and monitor the contribution of social insurance and housing provident funds and
consult our external legal advisor on a regular basis with respect to the relevant PRC laws and
regulations to stay informed of any regulatory developments. However, we cannot assure you
that we will not be subject to any order from the relevant government authorities in the future
to rectify such noncompliance, nor can we assure you that there are no or will not be any
employee complaints regarding payment of the social insurance funds and housing funds under
the relevant laws and regulations implemented at the national, provincial or local level. We
may also incur additional expenses to comply with the relevant laws and regulations
implemented by the national, provincial, or local authorities. If any of these occurs, our
business, financial condition, and results of operations may be adversely affected.
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There are risks associated with our leased properties or lease agreements. Our use of some
leased properties could also be challenged by third parties or governmental authorities.
Under the applicable PRC laws, lease agreements of commodity housing tenancy are
required to be registered with the local construction (real estate) departments. Although failure
to do so does not in itself invalidate the leases, the parties of the lease agreements may be
exposed to potential fines if they fail to rectify such non-compliance within the prescribed time
frame after receiving notice from the relevant PRC government authorities. The penalty ranges
from RMB1,000 to RMB10,000 for each unregistered lease, at the discretion of the relevant
authority. As of the Latest Practicable Date, the lease agreements for 12 of our leased
properties located on state-owned land parcels in China, all of which are required to obtain
lease registration, including the leased properties for our Shenzhen headquarters and the
intelligent robotic wet lab in Shanghai, had not been registered with the relevant PRC
government authorities. We cannot assure you that the government authorities will not impose
fines on us due to our failure to register any of our lease agreements, which may negatively
impact our financial condition.
As of the Latest Practicable Date, the lessors of five of our leased properties in China had
not provided us with valid title certificates or relevant authorization documents evidencing
their rights to lease the properties, and the lessors of three of our leased properties in China
were not the owner as stated on the title certificate of such leased properties. Moreover, we had
not entered into a supplemental lease agreement with the lessor of one of our leased properties
for expanded area and had not yet completed the renewal of lease agreements with the lessors
of three of our leased properties, as of the same date. As a result, these leases may not be valid,
and there are risks that we may not be able to continue to occupy and use such properties. In
addition, five of our leased properties, including our lease agreements for our Shenzhen
headquarters and two office premises in Guangzhou, are subject to prior-registered mortgages.
Each of the lease agreements for our Shenzhen headquarters provides that the lease agreement
could be unilaterally terminated by either party if the property is foreclosed by the mortgagee.
If the mortgagees foreclose our leased properties with prior-registered mortgages, we could be
required to vacate the properties. We cannot guarantee that suitable alternative locations are
readily available on commercially reasonable terms, or at all. If we fail to relocate our
operations in a timely manner, our operations may be interrupted, and our business, financial
condition, and results of operations may be materially and adversely affected.
As of the Latest Practicable Date, we were not aware of any regulatory or government
actions, claims or investigations being contemplated or any challenges by third parties to our
leased agreements or the use of our leased properties in connection with either the
non-registration of lease agreements, the prior-registered mortgages, or the contravention of
the planned or permitted use of such leased properties.
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We have customary insurance coverage, and any claims beyond our insurance coverage
may result in us incurring substantial costs and a diversion of resources.
We maintain insurance policies that are required under PRC laws and regulations as well
as other insurance policies based on our assessment of our operational needs and industry
practice. In line with industry practice in the PRC, we have elected not to maintain certain
types of insurances, such as business interruption insurance or key-man insurance. Our
insurance coverage may be insufficient to cover any claim for product liability, damage to our
fixed assets or employee injuries. Any uninsured risks may result in substantial costs and the
diversion of resources, which could adversely affect our business, financial condition, and
results of operations.
Our employees, third-party suppliers, consultants and partners may engage in
misconduct or other improper activities, including non-compliance with regulatory
standards and requirements, and insider trading, which could result in substantial costs
and reputational harm.
We are exposed to the risk of fraud or other misconduct by our employees, third-party
suppliers, consultants and partners. Misconduct by these parties could include (i) intentional or
unintentional failures to comply with the regulations of the NMPA, the FDA and overseas
regulators that have jurisdictions over us, comply with laws and regulations in China and
abroad, including but not limited to those related to healthcare fraud and abuse, IP
infringement, corruption, and unfair competition, or report financial information or data
accurately or (ii) disclosure of unauthorized activities to us. In particular, sales, marketing, and
business arrangements in the healthcare industry are subject to extensive laws and regulations
intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting,
marketing and promotion, sales commission, customer incentive programs and other business
arrangements.
We currently have a code of conduct applicable to all of our employees, but it is not
always possible to identify and deter employee misconduct, and our code of conduct and the
other precautions we take to detect and prevent this activity may not be effective in controlling
unknown or unmanaged risks or losses, or in protecting us from governmental investigations
or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
If any such actions are instituted against us, and we are not successful in defending ourselves
or asserting our rights, those actions could result in the imposition of significant civil, criminal
and administrative penalties, including, without limitation, damages, monetary fines,
individual imprisonment, disgorgement of profits, contractual damages, reputational harm,
diminished profits and future earnings, additional reporting or oversight obligations if we
become subject to a corporate integrity agreement or other agreement to resolve allegations of
non-compliance with the law and curtailment or restructuring of our operations, which could
have a significant impact on our business. Whether or not we are successful in defending
against such actions or investigations, we could incur substantial costs, including legal fees,
reputational harm and divert the attention of management in defending ourselves against any
of these claims or investigations.
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We are subject to environmental, health and safety, fire control, and construction related
laws and regulations, and may be exposed to potential costs for compliance and liabilities.
We and third parties, such as our collaborators, are subject to numerous environmental,
health and safety and construction related laws and regulations, including those governing lab
procedures and the handling, use, storage, treatment and disposal of hazardous materials and
wastes. The cost of compliance with environmental protection, health, safety and construction
project related regulations is substantial. For instance, we were required to complete
environmental impact assessment procedures, file for archives for our construction projects,
obtain permission for construction before the construction project commences for the offices
and labs in our Shenzhen headquarters. Our R&D activities involve the controlled storage, use
and disposal of hazardous materials, including the components of product candidates and other
hazardous compounds, which requires us to file with the relevant government authority for
occupational disease hazards. We cannot eliminate the risk of contamination or injury from
these materials, which could cause an interruption of our commercialization efforts, R&D
efforts and business operations. We generally contract with third parties for the disposal of
these materials and wastes. We cannot guarantee that the safety procedures utilized by our
partners and third-party suppliers will comply with the standards prescribed by laws and
regulations or will eliminate the risk of accidental contamination or injury from these
materials. In such an event, we could be held liable for any resulting damages, and such
liability could exceed our resources.
Under the PRC laws and regulations, we are required to archive files for our construction
projects, obtain permission for construction, and design and install occupational disease hazard
prevention facilities, production safety facilities and fire control facilities for our construction
projects and make necessary filings with the local competent authorities. We are also required
to have these construction projects appraised by qualified third party agencies and file the
acceptance reports and other requested forms with the relevant authorities if necessary.
Violation of the reporting and filing requirements may result in warnings, fines or orders of
rectification. We may be required to pay a fine or adopt rectification measures imposed by the
competent authorities if our operation causes any occupational disease, safety accident or fire
accident, failing which we may be required to suspend our operations on or use of relevant
constructions.
During the Track Record Period, we had certain non-compliance incidents in connection
with certain construction projects or leased properties, including failures to: (i) obtain the
construction permits and fulfill the filing of inspection and acceptance by competent
authorities upon completion of the construction projects for the renovation of a premise of
Beijing Jiangtai and a premise of Shenzhen Jiangtai; (ii) conduct the fire protection inspection
filing for a premise of Beijing Jingtai; (iii) conduct investment project filing with the NDRC
for the construction of a wet lab in Beijing; (iv) obtain the approval for environmental impact
report and/or conduct the environmental protection acceptance inspection for the construction
of a wet lab in Shanghai (the “ Shanghai Zhiyao Project ”) and a facility and premise for R&D
in Shanghai (the “ Banxia Road Project ”); (v) fulfill certain filing obligations and/or prepare
certain reports relating to occupational disease prevention for Banxia Road Project and
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Shanghai Zhiyao Project; (vi) prepare certain reports relating to safety facilities for Banxia
Road Project, Shanghai Zhiyao Project, and an AI-powered drug R&D facility in Shanghai. We
have taken a series of rectification measures in response to the risks arising from the potential
non-compliance incidents in connection with our construction projects or leased properties,
including engaging qualified assessment agencies to evaluate the current status of certain
projects and properties and cessation of the use of certain leased properties which may have
potential non-compliance issues. We have also implemented and will amend our internal
policies regarding construction projects, environmental protection, occupational disease
prevention and safety production in 2024, requiring our PRC subsidiaries to comply with the
relevant legal requirements and designate a specific team to be responsible for monitoring the
implementation of the foregoing policies, to avoid similar non-compliance incidents in the
future. Although we believe these non-compliance incidents will not have a material and
adverse impact on our business, financial condition, and results of operations, we cannot assure
you that we will not be subject to any fines, penalties, or other monetary or regulatory measures
in the future if we fail to comply with these laws and regulations.
In addition, we may be required to incur substantial costs to comply with current or future
environmental, health, safety and construction related laws and regulations which are complex,
change frequently and have tended to become more stringent. Failure to duly comply with the
environmental, health, safety and construction related laws and regulations may subject us to
fines, warnings, or rectification orders imposed by the competent authorities.
We do not currently carry biological or hazardous waste insurance coverage. In the event
of an accident or environmental discharge, we may be held liable for any consequential damage
and any resulting claims for damages, which may exceed our financial resources and may
materially adversely affect our business, financial condition, results of operations, and
reputation.
We may be directly or indirectly subject to anti-bribery, anti-corruption, anti-money
laundering, or other similar laws, and non-compliance with such laws can subject us to
administrative, civil and criminal fines and penalties, remedial measures and legal
expenses, which could adversely affect our business, results of operations, financial
condition and reputation.
We are subject to anti-bribery, anti-corruption, and anti-money laundering laws and
regulations of the jurisdictions in which we operate. For example, the Anti-Unfair Competition
Law and provisions of the Criminal Code prohibit giving and receiving money or property
(which includes cash, proprietary interests and items of value) to obtain an undue benefit.
Further, the Anti-Money Laundering Law of the PRC (),
promulgated by the Standing Committee of the National People’s Congress, prohibits money
laundering. In addition, many of our customers require us to follow strict anti-bribery as part
of doing business with us.
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In addition, although currently our primary operating business is in China, we are subject
to the U.S. Foreign Corrupt Practices Act, or the FCPA. The FCPA generally prohibits us from
making improper payments to non-U.S. officials for the purpose of obtaining or retaining
business. We are also subject to the anti-bribery laws of other jurisdictions. As our business
expands, the applicability of the FCPA and other anti-bribery laws to our operations will
increase. Our procedures and controls to monitor anti-bribery compliance may fail to protect
us from reckless or criminal acts committed by our employees or agents. If we, due to either
our employees’ deliberate or inadvertent acts or those of others, fail to comply with the
applicable anti-bribery laws, our reputation could be harmed and we could incur criminal or
civil penalties, other sanctions and/or significant compliance expenses, which could have a
material adverse effect on our business, financial condition, and results of operations.
Any failure to comply with applicable regulations and industry standards or obtain
various licenses and permits could harm our reputation and our business, results of
operations and prospects.
A number of governmental agencies or industry regulatory bodies in China, the U.S. and
other applicable jurisdictions impose strict rules, regulations and industry standards governing
biotechnology and pharmaceutical R&D activities, which apply to us. We may be required to
maintain licenses, registrations, permits, authorizations, approvals, certifications,
accreditations and other types of federal, state and local governmental permissions in the U.S.
and China and to comply with various regulations in every jurisdiction in which we operate,
including with respect to our R&D activities. Complying with the applicable regulations and
industry standards can be costly, time-consuming and require additional resources, which could
adversely affect our results of operations. The failure to comply with such licensure
requirements can result in enforcement actions, including the revocation or suspension of the
licenses, registrations or accreditations, or subject us to plans of correction, monitoring, civil
money penalties, civil injunctive action and/or criminal penalties. Our, our collaborators’,
business partners’ and/or our CROs’ failure to comply with such regulations could result in the
termination of ongoing research, administrative penalties imposed by regulatory bodies or the
disqualification of data for submission to regulatory authorities. This could harm our business,
reputation, prospects for future work and results of operations. For example, if our CROs were
to treat research animals inhumanely or in violation of international standards set out by the
Association for Assessment and Accreditation of Laboratory Animal Care, it could revoke any
such accreditation and the accuracy of our animal research data could be questioned. In
addition, new regulations or new interpretations of existing regulations may increase our costs
of doing business and prevent us from efficiently delivering services and expose us to potential
penalties and fines.
During the Track Record Period and up to the Latest Practicable Date, we had complied
with all applicable regulations, guidance and industry standards, and had obtained all licenses
and permits that are material to our operations. However, there can be no assurance that we will
be able to maintain our existing licenses, approvals, registrations or permits necessary to
provide our solutions or services, renew any of them when their terms expire, update licenses
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or obtain additional licenses, approvals, permits, registrations or filings necessary for our
business expansion from time to time. If we fail to do so, our business, financial conditions and
operational results may be materially and adversely affected.
We are subject to risks relating to disputes and legal proceedings, which could have a
material adverse effect on our business, financial condition and results of operations.
We may be subject to claims, disputes or legal proceedings of various types brought by
our competitors, employees, customers, business partners or others against us in matters
relating to contractual or labor disputes, IP infringements, or misconducts of our employees.
We cannot assure you that we will not be subject to similar disputes, complaints or legal
proceedings in the future, which may damage our reputation, evolve into litigations or
otherwise have a material adverse impact on our reputation and business. Litigation is
expensive, subjects us to the risk of significant damages, requires significant management time
and attention, and could have a material and adverse effect on our business, financial condition
and results of operations. The outcomes of actions we institute may not be successful or
favorable to us. Lawsuits against us may also generate negative publicity that significantly
harms our reputation, which may adversely affect our customer base. We may also need to pay
damages or settle lawsuits with a substantial amount of cash. As advised by our PRC Legal
Advisor, as of the Latest Practicable Date, we did not have any material pending proceedings
that are likely to have a material adverse effect on us. However, if in the future there are any
adverse determinations in legal proceedings against us, we could be required to pay substantial
monetary damages or adjust our business practices, which could have a material and adverse
effect on our business, financial condition and results of operations.
Our business, results of operations and financial condition may be adversely affected by
natural disasters, health epidemics and pandemics, civil and social disruption and other
outbreaks, such as the COVID-19 outbreak.
A vast majority of our operations and workforce are based in China and the U.S. China
and the U.S. have in the past experienced significant natural disasters, including earthquakes,
extreme weather conditions, as well as health scares related to epidemic diseases. Any similar
event could materially impact our business in the future. Although we maintain incident
management and disaster response plans, in the event of a major disruption caused by a natural
disaster or man-made problem, such as power disruptions, computer viruses, data security
breaches or terrorism, we may be unable to continue our operations and may endure system
interruptions, reputational harm, delays in our development activities, lengthy interruptions in
service, breaches of data security and loss of critical data, any of which could adversely affect
our business, results of operations and financial condition. In addition, our business could be
affected by public health epidemics and pandemics, such as the outbreak of avian influenza,
severe acute respiratory syndrome, or SARS, Zika virus, Ebola virus, COVID-19 virus or other
diseases. Even if we are not directly affected, such a disaster or disruption could affect the
operations or financial conditions of our customers, which could harm our results of
operations. If any of our employees is suspected of having contracted a contagious disease, we
may be required to apply quarantines or suspend our operations. Furthermore, any future
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outbreak may restrict economic activities in affected regions, resulting in reduced business
volume, temporary closure of our offices or otherwise disrupt our business operations and
adversely affect our financial condition and results of operations.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
Our commercial success depends significantly on our ability to operate without infringing
upon, misappropriating or otherwise violating the IP rights of third parties.
The markets we operate in are subject to rapid technological change and substantial
litigation regarding patent and other IP rights. Our competitors may have substantially greater
resources to make substantial investments in patent portfolios and competing technologies, and
may apply for or obtain patents that could prevent, limit or otherwise interfere with our ability
to make, use and sell our solutions or technologies. Numerous third-party patents exist in fields
relating to our technologies, and it is difficult for industry participants, including us, to identify
all third-party patent rights relevant to our solutions or technologies. Moreover, because some
patent applications are maintained as confidential for a certain period of time, we cannot be
certain that third parties have not filed patent applications that cover our solutions and
technologies.
Patents could be issued to third parties and we may ultimately be found to infringe such
patents. Third parties may have or obtain valid and enforceable patents or proprietary rights
that could block us from using our technologies. Our failure to obtain or maintain a license to
any third-party IP rights that we require may materially harm our business, financial condition
and results of operations. Furthermore, we would be exposed to risks of litigation.
Third-party IP right holders may also actively bring infringement or other IP-related
claims against us, even if we have received patent and other IP protection for our technologies,
solutions, and services. Regardless of the merit of third parties claims against us for
infringement, misappropriation or violations of their IP rights, such third parties may seek and
obtain injunctive or other equitable relief, which could effectively block our ability to continue
to offer our solutions and services. Further, if a patent or other IP infringement suit were
brought against us, we could be forced to stop or delay our R&D activities and the provision
of our solutions and services, the regulatory approval process, the use of the challenged
trademarks, or other activities that are the subject of such suit. Defense of these claims, even
if such claims are resolved in our favor, could cause us to incur substantial expenses and be
a substantial diversion of our resources even if we are ultimately successful. Any adverse
ruling or perception of an adverse ruling in defending ourselves could have a material adverse
impact on our cash position and Share price. Such litigation or proceedings could substantially
increase our operating costs and reduce the resources available for R&D activities, or any
future sales, marketing, or distribution activities. We may not have sufficient financial or other
resources to conduct such litigation or proceedings adequately. Some of our competitors may
be able to sustain the costs of such litigation or proceedings more effectively than we can
because of their greater financial resources and more mature and developed IP portfolios.
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Furthermore, because of the substantial amount of discovery required in connection with
IP litigation in the U.S., there is a risk that some of our confidential information could be
compromised by disclosure requirements during such litigation. There could also be public
announcements of the results of hearings, motions or other interim proceedings or
developments, and if securities analysts or investors perceive these results to be negative, it
could have a material adverse effect on the price of our Shares. The occurrence of any of these
events may have a material adverse effect on our business, financial condition, and results of
operation.
We may become involved in lawsuits to protect or enforce our patents or other IP, which
could be expensive, time consuming and unsuccessful, and any unfavorable outcome from
such litigation could limit our R&D activities and/or our ability to commercialize our
solutions and services.
Competitors may infringe our patent rights or misappropriate or otherwise violate our IP
rights. To counter infringement or unauthorized use, we may be required to file infringement
claims, which can be expensive and time consuming and divert the time and attention of our
management and scientific personnel. Any claims we assert against perceived infringers could
provoke these parties to assert counterclaims against us, alleging that we infringed their
patents. In addition, in a patent infringement proceeding, there is a risk that a court will decide
that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have
the right to preclude the other party from using the invention at issue. There is also a risk that,
even if the validity of our patents is upheld, the court will construe our patent claims narrowly
or decide that we do not have the right to preclude the other party from practicing the invention
at issue on the grounds that our patents do not cover the invention. An adverse outcome in
litigation or other quasi-judicial proceedings involving our patents could limit our ability to
assert our patents against those parties or other competitors, and may curtail or preclude our
ability to exclude third parties from making and selling similar or competitive solutions. Any
of these occurrences could adversely affect our competitive business position, business
prospects, and financial condition. Similarly, if we assert trademark infringement claims, a
court may determine that the marks we have asserted are invalid or unenforceable, or that the
party against whom we have asserted trademark infringement has superior rights to the marks
in question. In this case, we could ultimately be forced to cease use of such trademarks.
In any infringement litigation, any award of monetary damages we receive may not be
commercially valuable. Furthermore, because of the substantial amount of discovery required
in connection with IP litigation, there is a risk that some of our confidential information could
be compromised by disclosure during litigation. Moreover, there can be no assurance that we
will have sufficient financial or other resources to file and pursue such infringement claims,
which typically last for years before they are concluded. Even if we ultimately prevail in such
claims, the monetary cost of such litigation and the diversion of the attention of our
management and scientific personnel could outweigh any benefit we receive as a result of the
proceedings.
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Our obligations under our collaboration agreements may limit the IP rights that are
important to our business. If we fail to comply with our obligations under our
collaboration agreements, we could lose IP rights that are important to our business.
We are parties to and may continue to pursue collaborations with certain biotechnology
and pharmaceutical companies, pursuant to which we participate in drug design and discovery
and have either joint ownership or no ownership rights to certain IP generated through the
collaborations. If we are unable to obtain ownership or licensing of such IP generated through
our collaborations, which overlap with or relate to our own proprietary technologies, our
business, financial condition, results of operations, and prospects could be materially harmed.
Our collaboration agreements contain certain exclusivity obligations that require us to
design compounds exclusively for our collaborators with respect to certain specific targets over
a specified time period. These collaboration agreements may impose diligence obligations on
us. In spite of our best efforts, our collaborators may conclude that we have materially
breached our collaboration agreements. In addition, if these collaboration agreements are
terminated, or if the underlying IP , to the extent we have ownership or license of, fails to
provide the intended exclusivity, competitors would have the freedom to seek regulatory
approval of, and to market, solutions and technology identical to ours. This could have a
material adverse effect on our competitive position, business, financial condition, results of
operations, and prospects. Disputes may arise regarding IP subject to a collaboration
agreement, including:
 the scope of ownership or license granted under the collaboration agreement;
 the extent to which our technologies, solutions and services infringe on IP that is
generated through a collaboration, of which we do not have ownership or license
under such collaboration agreement;
 the assignment or sublicense of IP rights and other rights under the collaboration
agreement;
 our diligence obligations under the collaboration agreement and what activities
satisfy those diligence obligations; and
 the inventorship and ownership of inventions and know-how resulting from the joint
creation or use of IP by us and our collaborators.
In addition, collaboration agreements are complex, and certain provisions in such
agreements may be susceptible to multiple interpretations. The resolution of any contract
interpretation disagreement that may arise could narrow what we believe to be the scope of our
rights to the relevant IP , or increase what we believe to be our obligations under the relevant
agreements, either of which could have a material adverse effect on our business, financial
condition, results of operations, and prospects. Moreover, if disputes over IP that we have
owned, co-owned, or in-licensed under the collaboration agreements prevent or impair our
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ability to maintain our collaboration arrangements on commercially acceptable terms, the
affected technologies, solutions or services may not be able to successfully develop and
commercialize, which could have a material adverse effect on our business, financial condition,
results of operations, and prospects.
We may be unsuccessful in obtaining or maintaining patent or other adequate IP
protection for our technologies, solutions or services, due to any rejections of our patent
applications or licensed patent applications. If our issued patents are determined invalid
or unenforceable when challenged in court or before administrative bodies, third parties
could develop and commercialize solutions and technologies similar or identical to ours
and compete directly against us, and our ability to successfully commercialize any
technology, solutions or services may be adversely affected.
Our commercial success will depend, in large part, on our ability to obtain, maintain and
defend patent and other IP protection with respect to our integrated technology platform, such
as our in silico tools, algorithms, automation and other technologies. We seek to protect our
proprietary position by filing patent applications in China, the U.S. and other applicable
jurisdictions as well as under the Patent Cooperation Treaty, or the PCT, related to our
technologies, solutions and services we may develop that are important to our business, and by
in-licensing IP related to our technologies, solutions and services. If we are unable to obtain
or maintain patent protection with respect to any proprietary technologies, solutions or
services, our business, financial condition, results of operations, and prospects could be
materially harmed.
We cannot be certain that patents will be issued or granted with respect to our patent
applications that are pending, or that issued or granted patents will not later be found to be
invalid and/or unenforceable, be interpreted in a manner that does not adequately protect our
technologies, solutions and services, or otherwise provide us with any competitive advantage.
The patent position of biotechnology and pharmaceutical companies is generally uncertain
because it involves complex legal and factual considerations. Patent applications we have
submitted may not be granted in the end. Moreover, some of our patents and patent applications
are, and may in the future be, jointly owned with third parties. If we are unable to obtain an
exclusive license to any such third-party jointly-owned interest in such patents or patent
applications, such joint owners may be able to license or assign their rights to other third
parties, including our competitors, and our competitors could market competing solutions and
services and/or use the same technologies. In addition, we may need the cooperation of any
such joint owners of our patents in order to enforce such patents against third parties, and we
may not be able to achieve such cooperation. Furthermore, certain of our patents were used as
collateral to secure our financing activities, and if we fail to repay certain loans, we may not
be able to maintain such patent rights. Any of the foregoing could have a material adverse
effect on our competitive position, business, financial conditions, results of operations and
prospects. As such, we do not know the degree of future protection that we will have on our
technologies, solutions and services, if any, and a failure to obtain adequate IP protection with
respect to our technologies, solutions and services could have a material adverse impact on our
business.
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While we can take measures to obtain patent and other IP protections with respect to our
technologies, solutions and services, there can be no assurance that the existence, validity,
enforceability, or scope of our IP rights will not be challenged by a third party, or that we can
obtain sufficient scope of claim in those patents to prevent a third party from utilizing our
technologies or competing against our solutions or services. For example, in an infringement
proceeding, a court may decide that patent rights or other IP rights owned by us are invalid or
unenforceable, or may refuse to order the other party to refrain from utilizing the technology
at issue on the ground that our patent rights or other IP rights do not cover the technology in
question. An adverse result in any litigation or administrative proceedings could put our
patents, as well as any patents that may issue in the future from our pending patent
applications, at risk of being invalidated, held unenforceable, or interpreted narrowly.
Furthermore, because of the substantial amount of discovery required in connection with IP
litigation, there is a risk that some of our confidential information could be compromised by
disclosure during this type of litigation.
In addition, if we were to initiate legal proceedings against a third party to enforce a
patent covering our technologies, solutions and services, the defendant could counterclaim that
our patent is invalid and/or unenforceable. Third parties may also raise similar claims before
administrative bodies in China or abroad, even outside the context of litigation. Such
mechanisms include ex parte re-examination, inter partes review, post-grant review, derivation
and equivalent proceedings, such as opposition proceedings. Grounds for a validity challenge
could be an alleged failure to meet any of several statutory requirements, for example,
unpatentable subject matter, lack of novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of
the patent withheld relevant material information from the United States Patent and Trademark
Office, or the applicable foreign counterpart, or made a misleading statement, during
prosecution. Although we believe that we have conducted our patent prosecution in accordance
with the duty of candor and in good faith, the outcome following legal assertions of invalidity
and unenforceability during patent litigation is unpredictable. With respect to the validity
question, for example, we cannot be certain that there is no invalidating prior art, of which we,
our patent counsel, and the patent examiner were unaware during prosecution. If a defendant
were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least
part, and perhaps all, of the patent protection on our technologies, solutions or services. Even
if a defendant does not prevail on a legal assertion of invalidity and/or unenforceability, our
patent claims may be construed in a manner that would limit our ability to enforce such claims
against the defendant and others. Any loss of patent protection could have a material adverse
impact on one or more of our technologies, solutions or services and our business.
We may be subject to claims challenging the inventorship or ownership of our patents and
other IP.
We, our collaborators and/or our business partners may be subject to claims that former
employees, collaborators or other third parties have an interest in our patents or other IP as an
inventor or co-inventor. In addition, we cannot assure you that all inventors have been or will
be identified by us and/or by our collaborators and/or our business partners despite diligent
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effort. The failure to name the proper inventors on a patent application could result in the
patents issuing thereon being unenforceable. Inventorship disputes may arise from
conflicting views regarding the contributions of different individuals named as inventors, the
effects of foreign laws where foreign nationals are involved in the development of the subject
matter of the patent, conflicting obligations of third parties involved in developing our
technologies, solutions and services or as a result of questions regarding joint ownership of
potential joint inventions. Litigation may be necessary to resolve these and other claims
challenging inventorship and/or ownership. Alternatively, or additionally, we may enter into
agreements to clarify the scope of our rights in such IP . If we fail in defending any such claims,
in addition to paying monetary damages, we may lose valuable IP rights, such as exclusive
ownership of, or right to enforce, such valuable IP . Such an outcome could have a material
adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other
employees.
Our collaborators and business partners may have relied on consultants or other third
parties such that our collaborators and business partners are not the sole and exclusive owners
of the patents we in-licensed or utilized. If such third parties have ownership rights or other
rights to our in-licensed or utilized patents, they may be able to license such patents to our
competitors, and our competitors could market competing technologies, solutions or services.
This could have a material adverse effect on our competitive position, business, financial
conditions, results of operations, and prospects.
We may not be successful in obtaining or maintaining necessary rights for our technology
through acquisitions.
Because our integrated platform and programs may involve additional technologies that
may require the use of proprietary rights held by third parties, the growth of our business may
depend in part on our ability to acquire other rights to use these proprietary rights. We may be
unable to acquire any compositions, methods of use, or other IP rights from third parties that
we identify. The acquisition of third-party IP rights is a competitive area, and a number of more
established companies are also pursuing strategies to acquire third-party IP rights that we may
consider attractive or necessary. These established companies may have a competitive
advantage over us due to their size, cash resources and greater R&D and commercialization
capabilities. In addition, companies that perceive us to be a competitor may be unwilling to
assign rights to us. We also may be unable to acquire third-party IP rights on terms that would
allow us to make an appropriate return on our investment or at all. If we are unable to
successfully obtain rights to required third-party IP rights or maintain our IP rights, we may
have to abandon development of the relevant technology, solution or service, which could have
a material adverse effect on our business, financial condition, results of operations and
prospects for growth.
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We may not be able to enter into invention assignment and confidentiality agreements
with all of our employees and third parties. Such agreements may not prevent ownership
disputes or unauthorized disclosure of trade secrets and other proprietary information.
We rely upon unpatented trade secrets, unpatented know-how and continuing
technological innovation to develop and maintain our competitive position, which we seek to
protect, in part, by entering into agreements, including patent or invention assignment
agreements, confidentiality agreements and non-disclosure agreements, with parties that have
access to them, such as our employees, consultants, academic institutions, collaborators, and
other third-party service providers. Nevertheless, there can be no guarantee that an employee
or a third party will not make an unauthorized disclosure of our proprietary confidential
information. This might happen intentionally or inadvertently. It is possible that a competitor
will make use of such information, and that our competitive position will be compromised, in
spite of any legal action we may take against persons making such unauthorized disclosures.
In addition, to the extent that our employees, consultants or contractors use IP owned by others
in their work for us, disputes may arise as to the rights in related or resulting know-how and
inventions.
Trade secrets are difficult to protect. Although we use reasonable efforts to protect our
trade secrets, our employees, consultants, contractors or business partners may intentionally or
inadvertently disclose our trade secret information to competitors or our trade secrets may
otherwise be misappropriated. Enforcing a claim that a third party illegally obtained and is
using any of our trade secrets is expensive and time consuming, and the outcome is
unpredictable.
We may enter into agreements to sponsor individuals or research institutions to conduct
research relevant to our business in the future. The ability of these individuals or research
institutions to publish or otherwise publicly disclose data and other information generated
during the course of their research is subject to certain contractual limitations. These
contractual provisions may be insufficient or inadequate to protect our confidential
information. If we do not file patent application(s) prior to such publication, or if we cannot
otherwise maintain the confidentiality of our proprietary technologies and other confidential
information, then our ability to obtain patent protection or to protect our trade secret or
proprietary information may be jeopardized, which could adversely affect our business,
financial condition and results of operations.
We also seek to enter into agreements with our employees and consultants that obligate
them to assign any inventions created during their work for us to us. However, we may not
obtain these agreements in all circumstances, and the assignment of IP under such agreements
may not be self-executing. It is possible that technology relevant to our business will be
independently developed by a person that is, or is not, a party to such an agreement.
Furthermore, if the employees, consultants or collaborators who are parties to these agreements
breach or violate the terms of these agreements, we may not have adequate remedies for any
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such breach or violation, and we could lose our trade secrets and inventions through such
breaches or violations. Any of the foregoing could have a material and adverse effect on our
business, financial condition and results of operations.
We may be subject to claims that our employees, consultants and/or advisors have
wrongfully used or disclosed alleged trade secrets of their former employers.
Some of our employees, consultants and/or advisors were previously employed at
universities or other biotechnology or pharmaceutical companies, including our competitors.
Although we try to ensure that our employees do not use the proprietary information or
know-how of others in their work for us, we may be subject to claims that we or our employees
have used or disclosed IP , including trade secrets or other proprietary information, of any such
employee’s former employer. Litigation may be necessary to defend against these claims. If we
fail in defending any such claims, in addition to paying monetary damages, we may lose
valuable IP rights or personnel. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management.
IP rights do not necessarily protect us from all potential threats to our competitive
advantage.
The degree of future protection afforded by our IP rights is uncertain because IP rights
have limitations, and may not adequately protect our business, or permit us to maintain our
competitive advantage. The following examples are illustrative:
 others may be able to independently develop similar or alternative technologies or
designs that are similar to our solutions or services but that are not covered by the
claims of the patents that we own or have or have obtained an exclusive license to;
 we might not have been the first to make the inventions covered by the issued
patents or pending patent applications that we own or may in the future exclusively
license, which could result in the patent applications not issuing or being invalidated
after issuing;
 we might not have been the first to file patent applications covering certain of our
inventions, which could result in the patent applications not issuing or being
invalidated after issuing;
 others may independently develop similar or alternative technologies or duplicate
any of our technologies without infringing our IP rights;
 our pending patent applications will possibly not lead to issued patents;
 issued patents that we own or have obtained an exclusive license to may not provide
us with any competitive advantages, or may be held invalid or unenforceable, as a
result of legal challenges by our competitors;
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 our competitors might conduct R&D activities in countries where we do not have
patent rights and then use the information learned from such activities to develop
competitive solutions and services for commercialization in our major markets;
 we may fail to develop additional proprietary technologies that are patentable;
 we may fail to apply for or obtain adequate IP protection in all the jurisdictions in
which we operate; and
 the patents of others may have an adverse effect on our business, for example by
preventing us from commercializing one or more of our solutions and services.
Any of the aforementioned threats to our competitive advantage could have a material
adverse effect on our business.
Changes in patent laws in the U.S., Europe and China could raise challenges with respect
to our patent protection in the U.S., Europe and China and increase the risk of early
generic competition with our solutions or services.
Our success is heavily dependent on IP , particularly patents. Obtaining and enforcing
patents in the AI-powered drug and material science R&D market involves both technological
and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes
in either the patent laws or interpretation of the patent laws in the U.S., Europe and China could
raise the challenges and increase the costs surrounding the prosecution of patent applications
and the enforcement or defense of issued patents, including the Leahy-Smith America Invents
Act, or the Leahy-Smith Act, which was signed into law in September 2011 and became
effective in March 2013. The Leahy-Smith Act includes a number of significant changes to
U.S. patent law. These include provisions that affect the way patent applications are
prosecuted, redefine prior art and provide more efficient and cost-effective avenues for
competitors to challenge the validity of patents. For example, the Leahy-Smith Act allows
third-party submission of prior art to the United States Patent and Trademark Office
(“USPTO ”) during patent prosecution and additional procedures to attack the validity of a
patent by USPTO administered post-grant proceedings, including post-grant review, inter
partes review, and derivation proceedings. In addition, the Leahy-Smith Act has transformed
the U.S. patent system from a “first-to-invent” system to a “first-to-file” system in which,
assuming that other requirements for patentability are met, the first applicant to file a patent
application will be entitled to the patent on an invention regardless of whether a third party was
the first to invent the claimed invention. As a result, the Leahy-Smith Act and its
implementation could make it more difficult to obtain patent protection for our inventions, and
raise the challenges and increase the costs surrounding the prosecution of our or our
collaboration partners’ patent applications and the enforcement or defense of our or our
collaboration partners’ issued patents, all of which could harm our business, results of
operations, financial condition and prospects.
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In addition, the patent positions of companies in the development and commercialization
of biotechnology and pharmaceuticals are particularly challenging. The U.S. Supreme Court
has ruled on several patent cases in recent years, either narrowing the scope of patent
protection available in certain circumstances or weakening the rights of patent owners in
certain situations. This combination of events has raised challenges with respect to the validity
and enforceability of patents, once obtained. Additionally, there have been recent proposals for
additional changes to the patent laws of the U.S. and other countries that, if adopted, could
impact our ability to enforce our proprietary technology. Depending on future actions by the
U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other
countries, the laws and regulations governing patents could change in unpredictable ways that
could have a material adverse effect on our existing patent portfolio and weaken our ability to
obtain new patents or to enforce our existing patents and patents that we might obtain in the
future.
Furthermore, Europe’s planned Unified Patent Court may, in particular, present
uncertainties for our ability to protect and enforce our patent rights against competitors in
Europe. In 2012, the European Patent Package, or the EU Patent Package, was passed with the
goal of providing a single pan-European Unitary Patent system and a new European Unified
Patent Court, or the UPC, for litigation involving European patents. The Unitary Patent system
and UPC successfully launched on June 1, 2023. Under the UPC, all European patents,
including those issued prior to ratification of the European Patent Package, now by default
automatically fall under the jurisdiction of the UPC. The UPC provides our competitors with
a new forum to centrally revoke our European patents, and allows for the possibility of a
competitor to obtain pan-European injunctions. It will be several years before we will
understand the scope of patent rights that will be recognized and the strength of patent
remedies that will be provided by the UPC. Under the current EU Patent Package, we have the
right to opt our patents out of the UPC over the first seven years of the court’s existence, but
doing so may preclude us from realizing the benefits of the new unified court.
In China, the Patent Law of the PRC (), or the PRC Patent
Law, which came into effect on June 1, 2021, also adopts a patent-term extension mechanism
which provides that, from June 1, 2021, for a new drug already approved for marketing in
China, the term of the related invention patent may be extended, upon request by the relevant
patent applicant, to compensate the lengthy time period consumed in the market authorization
approval process. According to the PRC Patent Law, in order to compensate for the time used
for the review and approval of new drugs for marketing, the patent administration department
of the State Council shall, at the request of the patent applicant, provide patent term
compensation for invention patents of new drugs approved for marketing in China. The patent
term compensation may not exceed five years, and the total effective term of the patent after
the new drug approved for marketing shall not exceed 14 years. Moreover, the PRC Patent Law
also introduces the basis of patent linkage allowing litigation or administrative decision on
dispute over drug patent infringement while the new drug is still in the process of review and
assessment for marketing authorization. The NMPA may decide whether to suspend the
approval of marketing authorization of the new drug according to the effective court judgment
or administrative decision. Despite the PRC Patent Law, the NMPA and the National
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Intellectual Property Administration, or the NIPA, are yet to promulgate formal implementing
rules for patent term extension and patent linkage apart from several drafts for public comment.
Accordingly, we need to adopt various measures to protect ourselves against generic
competition in China until the relevant laws, regulations and implementing rules for patent
term extension, patent linkage, or data exclusivity are put into effect officially in China.
Obtaining and maintaining patent protection depends on compliance with various
procedural, document submission, fee payment and other requirements imposed by
governmental patent agencies, and our patent protection could be reduced or eliminated
for non-compliance with these requirements.
The USPTO, NIPA and various patent offices or authorities in other jurisdictions require
compliance with a number of procedural, documentary, fee payment and other provisions
during the patent application and prosecution process. Periodic maintenance fees, renewal fees,
annuity fees, and various other governmental fees on patents and/or applications will be due
to be paid to the USPTO, NIPA and various patent offices or authorities outside of China in
several stages over the lifetime of the patents and/or applications. We employ reputable
professionals and rely on such third parties to help us comply with these requirements and
effect payment of these fees with respect to the patents and patent applications that we own.
Noncompliance events that could result in abandonment or lapse of a patent or patent
application include failure to respond to official communications within prescribed time limits,
non-payment of fees and failure to properly legalize and submit formal documents. In many
cases, an inadvertent lapse can be cured by payment of a late fee or by other means in
accordance with the applicable rules. However, there are situations in which noncompliance
can result in abandonment or lapse of a patent or patent application, resulting in loss of patent
rights in the relevant jurisdiction. In such an event, competitors might be able to enter the
market earlier than would otherwise have been the case, which could have a material adverse
effect on our competitive position, business, financial condition, results of operations, and
prospects.
Patent terms may not be sufficient to effectively protect our technology and the product
candidates using our solutions and services.
In most countries in which we plan to file applications for patents, the term of an issued
patent is generally 10 to 20 years from the earliest claimed filing date of a non-provisional
patent application in the applicable country. Although various extensions may be available, the
life of a patent and the protection it affords is limited. Even if patents covering our technology
and the product candidates using our solutions and services are obtained, we may be exposed
to competition from other companies once our patent rights expire. Given the amount of time
required for the development, testing and regulatory review of new technology and product
candidates, patents protection for such technology and product candidates using our solutions
and services might expire before or shortly after such technology and candidates are
commercialized. As a result, our patent portfolio may not provide us with sufficient rights to
exclude others from commercializing products or technology similar or identical to ours.
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We may not be able to protect our IP rights throughout the world.
Filing, prosecuting and defending patents on our technology in all countries throughout
the world would be prohibitively expensive and time-consuming. We may also encounter
difficulties in protecting and defending such rights in foreign jurisdictions. Consequently, we
may not be able to prevent third parties from practicing our inventions in all countries outside
the jurisdictions of the registration of our IPs. Competitors may use our technologies in
jurisdictions where we have not obtained patent protection to develop their own products. Our
patents or other IP rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending IP
rights in foreign jurisdictions. The legal systems of many other countries do not favor the
enforcement of patents and other IP protection, which could make it difficult for us to stop the
infringement of our patents in such countries.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial
cost and divert our efforts and attention from other aspects of our business, could put our
patents at risk of being invalidated or interpreted narrowly and our patent applications at risk
of not issuing, and could provoke third parties to assert claims against us. We may not prevail
in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be
commercially meaningful. Accordingly, our efforts to enforce our IP rights around the world
may be inadequate to obtain a significant commercial advantage from the IP that we develop
or license.
RISKS RELATED TO OUR FINANCIAL PROSPECTS AND NEED FOR ADDITIONAL
CAPITAL
We have incurred significant operating expenses, net loss and cash outflow from
operations historically. We may continue to incur significant operating expenses, net loss
and cash outflow from operations in the near future, which may materially adversely
affect our business operations, results of operations, financial position and profitability.
We have a history of significant operating expenses and net loss and have a history of
experiencing, and expect to continue to experience, negative cash flow from operations,
requiring us to finance operations through capital contributions. Our operating expenses,
comprising R&D expenses, general and administrative expenses, contract fulfillment costs, and
selling and marketing expenses, increased from RMB407.1 million in 2021 to RMB671.0
million in 2022 and further to RMB965.3 million in 2023, primarily due to our continued
investments in R&D efforts and the increased employee benefit expenses. We had a net loss of
RMB2,137.3 million, RMB1,438.6 million and RMB1,906.3 million in 2021, 2022 and 2023,
respectively. These losses have resulted primarily from the significant amounts of fair value
loss in CRPS and other financial liabilities, and to a lesser extent, due to our R&D expenses,
general and administrative expenses, contract fulfillment costs and selling and marketing
expenses incurred during the Track Record Period. We anticipate that our operating expenses,
net losses and cash outflow from operations will continue to increase in the foreseeable future
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as we continue to expand our business and invest in our solutions and services, our integrated
technology platform and our sales and marketing related activities. Our operating expenses are
expected to increase primarily as a result of our further business expansion, as we:
 continue advancement of and investment in our integrated technology platform,
including quantum physics computation, AI, cloud computing and AI-powered
intelligent robotic wet lab experimentation capabilities;
 continue expansion and improvement of our drug and new materials discovery
solutions and intelligent automation solutions;
 continue our ongoing and planned R&D programs developed for our customers or
in collaboration with our collaborators;
 continue expansion of our collaborations with partners on drug discovery, including
CROs and other service providers;
 maintain, expand and protect our IP portfolio;
 establish and enhance our business development and marketing team to promote and
sell our services and forge collaborations;
 attract, hire and retain additional scientific, technical, management and
administrative personnel;
 maintain and expand our customer relationship and business development efforts;
 expand our operations in China and globally; and
 incur additional costs associated with operating as a public company upon the
completion of the Global Offering.
If our operating expenses and/or net loss continue to increase significantly, and we fail
to manage such increases, our business operations, results of operations, financial position and
profitability would be materially adversely affected.
We recorded net liabilities during the Track Record Period.
We had net liabilities of RMB3,604.0 million, RMB5,309.8 million and RMB7,241.2
million as of December 31, 2021, 2022 and 2023, respectively, primarily due to the
classification of our CRPS as liabilities. We expect to achieve a net assets position upon
Listing, as the CRPS will be re-designated from financial liabilities to equity as a result of the
automatic conversion into ordinary shares upon Listing.
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Fair value changes in our CRPS and other financial liabilities and related valuation
uncertainty may materially affect our financial condition and results of operations.
We have historically issued several series of CRPS and warrants to investors. See
“History, Development and Corporate Structure—Pre-IPO Investments” for more details. All
the warrants issued, recorded as other financial liabilities in our financial statements, were
converted into Series C Preferred Shares in 2021. We have used discounted cash flow method
to determine the underlying share value of our Company and adopted equity allocation model
to determine the fair value of the CRPS and warrants at the end of each Track Record Period.
Such valuation techniques are certified by an independent third party valuer before being
implemented for valuation to ensure that outputs reflect market conditions. Any changes in the
assumptions may lead to different valuation results and, in turn, changes in the fair value of
these CRPS. We recorded fair value changes of CRPS and other financial liabilities of
RMB1,843.9 million, RMB957.8 million and RMB1,275.2 million in 2021, 2022 and 2023,
respectively, which adversely affected our results of operations.
After the automatic conversion of the CRPS into Ordinary Shares upon the Listing, we do
not expect to recognize any further gains or losses on fair value changes from these CRPS in
the future. To the extent we need to revalue the CRPS prior to the closing of the Global
Offering, any change in fair value of CRPS and related valuation uncertainty could materially
affect our financial position and performance.
We are exposed to risks in connection with the fair value change of financial assets at
FVTPL and related valuation uncertainty.
Fluctuation of the fair value of our financial assets at FVPTL may affect our results of
operation. During the Track Record Period, our financial assets at FVTPL consisted of current
assets of wealth management products issued by reputable commercial banks and non-current
assets of equity interests in a listed company, equity interests in several unlisted companies and
a convertible debt.
We are exposed to credit risk in relation to our investments in financial assets at FVPTL,
which may adversely affect the net changes in their fair value. Factors beyond our control can
significantly influence and cause adverse changes to the estimates and thereby affect the fair
value. These factors include, but are not limited to, general economic conditions, market
conditions and regulatory environment.
We use significant unobservable inputs, such as expected volatility, discount for lack of
marketability, risk-free rate and expected rate of return, in valuing such financial assets. The
fair value change of financial assets at fair value through profit or loss may significantly affect
our financial position and results of operations. Accordingly, such determination requires us to
make significant estimates, which may be subject to material changes, and therefore inherently
involves a certain degree of uncertainty. Factors beyond our control can significantly influence
and cause adverse changes to the estimates we use and thereby affect the fair value of such
financial assets. These factors include, but are not limited to, general economic condition,
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changes in market interest rates and the stability of capital markets. Any of these factors, as
well as others, could cause our estimates to vary from actual results, which could materially
and adversely affect our results of operation and financial condition.
While we recorded net gains in fair value changes in financial assets at FVTPL of
RMB10.4 million in 2021, we recorded net losses in fair value changes in financial assets at
FVTPL of RMB9.6 million and RMB4.4 million in 2022 and 2023, respectively. We cannot
assure you that we will not incur any such fair value losses in the future, and any such fair
value losses may adversely affect our results of operations, financial condition and prospects.
We are exposed to changes in fair value of our derivative financial instruments.
We started using derivative financial instruments in 2021, including primarily forward
exchange contracts and cross currency swaps, to hedge exposure to exchange rate risk. The fair
value changes of our derivative financial instrument were recognized in other net gains and
losses. As of December 31, 2021, 2022 and 2023, the amounts of our derivative financial
instruments were RMB0.8 million, RMB2.5 million and RMB0.6 million, respectively. We
recorded gains on derivative financial instruments of RMB19.0 million and RMB4.2 million in
2021 and 2023, respectively, while recorded losses on derivative financial instruments of
RMB5.2 million in 2022. Our derivative financial instruments may incur negative fair value
change in the future, which may adversely affect our profitability. We monitor the market value
and financial performance of each investment, and analyse the market trends of interest rate
and exchange rate fluctuation. However, if our forecasts do not conform to actual changes in
market conditions, our trading activities may not achieve the investment returns we anticipate,
and we would suffer material losses, any of which could materially and adversely affect our
business, financial condition and results of operations.
We may be exposed to credit risk associated with our trade receivables.
Our trade receivables arose primarily from our solutions or services provided in the
ordinary course of business. As of December 31, 2021, 2022 and 2023, the carrying amount of
our trade receivables was RMB30.7 million, RMB37.9 million and RMB38.5 million,
respectively, and the turnover days of our trade receivables were 122 days, 94 days and 80 days
in 2021, 2022 and 2023, respectively. See “Financial Information—Description of Certain
Items of Consolidated Statements of Financial Position—Trade Receivables” for details. We
may not be able to collect all such trade receivables due to a variety of factors that are out of
our control. For example, if our relationship with any of our customers or collaborators
deteriorates or terminates, or if any of them experiences any difficulty in their operations or
a decrease in their business or financial performance for any reasons, our customers or
collaborators may delay or default in their payment. As a result, we may not be able to fully
recover the outstanding amounts due from them, in a timely manner or at all. If we are not able
to manage the credit risk associated with our trade receivables, our cash flows and results of
operations may be materially and adversely affected. During the Track Record Period, we
recorded impairment losses on financial assets of RMB0.7 million, RMB0.9 million and
RMB0.1 million in 2021, 2022 and 2023, respectively.
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We may not be able to fulfill our obligation in respect of contract liabilities which could
adversely affect our financial condition, results of operations and prospects.
As of December 31, 2021, 2022 and 2023 and April 30, 2024, we had contract liabilities
of RMB9.9 million, RMB15.5 million, RMB25.7 million and RMB26.9 million, respectively,
representing advance payments from our customers and collaborators for purchasing our
solutions and services which have not yet been rendered. If we have any difficulties or fail to
perform our obligations under our contracts, our relationships with our customers and
collaborators will be adversely affected and we will be unable to recognize such contract
liabilities as revenue, exposing us to the risk of shortfalls in liquidity, which may have a
material adverse effect on our operational performance and prospects. See “Financial
Information—Description of Certain Items of Consolidated Statements of Financial
Position—Contract Liabilities.”
We may not be able to realize and recover the full amount of the contract costs.
Our contract costs are initially recognized when we incur cost to fulfill the obligation
under our revenue contract with customers, while the receipt of consideration for our solutions
or services is conditional on the successful completion of our provision of solutions or services.
The capitalized contract cost for fulfilling revenue contract is amortized as contract fulfillment
cost in our consolidated statement of profit or loss when we recognize the relevant revenue. We
may make impairment over the contract cost if the carrying amount of contract costs exceed
the remaining amount of consideration that we expect to receive from customers. We recorded
contract costs of RMB17.1 million, RMB33.3 million, RMB37.9 million and RMB56.3 million
as of December 31, 2021, 2022 and 2023 and April 30, 2024, respectively. See “Financial
Information—Description of Certain Items of Consolidated Statements of Financial
Position—Contract Costs.” There is no assurance that we will be able to realize and recover the
full amount of contract costs as the operation and liquidity condition of our customers and
collaborators may change, or they may dispute the solutions or services we provided, which
will result in impairment of such contract costs. If we fail to realize and recover the full amount
of contract costs, our results of operations, liquidity and financial position may be adversely
affected.
We may never realize returns on our investment of resources and cash in our
collaborators and other investee companies. Fluctuation of the operational results of our
invested companies and the fair value of our investments may adversely affect our
financial position.
We make equity investments in certain of our drug discovery collaborators from time to
time, with whom we jointly discover and design novel therapeutical targets and technologies.
In addition to our equity positions in these collaborators, we expect to receive additional
royalty, milestone or contingent payments from our drug discovery collaborations if the
programs successfully reach milestones or events contemplated in the respective contracts. In
addition, we also invest in other companies with technologies or business that are
complementary to ours. The financial significance of such equity investments to our financial
performances are subject to valuation by third-party appraisers where multiple factors could
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impact such valuation, including the progress of R&D efforts of our investee companies, the
progress of pre-clinical studies and future clinical trials for any product candidates of our
investee companies, the success of our investee companies’ commercialization efforts and any
milestone or other payments we receive, market conditions in the relevant markets, the
operational performance of our investee companies and general economic, industry, and market
conditions. As the pre-clinical studies and clinical trials could be lengthy and time consuming,
we may not have positive valuation results in the near future and therefore has negative impact
on our financial performances in the short term. We recognized share of net loss of investments
accounted for using equity method of RMB4.5 million, RMB0.2 million and RMB2.0 million
in 2021, 2022, and 2023, respectively.
We may never realize return on our investment of resources and cash in our collaborators
and other investee companies. In particular, pre-clinical studies and clinical drug development
involves a lengthy and expensive process, with an uncertain outcome. Our investee companies
may incur additional costs or experience delays in completing, or ultimately be unable to
complete the development and commercialization of any product candidates. In addition, our
our investee companies’ R&D efforts may not lead to development or commercialization of
product candidates that results in our receipt of upfront payments, milestone payments, or
contingent payments in a timely manner, or at all, which could materially and adversely affect
our business, financial condition, results of operations, and prospect.
We have adopted a share incentive plan and will continue to grant share-based awards in
the future, which may increase expenses associated with share-based compensation, cause
shareholding dilution to our existing Shareholders, and have an adverse effect on our
financial performance. Exercise of the awards granted will increase the number of our
outstanding Shares, which may adversely affect the market price of our Shares.
Historically, we have adopted certain share incentive schemes to recognize the
contribution of certain eligible participants and to provide incentives to retain and attract
quality personnel for the continued operation and development of our business. For instance,
we adopted the Pre-IPO ESOP in July 2021. See “Appendix IV—Statutory and General
Information—D. Share Incentive Schemes.” In 2021, 2022 and 2023, there were RMB22.5
million, RMB43.4 million and RMB88.4 million of share-based compensation expenses,
respectively, related to our share options granted under the share incentive plans, which
reflected our increased valuation and expansion of employees.
We believe the granting of share-based awards is of significant importance to our ability
to attract and retain key personnel and employees. As a result, we will continue to grant
share-based compensation to employees in the future, which may further increase our expenses
associated with share-based compensation, cause shareholding dilution to our Shareholders,
and adversely affect the market price of our Shares, and in turn materially and adversely affect
our business, financial condition, and results of operations.
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We may need to obtain substantial additional financing to fund our growth and
operations, which may not be available on acceptable terms, if at all.
The technological advancement and R&D efforts are capital-intensive. We have used
substantial funds and expect to continue to invest significant financial resources in enhancing
our integrated technology platform, including improving our computation algorithms and AI
models, as well as setting up robotics in our wet lab to enable high-throughput automation. For
example, we are in the process of further enhancing the capabilities of our AI-powered
intelligent robotic wet lab and expect to incur substantial expenditures. In addition, we have
used substantial funds to advance our drug and material science R&D and intelligent
automation solutions.
To date, we have funded our operations primarily through capital contributions from our
shareholders and cash inflows from our business operations. Our operations have consumed
substantial amounts of cash since inception. The net cash used in our operating activities was
RMB253.7 million, RMB429.1 million and RMB567.6 million in 2021, 2022 and 2023,
respectively. Our future funding requirements and the period for which we expect increasing
capital need may be different than what we are planning.
Adequate additional financing may not be available to us on acceptable terms, or at all.
Any additional capital-raising efforts may divert our management from their day-to-day
activities, which may adversely affect our ability to develop and commercialize our
technologies, solutions and services. If we are unable to raise capital when needed or on
attractive terms, we could be forced to delay, reduce or altogether cease our R&D programs
and/or our service offerings.
Any discontinuation, reduction or delay of any government grant, tax refund or
preferential tax treatment could have a material and adverse impact on our business.
In 2021, 2022 and 2023, we received government grants of RMB8.6 million, RMB21.4
million and RMB27.5 million, respectively. In the same years, we also received certain V A T
refunds from the PRC governments, which are non-recurring in nature, amounting to RMB10.6
million, RMB21.8 million and RMB30.5 million, respectively. Furthermore, the Chinese
government has provided various tax incentives to our subsidiaries in China. These incentives
include reduced enterprise income tax rates. For example, under the EIT Law and its
implementation rules, the statutory enterprise income tax rate is 25%. However, the income tax
of an enterprise that has been determined to be a technologically advanced service enterprise
can be reduced to a preferential rate of 15%. For example, Shenzhen Jingtai and Beijing Jingtai
enjoy such preferential rates.
We cannot assure you that we will continue to receive such government grants at the same
level or at all, or that we will continue to enjoy such preferential tax treatment, in which case
our business, financial condition and results of operation may be materially and adversely
affected. In addition, in the ordinary course of our business, we are subject to complex income
tax and other tax regulations, and significant judgment is required in the determination of a
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provision for income taxes. As such, the PRC tax authorities may successfully challenge our
position and may require us to pay taxes, interest on such taxes, and/or penalties in excess of
our tax provisions. The discontinuation of financial incentives available to us may materially
and adversely affect our financial condition and results of operations.
Increased staff cost may negatively affect our financial performance and liquidity
position.
Our operations require a sufficient number of qualified employees. To support our rapid
growth, we have incurred increasing staff costs, with total employee benefit expenses of
RMB224.2 million, RMB420.6 million and RMB591.2 million in 2021, 2022 and 2023,
respectively. Further, we intend to recruit highly capable and experienced employees to support
our business growth and to provide our employees with training and development
opportunities. Such recruitments may increase our staff costs, and there is no assurance that our
total revenue will increase in proportion to or at a faster pace than that in staff costs. As a
result, the increases in staff costs may have a negative impact on our results of operations and
financial condition. Our continued investments in recruiting, retaining and training our
employees may also place constraints on our liquidity and working capital.
Raising additional capital may lead to dilution of shareholdings and restrict our
operations or require us to relinquish rights to our technologies, solutions or services.
We may seek additional funding through a combination of equity and debt financings and
collaborations. To the extent that we raise additional capital through the sale of equity or
convertible debt securities, the beneficial ownership interest of existing Shareholders will be
diluted, and the terms may include liquidation or other preferences that adversely affect the
rights of our existing Shareholders. The incurrence of additional indebtedness or the issuance
of certain equity securities could result in increased fixed payment obligations and could also
result in certain additional restrictive covenants, such as incurring additional debt, making
capital expenditures, or declaring dividends. If we raise additional funds through partnerships,
collaborations, strategic alliances, or licensing arrangements from third parties, we may have
to relinquish valuable rights to our technologies, solutions or services, or future revenue
streams, or grant licenses on terms that are not favorable to us.
Disruptions in the financial markets and economic conditions could affect our ability to
raise capital.
Global economies could suffer dramatic downturns as the result of a deterioration in the
credit markets and related financial crisis as well as a variety of other factors including,
extreme volatility in security prices, severely diminished liquidity and credit availability,
ratings downgrades of certain investments and declining valuations of others. In the past,
governments have taken unprecedented actions in an attempt to address and rectify these
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extreme market and economic conditions by providing liquidity and stability to the financial
markets. If these actions are not successful, the return of adverse economic conditions may
cause a significant impact on our ability to raise capital, if needed, on a timely basis and on
acceptable terms or at all.
In addition, there is considerable uncertainty over the long-term effects of the
expansionary monetary and fiscal policies adopted by the central banks and financial
authorities of some of the world’s leading economies. There have been concerns over unrest
and terrorist threats in the Middle East, Europe and Africa and over the Russo-Ukrainian
conflict and the Israeli-Hamas conflict. For example, the Russo-Ukrainian conflict has caused,
and continues to intensify, significant geopolitical tensions in Europe, the U.S., and across the
world, which could potentially adversely affect our global expansion strategy. All of the
above-mentioned uncertainties could adversely and materially affect the financial markets and
economic conditions of the markets in which we operate, which will in turn adversely and
materially affect our business operations, results of operations, financial conditions, and
prospects.
RISKS RELATED TO DOING BUSINESS IN THE JURISDICTIONS WE OPERATE
The PRC legal system is statute-based and continues to rapidly evolve, and the
enforcement of the PRC laws and regulations is expected to evolve accordingly, which
may have a material impact on our business and results of operations.
A large portion of our business and operations are conducted in China and are governed
by the PRC laws and regulations. The PRC legal system is a civil law system based on written
statutes and their interpretation by the legislative bodies, the judicial authorities and the
enforcement bodies. Unlike the common law system, prior court decisions under the civil law
system have little precedential value and can only be used as a reference. Since the PRC legal
system is statute-based and continues to rapidly evolve, the enforcement of these laws and
regulations is expected to evolve accordingly, which may have a material impact on our
business and results of operations.
From time to time, we may have to resort to administrative and court proceedings to
enforce our legal rights. It is difficult for us to predict the outcome of any administrative and
court proceedings that we may be involved in the future. Accordingly, our ability to enforce
contracts in China and our business and results of operations may be materially affected.
Changes in China’s economic and social conditions, as well as government policies, laws
and regulations, and industry practice guidelines could have a material effect on our
business, financial condition, results of operations and prospects.
A significant portion of our business operations and assets is located in China.
Accordingly, our business, results of operations, financial condition and prospects may be
influenced to a significant degree by economic, legal and social conditions in China. In recent
years, the PRC government implemented a series of laws, regulations and policies which
imposed additional standards with respect to, among other things, quality and safety control as
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well as supervision and inspection of enterprises operating in our industries. See “Regulatory
Overview.” We may incur additional costs in order to comply with the regulatory requirements
imposed by the relevant authorities, which may impact our profitability.
If the PRC government determines that the contractual arrangements constituting part of
the former VIE structure did not comply with PRC regulations, or if these regulations
change or are interpreted differently in the future, our Shares may decline in value or
become worthless if we are deemed to be unable to assert our contractual control rights
over the assets of the former consolidated affiliated entities that conducted all or
substantially all of our operations.
In July 2017, Shenzhen Zhiyao was established in China as a wholly-owned subsidiary of
QuantumPharm HK. Shenzhen Zhiyao was not engaged in substantive business operations in
the PRC. In November 2017, Shenzhen Zhiyao entered into the Former Contractual
Arrangements with Shenzhen Jingtai, as well as its registered shareholders to establish the VIE
structure. As a result of the Former Contractual Arrangements, we obtained effective control,
and became the primary beneficiary of Shenzhen Jingtai. As we continued to evaluate our
business plan, we have decided we no longer need to pursue business opportunities that could
fall within the scope of prohibited or restricted categories for foreign investment in the PRC;
therefore, the Former Contractual Arrangements with Shenzhen Jingtai and its registered
shareholders are no longer necessary. We have completed the restructuring to unwind the
Former Contractual Arrangements so that Shenzhen Jingtai becomes a wholly-owned
subsidiary of QuantumPharm HK, which has direct ownership of both Shenzhen Jingtai and
Shenzhen Zhiyao.
Although we have completed the restructuring to unwind the Former Contractual
Arrangements and currently have direct ownership of both Shenzhen Jingtai and Shenzhen
Zhiyao, it is difficult for us to predict the outcomes of the application and enforcement of
current and future PRC laws, regulations, and rules relating to the Former Contractual
Arrangements for our operations in China, including potential future actions by the PRC
government, which may retroactively affect the enforceability and legality of the Former
Contractual Arrangements and, consequently, significantly affect the historical financial
condition and results of operations of Shenzhen Jingtai, and our ability to consolidate the
results of Shenzhen Jingtai into our consolidated financial statements for the periods prior to
the completion of the restructuring. If the PRC government finds such agreements to be
non-compliant with relevant PRC laws, regulations, and rules, or if these laws, regulations, and
rules or the interpretation thereof change in the future, and such changes may be retroactively
applied to our historical contractual arrangements, we could be subject to severe penalties and
our control over Shenzhen Jingtai established through the former VIE structure may be
rendered ineffective, which could result in potential restatement of our financial statements for
the year ended December 31, 2021 included in this prospectus. As a result, our Shares may
decline in value or become worthless.
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We may be restricted from transferring our scientific data outside of China.
On March 17, 2018, the General Office of the PRC State Council promulgated the
Measures for the Management of Scientific Data (), or the Scientific
Data Measures, which provide a broad definition of scientific data and relevant rules for the
management of scientific data. According to the Scientific Data Measures, enterprises in China
must seek governmental approval from competent authorities in accordance with relevant
management procedures for guarding state secrets before any scientific data involving any state
secret may be transferred abroad or be disclosed to foreign parties. Further, any researcher
conducting research funded, at least in part, by the PRC government is required to submit
relevant scientific data for management by the entity to which such researcher is affiliated
before such data may be published in any foreign academic journal. As the term “state secret”
is not clearly defined, there is no assurance that we can always obtain relevant approvals for
sending scientific data (such as the results of our pre-clinical studies conducted within China)
abroad, or to our foreign partners in China.
If we are unable to obtain the necessary approvals in a timely manner, or at all, our R&D
activities and collaboration programs may be hindered, which may materially affect our
business, results of operations, financial conditions and prospects. If relevant government
authorities consider the transmission of our scientific data to be in violation of the
requirements under the Scientific Data Measures, we may be subject to specific administrative
penalties imposed by those government authorities.
Dividends we receive from our subsidiaries located in the PRC may be taxed at a higher
rate, which could materially affect the amount of dividends, if any, we may pay our
shareholders.
Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special
Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion
with Respect to Taxes on Income (ᅄ೼ձԣ˟
τર), or the Double Tax Avoidance Arrangement, and the Circular on Certain
Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties (ੂБ೼
), or the Circular on Tax Treaties, issued on February 20,
2009 by the State Taxation Administration of the PRC, or the STA, if a Hong Kong resident
enterprise owns more than 25% of the equity interest of a PRC company at all times during the
twelve-month period immediately prior to obtaining a dividend from such company, the 10%
withholding tax on such dividend is reduced to 5%, provided that certain other conditions and
requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws are
satisfied at the discretion of the relevant PRC tax authority. However, based on the Circular on
Tax Treaties, if the relevant PRC tax authorities determine, in their discretion, that a company
benefits from such reduced income tax rate due to a structure or arrangement that is primarily
tax-driven, the PRC tax authorities may adjust the preferential tax treatment. Based on the
Circular on Certain Issues with respect to the “Beneficial Owner” in Tax Treaties (೼ਕ
ʕ“Ϟɛ”ʮѓ), or the Circular 9, issued on February 3,
2018 by the STA and effective on April 1, 2018, when determining the applicant’s status as a
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“beneficial owner” for purpose of tax treatments in connection with dividends, interests or
royalties in the tax treaties, several factors will be taken into account, and it will be analyzed
according to the actual circumstances of the specific cases. If our Hong Kong subsidiary is
determined by PRC government authorities as receiving benefits from reduced income tax rates
due to a structure or arrangement that is primarily tax-driven, the dividends paid by our PRC
subsidiaries to our Hong Kong subsidiary will be taxed at a higher rate, which will have an
impact on our financial and operational conditions.
The biotechnology and pharmaceutical industries in China is highly regulated and such
regulations are subject to change which may affect our R&D activities and the approval
and commercialization of the product candidates using our solutions or services.
We conduct R&D operations in China, which we believe conferring commercial and
regulatory advantages. The biotechnology and pharmaceutical industries in China is subject to
comprehensive government regulation and supervision, encompassing the research, approval,
registration, manufacturing, packaging, licensing and marketing of new product candidates.
See “Regulatory Overview” for a discussion of the regulatory requirements that are applicable
to our current and planned business activities in China. In recent years, the regulatory
framework in China regarding the biotechnology and pharmaceutical industries has undergone
changes. To comply with such changes or amendments, we may face increased compliance
costs on our business. Such compliance may delay or affect our R&D activities or the approval
and commercialization of the product candidates using our solutions or services in China, and
as a result, could affect our business, results of operations, and financial conditions. PRC
authorities have become increasingly vigilant in enforcing laws in the biotechnology and
pharmaceutical industries and any failure by us or our partners to maintain compliance with
applicable laws and regulations or obtain and maintain required licenses and permits may result
in the suspension or termination of our business activities in China. We believe our strategy and
approach are aligned with the PRC government’s regulatory policies, but we cannot ensure that
our strategy and approach will continue to be aligned.
The interpretation and implementation of the Foreign Investment Law is evolving, which
may impact the viability of our current corporate structure, corporate governance and
business operations.
On March 15, 2019, the PRC National People’s Congress, or the NPC, approved the PRC
Foreign Investment Law (), or the Foreign Investment Law,
which came into effect on January 1, 2020 and replaces the trio of prior laws regulating foreign
investment in the PRC, namely, the Law on Sino-Foreign Equity Joint V entures of the PRC
(), the Law on Sino-Foreign Cooperative Joint
V entures of the PRC () and the Law on Wholly
Foreign-Invested Enterprises of the PRC (), together with
their implementation rules and ancillary regulations and become the legal foundation for
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foreign investment in the PRC. Meanwhile, the Regulations on Implementing the Foreign
Investment Law of the PRC (ૢԷ) came into effect as of
January 1, 2020, which clarified and elaborated the relevant provisions of the Foreign
Investment Law.
The Foreign Investment Law sets out the basic regulatory framework for foreign
investments and proposes to implement a system of pre-entry national treatment with a
“negative list” for foreign investments, pursuant to which (i) foreign entities and individuals
are prohibited from investing in the areas that are not open to foreign investments, (ii) foreign
investments in the restricted industries must satisfy certain requirements under the law, and
(iii) foreign investments in business sectors outside of the negative list will be treated equally
with domestic investments. The Foreign Investment Law also sets forth necessary mechanisms
to facilitate, protect and manage foreign investments and proposes to establish a foreign
investment information reporting system, through which foreign investors are required to
submit information relating to their investments to the Ministry of Commerce (“ MOFCOM ”),
or its local branches.
While our businesses are not included in the effective negative list and are not otherwise
restricted to foreign investment by PRC laws and regulations, we cannot assure you that our
industry will not be named in an updated “negative list” to be issued in the future. If our
industry is added to the “negative list” or if the PRC regulatory authorities otherwise decide
to limit foreign ownership in our industry, there could be a risk that we would be unable to do
business in China as we are currently structured. If any new laws and/or regulations on foreign
investments in China are promulgated and implemented, such changes could have a significant
impact on our current corporate structure, which in turn could have a material impact on our
business and operations, our ability to raise capital and the market price of our Shares. In such
event, despite our efforts to restructure to comply with the then applicable PRC laws and
regulations in order to continue our operations in China, we may experience material changes
in our business and results of operations, our attempts may prove to be futile due to factors
beyond our control, and the value of the Shares you invest in may significantly decline or
become worthless.
Any failure to comply with PRC regulations regarding the registration requirements for
employee stock incentive plans may subject the PRC plan participants or us to fines and
other legal or administrative sanctions.
In February 2012, SAFE promulgated the Circular of the SAFE on Relevant Issues
Concerning the Foreign Exchange Administration for Domestic Individuals Participating in
Stock Incentive Plans of Overseas Publicly Listed Company (ɛ
), replacing earlier rules
promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside
in China for a continuous period of not less than one year who participate in any stock
incentive plan of an overseas publicly listed company, subject to a few exceptions, are required
to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries
of such overseas-listed company, and complete certain other procedures. In addition, an
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overseas-entrusted institution must be retained to handle matters in connection with the
exercise or sale of stock options and the purchase or sale of shares and interests. We and our
executive officers and other employees who are PRC citizens or who reside in the PRC for a
continuous period of not less than one year and who have been granted options will be subject
to these regulations when our company becomes an overseas-listed company upon completion
of this Global Offering. Failure to complete the SAFE registrations may subject them to fines
and legal sanctions, and there may be additional requirements on their ability to exercise stock
options or remit proceeds gained from the sale of their stock into the PRC. We may also be
subject to regulatory requirements that could affect our ability to adopt incentive plans for our
directors, executive officers and employees under PRC law.
Under other rules and regulations issued by the STA concerning employee share
incentives, our employees working in the PRC will be subject to PRC individual income tax
upon exercise of the share options or grant of the restricted Shares. Upon exercise of the share
options or grant of the restricted Shares, our PRC subsidiaries have to file documents with
respect to the granted share options or restricted Shares with relevant tax authorities and to
withhold individual income taxes for their employees upon exercise of the share options or
grant of the restricted Shares. If our employees fail to pay, or we fail to withhold, their
individual income taxes according to relevant rules and regulations, we may face sanctions
imposed by the competent governmental authorities.
See “Regulatory Overview—PRC Regulations on Foreign Exchange and Dividend
Distribution—Employee Stock Incentive Plan.”
If we are classified as a PRC resident enterprise for PRC income tax purposes, such
classification could result in unfavorable tax consequences to us and our non-PRC
shareholders.
Under the Enterprise Income Tax Law of the PRC (),
or the EIT Law, and its implementation rules, an enterprise established outside of the PRC with
a “de facto management body” within the PRC is considered a “resident enterprise” and will
be subject to the enterprise income tax on its global income at the rate of 25%. The
implementation rules define the term “de facto management body” as the body that exercises
full and substantial control over and overall management of the business, productions,
personnel, accounts and properties of an enterprise. In 2009, the STA issued the Notice
Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC
Tax Resident Enterprises on the Basis of De Facto Management Bodies (ྤ̮ൗ̅ʕ༟
), or the STA Circular 82,
which provides certain specific criteria for determining whether the “de facto management
body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
Although this circular only applies to offshore enterprises controlled by PRC enterprises or
PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set
forth in the circular may reflect the STA ’s general position on how the “de facto management
body” test should be applied in determining the tax resident status of all offshore enterprises.
According to STA Circular 82, an offshore incorporated enterprise controlled by a PRC
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enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having
its “de facto management body” in China and will be subject to PRC enterprise income tax on
its global income only if all of the following conditions are met: (i) the primary location of the
day-to-day operational management and the places where they perform their duties are in the
PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made
or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s
primary assets, accounting books and records, company seals, and board and shareholder
resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board
members or senior executives habitually reside in the PRC.
We believe that we are not a PRC resident enterprise for PRC tax purposes. See
“Regulatory Overview—PRC Regulations on Taxation—Enterprise Income Tax (“ EIT”).”
However, the tax resident status of an enterprise is subject to determination by the PRC tax
authorities. If the PRC tax authorities determine that we (or any non-PRC subsidiaries of us)
are a PRC resident enterprise for enterprise income tax purposes, we (or such subsidiaries) will
be subject to a 25% income tax on our worldwide income. In addition, if we are treated as a
PRC resident enterprise we may be required to withhold a 10% withholding tax from dividends
we pay to our shareholders that are non-resident enterprises. In addition, non-resident
enterprise shareholders may be subject to PRC tax on gains realized on the sale or other
disposition of our Shares, if such income is treated as sourced from within the PRC.
Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC
individual shareholders and any gain realized on the transfer of our Shares by such
shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may
be withheld at source by us). Any PRC tax liability may be reduced under applicable tax
treaties. However, it is unclear whether in practice our non-PRC shareholders would be able
to obtain the benefits of any tax treaties between their countries of tax residence and the PRC
in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the
returns on your investment in our Shares.
Different interpretations exist with respect to the details of indirect transfers of equity
interests in PRC resident enterprises or other assets attributed to a PRC establishment of
a non-RPC company, or immovable properties located in PRC by their non-PRC holding
companies.
On February 3, 2015, the STA issued the Circular on Certain Issues Concerning
Enterprise Income Tax for Indirect Transfers of Assets by Non-Resident Enterprises (೼
ʮѓ), or the Circular 7, as
amended in 2017. Pursuant to this Circular 7, an “indirect transfer” of assets, including
non-publicly traded equity interests in a PRC resident enterprise, by non-PRC resident
enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if
such arrangement does not have a reasonable commercial purpose and was established for the
purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from
such indirect transfer may be subject to PRC enterprise income tax. According to Circular 7,
“PRC taxable assets” include assets attributed to an establishment in China, immovable
properties located in China, and equity investments in PRC resident enterprises, in respect of
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which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would
be subject to PRC enterprise income taxes. When determining whether there is a “reasonable
commercial purpose” of the transaction arrangement, features to be taken into consideration
include, without limitation: whether the main value of the equity interest of the relevant
offshore enterprise derives directly or indirectly from PRC taxable assets; whether the assets
of the relevant offshore enterprise mainly consists of direct or indirect investment in China or
if its income mainly derives from China; whether the offshore enterprise and its subsidiaries
directly or indirectly holding PRC taxable assets have real commercial nature which is
evidenced by their actual function and risk exposure; the duration of existence of the
shareholders, business model and organizational structure; the income tax payable abroad on
the income from the transaction of indirect transfer of PRC taxable assets; the replicability of
the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect
transfer and applicable tax treaties or similar arrangements. In respect of an indirect offshore
transfer of assets of a PRC establishment, the resulting gain is to be included with the
enterprise income tax filing of the PRC establishment or place of business being transferred,
and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the
underlying transfer relates to the immovable properties located in China or to equity
investments in a PRC resident enterprise, which is not related to a PRC establishment or place
of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply,
subject to available preferential tax treatment under applicable tax treaties or similar
arrangements, and the party who is obligated to make the transfer payments has the
withholding obligation. Circular 7 does not apply to transactions of sale of shares by investors
through a public stock exchange where such shares were acquired from a transaction through
a public stock exchange. On October 17, 2017, the STA promulgated the Circular of the STA
on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source ( ਷
ʮѓ), or STA Circular 37, which
became effective on December 1, 2017 and was most recently amended on June 15, 2018. STA
Circular 37, among other things, simplified procedures of withholding and payment of income
tax levied on non-resident enterprises.
The reporting and other implications of certain past and future transactions where PRC
taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore
subsidiaries or investments, are subject to the determination of the PRC tax authorities. Our
company may be subject to filing obligations or taxed if our company is transferor in such
transactions, and may be subject to withholding obligations if our company is transferee in
such transactions under Circular 7 and STA Circular 37. For transfer of shares in our company
by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to
assist in the filing under Circular 7 and STA Circular 37. As a result, we may be required to
expend valuable resources to comply with Circular 7 and STA Circular 37 or to request the
relevant transferors from whom we purchase taxable assets to comply with these publications,
or to establish that our company should not be taxed under these publications, which may have
a material effect on our financial condition and results of operations.
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Certain judgments obtained against us by our Shareholders may not be enforceable.
We are an exempted company limited by shares incorporated under the laws of the
Cayman Islands. We conduct a significant portion of our operations in China and a significant
portion of our assets are located in China. In addition, a majority of our Directors and senior
management reside within China, and most of their assets are located within China. As a result,
it may be difficult or impossible for you to effect service of process within Hong Kong upon
these individuals, or to bring an action against us or against these individuals in Hong Kong
in the event that you believe your rights have been infringed under the Hong Kong laws or
otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman
Islands and of the PRC may render you unable to enforce a judgment against our assets or the
assets of our Directors and senior management.
Our growth through acquisitions in China is subject to the procedures established under
the M&A Rules and certain other PRC regulations, which could make it difficult for us
to complete such acquisitions.
A number of PRC laws and regulations have established procedures and requirements that
could make merger and acquisition activities in the PRC by foreign investors more time
consuming and complex. In addition to the Anti-Monopoly Law (), which
became effective on August 1, 2008, and was lately amended on June 24, 2022 and came into
effect on August 1, 2022, other M&A related rules include the Regulations on Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors (ٙ
), or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in
2009, the Rules of the Ministry of Commerce on Implementation of Security Review System
of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated in
2011 (), or the Security Review
Rules, and the Measures on the Security Review of Foreign Investment (ݟ
), or the Foreign Investment Security Review Measures, promulgated by NDRC and the
MOFCOM in December 2020 and effective on January 18, 2021. In particular, the M&A Rules
require, among other things, that the MOFCOM be notified in advance of any change-of-
control transaction in which a foreign investor acquires control of a PRC domestic enterprise,
if (i) any important industry is concerned, (ii) such transaction involves factors that impact or
may impact national economic security, or (iii) such transaction will lead to a change in control
of a domestic enterprise which holds a famous trademark or PRC time-honored brand.
Moreover, the Provisions of the State Council on the Standard for Declaration of Concentration
of Business Operators (Draft for Comments) (֛(ࠈࡌ
ᅄӋจԈᇃ)) released for public comments in June 2022 require that transactions which
are deemed concentrations and involve parties with specified turnover thresholds (i.e., during
the previous fiscal year, (i) the total global turnover of all operators participating in the
transaction exceeds RMB12 billion (up from RMB10 billion) and at least two of these
operators each had a turnover of more than RMB800 million (up from the current RMB400
million) within China, or (ii) the total turnover within China of all the operators participating
in the concentration exceeded RMB4 billion (up from the current RMB2 billion), and at least
two of these operators each had a turnover of more than RMB800 million (up from the current
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RMB400 million) within China) must be notified and cleared by the MOFCOM before they can
be completed. In addition, in 2011, the General Office of the State Council promulgated a
Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors (ݟ
), or the Circular 6, which officially established a security review system for
mergers and acquisitions of domestic enterprises by foreign investors. Also, MOFCOM
promulgated the Regulations on Implementation of Security Review System for the Merger and
Acquisition of Domestic Enterprises by Foreign Investors (Իᒅྤʫ
), effective in 2011, to implement Circular 6. Under the foregoing
regulations, a security review is required for mergers and acquisitions by foreign investors
having “national defense and security” concerns and mergers and acquisitions by which foreign
investors may acquire the “de facto control” of domestic enterprises with “national security”
concerns. The foregoing regulations prohibit foreign investors from bypassing the security
review by structuring transactions through holding shares on behalf of others, trusts,
re-investment through multiple levels, leases, loans, control through contractual arrangements
or offshore transactions. Following the implementation of the Foreign Investment Law, NDRC
and MOFCOM promulgated the Measures on the Security Review of Foreign Investments
(), effective from January 18, 2021, which require foreign
investors or relevant parties to file a prior report before making a foreign investment if such
investment involves military related industry, national defense security or taking control of an
enterprise in a key industry that concerns national security; and if a foreign investment will or
may affect national security, the standing working office organized by NDRC and MOFCOM
will conduct a security review to decide whether to approve such investment. We may pursue
potential strategic acquisitions that are complementary to our business and operations.
Complying with the requirements of these regulations to complete such transactions could be
time-consuming, and any required approval processes, including obtaining approval or
clearance from the MOFCOM and other relevant PRC authorities, may delay or inhibit our
ability to complete such transactions, which could affect our ability to expand our business or
maintain our market share.
The approval of or report and filing with the CSRC, according to the Overseas Listing
Trial Measures, or other governmental authorities may be required in connection with the
Global Offering and where applicable, our potential follow-on offerings after the Global
Offering, and, if required, we cannot predict if we will be able to obtain these approvals
or complete such report and filing in accordance with relevant PRC laws.
The Opinions on Strictly Cracking Down on Illegal Securities Activities (੽
จԈ), issued on July 6, 2021, emphasized the need to strengthen
regulation over illegal securities activities and supervision on overseas listings by China-based
companies and propose to take effective measures, such as promoting the development of
relevant regulatory systems to deal with the risks and incidents faced by China-based
overseas-listed companies. The interpretation and implementation of these opinions are still
evolving, and further explanations or detailed rules and regulations with respect to these
opinions may be issued in the future, which may impose additional requirements on us.
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On February 17, 2023, the CSRC issued the Overseas Listing Trial Measures, which
became effective on March 31, 2023. Under the Overseas Listing Trial Measures, domestic
companies conducting overseas securities offering and listing activities, either in direct or
indirect form, shall complete filing procedures with the CSRC pursuant to the requirements of
the Overseas Listing Trial Measures within three working days following its submission of
initial public offerings or listing application. According to the Overseas Listing Trial Measures,
we are required to complete the filing procedures with the CSRC in connection with the
Listing. We submitted a filing to the CSRC for application for the Listing on December 5,
2023. The CSRC confirmed completion of such filing on April 22, 2024.
In addition, the CAC and 12 other relevant PRC government authorities published the
Measures for Cybersecurity Review () on December 28, 2021, which
took effect on February 15, 2022. The Cybersecurity Review Measures provide that, among
others, (i) the purchase of network products and services by a “critical information
infrastructure operator” and the data processing activities of a “network platform operator” that
affect or may affect national security shall be subject to the cybersecurity review; and (ii) if
a “network platform operator” that possesses personal information of more than one million
users intends to go public in a foreign country, it must apply for a cybersecurity review with
the Cybersecurity Review Office. Furthermore, the CAC released the Regulation on the
Administration of Cyber Data Security (Draft for Comments) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋ
จԈᇃ)), or the Draft Data Security Regulations, for public comments on November 14,
2021. The Draft Data Security Regulations provide that data processors shall, among others, in
accordance with relevant state provisions, apply for cyber security review when carrying out
the following activities: (i) merger, reorganization or separation of Internet platform operators
that have acquired a large number of data resources related to national security, economic
development or public interests, which affects or may affect national security; (ii) intention to
seek a listing abroad of data processors that process personal information of more than one
million people; (iii) intention of data processors to seek a listing in Hong Kong, which affects
or may affect national security; (iv) other data processing activities that affect or may affect
national security. As advised by our PRC Legal Advisor, the criteria for determining “have or
could have influence on national security,” as stipulated in the Draft Data Security Regulations,
are still evolving and may be subject to further elaboration by the CAC. If our business is
deemed as “having or could have influence on national security” when the Draft Data Security
Regulations become effective and we fail to conduct cybersecurity review according to the
relevant laws and regulations and/or take rectification actions as required by the relevant
competent government authority, we might be subject to penalties, warnings or revocation of
our practicing licenses and permits, which could materially affect our business, reputation as
well as financial performance. As of the Latest Practicable Date, we had not received any
investigation, notice, warning, or sanctions from applicable government authorities in relation
to national security or been involved in any investigations on cybersecurity review made by the
CAC on the national security basis or any other basis, and have not received any inquiry,
notice, warning, or sanctions in such respect. In addition, the operative provisions and
anticipated adoption or effective date of such draft regulations may be subject to changes. We
cannot predict the impact of these draft regulations, if any, at this stage, and we will closely
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monitor and assess any development in the rule-making process. See “Regulatory
Overview—Regulations on Data Privacy and Cybersecurity—PRC—Information security and
censorship” for more detailed discussion.
If the CSRC or other PRC regulatory body subsequently determines that we need to obtain
the CSRC or other governmental approvals for the Global Offering or if the CSRC or any other
PRC government authorities promulgates any interpretation or implements rules before our
listing that would require us to obtain CSRC or other governmental approvals for the Global
Offering, we may face adverse actions or sanctions by the CSRC or other PRC regulatory
agencies. In any such event, these regulatory agencies may impose fines and penalties on our
operations in China, limit our operation in China, delay or restrict the repatriation of the
proceeds from the Global Offering into the PRC, or take other actions that could have a
material effect on our business, financial condition, results of operations, reputation and
prospects, as well as our ability to complete the Global Offering.
PRC regulations relating to offshore investment activities by PRC residents may limit our
PRC subsidiaries’ ability to change their registered capital or distribute profits to us or
otherwise expose us or our PRC resident beneficial owners to liability and penalties under
PRC laws.
In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning
Foreign Exchange Administration of the Overseas Investment and Financing and the
Round-Tripping Investment Made by Domestic Residents through Special-Purpose Companies
(), or
the SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals
and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for
foreign exchange administration purpose) to register with SAFE or its local branches in
connection with their direct or indirect offshore investment activities. SAFE Circular 37 is
applicable to our shareholders who are PRC residents and may be applicable to any offshore
acquisitions that we make in the future.
Under SAFE Circular 37, PRC residents who make, or have prior to the implementation
of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles,
or SPVs, will be required to register such investments with SAFE or its local branches. A
foreign-invested enterprise formed by way of round tripping by the SPV shall also undergo
relevant foreign exchange registration procedure. In addition, any PRC resident who is a direct
or indirect shareholder of an SPV , is required to update its filed registration with the local
branch of SAFE with respect to that SPV , to reflect any material change. Moreover, any
subsidiary of such SPV in China is required to urge the PRC resident shareholders to update
their registration with the local branch of SAFE. If any PRC shareholder of such SPV fails to
make the required registration or to update the previously filed registration, the subsidiaries of
such SPV in China may be prohibited from distributing its profits or the proceeds from any
capital reduction, share transfer or liquidation to the SPV , and the SPV may also be prohibited
from making additional capital contributions into its subsidiaries in China. On February 13,
2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange
Administration Policies in Respect of Direct Investment (ટҳ༟̮
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), or the SAFE Notice 13, which became effective on June 1, 2015. Under
SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct
investments and outbound overseas direct investments, including those required under SAFE
Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will
directly examine the applications and accept registrations under the supervision of SAFE.
Some of our existing shareholders are PRC residents under SAFE Circular 37. However,
we may not be informed of the identities of all the PRC residents holding direct or indirect
interest in our company, and we cannot provide any assurance that these PRC residents will
comply with our request to make or obtain any applicable registrations or comply with other
requirements under SAFE Circular 37 or other related rules. The failure or inability of our PRC
resident shareholders to comply with the registration procedures set forth in these regulations
may subject us to fines and legal sanctions, restrict our cross-border investment activities, limit
the ability of our wholly foreign-owned subsidiaries in China to distribute dividends and the
proceeds from any reduction in capital, share transfer or liquidation to us, and we may also be
prohibited from injecting additional capital into the subsidiaries. Moreover, failure to comply
with the various foreign exchange registration requirements described above could result in
liability under PRC law for circumventing applicable foreign exchange requirements. As a
result, our business operations and our ability to distribute profits to you could be materially
affected.
Furthermore, as these foreign exchange regulations are still relatively new and their
interpretation and implementation has been evolving, it is difficult for us to predict the
outcome of the application, implement and enforcement of these regulations, and any future
regulation concerning offshore or cross-border transactions. For example, we may be subject
to a more stringent review and approval process with respect to our foreign exchange activities,
such as remittance of dividends and foreign-currency-denominated borrowings, which may
affect our financial condition and results of operations. In addition, if we decide to acquire a
PRC domestic company, we cannot assure you that we or the owners of such company, as the
case may be, will be able to obtain the necessary approvals or complete the necessary filings
and registrations required by the foreign exchange regulations. This may restrict our ability to
implement our acquisition strategy and could affect our business and prospects.
We may be materially affected if our Shareholders and beneficial owners who are PRC
entities fail to comply with the relevant PRC overseas investment regulations.
On December 26, 2017, the NDRC promulgated the Measures for the Administration of
Overseas Investments of Enterprises (), or the NDRC Order No.
11, which took effect as of March 1, 2018. According to NDRC Order No. 11, non-sensitive
overseas investment projects are subject to record-filing requirements with the local branch of
the NDRC. On September 6, 2014, MOFCOM promulgated the Administrative Measures on
Overseas Investments (), which took effect as of October 6, 2014.
According to this regulation, overseas investments of PRC enterprises that involve non-
sensitive countries and regions and non-sensitive industries are subject to record-filing
requirements with a local MOFCOM branch. According to the Circular of the State
Administration of Foreign Exchange on Issuing the Regulations on Foreign Exchange
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Administration of the Overseas Direct Investment of Domestic Institutions (̮ි၍ଣ҅
೯б<֛>), which was promulgated by SAFE
on July 13, 2009 and took effect on August 1, 2009, PRC enterprises must register for overseas
direct investment with a local SAFE branch. Under SAFE Notice 13, applications for foreign
exchange registration of outbound overseas direct investments need to be filed with qualified
banks instead of SAFE.
We may not be fully informed of the identities of all our Shareholders or beneficial
owners who are PRC entities, and we cannot provide any assurance that all of our shareholders
and beneficial owners who are PRC entities will comply with our request to complete the
overseas direct investment procedures under the aforementioned regulations or other related
rules in a timely manner, or at all. If they fail to complete the filings or registrations required
by the overseas direct investment regulations, the relevant authorities may order them to
suspend or cease the implementation of such investment and make corrections within a
specified time, which may affect our business, financial condition and results of operations.
PRC regulation of loans to and direct investment in PRC entities by offshore holding
companies and governmental control of currency conversion may make it difficult for us
to use the proceeds of the Global Offering to make loans or additional capital
contributions to our PRC subsidiaries, which could materially affect our liquidity and our
ability to fund and expand our business.
We are an offshore holding company conducting our operations in China through our PRC
subsidiaries. We may make loans to our PRC subsidiaries subject to the approval or registration
from governmental authorities and limitation of amount, or we may make additional capital
contributions to our wholly foreign-owned subsidiary in China. Any loans to our wholly
foreign-owned subsidiary in China, which are treated as foreign-invested enterprises under
PRC law, are subject to foreign exchange loan registrations, and cannot exceed statutory limits,
which is either the difference between the registered capital and the total investment amount
of such enterprise or a multiple of its net assets in the previous year. In addition, a
foreign-invested enterprise, or FIE, shall use its capital pursuant to the principle of authenticity
and self-use within its business scope. The capital of an FIE shall not be used for the following
purposes: (i) directly or indirectly used for payment beyond the business scope of the
enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or
indirectly used for investment in securities or investments other than banks’ principal-secured
products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans
to non-affiliated enterprises, except where it is expressly permitted in the business license; and
(iv) paying the expenses related to the purchase of real estate that is not for self-use (except
for the foreign-invested real estate enterprises).
In light of the various requirements imposed by PRC regulations on loans to and direct
investment in PRC entities by offshore holding companies, we cannot assure you that we will
be able to complete the necessary government registrations or obtain the necessary government
approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries
or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to
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complete such registrations or obtain such approvals, our ability to use the proceeds from the
Global Offering and to capitalize or otherwise fund our PRC operations may be negatively
affected, which could materially affect our liquidity and our ability to fund and expand our
business.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries
to fund any cash and financing requirements we may have, and any limitation on the
ability of our PRC subsidiaries to make payments to us could have a material effect on our
ability to conduct our business.
We are a Cayman Islands holding company and we rely principally on dividends and other
distributions on equity from our PRC subsidiaries for our cash requirements, including the
funds necessary to pay dividends and other cash distributions to our shareholders for services
of any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future,
the instruments governing the debt may restrict its ability to pay dividends or make other
distributions to us. Under PRC laws and regulations, our PRC subsidiaries may pay dividends
only out of its respective accumulated profits after making up losses as determined in
accordance with PRC accounting standards and regulations. In addition, a wholly foreign-
owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each
year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund
reaches 50% of its registered capital. Such reserve funds cannot be distributed to us as
dividends. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its
after-tax profits based on PRC accounting standards to an enterprise expansion fund, or a staff
welfare and bonus fund.
Our PRC subsidiaries generate substantially all of their revenue in Renminbi, which is not
freely convertible into other currencies. As a result, any regulatory requirements on currency
exchange may limit the ability of our PRC subsidiaries to use their Renminbi revenue to pay
dividends to us.
The PRC government may promulgate new regulations on capital controls and vetting
process for cross-border transactions falling under both the current account and the capital
account. Any regulation on the ability of our PRC subsidiaries to pay dividends or make other
kinds of payments to us may materially limit our ability to grow, make investments or
acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and
conduct our business.
In addition, the EIT Law and its implementation rules provide that a withholding tax rate
of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-
resident enterprises unless otherwise exempted or reduced according to treaties or
arrangements between the PRC central government and governments of other countries or
regions where the non-PRC-resident enterprises are incorporated.
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Fluctuations in exchange rates could have a material effect on our results of operations
and the value of your investment.
During the Track Record Period, we recorded in our consolidated statements of profit or
loss net foreign exchange gains of RMB9.4 million and RMB5.9 million in 2021 and 2022,
respectively, and net foreign exchange losses of RMB40.4 million in 2023. In addition, we
recorded in our other comprehensive income or loss gains on currency translation differences
of RMB60.8 million in 2021, and losses on currency translation differences of RMB456.8
million and RMB93.4 million in 2022 and 2023, respectively. The value of the RMB against
the Hong Kong dollar, the U.S. dollar and other currencies may fluctuate and is affected by,
among other things, changes in domestic and international economic conditions and the foreign
exchange policy adopted by the PRC government, as well as supply and demand in the local
market. It is difficult to predict how market forces or government policies may impact the
exchange rate between the RMB and the Hong Kong dollar, the U.S. dollar or other currencies
in the future. In addition, the value of the RMB is subject to intervention by the PBOC in the
foreign exchange market to limit fluctuations in RMB exchange rates. We are subject to the risk
of volatility in future exchange rates and to the PRC government’s regulations on currency
conversion.
Any significant appreciation or depreciation of the RMB may affect our revenue, earnings
and financial positions, and the value of, and any dividends payable on, our Shares in a foreign
currency. There are limited instruments available for us to hedge our foreign currency risk.
Further, the PRC government may in the future promulgate new regulations on the conversion
of foreign exchange that could affect our ability to convert RMB into foreign currency. All of
these factors could materially affect our business, financial condition, and results of operations
and prospects, and could reduce the value of, and dividends payable on, the Shares in foreign
currency terms.
We started using derivative financial instruments in 2021 to hedge exposure to exchange
rate risk such as foreign exchange forward contracts. These derivative financial instruments
reduce, but do not entirely eliminate the effect of foreign currency exchange rate movements
on our cash and cash equivalents and short-term investments in foreign currencies.
PRC regulations on currency conversion and capital inflow/outflow may limit our ability
to utilize our cash balance effectively and affect the value of your investment.
The convertibility of the Renminbi into foreign currencies and, in certain cases, the
remittance of currency out of China, are subject to laws, regulations and policies adopted by
the PRC government. We receive a significant portion of our revenue in Renminbi. Under our
current corporate structure, our Cayman Islands holding company primarily relies on dividend
payments from our PRC subsidiaries to fund any cash and financing requirements we may
have.
Pursuant to existing PRC foreign exchange regulations, payments of current account
items, including profit distributions, interest payments and trade and service-related foreign
exchange transactions, can be made in foreign currencies without prior SAFE approval by
RISK FACTORS
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complying with certain procedural requirements. However, approval from or registration or
filings with competent government authorities is required where RMB is to be converted into
foreign currency and remitted out of China to pay capital expenses such as the repayment of
loans denominated in foreign currencies. Pursuant to the Circular on the Reform of the
Management Method for the Settlement of Foreign Exchange Capital of Foreign-invested
Enterprises promulgated by SAFE (ஷ
), or the Circular 19, on March 30, 2015, a foreign-invested enterprise may convert up to
100% of the foreign currency in its capital account into RMB on a discretionary basis
according to the actual needs. The Circular on the Reform and Standardization of the
Management Policy of the Settlement of Capital Projects, promulgated by SAFE (ࠧ
), or the Circular 16, on June 9, 2016 provides for an
integrated standard for conversion of foreign exchange under capital account items on a
discretionary basis, which applies to all enterprises registered in China. In addition, the SAFE
Circular 16 has narrowed the scope of purposes for which an enterprise must not use the RMB
funds so converted, which include, among others, (i) payment for expenditure beyond its
business scope or otherwise as prohibited by the applicable laws and regulations, (ii)
investment in securities or other financial products other than banks’ principal-secured
products, (iii) provision of loans to non-affiliated enterprises, except where it is expressly
permitted in the business scope of the enterprise, and (iv) construction or purchase of
non-self-used real properties, except for real estate developers.
As a result, we need to obtain SAFE approval to use the cash generated from the
operations of our PRC subsidiaries to pay off their respective debt in a currency other than
Renminbi owed to entities outside China, or to make other capital expenditure payments
outside China in a currency other than Renminbi. The PRC government may promulgate further
regulations as it deems appropriate on the access to foreign currencies for current account
transactions in the future. If we fail to obtain sufficient foreign currencies to satisfy our foreign
currency demands in compliance with the foreign exchange regulations, we may not be able to
pay dividends in foreign currencies to our shareholders. Further, there is no assurance that new
regulations will not be promulgated in the future to further regulate the remittance of RMB into
or out of China.
Changes in international trade policies and other rising tensions, particularly between the
U.S. and China, may impact our business, financial condition and results of operations.
Although cross-border business may not be an area of our focus, if we plan to expand our
business internationally in the future, any unfavorable government policies on international
trade, such as capital controls or tariffs, may affect the demand for our solutions and services,
impact our competitive position, or prevent us from being able to conduct business in certain
countries. If any new tariffs, legislation, or regulations are implemented, or if existing trade
agreements are renegotiated, such changes could affect our business, financial condition, and
results of operations. Recently, there have been heightened tensions in international economic
relations, such as the one between the U.S. and China. On January 15, 2020, the U.S. and China
entered into the Economic and Trade Agreement between the United States of America and the
People’s Republic of China as a phase one trade deal, effective on February 14, 2020. It
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remains unclear what additional actions, if any, will be taken by the U.S. or other governments
with respect to international trade, tax policy related to international commerce, or other trade
matters. The situation is further complicated by the tensions between the U.S. and China that
escalated during the COVID-19 pandemic and in the wake of the PRC National People’s
Congress’ decision on Hong Kong national security legislation, and the various executive
orders issued by the U.S. President that prohibit certain transactions with certain China-based
companies and their respective subsidiaries and regulate investments by U.S. persons in certain
countries of concern (including China) in respect of national security technologies and
products, among others. Rising tensions could reduce levels of trade, investments,
technological exchanges and other economic activities between China and other countries,
which would have an effect on global economic conditions, the stability of global financial
markets, and international trade policies.
Although the direct impact of the current international trade and other tension, and any
escalation of such tension, on the AI-powered drug R&D service industry in China is evolving,
the impact on general, economic and social conditions of China may consequently impact our
business, financial condition and results of operations.
RISKS RELATED TO THE GLOBAL OFFERING
There has been no public market for our Shares prior to the Global Offering, and you may
not be able to resell our Shares at or above the price you pay, or at all.
Prior to the completion of the Global Offering, there has been no public market for our
Shares. There can be no guarantee that an active trading market for our Shares will develop or
be sustained after completion of the Global Offering. The Offer Price is the result of
negotiations between our Company and the Overall Coordinators (for themselves and on behalf
of the Underwriters and the CMIs), which may not be indicative of the price at which our
Shares will be traded following completion of the Global Offering. The market price of our
Shares may drop below the Offer Price at any time after completion of the Global Offering, and
may result in losses on your investment in our Shares.
The trading price and volume of the Shares may be volatile, which could result in
substantial losses to you.
Trading price of our Shares may be volatile and could fluctuate widely in response to
factors beyond our control, including:
 actual or anticipated fluctuations in our operating and financial results, such as
turnovers, earnings and cash flow;
 changes in earnings estimate or recommendations by financial analysts;
 general market conditions of the securities markets in Hong Kong, China, the U.S.
and elsewhere in the world or other developments affecting us or our industry;
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 potential litigation or regulatory investigations;
 the release of lock-up or other transfer restrictions on our outstanding Shares or
sales or perceived sales of additional Shares by us or other Shareholders.
In particular, the performance and fluctuation of the market prices of other companies
with business operations located mainly in China that have listed their securities in Hong Kong
may affect the volatility in the price of and trading volumes for our Shares. A number of
China-based companies have listed their securities, and some are in the process of preparing
for listing their securities, in Hong Kong. Some of these companies have experienced
significant volatility, including significant price declines after their initial public offerings. The
trading performances of the securities of these companies at the time of or after their offerings
may affect the overall investor sentiment towards China-based companies listed in Hong Kong
and consequently may impact the trading performance of our Shares. These broad market and
industry factors may significantly affect the market price and volatility of our Shares,
regardless of our actual operating performance, and may result in losses on your investment in
our Shares.
The actual or perceived sale or availability for sale of substantial amounts of our Shares,
especially by our Directors and/or existing Shareholders, could adversely affect the
market price of our Shares.
Future sales of a substantial number of our Shares, especially by our Directors and/or
existing Shareholders, or the perception or anticipation of such sales, could negatively impact
the market price of our Shares in Hong Kong and our ability to raise equity capital in the future
at a time and price that we deem appropriate.
The Shares held by our existing Shareholders are subject to certain lock-up periods
beginning on the date on which trading in our Shares commences on the Stock Exchange. We
cannot assure you that our existing Shareholders will not dispose of any Shares they may own
now or in the future. See “History, Development and Corporate Structure—Lock-Up and Free
Float” for details. Market sale of Shares by such Shareholders and the availability of these
Shares for future sale may have negative impact on the market price of our Shares, and may
result in losses on your investment in our Shares.
If securities or industry analysts do not publish research reports about our business, or
if they adversely change their recommendations regarding our Shares, the market price
and trading volume of our Shares may decline.
The trading market for our Shares will be influenced by the research and reports that
industry or securities analysts publish about us or our business. If one or more of the analysts
who cover us downgrade our Shares, the price of our Shares may decline. If one or more of
these analysts cease coverage of our Company or fail to regularly publish reports on us, we
could lose visibility in the financial markets, which in turn could cause our stock price or
trading volume to decline.
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Y ou will incur immediate and substantial dilution and may experience further dilution in
the future.
As the Offer Price of Shares is higher than the net tangible book value per share of our
Shares immediately prior to the Global Offering, purchasers of our Shares in the Global
Offering will experience an immediate dilution. If we issue additional Shares in the future,
purchasers of our Shares in the Global Offering may experience further dilution in their
shareholding percentage.
We cannot assure you that we will declare and distribute any amount of dividends in the
future, and you may have to rely on price appreciation of our Shares for returns on your
investment.
We intend to retain most, if not all, of our available funds and any future earnings to fund
the development and growth of our business. As a result, we have not yet adopted a dividend
policy with respect to future dividends. Therefore, you should not rely on an investment in our
Shares as a source for any future dividend income.
Our Board has the discretion to pay interim dividends and to recommend to shareholders
to pay final dividends; however, dividend payment is subject to certain restrictions under
Cayman Islands law, namely that we may only pay dividends either out of profits and/or share
premium account, and provided that in no circumstances may a dividend be paid out of share
premium, if this would result in us being unable to pay our debts if they fall due in the ordinary
course of business. In addition, our Shareholders may by ordinary resolution declare a
dividend, but no dividend may exceed the amount recommended by our Board. Even if our
Board decides to declare and pay dividends, the timing, amount and form of future dividends,
if any, will depend on, among other things, our future results of operations and cash flow, our
capital requirements and surplus, the amount of distributions, if any, received by us from our
subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant
by our Board. Accordingly, the return on your investment in our Shares will likely depend
entirely upon any future price appreciation of our Shares. There is no guarantee that our Shares
will appreciate in value or even maintain the price at which you purchased the Shares. Y ou may
not realize a return on your investment in our Shares, and you may even lose your entire
investment in our Shares.
There can be no assurance of the accuracy or completeness of certain facts, forecasts and
other statistics obtained from various resources contained in this prospectus.
This prospectus contains information and statistics relating to our business operations and
the markets in which we operate. Such information and statistics have been derived from
third-party reports, either commissioned by us or publicly accessible sources. We believe that
the sources of the information are appropriate sources for such information, and we have taken
reasonable care in extracting and reproducing such information. However, we cannot guarantee
the quality or reliability of such source materials. Collection methods of such information may
be flawed or ineffective, or there may be discrepancies between published information and
RISK FACTORS
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market practice, which may result in the statistics being inaccurate or not comparable to
statistics produced for other economies. Y ou should therefore not place undue reliance on such
information. In addition, we cannot assure you that such information is stated or compiled on
the same basis or with the same degree of accuracy as similar statistics presented elsewhere.
In any event, you should consider carefully the importance placed on such information or
statistics.
We are a Cayman Islands company and, because judicial precedent regarding the rights
of shareholders is more limited under the laws of the Cayman Islands than other
jurisdictions, the investors may experience difficulties in enforcing Shareholder rights.
Our Company is an exempted company incorporated in the Cayman Islands with limited
liability and the laws of the Cayman Islands differ in some respects from those of Hong Kong,
the U.S. or other jurisdictions where investors may be located. The corporate affairs of our
Company are governed by the Memorandum and the Articles, the Companies Act and the
common law of the Cayman Islands. The rights of Shareholders to take legal action against our
Company and/or our Directors, actions by minority Shareholders and the fiduciary duties of
our Directors to our Company under Cayman Islands laws are to a large extent governed by the
common law of the Cayman Islands. The common law of the Cayman Islands is derived in part
from comparatively limited judicial precedent in the Cayman Islands as well as from English
common law, which has persuasive, but not binding, authority on a court in the Cayman
Islands. The rights of the Shareholders and the fiduciary duties of our Directors under Cayman
Islands laws may not be as clearly established as they would be under statutes or judicial
precedents in Hong Kong or other jurisdictions where investors reside. In particular, the
Cayman Islands has a less developed body of securities laws. As a result of all of the above,
Shareholders may have more difficulty in exercising their rights in the face of actions taken by
the management of our Company, Directors or major Shareholders than they would as
shareholders of a Hong Kong company or company incorporated in other jurisdictions.
Y ou should read the entire prospectus carefully and should not rely on any information
contained in press articles or other media regarding us and the Global Offering.
We strongly caution you not to rely on any information contained in press articles or other
media regarding us and the Global Offering. Prior to the publication of this prospectus, there
may be press and media coverage regarding us and the Global Offering. Such press and media
coverage may include references to certain information that does not appear in this prospectus,
including certain operating and financial information and projections, valuations and other
information. We have not authorized the disclosure of any such information in the press or
media and do not accept any responsibility for any such press or media coverage or the
accuracy or completeness of any such information or publication. We make no representation
as to the appropriateness, accuracy, completeness or reliability of any such information or
publication. To the extent that any such information is inconsistent or conflicts with the
information contained in this prospectus, we disclaim responsibility for it and you should not
rely on such information.
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Forward-looking statements contained in this prospectus are subject to risks and
uncertainties.
This prospectus contains certain statements and information that are forward-looking and
uses forward-looking terminology such as “anticipate,” “believe,” “could,” “going forward,”
“intend,” “plan,” “project,” “seek,” “expect,” “may,” “ought to,” “should,” “would” or “will”
and similar expressions. Y ou are cautioned that reliance on any forward-looking statement
involves risks and uncertainties and that any or all of those assumptions could prove to be
inaccurate and as a result, the forward-looking statements based on those assumptions could
also be incorrect. In light of these and other risks and uncertainties, the inclusion of
forward-looking statements in this prospectus should not be regarded as representations or
warranties by us that our plans and objectives will be achieved and these forward-looking
statements should be considered in light of various important factors, including those set forth
in this section. Subject to the requirements of the Listing Rules, we do not intend publicly to
update or otherwise revise the forward-looking statements in this prospectus, whether as a
result of new information, future events or otherwise. Accordingly, you should not place undue
reliance on any forward-looking information. All forward-looking statements in this prospectus
are qualified by reference to this cautionary statement.
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In preparation for the Listing, we have sought the following waivers from strict
compliance with the relevant provisions of the Listing Rules and exemption from strict
compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance:
MANAGEMENT PRESENCE IN HONG KONG
Rule 8.12 of the Listing Rules provides that a new applicant for listing on the Stock
Exchange must have a sufficient management presence in Hong Kong. Under normal
circumstances, at least two of the new applicant’s executive directors must be ordinarily
resident in Hong Kong.
Our Company does not, and for the foreseeable future will not, have executive Directors
who are ordinarily resident in Hong Kong for the purpose of satisfying Rule 8.12 of the Listing
Rules. Our Group’s business operations and assets are primarily based outside Hong Kong, and
it would be practically difficult and not commercially necessary for us to relocate our executive
Directors to Hong Kong for the purpose of satisfying Rule 8.12 of the Listing Rules.
Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has granted
us, a waiver from strict compliance with Rule 8.12 of the Listing Rules on the basis that the
following measures have been adopted by us:
(a) pursuant to Rule 3.05 of the Listing Rules, we have appointed two authorized
representatives, namely Dr. Wen, our executive Director and chairman of the Board,
and Mr. Tam, our joint company secretary, who will act as our principal channel of
communication with the Stock Exchange. Mr. Tam is ordinarily resident in Hong
Kong. Each of our authorized representatives will be available to meet with the
Stock Exchange in Hong Kong within a reasonable time frame upon the request of
the Stock Exchange and will be readily contactable by telephone, facsimile and
email. Each of the authorized representatives is authorized to communicate on our
behalf with the Stock Exchange;
(b) both our authorized representatives have the means to contact all members of our
Board (including our independent non-executive Directors) promptly at all times as
and when the Stock Exchange wishes to contact the members of our Board for any
matters. Our Directors who are not ordinarily resident in Hong Kong possess or can
apply for valid travel documents to visit Hong Kong and will be able to meet with
the Stock Exchange within a reasonable period of time, when required. All Directors
have provided their mobile phone numbers, fax numbers and e-mail addresses
(where available) to our authorized representatives. In the event that a Director
expects to travel, he/she will endeavor to provide the phone number of the place of
his/her accommodation to our authorized representatives or maintain an open line of
communication via his/her mobile phone and all Directors and authorized
representatives have provided their mobile numbers, office phone numbers, fax
numbers and email addresses (where available) to the Stock Exchange;
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTION FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
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(c) pursuant to Rule 3A.19 of the Listing Rules, our Company has appointed UOB Kay
Hian (Hong Kong) Limited as our compliance advisor (the “ Compliance Advisor ”),
which has access at all times to our authorized representatives, Directors, senior
management and other officers, and will act as an additional channel of
communication with the Stock Exchange in addition to the authorized
representatives of our Company; and
(d) meetings between the Stock Exchange and our Directors could be arranged through
our authorized representatives or the Compliance Advisor, or directly with our
Directors within a reasonable time frame. We will promptly inform the Stock
Exchange of any changes of our authorized representatives and/or the Compliance
Advisor.
OUTSTANDING SHARE OPTIONS
The Listing Rules and the Companies (Winding Up and Miscellaneous Provisions)
Ordinance prescribe certain disclosure requirements in relation to the share options granted by
our Company (the “ Share Option Disclosure Requirements ”):
(a) Rule 17.02(1)(b) of the Listing Rules stipulates that all the terms of a scheme must
be clearly set out in this prospectus. Our Company is also required to disclose in this
prospectus full details of all outstanding options and their potential dilution effect
on the shareholdings upon listing as well as the impact on the earnings per share
arising from the exercise of such outstanding options;
(b) Paragraph 27 of Appendix D1A to the Listing Rules requires our Company to set out
in this prospectus particulars of any capital of any member of our Group that is
under option, or agreed conditionally or unconditionally to be put under option,
including the consideration for which the option was or will be granted and the price
and duration of the option, and the name and address of the grantee; and
(c) under paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance, the number, description and amount of
any shares in or debentures of the company which any person has, or is entitled to
be given, an option to subscribe for, together with the particulars of the option, that
is to say, (i) the period during which it is exercisable; (ii) the price to be paid for
shares or debentures subscribed for under it; (iii) the consideration (if any) given or
to be given for it or for the right to it; and (iv) the names and addresses of the
persons to whom it or the right to it was given or, if given to existing shareholders
or debenture holders as such, the relevant shares or debentures must be specified in
the prospectus.
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As of the Latest Practicable Date, our Company had outstanding options held by a total
of 208 grantees to purchase an aggregate of 298,041,143 Shares. As of the Latest Practicable
Date, such 298,041,143 outstanding options represented options to purchase 168,639,365
Shares held by four executive Directors; options to purchase 34,837,200 Shares held by two
members of our senior management; options to purchase 532,149 Shares held by two
consultants, see “Appendix IV—Statutory and General Information—D. Share Incentive
Schemes—1. Pre-IPO ESOP—(m) Outstanding awards” for details of their identity and
background; options to purchase 1,780,000 Shares held by seven ex-employees of our Group;
and options to purchase 92,252,429 Shares which belonged to 193 other employees (who are
not Directors, members of our senior management, consultants or ex-employees of our Group).
TMF Trust (HK) Limited has been appointed to act as the trustee of the QuantumPharm
Employee Benefit Trust, being a discretionary trust established for the purposes of managing
and administering 59,103,125 outstanding options granted to 12 of such other employees of our
Group and Dr. Zhang Peiyu, a member of our senior management. All such 59,103,125
outstanding options are held by QuantumPharm Employee Holdings, a holding vehicle wholly
owned by TMF Trust (HK) Limited. Save for our Co-founders and Dr. Jiang Yide Alan who are
our executive Directors, none of the option grantees is our connected person. All of the
298,041,143 Shares underlying the outstanding options (including those vested and unvested),
representing 8.75% of the total number of issued Shares immediately following the completion
of the Global Offering (assuming the Over-allotment Option is not exercised and no Shares will
be issued under the ESOPs), have been issued by our Company, the last issuance of which took
place in August 2021, and are held by QuantumPharm Roc, a shareholding platform for the
Pre-IPO ESOP which holds such Shares, for the benefit of the grantees. There will be no
dilutive effect on the shareholdings following the completion of the Global Offering and no
impact on the earnings per Share upon the exercise of any such outstanding options granted
under the Pre-IPO ESOP . No further awards will be granted pursuant to the Pre-IPO ESOP ,
being the only subsisting share incentive scheme of our Company as of the Latest Practicable
Date, after the Listing and the terms of the Pre-IPO ESOP is not subject to the provisions of
Chapter 17 of the Listing Rules. For further details of the Pre-IPO ESOP , see “Appendix
IV—Statutory and General Information—D. Share Incentive Schemes—1. Pre-IPO ESOP .”
We have applied to (i) the Stock Exchange for a waiver from strict compliance with the
requirements under Rule 17.02(1)(b) of the Listing Rules and paragraph 27 of Appendix D1A
to the Listing Rules and (ii) the SFC for an exemption from strict compliance with paragraph
10(d) of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance pursuant to section 342A of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance in connection with the disclosure of certain details
relating to the options and certain grantees in this prospectus on the grounds that the waiver
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and the exemption will not prejudice the interest of the investing public and strict compliance
with the Share Option Disclosure Requirements would be unduly burdensome for our Company
for the following reasons, among others:
(a) as of the Latest Practicable Date, there were outstanding options belonging to a total
of 208 grantees, which corresponded to an aggregate of 298,041,143 underlying
Shares, representing 8.75% of the total number of issued Shares immediately
following the completion of the Global Offering (assuming the Over-allotment
Option is not exercised and no Shares will be issued under the ESOPs).
(b) it would be unduly burdensome for the purpose of strict compliance with the Share
Option Disclosure Requirements of all the options granted to each of the grantees,
which would significantly increase the cost and time required for information
compilation and disclosure preparation;
(c) material information on the options for the purpose of providing prospective
investors with sufficient information to make an informed assessment of the
potential dilutive effect and impact on earnings per Share of the outstanding options
has been disclosed in this prospectus. Such information includes:
(i) a summary of the major terms of the Pre-IPO ESOP;
(ii) the aggregate number and percentage of our issued Shares subject to the
outstanding options;
(iii) the fact that there will not be any dilutive effect following the completion of
the Global Offering or impact on earnings per Share upon full exercise of the
options granted under the Pre-IPO ESOP;
(iv) all the particulars required under Rule 17.02(1)(b) of the Listing Rules,
paragraph 27 of Appendix D1A to the Listing Rules and paragraph 10 of Part
I of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, in respect of outstanding options held by (1) our
Directors, members of our senior management, our consultants and connected
persons of our Company (if any); and (2) other grantees who have been granted
options to subscribe for 5,000,000 Shares or more, on an individual basis; and
(v) with respect to the options granted to other grantees (other than those referred
to in (iv) above), disclosures are made on an aggregate basis, categorized into
lots based on the number of Shares underlying each individual grantee, being
(1) 1-499,999; (2) 500,000-999,999; and (3) 1,000,000-4,999,999, and for each
lots of Share, the following details are disclosed in this prospectus, including
(1) the total number of grantees other than those set out in (iv) above and
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number of Shares underlying the outstanding options as of the Latest
Practicable Date; (2) the grant date, exercise price, exercise period and vesting
period of the options granted under the Pre-IPO ESOP; and (3) the
consideration paid for the grant of the options under the Pre-IPO ESOP (if
any); and
(d) strict compliance with the disclosure requirements, in particular the names,
addresses, and entitlements on an individual basis of 208 grantees would not provide
additional meaningful information to the investing public. Deviation from strict
compliance with the disclosure requirements would not deprive potential investors
of information necessary for them to make an informed assessment of the activities,
assets, liabilities, financial position, management and prospects of our Group.
The Stock Exchange has granted to our Company a waiver from strict compliance with
the disclosure requirements under Rule 17.02(1)(b) of the Listing Rules and paragraph 27 of
Appendix D1A to the Listing Rules with respect to the outstanding options on the condition
that:
(a) all the particulars required under Rule 17.02(1)(b) of the Listing Rules, paragraph
27 of Appendix D1A to the Listing Rules and paragraph 10 of Part I of the Third
Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance,
in respect of outstanding options held by (1) our Directors, members of our senior
management, our consultants and connected persons of our Company (if any); and
(2) other grantees who have been granted options to subscribe for 5,000,000 Shares
or more, on an individual basis are disclosed in “Appendix IV—Statutory and
General Information—D. Share Incentive Schemes—1. Pre-IPO ESOP;”
(b) with respect to the options granted to other grantees (other than those referred to in
(a) above), disclosures are made on an aggregate basis, categorized into lots based
on the number of Shares underlying each individual grantee, being (1) 1-499,999;
(2) 500,000-999,999; and (3) 1,000,000-4,999,999, and for each lots of Share, the
following details are disclosed in this prospectus, including (1) the total number of
grantees other than those set out in (a) above and number of Shares underlying the
outstanding options as of the Latest Practicable Date; and (2) the grant date, exercise
price, exercise period and vesting period of the options granted under the Pre-IPO
ESOP; and (3) the consideration paid for the grant of the options under the Pre-IPO
ESOP (if any); and
(c) the aggregate number and percentage of our issued Shares subject to the outstanding
options as of the Latest Practicable Date are disclosed in this prospectus;
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(d) the fact that there will not be any dilutive effect following the completion of the
Global Offering or impact on earnings per Share upon full exercise of the options
granted under the Pre-IPO ESOP is disclosed in this prospectus;
(e) a summary of the major terms of the Pre-IPO ESOP are disclosed in “Appendix
IV—Statutory and General Information—D. Share Incentive Schemes—1. Pre-IPO
ESOP;”
(f) the particulars of this waiver are disclosed in this prospectus;
(g) the grant of a certificate of exemption under the Companies (Winding Up and
Miscellaneous Provisions) Ordinance from the SFC exempting our Company from
the disclosure requirements provided in paragraph 10(d) of Part I of the Third
Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance;
and
(h) a full list of all the grantees under the Pre-IPO ESOP , containing all the particulars
as required under the applicable Share Option Disclosure Requirements will be
made available for public inspection in accordance with “Appendix V—Documents
Delivered to the Registrar of Companies and Documents on Display—Document
Available for Inspection.”
The SFC has agreed to grant to our Company a certificate of exemption under section
342A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance with respect to
the options granted under the Pre-IPO ESOP exempting our Company from strict compliance
with paragraph 10(d) of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance on the conditions that:
(a) all the particulars required under paragraph 10 of Part I of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance, in respect of
outstanding options held by (1) our Directors, members of our senior management,
our consultants and connected persons of our Company (if any); and (2) other
grantees who have been granted options to subscribe for 5,000,000 Shares or more,
on an individual basis are disclosed in “Appendix IV—Statutory and General
Information—D. Share Incentive Schemes—1. Pre-IPO ESOP;”
(b) with respect to the options granted to other grantees (other than those referred to in
(a) above), disclosures are made on an aggregate basis, categorized into lots based
on the number of Shares underlying each individual grantee, being (1) 1-499,999;
(2) 500,000-999,999; and (3) 1,000,000-4,999,999, and for each lots of Share, the
following details are disclosed in this prospectus, including (1) the total number of
grantees other than those set out in (a) above and number of Shares underlying the
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outstanding options as of the Latest Practicable Date; and (2) the grant date, exercise
price, exercise period and vesting period of the options granted under the Pre-IPO
ESOP; and (3) the consideration paid for the grant of the options under the Pre-IPO
ESOP (if any);
(c) a full list of all the grantees under the Pre-IPO ESOP , containing all the particulars
as required under the applicable Share Option Disclosure Requirements will be
made available for public inspection in accordance with “Appendix V—Documents
Delivered to the Registrar of Companies and Documents on Display—Document
Available for Inspection;”
(d) the particulars of this exemption are disclosed in this prospectus; and
(e) this prospectus is issued on or before June 4, 2024.
Further details of the Pre-IPO ESOP are set forth in “Appendix IV—Statutory and
General Information—D. Share Incentive Schemes—1. Pre-IPO ESOP .”
INVESTMENTS AFTER THE TRACK RECORD PERIOD
Pursuant to Rules 4.04(2) and 4.04(4)(a) of the Listing Rules, a new listing applicant is
required to include in its accountants’ report in the listing document the results and balance
sheets of any subsidiary or business acquired, agreed to be acquired or proposed to be acquired
since the date to which the latest audited financial statements of the listing applicant have been
made up in respect of each of the three financial years immediately preceding the issue of the
listing document, or since the incorporation of such subsidiary or the commencement of such
business if this occurred less than three years prior to such issue, or such shorter period as may
be acceptable to the Stock Exchange. For the purpose of Rules 4.04(2) and 4.04(4) of the
Listing Rules, “acquisition of business” includes acquisition of associates and any equity
interest in another company.
(i) Target Company A
On September 25, 2023, our Company entered into a convertible loan agreement (the “ CB
Agreement A ”) with Target Company A which is an Independent Third Party, pursuant to
which our Company agreed to extend a convertible loan in the principal amount of up to
US$10.0 million (the “ Loan A ”) at a simple interest rate of 8% per annum, which shall mature
at the earlier of (i) 18 months from the drawdown date of the Loan A and (ii) the closing date
of the conversion of all of the principal outstanding under the Loan A. The Loan A is expected
to be funded with our internal financial resources. As of the Latest Practicable Date, US$9.0
million had been drawn down by Target Company A.
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Under the terms of the CB Agreement A, upon the issuance of new preferred shares by
the Target Company A pursuant to a bona fide equity financing of Target Company A (the
“Financing ”) or at the maturity date of the Loan A, our Company shall have the right but not
the obligation to convert all of the principal outstanding under the Loan A into certain number
of preferred shares of Target Company A as follows:
(a) if the closing of the Financing occurs within nine months following the drawdown
date of the Loan A, the outstanding principal under the Loan A may be converted
into such number of preferred shares of Target Company A with the same rights and
privileges of the preferred shares to be issued and at a conversion price equal to 80%
of the per share price under the Financing;
(b) if the closing of the Financing occurs after nine months but within 18 months
following the drawdown date of the Loan A, the outstanding principal under the
Loan A may be converted into such number of preferred shares of Target Company
A with the same rights and privileges of the preferred shares to be issued and at a
conversion price equal to 70% of the per share price under the Financing; and
(c) if there is no Financing prior to the maturity date of the Loan A, the outstanding
principal under the Loan A may be converted after the maturity date of the Loan A
into such number of preferred shares of Target Company A ranking superior to or at
least pari passu with the most senior equity securities of Target Company A with the
same rights and privilege of such equity securities and at a conversion price that
equals to 70% of the per share price under the latest series pre-A-3 financing of
Target Company A. Our Company may also choose to request Target Company A to
repay all outstanding amount (including the unpaid principal and outstanding
interest) of the Loan A in full.
Assuming that (i) the Loan A will be drawn down in full; (ii) there will be no further
round of financing by Target Company A prior to the maturity date of the Loan A; and (iii) we
elect to convert all of the principal outstanding under the Loan A, we expect to receive at
maximum 13.83% equity interest in Target Company A.
Target Company A, being the holding company of Customer D, our collaborator-investee
and one of our top five customers in 2022, is a company incorporated in the Cayman Islands
and is a genomics-based platform focusing on the development of novel medicines targeting
human RNAs. The investment in Target Company A was made in the ordinary and usual course
of business of our Group as it is one of our strategies to make equity investments in our
collaborators which develop complementary technologies to ours and are compatible with our
strategic position. According to the unaudited management accounts of Target Company A
prepared in accordance with PRC GAAP , its net loss for the year ended December 31, 2023 was
RMB90.8 million, which was incurred due to the costs and expenses associated with its R&D
activities, and its total assets as of December 31, 2023 was RMB69.1 million. The terms of the
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investment in Target Company A, including the principal amount and the conversion price of
the Loan A, were determined on an arm’s length basis taking into consideration the business
prospects, the valuation and timing of the previous round of financing as well as the next
potential round of financing. Pursuant to the terms of the investment in Target Company A, we
do not have any board representation in Target Company A, and we are not entitled to any other
right that would enable us to exercise control on Target Company A.
(ii) Target Company B
Pursuant to our collaboration program with Target Company B and the shareholders’
agreement dated February 15, 2022 entered into between, among others, Shenzhen Zhiyao,
Target Company B and its shareholders, all being Independent Third Parties, and a
supplemental agreement dated July 2, 2022 entered into between the same parties and XtalPi
Investment, XtalPi Investment was granted the right to receive shares in Target Company B
with a value equal to the RMB-equivalent of US$1.2 million divided by the post-money
valuation of the next round of its financing upon the delivery of PCC compound to Target
Company B by our Group for IND enabling studies. In the event that there has been no further
round of financing conducted by the time of the delivery of the PCC compound, the shares in
Target Company B which may be received by XtalPi Investment will be with a value equal to
the RMB-equivalent of US$1.2 million divided by the post-money valuation of its previous
round of financing. Assuming that there will be no further round of financing conducted by the
time of the delivery of the PCC compound, we expect to receive at maximum 1.51% equity
interest in Target Company B. The subscription price of US$1.2 million, which was determined
on an arm’s length basis taking into consideration the business prospects and the valuation and
timing of the previous round of financing as well as the next potential round of financing, will
be settled by our Group after receipt of an equivalent amount of services fees from Target
Company B.
Target Company B, being our collaborator-investee and one of our top five customers in
2020 and 2021, is a pre-clinical stage biopharmaceutical company focusing on the development
of innovative targeted cancer drugs using novel disease models disease models. The investment
in Target Company B was made in the ordinary course of business of our Group to acquire
equity positions in our collaborators with whom we jointly discover and design novel
therapeutical targets and technologies. According to the unaudited management accounts of
Target Company B prepared in accordance with PRC GAAP , its net loss for the year ended
December 31, 2023 was RMB24.1 million, which was incurred due to the costs and expenses
associated with its pre-clinical development activities, and its total assets as of December 31,
2023 was RMB79.2 million. Pursuant to the terms of the investment in Target Company B, we
are entitled to nominate only one director on the board of directors of Target Company B and
Target Company B had seven directors as of the Latest Practicable Date. We are not entitled
to any other right that would enable us to exercise control on Target Company B.
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Incubating and investing into certain of our collaborators, in particular those that we
consider to have potential first-in-class or best-in-class pipelines or cutting-edge technologies,
has been one of our growth strategies. Centering on our key upstream and downstream industry
chains and technologies, we have incubated and invested in a number of innovative companies,
including Target Company A and Target Company B, which are required to incur significant
amount of costs and expenses for their R&D activities, and have provided resources,
technologies and expertise to support their growth and development. For details, see
“Business—Our Growth Strategies” and “Business—Our Drug Discovery Solutions—Strategic
Collaborations.” As of the Latest Practicable Date, benefiting from our funding and
technological support, Target Company A was in progress to develop its first candidate for IND
submission through the application of AI technologies and RNA biology and Target Company
B had developed two innovative drug candidates, including the world’s first diffuse gastric
cancer targeted drug candidate which IND application had been submitted and a pan-cancer
targeted drug candidate in the lead to PCC stage, which are targeted towards the largely unmet
medical needs of patients and the growing medication market. We expect to benefit from the
potential growth in the valuation of our equity interest in Target Company A and Target
Company B as a result of its R&D advancement and clinical trials of its pipelines. Furthermore,
the data assets, experience, and feedback we receive from Target Company A and Target
Company B would be helpful to optimize the algorithms in our technology platform and
strengthened our AI-powered computation and automation capabilities.
(iii) Target Company C
On January 23, 2024, Shenzhen Jingtai entered into a convertible loan agreement (the
“CB Agreement C ”) with, among others, Target Company C, its parent company (together
with its subsidiaries (including Target Company C), the “ Target Company C Group ”) and its
ultimate beneficial owner, all being Independent Third Parties, pursuant to which Shenzhen
Jingtai agreed to extend a convertible loan to Target Company C in the principal amount of
RMB20.0 million (the “ Loan C ”) at a simple interest rate of 8% per annum, which shall mature
at the earlier of (i) three years from the drawdown date of the Loan C; and (ii) the occurrence
of any event of default under CB Agreement C or breach of any agreement entered into with
Shenzhen Jingtai (or its related party) on the part of the Target Company C Group and its
ultimate beneficial owner. The Loan C is expected to be funded with our internal financial
resources. As of the Latest Practicable Date, the Loan C had been fully drawn down by Target
Company C.
Under the terms of the CB Agreement C, provided that (a) our Group has become a
supplier of the Target Company C Group within 12 months from the drawdown date of the Loan
C; and (b) Target Company C has obtained the development rights of land with a total site area
of not less than 300,000 acres and Target Company C Group has procured from our Group
products and services of not less than RMB600.0 million within three years from the
drawdown, Shenzhen Jingtai shall have the right to convert the Loan C into 14% of the equity
interest in Target Company C (on a fully diluted basis) on or before the maturity date of the
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Loan C, subject to adjustment if subsequent financing by Target Company C will be conducted
at a lower valuation before the maturity date. The terms of the investment in Target Company
C, including the principal amount and the conversion of the Loan C, were determined on an
arm’s length basis taking into consideration the business prospects of Target Company C, the
potential valuation of its next round of financing and the anticipated cooperation with our
Group.
Target Company C is a company principally engaged in the development and application
of green agricultural technologies in China and is expected to be our customer pursuant to the
CB Agreement C. Target Company C Group, of which Target Company C is a member, is a
group established in China with an aim to boosting technical and financial support green
development, and is principally engaged in the promotion of (a) green technology
transformation services, (b) financial support services for green technology innovation, (c)
comprehensive solutions for green technology development, (d) regional green development
system solutions and (e) green technology internationalization transformation services.
Pursuant to the CB Agreement C, the Loan C shall be applied towards purpose of business
operations related to Target Company C Group’s land transformation projects including the
deployment of AI equipment, robotic R&D and maintenance. According to the unaudited
management accounts of Target Company C prepared in accordance with PRC GAAP , its net
loss for the year ended December 31, 2023 was RMB1.4 million, which was incurred due to
the costs and expenses associated with its development activities, and its total assets as of
December 31, 2023 was RMB17.5 million. Pursuant to the terms of the investment in Target
Company C, we are entitled (but had not exercised the right) to nominate only one director on
the board of directors of Target Company C prior to the repayment of Loan C and upon the
conversion of the Loan C and Target Company C had one director as of the Latest Practicable
Date. We are not entitled to any other right that would enable us to exercise control on Target
Company C.
The investment in Target Company C was made in the ordinary course of business of our
Group as it is one of our strategies to make equity investments in our downstream industry
which deploy our complementary technologies and are compatible with our strategic position
along the value chains of automation and material science industries. Benefiting from our
funding and technological support, Target Company C is expected to deploy our AI and robotic
technologies to green agriculture projects in the PRC, which is targeted to promote green
agricultural technologies and to provide technical support and overall solutions for regional
green development in China. We expect to benefit from being a strategic shareholder of Target
Company C to broaden our integrated service offerings into the green agricultural sector.
Furthermore, we believe that the data assets, experience, and feedback we receive from Target
Company C would help us to optimize the algorithms in our technology platform and
strengthen our AI-powered computation and automation capabilities.
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(iv) Target Company D
On March 28, 2024, XtalPi Investment Limited, a wholly-owned subsidiary of XtalPi
Investment, entered into a capital injection agreement with, among others, Target Company D
and its ultimate beneficial owner, all being Independent Third Parties, pursuant to which XtalPi
Investment Limited agreed to make an investment in Target Company D by contributing the
USD equivalent of RMB6.0 million in its registered capital for a 5.22% equity interest in
Target Company D (on a fully diluted basis). The terms of the investment in Target Company
D, including the investment amount, were determined on an arm’s length basis taking into
consideration the business prospects, the valuation and timing of the previous round of
financing, and the investment amount will be paid in cash with our internal resources within
10 business days after the completion of due diligence on Target Company D and the
completion of the regulatory filings for the investment.
Target Company D is an early-stage startup company principally engaged in the research
and development of LLM, LLM-powered agents and LLM-based AI solutions in China.
According to the unaudited management accounts of Target Company D prepared in
accordance with PRC GAAP , as it was only established in mid-2023, Target Company D
incurred a net loss for the year ended December 31, 2023 of RMB290 and had a total assets
of RMB92,000 as of December 31, 2023. Pursuant to the terms of investment in Target
Company D, we had nominated one director on the board of directors of Target Company D and
Target Company D had five directors as of the Latest Practicable Date. We are not entitled to
any other right that would enable us to exercise control on Target Company D.
The investment in Target Company D was made in the ordinary course of business of our
Group as it is one of our strategies to make equity investments in company which develop
complementary technologies to ours and are compatible with our strategic position. We
envisage collaborating with Target Company D to develop LLM-based solutions to improve our
literature LLM system and AI data training, which may improve our AI capabilities, assist in
the building of vertical models in the biomedical field and increase the successful rate of our
drug R&D. The collaboration with Target Company D will also help to enhance the efficiency
of our closed-loop large models by optimizing our computational power and R&D process. In
addition, we expect to benefit from the potential growth in the valuation of our equity interest
in Target Company D as a result of its R&D advancement.
(v) Target Company E
On March 28, 2024, our Company entered into a capital injection agreement with, among
others, Target Company E and its co-founders, all being Independent Third Parties, pursuant
to which we agreed to make an investment in Target Company E by contributing US$750,000
in its registered capital for a 5.0% equity interest in Target Company E (on a fully diluted
basis). The terms of the investment in Target Company E, including the investment amount,
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were determined on an arm’s length basis taking into consideration its business and market
prospects, including the background and experience of the co-founders and the market
potential and opportunities for novel catalysts applications. The investment amount will be
paid in cash with our internal resources within five business days after the completion of due
diligence on Target Company E and the completion of the regulatory filings for the investment.
Target Company E is a quantum physics-based and AI-powered early-stage startup
company with a registered capital of RMB1.0 million in which aims to focus on the R&D of
catalysts for the purpose of optimizing catalytic performance and discovering novel catalysts.
As Target Company E was established in early 2024, no financial information was available as
of the Latest Practicable Date. Taking into consideration the nature of start-up company which
generally has loss-making performance and the equity stake of our Group in Target Company
E, our Directors expect the scale of the business operated by Target Compnay E is immaterial
as compared to that of our Group. Pursuant to the terms of the investment in Target Company
E, we do not have any board representation in Target Company E, and we are not entitled to
any other right that would enable us to exercise control on Target Company E.
The investment in Target Company E was made in the ordinary course of business of our
Group as it is one of our strategies to make equity investments in company which develop
complementary technologies to ours and are compatible with our strategic position. Target
Company E was founded by two scientists from MIT who have published multiple papers in
leading journals. To the best knowledge of our Directors, their AI model under development
aims to (a) predict the performance of catalysts under specific conditions, thereby providing
guidance for experimental design and optimization and (b) predict chemical reaction results
and material properties by simulating experimental conditions, which can help to reduce the
number of experiments and experimental costs. We envisage collaborating with Target
Company E in optimizing and enhancing catalytic performance in our complex compound
synthesis process which will help to improve its overall efficiency and successful rate. In
addition, we expect to benefit from the potential growth in the valuation of our equity interest
in Target Company E as a result of its R&D advancement.
We have applied for, and the Stock Exchange has granted us, a waiver from strict
compliance with Rules 4.04(2) and 4.04(4)(a) of the Listing Rules in relation to the preparation
of financial statements in respect of each of Target Company A, Target Company B, Target
Company C, Target Company D and Target Company E on the following grounds:
(a) Ordinary and usual course of business — our Group is principally engaged in the
provision of (i) drug discovery solutions; and (ii) intelligent automation solutions.
Incubating and investing into certain of our collaborators, in particular those that we
consider to have potential first-in-class or best-in-class pipelines or cutting-edge
technologies, has been one of our growth strategies. We have made equity
investments or acquire equity positions in Target Company A and Target Company
B which are our collaborators with whom we jointly discover and design novel
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTION FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
– 169 –


--- page 179 ---
therapeutical targets and technologies, and Target Company C, Target Company D
and Target Company E which deploy or develop complementary technologies to
ours and are compatible with our strategic position. For details, see “Business—Our
Growth Strategies” and “Business—Our Drug Discovery Solutions—Strategic
Collaborations.” Our Directors believe that the investments are in line with our
growth strategy and the terms of the investments are fair and reasonable and in the
interests of our Company and our Shareholders as a whole.
(b) Immateriality of the target companies — the scale of the business operated by
each of Target Company A, Target Company B, Target Company C, Target Company
D and Target Company E as compared to that of our Group is immaterial. All the
applicable percentage ratios (as defined under Rule 14.04(9) of the Listing Rules) in
relation to each of the investments referenced against the financials of our Company
in the most recent financial years of the Track Record Period are less than 5%.
Moreover, investments are not significant enough to require our Company to prepare
pro forma financial information under Rule 4.28 of the Listing Rules.
Accordingly, our Directors believe that (i) each of the investments is immaterial
when compared to the scale of our Group’s operations as a whole; (ii) each of the
investments has not resulted in any significant change to the financial position of
our Group since the end of the Track Record Period; and (iii) all information that is
reasonably necessary for potential investors to make an informed assessment of the
activities or financial position of our Group has been included in this prospectus. As
such, a waiver from compliance with the requirements under Rules 4.04(2) and
4.04(4)(a) of the Listing Rules would not prejudice the interests of the investing
public.
(c) Unavailability of information — as none of the investments had been completed
and we are not able to exercise control over each of Target Company A, Target
Company B, Target Company C, Target Company D and Target Company E at the
board or shareholders’ level, our Group does not have full and immediate access to
their books and records for the purpose of complying with the requirements under
Rules 4.04(2) and 4.04(4)(a) of the Listing Rules. Even with full and immediate
access to their books and records, it will require considerable time and resources for
our Company to familiarize with their management accounting policies and for our
Company and our reporting accountants to compile the necessary financial
information for disclosure in this prospectus. As such, it would be impracticable and
unduly burdensome to our Company to disclose the audited financial information of
each of Target Company A, Target Company B, Target Company C, Target Company
D and Target Company E as required under the Listing Rules.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTION FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
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--- page 180 ---
(d) Alternative disclosure available — our Company has provided in this prospectus
alternative information regarding the investments which is comparable to the
information that is required to be included in the announcement of a discloseable
transaction (as defined in the Listing Rules), including:
(i) description of the principal business activities of Target Company A, Target
Company B, Target Company C, Target Company D and Target Company E;
(ii) the unaudited net losses for the year ended December 31, 2023 and the
unaudited total assets as of December 31, 2023 of each of Target Company A,
Target Company B, Target Company C and Target Company D;
(iii) confirmation as to whether each of the counterparties is an Independent Third
Party;
(iv) the date of the investments;
(v) the basis of the considerations, including the investment amounts in Target
Company D and Target Company E and upon which the principal amounts and
the conversion prices of the Loan A and the Loan C were determined;
(vi) the reasons for the investments and the benefits which are expected to accrue
to our Group as a result thereof; and
(vii) a statement that our Directors believe that the terms of the investments are fair
and reasonable and in the interests of our Company and our Shareholders as a
whole.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND
EXEMPTION FROM STRICT COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
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--- page 181 ---
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed director who is named
as such in this prospectus) collectively and individually accept full responsibility, includes
particulars given in compliance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571
V of the Laws of Hong Kong) and the Listing Rules for the purpose of giving information to
the public with regard to our Group. Our Directors, having made all reasonable inquiries,
confirm that to the best of their knowledge and belief the information contained in this
prospectus is accurate and complete in all material respects and not misleading or deceptive,
and there are no other matters the omission of which would make any statement herein or this
prospectus misleading.
CSRC FILING
According to the Overseas Listing Trial Measures, we are required to complete the filing
procedures with the CSRC in connection with the Listing. We submitted a filing to the CSRC
for application for the Listing on December 5, 2023. The CSRC confirmed completion of such
filing on April 22, 2024.
THE HONG KONG PUBLIC OFFERING AND THIS PROSPECTUS
This prospectus is published solely in connection with the Hong Kong Public Offering,
which forms part of the Global Offering. For applicants under the Hong Kong Public Offering,
this prospectus contains the terms and conditions of the Hong Kong Public Offering.
The Hong Kong Offer Shares are offered solely on the basis of the information contained
and representations made in this prospectus and on the terms and subject to the conditions set
out herein and therein. No person is authorized to give any information in connection with the
Global Offering or to make any representation not contained in this prospectus, and any
information or representation not contained herein and therein must not be relied upon as
having been authorized by our Company, the Sole Sponsor, the Overall Coordinators, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, any of the Underwriters
or Capital Market Intermediaries, any of their respective directors, agents, employees or
advisors or any other party involved in the Global Offering.
The Listing is sponsored by the Sole Sponsor and the Global Offering is managed by the
Overall Coordinators. The Hong Kong Public Offering is fully underwritten by the Hong Kong
Underwriters under the terms and conditions of the Hong Kong Underwriting Agreement,
subject to agreement on the Offer Price to be determined between the Overall Coordinators (on
behalf of the Underwriters and the CMIs) and our Company on the Price Determination Date.
The International Offering is expected to be fully underwritten by the International
Underwriters subject to the terms and conditions of the International Underwriting Agreement,
which is expected to be entered into on or around the Price Determination Date.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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--- page 182 ---
Neither the delivery of this prospectus nor any offering, sale or delivery made in
connection with the Offer Shares should, under any circumstances, constitute a representation
that there has been no change or development reasonably likely to involve a change in our
affairs since the date of this prospectus or imply that the information contained in this
prospectus is correct as of any date subsequent to the date of this prospectus.
PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES
The procedures for applying for the Hong Kong Offer Shares are set forth in “How to
Apply for Hong Kong Offer Shares.”
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, are set forth in
“Structure of the Global Offering.”
RESTRICTIONS ON OFFERS AND SALES OF SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his/her acquisition of Offer Shares to, confirm that he/she
is aware of the restrictions on offers for the Offer Shares described in this prospectus.
No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than in Hong Kong, or the distribution of this prospectus in any jurisdiction
other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and
does not constitute an offer or invitation in any jurisdiction or in any circumstances in which
such an offer or invitation is not authorized or to any person to whom it is unlawful to make
such an offer or invitation. The distribution of this prospectus and the offering and sale of the
Offer Shares in other jurisdictions are subject to restrictions and may not be made except as
permitted under the applicable securities laws of such jurisdictions and pursuant to registration
with or authorization by the relevant securities regulatory authorities or an exemption
therefrom.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the approval of the listing of, and permission
to deal in, (a) the Shares in issue and to be issued pursuant to the Global Offering (including
any Shares which may be issued pursuant to the exercise of the Over-allotment Option) and (b)
the Shares which may be issued under the ESOPs.
No part of our Shares or loan capital is listed on or dealt in on any other stock exchange
and no such listing or permission to list is being or proposed to be sought as of the date of this
prospectus. All Offer Shares will be registered on the Hong Kong Share Register of our
Company in order to enable them to be traded on the Stock Exchange.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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--- page 183 ---
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing of,
and permission to deal in, the Shares on the Stock Exchange is refused before the expiration
of three weeks from the date of the closing of the application lists, or such longer period (not
exceeding six weeks) as may, within the said three weeks, be notified to our Company by the
Stock Exchange.
COMMENCEMENT OF DEALINGS IN THE SHARES
Dealings in the Shares on the Stock Exchange are expected to commence on Thursday,
June 13, 2024. The Shares will be traded in board lots of 1,000 Shares each. The stock code
of the Shares will be 2228.
OVER-ALLOTMENT OPTION AND STABILIZATION
Details of the arrangements relating to the Over-allotment Option and stabilization are set
out in the section headed “Structure of the Global Offering.” Assuming that the Over-allotment
Option is exercised in full, our Company may be required to issue up to an aggregate of
28,105,000 additional Shares.
SHARES THAT WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the approval for the listing of, and permission to deal in, the
Shares on the Stock Exchange and compliance with the stock admission requirements of
HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance
and settlement in CCASS with effect from the Listing Date or any other date as determined by
HKSCC. Settlement of transactions between participants of the Stock Exchange is required to
take place in CCASS on the second settlement day after any trading day. All activities under
CCASS are subject to the General Rules of HKSCC and HKSCC Operational Procedures in
effect from time to time.
All necessary arrangements have been made for the Shares to be admitted into CCASS.
Investors should seek the advice of their stockbroker or other professional advisers for details
of the settlement arrangements and how such arrangements will affect their rights and interests.
SHARE REGISTER AND STAMP DUTY
Our principal register of members will be maintained by our principal registrar, Maples
Fund Services (Cayman) Limited, in the Cayman Islands, and our Hong Kong Share Register
will be maintained by the Hong Kong Share Registrar, Tricor Investor Services Limited, in
Hong Kong.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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--- page 184 ---
All Offer Shares issued pursuant to applications made in the Hong Kong Public Offering
and the International Offering will be registered on the Hong Kong Share Register of our
Company in Hong Kong. Dealings in the Shares registered in our Hong Kong Share Register
will be subject to Hong Kong stamp duty. For further details of Hong Kong stamp duty, please
seek professional tax advice.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisors if they are in any doubt as to the taxation implications of subscribing for, holding and
dealing in the Shares or exercising any rights attached to them. It is emphasized that none of
our Company, the Sole Sponsor, the Overall Coordinators, the Joint Global Coordinators, the
Joint Bookrunners, the Joint Lead Managers, the Underwriters or Capital Market
Intermediaries, any of our or their respective affiliates, directors, employees, agents or advisors
or any other party involved in the Global Offering accepts responsibility for any tax effects on,
or liabilities of holders of the Shares resulting from the subscription, purchase, holding or
disposal of the Shares or exercising any rights attached to them.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations of certain Renminbi
amounts into Hong Kong dollars, of Renminbi amounts into U.S. dollars and of Hong Kong
dollars into U.S. dollars at specified rates. Unless otherwise specified, or in respect of
transactions that have occurred at historical exchange rates, the translation of Renminbi into
Hong Kong dollars, of Renminbi into U.S. dollars, and of Hong Kong dollars into U.S. dollars
and vice versa, in this prospectus was made at the following rates:
RMB0.9105 to HK$1.00
RMB7.2425 to US$1.00
HK$7.8128 to US$1.00
We make no representation and none should be construed as being made, that any of the
Hong Kong dollar, U.S. dollar and RMB amounts contained in this prospectus could have been
or could be converted into amounts at the above rates or at any particular rate or at all on such
date or any other date.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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--- page 185 ---
LANGUAGE
If there is any inconsistency between the English version of this prospectus and its
Chinese translation, the English version of this prospectus shall prevail unless otherwise stated.
However, if there is any inconsistency between the names of any of the entities mentioned in
this English document which are not in the English language and their English translations, the
names in their respective original languages shall prevail. The English translations of the
Chinese names of such PRC entities, enterprises, titles, laws, regulations and the like are
provided for identification purposes only.
ROUNDING
Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments, or have been rounded to one or two decimal places. Any discrepancies
in any table in this prospectus between total and sum of amounts listed therein are due to
rounding.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
– 176 –


--- page 186 ---
DIRECTORS
Name Address Nationality
Executive Directors
Dr. Wen Shuhao (Ⴔ) Room 17D, Unit A, Block 4
Dachong City Garden
Nanshan District
Shenzhen
Guangdong
PRC
Chinese
Dr. Ma Jian ( ৵਄) Room 3511, Unit B, Block 6
Shenye Midtown
Futian District
Shenzhen
Guangdong
PRC
Chinese
Dr. Lai Lipeng ( ፠ɢᘄ) Room 1302, Unit 3
Building 1
Y ard 21, Baiwanzhuang Street
Xicheng District
Beijing
PRC
Chinese
Dr. Jiang Yide Alan 83 Bird Street
Needham
Massachusetts
USA
United States of
America
Non-Executive Director
Dr. Gu Cuiping ( ᚥၯറ) Room 804, Building No. 28
1688 North Shanxi Road
Jingan District
Shanghai
PRC
Chinese
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 177 –


--- page 187 ---
Name Address Nationality
Independent Non-Executive Directors
Mr. Law Cheuk Kin
Stephen ( ᖯՙ਺)
Flat C, 23/F, Block 1
Ronsdale Garden
25 Tai Hang Drive
Hong Kong
Chinese
Ms. Chan Wing Ki
(௓጑೘)
Flat B, 17/F, Tower 1A
The Austin, Wui Cheung Road 8
West Kowloon
Hong Kong
Chinese
Mr. Chow Ming Sang
(୍)
Room 2011
Tsui Yiu Court
Lai Chi Ling Road
Kwai Chung
Hong Kong
Chinese
See “Directors and Senior Management” for further details.
PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor CITIC Securities (Hong Kong) Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Sponsor-Overall Coordinator CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Sole Financial Advisor CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central
Hong Kong
Overall Coordinators CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 178 –


--- page 188 ---
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Jefferies Hong Kong Limited
Level 26, Two International Finance Centre
8 Finance Street
Central
Hong Kong
Deutsche Bank AG, Hong Kong Branch
Level 60, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong
CMB International Capital Limited
45th Floor, Champion Tower
3 Garden Road
Central
Hong Kong
Joint Global Coordinators CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Jefferies Hong Kong Limited
Level 26, Two International Finance Centre
8 Finance Street
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 179 –


--- page 189 ---
Deutsche Bank AG, Hong Kong Branch
Level 60, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong
CMB International Capital Limited
45th Floor, Champion Tower
3 Garden Road
Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
1 Hennessy Road
Hong Kong
Guosen Securities (HK) Capital
Company Limited
Suites 3207-3212 on Level 32
One Pacific Place
88 Queensway
Hong Kong
Joint Bookrunners CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Jefferies Hong Kong Limited
Level 26, Two International Finance Centre
8 Finance Street
Central
Hong Kong
Deutsche Bank AG, Hong Kong Branch
Level 60, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 180 –


--- page 190 ---
CMB International Capital Limited
45th Floor, Champion Tower
3 Garden Road
Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
1 Hennessy Road
Hong Kong
Guosen Securities (HK) Capital
Company Limited
Suites 3207-3212 on Level 32
One Pacific Place
88 Queensway
Hong Kong
Fosun International Securities Limited
Suite 2101–2105, 21/F
Champion Tower
3 Garden Road
Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road
Central
Hong Kong
BOCI Asia Limited
26th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong
CCB International Capital Limited
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 181 –


--- page 191 ---
Joint Lead Managers CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Jefferies Hong Kong Limited
Level 26, Two International Finance
Centre
8 Finance Street
Central
Hong Kong
Deutsche Bank AG, Hong Kong Branch
Level 60, International Commerce
Centre
1 Austin Road West
Kowloon
Hong Kong
CMB International Capital Limited
45th Floor, Champion Tower
3 Garden Road
Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
1 Hennessy Road
Hong Kong
Guosen Securities (HK) Capital
Company Limited
Suites 3207-3212 on Level 32
One Pacific Place
88 Queensway
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 182 –


--- page 192 ---
Fosun International Securities Limited
Suite 2101–2105, 21/F
Champion Tower
3 Garden Road
Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road
Central
Hong Kong
BOCI Asia Limited
26th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong
CCB International Capital Limited
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
Futu Securities International
(Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
Livermore Holdings Limited
Unit 1214A, 12/F, Tower II Cheung
Sha Wan Plaza
833 Cheung Sha Wan Road
Kowloon
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 183 –


--- page 193 ---
TradeGo Markets Limited
Room 3405, West Tower
Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
Capital Market Intermediaries CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Jefferies Hong Kong Limited
Level 26, Two International Finance Centre
8 Finance Street
Central
Hong Kong
Deutsche Bank AG, Hong Kong Branch
Level 60, International Commerce Centre
1 Austin Road West
Kowloon
Hong Kong
CMB International Capital Limited
45th Floor, Champion Tower
3 Garden Road
Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
1 Hennessy Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 184 –


--- page 194 ---
Guosen Securities (HK) Capital
Company Limited
Suites 3207-3212 on Level 32
One Pacific Place
88 Queensway
Hong Kong
Fosun International Securities Limited
Suite 2101–2105, 21/F
Champion Tower
3 Garden Road
Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road
Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road
Central
Hong Kong
BOCI Asia Limited
26th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong
CCB International Capital Limited
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 185 –


--- page 195 ---
Futu Securities International
(Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
Livermore Holdings Limited
Unit 1214A, 12/F, Tower II Cheung
Sha Wan Plaza
833 Cheung Sha Wan Road
Kowloon
Hong Kong
TradeGo Markets Limited
Room 3405, West Tower
Shun Tak Centre
168-200 Connaught Road
Central
Hong Kong
Legal Advisors to the Company As to Hong Kong and U.S. laws
Sidley Austin
Level 39, Two International Finance Centre
8 Finance Street
Central
Hong Kong
As to PRC laws
Fangda Partners
24/F, HKRI Centre Two
HKRI Taikoo Hui
288 Shi Men Yi Road
Shanghai
The PRC
As to Cayman Islands laws
Maples and Calder (Hong Kong) LLP
26/F, Central Plaza
18 Harbour Road
Wanchai
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 186 –


--- page 196 ---
Legal Advisors to the Sole Sponsor
and the Underwriters
As to Hong Kong and U.S. laws
Herbert Smith Freehills
23/F, Gloucester Tower
15 Queen’s Road Central
Hong Kong
As to PRC laws
JunHe LLP
Suite 2803-04, 28/F
Tower Three, Kerry Plaza
No. 1-1, Zhongxinsi Road
Futian District
Shenzhen
The PRC
Reporting Accountant and Auditor PricewaterhouseCoopers
(Certified Public Accountants and
Registered Public Interest Entity Auditor)
22/F, Prince’s Building
Central
Hong Kong
Industry Consultant Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
Room 1018, Block B
500 Y unjin Road
Shanghai
The PRC
Receiving banks CMB Wing Lung Bank Limited
45 Des V oeux Road Central
Hong Kong
Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 187 –


--- page 197 ---
Registered Office PO Box 309
Ugland House
Grand Cayman
KY1-1104
Cayman Islands
Headquarters and Principal Place of
Business in the PRC
3/F, Second Phase of the International
Biomedical Industrial Park
No. 2 Hongliu Road
Futian District
Shenzhen
PRC
Principal Place of Business in Hong Kong 5/F, Manulife Place
348 Kwun Tong Road
Kowloon
Hong Kong
Joint Company Secretaries Mr. Tam Man Hong (HKICP A) (CF A)
(CP A(Australia))
Ms. Chan Sau Ling (HKCGI, CGI)
Authorized Representatives Dr. Wen Shuhao
Room 17D, Unit A, Block 4
Dachong City Garden
Nanshan District
Shenzhen
Guangdong
PRC
Mr. Tam Man Hong
Flat B, 4/F, Ho King View
2 Braemar Hill Road
North Point
Hong Kong
Audit Committee Mr. Law Cheuk Kin Stephen (Chairman)
Ms. Chan Wing Ki
Mr. Chow Ming Sang
Remuneration Committee Mr. Law Cheuk Kin Stephen (Chairman)
Dr. Ma Jian
Mr. Chow Ming Sang
CORPORATE INFORMATION
– 188 –


--- page 198 ---
Nomination Committee Dr. Wen Shuhao (Chairman)
Mr. Law Cheuk Kin Stephen
Ms. Chan Wing Ki
Compliance Advisor UOB Kay Hian (Hong Kong) Limited
6/F, Harcourt House
39 Gloucester Road
Hong Kong
Principal Share Registrar and
Transfer Office
Maples Fund Services (Cayman) Limited
PO Box 1093
Boundary Hall
Cricket Square
Grand Cayman KY1-1102
Cayman Islands
Hong Kong Share Registrar Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Principal Banks Shanghai Pudong Development Bank
(Shanghai Branch)
No. 588 South Pudong Road
Pudong New Area
Shanghai
PRC
China Construction Bank Corporation
(Shenzhen Cuiyuan Sub-branch)
36/F, No. 8 Pengcheng 1st Road
Futian District, Shenzhen
Guangdong
PRC
China Merchants Bank
(Shenzhen Branch)
2/F, Building 3 News Building, No. 1002
Shennan Middle Road
Futian District, Shenzhen
Guangdong
PRC
CORPORATE INFORMATION
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Bank of Ningbo (Shenzhen Branch)
1/F, Bank of Ningbo, Huangting Building,
Jintian Road
Futian District, Shenzhen
Guangdong
PRC
Company’s Website www.xtalpi.com
(the information contained on this website
does not form part of this prospectus)
CORPORATE INFORMATION
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The information and statistics set out in this section and other sections of this
prospectus were extracted from different official government publications, available
sources from public market research and other sources from independent suppliers,
and from the independent industry report prepared by Frost & Sullivan. We engaged
Frost & Sullivan to prepare the Frost & Sullivan Report, an independent industry
report, in connection with the Global Offering. The information and statistics from
official government sources has not been independently verified by us, the Sole
Sponsor, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, any of the Underwriters or Capital Market
Intermediaries, any of their respective directors and advisers, or any other persons or
parties involved in the Global Offering, and no representation is given as to its
accuracy. Accordingly, the information from official government sources contained
herein may not be accurate and should not be unduly relied upon.
OVERVIEW OF NEW TECHNOLOGIES
New technologies, such as artificial intelligence (“ AI”), quantum physics and automation,
are transforming businesses and are believed to contribute to economic growth by enhancing
productivity. These technologies have been gradually transforming the nature of work by
enabling computers and machines to carry out tasks more efficiently than manually in the past,
and even tasks that humans are not capable of doing.
China is emerging as one of the global leaders in new technologies. Along with China’s
strategic shift from high-growth development to high-quality development, these new
technologies have become a key driver of China’s future economy. The U.S. and the European
Union (“ EU”) have also been actively launching similar favorable policies to foster the
development and adoption of new technologies. See “—Key Drivers and Future Trends of New
Technologies” for more details.
Artificial Intelligence (“AI”)
AI is a branch of computer science that aims to empower machines to simulate human
intelligence and intricate cognitive functions associated with learning, reasoning, and
problem-solving. AI works in two main phases: training and inference. In the training phase,
developers feed their models with curated datasets for the models to “learn” all the knowledge
they need to analyze a specific type of data. In the inference phase, the trained models make
predictions based on live data to produce actionable results.
AI represents a transformational and foundational technology for the future of computing
and is expected to transform human-to-human, human-to-machine, machine-to-human, and
machine-to-machine interactions in the coming decades. The influence of AI is expected to
permeate deeper into many industries in the foreseeable future.
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Quantum Physics
Quantum physics is the study of matter and its interactions with energy on the scale of
atomic and subatomic particles. It enables the calculation of properties and behavior of
physical systems, such as wave-particle duality, superposition, uncertainty principle,
entanglement, energy level quantization, spin, tunneling and interference. Quantum physics
plays a crucial role in life science and material science by providing a fundamental
understanding of the behavior of matter at the atomic and subatomic level. Through the first
principles of quantum mechanics, scientists are able to predict and explain the properties of
materials, such as their electronic structure, optical properties and magnetic behavior.
Automation
Automation is the use of technology to perform tasks with minimal human input.
Developed along with AI, automation has evolved from physical machinery that assisted in the
performance of labor-intensive tasks, such as the manufacturing of cars, to a new level of
sophistication and adaptability to various industries.
One of the key advantages of automation is the significantly increased efficiency. By
automating repetitive and time-consuming tasks, companies can significantly reduce human
errors and create a more productive workforce. Moreover, automation can improve quality and
consistency by eliminating human-caused inconsistencies, leading to standardized outputs and
improved accuracy.
The New Technology Markets
AI Solution Market
AI solutions show great potential in various application scenarios, as it can break through
the huge bottleneck of data quality, processing efficiency, complete in-depth analysis, and
standardization of large-scale, multi-source heterogeneous data, thereby significantly
increasing the demand for AI technology. For instance, AI is able to automate and unceasingly
perform a repetitive task which used to be done manually. In addition, AI can be possibly
trained to generate more accurate work products than humans, helping humans to make better
decisions.
The global AI solution market is experiencing rapid growth, driven by technological
advancements, favorable government policies, and increased demand across various industries.
The size of the global AI solution market increased at a CAGR of 34.0% from US$43.3 billion
in 2018 to US$139.5 billion in 2022, and is expected to further increase at a CAGR of 33.5%
from US$187.0 billion in 2023 to US$1,414.2 billion in 2030. The size of the AI solution
market in China increased at a CAGR of 40.8% from US$3.5 billion in 2018 to US$13.9 billion
in 2022, and is expected to further increase at a CAGR of 37.0% from US$18.5 billion in 2023
to US$168.3 billion in 2030.
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Global and China AI Solution Markets, 2018-2030E
43.3 3.5 65.7 6.1 92.2
7.6
114.9
11.2
139.5
13.9
187.0
18.5
249.6
25.3
330.0
450.0
48.9
605.7
69.4
809.8
94.2
1,073.0
126.4
1,414.2
168.3
2030E
CAGR Global China
2018-2022 34.0% 40.8%
2023E-2030E 33.5% 37.0%
Billion USD
2018 2019 2020 2021 2022 2023E 2024E 2025E 2027E 2028E 2029E2026E
Rest of the world China
34.9
Source: Frost & Sullivan Report
Among the various sectors in AI solutions market, the application of AI solutions in
healthcare and material science (including agriculture, beauty and cosmetics, petrochemical,
battery, and display sectors) is expected to grow significantly.
The size of the global market for AI solutions in the healthcare sector is expected to
increase at a CAGR of 35.5% from US$13.7 billion in 2022 to US$155.3 billion in 2030; the
size of the global market for AI solutions in the agriculture sector is expected to increase at a
CAGR of 34.0% from US$5.4 billion in 2022 to US$56.0 billion in 2030; the size of the global
market for AI solutions in the beauty and cosmetics sector is expected to increase at a CAGR
of 34.0% from US$2.7 billion in 2022 to US$28.1 billion in 2030; the size of the global market
for AI solutions in the petrochemical sector is expected to increase at a CAGR of 39.8% from
US$1.4 billion in 2022 to US$20.6 billion in 2030; the size of the global market for AI
solutions in the battery sector is expected to increase at a CAGR of 33.8% from US$3.8 billion
in 2022 to US$39.5 billion in 2030; and the size of the global market for AI solutions in the
display sector is expected to increase at a CAGR of 39.1% from US$0.1 billion in 2022 to
US$1.3 billion in 2030.
Automation Market
The global automation market is experiencing significant growth as industries
increasingly embrace technology to streamline processes and improve efficiency. The
automation market can be divided into the markets for industrial automation and lab
automation. Industrial automation primarily refers to the incorporation of automation into
end-to-end manufacturing processes, while lab automation primarily refers to the application
of technology and services to automate various lab processes and tasks. The global penetration
rate of lab automation is expected to increase from 3.7% in 2022 to 23.2% in 2030.
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The size of the global automation market increased at a CAGR of 10.4% from US$144.8
billion in 2018 to US$215.1 billion in 2022. Driven by the advancements in robotic and AI
technologies, the size of the global automation market is expected to further increase at a
CAGR of 10.5% from US$234.6 billion in 2023 to US$471.5 billion in 2030. The size of the
automation market in China increased at a CAGR of 14.7% from US$25.4 billion in 2018 to
US$44.0 billion in 2022, and is expected to further increase at a CAGR of 13.0% from US$48.9
billion in 2023 to US$114.6 billion in 2030.
Global and China Automation Markets, 2018-2030E
Rest of the world China
144.8 162.3
180.3
196.6
215.1
234.6
259.6
287.3
317.8
351.3
387.9
427.9
471.5
25.4
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
28.1 30.8 40.0 44.0
48.9
54.6
61.4
100.8
69.2
78.2
88.8
114.6
CAGR Global China
2018-2022
2023E-2030E
10.4%
10.5%
14.7%
13.0%
Billion USD
Source: Frost & Sullivan Report
Among the various sectors in the automation market, the application of automation in
healthcare and material science (including, petrochemical, battery, and display sectors) is
expected to grow significantly.
The size of the global market for automation in the healthcare sector is expected to
increase at a CAGR of 19.2% from US$15.5 billion in 2022 to US$63.2 billion in 2030; the
size of the global market for automation in the petrochemical sector is expected to increase at
a CAGR of 11.0% from US$6.7 billion in 2022 to US$15.3 billion in 2030; the size of the
global market for automation in the battery sector is expected to increase at a CAGR of 9.5%
from US$10.4 billion in 2022 to US$21.4 billion in 2030; and the size of the global market for
automation in the display sector is expected to increase at a CAGR of 9.9% from US$0.9
billion in 2022 to US$2.0 billion in 2030.
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Key Drivers and Future Trends of New Technologies
The growth of the new technology market is expected to be driven and influenced by the
following factors and trends:
 Growing data volume across industries. The exponential growth in data volume
presents significant prospects for extracting meaningful insights and knowledge,
spurring the emergence of cutting-edge data analytics technologies like machine
learning (“ ML”) algorithms and AI models. The surge in data also necessitates the
development of sophisticated solutions for data storage, management, computation,
and security.
 Increasing labor cost. Increasing labor costs prompt businesses to explore
alternative means of minimizing their reliance on human labor, thereby driving more
investment in new technologies. Automation technologies, robotics, and AI models
have emerged as primary solutions to reduce labor costs. These technologies enable
businesses to streamline operations, enhance productivity, and optimize resource
allocation, while reducing labor expenses.
 Convergence of technologies. The convergence of technologies, such as the
integration of AI in combination with quantum physics, cloud computing, and
automation, empowers the rapid growth of the new technology market. By
combining their strengths and capabilities, technologies can drive synergistic
innovation, enable cross-domain applications, enhance performance and efficiency,
and foster an interconnected ecosystem. As technologies continue to converge and
interact, the pace of innovation and market growth is expected to further accelerate.
 Favorable policies. The PRC government has launched a series of favorable
national and regional policies in recent years to incentivize and encourage
technological innovations and spur technological enhancements to support
economic growth. For instance, the Development Plan for National High-Tech
Industrial Development Zones in the “14th Five-Year Plan” Period (2021-2025)
(“ɤ̬ʞ”஝ྌ(2021-2025) ) emphasizes on the
importance of implementing the strategy of technological innovation-driven
development in key industries, such as the biotechnology industry. Specifically, the
Three-year Guidance for Internet Plus Artificial Intelligence Plan (“ʝᑌၣ+”ɛ
) focuses on supporting neural network chips to achieve
large-scale application of AI in China. In addition, the “14th Five-Year Plan”
Intelligent Manufacturing Development Plan (“ɤ̬ʞ”஝ྌ)
highlights the importance of intelligent manufacturing and promotes the
transformation of manufacturing to be automation-enabled and the development of
robotics. The U.S. government has also been actively implementing favorable
policies to foster the development and adoption of new technologies. The Credit for
Increasing Research Activities (R&D Tax Credit), for example, is a key policy tool
introduced by the U.S. government to incentivize businesses to invest in qualifying
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R&D programs so as to encourage innovation and technological advancement.
Furthermore, the Horizon Europe , the European Union’s largest R&D funding
program running from 2021 to 2027, also aims to provide substantial funding for the
development of new technology and encourage collaboration and innovation
throughout the European Union.
THE DRUG R&D MARKET
Overview
Drug R&D is a systematic process that requires interdisciplinary efforts to design safe,
effective and commercially feasible drugs, which can be divided into three main stages: early
drug discovery, pre-clinical studies, and clinical studies. Among all the stages, early drug
discovery is the first step and is considered as fundamental to drug R&D.
There are four phases in drug discovery, from the initial phases of target identification and
target validation (“ target-to-hit ”), to the later phases of lead generation (“ hit-to-lead ”), and
lead optimization. Target identification is the process of identifying the direct molecular target,
and target validation is the process of verifying the predicted molecular target. Lead generation
is the process of evaluating target molecules and performing limited optimization to identify
promising compounds, and lead optimization is the process of designing drug candidates after
the initial target compounds have been identified.
The diagram below illustrates the four phases of drug discovery in detail:
Target ValidationTarget Identification Lead Generation Lead Optimization
/g137Discovery of Target
Genes
/g137Cheminformatics
/g137Bioinformatics
/g137Molecular Biology
/g137Functional Genomics
/g137Biochemistry
/g137Molecular Biology
/g137Pathological
/g137Chemical Synthesis
/g137Biometrics
/g137Analytical Chemistry
/g137High Throughout
Screening
/g137Medicinal Chemistry
/g137SAR Assessment
/g137DMPK in Vitro
/g137Toxicity Assays in Vitro
Phase
Primary
Domain
Main
Content
Validating whether a
molecular target is directly
involved in a disease
process and have
therapeutic effects.
Taking hits from the early
screening phases of a drug
discovery program to lead
compounds.
Identifying the function of
a possible therapeutic
target (gene/protein) and
its role in the disease.
Synthesizing lead compounds,
new analogs with improved
potency, reduced off-target
activities, and physiochemical
/metabolic properties
suggestive of reasonable in
vivo pharmacokinetics.
ClinicalPre-clinicalDrug Discovery
Target-to-Hit Hit-to-Lead Lead Optimization
Source: Frost & Sullivan Report
Notes:
(1) SAR: Structure-activity relationship.
(2) DMPK: Drug Metabolism and Pharmacokinetics.
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The drug R&D process is time-consuming, usually taking at least a decade to
commercialize a drug asset. The entire drug R&D process typically involves (i) four to six
years of drug discovery process, including approximately 25 months of target-to-hit phase,
approximately 25 months of hit-to-lead phase, and approximately ten months of lead
optimization phase, (ii) one to two years of PCC stage, (iii) six to seven years of clinical trial
stage, and (iv) half a year to two years of regulatory approval stage, before the marketing and
commercialization of the drug assets. However, the use of AI technologies and quantum
physics-based computations in drug discovery can reduce the time and costs required and
improve the efficiency of the drug discovery process. The diagram below sets forth the
comparison of efficiency between AI-based method and traditional manual method for drug
discovery.
Comparison of Efficiency between AI-based and Traditional Manual Methods
20 40 60 80
Months
Traditional Manual Method AI-powered Method
• To identify a PCC candidate, around 5,000 molecules need to be
synthesized and tested over four to six years
• To identify a PCC candidate, billions of molecules can be virtually
screened and only a few hundreds need to be synthesized and
tested over two to three years
• Begins from experimental screening of existing limited libraries of
molecules to identify molecules with detectable activity against
particular targets
• Customized generation of millions of hit molecules for a given target
• Manual testing of physical and chemical properties and optimization
through trial and error
• Multi-dimensional screening and optimization of drug properties to
ensure novelty and patentability of molecules, narrowing down to a
list of dozens of compounds from thousands of compounds
• Costly and iterative synthesis and testing of molecules • Only a few dozens of compounds to be synthesized and testes in wet lab
Traditional drug
discovery
AI-powered drug
discovery
Target-to-hit
Hit-to-lead
Lead optimization
Source: Frost & Sullivan Analysis
Market Size
Global and China Drug R&D Expenditure
The global drug R&D expenditure has experienced rapid growth in recent years and is
expected to continue increasing. It increased at a CAGR of 8.5% from US$174.0 billion in
2018 to US$241.5 billion in 2022, and is expected to further increase at a CAGR of 6.1% from
US$260.5 billion in 2023 to US$394.3 billion in 2030.
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Although some regions, such as the U.S. and the UK, have been ahead of the others in
adopting new technologies, regulating, and encouraging the drug and material science R&D,
driven by increasing domestic technological advancements, robust government support, and a
strategic emphasis on fostering innovation, drug R&D expenditure in China increased at a
CAGR of 17.0% from US$17.4 billion in 2018 to US$32.6 billion in 2022, and is expected to
further increase at a CAGR of 9.1% from US$36.6 billion in 2023 to US$67.5 billion in 2030.
Global and China Drug R&D Expenditure, 2018-2030E
Rest of the world
174.0 182.4
204.8
224.1
241.5
260.5
279.2
297.8
316.8
335.7
354.9
374.4
394.3
2030E
CAGR Global China
2018-2022 8.5% 17.0%
2023E-2030E 6.1% 9.1%
Billion USD
2018 2019 2020 2021 2022 2023E 2024E 2025E 2027E 2028E 2029E2026E
China
17.4 21.1
24.7
29.0
32.6
36.6
40.7
44.9
49.3
53.7
58.2
62.8
67.5
Source: Frost & Sullivan Report
Global and China Drug R&D Outsourcing Service Markets
Drug R&D outsourcing services includes CRO services for drug discovery, preclinical,
clinical studies, and CMO/CDMO services for small molecular drugs and biologics. The size
of the global drug R&D outsourcing service market increased at a CAGR of 11.3% from
US$86.7 billion in 2018 to US$133.0 billion in 2022, and is expected to further increase at a
CAGR of 13.3% from US$151.2 billion in 2023 to US$363.2 billion in 2030. In particular, the
size of the global drug R&D outsourcing service market for drug discovery increased at a
CAGR of 10.3% from US$7.6 billion in 2018 to US$11.2 billion in 2022, and is expected to
further increase at a CAGR of 14.9% from US$12.3 billion in 2023 to US$32.5 billion in 2030.
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Global Drug R&D Outsourcing Service Market, 2018-2030E
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Total 86.7 93.8 100.2 116.5 133.0 151.2 172.3 195.5 222.1 252.0 285.0 321.9 363.2
Discovery outsourcing services 7.6 8.5 9.2 10.2 11.2 12.3 14.7 17.1 19.8 22.7 25.8 29.1 32.5
Preclinical outsourcing services 8.4 9.1 9.5 10.6 11.7 12.9 14.2 15.5 17.0 18.5 20.2 22.0 23.9
Clinical outsourcing services 37.9 40.6 41.8 50.2 54.7 59.5 64.6 70.0 75.8 81.8 88.2 94.9 101.9
CMO/CDMO outsourcing services 32.8 35.6 39.7 45.5 55.4 66.5 78.9 92.9 109.6 128.9 150.8 175.9 204.9
86.7 93.8 100.2 116.5 133.0
151.2
172.3
195.5
222.1
252.0
285.0
321.9
363.2
Billion USD
Period Discovery Preclinical Clinical CDMO Total
2018-2022 10.3% 8.6% 9.6% 14.0% 11.3%
2023E-2030E 14.9% 9.2% 8.0% 17.4% 13.3%
Source: Frost & Sullivan Report
The size of the China drug R&D outsourcing service market increased at a CAGR of
28.2% from US$7.8 billion in 2018 to US$21.1 billion in 2022, and is expected to further
increase at a CAGR of 18.3% from US$26.9 billion in 2023 to US$87.1 billion in 2030. In
particular, the size of drug R&D outsourcing service market for drug discovery in China
increased at a CAGR of 24.3% from US$1.1 billion in 2018 to US$2.7 billion in 2022, and is
expected to further increase at a CAGR of 19.6% from US$3.5 billion in 2023 to US$12.2
billion in 2030.
China Drug R&D Outsourcing Service Market, 2018-2030E
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Total 7.8 9.5 11.1 15.1 21.1 26.9 33.5 40.8 48.9 57.4 66.7 76.6 87.1
Discovery outsourcing services 1.1 1.4 1.8 2.5 2.7 3.5 4.3 5.3 6.5 7.7 9.1 10.6 12.2
Preclinical outsourcing services 1.5 1.8 1.9 2.4 3.1 3.5 4.1 4.8 5.5 6.4 7.2 8.1 9.1
Clinical outsourcing services 3.2 3.7 3.8 5.1 6.1 7.4 9.1 10.8 12.5 14.5 16.5 18.5 20.3
CMO/CDMO outsourcing services(1) 1.9 2.6 3.5 5.2 9.1 12.5 15.9 19.9 24.4 28.9 33.8 39.4 45.6
7.8 9.5 11.1 15.1
21.1
26.9
33.5
40.8
48.9
57.4
66.7
76.6
87.1
Billion USD
Period Discovery Preclinical Clinical CDMO Total
2018-2022 24.3% 19.1% 17.8% 47.4% 28.2%
2023E-2030E 19.6% 14.6% 15.5% 20.3% 18.3%
Source: Frost & Sullivan Report
Note:
(1) Include services for small molecular drugs and cell and gene therapies only.
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In 2022, the size of the drug R&D outsourcing service market in China was approximately
US$21.1 billion, accounting for approximately 15.8% of the global drug R&D outsourcing
service market; the size of the drug R&D outsourcing service market in the U.S. was
approximately US$56.3 billion, accounting for approximately 42.4% of the global drug R&D
outsourcing service market; and the size of the drug R&D outsourcing service market in the EU
was approximately US$31.6 billion, accounting for approximately 23.8% of the global drug
R&D outsourcing service market. With the enhancement of China’s drug R&D capabilities and
the relatively low of R&D costs in China compared to in the U.S. and the EU, the projected
size of the drug R&D outsourcing market in China is expected to increase at a CAGR of 18.3%
from approximately US$26.9 billion in 2023 to approximately US$87.1 billion in 2030.
Global Drug R&D Outsourcing Market Breakdown by Region, 2022
RoW: 18.0%
U.S.: 42.4%
EU: 15.8%
China: 23.8%
US China EU RoW
Source: Frost & Sullivan Report
Application of AI in Drug R&D
The traditional drug R&D process is costly and time-consuming, and generally takes at
least approximately 10 years and over US$1 billion investment. In particular, it generally takes
approximately one to two years and around US$400 million to US$450 million for the
discovery of a single drug. Furthermore, one commercially viable drug is typically selected
from thousands of compounds at drug discovery. The total cost of R&D activities for a new
drug can reach US$2.6 billion.
However, the application of new technologies, such as AI, in drug R&D can significantly
reduce the time and costs required for the drug R&D, and improve the success rate. AI has been
successfully applied in each step of the drug R&D process, and the feedback from drug R&D
helps to refine the functionality of the AI-powered drug R&D platform and enrich AI database.
In the process of learning and validation, algorithm, computing power and data, which are the
three core elements of AI, can enhance each other and continually strengthen the AI-powered
drug R&D platform.
With the increasing adoption of AI across all stages of drug R&D, pharmaceutical
companies worldwide have either built their own AI platforms or have formed collaborations
with AI companies for drug R&D. The table below provides an overview of the AI partnership
engagements among some of these companies.
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Global
Companies
Company AI Partners Year of Earliest
Partnership Collaboration Deals Highlights
Pfizer 2016XtalPi, Atomwise,
Concerto HealthAI,
IBM Watson, Insilico
Medicine
Collaborates with XtalPi to expedite the development of
Paxlovid and successfully confirmed the drug crystal
structure within six weeks in 2021;
Collaborates with Atomwise to discover potential drug
candidates for three target proteins
Bayer 2020XtalPi, Huma AI,
Exscientia, Blackford
Analysis
Collaborates with Exscientia to identify and optimize
novel lead structures for potential drug candidates to
treat cardiovascular and oncological diseases;
Acquires Blackford Analysis in 2023 to drive
innovation in radiology and adopt AI technologies
within the clinical workflow
MSD 2012XtalPi, Atomwise,
Numerate, PathAI
Collaborates with XtalPi to investigate the impact of
different polymer additives on the crystal habit of
metformin hydrochloride;
Collaborates with Numerate to generate new drug leads
for an undisclosed cardiovascular disease target
Johnson &
Johnson/
Janssen
2016XtalPi, BenevolentAI,
Celsius Therapeutics,
Iktos
Collaborates with XtalPi to validate small molecule hits
that possess defined properties for a given target and
deploys XtalPi’s ID4 platform to shorten the DMTA
cycle;
Collaborates with BenevolentAI to transfer small
molecule compounds under test for drug discovery
Eli Lilly
2021XtalPi, Autowise,
Verge Genomics,
Nimbus
Collaborates with Verge Genomics to conduct research
on novel therapies and treatments of amyotrophic lateral
sclerosis;
Collaborates with XtalPi and leverages XtalPi’s
integrated AI capabilities and robotics platform to
identify and develop small molecule first-in-class
therapeutics
Haisco
Pharma
2021XtalPi Collaborates with XtalPi and adopts its AI
capabilities and novel “experiment + computation”
approach into solid-state research to further
accelerate the breakthrough and progress in its
innovative drug R&D projects
Hansoh XtalPi, StoneWise,
DP Technology
2019 Collaborates with StoneWise to design and
discover potential drug candidates in various
therapeutic areas including oncology and central
nervous system
Hengrui XtalPi, Iktos 2021 Collaborates with Iktos and utilizes its AI-based
de novo drug design software to accelerate the
discovery of small molecule drugs and optimize
lead compounds
Shanghai
Pharma
XtalPi, AlphaMol 2021 Collaborates with AlphaMol and leverages its smart
drug development platform to precisely predict target
protein structures and engage in the first-in-class
GPCR drug R&D
Nhwa Pharma DP Technology 2022 Collaborates with DP Technology and combines its
central nervous system (“CNS”) drug R&D experience
with DP Technology's AI drug discovery platform to
promote its CNS drug research and development
China-based
Companies
Gilead 2019Insitro Collaborates with Insitro to chemically develop up to
five of the proposed treatments for nonalcoholic
steatohepatitis
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Application of Quantum Physics in AI-based Drug R&D
Along with the significant advancements in AI technology, big data and computing power,
quantum physics-based computation, a physics-based method to pharmaceutical computation
has gradually emerged. This method origins from the first-principles of quantum physics, and
can be used to calculate the interaction forces between drug molecules and target protein
molecules at the microscopic particle level, such as molecules and atoms. Quantum
physics-based computation is recognized as the next technological breakthrough, and is
expected to make a great impact on the R&D of pharmaceutical interventions and therapeutics.
Unlike typical AI-based methods that require sufficient experimental data to train their AI
models, quantum physics-based first-principles calculation can generate its own scalable data,
overcoming the lack of data in early stages of AI-based drug R&D. Quantum physics-based
methods can also substantially increase the accuracy of predictions and provide more relevant
models of chemical and biological objects and their interactions.
Furthermore, quantum physics-based computation is able to compute properties of
molecules beyond existing industry knowledge and data without any training sets, significantly
improving early drug discovery. Quantum physics-based algorithms can also guide generative
AI to efficiently discover innovative drug candidates on a larger scale in a more rapid and
accurate manner. The table below illustrates the differences in features of AI-based and
quantum physics-based methods.
Features AI-based method Quantum Physics-based method
Principle
Method
Data
Inductive reasoning
First-principles
Deductive reasoning
Applicable Scenarios When large amounts of data
are available, such as virtual
molecule generation, compound
synthesis route prediction and
ADMET property prediction
Target protein and molecular
simulation-based de novo design,
 virtual screening, and lead
compound optimization
Characteristics High-throughput, high requirement
for data
High accuracy, high requirement
for computational power
Potential
Development
Fast iteration, with the
potential of rapid development
after crossing the critical point
Linear development relies on the
progress of the field of physics
Source: Frost & Sullivan Report
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The table below shows the comparison of AI-based methods with and without quantum
physics.
AI-based method without quantum physics AI-based method with quantum physics
• Enables rapid processing of data at
scale, and can accurately predict
molecular properties similar to the
training set; but
• Requires large amounts of empirical
data and is incapable of extrapolating
molecules that are not similar to the
training set.
• Enables the modeling of drug
properties ab initio, which allows the
discovery and design of promising
drug candidates without having to
first accumulate empirical data;
• Allows both rapid processing of data
at scale and computing molecular
properties that are beyond existing
industry capabilities and data;
• Guides AI to efficiently discover
novel molecules on a large scale and
in a rapid and accurate manner; and
• Enables continuous improvement of
AI models with data input generated
by quantum physics-based first-
principles calculation.
Source: Frost & Sullivan Report
To date, several companies have taken the first step towards incorporating quantum-
physics based computation into AI-based drug R&D. With the processing power of quantum-
physics based computation, scientists expect to further accelerate and refine the AI-based drug
R&D process. The table below shows the two major companies that employ quantum-physics-
based methods of drug discovery.
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Major Companies Using Quantum Physics-based Method
XtalPi Company J
Established in 2015 by three postdoctoral
physicists at MIT. Its proprietary
integrated technology platform, which
integrates high performance cloud
computing-powered in silico tools,
including quantum physics-based first-
principles calculation and AI, for dry lab
calculation and evaluation, and wet lab
experimentation with robotic automation,
enables the transformation of how drugs
and new materials are discovered at a
pace and scale beyond traditional
alternatives.
Founded in 1990 with the intent to develop
a highly advanced, physics-based
computational platform. The physics-
based software platform enables its
customers to discover higher quality novel
molecules in drug and material science
R&D with greater efficiency than
traditional approaches.
Company J is also leveraging its software
platform to support its internal drug
discovery programs.
Source: Frost & Sullivan Report
Entry Barriers of the AI-based Drug R&D Market
New entrants into the AI-based drug R&D market face the following entry barriers:
 Limited resources. The scarcity of experts in both AI algorithms and biomedical
research is a significant challenge for new entrants seeking to design AI-based
algorithms for drug R&D. Moreover, the expenses and lengthy validation cycles
associated with the development and testing of AI-based algorithms further
exacerbate difficulties in funding technological acquisitions.
 Lack of algorithms and models. Algorithms are critical for AI-based drug R&D, as
excellent drug R&D models can significantly improve prediction accuracy.
However, drug R&D models are usually complex, containing a large number of
complex parameters and algorithms. Furthermore, a large amount of real-world data
is crucial to further fine-tune the drug R&D models. As new entrants lack advanced
AI capabilities and high quality data, they are unable to take advantage of the
benefits brought by algorithms and AI model to outperform current market players
in drug R&D.
 Competition with current market players. The AI-based drug R&D market is
competitive, presenting formidable obstacles for new entrants to compete with
established market players. Major players combine AI-powered dry lab with robotic
wet lab to form an iterative feedback loop for one-stop drug R&D services, making
it difficult for new entrants to introduce innovations and distinguish themselves
from existing major players.
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 Commercialization difficulties. The drug R&D process is complex and time-
consuming, making it difficult for small companies to commercialize their R&D
services. Furthermore, with customers’ evolving requirements and needs as well as
stringent data requirements, start-ups may find it challenging to meet customer
expectations.
Growth Drivers and Future Trends
The AI-based drug R&D market is expected to be driven and influenced by the following
factors or trends:
 Rise in demand to accelerate drug R&D. The world’s aging population and rising
incidence of diseases, such as cardiovascular, metabolic, cancer, and
neurodegenerative conditions, are stimulating demand for novel therapeutics and
more efficient drug discovery. Traditional drug R&D programs are not efficient,
characterized by lengthy R&D cycles, high failure rates, and exorbitant costs. This
marks a significant opportunity for AI-based drug R&D to revolutionize current
approaches.
 Technological advancements in AI. The discovery of new drug candidates aided by
AI is particularly critical for diseases that lack effective treatment options and have
significant unmet needs. Recent developments in deep learning, neural networks,
generative adversarial networks (“ GANs ”), and generative AIs have enabled AI to
analyze vast quantities of data with greater complexity and higher speed. By
simulating and predicting potential outcomes, AI is helping researchers to reduce the
experimental labor required in drug R&D, while increasing the efficiency in
identifying suitable drug targets. Ultimately, AI has the potential to significantly
shorten the drug R&D process and lower costs by screening for molecules that are
more likely to succeed.
 Increasing investment in AI-based drug R&D and collaboration with AI
companies. Utilizing AI capabilities can significantly reduce both the time and cost
required in the drug R&D process, making it a highly advantageous strategy for
multinational corporations (“ MNCs ”). Biotechnology and pharmaceutical
multinational corporations have showed great interest in investing in or
collaborating with AI-based drug R&D companies. With the increased realization of
the benefits of AI integration, the demand for AI-based solutions is predicted to rise
continuously, leading to further investment and collaboration in this field.
 Supportive regulatory framework. Favorable policies have been implemented to
promote innovative solutions in healthcare industry, such as the “2017 Digital
Health Innovation Action Plan” in the U.S. This plan encourages risk-based
approaches to regulate digital health technology to foster innovation. In addition, the
FDA has also introduced four approaches to expedite the regulatory review and
approval processes, including fast track program, breakthrough therapy program,
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accelerated approval program, and priority review program, aiming to stimulate the
development of new therapies for serious diseases. Likewise, China has enacted
several reform policies that aim to expedite the drug approval process. For instance,
the Opinions on Reform of the Drug and Medical Device Review and Approval (ᗫ
จԈ) has transformed the
regulatory system and environment of the pharmaceutical market in China, which
reforms the clinical trial management, accelerates regulatory review and approval
process, recognizes global application and accepts foreign clinical data, and
enhances patent protection. See “Regulatory Overview—Regulations on
Pharmaceutical Product Research, Development, Approval and
Registration—PRC—Accelerated Approval for Clinical Trial and Registration” for
more details.
 Data privacy and protection. AI start-ups and biotechnology and pharmaceutical
companies are leveraging cloud-based platforms to share data. To ensure the
compliance with regulations and to prevent data breaches, players will need to use
advanced technologies, such as blockchain.
 Pipeline diversification. The advancement of AI-powered prediction tools has and
will continue to enhance the accuracy and efficiency of drug R&D and pre-clinical
testing, enabling new research directions and more strategic R&D approaches. As
the volume of high-quality data and algorithms continues to grow, AI-based method
will further minimize failures in drug R&D while enhance pipeline diversification,
thereby generating a higher return on investment in drug R&D.
Competitive Landscape
Most of the major AI-based drug R&D companies are conducting R&D with a focus on
the development or commercialization of their own drug products, while we primarily provide
drug discovery solutions to biotechnology and pharmaceutical companies. Furthermore, unlike
us, most of the market players lack the integrated capabilities of the combination of wet lab and
dry lab, resulting in a longer and more costly R&D cycle.
Computational technology and the level of automation in wet lab play vital roles in the
AI-powered drug discovery industry. Quantum physics-based first-principles calculation can
model drug properties ab initio , without the need of massive empirical data. In addition, data
generated by quantum physics-based first-principles calculation can be used to train and
enhance AI models to predict critical molecular properties for identifying candidate compounds
and crystal forms suitable for drug R&D. However, both quantum physics-based computation
and AI have significant limitations of their own; for example, quantum physics-based
computation is difficult and time-consuming to develop for R&D purposes, while AI models
are limited by their training sets as they are incapable of extrapolating molecules that are not
similar to the training set. Nonetheless, combining quantum physics-based computation and AI
capabilities allows for rapid processing of data at scale and calculation of molecular properties
beyond current industry capabilities and data. Moreover, automation can enable wet lab to
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quickly validate predictions generated by AI models and generate data at scale to further train
AI models. Improved AI models can, in turn, provide better insights into the design and
performance of wet lab experimentation. Thus, an AI drug R&D company that owns and
integrates AI, quantum physics, and automated wet lab capabilities can continually enhance its
drug R&D capabilities by creating a virtuous cycle in which data generation, learning, and
confirmation reinforce each other and outperform its competitors who do not have such
capabilities.
The U.S. dominates the global AI-powered drug discovery market, due to the vast
investments in the R&D of AI tools and fast adoption of AI technology in the drug discovery
industry. The AI-powered drug discovery industry in other regions is less mature than in the
U.S. Specifically, the AI-powered drug discovery industry in the EU and the UK is developing
quickly, following their U.S. peers. Global leading pharmaceutical companies in the EU and
the UK are actively exploring the application of AI technology in their drug discovery, due to
their keen needs for innovative drug products and improved operational efficiency and reduced
costs. The AI-powered drug discovery market in the EU and the UK is expected to further grow,
as both of them have published favorable policies to encourage the development of AI
technology and the adoption of AI technology in the drug discovery industry. AI-powered drug
discovery in China is rapidly emerging, as the Chinese government has published a series of
polices encouraging the development of AI technology and the application of AI in the
pharmaceutical industry. Meanwhile, China’s booming innovative drug market also stimulates
the development and application of AI technology in the drug discovery industry in China.
Some regions are at the very beginning of using AI technology in drug discovery, such as India.
These regions typically focus on using AI technology in low-priced and labor-intensive CRO
services rather than innovative drug discovery, due to their technological inferiority and
low-cost labor.
According to Frost & Sullivan, we are one of the few drug and material science R&D
companies in the world with quantum physics-based first-principles calculation, AI
technologies and automated wet lab capabilities, and therefore a globally leading, quantum
physics-based, AI-powered, and robotics-driven drug and material science R&D company in
terms of technological advantages.
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The table below shows the comparison of the major AI drug discovery companies in terms
of technological capabilities:
Technological Capabilities of the Major 10 AI Drug Discovery Companies
Company Location Background AI Applications
Funding
Raised
(Million)(1)
Quantum
Physics
Capability
Automated
Lab
Capabilities
Wet
Lab
Capability
XtalPi China Our Company Drug and material science R&D,
solid-state R&D, automated lab US$732√√ √
Company A U.S. Target discovery, compound screening,
clinical trial design US$643×× ×
A U.S.-based, data-driven drug discovery and
development company that leverages machine
learning and high-throughput biology to transform
drug R&D
Company B U.S. Target modulation hypothesis, hit finding
and lead generation, lead optimization US$550×× ×A U.S.-based, Nasdaq listed clinical-stage precision
medicines company
Company C Canada Target discovery, compound screening,
compound synthesis US$517×× ×A Canada-based, Nasdaq listed antibody drug
discovery company
Company D U.S. Target discovery, compound screening US$465× √√
A U.S.-based, Nasdaq listed clinical-stage
biotechnology company, decoding biology by
integrating technological innovations across biology,
chemistry, automation, data science and engineering
Company E U.S. Target discovery, drug design US$460×× ×
A U.S.-based biotechnology company, harnessing
high-quality patient data and powerful AI
technology to transform drug R&D
Company F HK Target discovery, drug design US$401√√ √A Hong Kong-based, clinical stage, end-to-end
generative AI-driven biotechnology company
Company G UK Target discovery, compound screening US$374√√ ×
A UK-based, Nasdaq listed pharmatech
company, using patient-first AI to discover and
design better drugs more quickly
Company H U.S. Target discovery, drug redirection US$300 ×× ×A U.S.-based, Nasdaq listed clinical-stage
precision oncology company
Company I UK Target discovery, compound screening,
drug redirection US$292√ ××A UK-based, Amsterdam Stock Exchange listed
AI-powered novel drug discovery company
Source: Frost & Sullivan Report
Note:
(1) Represents pre-IPO funds raised as of December 31, 2023, which is calculated based on the rounded figures
in the public domain.
THE SOLID-STATE R&D SERVICE MARKET
Overview
Solid-state R&D is critical for the evaluation of the physical and chemical properties of
solid materials. For instance, properties such as bioavailability, solubility, dissolution rate, and
stability, are important for the success of a drug candidate, as they affect how well the drug will
be absorbed by the human body and stored under required conditions.
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It is necessary to have a comprehensive solid form screening to identify and characterize
the most optimal salt/co-crystal and polymorph to select the most
pharmacologically/physically viable crystal form, while protecting the drug from generic
competition. A thorough solid-state R&D effort can help maximize the success rate of viable
drug candidates and reduce the risk of excessive investments on less competent candidates.
Market Size
The global solid-state R&D service market consists of two segments: pharmaceuticals and
material science. The size of the global solid-state R&D service market increased at a CAGR
of 21.4% from US$1.3 billion in 2018 to US$2.9 billion in 2022, and is expected to further
increase at a CAGR of 27.7% from US$3.8 billion in 2023 to US$20.9 billion in 2030.
Global Solid-state R&D Service Market, 2018-2030E
2018
1.2 1.3 1.5 1.9 2.4 3.1 4.0 5.20.5
0.9
1.3
2.0
2.8
3.9
5.2
6.9
6.7 8.2 10.1 11.9
14.0
2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
0.2 0.2 0.3 0.3 0.61.3 1.5 1.8 2.3 2.9 3.8
4.9
6.5
8.7
11.1
14.0
17.1
20.9
Billion USD
Pharmaceuticals Material Science
CAGR Pharmaceuticals Material Science Total
2018-2022
2023E-2030E
20.2%
23.9%
28.7%
40.3%
21.4%
27.7%
Source: Frost & Sullivan Report
In 2022, the size of the solid-state R&D service market in China was approximately
US$0.6 billion, accounting for approximately 20.1% of the global solid-state R&D service
market; the size of the solid-state R&D service market in the U.S. was approximately US$1.3
billion, accounting for approximately 44.9% of the global solid-state R&D service market; and
the size of the solid-state R&D service market in the EU was approximately US$0.7 billion,
accounting for approximately 23.5% of the global solid-state R&D service market. With the
increasing use of solid-state R&D in more industries in China, the projected size of the
solid-state R&D service market in China is expected to increase at a CAGR of 32.1% from
approximately US$0.8 billion in 2023 to approximately US$5.9 billion in 2030.
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Global Solid-state R&D Service Market Breakdown by Region, 2022
RoW: 11.5%
U.S.: 44.9%
China: 20.1%
EU: 23.5%
US China EU RoW
Source: Frost & Sullivan Report
Application of New Technologies in Solid-state R&D Services
Traditional solid-state R&D methods are unable to effectively predict potentially correct
crystal structures that will form a specific molecule with past data and publication. They can
only screen and evaluate assays with a limited number of ligands, making it difficult to identify
optimal salt or co-crystal and polymorph forms. Traditional solid-state R&D methods are also
unable to determine a crystal structure accurately by manual analysis, and can only use
experimental analysis to perform solid-state testing and analysis, which is insufficient for
obtaining the detailed characteristics of a specific crystal form. Furthermore, traditional
solid-state R&D methods can only address issues in the crystallization process by the
“trial-and-error” method, requiring large amounts of time and cost.
Solid-state R&D involves five key aspects, which are (i) crystal structure prediction, (ii)
solid-state screening and evaluation, (iii) crystal structure determination, (iv) solid-state
testing and analysis and (v) crystallization process. Compared to traditional, experiment-only
methods, the new technology-powered approach, in particular, the AI- and automation-powered
approach, can establish a feedback loop between computational predictions and experimental
validations, thus offering much higher efficacy and precision within a shorter period of time.
The table below sets forth the advantages of the new technology-powered method over the
traditional manual method in solid-state R&D.
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Purpose Traditional Manual Method New Technology Method
• To predict the potential
correct crystal structures
that will form from a given
molecule based on first
principles
• Cannot be effectively
predicted by using past
data and publications
• To identify the optimal salt
/ co-crystal and polymorph
out of all possibilities
• Assay with only a limited
number of ligands
• To determine the 3D
structure of the single
crystal
• Cannot be accurately
determined with manual
analysis using X-ray powder
diffraction (“XRPD”)
• To test and analyze the
detailed characteristics of
a specific crystal form
• Experimental analysis, such as
X-ray diffraction analysis,
dynamic vapor sorption, and
hot stage microscopy
• Address issues by trial and
error
• To identify the optimal
crystallization conditions
and process to scale up
production
• Computational screening expands the
exploration of chemical space of novel
drugs and materials
• AI-powered tool evaluate viability only on
the most promising candidates
• 3D structure can be obtained with AI-
powered analysis on an XRPD spectrum
• High-throughput properties screening
driven by quantum physics-based
simulations and ML
• More thorough data analysis with AI-
powered tools
• Predict and solve potential scale up
issues based on the crystal’s chemical /
physical properties beforehand, reducing
the number of trials needed, and involve
auto lab to improve the experiment
efficienc
y
• AI-powered CSP platform has the capability
of computing all possible crystal forms
and determine the stabilities with accuracy
and efficiency at a faster speed
Crystallization
Process
Development
Solid-state Testing
and Analysis
Crystal Structure
Determination
Solid-state
Screening and
Evaluation
Crystal Structure
Prediction
Source: Frost & Sullivan Report
Entry Barriers of the Solid-state R&D Service Market
New entrants into the solid-state R&D service market face the following entry barriers:
 Technical barrier. The development of drugs and new materials is a challenging,
costly, and time-consuming process, particularly with regards to solid-state R&D.
This is due to the technical difficulties involved in utilizing advanced crystal
screening techniques to identify as many solid forms as possible while using
minimal materials and time. Additionally, a deep understanding of solid-state R&D
is necessary to accurately assess the market viability of crystal forms, by employing
various characterization methods and research approaches to select the most
advantageous forms for innovative pharmaceutical and new material enterprises.
Furthermore, developing crystallization processes and conducting feasibility
assessments of crystal forms in formulation development also involve techniques
that would be challenging for new entrants.
 Lack of technical expertise. The solid-state R&D service industry demands a high
level of technical expertise, which can only be accumulated from real-world work
experience over an extended period, hence the lack of experienced professionals in
the industry. Solid-state R&D companies continually engage in numerous
crystallization programs involving various compounds, enabling them to accumulate
invaluable expertise and experience. This facilitates the continual enhancement of
their technical proficiency in crystal form development, and the quality and
efficiency of their services.
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 Commercialization difficulties. The high risk and uncertainty in solid-state R&D
services can prevent investments in new entrants. In addition, solid-state R&D,
especially in regulated industries, such as the healthcare or energy industries, must
comply with stringent regulatory requirements. Compliance with safety, quality, and
environmental regulations can be complex and time-consuming, delaying the
commercialization process for those new entrants unfamiliar with the regulatory
framework.
Growth Drivers and Future Trends
The growth of the solid-state R&D service market is expected to be driven and influenced
by the following factors or trends:
 Technological advancements. The development of new technologies, such as
quantum physics and AI, has enabled faster and more cost-efficient solid-state R&D.
AI-enabled solid-state R&D can speedily and exhaustively predict crystal forms and
their characteristics, and provide critical insights for scientists to conduct
targeted lab work to identify the most meaningful crystal structures. Consequently,
AI-enabled solid-state R&D can increase the success rate, supports critical R&D
decision making, and significantly reduces the cycle of crystal structure research
from at least several months or years to a mere few months or weeks.
 Increased outsourcing. Solid-state R&D services come in the early stage of drug
R&D programs, including the profiling of crystallinity, stability, and solubility of
novel molecules, thereby providing a developability assessment to support candidate
nomination and ease the transition into pre-clinical development. Biotechnology and
pharmaceutical companies are increasingly outsourcing R&D activities to third-
party providers with the expertise and resources required for solid-state
characterization, formulation optimization, and other related services. This trend is
driven by the growing complexity of drug R&D and manufacturing, the need for
specialized knowledge, and the capabilities to bring complex drugs to market.
 Expansion of application field. Solid-state R&D services, including crystal form
screening and crystallization process development, play a vital role in many
industries that require precise control over the properties of crystalline materials, in
addition to the pharmaceutical industry. In the agrochemical industry, for example,
solid-state R&D can help to optimize the active ingredients in pesticides, herbicides,
and fertilizers. This can improve the efficacy, safety, and shelf life of these products.
Furthermore, solid-state R&D services can contribute to the development of new
materials with specific properties, such as high strength, durability or conductivity.
These materials have been applied in industries, such as electronics and
construction.
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Competitive Landscape
There are three types of companies providing solid-state R&D services, namely (i)
specialized solid-state CROs, (ii) large CROs, and (iii) AI-focused technology companies, like
us. Due to the complexity and the amount of advanced equipment required for solid-state
research, biotechnology and pharmaceutical companies often choose to outsource solid-state
R&D. The table below shows the comparison of the capabilities of major companies which
provide third-party solid-state R&D services.
Background
Company P
Company Q
Company R
Company S
Company T
Company U
Company V
Capability in
Crystallization Process
Development
No capability
Traditional
experimentation
Traditional
experimentation
Traditional
experimentation
Experimental screening and
characterization combined
with theoretical
calculations and analysis
Traditional
experimentation
Traditional
experimentation
High-precision
technologies combined
with automated
experimentation
Capability in Crystal
Form Screening
Traditional
experimentation
Traditional
experimentation
Traditional
experimentation
Traditional
experimentation
AI-powered algorithms
combined with traditional
experimentation
Traditional
experimentation
Traditional
experimentation
AI-powered algorithms
combined with traditional
experimentation
Company Type
Specialized solid-state
CRO
Large CRO
Large CRO
Large CRO
AI-focused technology
company
Specialized solid-state
CRO
Large CRO
AI-focused technology
company
Our Company
A Luxembourg-based,
Euronext Paris listed lab
testing service provider
A Canada-based
solid-state and
crystallization
engineering service
provider
A U.S.-based
biopharmaceutical
company focused on the
development of novel
therapeutics across
various medical
domains
A U.S.-based, New York
Stock Exchange listed
pharmaceutical company,
specializing in a variety of
preclinical and clinical lab,
gene therapy and cell
therapy services
A China-based, Shenzhen
Stock Exchange
listed pharmaceutical R&D
and manufacturing
service provider
A China-based, Shanghai
Stock Exchange-
and Hong Kong
Stock Exchange-listed
pharmaceutical R&D and
manufacturing
service provider
A China-based solid-state
research and formulation
CDMO service provider
XtalPi
Source: Frost & Sullivan Report
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THE AUTOMATED R&D LAB MARKET
Overview
Automated R&D solutions apply automation technology to enable accelerated, higher
throughput and more accurate wet lab processes, such as automated liquid handling, sample
preparation, synthesis, and crystallization in a wide array of industries, including
biopharmaceutical, chemical, and material industries. They can be used to analyze and
optimize a large scale of data running 24 hours per day while ensuring occupational safety,
enabling higher quality and efficiency in R&D.
Although automated reaction machinery is predominantly used in the pharmaceutical
industry currently, the use of automated machinery is expected to increase across a wide range
of other fields, including material science and agriculture. This cutting-edge technology has the
potential to revolutionize the R&D process, shortening the time required to synthesize new
molecules, and providing better reaction insights to optimize large-scale production. The
diagram below shows the addressable industries and the advantages of the application of
automation in such industries.
Small Molecule
Antibody
/g190In-depth investigations on the safety
and other physical / chemical
properties of new drugs
/g190Optimization of related
production processes
Pharmaceutical
Polymeric
Materials
Organic
Electronics
Semiconductors Energy Capture
and Storage
Complex
Formulations
Consumer
Package Goods
/g190Rapid discovery of novel
molecules at lower cost, with a
higher likelihood of success
/g190Optimization of production
processes by molecular modeling
and simulation
Material Science
/g190High throughput screening for
faster molecule selection
/g190Safety assurance and monitoring
of hazardous chemical reactions
Cosmetics
Veterinary
medicinePesticide
Fertilizers
Healthcare
products Agriculture
Others
Project
Areas
Advantage
……
…… ……
ADC
Peptide
PROTAC
Source: Frost & Sullivan Report
Market Size
Automated R&D labs can be used in three aspects of the R&D process, including (i)
synthesis, (ii) crystallization and (iii) process control, by providing screening, condition
control, quality assurance, in situ reaction analysis, real-time monitoring and data collection
services. They can improve efficiency and precision in the R&D processes across various
industries. The size of the global automated R&D lab market increased at a CAGR of 23.6%
from US$1.8 billion in 2018 to US$4.2 billion in 2022, and is expected to further increase at
a CAGR of 39.6% from US$5.9 billion in 2023 to US$60.7 billion in 2030.
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Global Automated R&D Lab Market, 2018-2030E
CAGR
2018-2022
2023E-2030E
Solutions
48.7%
51.8%
Systems
18.0%
30.4%
Total
23.6%
39.6%
2018 2030E2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E
Billion USD
1.8 2.1 2.4 3.2 4.2 5.9 8.9
13.2
18.7
25.7
35.0
46.3
60.7
Source: Frost & Sullivan Report
The pharmaceutical industry currently dominates the use of automated R&D labs and
accounted for the largest market share, approximately 86.4%, of the overall market in 2022.
The global market for automated R&D labs is expected to experience rapid growth from 2022
to 2030, as the demand for automated R&D labs increases in various industries other than
pharmaceutical, such as chemical and material science industries which manufacture
pesticides, veterinary drugs, fertilizers, and cosmetics, among others. Apart from the
pharmaceutical industry, other industries are expected to capture 44.5% of the global
automated R&D lab market in 2030.
In 2022, the size of the automated R&D lab market in China was approximately US$0.8
billion, accounting for approximately 18.4% of the global automated R&D lab market; the size
of the automated R&D lab market in the U.S. was approximately US$1.5 billion, accounting
for approximately 35.3% of the global automated R&D lab market; and the size of the
automated R&D lab market in the EU was approximately US$1.2 billion, accounting for
approximately 27.6% of the global automated R&D lab market. With the development of
automation technology in China, the projected size of the automated R&D lab market in China
is expected to increase at a CAGR of 39.6% from approximately US$1.2 billion in 2023 to
approximately US$17.4 billion in 2030.
Global Automated R&D Lab Market Breakdown by Region, 2022
RoW: 18.7%
U.S.: 35.3%
China: 18.4%
EU: 27.6%
US China EU RoW
Source: Frost & Sullivan Report
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Application of Automation in R&D
In traditional manual methods, 95% of the experimental operations rely heavily on
manual testing, resulting in numerous drawbacks, such as increased labor costs, inadequate
productivity, the risk of worker infections, among others. Automation is expected to be the
prevailing trend in industrial upgrade and reform. The table below illustrates the pain points
of traditional compound synthesis and research:
• Traditional
method conduct
experiments
manually
•M a n u a l l y
conduction
leads to high
risk of cross -
contamination,
chemical
leakage, and
sample
contamination.
Rising Labor Cost
• Traditional manual method relies on human resources
• The aging population leads to an increase in labor costs
• The complex experimental process results in a lengthy
training period for qualification
• Traditional manual method conduct experiments manually
• Manually conduction leads to high risk of cross-
contamination, chemical leakage, and sample
contamination
Safety Hazards
• Human beings are unable to conduct experiments
continuously 24/7
• The testing process is complex and time-consuming,
manual labor cannot effectively handle substantial
number of samples
• Long time repeated operations lead to lower efficiency
and accuracy
Inadequate Productivity
Unreliable Results
• Human error present in manual operations leads to
lower accuracy and inconsistent results
• The experimental data obtained from manual
operations lacks traceability
/g190Automation is expected to be the prevailing trend within the context of industrial upgrading and reform
Source: Frost & Sullivan Report
With a confluence of technological breakthroughs and increasing integration and
compatibility of technologies, automation has been widely employed across various industries,
including pharmaceuticals and material science, among others, to achieve a more efficient,
predictable, and high-throughput R&D process. Automation in R&D is applied in a wide array
of areas, including, among others, drug and material science discovery, chemical synthesis,
quality control, equipment and material handling, and data collection.
Advanced automation technologies can be used in the identification of new therapeutic
compounds, optimization of chemical properties, and high-throughput material screening, to
streamline and accelerate the drug and new materials discovery process. By integrating robotic
platforms, advanced instrumentation, and smart software, automation technologies can also be
used to perform chemical reactions and synthesize compounds to streamline and enhance the
efficiency of such process. Moreover, automation technologies can be used to capture and
analyze real-time experimental data from various sources and platforms, and accelerate the
analysis process by linking to shared analytical systems and combining with advanced
analytics and ML. In addition, automation technologies can be applied to continuously monitor
and assess safety parameters and potential risks in various lab environments and be employed
in sensor-based monitoring, warning and alert systems, environmental conditions, and
equipment and process monitoring.
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Entry Barriers
New entrants into the automated R&D lab market face the following entry barriers:
 High investment. Establishing an automated R&D lab requires significant
investment in infrastructure, equipment, and technology. This will require
substantial upfront costs for acquiring advanced robotic systems, lab automation
software, and analytical instruments, and future maintenance and upgrade costs,
making it challenging for new entrants with limited financial resources to enter the
market.
 Lack of technical expertise. The automated R&D lab market relies on sophisticated
technologies, such as robotics, AI, and data analytics. New entrants need to possess
the necessary technical knowledge and expertise to design, develop and maintain
these systems, where a large portion of the healthcare companies face difficulties in
hiring competent R&D staff due to the shortage of relevant talents in the market.
 Competition with current market players. In the automated R&D lab market, there
are already a number of established market players with well-known brands,
extensive service offerings, and a strong market presence, creating a huge hurdle for
new entrants to gain market share and compete with the established players.
Pioneers have already automated their “wet labs” to improve R&D efficiency and
prepare for large-scale production.
 Compatibility challenges with existing lab infrastructure. The process of
integrating automated R&D lab with existing lab workflows, information systems,
and data management platforms is complex. Costly and time-consuming training is
required for lab staff who are unfamiliar with automation to use automated
solutions. Compatibility issues, data transfer challenges, staff training, and the need
for seamless integration will create obstacles for new entrants to establish smooth
operations in an existing lab environment.
Growth Drivers and Future Trends
The growth of the automated R&D lab market is expected to be driven and influenced by
the following factors or trends:
 Industrial upgrade. Automation is the key to industrial upgrade and reform.
Automated R&D lab offers significant advantages over traditional non-automated
R&D labs, such as increased productivity, improved accuracy, scalability, and
standardization, and lower costs, among others. These benefits help revolutionize
lab workflows, enable researchers to optimize their operations and generate reliable
data, and accelerate the pace of scientific discovery and innovation.
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 Technological advancements. Technological advancements are one of the driving
forces behind the rapid growth of lab automation. The continuous evolution of
technologies, such as robotics, AI/ML, and cloud computing has revolutionized lab
process. R&D automation lab equipped with robotics enable precise and efficient
handling of experiments; AI and ML algorithms analyze complex datasets, providing
valuable insights and supporting data-driven decision-making; and cloud computing
empowers labs to interpret large volumes of data effectively. These technological
advancements can optimize lab workflows, and enable scalability, increase
efficiency and improve accuracy in laboratories.
 Integration of technologies. The integration of different technologies in the
automated R&D lab is revolutionizing the way labs operate and improving
efficiency, accuracy and productivity. Major market players offer a comprehensive
and sophisticated solution for lab automation. The integration of AI, robotics,
quantum physics-based first-principles calculation, and cloud computing can enable
researchers to optimize workflows, accelerate R&D processes, and produce
exceeding outputs.
 Emphasis on data security. As the reliance on data for automated R&D lab
increases, there is a growing focus on data security, privacy protection, and
regulatory compliance. Market players are implementing comprehensive data
management practices, encryption technologies, and compliance frameworks to
ensure data integrity and meet regulatory requirements.
Competitive Landscape
The global automated R&D lab market features several prominent players, all of whom
offer specialized solutions and cutting-edge technologies. Solutions coverage, advanced
AI/ML, intelligent data processing, and customization are the four primary indicators of the
capability of an automated R&D wet lab. A broad and diversified solutions coverage can better
address the various and evolving needs of customers, improving the possibility of cooperation
or collaboration. Advanced AI/ML can improve the intelligence of automation, helping
automated R&D lab to handle complex processes. Intelligent data processing can accelerate the
process of and improve the quality of data processing, enlarging the scale of and improving the
accuracy of data analysis. Customization can improve the flexibility of an automated R&D lab,
allowing labs to provide tailor-made wet lab R&D according to customers’ specifications and
unique parameters.
Most players in the automated R&D lab market provide a limited number of solution
types, such as automated synthesis or automated liquid handling, while we, among the several
prominent players, provide comprehensive automated R&D lab solutions, enabling us to
operate in diversified areas and serve different types of customers. We are renowned for our
robust AI-powered automated solutions to analyze extensive datasets and monitor real-time
experiment progress via digital LIMS systems. Other major market players can provide various
diversified automation solutions, but have limited AI capabilities. As the industry continues to
evolve, innovation, seamless integration of AI technologies, and customization will affect
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industry competition and market dynamics. Major companies in the automated R&D lab market
primarily offer automated equipment and/or high-throughput screening services but most of
them are still using traditional automated robotic systems due to the lack of AI capabilities.
Companies that are using traditional automated robotic systems have no or limited capabilities
for intelligent data processing, thus companies with AI-powered real-time experimental
progress monitoring and data processing capabilities, advanced AI-powered automated systems
and digital LIMS, like us, are expected to outperform traditional automated R&D lab.
According to Frost & Sullivan, we are one of the few market players that possess
simultaneously diverse solution types, AI and ML capability, robust intelligent data processing
capability, and strong customization capability, enabling our automated R&D lab to provide
high quality, accurate, diverse and intelligent solutions and services.
The table below shows the comparison of the capabilities of major companies in the
automated R&D lab market:
Company L Company M Company O
Main
Solution Type
Automated
crystallization,
intelligent
synthesis
workstations,
and benchtop
solid dispenser
Automated
synthesis
workstations,
and benchtop
solid dispenser
Lab automation
solutions, such as
liquid handling
equipment, and
high-throughput
screening
Automated
liquid handling
equipment
Advanced AI
and ML
Capabilities
Advanced
AI-driven
automation
systems
Traditional
automated
robotic systems
Traditional
automated
robotic systems
Traditional
automated
robotic systems
Intelligent Data
Processing
Capabilities
Customization
Capabilities
AI-empowered
real-time
experiment
progress
monitoring and
data processing;
digital LIMS
systems
Limited
capability with
external
software,
AUTOSUITE
Limited
capability with
external
software
No capability
Strong
customization
capabilities
tailored for drug
R&D
workflows
Strong
customization
capabilities to
meet specific
industry needs
Standardized
automation
solutions with
limited
customization
capabilities
Limited
customization
capabilities in
product size and
style
A U.S.-based leading
manufacturer, specializing
in the development,
manufacturing and
customization of precision
measurement devices,
automated liquid handling
workstations, and sample
management systems
A U.S.-based, New York
Stock Exchange listed
biotechnology company,
providing analytical
instruments, life sciences
solutions, specialty
diagnostics, laboratory,
pharmaceutical and
biotechnology services
A Switzerland-based
provider of leading
lab automation and
digitalization technology
for high-throughput and
high-output experimentation
in R&D and quality control
Our CompanyBackground
Source: Frost & Sullivan Report
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THE MATERIAL SCIENCE R&D MARKET
Overview
Material science is a multidisciplinary field that explores the properties, structure,
performance, and processing of materials. Material science R&D aims to discover novel
materials with enhanced and tailored properties, such as strength, conductivity, and flexibility.
The development of new materials drives innovation in both research and technology in crucial
areas, such as cosmetics, consumer packaged goods, petroleum, sustainable energy,
microelectronics, and mobile electronics.
Market Size
Driven by the increasing demand for novel materials with enhanced properties and
performance, global material science R&D expenditure increased at a CAGR of 13.5% from
US$40.0 billion in 2018 to US$66.4 billion in 2022, and is expected to further increase at a
CAGR of 12.8% from US$76.3 billion in 2023 to US$177.9 billion in 2030. Material science
R&D expenditure in China increased at a CAGR of 19.3% from US$7.3 billion in 2018 to
US$14.8 billion in 2022, and is expected to further increase at a CAGR of 18.5% from US$17.8
billion in 2023 to US$58.5 billion in 2030.
Global and China Material Science R&D Expenditure, 2018-2030E
Rest of the world
40.0
7.3
44.8
8.6
50.2
10.1
57.7
12.2
66.4
14.8
76.3
17.8
87.8
21.5
100.9
26.0
113.0
30.6
126.6
36.0
141.8
42.3
158.8
49.7
177.9
58.5
2030E
CAGR Global China
2018-2022 13.5% 19.3%
2023E-2030E 12.8% 18.5%
Billion USD
2018 2019 2020 2021 2022 2023E 2024E 2025E 2027E 2028E 2029E2026E
China
Source: Frost & Sullivan Report
Application of New Technologies in Material Science R&D
The traditional material science R&D process is a systematic approach covering scientific
exploration, experimentation, assessment, and manufacturing. Currently, most material science
R&D programs follow this established process, requiring a lengthy period before a concept
attains market viability. Empowered by the advancements in cutting-edge technologies and the
increasing adoption of big data analytics, computational material science and engineering has
emerged as a prominent subfield in material science R&D, which is expected to revolutionize
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the discovery of new materials, reduce R&D time and costs, and accelerate the application of
new materials into commercial products. The table below shows a comparison between
traditional material science R&D methods and new technology-enabled methods of material
science R&D.
Traditional Manual Method New Technology-empowered Method
Idea &
Conceptualization
Limited labor force limits the
exploration of material space: the
vastness of search space for potential
materials makes it impossible for
scientists to enumerate all the
possibilities.
Computational screening expands the
exploration of material space:
predictive computational capabilities
can fully explore the vast search space
for potential materials, levering new
technologies, such as AI, ML, and
open-source algorithms.
Characterization
Material Synthesis
The “trial-and-error” process is
inherently slow: in traditional manual
method, the characterization and
synthesis of each individual material
may take months to years. As the
synthesized materials may fail to
present desired properties, it has to go
through the “trial-and-error” process to
optimize the material design;
Manual material synthesis experiments
cause human errors: in the procedure of
material synthesis, manual, serial and
human-intensive work can result in
errors, such as measurement errors,
procedural errors, contamination,
sample mishandling, and lack of
quality control.
Autonomous data collection and
analysis enhances the accuracy of
prediction: autonomous data collection
can construct libraries with
comprehensive properties of materials,
which can be used as training set to
further improve the accuracy of
predictive models;
Automated synthesis, facilitated by AI,
robotics, and information technology,
releases researchers from repetitive and
lengthy experiments: researchers can
simply input target molecules or
materials, and computers will
automatically make decisions while
controlling robots to carry out
experiments. The synthesis process is
monitored, and conditions or routes are
automatically optimized based on the
feedback from analytical instruments.
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Traditional Manual Method New Technology-empowered Method
Testing & Validation
T
Advanced testing and property
validation techniques are required for
complex and multi-material
compounds: experimental observations
have been the primary and the most
fundamental means to validate various
chemical and physical properties of
materials. This process is time-
consuming and lengthy and hard to
manage for complex and multi-material
synthetic product.
High-throughput material properties
screening and validations accelerate the
process: the high-throughput atomistic
calculation frameworks driven by
quantum physics and AI are able to
help researchers accurately computing
the electronic-scale properties of a
crystalline solid using first-principles.
Material structures and properties are
predicted and validated on the basis of
electronic bonding and quantum
physics-based computations with the
usage of empirical and experimental
data.
Life Cycle ASMT
Pilot of Scaling
Product
Assessment process is lengthy and
inefficient: lab experiments and
observations, literature review and
existing knowledge, and simplified
mathematical models are utilized to
conduct assessments for new materials
in the traditional manual method. The
scale, complexity and precision on
conducted assessments are extremely
limited.
Process optimization, sensitivity
analysis and scenario testing optimize
the assessment process: computational
modeling and simulation techniques
enable the evaluation of different
manufacturing processes and can
identify key areas of improvements on
energy efficiency and resource
consumption. By conducting scenario
testing, researchers can assess the
environmental impacts associated with
each stage of the material’s life cycle.
Source: Frost & Sullivan Report
Growth Drivers and Future Trends
The growth of the material science R&D market is expected to be driven and influenced
by the following factors or trends:
 Advanced materials for sustainable applications . Increasing emphasis on
sustainability is driving the development of advanced materials with reduced
environmental impact, such as bio-based materials. Consequently, the current
material science R&D is likely to shift its emphasis from petroleum-based materials
to bio-based materials.
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 Data-driven approaches and AI-driven methods. Material science R&D is
inherently time-consuming, as it relies on the traditional “trial-and-error” method of
experimentation to implement R&D activities. The use of data analytics and ML
techniques will accelerate the process of discovery, optimization, and
characterization of materials.
 Collaboration and interdisciplinary R&D. Collaboration and interdisciplinary R&D
as well as academia-industry partnerships will drive innovation in material science
R&D by exchanging knowledge, ideas, and methodologies across disciplines,
fostering a comprehensive understanding of materials, and enabling the
development of novel functionalities.
Competitive Landscape
The material science R&D market is competitive, encompassing established industry
leaders and new entrants like technology-driven companies. These emerging players harness
the power of advanced computational capabilities and offer AI-powered platforms, software
solutions, and automation systems to serve the end users in various industries, such as
manufacturing, biotechnology and pharmaceutical, infrastructure, agriculture, and cosmetics,
which are able to accelerate the material science R&D process. The table below shows the
comparison of the capabilities and areas of applications of major companies which leverage AI
technology to provide material science R&D services.
Main Product TypeBackground
Advanced AI and
ML Capabilities Areas of Applications
Company J
Company W
Company X
Company Y
Founded in 1990 with the
intent to develop a highly
advanced, physics-based
computational platform.
The physics-based
software platform
enables its customers to
discover higher quality
novel molecules in drug
and material science
R&D with greater
efficiency than
traditional approaches
Quantum physics-based,
AI-powered software
solutions
Advanced AI algorithms
that utilize deep learning
techniques
Virtual screening, property
prediction, and chemical
simulation
Virtual screening,
property prediction,
modeling and simulation,
and compound synthesis
Advanced AI algorithms
that utilize deep learning
techniques
Quantum physics-based,
AI-powered software
solutions, and automated
lab services
Our Company
A U.S.-based
manufacturer and provider
of precision measurement
devices and
automation solutions
A U.S.-based, New York
Stock Exchange listed
manufacturer and supplier
of lab automation
equipment and services
A Switzerland-based
lab automation and
digitalization technology
company
XtalPi
Property prediction,
molecular modeling and
simulation, and quality
assurance
ML-driven scientific
informatics
Integrated platform
solutions
Compound modeling,
structure design, and
molecular simulation
ML-driven modeling
techniques
Cloud-native digital
platform solutions
Virtual screening,
formulation development,
and capability mapping
Domain-specific AI
algorithms and smart data
management
SaaS platform solutions
Source: Frost & Sullivan Report
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REPORT COMMISSIONED BY FROST & SULLIV AN
In connection with the Global Offering, we have engaged Frost & Sullivan to conduct a
detailed analysis and to prepare an industry report on our markets. Frost & Sullivan is an
independent global market research and consulting company founded in 1961 and is based in
the U.S. Services provided by Frost & Sullivan include market assessments, competitive
benchmarking, and strategic and market planning for a variety of industries.
We have included certain information from the Frost & Sullivan Report in this prospectus
because we believe such information facilitates an understanding of our markets for potential
investors. Frost & Sullivan prepared its report based on its in-house database, independent
third-party reports, and publicly available data from reputable industry organizations. Where
necessary, Frost & Sullivan contacts companies operating in the industry to gather and
synthesize information in relation to the market, prices and other relevant information. Frost
& Sullivan believes that the basic assumptions used in preparing the Frost & Sullivan Report,
including those used to make future projections, are factual, correct and not misleading.
Frost & Sullivan has independently analyzed the information, but the accuracy of the
conclusions of its review largely relies on the accuracy of the information collected. Frost &
Sullivan research may be affected by the accuracy of these assumptions and the choice of these
primary and secondary sources.
We have agreed to pay Frost & Sullivan a fee of RMB380,000 for the preparation of the
Frost & Sullivan Report. The payment of such amount was not contingent upon our successful
listing or on the content of the Frost & Sullivan Report. Except for the Frost & Sullivan Report,
we did not commission any other industry report in connection with the Global Offering.
Our Directors, after making reasonable enquiries, confirm that there have been no adverse
change in the market information since the date of the Frost & Sullivan Report which may
qualify, contradict or have an impact on the information in this section.
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This section sets forth a summary of the principal laws, rules and regulations in the PRC
and the United States that are relevant to our business.
PRC REGULATIONS ON COMPANY ESTABLISHMENT AND FOREIGN
INVESTMENT
The establishment, operation and management of corporate entities in China are governed
by the Company Law of the PRC (), or the PRC Company Law,
which was promulgated by the Standing Committee of the National People’s Congress, or the
NPC, in December 1993 and further amended in December 1999, August 2004, October 2005,
December 2013 and October 2018, respectively. According to the PRC Company Law,
companies are generally classified into two categories: limited liability companies and
companies limited by shares. The PRC Company Law also applies to foreign-invested limited
liability companies. According to the PRC Company Law, where laws on foreign investment
have other stipulations, such stipulations shall prevail.
Investment activities in the PRC by foreign investors are governed by the Provisions on
Guiding Foreign Investment Direction (), which was promulgated
by the State Council in February 2002 and came into effect in April 2002, the Special
Administrative Measures for the Access of Foreign Investment (Negative List) (2021 V ersion)
(݄(૶ఊ)(2021و)), or the Negative List, which was
promulgated by the Ministry of Commerce of the PRC, or the MOFCOM, and the National
Development and Reform Commission, or the NDRC, in December 2021 and came into effect
in January 2022, and the Catalogue of Encouraged Industries for Foreign Investment (2022
version) ( ོᎸ̮ਠҳ༟ପุͦ፽(2022و)), or the Encouraged Catalogue, which was
promulgated by the MOFCOM and the NDRC in October 2022 and came into effect in January
2023. The Provisions on Guiding Foreign Investment Direction divides foreign investment
projects into four categories, namely “encouraged,” “permitted,” “restricted” and “prohibited”
categories. The Encouraged Catalogue lists the foreign investment projects of the encouraged
category, while the Negative List lists the foreign investment projects of the restricted and
prohibited categories, and foreign investment projects which fall outside the encouraged,
restricted and prohibited categories belong to the permitted category unless otherwise
restricted by other PRC laws. The Negative List sets out the restrictive measures in a unified
manner, such as the requirements on shareholding percentages and management, for the access
of foreign investments, and the industries that are prohibited from receiving foreign
investment. The Negative List covers 12 industries, and any field not falling under the
Negative List shall be administered under the principle of equal treatment to domestic and
foreign investment.
Foreign Investment Law of the PRC (), or the Foreign
Investment Law, was promulgated by the NPC in March 2019 and came into effect in January
2020. When the Foreign Investment Law came into effect, the Law on Wholly Foreign-Invested
Enterprises of the PRC (), the Law on Sino-Foreign Equity
Joint V entures of the PRC () and the Law on
Sino-Foreign Cooperative Joint V entures of the PRC ( ʕശɛ͏΍ձ਷ʕ̮ΥЪ຾ᐄΆุ
REGULATORY OVERVIEW
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) were repealed simultaneously. The investment activities of foreign natural persons,
enterprises or other organizations (collectively, the “foreign investors”) directly or indirectly
within the territory of China shall comply with and be governed by the Foreign Investment
Law. Such activities include: (1) establishing by foreign investors of foreign-invested
enterprises in China alone or jointly with other investors; (2) acquiring by foreign investors of
shares, equity, property shares, or other similar interests of Chinese domestic enterprises; (3)
investing by foreign investors in new projects in China alone or jointly with other investors;
and (4) other forms of investment prescribed by laws, administrative regulations or the State
Council.
In December 2019, the State Council promulgated the Regulations on Implementing the
Foreign Investment Law of the PRC (ૢԷ), which came
into effect in January 2020. When the Regulations on Implementing the Foreign Investment
Law of the PRC came into effect, the Regulations on Implementing the Sino-Foreign Equity
Joint V enture Enterprise Law of the PRC (ૢԷ),
Provisional Regulations on the Duration of Sino-Foreign Equity Joint V enture Enterprise ( ʕ
), the Regulations on Implementing the Wholly Foreign-
Invested Enterprise Law of the PRC () and the
Regulations on Implementing the Sino-Foreign Cooperative Joint V enture Enterprise Law of
the PRC () were repealed simultaneously.
In December 2019, the MOFCOM and the State Administration for Market Regulation, or
the SAMR promulgated the Measures on Reporting of Foreign Investment Information ( ̮
), which came into effect in January 2020. When the Measures on
Reporting of Foreign Investment Information came into effect, the Interim Measures for the
Administration of Filing for Establishment and Changes in Foreign Investment Enterprises
() were repealed simultaneously. Since
January 1, 2020, for foreign investors carrying out investment activities directly or indirectly
in China, the foreign investors or foreign-invested enterprises shall submit investment
information to the relevant commerce administrative authorities according to the Measures on
Reporting of Foreign Investment Information.
In December 2020, the NDRC and the MOFCOM promulgated the Measures on the
Security Review of Foreign Investment (), which came into effect
in January 2021, setting forth provisions concerning the security review mechanism on foreign
investment, including the types of investments subject to review, the scopes of review and the
procedures to review, among others.
Regulations on Artificial Intelligence Industry
The Notice of the State Council on Promulgating the “Made in China 2025” Plan ( ਷ਕ
Ι೯ʕ਷Ⴁி2025ٝwas promulgated by the State Council on May 8, 2015
and came into effect on the same date, which emphasizes that the promotion of the integrated
development of the new generation of information technology and manufacturing technology
shall be accelerated and the intelligent manufacturing shall be regarded as the main direction
REGULATORY OVERVIEW
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--- page 236 ---
of the comprehensive integration of informatization and industrialization. Meanwhile, it also
implies that efforts should be made to develop intelligent equipment and intelligent products,
promote intelligent production process, cultivate new production methods, and
comprehensively enhance the intelligent level of the research and development, production,
management and service of the enterprises.
The Three-Y ear Guidance for Internet Plus Artificial Intelligence Plan ( “ʝᑌၣ+”ɛʈ
) was promulgated by the NDRC, the MOST, the Ministry of Industry
and Information Technology and the CAC on May 18, 2016 and came into effect on the same
date, which encourages the cultivation and development of the AI industry.
The Development Plan of the New Generation of Artificial Intelligence ( อɓ˾ɛʈ౽
஝ྌ) was promulgated by the State Council on July 8, 2017 and came into effect on
the same date, emphasizing that the cultivation of an artificial intelligence industry with a
major leading role shall be accelerated, the in-depth integration of artificial intelligence and
various industrial fields shall be promoted, and therefore a data-driven, human-machine
collaboration, cross-border integration, and co-creation and sharing of intelligent economic
forms will be established. Meanwhile, more convenient and efficient intelligent services are
also encouraged to be developed, including AI-based drug R&D, among others.
The Guidelines for the Construction of the New Generation of National Artificial
Intelligence Open Innovation Platform (ˏ)
was promulgated by the Ministry of Science and Technology of the PRC, or the MOST, on
August 1, 2019 and came into effect on the same date, which points out that “open and sharing”
shall be the important guideline in promoting artificial intelligence innovation and industry
development in China, and encourages the enterprises to open innovation platforms for
companies to do testing, in order to form standard and modularized models, middleware and
applications for providing services to the public in the form of open interfaces, model libraries,
algorithm packages, etc.
The Guidelines for the Construction of the New Generation of National Artificial
Intelligence Innovation and Development Pilot Zone (༊᜕ਜ
ˏ) was promulgated by the MOST on August 29, 2019, last amended on
September 29, 2020 and came into effect on the same date, which underlines that an
environment conducive to the innovation and development of artificial intelligence shall be
created, as well as to promote the construction of artificial intelligence infrastructure and
strengthen the conditional support for the innovation and development of artificial intelligence.
The Outline of the 14th Five-Y ear Plan for National Economic and Social Development
of the People’s Republic of China and Outlines of Objectives in Perspective of the Y ear 2035
(ʞϋ஝ྌձ2035) was
promulgated by the NPC on March 11, 2021 and came into effect on the same date, which
underlines that efforts shall be made to develop various key fields, including AI and life
science, among others.
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The Intelligent Manufacturing Development Plan in the “14th Five-Y ear Plan” Period
(“ɤ̬ʞ”஝ྌ) was promulgated by the Ministry of Industry and
Information Technology, the NDRC, the MOST, the Ministry of Education, the MOF, the
Ministry of Human Resource and Social Security, the SAMR and the State-Owned Assets
Supervision and Administration Commission of the State Council on December 21, 2021 and
came into effect on the same date, which encourages the R&D of AI. Meanwhile, it also
emphasizes that the innovation and application of AI and other new technologies shall be
promoted.
The Development Plan for National High-Tech Industrial Development Zones in the
“14th Five-Y ear Plan” Period ( “ɤ̬ʞ”ྌ) was
promulgated by the MOST on September 21, 2022 and came into effect on the same date,
which encourages the cultivation of the AI industry and other emerging digital industries.
REGULATIONS ON PHARMACEUTICAL PRODUCT RESEARCH, DEVELOPMENT,
APPROV AL AND REGISTRATION
PRC
Drug Regulatory Regime
The Drug Administration Law of the PRC (), or the Drug
Administration Law, was promulgated by the Standing Committee of the NPC, in September
1984, and amended in February 2001, December 2013, April 2015 and August 2019,
respectively. The Regulations for the Implementation of the Drug Administration Law of the
PRC (ૢԷ  ), or the Regulations for the Implementation
of the Drug Administration Law, was promulgated by the State Council in August 2002, and
amended in February 2016 and March 2019, respectively. The Drug Administration Law and
the Regulations for the Implementation of the Drug Administration Law have jointly
established the legal framework for the administration of pharmaceutical products in China,
including the research, development and manufacturing of new drugs. The Drug
Administration Law applies to entities and individuals engaged in the development,
production, trade, application, supervision and administration of pharmaceutical products. It
regulates and provides for a framework for the administration of pharmaceutical
manufacturers, pharmaceutical trading companies and medicinal preparations of medical
institutions, and the development, research, manufacturing, distribution, packaging, pricing
and advertisements of pharmaceutical products. The Regulations for the Implementation of the
Drug Administration Law, at the same time, provide the detailed implementation regulations
for the Drug Administration Law.
In 2017, the drug regulatory system entered a new and significant period of reform. The
General Office of the State Council and the General Office of the General Committee of China
Communist Party jointly issued Opinions on Deepening the Reform of the Evaluation and
Approval Systems and Encouraging Innovation on Drugs and Medical Devices (ଉʷᄲ
จԈ), or the Innovation Opinions, in October
2017. The expedited programs, the record-filing system, the prioritized review mechanism, the
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acceptance of foreign clinical data under the Innovation Opinions and other recent reforms
encourage drug manufacturers to seek marketing approval in China first for the development
of drugs in highly prioritized therapeutic areas, such as severe and life-threatening diseases that
cannot be treated in an effective manner and those badly needed for public health or rare
diseases.
To implement the regulatory reform introduced by Innovation Opinions, according to the
Decision of the First Session of the Thirteenth NPC on the State Council Institutional
Reform Proposal (Ӕ
) promulgated in March 2018, the National Medical Products Administration, or the
NMPA was formed to assume the responsibilities of China Food and Drug Administration
relating to administration of drugs and medical devices, or the CFDA, as well as other
authorities. The NMPA is currently responsible for promulgating and supervising the
enforcement of the rules and standards governing the pharmaceutical products.
In August 2019, the Standing Committee of the NPC promulgated the new Drug
Administration Law, or the 2019 Amendment, which came into effect in December 2019. The
2019 Amendment contains many of the major reform initiatives implemented by the Chinese
government since 2015, including but not limited to the Marketing Authorization Holder
system, or the MAH system, conditional approvals of drugs, traceability system of drugs, and
the cancellation of relevant certification according to the Good Manufacturing Practice, or the
GMP , and the Good Supply Practice, or the GSP .
Regulatory Authorities
Pharmaceutical products in China are monitored and supervised on a national scale by the
NMPA. The local provincial medical products administrative authorities are responsible for
supervision and administration of drugs within their respective administrative regions. The
NMPA was formed under the SAMR in 2018. The NMPA ’s predecessor, the State Drug
Administration, or the SDA, was replaced by the State Food and Drug Administration, or the
SFDA, which was later reorganized into the CFDA, as part of the institutional reforms
implemented by the State Council.
The primary responsibilities of the NMPA include:
 supervision of the administration of pharmaceutical products, medical devices as
well as cosmetics in the PRC;
 formulation of administrative rules, policies and standards concerning the
supervision and administration of pharmaceutical, medical devices, and cosmetics
industry;
 registration and administration of drugs, medical devices, and cosmetics,
establishing the system for relevant registration and administration and performing
stringent review and approval for marketing;
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 administration of quality of drugs, medical devices, and cosmetics, formulating and
supervising the implementation of regulations on quality management, formulation
of the regulations on quality management of production and supervision of the
relevant implementation within its authority;
 risk management of drugs, medical devices, and cosmetics that have been launched
to the market, organization of inspection, test, evaluation and handling of cases in
relation to adverse reaction or events arising from drugs, medical devices, and
cosmetics;
 guiding the supervising and inspecting work on drugs, medical devices, and
cosmetics;
 guiding work of authorities responsible for supervision and administration of drugs
in provinces, autonomous regions and municipalities directly under the central
government.
In 2013, the Ministry of Health and the National Population and Family Planning
Commission were integrated into the National Health and Family Planning Commission of the
PRC, or the NHFPC. In March 2018, according to Decision of the First Session of the
Thirteenth NPC on the State Council Institutional Reform Proposal (ڌ
), NHFPC and certain other governmental
authorities were consolidated into the National Health Commission, or the NHC. The
responsibilities of the NHC include coordinating the formulation of national drug policies, the
national essential medicine system and the National Essential Medicines List and drafting the
administrative rules for the procurement, distribution and use of national essential medicines.
According to the Decision of the CFDA on Adjusting the Approval Procedures under the
Administrative Approval Items for Certain Drugs (ሜ዆௅ʱ
), which was promulgated by the CFDA in March 2017
and came into effect in May 2017, the approval for clinical trials of drugs and supplementary
drug applications (both including domestic and imported drugs) and renewal of the approval
for imported drugs should be issued by the Center for Drug Evaluation, or the CDE, on behalf
of the CFDA and now the NMPA.
Non-Clinical Research
The institutions for non-clinical safety evaluation and study shall implement the Good
Laboratory Practice for Non-Clinical Laboratory Studies (Ӻሯඎ၍ଣ஝ᇍ),
or the GLP . The GLP contains a set of rules and criteria for the quality system concerned with
the organizational process and conditions under which non-clinical laboratory studies are
planned, performed, monitored, recorded, achieved and reported. Other pre-clinical related
research activities for the purpose of drug registration shall be carried out with reference to the
GLP .
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Administrative Measures for Drug Registration
The Administrative Measures for Drug Registration (), or the
Registration Measures, was promulgated by the SFDA in October 2002 and was last amended
in January 2020, which became effective in July 2020. According to the Registration Measures,
drug registration refers to the activities including, an applicant for drug registration submitting
an application or where applicable, a supplementary application, for approval of drug clinical
trial, marketing authorization and re-registration of drugs upon expiration of the initial
registration period, and the drug supervisory and administrative authority examining the safety,
efficacy and quality control based on the applicable laws and regulations, as well as the
existing scientific cognitions, to decide whether to approve the application. Drug registration
is classified into different categories based on the types of drugs, namely, traditional Chinese
drug, chemical drugs and biological products.
The Registration Measures amended in 2020 provide detailed procedural and substantive
requirements for the key regulatory concepts established by the Drug Administration Law, and
confirms a number of reform actions that have been taken in the past years, including but not
limited to: (i) the full implementation of the MAH system and implied approval of the
commencement of clinical trial; (ii) the implementation of associated review of chemical raw
material medicines, auxiliary materials, and packaging materials and containers in direct
contact with drugs; and (iii) the introduction of four procedures for expedited registration of
drugs, which are procedures for ground-breaking therapeutic drugs, procedures for conditional
approval, procedures for prioritized reviews and approval, and procedures for special
examination and approval. Detailed implementation rules for drug classification and
requirements for corresponding application materials will be promulgated by the NMPA.
In March 2016, the CFDA issued the Reform Plan for Registration Category of Chemical
Medicine (), which outlined the reclassifications of drug
applications under the Registration Measures promulgated in 2007. According to the Reform
Plan for Registration Category of Chemical Medicine, Category 1 drugs refer to innovative
chemical drugs that have not been marketed anywhere in the world. Improved new chemical
drugs that are not marketed anywhere in the world fall into Category 2 drugs. Generic chemical
drugs, that have equivalent quality and efficacy to the originator’s drugs and have been
marketed abroad but not yet in China, can be classified as Category 3 drugs. Generic drugs, that
have equivalent quality and efficacy to the originator’s drugs and have been marketed in China,
fall into Category 4 drugs. Category 5 drugs are drugs which have already been marketed
abroad, but are not yet approved in China.
As a support policy and implementing rule of the Registration Measures amended in
2020, the NMPA issued the Chemical Drug Registration Classification and Application Data
Requirements (Ӌ) in June 2020, which reaffirmed the
principles of the classification of chemical drugs set forth by the Reform Plan for Registration
Category of Chemical Medicine.
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In January 2009, the SFDA promulgated the Administrative Provisions on Special
Examination and Approval of Registration of New Drugs (),
according to which, the SFDA, and now the NMPA, conducts special examination and approval
for new drug registration applications when: (1) the effective constituent extracted from plants,
animals, minerals, etc., as well as the preparations thereof which have never been marketed in
China, and the medicinal materials and the preparations thereof that are newly discovered; (2)
the chemical raw material medicines as well as the preparations thereof and the biological
products that have not been approved for marketing at home and abroad; (3) the new drugs
which have obvious clinical treatment advantages for diseases such as AIDS, malignant tumors
and orphan diseases, etc.; or (4) the new drugs that treat diseases currently with no effective
methods of treatment.
The Administrative Provisions on Special Examination and Approval of Registration of
New Drugs further provide that the applicant may file for special examination and approval at
the clinical trial application stage if the product candidate falls within items (1) or (2), and for
product candidates that fall within items (3) or (4), the application for special examination and
approval cannot be made until filing for production.
Accelerated Approval for Clinical Trial and Registration
The Opinions of the State Council on the Reform of Evaluation and Approval System for
Drugs and Medical Devices (จԈ) issued
by the State Council in August 2015, established a reform framework of the evaluation and
approval system for drugs and medical devices, and indicated the tasks of enhancing the
standards of approval for drug registration, accelerating the evaluation and approval process
for innovative drugs, and improving the approval for clinical trials of drugs, etc.
The Opinions of the State Council on the Reform of Evaluation and Approval System for
Drugs and Medical Devices established a framework for reforming the evaluation and approval
system for drugs and medical devices, improved the system of approval for drug registration
and accelerated the evaluation and approval process for new drugs as well as drug clinical
trials.
The CFDA released the Circular Concerning Several Policies on Drug Registration
Review and Approval (ʮѓ) in November 2015, which
further clarified the measures and policies for simplifying and accelerating the approval
process for clinical trials and drug registration, including:
 a one-time umbrella approval procedure allowing the overall approval of all phases
of a new drug’s clinical trials, replacing the current phase-by-phase application and
approval procedure; and
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 a fast track drug registration or clinical trial approval pathway for the following
applications: (1) registration of innovative new drugs for preventing and treating
AIDS, malignant tumors, serious infectious diseases and orphan diseases, etc.; (2)
registration of pediatric drugs; (3) registration of geriatric drugs and drugs treating
PRC-prevalent diseases in elders; (4) registration of drugs listed in national major
science and technology projects and national key research and development plans;
(5) registration of clinical urgently needed drugs using advanced technology, using
innovative treatment methods, or having obvious treatment advantages; (6)
registration of foreign innovative drugs to be manufactured locally in China; (7)
concurrent applications for new drug clinical trials which are already approved in
the United States or EU or concurrent drug registration applications for drugs which
have applied to the competent drug approval authorities for marketing authorization
and passed such authorities’ onsite inspections in the United States or EU and are
manufactured using the same production line in China; and (8) clinical trial
applications for drugs with urgent clinical need and patent expiry within three years,
and manufacturing authorization applications for drugs with urgent clinical need and
patent expiry within one year.
The NMPA released the Circular on Adjusting Evaluation and Approval procedures for
Clinical Trials for Drugs (ʮѓ) in July 2018,
according to which, within 60 days after the acceptance of and the fees paid for the drug
clinical trial application, the applicant may conduct the clinical trials for the drug in
accordance with the clinical trial protocol submitted, if the applicant has not received any
negative or questioning opinion from the CDE. Such approval process has been further enacted
into the 2019 Amendment, according to which, if the applicant has not received any notice
from NMPA within 60 working days after the acceptance of clinical trial application, such
application shall be deemed as approved.
In July 2020, the NMPA issued Review and Approval Procedures for Conditional
Approval of Drug Marketing Applications (Trial Implementation) (ɪ̹͡ሗ
ᄲ൙ᄲҭʈЪ೻ҏ(༊Б)), pursuant to which and the Registration Measures amended in
2020, an applicant may submit, during the stage of clinical trials, an application for conditional
approval, for pharmaceuticals which fall under the following circumstances: (i) drugs for
treatment of life-threatening illnesses for which there is no effective treatment, whose clinical
trial has data to prove efficacy and to forecast the clinical value thereof; (ii) drugs urgently
needed for public health, whose clinical trial has data to prove efficacy and to forecast the
clinical value thereof; and (iii) other vaccines urgently needed for major public health
emergencies or deemed by the NHC to be urgently needed, which has been concluded upon
evaluation that the benefits outweigh the risks. For applications for a conditional approval, the
applicant shall communicate with the CDE on the conditional approval criteria for marketing
and the post-marketing research work to be continued and completed, and apply for drug
marketing authorization upon communication and confirmation. If it is concluded that the
conditional approval requirements are complied with, the drug registration certificate shall
state the validity period of the drug registration with conditional approval, the post-marketing
research work to be continued and completed and the deadline to complete such work, etc. For
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the drug which is granted with conditional approval, the holder shall adopt the appropriate risk
management measures following marketing of the drug, and complete the drug clinical trial and
relevant post-marketing research within the stipulated period, and declare so to the CDE via a
supplementary application.
In July 2020, NMPA issued the Priority Review and Approval Procedures for Drug
Marketing Authorizations (Trial Implementation) (ɪ̹஢̙Ꮄ΋ᄲ൙ᄲҭʈЪ೻ҏ(༊
Б)), at the time of application for drug marketing authorization, the following drugs which
have obvious clinical value may apply for prioritized review and approval procedures: (i)
clinically and urgently needed but insufficient drugs, innovative drugs and improved new drugs
for prevention and treatment of major contagious diseases and rare diseases; (ii) new pediatric
use pharmaceutical products, dosage form and specifications which comply with pediatric
physiological characteristics; (iii) vaccines and innovative vaccines urgently needed for
prevention and control of diseases; (iv) drugs included in the procedures for breakthrough
therapy designation; (v) drugs which comply with conditional approval criteria; and (vi) other
circumstances entitled to prioritized review as stipulated by the NMPA. Upon communication
and confirmation with the CDE, when the applicant submits the application for drug marketing
authorization, the applicant shall simultaneously submit an application for prioritized review
and approval. If an application satisfies one of the foregoing criteria, the CDE shall announce
so and admit the application in the prioritized review and approval procedures. The following
policy support shall be granted to an application for drug marketing authorization admitted in
the prioritized review and approval procedures: (i) the review period shall be limited to no
more than 130 days; (ii) for clinically and urgently needed imported drugs for rare diseases
which are not yet marketed in the PRC, the review period shall be limited to no more than 70
days; (iii) priority shall be granted to examination, inspection and approval of the commonly
used name of drugs (if applicable); and (iv) upon communication and confirmation,
supplementary supporting materials may be required.
Research and Development of New Drugs
Pursuant to the Drug Administration Law (2019 Amendment), for clinical trials on
pharmaceuticals, relevant data, information and samples such as development methods, quality
indicators and pharmacological and toxicological testing results shall be truthfully submitted
to and approved by the NMPA. Clinical trial organizations shall implement the Good Clinical
Practice of Drugs.
Pursuant to the Regulations for the Implementation of the Drug Administration Law,
research and development of new drugs that require clinical trials shall be approved by the
NMPA. The applicant shall choose institutions qualified for conducting clinical trials of drugs
and record the chosen clinical trial institution with NMPA. Before clinical trials for drugs are
conducted by such institutions, the subjects or their guardians (for a person without capacity
or with limited capacity for civil conducts) shall be informed of the facts and their written
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consents shall be obtained. Pursuant to the Registration Measures amended in 2020, an
applicant shall, before applying for marketing registration of the drug, complete
pharmaceutical research, pharmacological and toxicological research, clinical drug trial, and
other relevant research work.
Trial Exemptions and Acceptance of Foreign Data
The NMPA issued the Technical Guidance Principles on Accepting Foreign Drug Clinical
Trial Data of Drugs () in July 2018, or the
Technical Guidance, as one of the implementing rules for the Innovation Opinions, which
provides that overseas clinical data can be submitted for the drug registration applications in
China when relevant requirements are met. According to the Technical Guidance, sponsors may
use the data of foreign clinical trials as clinical evaluation materials to support drug
registration in China, provided that sponsors must ensure the authenticity, completeness,
accuracy and traceability of foreign clinical trial data and such data must be obtained consistent
with the relevant requirements under the Good Clinical Trial Practice of the International
Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals
for Human Use, or the ICH. Sponsors must also comply with other relevant sections of the
Registration Measures, when applying for drug registrations in China using foreign clinical
trial data.
The NMPA now officially permits, and its predecessor agencies have permitted on a
case-by-case basis in the past, drugs approved outside of China to be approved in China on a
conditional basis without pre-approval clinical trials being conducted in China. Specifically,
the NMPA and the NHC released the Procedures for Reviewing and Approval of Clinical
Urgently Needed Overseas New Drugs (ʮѓ)
in October 2018, permitting drugs that have been approved within the last ten years in the
United States, the EU or Japan and that prevent or treat orphan diseases, or prevent or treat
serious life-threatening illnesses for which there is either no effective therapy in China, or for
which the foreign-approved drugs would have clear clinical advantages to be approved through
specialized channel. Applicants will be required to establish a risk management and control
plan and may be required to complete trials in China after the drug has been marketed. The
CDE has issued and may continue to announce lists of qualifying drugs that meet the foregoing
criteria from time to time.
Clinical Trial Process and Good Clinical Practices
According to the Registration Measures, clinical trials are classified into Phase I, Phase
II, Phase III, Phase IV and bioequivalence clinical trials. Pursuant to the Registration
Measures, an applicant that applies for a drug clinical trial shall submit relevant research
materials according to the requirements for application materials, which will be accepted if
they are deemed qualified upon formal examination. The CDE shall organize pharmaceutical,
medical and other technicians to review the application for the drug clinical trials.
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To improve the quality of clinical trials, the SFDA promulgated the Good Clinical Trial
Practice for Drugs (ᑗґ༊᜕ሯඎ၍ଣ஝ᇍ) in August 2003, or the GCP Rules, which
was replaced by the revised Good Clinical Trial Practice for Drugs, or the Revised GCP Rules,
promulgated by the NMPA and the NHC in April 2020 and coming into effect in July 2020.
According to the Revised GCP Rules, clinical trial means systematical investigation of the
efficacy and safety of drugs conducted on human subjects (patients or healthy volunteers) to
prove or reveal the clinical, pharmacological and other pharmacodynamic function, adverse
reactions and/or absorption, distribution, metabolism and excretion of the drug being
investigated. The purpose of a clinical trial is to determine the therapeutic efficacy and safety
of the drug. The Revised GCP Rules provide comprehensive and substantive requirements on
the design and conduct of clinical trials in China. In particular, the Revised GCP Rules enhance
the protection for study subjects and tighten the control over bio-samples collected under
clinical trials. Pursuant to the Revised GCP Rules, a trial protocol shall be distinct, explicit and
operable and may be executed only upon the consent of the ethics committee. An investigator
shall abide by the relevant trial protocol during a clinical trial, and each medical judgment or
clinical decision-making involved shall be made by clinicians. The quality management system
for clinical trials shall cover the whole process of a clinical trial with emphasis on the
protection of subjects, reliability of the trial results and compliance with relevant laws and
regulations.
The Revised GCP Rules also set out the qualifications and requirements for the
investigators and clinical trial institutions participating in clinical trial, who must: (i) have
professional certification at a clinical trial institution, professional knowledge, training
experience and capability of clinical trial, and be able to provide the latest resume and relevant
qualification documents per request; (ii) be familiar with the trial protocol, investigator’s
brochure and relevant information of the trial drug provided by the applicant; (iii) be familiar
with and comply with the Revised GCP Rules and relevant laws and regulations relating to
clinical trials; (iv) keep a copy of the authorization form on work allocation signed by
investigators; (v) accept supervision and inspection organized by the applicant and inspection
by the drug regulatory authorities; and (vi) in the case of investigators and clinical trial
institutions authorizing other individual or institution to undertake certain responsibilities and
functions relating to clinical trial, they shall ensure such individual or institution are qualified
and establish complete procedures to ensure the responsibilities and functions are fully
performed and generate reliable data.
Drug Clinical Trial Registration
According to the Registration Measures, upon obtaining the approval of its clinical trials
applications and before conducting a clinical trial, the applicant shall (a) formulate
corresponding drug clinical trial protocol and implement such protocol upon approval of ethics
committee and submit such protocol and supporting materials on the website of CDE; and (b)
register the drug clinical trial protocol and other information on the Drug Clinical Trial
Registration and Information Publicity Platform. The CFDA released the Announcement on
Drug Clinical Trial Information Platform (ʮѓ)i n
September 2013, according to which, the applicant shall complete the trial pre-registration
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within one month after obtaining the clinical trial approval in order to obtain the trial’s unique
registration number and complete registration of certain follow-up information and first
submission for publicity before the first subject’s enrollment in the trial. If the first submission
is not completed within one year after the approval of the clinical trial applications, the
applicant shall submit an explanation, and if the first submission is not completed within three
years, the approval of the clinical trial applications shall automatically expire.
MAH System
Pursuant to the Drug Administration Law (2019 Amendment), China implements a system
of drug marketing authorization holder, or MAH, for drug administration. MAHs, namely
enterprises or drug research and development institutions which have obtained drug
registration certificates, shall be responsible for drug safety, efficacy and quality control
throughout the process of drug research and development, production, marketing and use.
MAHs may engage in drug manufacturing and sale on their own or outsource the
manufacturing or sale activities to a third party. When engaging third parties to take charge of
the drug storage and transportation, the MAHs shall evaluate the quality control and risk
management competence of such third parties, enter into an agreement with such third parties
to stipulate the quality control responsibility, operating procedures etc., and supervise the
activities of such third parties. Upon approval by the NMPA, a MAH may transfer its drug
marketing authorization certificate.
International Multi-Center Clinical Trials
The International Multi-Center Clinical Trial Guidelines (Trial Implementation) ( ਷ყ
یܸ(༊Б)), or the Multi-Center Clinical Trial Guidelines, which was
promulgated by the CFDA in January 2015 and came into effect in March 2015, provided
guidance on the implementation of International Multi-center Clinical Trials, or the IMCCT, in
China. According to the Multi-Center Clinical Trial Guidelines, international multi-center
clinical trial applicants may simultaneously perform clinical trials in different centers using the
same clinical trial protocol. Where the applicants plan to implement the international
multi-center clinical trials in the PRC, the applicants shall comply with relevant laws and
regulations, such as the Drug Administration Law, the Regulations for the Implementation of
the Drug Administration Law and the Registration Measures, execute the Revised GCP Rules,
make reference to universal international principles such as the ICH-GCP and comply with the
laws and regulations of the countries involved in the international multi-center clinical trials.
Where the applicants plan to use the data derived from the international multi-center clinical
trials for approval of a drug registration in the PRC, it shall involve at least two countries,
including China, and shall satisfy the requirements for clinical trials set forth in the
Multi-Center Clinical Trial Guidelines, current Registration Measures and other related laws
and regulations.
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In April 2020, the NMPA and the NHC promulgated the Revised GCP Rules, which came
into effect in July 2020. The Revised GCP Rules summarize the requirements for initiating an
IMCCT, that is: (i) the applicant shall ensure that all the centers participating in the clinical
trial comply with the trial protocol; (ii) the applicant shall provide each center with the same
trial protocol, and each center shall comply with the same unified evaluation criterion for
clinical trial and laboratory data and the same guidance for case report form; (iii) each center
shall use the same case report form to record the data obtained during the trial; (iv) before
initiating a clinical trial, a written document is required to specify the responsibilities of the
investigators of each center; and (v) the applicant shall ensure the communication among the
investigators of each center.
Data derived from an IMCCT can be used for the new drug applications with the NMPA.
When using IMCCT data to support new drug applications in China, applicants shall submit the
completed global clinical trial report, statistical analysis report and database, along with
relevant supporting data in accordance with the content and format requirements under the
International Conference on Harmonization of Technical Requirements for Registration of
Pharmaceuticals for Human Use-Common Technical Document; subgroup research results
summary and comparative analysis shall also be conducted concurrently.
The CFDA released the Decision on Adjusting Relevant Items concerning the
Administration of Imported Drug Registration (Ӕ
) in October 2017, which includes the following key points:
 If the IMCCT of a drug is conducted in China, Phase I clinical trial of the drug is
allowed simultaneously. The IMCCT drug does not need to be approved or to enter
into either a Phase II or III clinical trial in a foreign country, except for preventive
biological products;
 If the IMCCT is conducted in China, the application for drug marketing
authorization can be submitted directly after the completion of the IMCCT. The
Amended Registration Measures and relevant laws and regulations shall be
complied with for registration application;
 With respect to applications for clinical trial and marketing of the imported new
chemical drugs and innovative therapeutic biological products, the marketing
authorization in the country or region where the foreign drug manufacturer is
located will not be required; and
 With respect to drug applications that have been accepted before the release of this
Decision, if relevant requirements are met, importation permission can be granted if
such applications request exemption of clinical trials for the imported drugs based
on the data generated from the IMCCT.
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Real-Word Data
The NMPA published the Guidelines on Using Real-world Evidence to Support Research,
Development and Review of Drugs (Trial Implementation) (ॆྼ˰
ۆࡡ(༊Б)) in April 2021. Real-world data, or the RWD, refers to a variety of
data collected on a daily basis related to patients’ health conditions and/or diagnosis, treatment
and healthcare. Subject to relevance and reliability of the collected data, the RWD may be used
to form real-world evidence which may be used as supporting materials when considering the
approval in the PRC. When assessing the data reliability, the following five aspects will be
taken into account: the completeness, accuracy, transparency, quality control and quality
guarantee of the RWD.
Approval of Human Genetic Resources
Pursuant to the Regulations on the Administration of Human Genetic Resources of the
PRC ( ʕശɛ͏΍ձ਷ɛᗳ፲ෂ༟๕၍ଣૢԷ) which was promulgated by the State
Council in May 2019 and became effective in July 2019, the Biosecurity Law of the PRC ( ʕ
) which was promulgated by the Standing Committee of the NPC
in October 2020 and became effective in April 2021, utilization of human genetic resources in
China for the purposes of conducting research and development of biotechnology or clinical
trials shall be subject to the relevant laws, regulations and state provisions with respect to
biotechnology development and clinical application and management, and shall also conform
to ethical principles and shall not harm public health, national security or public interest.
Unless otherwise stipulated by laws and regulations, no institution or individual may preserve
human genetic resources, collect certain human genetic resources as stipulated by laws and
regulations, use human genetic resources for international collaborative scientific research or
export human genetic resources, or take such resources outside of China, or provide the same
to other countries in other forms without permission or recordation.
Foreign organizations and the institutions formed or actually controlled by any foreign
organizations and individuals, or a Foreign Entity, shall not collect or preserve Chinese human
genetic resources within the territory of the PRC, and shall not provide Chinese human genetic
resources abroad, unless otherwise stipulated in laws and regulations. Where a Foreign Entity
needs to use Chinese human genetic resources to conduct scientific research activities, it shall
cooperate with Chinese scientific research institutions, institutions of higher education,
medical institutions or enterprises. Utilization of human genetic resources in China for the
purpose of conducting international collaborative scientific research shall be jointly applied by
the parties and get approval by the MOST, and shall comply with the following conditions: (i)
it will not harm the public health, state security or public interest of China; (ii) the
collaboration shall be between a Chinese entity and a Foreign Entity, both of which shall have
legal person status and have the bases and capability to perform relevant duties; (iii) the
purposes and contents of the cooperative research are clear and legitimate, and the cooperation
period is reasonable; (iv) the cooperative research plan is reasonable; (v) the sources of human
genetic resources to be utilized are legal, and the types and quantities of such human genetic
resources are consistent with the research contents; (vi) they have passed the ethical review of
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the respective countries (regions) where the parties are located; and (vii) there are clear
agreements on the ownership of research achievements reasonable and clear arrangements for
the distribution of benefits. In order to obtain the market authorization of relevant drugs and
medical devices in China, the clinical trials conducted through international cooperation at
clinical institutions by using Chinese human genetic resources are not subject to approval
provided that they do not involve the transport of materials of human genetic resources out of
China. However, the type, quantity and use of human genetic resources to be used shall, before
the collaborating parties start clinical trials, be submitted to the MOST for recordation. Where
Chinese human genetic resource information is to be provided or made available to a Foreign
Entity, a report shall be made to the MOST, with a backup of the information submitted.
On May 26, 2023, the MOST promulgated the Implementation Rules for the
Administrative Regulation on Human Genetic Resources (୚
), or the Implementation Rules for HGR, which came into effect on July 1, 2023. The
Implementation Rules for HGR further provide detailed implementation regulations for the
Administration of Human Genetic Resources of the PRC, such as:
 Clarifying the scope of human genetic resource information, which shall include
information resources generated from human genetic resource materials (such as
human genes and genome data) and exclude clinical data, image data, protein data
and metabolic data;
 Further clarifying the criteria to constitute a Foreign Entity, which shall include (i)
any foreign organization or individual that holds directly or indirectly more than
50% of the shares, equity interests, voting rights, property shares or other interests
in the institution, (ii) any foreign organization or individual that is able to dominate
or have material effect on the decision-making or management of the institution
through its voting right or other interests, although the shares, equity interests,
voting rights, property share or other interests it directly or indirectly holds in the
institution is less than 50%, (iii) any foreign organization or individual that is able
to dominate or have material effect on the decision-making or management of the
institution through investment relationship, contract or other arrangement; and (iv)
other situations stipulated by laws, regulations and rules;
 Specifically listing the situations where security review may be required, which
shall include: (i) human genetic resource information of important genetic families;
(ii) human genetic resources information of specific regions; (iii) exome sequencing
and genome sequencing information resources with a population greater than 500
cases; and (iv) other situation that may affect the public health, national security and
social public interest of China;
 Further improve the clarity and efficiency of the administration of human genetic
resources, for example, clarifying the method for the calculation of illegal gains and
providing detailed exemptions on certain matters that are subject to approval.
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During the Track Record Period, we procured and used human cells solely in (i) the
experiments with respect to certain proof-of-concept pipelines conducted by ourselves or the
CROs engaged by us, and/or (ii) the provision of solutions or services to third parties. All such
human cells we procured or used are derived from non-Chinese individuals or procured outside
of the PRC, and in each case does not constitute “PRC human genetic resources” which are
subject to the Regulations on the Administration of Human Genetic Resources of the PRC, the
Implementation Rules for HGR and the Biosecurity Law of the PRC (collectively, the “ HGR
Laws ”). Other than the foregoing, we have not conducted other activities which would subject
us to the requirements in terms of the collection, restoration, use of and provision to any third
party of PRC human genetic resources under the HGR Laws. As such, our PRC Legal Advisor
is of the view that the HGR Laws do not apply to our activities during the Track Record Period.
United States
The FDA and other regulatory authorities at federal, state, and local levels, as well as in
foreign countries, extensively regulate, among other things, the research, development, testing,
manufacture, quality control, import, export, safety, effectiveness, labeling, packaging,
storage, distribution, record keeping, approval, advertising, promotion, marketing, post-
approval monitoring and post-approval reporting of drugs and biologics such as those we are
developing. We, along with third-party contractors, will be required to navigate the various
preclinical, clinical and commercial approval requirements of the governing regulatory
agencies of the countries in which we wish to conduct studies or seek approval or licensure of
our product candidates.
In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic
Act, or FDCA, and its implementing regulations and biologics under the FDCA and the Public
Health Service Act, or PHSA, and their implementing regulations. Both drugs and biologics
also are subject to other federal, state and local statutes and regulations, such as those related
to competition. Our product candidates must be approved by the FDA through either a New
Drug Application, or NDA, or a Biologics License Application, or BLA, process before they
may be legally marketed in the United States. Failure to comply with applicable FDA or other
requirements at any time during product development, clinical testing, the approval process or
after approval may result in administrative actions or judicial sanctions. These actions and
sanctions could include the FDA ’s refusal to approve pending applications, suspension or
revocation of approved applications, warning letters, product recalls, product seizures, total or
partial suspensions of manufacturing or distribution, injunctions, fines, civil penalties or
criminal prosecution.
The process required by the FDA before drug or biologic product candidates may be
marketed in the United States generally involves the following:
 completion of preclinical laboratory tests and animal studies in accordance with
applicable regulations, including studies conducted in accordance with Good
Laboratory Practices, or GLP , requirements;
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 submission to the FDA of an IND, which must become effective before clinical trials
may begin and must be reported on annually and amended when significant changes
are made;
 approval by an Institutional Review Board, or IRB, or independent ethics committee
at each clinical trial site before each human trial is commenced;
 performance of adequate and well-controlled human clinical trials in accordance
with applicable IND regulations, Good Clinical Practices, or GCP , requirements and
other clinical trial-related regulations to establish the safety and effectiveness of the
investigational product for each proposed indications;
 preparation of and submission to the FDA of an NDA or BLA;
 a determination by the FDA within 60 days of its receipt of an NDA or BLA to
accept the application for review;
 satisfactory completion of one or more FDA pre-approval inspection of the
manufacturing facility or facilities at which the drug or biologic will be produced to
assess compliance with Current Good Manufacturing Practices, or cGMP ,
requirements to assure that the facilities, methods and controls are adequate to
preserve the drug or biological product’s identity, strength, quality and purity;
 potential FDA audit of the nonclinical study and clinical trial sites that generated the
data in support of the NDA or BLA; and
 FDA review and approval of the NDA or BLA, including consideration of the views
of any FDA advisory committee, prior to any commercial marketing or sale of the
drug or biologic in the United States.
Preclinical and Clinical Development
Before testing any drug or biological candidate in humans, the product candidate must
undergo rigorous preclinical testing. Preclinical studies include laboratory evaluation of
product chemistry and formulation, as well as in vitro and animal studies to assess safety and
in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is
subject to federal and state regulations and requirements, including GLP regulations for
safety/toxicology studies.
An IND sponsor must submit the results of the preclinical tests, together with
manufacturing information, analytical data, any available clinical data or literature and plans
for clinical trials, among other things, to the FDA as part of an IND. An IND is a request for
authorization from the FDA to administer an investigational product to humans. An IND must
become effective before human clinical trials may begin. Some long-term preclinical testing,
such as animal tests of reproductive AEs and carcinogenicity, may continue after the IND is
submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless
before that time, the FDA raises safety concerns or questions related to one or more proposed
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clinical trial. If the IND sponsor is not able to address FDA ’s concerns satisfactorily within the
30-day time frame, the IND may be placed on clinical hold. In such a case, the IND sponsor
and the FDA must resolve any outstanding concerns or questions before the clinical hold is
removed by FDA and the clinical trial can begin. Submission of an IND therefore may or may
not result in FDA authorization to begin a clinical trial. Additionally, the review of information
in an IND submission may prompt the FDA to, among other things, scrutinize existing INDs
or any marketed products and could generate requests for information or clinical holds on other
product candidates or programs.
Clinical trials involve the administration of the investigational product to human subjects
under the supervision of qualified investigators in accordance with GCP requirements, which
include the requirement that all research subjects provide their informed consent for their
participation in any clinical trial. Clinical trials are conducted under protocols detailing, among
other things, the objectives of the study, dosing procedures, subject selection and exclusion
criteria, the parameters to be used in monitoring safety and the effectiveness criteria to be
evaluated. Generally, a separate submission to the existing IND must be made for each
successive clinical trial conducted during product development and for any subsequent
protocol amendments. Furthermore, an IRB for each site proposing to conduct the clinical trial
must review and approve the plan for any clinical trial and its informed consent form before
the clinical trial begins at that site, and must monitor the study until completed. Regulatory
authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds,
including a finding that the subjects are being exposed to an unacceptable health risk or that
the trial is unlikely to meet its stated objectives. Some studies also include oversight by an
independent group of qualified experts organized by the clinical trial sponsor, known as a data
and safety monitoring board, or DSMB, which provides recommendation on whether or not a
study should move forward at designated check points based on access to certain data from the
study. The DSMB may recommend halting of the clinical trial if it determines that there is an
unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy.
There are also requirements governing the reporting of ongoing clinical trials and clinical trial
results to public registries.
A sponsor who wishes to conduct a clinical trial outside of the United States may, but
need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign
clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial
to the FDA in support of an NDA or BLA. The FDA will accept a well-designed and
well-conducted foreign clinical study not conducted under an IND if the study was conducted
in accordance with GCP requirements, and the FDA is able to validate the data through an
onsite inspection if deemed necessary.
Clinical trials are typically conducted in three sequential phases that may overlap.
 Phase I—The investigational product is initially introduced into healthy human
subjects or patients with the target disease or condition. These studies are designed
to test the safety, dosage tolerance, absorption, metabolism and distribution of the
investigational product in humans, the side effects associated with increasing doses,
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and, if possible, to gain early evidence on effectiveness. For investigational products
developed for oncology indications, the Phase I trials are normally conducted in
patients with serious or life-threatening diseases without other treatment
alternatives.
 Phase II—The investigational product is administered to a limited patient population
with a specified disease or condition to evaluate the preliminary efficacy, optimal
dosages and dosing schedule and to identify possible adverse side effects and safety
risks. Multiple Phase II clinical trials may be conducted to obtain information prior
to beginning larger and more expensive Phase III clinical trials.
 Phase III—The investigational product is administered to an expanded patient
population to further evaluate dosage, to provide statistically significant evidence of
clinical efficacy and to further test for safety, generally at multiple geographically
dispersed clinical trial sites. These clinical trials are intended to establish the overall
risk/benefit ratio of the investigational product and to provide an adequate basis for
product labeling.
In some cases, the FDA may require, or companies may voluntarily pursue, additional
clinical trials after a product is approved to gain more information about the product. These
so-called Phase 4 studies may be made a condition to approval of the NDA or BLA. These
clinical trials are used to gain additional experience from the treatment of patients in the
intended therapeutic indication, particularly for long-term safety follow-up. During all phases
of clinical development, regulatory agencies require extensive monitoring and auditing of all
clinical activities, clinical data, and clinical trial investigators. Annual progress reports
detailing the results of the clinical trials must be submitted to the FDA. Written IND safety
reports must be promptly submitted to the FDA, and to the clinical investigators, regarding
serious and unexpected adverse events, as well as any findings from other studies, tests in
laboratory animals or in vitro testing that suggest either a significant risk for human patients
or a clinically important increase in the rate of a serious suspected adverse reaction over that
listed in the protocol or investigator brochure. In addition, concurrent with clinical trials,
companies may complete additional animal studies and develop additional information about
the characteristics of the product candidate, and must finalize a process for manufacturing the
product in commercial quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches of the product candidate and,
among other things, must develop methods for testing the identity, strength, quality and purity
of the final product, or for biologics, the safety, purity and potency. Additionally, appropriate
packaging must be selected and tested and stability studies must be conducted to demonstrate
that the product candidate does not undergo unacceptable deterioration over its shelf life.
FDA Review Process
Following completion of the clinical trials, data are analyzed to assess whether the
investigational product is safe and effective for the proposed indicated use or uses, the results
of product development, preclinical studies and clinical trials are submitted to the FDA as part
of an NDA or BLA requesting approval to market the product for one or more indications. The
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NDA or BLA must include all relevant data available from pertinent preclinical and clinical
trials, including negative or ambiguous results as well as positive findings, together with
detailed information relating to the product’s chemistry, manufacturing, controls and proposed
labeling, among other things. The submission of an NDA or BLA requires payment of a
substantial application user fee to the FDA unless a waiver or exemption applies.
Once an NDA or BLA has been submitted, FDA has 60 days to determine whether the
application can be filed. If FDA determines that an application is deficient on its face in a way
that precludes a complete review, FDA may not accept the application for review and may issue
a refuse-to-file letter to the sponsor. If FDA determines the application is fileable, the FDA ’s
goal is to review standard applications within ten months after it accepts the application for
filing, or, if the application qualifies for priority review, six months after the FDA accepts the
application for filing. The FDA does not always meet its goal dates for standard and priority
NDAs or BLA, and, the review process is often extended by FDA requests for additional
information or clarification. The FDA reviews an NDA or BLA to determine, among other
things, whether a product is safe and effective for a drug or safe, pure and potent for a biologic.
The FDA may convene an advisory committee to provide clinical insight on application review
questions. The FDA is not bound by recommendations of an advisory committee, but it
considers such recommendations when making decisions on approval. Before approving an
NDA or BLA, the FDA will typically inspect the facility or facilities where the product is
manufactured. The FDA will not approve an application unless it determines that the
manufacturing processes and facilities are in compliance with cGMP requirements and
adequate to assure consistent production of the product within required specifications.
Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more
clinical sites to assure compliance with GCP requirements. If the FDA determines that the
application, manufacturing process or manufacturing facilities are not acceptable, it will
outline the deficiencies in the submission and often will request additional testing or
information.
Notwithstanding the submission of relevant data and information, the FDA may
ultimately decide that the NDA or BLA does not satisfy its regulatory criteria for approval and
deny approval. Data obtained from clinical trials are not always conclusive and the FDA may
interpret data differently than the company interprets the same data. If the FDA decides not to
approve an NDA or BLA in its present form, the FDA will issue a complete response letter that
usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The
complete response letter may require the applicant to obtain additional clinical data, including
the potential requirement to conduct additional pivotal Phase 3 clinical trial(s) and/or to
complete other significant and time-consuming requirements related to clinical trials, or to
conduct additional preclinical studies or manufacturing activities. If a complete response letter
is issued, the applicant may either resubmit the NDA or BLA, addressing all of the deficiencies
identified in the letter, or withdraw the application or request an opportunity for a hearing.
Even if such data and information are submitted, the FDA may decide that the NDA or BLA
does not satisfy the criteria for approval.
If regulatory approval of a product is granted, such approval will be granted for particular
indications and may entail limitations on the indicated uses for which such product may be
marketed. For example, the FDA may approve the NDA or BLA with a Risk Evaluation and
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Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS
is a safety strategy to manage a known or potential serious risk associated with a product and
to enable patients to have continued access to such medicines by managing their safe use, and
could include medication guides, physician communication plans, or elements to assure safe
use, such as restricted distribution methods, patient registries and other risk minimization
tools. The FDA also may condition approval on, among other things, changes to proposed
labeling or the development of adequate controls and specifications. Once approved, the FDA
may withdraw the product approval if compliance with pre- and post-marketing requirements
is not maintained or if problems occur after the product reaches the marketplace. The FDA may
require one or more Phase 4 post-market studies and surveillance to further assess and monitor
the product’s safety and effectiveness after commercialization, and may limit further marketing
of the product based on the results of these post-marketing studies.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying
product candidates.
The fast track program is intended to expedite or facilitate the process for reviewing new
drugs and biologics that meet certain criteria. Specifically, new products are eligible for fast
track designation if they are intended to treat a serious or life-threatening disease or condition
and nonclinical or clinical data demonstrate the potential to address unmet medical needs for
the disease or condition. Fast track designation applies to the combination of the product and
the specific indication for which it is being studied. A fast track designated product may be
eligible for rolling review, in which case the FDA may consider for review sections of the NDA
or BLA on a rolling basis before the complete application is submitted, if the sponsor provides
a schedule for the submission of the sections of the NDA or BLA, the FDA agrees to accept
sections of the NDA or BLA and determines that the schedule is acceptable, and the sponsor
pays any required user fees upon submission of the first section of the NDA or BLA.
A product intended to treat a serious or life-threatening disease or condition may also be
eligible for breakthrough therapy designation to expedite its development and review. A
product can receive breakthrough therapy designation if preliminary clinical evidence indicates
that the product may demonstrate substantial improvement over existing therapies on one or
more clinically significant endpoints, such as substantial treatment effects observed early in
clinical development. The designation includes all of the fast track program features, as well
as more intensive FDA interaction and guidance and an organizational commitment to expedite
the development and review of the product, including involvement of senior managers.
A marketing application for a drug or biologic submitted to the FDA for approval,
including a product with a fast track designation and/or breakthrough therapy designation, may
be eligible for other types of FDA programs intended to expedite the FDA review and approval
process, such as priority review and accelerated approval. A product is eligible for priority
review if it is designed to treat a serious or life-threatening disease condition and, if approved,
would provide a significant improvement in safety and effectiveness compared to available
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therapies. Priority review means that, for a new molecular entity or original BLA, the FDA sets
a target date for FDA action on the marketing application at six months after accepting the
application for filing as opposed to ten months.
A product may also be eligible for accelerated approval if it is designed to treat a serious
or life-threatening disease or condition and generally provides a meaningful advantage over
available therapies upon a determination that the product has an effect on either a surrogate or
intermediate clinical endpoint that is reasonably likely to predict clinical benefit or on a
clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM,
that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into
account the severity, rarity, or prevalence of the disease or condition and the availability or lack
of alternative treatments. As a condition of approval, the FDA may require that a sponsor of
a drug or biologic receiving accelerated approval perform adequate and well-controlled
post-marketing confirmatory clinical trials with due diligence and, under FDORA, the FDA is
permitted to require, as appropriate, that such confirmatory studies be underway prior to
approval or within a specified time period after accelerated approval is granted. In addition, the
FDA currently requires, unless otherwise informed by the agency, pre-approval of promotional
materials, which could adversely impact the timing of the commercial launch of the product.
Under FDORA, the FDA has increased authority for expedited procedures to withdraw
approval of a drug or indication approved under accelerated approval if, for example, the
confirmatory trial fails to verify the predicted clinical benefit of the product.
Even if a product qualifies for one or more of these programs, the FDA may later decide
that the product no longer meets the conditions for qualification or the time period for FDA
review or approval may not be shortened. Furthermore, fast track designation, breakthrough
therapy designation, priority review and accelerated approval do not change the standards for
approval.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic
intended to treat a rare disease or condition, which is a disease or condition that affects fewer
than 200,000 individuals in the United States, or to a drug or biologic intended to treat a
disease or condition affecting 200,000 or more individuals in the United States if there is no
reasonable expectation that the cost of developing and making available the drug or biologic
to treat that disease or condition will be recovered from sales in the United States for that drug
or biologic. Orphan drug designation must be requested before submitting an NDA or BLA.
After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and
its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not
convey any advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA
approval for the disease or condition for which it has such designation, the product is entitled
to orphan drug exclusivity, which means that the FDA may not approve any other applications
to market the same drug for the same indication for seven years from the date of such approval,
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except in limited circumstances, such as a showing of clinical superiority to the product with
orphan drug exclusivity by means of greater effectiveness, greater safety or providing a major
contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving
a different drug or biologic for the same disease or condition, or the same drug or biologic for
a different disease or condition. Among the other potential benefits of orphan drug designation
are tax credits for certain research and a waiver of the NDA or BLA application fee.
A product may not receive orphan drug exclusivity if it is approved for a use that is
broader than the indication for which it received orphan designation. In addition, exclusive
marketing rights in the United States may be lost if the FDA later determines that the request
for designation was materially defective or if the manufacturer is unable to assure sufficient
quantities of the product to meet the needs of patients with the disease or condition for which
the drug was designated.
Pediatric Information and Pediatric Exclusivity
Under the Pediatric Research Equity Act, or PREA, certain NDAs and BLAs and certain
supplements to an NDA or BLA must contain data to assess the safety and efficacy of the drug
for the claimed indications in all relevant pediatric subpopulations and to support dosing and
administration for each pediatric subpopulation for which the product is safe and effective. The
FDA may grant deferrals for submission of pediatric data or full or partial waivers. The Food
and Drug Administration Safety and Innovation Act, or FDASIA, amended the FDCA to require
that a sponsor who is planning to submit a marketing application for a drug that includes a new
active ingredient, new indication, new dosage form, new dosing regimen or new route of
administration submit an initial Pediatric Study Plan, or PSP , within 60 days of an end-of-Phase
2 meeting or, if there is no such meeting, as early as practicable before the initiation of the
Phase 3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study or
studies that the sponsor plans to conduct, including study objectives and design, age groups,
relevant endpoints and statistical approach, or a justification for not including such detailed
information, and any request for a deferral of pediatric assessments or a full or partial waiver
of the requirement to provide data from pediatric studies along with supporting information.
The FDA and the sponsor must reach an agreement on the PSP . A sponsor can submit
amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to
be considered based on data collected from preclinical studies, early phase clinical trials and/or
other clinical development programs.
A drug or biologic product can also obtain pediatric market exclusivity in the United
States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and
patent terms. This six-month exclusivity, which runs from the end of other exclusivity
protection or patent term, may be granted based on the voluntary completion of a pediatric
study in accordance with an FDA-issued “Written Request” for such a study.
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Post-Approval Requirements
Following approval of a new product, the manufacturer and the approved products are
subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to monitoring and record keeping activities, reporting of adverse
experiences, periodic reporting, product sampling and distribution, and advertising and
promotion of the product. After approval, most changes to the approved product, such as
adding new indications or other labeling claims, are subject to prior FDA review and approval.
There also are continuing user fee requirements, under which FDA assesses an annual program
fee for each product identified in an approved NDA or BLA.
Further, if there are any modifications to the drug or biologic, including changes in
indications, labeling or manufacturing processes or facilities, the applicant may be required to
submit and obtain FDA approval of a new NDA/BLA or NDA/BLA supplement, which may
require the development of additional data or preclinical studies and clinical trials. Such
regulatory reviews can result in denial or modification of the planned changes, or requirements
to conduct additional tests or evaluations that can substantially delay or increase the cost of the
planned changes.
The FDA may also place other conditions on approvals including the requirement for a
REMS, to assure the safe use of the product. If the FDA concludes a REMS is needed, the
sponsor of the NDA or BLA must submit a proposed REMS. The FDA will not approve the
NDA or BLA without an approved REMS, if required. A REMS could include medication
guides, physician communication plans or elements to assure safe use, such as restricted
distribution methods, patient registries and other risk minimization tools. Any of these
limitations on approval or marketing could restrict the commercial promotion, distribution,
prescription or dispensing of products. Product approvals may be withdrawn for non-
compliance with regulatory requirements, if problems occur following initial marketing or if
the FDA determines that the product is no longer safe or effective.
FDA regulations require that products be manufactured in specific approved facilities and
in accordance with cGMP regulations. NDA and BLA holders using contract manufacturers,
laboratories or packagers are responsible for the selection and monitoring of qualified firms,
and, in certain circumstances, qualified suppliers to these firms. These manufacturers must
comply with cGMP regulations that require, among other things, quality control and quality
assurance, the maintenance of records and documentation and the obligation to investigate and
correct any deviations from cGMP . Manufacturers and other entities involved in the
manufacture and distribution of approved drugs or biologics are required to register their
establishments with the FDA and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with cGMP
requirements and other laws. Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to maintain cGMP compliance. The
discovery of violative conditions, including failure to conform to cGMP regulations, could
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result in enforcement actions, and the discovery of problems with a product after approval may
result in restrictions on a product, manufacturer or holder of an approved NDA or BLA,
including recall or withdrawal of the product from the market.
The FDA may issue enforcement letters or withdraw approval if compliance with
regulatory requirements and standards is not maintained or if problems occur after the product
reaches the market. Corrective action could delay drug or biologic distribution and require
significant time and financial expenditures. Later discovery of previously unknown problems
with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in
revisions to the approved labeling to add new safety information; imposition of post-market
studies or clinical trials to assess new safety risks; or imposition of distribution restrictions or
other restrictions under a REMS program. Other potential consequences include, among other
things:
 mandated corrective advertising or communications with doctors;
 restrictions on the marketing or manufacturing of a product, complete withdrawal of
the product from the market or product recalls;
 fines, warning letters or holds on post-approval clinical trials;
 refusal of the FDA to approve pending applications or supplements to approved
applications, or suspension or revocation of existing product approvals;
 product seizure or detention, or refusal of the FDA to permit the import or export of
products; or
 injunctions or the imposition of civil or criminal penalties.
The FDA closely regulates the marketing, labeling, advertising and promotion of drugs
and biologics to ensure that these activities are carried out in a manner that is truthful,
non-misleading and consistent with FDA-approved labeling. Under the FDCA and its
implementing regulations, a medical product, including a drug or biologic, may be deemed
misbranded if its labeling is false or misleading in any particular, or if the medical product is
promoted in a manner that evidences a new intended and unapproved indication. Failure to
comply with FDCA requirements can result in, among other things, adverse publicity, warning
letters, corrective advertising and potential civil and criminal penalties. Physicians may
prescribe legally available products for uses that are not described in the product’s labeling and
that differ from those tested by us and approved by the FDA. Such off-label uses are common
across medical specialties, as physicians may believe that such off-label uses are the best
treatment for many patients in varied circumstances. The FDA does not regulate the behavior
of physicians in their choice of treatments. The FDA and other agencies do, however, actively
enforce the laws and regulations prohibiting the promotion of off-label uses, and a company
that is found to have improperly promoted off-label uses may be subject to significant liability,
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including investigation by federal and state authorities. Prescription drug promotional
materials must be submitted to the FDA in conjunction with their first use or first publication,
and may be required to be reviewed in advance in certain circumstances such as for products
that receive accelerated approval.
Biosimilars and Reference Product Exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act, or collectively, the ACA, signed into law in 2010, includes a
subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which
created an abbreviated approval pathway for biological products that are biosimilar to or
interchangeable with an FDA-approved reference biological product.
Biosimilarity, which requires that the biological product be highly similar to the reference
product notwithstanding minor differences in clinically inactive components and there be no
clinically meaningful differences between the biological product and the reference product in
terms of safety, purity, and potency, can be shown through analytical studies, animal studies,
and a clinical trial or studies. Interchangeability requires that a product be biosimilar to the
reference product and the product must demonstrate that it can be expected to produce the same
clinical results as the reference product in any given patient and, for products that are
administered to a patient more than once, the biologic and the reference biologic may be
alternated or switched after one has been previously administered without increasing safety
risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Complexities associated with the larger, and often more complex, structures of biological
products, as well as the processes by which such products are manufactured, pose significant
hurdles to implementation of the abbreviated approval pathway that are still being worked out
by the FDA.
Under the BPCIA, an application for a biosimilar product may not be accepted by the
FDA until four years after the date of first licensure of the reference product. In addition, the
FDA may not approve an application for a biosimilar or interchangeable product until 12 years
after the date of first licensure of the reference product.
The BPCIA also created certain exclusivity periods for biosimilars approved as
interchangeable products. At this juncture, it is unclear whether products deemed
“interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are
governed by state pharmacy law.
The BPCIA is complex and continues to be interpreted and implemented by the FDA. In
addition, government proposals have sought to reduce the 12-year reference product
exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA
exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate
implementation and impact of the BPCIA is subject to significant uncertainty.
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OTHER HEALTHCARE LA WS AND COMPLIANCE REQUIREMENTS
Pharmaceutical companies are subject to additional healthcare regulation and
enforcement by the federal government and by authorities in the states and foreign jurisdictions
in which they conduct their business. Such laws include, without limitation, state and federal
anti-kickback, fraud and abuse, false claims, the federal Health Insurance Portability and
Accountability Act of 1996, or HIPAA, and transparency laws and regulations related to drug
pricing and payments and other transfers of value made to physicians and other healthcare
providers. The scope and enforcement of each of these laws is uncertain and subject to rapid
change in the current environment of healthcare reform.
Because of the breadth of these laws and the narrowness of the statutory exceptions and
regulatory safe harbors available, it is possible that some pharmaceutical manufacturers may
engage in business activities, or arrangements with physicians, that could subject them to
challenge under one or more of such laws.
If their operations are found to be in violation of any of such laws or any other
governmental regulations that apply, they may be subject to significant penalties, including,
without limitation, civil, criminal and administrative penalties, damages, fines, exclusion from
government-funded healthcare programs, such as Medicare and Medicaid or similar programs
in other countries or jurisdictions, integrity oversight and reporting obligations to resolve
allegations of non-compliance, disgorgement, imprisonment, contractual damages, reputational
harm, diminished profits and the curtailment or restructuring of their operations. Federal and
state enforcement bodies have recently increased their scrutiny of interactions between
healthcare companies and healthcare providers, which has led to a number of investigations,
prosecutions, convictions and settlements in the healthcare industry.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any
pharmaceutical or biological product for which pharmaceutical manufacturers obtain
regulatory approval. Sales of any product depend, in part, on the extent to which such product
will be covered by third-party payers, such as federal, state, and foreign government healthcare
programs, commercial insurance and managed healthcare organizations, and the level of
reimbursement for such product by third-party payers. Decisions regarding the extent of
coverage and amount of reimbursement to be provided are made on a plan-by-plan basis.
There may be significant delays in obtaining coverage and reimbursement as the process
for doing so is often time-consuming and costly. As there is no uniform policy of coverage and
reimbursement for drug products among third-party payers in the United States, coverage and
reimbursement policies for drug products can differ significantly from payer to payer. Factors
payors consider in determining reimbursement are based on whether the product is:
 a covered benefit under its health plan;
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 safe, effective and medically necessary;
 appropriate for the specific patient;
 cost-effective; and
 neither experimental nor investigational.
In addition, the U.S. government, state legislatures and foreign governments have
continued implementing cost-containment programs, including price controls, restrictions on
coverage and reimbursement and requirements for substitution of generic products. Third-party
payers are increasingly challenging the prices charged for medical products and services,
examining the medical necessity and reviewing the cost effectiveness of pharmaceutical or
biological products, medical devices and medical services, in addition to questioning safety
and efficacy. Adoption of price controls and cost-containment measures, and adoption of more
restrictive policies in jurisdictions with existing controls and measures, could further limit
sales of any product. Decreases in third- party reimbursement for any product or a decision by
a third-party payer not to cover a product could reduce physician usage and patient demand for
the product.
Healthcare Reform
The United States and some foreign jurisdictions are considering or have enacted a
number of reform proposals to change the healthcare system. There is significant interest in
promoting changes in healthcare systems with the stated goals of containing healthcare costs,
improving quality or expanding access. In the United States, the pharmaceutical industry has
been a particular focus of these efforts and has been significantly affected by federal and state
legislative initiatives, including those designed to limit the pricing, coverage, and
reimbursement of pharmaceutical and biopharmaceutical products, especially under
government-funded healthcare programs, and increased governmental control of drug pricing.
The continuing efforts of the government, insurance companies, managed care
organizations and other payers of healthcare services to contain or reduce costs of healthcare
may adversely affect pharmaceutical manufacturers in the following ways:
 the demand for any product candidates, if approved;
 the ability to set a price that they believe is fair for any product candidates, if
approved;
 their ability to generate revenue and achieve or maintain profitability;
 the level of taxes that they are required to pay; and
 the availability of capital.
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There has been increasing legislative and enforcement interest in the United States with
respect to drug pricing practices. Specifically, there has been heightened governmental scrutiny
over the manner in which manufacturers set prices for their marketed products, which has
resulted in several U.S. Congressional inquiries and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to drug pricing, reduce
the cost of prescription drugs under Medicare, and review the relationship between pricing and
manufacturer patient programs.
The Inflation Reduction Act of 2022, or IRA includes several provisions that may impact
pharmaceutical manufacturers to varying degrees, including provisions that reduce the
out-of-pocket spending cap for Medicare Part D beneficiaries from US$7,050 to US$2,000
starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer
financial liability on certain drugs under Medicare Part D; allow the U.S. government to
negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics
without generic or biosimilar competition; require companies to pay rebates to Medicare for
certain drug prices that increase faster than inflation; and delay until January 1, 2032 the
implementation of the HHS rebate rule that would have limited the fees that pharmacy benefit
managers can charge. Further, under the IRA, orphan drugs are exempted from the Medicare
drug price negotiation program, but only if they have one orphan designation and for which the
only approved indication is for that disease or condition. If a product receives multiple orphan
designations or has multiple approved indications, it may not qualify for the orphan drug
exemption. The implementation of the IRA is currently subject to ongoing litigation
challenging the constitutionality of the IRA ’s Medicare drug price negotiation program. The
effects of the IRA on pharmaceutical manufacturers and the healthcare industry in general is
not yet known.
In addition, President Biden has issued multiple executive orders that have sought to
reduce prescription drug costs. In February 2023, HHS also issued a proposal in response to
an October 2022 executive order from President Biden that includes a proposed prescription
drug pricing model that will test whether targeted Medicare payment adjustments will
sufficiently incentivize manufacturers to complete confirmatory trials for drugs approved
through FDA ’s accelerated approval pathway. Although a number of these and other proposed
measures may require authorization through additional legislation to become effective, and the
Biden administration may reverse or otherwise change these measures, both the Biden
administration and Congress have indicated that they will continue to seek new legislative
measures to control drug costs.
At the state level, legislatures have increasingly passed legislation and implemented
regulations designed to control pharmaceutical product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost
disclosure and transparency measures, and, in some cases, designed to encourage importation
from other countries and bulk purchasing.
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We expect that these and other healthcare reform measures that may be adopted in the
future, may result in more rigorous coverage criteria and lower reimbursement, and in
additional downward pressure on the price that pharmaceutical manufacturers receive for any
approved product.
Proposed BIOSECURE Act
On December 20, 2023, the U.S. Senate published proposed legislation to prohibit federal
contracting with certain biotechnology providers connected to foreign adversaries, commonly
referred to as the BIOSECURE Act. On March 6, 2024, the version of the legislation proposed
by the U.S. Senate was advanced to the full U.S. Senate. On January 24, 2024, the U.S. House
of Representatives proposed an analogous version of such legislation (the “ House version ”),
which was advanced to the full U.S. House of Representatives on May 15, 2024. The
BIOSECURE Act, if enacted in the proposed form, would prohibit the U.S. government from
procuring biotechnology equipment or services from so-called “biotechnology companies of
concern.” The BIOSECURE Act, if enacted in the proposed form, would also prohibit U.S.
federal loans and grants to, and federal contracts (including contract extensions and renewals)
with, any entity that uses biotechnology equipment or services from one of these
“biotechnology companies of concern.” The most recent House version of the legislation names
five specific Chinese biotech companies as “biotechnology companies of concern,” and gives
the U.S. government the authority to identify other entities for inclusion as “biotechnology
companies of concern,” specifically any entity that is subject to the control or jurisdiction or
acts on behalf of a “foreign adversary” (defined by law to be China, Iran, North Korea, and
Russia), provided that the entity is involved in the manufacturing, distribution, provision, or
procurement of a biotechnology equipment or service, and poses a risk to the national security
of the U.S., based on: (i) engaging in joint research with, being supported by, or being affiliated
with a foreign adversary’s military, internal security forces, or intelligence agencies; (ii)
providing multiomic data obtained via biotechnology equipment or services to the government
of a foreign adversary; or (iii) obtaining human multiomic data via the biotechnology
equipment or services without express and informed consent. The most recent House version
of the legislation would delay the application of the BIOSECURE Act’s provisions (i) until
January 1, 2032, with respect to biotechnology equipment or services provided or produced by
one of the named biotechnology companies of concern under a contract or agreement entered
before the effective date of the legislation; and (ii) for a period of five years after the
identification of new biotechnology companies of concern, with respect to biotechnology
equipment and services provided or produced by an entity that the government identifies in the
future as a biotechnology company of concern.
Privacy and Security
We may be subject to data privacy and security regulations by both the federal
government and the states in which we conduct our business. For example, under the
administrative simplification provisions of the Health Insurance Portability and Accountability
Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and
Clinical Health Act, or HITECH, the U.S. Department of Health and Human Services, or HHS,
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issued regulations that establish uniform standards governing the conduct of certain electronic
healthcare transactions and requirements for protecting the privacy and security of protected
health information, or PHI, used or disclosed by covered entities. Covered entities and their
business associates are subject to HIPAA and HITECH.
HIPAA and HITECH include the privacy and security rules, breach notification
requirements and electronic transaction standards. The privacy rule covers the use and
disclosure of PHI by covered entities and business associates. The privacy rule generally
prohibits the use or disclosure of PHI except as permitted under the rule. The rule also sets
forth individual patient rights, such as the right to access or amend certain records containing
his or her PHI, or to request restrictions on the use or disclosure of his or her PHI. The security
rule requires covered entities and business associates to safeguard the confidentiality, integrity,
and availability of electronically transmitted or stored PHI by implementing administrative,
physical and technical safeguards. Under HITECH’s breach notification rule, a covered entity
must notify individuals, the Secretary of the HHS, and in some circumstances, the media of
breaches of unsecured PHI.
If they are found to be in violation of HIPAA as the result of a breach of unsecured PHI,
a complaint about their privacy practices or an audit by HHS, entities may be subject to
significant civil and criminal fines and penalties and/or additional reporting and oversight
obligations if such entities are required to enter into a resolution agreement and corrective
action plan with HHS to settle allegations of HIPAA non-compliance.
In addition, we may be subject to state health information privacy, security and data
breach notification laws, which may govern the collection, use, disclosure and protection of
health-related and other personal information. State laws may be more stringent, broader in
scope or offer greater individual rights with respect to PHI than HIPAA. California, for
example, has enacted the Confidentiality of Medical Information Act, which sets forth
standards in addition to HIPAA and HITECH with which all California health care providers
like us must abide. In addition, the California Consumer Privacy Act, or the CCPA, was signed
into law on June 28, 2018, and went into effect on January 1, 2020. The CCPA contains new
disclosure obligations for businesses that collect personal information about California
residents and affords those individuals new rights relating to their personal information that
may affect our ability to use personal information. The CCPA authorizes private lawsuits to
recover statutory damages for certain data breaches. Although the CCPA exempts protected
health information regulated by HIPAA and certain data regarding clinical trials, the CCPA, to
the extent applicable to our business and operations, may increase our compliance costs and
potential liability with respect to other personal information we maintain about California
residents. The CCPA has substantial penalties for non-compliance and we continue to assess its
impact on our business. Complying with these various state laws and regulations, which may
differ from state to state, requires significant resources and may complicate our compliance
efforts. Penalties for violation of any of these laws and regulations may include sanctions
against a laboratory’s licensure, as well as civil and/or criminal penalties.
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Proposed Customer Identification Program
On January 29, 2024, the U.S. Department of Commerce published proposed regulations
that would, if passed as proposed, require U.S. Infrastructure as a Service (“ IaaS ”) providers,
including certain U.S. cloud computing service providers, to, among other requirements, verify
the identities and ownerships of their foreign customers. If passed, the proposal will require
U.S. IaaS providers and their resellers to collect “know your customer” information from
foreign customers about their foreign account owners and beneficial owners to verify foreign
customers’ identities and notify customers about the disclosure of identifying information to
the federal government. The proposed regulations also outline procedures for the U.S.
Department of Commerce to authorize measures to deter foreign malicious cyber actors’ use
of U.S. IaaS products. These measures could include prohibitions on use of U.S. IaaS products
by persons or entities in specific jurisdictions that the U.S. Department of Commerce
determines have a significant number of foreign persons who either offer or use U.S. IaaS
products for malicious cyber activities. The proposed regulations would also require IaaS
providers and their resellers to report to the U.S. Department of Commerce when they have
knowledge that a transaction with a foreign person results in or could result in training large
AI models with capabilities that could be used in malicious cyber-enabled activities.
OTHER GOVERNMENT REGULATIONS
Regulations on Intellectual Property Rights
PRC
In terms of international conventions, China has entered into (including but not limited
to) the Agreement on Trade-Related Aspects of Intellectual Property Rights (ٙ
), the Paris Convention for the Protection of Industrial Property (ᚐʈุ
), the Madrid Agreement Concerning the International Registration of Marks
() and the Patent Cooperation Treaty ().
Patents
According to the Patent Law of the PRC (), or the PRC Patent
Law, which was promulgated by the Standing Committee of the NPC in March 1984, amended
in September 1992, August 2000, December 2008 and October 17, 2020 and came into effect
on June 1, 2021, and the Implementation Rules of the Patent Law of the PRC ( ʕശɛ͏΍
), which was promulgated by the State Council in June 2001, amended
in December 2002 and January 2010 and came into effect in February 2010, there are three
types of patents in the PRC: invention patents, utility model patents and design patents.
According to the PRC Patent Law, the protection period is 20 years for an invention patent, 10
years for a utility model patent and 15 years for a design patent (10 years for a design patent
filed on or before May 31, 2021), commencing from their respective application dates. The
Chinese patent system adopts a “first come, first file” principle, which means that where more
than one person files patent applications for the same invention, a patent will be granted to the
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person who files the application first. To be patentable, invention or utility models must meet
three criteria: novelty, inventiveness and practicability. Except under certain specific
circumstances provided by law, any individual or entity that utilizes a patent or conducts any
other activities that infringe a patent without prior authorization of the patent holder shall pay
compensation to the patent holder and if counterfeiting patent, is subject to a fine imposed by
relevant administrative authorities and, if constituting a crime, shall be held criminally liable
in accordance with the law. Any organization or individual that applies for a patent in a foreign
country for an invention or utility model patent established in China is required to report to the
patent administrative authorities of the State Council for confidentiality examination. The PRC
Patent Law also provides a patent protection period compensation system in the event of
unreasonable delay in granting the invention patent right, a special patent protection period
compensation system for making up the time required for assessment and approval of
marketing of new drugs and punitive damages for willful patent infringement under severe
circumstances. In addition, under the Regulations of the PRC on the Administration of Human
Genetic Resources, patents derived from the cross-border collaboration using the PRC human
genetic resources shall be jointly applied for and owned by the PRC and foreign parties.
Patent Transfer and License
Patent transfer (patent assignment) and patent license are two different ways of
transferring or granting rights of a patent.
Patent assignment refers to the transfer of ownership of a patent from one party (assignor)
to another (assignee). The party who receives the assignment (assignee) becomes the new
owner of the patent, has the entire right to enforce it. Pursuant to the PRC Patent Law, patent
assignment is required to be registered with the competent patent administration authority and
announced to public, and such patent assignment will come into effect on its registration date.
On the other hand, patent license grants permission to another party (licensee) to use a
patent, but ownership of the patent remains with the original owner (licensor). The licensee is
allowed to use the patent subject to the terms of the license agreement, which may specify
limitations on territory, field, scope and/or duration of use. Pursuant to the Implementation
Rules of the Patent Law of the PRC, a patent license agreement is required to be filed with the
competent patent administration authority within three months after the date when such patent
license agreement becomes effective.
Patent Enforcement
Unauthorized use of patents without consent from owners of patents, forgery of the
patents belonging to other persons, or engagement in other patent infringement acts, will
subject the infringers to infringement liability. Serious offences such as forgery of patents may
be subject to criminal penalties.
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A patent owner, or an interested party who believes the patent is being infringed, may
either file a civil legal suit or file an administrative complaint with the relevant patent
administration authority. A PRC court may issue a preliminary injunction upon the patent
holder’s or an interested party’s request before instituting any legal proceedings or during the
proceedings. Damages for patent infringement shall be calculated as the losses suffered by the
patent holder arising from the infringement or the benefit gained by the infringer from the
infringement. If it is difficult to ascertain damages in this manner, damages may be determined
by using a reasonable multiple of the license fee under a contractual license. If the patent
infringement is found to be willful and has caused severe consequences, the damages for patent
infringement may be determined by one to five times of the damage calculated according to the
foregoing sentence.
Trade Secrets
According to the PRC Anti-Unfair Competition Law (ن
), which was promulgated by the Standing Committee of the NPC in September 1993 and
amended in November 2017 and April 2019 respectively, the term “trade secrets” refers to
technical and business information that is unknown to the public, has commercial value, and
is maintained as a secret by its legal owners or holders. Under the PRC Anti-Unfair
Competition Law, business persons are prohibited from infringing others’ trade secrets by: (1)
obtaining the trade secrets from the legal owners or holders by any unfair methods such as
theft, bribery, fraud, coercion, electronic intrusion, or any other illicit means; (2) disclosing,
using or permitting others to use the trade secrets obtained illegally under item (1) above; (3)
disclosing, using or permitting others to use the trade secrets, in violation of any confidentiality
obligation or any requirements of the legal owners or holders to keep such trade secrets in
confidence; or (4) instigating, inducing or assisting others to violate a confidentiality
obligation or to violate a legal owner or holder’s requirements on keeping confidentiality of
trade secrets, obtaining, disclosing, using or permitting others to use the trade secrets of the
legal owners or holders. If a third party knows or should have known of the above-mentioned
illegal conduct but nevertheless obtains, discloses, uses or permits others to use the trade
secrets acquired through the illegal conduct, the third party may be deemed to have committed
a misappropriation of the others’ trade secrets. The parties whose trade secrets are being
misappropriated may initiate actions in people’s court, and regulatory authorities may stop any
illegal activities and fine infringing parties.
Trademarks
According to the Trademark Law of the PRC (), or the PRC
Trademark Law, promulgated by the Standing Committee of the NPC in August 1982, amended
in February 1993, October 2001, August 2013 and April 2019 respectively, and the latest
amendment came into effect in November 2019, and the Regulation on the Implementation of
the Trademark Law of the PRC (ૢԷ), which was
promulgated by the State Council in August 2002 and amended in April 2014, trademarks may
seek registration with the Trademark Office of State Intellectual Property Office, or the
Trademark Office, and the successfully registered trademarks are entitled to the protections
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afforded by the PRC Trademark Law. Where registration is sought for a trademark that is
identical or similar to another trademark which has already been registered or pending in
application for use in the same or similar category of commodities or services, the later
application for registration of such trademark may be rejected. The period of validity for a
registered trademark is ten years, commencing on the date of registration. The registrant shall
go through the formalities for renewal within 12 months prior to the expiry date of the validity
period if continued use is intended. Where the registrant fails to do so, a grace period of six
months may be granted. The validity period for each renewal of registration is ten years,
commencing on the day immediately after the expiry of the preceding period of validity for the
trademark. In the absence of a renewal upon expiry, the registered trademark shall be canceled.
Trademark license agreements must be filed with the Trademark Office. The licensor shall
supervise the quality of the commodities on which the trademark is used, and the licensee shall
guarantee the quality of such commodities. Market regulation administrative authorities have
the authority to investigate any behavior that infringes the exclusive right under a registered
trademark in accordance with laws. In case of a suspected criminal offense, the case shall be
timely referred to a judicial authority and decided according to laws.
Domain Names
Domain names are protected under the Administrative Measures on the Internet Domain
Names (), which was promulgated by the Ministry of Industry and
Information Technology in August 2017 which came into effect in November 2017, and the
Implementing Rules on Registration of National Top-level Domain Names (௟ॴਹΤൗ
), which was promulgated by China Internet Network Information Center in and
came into effect in June 2019 which became effective on the same day. The Ministry of
Industry and Information Technology is the main regulatory body responsible for the
administration of PRC internet domain names. Domain name registrations are handled through
domain name service agencies established under the relevant regulations, and the applicants
become domain name holders upon successful registration.
Copyright and Software Products
On September 7, 1990, the Standing Committee of the NPC promulgated the Copyright
Law of the PRC (), or the PRC Copyright Law, which was
amended in October 2001, February 2010 and November 2020 respectively and the latest
amendment came into effect on June 1, 2021. The PRC Copyright Law provides that Chinese
citizens, legal persons, or other unincorporated organizations shall, whether published or not,
enjoy copyright in their works, which include, among others, works of literature, art,
architecture, photography, audiovisual, engineering technology and computer software. There
is a voluntary registration system administered by the PRC Copyright Protection Center. In
order to further implement the Computer Software Protection Regulations (ᚐ
ૢԷ) promulgated by the State Council in December 2001, and amended in January 2011
and January 2013 with the last amended version coming into effect on March 1, 2013, the
National Copyright Administration issued the Measures on Computer Software Copyright
Registration () in February 2002 (which was amended in May
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2004), which apply to software copyright registration, license contract registration and transfer
contract registration. The National Copyright Administration of the PRC shall be the competent
authority for the nationwide administration of software copyright registration and the
Copyright Protection Center of China, or the CPCC, is designated as the software registration
authority. The CPCC shall grant registration certificates to the Computer Software Copyrights
applicants which conforms to the provisions of both the Measures on Computer Software
Copyright Registration and the Computer Software Protection Regulations.
United States
Patent Term Restoration, Extension and Marketing Exclusivity
A patent claiming a new drug product may be eligible for a limited patent term extension
under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent
term lost during the FDA regulatory review. The restoration period granted on a patent covering
a product is typically one-half the time between the effective date of a clinical investigation
involving human beings is begun and the submission date of an application, plus the time
between the submission date of an application and the ultimate approval date. Patent term
restoration cannot be used to extend the remaining term of a patent past a total of 14 years from
the product’s approval date. Only one patent applicable to an approved product is eligible for
the extension, and only those claims covering the approved product, a method for using it, or
a method for manufacturing it, may be extended. Additionally, the application for the extension
must be submitted prior to the expiration of the patent in question. A patent that covers multiple
products for which approval is sought can only be extended in connection with one of the
approvals. The United States Patent and Trademark Office reviews and approves the
application for any patent term extension or restoration in consultation with the FDA.
Market exclusivity provisions under the FDCA also can delay the submission or the
approval of certain applications. The FDCA provides a five-year period of non-patent
marketing exclusivity within the United States to the first applicant to gain approval of an NDA
for a new chemical entity, or NCE. A drug is an NCE if the FDA has not previously approved
any other new drug containing the same active moiety, which is the molecule or ion responsible
for the action of the drug substance. During the exclusivity period, the FDA may not accept for
review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by
another company for another version of such drug where the applicant does not own or have
a legal right of reference to all the data required for approval. However, an application may be
submitted after four years if it contains a certification of patent invalidity or non-infringement.
The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or
supplement to an existing NDA if new clinical investigations, other than bioavailability
studies, that were conducted or sponsored by the applicant are deemed by the FDA to be
essential to the approval of the application, for example, new indications, dosages or strengths
of an existing drug. This three-year exclusivity covers only the conditions of use associated
with the new clinical investigations and does not prohibit the FDA from approving ANDAs for
drugs containing the original active agent. Five-year and three-year exclusivity will not delay
the submission or approval of a full NDA. However, an applicant submitting a full NDA would
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be required to conduct or obtain a right of reference to all of the preclinical studies and
adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness
or generate such data themselves.
PRC Regulations on Product Liability
In addition to the strict new drug approval process, certain PRC laws have been
promulgated to protect the rights of consumers and to strengthen the control of medical
products in the PRC. Under current PRC laws, manufacturers and vendors of defective
products in the PRC may incur liability for loss and injury caused by such products.
According to the Civil Code of the PRC (Պ), which was
promulgated by the NPC in May 2020 and came into force in January 2021, the manufacturer
or vendor of a defective product which causes property damage or physical injury to any person
may be subject to civil liability for such damage or injury.
According to the Product Quality Law of the PRC (), or
the PRC Product Quality Law, promulgated in February 1993 and amended in July 2000,
August 2009 and December 2018 respectively, the legitimate rights and interests of the
end-users and consumers shall be protected and the supervision and control of the quality of
products shall be strengthened. Manufacturers who produce defective products may be subject
to civil or criminal liability and have their business licenses revoked.
The Law of the PRC on the Protection of the Rights and Interests of Consumers ( ʕശ
), or the PRC Consumer Protection Law, was promulgated in
October 1993 and amended in August 2009 and October 2013 to protect consumers’ rights
when they purchase or use goods and services. According to which, all business operators must
comply with this law when they provide customers with the goods manufactured or sold by
them and/or provide services to customers, and all business operators shall protect the
customers’ privacy and keep any consumer information they obtain during the business
operation strictly confidential. In addition, violations of the PRC Consumer Protection Law
may result in the indemnification liabilities and/or the imposition of fines, and if the
circumstances are serious, the operator may be ordered to suspend operations and its business
license may be revoked, if constituting a crime, shall be held criminally liable in accordance
with the laws.
PRC Regulations on Tort
According to the Civil Code of the PRC, if damages to other persons are caused by
defective products due to the fault of third parties, such as the parties providing transportation
or warehousing, the producers and the sellers of the products have the right to recover their
respective losses from such third parties. If defective products are identified after they have
been put into circulation, the producers or the sellers shall take remedial measures such as
issuance of a warning, recall of products, etc., in a timely manner. The producers or the sellers
shall be liable under tort if they fail to take remedial measures in a timely manner or have not
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made efforts to take remedial measures, thus expanding damages. If the products are produced
or sold with known defects, causing deaths or severe adverse health issues, the infringed party
has the right to claim punitive damages in addition to compensatory damages.
PRC Regulations on Environment Protection
Pursuant to the Environmental Protection Law of the PRC (ᚐ
) promulgated by the Standing Committee of the NPC, or the Environmental Protection
Law, in September 1979, last amended in April 2014 and became effective in January 2015, any
entity which discharges or will discharge pollutants during its course of operations or other
activities must implement effective environmental protection safeguards and procedures to
control and properly treat waste gas, waste water, waste residue, medical wastes, dust,
malodorous gases, radioactive substances, noise, vibrations, optical radiation, electromagnetic
radiation and other hazards produced during such activities. According to the provisions of the
Environmental Protection Law, in addition to other relevant laws and regulations of the PRC,
the Ministry of Ecology and Environment and its local counterparts take charge of
administering and supervising said environmental protection matters.
Pursuant to the Environmental Protection Law, the environmental impact assessment shall
be prepared for construction project that have impacts on environment. Installations for the
prevention and control of pollution in construction projects must be designed, built and
commissioned together with the principal part of the project.
Pursuant to the Law of the People’s Republic of China on Environment Impact Assessment
(), which was promulgated in October 2002 and amended
in July 2016 and December 2018, and Regulations on the Administration of Construction Project
Environmental Protection (ᚐ၍ଣૢԷ) promulgated in November 1998
and amended in July 2017, the PRC government implements a classification-based management
on the environmental impact assessment of construction projects according to the impact of the
construction projects on the environment. Construction entities shall prepare an environmental
impact report, an environmental impact report form, or fill out the environmental impact
registration form. The construction entity for a project that is required to prepare the
environmental impact report or environmental impact report form in accordance with the laws
shall obtain the approval from the relevant environmental protection authority for its
environmental impact assessment documents; otherwise it shall not commence the construction.
After the construction project is completed, the construction entity shall conduct environmental
protection acceptance of the construction project and prepare acceptance report pursuant to the
standard and formality set by relevant environmental protection authority, and environmental
impact post-assessment shall also be conducted after the construction project is put into
production or use according to relevant regulations and provisions.
The Law of the PRC on Prevention and Treatment of Water Pollution ( ʕശɛ͏΍ձ਷
), promulgated by the Standing Committee of the NPC on May 11, 1984, last
amended with effect from January 1, 2018, requires that the environmental impact assessment
shall be conducted in accordance with the law if the applicant plans to initiate any new
construction, reconstruction, and expansion of those projects which directly or indirectly
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discharge pollutants into the water or other facilities on water. The water pollution prevention
and treatment facilities of a construction project must be designed, constructed and put into
operation simultaneously with the major construction works of the said construction project.
The applicants shall ensure the water pollution prevention and treatment facilities comply with
the requirements set out in the environmental impact assessment documents approved by or
filed with the competent administrative authority.
Pursuant to the Regulations on Urban Drainage and Sewage Disposal (ᕄર˥ၾϮ˥
ஈଣૢԷ), which was promulgated in October 2013 and came into effect in January 2014,
and the Measures for the Administration of Permits for the Discharge of Urban Sewage into the
Drainage Network (), which was promulgated in
January 2015, amended in December 2022 and came into effect in February 2023, drainage
entities covered by urban drainage facilities shall discharge sewage into urban drainage
facilities in accordance with the relevant provisions of the state. Where an enterprise, public
institution or individual business operator engaging in industry, construction, catering, medical
services or other activities needs to discharge sewage into urban drainage facilities, it shall
apply for a drainage license in accordance with the provisions of these Measures. The drainage
entity that has not obtained the drainage license shall not discharge sewage into urban drainage
facilities.
According to the Law of the PRC on Prevention and Control of Environmental Pollution
Caused by Solid Wastes (2020 Revision) (جط2020ࡌ
ࠈ)), promulgated on October 30, 1995 and last amended with effect from September 1,
2020, the construction of projects which discharge solid waste and the construction of projects
for storage, use and treatment of solid waste shall be carried out upon the assessment regarding
their effects on the environment and in compliance with the relevant regulations concerning the
administration of environmental protection in respect of construction projects. The necessary
supporting facilities for the prevention and control of environmental pollution caused by solid
wastes as specified in the environmental impact assessment documents of the construction
project must be designed, constructed and put into operation simultaneously with the major
construction works of the construction project.
According to the Environmental Protection Law of the PRC, the Regulation on
Administration of Permits for Pollutant Discharge ( રϮ஢̙၍ଣૢԷ), which was
promulgated by the State Council in January 2021 and came into effect in March 2021, and the
Catalog of Classified Management of Pollutant Discharge Permits for Stationary Pollution
Sources (2019 Edition) (๕રϮ஢̙ʱᗳ၍ଣΤ፽(2019و)), which was
promulgated by the Ministry of Ecology and Environment, or the MEE, in December 2019 and
came into effect on the same date, key management, simplified management and registration
management of pollutant discharge permits are implemented based on factors such as the
volume of pollutants generated, the amount of pollutants discharged and the degree of impact
on the environment. The pollutant discharging entity subject to registration management does
not need to apply for the pollutant discharge permit, but shall fill in the pollutant discharge
registration form on the national pollutant discharge permit administration information
platform.
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According to the Guidelines for the Registration of Pollutant Discharge for Stationary
Pollution Sources (Trial Implementation) (یܸ(༊Б)), issued
by the MEE on January 6, 2020 and came into effect on the same date, registration of pollutant
discharge refers to the situation where enterprises that do not need to apply for a pollutant
discharge permit in accordance with the law because the volume of pollutants they generate,
discharge is small and the impact on the environment is limited, such enterprises shall carry
out pollutant discharge registration in accordance with the relevant provisions.
The Regulations on Safety Administration of Hazardous Chemicals (τΌ၍
ଣૢԷ), or the Hazardous Chemicals Regulation, was promulgated by the State Council on
January 26, 2002, last amended on December 7, 2013 and became effective on the same date.
The Hazardous Chemicals Regulation provides regulatory requirements on the safe production,
storage, use, operation and transportation of hazardous chemicals. The hazardous chemicals
shall be stored in specialized warehouses, sites or storerooms and be managed by special
personnel. An entity storing hazardous chemicals shall establish the system of examination and
registration on the entry and exit of hazardous chemicals into and out of warehouses. The
Regulations on the Administration of Precursor Chemicals (2018 Revision) (ۜ
၍ଣૢԷ(2018ࠈࡌ)) was promulgated by the State Council on September 18, 2018 and
became effective on the same date, which adopts a classified administration and licensing
system for the production, distribution, purchase, transportation and import and export of
precursor chemicals. The precursor chemicals are classified into three categories. Category I
includes the major materials that can be used for producing drugs. Categories II and III include
the chemical formulation that can be used for producing drugs. Any entity that is to purchase
any precursor chemicals in Category II or III shall, prior to its purchase, file an information
about the type and quantity in demand for record, with the public security organ of the local
people’s government at the county level.
PRC Regulations on Enterprise Investment Projects
According to Regulations on the Administration of Approval and Filing of Enterprise
Investment Projects (၍ଣૢԷ) implemented in February 2017,
pre-approval is required for projects that have national security concern or relate to major
productivity distribution, strategic resource development and major public interests are subject
to approval management, while the other enterprise investment projects are subject to the filing
requirements provided under the aforesaid rules.
The Notice of the State Council on Issuing the Catalogue of Investment Projects
Approved by the Government (2016 V ersion) (ҳ༟ධͦͦ፽
(2016 ϋ͉)) promulgated by the State Council and taking effect from December 12,
2016 sets out a list of projects that may be subject to pre-approvals of the competent
authorities.
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PRC Regulations on Construction
Construction Work Planning Permit
According to the Urban and Rural Planning Law of the PRC (ඊ஝
), promulgated by the Standing Committee of the NPC on October 28, 2007 and last
amended with effect from April 23, 2019, where construction work is conducted in a city or
town planning area, the relevant construction entity shall apply for a Construction Work
Planning Permit from competent construction administration authority in charge of urban and
rural planning.
Construction Work Commencement Permit
According to the Construction Law of the PRC ()
promulgated by the Standing Committee of the NPC in November 1997 and last amended in
April 2019, a construction entity shall, prior to the commencement of a construction project,
apply for a construction work commencement permit (ʈ஢̙ᗇ) from a competent
construction administration authority, except that certain small-scale projects may be exempted
from obtaining a construction work commencement permit.
Pursuant to the Administrative Measures for Construction Permits of Building Projects
() promulgated by the Ministry of Construction (the
predecessor of the Ministry of Housing and Urban-Rural Development, or the MOHURD) in
October 1999, last amended in March 2021 and came into effect on the same day, within the
territory of the PRC, any entity in China that carries out construction or decoration of a
building and its ancillary facilities, installation of supporting lines, pipelines or equipment, as
well as the construction of municipal infrastructure projects shall, prior to the commencement
of the construction, apply for a construction permit. Construction works with an investment
amount of less than RMB300,000 or a construction area of less than 300 square meters are not
required for construction permits.
Acceptance on Completion of Construction
Pursuant to the Construction Law of the PRC (), or the
Construction Law, promulgated by the Standing Committee of the NPC in November 1997, last
amended in April 2019 and came into effect on the same date, enterprises engaged in
construction, engineering survey, engineering design and supervision shall apply for the
qualifications of different grades according to its registered capital, professional and technical
personnel, technical equipment and achievements and after passing the qualification
examination, could separately obtain qualification certificates of commensurate grades for
construction, surveying, design, supervision, only with which, can it undertake construction,
survey, design, and supervision activities within the scope set out in its qualifications.
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Pursuant to the Administrative Measures for the Administration of Completion
Acceptance and Filing of Housing Construction and Municipal Infrastructure Projects (܊ג
) promulgated by the MOHURD in October
2009 and came into effect on the same day, any entity in China that carries out construction
works to build, expand or re-build real properties or municipal infrastructure projects shall,
within 15 days after the acceptance upon completion of the relevant construction work, make
a record-filing with the competent construction administration authority.
Pursuant to the Provisions on the Acceptance Inspection of Completed
Housing and Municipal Infrastructure Projects (ʈ೻ംʈ᜕ϗ஝
) promulgated by the MOHURD in December 2013 and came into effect on the same date,
the project owner shall, no later than 7 days prior to the date when the acceptance inspection
is to be conducted, notify the competent quality supervision authority in writing of the time and
place to conduct the acceptance inspection as well as a list of the acceptance inspection team
members.
PRC Regulations on Fire Protection
The Fire Prevention Law of the PRC (), or the Fire Prevention
Law, which was promulgated in April 1998 and most recently amended in April 2021, provides
that design and construction of the fire control facilities for a construction work shall comply
with the national fire control technical standards. The developer, designer, constructors and
project supervisor of a construction project shall be responsible for the quality of the design
and construction of the fire control facilities for the construction work according to the relevant
laws.
According to the Fire Prevention Law and the Interim Provisions on Design Inspection
and Acceptance of Fire Protection of Construction Works (᜕ϗ၍ଣ
), or the Interim Provisions on Fire Protection, promulgated by the MOHURD on
April 1, 2020 and effective as of June 1, 2020, a special construction work as stipulated in the
Interim Provisions on Fire Protection shall be subject to fire protection design review before
the construction of such work is commenced and shall be subject to fire protection inspection
before such work is put into use. Construction works other than a special construction work
shall be subject to fire protection inspection filing, and the competent administration authority
in charge of the examination and acceptance of fire protection design shall conduct spot
inspections. If a construction work fails to pass the spot inspection, the use of such construction
shall be required to cease, and rectification actions must be taken with a view to applying for
a re-inspection.
PRC Regulations on Safety Production
According to the Safety Production Law of the PRC (),
promulgated by the SCNPC on June 29, 2002 and last amended with effect from September 1,
2021, any enterprise that carries out production and business operation activities shall (1) abide
by the Safety Production Law of the PRC and other laws and regulations related to production
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safety, strengthen production safety management, and establish a sound production safety
responsibility system and formulate a set of production safety rules and regulations for all
employees; (2) increase the efforts to guarantee the input of funds, supplies, technology and
personnel to production safety, improve production safety conditions, and strengthen
standardization and informatization of production safety; (3) construct a “dual-prevention”
mechanism consisting of graded management and control of safety risks and examination and
control of potential risks, improve the risk prevention and resolution mechanism, enhance
production safety levels and ensure production safety. Enterprises that do not have the
conditions for safe production shall not engage in production and business activities.
The person in charge of an enterprise shall be fully responsible for the work safety of the
enterprise. An enterprise with more than one hundred employees shall set up an institution for
the management of work safety or designate full-time staff for the management of work safety.
The management personnel of the enterprise in charge of work safety shall conduct regular
inspections of the work safety status according to the production and operation characteristics
of the enterprise; the safety risks identified during the inspection shall be dealt with
immediately; if they cannot be dealt with, they shall be reported to the relevant person in
charge in a timely manner, who shall then promptly take measures to eliminate the safety risks.
The inspection and measures taken for elimination of the safety risks must be truthfully
recorded. Enterprises shall educate their employees on work safety, and truthfully inform them
of the dangerous factors that exist in the workplaces and positions, preventive measures and
emergency response measures. In addition, enterprises must provide employees with personal
protective equipment that meets national or industry standards, and supervise and train
employees to use the equipment.
According to the Measures for the Supervision and Administration of “Three
Simultaneities” for the Safety Facilities of Construction Projects (݄“ɧΝ
ࣛ”), which were promulgated by the former State Administration of Work
Safety (now the Ministry of Emergency Management, or the MEM) on April 2, 2015 and
became effective on May 1, 2015, the safety facilities of a construction project must be
designed, constructed and put into operation simultaneously with the major construction works
of the construction project.
PRC Regulations on Prevention and Control of Occupational Diseases
According to the Law of the PRC on the Prevention and Control of Occupational Diseases
(), which was promulgated by Standing Committee of the
NPC on October 27, 2001 and last amended with effect from December 29, 2018, the Measures
for the Supervision and Administration of “Three Simultaneities” of Facilities for the
Prevention and Control of Occupational Diseases of Construction Projects (ணධͦᔖุष
݄“ࣛ”), which was promulgated by the MEM on March 9, 2017
and became effective on May 1, 2017, and the Measures for the Declaration of Projects with
Occupational Hazards (), which was promulgated by the MEM
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on April 27, 2012 and became effective on June 1, 2012, the facilities for the prevention and
control of occupational diseases of a construction project must be designed, constructed and
put into operation simultaneously with the major construction works of the construction
project.
PRC Regulations on Pathogenic Microorganism Laboratories
According to the Regulations on Administration of Bio-safety in Pathogenic
Microorganism Laboratories (τΌ၍ଣૢԷ), which was
promulgated by the State Council on November 12, 2004 and last amended on March 19, 2018,
the pathogenic microorganism laboratory is classified into four levels, namely Bio-safety Level
1, 2, 3 and 4 in terms of the national standard on biosafety of the laboratory. A laboratory of
Bio-safety Level 1 or 2 shall not conduct laboratory activities related to highly pathogenic
microorganisms. The construction, alteration or expansion extension of a laboratory of
Bio-safety Level 1 or 2 shall be reported for the record to competent health authorities. The
person who establishes a laboratory shall develop a scientific and strict management system,
regularly inspect the implementation of the regulations on bio-safety, and regularly inspect,
maintain and update the facilities, equipment and materials in the laboratory, to ensure its
compliance with the national standards.
PRC Regulations on Lease of Property
Pursuant to the Administrative Measures for the Leasing of Commodity Housing (ۜ
) issued by the MOHURD on December 1, 2010 and effective on February
1, 2011, within 30 days after the execution of the housing lease contract, parties to the leasing
of housing shall file and register the leasing of housing at the departments in charge of
construction (real estate) of the people’s governments at the municipality, city or country level
where the leased housing is located.
PRC Regulations on Foreign Exchange and Dividend Distribution
Foreign Exchange Control
According to the Regulation of the PRC for the Foreign Exchange Administration ( ʕ
ശɛ͏΍ձ਷̮ි၍ଣૢԷ) promulgated by the State Council in January 1996, which was
amended in January 1997 and August 2008, payments of current account items, such as trade,
services, benefits or current transfer-related transactions in foreign currencies, may be
proceeded without prior approval from the State Administration of Foreign Exchange, or the
SAFE, as long as certain procedural requirements are complied with. By contrast, approval
from or registration with appropriate government authorities is required where RMB is to be
converted into foreign currency and remitted out of China for items under the capital account
such as repayment of foreign currency denominated loans or foreign currency is to be remitted
into China under the capital account, such as a capital increase or foreign currency loans
extended to a PRC subsidiary.
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The Provisions on the Administration of Foreign Exchange in Domestic Direct
Investments by Foreign Investors (), which were
promulgated by the SAFE in May 2013 and amended in October 2018 and December 2019,
regulate and clarify the administration over foreign exchange administration in foreign
investors’ direct investments, and provide that the administration by SAFE or its local branches
over direct investment by foreign investors in the PRC shall be conducted by way of
registration and banks shall process foreign exchange business relating to the direct investment
in the PRC based on the registration information provided by SAFE and its branches.
However, according to the Circular of the State Administration of Foreign Exchange on
Further Improving and Adjusting the Foreign Exchange Administration Policies on Direct
Investment () and
its appendix promulgated in November 2012 and amended in May 2015, October 2018 and
December 2019 by the SAFE, the foreign exchange procedures are further simplified: (1) the
opening of and payment into foreign exchange accounts under direct investment are no longer
subject to approval by the SAFE; (2) reinvestment with legal income of foreign investors in
China is no longer subject to approval by SAFE; (3) the procedures for capital verification and
confirmation that foreign-invested enterprises need to go through are simplified; (4) purchase
and external payment of foreign exchange under direct investment are no longer subject to
approval by SAFE; (5) domestic transfer of foreign exchange under direct investment is no
longer subject to approval by SAFE; and (6) the administration over the settlement of foreign
exchange capital of foreign-invested enterprises is improved. Later, the SAFE promulgated the
Notice on Further Simplifying and Improving Foreign Exchange Administration Policies in
Respect of Direct Investment ()i n
February 2015 which became effective in June 2015 and was further amended in December
2019, prescribed that the banks instead of the SAFE can directly handle the foreign exchange
registration under foreign direct investment and outbound investment while the SAFE and its
branches indirectly supervise the foreign exchange registration under foreign direct investment
through the bank.
According to the Circular on the Reform of the Management Method for the Settlement
of Foreign Exchange Capital of Foreign-invested Enterprises (̮ਠҳ༟Άุ̮ි༟
) promulgated by the SAFE in March 2015 and amended in
December 2019, and the Circular on the Reform and Standardization of the Management Policy
of the Settlement of Capital Projects ()
promulgated by the SAFE in June 2016, the settlement of foreign exchange by foreign invested
enterprises shall be governed by the policy of foreign exchange settlement on a discretionary
basis. However, the settlement of foreign exchange shall only be used for their own operational
purposes within the business scope of the foreign invested enterprises and follow the principles
of authenticity.
On October 23, 2019, the SAFE issued the Circular on Further Facilitating the
Convenience of Cross-border Trade and Investment (ٙ
), or Circular 28, which took effect on the same day. Circular 28 allows non-investment
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foreign-invested enterprises to use their capital funds to make equity investments in China,
provided that such investments do not violate the requirements on the Negative List and the
target investment projects are genuine and in compliance with laws and regulations.
According to the Circular on Optimizing Administration of Foreign Exchange to Support
the Development of Foreign-related Business (ஷ
) issued by the SAFE in April 2020, eligible enterprises are allowed to make domestic
payments by using their funds received by way of capital contribution, foreign debts and
overseas listing, with no need to provide the evidentiary materials concerning authenticity of
such payment for banks in advance, provided that their capital use shall be authentic and
compliant, and conform with the prevailing administrative regulations on the use of income
under capital accounts. The concerned bank shall conduct ex post spot check and the local
branches of the SAFE shall strengthen operational and post-operational oversight in
accordance with the relevant requirements.
Dividend Distribution
The principal regulations governing distribution of dividends of wholly foreign-invested
enterprise, or WFOE, include the PRC Company Law, under which, WFOEs in China may pay
dividends only out of their accumulated profits, if any, determined in accordance with the PRC
accounting standards and regulations. In addition, foreign investment enterprises in the PRC
are required to allocate at least 10% of their accumulated profits each year, if any, to fund
certain reserve funds unless these reserves have reached 50% of the registered capital of the
enterprises. These reserves are not distributable as cash dividends.
The SAFE promulgated the Notice on Improving the Check of Authenticity and
Compliance to Further Promote Foreign Exchange Administration Reform (ආɓӉપආ
) in January 2017, which stipulates several capital
control measures with respect to outbound remittance of profits from domestic entities to
offshore entities, including the following: (1) under the principle of genuine transaction, banks
shall check board resolutions regarding profit distribution, the original version of tax filing
records and audited financial statements for any remittance of profits of more than (not
excluding) USD50,000; and (2) domestic entities shall hold income to account for previous
years’ losses before remitting the profits. Moreover, domestic entities shall make detailed
explanations of sources of capital and utilization arrangements, and provide board resolutions,
contracts and other proof when completing the registration and outward remittance procedures
in connection with an outbound investment.
Foreign Exchange Registration of Offshore Investment by PRC Residents
The SAFE promulgated the Circular on Relevant Issues Concerning the Foreign Exchange
Administration of the Overseas Investment and Financing and the Round-Tripping Investment
Made by Domestic Residents through Special-Purpose Companies (ࣿ
), or SAFE Circular 37, in July
2014. The SAFE Circular 37 requires PRC residents (including PRC institutions and
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individuals) to register with local branches of SAFE in connection with their direct or indirect
offshore investment in an overseas special purpose vehicle, or the SPV , directly established or
indirectly controlled by PRC residents for offshore investment and financing with their legally
owned assets or interests in domestic enterprises, or their legally owned offshore assets or
interests. Such PRC residents are also required to amend their registrations with the SAFE
when there is a change to the basic information of the SPV , such as changes of a PRC resident
individual shareholder, the name or operating period of the SPV , or when there is a significant
change to the SPV , such as changes of the PRC individual resident’s increase or decrease of its
capital contribution in the SPV , or any share transfer or exchange, merger, division of the SPV .
Failure to comply with the registration procedures set forth in the SAFE Circular 37 may
result in restrictions on the foreign exchange activities of the relevant onshore company,
including the payment of dividends and other distributions to its offshore parent or affiliate, the
capital inflow from the offshore entities and settlement of foreign exchange capital, and may
also subject relevant onshore company or PRC residents to penalties under PRC foreign
exchange administration regulations for evasion of foreign exchange controls.
Employee Stock Incentive Plan
In February 2012, the SAFE promulgated the Circular on Relevant Issues Concerning the
Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive
Plans of Overseas Publicly Listed Company (ྌ
), or the Stock Option Rules, which replaced the earlier rules
promulgated by the SAFE in March 2007. Under the Stock Option Rules, PRC residents who
participate in stock incentive plans in an overseas publicly listed company are required,
through a PRC agent or PRC subsidiary of such overseas publicly listed company, to complete
the foreign exchange registration and certain other procedures. These participants must also
retain an overseas entrusted institution to handle matters in connection with their exercise of
stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In
addition, the PRC agent is required to amend the registration with respect to the share scheme
if there is any material change to the stock incentive plan, the PRC agent or the overseas
entrusted institution or other material changes.
PRC Regulations on Labor
Labor Law and Labor Contract Law
According to the PRC Labor Law (), which was promulgated
by the Standing Committee of the NPC in July 1994 and amended in August 2009 and
December 2018 respectively, the PRC Labor Contract Law (),
which was promulgated by the Standing Committee of the NPC in June 2007 and amended in
December 2012 and came into effect in July 2013, and the Implementing Regulations of the
Labor Contract Law of the PRC (ૢԷ), which was
promulgated by the State Council in September 2008, employers shall establish and improve
labor rules and regulations according to the laws and regulations and shall strictly comply with
the national standards, provide trainings to its employees, protect their labor rights and perform
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its labor obligations. Labor contracts in written form shall be executed to establish labor
relationships between employers and employees. Labor contracts shall be categorized into
contracts with fixed term, contracts without fixed term and contracts to be expired upon
completion of certain tasks. In addition, wages cannot be lower than the local minimum wage.
The employers must establish a system for labor safety and sanitation, strictly abide by State
rules and standards, provide education regarding labor safety and sanitation to its employees,
provide employees with labor safety and sanitation conditions and necessary protection
materials in compliance with State rules, and carry out regular health examinations for
employees engaged in work involving occupational hazards. Violations of the PRC Labor Law
and the PRC Labor Contract Law and its implementation rules may result in the imposition of
fines and other administrative and criminal liabilities in the case of serious violations.
Social Insurance and Housing Provident Funds
According to the Social Insurance Law of PRC (), which
was promulgated by the Standing Committee of the NPC in October 2010 and came into effect
in July 2011, and further amended in December 2018, the Interim Regulations on the
Collection and Payment of Social Security Funds (ᎈ൬ᅄᖮᅲБૢԷ), which was
promulgated by the State Council in January 1999 and amended in March 2019, the
Regulations on the Administration of Housing Provident Funds (၍ଣૢԷ),
which was promulgated by the State Council in April 1999 and amended in March 2002 and
March 2019 and other regulations and rules (e.g. Trial Measures for Enterprise Staff Maternity
Insurance () coming into effect in January 1995, Regulations
on Work-Related Injury Insurance (ᎈૢԷ) coming into effect in January 2004 and
amended in December 2010, the Decision of the State Council on Establishing the Urban
Employees’ Basic Medical Insurance System (ܓ
) coming into effect in December 1998, the Regulations on Unemployment Insurance
(ᎈૢԷ) coming into effect in January 1999, and the Decision of the State Council
on Establishing the Unified Enterprise Employee Basic Pension Insurance System ( ਷ਕ৫
) coming into effect in July 1997),
employers are required to register with relevant social insurance and housing provident fund
authorities, contribute, on behalf of their employees, to a number of social security funds,
including funds for basic pension insurance, unemployment insurance, basic medical
insurance, occupational injury insurance, maternity insurance and to housing provident funds,
in full and on time. If an employer fails to go through the formalities or does not pay the full
amount as required, the relevant administration authority shall order it to rectify and make up
the shortfall within the prescribed time limit and a late payment fee for each overdue shall be
paid. If the rectification for social insurance registration is not made within the stipulated
period, the employer shall be imposed a fine. If an employer fails to undertake requisite
registration of housing provident fund or fails to go through the formalities of opening housing
provident fund account for its employees, a fine shall be imposed. If an employer fails to make
payment for the housing provident fund, it may be subject to an order for compulsory
enforcement issued by the people’s court.
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On July 20, 2018, the General Office of the Central Committee of the Communist Party
of China and the General Office of the State Council issued the Reform Plan of the State Tax
and Local Tax Collection Administration System (), under
which, beginning from January 1, 2019, tax authorities are responsible for the collection of
social insurance contributions in the PRC. According to the Notice on Conducting the Relevant
Work Concerning the Administration of Collection of Social Insurance Premiums in a Steady,
Orderly and Effective Manner ()
promulgated by the General Office of the State Taxation Administration, or the STA, in
September 2018 and the Urgent Notice on Implementing the Spirit of the Executive Meeting
of the State Council in Stabilizing the Collection of Social Security Contributions (஫
) promulgated by the
General Office of the Ministry of Human Resources and Social Security in September 2018,
all the local authorities responsible for the collection of social insurance are strictly forbidden
to conduct self-collection of historical unpaid social insurance contributions from enterprises.
Notice on Implementing Measures to Further Support and Serve the Development of Private
Economy () promulgated by the
Statement Administration for Tax in November 2018, repeated that tax authorities at all levels
may not organize self-collection of arrears of taxpayers including private enterprises in the
previous years. The Notice on Promulgation of the Comprehensive Plan for the Reduction of
Social Insurance Premium Rate ()
promulgated by the General Office of the State Council in April 2019, generally reduces the
social insurance contribution burden of enterprises, underlines that the duties for collection of
social insurances premium paid by the enterprises in any province shall not be transferred to
tax authorities until the condition of the province is mature, and re-emphasizes that local
authorities shall not conduct self-collection of historical unpaid social insurance contributions
from enterprises.
PRC Regulations on Taxation
Enterprise Income Tax (“EIT”)
According to the Enterprise Income Tax Law of the PRC (੻೼
) promulgated by the NPC in March 2007 and amended in February 2017 and December
2018, and the Implementation Regulation of the Enterprise Income Tax Law of the PRC ( ʕ
ૢԷ) promulgated by the State Council in December 2007
and amended in April 2019 (collectively, the “EIT Law”), other than a few exceptions, the
income tax rate for both domestic enterprises and foreign-invested enterprises is 25%.
Enterprises are classified as either “resident enterprises” or “non-resident enterprises.” Apart
from enterprises established within the PRC, enterprises established outside China whose “de
facto management bodies” are located in China are considered as “resident enterprises” and
subject to the uniform 25% enterprise income tax rate for their global income. A non-resident
enterprise refers to an entity established under foreign law whose “de facto management
bodies” are not within the PRC but which has an establishment or place of business in the PRC,
or which does not have an establishment or place of business in the PRC but have income
sourced within the PRC. An income tax rate of 10% will normally be applicable to dividends
declared to non-PRC resident enterprise investors that do not have an establishment or place
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of business in the PRC, or that have such establishment or place of business but the relevant
income is not effectively connected with the establishment or place of business, to the extent
such dividends are derived from sources within the PRC.
The Notice Regarding the Determination of Chinese-Controlled Offshore
Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto
Management Bodies (͏ΆุϞ
) promulgated by the STA in April 2009 and amended in December 2017 sets
out the standards and procedures for determining whether the “de facto management body” of
an enterprise registered outside of the PRC and controlled by PRC enterprises or PRC
enterprise groups is located within the PRC.
According to the EIT Law, the EIT tax rate of a high-tech enterprise is 15%. Pursuant to
the Administrative Measures for the Recognition of High and New Technology Enterprises
(), came into effect from January 1, 2008 and amended on
January 29, 2016, the certificate of a high and new technology enterprise is valid for three
years. An enterprise shall, after being accredited as a high-tech enterprise, fill out and submit
the statements on annual conditions concerning the IP rights, scientific and technical personnel,
expenses on research and development and operating income for the previous year on the
“website for the administration of accreditation of high-tech enterprises.” Besides, when any
high-tech enterprise has changed its name or has undergone any major change concerning the
accreditation conditions (such as a division, merger, reorganization or change of business), it
shall report the change to the accreditation institution within three months upon occurrence of
the change. If the high-tech enterprise is qualified upon review by the accreditation institution,
it continues to have the qualification as a high-tech enterprise, and in case of change in the
name, a new accreditation certificate will be issued with the number and term of validity
remaining the same as the previous certificate; otherwise, the qualification as a high-tech
enterprise shall be canceled as of the year of change in the name or any other condition.
Dividend Withholding Tax
Pursuant to the EIT Law, if a non-resident enterprise has not set up an organization or
establishment in the PRC, or has set up an organization or establishment but the income derived
has no actual connection with such organization or establishment, it will be subject to a
withholding tax on its PRC-sourced income at a rate of 10%. According to the Arrangement
Between the Mainland of China and the Hong Kong Special Administrative Region for the
Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on
Income (τર), or the
Double Tax Avoidance Arrangement, which was promulgated and came into effect in August
2006, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the
competent PRC tax authority to have satisfied the relevant conditions and requirements under
such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax
on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise
may be reduced to 5%. However, based on the Circular on Certain Issues with Respect to the
Enforcement of Dividend Provisions in Tax Treaties (ૢಛϞᗫਪᕚ
) which was promulgated by the STA, in February 2009, if the relevant PRC tax
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authorities determine, in their discretion, that a company benefits from such reduced income
tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities
may adjust the preferential tax treatment. Based on the Announcement of the State Taxation
Administration on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties ( ਷
ʕ“Ϟɛ”ʮѓ), which was promulgated by the
STA in February 2018 and came into effect in April 2018, if an applicant’s business activities
do not constitute substantive business activities, it could result in the negative determination
of the applicant’s status as a “beneficial owner,” and consequently, the applicant could be
precluded from enjoying the above-mentioned reduced income tax rate of 5% under the Double
Tax Avoidance Arrangement.
Income Tax for Share Transfers
On February 3, 2015, the STA issued the Circular on Certain Issues Concerning
Enterprise Income Tax for Indirect Transfer of Assets by Non-Resident Enterprises (ڢ׵
ʮѓ), or Circular 7. Circular 7 provides
comprehensive guidelines relating to, and heightened the PRC tax authorities’ scrutiny over,
indirect transfers by a non-resident enterprise of assets (including equity interests) of a Chinese
resident enterprise, or PRC Taxable Assets. For example, Circular 7 specifies that where a
non-resident enterprise transfers PRC Taxable Assets indirectly by disposing of equity interests
in an overseas holding company which directly or indirectly holds such PRC Taxable Assets,
the PRC tax authorities are entitled to reclassify the nature of an indirect transfer of PRC
Taxable Assets by disregarding the existence of such overseas holding company and
considering the transaction to be a direct transfer of PRC Taxable Assets, if such transfer is
deemed to have been conducted for the purposes of avoiding PRC EIT and without any other
reasonable commercial purpose. Except as otherwise provided in Circular 7, transfers of PRC
Taxable Assets under the following circumstances shall be automatically deemed as having no
reasonable commercial purpose, and are subject to PRC EIT: (i) more than 75.00% of the value
of the equity interest of the overseas enterprise is directly or indirectly attributable to the PRC
Taxable Assets; (ii) more than 90.00% of the total assets (cash excluded) of the overseas
enterprise are directly or indirectly composed of investment in China at any time during the
year prior to the indirect transfer of PRC Taxable Assets, or more than 90.00% of the income
of the overseas enterprise is directly or indirectly derived from China during the year prior to
the indirect transfer of PRC Taxable Assets; (iii) the overseas enterprise and its subsidiaries
directly or indirectly holding PRC Taxable Assets have registered with the relevant authorities
in the host countries (regions) in order to meet the legal requirements in relation to
organizational forms, yet demonstrate to be inadequate in their ability to perform their intended
functions and withstand risks as their alleged organization forms suggest; and (iv) the income
tax from the indirect transfer of PRC Taxable Assets payable abroad is lower than the income
tax in China that may be imposed on the direct transfer of such PRC Taxable Assets.
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V alue Added Tax (“VAT”)
According to the Interim Regulations of the PRC on V alue-Added Tax ( ʕശɛ͏΍ձ
೼ᅲБૢԷ), effective in January 1994 and further amended in November 2008,
February 2016, and November 2017, and the Detailed Rules for the Implementation of the
Interim Regulations of the PRC on V alue-Added Tax (݄
) which became effective in December 1993 and amended in December 2008 and
October 2011, except stipulated otherwise, taxpayers who sell goods, labor services or tangible
movable property leasing services or import goods shall be subject to a 17% tax rate; taxpayers
who sell transport services, postal services, basic telecommunications services, construction
services, or real property leasing services, sell real property, transfer the land use right and sell
or import certain goods shall be subject to an 11% tax rate, and taxpayers who sell services or
intangible assets shall be subject to a 6% tax rate.
According to the Circular of the Ministry of Finance and the STA on Adjusting
V alue-added Tax Rates () adopted in April
2018, as of May 2018, where a taxpayer engages in a taxable sales activity for the value-added
tax purpose or imports goods, the previous applicable 17% and 11% rates are respectively
adjusted to 16% and 10%.
According to the Announcement of the Ministry of Finance, the STA and the General
Administration of Customs on Relevant Policies for Deepening V alue-Added Tax Reform ( ৌ
ʮѓ), effective in April 2019,
the 16% V A T tax rate, which applies to the sales or imported goods of a V A T general taxpayer,
will be lowered to 13%; and the 10% V A T tax rate will be lowered to 9%.
According to the Measures for the Exemption of V alue-Added Tax from Cross-Border
Taxable Activities in the Collection of V alue-Added Tax in Lieu of Business Tax
(Trial Implementation) (ج(༊Б))
promulgated in May 2016 and amended in June 2018, if domestic enterprises provide
cross-border taxable activities such as professional technical services, technology transfer,
software services, the above-mentioned cross-border taxable activities are exempt from V A T.
Regulations on Data Privacy and Cybersecurity
General Data Protection Regulation 2016/679 (“GDPR”) and the UK GDPR
The collection, use, disclosure, transfer, or other processing of personal data regarding
individuals in the European Union, including personal health data, is subject to the GDPR
which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes
numerous requirements on companies that process personal data, including requirements
relating to processing health and other sensitive data, obtaining consent of the individuals to
whom the personal data relates, providing information to individuals regarding data processing
activities, implementing safeguards to protect the security and confidentiality of personal data,
providing notification of data breaches, and taking certain measures when engaging third-party
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processors. The GPDR imposes restrictions on our ability to gather personal data, provides
individuals with the ability to opt out of personal data collection, imposes obligations on our
ability to share data with others, and potentially subjects us to fines, lawsuits, and regulatory
scrutiny.
The GDPR also imposes strict rules on the transfer of personal data to countries outside
the European Union, including the United States, and permits data protection authorities to
impose large penalties for violations of the GDPR, including potential fines of up to
C20
million or 4% of annual global revenue, whichever is greater. The GDPR also confers a private
right of action on data subjects and consumer associations to lodge complaints with
supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting
from violations of the GDPR. Compliance with the GDPR is a rigorous and time-intensive
process that increases the cost of doing business and has required companies to change their
business practices.
Since the United Kingdom (“UK”) ceased to be a member of the European Union in
January 2020, the UK GDPR has applied to the processing of personal data in the UK.
Although the UK GDPR is a copy of the GDPR, ongoing developments in the UK have created
uncertainty with regard to data protection regulation, which could result in new UK data
privacy and protection laws and standards.
PRC
Scientific data
In March 2018, the General Office of the State Council promulgated the Measures for the
Management of Scientific Data (), or the Scientific Data Measures,
which provide a broad definition of scientific data and relevant rules for the management of
scientific data. Pursuant to the Scientific Data Measures, the scientific data involving state
secrets, national security, social or public interests, trade secrets and individual privacy shall
be kept confidential; where it is necessary to disclose such data, the purposes of utilization,
qualifications of users and confidentiality conditions, among others shall be examined, and the
scope of those with access thereto shall be strictly controlled. Enterprises in the PRC must seek
governmental approval before any scientific data involving a state secret is provided during
foreign contacts and cooperation. Upon approval by the competent authorities, corporate
entities shall undergo the relevant formalities as required, and sign confidentiality agreements
with users. Furthermore, any researcher conducting research funded in part or in whole by the
PRC government is required to submit relevant scientific data for management by the entity to
which such researcher is affiliated before that data may be published in any foreign academic
journal.
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Personal data
Pursuant to the Civil Code of the PRC, the personal information of an individual shall be
protected by the law. Any organization or individual that needs to obtain personal information
of others shall obtain such information legally and ensure the safety of such information, and
shall not illegally collect, use, process or transmit personal information of others, or illegally
purchase or sell, provide or publish personal information of others. In addition, the processing
of personal information shall follow the principles of lawfulness, appropriateness and
necessity.
On August 20, 2021, the Standing Committee of the NPC promulgated the Personal
Information Protection Law of the PRC (), or the
Personal Information Protection Law, which became effective on November 1, 2021. The
Personal Information Protection Law requires, among others, that the processing of personal
information should have a clear and reasonable purpose and should be limited to the minimum
scope necessary to achieve the processing purpose, adopt a method that has the least impact on
personal rights and interests, and shall not process personal information that is not related to
the processing purpose.
The Interpretations of the Supreme People’s Court and the Supreme People’s
Procuratorate on Several Issues Concerning the Application of Law in the Handling of
Criminal Cases Involving Infringement of Citizens’ Personal Information (৫e
༆ᙑ), or the
Interpretations, was promulgated on May 8, 2017 and became effective on June 1, 2017. The
Interpretations clarify several concepts regarding the crime of “infringement of citizens’
personal information” stipulated by Article 253A of the Criminal Law of the PRC ( ʕശɛ
), including “citizens’ personal information,” “violation of relevant national
provisions,” “provision of citizens’ personal information” and “illegally obtaining any citizen’s
personal information by other methods.” In addition, the Interpretations specify the standards
for determining “serious circumstances” and “extraordinary serious circumstances” of this
crime.
Information security and censorship
Under the Administrative Measures for the Multi-level Protection of Information Security
(), or the Measures for the Multi-level Protection, which was
promulgated jointly by the Ministry of Public Security and certain other PRC government
authorities in January 2006, and was last amended on June 17, 2007 and became effective on
the same day, the national multi-level protection of the information security shall follow the
principle of “independent grading and independent protection.” Companies operating or using
information systems shall determine their security protection level of the information system
pursuant to the Measures for the Multi-level Protection and the Guidelines for Grading of
Classified Protection of Information Systems ()o rt h e
Guidelines for Grading, and report the level to the relevant authority for examination and
approval. According to the Measures for the Multi-level Protection and the Guidelines for
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Grading, the security protection of an information system may be classified into five levels,
and for any system equal to or above level II as determined in accordance with these measures,
a record-filing with the competent authority is required.
On July 1, 2015, the Standing Committee of the NPC promulgated the National Security
Law of the PRC (), or the National Security Law, which came
into effect on the same date. The National Security Law provides that the state shall build a
network and information security guarantee system and improve network and information
security protection capability to realize the controllable security of the network information
key technologies and critical infrastructure and the information systems and data in important
fields. In addition, a national security review and supervision system is required to be
established to review, among other things, foreign investment, key technologies and network
information technology products and services and other important activities that impact or are
likely to impact the national security of the PRC.
On November 7, 2016, the Standing Committee of the NPC promulgated the Cyber
Security Law of the PRC (), which became effective on June
1, 2017, pursuant to which, network operators shall fulfill their obligations to safeguard
security of the network when conducting business and providing services. Those who provide
services through networks shall take technical measures and other necessary measures pursuant
to laws, regulations and compulsory national requirements to safeguard the safe and stable
operation of the networks, respond to network security incidents effectively, prevent illegal and
criminal activities, and maintain the integrity, confidentiality and usability of network data.
Network operator shall not collect the personal information irrelevant to the services it
provides or collect or use the personal information in violation of the provisions of laws or
agreements concluded with its users, and network operators of key information infrastructure
shall store within the PRC all the personal information and important data collected and
produced within the PRC. The purchase of network products and services that may affect
national security shall be subject to national cyber security review.
On June 10, 2021, the Standing Committee of the NPC promulgated the Data Security
Law of the PRC (), or the Data Security Law, which came into
effect on September 1, 2021. The Data Security Law sets forth the regulatory framework and
the responsibilities of the relevant governmental authorities in regulating data security. It
provides that the central government shall establish a state data security work liaison system,
which shall coordinate the relevant authorities covering different industries to formulate the
catalogues of key data, and the special measures that shall be taken to protect the security of
the key data.
On July 30, 2021, the State Council promulgated the Regulations on the Protection of the
Security of Critical Information Infrastructure (ᚐૢԷ), which
became effective on September 1, 2021. According to the Regulations on the Protection of the
Security of Critical Information Infrastructure, a “critical information infrastructure” refers to
any of the network facilities and information systems in important industries and fields (such
as public communication and information services, energy, transportation, water conservancy,
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finance, public services, e-government, and science, technology and industry for national
defense) that may seriously endanger national security, national economy and people’s
livelihood, and the public interests in which event that they are damaged, lose their functions
or leak their data. These regulations supplement and specify the provisions on the security of
critical information infrastructure as stated in the Cyber Security Law of the PRC, and provide
that the competent governmental authorities and supervision and management authorities of the
aforementioned important industries will be responsible for (i) organizing the identification of
critical information infrastructures in their respective industries in accordance with certain
identification rules, and (ii) promptly notifying the identified operators and the Ministry of
Public Security of the identification results. These regulations require that the relevant operator
shall submit a report to the competent PRC governmental authority in accordance with relevant
provisions upon the occurrence of any major cybersecurity incident or the discovery of any
major cybersecurity threat to the critical information infrastructures, and the operators of
critical information infrastructures shall purchase the safe and trusted network products and
services in the first place. If the purchase of network products and services may affect national
security, such operators shall pass the cybersecurity review accordingly.
On December 28, 2021, the Cyberspace Administration of China, or the CAC, jointly with
12 other governmental authorities, promulgated the Measures for Cybersecurity Review ( ၣ
), or the MCR, which became effective on February 15, 2022. Pursuant to
the MCR, critical information infrastructure operators that purchase network products and
services, and network platform operators engaging in data processing activities that affect or
may affect national security are subject to cybersecurity review under the MCR. In addition,
network platform operators with personal information of over one million users shall be subject
to cybersecurity review before listing abroad ( ਷̮ɪ̹). The competent governmental
authorities may also initiate a cybersecurity review against the operators if the authorities
believe that the network product or service or data processing activities of such operators affect
or may affect national security. During the verbal consultation conducted on July 10, 2023 with
the China Cybersecurity Review Technology and Certification Center (CCRC), the Company
was advised that the Company is not required to file an application for cybersecurity review
under Article 7 of the MCR with respect to the Listing. As of the Latest Practicable Date: (i)
we had not been designated as a critical information infrastructure operator by any
governmental authorities; (ii) we believe that we had not engaged in any data processing
activities that affect or may affect national security; and (iii) we had not been involved in any
investigations on cybersecurity review made by CAC, and had not received any inquiry, notice,
warning or sanctions in this regard.
On July 7, 2022, the CAC promulgated the Cross-border Data Transfer Security
Assessment Measures (), or the Security Assessment Measures,
which became effective on September 1, 2022. The Security Assessment Measures provide
that, among others, data processors shall apply to competent authorities for security assessment
when (i) the data processors transferring important data abroad; (ii) a critical information
infrastructure operator or a data processor that has processed personal information of more than
one million people, transferring personal information abroad; (iii) a data processor who has
provided personal information of 100,000 individuals or sensitive personal information of
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10,000 individuals abroad, in each case as calculated cumulatively, since January 1 of the last
year, transferring personal information abroad, and (iv) other circumstances where the security
assessment of data cross-border transfer is required as prescribed by the CAC. In addition, on
February 22, 2023, the Provisions on the Prescribed Agreement on Cross-border Data Transfer
of Personal Information (), or the Provisions on Prescribed
Agreement were promulgated by the CAC, which took effect on June 1, 2023. The Provisions
on Prescribed Agreement attach the prescribed template for cross-border data transfer
agreement that could be used as an available option to satisfy the condition for cross-border
transfer of personal information under Article 38 of the Personal Information Protection Law.
Furthermore, on March 22, 2024, the CAC promulgated the Provisions on Promoting and
Regulating Cross-Border Data Flows (), effective on the
date of promulgation. The provisions provide several exemptions from undergoing security
assessment, obtaining personal information protection certification, or entering into prescribed
agreement for cross-border transfer of personal information for businesses. These exemptions
include, among others, scenarios where a data processor, other than CIIO, has cumulatively
transferred overseas the personal information (excluding sensitive personal information) of
fewer than 100,000 individuals since January 1 of the current year. The provisions also
explicitly state that data processors are not required to conduct data security assessment for
cross-border data transfers if the concerning data has not been notified or published as
important data by relevant departments or regions. Our business does not require processing of
personal data in general and we only need to process and transfer personal information of
contact persons of our corporate clients and our employees outside of China for business and
employee management purpose. The estimated number of these individuals whose personal
data may be transferred outside China is less than 100,000 within one year. Therefore, with the
support of our PRC Legal Advisor’s view, we are of the view that we are exempted from the
relevant PRC cross border data transfer regulations.
On November 14, 2021, CAC promulgated the Regulation on the Administration of Cyber
Data Security (Draft for Comments) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)), or the Draft
Cyber Data Security Regulation. Pursuant to Article 2 and Article 73 of the Draft Cyber Data
Security Regulation, the Draft Cyber Data Security Regulation applies to data processing
activities by utilizing the internet as well as cyber data security supervision and management
activities within the PRC. “Cyber data” refers to any information that is electronically
recorded, whereas “data processing activities” refer to activities such as data collection,
storage, usage, processing, transmission, provision, disclosure and deletion. In general, any
company which is engaged in data processing activities through the internet within the PRC
will be subject to the Draft Cyber Data Security Regulation. In particular, Article 32 of the
Draft Cyber Data Security Regulation provides that, any data processor who processes
important data or who is listed overseas shall complete an annual data security assessment
either by itself or by a data security service organization engaged, and before January 31 of
each year, submit the annual data security assessment report of the previous year to the
competent cyberspace administration. As advised by our PRC Legal Advisor, by collecting,
storing and otherwise processing certain information via internet in connection with our
business operation, the Company would be subject to relevant requirements under the Draft
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Cyber Data Security Regulation in terms of personal data protection, cyber security
management, assessment and report and other applicable aspects, assuming that such
regulation is implemented in the current form. In addition, Article 13 of the Draft Cyber Data
Security Regulation stipulates that data processors must apply for cybersecurity review when
carrying out activities including (i) seeking to be listed in Hong Kong that affect or may affect
national security and (ii) other data processing activities that affect or may affect national
security. Given that the Draft Cyber Data Security Regulation was still in the draft form for
comments and had not come into force as of the Latest Practicable Date, the applicability and
interpretation of various requirements under the Draft Cyber Data Security Regulation may
change in the future.
Generative AI
On July 10, 2023, the CAC, together with other relevant authorities, released the Interim
Measures on Administration of Generative AI Services (ਕ၍ଣᅲБ፬
), or the Generative AI Measures, which came into effect on August 15, 2023 and imposed
compliance requirements on providers of generative AI services. According to the Generative
AI Measures, individuals or organizations that provide generative AI services of texts, images,
audios, videos, and other content shall be responsible as the producers of such network
information content to fulfill the obligations of network information security and as the
personal information handlers to protect any personal information involved. Certain providers
of generative AI services shall also conduct security assessments and complete regulatory
filings. Non-compliance may subject generative AI services providers to penalties, including
warning, public denouncement, rectification orders, and suspension of the provision of relevant
services.
Pursuant to Article 2 thereof, the Generative AI Measures do not apply where a company
researches, develops, or applies generative AI technology but does not provide relevant
generative AI services to the public within the PRC. During the Track Record Period, although
we used generative AI technology in our business, we did not provide generative AI services
to the public. Specifically, (i) our generative AI technology is only offered to internal business
team for the purpose of preliminary work products generation; (ii) our customers and
collaborators will not be allowed to access a platform supported by the generative AI
technology and use relevant generative AI services by themselves; and (iii) in most programs,
we will not provide such generative AI-based preliminary work products to our customers and
collaborators, but will engage in further offline improvement and refinement before delivering
the semi-finished/finished products. Based on the above, with the support of our PRC Legal
Advisor’s view, we are of the view that we are not subject to the Generative AI Measures.
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PRC Regulations on Overseas Listing
CSRC Filing Requirements for Overseas Offering and Listing
On February 17, 2023, the CSRC promulgated the Overseas Listing Trial Measures,
which became effective on March 31, 2023. The Overseas Listing Trial Measures
comprehensively improve and reform the existing regulatory regime for overseas offering and
listing of PRC domestic companies’ securities, and regulate both direct and indirect overseas
offering and listing of PRC domestic companies’ securities by adopting a filing-based
regulatory regime.
Pursuant to the Overseas Listing Trial Measures, PRC domestic companies that seek to
offer and list securities in overseas markets, either in direct or indirect means, are required to
fulfill the filing procedure with the CSRC and report relevant information. The Overseas
Listing Trial Measures provide that an overseas offering and listing is explicitly prohibited, if
any of the following exists: (i) such securities offering and listing is explicitly prohibited by
provisions in laws, administrative regulations and relevant state rules; (ii) the intended
overseas securities offering and listing may endanger national security as reviewed and
determined by competent authorities under the State Council in accordance with law; (iii) the
domestic company intending to make the securities offering and listing, or its controlling
shareholder(s) and the actual controller, have committed relevant crimes such as corruption,
bribery, embezzlement, misappropriation of property or undermining the order of the socialist
market economy during the latest three years; (iv) the domestic company intending to make the
securities offering and listing is currently under investigations for suspicion of criminal
offenses or major violations of laws and regulations, and no conclusion has yet been made
thereof; or (v) there are material ownership disputes over equity held by the domestic
company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the
controlling shareholder(s) and/or actual controller.
The Overseas Listing Trial Measures also provide that if the issuer meets both the
following criteria, the overseas securities offering and listing conducted by such issuer will be
deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of
the issuer’s operating revenue, total profit, total assets or net assets as documented in its
audited consolidated financial statements for the most recent fiscal year is accounted for by
domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in
mainland China, or its main place(s) of business are located in mainland China, or the majority
of senior management staff in charge of its business operations and management are PRC
citizens or have their usual place(s) of residence located in mainland China. The determination
of the indirect overseas issuance and listing of domestic enterprises follows the principle of
“substance over form.”
REGULATORY OVERVIEW
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According to the Overseas Listing Trial Measures, where an issuer submits an application
for initial public offering overseas to competent overseas regulators, such issuer must file with
the CSRC within three business days after such application is submitted. Generally, once the
filing documents are complete and in compliance with the stipulated requirements, the CSRC
will, within 20 working days, conclude the review procedure and publish the filing results on
the CSRC website. To the extent the filing documents are incomplete or do not conform to
stipulated requirements, the CSRC will, within 5 working days upon receipt of filing
documents, request supplementation and amendment to the filing. Then the issuer has 30
working days to prepare any requested supplemented/amended filing. In addition, following
the listing on an overseas market, the issuer shall submit a report to the CSRC within 3 working
days after the occurrence and public disclosure of the following events involving the issuer: (i)
change of control; (ii) investigations or sanctions imposed by overseas regulators; (iii) change
of listing status; and (iv) voluntary or involuntary delisting. Besides, if any material change in
the principal business and operation of the issuer after its overseas offering and listing takes
place and results in the issuer no longer within the scope of record-filing under Overseas
Listing Trial Measures, the issuer shall submit a special report and a legal opinion issued by
a PRC law firm to the CSRC within 3 working days after the occurrence of such change in
order to provide an explanation of the relevant situation.
Non-compliance with the Overseas Listing Trial Measures will result in regulatory action
by the CSRC and fines for PRC issuers in an amount up to RMB10 million. If a domestic
company fails to comply with the filing procedures or conceals material facts or falsifies major
contents in the filing documents, it may be subject to orders to make corrections, warnings,
fines and other administrative penalties, and its controlling shareholder, de facto controller,
directly responsible supervisors and other directly responsible persons may also be subject to
warnings or fines.
CSRC Requirements on Confidentiality and Archives Administration for Overseas Offering
and Listing
On February 24, 2023, the CSRC, the Ministry of Finance, National Administration of
State Secrets Protection and National Archives Administration of China jointly released the
revised Provisions on Strengthening the Confidentiality and Archives Administration of
Overseas Securities Offering and Listing by Domestic Companies (̋੶ྤʫΆุྤ̮೯
), or the Archives Administration Provisions,
which came into effect on March 31, 2023. The Archives Administration Provisions shall apply
to both (i) the PRC domestic companies seeking direct listing on the overseas stock exchange
and (ii) the PRC domestic operating entities of a foreign company seeking listing on the
overseas stock exchange that qualifies as an “indirect listing” (above (i) and (ii) collectively,
“Domestic Companies ”).
REGULATORY OVERVIEW
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According to the Archives Administration Provisions, the Domestic Companies shall
establish and implement a solid confidentiality and archives administration system. If a
Domestic Company decides to disclose any documents or materials containing state secrets,
work secrets of governmental agencies or any documents or materials that may be detrimental
to national security or public interest once leaked, such Domestic Company shall go through
proper governmental approval procedures with competent authorities, and complete the
relevant filings with the secrecy administration at the same level for the record purpose. After
obtaining the governmental clearance, the Domestic Company disclosing such information, as
one party, and the securities companies and securities services providers receiving such
information, as the other party, shall also enter into non-disclosure agreements, setting forth the
confidentiality obligations of the securities companies and securities services providers. When
providing above information to the securities companies and securities services providers
retained by it, the Domestic Companies are also required to issue a written statement outlining
its compliance with the relevant regulatory requirements and procedures.
In terms of providing accounting archives or copies thereof to any other entities or
persons (such as securities companies, securities services providers and overseas regulators),
the Archives Administration Provisions stipulate that relevant governmental procedures should
be followed.
Any violation of the Archives Administration Provisions may subject the Domestic
Companies to regulatory penalties under the PRC Law of Safeguarding State Secrets ( ʕശ
) and the PRC Law of Archives ()
and even criminal liabilities to the extent applicable.
REGULATORY OVERVIEW
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OVERVIEW
Our Group was established in 2015 by our Co-founders, Dr. Wen, Dr. Ma and Dr. Lai, who
are MIT-trained scientists. We have since developed into a globally leading, quantum
physics-based, AI-powered, and robotics-driven, innovative R&D platform, and have made
significant contributions in the fields of drug design and discovery by improving the speed,
scale, novelty and success rate. We are also making substantive progress in the fields of
material science (such as the design and discovery of bio-based materials, novel chemical
compounds for agritech applications, new chemical surfactants and catalysts, and cosmetics
and healthcare products) and automation (such as automated chemical synthesis). We aim to
revolutionize the design and discovery of novel molecules and materials, and venture into new
fields where our vision and strengths lead us. See “Business” for details of our achievements.
Since our founding, we have received substantial investments and support from
world-renowned private equity and strategic investors, and have raised funds of approximately
US$732 million. We ranked first among global AI-powered drug discovery companies by
aggregate funding raised through private equity financing as of December 31, 2023, according
to Frost & Sullivan. See “—Pre-IPO Investments” for details of our Pre-IPO Investors.
OUR MILESTONES
The following table sets forth our key development milestones:
Y ear Milestone
2015 Our Group was founded by our Co-founders with the establishment of
Shenzhen Jingtai to provide crystal structure prediction and drug
research development services.
We began to develop our research platform to study the solid-state
form of drugs.
2016 We established a CSP platform for crystal form prediction, leveraging
quantum physics applications and AIs.
Our CSP platform was proven accurate in a blind test held by Pfizer.
We established our AI R&D center.
We completed our Series Pre-A Financing, Series A-1 Financing and
Series A-2 Financing which had first launched since 2015.
2017 We launched our AI-powered integrated technology platform
“Atompai” and our AI-powered drug discovery platform “Renova”.
Our Company was incorporated in the Cayman Islands.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Y ear Milestone
We began our cooperation with Pfizer to provide polymorph
screening and selection service.
We completed our Series B Financing.
2018 We entered into a ten-year strategic Master Collaboration Research
and License Agreement with Pfizer to develop force field platform.
We developed the XFF high-precision force field in cooperation with
Pfizer and XFEP for free energy perturbation calculations.
We established wet lab facilities for solid-state R&D, synthesis and
experimental research.
We developed our drug discovery platform for small molecules.
We completed our Series B+ Financing.
2019 We began to develop our drug discovery platform for antibody,
peptide and protein therapeutics.
We completed our Series B++ Financing.
2020 We started R&D of automation laboratory and completed
development and concept certification on the prototype machine of
the automation station.
We completed our Series C Financing.
2021 We completed the development of our experimental and computing
R&D center in Futian, Shenzhen.
We completed the development of our pharmaceutical innovation
R&D center in Pudong, Shanghai.
We developed a proprietary AI-powered next-generation antibody
discovery platform “XupremAb”.
We completed our Series D Financing.
2022 We built-up our scalable and standardized intelligent robotic wet labs.
2023 We have developed our proprietary ProteinGPT, an AI-based
biomedical generative tool, designed to predict and screen protein
sequences and generate protein drugs that meet specific pre-set
criteria by incorporating LLM into our algorithms.
We entered into an AI small molecule drug discovery collaboration
worth up to US$250 million with a global leading pharmaceutical
company headquartered in Indianapolis, Indiana.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Y ear Milestone
We established an innovative demo lab in Boston, Massachusetts to
showcase our R&D capability in the U.S. market.
We unveiled the brands “XtalPi Drug Discovery” and “XtalPi
Intelligent Automation.”
OUR GROUP
Our Company
Our Company was incorporated in the Cayman Islands on April 28, 2017 as an exempted
company with limited liability to serve as the holding company and listing vehicle of our
Group. See “Major Corporate Developments of Our Group” below for details.
Our Principal Subsidiaries
The following are our principal subsidiaries:
Name
Date of
incorporation
Place of
incorporation
Direct or
indirect
shareholding
attributable to
our Company
Principal
activities/functions
Shenzhen Jingtai September 11,
2015
PRC 100% Provision of solid-
state R&D, drug
discovery
solutions and
other services
XtalPi US February 10,
2016
U.S. 100% Business
development
Shenzhen Zhiyao July 5, 2017 PRC 100% Patent holding
platform
Beijing Jingtai March 14, 2016 PRC 100% Provision of drug
discovery
solutions and
other services
Shanghai Zhiyao December 2,
2019
PRC 100% Provision of solid-
state R&D, drug
discovery
solutions and
other services
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Name
Date of
incorporation
Place of
incorporation
Direct or
indirect
shareholding
attributable to
our Company
Principal
activities/functions
Shanghai Jingtai September 21,
2022
PRC 100% Provision of drug
discovery
solutions and
other services
XtalPi Investment December 22,
2021
Cayman Islands 87.69% Incubator platform
Shenzhen Zhongge January 20,
2022
PRC 100% Patent holding
platform
For the alterations in the share capital of our subsidiaries that have taken place within the
two years immediately preceding the date of this prospectus and which are not set out below,
see “Appendix IV—A. Further Information about Our Group—3. Changes in the Share Capital
of Our Subsidiaries.”
MAJOR CORPORATE DEVELOPMENTS OF OUR GROUP
Establishment of Shenzhen Jingtai
Shenzhen Jingtai is our principal operating subsidiary in the PRC and is principally
engaged in the provision of solid-state R&D, drug discovery solutions and other services. It
was established in the PRC with limited liability on September 11, 2015 with an initial
registered capital of RMB100,000. As of the date of its establishment, Shenzhen Jingtai was
owned as to 41.22% by Dr. Wen, 23.14% by Dr. Ma, 17.82% by Dr. Lai and 17.82% by Mr.
Zhu Qiang ( ϡ੶).
Mr. Zhu Qiang is our former R&D engineer and an Independent Third Party. On July 13,
2017, due to Mr. Zhu Qiang’s resignation from our Group to pursue other career opportunities,
he transferred his entire equity interests in Shenzhen Jingtai to Shenzhen Quantum Pengyun
Technology Enterprise (Limited Partnership) (ҦΆุ(Υྫ)) (“ Quantum
Pengyun ”), a limited partnership established in the PRC which was the then employee
incentive platform of Shenzhen Jingtai, at a consideration of RMB17,820, which was
determined with reference to the then paid-up capital of Shenzhen Jingtai contributed by him
and has been settled. Quantum Pengyun was owned as to 30% by Dr. Wen as its general partner,
30% by Dr. Ma as its general partner and 40% by Dr. Zhang Peiyu as its limited partner, who
had held the partnership interest on behalf of the eligible participants.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Series Pre-A Financing
On October 13, 2015, we conducted the Series Pre-A Financing, resulting in an 19.36%
increase in the registered capital in Shenzhen Jingtai. See “—Pre-IPO Investments” for further
details.
Concurrently with the completion of the Series Pre-A Financing, Quantum Pengyun, the
then employee incentive platform of Shenzhen Jingtai, subscribed for 19.73% of the enlarged
registered capital in Shenzhen Jingtai at a consideration of RMB32,390.
Series A-1 Financing
On December 15, 2015, we conducted the Series A-1 Financing, resulting in an 25.00%
increase in the registered capital in Shenzhen Jingtai. See “—Pre-IPO Investments” for further
details.
Series A-2 Financing
In June and August 2016, we conducted the Series A-2 Financing, pursuant to which we
were extended a convertible loan (the “ Series A-2 CB ”) in the principal amount of
US$400,000. See “—Pre-IPO Investments” for further details.
Incorporation of our Company
Our Company was incorporated in the Cayman Islands on April 28, 2017 as an exempted
company with limited liability to serve as the holding company of our Group. Upon
incorporation, one share of US$0.0001 was issued to the initial subscriber, an Independent
Third Party, who transferred such share to QuantumPharm Holdings, a company which was
then owned as to 50.16% by SSBL Holdings (a company which was wholly owned by Dr. Wen),
28.16% by Jian Guo Pai (a company which was wholly owned by Dr. Ma) and 21.68% by
Sevening B Holdings (a company which was wholly owned by Dr. Lai). On the same date,
additional 9,999 ordinary shares of US$0.0001 each were issued to QuantumPharm Holdings
at par. As a result, our Company became ultimately wholly owned by the Co-founders through
QuantumPharm Holdings.
Incorporation of QuantumPharm HK and Shenzhen Zhiyao
QuantumPharm HK was incorporated in Hong Kong with limited liability on May 19,
2017 to serve as an intermediate holding company of our Group. Upon its incorporation,
10,000 shares were issued to our Company at a subscription price of HK$10,000 and
QuantumPharm HK became wholly owned by our Company.
Shenzhen Zhiyao was established in the PRC with limited liability on July 5, 2017 with
an initial registered capital of US$5.0 million. Since its establishment, Shenzhen Zhiyao has
been wholly owned by QuantumPharm HK.
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Share Consolidation and Adoption of WVR Structure and VIE Structure
On November 17, 2017, our Company conducted a share consolidation pursuant to which
ten shares of US$0.0001 each in our share capital were consolidated into one Share of
US$0.001 each.
On the same date, following the aforesaid share consolidation, our Company adopted a
weighted voting rights structure (the “ WVR Structure ”) by re-classifying and re-designating
all the then issued and unissued ordinary shares in our share capital into (i) Class A Ordinary
Shares, (ii) Class B Ordinary Shares, (iii) Series Pre-A Preferred Shares; (iv) Series A-1
Preferred Shares; (v) Series A-2 Preferred Shares; and (vi) Series B Preferred Shares. Each
Class A Ordinary Share and Preferred Share entitles its holder to exercise one vote on all
matters at the general meetings of our Company, and each Class B Ordinary Share entitles its
holder to exercise ten votes on all matters at the general meetings of our Company. The 10,000
ordinary shares of US$0.001 each held by QuantumPharm Holdings, representing all the then
issued shares of our Company prior to the adoption of the WVR Structure, were re-classified
and re-designated into 1,000 Class B Ordinary Shares. As a result, the Co-founders, through
QuantumPharm Holdings, became the sole ultimate beneficial owners of the Class B Ordinary
Shares. The adoption of the WVR Structure allowed the Co-founders to be in a position to
maintain control over our Company and our operations with their holding of more than 50%
of the voting rights of our Company, notwithstanding the dilution of their shareholding in our
Company following the various rounds of Pre-IPO Investments conducted thereafter, which
enabled our Company to continue to benefit from the continuing vision and leadership of the
Co-founders for our long-term growth and prospects. Nonetheless, in light of the requirements
under Rule 8.11 of the Listing Rules, by the adoption of the Memorandum and the Articles, the
WVR Structure will be unwound with effect upon the Listing, and each Share (including each
of the Class B Ordinary Shares with super-voting rights) will be converted or redesignated to
one Ordinary Share. See “—Unwinding of the WVR Structure and Conversion of the Preferred
Shares” for details.
Concurrently, we adopted a variable interest entity structure (the “ VIE Structure ”) and
entered into the Former Contractual Arrangements with the then existing shareholders of
Shenzhen Jingtai in order to pursue potential business opportunities in an area which could fall
within the scope of prohibited or restricted categories for foreign investment in the PRC at that
time. The VIE Structure was unwound in July 2021. See “—Former Contractual Arrangements”
for further details.
Following the adoption of the WVR Structure and the VIE Structure, our Company (i)
issued 4,363,647 Class B Ordinary Shares at par to QuantumPharm Holdings; (ii) issued
1,452,210 Series Pre-A Preferred Shares and 2,500,010 Series A-1 Preferred Shares at par to
the investors of the Series Pre-A Financing and Series A-1 Financing, in proportion to the
respective shareholdings of the then shareholders of Shenzhen Jingtai.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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On November 17, 2017, concurrently with the aforesaid issuance of the Series Pre-A
Preferred Shares and the Series A-1 Preferred Shares, our Company further issued 563,383
Series A-2 Preferred Shares upon the conversion of the Series A-2 CB. See “—Pre-IPO
Investments” for further details.
Series B Financing
On November 17, 2017, we conducted the Series B Financing, resulting in the issuance
of 3,018,109 Series B Preferred Shares. See “—Pre-IPO Investments” for further details.
On May 22, 2018 and May 28, 2018, Mr. Zhu Qiang and Dr. Zhang Peiyu agreed to
transfer options to purchase an aggregate of 443,184 Class A Ordinary Shares to
QuantumPharm Holdings at a total consideration of US$2.6 million. The considerations were
determined after arm’s length negotiations based on an agreed premium on the valuation of our
Company under the Series B Financing. We issued 443,184 Class A Ordinary Shares to
QuantumPharm Holdings subsequently on August 17, 2018 upon the exercise of the aforesaid
options.
Series B+ Financing
On September 5, 2018 and October 26, 2018, we conducted the Series B+ Financing,
resulting in the issuance of 2,646,649 Series B+ Preferred Shares. See “—Pre-IPO
Investments” for further details.
Share Split
On August 9, 2019, our Company effected a 100-for-1 share split (the “ Share Split ”)
whereby each of our then issued and unissued shares of US$0.001 each was sub-divided into
100 shares of US$0.00001 each.
Series B++ Financing
On August 9, 2019, we conducted the Series B++ Financing, resulting in the issuance of
29,305,077 Series B++ Preferred Shares. See “—Pre-IPO Investments” for further details.
On the same date, we issued 198,127,000 Class A Ordinary Shares to QuantumPharm
Roc, a company wholly owned by QuantumPharm Holdings which, at the relevant time was a
shareholding platform for our then share incentive scheme, which held the Shares underlying
the awards to be granted thereunder for the benefit of the eligible participants.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Series C Financing
On September 28, 2020, we conducted the Series C Financing, resulting in the issuance
of 6,811,360 Class A Ordinary Shares, 696,568,031 Series C Preferred Shares and the issuance
of warrants (the “ Series C Warrants ”) with the right to purchase an aggregate of 71,838,567
Series C Preferred Shares. See “—Pre-IPO Investments” for further details.
On the same date, concurrently with the completion of the Series C Financing, 6,811,360
Class B Ordinary Shares were repurchased from QuantumPharm Holdings at a total
consideration of US$2,560,000. The consideration was determined with reference to the issue
price per Share under the Series C Financing.
Subsequently, on June 18, 2021, our Company issued an aggregate of 71,838,567 Series
C Preferred Shares upon exercise of the Series C Warrants.
Issuance of Shares upon exercise of options prior to the Series D Financing
On July 19, 2021, we issued 3,195,700 Class A ordinary shares to QuantumPharm
Holdings upon the exercise of the remaining options granted to Mr. Zhu Qiang, which were
acquired by QuantumPharm Holdings pursuant to an option transfer agreement dated May 28,
2021 at a consideration of US$840,000. The consideration was determined after arm’s length
negotiations based on an agreed discount on the valuation of the Company under the Series C
Financing and has been settled.
Establishment of discretionary trusts by the Co-founders
On July 19, 2021, QuantumPharm Holdings repurchased the 28.16% shareholding interest
held by Jian Guo Pai. The consideration was settled by QuantumPharm Holdings transferring
122,908,500 Class B Ordinary Shares to Crete Helix, a company owned as to 1% by Jian Guo
Pai and 99% by MH International, a holding vehicle wholly owned by TMF (Cayman) Ltd. for
the administration of the MH Fund Trust, a discretionary trust the beneficiary of which is Dr.
Ma.
On the same date, QuantumPharm Holdings repurchased the 21.68% shareholding interest
held by Sevening B Holdings. The consideration was settled by QuantumPharm Holdings
transferring 87,814,140 Class B Ordinary Shares to SeveningBAlpha, a company owned as to
1% by Sevening B Holdings and 99% by LPHappy Holding Limited, a holding vehicle wholly
owned by TMF (Cayman) Ltd. for the administration of the LPHappy Family Trust, a
discretionary trust the beneficiary of which is Dr. Lai.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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On the same date, WSH Family Holdings, a holding vehicle wholly owned by TMF
(Cayman) Ltd. for the administration of the WSH Family Trust, a discretionary trust the
beneficiary of which is Dr. Wen, subscribed for 99% of the enlarged issued share capital of
QuantumPharm Holdings for nominal consideration. Upon the completion of the aforesaid
subscription, QuantumPharm Holdings became owned as to 1% by SSBL Holdings and 99% by
WSH Family Holdings.
Series D Financing
On August 5, 2021, we conducted the Series D Financing, resulting in the issuance of
621,632,043 Series D Preferred Shares. See “—Pre-IPO Investments” for further details.
On the same date, we issued 99,914,143 Class A Ordinary Shares to QuantumPharm Roc,
which held such Shares for grants of awards under our share incentive schemes.
Shareholding structure of our Company as of the date of this prospectus
See “—Capitalization” for a summary of the shareholding and the voting power of the
Shareholders of our Company as of the date of this prospectus.
MAJOR ACQUISITIONS AND DISPOSALS
We had not conducted any major acquisitions or disposals during the Track Record
Period.
MAJOR INVESTMENTS
XtalPi Investment
XtalPi Investment was incorporated in the Cayman Islands as an exempted company with
limited liability on December 22, 2021. XtalPi Investment serves as the incubator platform for
our collaboration programs with our collaborator-investees, which we consider to have
potential first-in-class or best-in-class pipelines or cutting-edge technologies. Under such
programs, we either offer our solutions in exchange for equity interests in such collaborator-
investees or make equity investments in such collaborator-investees which develop
complementary technologies to ours and who we consider are compatible with our strategic
position, and offer various resources to our collaborator-investees as it may need to support
their early-stage business growth and development through access to our integrated technology
platform. XtalPi Investment is the ultimate holding company of the equity interests of certain
collaborator-investees which we have acquired under our collaboration programs. See
“Business—Our Drug Discovery Solutions—Strategic Collaborations” for details.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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On August 12, 2022, we conducted the series A round of financing for XtalPi Investment,
resulting in the issuance of 10,000,000 series A preferred shares at a total consideration of
US$10,000,000. The consideration was determined after arm’s length negotiations based on a
pre-money valuation of US$71.3 million with reference to the prospects and development
potential of the investments held by XtalPi Investment, and was fully settled on September 13,
2022.
As a result, XtalPi Investment became held as to 87.69% by our Company and 12.31%
by other investors under such round of financing, all being Independent Third Parties. Given
that our Company holds a majority of the voting rights in XtalPi Investment through our
shareholding interests and has the right to appoint four out of five members of the board of
directors, our Company is able to exercise control over XtalPi Investment. Furthermore, our
Company is not required to obtain unanimous approval from other investors when making
decisions on the investments in collaborator-investees (including acquisitions and disposals of
the equity stakes in the collaborators) according to the memorandum and articles of association
and the terms of the shareholders’ agreement of XtalPi Investment.
FORMER CONTRACTUAL ARRANGEMENTS
On November 6, 2017, we adopted the VIE Structure in order to pursue potential business
opportunities in an area which could fall within the scope of prohibited or restricted categories
for foreign investment in the PRC at that time.
For the purpose of the Former Contractual Arrangements, Shenzhen Zhiyao entered into
a series of contractual arrangements with Shenzhen Jingtai and its then registered shareholders.
As a result of these contractual arrangements, we were able to obtain effective control and
enjoy all the economic benefits to be derived from the operations of the business in the PRC
carried out by Shenzhen Jingtai. Shenzhen Jingtai and its subsidiaries became our Consolidated
Affiliated Entities, such that their financial results were consolidated and accounted for as
subsidiaries of our Company.
As we continued to evaluate our business plan, we decided we would no longer pursue
such business opportunities. Accordingly, the Former Contractual Arrangements with Shenzhen
Jingtai and its shareholders were no longer necessary. In July 2021, the Former Contractual
Arrangements were terminated and the VIE Structure was unwound, resulting in
QuantumPharm HK obtaining direct ownership of Shenzhen Jingtai and Shenzhen Jingtai
became a wholly-owned subsidiary of QuantumPharm HK.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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As advised by our PRC Legal Advisor, the termination of the Former Contractual
Arrangements was binding among the parties thereto and the Former Contractual Arrangements
have been effectively unwound. The termination of the Former Contractual Arrangements was
merely a reorganization of our Group’s corporate structure with no substantive change in the
economic substance of the ownership and our Group’s business before and after the
termination. Accordingly, the historical financial information has been prepared and presented
as a continuation of the financial information of our Group’s business prior to the termination
of the Former Contractual Arrangements.
PREVIOUS LISTING ATTEMPT
In May 2021, we considered the possibility of seeking an initial public offering in the
United States. As part of the process of the Contemplated U.S. Listing, we submitted the listing
application documents on a confidential basis to the SEC for its review. Our Directors are of
the view that we had satisfactorily addressed SEC’s questions and review and there was no
disagreement with the SEC or other professional parties in the Contemplated U.S. Listing. In
light of the introduction of the listing regime under Chapter 18C of the Listing Rules, our
Directors decided to pursue a listing in Hong Kong instead. Based on the due diligence
conducted by the Sole Sponsor, nothing material has come to the attention of the Sole Sponsor
in relation to the Contemplated U.S. Listing that would cast doubt on the Company’s suitability
for listing in Hong Kong or that should be brought to the attention of the Stock Exchange or
potential investors.
SHARE INCENTIVE SCHEMES
Historically, our Group has adopted various share incentive schemes to recognize the
contribution of certain eligible participants and to provide incentives to retain and attract
suitable personnel for the continued operation and development of our Group.
As of the Latest Practicable Date, we had one share incentive scheme subsisting, being
the Pre-IPO ESOP adopted on July 14, 2021 and amended on August 5, 2021, which had
granted outstanding options to purchase an aggregate of 298,041,143 underlying Shares,
representing 8.75% of the total number of issued Shares immediately following the completion
of the Global Offering (assuming the Over-allotment Option is not exercised and no Shares will
be issued under the ESOPs), to a total of 208 grantees. The terms of the Pre-IPO ESOP are not
subject to the provisions of Chapter 17 of the Listing Rules. All Shares underlying the
outstanding options are held by QuantumPharm Roc, a shareholding platform for the Pre-IPO
ESOP which holds such Shares for the benefit of the grantees.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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It is expected that immediately upon the completion of the Global Offering, the following
Shares will be held by QuantumPharm Roc, being Shares underlying outstanding options
granted under the Pre-IPO ESOP:
Shares
underlying
vested options
which are yet
to be exercised
Shares
underlying
unvested
options Total
Co-founders
– Dr. Wen 38,183,588 42,909,774 81,093,362
– Dr. Ma 21,436,379 23,793,963 45,230,342
– Dr. Lai 15,315,639 17,000,022 32,315,661
Subtotal 74,935,606 83,703,759 158,639,365
Executive Director
– Dr. Jiang Yide Alan 10,000,000
(1) – 10,000,000
Senior management members
– Dr. Zhang Peiyu 22,837,200 (2) – 22,837,200 (3)
– Mr. Tam Man Hong 12,000,000 (1) – 12,000,000
Subtotal 34,837,200 – 34,837,200
QuantumPharm Employee
Benefit Trust on behalf
of 12 grantees 34,949,443
(2) 1,316,482 36,265,925 (3)
Other 194 grantees 25,769,149 32,529,504 58,298,653
Total 180,491,398 117,549,745 298,041,143
Notes:
(1) Pursuant to the powers of attorney granted by Mr. Tam Man Hong and Dr. Jiang Yide Alan in favor of
Dr. Wen on May 28, 2024, respectively, Dr. Wen is unconditionally, indefinitely and irrevocably
authorized and appointed to exercise all the voting rights attached to: (i) the Shares underlying the
vested outstanding options owned by them; and (ii) the Shares transferred or issued to them upon the
exercise of the vested outstanding options, except for any matter the outcome of the vote on which will
disproportionately, materially and adversely affect the grantors, as compared to Dr. Wen or any other
Shareholder. The powers of attorney shall be valid from the Listing Date for an indefinite term.
Accordingly, the voting rights of such Shares will be entrusted to Dr. Wen upon the Listing.
(2) Representing the Shares underlying options held by QuantumPharm Employee Holdings, a holding
vehicle wholly owned by TMF Trust (HK) Limited as trustee of the QuantumPharm Employee Benefit
Trust. In accordance with the terms of the trust deed of the QuantumPharm Employee Benefit Trust
dated June 28, 2021, Dr. Ma, being the sole member of the advisory committee established by our
Company, has the sole power to make all decisions relating to the exercise of any voting and other rights
of the properties held under the trust and to give instructions and directions to the trustee for the
execution of such decisions.
(3) Such options are held by QuantumPharm Employee Holdings pursuant to the QuantumPharm Employee
Benefit Trust for the benefit of Dr. Zhang and other 12 grantees for planning and management purposes.
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In the case of the options held under the QuantumPharm Employee Benefit Trust, the
underlying Shares will be transferred by QuantumPharm Roc to QuantumPharm Employee
Holdings as and when the relevant options are exercised by QuantumPharm Employee Benefit
Trust for the benefit of the 13 employees who are its beneficiaries. In the case of options held
by other individual grantees, the underlying Shares will be transferred by QuantumPharm Roc
to the relevant grantees (or their nominees) as and when the relevant options are exercised.
Pursuant to the rules of the Pre-IPO ESOP , an option, whether vested or unvested, will not
convey to a grantee the right to vote and to receive dividends, unless and until and to the extent
a Share is issued to such grantee upon exercise of such option. According to the Articles, the
right to vote and to receive dividends in respect of the Shares underlying the vested and
unvested options granted under the Pre-IPO ESOP belongs to QuantumPharm Roc, being the
registered holder of such Shares. Notwithstanding the above, as none of the grantees for whom
QuantumPharm Roc holds the Shares is entitled to any dividends, QuantumPharm Roc has
unconditionally and irrevocably waived its entitlement to the dividends to be paid to it as a
Shareholder after the Listing. QuantumPharm Roc, in respect of the Shares underlying
unvested options, is also required under Rule 17.05A of the Listing Rules to abstain from
voting on matters that require shareholders’ approval under the Listing Rules, unless otherwise
required by law to vote in accordance with the beneficial owner’s direction and such a direction
is given.
See “Appendix IV—D. Share Incentive Schemes—1. Pre-IPO ESOP” for details of the
terms of the options granted under the Pre-IPO ESOP .
For the purpose of the Listing, our Company adopted the Post-IPO Share Option Scheme
and the Post-IPO RSU Scheme on May 28, 2024, the terms of which comply with the
requirements of Chapter 17 of the Listing Rules. The Post-IPO Share Option Scheme and the
Post-IPO RSU Scheme will take effect upon the Listing and will replace the Pre-IPO ESOP in
its entirety. Upon the effectiveness of the Post-IPO Share Option Scheme and the Post-IPO
RSU Scheme, no new awards can be granted under the Pre-IPO ESOP , but the awards
previously granted under the Pre-IPO ESOP will continue to be valid and governed by the
terms of the Pre-IPO ESOP . We will comply with the requirements under Chapter 17 of the
Listing Rules regarding the operation and administration of the Post-IPO Share Option Scheme
and the Post-IPO RSU Scheme. See “Appendix IV—D. Share Incentive Schemes—2. Post-IPO
Share Option Scheme” and “Appendix IV—D. Share Incentive Schemes—3. Post-IPO RSU
Scheme” for details of the terms of the Post-IPO Share Option Scheme and the Post-IPO RSU
Scheme.
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VOTING PROXY ARRANGEMENTS
Pursuant to the powers of attorney dated July 19, 2021 executed by (i) Dr. Ma, Jian Guo
Pai and Crete Helix; and (ii) Dr. Lai, Sevening B Holdings and SeveningBAlpha (collectively,
the “ Co-founder Grantors ”), QuantumPharm Holdings is unconditionally, indefinitely and
irrevocably authorized and appointed to exercise all the voting rights attached to the Shares
held by them at any time and from time to time which they are entitled to under the laws of
the Cayman Islands and the Memorandum and the Articles on all matters submitted to a vote
of Shareholders at a meeting of Shareholders or through the solicitation of a written consent
of Shareholders, except for any matter the outcome of the vote on which will
disproportionately, materially and adversely affect the Co-founder Grantors, as compared to
QuantumPharm Holdings or any other Shareholder. The powers of attorney shall be valid from
the date of execution for an indefinite term and the terms and arrangements under the powers
of attorney will not be affected upon the completion of the unwinding of the WVR Structure.
The Co-founder Grantors believe that by authorizing QuantumPharm Holdings to exercise their
voting rights on their behalf, the voting proxy arrangement allows the Co-founders to
consolidate and maintain the Co-founder Group’s overall control over more than 50% of the
voting rights of our Company prior to the Listing, which ensures that the Co-founders are in
a position to continually contribute to our Company with their vision and leadership, and
benefit the overall growth, strategic planning, decision-making process and prospects of our
Group as a whole, thereby leading to better investment return to all the Shareholders including
the Co-founders.
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PRE-IPO INVESTMENTS
We completed eight rounds of Pre-IPO Investments, namely the Series Pre-A Financing, the Series A-1 Financing, the Series A-2 Financing,
the Series B Financing, the Series B+ Financing, the Series B++ Financing, the Series C Financing and the Series D Financing.
Series Pre-A
Financing
Series A-1
Financing
Series A-2
Financing Series B Financing
Series B+
Financing
Series B++
Financing Series C Financing Series D Financing
Date of agreement(s) September 23, 2015 November, 2015 June 16, 2016, July,
2016 and
September 15,
2017
September 16, 2017 September 5, 2018
and October 26,
2018
August 9, 2019 September 16,
2020 and
September 28,
2020
July 29, 2021
Number of Shares issued
(1) 145,221,000 Series
Pre-A Preferred
Shares
250,001,000 Series
A-1 Preferred
Shares
56,338,300 Series
A-2 Preferred
Shares
301,810,900 Series
B Preferred Shares
264,664,900 Series
B+ Preferred
Shares
29,305,077 Series
B++ Preferred
Shares
768,406,598 Series
C Preferred Shares
621,632,043 Series
D Preferred
Shares
Amount of consideration paid
(2) RMB2,000,000 RMB24,469,600 US$1,066,666 US$14,285,714 US$38,000,000 US$6,550,000 US$288,800,000 US$380,000,000
Date of settlement of consideration October 27, 2015 December 11, 2015 November 22, 2017 November 24, 2017 December 27, 2018 September 5, 2019 June 18, 2021 October 12, 2021
Cost per Share US$0.002 US$0.015 US$0.019 US$0.047 US$0.144 US$0.224 US$0.376 US$0.611
Pre-money valuation of the Company (3) RMB8.3 million RMB73.4 million US$18.9 million (5) US$50.0 million (6) US$206.1 million (7) US$380.0 million (8) US$650.0 million (9) US$1,588.0
million (10)
Post-money valuation of the Company (4) RMB10.3 million RMB97.9 million US$20.0 million (5) US$64.3 million (6) US$244.1 million (7) US$386.6 million (8) US$938.8 million (9) US$1,968.0
million (10)
Discount to the Offer Price (11) 99.7% 97.9% 97.3% 93.4% 79.7% 65.5% 46.9% 13.7%
Use of proceeds received by our Company
from the Pre-IPO Investments
For the purpose of business expansion, capital expenditure and as working capital of our Group, including the operation and development of business o n XtalPi Drug Discovery and
XtalPi Intelligent Automation. In addition, the proceeds from the Series D Financing will also be used for the investment in or acquisition of other bu siness or entity.
As of April 30, 2024, 47.4% of the net proceeds received by our Company from the Pre-IPO investments were utilized. We intend to utilize the remaining ne t proceeds from the
Pre-IPO Investments after the Global Offering.
Strategic benefits of the Pre-IPO Investors
brought to our Company
At the time of the Pre-IPO Investments, our Directors were of the view that our Company could benefit from the additional capital that would be provided by the Pre-IPO
Investors’ investments in our Company and the Pre-IPO Investors’ knowledge and experience. The Pre-IPO Investments also signify our Pre-IPO Invest ors’ endorsement of and
confidence in our Company.
Lock-up Six months commencing on the Listing Date. See “Underwriting – Undertaking by the Pre-IPO Investors” for details. Our Pathfinder SIIs will be subject to additional disposal
restrictions pursuant to Rule 18C.14 of the Listing Rules.
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Notes:
(1) Representing the respective class of Preferred Shares in issue as of the date of this prospectus.
(2) Representing the total investment cost paid for the corresponding class of Preferred Shares issued in the respective round of the Pre-IPO Investm ent. The consideration was
determined after arm’s length negotiations with reference to our funding needs and the prospects and development potential of our Group.
(3) Representing the price per Share under the respective round of the Pre-IPO Investments multiplied by the capitalization of the Company (on a fully diluted basis) immediately
before the closing of the corresponding round of the Pre-IPO Investments.
(4) Representing the price per Share under the respective round of the Pre-IPO Investments multiplied by the capitalization of the Company (on a fully diluted basis) immediately
after the closing of the corresponding round of the Pre-IPO Investments.
(5) The increase in valuation from the Series Pre-A Financing to the Series A-1 Financing and the Series A-2 Financing was mainly due to (a) the planning and market prospects
of our Group, including but not limited to the set-up of our management team and the research results on crystal form prediction; and (b) the establishm ent of our AI R&D
center in March 2016. Such increase in valuation also reflected the industry-wide increase in valuation of companies in the AI drug R&D industry throu ghout years 2015 to
2017 with overall positive investment market sentiment.
(6) The increase in valuation from the Series A-2 Financing to the Series B Financing was mainly due to (a) the AI-related capabilities we achieved, in p articular we developed
the first generation of our ADMET properties prediction model and evaluation model for small molecule drugs; and (b) the launch of our AI-powered inte grated technology
platform “Atompai” and our AI-powered drug discovery platform “Renova.” These developments were our first proof of concept and demonstrated our alg orithmic models had
practical industrial application. In terms of technology breakthrough, we participated in a global crystal structure prediction blind test held by Pfizer in 2016 and achieved
accurate prediction, which led to our long-term strategic master partnership in technological innovation and drug R&D with Pfizer and began our grad ual development into a
global leader in terms of technological advantages in providing computational solid-state R&D services. Having Pfizer as our anchor client validat ed our commercial prospects
and attracted interest from other companies in the pharmaceutical industry to adopt our technology.
(7) The increase in valuation from Series B Financing to Series B+ Financing was mainly due to (a) the AI-related capabilities we achieved, in particul ar we developed protein
pocket’s pharmacophore selection model; and (b) the improvement of ADMET properties prediction model with AI-powered virtual screening and evalua tion model for small
molecule drugs. From these developments we were able to expand our business from a niche focus on solid state research to encompass the pre-clinical dr ug discovery value
chain. In terms of business development and milestone, we entered into a ten-year strategic Master Collaborative Research and License Agreement wit h Pfizer in April 2018,
pursuant to which Pfizer and we have engaged in strategic research collaborations to develop hybrid physics- and AI-powered technologies to acceler ate drug R&D. Such
increase in valuation also reflected the industry-wide increase in valuation of companies in the AI drug R&D industry in year 2018 with overall positi ve investment market
sentiment.
(8) The increase in valuation from Series B+ Financing to Series B++ Financing was mainly due (a) to the breakthrough in chemical synthesis and experim entation in drug R&D
as a result of the establishment of our wet lab facilities for solid-state R&D, synthesis and experimental research in September 2018; (b) the launch o f our small molecule drug
discovery platform; and (c) the computational chemistry-related capabilities we achieved, in particular we developed the XFF high-precision forc e field in cooperation with
Pfizer and XFEP for free energy perturbation calculations. These developments enabled us to further expand our business coverage of the pre-clinica l value chain and position
our Company to capture the strategic advantages of having a platform that integrates dry and wet lab.
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(9) The increase in valuation from Series B++ Financing to Series C Financing was mainly due to (a) the AI-related and computational chemistry-relate d capabilities we achieved,
in particular we developed small molecule drug efficacy evaluation model, antibody developability prediction model; (b) the launch of our MicroED p latform and polypeptide
and protein drug R&D platform. These developments broadened our drug discovery business scope to address both large and small molecules, and the inte gration of MicroED
platform bolstered our research capabilities. Furthermore, in light of the COVID-19 pandemic, there was a demand for an effective and conveniently- administrable oral drug
for the prevention and treatment of COVID-19. The COVID-19 pandemic had caused a surge in the capital market’s interest in biomedical projects. As a st rategic partner of
Pfizer, we had captured the investors’ interests of market pursuit.
(10) The increase in valuation from Series C Financing to Series D Financing was mainly due to (a) the completion of concept certification on the protot ype machine of automation
station; (b) the AI-related capabilities we achieved, in particular we developed small molecule library model for comparison and evaluation, bindi ng affinity calculation tool,
cyclic peptide design model; (c) the establishment of our AI-powered antibody drug discovery platform; and (d) the establishment of our experimenta l and computing R&D center
in Futian, Shenzhen and our pharmaceutical innovation R&D center in Pudong, Shanghai. These developments expanded our data library, accelerate the iteration of our
algorithmic models and bolstering our capabilities in large molecule discovery. In terms of business development and millstone, we achieved a break through of our solid-state
R&D services in cooperation with Pfizer to develop Paxlovid, the world’s first FDA-approved oral treatment for COVID-19 at a critical juncture of the global fight against
SARS-CoV-2, see “Business—Our Technologies and Closed-loop Integrated Technology Platform—Our Quantum Physics-based Computation Capabilitie s—Crystal Structure
Prediction—Case Study—Crystal Structure Prediction: Development of Paxlovid” for details. Our business also achieved rapid growth in terms of rev enue and the number of
programs during the stage of Series D Financing also reflected our efforts to grow our business and commercialize our services.
The increase in valuation from Series D Financing to the Listing was mainly due to (a) the strong revenue growth since Series D Financing in year 2021 in b oth drug discovery
solutions and intelligent automation solutions; and (b) various agreements we entered into in year 2023 with certain well-known customers and colla borators, which demonstrated
our efforts to enhance commercializations for our solutions and services. For instance, we entered into an AI small molecule drug discovery collabor ation worth up to US$250
million with a global leading pharmaceutical company headquartered in Indianapolis, Indiana, in April 2023, which will leverage our AI capabilitie s and automated robotics
platform for the de novo design and delivery of a novel compound for the purpose of developing drug candidates.
(11) The discount to the Offer Price is calculated based on the Offer Price of HK$5.53 per Share, being the mid-point of the Offer Price range of HK$5.03 t o HK$6.03, and the
conversion of the Shares into Ordinary Shares having completed upon the Listing.
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Rights of the Pre-IPO Investors
The special rights granted to the Pre-IPO Investors included, among others, information
rights, redemption rights, pre-emptive rights, director nomination rights, rights to be consented
prior to certain corporate actions and anti-dilution rights. All special rights which are required
to be terminated pursuant to Chapter 4.2 of the HKEX Guide have been terminated or will
terminate upon the Listing. The special rights which have been terminated on the date of filing
of listing application shall be restored upon the earliest of (i) the withdrawal of the listing
application to the Stock Exchange by our Company; (ii) the Stock Exchange returning or
rejecting our listing application; (iii) the lapse of the listing application has not been renewed
within three months after the lapse; and (iv) our Company fails to complete the Listing within
12 months after the first submission of the listing application to the Stock Exchange.
Information about the Pre-IPO Investors
Our Pathfinder SIIs and Sophisticated Independent Investors
We have received meaningful investments from the following Sophisticated Independent
Investors, all of whom are our Pathfinder SIIs, and each having invested in our Company for
at least 12 months prior to the first submission of our listing application to the Stock Exchange.
Image Frame Image Frame Investment (HK) Limited (“ Image Frame ”) is
interested in 13.66% of the total number of Shares as of the date
of this prospectus.
Image Frame is a company incorporated in Hong Kong and is a
wholly-owned subsidiary of Tencent, a company listed on the Main
Board of The Stock Exchange of Hong Kong Limited (stock code:
00700). Tencent is principally engaged in the provision of
communication, social, digital content, games, online advertising,
fintech and cloud services in the PRC. Tencent manages its
investment portfolio with a primary objective to strengthen its
leading position in core businesses and complement its
“Connection” strategy in various industries.
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Tencent pays a lot of attention to investment risk and has
established an investment committee under its board of directors.
Tencent also puts in place an investment evaluation and approval
process, and sets up a dedicated professional team to advise on
investment projects. Finance, legal and other relevant professional
teams are responsible for managing relevant investment risks and
following up with post-investment management, reviewing the
operating and financial information of the investee companies on
a regular basis, monitoring and analyzing the performance of the
investee companies, to ensure that they continue to meet Tencent’s
investment strategies. We became acquainted with Tencent during
our Series A-1 Financing through networking activities in the
technology industry. In addition to our Company, Tencent, through
Image Frame, has invested in other healthcare companies such as
MedSci Healthcare Holdings Limited (stock code: 2415) which
had a market capitalisation of HK$5,525.3 million upon its listing
and Yidu Tech Inc. (stock code: 2158) which had a market
capitalisation of HK$19,601.7 million upon its listing.
As of June 30, 2021 and 2023, the investment portfolio of Tencent
amounted to approximately RMB844,262 million and
RMB713,697 million as recorded in its unaudited consolidated
results for the six months ended June 30, 2021 and 2023,
respectively, under various categories including investments in
associates and joint ventures which are accounted for by using
equity method; and financial assets at fair value through profit or
loss and through other comprehensive income (including assets
held for distribution).
HongShan HSG V enture VI Holdco, Ltd., HSG V enture VIII Holdco, Ltd. and
HSG Growth VI Holdco E, Ltd. are interested in 8.25% of the total
number of Shares as of the date of this prospectus.
Each of HSG V enture VI Holdco, Ltd., HSG V enture VIII Holdco,
Ltd. and HSG Growth VI Holdco E, Ltd. is an exempted company
with limited liability incorporated in the Cayman Islands. HSG
V enture VI Holdco, Ltd. is wholly owned by HongShan Capital
V enture Fund VI, L.P ., whose general partner is HSG V enture VI
Management, L.P . HSG V enture VIII Holdco, Ltd. is wholly owned
by HongShan Capital V enture Fund VIII, L.P ., whose general
partner is HSG V enture VIII Management, L.P . HSG Growth VI
Holdco E, Ltd. is wholly owned by HongShan Capital Growth
Fund VI, L.P ., whose general partner is HSG Growth VI
Management, L.P .
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The general partner of each of HSG V enture VI Management, L.P .,
HSG V enture VIII Management, L.P . and HSG Growth VI
Management, L.P . is HSG Holding Limited, a wholly-owned
subsidiary of SNP China Enterprises Limited. Neil Nanpeng Shen
is the sole shareholder of SNP China Enterprises Limited.
Each of HongShan Capital V enture Fund VI, L.P ., HongShan
Capital V enture Fund VIII, L.P . and HongShan Capital Growth
Fund VI, L.P . (collectively as “ HongShan Funds ”) is an
investment fund whose primary purpose is to make equity
investments in private companies, and its limited partners include
sovereign wealth funds, pension funds, non-governmental
organisations and endowment funds. None of the limited partners
has more than 30% of the limited partnership interests in each of
the HongShan Funds or cumulatively across all HongShan Funds.
As of June 30, 2021 and June 30, 2023, HSG V enture VI Holdco,
Ltd., HSG V enture VIII Holdco, Ltd. and HSG Growth VI Holdco
E, Ltd. had an aggregate assets under management over HK$11
billion and HK$20 billion, respectively.
HongShan is a leading venture capital and private equity firm
investing across technology, healthcare and consumer sectors.
Since 2005, HongShan has been fostering entrepreneurship and
innovation, backing more than 1,500 companies around the globe.
Our Company became acquainted with HongShan during our
Series B Financing through introduction by industry peers. In
addition to our Company, investment funds affiliated with
HongShan have invested in other technology, biotechnology or
healthcare companies such as CStone Pharmaceuticals (stock code:
2616), Innovent Biologics, Inc. (stock code: 1801), V enus Medtech
(Hangzhou) Inc. (stock code: 2500), Brii Biosciences Limited
(stock code: 2137), Jiangsu Recbio Technology Co., Ltd. (stock
code: 2179), Beijing Fourth Paradigm Technology Co., Ltd. (stock
code: 6682).
5Y Capital Evolution Fund I, L.P ., Evolution Special Opportunity Fund I, L.P .
and Evolution Fund I Co-investment, L.P ., are interested in 7.94%
of the total number of Shares as of the date of this prospectus.
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Evolution Fund I, L.P ., Evolution Special Opportunity Fund I, L.P .
and Evolution Fund I Co-investment, L.P ., are exempted limited
partnerships established under the laws of the Cayman Islands.
Each of Evolution Fund I, L.P ., Evolution Special Opportunity
Fund I, L.P . and Evolution Fund I Co-investment, L.P . has 73, 73,
and 26 limited partners which mainly include pension funds,
endowment funds, foundation and global renowned fund. None of
the limited partner has contributed an amount exceeding 30% of
the total commitment of Evolution Fund I, L.P ., Evolution Special
Opportunity Fund I, L.P . and Evolution Fund I Co-investment,
L.P ., and none of the limited partner has held a cumulative limited
partner interest exceeding 30% across Evolution Fund I, L.P .,
Evolution Special Opportunity Fund I, L.P . and Evolution Fund I
Co-investment, L.P .
Each of Evolution Fund I, L.P ., Evolution Special Opportunity
Fund I, L.P . and Evolution Fund I Co-investment, L.P . is controlled
by 5Y Capital GP Limited, as their general partner. Each of Liu
Qin and Shi Jianming is entitled to exercise or control the exercise
of one-half of the voting power of all issued shares, respectively,
in 5Y Capital GP Limited at its general meeting.
Evolution Fund I, L.P ., Evolution Special Opportunity Fund I, L.P .
and Evolution Fund I Co-investment, L.P . are investment funds
under the brand of 5Y Capital whose primary purpose is to make
equity investments in private companies. 5Y Capital is a venture
capital firm which specializes in fostering the growth of
outstanding companies in the technology, life sciences, and
consumer innovation sectors. The unwavering commitment of 5Y
Capital is to serve as the premier, enduring, and most impactful
investor for top-tier entrepreneurs. We became acquainted with 5Y
Capital during our Series B++ Financing through conducting their
own industry researches. In addition to our Company, 5Y Capital
has invested in other technology companies such as Xiaomi
Corporation (stock code: 1810), Kuaishou Technology (stock code:
1024), XPeng Inc. (stock code: 9868) and Kingsoft Office
(Shanghai Stock Exchange, stock code: 688111) etc. As of June 30,
2021 and June 30, 2023, 5Y Capital had assets under management
of over USD5.0 billion, respectively.
China Life
Chengda
China Life Chengda (Shanghai) Healthcare Equity Investment
Center (Limited Partnership) ( ਷ྪϓ༺(ɪऎ)ᛆҳ༟
ʕː(Υྫ)) (“ China Life Chengda ”) is interested in 7.32%
of the total number of Shares as of the date of this prospectus.
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China Life Chengda is a limited partnership established in the PRC
specializing in equity investment, investment management and
asset management services. Its general partner is China Life
Chengda (Shanghai) Healthcare Equity Investment Management
Co., Ltd., a limited liability company indirectly and wholly owned
by China Life Insurance (Group) Company which in turn is owned
as to 90% by the Ministry of Finance of the PRC. The largest
limited partner of China Life Chengda with 74.94% partnership
interests is China Life Insurance Company Limited (“ China Life
Insurance ”), a company listed on the Stock Exchange (stock code:
2628) and the Shanghai Stock Exchange (stock code: 601628)
which is indirectly owned as to 68.37% by the Ministry of Finance
of the PRC.
Investment is one of the principal businesses of China Life
Insurance. China Life Insurance has established a well-developed
system relating to investment decisions in accordance with the
relevant laws and regulations and based on the actual situation of
investment management. The system defines the approval and
decision-making authority, authorization mechanism and specific
decision-making procedures for investment management. All
major investment decisions shall be approved and implemented in
strict compliance with the internal decision-making process of
China Life Insurance and the requirements of its investment
management system. The investment decisions committee of China
Life Insurance is a permanent body of China Life Insurance for
investment decisions, which is responsible for reviewing major
investments and providing support to any investment decisions
made by the management. In terms of investment assets
management, China Life Insurance mainly adopts the mode of
entrusted investment for management of its investment assets, and
has established a diversified framework of entrusted investment
management with China Life Insurance’s internal managers
playing the key role and the external managers offering effective
supports. We became acquainted with China Life Insurance during
our Series B+ Financing through networking activities in the
technology industry. In addition to our Company, China Life
Insurance, through China Life Chengda, has invested in other
biotechnology or healthcare companies such as Innovent
Biologics, Inc. (stock code: 1801), JD Health International Inc.
(stock code: 6618), HBM Holdings Limited (stock code: 2142),
Biocytogen Pharmaceuticals (Beijing) Co., Ltd. (stock code: 2315)
and Jenscare Scientific Co., Ltd. (stock code: 9877). As of June 30,
2020 and 2023, the investment assets of China Life Insurance
amounted to RMB3,781,024 million and RMB5,386,667 million,
respectively, which comprised investment in bond, term deposits,
debt-type financial products, stocks and funds.
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PICC Health &
Pension Fund
Beijing PICC Health and Pension Industry Investment Fund
(Limited Partnership) (ږ( Υ
ྫ)) (“ PICC Health & Pension Fund ”) is interested in 3.72% of
the total number of Shares as of the date of this prospectus.
PICC Health & Pension Fund is a limited partnership established
in the PRC which focuses on investment in life science,
biotechnology, medical devices and healthcare services industries.
Its general partner is PICC Capital Equity Investment Company
Limited (ʮ̡)( “ PICC Equity
Investment ”), a company principally engaged in the provision of
growth equity and fund management services and is wholly owned
by PICC Capital Insurance Asset Management Co., Ltd. (“ PICC
Capital ”). PICC Capital is wholly owned by The People’s
Insurance Company (Group) of China Limited (“ PICC ”). PICC
Health & Pension Fund has a total of two limited partners, with the
largest limited partner, PICC Life Insurance Co., Ltd. ( ʕ਷ɛ͏ɛ
ʮ̡)( “ PICC Life ”) holding approximately
66.5% of its ownership. PICC Life is a non-wholly owned
subsidiary of PICC, the shares of which are listed on the Stock
Exchange (stock code: 1339) and the Shanghai Stock Exchange
(stock code: 601319). The remaining limited partner of PICC
Health & Pension Fund is PICC Property and Casualty Company
Limited, the H shares of which are listed on the Stock Exchange
(stock code: 2328) and the ultimate holding company of which is
PICC.
PICC Capital focuses on various investments such as private debt,
private equity, infrastructure and private equity funds and invests
extensively in energy resources, infrastructure, technology and
innovation, healthcare sectors. We became acquainted with PICC
Health & Pension Fund during our Series C Financing through
networking activities in the technology industry. In addition to our
Company, PICC Health & Pension Fund has invested in other
biotechnology or healthcare companies such as Biocytogen
Pharmaceuticals (Beijing) Co., Ltd. (stock code: 2315) and
Jenscare Scientific Co., Ltd. (stock code: 9877).
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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As required by Chapter 2.5 of the HKEX Guide, each of the aforesaid Pathfinder SIIs and
Sophisticated Independent Investors holds 3% or more, and in aggregate 10% or more, of the
issued share capital of the Company as of the date of our listing application and throughout the
pre-application 12-month period. For details of the shareholding in our Company of each of the
aforesaid Pathfinder SIIs and Sophisticated Independent Investors, see “—Capitalization”
below. To the best knowledge of our Directors, other than (i) being our Pathfinder SIIs; (ii) the
nomination of Dr. Gu Cuiping as Director by HongShan pursuant to its director nomination
right; (iii) the past nomination of directors of our Company and our subsidiaries by 5Y Capital,
PICC Health & Pension Fund, Image Frame and China Life Chengda (as the case may be)
pursuant to their respective director nomination rights; (iv) the 6.15% shareholding in XtalPi
Investment by 5Y Capital; (v) the procurement of cloud services from Tencent Group; and (vi)
business relationship established during ordinary course of business, our Pathfinder SIIs do not
have past or present relationships with our Group, our Co-founders, the executive Directors,
members of our senior management and their respective associates.
On the basis that (i) 3,406,772,761 Shares are expected to be in issue upon the completion
of the Global Offering; and (ii) the market capitalization of our Company will be HK$18,839.5
million as calculated based on the Offer Price of HK$5.53 per Share, being the mid-point of
the Offer Price range, upon the Listing, the aforesaid Pathfinder SIIs and Sophisticated
Independent Investors will hold, in aggregate, no less than 38.64% of the issued share capital
of the Company (assuming the Over-allotment Option is not exercised and no Shares will be
issued under the ESOPs).
Our other Pre-IPO Investors
We have also received investments from the following Pre-IPO Investors.
Aqua Elite
Capital
Aqua Elite Capital Limited is a company incorporated in the BVI
and is wholly by Aqua Fund Investment SPC—Global Fund XI SP .
Aqua Fund Investment SPC is a segregated portfolio company
established in the Cayman Islands and all management shares of
Aqua Fund Investment SPC are held by Aqua Financial Investment
Limited which is wholly owned by Y ang Xuan. Aqua Elite Capital
Limited primarily engages in private equity investment focusing
on the investment areas of biotechnology.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Artisan Partners Artisan China Post-V enture Holdings Limited is a company
incorporated in Hong Kong, which is wholly owned by Artisan
China Post-V enture Master Fund LP , an exempted limited
partnership registered in the Cayman Islands. Artisan China
Post-V enture Master Fund LP has two limited partners, namely
Artisan China Post-V enture Fund LP and Artisan China Post-
V enture Offshore Fund LP as of the Latest Practicable Date. The
general partner of Artisan China Post-V enture Master Fund LP is
Artisan Partners Asia Funds GP LLC. The investments made by
Artisan China Post-V enture Master Fund LP are directed by
Artisan Partners Limited Partnership (“ Artisan Partners ”), a
limited partnership incorporated in Delaware, the United States
and an investment manager registered with the United States
Securities and Exchange Commission under the Investment
Advisers Act of 1940, as amended. Artisan Partners Holdings LP
wholly owns Artisan Partners and is Artisan Partners’ sole limited
partner. Artisan Investments GP LLC (a wholly-owned subsidiary
of Artisan Partners Holding LP) is Artisan Partners’ general
partner. Artisan Partners Holdings LP is a limited partnership
incorporated in the Delaware, the United States, the general
partner of which is Artisan Partners Asset Management Inc., a
Delaware corporation with its Class A common stock listed on the
New Y ork Stock Exchange (ticker: APAM). Artisan Partners Asset
Management Inc., through its subsidiary Artisan Partners, operates
as an investment management company, which provides
investment strategies to clients globally.
Bopu Capital Bopu Capital Management Ltd is a company incorporated in the
Cayman Islands and is wholly owned by Bopu Technologies
Limited. The ultimate beneficial owner of Bopu Capital
Management Ltd is He Xiao who holds 40% shareholding in Bopu
Technologies Limited. Bopu Technologies Limited primarily
engages in investments focusing on the investment areas of
healthcare and AI-driven technologies.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Zeta Capital Bopu HiTech Portfolio XP LP is an exempted limited partnership
incorporated in the Cayman Islands focusing on investment
opportunities in Biotech. Bopu HiTech Portfolio XP LP has three
limited partners as of the Latest Practicable Date who are
institutional investors. The general partner of Bopu HiTech
Portfolio XP LP is Zeta V enture Limited and the fund is managed
by Zeta Capital (H.K.) Limited, a limited company incorporated in
Hong Kong with Type 4 and Type 9 licenses issued by the SFC and
is indirectly wholly owned by Mr. Zhu Xuejun. Mr. Zhu, the
founder and responsible officer of Zeta Capital (H.K.) Limited,
with approximately 20 years of experience in asset management,
has managed investment into a number of early-stage biotech
companies.
Brainpower
Electronic
Technology
Brainpower Electronic Technology Limited is a company
incorporated in the BVI and is owned as to 100% by Lin Li. Lin Li
has over 25 years of experience in investment management and
capital markets. She has served as a partner of Diligence Capital
since 2009 and has invested in multiple well-known domestic PE
funds, including Legend Capital, CDH Investment, Hillhouse
Capital, etc. Brainpower Electronic Technology Limited primarily
engages in investments focusing on AI, big data, chips and
semiconductors and new energy.
Cassini Partners,
Favor Star and
Neumann
Neumann Capital is a mutual fund registered with Cayman Islands
Monetary Authority, whose managing shareholder is Neumann
Advisory Hong Kong Limited (“ NAHKL ”). NAHKL is a licensed
corporation to conduct Type-9 (asset management) regulated
activities under the SFO and a registered investment advisor with
U.S. Securities and Exchange Commission. NAHKL is managed
by Mr. Zhang Fei who has over 20 years of venture capital
experience, with a focus in the areas of AI/cloud computing,
social/digital media and entertainment, and electric
vehicle/autonomous driving.
Cassini Partners, L.P . is a limited partnership formed in Delaware,
the United States, whose general partner is Cassini GP , LLC.
Favor Star Limited is a company incorporated in the BVI and is a
holding company wholly owned by Mr. Chan Adriel Wenbwo.
Neumann Galaxy Limited is a company incorporated in the BVI
and is a holding company wholly owned by Ms. Leung Y ee Ting
who is holding the position of executive director at NAHKL.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Central Point Central Point Holding Development Limited is a company
incorporated under the laws of British Virgin Islands with limited
liability and is owned as to 50% by Mrs. So Chan Wai Hang, and
50% by Mr. So Kai Sing. Mrs. So Chan Wai Hang has over 40
years of experience in manufacturing and trading business. She
founded Y ue Wing Cheong Manufactory Limited in 1980, and
served as the chairman of the board of directors of Y an Chai
Hospital and the honorary chairman of the Hong Kong Baptist
University Foundation. Mr. So Kai Sing has over 40 years of
experience in stock, bond and fund investment. He serves as the
chairman of the board of directors and a controlling shareholder of
Winnie Sanitary Product Limited. Central Point Holding
Development Limited primarily engages in private equity
investments focusing on emerging industries.
China
Renaissance
CR Life Star Fund LLC is a company incorporated in the Cayman
Islands. CR Life Star Fund LLC is a private fund registered with
Cayman Islands Monetary Authority, which is held by 1 manager
and 10 members, with the largest member holding 54.04% of
shareholding interest. The members of CR Life Star Fund LLC
include institutional investors and high-net-worth individuals. CR
Life Star Fund LLC is managed by the manager, Grand Eternity
Limited, a BVI company, which is ultimately owned by China
Renaissance Holdings Limited, a company listed on the Stock
Exchange (stock code: 1911) and it primarily engages in the
provision of investment banking and investment management
services.
CICC CICC Biomedical Fund L.P . (઼ᅃ(ژ)ᔼᖹ௴ุҳ
༟ΥྫΆุ(Υྫ) (formerly known as઼ᅃ(ژ)௴อ͛
ΥྫΆุ(Υྫ)) (“ CICC Biomedical
Fund ”) is a limited partnership established in the PRC focusing on
world-leading innovative medicines and technologies. CICC
Biomedical Fund has 30 limited partners as of the Latest
Practicable Date who are private investors and institutional
investors and none of the limited partners has more than one third
of the limited partnership interests. The general partner of CICC
Biomedical Fund is CICC Capital Management Co., Ltd., a
wholly-owned subsidiary of China International Capital
Corporation Limited, a company listed on the Stock Exchange
(stock code: 3908) and the Shanghai Stock Exchange (stock code:
601995) and principally engaged in investment banking business,
equities business, fixed-income, commodities and currency
business, asset management business, private equity business,
wealth management business and other business activities.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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CICC Qizhi (Shanghai) Private Equity Investment Center L.P .
(“CICC Qizhi ”) is a limited partnership established in the PRC
focusing on equity and industrial investment, investment
management and investment consulting. CICC Qizhi has 41
limited partners as of the Latest Practicable Date who are private
investors and institutional investors and none of the limited
partners has more than one third of the limited partnership
interests. The general partner of CICC Qizhi is CICC Private
Equity Investment Management Co., Ltd. (ᛆҳ༟၍ଣ
ʮ̡), a wholly-owned subsidiary of China International
Capital Corporation Limited.
CITIC Securities Pluto Connection Limited is an indirectly wholly-owned
subsidiary of CITIC Securities Company Limited (΅
ʮ̡). CITIC Securities Company Limited is a joint stock
limited company established in the PRC with limited liability, the
H shares and A shares of which are listed on the Stock Exchange
(stock code: 6030) and the Shanghai Stock Exchange (stock code:
600030) and is principally engaged in securities brokerage,
securities investment consulting, financial advice in relation to
securities trading and investment activities, securities underwriting
and sponsoring, self-operated securities business, securities assets
management, securities margin trading, selling of securities
investment funds, provision of intermediary introduction services
to futures companies, distribution of financial products and stock
options market making.
CITIC Venture
Capital
CITIC (Shenzhen) V enture Capital Equity Investment Fund
Partnership (Limited Partnership) (ڦ(ଉέ)ᛆҳ༟
ΥྫΆุ(Υྫ)) (“ CITIC Venture Capital ”) is a limited
partnership established in the PRC focusing on investment
opportunities in intelligent manufacturing, new generation of
information technology and healthcare. CITIC V enture Capital has
five limited partners as of the Latest Practicable Date who are
private investors and institutional investors and none of the limited
partners has more than one third of the limited partnership
interests. The general partner of CITIC V enture Capital is CITIC
(Shenzhen) Innovation Equity Investment Management Co., Ltd.
(ڦ(ଉέ)ʮ̡), which is owned as to
60% by Tianjin Y uebo Investment Consultancy Co., Ltd. (ᚔ
ʮ̡) and 40% by CITIC Industrial Cloud Co.,
Ltd. (ʮ̡). Tianjin Y uebo Investment Consultancy
Co., Ltd. is ultimately held by Zhao Y an (ܗand Wang Ranxu
(ˮ̄ϛ) and CITIC Industrial Cloud Co., Ltd. is wholly-owned by
CITIC Group Corporation Ltd. (ʮ̡), the
holding company of the Sole Sponsor.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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CMBI Nanjing Zhaoyin Gongying Equity Investment Partnership
(Limited Partnership) (ᛆҳ༟ΥྫΆุ(Υ
ྫ)) (“ Nanjing Zhaoyin Gongying ”) is a limited partnership
established in the PRC. Nanjing Zhaoyin Gongying has seven
limited partners as of the Latest Practicable Date who are private
investors and none of the limited partners has more than one third
of the limited partnership interests. The general partner of Nanjing
Zhaoyin Gongying is Jiangsu Zhaoyin Industrial Fund
Management Co., Ltd., a wholly-owned subsidiary of CMB
International Capital Management (Shenzhen) Ltd., which in turn
is a wholly-owned subsidiary of CMB Financial Holdings
(Shenzhen) Co., Ltd. (ٰ(ଉέ)ʮ̡). CMB
Financial Holdings (Shenzhen) Co., Ltd. is wholly owned by CMB
International Capital Corporation Limited (ʮ
̡).
Shanghai Y uji Technology LLP is a limited partnership established
in the PRC. Shanghai Y uji Technology LLP has one limited partner
as of the Latest Practicable Date who is an institutional investor.
The general partner of Shanghai Y uji Technology LLP is Shenzhen
CMB Telecom Equity Investment Fund Management Co., Ltd. ( ଉ
ʮ̡) which is ultimately
controlled by CMB International Capital Management (Shenzhen)
Ltd. (ვ਷ყ༟͉၍ଣ(ଉέ)ʮ̡), an indirect wholly-
owned subsidiary of CMB International Capital Corporation
Limited, with a focus on private equity investment and investment
fund management.
CMB International Capital Corporation Limited is an indirect
wholly-owned subsidiary of China Merchants Bank Co., Ltd.
whose shares are listed on the Stock Exchange (stock code: 3968)
and Shanghai Stock Exchange (stock code: 600036).
Crystal
Technology
Crystal Technology Investment Company Ltd is a company
incorporated in the BVI with limited liability and is wholly owned
by Crystal Technology Holding Company Ltd. Crystal Technology
Holding Company primarily engages in investing in the technology
sector.
Crystal II Technology Investment Company Ltd is a company
incorporated in the BVI with limited liability and is wholly owned
by Crystal II Technology Holding Company Ltd. Crystal II
Technology Holding Company primarily engages in investing in
the technology sector.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Decent Capital Decent Capital Overseas Limited is a company incorporated in the
BVI and is wholly owned by Zeng Liqing. Mr. Zeng is the founder
and chairman of Decent Capital, an angel investment institution
dedicated to Internet-related consumption and high-tech fields.
Duckling Fund Duckling Fund, L.P ., an exempted limited partnership registered
under the laws of Cayman Islands, whose general partner is
Grandiflora Hook GP Limited and ultimately controlled by Eric Li.
The only limited partner of Duckling Fund is Lionet Fund, L.P .,
which is a fund focusing on logistics, healthcare,
telecommunication, media, technology and consumer industries
investment. The general partner of Lionet Fund, L.P . is Grandiflora
Hook GP Limited. Lionet Fund, L.P . has more than 15 limited
partners, none of which holds more than one third of the interest in
Lionet Fund, L.P .
Epiphron Capital Epiphron Capital Holdings Limited is a company incorporated in
Hong Kong and is wholly owned by Epiphron Capital (Hong
Kong) Limited. It is primarily engaged in investments focusing on
the investment areas of healthcare sector and is ultimately wholly
owned by Mr. Timothy Mark Fletcher Ferdinand. Mr Ferdinand is
a director and chief operating officer of Epiphron Capital. Prior to
joining Epiphron Capital, Mr Ferdinand started his career as an
international capital markets lawyer in London, Tokyo and Hong
Kong before making the switch to investment banking where he
spent the bulk of his career. He has lived in, and worked with, Asia
for over 30 years and has gained considerable experience relating
to investment in China.
Fangyuan Capital Fangyuan J Fund is an exempted company incorporated in the
Cayman Islands and Fangyuan Growth SPC (for and on behalf of
PCJ Healthcare Fund SP) is an exempted segregated portfolio
company incorporated in the Cayman Islands. Fangyuan J Fund is
wholly owned by Fangyuan Capital Holdings (Cayman) Limited,
which is 100% owned by Zheng Juan. Fangyuan Growth SPC is
wholly owned by PCJ Capital Management Limited, an exempted
company incorporated in the Cayman Islands, which is ultimately
owned as to 50% by Zheng Juan. Both Fangyuan J Fund and
Fangyuan Growth SPC are managed by Fangyuan Capital (Hong
Kong) Limited, a limited liability company incorporated in Hong
Kong, which is active in healthcare investments, with focus on
enacting innovation and technology transformation.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Flaming Capital Flaming Capital Limited is a company incorporated in Hong Kong
and is wholly owned by Ng Kong Ping Albert who is a private
investor, Ng Kong Ping Albert has over 30 years of professional
experience in accounting in Hong Kong and Mainland China.
Flaming Capital Limited primarily engages in investment
management and primarily focuses on investment areas of
biotechnology, new energy, and high-end manufacturing.
FreeS Fund FreeS Fund LP is an exempted limited partnership incorporated in
the Cayman Islands focusing on investment opportunities in equity
and equity-linked securities of privately-held companies in the
technology, media and telecommunications industry, finance,
education and healthcare industries as they relate to the TMT
industry, and business service industry, which are in seed-stage,
early stage or high-growth stage and organized and/or operated in
United States, China, or otherwise with a significant nexus to
China. FreeS Fund LP has over ten limited partners as of the Latest
Practicable Date who are private investors and institutional
investors. None of the limited partners has more than one third of
the limited partnership interests. The general partner of FreeS Fund
LP is FreeS Capital Management LP which is wholly owned by
Brightest Leads Limited. Brightest Leads Limited is in turn wholly
owned by Mr. Li Feng.
Glut Treasure Glut Treasure International Limited is a company incorporated in
the BVI and is owned as to 95% by Shang Fengjiao and 5% by He
Yijun. Shang Fengjiao and He Yijun are private investors. Glut
Treasure International Limited primarily engages in investments
focusing on biology technology and information technology.
Google Google’s mission is to organize the world’s information and make
it universally accessible and useful. Through products and
platforms like Search, Maps, Gmail, Android, Google Play, Google
Cloud, Chrome and Y ouTube, Google plays a meaningful role in
the daily lives of billions of people and has become one of the most
widely-known companies in the world. Google is a subsidiary of
Alphabet Inc. (ticker: GOOGL for Class A and GOOG for Class C,
listed on Nasdaq).
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Harvest Harvest International Premium V alue (Secondary Market) Fund
SPC on behalf of Harvest Great Bay Investment SP (“ Harvest ”) is
a fund established in February 2022. Harvest International
Premium V alue (Secondary Market) Fund SPC is a segregated
portfolio company established in the Cayman Islands. 91% of the
management shares of Harvest International Premium V alue
(Secondary Market) Fund SPC are held by Harvest Global
Investments Limited (“ HGI”) and 9% of the management shares
are held by Harvest Global Capital Investments Limited
(“HGCI ”). Incorporated in Hong Kong in 2008, HGI is a wholly-
owned subsidiary of Harvest Fund Management Co., Ltd
(“HFM”). HFM is one of the first ten public fund management
companies approved to be established within China. HGCI is a
company incorporated in Hong Kong in 2011 and licensed to carry
out type 1 (dealing in securities), type 4 (advising on securities)
and type 9 (asset management) regulated activities under the SFO
in Hong Kong by the SFC. HGCI is principally engaged in asset
management and investment advisory business. The sole
participating shareholder of Harvest is Navigator Technology
Limited (“ NTL”), and the ultimate beneficial owner of NTL is
Zheng Fuhua.
Hermitage Fund Hermitage Fund Two SP is a segregated portfolio created by and
held under Hermitage Galaxy Fund SPC. Hermitage Galaxy Fund
SPC is an exempted segregated portfolio company incorporated in
the Cayman Islands. Hermitage Galaxy Fund SPC primarily
engages in private equity investments. The management share of
Hermitage Galaxy Fund SPC is owned as to 100% by Hermitage
Fund Management Limited. Hermitage Fund Management Limited
is ultimately controlled by Mr. Y uqiu Xiang.
Founded in 2017, Hermitage Fund is headquartered in Hong Kong
and has an office in Shanghai. It is an investment group focusing
on the global technology field. The total assets managed by
Hermitage Fund exceeds US$1.5 billion, and all partners have
served as senior executives in top international investment banks
and asset management firms. Hermitage Fund is dedicated to the
global technology field, focusing on artificial intelligence,
autonomous driving, financial technology, cloud computing,
energy technology and other potential emerging industries with
great potential.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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HCHP HCHP Holdco, Ltd. is an exempted company incorporated with
limited liability under the laws of the Cayman Islands. HCHP
Holdco, Ltd. is a wholly-owned subsidiary of HCHP Master Fund,
which is managed by HCHP Management Limited as investment
manager, which is in turn wholly owned by HCHP Management
Holding Limited. The majority voting rights of HCHP
Management Holding Limited are indirectly held by its non-
executive director, Neil Nanpeng Shen. HCHP Master Fund is an
investment fund whose primary purpose is to make China-related
public equity investments in healthcare sector. HCHP Management
Limited was incorporated under the laws of Hong Kong in 2021
and is licensed for Type 9 regulated activities under the SFO.
HX Quality HX Quality Selection Limited is a company incorporated in the
BVI. HX Quality Selection Limited primarily engages in an
investment holding and its management shareholder is Grand
Eternity Limited, which is ultimately owned by China Renaissance
Holdings Limited, a company listed on the Stock Exchange (stock
code: 1911) and primarily engages in the provision of investment
banking and investment management services.
IMO Ventures IMO Global Growth Fund SPC—IMO Opportunity Fund I SP , IMO
Global Growth Fund SPC—IMO Opportunity Fund II SP and IMO
Global Growth Fund SPC—IMO Opportunity Fund V SP
(collectively, the “ IMO Opportunity Fund SP ”) are segregated
portfolios created by IMO Global Growth Fund SPC. IMO Global
Growth Fund SPC is a segregated portfolio company incorporated
in the Cayman Islands. The management shares of IMO Global
Growth Fund SPC is owned as to 100% by Global Growth Fund
Investment Limited. Global Growth Fund Investment Limited is
the investment advisor of IMO Global Growth Fund SPC—IMO
Opportunity Fund I SP and IMO Global Growth Fund SPC—IMO
Opportunity Fund II SP . Immersion V entures Capital Limited is the
investment manager of IMO Global Growth Fund SPC—IMO
Opportunity Fund V SP . Global Growth Fund Investment Limited
and Immersion V entures Capital Limited are ultimately controlled
by Yiwen ZHAI.
IMO Opportunity Fund V , L.L.C. is a company incorporated in
Delaware, the United States with limited liability and is wholly
owned by Bobby LO. IMO Opportunity Fund V , L.L.C. primarily
engages in investments focusing on biotechnology industry. IMO
Opportunity Fund V , L.L.C. is ultimately controlled by Bobby LO.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Mirae Asset Mirae Asset Growth Xtalpi Investment Company Limited is a
company incorporated in the BVI and is wholly owned by Mirae
Asset Growth Investment Company Limited, a company
incorporated in the BVI, which is in turn wholly owned by Mirae
Asset Global Investments (Hong Kong) Limited, a company
incorporated in Hong Kong. Mirae Asset Growth Xtalpi
Investment Company Limited is part of Mirae Asset Financial
Group. Founded in 1997, Mirae Asset Financial Group is one of the
largest financial groups in Asia, providing comprehensive services
to clients worldwide—including asset management, wealth
management, investment banking and life insurance. Mirae Asset
Growth Xtalpi Investment Company is a special vehicle for private
equity investments.
Mirae Asset New Economy Fund L.P . (“ Mirae Asset Fund ”) is an
exempted limited partnership incorporated in the Cayman Islands
and its general partner is Mirae Asset General Partners. Mirae
Asset Securities (HK) Limited holds 30% or more limited
partnership interests in Mirae Asset Fund. The shareholder of
Mirae Asset Securities (HK) Limited is Mirae Asset Securities Co
Ltd. which is a company listed on the Korea Exchange (stock code
006800). Mirae Asset Fund mainly invests in growth stage
companies in healthcare, consumer, telecommunications, media
and technology (TMT) sectors in Greater China.
Musketeers
Capital
The Musketeers Capital Limited is a company incorporated in
Hong Kong with limited liability and is owned as to 40% by Mr.
Woo Ying Hung Alan, 40% by Mr. Zhang Y ao, and 20% by Mr.
Chen Bo, who are private investors. The Musketeers Capital
Limited primarily engages in financial consulting and investment
holding and is ultimately controlled by Mr. Woo Ying Hung Alan,
Mr. Zhang Y ao and Mr. Chen Bo.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 330 ---
Oceanpine Oceanpine Investment Fund II LP is an exempted limited
partnership incorporated in the Cayman Islands. Oceanpine
Investment Fund II LP has eight limited partners as of the Latest
Practicable Date, including Oceanpine Inc., Fine Hope Holdings
Limited, Prosperous Investment Limited, Purple Mountain
Holding Ltd., Profit Reach International Limited, etc. Oceanpine
Inc. is the single largest limited partner of Oceanpine Investment
Fund II LP which holds 77.75% of limited partnership interest. The
general partner of Oceanpine Investment Fund II LP is Oceanpine
Growth (Cayman) Limited, an exempted company incorporated in
the Cayman Islands with limited liability, which is wholly owned
by Dave Liguang Chenn, the founder, chief executive officer and
managing partner of Oceanpine Capital.
OrbiMed OrbiMed Genesis Master Fund, L.P . (“ OrbiMed Genesis ”) and
OrbiMed New Horizons Master Fund, L.P . (“ OrbiMed New
Horizons ”) are each an exempted limited partnership incorporated
in the Cayman Islands with OrbiMed Advisors LLC acting as the
investment manager. OrbiMed Advisors LLC exercises voting and
investment power through a management committee comprised of
Carl L. Gordon, Sven H. Borho and W. Carter Neild.
OrbiMed Partners Master Fund Limited is an exempted company
limited by shares incorporated in Bermuda. OrbiMed Capital LLC
is the sole investment advisor of OrbiMed Partners Master Fund
Limited. OrbiMed Capital LLC exercises voting and investment
power through a management committee comprised of Carl L.
Gordon, Sven H. Borho and W. Carter Neild.
OrbiMed Partners SPV , Ltd. is an exempted company incorporated
in the Cayman Islands. OrbiMed Advisors LLC is the investment
manager of OrbiMed Partners SPV , Ltd. OrbiMed Advisors LLC
exercises voting and investment power through a management
committee comprised of Carl L. Gordon, Sven H. Borho and W.
Carter Neild.
The Biotech Growth Trust PLC is a publicly listed trust organized
in England and Wales with OrbiMed Capital LLC acting as its sole
portfolio manager. OrbiMed Capital LLC exercises voting and
investment power through a management committee comprised of
Carl L. Gordon, Sven H. Borho and W. Carter Neild.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 331 ---
Parkway Parkway Limited is a company incorporated in the BVI and is
wholly owned by Star Forum Limited. Star Forum Limited is
solely owned by Mr. Xie Yijing. Mr. Xie Yijing is a private
investor who is a director of China Renaissance Holdings Limited,
a company listed on the Stock Exchange (stock code: 1911).
Shunwei Capital Astrend Opportunity III Alpha Limited is a company incorporated
in the BVI, which is wholly owned by Shunwei China Internet
Opportunity Fund III, L.P . Shunwei China Internet Opportunity
Fund III, L.P . has over fifty limited partners as of the Latest
Practicable Date who are private investors and institutional
investors. The general partner of Shunwei China Internet
Opportunity Fund III, L.P . is Shunwei Capital Partners IV GP , L.P .,
and the general partner of Shunwei Capital Partners IV GP , L.P . is
Shunwei Capital Partners IV GP Limited. Silver Unicorn V entures
Limited holds more than 50% of the issued and outstanding shares
of Shunwei Capital Partners IV GP Limited, and Mr. Koh Tuck Lye
is the sole shareholder of Silver Unicorn V entures Limited. Mr.
Koh Tuck Lye co-founded Shunwei Capital in 2011, an early to
growth stage venture capital firm focusing on deep technology,
smart manufacturing, Internet+, consumer IoT, consumption,
enterprise services and electric vehicle ecosystem sectors, and has
served as its chief executive officer.
SIG SIG Global China Fund I, LLLP is a limited liability limited
partnership incorporated in Delaware, the United States. SIG
Global China Fund I, LLLP has one limited partner as of the Latest
Practicable Date. The general partner of SIG Global China Fund I,
LLLP is SIG Global Investments GP , LLC. SIG Asia Investment,
LLLP acting as the investment manager of SIG Global China
Fund I, LLLP . Heights Capital Management, Inc., a Delaware
corporation, is the investment manager for SIG Asia Investment,
LLLP . SIG Global China Fund I, LLLP is ultimately controlled by
an individual who is a U.S. citizen.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Sino Biopharm Sino Biopharmaceutical Limited (“ Sino Biopharm ”) is a company
with limited liability incorporated under the laws of the Cayman
Islands, the shares of which are listed on the Main Board of the
Stock Exchange (stock code: 1177), and has been a constituent
stock of the Hang Seng Index since 2018. Sino Biopharm is
principally engaged in the research and development as well as the
manufacture and sales of pharmaceutical products. Its products
have gained a competitive foothold in various therapeutic areas
with promising potentials, comprising a variety of
biopharmaceutical and chemical medicines for tumors, liver
diseases, respiratory system diseases and surgery/analgesia.
Sixth Dimension Sixth Dimension Investment Limited is a company incorporated in
Hong Kong and is owned as to 100% by Ms. Wen Y uan. Sixth
Dimension Investment Limited primarily engages in making
private investments in the areas of SaaS and healthcare technology
companies. Ms. Wen Y uan used to work in securities and banking
industry and has been a private investor since 2004.
Sky9 Capital Sky9 MVP XtalPi, L.P . is an exempted limited partnership
incorporated in the Cayman Islands. Sky9 MVP XtalPi, L.P . has six
limited partners as of the Latest Practicable Date who are private
investors and institutional investors. The general partner of Sky9
MVP XtalPi, L.P . is Sky9 Capital MVP GP Ltd, which is ultimately
controlled by Mr. Ronald Cao. Sky9 Capital is a venture capital
firm dedicated to supporting disruptive technologies and
outstanding innovators around the world.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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SoftBank Vision
Fund II-2 L.P.
SVF II Crystal Subco (DE) LLC is a limited liability company
incorporated in Delaware, the United States, and is an indirect
subsidiary of SoftBank Vision Fund II-2 L.P .. SoftBank Vision
Fund II-2 L.P ., a limited partnership established in Jersey, is an
investment fund that focuses on investments in the global
technology industry. Its general partner is SVF II GP (Jersey)
Limited, a company incorporated in Jersey and a wholly-owned
subsidiary of SoftBank Group Corp. (“ SoftBank Group ”) and its
manager is SB Global Advisers Limited, a company incorporated
in the United Kingdom and also a wholly-owned subsidiary of
SoftBank Group. SB Global Advisers Limited is responsible for
making final decisions related to the acquisition, structuring,
financing and disposal of SoftBank Vision Fund II-2 L.P .’s
investments. SoftBank Group is a Japanese corporation listed on
the Tokyo Stock Exchange (stock code: 9984), with operations in
broadband, mobile and fixed-line telecommunications,
e-commerce, Internet, technology services, media and marketing,
and other businesses.
Summer
Inspiration
Summer Inspiration Holdings Limited is a company incorporated
in BVI and is owned as to 100% by Summer Healthcare Fund, L.P .
Summer Inspiration Holdings Limited primarily engages in
investment holding. Summer Healthcare Fund, L.P . has over 25
limited partners as of the Latest Practicable Date who are
institutional investors and private investors. None of the limited
partners has more than one third of the limited partnership
interests. The general partner of Summer Healthcare Fund, L.P . is
Summer Capital GP Limited which is ultimately controlled by
Summer Capital Limited (“ Summer Capital ”). Summer Capital is
a multi-strategy investment advisory company, focusing on
advising investments in healthcare, blockchain, fintech and
technology-driven consumption sectors. Summer Capital is
ultimately controlled by Ms. Birong Zhang.
Ten Fortress Ten Fortress Limited is a company incorporated in the BVI. Ten
Fortress Limited focuses on investment in the healthcare industry,
it is ultimately controlled by Patrick Cheung who is a partner of a
private equity firm ZWC Partners.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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TPFG Crystal TPFG Crystal Limited (formerly known as “Pine Peak Crystal
Limited”) is a company incorporated in the BVI and is wholly
owned by TPFG Holdings Limited. TPFG Crystal Limited
primarily engages in investment holdings business and Mr. Ma Chi
Kong Karl is the largest ultimate beneficial owner of TPFG Crystal
Limited who indirectly holds approximately 25% of its
shareholding interest.
Wealth Maker Wealth Maker Holdings Limited is a company incorporated in the
BVI and is wholly owned by a Hong Kong resident who is a private
investor.
Y ael Capital Y ael Capital Partners I L.P . is a limited partnership incorporated in
the BVI. Y ael Capital Partners I L.P . has over 30 limited partners
as of the Latest Practicable Date who are private investors and
institutional investors. None of the limited partners has more than
one third of the limited partnership interests. The general partner
of Y ael Capital Partners I L.P . is Y ael Capital Management Limited
which is ultimately controlled by LIU Chong. Y ael Capital Partners
I L.P . primarily focuses on investment area of new drug discovery
and relevant services.
Y an Capital Y an Capital L.P . is an exempted limited partnership incorporated in
the Cayman Islands focusing on investment opportunities in AI
areas. Y an Capital L.P . has one limited partner as of the Latest
Practicable Date who is an institutional investor. The general
partner of Y an Capital L.P . is Y an Capital Management Ltd. which
is ultimately controlled by Y an Dan.
Save for Image Frame which is a core connected person only because it is a substantial
shareholder of our Company, to the best of the knowledge, information and belief of our
Directors having made all reasonable enquiries, each of the Pre-IPO Investors is an
Independent Third Party.
Compliance with Chapter 4.2 of the HKEX Guide
On the basis that (i) the considerations for the Pre-IPO Investments have been settled no
less than 120 clear days before the Listing Date; and (ii) all the special rights granted to the
Pre-IPO Investors as set out above have been terminated or will terminate upon the Listing, the
Sole Sponsor confirms that the Pre-IPO Investments are in compliance with Chapter 4.2 of the
HKEX Guide.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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CAPITALIZATION
The table below sets out a summary of the shareholding structure of our Company as of the date of this prospectus and immediately upon the
completion of the Global Offering (assuming the Over-allotment Option is not exercised and no Shares will be issued under the ESOPs):
No. Name of Shareholder
Class A
Ordinary
Shares
Class B
Ordinary
Shares
Series Pre-A
Preferred
Shares
Series A-1
Preferred
Shares
Series A-2
Preferred
Shares
Series B
Preferred
Shares
Series B+
Preferred
Shares
Series B++
Preferred
Shares
Series C
Preferred
Shares
Series D
Preferred
Shares
Number of Shares
held as of the date
of this prospectus
Number of Shares
held immediately
upon the
completion of the
Global Offering
Shareholding
as of the date
of this
prospectus
Shareholding
immediately upon
the completion of
the Global
Offering
1 QuantumPharm Holdings 3,195,700 218,930,700 –––––––– 222,126,400 222,126,400 6.90% 6.52%
2 QuantumPharm Roc 298,041,143 ––––––––– 298,041,143 298,041,143 9.26% 8.75%
3 Crete Helix – 122,908,500 –––––––– 122,908,500 122,908,500 3.82% 3.61%
4 SeveningBAlpha – 87,814,140 –––––––– 8 7,814,140 87,814,140 2.73% 2.58%
5 Image Frame – – – 250,001,000 14,084,700 63,380,300 – – 63,324,366 49,076,214 439,866,580 439,866,580 13.66% 12.91%
6 HSG Growth VI Holdco E, Ltd. ––––––––– 4 9 , 076,214 49,076,214 49,076,214 1.52% 1.44%
7 HSG V enture VI Holdco, Ltd. ––––– 190,140,900 – – 13,303,438 – 203,444,338 203,444,338 6.32% 5.97%
8 HSG V enture VIII Holdco, Ltd. –––––––– 13,303,439 – 13,303,439 13,303,439 0.41% 0.39%
9 HCHP Holdco, Ltd. ––––––––– 1 6 , 358,738 16,358,738 16,358,738 0.51% 0.48%
10 Evolution Fund I Co-investment,
L.P .
1,789,224 ––––– 227,113 2,917,864 15,617,079 12,802,491 33,353,771 33,353,771 1.04% 0.98%
11 Evolution Fund I, L.P . 11,928,171 ––––– 1 , 514,087 19,452,424 104,113,865 – 137,008,547 137,008,547 4.26% 4.02%
12 Evolution Special Opportunity Fund
I, L.P .
––––––––– 8 5 , 349,937 85,349,937 85,349,937 2.65% 2.51%
13 China Life Chengda (Shanghai)
Healthcare Industry Equity
Investment Center (Limited
Partnership)
–––––– 208,946,000 – 26,606,877 – 235,552,877 235,552,877 7.32% 6.91%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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No. Name of Shareholder
Class A
Ordinary
Shares
Class B
Ordinary
Shares
Series Pre-A
Preferred
Shares
Series A-1
Preferred
Shares
Series A-2
Preferred
Shares
Series B
Preferred
Shares
Series B+
Preferred
Shares
Series B++
Preferred
Shares
Series C
Preferred
Shares
Series D
Preferred
Shares
Number of Shares
held as of the date
of this prospectus
Number of Shares
held immediately
upon the
completion of the
Global Offering
Shareholding
as of the date
of this
prospectus
Shareholding
immediately upon
the completion of
the Global
Offering
14 Beijing PICC Health & Pension
Industry Investment Fund
(Limited Partnership)
–––––––– 1 19,730,945 – 119,730,945 119,730,945 3.72% 3.51%
15 Aqua Elite Capital Limited ––––––––– 1 6 , 358,738 16,358,738 16,358,738 0.51% 0.48%
16 Artisan China Post-V enture
Holdings Limited
––––––––– 8 , 179,369 8,179,369 8,179,369 0.25% 0.24%
17 Astrend Opportunity III Alpha
Limited
6,906,035 ––––– 1 , 741,200 – 7,982,063 4,907,621 21,536,919 21,536,919 0.67% 0.63%
18 Bopu Capital Management Ltd ––––––––– 1 , 635,874 1,635,874 1,635,874 0.05% 0.05%
19 Bopu HiTech Portfolio XP LP – – 23,620,314 – – – – – – – 23,620,314 23,620,314 0.73% 0.69%
20 BRAINPOWER ELECTRONIC
TECHNOLOGY LIMITED
––––––––– 8 , 179,369 8,179,369 8,179,369 0.25% 0.24%
21 Cassini Partners, L.P . ––––––––– 1 , 5 1 1,937 1,511,937 1,511,937 0.05% 0.04%
22 CENTRAL POINT HOLDING
DEVELOPMENT LIMITED
–––––––– 17,885,554 – 17,885,554 17,885,554 0.56% 0.52%
23 CICC Biomedical Fund L.P . –––––––– 20,457,715 – 20,457,715 20,457,715 0.64% 0.60%
24 CICC Qizhi (Shanghai) Private
Equity Investment Center L.P .
–––––––– 19,452,600 – 19,452,600 19,452,600 0.60% 0.57%
25 CITIC (Shenzhen) V enture Capital
Equity Investment Fund
Partnership (Limited Partnership)
–––––––– 2,660,688 – 2,660,688 2,660,688 0.08% 0.08%
26 CR Life Star Fund LLC ––––––––– 5 , 725,558 5,725,558 5,725,558 0.18% 0.17%
27 Crystal II Technology Investment
Company Ltd
––––––––– 2 2 , 902,233 22,902,233 22,902,233 0.71% 0.67%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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No. Name of Shareholder
Class A
Ordinary
Shares
Class B
Ordinary
Shares
Series Pre-A
Preferred
Shares
Series A-1
Preferred
Shares
Series A-2
Preferred
Shares
Series B
Preferred
Shares
Series B+
Preferred
Shares
Series B++
Preferred
Shares
Series C
Preferred
Shares
Series D
Preferred
Shares
Number of Shares
held as of the date
of this prospectus
Number of Shares
held immediately
upon the
completion of the
Global Offering
Shareholding
as of the date
of this
prospectus
Shareholding
immediately upon
the completion of
the Global
Offering
28 Crystal Technology Investment
Company Ltd
––––––––– 5 0 , 712,088 50,712,088 50,712,088 1.58% 1.49%
29 Decent Capital Overseas Limited ––––––––– 3 , 271,748 3,271,748 3,271,748 0.10% 0.10%
30 Duckling Fund, L.P . –––––––– 79,820,630 19,630,486 99,451,116 99,451,116 3.09% 2.92%
31 Epiphron Capital Holdings Limited ––––––––– 1 , 635,874 1,635,874 1,635,874 0.05% 0.05%
32 Fangyuan Growth SPC – PCJ
Healthcare Fund SP
–––––––– 13,303,438 – 13,303,438 13,303,438 0.41% 0.39%
33 Fangyuan J Fund – – 46,118,586 – – – – – – 9,815,243 55,933,829 55,933,829 1.74% 1.64%
34 FA VOR STAR LIMITED ––––––––– 967,243 967,243 967,243 0.03% 0.03%
35 FLAMING CAPITAL LIMITED ––––––––– 4 , 907,622 4,907,622 4,907,622 0.15% 0.14%
36 FreeS Fund LP –––– 1 2 , 947,431 – – – – – 12,947,431 12,947,431 0.40% 0.38%
37 Glut Treasure International Limited –––––– 4,711,274 – 4,757,549 – 9,468,823 9,468,823 0.29% 0.28%
38 Google LLC ––––– 29,375,901 – – – – 29,375,901 29,375,901 0.91% 0.86%
39 Harvest International Premium
V alue (Secondary Market) Fund
SPC on behalf of Harvest Great
Bay Investment SP
– – 28,007,062 – 21,126,800 18,913,799 12,437,333 – – – 80,484,994 80,484,994 2.50% 2.36%
40 Hermitage Galaxy Fund SPC for
and on behalf of Hermitage Fund
Two SP
––––––––– 4 4 , 168,592 44,168,592 44,168,592 1.37% 1.30%
41 HX Quality Selection Limited ––––––––– 6 , 543,495 6,543,495 6,543,495 0.20% 0.19%
42 IMO Global Growth Fund SPC –
IMO Opportunity Fund I SP
– – 14,412,058 – – – – – – – 14,412,058 14,412,058 0.45% 0.42%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 338 ---
No. Name of Shareholder
Class A
Ordinary
Shares
Class B
Ordinary
Shares
Series Pre-A
Preferred
Shares
Series A-1
Preferred
Shares
Series A-2
Preferred
Shares
Series B
Preferred
Shares
Series B+
Preferred
Shares
Series B++
Preferred
Shares
Series C
Preferred
Shares
Series D
Preferred
Shares
Number of Shares
held as of the date
of this prospectus
Number of Shares
held immediately
upon the
completion of the
Global Offering
Shareholding
as of the date
of this
prospectus
Shareholding
immediately upon
the completion of
the Global
Offering
43 IMO Global Growth Fund SPC –
IMO Opportunity Fund II SP
– – 17,294,470 – – – – – 10,642,751 – 27,937,221 27,937,221 0.87% 0.82%
44 IMO Global Growth Fund SPC –
IMO Opportunity Fund V SP
––––––––– 4 4 , 168,592 44,168,592 44,168,592 1.37% 1.30%
45 IMO Opportunity Fund V , L.L.C. ––––––––– 1 , 635,874 1,635,874 1,635,874 0.05% 0.05%
46 Mirae Asset Growth Xtalpi
Investment Company Limited
–––––––– 2,660,688 – 2,660,688 2,660,688 0.08% 0.08%
47 Mirae Asset New Economy Fund
L.P .
–––––––– 26,606,877 – 26,606,877 26,606,877 0.83% 0.78%
48 Nanjing Zhaoyin Gongying Equity
Investment Partnership (Limited
Partnership)
–––––––– 2,926,756 – 2,926,756 2,926,756 0.09% 0.09%
49 Neumann Capital ––––––––– 10,117,048 10,117,048 10,117,048 0.31% 0.30%
50 Neumann Galaxy Limited ––––––––– 490,762 490,762 490,762 0.02% 0.01%
51 Oceanpine Investment Fund II LP –––––––– 26,606,877 – 26,606,877 26,606,877 0.83% 0.78%
52 OrbiMed Genesis Master Fund, L.P . ––––––––– 8 , 179,369 8,179,369 8,179,369 0.25% 0.24%
53 OrbiMed New Horizons Master
Fund, L.P .
––––––––– 8 , 179,369 8,179,369 8,179,369 0.25% 0.24%
54 OrbiMed Partners Master Fund
Limited
––––––––– 1 6 , 218,525 16,218,525 16,218,525 0.50% 0.48%
55 OrbiMed Partners SPV , Ltd. ––––––––– 8 , 319,582 8,319,582 8,319,582 0.26% 0.24%
56 PARKW AY LIMITED –––––––– 7,982,063 – 7,982,063 7,982,063 0.25% 0.23%
57 Pluto Connection Limited –––––––– 13,303,438 – 13,303,438 13,303,438 0.41% 0.39%
58 Shanghai Y uji Technology LLP ––––––––
26,340,808 – 26,340,808 26,340,808 0.82% 0.77%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 339 ---
No. Name of Shareholder
Class A
Ordinary
Shares
Class B
Ordinary
Shares
Series Pre-A
Preferred
Shares
Series A-1
Preferred
Shares
Series A-2
Preferred
Shares
Series B
Preferred
Shares
Series B+
Preferred
Shares
Series B++
Preferred
Shares
Series C
Preferred
Shares
Series D
Preferred
Shares
Number of Shares
held as of the date
of this prospectus
Number of Shares
held immediately
upon the
completion of the
Global Offering
Shareholding
as of the date
of this
prospectus
Shareholding
immediately upon
the completion of
the Global
Offering
59 SIG Global China Fund I, LLLP –––––– 26,906,426 – 8,774,133 – 35,680,559 35,680,559 1.11% 1.05%
60 SINO BIOPHARMACEUTICAL
LIMITED
––––––––– 1 9 , 630,486 19,630,486 19,630,486 0.61% 0.58%
61 Sixth Dimension Investment Limited ––––––––– 4 , 907,621 4,907,621 4,907,621 0.15% 0.14%
62 Sky9 MVP XtalPi, L.P . ––––––––– 4 , 907,621 4,907,621 4,907,621 0.15% 0.14%
63 Summer Inspiration Holdings
Limited
––––––––– 6 , 543,495 6,543,495 6,543,495 0.20% 0.19%
64 SVF II Crystal Subco (DE) LLC –––––––– 9 3 , 975,747 – 93,975,747 93,975,747 2.92% 2.76%
65 TEN FORTRESS LIMITED ––––––––– 4 , 907,621 4,907,621 4,907,621 0.15% 0.14%
66 The Biotech Growth Trust PLC ––––––––– 2 4 , 538,107 24,538,107 24,538,107 0.76% 0.72%
67 The Musketeers Capital Limited ––––––––– 3 , 271,748 3,271,748 3,271,748 0.10% 0.10%
68 TPFG Crystal Limited – – 4,250,350 – – – – – – – 4,250,350 4,250,350 0.13% 0.12%
69 WEALTH MAKER HOLDINGS
LIMITED
1,862,481 ––––––––– 1 ,862,481 1,862,481 0.06% 0.05%
70 Y ael Capital Partners I L.P . 28,643,849 – 11,518,160 – 8,179,369 – 3,581,867 6,934,789 26,266,214 31,899,539 117,023,787 117,023,787 3.64% 3.44 %
71 Y an Capital L.P . –––––– 4 , 599,600 – – – 4,599,600 4,599,600 0.14% 0.14%
Subtotal 352,366,603 429,653,340 145,221,000 250,001,000 56,338,300 301,810,900 264,664,900 29,305,077 768,406,598 621,632,043 3,219,399,7 61 3,219,399,761 100.00% 94.50%
72 Public Shareholders –––––––––– – 187,373,000 – 5.50%
Total 3,219,399,761 3,406,772,761 100.00% 100.00%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 340 ---
Notes:
(1) Pursuant to the powers of attorney dated July 19, 2021 executed by (i) Dr. Ma, Jian Guo Pai and Crete Helix; and (ii) Dr. Lai, Sevening B Holdings and Se veningBAlpha
(collectively, the “ Co-founder Grantors ”), QuantumPharm Holdings is indefinitely and irrevocably authorized and appointed to exercise all the voting rights attached to the
Shares held by them at any time and from time to time which they are entitled to under the laws of the Cayman Islands and the Memorandum and Articles on all m atters submitted
to a vote of Shareholders at a meeting of Shareholders or through the solicitation of a written consent of Shareholders, except for any matter the outco me of the vote on which
will disproportionately, materially and adversely affect the Co-founder Grantors, as compared to QuantumPharm Holdings or any other Shareholder.
(2) QuantumPharm Roc, the shareholding platform for the Pre-IPO ESOP which holds the Shares underlying the options granted thereunder for the benefi t of the grantees, is wholly
owned by QuantumPharm Holdings.
(3) Inclusive of transfers of shares between May 2019 and April 2024, between a number of investors at a total consideration of US$171.9 million.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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PUBLIC FLOAT
Save for Image Frame, which will hold 12.91% of the total number of our issued Shares
upon Listing (assuming the Over-allotment Option is not exercised and no Shares will be
issued under the ESOPs) and will be a substantial shareholder of our Company, all Pre-IPO
Investors are independent from our Group and not our core connected persons. Accordingly, the
Shares held by such Pre-IPO Investors shall be counted towards the public float of our
Company.
Further, upon the Listing, (i) the Shares held by QuantumPharm Holdings, Crete Helix
and SeveningBAlpha, representing 12.71% of the total number of our issued Shares upon
Listing (assuming the Over-allotment Option is not exercised and no Shares will be issued
under the ESOPs); and (ii) the Shares held by QuantumPharm Roc, representing 8.75% of the
total number of our issued Shares upon Listing (assuming the Over-allotment Option is not
exercised and no Shares will be issued under the ESOPs), will not be counted towards the
public float of our Company.
Based on the above, it is expected that immediately following completion of the Global
Offering (assuming the Over-allotment Option is not exercised and no Shares will be issued
under the ESOPs), the total number of Shares held by the public represents 65.63% of the total
number of issued Shares upon the Listing. Therefore, our Company will be able to meet the
minimum public float requirement under Rule 8.08 of the Listing Rules.
LOCK-UP AND FREE FLOAT
The following Shares will be subject to disposal restrictions pursuant to Rule 18C.14 of
the Listing Rules at the time of the Listing:
Person(s) Capacity
Number of Shares
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1)
Shareholding
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1) Lock-up period
Dr. Wen One of the
Co-founders and
executive Director
222,126,400
(2) 6.52% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 342 ---
Person(s) Capacity
Number of Shares
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1)
Shareholding
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1) Lock-up period
81,093,362 (4) 2.38% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
22,000,000 (5) 0.65% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
Dr. Ma One of the
Co-founders and
executive Director
122,908,500
(6) 3.61% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
45,230,342 (7) 1.33% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
59,103,125 (8) 1.73% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
Dr. Lai One of the
Co-founders and
executive Director
87,814,140
(9) 2.58% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 343 ---
Person(s) Capacity
Number of Shares
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1)
Shareholding
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1) Lock-up period
32,315,661 (10) 0.95% Commencing on the
date of this
prospectus and
ending on expiry
of 24 months from
the Listing Date
(3)
Image Frame Pathfinder SII 439,866,580 12.91% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
HSG V enture VI
Holdco, Ltd.
Pathfinder SII 203,444,338 5.97% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
HSG Growth VI
Holdco E, Ltd.
Pathfinder SII 49,076,214 1.44% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
HCHP Holdco,
Ltd.
Close associate of
our Pathfinder SII
16,358,738 0.48% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 344 ---
Person(s) Capacity
Number of Shares
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1)
Shareholding
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1) Lock-up period
HSG V enture VIII
Holdco, Ltd.
Pathfinder SII 13,303,439 0.39% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
Evolution Fund I,
L.P .
Pathfinder SII 137,008,547 4.02% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
Evolution Special
Opportunity
Fund I, L.P .
Pathfinder SII 85,349,937 2.51% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
Evolution Fund I
Co-investment,
L.P .
Pathfinder SII 33,353,771 0.98% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
China Life
Chengda
(Shanghai)
Healthcare
Industry Equity
Investment
Center (Limited
Partnership)
Pathfinder SII 235,552,877 6.91% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 345 ---
Person(s) Capacity
Number of Shares
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1)
Shareholding
subject to disposal
restrictions
immediately
following the
completion of the
Global Offering (1) Lock-up period
Beijing PICC
Health &
Pension
Industry
Investment Fund
(Limited
Partnership)
Pathfinder SII 119,730,945 3.51% Commencing on the
date of this
prospectus and
ending on expiry
of 12 months from
the Listing Date
(13)
Notes:
(1) On the basis that 3,406,772,761 Shares are expected to be in issue immediately following the completion
of the Global Offering and assuming the Over-allotment Option is not exercised and no Shares will be
issued under the ESOPs.
(2) Representing the Shares held by QuantumPharm Holdings. QuantumPharm Holdings is held as to 99%
by WSH Family Holdings, which is the holding vehicle of TMF (Cayman) Ltd. TMF (Cayman) Ltd. is
the trustee of the WSH Family Trust, a discretionary trust established by Dr. Wen as settlor.
(3) In the event that upon the notification by the Stock Exchange that our Company will no longer be
regarded as a Pre-Commercial Company after the Listing, the lock-up period will expire on the later of:
(i) the date which is 12 months from the Listing Date; and (2) the date falling on the 30th day after the
announcement on the removal of designation as a Pre-Commercial Company as required under Rule
18C.24 of the Listing Rules.
(4) Representing the Shares held by QuantumPharm Roc underlying outstanding options held by Dr. Wen.
Such Shares will be transferred by QuantumPharm Roc to Dr. Wen upon the exercise of the options and
continue to be subject to the disposal restrictions. Dr. Wen has provided a lock-up undertaking to our
Company and the Stock Exchange with respect to the Shares underlying the options granted to him as
well as any Shares to be transferred to him upon the exercise of his vested options under Rule 18C.14
of the Listing Rules and that he will continue to comply with the relevant disposal restrictions
throughout the lock-up period. See “Underwriting—Undertakings to the Stock Exchange pursuant to the
Listing Rules—Undertakings by the Key Persons” for details.
(5) Representing the Shares held by QuantumPharm Roc underlying outstanding options held by Dr. Jiang
Yide Alan (and his close associates) and Mr. Tam Man Hong. Such Shares will be transferred by
QuantumPharm Roc to them upon the exercise of the options and continue to be subject to the disposal
restrictions. Pursuant to the powers of attorney granted by Mr. Tam Man Hong and Dr. Jiang Yide Alan
in favor of Dr. Wen on May 28, 2024, respectively, Dr. Wen is unconditionally, indefinitely and
irrevocably authorized and appointed to exercise all the voting rights attached to: (i) the Shares
underlying the vested outstanding options owned by them; and (ii) the Shares transferred or issued to
them upon the exercise of the vested outstanding options, except for any matter the outcome of the vote
on which will disproportionately, materially and adversely affect the grantors, as compared to Dr. Wen
or any other Shareholder. The powers of attorney shall be valid from the Listing Date for an indefinite
term. Accordingly, the voting rights of the Shares underlying the vested outstanding options will be
entrusted to Dr. Wen upon the Listing. Dr. Jiang Yide Alan and Mr. Tam Man Hong have provided a
lock-up undertaking to our Company and the Stock Exchange with respect to the Shares underlying the
options granted to them as well as any Shares to be transferred to them upon the exercise of their vested
options under Rule 18C.14 of the Listing Rules and that they will continue to comply with the relevant
disposal restrictions throughout the lock-up period. See “Underwriting—Undertakings to the Stock
Exchange pursuant to the Listing Rules—Undertakings by the Key Persons” for details.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 346 ---
(6) Representing the Shares held by Crete Helix. Crete Helix is held as to 99% by MH International
Holdings, which is the holding vehicle of TMF (Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the
MH Fund Trust, a discretionary trust established by Dr. Ma as settlor.
(7) Representing the Shares held by QuantumPharm Roc underlying outstanding options held by Dr. Ma.
Such Shares will be transferred by QuantumPharm Roc to Dr. Ma upon the exercise of the options and
continue to be subject to the disposal restrictions. Dr. Ma has provided a lock-up undertaking to our
Company and the Stock Exchange with respect to the Shares underlying the options granted to him as
well as any Shares to be transferred to him upon the exercise of his vested options under Rule 18C.14
of the Listing Rules and that he will continue to comply with the relevant disposal restrictions
throughout the lock-up period. See “Underwriting—Undertakings to the Stock Exchange pursuant to the
Listing Rules—Undertakings by the Key Persons” for details.
(8) Representing the Shares held by QuantumPharm Roc underlying options held by QuantumPharm
Employee Holdings, a holding vehicle wholly owned by TMF Trust (HK) Limited as trustee of the
QuantumPharm Employee Benefit Trust, a discretionary trust established for the purposes of managing
and administering the outstanding options granted to Dr. Zhang Peiyu, a member of our senior
management, and 12 other employees of our Group. Such options have been irrevocably settled into the
QuantumPharm Employee Benefit Trust under the terms of its trust deed dated June 28, 2021. Under the
terms of the trust deed, Dr. Ma, being the sole member of the advisory committee established by our
Company, has the sole power to make all decisions relating to the exercise of any voting and other rights
of the properties (including the exercise of the options) held under the trust and to give instructions and
directions to the trustee for the execution of such decisions without the need to seek for consent from
the beneficiaries, and the beneficiaries have no right to sell, bequeath or transfer any trust property.
Upon exercise of the relevant options by the trustee based on Dr. Ma’s instructions, the underlying
Shares will be transferred by QuantumPharm Roc to QuantumPharm Employee Holdings (but not to the
beneficiaries) and become part of the trust property of the QuantumPharm Employee Benefit Trust.
Dividends paid to QuantumPharm Employee Holdings as a Shareholder will also form part of the trust
property of the QuantumPharm Employee Benefit Trust. Under the terms of the trust deed, Dr. Ma also
has the power to direct the trustee to make distributions of the trust property to the beneficiaries, but
no beneficiaries can unilaterally withdraw from the trust any trust property, including options, Shares
or dividends held thereunder.
Dr. Ma has provided a lock-up undertaking to our Company and the Stock Exchange with respect to the
Shares to be transferred to the QuantumPharm Employee Benefit Trust upon the exercise of vested
options held by it which Dr. Ma has the power to provide voting instructions under Rule 18C.14 of the
Listing Rules and that he will, and will procure the QuantumPharm Employee Benefit Trust to, continue
to comply with the relevant disposal restrictions throughout the lock-up period. See
“Underwriting—Undertakings to the Stock Exchange pursuant to the Listing Rules—Undertakings by
the Key Persons” for details.
(9) Representing the Shares held by SeveningBAlpha. SeveningBAlpha is held as to 99% by LPHappy
Holding, which is the holding vehicle of TMF (Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the
LPHappy Family Trust, a discretionary trust established by Dr. Lai as settlor.
(10) Representing the Shares held by QuantumPharm Roc underlying outstanding options held by Dr. Lai.
Such Shares will be transferred by QuantumPharm Roc to Dr. Lai upon the exercise of the options and
continue to be subject to the disposal restrictions. Dr. Lai has provided a lock-up undertaking to our
Company and the Stock Exchange with respect to the Shares underlying the options granted to him as
well as any Shares to be transferred to him upon the exercise of his vested options under Rule 18C.14
of the Listing Rules and that he will continue to comply with the relevant disposal restrictions
throughout the lock-up period, see “Underwriting—Undertakings to the Stock Exchange pursuant to the
Listing Rules—Undertakings by the Key Persons” for details.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 347 ---
(11) Representing the Shares held by QuantumPharm Roc underlying vested options held by Dr. Jiang Yide
Alan (and his close associates), the voting right of which will be entrusted to Dr. Wen upon the Listing.
See note (5) above for details.
(12) Representing the Shares held by QuantumPharm Roc underlying vested options granted to Mr. Tam Man
Hong, the voting right of which will be entrusted to Dr. Wen upon the Listing. See note (5) above for
details.
(13) In the event that upon the notification by the Stock Exchange that our Company will no longer be
regarded as a Pre-Commercial Company after the Listing, the lock-up period will expire on the later of:
(i) the date which is six months from the Listing Date; and (2) the date falling on the 30th day after the
announcement on the removal of designation as a Pre-Commercial Company as required under Rule
18C.24 of the Listing Rules.
In addition, (a) 58,298,653 Shares underlying options granted under the Pre-IPO ESOP
are subject to disposal restrictions pursuant to the respective award agreements during the
period of 180 days commencing on the date of this prospectus; (b) 1,155,464,192 Shares held
by the other Pre-IPO Investors are subject to disposal restrictions during the period of six
months commencing on the Listing Date; (c) based on the low-end of the Offer Price range of
HK$5.03, 67,134,000 Shares to be subscribed by the cornerstone investors, particulars of
which are set out in “Cornerstone Investors,” will be subject to disposal restrictions during the
period of six months commencing on the Listing Date. Accordingly, assuming the Over-
allotment Option is not exercised and based on the low-end of the Offer Price range of
HK$5.03, upon the completion of the Global Offering, it is expected that at least 120,239,000
Shares, which will be all the Offer Shares not being subscribed by the cornerstone investors,
representing a market capitalization of HK$604.8 million, will not be subject to any disposal
restrictions (whether under contract, the Listing Rules, applicable laws or otherwise) at the
time of the Listing, which will satisfy the free float requirement under Rule 18C.10 of the
Listing Rules.
UNWINDING OF THE WVR STRUCTURE AND CONVERSION OF THE PREFERRED
SHARES
Under the WVR Structure in place as of the date of this prospectus, each of the Class A
Ordinary Shares and the Preferred Shares entitles its holder to exercise one vote at our
Company’s general meetings, and each Class B Ordinary Share entitles its holder to exercise
ten votes at our Company’s general meetings. The following table sets forth the changes in
shareholding structure of our Company since the commencement of the Track Record Period
and until immediately prior to the completion of the Global Offering:
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 348 ---
As of January 1, 2021
Immediately following the issuance of Shares
upon exercise of the Series C Warrants
Immediately following the issuance
of Shares upon exercise of options prior
to the Series D Financing
Immediately following the completion
of the Series D Financing, as of the Latest
Practicable Date and immediately prior to
the completion of the Global Offering
Number of
Shares Shareholding Voting power
Number of
Shares Shareholding Voting power
Number of
Shares Shareholding Voting power
Number of
Shares Shareholding Voting power
Class A Ordinary Shares 249,256,760 10.29% 3.96% 249,256,760 9.99% 3.92% 252,452,460 10.11% 3.97% 352,366,603 10.95% 4.97%
Class B Ordinary Shares 429,653,340 17.73% 68.31% 429,653,340 17.22% 67.54% 429,653,340 17.20% 67.51% 429,653,340 13.35% 60.63%
Series Pre-A Preferred Shares 145,221,000 5.99% 2.31% 145,221,000 5.82% 2.28% 145,221,000 5.81% 2.28% 145,221,000 4.51% 2.05%
Series A-1 Preferred Shares 250,001,000 10.32% 3.97% 250,001,000 10.02% 3.93% 250,001,000 10.01% 3.93% 250,001,000 7.77% 3.53%
Series A-2 Preferred Shares 56,338,300 2.33% 0.90% 56,338,300 2.26% 0.89% 56,338,300 2.26% 0.89% 56,338,300 1.75% 0.80%
Series B Preferred Shares 301,810,900 12.46% 4.80% 301,810,900 12.10% 4.74% 301,810,900 12.08% 4.74% 301,810,900 9.37% 4.26%
Series B+ Preferred Shares 264,664,900 10.92% 4.21% 264,664,900 10.61% 4.16% 264,664,900 10.60% 4.16% 264,664,900 8.22% 3.73%
Series B++ Preferred Shares 29,305,077 1.21% 0.47% 29,305,077 1.17% 0.46% 29,305,077 1.17% 0.46% 29,305,077 0.91% 0.41%
Series C Preferred Shares 696,568,031 28.75% 11.07% 768,406,598 30.80% 12.08% 768,406,598 30.76% 12.07% 768,406,598 23.87% 10.84%
Series D Preferred Shares ––––––––– 621,632,043 19.31% 8.77%
Total 2,422,819,308 100.00% 100.00% 2,494,657,875 100.00% 100.00% 2,497,853,575 100.00% 100.00% 3,219,399,761 100.00% 100.00%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
– 339 –


--- page 349 ---
For details of the authorized and issued share capital of our Company upon completion
of the Global Offering, see “Share Capital.”
In light of the requirements under Rule 8.11 of the Listing Rules, the Memorandum and
the Articles were duly adopted by a special resolution passed by our then Shareholders holding
at least two-thirds of votes present at the general meeting convened on May 28, 2024 and with
the written consent from the relevant Preferred Shareholders dated May 28, 2024, in
substitution for and to the exclusion of the current effective memorandum of association and
articles of association of our Company, which shall take effect upon the Listing. Under the
Memorandum and the Articles, the WVR Structure will be unwound and each Share (including
each of the Class B Ordinary Shares with super-voting rights) will be converted or
re-designated to one Ordinary Share with effect upon the Listing. After the re-designation, all
the issued Shares will entitle their holders to one vote per Share at each general meeting of our
Company. See “Share Capital” and “Appendix IV—Statutory and General Information—A.
Further Information about Our Group—4. Resolutions of the Shareholders of Our Company
dated May 28, 2024” for further details.
Each of the Series Pre-A Preferred Shares, the Series A-1 Preferred Shares, the Series A-2
Preferred Shares, the Series B Preferred Shares, the Series B+ Preferred Shares, the Series B++
Preferred Shares, the Series C Preferred Shares and the Series D Preferred Shares will be
converted to one Ordinary Share upon the Listing.
PRC LEGAL COMPLIANCE
Regulations on Overseas Listing
On February 17, 2023, the CSRC released the Overseas Listing Trial Measures, which
came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that
seek to list overseas, both directly and indirectly, should fulfill the filing procedure and report
relevant information to the CSRC. Specifically, following the principle of substance over form,
if an issuer meets both of the following criteria, its overseas offering and listing will be deemed
as an indirect overseas offering and listing by a domestic enterprise: (1) any of the total assets,
net assets, revenue or profits of the domestic operating entities of the issuer in the most recent
accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited
consolidated financial statements for the same period; and (2) its major operational activities
are carried out in China or its main places of business are located in China, or a majority of
the senior management in charge of operation and management of the issuer are Chinese
citizens or are domiciled in China. The filing is required to be conducted within three business
days after the submission of the application for initial public offering overseas to the overseas
regulators. Our PRC Legal Advisor is of the view that this offering shall be deemed as an
indirect overseas offering and listing by PRC domestic enterprise, and we are required to
submit filings with the CSRC within three business days after we submit application for this
offering. We submitted a filing to the CSRC for application for the Listing on December 5,
2023 as required by the Overseas Listing Trial Measures and will seek guidance from the
relevant regulator and/or legal advisors to ensure our compliance in all respects. For details,
see “Regulatory Overview—Regulations on Overseas Listing.”
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 350 ---
Circular 37
Pursuant to the Circular on Relevant Issues Concerning the Foreign Exchange
Administration of the Overseas Investment and Financing and the Round-Tripping Investment
Made by Domestic Residents through Special-Purpose V ehicles (ྤʫ
), or the Circular
37, promulgated and implemented by SAFE on July 4, 2014, a special purpose vehicle refers
to an overseas enterprise directly established or indirectly controlled by a domestic resident
(including domestic institutions and domestic individual residents) for the purpose of
investment and financing by utilizing the domestic corporate assets or interests or overseas
assets or interests he/she/it legally holds. A domestic resident shall apply to the SAFE for
foreign exchange registration of overseas investments before investing the domestic or
overseas legal assets or interests into a special purpose vehicle. Where a domestic resident
invest legally owned domestic assets or interests into a special purpose vehicle, he/she/it shall
apply for registration to the local SAFE branch at the place of incorporation or where the
domestic corporate assets or interests are located. Where a domestic resident invest legally
owned overseas assets or interests into a special purpose vehicle, he/she/it shall apply for
registration to the local SAFE branch at the place of incorporation or household registration.
Following the initial registration, the domestic resident is also required to register with the
local SAFE branch for any major change in respect of the special purpose vehicle, including,
among other things, a change of the domestic individual shareholder(s) of the special purpose
vehicle, the name and the terms of operation of the special purpose vehicle, or any increase or
reduction of the capital of the special purpose vehicle, share transfer or swap by domestic
resident, and merger or division. Pursuant to Circular 37, failure to comply with these
registration procedures may result in penalties.
Pursuant to the Notice on Further Simplifying and Improving Policies for the Foreign
Exchange Administration Policies in Respect of Direct Investment (ආɓӉᔊʷձҷආ
), or the Circular 13, which became effective on June 1, 2015
and amended on December 30, 2019, the power to accept SAFE registration was delegated
from local SAFE to local banks where the assets or interest in the domestic entity was located.
As advised by our PRC Legal Advisor, each of the Co-founders who is a domestic resident
(namely, Dr. Wen, Dr. Ma and Dr. Lai) has respectively completed the required registration
with the local SAFE branch pursuant to the Circular 37 as of the Latest Practicable Date.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
– 341 –


--- page 351 ---
OUR STRUCTURE IMMEDIATELY PRIOR TO THE GLOBAL OFFERING
The following diagram illustrates the corporate and shareholding structure of our Group immediately prior to the completion of the Global
Offering:
Dr. Wen
100%
1% 99%
100%
9.26% 3.82%
100%
100%
100%
100%
100%
2.73% 13.66% 8.25% 7.95% 7.32% 3.72%6.90%
100% 100%
1%
100%
99%
100%
100%76.34%
100%
1%
100%
99%
SSBL
Holdings
(BVI)
QuantumPharm
Holdings(4)
(BVI)
The Company
(Cayman Islands)
XtalPi US
(Delaware)
XTALPI
PTE LTD.
(Singapore)
QuantumPharm
Roc(5)
(BVI)
Shanghai
Jingtai
(PRC)
Shanghai
Zhiyao
(PRC)
QuantumPharm
HK
(Hong Kong)
Shenzhen
Jingtai
(PRC)
Beijing
Jingtai
(PRC)
100%
Shenzhen Rentai
Pharmaceutical
Technology Co., Ltd.
(PRC)
Shenzhen
Zhiyao
(PRC)
Shenzhen
Zhongge
(PRC)
Crete Helix
(BVI)
SeveningBAlpha
(BVI) Image Frame HongShan entities(6) 5Y Capital entities(7) China Life Chengda PICC Health &
Pension Fund
WSH Family
Holdings(1)
(BVI)
Jian Guo Pai
(BVI)
MH
International(2)
(BVI)
Sevening B
Holdings
(BVI)
LPHappy
Holding(3)
(BVI)
WSH Family
Trust Dr. Ma MH Fund
Trust Dr. Lai LPHappy Family
Trust
100%
Shanghai Huitai
Technology Co., Ltd.
(PRC)
100%
CubeBio Limited
(Hong Kong)
87.69%
XtalPi
Investment
(Cayman Islands)
100%
CubeBio Inc
(Cayman Islands)
36.39%
Other Pre-IPO
Investors(8)
100% 100%
The Company
(Cayman Islands)
65%
NeoGeode Inc.
(Cayman Islands)
100%
XtalPi Investment
Limited
(Hong Kong)
100%
XtalPi Star Atlas
(Suzhou)
Biotech Co., Ltd.
(PRC)
Forcefield
Ventures SPV I,
L.P.
(United States)
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
– 342 –


--- page 352 ---
Notes:
(1) WSH Family Holdings is the holding vehicle of TMF (Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the WSH Family Trust, a discretionary trust estab lished by Dr. Wen
as settlor.
(2) MH International Holdings is the holding vehicle of TMF (Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the MH Fund Trust, a discretionary trust es tablished by Dr. Ma
as settlor.
(3) LPHappy Holding is the holding vehicle of TMF (Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the LPHappy Family Trust, a discretionary trust esta blished by Dr. Lai
as settlor.
(4) Pursuant to the powers of attorney dated July 19, 2021 executed by (i) Dr. Ma, Jian Guo Pai and Crete Helix; and (ii) Dr. Lai, Sevening B Holdings and Se veningBAlpha
(collectively, the “ Co-founder Grantors ”), QuantumPharm Holdings is indefinitely and irrevocably authorized and appointed to exercise all the voting rights attached to the
Shares held by them at any time and from time to time which they are entitled to under the laws of the Cayman Islands and the Memorandum and the Articles on a ll matters
submitted to a vote of Shareholders at a meeting of Shareholders or through the solicitation of a written consent of Shareholders, except for any matte r the outcome of the vote
on which will disproportionately, materially and adversely affect the Co-founder Grantors, as compared to QuantumPharm Holdings or any other Share holder.
(5) QuantumPharm Roc, the shareholding platform for the Pre-IPO ESOP which holds the Shares underlying the options granted thereunder for the benefi t of the grantees, is wholly
owned by QuantumPharm Holdings. See “—Share Incentive Schemes” above for details.
(6) HongShan entities include HSG V enture VI Holdco, Ltd., HSG V enture VIII Holdco, Ltd. and HSG Growth VI Holdco E, Ltd., see “—Pre-IPO Investments” a nd
“—Capitalization” above for details of the Pathfinder SIIs and Sophisticated Independent Investors.
(7) 5Y Capital entities include Evolution Fund I, L.P ., Evolution Special Opportunity Fund I, L.P . and Evolution Fund I Co-investment, L.P ., see “—Pr e-IPO Investments” and
“—Capitalization” above for details of the Pathfinder SIIs and Sophisticated Independent Investors.
(8) See “—Pre-IPO Investments” and “—Capitalization” above for details of other Pre-IPO Shareholders.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
– 343 –


--- page 353 ---
OUR STRUCTURE IMMEDIATELY FOLLOWING THE GLOBAL OFFERING
The following diagram illustrates the corporate and shareholding structure of our Group immediately following the completion of the Global
Offering (assuming the Over-allotment Option is not exercised and no Shares will be issued under the ESOPs):
Dr. Wen
100%
1% 99%
100%
8.75% 3.61% 2.58% 12.91% 7.80% 7.51% 6.91% 34.40% 5.50%6.52%
100% 100%
1%
100%
99%
100%
1%
100%
99%
SSBL
Holdings
(BVI)
QuantumPharm
Holdings(4)
(BVI)
The Company
(Cayman Islands)
QuantumPharm
Roc(5)
(BVI)
Crete Helix
(BVI)
SeveningBAlpha
(BVI) Image Frame HongShan entities(6) 5Y Capital entities(7) China Life Chengda Other Pre-IPO
Investors(8)
PICC Health &
Pension Fund
Public
Shareholders
WSH Family
Holdings(1)
(BVI)
Jian Guo Pai
(BVI)
MH
International(2)
(BVI)
Sevening B
Holdings
(BVI)
LPHappy
Holding(3)
(BVI)
WSH Family
Trust Dr. Ma MH Fund
Trust Dr. Lai LPHappy Family
Trust
3.51%
100%
100%
100%
100%
100%
XtalPi US
(Delaware)
XTALPI
PTE LTD.
(Singapore)
Shanghai
Jingtai
(PRC)
Shanghai
Zhiyao
(PRC)
QuantumPharm
HK
(Hong Kong)
Shenzhen
Jingtai
(PRC)
Beijing
Jingtai
(PRC)
100% 100%
100%
100%
Shenzhen Rentai
Pharmaceutical
Technology Co., Ltd.
(PRC)
Shenzhen
Zhiyao
(PRC)
Shenzhen
Zhongge
(PRC)
100%100%
Shanghai Huitai
Technology Co., Ltd.
(PRC)
100%
CubeBio Limited
(Hong Kong)
87.69%
XtalPi
Investment
(Cayman Islands)
100%
CubeBio Inc
(Cayman Islands)
65%
NeoGeode Inc.
(Cayman Islands)
100%
XtalPi Investment
Limited
(Hong Kong)
100%
XtalPi Star Atlas
(Suzhou)
Biotech Co., Ltd.
(PRC)
76.34%
Forcefield
Ventures SPV I,
L.P.
(United States)
Notes: Please refer to the notes to “—Our Structure Immediately Prior To The Global Offering” above.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
– 344 –


--- page 354 ---
Our mission is a world of smarter science, better lives.
We aim to accelerate the design and discovery of novel drugs and materials leveraging
quantum physics*, AI and robotic automation.
OVERVIEW
Who We Are
We are a quantum physics-based, AI-powered, and robotics-driven, innovative R&D
platform. We adopt a combination of quantum physics-based first-principles calculation, AI,
high performance cloud computing, and scalable and standardized robotic automation to
provide drug and material science R&D solutions and services to global and domestic
companies in the pharmaceutical and material science (including agritech, energy and new
chemicals, and cosmetics) industries and beyond.
We believe that the following capabilities differentiate us from our competitors:
 our AI capabilities anchored by quantum physics calculations;
 our quantum physics-based first-principles calculation supported by high
performance cloud computing;
 our flexible and extensive AI capabilities backed by our various multi-modality,
customer-driven, scenario-based algorithms and models;
 clusters of intelligent robot scientists with AI brain driving wet lab automation,
scalability, standardization and high throughput;
 iterative and mutually informing and reinforcing feedback loop between our dry lab
and wet lab;
 accumulated meaningful and extensive data assets generated through synergistic dry
lab and wet lab; and
 our domain expertise, creative thinking, and entrepreneurial mindset.
* Our business does not involve quantum computing or the use of quantum computers, nor is quantum computing
or the use of quantum computers a primary mode of our operations.
BUSINESS
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--- page 355 ---
In 2014, cloud-based computing power started growing exponentially, when our
Co-founders immediately realized that would make large-scale high precision and fast
computation a reality. Established in 2015 by three postdoctoral physicists at MIT, underpinned
by our quantum physics-based first-principles calculation and AI capabilities, we seek to
transform the way drugs and new materials are designed and discovered at a pace and scale
beyond traditional alternatives. In 2016, we participated in a global crystal structure prediction
(“CSP”) blind test held by Pfizer and achieved accurate prediction, which led to our long-term
strategic master partnership in technological innovation and drug R&D with Pfizer. Since then,
we gradually became a global leader in terms of technological advantages in providing
computational solid-state R&D services. Our CSP capability and long-lasting cooperation with
Pfizer eventually enabled us to help shorten the time needed to confirm the optimal crystalline
drug form for use in the development and production of Paxlovid, the world’s first
FDA-approved oral treatment for COVID-19 at a critical juncture of the global fight against
SARS-CoV-2.
As CSP and drug design and discovery share similar fundamental methodologies and
problem-solving patterns where target functions are deployed to search for solutions within a
vast array of possible outcomes, we naturally expanded into the drug R&D industry driven by
our customers’ evolving needs. To validate the compounds generated from our drug R&D
activities, we built our wet lab experimental capabilities. Along with our rapid business growth,
we had increasing customer demand for compound synthesis, which is one of the most
time-consuming and costly parts of the entire drug R&D process. To expedite our synthesis
process and further scale our business, we further developed robotic automation in our wet lab
to enable scalable, flexible, multi-project, faster, and more cost-efficient experiment cycles. As
we function as a molecular search engine, we have been able to explore the applicability of
novel molecular-level material design and discovery in a wide array of industries.
We have established a proprietary integrated technology platform, which integrates high
performance cloud computing-powered in silico tools, including quantum physics-based
first-principles calculation and AI, for dry lab calculation and evaluation, and wet lab
experimentation with robotic automation. Our platform is designed to improve dry lab
calculations with experimental data generated by our wet lab and to enhance the efficiency of
our wet lab by insights derived from dry lab calculations. In the meantime, our wet lab
accumulates large-scale, high-quality and consistent data to provide the foundation for the
formation of our closed-loop large models, containing perception, generation, prediction,
decision-making, planning and execution. We are one of the few drug and material science
R&D companies in the world with quantum physics-based first-principles calculation, AI
technologies, and automated wet lab capabilities, according to Frost & Sullivan. As such, we
believe that we are well positioned at this moment to capture the opportunities arising from the
increasing importance of the combination of AI, computing power, data analysis, and scalable
and standardized automation for the design and discovery of novel drugs and materials.
We believe that quantum physics-based computation, AI, and robotic automation technologies
will play indispensable roles as basic infrastructure components underpinning drug and
material science R&D in the AI-age, like water and electricity in the industrial age.
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The following diagram illustrates the structure of our closed-loop integrated technology
platform combining our dry lab and wet lab capabilities:
Quantum physics-based
 computation
In silico tools together with human input Wet lab experimentation with robotic automation
Inform
Synthesis lab
Intelligent robotic
wet lab
Analysis and
testing lab
Validate & Train
Crystallization
lab
Human Input and Expertise
Support
Data assets
Advanced
generative AI
High performance
cloud computing
We have made significant contributions in the field of drug design and discovery by
improving speed, scale, novelty and success rate since 2018. We have recently expanded our
business into the field of material science (such as the design and discovery of bio-based
materials, novel chemical compounds for agritech applications, new chemical surfactants and
catalysts, and cosmetics products) and automation (such as automated chemical synthesis) and
are focused on continuing to expand this business going forward.
We have a diverse customer base, ranging from start-ups to global biotechnology and
pharmaceutical companies. Our customer base includes 16 of the top 20 global biotechnology
and pharmaceutical companies ranked by revenue in 2022 according to Frost & Sullivan, which
we believe is an indicator of the caliber of our solutions and services. With operations in both
China and the U.S., we strive to take advantage of the best capabilities and resources available
to us in each region to meet the evolving needs of our customers and collaborators and
academic partners. We have well-established and longstanding relationships with many of the
world’s leading biotechnology and pharmaceutical conglomerates, such as Pfizer, Johnson &
Johnson, and Merck KGaA, Darmstadt, Germany, many of which are our repeat customers.
Since our founding, we have received substantial investments and support from world-
renowned private equity and strategic investors, including HongShan, Mirae Asset, Google,
Tencent, China Life Chengda, and 5Y Capital. We believe our blue-chip shareholder base and
prominent customer base is a testament to our capabilities and prospects.
As of December 31, 2023, we had more than 500 scientists and technologists, including
engineers, medicinal chemists, and programmers, with experience in leading global academic
institutions and well-recognized industry participants, a majority of whom have a master’s
degree or above. We also had more than 160 granted patents, approximately 39 ongoing drug
discovery programs, and four R&D facilities with more than 10,000 sq.m. of lab space, as of
the same date. Our talents, operational infrastructure, and scientific and commercial
achievements have contributed to, and in turn demonstrated, our strong R&D capabilities.
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During the Track Record Period, we generated revenue from providing drug discovery
solutions to biotechnology and pharmaceutical companies and intelligent automation solutions
to companies in the pharmaceutical industry and beyond. Our revenue experienced rapid
growth from RMB62.8 million in 2021 to RMB133.4 million in 2022, and further to RMB174.4
million in 2023, representing a CAGR of 66.7%. The substantial increase in our revenue and
our rapid business growth during the Track Record Period demonstrates our commercialization
capability and business sustainability. Although we generated meaningful revenue during the
Track Record Period, we are a Pre-Commercial Company as defined under Chapter 18C of the
Listing Rules. We had a net loss of RMB2,137.3 million, RMB1,438.6 million and
RMB1,906.3 million in 2021, 2022, and 2023, respectively. As of the Latest Practicable Date,
we had served more than 300 biotechnology and pharmaceutical companies and research
institutions globally; at the same time, centering on our key upstream and downstream industry
chains and technologies, we have incubated and invested in a number of innovative companies,
including Geode, META, Signet, and Leman. See “—Our Strengths—Meaningful value to our
customers and collaborators and synergies within our ecosystem” for details regarding our
ecosystem.
Our Business and Revenue Model
Our business primarily comprises (i) drug discovery solutions providing modular
solutions spanning the full spectrum of the drug discovery and research process, and (ii)
intelligent automation solutions consisting primarily of solid-state R&D services and
automated chemical synthesis services. We have diverse revenue streams, including (i)
transaction-based upfront payments, milestone payments, contingent payments, and/or
royalties from our drug discovery collaborations, (ii) transaction-based service fees from our
drug discovery solutions and solid-state R&D services, and (iii) subscription-based service fees
from our automated chemical synthesis services.
Our drug discovery solutions focus on identifying and developing molecules that exhibit
pharmaceutically active functions on particular disease-related targets. Our drug discovery
solutions span the whole drug discovery and research process, from target validation, hit
identification, lead generation, lead optimization to PCC nomination, covering various
modalities, including small molecules, antibodies, peptides, ADC, and PROTAC. We also
collaborate with certain drug developers (“ collaborators ”) to jointly work on various
therapeutic targets (“ collaboration programs ”), from which we expect to receive royalty,
milestone or contingent payments if such collaboration programs reach milestones or events
specified in the respective contracts, such as successful commercialization in particular
regions. See “—Our Drug Discovery Solutions.”
Our intelligent automation solutions focus on AI- and automation-enabled novel drug and
materials discovery and research. In particular, our solid-state R&D services focus on
analyzing the physical and chemical properties of solid materials, which are key to drug and
material science R&D. Our automated chemical synthesis services in 2021 to accelerate the
chemical synthesis process, which is time-consuming and costly. We are also leveraging our
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robotic automation capability and expertise to scale our intelligent automation solutions
business by providing standard or customized automation solutions to customers in the
pharmaceutical and material science industries and beyond. See “—Our Intelligent Automation
Solutions.”
We provide either standalone solutions or services or a combination of our solutions or
services, depending on our customers’ needs. For our drug discovery solutions, we typically
charge our customers under transaction-based model in accordance with our agreed-upon
pricing and payment terms. See “—Significant Cooperations and Collaborations” for details.
For our solid state R&D services, we typically charge our customers under transaction-based
model, or through a master service agreement which allows our customers to place work orders
for services as and when needed. For our automated chemical synthesis services, we typically
charge our customers under subscription-based model, which allows our customers to place
work orders during the subscription term and make monthly or quarterly payment based on the
full-time equivalent rates specified in the relevant subscription agreement.
As our business has evolved, we have launched our XtalPi R&D Solutions program to
provide R&D solutions to other high-value industries, such as material science (including
agritech, energy and new chemicals, and cosmetics), leveraging our proprietary in-house
technologies and expertise derived from our drug discovery and intelligent automation
businesses.
We aim to enable synergies across our business lines and technologies to better serve the
different and evolving R&D needs of, and cross sell our diversified service offerings to, our
customers and collaborators in a wide array of industries. For example, our joint venture with
a bio-materials designer has been able to leverage our quantum physics-based computation and
AI capabilities to develop a new type of furan-based bio-based surfactant. See “—Our Future
Development” for future developments regarding our XtalPi R&D Solutions.
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The chart below illustrates our business and revenue models in general:
Specialist Technology Product Type of customers Revenue model
Accumulated number
and duration of
contracts during the
Track Record Period Payment schedules Ownership of IP rights
Drug discovery
solutions
(including drug
discovery
solutions and
drug discovery
collaborations)
Pharmaceutical or
biotechnology
companies,
whether
established or
start-up
Customers and
collaborator customers :
 Fee-for-service
 Transaction-based
Collaborator-investee
customers :
 Fee-for-service or
equity-for-service
 Transaction-based
Number : 150;
Duration : One-off,
typically ranging
from one to
three years
One-stop drug discovery solutions :
(i) upfront payment upon signing
of contract; (ii) milestone
payments when specified milestone
events are reached, such as
delivery of research results or
desired hits, leads, and PCCs; (iii)
contingent payments, depending on
the development stages of the drug
candidates, such as IND and
clinical trials; and/or (iv) single-
to low double-digit tiered royalties
depending on the levels of the
commercialization revenue of the
relevant drugs
Modular drug discovery solutions :
one-off payment
 We typically have sole ownership
of background IP and IP
developed in the relevant
programs related to AI/ML
technologies;
 Our customers typically have sole
ownership of IP developed in the
relevant programs related to
target compounds
Intelligent
automation
solutions
Solid-state R&D
services
Pharmaceutical or
biotechnology
companies
 Fee-for-service
 Transaction-based
Number : 398;
Duration : One-off,
typically within six
months
(i) Upfront payment or initiation
payment upon signing of contract,
and (ii) final payment upon
completion of the relevant research
program designed by us for our
customers
 We typically have sole ownership
of background IP and IP
developed in the relevant
programs related to AI
technologies;
 Our customers typically have sole
ownership of IP developed in the
relevant programs related to
target compounds
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Specialist Technology Product Type of customers Revenue model
Accumulated number
and duration of
contracts during the
Track Record Period Payment schedules Ownership of IP rights
Automated
chemical
synthesis
services
Pharmaceutical or
biotechnology
companies
 Fee-for-service
 Subscription-based
Number : 242;
Duration : Recurring,
typically ranging
from half a year to
one year
Monthly or quarterly payment under
a master service agreement
 We typically have sole ownership
of background IP and IP
developed in the relevant
programs related to AI/ML
technologies;
 Our customers typically have sole
ownership of IP developed in the
relevant programs related to
target compounds
XtalPi R&D
Solutions
1
R&D solutions
for various
industries
Companies that are
in need of our
technologies in a
wide array of,
such as
automation and
material science
 Fee-for-service
 Transaction-based
Number :3 ;
Duration : One-off,
typically ranging
from several months
to three years
(i) Upfront payment or initiation
payment upon signing of contract,
and (ii) milestone payments when
specified milestone events are
reached
Where applicable, our customers are
entitled to the IP developed under
the solutions
1. Currently under development and planned for future commercialization
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Our Mutually Informing and Reinforcing In Silico Tools and Wet Lab
We are one of the leaders in the adoption of quantum physics-based first-principles
calculation, AI, and robotic automation in drug and material science R&D, according to Frost
& Sullivan. We believe that we have become one of the most well-reputed drug and material
science R&D companies in China and globally with combined capabilities of quantum
physics-based first-principles calculation, AI, and robotic automation.
Fundamentally, quantum physics-based computation methods form the core of our
technology platform. Quantum physics-based first-principles calculation enables us to model
drug properties ab initio , which helps us to discover and design promising drug candidates
promptly without having to first accumulate empirical data. The data we generate from our
quantum physics-based computation in turn help us to train our AI models to predict critical
properties at various levels of complexity, from atomic, molecular, crystal, biological target, to
in vitro and in vivo . Such capabilities allow us to identify hits, leads and eventually candidate
compounds and crystal forms suitable for drug R&D. We consider that the fundamental
approaches and technologies underlying our quantum physics-based computation capability
can equally be applied in the field of material science R&D, naturally extending our services
to cover material science R&D.
We integrate our AI capabilities into many of our core technologies, including automated
chemical synthesis, crystal structure screening, and our multiple-modality drug discovery
platforms covering small molecule, peptide, ADC, PROTAC, and antibody, to optimize the
efficiency and performance of these technologies. Unlike some of our competitors whose
primary technology is either quantum physics-based computation or AI, we combine our
quantum physics-based first-principles calculation with our AI technologies. The quantum
physics-based first-principles calculation method is difficult and time-consuming to develop
for R&D purpose; while AI on its own has significant limitations and has therefore on its own
had a limited effect on improving the efficiency of drug and material science R&D, because
AI models are expected to accurately predict molecular properties similar to the training set,
but are incapable of extrapolating molecules that are not similar to the training set. In contrast,
by combining quantum physics-based computation with AI, we are able to enjoy both the
benefits of rapid processing of data at scale and computing molecular properties that are
beyond existing industry capabilities and data. Moreover, we have developed our proprietary
ProteinGPT, an AI-based biomedical generative tool, designed to predict and screen protein
sequences and generate protein drug candidates that meet specific pre-set criteria by
incorporating LLM into our algorithms. We use ProteinGPT as a general strategy in the
discovery and research of multiple large molecule drugs and new materials including: (i)
generation of binder proteins based on a specific target protein sequence, (ii) generation of
antibody libraries according to specific pre-set criteria, and (iii) optimization of certain
existing antibodies based on specific improvement requirements.
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Our wet lab with robotic automation can validate the predictions generated by our in
silico tools, while the data produced at scale from our wet lab experimentation function as the
feedback to further train our in silico tools, creating a mutually reinforcing cycle of learning.
The improved in silico tools then produce better insights into the design and performance of
wet lab experimentation. Therefore, the iteration of in silico and wet lab experimentation
creates a virtuous cycle where data generation, learning and confirmation enhance each other
and continually strengthen our integrated technology platform with real world experimental
data on molecules and chemical synthesis.
For more details regarding our technologies, see “—Our Technologies and Closed-loop
Integrated Technology Platform.”
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Our AI and automation technologies underpinning our drug discovery solutions, intelligent automation solutions, and XtalPi R&D Solutions
fall under the acceptable sectors of “next-generation information technology” and “advanced hardware and software,” respectively, that are inclu ded
in the list of Specialist Technology Industries set out in Chapter 2.5 of the HKEX Guide. The table below sets out the analysis of how our solutions
and services and technologies fall within their respective acceptable sectors:
Specialist Technology Products
Specialist
Technology Acceptable Sectors Applications Timeframe of delivery
Drug discovery solutions (one-stop
drug discovery solutions or
standalone solutions spanning our
drug discovery solutions)
AI Next-generation information technology
- Artificial intelligence (“ AI”) - AI
solutions: the design and provision of
AI solutions used in different industry
verticals
We develop proprietary AI algorithms to automatically search through the
chemical space of novel drugs and materials to identify (i) new compounds
with novel modes of action or with new chemical scaffolds for targets with
existing therapeutics and (ii) compounds for new targets with desired
pharmacological effects.
Our customizable AI algorithms and models can also be embedded into our
quantum physics-based computation algorithms to enable more accurate
and faster design and discovery of desired molecules.
Overall, our AI-powered drug discovery solutions enable the design and
discovery of drug candidates at scale and with higher novelty, speed, and
success rate, as compared to traditional manual method.
See “—Overview—The Advantages of Our Solutions” and “—Our
Technologies and Closed-loop Integrated Technology Platform—Our
Advanced Generative AI Capabilities.”
We develop proprietary AI algorithms and models to enable faster screening
of molecules.
One-stop drug discovery
solutions/drug discovery
collaborations
Typically two to eight milestones within
one to three years
Modular drug discovery solutions
One or several steps of the one-stop
drug discovery solutions, including hit
identification, lead generation, lead
identification and lead optimization,
and the generation of high-quality
PCC molecules
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Specialist Technology Products
Specialist
Technology Acceptable Sectors Applications Timeframe of delivery
Intelligent
automation
solutions
(representing our
solid-state R&D
services and
automated
chemical
synthesis
services as
standalone
services)
Solid-state
R&D
services
AI Next-generation information technology
- Artificial intelligence (“ AI”) - AI
solutions: the design and provision of
AI solutions used in different industry
verticals
Our AI-powered virtual screening only needs to synthesize and test a few
hundred molecular candidates to identify the viable ones, while manual
screening needs to synthesize and test approximately 5,000 molecules to
achieve comparable results. Our AI-powered virtual screening can also
screen billions of potential molecules and compounds from the vast
chemical space of novel drugs and materials and efficiently rank them by
drug properties, while manual screening can only screen a small fraction of
the vast chemical space of novel drugs and materials and usually are
subject to human biases and idiosyncrasies.
See “—Overview—The Advantages of Our Solutions.”
Delivery of the result report on the
solid-state analysis is typically within
six months.
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Specialist Technology Products
Specialist
Technology Acceptable Sectors Applications Timeframe of delivery
Automation Advanced hardware and software -
Robotics and automation - Robot
technology: the engineering of robots,
computer software and machines for
the improved performance of tasks
and/or automation processes
We equip our wet lab with robotic automation. Our robotic workstation can
autonomously conduct sample loading, particle targeting, photograph, and
real-time data monitoring for crystallization and crystal structure
determination processes.
Overall, our AI-powered, robotics-driven solid-state R&D can accelerate and
scale the chemical synthesis and wet lab experimentation in drug and
material science R&D.
See “—Our Technologies and Closed-loop Integrated Technology
Platform—Intelligent Robotic Wet Lab Infrastructure.”
Automated
chemical
synthesis
services
Automation Advanced hardware and software -
Robotics and automation - Robot
technology: the engineering of robots,
computer software and machines for
the improved performance of tasks
and/or automation processes
We apply automated robotic workstations to conduct chemical synthesis,
including autonomous reaction conditions screening and optimization and
synthesis of intermediaries, to accelerate the process of and enable higher
throughput of chemical synthesis.
See “—Our Technologies and Closed-loop Integrated Technology
Platform—Intelligent Robotic Wet Lab Infrastructure.”
Delivery of the target compounds every
week or at any time upon our
customers’ request and the result
report on compound synthesis
typically in half a year or one year.
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Specialist Technology Products
Specialist
Technology Acceptable Sectors Applications Timeframe of delivery
XtalPi R&D
Solutions
A I
 Automation
 Next-generation information
technology – Artificial intelligence
(“AI”) – AI solutions: the design and
provision of AI solutions used in
different industry verticals
 Advanced hardware and software –
Robotics and automation – Robot
technology: the engineering of robots,
computer software and machines for
the improved performance of tasks
and/or automation processes
Leveraging our technological capabilities in AI, quantum physics and
automation as well as our expertise and experiences accumulated in our
drug discovery solutions and intelligent automation solutions businesses,
we provide R&D solutions to customers beyond the pharmaceutical
industry, such as material science and automation, to unleash the potential
of our integrated technology platform and R&D capacity.
See “—Our Future Development.”
Delivery of the solutions typically
within several months to three years
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The table below sets out the timeframe of operations for each of our solutions and services:
Specialist Technology Products Timeframe of Operations
Drug discovery solutions Small molecule discovery Commencement of R&D: second quarter of 2017
Proof-of-concept (“ PoC”): first quarter of 2019
Commercial-ready: fourth quarter of 2019
Revenue generation: fourth quarter of 2019
Antibody discovery Commencement of R&D: first quarter of 2021
PoC: second quarter of 2022
Commercial-ready: second quarter of 2022
Revenue generation: fourth quarter of 2022
Intelligent automation solutions Solid-state R&D services Commencement of R&D: fourth quarter of 2015
PoC: fourth quarter of 2016
Commercial-ready: first quarter of 2017
Revenue generation: second quarter of 2017
Automated chemical synthesis services Commencement of R&D: second quarter of 2021
PoC: fourth quarter of 2021
Commercial-ready: fourth quarter of 2021
Revenue generation: fourth quarter of 2021
XtalPi R&D solutions Commencement of R&D: fourth quarter of 2022
PoC: second quarter of 2023
Commercial-ready: third quarter of 2023
Revenue generation: fourth quarter of 2023
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Most of our technology platforms and the related technologies are proprietary technologies developed in-house, except for XFF. The table
below sets out a summary of a non-exhaustive list of our main technologies and platforms:
Technologies Platform Applications Functions Origins and Ownership Acceptable Sectors
AI1 ID4Inno
(including
ID4Idea and
ID4Gibbs)
Small molecule drug
discovery
Designed for exploring a broader chemical space of novel drugs and materials with higher
efficiency and lower cost. Through ID4Inno, our intelligent computing designs the process for
and analyses the outcome of automated experimentation, which provides data feedback to
experts, and these experts set specific metrics for smart computing, to achieve a closed-loop AI
drug R&D process.
ID4Inno consists of two sub-platforms, ID4Idea and ID4Gibbs, with different but complementary
functionalities. ID4Idea can be customized based on our customers’ and collaborators’ diverse
and specific requirements. It is used for the generation, selection, and evaluation of small
molecules with over 200 AI models, covering molecular generation, molecular property
evaluation, and various other scenarios. ID4Gibbs is a high-precision quantum physics-based
computational platform based upon physical modeling and first-principles calculation, enabling
high-precision prediction of drug-target interactions.
See “—Our Drug Discovery Solutions—Small Molecule Discovery.”
Self-developed since 2018
Proprietary
Next-generation information
technology - Artificial
intelligence (“ AI”) - AI
solutions: the design and
provision of AI solutions
used in different industry
verticals
ProteinGPT Large molecule design
and antibody drug
discovery
A generative algorithmic drug and new materials design tool, designed to generate drugs and new
materials that meet specific criteria. ProteinGPT can be applied in (i) generation of binder
proteins given a specific target protein sequence, (ii) generation of antibody libraries according
to specific pre-set criteria, and (iii) optimization of certain antibodies given specific
improvement requirements. ProteinGPT has been upgraded by incorporating LLM into its
algorithms.
See “—Our Technologies and Closed-loop Integrated Technology Platform—Our Advanced
Generative AI Capabilities—Protein Design.”
Self-developed since 2022
Proprietary
Next-generation information
technology - Artificial
intelligence (“ AI”) - AI
solutions: the design and
provision of AI solutions
used in different industry
verticals
1. Quantum physics-anchored AI technology.
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Technologies Platform Applications Functions Origins and Ownership Acceptable Sectors
XupremAb
(including
Xtalfold and
XpeedPlay)
Antibody drug
discovery
Contains different critical functions across the antibody drug discovery process, including AI-
powered hybridoma, AI-powered repertoire NGS discovery, AI-powered phage display, de novo
design, super humanization, AI-powered affinity modulation, developability assessment and
optimization, bispecific design, and ADC design.
XtalFold is an antigen-antibody complex structure prediction algorithm with unprecedented
probability and accuracy. XpeedPlay is an AI-powered phage display platform, capable of
generating hit antibodies at ultra-high speed.
See “—Our Drug Discovery Solutions—Antibody Discovery.”
Self-developed since 2021
Proprietary
Next-generation information
technology - Artificial
intelligence (“ AI”) - AI
solutions: the design and
provision of AI solutions
used in different industry
verticals
Quantum physics-based
computation
2
XFF Drug discovery Next-generation general molecular force field, designed for global optimization of design
parameters.
See “—Our Technologies and Closed-loop Integrated Technology Platform—Our Quantum
Physics-based Computation Capabilities—Force Field.”
Jointly-developed with Pfizer
since 2018
Joint ownership
N/A
XFEP Drug discovery A binding affinity prediction platform, designed to evaluate the binding affinity between
candidate molecules and their biological target at scale, from which false positives can be
filtered out before conducting wet lab experiments. Our XFEP is based on high accuracy and
high-throughput affinity prediction combined with AI modelling, incorporating enhanced
sampling algorithms, statistical analysis methods, and our proprietary XFF.
See “—Our Technologies and Closed-loop Integrated Technology Platform—Our Quantum
Physics-based Computation Capabilities—Binding Affinity and Pose Prediction.”
Self-developed since 2018
Proprietary
N/A
2. AI-powered quantum physics-based computation.
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Technologies Platform Applications Functions Origins and Ownership Acceptable Sectors
XPose Drug discovery A binding pose prediction platform, which is able to combine the advantages of different
sampling and evaluation algorithms to predict the binding pose of small molecule target-ligand
more accurately. XPose can be used to build accurate SAR and structure-based affinity
evaluation, using FEP to design and evaluate molecules. It bridges the gap between the
predicted target structure and real applications in different drug discovery scenarios.
See “—Our Technologies and Closed-loop Integrated Technology Platform—Our Quantum
Physics-based Computation Capabilities—Binding Affinity and Pose Prediction.”
Self-developed since 2021
Proprietary
N/A
XtalCSP Solid-state R&D A crystal structure prediction platform, which is equipped with a global searching algorithm and
covers all theoretical stable forms. XtalCSP is experiment independent, and can cross-validate
the experiments and de-risk the polymorphic system. XtalCSP enables us to conduct
thermodynamic stability evaluations to identify crystal forms that are relatively stable among
various crystal forms at different temperatures.
See “—Our Technologies and Closed-loop Integrated Technology Platform—Our Quantum
Physics-based Computation Capabilities—Crystal Structure Prediction.”
Self-developed since 2015
Proprietary
N/A
Automation
3 ChemPlus Solid-state R&D
Automated chemical
synthesis
An AI-powered automatic solid sampling robot, enabling smart parameter adjustment and
supporting data tracking throughout the process. ChemPlus provides flexible, high-throughput
processing of a wide range of solid samples, such as large, fluffy, highly viscous and static
solid powder samples.
See “—Our Future Development—Intelligent Automation.”
Self-developed since 2022
Proprietary
Advanced hardware and
software - Robotics and
automation - Robot
technology: the engineering
of robots, computer software
and machines for the
improved performance of
tasks and/or automation
processes
3. AI-powered automation technology.
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The Advantages of Our Solutions
Technology is the bedrock of our operations and business. We leverage quantum
physics-based first-principles calculation, AI, and automation to provide drug and material
science R&D solutions. Our integrated technology platform enables us to search the vast
chemical space of novel drugs and materials, execute the entire R&D process from dry lab
calculation and evaluation to wet lab experimentation.
The table below sets forth a comparison of traditional manual methods and AI-based
methods of drug R&D in terms of speed, scale, novelty, and pre-clinical development success
rate for developing novel therapeutics, as well as our experience in those aspects enabled by
our integrated technology platform.
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Traditional manual methods* AI-based methods* Quantum physics-based methods* Our Achievements
Speed Traditional drug R&D efforts for novel
therapeutics are akin to finding a
needle in a haystack. The process
typically involves experimental
screening of existing libraries of
molecules and iterative and time-
consuming synthesis and testing to
reach a required property profile for
subsequent clinical development.
Traditionally, it typically takes four to
six years to develop a novel
therapeutic candidate from early
discovery to pre-clinical stage
involving around 5,000 molecules to
be synthesized and tested.
The traditional wet lab experiment-
based crystal structure studies take
approximately one year to assess the
landscape of thermodynamically
stable crystal forms.
AI-based drug R&D in general would
take two to three years for drug
discovery process to identify a novel
PCC from the early discovery stage.
This would shorten around 30% to
50% of the entire traditional drug
discovery cycle and reduce around
25% to 50% of the total costs. With
AI-powered virtual screening, only a
few hundred molecules may need to
be synthesized and tested in wet lab
experimentation to identify viable
PCCs for subsequent development.
The net result is not only fewer
design make-test cycles, but also less
time and resource requirements
within each cycle.
Quantum physics-based methods can
generate in sillico data ab initio to
train AI models, which can identify,
prioritize and optimize promising
drug candidates, thus accelerating the
drug discovery process and reducing
overall R&D costs.
Our quantum physics-anchored AI-
based method can further shorten the
drug discovery process. For instance,
for the hit-to-lead discovery process,
the traditional manual methods
typically take approximately two and
a half years and the AI-based
methods typically take approximately
ten months, while our quantum
physics-anchored AI-based method is
able to complete the hit-to-lead
discovery in less than two months,
according to Frost & Sullivan.
We are also able to deliver the CSP
results for a common case small
molecule in two to three weeks. Our
technologies are also applicable to
more complex molecular systems.
We expect our standardized and
automated wet lab will accelerate the
chemical synthesis and
experimentation in drug R&D.
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Traditional manual methods* AI-based methods* Quantum physics-based methods* Our Achievements
Scale Constrained by available resources
such as budget and time, a
traditional drug R&D program can
only afford to synthesize and
interrogate no more than a few
thousand molecules through wet lab
experimentation. Such small
sampling merely represents a small
fraction of the vast chemical space
of novel drugs and materials and is
potentially fraught with human bias
and idiosyncrasies from prior
experience. Collectively, the limited
and potentially biased chemical
space of novel drugs and materials
explored through the traditional drug
R&D process leads to clustering and
convergence of drug design and
discovery, and as well as reduces the
likelihood of identifying molecules
with desired property profile to
increase the chance of success of
drug R&D.
AI-based methods can screen billions
of potential molecules and
compounds from the vast chemical
space of novel drugs and materials
and efficiently rank them by drug
properties. Therefore, AI-based
methods may increase the likelihood
of identifying viable drug candidates.
Quantum physics-based first-principles
calculation can generate scalable data
assets ab initio to scale our
calculations of key molecular
properties to ultra-large idea sets of
over a billion molecules to enable
more rapid and successful
identification of high-quality
candidate molecules. The data assets
generated by first-principles
calculation can also be used to guide
generative AI to efficiently discover
innovative drug candidates on a
larger scale.
Our quantum physics-anchored AI-
based platform can further broaden
the funnel of potential therapeutic
starting points via AI-enabled
sampling to create tens of millions of
molecules virtually. Such a scale
enabled by our platform increases
the probability of discovering novel
molecules for targets that are
traditionally viewed as challenging
and to identify molecules with
desired property profile, which in
turn contributes to a higher chance
of progressing through subsequent
development.
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Traditional manual methods* AI-based methods* Quantum physics-based methods* Our Achievements
Novelty It is estimated that the existing pool of
therapeutics only acts on
approximately a quarter of the
approximately 4,000 disease-related
targets known today. The remaining
disease-related targets are
challenging under traditional drug
R&D methods, because traditional
drug R&D tends to be based on a
narrow spectrum of known targets,
therefore limiting the overall novelty
of the drug R&D.
AI can overcome the limitations of
human searches to explore a much
larger chemical space of novel drugs
and materials and greatly facilitate
innovation. By automatically
analyzing and detecting complex
patterns from existing chemical data,
AI algorithms can search through the
chemical space of novel drugs and
materials to identify new compounds
with novel modes of action or with
new chemical scaffold for targets
with existing therapeutics and
compounds for new targets with
desired pharmacological effects.
Quantum physics-based method can
describe the interaction in the
molecular system accurately and
provide mechanistic insights into
molecular events, which enhances
rational design of new drugs and
materials by generating and
validating new hypotheses. In
addition, quantum physics-based
first-principles calculation can
generate data ab initio , enabling
de novo design of potential novel
targets beyond existing industry
knowledge and data without any
training sets.
Leveraging our integrated quantum
physics-anchored AI-based
technology platform, we have
developed drug candidates for an
array of traditionally challenging or
underexplored targets even with AI-
based methods. As of December 31,
2023, we had approximately 39
ongoing drug discovery programs
targeting a variety of therapeutic
areas, a number of which are
designed to address novel targets or
identify new mechanisms of action
and/or new chemical scaffolds.
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Traditional manual methods* AI-based methods* Quantum physics-based methods* Our Achievements
Success
rate (1)
Because traditional drug discovery is
conducted by screening a limited
number of molecules that are
selected based on human experience
and idiosyncrasy, the selected
molecules often have poor activities
and physicochemical properties,
which prevent them from being
qualified as PCCs. The overall
probability (success rate) of
progressing drug candidate molecules
identified by traditional manual
methods from hits to PCCs is 51%.
Because AI-based drug discovery can
more exhaustively explore the
chemical space of novel drugs and
materials and is less influenced by
human experience and idiosyncrasy,
molecules discovered by AI-based
methods tend to have better drug
profiles and higher probabilities of
being qualified as PCCs. The overall
probability (success rate) of
progressing drug candidate molecules
identified by AI-based methods from
hits to PCCs is estimated to be over
70%.
Quantum physics-based methods can
predict the critical properties of the
molecular system to assist decision
making, such as binding affinity,
solubility, permeability, toxicity, and
metabolic stability, which are critical
in identifying the promising
candidates, thereby increasing the
success rate of drug discovery.
Our quantum physics-based method can
substantially increase the accuracy of
predictions and provide more
relevant models of chemical and
biological objects and their
interactions, thereby increasing the
overall probability (success rate) of
progressing drug candidate molecules
from hits to PCCs. For example, our
XFEP can increase the chance of
finding active compounds from 8.5%
to 36%. Furthermore, our Xpose, a
binding pose prediction platform
supported by both our quantum
physics-based computation and AI
capabilities, has significantly higher
success rates and a higher prediction
accuracy of approximately 56% for
high-accuracy predictions (1.0
angstrom) of binding pose for small
molecules, compared to the state-of-
the-art commercial package of
approximately 30%.
Our quantum physics-anchored AI-
based platform has successfully
generated drug candidates, which are
promising, in all of our drug
discovery programs, with a higher
success rate than AI-based method
that is not anchored by quantum-
physics-based computation,
according to Frost & Sullivan.
* Source: Frost & Sullivan
(1) This refers to the overall probability of progressing drug candidate molecules identified from hits to PCCs, excluding the probability of obtain ing regulatory approvals on drug
candidates. The success rate is calculated as multiplying the success rate of the target-to-hit stage by the success rate of the hit-to-lead stage and by the success rate of the lead
optimization stage.
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Our Future Development
We plan to scale our intelligent automation solutions, with a view to leveraging our AI
and automation capabilities and expertise to empower our automated robotic labs as
experimental infrastructure to provide stable and reliable data and results in a more efficient,
accurate, and scalable way. For additional details regarding our future plans on intelligent
automation solutions, see “—Our Future Development—Intelligent Automation.”
In addition, leveraging our potent scientific research capabilities, integrated technology
platform, and domain expertise, we have introduced our XtalPi R&D Solutions program to tap
into other high-value sectors which rely on advanced technologies, such as material science
(including agritech, new chemicals and energy, and cosmetics), to diversify our service
offerings and grow our business. We have established a joint venture, which has launched the
UpChemist.AI platform to expand our business in material science R&D, leveraging our strong
quantum physics-based computation, AI, and intelligent automation capabilities. For additional
details regarding our future plans on new materials discovery, see “—Our Future
Development—Material Science.”
OUR STRENGTHS
A globally leading quantum physics-based, AI-powered drug and material science R&D
platform in terms of technological advantages
We are a pioneer in applying quantum physics-based computation, AI, and automation
technologies with drug R&D expertise in the design and discovery of drugs and new materials,
including biomaterials, novel chemical compounds for agritech applications, new chemical
surfactants and catalysts, and cosmetics and healthcare products. Leveraging our advanced
technologies, innovative solutions and diverse applications across the pharmaceutical value
chain, we are dedicated to the R&D of novel drug candidates, with the goal of developing
potential first-in-class or best-in-class drugs.
Noteworthy achievements that we have attained since our founding in 2015 are listed
below:
 We are a market leader in adopting AI-powered CSP in drug and material science
R&D, according to Frost & Sullivan. In 2016, we participated in a global CSP blind
test held by Pfizer and achieved accurate prediction, leading to our ten-year strategic
partnership with Pfizer.
 We were awarded as the 2023 Super AI Leader Award (2023ՙ൳ɛʈ౽ঐˏჯ
ᆤ) by World Artificial Intelligence Conference (ɛʈ౽ঐɽึ) for our
intelligent and automated drug discovery platform technology.
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 As of the Latest Practicable Date, we had achieved a 100% success rate in all of the
CSP programs we conducted for small molecules, with success rate defined as the
capability of correctly predicting the crystal structures of thermodynamically stable
experimental forms through computational method for typical small molecule drugs.
We are one of the few companies globally that can achieve such computational
accuracy, while the average industry success rate for CSP ranges from 86% to 93%
according to Frost & Sullivan.
 As of the Latest Practicable Date, our integrated technology platform had utilized
over 700 million core hours of cloud computing and we had contributed to over 500
programs including drug discovery and solid-state R&D programs. As of the Latest
Practicable Date, we had served more than 300 biotechnology and pharmaceutical
companies and research institutions globally, including 16 of the top 20 global
biotechnology and pharmaceutical companies ranked by revenue in 2022 according
to Frost & Sullivan.
 Within merely four months, we and our collaborator successfully developed a new
type of bio-based furan surfactant that is able to outperform the generally used
petroleum-based surfactants. The new bio-based surfactant has generated better
results in the evaluation of detergency in certain different scenarios, such as better
foaming and hard water resistance, compared with the traditional petroleum-based
surfactants. In addition, the new bio-based surfactant has demonstrated better
inhibition in metal processing.
 In addition to our proprietary advanced technologies, we are equipped with
advanced experimental facilities to enhance our wet lab capabilities, which
differentiates us from our competitors. For example, we set up a cryo-EM facility at
our Shenzhen headquarters in June 2022, which is a Nobel prize-winning imaging
technique that allows scientists to observe biomolecules at sub-nanometer resolution
and complete the crystal structure analysis within a week when such crystal
structure is typically difficult to obtain with conventional methods, significantly
improving the accuracy and efficiency of our experiments.
 We formed strategic cooperations and collaborations with a number of the world’s
renowned biotechnology and pharmaceutical conglomerates, national research
institutes, and governmental authorities, including Pfizer, CK Life Sciences, and the
Experimental Drug Development Centre (“ EDDC ”), Singapore’s national platform,
for drug design and discovery. See “—Significant Cooperations and Collaborations”
for more details.
 As of December 31, 2023, we had raised approximately US$732 million through
private equity financing from many leading, global financial and strategic investors,
ranking us the first among all global AI-powered drug R&D companies by aggregate
funding raised, according to Frost & Sullivan.
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Quantum physics-based, AI-powered, and robotics-driven integrated technology platform
Technology is the bedrock of our operations and business. We have established a
proprietary integrated technology platform, which integrates high performance cloud
computing-powered in silico tools, including quantum physics-based first-principles
calculation and AI, for dry lab calculation and evaluation, and wet lab experimentation with
robotic automation. We are one of the few leading quantum physics-based, AI-powered drug
and material science R&D companies in the world that have established a platform with an
iterative feedback loop between quantum physics-based, AI-powered dry lab and scalable,
standardized and automated robotic wet lab, according to Frost & Sullivan.
Our Quantum Physics-based Computation
Our quantum physics-based first-principles calculation empowered by our well-trained AI
distinguishes us from traditional R&D service providers, enhances our competitiveness among
market participants, and enables us to provide more effective, efficient, and accurate services.
We are among the few scientific research companies that have first-principles calculation
capabilities to predict the properties and behavior of potential drug candidates, including their
binding affinity to target proteins, solubility, and stability, among others, at the molecular level
ab initio , according to Frost & Sullivan. Unlike traditional R&D service providers and other
market participants without first-principles calculation capabilities, which generally require
sufficient experimental data to train their AI models, our quantum physics-based first-
principles calculation can generate scalable data assets and drug properties ab initio , enabling
us to overcome the problem of lack of data frequently seen in the early stages of applying AI.
Thus, our quantum physics-based first-principles calculation capabilities enable us to identify
promising candidates faster and more accurately by generating training data ab initio for
scalable machine learning models of binding, ADMET, and solid state properties.
Furthermore, given its focus on molecular formations, we believe material science as an
industry is a natural candidate for quantum physics-based computation. Quantum physics is
well-known for predicting and simulating the structure, properties, and behavior (or reactivity)
of atoms and molecules more effectively and accurately than conventional computing. As a
result, we believe our capability in quantum physics-based computation naturally empowers us
to tap into high-value sectors in material science that involve the fundamental understanding
of properties and behaviors of the very building blocks of materials, including biomaterials,
novel chemical compounds for agritech applications, new chemical surfactants and catalysts,
and cosmetics and healthcare products.
Our quantum physics-based computation has a wide array of inherent capabilities:
 Faster Lead Discovery : the ability to rapidly identify potent molecules suitable to
initiate hit-to-lead and lead optimization efforts via solutions for virtual screening
of extremely large libraries of molecules, as well as molecular design with various
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algorithms, including fragment growth and linkage, R-group substitution, scaffold
hopping, conformation constraint, and molecular hybrid, to identify novel, highly
potent molecules unavailable in library collections;
 Accurate Property Prediction : the ability to assess critical properties of molecules
using our quantum physics-based computation with accuracy comparable to that of
experimental lab assays, to facilitate optimization of molecular properties, including
potency, selectivity, and bioavailability;
 Large-scale Molecule Exploration : the ability to computationally conceptualize and
explore novel, high-quality molecules for consideration by discovery program teams
utilizing computational enumeration and generative machine learning techniques
that are trained and constructed to yield molecules that are synthetically feasible;
and
 Large-scale Molecule Evaluation : the ability to scale our calculations of key
molecular properties to ultra-large idea sets of over a billion molecules to enable
more rapid and successful identification of high-quality candidate molecules via
integration of machine learning methods with our quantum physics-based
techniques, as well as large-scale utilization of internal and cloud computing
resources.
For more details of our quantum physics-based computation techniques, including XFF,
Xpose, XFEP , CSP , conformer and carrier screening, and morphology prediction, see “—Our
Technologies and Closed-loop Integrated Technology Platform—Our Quantum Physics-based
Computation Capabilities.”
Our Advanced Generative AI Capability
Our AI technology is one of our core competencies that enables us to revolutionize the
scientific fields of drug and material science R&D. Our integrated technology platform utilizes
AI to process information and generate predictions at scale. Built upon cloud computing
resources, we have constructed a set of over 200 AI models to conduct comprehensive
evaluation of the critical properties of compounds. In addition, we have built and are
continually upgrading our technical capabilities in therapeutic modalities with respect to large
molecule drugs, including peptides, RNA, and antibodies. We embed AI models within our
quantum physics-based computation algorithms to improve their calculation efficiency while
maintaining accuracy. For particular targets and compounds, we are able to build customizable
AI models as necessary to improve the performance of our in silico predictions. We have
developed an in-house AI modeling platform, which equips us with data feature extraction and
data mining capabilities. Our valuable data assets generated from quantum physics-based
computation through our drug discovery collaborations with biotechnology and pharmaceutical
companies will further guide and train our AI model algorithms to improve the speed, accuracy,
efficiency and success rate of our R&D cycles.
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We have also implemented a generative algorithmic drug design and discovery strategy
called “ProteinGPT.” Our proprietary AI-based ProteinGPT tool is designed to predict and
screen protein sequences and generate protein drugs that meet specific pre-set criteria by
incorporating LLM into our algorithms. We have applied our ProteinGPT strategy in multiple
large molecule drug and new materials design and development including: (i) generation of
binder proteins given a specific target protein sequence, (ii) generation of antibody libraries
according to specific pre-set criteria, and (iii) optimization of certain antibodies given specific
improvement requirements.
Our AI-powered Intelligent Robotic Wet Lab
Our automation technology and capability gives us a competitive advantage over other
AI-powered drug discovery companies. We have recently completed the construction of our
intelligent robotic wet lab with the aim of replacing manual experiments, featuring our
cross-disciplinary automation team, clusters of robot scientists, standardization and scalability,
AI, intelligent control, digital twin, and Lab-as-a-Service. See “—Our Technologies and
Closed-loop Integrated Technology Platform—Our Intelligent Robotic Wet Lab Infrastructure”
for details regarding our automation technology and capabilities. Our AI-powered intelligent
robotic wet lab can tremendously improve our operational efficiency and reduce our operating
expenses. The combination of in silico tools and robotic wet lab experimentation brings
benefits over traditional manual methods, in terms of speed, scale, novelty, and success rate of
drug and material science R&D. The two pillars of high performance cloud computing-powered
in silico tools and robotic wet lab experimentation mutually inform and reinforce each other,
thus creating synergies among our technologies and achieve a closed-loop technology chain.
For more details regarding our advanced technologies and their internal synergies, see “—Our
Technologies and Closed-loop Integrated Technology Platform.”
Our High Performance Cloud Computing Infrastructure
Our quantum physics-based computation and AI capabilities are optimized through our
self-developed cloud architecture, allowing us to benefit from the security, scalability,
flexibility, and efficiency of cloud computing. Our cloud architecture is designed for
multi-cloud capacity and is supported by multiple leading, global public cloud service
providers which are able to provide high performance cloud computing and stable computing
resources to meet our demand. Our integrated technology platform is able to run on major
cloud service providers simultaneously and leverage their combined computing capabilities.
Combining the effects of GPUs and cloud computing with our integrated quantum physics and
machine learning technologies enables us to shorten timelines, decrease costs, and increase the
probability of success of our drug or material science R&D efforts. We are able to adjust
different cloud computing clusters across geographies, scaling our computing power to
hundreds of thousands of cores in minutes to accelerate the computing process and quickly
deliver results to our customers or collaborators. Our powerful high performance cloud
computing infrastructure enables us to deploy over a million cores in a few hours and run
dozens of projects in parallel, thus augmenting our computing power to be more efficient and
faster.
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We have also developed a proprietary, smart cloud resources allocation system
empowered by our AI and machine learning technologies, designed to automatically and
dynamically allocate different computing tasks to low-cost cloud resources during off-peak
hours, notably improving our resource utilization, reducing our cloud computing costs, and
enhancing our cloud infrastructure’s reliability and flexibility. During the Track Record Period,
our overall cloud resources utilization rate remained above 90% by adjusting dynamic cluster
upper limit and expanding multi-specification node pool elastic volume.
With the increasing adoption of state-of-the-art technologies across various stages and
segments of our business, we believe we can help transform the methodology of scientific
research, unleash the power of quantum physics-based computation, AI, and automation to
derive valuable insights, and advance scientific research into a more technologically-involved
and -enabled era.
A suite of well-known customers and collaborators as well as reputable investors
Since our founding, we have served and collaborated with a large number of global
biotechnology and pharmaceutical conglomerates and have received investments and support
from world-renowned private equity and strategic investors. We believe our blue-chip
shareholder base and prominent customer base is a testament to our capabilities and prospects.
We have well-established, long-term, mutually beneficial relationships with our
customers and collaborators. We have been serving and collaborating with certain global
biotechnology and pharmaceutical conglomerates, including Pfizer, Johnson & Johnson, CTTQ
Pharma, Daewoong Pharma, and Merck KGaA, Darmstadt, Germany, since our inception. Our
customers and collaborators include 16 of the top 20 global biotechnology and pharmaceutical
companies in terms of revenue in 2022 according to Frost & Sullivan. Due to our advanced
R&D capabilities and distinct value proposition to our customers and collaborators, many of
them are our repeat customers and collaborators and engage us for either bundled
transactions or long-term collaborations. See “—Significant Cooperations and
Collaborations—Cooperation with Pfizer” as an example. Our customer retention rate was
approximately 67.5%, 51.4% and 64.9%, respectively, in 2021, 2022 and 2023. Our advanced
technologies have attracted both private equity and strategic investors, many of which are
globally leading sophisticated investors with proven track records, such as HongShan, Mirae
Asset, Google, Tencent, China Life Chengda, and 5Y Capital.
Our well-known customers and collaborators as well as reputable investors not only
provide ample resources, capital or otherwise, to our operations and growth, but also
strengthen our brand name, reliability, and ability to acquire future opportunities through their
global, strong network and word-of-mouth referrals.
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Meaningful value to our customers and collaborators and synergies within our ecosystem
We believe that we are a valuable business partner to our customers and collaborators and
other companies, as we provide technology-enabled, diversified services in a more speedy,
scalable, novel, and accurate way, as compared to traditional manual methods. We believe that
our advantages increase the possibility of successful drug and material science R&D, which
can help improve the efficiency and profitability of the operations of our customers and
collaborators. As we participate in a large number of leading global biotechnology and
pharmaceutical companies’ R&D programs, we are able to share our experience and expertise
as well as our proprietary advanced technology infrastructure, which are not available from
traditional companies, with our customers and collaborators to empower their internal
technological and product upgrades. By establishing long-term relationships with our
customers and collaborators, we have gained a deep understanding of their business models and
pain points to better serve their evolving R&D needs. Most of our customers and collaborators
are biotechnology and pharmaceutical companies at different stages of development, which
have strong demand for our AI-powered molecular design and discovery capabilities to
increase their success rate and accelerate their R&D process. We believe we are well positioned
to provide our AI-powered, quantum physics-based computation, robotic wet lab capabilities,
meaningful data assets as well as our domain expertise and skilled and experienced talent to
help biotechnology and pharmaceutical companies streamline and expedite their drug R&D
process to obtain favorable results.
For instance, we helped Pfizer expedite the development of Paxlovid, the world’s first
FDA-approved oral treatment for COVID-19, combining our prediction algorithm utilizing
quantum physics-based computation and robotic wet lab experimental validation. Our
computational prediction provided powerful evidence that the crystal structure designed by
Pfizer was the most stable crystal structure under room temperature, thus making it suitable for
scalable production. In this way, Pfizer CMC scientists were able to rapidly make research
decisions and begin the development process without delay. Pfizer and our team worked
closely and spent only six weeks to complete mutual validation and precise matching of drug
CSP against the experimental results, making possible the subsequent development and
production. We believe we have made valuable contributions to our customers’ and
collaborators’ success, and have earned their trust to take on their prominent programs. See
“—Significant Cooperations and Collaborations” which demonstrates our value-add to our
customers and collaborators.
In addition, from time to time, we invest in certain of our collaborators that are
complementary to our business or that have tremendous market potential. By investing in our
collaborators and other companies along our industry chain, we expect to establish an
ecosystem within which we and our investees can achieve synergies in a wide array of aspects,
including resources, technologies, expertise, and sales channels. For example, we can provide
services, experience and capital to our investees, while they can in turn help us expand into
other sectors complementary to our business and enhance our existing technology.
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Our visionary senior management team and talented key employees with scientific
expertise
We have assembled a global team with multi-disciplinary expertise in algorithm design,
physics, biology, chemistry, pharmaceutical R&D, automation and robotics, and business
development that collectively bring their insights and experience to our business operations.
Led by our Co-founders Dr. Wen, Dr. Ma, and Dr. Lai, three physicists with postdoctoral
trainings at MIT, our senior management team of pharmaceutical scientists, software engineers,
and financial and business development veterans brings vision and extensive experience from
academia and industry to us. Such experience and leadership enable us to not only advance our
technologies and growth but also understand and tackle our customers’ and collaborators’
challenges in order to deliver enhanced performance.
Dr. Wen, our Co-founder, Chairman of the Board and executive Director, leads our global
strategies and contributes to our cooperation with world-leading research institutes and
biotechnology and pharmaceutical companies. Dr. Wen is a quantum physicist with over 14
years of research experience in the field of computational physics and quantum chemistry, and
has published 36 papers with more than 2,100 citations. Dr. Wen also served as an adjunct
professor at Zhejiang University. Dr. Wen has received multiple awards and recognitions for
his accomplishments, including the recognition as one of “Fortune’s 40 Business Elites Under
40 in China” and one of the Top Ten Outstanding Y oung Entrepreneurs in Shenzhen ( ଉέ̹
࢕.)
Dr. Ma, our Co-founder, Chief Executive Officer and executive Director, has extensive
experience in quantum information and numerical simulation. Dr. Ma has published 30 papers
in leading scientific journals with more than 1,700 citations. Dr. Ma is honored as “Innovators
Under 35” by MIT Technology Review and is recognized as a Shenzhen regional leading talent
(ɛʑ) and Shenzhen overseas high-caliber personnel ( ଉέ̹ऎ̮৷ᄴϣɛ
ʑ).
Dr. Lai, our Co-founder, Chief Innovation Officer and executive Director, has extensive
research experience in AI and quantum physics applications in pharmacology. Dr. Lai has
published multiple papers in leading journals, including Physical Review Letters , and is
recognized as a Shenzhen overseas high-caliber personnel ( ଉέ̹ऎ̮৷ᄴϣɛʑ).
For additional information on our management team and key employees, see “Directors
and Senior Management.”
In addition, our key employees hail from well-known academic and research institutes,
biotechnology and pharmaceutical companies, and financial institutions. As of December 31,
2023, approximately 124 employees within our global team hold a Ph.D. degree in various
fields, including AI, physics, chemistry, biology, medicinal chemistry, organic chemistry,
physical chemistry, biochemistry and computational biology, and approximately 21 employees
had been recognized as “leading talent,” “national expert,” or “high-caliber personnel” under
prominent national and regional talent programs, such as the National Major Talent Programs
(ɽɛʑʈ೻), the Pearl River Recruitment Program of Talents of Guangdong province
(ྌ), and the above-mentioned talent programs. As of the same date, more
than 50% of our employees have master degree or above.
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OUR MARKET OPPORTUNITIES
Features* Market Size*
Drug R&D Many biotechnology and
pharmaceutical companies elect to
collaborate with AI-powered service
providers, especially those with both
AI and wet lab capabilities that can
act as a one-stop solution provider
to accelerate their drug discovery
process, reduce R&D costs, and
optimize the molecules.
The projected size of the global drug
R&D outsourcing service market for
drug discovery is expected to
increase at a CAGR of 14.9% from
US$12.3 billion in 2023 to US$32.5
billion in 2030, and the projected
size of the drug R&D outsourcing
service market for drug discovery in
China is expected to increase at a
CAGR of 19.6% from US$3.5
billion in 2023 to US$12.2 billion in
2030.
Solid-state R&D The global solid-state R&D service
market mainly comprises
pharmaceuticals and material
science.
Global pharmaceutical companies are
increasingly choosing to use AI-
based solid-state R&D services for a
more systematic screening of
potential crystal/salt forms to make
more informed decisions.
The projected size of the global solid-
state R&D service market is
expected to increase at a CAGR of
27.7% from US$3.8 billion in 2023
to US$20.9 billion in 2030, and the
projected size of the solid-state R&D
service market in China is expected
to increase at a CAGR of 32.1%
from US$0.8 billion in 2023 to
US$5.9 billion in 2030.
Automated
R&D Lab
Automation is the prevailing trend for
industrial upgrade and reform, and is
expected to bring significant
benefits, such as higher quality and
efficiency in R&D. Automated R&D
lab can be involved in three aspects
of the R&D process, including (i)
synthesis, (ii) crystallization and (iii)
process control by providing
screening, condition control, quality
assurance, in situ reaction analysis
and real-time monitoring and data
collection services.
The projected size of the global
automated R&D lab market is
expected to increase at a CAGR of
39.6% from US$5.9 billion in 2023
to US$60.7 billion in 2030, and the
projected size of the automated R&D
lab market in China is expected to
increase at a CAGR of 39.6% from
US$1.2 billion in 2023 to US$17.4
billion in 2030.
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Features* Market Size*
Material
Science R&D
The development of new materials
drives innovation in both research
and technology in crucial areas, such
as sustainable energy and
microelectronics.
With the technological advancements
and the growing adoption of big
data, computational material science
and engineering has emerged as a
prominent subfield in material
science R&D. It is expected to
revolutionize the discovery of new
materials, reduce the time and costs
of R&D cycles, and accelerate the
rapid evolution of new materials into
products.
The projected global material science
R&D expenditure is expected to
increase at a CAGR of 12.8% from
US$76.3 billion in 2023 to
US$177.9 billion in 2030, and the
projected material science R&D
expenditure in China is expected to
increase at a CAGR of 18.5% from
US$17.8 billion in 2023 to US$58.5
billion in 2030.
* Source: Frost & Sullivan
OUR GROWTH STRATEGIES
With our vision of becoming the global leader in quantum physics-based, AI-powered
drug and material science R&D, we intend to execute the following growth strategies:
Enhance our service capabilities and expand our service offerings in the biotechnology
and pharmaceutical industries and beyond
We strive to scale our business to achieve sustainable growth and profitability, by both
enhancing our existing service capabilities and expanding our service offerings in the
biotechnology and pharmaceutical industries and beyond.
Small molecule drug discovery
We plan to scale our small molecule drug discovery business by providing flexible
modular drug discovery solutions as our standalone solutions spanning the entire drug
discovery process, covering hit identification, lead generation, lead identification and lead
optimization, and the generation of high-quality PCC molecules. By being flexible in providing
modular drug discovery solutions, where we can provide one or several steps of the entire drug
discovery solutions selected by our customers, we aim to capture the vast opportunities arising
from each and every stage of drug discovery, in addition to solely providing end-to-end
one-stop solutions that only a few established biotechnology and pharmaceutical companies
can afford.
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Antibody drug discovery
We have been strategically venturing into antibody drug discovery, which is one of the
main sectors of the global drug R&D market. We aim to seize the tremendous market
opportunities by taking advantage of AI’s superiority over traditional wet lab in antibody drug
discovery. In addition to the fee-for-service model in our antibody drug discovery business, we
plan to focus on antibody drug discovery collaborations with biopharmaceutical companies in
2024, where we may receive upfront payment, development or commercial milestone
payments, and/or royalties on a program-by-program basis, in recognition of our technological
superiority and contribution.
Automation
We will continue to expand our intelligent automation solutions business, by building up
our scalable, standardized, and intelligent robotic wet lab to achieve greater economies of
scale. To achieve this, we will continue to deploy more, and upgrade our existing, robotic
workstations and robots to carry out standardized functions of wet labs, including compound
synthesis, solid-state screening, and pre-clinical studies, among others, to the largest extent
possible. In addition, we plan to provide standard and customized automation solutions to
potential customers in the biotechnology and pharmaceutical industries and beyond, who are
keen on higher operational efficiency and accuracy and lower operating costs brought by
automation technology. See “—Our Future Development—Intelligent Automation.”
Expanding into new modalities and industries
We will continue to leverage our technological capability, domain expertise and
experience, and data assets accumulated from current businesses to explore opportunities in
other therapeutic modalities, such as PROTAC, ADC, peptide, and RNA, and in molecular
design for material science (including agriculture, energy, cosmetics, and healthcare sectors).
For instance, we have established a joint venture, which launched the UpChemist.AI platform
combining structural design, property screening, process optimization, robotic wet lab
experiments, and our domain expertise, to engage in the design, development, and evaluation
of new materials in a speedy, novel, accurate, and cost-efficient manner. In addition, we have
been providing solid-state R&D services for a leading agricultural chemical and fertilizer
manufacturer in the U.S.
Advance the science underpinning our integrated technology platform
We are committed to keeping abreast of the newest and most advanced technologies to
improve our accuracy, efficiency, scale of business, success rate, and profitability. We plan to
continually and proactively upgrade and optimize our technologies to better serve our
customers and collaborators and maintain our market leadership.
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Further our technological differentiation
We believe we have differentiated ourselves in the market technologically with a unique
combination of quantum physics-based computation, AI, and automation technologies. We
intend to maintain our leading position through R&D to amplify and add capabilities in areas
such as computation, automation solutions, and digitalization. For example, we will continue
to develop and enhance our LLMs to enable our ProteinGPT to quickly generate de novo
structures which could potentially have therapeutic or other desired properties. We expect that
our updated ProteinGPT will have the potential to help predict molecular interactions, side
effects, and efficacy, accelerating the drug and new materials discovery process and reducing
costs. As our LLMs evolve, and through their continued use, we expect that our ProteinGPT
can continually improve the capacity for analysis and prediction through fine tuning and
incorporating empirical data and domain expertise derived from our drug and new materials
discovery programs, providing ever-more valuable insights and solutions. Our ultimate goal is
to construct a closed-loop, intelligent and automated integrated R&D platform that can be
applied in various modalities, business scenarios, and industries.
Leverage the synergy of data and computation
We will continue to accumulate data assets from our drug discovery solutions as well as
collaboration programs, with a view to leveraging unique data sets and AI to increase the
efficiency, speed, and capacity of our discovery programs. We intend to use our accumulated
data to create an accelerating iterative learning: data generation from our current business
provides the basis for AI models that lead to expanded capabilities and faster data generation
which further supports and enhances our technology and business. In addition, our wet lab
accumulates large-scale, high-quality and consistent data from our intelligent automation
solutions to provide the foundation for the formation of our closed-loop large models,
containing perception, generation, prediction, decision-making, planning and execution.
Expand application of our technologies into new modalities, business scenarios, and
industries
We will continue to enhance and upgrade the capabilities of our integrated technology
platform, with a view to adapting our technology to more modalities, business scenarios, and
industries, thereby satisfying the different and evolving needs of our customers and
collaborators and growing our business. For example, we have invested additional R&D efforts
in our intelligent automation technology to render it adaptable to other business scenarios and
industries, in addition to automated chemical synthesis. We also partnered with one of the
world’s largest petrochemical conglomerates in December 2023, to establish an automated
chemical synthesis facility that will enable high-throughput synthesis of a specific biomaterial
for the petrochemical company, with the goal of increasing its operational efficiency.
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Broaden customer base, and deepen relationships with customers and collaborators and
enable cross-selling
We aim to broaden and grow our customer base. We believe that by continuing to serve
our well-known customers and collaborators, especially the biotechnology and pharmaceutical
conglomerates with global impact, we will be able to promote the awareness of our brand and
industry reputation by word-of-mouth referrals, which helps us to procure new customers and
collaborators effectively through peer success stories. We will also formulate bespoke
marketing strategies and enhance our business development efforts to attract new customers
and collaborators. See “—Business Development and Marketing.” In addition, we intend to
collaborate with small-to-medium-sized biotechnology and pharmaceutical companies,
considering their potential in producing the future first-in-class or best-in-class therapeutics.
Lastly, we aim to continue to diversify our customer base by providing our XtalPi R&D
Solutions to companies beyond the pharmaceutical industry. Subsequent to the Track Record
Period, our customer base has extended to a wide array of sectors, including biomaterial, new
chemical surfactant and catalyst, energy, automation, agritech, and cosmetics.
We will also strive to maintain and deepen the relationships with our existing customers
and collaborators. We believe there are significant synergies within our businesses. As our
customers and collaborators usually have evolving and differentiated needs, we plan to enable
cross-selling across our different business segments and lines. For example, our automated
chemical synthesis customers may also need to employ our solid-state R&D services to
evaluate the chemical properties of their new materials. By successfully implementing our
cross-selling strategies within our different business segments, we believe we will be able to
maximize the efficiency of our marketing efforts and improve sales and profitability.
Create more value within our ecosystem
We will endeavor to forge new collaborations with our target customers, including large
cap pharmaceutical companies, biotechnology companies of all sizes, and non-profit and
government organizations dedicated to drug and material science R&D. Incubating and
investing into certain of our collaborators, in particular those that we consider to have potential
first-in-class or best-in-class pipelines or cutting-edge technologies, will continue to be one of
our growth strategies. Given many of our collaborators’ pipelines aim to address largely unmet
medical needs, we believe we will profit from our equity positions in such collaborators or our
royalty rights in the collaboration programs. Furthermore, we will constantly advance our
technology based on the data assets, experience, and feedback we receive from our
collaboration programs, which in turn will improve our competitiveness. We will continue to
enhance our mutually beneficial ecosystem by sharing our integrated technology platform,
domain expertise, and operational capability with our collaborators, and capitalize on their
success.
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Expand our global footprint
We aim to expand globally and grow robustly.
To successfully execute our global expansion strategy, we have established an innovative
demo lab in Boston, Massachusetts to showcase our R&D capability and expect to timely
deliver our solutions and services locally in the U.S. market in the future. In addition, we plan
to launch a full-scale robotic lab in Somerville, Massachusetts (the “ Somerville Robotic Lab ”)
in the third quarter of 2024 to serve our global customers and broaden our existing
collaborations with our business partners in the North America. The Somerville Robotic Lab
is expected to serve as our U.S. R&D hub and work closely with research institutions,
including some of the best universities in Boston, Massachusetts. We plan to continuously scale
up the Somerville Robotic Lab over the next three years to approximately 500 sq.m. to enhance
our presence in North America. We will also build up business development and marketing
teams in key markets, such as the U.S. and Europe, to acquire new customers and collaborators.
For example, we will be focusing on expanding our drug discovery solutions business, in
particular antibody drug discovery, in the U.S. in 2024. Furthermore, as of the Latest
Practicable Date, we were in discussions with a number of Europe-headquartered global
pharmaceutical companies about drug discovery collaborations and automated chemical
synthesis opportunities. We will also leverage our well-established long-term relationships
with certain global leading biotechnology and pharmaceutical conglomerates to reach out to
prospective customers, which may be short of adequate technologies and expertise, either
through word-of-mouth referrals or introductions.
As an innovative technology company headquartered in the Lok Ma Chau Loop
Shenzhen-Hong Kong Science and Technology Innovation Co-operation Zone (ଉ
Ҧ௴อΥЪਜ) promulgated by the State Council and jointly developed by Hong Kong and
Shenzhen, we aim to continue to leverage our geographic advantages to benefit from the
opportunities brought by the efforts of Shenzhen and Hong Kong in promoting the
biotechnology and pharmaceutical industries. In addition, as Hong Kong is striving to promote
technological innovation, we plan to expand our presence in Hong Kong by establishing an
AI-powered dry lab and intelligent robotic wet lab as well as strategic alliances with local
research institutions with a view to capturing a larger market share and obtaining academic and
economic support to grow our business. In particular, we are amongst the first batch of
participants in the Hong Kong government’s Research, Academic and Industry Sectors
One-plus Scheme (“ RAISe+ ”) and expect to increase our investment and efforts in R&D in
Hong Kong over the next three years, including by broadening our collaboration with the
Advanced Biomedical Instrumentation Centre, which is a major collaborative effort between
the University of Hong Kong and Harvard John A. Paulson School of Engineering and Applied
Science to translate advanced biomedical instrumentation into real-world healthcare solutions
that benefit people in Hong Kong and around the world.
Furthermore, to protect us from the potential intensified international trade tensions, we
also plan to expand our operations in Southeast Asia and the Middle East. In particular, as of
the Latest Practicable Date, we had several ongoing programs with the national research
institutions in Singapore for our drug discovery solutions, and were finalizing establishing
library synthesis capability using our automation technology for one of such academic
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institutions. We will continue to explore more business opportunities in Singapore in light of
its favorable governmental support to the AI industry. In addition, as of the same date, we were
in the process of negotiating strategic cooperation with a global leading petrochemical
conglomerate in the Middle East for automated wet lab experiments, and were in discussion
with a leading pharmaceutical company in Saudi Arabia about drug discovery collaboration and
chemical synthesis opportunities. We target to kick off these programs before the end of 2024.
As of the Latest Practicable Date, we had not had any material operations outside China,
including the U.S. and Europe.
Pursue selective acquisitions, joint ventures, and strategic alliance opportunities
To further grow our business operations, we may seek potential acquisitions, joint
ventures, and strategic alliances along the value chains of pharmaceutical, automation, and
material science industries with a view to broadening our integrated service offerings and
complementing or upgrading our technologies. In particular, we will primarily focus on
potential acquisition opportunities of suitable targets that can generate synergies with us or that
have innovative technologies that are amenable and complementary to our integrated
technology platform, from which we expect to broaden our R&D capabilities and expertise.
OUR TECHNOLOGIES AND CLOSED-LOOP INTEGRATED TECHNOLOGY
PLATFORM
Overview
Our technology platform is designed to efficiently search chemical and material space for
the rapid identification and analysis of lead molecules and materials with desired functional
properties for applications in various areas, including drug and material science R&D, as well
as to provide insights and assistance to our customers and collaborators in their drug and new
materials discovery processes.
Our technology platform integrates (i) high performance cloud computing-powered in
silico tools, including quantum physics-based computation and AI, for dry lab calculation and
evaluation, and (ii) wet lab experimentation with robotic automation, backed up by our domain
expertise, to develop R&D solutions with the potential to accelerate the process, expand the
scale, address challenging targets, and improve success rate over traditional alternatives. The
combination of in silico tools and robotic wet lab experimentation brings benefits over the
traditional manual methods, where our dry lab and wet lab are informed and reinforced by each
other creating a closed-loop technology platform. In addition to constantly improving our in
silico tools by fine-tuning our algorithms and training our AI with data accumulated in our wet
lab, we have recently enhanced our wet lab capabilities with the aim of replacing manual
experiments with robotic automation, to the largest extent applicable, to improve the speed,
scale and efficiency of our wet lab experimentation. Furthermore, we have successfully
upgraded our proprietary AI-based ProteinGPT tool, designed to predict protein sequences and
generate protein drugs that meet specific pre-set criteria, by incorporating LLM into our
algorithms.
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The following diagram illustrates the structure of our closed-loop integrated technology
platform combining our dry lab and wet lab capabilities:
Quantum physics-based
 computation
In silico tools together with human input Wet lab experimentation with robotic automation
Inform
Synthesis lab
Intelligent robotic
wet lab
Analysis and
testing lab
Validate & Train
Crystallization
lab
Human Input and Expertise
Support
Data assets
Advanced
generative AI
High performance
cloud computing
Our integrated technology platform allows us to conduct discovery of novel drugs and
new materials at a pace and scale beyond those with the traditional approaches. As of the Latest
Practicable Date, our integrated technology platform had utilized over 700 million core hours
of cloud computing and we had contributed to over 500 programs including drug discovery and
solid-state R&D programs.
The components of our integrated technology platform integrate within our system and
enable each other as follows:
 Within our in silico tools, we embed AI models into our quantum physics-based
computation algorithms to expedite the calculation process by reducing the number
of calculations otherwise required without the AI models, and we deploy quantum
physics-based computation methods to extract features of molecules to facilitate
construction of AI models for better predictions. We also use the results at the
molecular, crystal, or protein-ligand complex level generated from quantum
physics-based computation, such as intra-molecular energy and inter-molecular
energy, as training sets to enhance our AI models.
Our quantum physics-based computation algorithms and AI models are powered by
high performance cloud computing architecture that allows us to benefit from high
cloud computing power and adjust different cloud computing clusters to scale up our
computing capacity to hundreds of thousands of cores in order to accelerate the
calculation process and timely deliver results to our customers and collaborators.
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 In integrating our in silico tools and wet lab experimentation, the predictions
generated by in silico tools are assessed in our own wet lab, which creates a
mutually reinforcing cycle of learning. The data produced at scale from our wet lab
experimentation, such as biological activity, target selectivity, metabolic stability,
hERG liability, and crystallization propensity, function as the feedback to further
train our in silico tools.
Predictions that are confirmed through experiments reinforce our understanding and
algorithms. Predictions that are identified as incorrect through experiments generate
valuable data to refine the algorithms to improve future predictions. The improved
in silico tools then produce better insights into the design and performance of wet
lab experimentation.
Therefore, the iteration of in silico and wet lab experimentation creates a virtuous
cycle where data generation, learning and confirmation enhance each other and
continually strengthen our integrated technology platform with real world
experimental data on molecules and chemical synthesis.
In addition, as we further expand our wet lab and enhance automation with the aim
of replacing manual operations with robotics, we expect to generate abundant wet
lab data at a faster pace compared to that of manual operations, which would further
enable us to enhance our in silico tools.
We manage the data generated from our operations by following a data lake design, which
enables us to visualize the data and quickly aggregate them for further analyses and AI
modeling.
The following diagram illustrates the workflows of our integrated technology platform:
Applications
Web lab
experiments
Computational
modules
Computing
models
Computing
facility
Intelligent robotic wet lab
(Solid-State R&D & automated chemical synthesis)
Biology-Structure-Synthesis-Crystallization
Machine learning Force field Pose
determination
Free energy
perturbation
Crystal structure
prediction
Crystal structure
determination
Salt/coformer
screening
Renova XFF XPose XFEP CSP CSD
Coformer
screening
Artificial intelligence (AI)Quantum physics
High performance cloud computing
Drug R&D
Material science R&D
(Solid-State R&D Services & Automated
Chemical Synthesis Services)
Data
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A critical pillar of our integrated technology platform is our in silico capability, which is
enabled by quantum physics-based computation and AI, both of which are powered by the
highly scalable cloud computing infrastructure. We have entered into a ten-year strategic
research cooperation with Pfizer, with regard to improving in silico tools for accelerating drug
R&D. We believe that this strategic collaboration evidences the industry recognition of our
technological capabilities. For additional information, see “—Significant Cooperations and
Collaborations—Cooperations with Pfizer.”
As of December 31, 2023, we had built the largest dry lab and wet lab R&D team in
China, according to Frost & Sullivan, consisting of over 500 experienced large and small
molecule scientists and engineers, many of whom have doctoral or master’s degrees.
Our Quantum Physics-based Computation Capabilities
The properties and behavior of molecules, including those that might be useful for drugs
and new materials design and discovery, are intrinsically determined by quantum physics.
Therefore, quantum physics-based approaches can predict and simulate the structure,
properties, and behavior (or reactivity) of these molecules more accurately, and provide the
mechanistic insights at the electronic and atomic level, thereby harnessing human problems to
generate new hypotheses and ideas for further novel drug and material science R&D.
Fundamental, quantum physics-based computation methods and other methods that we
have built based on first-principles, as well as their applications, form the core of our
technology platform. Powered by our self-developed first-principles-based methods and
applications, we are able to efficiently and accurately perform energy and structure
calculations, high-throughput screening, comprehensive conformational analyses,
conformational space sampling, thermodynamic property prediction, and structural or
parameter optimization. Such capabilities allow us to identify hits, leads and eventually
candidate compounds and crystal forms suitable for further drug and material science R&D.
Quantum physics-based computation can improve the R&D cycle in the following ways:
 Describing the interaction in the molecular system more accurately and providing
mechanistic insights into molecular events, which enhances rational design of new
drugs and materials by generating and validating new hypotheses;
 Predicting the critical properties of the molecular system to assist decision making,
for example, physicochemical and pharmacokinetic properties of drug candidates,
such as binding affinity, solubility, permeability, toxicity, and metabolic stability,
which are critical for successful drug and material science R&D;
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 Generating in silico but accurate data for AI model training to overcome the data
scarcity problem that often occurs in the early stages of the application of AI,
enabling these AI models to predict critical properties at various levels of
complexity from atoms, molecules, crystals, and biological targets to in vitro and in
vivo ;
 Accelerating the drug discovery process and reducing overall R&D costs by helping
to prioritize and optimize drug candidates together with trained AI models before
entering expensive and time-consuming experimental stages, thereby reducing
overall R&D time and costs; and
 Triggering a paradigm shift in drug and material science R&D, moving beyond
digitally enabled R&D toward simulation-based or in silico drug discovery.
Force Field
Molecular mechanics force fields are empirical models, which serve as an essential
component for many structure-based drug and new materials design predictions. Force fields
provide a description of intramolecular and intermolecular interactions by parameterizing a
functional form to characterize the potential energy of molecules. Existing force fields
originate from a limited number of organizations, and they either suffer from limited number
of training sets, lower than desired quality because of oversimplified representations, or are
costly for the molecular modeling community to access. We have developed a proprietary
next-generation general molecular force field, XFF, for global optimization of design
parameters. The XFF was jointly developed by Pfizer and us from May 2018 to March 2021,
and we continued to advance the development of the XFF independently onwards. We own the
XFF parameters developed with publicly available data and all the XFF tools, such as
molecular simulation method and bespoke fitting workflow, while Pfizer owns the XFF
parameters developed with its proprietary molecular structures. Set out below are notable
features of XFF:
 Sufficient coverage of chemical space of novel drugs and materials. XFF has a
comprehensive coverage of chemical space of novel drugs and materials because
exponentially more molecules can be calculated, due to our enhanced algorithms and
a variety of different training sets. The number of training compounds utilized in the
development of XFF exceeds the public academic force fields by approximately two
orders of magnitude. According to our testing of XFF in two important public
molecular databases, DrugBank and PubChem, the molecular coverage of XFF in
both databases was found to be above 90%. This expansive coverage enables the
effective exploration of chemical space of novel drugs and materials and improves
the drug and new materials design process.
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 Accurate description and prediction of properties. XFF is trained with quantum
chemistry and experimental data, and thus provides a reliable presentation of
molecular conformations, single molecule properties, intermolecular interactions,
and molecular behavior in both solution environments and drug targets. Our
customized force fields exhibit great accuracy, in the prediction of molecularization
energy and structure than the two most popular open-source force fields, GAFF2 and
OpenFF2.
 Flexible deployment and customizable fitting parameters. XFF offers flexible
deployment options, both on-cloud and locally, to cater to users’ specific needs. The
cloud deployment provides users with access to computing resources that enable a
fast verification and re-parameterization process. On the other hand, the local
deployment can facilitate the development of customized molecular force fields
based on users’ particular internal data. XFF also has features such as cloud
computing capabilities, database access to tens of millions of molecules and millions
of quantum mechanics calculations, and capabilities of generation of new data,
refitting of force field by machine learning, optimizing the chemical space of novel
drugs and materials, and parameter scoring. The parameter scoring functionality
assists users in ensuring the applicability of force field parameters to their specific
molecules and helps determine whether the force field requires refitting.
Case Study—Development and validation of a high quality drug-like small molecule force field,
XFF
Problem. Biomolecular simulations have become an essential tool in contemporary drug
discovery, and the molecular mechanics force field constitutes its cornerstone. Traditionally,
the development of a general force field with high quality and broad coverage requires tedious
manual work to perform systematic selection of training set, substantial expertise and
dedicated computing resources, and normally takes many years to develop or update. However,
existing force fields originate from only a limited number of academic or research institutions.
They either suffer from limited coverage of chemical space of novel drugs and materials and
lower than desired quality because of over generalization, or are costly to access. Therefore,
we and Pfizer aimed to develop a high-quality drug-like small molecule force field with broad
coverage of chemical space of novel drugs and materials for molecular modeling and
simulation in a variety of drug discovery applications to address these issues.
Solution. We developed a systematic force field parametrization platform and a set of
advanced force field parameters for drug-like small molecules with extensive coverage of
chemical space of novel drugs and materials. Millions of high-quality quantum mechanics
(“QM”) calculations were performed on our cloud computing platform for force field
parameter training. The quality of these parameters has been comprehensively benchmarked
with intra- and inter-molecular interactions, showing superior performance for intra-molecular
properties and comparable performance to leading commercial force fields for inter-molecular
binding affinity prediction. The success of our XFF is attributed to key factors including: (i)
well-balanced selection of training set molecules using a scaffold network graph analysis
method; (ii) well-designed parameter fitting workflow for rapid iterative refinement; (iii)
high-throughput cloud computing capabilities for training force filed parameters on millions of
high-quality QM data; and (iv) high-precision and high-scale molecular simulation platform,
particularly the XFEP simulation platform for binding affinity prediction.
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Result. We developed a proprietary advanced small molecule force field, XFF, with
readily available parameters that are available to the industry. Extensive validations on
QM/MM conformer comparison and FEP calculations demonstrated the accuracy and wide
coverage of the chemical space of novel drugs and materials of our XFF. Compared to the two
most popular open-source force fields, our XFF was found to have achieved a higher level of
performance at reproducing QM energies and geometries. In relative binding affinity
predictions for 31 publicly assessed protein-ligand data sets and 1,079 pairs of ligands, our
XFF has achieved an overall accuracy of 1.19 kcal/mol for relative binding free energy and
0.95 kcal/mol for change in free energy on a subset of 463 ligands without bespoke fitting to
the data sets. The results are on par with the latest version of the leading commercial force
field. With the advantages of freely available parameters and wide coverage of chemical space
of novel drugs and materials, our XFF can serve as an alternative to the existing academic and
commercial force fields for molecular simulations in drug discovery programs. Furthermore,
our cloud-based high-throughput bespoke fitting workflow can also bring higher accuracy to
molecule-specific FEP simulations.
We used FEP with open-source/academic force fields as well as our XFF to calculate and
rank the binding affinities of the candidate compounds to find lead compounds for a
first-in-class target. The compounds proposed by these force fields were then synthesized and
their affinities were measured experimentally. Such results showed that using our XFF for
prediction can save approximately 80% of chemical synthesis work in finding compounds with
high binding affinities, compared to the open-source/academic force fields.
Binding Affinity and Pose Prediction
Free energy perturbation (“ FEP”) is the approach to predict the binding strength between
the candidate molecules and their biological target. FEP allows calculation of the ligand-
binding free energies by constructing a series of non-physical intermediate states connecting
the bound and unbound states. In addition, FEP allows for the calculation of relative binding
free energies between different ligands.
To overcome the limitations of FEP applications, including high cost, long waiting time,
lack of scalability, and limited application scenarios, we have implemented the FEP method on
our cloud computing platform to develop our proprietary XFEP , a binding affinity prediction
platform, to evaluate the binding affinity between candidate molecules and their biological
target at scale, from which false positives can be filtered out before conducting wet lab
experiments. Our XFEP is based on high accuracy and high-throughput affinity prediction
combined with AI model, incorporating enhanced sampling algorithms, statistical analysis
methods, and our proprietary XFF. We utilize high performance cloud computing to shorten the
waiting time and increase the scalability of our XFEP . Our XFEP is able to evaluate binding
affinities of approximately 240,000 molecules per year, which is about ten to 100 times more
than the FEP capability of other renowned biotechnology and pharmaceutical companies,
according to Frost & Sullivan. In addition, we estimate that our XFEP has lowered the cost of
traditional FEP by approximately 75% through algorithms fine-tune and optimization. By
developing novel algorithms, our XFEP can be applied in various application scenarios, such
as the prediction of irreversible binding, structural diversity, and protein mutation. As
confirmed by both retrospective and prospective testing results, values predicted by our XFEP
can be strongly correlated with experimental data, and the average prediction error of XFEP
in R-group replacement and scaffold-hopping calculations is about 1.0 kcal/mol, which can
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increase the chance of finding active compounds from 8.5% to 36%. Supported by our XFEP ,
we believe we are well-positioned to explore new opportunities for FEP applications in all
stages of drug R&D, based not only on structure exploitation within the given chemical series
but also evaluation and comparison of completely unrelated molecules during structure
exploration in a larger chemical space of novel drugs and materials. Our XFEP provides the
basis for accurate, full-scenario, efficient, scalable and affordable FEP applications in drug and
material science R&D. For example, it can accelerate the whole process from hit identification
to PCC compound nomination.
We have also self-developed an in-house binding pose prediction platform, Xpose, which
is able to combine the advantages of different sampling and evaluation algorithms to predict
the binding pose of small molecule target-ligand more accurately. Molecules and their targets
are like keys and locks. A binding pose is the correct structure and orientation that a molecule
binds to its drug target. A correct binding pose can help chemists to design molecules that
better match the target, enabling molecules to have a better efficacy to “unlock” the targets
while avoiding to “unlock” other targets. The interactions and the binding poses between
molecules and targets are governed by free energy, and our Xpose can simulate the free energy
of the drug or target complexes to predict the correct binding pose.
Xpose can be used to build accurate SAR and structure-based affinity evaluation, using
FEP to design and evaluate molecules. It bridges the gap between the predicted target structure
and the real application in different drug discovery scenarios. Our Xpose has significantly
higher success rates and a higher prediction accuracy of approximately 56% for high-accuracy
predictions ( /H113491.0 angstrom) of binding pose for small molecules, compared to the state-of-
the-art commercial package of approximately 30%.
Our XFF, XFEP and Xpose can be customized to be applied in different application
scenarios and provide efficient and accurate exploration and exploitation of critical chemical
space of novel drugs and materials. The following diagram is an illustration of the way in
which the three techniques interact with each other:
Binding affinity
prediction
ͣXFEPͤ
High-accuracy
force field
XFF
High-efficient
conformation
sampling
(XPose)XFF
• Complete coverage of chemical space
of novel drugs and materials
• Higher parameter accuracy
• Customized parameters
XPose • Dynamic simulation of protein
conformation
• Predict protein-ligand binding model
• Motion-based material design
XFEP
Automated FEP tools
for multiple scenarios
Accurate
Complete
Efficient
Scalable
• R-Group
substitution
• Core hopping
• Molecule design
• Protein design
• Drug resistance
prediction
• Selectivity
prediction
•P R O T A C
compound design
• Peptide design
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Case study—Small Molecule Discovery: Binding Affinity Prediction
Problem. We partnered with Janssen Pharmaceutica NV (“ Janssen ”) on a research
collaboration program, pursuant to which we are to provide small molecules with proven
binding affinities for a specific target nominated by Janssen. This target has an allosteric
binding site that is highly flexible as it is located at the interface of domains. Therefore,
predicting binding affinity is a major challenge. In addition, the patent landscape for this
particular target is highly saturated, which increases the likelihood of patent infringement.
Solution. We used our proprietary small molecule drug R&D platform, ID4Inno
consisting of two sub platforms ID4Gibbs and ID4Idea, which seamlessly combines our
proprietary cloud-based computation and robotic wet lab capabilities, to accelerate the DMTA
cycle. In particular, we employed our high-precision quantum physics-based computation
platform, ID4Gibbs, to estimate the binding affinity between our candidate compounds and the
nominated target. ID4Gibbs is a versatile computing platform designed for predicting relative
and absolute free energy using optimized simulation protocols. We then utilized our AI drug
discovery platform, ID4Idea to generate approximately one million compounds, and conducted
a series of processes, including filtering, docking, and high-throughput FEP calculations, to
narrow down the list of potential candidates. Ultimately, we identified a selection of
high-priority compounds for synthesis. See “—Our Drug Discovery Solutions—Small
Molecule Discovery” for details regarding our ID4Inno, ID4Gibbs and ID4Idea platforms.
Result. Our ID4Gibbs demonstrated a stronger correlation with the experimental data
with a correlation coefficiency of 0.64 compared to 0.37 for other commercial software used
by our customers. Furthermore, 37% of the synthesized compounds exhibit strong potency
which demonstrated a remarkably high success rate considering the presence of nine novel
scaffolds. As a result, we managed to deliver the design and synthesis recommendation of small
molecule leads featuring nine novel scaffolds and robust potency for Janssen’s nominated
target within two months, while traditional approaches typically take a significantly longer
time to achieve similar results or design a much lower diversity of lead compounds.
Crystal Structure Prediction
Conducting solid-state studies of drugs and materials to obtain their stable crystal forms
is a critical step for drug and material science R&D and to extend their life cycle through patent
protection. We offer a combination of quantum physics-based computation and AI-powered
CSP services that help transform the CSP process. Our CSP service is able to identify the most
stable crystal forms and provide thermodynamic stability ranking of different structures across
a range of temperatures (0K-400K) efficiently.
We have a self-developed AI-powered CSP platform, XtalCSP , which is equipped with a
global searching algorithm and covers all theoretical stable forms. Our XtalCSP is experiment-
independent, and can cross-validate the experiments and de-risk the polymorphic system. By
leveraging our XtalCSP , we can conduct thermodynamic stability evaluations to identify
crystal forms that are relatively stable among various crystal forms at different temperatures.
Our XtalCSP can also recommend solvents to enable higher propensity for the crystallization
of the target polymorph, and validate more than 70 experimental forms per year. We had
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de-risked approximately 350 polymorphic systems through our XtalCSP as of December 31,
2023. We are able to provide converged energy landscapes in just four to eight weeks, and
deliver the final report to our customers within additional two weeks.
In addition, by leveraging our integrated technology platform, we are able to deploy cloud
computing resources, screen crystal structures, and determine their stabilities with accuracy
and efficiency at a faster speed compared to that of traditional methods. Instead of the two
months typically required by traditional experimental methods, we are able to deliver the CSP
results for a common-case small molecule within two to three weeks. Our technologies are also
applicable to more complex molecular systems, such as highly flexible molecules with more
than 15 rotatable bonds, complex molecules with isomerization of multiple flexible rings, as
well as multi-component crystals such as salts, co-crystals, hydrates, and solvates, given that
the CSP technology has been shown to be capable of predicting certain multi-component
crystals in a previous CSP blind test.
The CSP results are able to enhance our experimental screening efforts and can
potentially reduce unnecessary experimental trials, which may lead to selection of the optimal
medicinal solid form. The selection of the optimal medicinal solid form may increase the
quality and success rate of later-stage drug development.
The following diagrams illustrates the overall workflow of our CSP:
. .. .. .. .. .... .. ..
. .. .. .
.. ...
.
.
..
.
.
Case Study—Crystal Structure Prediction: Development of Paxlovid
Problem. In light of the continuous COVID-19 pandemic, there was a global, urgent
demand for a safe, effective, and orally administrable drug for the prevention and treatment of
COVID-19. Typically it would take several years for pharmaceutical companies to screen
potential drug candidates, which would have delayed the introduction of effective COVID-19
drugs. Fully aware of our strong solid-state R&D capabilities, Pfizer decided to engage us to
expedite the development of potential COVID-19 drugs.
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Solution. Our computational prediction and wet lab experimental validation provided
compelling evidence that the crystal structure designed by Pfizer was the most stable crystal
structure under room temperature, thus making it suitable for scale-up and production.
Therefore, Pfizer CMC scientists were able to rapidly make research decisions and begin the
process without delay.
Result. Within a short time period of only six weeks, we and Pfizer completed the mutual
validation process, ensuring precise alignment between the predicted crystal structure and
experimental results, which helped make possible the subsequent development and production
of Paxlovid. Paxlovid became the world’s first FDA-approved oral treatment for COVID-19
with our help.
Our Advanced Generative AI Capabilities
Overview
Our AI technology is one of our core competencies that enables us to revolutionize drug
and material science R&D. Our integrated technology platform utilizes AI to process
information and generate predictions at scale. Built upon cloud computing resources, we have
constructed a set of over 200 AI models to conduct comprehensive evaluation of the critical
properties of compounds. We also embed AI models within the quantum physics-based
computation algorithms to improve their calculation efficiency while maintaining accuracy.
For particular targets and compounds, we are able to build customizable AI models as
necessary to improve the performance of our in silico predictions.
We have eight self-developed basic AI generative models, including the pocket-based
generation model for first-in-class drug discovery, the scaffold hopping model for best-in-class
or fast-follower drug discovery or SAR studies, and the goal-directed generation model for
property optimization, among others, which can be customized with specific parameters to be
applied in different scenarios to cater to customers’ diversified and evolving needs. Combined
with physical models, our AI system can simultaneously improve the accuracy and efficiency
in scenario evaluations of high-throughput data analysis, while the accumulated models and
data can in turn optimize the design and discovery of molecular structures. Our AI system
allows us to utilize a collection of these AI models for R&D, such as activity and predictions
of ADMET properties, new drug and materials scaffold design, new binding pocket discovery,
and crystallization propensity, among others, and provides access libraries containing tens of
billions of molecules to facilitate development of new models.
In particular, we utilize generative AI for small molecule design, protein design, and other
computational molecular design. The algorithm-generated molecules are able to not only
reproduce the ones designed by domain experts, but also inspire domain experts with new ideas
for novel molecules generated. Together with our predictive models, goal-directed generation
can balance space exploration and exploitation to identify the global optimal candidates. One
of our major generative AI models is our ProteinGPT, like ChatGPT, which is capable of
autonomous decision making in the R&D process. We are now exploring its potential in drug
discovery, chemical synthesis, and robotic operations.
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Small Molecule Design
We have developed a proprietary scenario-driven molecular design and evaluation
platform which can be applied in different stages of drug and new materials discovery. This
small molecule design platform is capable of generating up to tens of millions of molecules in
a day or two, enabling us to explore a wider chemical space of novel drugs and materials for
the novelty, diversity and innovation of molecules. We aim to leverage this platform to address
the challenges of molecular design by providing a customizable and efficient solution for
various application scenarios, such as first-in-class and best-in-class scenarios. Our small
molecule design platform integrates three functionality modules, including customized
molecular generation, in silico multiple parameter evaluation, and expert feedback, which are
closely related to each other. The following diagram is an illustration of the way in which the
three modules of our platform interact with each other:
Expert
Feedback
Customized
Molecular
Generation
In-Silico Multi-Parameter
Evaluation
Our small molecule design platform can be customized for a given molecular design
scenario by flexible combinations of: (i) two types of generation models, developed based on
rule-library or generative algorithms; (ii) various AI learning paradigms, such as pre-training,
transfer learning, reinforcement learning, and active learning; (iii) different input information
and compound representations, such as 1D SMILES, 2D graph, 3D shape, binding site, and
pharmacophore; or (iv) multiple in silico prediction models for in vitro property screening.
Supported by more than 200 AI models, it can be used for goal-directed generation, and
screening and evaluation of small molecules. Therefore, we can utilize our small molecule
design platform to efficiently obtain small molecules with pre-defined objective functions.
Protein Design
GPT, which stands for generative pre-trained transformer, is a family of pre-trained AI
language models generally trained on a large amount of text data to generate human-like text.
GPT is developed based on an AI paradigm called large language model (“ LLM”), which is
among the most successful applications of the transformer models. LLM is a deep learning
algorithm that can recognize, summarize, translate, predict and generate text and other content
based on knowledge gained from massive datasets.
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Just as the 26 letters in the English alphabet form the basic building blocks of the English
language, if we imagine the complicated protein sequence structure as the “sentences” and
“paragraphs” of a form of “language,” the 20 basic types of amino acids which form every
protein sequences in the world are the basic building blocks of this “language.” Therefore, the
same LLM can aid in the analysis of protein sequence data and the design of new protein
sequences.
Similarly, if we envision DNA sequences as a form of biological “language” with various
genes as the basic building blocks of this language, LLM can be used to analyze, predict,
understand, and ultimately design and engineer DNAs. The application of LLMs, or broadly AI
technologies, in pharmaceutical and material science fields is very promising and seems
limitless, and can potentially vastly accelerate advancements in various domains, including
personalized medicines, novel drug and new materials discoveries, and more precise and
effective clinical trials.
We have applied LLM to our self-developed ProteinGPT, which is a generative
algorithmic drug and new materials design strategy. Our proprietary AI-based ProteinGPT is
designed to generate drugs and new materials that meet specific criteria. As of the Latest
Practicable Date, we had applied our ProteinGPT solutions in our antibody drug discovery
business, which is capable of: (i) generation of binder proteins given a specific target protein
sequence, (ii) generation of antibody libraries according to specific pre-set criteria, and (iii)
optimization of certain antibodies given specific improvement requirements.
Features of Our LLMs
LLM uses deep learning techniques and massively large data sets to understand,
summarize, generate, and predict new content. AI and automation are key infrastructures and
pathways for upgrading and innovating drug and material science R&D. By continuously
optimizing algorithmic models and consolidating data generated from different modalities,
LLMs are able to increase efficiency and success rate in different key stages of drug and
material science R&D. Furthermore, the generative and reasoning capabilities of LLMs can
optimize drug and material science R&D workflow by combining expertise and automated wet
lab, thereby forming a flywheel effect in drug and material science R&D. Empowered by
LLMs, the in-depth integration of AI and automation can improve the success rate of drug and
material science R&D, reduce R&D costs, and shorten the R&D cycle time, thereby bringing
more value to customers and patients. Our competitive strength in drug and material science
R&D is built upon combining LLMs’ advantages of providing vast amount of existing
knowledge and data and assisting in decision-making by validating molecules as well as
automation’s advantages of low cost and standardized scalability.
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LLMs-empowered automated drug and material science R&D can map the six traditional
key processes of the DMTA cycle, including research and analysis, molecular design,
molecular evaluation, molecule selection, experimental design and execution, and data
analysis, into a closed loop of perception, generation, prediction, decision-making, experiment
planning, and execution.
Perception
LLMs can generate drug and material science R&D strategies for different scenarios
based on the input of experimental, literature and patent data. We have developed various
LLM systems for different scenarios, such as our literature LLM system and medicinal
chemistry LLM system. Our literature LLM system can help researchers efficiently
extract key information from massive biomedical literature, and our medicinal chemistry
LLM system can construct structured knowledge maps by correlating text, diagrams,
tables and experimental results from a large amount of literature, giving researchers
insights to formulate drug-forming reconfiguration strategies and improve the success
rate of drug pipelines. In addition, our literature LLM system can also provide smart
optimization suggestions for drug and new materials screening and synthesis processes,
reducing the cost and risk of trial-and-error and shortening the R&D cycle time. However,
typical literature LLM system does not support the processing of non-literature
information, such as graphics, tables, mathematical formulas, and chemical structures in
the literature. As of the Latest Practicable Date, we were in the process of upgrading our
literature LLM system to process literature, graphics, tables, formulas, and structures, by
developing and incorporating algorithms, such as the chemical structure recognition
algorithm and the table recognition algorithm, into our literation LLM system.
In addition, we also utilize our AI and automation capabilities in target discovery
and validation. Target discovery is the first step in drug and new materials R&D and one
of the key challenges. We discover and validate target exploitability through multi-
dimensional orthogonal validation. We can also build 3D virtual models to predict and
evaluate binding sites and obtain potential lead compounds through virtual screening,
leveraging our AI algorithms, quantum physics-based simulation, and wet lab
capabilities. This enables our LLMs to analyze a combination of large amounts of medical
literature and experimental data to provide researchers with critical information that may
have been overlooked. As a result, our LLMs can enhance the understanding and
expression of the bioscience and material science fields, help scientists to explore
potential therapeutic or other targets, and improve the efficiency and success rate of drug
and new materials discovery. During this process, we strategically accumulate data and
construct our own database to constantly improve our AI algorithms and optimize the
standardization process.
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Generation
Our LLMs can learn the probability distribution from training sets, extract
representative features, generate a low-dimensional continuous vector representation, and
ultimately generate a new molecule or biological entity by sampling from the learned data
distribution. In addition, our LLMs can be combined with evolutionary algorithms or
reinforcement learning to optimize a specific target or reward shaping for generated
molecules, by providing the AI model with a starting molecule and an optimization goal.
This allows the AI model to modify and optimize the starting molecule so as to
directionally generate molecules with better properties.
Prediction and decision-making
To enable molecular assessment and recommendation, we adopt a combination of
complementary physical and AI models to build the comprehensive molecular property
assessment and recommendation process and form a closed-loop process of expert
strategy, prediction model, data validation, and expert feedback. Using our AI models, we
can predict the ADMET properties of small molecules, as well as the expression,
solubility, and aggregation properties of antibodies more accurately and efficiently.
Experimental planning and execution
In terms of experimental planning and execution, our LLMs can analyze literature,
patents, and in-house data to generate the information of relevant procedures, conditions,
and operations required for chemical synthesis, and translate this information into a
descriptive language that can be executed by automated robots. In this scenario, LLMs act
as a brain, connecting the virtual world where operation commands are generated based
on massive data and the real world where the commands are executed by automated
robots, such as performing automated synthesis and crystallization. Our automation
technique applied in the execution phase can help dramatically speed up the time-
consuming experimental process and, furthermore, the entire drug discovery process. See
“—Our Technologies and Closed-loop Integrated Technology Platform—Intelligent
Robotic Wet Lab Infrastructure” for more details regarding our automation capability.
The Application of Our LLMs
We have adopted two different practice paradigms in applying our LLMs, including the
development of various AI systems designed specifically for different scenarios, and the
development of a central AI system for different tools.
LLMs have a few limitations in analyzing protein sequence data and designing new
proteins and DNA sequences since they can only depict the natural laws within the training set,
and LLMs-designed proteins may need further engineering. However, compared to traditional
machine learning methods, the application of LLMs realizes the potential of larger amounts of
unlabeled data through the ideas of self-supervised learning and reinforcement learning,
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enabling the emergence of multi-domain intelligence. This provides new ideas and
opportunities for solving problems in the bioscience and material science fields. By organically
combining AI and automation technologies, we can benefit from the decision-making
assistance provided by AI, as well as the cost reductions and scale efficiencies brought about
by automation.
The following graph illustrates the working mechanism of our AI-based ProteinGPT tool:
Scoring model
Reinforcement
learning
Protein LLM based
on massive data
Expert
experience
High-throughput
experiments
Affinity Titer Stability Hydrophobicity
Immunogenicity Solubility Viscosity …
Protein to be
optimized
Target protein
Designed
protein type
Generate fully
human VHH library
Protein drug
Case Study—Generation of humanized variable heavy domain of heavy chain (“ VHH”)
antibodies with our AI-driven phage display platform
Problem. The VHH antibody, which has a single variable heavy domain located on a
heavy chain, is a natural light chain-deficient antibody found in camel serum, has the
advantages of small molecular weight, short preparation cycle, and high tumor penetration, and
is an ideal tool for cancer treatment. However, in order to make VHH antibodies effective in
human bodies and to minimize immunogenicity, these VHH antibodies need to be humanized.
However, humanized VHH antibodies do not exist in nature, and it is difficult to generate large
scale of humanized VHH antibodies that meet various druggability requirements.
Solution. Our AI-powered phage display platform, XpeedPlay, leveraging our phage
display technology and a natural language processing model that learns “grammar” from
billions of natural sequences, is capable of generating hit antibodies at ultra-high speed
utilizing our LLMs. Through simultaneous optimization of multiple drug properties,
XpeedPlay helped us obtain 100 billion most promising de novo VHH antibody sequences.
Subsequently, we randomly selected 26 sequences for testing and found 25 sequences
successfully expressed in vitro recombination, with an expression success rate of 96.1%, much
higher than the industry average, according to Frost & Sullivan.
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Result. The experimental results showed that (i) the average expression of the
AI-generated sequences was 59.6 mg/L, which greatly exceeded the average expression of 37.1
mg/L of the positive control group; (ii) approximately 80% of the AI-generated sequences had
a hydrophobicity satisfying the druggability requirement since they had the same hydrophobic
interaction chromatography (“ HIC”) retention time as the positive control group, much higher
than the industry average success rate without using our XpeedPlay, according to Frost &
Sullivan; and (iii) the humanness, a metric inversely correlated with immunogenicity, of all of
our AI-generated sequences was found to be above average value of the positive control group
based on a widely-used prediction algorithm. As of the Latest Practicable Date, we were in the
process of assessing the capabilities of our XpeedPlay, by verifying whether the antibody
sequences generated by our XpeedPlay outperforms other sequences generated by traditional
methods in all aspects.
Our ProteinGPT has been trained with approximately 280 million pieces of unlabeled
protein sequence data as well as a few billion published antibody sequence data and our
internally accumulated antibody NGS data. In this well-developed closed-loop process, we can
quickly generate, screen and verify a large amount of high-quality proprietary data that can be
used to train our AI models. As the first company in China that is committed to AI-powered
drug and material science R&D, according to Frost & Sullivan, over the eight years since our
inception, our various AI algorithms have performed and delivered results better than public
test data sets and we have successfully implemented a set of best practices in-house for the
successful transition from AI models to business practice and product development. As a result,
we have promptly identified optimal scenarios for our nascent AI-based ProteinGPT tool,
which further enhanced our leading position in the field of AI drug and material science R&D.
Structure Prediction
Historically, predicting a molecular structure was a critical challenge, which could be
limiting for drug R&D. However, powered by our predictive models, we are able to quickly and
accurately predict molecular structures. In particular, we have developed a proprietary
antigen-antibody complex structure prediction algorithm, XtalFold, with unprecedented
probability and accuracy.
Our XtalFold starts by running a multi-sequence alignment (“ MSA”) that considers the
evolutionary relationships between proteins and, thus, changes in individual amino acids. The
alignment and pairings are iteratively passed through a machine learning algorithm. This
algorithm identifies the best pair interactions and alignments and passes the information to a
third portion of the pipeline that generates a structure. The last two parts are repeated several
times, generating the final predicted structure. Our XtalFold has a much higher success rate of
correctly modeled protein complex structures, improved modeling accuracy, and superior
interface modeling quality, compared to other generative AI structure prediction models. We
have applied our XtalFold in our antibody drug discovery business, which is capable of
predicting the complex structure of antigen-antibody with high probability and accuracy,
relying solely on sequence information, and were in the process of optimizing the speed of our
XtalFold to achieve ultra-high throughput, as of the Latest Practicable Date. Given our
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successful record in antigen-antibody complex prediction, one of the most technically
challenging scenarios, we believe our XtalFold has significant potential in predicting
protein-protein and protein-peptide complex structures, as well as other related scenarios. We
expect that our XtalFold will play a vital role in various antibody-related applications,
including antibody engineering, epitope identification, functional elucidation, and de novo
design.
Our multi- and inter-disciplinary, AI-powered drug R&D technologies and platforms have
a wide array of applications in different modalities, including small molecules, antibodies,
ADC, PROTAC, and peptides and proteins. This enables us to cover diversified sectors in the
biotechnology and pharmaceutical industries and lowers the technological barrier for us to
enter into untapped sectors.
Intelligent Robotic Wet Lab Infrastructure
Overview
Our intelligent robotic wet lab, supporting our intelligent automation solutions (including
solid-state R&D services and automated chemical synthesis services), is one of our competitive
strengths that distinguishes us from our competitors. Unlike our competitors, we are capable
of developing our proprietary hardware and software for our operating systems in the wet lab.
In addition, we integrate our AI technologies in our operating systems, enabling our wet lab to
cover and automate approximately 80% of operational steps typically involved in traditional
experimental process, such as amide coupling, reductive amination, and substitution reactions,
but currently does not support gas-involved reactions and cryogenic reactions. As a critical part
of our integrated technology platform, wet lab experimentation not only synthesizes chemical
compounds, but also supplements our in silico tools in the operative workflow by assessing the
prediction results and generates real-world experimental data to train and improve our in silico
tools. In the meantime, our wet lab accumulates large-scale, high-quality and consistent data
from to be generated from our intelligent robotic wet lab experiments to provide the foundation
for the formation of our closed-loop large models, containing perception, generation,
prediction, decision-making, planning and execution. Our goal is to encode and automate to
transform every stage of wet lab experiments, by applying AI-powered intelligent robotics to
replace labor-intensive traditional manual methods. Compared to a traditional wet lab, our
intelligent robotic wet lab possesses multiple advantages, such as higher throughput,
accelerated wet lab processes, minimized human error, reduced operating cost, increased
process stability, and higher quality data, which are critical for the iterative training of AI
models, drug and materials screening, and process optimization. We emphasize on the safety
of our wet lab operations. We have obtained ISO 9001 quality management system
certifications and monitor our operations regularly to ensure we follow closely with the rules
and standards in the certifications. We also have a safety handbook in place to guide our
operations with respect to various safety aspects, such as hazardous chemical management
policy, special equipment management policy, medical waste management policy, safety
inspection and accident management policy, and lab patrol rules. During the Track Record
Period and up to the Latest Practicable Date, we had not experienced any serious adverse safety
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events. We use liquid chromatography-mass spectrometry instruments (“ LC-MS ”), which is a
powerful analytical technique used for separation, identification, and quantification of
compounds as well as to elucidate the structure and chemical properties of different molecules,
to control the quality of the experiments conducted in our intelligent robotic wet lab. In
addition, we employ an automated monitoring system to monitor our systems in real time, and
have self-developed an alert system to caution us in a timely manner of any disruptions
detected so that we can react promptly to resolve such disruptions. We also strive to standardize
our wet lab operations to enable scalable robotic automation.
The following figure outlines the workflow of our intelligent robotic wet lab:
Automatic
collection of
structured data
Target molecule
Intelligent Robotic Wet Lab Workflow System
AI-based
experimental
 solutions
Experimental
data training
Machine
language
transforming
Test and
auto-
analysis
Experimental
recommendation
YES
NO
• Experiment execution records
 Resource changing
 Analytics data records
Intelligent
scheduling
Automated
experiment
with robotics
 Dynamic resource
matching
 Intelligent packaging
and task scheduling
 Continuity assurance
 Equipment and
experiments status
monitoring
 Data persistence
 Anti-tampering
 Multiple backup policy
Lab Information
Management
System (LIMS)
Input
Output
Our Experimental Centers and Cross-disciplinary Team
As of the Latest Practicable Date, we had three wet lab experimental centers with more
than 200 robotic workstations and robots. Our experimental center in Shenzhen, China consists
of a chemical compound synthesis lab, a biology lab, an analysis and testing lab and a
crystallization lab. In addition, we have another AI-powered, automated robotic experimental
center in Shanghai.
We have a cross-disciplinary automation team with academic background in automation,
engineering, chemistry, and computer science, who can help assess and supplement the
prediction results derived from our algorithms and AI models by synthesizing the selected
molecules and conducting targeted experiments, including toxicity studies. Our automation
team plays a critical role in designing experiments and setting specific parameters to suit the
particular needs of different research programs. Leveraging our accumulated domain expertise
and successful track record in automated synthesis and crystallization, we aim to further scale
our automation operations by providing scalable and standardized wet lab services. We also
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plan to customize our intelligent robotic wet lab to apply in various other scenarios, such as
chemical engineering, material science R&D, and inspection and testing. The following
pictures depict our intelligent robotic wet lab facility in Shenzhen and Shanghai.
Shenzhen wet lab
 Shanghai wet lab
Our Differentiated Innovation Model
Our intelligent robotic wet lab is differentiated due to the combination of our
scenario-driven approach, quick reaction to market, and cutting-edge technologies. Firstly, our
wet lab is equipped with self-designed standard software, hardware, and technologies.
Secondly, our wet lab has various building blocks and modular applications, enabling us to
provide customized automation solutions to be applied in various scenarios in the
biotechnology and pharmaceutical industry and beyond to cater to the diversified and evolving
needs of our customers and collaborators. Thirdly, we possess strong business acumen, and
react quickly to market trends. We are expanding the applicability of our intelligent robotic wet
lab to other industries, such as material science and energy, in response to the increasing needs
of high-throughput, accelerated process, and high experimental quality in these industries. We
also capitalize on cutting-edge technologies to further grow our business and enhance our
reputation. We have invested and will continue to invest significantly to adopt powerful
advanced technologies, such as digitalization and digital twins, in our intelligent robotic wet
lab to enhance its performance.
Core Technologies in Our Wet Lab
Our intelligent robotic wet lab is able to perform high-throughput, flexible R&D,
leveraging our cutting-edge technologies, including standardization and scalability, AI,
intelligent control, digital twin, and Lab-as-a-Service (“ LaaS ”).
Standardization and Scalability
We are endeavoring to standardize and automate every step of the drug and material
science R&D process. Standardized experimental processes can optimize and accelerate wet
lab operations and enhance the consistency of experimental results, while automation can
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enable our wet lab to operate perpetually without downtime and with minimum human
intervention, enabling higher throughput, data quality, and efficiency. Thus, we have
standardized and automated the time-consuming “make” phase to shorten the iteration time of
the DMTA cycle.
We also utilize standardization, automation and swarm robotics to scale our wet lab
operations. We have more than 4,500 sq.m. of lab space in Shenzhen and Shanghai dedicated
for our robotic workstations and plan to expand the capacity of our intelligent robotic wet lab.
Our wet lab experiment centers in Shenzhen and Shanghai presently have more than 200
robotic workstations and robots and we expect to further scale our robotic workstations. Based
on our internal calculation, our intelligent robotic wet lab is capable of executing up to 1,500
experiments per day.
AI
The integration of our AI and automation capabilities is the general paradigm of our
intelligent robotic wet lab. We apply various algorithms and AI models to streamline and
optimize the DMTA cycle to make wet lab experiments faster and more predictable. We use
machine learning algorithms to understand drug designers’ intent and decision-making process
and extract, organize and formalize this domain knowledge and expertise to achieve
autonomous design. We have also developed machine learning and AI methods to replace
manual data analysis and quality assurance. Similarly, our vast image data sets have allowed
us to develop AI-based machine vision tools for real-time processing, enabling screening at
much greater speed, volume and resolution. This interactive visualization interface allows us
to quickly explore and interpret complex data sets. In addition, our robotic workstations record
experimental data and work as data generators, which can in turn be used to fine-tune our
parameter algorithms and train our AI models, and continuously enhance our capability to
predict and authenticate novel drug candidates and new materials in a closed loop. Thus, our
computational power and AI now make it possible to see relationships within big data sets that
could otherwise not be seen.
Intelligent Control
According to Frost & Sullivan, we are one of the few companies that deploy an intelligent
control system in the wet lab. Our intelligent control system integrates various instruments and
functions, including lab information management system (“ LIMS ”), resource scheduling
system, and control system, through which we can manage various equipment and experimental
tasks in the wet lab to achieve efficient experimental operations and data collection, and
maximize the resource utilization rate of our wet lab. Our LIMS can automatically standardize
the collection, storage, version control, and analyses of raw and processed experimental data,
and instantly returns essential information that would otherwise take days of work. Our
resource scheduling system can autonomously allocate tasks to different workstations and
automated guided vehicle (“ AGV”) trolleys, according to the number and priority level of
tasks. It can also intelligently monitor and trace the entire experimental process and analyze the
experimental data for result processing. Our control system is designed with accurate
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parameters to minimize the errors and inconsistency of our device and equipment in executing
experiments. In addition, our intelligent robotic wet lab can be accessed remotely. It can
receive experiment instructions or testing orders and instructions from the cloud and execute
such instructions locally, while synchronizing the experimental results in real time to our
researchers or customers, facilitating timely follow-up studies.
Digital Twin
We integrate digital twin in our intelligent robotic wet lab technology for rapid plan,
design and optimization of our wet lab experiments. By simulating the entire experimental
process, we are able to identify potential flaws in the design and determine the optimal
experimental process, allowing for real-time adjustment or redesign. Our digital twin
capability also enables us to customize our intelligent robotic wet lab solutions to engage in
experiments in different scenarios and for customers in different industries, without having to
set up a physical wet lab for each engagement before operations. Thus, digital twins can
augment our wet lab design capability, avoid upfront physical simulations, reduce our
operational costs, and improve our experimental quality.
Lab-as-a-Service (“LaaS”)
Our intelligent robotic wet lab is designed to serve as a customer-focused Lab-as-a-
Service offering, and we can leverage the impact of such online platform to achieve
exponential growth of our intelligent automation solutions.
In particular, our wet lab can be accessed remotely, i.e. receive experiment instructions
or testing orders and instructions online and execute such instructions locally on our “virtual”
wet lab, with real experiments performed on real equipment, generating real-world data. Our
customers or collaborators can submit the design route and basic reaction conditions of their
target molecules remotely to our wet lab. Upon receiving the online orders and instructions, our
engineers and technicians prepare the required materials in-house and our intelligent control
system assigns tasks in a coordinated manner after the required experiment materials are ready.
Our intelligent robotic wet lab can be flexibly customized to be applied in diverse
scenarios and industries, including pharmaceutical and material science (such as agritech,
energy, cosmetics, and healthcare). We have been utilizing our intelligent robotic wet lab to
provide lab automation solutions, including high-throughput chemical synthesis and high-
throughput solid-state R&D, and expect to focus on providing standard or customized
automation solutions in the future. Relying on our robotic workstation, our chemical synthesis
services adopt a “human-machine” model where the synthesis are conducted by robots, and
supervised and validated by our technicians. For high-throughput parallel reactions, our
intelligent robotic wet lab has an excellent track record in scenarios such as compound library
synthesis, catalyst screening and methodological studies, and optimization of reaction
conditions. See “—Our Intelligent Automation Solutions—Automated Chemical Synthesis
Services—Case Study—Synthesis of Compound Library” for a demonstration of our high-
throughput parallel reaction capabilities with the “human-machine” model. For multi-step
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automated chemical synthesis, our intelligent robotic wet lab is capable of screening and
optimization of hit and lead compounds, multiple scaffold structure exploration, and SAR
experiments, as well as conducting multi-conditional reaction screening in parallel.
OUR INTEGRATED PLATFORM-ENABLED BUSINESS
We started as a technology innovator specializing in in silico solid-state R&D studies with
a primary focus on CSP , which provides valuable insights for various aspects of drug R&D that
span from the pre-clinical stage to commercialization, such as CMC, formulation development,
and patent protection. CSP is derived from the accurate calculation of weak, intermolecular
forces, which is a known challenge in the industry. Leveraging our quantum physics-based
computation and AI capabilities, we have been expanding our business to cover drug design
and discovery, which focuses on the initial stages of drug R&D, with a goal to establish
integrated pharmaceutical R&D capabilities. The expansion into drug discovery is natural,
because both CSP and drug discovery share similar problem-solving patterns where target
functions are deployed to search for solutions within a vast array of possible outcomes. In
addition, the method of calculating intermolecular forces, which is the focal point of CSP , is
transferable to the process of calculating intermolecular interactions, which is the foundation
of predicting the drug-target interactions. As drug discovery involves a multi-target
optimization process, our AI expertise is particularly useful to expedite the process and source
a set of appropriate molecules for subsequent computational screenings and experimental
assessments.
Along with our rapid growth, the traditional manual “make” process in the DMTA cycle
is time-consuming and error-prone and hinders our ability to further grow and scale our
business. To enhance our operating efficiency, improve overall experimental quality, minimize
manual error, and further scale our business, we apply standardized and automated automation
to the “make” process. As our automation technologies and capabilities evolve, we are
exploring to provide standard or customized automation solutions to companies in the
biotechnology and pharmaceutical industries and beyond. Our technologies and expertise
accumulated from our drug discovery business also enable us to extend our R&D services into
other related industries, such as automation and material science (including agritech, energy
and new chemicals, and cosmetics).
We believe we are able to realize the benefits of having both local roots and a global
footprint. Our access to talent and infrastructure in China as well as our proximity to global
biotechnology and pharmaceutical conglomerates allows us to establish relationships with
emerging Chinese and global companies. We believe our addressable market within the
pharmaceutical industry is large and rapidly expanding, and we are well-positioned to capture
such market opportunities.
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Our Current Business
To date, we have leveraged our technological capabilities to focus on two primary
businesses:
 Drug discovery solutions. Our drug discovery solutions span the full spectrum of the
drug discovery and research process, providing modular standalone solutions to or
collaborating with a diverse range of biotechnology and pharmaceutical companies
and academic institutions for novel drug discovery endeavors.
 Intelligent automation solutions. Our intelligent automation solutions primarily
consist of solid-state R&D services and automated chemical synthesis services.
 Our solid-state R&D services encompass computational services, wet lab
experimental services, and integrated solutions which is a combination of both
computational services and web lab experimental services. The computational
services include CSP and morphology prediction, as well as screenings on
coformers and carriers for crystallization. Our wet lab experimental services
encompass many aspects of solid-state R&D, such as crystallization process
development and crystal structure determination, among others.
 Our automated chemical synthesis services apply automation technology to
enable faster and more accurate production of chemical compounds.
We also offer standard or customized automation solutions to companies in the
biotechnology and pharmaceutical industries and beyond.
The table below sets forth our revenue by business segment for the years indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000, except for %)
Drug discovery solutions 39,346 62.7 87,666 65.7 87,728 50.3
Intelligent automation
solutions 23,453 37.3 45,687 34.3 86,692 49.7
Total 62,799 100.0 133,353 100.0 174,420 100.0
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The table below sets forth our revenue by type of customers and business segment for the
years indicated:
Y ear Ended December 31,
2021 2022 2023
RMB’000
Drug discovery solutions
Collaborator and collaborator-investee
customers 38,186 79,379 78,955
Customers 1,160 8,287 8,773
Subtotal 39,346 87,666 87,728
Intelligent automation solutions
Collaborator and collaborator-investee
customers 3,014 807 4,575
Customers 20,439 44,880 82,117
Subtotal 23,453 45,687 86,692
Total 62,799 133,353 174,420
During the Track Record Period, substantially all of our revenue from drug discovery
solutions were generated from our small molecule discovery solutions. We started recording
revenue from our antibody discovery solutions in 2022, and generated a total revenue of
RMB10.3 million during the Track Record Period (i.e. in 2022 and 2023), representing
approximately 5.9% of our total revenue from drug discovery solutions in 2022 and 2023,
accumulatively.
The increases of revenue in both drug discovery solutions and intelligent automation
solutions reflected our efforts to grow our business and commercialize our services.
The table below sets forth the number of programs which generated revenue for our
different business segment for the years indicated:
Y ear ended December 31,
2021 2022 2023
Drug discovery solutions 18 47 81
Intelligent automation solutions 168 246 423
Total 186 293 504
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The table below sets forth the movement of the total number of our customers (including
collaborators and collaborator-investees) which contributed revenue for the years indicated:
Y ear ended December 31,
2021 2022 2023
At the beginning of the year (1) 43 75 120
Addition 63 82 105
Cessation due to completion
of programs 8 26 33
Less:
Existing customers without revenue
contribution in the relevant year 23 11 5
As of the end of the year
(1) 75 120 187
Note:
(1) Including overlapping customers in both business lines of drug discovery solutions and intelligent
automation solutions.
We had 75, 120 and 187 customers in 2021, 2022 and 2023, respectively. The increase in
the number of our customers reflected our efforts in expanding and growing our businesses. We
believe that our cutting-edge technologies, strong R&D capabilities, and cost-efficient
solutions and services enable us to retain many repeat customers, including Pfizer, Johnson &
Johnson, CTTQ Pharma, Daewoong Pharma, and Merck KGaA, Darmstadt, Germany. Our
customer retention rate was approximately 67.5%, 51.4% and 64.9%, respectively, in 2021 and
2022 and 2023.
There is a virtuous cycle within our business. The feedback from our drug discovery and
solid-state R&D activities helps refine the functionality of our integrated technology platform,
which improves the quality of our operations leading to increased volume and enhanced
execution of business, which in turn produces more feedback to advance our integrated
technology platform. The quantum physics-based computation methods and AI models
improved due to either drug discovery or solid-state R&D will enhance the quality of our
XtalPi R&D Solutions given the similar underpinning methodologies. In addition, the success
of our drug discovery endeavors, either with our collaborators or by ourselves, serves as an
affirmation of our platform and approach, which would further attract existing and prospective
customers. Likewise, our success in solid-state R&D serves as an affirmation of our integrated
technology platform, and may therefore enable us to cross sell our drug and new materials
discovery business to existing customers.
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Key Pillars of Our Future Business
As we further grow our business, we intend to evolve our business model into one with
“one integrated platform and two key pillars,” where the two future key pillars, intelligent
automation solutions and XtalPi R&D Solutions, are expected to function as two driving
wheels to enhance our commercial prospects and the functionality of our integrated technology
platform.
We view the future pillars as a natural evolution of our existing business. In particular,
our automation solutions will be an extension of our automation technology and capability to
provide standard or customized automation solutions in other high-value sectors. Our XtalPi
R&D Solutions will combine our capabilities in drug discovery and solid-state R&D to provide
R&D solutions beyond the pharmaceutical industries, such as material science (including
agritech, energy and new chemicals, and cosmetics). Instead of operating the business
separately, each future pillar will leverage the full range of our capabilities in both quantum
physics-based, AI-powered drug discovery, automation, and solid-state R&D to achieve
internal synergies and attain cross-selling opportunities. Overall, we expect to achieve the
transition from our early stage when we focused on providing solid-state R&D services to our
current stage with expanded offering in both solid-state R&D and drug and new materials
discovery, and eventually to the future stage that features value drivers in the provision of
intelligent automation solutions and R&D solutions, with both stemming from and deploying
the full scope of our integrated capabilities in quantum physics-based, automation-driven,
AI-powered R&D that we have established and will further enhance. We believe this “one
integrated platform and two key pillars” model will unleash our potential to grow our business
and create value.
See “—Our Future Development” for additional details regarding our future business
development.
OUR DRUG DISCOVERY SOLUTIONS
Overview
Drug discovery is the first stage of drug R&D, comprising primarily target identification
and validation, hit identification, lead generation and optimization, and pre-clinical candidate
nomination. Our drug discovery solutions primarily revolves around hit identification, lead
generation, lead identification and lead optimization to yield high-quality PCC molecules.
Leveraging our integrated technology platform, we help transform the traditional manual
methods for drug design and discovery and contribute to the pharmaceutical innovations in
China and around the world.
Our innovative, integrated technology platform-based approach features an efficient,
streamlined workflow with iterative steps including AI-powered molecule generation and
comprehensive evaluation on drug-like properties such as selectivity, solubility, ADMET and
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synthesizability, prediction of molecular interactions using high-precision quantum physics-
based computation and robotic wet lab synthesis and assessments. We believe our approach
enables discovery of high-quality molecules for potentially challenging targets at a faster pace
and a larger scale, and with a higher likelihood of success compared to traditional manual
methods.
Comprising approximately 160 experts in protein science, biochemistry, biophysics,
medicinal and quantum physics-based computation, and pre-clinical development as of
December 31, 2023, our drug R&D team applies our integrated technology platform-based
approach and our practical expertise across a portfolio of drug discovery and collaboration
programs spanning across a wide range of disease targets and indications.
We had entered into approximately 193 agreements for our drug discovery solutions,
including collaboration programs, some of which had entered into the IND-enabling or
IND-submission phase, as of the Latest Practicable Date. These solutions and collaboration
programs generate drug discovery revenue, and generally have the potential to produce
additional royalty, milestone or contingent payments. We also expect to profit from our equity
positions in certain of our collaborators. Going forward, we intend to provide new solutions
and forge new collaborations that offer scientific synergies and favorable economic terms.
In 2021, 2022 and 2023, we had approximately 18, 47 and 81 drug discovery solutions
and collaboration programs which generated revenue, respectively, and approximately 17, 33
and 42 customers and collaborators, respectively.
The table below sets forth the number of drug discovery solutions and collaboration
programs which generated revenue for the years indicated:
Y ear Ended December 31,
2021 2022 2023
Drug discovery collaboration 10 31 36
Drug discovery solutions 81 64 5
Total 18 47 81
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Small Molecule Discovery
The diagram below illustrates the overall workflow underlying small molecule drug
design and discovery.
Auto quantitative
structure-activity
relationship
SAR analysis based on
known data and patents
AutoML
druggability
prediction
Multi-dimensional screening
and optimization of drug
properties ensure molecular
novelty and patentability
Classical drug design
Expert experience, structure-based
drug discovery and other classical
drug design methods
AI molecular generation
Generates a library of
million-level target
molecules for a given target
Synthesis
and testing
XFEP high precision
affinity prediction
Evaluation of high precision
computational chemical methods
106
103 <100
 Broad-scope sampling of chemical structures. We start from using our AI models
to explore the vast chemical space of novel drugs and materials that is available to
sample tens of millions of drug-like molecules as the starting pool that our AI
models predict to be suitable for the subsequent screening for the particular target
at issue.
As a broader and deeper search of the chemical space of novel drugs and materials
is conducted for each target as compared to traditional manual methods, we believe
that our approach is more likely to yield quality candidate molecules for
traditionally challenging targets.
 Prediction of potency, selectivity and drug-like properties. Next, we deploy a
combination of our AI models and quantum physics to perform a multi-property
optimization process where our AI models predict certain drug-like properties, such
as solubility and ADMET features, and our quantum physics-based platform predicts
potency and selectivity, some of which could only be assessed at a later stage with
traditional manual methods.
The optimal profile of a drug candidate represents an acceptable balance of
properties such as potency, selectivity, solubility, bioavailability, half-life,
permeability, drug-drug interaction potential, synthesizability, and toxicity, among
others. We view drug development as a multi-parameter optimization process
because multiple properties are often inversely correlated, meaning that optimizing
one property often de-optimizes others. The inherent difficulties and uncertainties of
achieving a balanced profile, the inability to assess certain critical drug-like
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properties and liabilities until in the later stage of development with traditional
manual methods, and the limited sampling of chemical space of novel drugs and
materials often lead to suboptimal candidate molecules advancing to subsequent
development stages and eventually resulting in costly late-stage failures. Therefore,
it is critical to identify potential failures early in the process of drug R&D when the
costs incurred are still relatively low, in order to increase the efficiency, reduce the
overall cost and improve the success rate of the drug R&D programs.
Our predictions are able to yield a limited number of candidate molecules with a
promising property profile. Our algorithms and prediction process are so designed
that the resulting pool of molecules is small enough to be feasible for evaluation by
the subsequent wet lab experimentation, while being large enough to reduce false
negative results due to the limitation of the computational accuracy.
 Robotic wet lab validation. Finally, we perform wet lab experimentation to
synthesize the pool of candidate molecules and conduct a variety of tests to assess
their properties. We carry out a vast majority of the standard synthesis and tests by
robotic automation, which can reduce costs, increase capacity and improve accuracy.
The wet lab validations also generate data on molecules which are used to train our
in silico tools for better future insights.
We have a proprietary “three-in-one” AI-powered small molecule drug R&D platform,
ID4Inno, designed for exploring a broader chemical space of novel drugs and materials with
higher efficiency and lower cost. Through our ID4Inno, our intelligent computing designs the
process for and analyzes the outcome of automated experimentation, which provides data
feedback to experts, and experts set specificality and metrics for smart computing, to achieve
a closed-loop AI drug R&D process. Our ID4Inno consists of two sub platforms, ID4Idea and
ID4Gibbs, with different but complementary functionalities. Our ID4Idea, embedded with
generative AI models, high-throughput virtual screening, and enriched nature prediction
models, can be customized based on our customers’ and collaborators’ diverse and specific
requirements. It is used for the generation, selection, and evaluation of small molecules with
over 200 AI models, covering molecular generation, molecular property evaluation, and
various other scenarios. Our ID4Gibbs is a high-precision quantum physics-based computation
platform based upon physical modeling and first-principles calculation, including XFF, Xpose
and XFEP , for structural modeling, binding site identification, binding pattern prediction, and
affinity assessment, which enables high-precision prediction of drug-target interactions.
Set forth below are two examples of our small molecule discovery programs, which
evidence the strong capabilities of our integrated technology platform and drug discovery
expertise.
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Case study–Small Molecule Discovery: “AI + High-Precision” Computing Accelerates PCC
Nomination
Problem. We intend to identify and obtain potential novel compounds in a synthetic
lethality program with a highly competitive targeted indication, which has one of the largest
precision oncology patient populations. Furthermore, the co-crystal structure of such target
protein with the reference compound is unknown, and the water molecule information is also
not available from Cyro-EM structure.
Solution. In just two months, we built a reliable protein-ligand complex model and
relatively high correlation FEP model for binding affinity prediction. Using our proprietary
AI-powered small molecule drug R&D platform, ID4Idea, we generated a large number of
novel scaffolds, and selected limited potential candidate molecules from the generated
molecules with the help of our proprietary high-precision quantum physics-based computation
platform, ID4Gibbs.
Result. Among the generated molecules, 48 molecules showed stronger cellular potency
than the reference compound and 75 molecules showed better selectivity. In addition, most of
the molecules we generated had better PK properties, demonstrating a remarkably high success
rate. The best candidate compound was able to induce sustained tumor regression in a
non-small cell lung cancer murine xenograft model, much better than the reference compound.
Ultimately, we obtained potential pre-preclinical compounds after synthesizing around 120
molecules, and managed to identify the lead compound after synthesizing around 20
compounds.
Case Study—Promising IRAK4 PROTAC
Problem. IRAK4 is a key protein involved in inflammation, mediated by the activation
of Toll-like receptors (“ TLRs ”) and IL-1 receptors (“ IL-1Rs ”). Aberrant activation of IRAK4
is the underlying cause of multiple immune-inflammatory conditions. Small molecule IRAK4
kinase inhibitors have been evaluated for safety and efficacy in several clinical trials, which
has not yielded positive results due to limited efficacy. PROTAC is a novel technology for
targeted protein degradation. The knockdown of IRAK4 using PROTAC technology is an
alternative strategy for treating IRAK4-related diseases, whereas KT474 was an IRAK4-
PROTAC degrader developed for the treatment of inflammatory diseases, which has finished
the phase I clinical trial and showed the excited results. However, possible cardiac side effects
and the cytochrome P450 (“ CYP”) inhibition issue, which can lead to drug-drug interactions
and can in turn lead to toxicity, of KT474 were potential risks for subsequent development,
while the computation of ternary complexes mediated by PROTAC molecules has long been a
challenge in the field of molecular computing.
Solution. To address this challenge, we have developed a PROTAC full-process
computational platform and conducted comprehensive pre-clinical PROTAC biological assays.
This platform consists of three components, including our proprietary AI models, PROTAC
linker library, and efficient linker virtual screening technology. Our AI models accurately
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predicted structures of E3-PROTAC-Target ternary complex, where our self-developed
protein-protein docking algorithm searched for stable protein-protein conformations, and our
self-created scoring function quickly and accurately selected the optimal E3-PROTAC-Target
conformation. Our PROTAC linker library has collected more than 6,200 linkers, which is four
times the open source database of PROTAC-DB, as of the Latest Practicable Date. It can
provide more druggable linkers for PROTAC molecule design, while generating thousands of
novel linkers leveraging our strong machine learning capabilities at the same time. We then
assembled the linkers, warheads and E3 ligands into PROTAC molecules using our efficient
linker virtual screening technology, and conducted QSAR and X-score predictions on these
PROTAC molecules. Lastly, we further synthesized and recommended PROTAC molecules
with excellent degradation activities.
Result. We successfully developed IRAK4 small molecules with completely novel
structure, which can act as the warhead for PROTAC, compared to the reported IRAK4 small
molecules. We have filed patents for three series of warhead molecules and two series of
PROTAC molecules. Our PROTAC showed excellent DMPK properties, which improved the
CYP inhibition and hERG toxicity issue of KT474. The efficacy of our PROTAC has
outperformed KT474 in vitro and in vivo , which indicates that our IRAK4 PROTAC is a
promising molecule.
Antibody Discovery
Driven by our customers’ and collaborators’ demand for antibody drug discovery and the
great market potential of antibody drug discovery, we began to establish our antibody drug
discovery capabilities since March 2021, leveraging our capabilities and expertise in small
molecule drug discovery. We have developed a proprietary AI-powered next-generation
antibody discovery platform, XupremAb, which is designed to provide a one-stop solution for
antibody discovery covering antibody generation, antibody engineering, and antibody
developability assessment. It integrates various sub-platforms for different critical functions,
including AI-powered hybridoma, AI-powered repertoire NGS discovery, AI-powered phage
display, de novo design, super humanization, AI-powered affinity modulation, developability
assessment and optimization, bispecific design, and ADC design. We will continue to develop
domain-specific LLMs to be incorporated into our antibody discovery platforms, which will
take into account the more complex three-dimensional structural information, as drugs interact
with targets and exert their effects in a three-dimensional space. We expect our novel approach
of antibody drug discovery to enable de novo antibody design, with little or no wet lab
experiments, to optimize and accelerate the antibody drug discovery process. For more details
regarding our LLMs and ProteinGPT, see “—Our Technologies and Closed-loop Integrated
Technology Platform—Our Advanced Generative AI Capabilities—Protein Design.” Our
antibody discovery solutions charge our customers in exchange for service fees under
transaction-based model. We have made certain progress in our antibody discovery business,
by entering into collaboration programs on antibody screening and antibody engineering, and
plan to focus on antibody drug discovery collaborations with biopharmaceutical companies in
2024, where we may receive upfront payment, development or commercial milestone
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payments, and/or royalties on a program-by-program basis, in recognition of our technological
superiority and contribution. During the Track Record Period, our antibody drug discovery
business generated revenue of RMB10.3 million.
To accelerate and reduce the cost and uncertainty of developing novel, life-saving drugs,
which are limiting factors of traditional antibody drug discovery methods, we adopt the
following approaches:
 Cast a wider net. Our AI-powered repertoire discovery platform can unlock
antibody sequence space to search for better and rarer candidates. With traditional
methods involving hybridoma, only 0.01% to 0.1% of all B-cells can be explored,
missing rare binders; while our sequence-based AI models and NGS technologies
can help search a much larger repertoire space, capturing nearly the entirety of the
immune response, significantly improving hit diversity, and achieving a hit rate of
over 50%.
 Design, not guess. We approach antibody engineering as design work rather than
guesswork. We design antibodies with direction by minimizing the random
mutagenesis and trial-and-error method that drives traditional engineering. Our suite
of predictive AI models analyze antibodies using sequences solely, reducing the
number of sequences to be made and tested. As a result, our AI-powered precision
engineering can quickly and accurately enable fine-tuning of candidates to targeted
profiles.
 Excel in all dimensions. We search for the optimal candidates, which are expected
to excel across all properties, including function, developability, and
immunogenicity. Our extensive predictive sequence-based AI models can predict
developability with enhanced accuracy and speed and achieve multi-objective
optimization, including on aggregation, thermostability, viscosity, and yield rate.
 Design superior antigens. We aim to design antigens beyond nature. As an example,
GPCRs are difficult to express in their native forms, making GPCR antigen
preparation a challenge. Mutations are usually required to thermostabilize GPCRs
for expression. Human judgment and trial-and-error method are needed to identify
mutations, which is tedious and time-consuming. Therefore, we utilize our AI
technologies on large-scale mutations to thermostabilize the GPCR antigen. We use
our generative AI models, primarily our ProteinGPT with proprietary LLM, to
generate mutants, and narrow down the scope of mutants leveraging our predictive
AI models of stability and ECL conformation. Our MD modeling subsequently
conducts fine-grained assessment of stability to select optimal mutants, which have
been validated by benchmark antibodies and cleared stability tests. Our unique
approach can achieve rapid identification of mutations, maintain conformation of
ECL, and enhance the level of stability and expression of GPCR antigens.
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 Integrate and synergize. We combine various platforms with diversified functions
end-to-end and integrate wet lab and dry lab capabilities to achieve optimal results.
Specifically, we house our computational and experimental capabilities under the
same roof to achieve closed-loop synergies, integrate our internal data generation
and immediate wet lab feedback to contribute to the superiority of our AI models,
and routinely optimize and train ad hoc models for numerous specific programs to
generate and accumulate new data.
The following diagram illustrates the overall workflow of our antibody discovery
platform:
Hit generation
Complex structure prediction
Developability assessment
Antigen
preparation
Immunization
 Lead
identification
Lead
optimization
PCC
(Pre-clinical candidate)
Leveraging our integrated technology platform and similar underlying methodologies that
we use for small-molecule drug discovery, we are exploring AI-powered solutions for the
generation and prediction of other drug modalities, such as peptide, ADC, and PROTAC.
Coupled with theoretical computation, empirical experimental data and our expert judgment,
our AI-powered function prediction model enables us to screen and recommend candidate
sequences to satisfy the specific needs and criteria of the research programs.
With our AI-powered capabilities and practical experience, we are able to assist our
customers and collaborators to tackle problems efficiently in drug design and discovery and to
conduct discovery of novel therapeutics at a pace and scale beyond those with the traditional
wet lab-based approaches.
Case Study—Antibody Discovery for a challenging GPCR Target
Problem. G protein-coupled receptors (“ GPCRs ”) are considered as the largest class of
therapeutic targets for various indications, such as asthma, hypertension, and depression.
However, the GPCRs’ complex architecture, which consists of seven transmembrane helices,
intracellular loops, and N- and C-terminal domains, poses substantial challenges for antigen
preparation and antibody discovery. To date, only three antibodies targeting GPCRs have been
approved by the FDA.
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Solution. To navigate this complexity, we sought to address the dual challenges of GPCR
antigen preparation and antibody discovery through our AI-driven GPCR antigen design and
AI-powered antibody discovery platform, XploreSeq, which leverages NGS and AI
technologies to mine the B-cell repertoire with ultra-fast turnaround and is able to analyze
millions of antibody sequences and recommend a highly-diverse panel of candidates with more
than 50% hit rate.
AI-driven GPCR antigen design : We employed our ProteinGPT to generate new antigens
featuring large-scale mutations in the non-epitope transmembrane domains of the wildtype
GPCR. Subsequently, we modeled the structures of these novel GPCRs and assessed their
structural stability using MD simulations.
AI-powered antibody discovery : Through our XploreSeq, we utilized single-cell and bulk
NGS on immunized animal samples to delve into antibody sequence space with millions of
unique sequences, the scope of which is hundreds of times larger than that traditional platforms
can explore. In addition, we applied a suite of bioinformatics analysis and ensemble AI models
to this expansive sequence space to meticulously and efficiently evaluate, rank and select
antibody candidates with optimal drug-like characteristics for expression and subsequent
validation.
Result. Our ProteinGPT enabled us to obtain antigens containing more than 100 point
mutations which exhibited excellent homogeneity, high yield rates, good stability, and strong
immune response with one-sixth to one-third of the time compared to traditional methods.
Furthermore, we have significantly expedited the antibody discovery process using our
XploreSeq, shortening the timeline from immunizing animals to hit identification phase.
We set out below a summary of the salient terms of a typical agreement for our drug
discovery solutions (excluding collaboration programs):
Term. The duration of the agreements with our drug discovery solutions customers
typically ranges from one to three years.
Respective roles and responsibilities. We are generally responsible for (i) implementing
the research plans as agreed under the agreements, (ii) achieving different milestones typically
including hit identification, lead identification, lead optimization, pre-PCC nomination, and
PCC nomination, (iii) updating on the progress of the research programs or relevant data
regularly, and (iv) delivering the research reports. Our customers are typically responsible for
(i) performing compound synthesis and developability assessment, and (ii) providing
information, such as compound structure, target activity, or other compound characteristics,
necessary for us to complete the research program.
Payment schedule . We are typically entitled to (i) an upfront payment or initiation
payment within a specified time period following the effectiveness of the relevant agreements,
and (ii) typically two to eight milestone payments when the relevant programs reach certain
development milestones or events specified in the relevant agreements.
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Credit Term. We generally grant to our customers credit terms of ten to 30 days and settle
with them by wire transfer.
IP .We typically have sole ownership of background IP and IP developed in the relevant
programs related to AI/ML technologies. Our customers typically own the IP derived from the
research program, and are entitled to apply for patent for such IP .
Exclusivity. We generally have exclusivity obligations under the agreements, prohibiting
us to research, develop or design, or enable other parties to conduct such activities of any
compounds, molecules or other targeting moieties that are related to the research programs
within a specified period, with certain exceptions, such as written consents of our customers
or written waivers of such exclusivity rights by our customers. Some of the exclusivity
provisions are effective for a specified period of time, typically two to eight years.
Confidentiality. We and our customers are obliged to keep confidential any information
in relation to the performance of the agreements, including but not limited to the confidential
information received from the other party.
Termination. If we are unable to deliver the desired work products that satisfies the
criteria specified in the relevant agreements within a specified time period, our customers are
generally entitled to early termination rights; if our customers fail to make payments pursuant
to the relevant agreements within a specified time period, we are generally entitled to early
termination rights. Our customers typically may also terminate the agreements upon a ten to
30 days’ prior written notice if our customers determine that the research program under the
agreements is not necessary to continue.
Strategic Collaborations
In addition to drug discovery solutions, we also collaborate with certain drug developers
(“collaborators ”) to jointly work on various therapeutic targets (“ collaboration programs ”)
with huge unmet medical needs, from which we expect to receive royalty, milestone or
contingent payments if such collaboration programs reach milestones or events specified in the
respective contracts, such as successful commercialization in particular regions. We are
responsible for the design, synthesis and assessment of candidate molecules against the
pre-determined targets. Our collaborators conduct supplementary assays for the synthesized
compounds and share the results with us. If the need arises, we will further optimize on the
molecules and our collaborators will run further tests until a set of satisfactory compounds are
generated.
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We aspire to be a meaningful partner for innovative biotechnology and pharmaceutical
and related companies, facilitating the quick translation of new biological discoveries into their
promising new clinical candidates. We have entered into a number of collaborations with
biotechnology and pharmaceutical companies and academic institutions under which our
collaborators pursue research in a number of therapeutic areas, such as oncology, neurology,
respirology, and inflammatory diseases. In some cases, we retain at least partial ownership in
the pipeline programs, typically in the double-digit percentage range, of the programs pursued
under these collaborations. We are not responsible for advancing their pre-clinical development
beyond generation of PCCs.
Among the key factors we use in selecting collaborators are potential conflicts of interest,
existence of sufficient structural information on the targets, well-understood nature and high
therapeutic potential of the target, amenability of the target to the strengths of our integrated
technology platform, and the collaborator’s complementary capabilities, all of which
contribute to an increased probability of success.
Through access to our integrated technology platform and our practical experience in
drug discovery, we can provide our collaborators with the following key benefits:
 Immediate utilization of our integrated technology platform. Ability to
immediately and efficiently access the full benefits of our premier in silico tools,
robotic wet lab facilities and our deep practical experience and expertise.
 Access to vast data assets. Ability to utilize the vast meaningful data assets
accumulated from our calculations and experiments, reducing the time and costs for
the design and discovery of drug candidates and evaluation of drug-like properties.
 Access to substantial computing power . Ability to access over hundreds of
thousands of cores of computing power through the multi-cloud infrastructure for
drug design and discovery, thereby avoiding the time and cost needed to build this
infrastructure on their own and improve the capital and research efficiency.
 Target uniqueness . Under our collaboration agreements, we typically agree to
design drugs for a particular target or targets using our integrated technology
platform and know-how only for the specific collaborator, therefore enhancing the
protection of IP and reducing the likelihood of future conflicts of interest.
Equity Stakes . From time to time, we may either (i) offer our solutions in exchange for
equity interests in our collaborators which are at an early development stage, short of fundings,
and have great growth potential, or (ii) make equity investments in selected companies which
develop complementary technologies to ours and who we consider are compatible with our
strategic position (such collaborators and selected companies, collectively the
“collaborator-investees ”). XtalPi Investment is the ultimate holding company of the equity
interests of certain collaborator-investees and serves as the incubator platform for our
collaborator-investees, which is led by our Co-founders and Dr. Zhang Peiyu (our Chief
Scientific Officer), and supported and executed by our scientists, technologists and employees.
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We invest in the companies which we consider to have potential first-in-class or
best-in-class pipelines or cutting-edge technologies, aiming to establish an ecosystem within
which we and our collaborator-investees can achieve synergies in a wide array of aspects,
including resources, technologies and expertise. We mainly focus on collaborator-investees
engaging in domains which align with our existing business focus, including design and
discovery of drugs and new materials, biomaterials, novel chemical compounds for agritech
applications, new chemical surfactants and catalysts, and cosmetics and healthcare products,
and which we believe will have more potential to benefit from the specific resources and
expertise offered by us. In addition, we assess and evaluate our collaborator-investees based on
various factors, which include: (a) the novelty and potential scientific achievements of the
collaborator-investees’ programs; (b) synergies which we may achieve with the collaborator-
investees through applying our quantum physics-based computation, AI, and automation
technologies; (c) the founders and management team’s credentials, their R&D achievements of
research projects in their respective scientific fields and industry experience; (d) market size
and competitive landscape of similar drugs or technologies in the market; (e) stage of
development of the collaborator-investees which offers higher potential of growth; (f)
background and portfolio of the existing partners and shareholders of the collaborator-
investees; and (g) options for potential exit. As an incubator platform, apart from the service
solutions we provide in exchange for equity interests, we can offer various resources to our
collaborator-investees as they may need to support their early-stage business growth and
development through access to our integrated technology platform, including offering them
corporate venturing opportunities, providing them business development, operational and
technology infrastructure support, providing networking opportunities to potential investors,
recommending and referring potential customers, suppliers, business partners and licensees,
sharing our development and operational experience and providing guidance on technology and
laboratory infrastructure. We expect our collaborator-investees could help us expand into other
sectors complementary to our business and enhance our existing technology, and allow us to
profit from their increased value and growth.
Our collaborator-investees typically grant us certain special rights in the relevant
investment agreements, including information and inspection rights, right of first refusal,
co-sale rights, drag-along rights, anti-dilution rights, redemption rights, director nomination
rights and/or liquidation preference.
For those equity-for-service non-cash transactions, we recognize revenue when we
transfer control of the relevant research results to the collaborators, and meanwhile record the
relevant equity interests as investments accounted for using the equity method and financial
assets at FVTPL when we obtain legal titles or relevant risks and rewards of such equity
interests. In particular, when we transfer control of the relevant research results to the
collaborator-investees but have not obtained the legal titles or relevant risks and rewards of the
relevant equity interests, we recognize such equity interests as receivables; when we obtain
legal titles or relevant risks and rewards of equity interests of collaborator-investees but have
not transferred the control of the relevant research results to them, we recognize such equity
interests as contract liabilities. In 2021, 2022 and 2023, we recognized revenue from non-cash
transactions of RMB14.8 million, nil and nil, respectively. The revenue generated from the
non-cash transaction in 2021 was primarily from one of our collaborator-investees, for which
we provided drug discovery solutions under our equity-for-service model. Since 2022, we have
started to receive only cash consideration from our collaborator-investees. See “Financial
Information—Description of Certain Items of Consolidated Statements of Financial
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Position—Financial Assets at FVTPL” for details. In addition to those equity-for-service
non-cash transactions, we may also charge our collaborator-investees service fees in exchange
for our solutions or services as they may need from time to time.
For the salient terms of our drug discovery collaborations, see “—Significant
Cooperations and Collaborations.”
The following table presents our equity stakes in our selected collaborator-investees as of
the Latest Practicable Date:
Company Shareholding Business Focus
%
Geode 35.00 Oncology
META 15.34 Autoimmune disease and
immunometabolism
Signet 9.11 Oncology
Hangzhou METiS
Pharmaceutical Technology
Co., Ltd. (Ҧ
ப΂ʮ̡)( “ Metis ”)
4.17 AI-driven drug delivery and drug
development
PhoreMost Ltd. 6.67 Oncology and targeted protein
degradation platform
CytoCan Inc 14.19 Multi-specific fusion protein drug
development
ClickMab Biotech (Suzhou) Co.
Ltd. (Ҧ(ᘽψ)ࠢ
ʮ̡)
30.0 De novo generation of antibodies
Leman 15.26 AI-driven tumor immunotherapy drug
development and cell therapy
Xinshengtai (Hangzhou)
Materials Technology Co.
Ltd. ( อ͛इ(ψ)ҦϞ
ʮ̡)
30.0 AI-powered new materials discovery
platform
Hangzhou Zentec Biotech Co.,
Ltd. (ࠢ
ʮ̡)
30.23 AI- and automation-driven drug
transdermal formulation R&D
We regularly monitor the operations and evaluate the performance of our collaborator-
investees. We employ a flexible exit strategy to optimize our returns under which, when exit
opportunities arise, we may exit by transferring all or a portion of the equity interests in our
collaborator-investees to third parties through private transactions, acquisitions (in the event
they are acquired by third parties) or sales in the open market (in the event they go public), as
we consider appropriate and if the terms and valuation are attractive.
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As of the Latest Practicable Date, all of our collaboration programs were still in the
discovery, pre-clinical, or IND stage. Generally, the payments we are eligible to receive from
a collaboration program increase as the program advances, while we may incur substantial
upfront expenses at the early stage of the program. We will continue evaluating new
collaboration programs that fit our selection criteria and where the collaborator’s particular
expertise has the potential to create synergies with ours.
However, because these collaborations are not entirely within our control, we cannot
predict the timing or likelihood of receiving any royalty, milestone payments, contingent
payments or other payments under these collaborations or estimate the full amount of such
payments, and we may never receive any such payments. For a further discussion of the risks
we face with respect to receipt of any of these payments, please refer to “Risk Factors—Risks
Related to Our Financial Prospects and Need for Additional Capital—We may never realize
returns on our investment of resources and cash in our collaborators and other investee
companies. Fluctuation of the operational results of our invested companies and the fair value
of our investments may adversely affect our financial position.”
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Set below are selective examples of our collaborators-investees and an overview of our complementary and mutually beneficial relationships.
Collaborator-Investee Background Relationship Drug Pipeline
Market Potential of Our
Collaborators’ Pipeline
Geode Geode is a Boston-based innovative drug
R&D company, committed to the R&D of
immunosuppressive drugs for various
cancers, with a proprietary tumor
suppression target discovery platform and
a unique biological screening evaluation
model.
To date, there is no approved therapy
specifically designed to treat PTEN-
deficient cancer, which is a major tumor
suppressor and the key negative regulator
of PI3K activity. Early clinical trials with
pan-PI3K inhibitors showed limited
efficacy and significant toxicity in most
patients with PTEN-deficient tumors.
We entered into a strategic collaboration
with Geode to jointly develop a PI3K /H9252-
selective inhibitor, pursuant to which,
Geode uses our unique AI models and
AI-assisted rational design to develop a
robust pipeline of well-differentiated and
novel therapeutic agents, including
targeted drugs and immune modulatory
agents to target PI3K /H9252and beyond,
aiming to transform the treatment
landscape for patients afflicted with
PTEN-deficient disease.
We have designed a highly selective, novel
small molecule inhibitor of PI3K /H9252for the
treatment of PTEN-deficient cancers,
including triple-negative breast cancer,
either as a monotherapy or in
combination with immune check point
blockade.
We have progressed XTC-002
from conception to a potent pre-clinical
molecule with superior efficacy, favorable
pharmacokinetics and pharmacodynamics
(PK/PD) properties and high isoform
selectivity.
According to Frost &
Sullivan, the size of the
global breast cancer
medication market was
approximately US$35.6
billion in 2022 and is
expected to increase to
approximately US$64.9
billion in 2030.
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Collaborator-Investee Background Relationship Drug Pipeline
Market Potential of Our
Collaborators’ Pipeline
META META is China’s first, immunometabolism-
based drug development company, which
harnesses metabolic pathways to develop
novel drugs to treat various chronic
diseases caused by immune and metabolic
dysregulation.
We invested in and formed a close
partnership with META to jointly develop
first-in-class drugs with novel targets that
can potentially help patients who suffer
from autoimmune diseases and cancer
physically and psychologically.
META was supported by our AI-powered
computation and automation to improve
the design and discovery capabilities of
autoimmune disease medicines and
accelerate the development of META ’s
immunometabolism-based small molecule
pipelines.
Benefiting from our funding and
technological support, META has
identified a series of new druggable
targets with first-in-class potential and
developed a pipeline with three first-in-
class small molecule inhibitors, one of
which is a candidate for a broad spectrum
of autoimmune diseases, META-001.
META has progressed META-001 from hits
to a potent PCC molecule with favorable
results in in vitro cellular assay.
According to Frost &
Sullivan, the size of the
global autoimmune
disease medication
market was
approximately US$132.3
billion in 2022 and is
expected to increase to
approximately US$176.7
billion in 2030.
Signet Signet is a pre-clinical stage
biopharmaceutical company focusing on
the development of first-in-class targeted
cancer drugs using self-developed
organoid disease models.
We invested in, and formed a strategic
collaboration with, Signet in 2020, with a
view to combining our AI, quantum
physics-based computation, and
automation capabilities with Signet’s
unique novel organoid disease models to
generate first-in-class pipeline candidates.
As of the Latest Practicable Date, Signet
had developed two innovative drug
candidates, the world’s first diffuse
gastric cancer targeted drug candidate,
FAK, in the IND-submission stage, and a
pan-cancer targeted drug candidate,
Hippo, in the lead to PCC stage.
According to Frost &
Sullivan, the size of the
global gastric cancer
medication market was
approximately US$16.3
billion in 2022 and is
expected to increase to
approximately US$34.3
billion in 2030.
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Collaborator-Investee Background Relationship Drug Pipeline
Market Potential of Our
Collaborators’ Pipeline
Our quantum physics-based computation
combined with our AI models and domain
knowledge can generate novel scaffolds
beyond the conventional boundaries of
known chemical space of novel drugs and
materials and predict molecular behaviors
as well as important physicochemical and
pharmaceutical properties with enhanced
accuracy. We will then synthesize top-
ranking molecules in our wet lab for
biological and functional evaluation, with
the results used to further fine-tune our
AI models.
Leman Leman is a biotech company focusing on
the development, production, and
commercialization of novel tumor
immunotherapy drugs, while actively
expanding its strategic presence in
developing novel immunotherapy
platforms. It has received recognition for
its breakthrough core technology of
metabolic reprogramming in exhausted
T-cells that can dramatically improve the
efficacy of multiple immunotherapies
from a wide range of well-known
strategic investors and private equity
funds around the globe.
We invested in, and established a strategic
collaboration with, Leman in 2022, with
a view to facilitating next-generation
cancer immunotherapy escalation by
jointly developing an AI-enabled
superkine R&D platform, leveraging our
expertise in AI, quantum physics-based
computation and automation capabilities,
to improve the design and discovery
capabilities of metabolic reprogramming
regulators and accelerate the development
of novel tumor immunotherapy.
As of the Latest Practicable Date, Leman
had developed a metabolic enhanced cell
therapy product, Meta10-19, in the
investigator initiated trial clinical
research stage, and an innovative
biomacromolecule drug, IL-10-Fc, in the
CMC and non-clinical research stages.
We believe that IL-10-Fc has the potential
to be widely used in combination with
different existing immunotherapies for
patients with multiple solid cancers,
including colon cancer and melanoma;
while Meta10-19 has the potential to be a
next-generation therapy for patients with
diffuse large B cell lymphoma and B-cell
acute lymphoblastic leukemia cancers.
According to Frost &
Sullivan, the size of the
global cancer
immunotherapy market
was approximately
US$50.2 billion in 2022
and is expected to
increase to
approximately US$219.7
billion in 2030.
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Case Study—Drug Discovery Collaboration for PCCs
Problem. Triple negative breast cancer (“ TNBC ”) is considered to be more aggressive
and have a poorer prognosis than other types of breast cancer. Our collaborator identified a
novel target associated with TNBC and proposed to develop PCC molecules with promising
druglike properties. The target identified by our collaborator has four highly homologous
isoforms, therefore it is challenging to derive selective candidate molecules that address only
the target at issue without affecting other isoforms.
Solution. We constructed models for the four isoforms as the selectivity filter and utilized
our AI-powered molecule generation methods and binding affinity prediction platform, XFEP ,
to sample and evaluate millions of molecules. In particular, our XFEP allowed us to predict the
binding affinities of different molecules to the isoforms and eliminate those that are predicted
to not distinguish the target from other isoforms. For each iteration of combined in silico and
wet lab studies, we deployed various structure- or AI-based methods to prioritize a small set
of promising molecules. Our medicinal chemists then evaluated the results and further
narrowed down to approximately ten molecules for synthesis and wet lab experimentation.
Result. Within approximately 15 months, we recommended four highly selective PCCs in
two different scaffolds. Currently, our collaborator is in the process of evaluating those
candidate molecules in IND-enabling studies.
OUR INTELLIGENT AUTOMATION SOLUTIONS
Our intelligent automation solutions leverage our AI and robotic automation to empower
our wet lab to provide stable and reliable data and results in a more efficient, accurate, and
scalable way. Our intelligent automation capability is a natural extension of our automation,
digitization and AI capabilities. Automation can reduce human errors and experiment costs,
thus enhancing experimental efficiency and quality; digitization can connect all the data and
make the data processing and analysis more visible and accessible; and AI can transform our
perception of data from a simple statistical analysis mode and experience-driven R&D mode
to an AI model-driven innovative R&D mode, helping us more efficiently discover points of
variation and the corresponding new rules and patterns in the R&D process.
Our intelligent automation solutions comprise primarily solid-state R&D services and
automated chemical synthesis services catered to our drug discovery customers and
collaborators, and plan to strategically focus on providing standard or customized automation
solutions to prospective customers in the pharmaceutical and material science industries.
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The table below sets forth our revenue from our intelligent automation solutions by
business line for the years indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000)
Solid-state R&D services 23,296 27,756 42,184
Automated chemical synthesis 55 17,931 43,715
Others (1) 102 – 793
Total 23,453 45,687 86,692
Note:
(1) Income from other services pursuant to customers’ requests, including lease income in 2021, and income
primarily from the provision of automation solutions in 2023, such as the set-up of an automated wet
lab for a biomaterials company. Our automation solutions, as part of our XtalPi R&D Solutions, were
launched in 2023.
The table below sets forth the number of intelligent automation solutions programs which
generated revenue for the years indicated:
Y ear ended December 31,
2021 2022 2023
Solid-state R&D services 166 198 283
Automated chemical synthesis
services 1 48 137
Others (1) 1–3
Total 168 246 423
Note:
(1) Income from other services pursuant to customers’ requests, including lease income in 2021, and income
primarily from the provision of automation solutions in 2023, such as the set-up of an automated wet
lab for a biomaterials company. Our automation solutions, as part of our XtalPi R&D Solutions, were
launched in 2023.
The increases in revenue and the number of programs in our solid-state R&D services and
automated chemical synthesis services during the Track Record Period reflected our strategic
focus on our intelligent automation solutions, which we expect to further grow in anticipation
of our provision of standard or customized automation solutions.
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Solid-state R&D Services
Overview
Solid-state R&D is part of drug development, the second stage of drug R&D, comprising
primarily pre-clinical studies and clinical trials. Solid-state R&D plays a critical role
throughout the drug development cycle. Typically, solid-state studies are required in at least
three stages of drug development: pre-clinical stage, post-Phase I clinical studies, and
post-Phase II clinical studies, with the purpose of identifying suitable and thermodynamically
stable crystal forms for in vitro studies, scale-up studies, and patent protection. The quality of
solid-state studies directly affects various aspects of drug R&D. According to Frost & Sullivan,
we are a global leader in providing computational solid-state R&D services, as assessed by our
AI capabilities and the number of completed computational programs in 2022. We are one of
the few companies globally that are able to simultaneously provide computational CSP services
and experimental polymorph screening and selection services, according to the same source.
We leverage our computational and experimental capabilities in wet lab to provide
solid-state R&D services to pharmaceutical and biotechnology as well as material science
companies, typically after we discover and design a target compound in dry lab, to identify the
optimal crystal form of such compound. The flagship program of our solid-state R&D is the
study of crystal forms. Many compounds crystallize into more than one distinct crystal form,
a phenomenon known as polymorphism, which is particularly important for pharmaceutical
molecules as the bioavailability and efficacy of drugs can be significantly affected by a
particular crystal form. Thorough solid-state studies are crucial for obtaining patent protections
for the critical crystal forms of a particular drug molecule.
Traditional solid-state R&D mainly relies on the practical experience of researchers and
requires a large amount of experimental screening that does not guarantee full elucidation of
all crystal forms, which in turn, leads to a potential risk to drug bioavailability and
effectiveness, according to Frost & Sullivan. In contrast, we are dedicated to enhancing
solid-state R&D workflow by combining theoretical computation and wet lab experimentation,
which is designed to encompass major steps of solid-state R&D from full screening and
characterization of crystal forms to crystallization process development. Our solid-state R&D
services can efficiently and effectively address challenges that traditional solid-state R&D
methods face, such as API low solubility, poor in vitro stability, hygroscopicity, unclear API
conformation, and polymorphic risk.
We have achieved favorable results that demonstrate the value of our solid-state R&D
services. As an illustration of the quality of our services, we had achieved a 100% success rate
in all of the CSP programs we conducted for small molecules as of the Latest Practicable Date.
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The following diagram demonstrates our approach to and advantages in solid-state R&D
compared to traditional manual methods:
• Bioavailability
• Dissolution
• Stability
• …
Most stable
Particle size
Crystal habit
Powder flowability
…
Goal Crystallinity, solubility, stability Most stable form 3D crystal structure Efficient and stable scale-up Comprehensive IP
protection
Traditional
way 10-20 common counterions/co-formers 200+ screening experiments Only focusing on the problems in the
crystallization process
Doing more
experiments blindly
XtalPi Virtual screening of 70 co-formers +
experiments Screening experiments + MicroED+ CSP Morphology prediction + process
optimization Experiments + CSP
Our
advantage
Larger screening scale
Higher success rate
De-risk
Determination of crystal structure with fast
and high success rate
Solving problems from properties of
crystal
Improving
completeness of
study obtaining more
IP rights
Our solid-state R&D services encompass computational services, wet lab experimental
services, and integrated solutions which is a combination of computational services and web
lab experimental services.
Our Computational Services
Leveraging our years of experience and expertise in enhancing our in silico tools for
solid-state studies, we are differentiated from our peers in the solid-state R&D industry by our
core competence in conducting computational studies to predict the crystal structure and
morphology of solid-state drugs. Such computational studies help better inform the subsequent
wet lab experimentation and reduce the risk of failures in drug development and patent
protection.
Crystal Structure Prediction
Traditionally, crystal polymorph studies rely almost exclusively on experimental
screening. However, under the constraints of time and with a limited supply of raw materials,
it is often challenging to determine the best crystal form for drug development or ensure
completeness in the landscape of crystal forms. We offer a combination of quantum
physics-based computation and AI-powered CSP service that help transform the CSP process.
Our CSP service is able to identify stable crystal forms and provide thermodynamic stability
ranking of different structures across a range of temperatures (0K-400K) efficiently. See
“—Our Technologies and Closed-loop Integrated Technology Platform—Our Quantum
Physics-based Computation Capabilities—Crystal Structure Prediction” for details of our CSP
technologies.
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Virtual Coformer , Salt, Solvate and Carrier Screening
We are capable of conducting computational screenings to recommend suitable co-crystal
coformers, counterions, solvents, and carriers to potentially accelerate solid-state R&D, reduce
costs, avoid empirical omissions and increase the likelihood of successful identification of
coformers, counterions, solvents or carriers. With our advanced virtual screening techniques,
we can conduct rational design enabling us to deliver a list of promising coformers or
counterions to our customers in just one week and ultimately recommend approximately 20
promising coformers or counterions for the follow-up experimental studies within a short
timeframe of two to three weeks.
Morphology Prediction
Crystal morphology, which can be highly dependent on crystallization conditions, is one
of the key properties affecting the flowability, compressibility and dissolution of
pharmaceutical solids. Our morphology prediction is based on multiple computation models to
systematically explore the variability and controllability of the crystal morphology. It
facilitates rational design of the relevant crystallization parameters to obtain a desired
morphology for industrial processes in order to resolve issues such as difficulty in filtration or
wide distribution of particle size.
Our Wet Lab Experimental Services
In addition to our computational services, we conduct wet lab experimentation for
solid-state R&D to support our internal research efforts and suit our customers’ particular
needs. Our wet lab capability encompasses various stages of solid-state R&D from early solid
form screening to process development for scaled-up production. Combining our improved
algorithms and experimental expertise, we can design and customize as well as effectively
perform the solid-state screening process through our proprietary automated crystallization
workstations. We have also established technical capabilities with microcrystal electron
diffraction (“ MicroED ”) to facilitate structure determination and circumvent limitations of
traditional methods, such as single X-ray diffraction that requires large size, single-phase
crystal in regular shape and uniform orientations.
Polymorph Screening and Selection
We incorporate our CSP technology to locate low-energy structures as clear targets for the
screening experiments to ensure the completeness of polymorph screening and mitigate the risk
of missing stable forms. We also compare the experimental results with the computationally
generated energy ranking to evaluate the relative stability between crystal forms.
Salt Screening and Selection
When a free form API has undesired solubility or stability properties, a common
optimization strategy is to screen for possible salt forms and select the optimal form for
subsequent R&D. Our systematic salt screening and selection service combines virtual
counterion screening with solvent system recommendation for the testing of more than 10 of
each of acidic and alkaline counterions in salt forming reactions with the free form API. The
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resulting samples are characterized by a series of methods to confirm the formation of salt
form, determine certain parameters such as the ratio of counterions, and assess the
thermodynamic properties. For the salt forms with desired properties, we can then carry out
scaled-up production and systematic characterization studies, such as hygroscopicity, stability
and solubility, to select the optimal salt form for the subsequent R&D.
Crystal Structure Determination
Once a crystal form of a particular drug candidate is available, it is critical to determine
its crystal structure. We can obtain structural information primarily by two experimental
methods: MicroED and the traditional single-crystal X-ray diffraction. MicroED uses electron
beams with stronger interactions with atoms in the crystal than X-rays, resulting in stronger
diffraction patterns. Compared to the traditional single-crystal X-ray diffraction method,
MicroED lowers the requirements for the crystal samples in terms of shape, size and purity, and
can determine the crystal structure in a shorter time which may improve the efficiency of
crystal structure determination. Our MicroED platform also features an automated process that
integrates sample loading, particle targeting, photograph, and on-the-fly monitor of data-
collection progress capabilities. A structure determination program can be completed within
just two to three weeks, compared to the two months typically required by traditional methods.
According to Frost & Sullivan, we are one of the few companies globally that have developed
technical capabilities on MicroED.
Crystallization Process Development
Crystal form research on an API forms the nexus between its chemical synthesis and
subsequent formulation development. A fundamental part of crystal form research is to ensure
reproducible and scalable production of the desired crystal form selected from solid-state
studies. Our crystallization process development services help customers establish a scientific
and rational crystallization process to generate the selected crystal form, as well as improve the
overall quality of the API by optimizing yield, purity, solvent residue, particle size and particle
size distribution, and bulk density, among others. For example, we optimize process conditions
to avoid needle-shaped crystals that are fragile, because such crystals may break easily in the
agitation and filtration process and produce a large number of secondary nucleation sites that
negatively affect the final crystal size and form. We also systematically investigate approaches
to optimize the crystal size and size distribution to reduce risks associated with uneven size
distribution that could lead to dissolution issues and quality fluctuations of the crystal form.
Our Integrated Solutions
Beyond individual computational or experimental services, we offer integrated solutions
that combine our expertise in both computation and experimentation to cater to our customers’
needs and address multiple aspects of their solid-state R&D endeavors. As of the Latest
Practicable Date, we offered a series of solutions that encompass solid-state property screening
for lead molecules, solubility improvement studies, crystallization process development and
crystal structure determination for challenging molecules, polymorph risk assessment for
medicinal crystal form, and polymorph patent breakthrough studies for generic drugs.
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The below chart illustrates our “Experiment + Computation” integrated service platform,
providing advanced, high-quality, and high-efficiency solid-state R&D services.
Improve physicochemical
property
• API low solubility
• Poor in vitro stability
• Hygroscopicity
Challenges
XtalPi Solutions:
• Virtual salt/co-crystal screening
• Computation-enhanced wet-lab
screening
Complete IND filing
materials
• Unclear API conformation
• Polymorphic risk
Challenges:
• MicroED solve structure from
powder sample
• CSP to de-risk target forms
Technical life cycle
management
Challenges:
• Wet-lab screening & preparation
of new forms
• CSP to systematically study target
forms
• Complete IP protection
• Develop new polymorph
Shorten development cycle
Challenges:
• Morphology prediction to
"design" the morphology
• CSP to understand the stability
between forms
• Change polymorph during clinic
phases
• Scale-up/manufacturing problems
XtalPi Solutions: XtalPi Solutions: XtalPi Solutions:
The following case studies demonstrate how our solid-state R&D services are applied to
empower our customers and collaborators.
Case Study—MicroED and Experimental Screening: Structure Determination
Problem. A Chinese innovative drug development customer aimed to acquire a specific
salt crystal form of a drug candidate. Salt forms of drugs have a radical effect on the drugs’
quality, safety, properties, and performance. We were engaged to carry out extensive solid-state
R&D, including salt screening, polymorph screening of the chosen salt, and determination of
the crystal structure of the selected polymorph. Moreover, since the sample is a salt, we were
also responsible for identifying the protonation site of the salt.
Solution. Starting from the freebase sample, we conducted a salt screening to identify the
optimal salt candidate, following by an extensive polymorph screening of the chosen salt. The
polymorph screening yielded several crystallized powder samples, but no single crystal was
obtained. As a result, solving the crystal structure using the traditional single-crystal X-ray
diffraction method was not feasible. To solve this problem, we deployed our MicroED to
determine the crystal structure directly from the powder sample.
Result. We conducted a salt screening involving a total of approximately 45 experimental
trials within two months. The characterization of the obtained salts suggested that the
dihydrochloride salt is the optimal candidate. Subsequently, we performed a 200-trial
polymorph screening on the dihydrochloride salt within another two months. The polymorph
screening yielded only three poorly crystallized powder samples from the dihydrochloride salt,
indicating that it is difficult to crystallize. It is nearly impossible to determine the crystal
structure with the limited amount of poorly crystallized powder samples with traditional
manual methods. However, we successfully determined the crystal structure of one of these
powder samples using our MicroED method within one week. The structure revealed that the
sample is a monohydrated dihydrochloride salt and identified the actual protonation site in the
API cation.
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We set out below a summary of the salient terms of a typical agreement for our solid-state
R&D services:
Term. The duration of the agreements with our solid-state R&D service customers is
typically less than six months.
Our roles and responsibilities. We are generally responsible for (i) carrying out the steps
as described in the research plan as agreed under the agreements, (ii) updating on the progress
of the research programs regularly, and (iii) delivering the research reports.
Payment schedule . We are typically entitled to (i) an upfront payment or initiation
payment within a specified time period following the effectiveness of the relevant agreements,
and (ii) a final payment upon completion of the relevant research program.
Credit term. We generally grant to our customers credit terms of 15 to 30 days and settle
with them by wire transfer.
IP .We typically have sole ownership of background IP and IP developed in the relevant
programs related to AI/ML technologies. Our customers typically own the IP derived from the
research program after making all payments under the agreements, and are entitled to apply for
patent for such IP .
Confidentiality. We and our customers are obliged to keep confidential any information
in relation to the performance of the agreements, including but not limited to the confidential
information received from the other party.
Termination. If we are unable to deliver the desired work products that satisfies the
criteria specified in the relevant agreements within a specified time period, our customers are
generally entitled to early termination rights; if our customers fail to make payments pursuant
to the relevant agreements within a specified time period, we are generally entitled to early
termination rights.
Automated Chemical Synthesis Services
Chemical synthesis is the process where chemical reactions are performed to convert a
reactant or starting material into compounds, which is time-consuming and costly. We began
leveraging our automation technology and capabilities to provide automated chemical
synthesis services in December 2021, as an upgrade to our traditional non-automated chemical
synthesis services. We have developed an in-house automation system, XtalDynamics, which
is able to accelerate the chemical synthesis process, improve data quality, and generate a large
scale of data 24 hours per day, while ensuring occupational safety with minimum human
intervention. Our XtalDynamics can standardize certain automated wet lab process, ensuring
reduced human intervention and errors and consistent operational results. Our lab operators
simply need to set up the procedures in our system, such as the order in which reagents are
added, the heating temperature and the period of experiment time, and our XtalDynamics can
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run the chemical synthesis automatically. To ensure our data quality, we also employed a
powerful analytical technique, LC-MS, to monitor and control the quality of our automated
chemical synthesis process. Please see “—Our Technologies and Closed-loop Integrated
Technology Platform—Intelligent Robotic Wet Lab Infrastructure” for more details regarding
experimental quality control. With the large amount of quality data accumulated from our
automated chemical synthesis services, we can further optimize the reaction conditions and
synthesize the target compounds efficiently. In addition, our automated robotic workstations
can enable higher throughput of reaction conditions screening and optimization, accelerate the
synthesis of intermediates, and significantly improve the efficiency of synthesis of compound
libraries.
Case Study — Synthesis of Compound Library
Problem. Our customer sought to complete the synthesis of 400 molecules for building
a compound library within four weeks.
Solution. We adopted the “human-machine” model: assigning an automated synthesis
robotic workstation to this program, supervised and validated by one researcher and one lab
operator.
Result. Our researcher set up approximately 600 synthesis reactions online, and the
assigned robotic workstation speedily completed all the parallel reactions in just five days, as
compared to at least three weeks in a traditional lab. Our purification team and compound
management team managed to complete the entire program in nine days with a compound
library of approximately 392 target compounds delivered to our customer. As demonstrated,
our automated synthesis solution significantly increased efficiency and reduced the waiting
period and costs for our customer, as compared to a traditional lab.
We set out below a summary of the salient terms of a typical agreement for our automated
chemical synthesis services:
Term. The duration of the agreements with our automated chemical synthesis service
customers typically ranges from half a year to one year.
Respective roles and responsibilities. We are generally responsible for performing
automated chemical synthesis work, and delivering the target compounds and final research
report on the result of compound synthesis. Our customers are typically responsible for
providing information, materials and other support necessary for us to complete the program.
Payment schedule . We are typically entitled to receive monthly or quarterly payments
based on the full-time equivalent rates as specified in the agreements within a specified time
period upon the receipt of the invoice.
Credit term. We generally grant to our customers credit terms of ten to 30 days and settle
with them by wire transfer.
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IP .We typically have sole ownership of background IP and IP developed in the relevant
programs related to AI/ML technologies. Our customers typically own the IP derived from the
research program, and are entitled to apply for patent for such IP .
Confidentiality. We and our customers are obliged to keep confidential any information
in relation to the performance of the agreements, including but not limited to the confidential
information received from the other party.
Termination and renewal. Typically, both parties can terminate the agreements if the
other party fails to cure a breach within a notice period of 30 days. The agreements may also
be terminated as mutually agreed by both parties.
We will strive to scale our intelligent automation solutions business by applying our
automation technology and capability in other high-value sectors and business scenarios, such
as the provision of automation solutions to companies engaging in pharmaceutical and material
science. See “—Our Future Development—Intelligent Automation.”
OUR FUTURE DEVELOPMENT
To unleash the potential of our integrated technology platform, R&D capacity, and
accumulated expertise and experience, we have launched our XtalPi R&D Solutions program
in late 2022 to expand our business in other sectors, such as material science and automation.
We have and will continue to engage in molecular design for industrial purposes. Our
XtalPi R&D Solutions business is expected to leverage similar well-established technologies
as those for our drug discovery customers, making the R&D of new materials a natural
extension of our existing business. We believe the combination of our drug discovery expertise,
solid-state R&D capability, AI-powered quantum physics-based computation, and high-
throughput standardized and automated wet lab facilities will enable us to offer R&D solutions
beyond the pharmaceutical industry.
As of the Latest Practicable Date, we had entered into several contracts to provide
customized R&D solutions but were still in the early stage of exploring the use of our
technologies and expertise in our XtalPi R&D Solutions.
Material Science
Our quantum physics-based AI-powered integrated platform can also be applied to new
problems of interest and new fields of study. Since the underlying physics that drives a biologic
to bind to its target is no different than the physics that drives a small drug molecule to bind
to a protein, we have been able to successfully apply these technologies to the discovery of
biologics. Similarly, the physics underlying the properties of materials is no different than the
physics underlying the properties of drug molecules. Therefore, we believe we are able to apply
our integrated technology platform to material science applications, including in the fields of
biomaterials, novel chemical compound for agritech applications, new chemical surfactant and
catalyst, and cosmetics and healthcare products.
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Advanced technologies, such as quantum physics-based computation, automation and AI,
have transformed the R&D of new materials. Similar to traditional drug discovery efforts,
traditional approaches to discovering new materials also require significant time and efforts,
which may take as long as 10 to 20 years to bring new materials to the market. We are
committed to leveraging our technology to transform the way new materials are discovered,
including the integration of our proprietary quantum physics-based AI-powered integrated
platform to our XtalPi R&D Solutions.
Biomaterial
We believe that the material science industry is only beginning to recognize the potential
of computational methods. According to Frost & Sullivan, global material science R&D
expenditure is expected to increase at a CAGR of 13.1% from US$66.4 billion in 2022 to
US$177.9 billion in 2030, while material science R&D expenditure in China is expected to
increase at a CAGR of 18.7% from US$14.8 billion in 2022 to US$58.5 billion in 2030. As
predicted by Organization for Economic Co-operation and Development (“ OECD ”),
approximately 20% of petroleum-based products will be replaced by bio-based products over
the next decade in the U.S. Shifting towards bio-based products in place of petroleum-based
products not only aids in effectively reducing carbon emissions, but also aligns with global and
China’s zero carbon strategies. Recognizing the unprecedented opportunity presented by the
emerging transformation of traditional pollutant materials and to contribute to a better
environment, we are leveraging our quantum physics-based computation, AI, and standardized
and automated wet labs to address the challenges of time-consuming processes, high costs, low
efficiency, and environmental contamination associated with the traditional R&D of new
materials.
We formed a joint venture with Zhongke Guosheng (Hangzhou) Technology Co., Ltd.
(“GS BIOMATS ”) in May 2022 to capitalize on the transition from petroleum-based materials
to bio-based materials. The joint venture has established a proprietary UpChemist.AI platform,
which integrates our quantum physics-based computation, AI, and automation capabilities with
GS BIOMA TS’ expertise in product industrialization. The UpChemist.AI platform is designed
to combine structural design, property screening, process optimization, robotic automation, and
our domain expertise to accelerate and scale the R&D and commercialization of bio-based
materials.
We have made some progress in the R&D of bio-based surfactants. In a collaboration
program between our joint venture and the Institute of Chemical Engineering of the Guangdong
Academy of Sciences, the UpChemist.AI platform substantially shortened the R&D cycle of
the new surfactants. Within merely four months, we successfully developed a new type of
furan-based bio-based surfactant that is able to outperform the generally used petroleum-based
surfactants. The new bio-based surfactant has generated better results when evaluated for
detergency in certain different scenarios, such as better foaming and hard water resistance,
compared with the traditional petroleum-based surfactants. In addition, the new bio-based
surfactant demonstrates superior corrosion inhibition properties in metal processing.
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In addition, we partnered with one of the world’s largest petrochemical conglomerates in
December 2023, to establish an automated chemical synthesis facility that will enable
high-throughput synthesis of a specific biomaterial for the petrochemical company, with the
goal of increasing its operational efficiency.
Agritech
We foresee huge market potential for smart technologies to be applied in many aspects in
the agricultural industry. According to Frost & Sullivan, the size of the global AI solution in
agriculture industry is expected to increase at a CAGR of 34.0% from US$5.4 billion in 2022
to US$56.0 billion in 2030. To seize such opportunities, we have assembled a sophisticated,
experienced team, consisting of industry leaders and academics, with a view to innovating the
agricultural industry. We aim to leverage our R&D capabilities and accumulated expertise, in
particular our AI and quantum physics-based technologies, to enable more cost-efficient, more
accurate, and faster design and discovery of new chemical compounds with desired properties,
for example, in the pesticides and fertilizer sectors. We are exploring the opportunity to form
a cooperation to conduct solid-state R&D on the dosage forms of pesticides with a global
market leader in the agriculture industry in terms of sustainability performance in 2023,
according to Frost & Sullivan.
Cosmetics Products
We also plan to leverage our R&D capabilities to tap into the cosmetics and healthcare
industries, which have significant market potential. We believe that our technologies and
expertise accumulated in our provision of drug discovery solutions will enable us to innovate
in the cosmetics and healthcare industries and outperform other market participants. According
to Frost & Sullivan, the size of the global AI solution in the beauty and cosmetics industry is
expected to increase at a CAGR of 34.0% from US$2.7 billion in 2022 to US$28.1 billion in
2030. We aim to help cosmetics and healthcare companies identify high quality products and
accelerate their product development process.
We entered into a strategic cooperation with Edelweiss Connect (“ EwC”), a Swiss
product design and risk assessment solution provider, in July 2023, to jointly develop
AI-powered skincare product safety assessment solutions by integrating machine learning, in
vitro assays and high-content cellular imaging analysis technology. The aim of this strategic
cooperation is to provide an integrated in silico and in vitro assessment method in lieu of
animal testing, which is expected to be more accurate and reliable for the risk assessment of
skincare products and at reduced costs and time. We anticipate that future applications of such
safety assessment methods will be applied in other safety endpoints for healthcare products,
environmental chemicals, and pharmaceuticals, ultimately delivering significant social and
economic benefits to different industries and the society.
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New Materials and Chemicals
We are committed to contributing our technologies and experience in drug R&D to the
development of new materials and chemicals. By embracing the global trend of reducing
carbon emissions, we aim to booster our R&D solutions business by discovering and
developing more environment friendly materials. We are in the process of developing
automated synthesis of petrochemicals and new materials for electric vehicle (“ EV”) batteries.
Furthermore, we are partnering with a leading university on battery R&D automation, focusing
mainly on the automation of formulation and property testing of battery electrolyte. This
battery R&D automation program aims to realize rapid iteration of the automated battery
electrolyte formulation process, reduce experimental costs, and shorten experimental cycles,
through automated weighing and mixing, high-throughput dispensing, and automated formulas
record.
Intelligent Automation
We launched our intelligent automation solutions with a goal of spearheading the design
and production of next-generation lab automation platforms, with emphases on efficiency,
flexibility, scalability, seamless integration with third-party hardware and software, and
digital-twin applications. Our aim is to create a robust, intelligent R&D infrastructure, curate
tools tailored for optimal data flow, and lead the charge in next-generation automated lab
solutions.
Our intelligent automation solutions will strategically focus on providing standard or
customized automation solutions to empower our customers to scale their business, enhance
their product or service quality, and reduce their operational costs.
Our self-designed ChemPlus is an example of our efforts in offering standard automation
solutions. ChemPlus is a smart desktop solid sampler, designed to be more accurate, efficient
and user-friendly than manual methods. It is powered by AI algorithms, enabling smart
parameter adjustment and supporting data tracking throughout the process. Our ChemPlus
provides flexible, high-throughput processing of a wide range of solid samples, such as large,
fluffy, highly viscous and static solid powder samples. ChemPlus is equipped with a touch
screen for easy and efficient operation which allows users to set up multiple experimental tasks
at the same time. It can automatically execute and complete tasks without human intervention.
ChemPlus has six receiver trays for precise loading of samples to different sizes or types of
vials and multi-well plates, with sample weights ranging from 1 milligram to 20 grams.
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SIGNIFICANT COOPERATIONS AND COLLABORATIONS
Cooperation with Pfizer
In April 2018, we entered into a ten-year strategic master research cooperation agreement
(the “ Pfizer Master Agreement ”) with Pfizer for our solid-state R&D service business,
pursuant to which Pfizer and we have engaged in strategic research cooperations to develop
hybrid physics- and AI-powered technologies to accelerate drug R&D. Pfizer and we approved
a research plan under the Pfizer Master Agreement, containing research purpose and program
milestones and identifying funding and resources from each party required to complete such
research plan. Each party shall bear its own costs in connection with a research plan, if not
otherwise agreed by both parties.
In accordance with the Pfizer Master Agreement, Pfizer and we established a joint
steering committee (“ JSC”) with equal representation from each party and chaired by a Pfizer
member. The JSC coordinates, oversees and makes decisions in relation to the R&D activities
under the Pfizer Master Agreement.
As part of the Pfizer Master Agreement, each party granted to the other party a
non-exclusive, royalty-free, fully paid-up license to certain of its technology and IP , to the
extent necessary to enable the other party to perform its obligations under the Pfizer Master
Agreement and for limited additional purposes. Such technologies and IP include (i) the
respective background technology, which includes certain technology, technical information,
IP and know-how that Pfizer and we separately owned before entering into the Pfizer Master
Agreement or acquired independently of the Pfizer Master Agreement, and (ii) the respective
program technology, which is developed using a party’s background technology in connection
with the performance of the research programs under the Pfizer Master Agreement. The license
that we granted to Pfizer also includes the improved program technology, which encompasses
certain limited changes or additions developed outside the scope of the Pfizer Master
Agreement through use of certain Pfizer background and program technologies that add new
functions to, or improve the performance of, our program technology.
Subject to the terms of the Pfizer Master Agreement, we own all rights and title to and
interests in our program technology and improved program technology. We have the sole right,
but no obligation, at our sole expense and in our sole discretion, to file for, prosecute and
maintain any patent rights regarding our program technology and improved program
technology. Likewise, Pfizer owns all rights and title to and interests in its program technology,
and it has the sole right, but no obligation, at its sole expense and in its sole discretion, to file
for, prosecute and maintain any patent rights regarding its program technology.
Building upon our existing relationship with Pfizer for CSP , this research cooperation
aims to help us and Pfizer further advance our capability in computation-based rational drug
design and solid-form selection. For example, our quantum physics-based computation have
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enabled Pfizer scientists to perform CSP calculations in a matter of days, while traditional
methods may take up to four months. We believe that this cooperation is already changing the
way Pfizer performs its screening work and has the potential to disrupt the industry as a whole.
To date, we have cooperated with Pfizer to carry out multiple research plans, including
the development of optimized force field parameters. Force field parameters provide a
description of intramolecular and intermolecular interactions and are an essential component
for the structure-based drug design predictions and CSP studies. We believe that our strategic
cooperation with Pfizer evidences industry recognition of our capabilities in quantum
physics-based computation and AI-powered solid-state R&D and presents a valuable
opportunity to upgrade our technologies. See “Our Technologies and Closed-loop Integrated
Technology Platform—Our Quantum Physics-based Computation Capabilities—Crystal
Structure Prediction—Case Study—Crystal Structure Prediction: Development of Paxlovid”
for an example of our cooperation with Pfizer.
Cooperations with CK Life Sciences
CK Life Sciences, a member of the CK Hutchison Group, is listed on the Stock Exchange
of Hong Kong (stock code: 0775). CK Life Sciences engages in the business of R&D,
manufacturing, commercialization, marketing, sale of and investment in products and assets
which fall into three core categories, including nutraceuticals, pharmaceuticals & diagnostics,
and agriculture-related products. Its healthcare R&D focuses on the R&D of tumor vaccines
and pain management products, and early tumor detection.
We entered into a three-year research cooperation agreement (the “ CK Life Sciences
Agreement ”) with CK Life Sciences for our drug discovery solutions business in
November 2022, to jointly develop a novel AI-powered tumor vaccine R&D platform to
improve the discovery and design capabilities of tumor vaccines and accelerate the
development of more vaccine types. Our goal of this cooperation is to realize precision
treatment for patients worldwide.
According to Frost & Sullivan, the size of the global cancer immunotherapy market was
approximately US$50.2 billion in 2022 and is expected to increase to approximately US$219.7
billion in 2030, with a CAGR of 20.3% from 2022 to 2030. The existing design and pre-clinical
development process for tumor vaccines is complex and lengthy, hindering the efficiency and
success rate of tumor vaccine R&D. To address these unmet medical needs, we cooperated with
CK Life Sciences, leveraging our advanced technologies and industry expertise in quantum
physics-based computation, AI, and robotic automation, to build an AI-powered tumor vaccine
R&D platform that applies AI algorithms and high-precision molecular modeling to predict and
design a variety of tumor vaccines that can activate specific immune responses to kill tumors.
Tumor vaccines will be screened and verified through intelligent robotic wet lab experiments.
By integrating algorithmic feedback to optimize activity and efficacy, we expect the platform
to generate pre-clinical tumor vaccine candidate compounds with robust immune activity.
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Expanding upon our existing partnership, we entered into a three-year agreement with CK
Life Sciences in October 2023 to explore and develop clinically usable, high-precision
molecular diagnostic models for prognostic risk prediction which may enhance the ability of
physicians to assess the risk of cancer recurrence and implement better-tailored postoperative
treatment plans to improve the survival rate and quality of life of patients. Leveraging our AI
capabilities and machine learning models, we expect that this program will lead to the
development of advanced intelligent solutions for the processing and modeling of holistic
multidimensional biomedical data, biomarker discovery, and postoperative recurrence risk
prediction. Furthermore, we intend to utilize the crucial biomarkers to be identified in this
program to further enhance our computational modeling capabilities in clinical diagnosis,
disease management, and the screening of novel therapeutics, and to lay the foundation for our
future programs involving larger and more complex datasets.
Collaboration with a global leading pharmaceutical company headquartered in
Indianapolis, Indiana
We entered into an AI small molecule drug discovery collaboration worth up to US$250
million with a global leading pharmaceutical company headquartered in Indianapolis, Indiana,
for our drug discovery solutions business in April 2023. Our collaborator is a U.S.-based
NewY ork Stock Exchange-listed global pharmaceutical conglomerate with total assets of
approximately US$57,915.5 million as of September 30, 2023, which discovers, develops,
manufactures, and markets human pharmaceutical products in approximately 110 countries.
Our collaboration aims to develop the drug candidates which target a disease that currently has
huge unmet medical needs. We will leverage our AI capabilities and automated robotics
platform for the de novo design and delivery of a novel compound, which will be advanced by
this collaborator through clinical and commercial development. In particular, our small
molecule drug discovery platform will help to create and explore a target-specific mega
chemical space, as well as identify a promising lead series. We will conduct tests on each
synthesized molecules group using our internal biochemical, pharmacodynamic, cellular and
pharmacokinetic assay capabilities. The program-specific R&D data will be fed into generative
AI models through iterative cycles of design, making, testing and analysis. By using multiple
autonomous robotic workstations, we are able to perform precise and energy-efficient parallel
chemical synthesis and assays 24 hours per day. With our closed-loop of AI and quantum
physics algorithms working in sync with the data factory of large-scale robotics experiments,
we believe we are uniquely equipped to tackle challenging novel targets for this collaborator.
Salient Terms of Our Collaboration and Cooperations Agreements
We set out below a summary of the salient terms of a typical agreement for our significant
collaborations and cooperations:
Term. The duration of our collaboration/cooperation agreements typically ranges from
one to three years.
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Respective roles and responsibilities . We are typically responsible for (i) open data
collection; (ii) database construction; (iii) AI models building; (iv) computational design;
and/or (v) machine learning algorithm development to identify, generate, optimize, and deliver
specific hit and/or lead compounds directed to certain targets utilizing our integrated
technology platform and technologies. Our collaborators/cooperators are typically responsible
for (i) designating the therapeutical targets, (ii) providing the relevant raw data, data sets and
testing sets, (iii) carrying out experiments and rigorous testing, (iv) conducting clinical trials
and commercial development, and/or (v) preparing and submitting any applicable regulatory
filings to further develop and eventually commercialize the product candidates.
Pricing and payment schedule . We are typically entitled to (i) a non-refundable one-off
upfront payment or initiation payment ranging from tens of thousands to several millions of
U.S. dollars within a specified time period following the effectiveness of the relevant
agreements, (ii) milestone payments ranging from tens of thousands to tens of millions of U.S.
dollars when the relevant programs reach certain milestones or events specified in the relevant
agreements, with each milestone ranging from two to four months, (iii) contingent payments
if the product candidates under collaborations reach certain development stages, such as IND
and clinical trials, and/or (iv) single- to low double-digit tiered royalties in terms of revenue
if the product candidates are successfully commercialized and hit certain revenue targets. Our
milestone payments and royalties vary in a wide range, largely due to the different levels of the
deal sizes, the uncertainty of the programs, and our intentions to explore new customers and
regions. For research cooperation programs, which are mainly for academic purposes where we
do not receive considerations, both parties shall make payments to a designated account to
finance the research program according to the payment schedule set forth in the relevant
agreements.
Credit Term. We generally grant to our collaborators/cooperators credit terms of ten to 60
days and settle with them by wire transfer.
Research plan and costs . Both parties shall together formulate a comprehensive written
research plan, which shall set out (a) the objective of the applicable research plan, the research
and pre-clinical development activities to be conducted by each party, and their respective
allocations; (b) the criteria of the desired work products; (c) the anticipated timeline and
milestones related to such activities; and (d) the process for preparation and provision to our
customers/collaborators of the research results and the primary deliverables. For research
cooperation programs, each party typically shall bear all costs and expenses for the R&D
activities conducted by itself, including pursuant to the research plan.
IP. We typically have sole ownership of background IP and IP related to AI/ML
technologies developed in the relevant programs. Our customers typically own the IP derived
from the research program, and are entitled to apply for patent for such IP . While, for a limited
number of collaboration programs, all inventions, know-how, confidential information and
other IPs conceived of jointly by each party or its respective employees, affiliates, agents or
contractors in the course of performing its obligations or exercising its rights under the
collaboration/cooperations agreements shall be jointly owned by the parties. Nonetheless, each
party shall (i) continue to own all IP rights owned by such party as of the effective date of the
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agreements or that is developed independently of the agreement and without use or reference
to the other party’s background technologies; and (ii) solely own any IP that is made by its own
employees, consultants or contractors, except that such IP relies on the other party’s
background technologies.
License . Typically, each party grants to the other party a non-exclusive, royalty-free, fully
paid-up license to certain of its technologies and IPs, to the extent necessary to enable the other
party to perform its obligations under the agreements (the “ Cross-licensing ”). We may also
grant an exclusive, irrevocable, royalty-bearing, sublicensable license to certain of our
know-hows and IPs to our collaborators to further develop or commercialize the work products
developed under the collaboration agreement.
Exclusivity . We generally have exclusivity obligations under the collaboration/
cooperation agreements, prohibiting us to research, develop, manufacture or commercialize, or
enable other parties to conduct such activities of any compounds, molecules or other targeting
moieties that are related to the collaboration/cooperation perpetually or within a specified
period, subject to certain exceptions, such as those work products demonstrating only
sub-therapeutic, non-clinically meaningful properties.
Renewal and termination . Typically, both parties can terminate the collaboration/
cooperation agreements if the other party fails to cure a breach within a notice period arranging
from 15 to 60 days, and can also terminate the agreements without cause upon 30 to 60 days’
prior written notice. In addition, if we are unable to deliver the desired work products that
satisfy the criteria specified in the relevant agreements within a specified time period, our
collaborators/cooperators are generally entitled to early termination rights. The agreements
typically may be extended as mutually agreed by both parties.
COMMERCIALIZATION AND BUSINESS SUSTAINABILITY
Commercialization
We believe our commercialization efforts have and will continue to contribute to our rapid
growth in China and globally. The following is a brief summary of our commercialization plans
in the U.S. and Europe:
Scale our
existing
solutions and
services
According to Frost & Sullivan, the projected size of the global drug
R&D outsourcing service market for drug discovery is expected to
increase at a CAGR of 14.9% from US$12.3 billion in 2023 to
US$32.5 billion in 2030, and the projected size of the global
solid-state R&D service market is expected to increase at a CAGR
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of 27.7% from US$3.8 billion in 2023 to US$20.9 billion in 2030.
Given the anticipated growth in the projected size of the addressable
markets, we will continue to scale our drug discovery solutions and
solid-state R&D services to seize the market opportunities.
 We plan to scale our flexible modular drug discovery solutions
as our standalone solutions spanning the entire drug discovery
process to increase the accessibility of our solutions, broaden
our customer base and grow our business. See “—Our Growth
Strategies—Enhance our service capabilities and expand our
service offerings in the biotechnology and pharmaceutical
industries and beyond.”
 We are strategically focusing on growing our antibody drug
discovery business, given our customers’ increasing demands
and the tremendous market opportunities. In particular, in
addition to providing antibody drug discovery solutions in
exchange for services fees, we plan to focus on antibody drug
discovery collaborations with biopharmaceutical companies in
2024, where we may receive upfront payment, development or
commercial milestone payments, and/or royalties on a
program-by-program basis, in recognition of our technological
superiority and contribution.
 We will continue to strengthen our technologies and improve
our service capabilities to further grow our drug discovery and
solid-state R&D business and improve our operational
efficiency. We will continuously upgrade our existing
technologies and develop new technologies, taking into
consideration the technological landscape of the drug and
material science R&D industries as well as our customers’
evolving needs. For the roadmap and process of our R&D
upgrade, see “—Research and Development.”
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 We will also endeavor to increase our customer base to scale
our existing solutions and services, See “—Our
Strategies—Broaden customer base, and deepen relationships
with customers and collaborators and enable cross-selling” for
details. Moreover, we will formulate a series of marketing
strategies to increase our new customer conversion rate,
including designating specific business development and
technical staff to communicate with potential customers,
regular executive-level visits to learn about potential
customers’ problems and needs, and establishing relationships
with a broader scope of industry participants.
Expand into new
modalities,
business
scenarios, and
industries
A large portion of our revenue was generated from small molecule
drug discovery during the Track Record Period. As our fundamental
technologies, domain expertise, and experiences derived from our
existing business can be applied in various modalities, business
scenarios, and industries, we plan to expand into other high-value
businesses.
 Many global biotechnology and pharmaceutical giants have
been exploring new therapeutic modalities, which are the
future trends for disease treatment and have great market
potential. For example, the global ADC market has reached
approximately US$7.9 billion in 2022 in terms of sales, and is
expected to grow to US$64.7 billion in 2030, according to
Frost & Sullivan. To better serve our customers, keep abreast
of the market trends in the pharmaceutical industry, and seize
this emerging opportunities, we plan to leverage our
technologies, experiences and expertise derived from small
molecule drug discovery to explore more therapeutic
modalities, such as PROTAC, ADC, peptide, and RNA.
 Driven by the global demand for enhanced efficiency and
lower costs, many industries and companies are exploring the
application of new technologies. We will leverage our
advanced technologies, expertise and experiences to tap into
more business scenarios. For example, we will apply our
automation technology to petroleum engineering, given global
petrochemical conglomerates are strategically focusing on the
utilization of AI and automation technologies according to
Frost & Sullivan. We also plan to apply our material science
R&D capabilities to the discovery of advanced materials for
electric vehicle batteries.
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 We will expand our service offerings into more industries. For
example, our quantum physics-based computation capability
enables us to expand into other high-value sectors naturally,
such as material science (including agritech, energy,
cosmetics, and healthcare). According to Frost & Sullivan, the
projected global material science R&D expenditure is expected
to increase at a CAGR of 12.8% from US$76.3 billion in 2023
to US$177.9 billion in 2030, and the projected material science
R&D expenditure in China is expected to increase at a CAGR
of 18.5% from US$17.8 billion in 2023 to US$58.5 billion in
2030.
See “—Our Growth Strategies—Enhance our service capabilities
and expand our service offerings in the biotechnology and
pharmaceutical industries and beyond” and “—Our Future
Development” for details regarding how we intend to expand into
more business scenarios and industries.
Advance
intelligent
automation
business
Due to global technological innovations, a number of market leaders
in the industrial sector are upgrading their operations to be
automatic, digital and intelligent, providing tremendous
opportunities for solutions providers with automation capability.
According to Frost & Sullivan, the projected size of the global
automated R&D lab market is expected to increase at a CAGR of
39.6% from US$5.9 billion in 2023 to US$60.7 billion in 2030. To
seize such huge market opportunities, we will strategically focus on
expanding our intelligent automation businesses, as we believe
automation is effective in accelerating R&D process, improving
operational efficiency, and enhancing product or service quality. We
plan to leverage our automation technology and capability to
provide standard or customized automation solutions to prospective
customers that desire streamlined operation process, and provide
customized automation solutions to cater to customers’ different and
evolving needs.
See “—Our Growth Strategies—Advance the science underpinning
our integrated technology platform” and “—Our Future
Development” for details regarding how we intend to scale our
intelligent automation solutions business.
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Expand globally Our revenue generated from China has accounted for the largest
portion of our total revenue. In addition, according to Frost &
Sullivan, the U.S. and Europe still dominate the pharmaceutical
industry and have the largest market shares. Therefore, to further
our growth and commercialize our solutions or services more
effectively, we plan to invest more efforts and resources to expand
our business globally, particularly in the U.S. and Europe, while
maintaining our established business in China. Furthermore, to
protect us from the potential intensified international trade tensions,
we plan to expand our operations in the U.S., Europe and other
regions, including Singapore, and Saudi Arabia, by setting up dry
lab or wet lab. As of the Latest Practicable Date, we had not had any
material operations outside China, including the U.S. and Europe.
For our detailed commercialization plan on global expansion, see
“—Our Growth Strategies—Expand our global footprint.”
As of the Latest Practicable Date, we had served more than 300 biotechnology and
pharmaceutical companies and research institutions globally, including 16 of the top 20 global
biotechnology and pharmaceutical companies in terms of revenue in 2022 according to Frost
& Sullivan. In addition, we have been and will continue to explore collaborative opportunities
with global biotechnology and pharmaceutical conglomerates to sustain our growth. For
example, we had well-established long-term relationship with Pfizer and Johnson & Johnson,
which showcases our superiority and demonstrates our prospects. See “—Significant
Cooperations and Collaborations” for more details.
Path to Commercialization
We primarily provide drug discovery solutions and intelligent automation solutions to
pharmaceutical or biotechnology companies worldwide.
Drug discovery solutions : We enter into contracts for our drug discovery solutions and
drug discovery collaborations, where we receive upfront payments, milestone payments and/or
royalties.
 Drug discovery solutions : We generally receive service fees which are typically
recognized as revenue within one year upon signing of the relevant contracts.
 Drug discovery collaborations : We generally receive around 15% of the contract
value (excluding contingent payments and royalties) as upfront payment upon the
signing of contracts and the remaining will be paid and recognized upon achieving
certain milestones, such as the delivery of desired hits, leads, PCCs or the
completion of toxicity studies. The upfront and milestone payments we receive
under our drug discovery collaborations are typically recognized as revenue within
18 months upon signing of the relevant contracts. Under our drug discovery
collaborations, we may also be entitled to (i) contingent payments, depending on the
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development stages of the drug candidates, such as IND and clinical trials, and/or
(ii) single- to low double-digit tiered royalties depending on the levels of the
commercialization revenue of the relevant drugs.
Intelligent automation solutions : We enter into contracts for our solid-state R&D
services and automated chemical synthesis services where we receive service fees.
 Solid-state R&D services : We generally receive an upfront payment upon signing of
contract and a final payment upon completion of the relevant research program. The
payments we receive under our solid-state R&D services are typically recognized as
revenue within six months.
 Automated chemical synthesis services : We generally receive and recognize as
revenue monthly or quarterly payments. The duration of our automated chemical
synthesis contracts in general ranges from half a year to one year.
See “—Overview—Our Business and Revenue Model” and “—Significant Cooperations
and Collaborations—Salient Terms of Our Collaboration and Cooperations Agreements.”
From time to time, we may also (i) offer our solutions in exchange for equity interests in
our collaborators which are at an early development stage, short of fundings, and have great
growth potential, or (ii) make equity investments in selected collaborators which develop
complementary technologies to ours and who we consider are compatible with our strategic
position. See “—Our Drug Discovery Solutions—Strategic Collaborations.”
Robust Program Pipeline and Expected Revenue
We have robust ongoing programs and expect to experience continuous rapid growth in
the near future. In particular, as of the Latest Practicable Date, we had a number of existing
significant collaborations and cooperations which are expected to generate significant revenue,
including those with (i) a global leading pharmaceutical company for small molecule drug
discovery worth up to US$250 million; (ii) a global pharmaceutical company for small
molecule compound library synthesis; (iii) two international companies for antibody drug
discovery and development; (iv) a leading petrochemical conglomerate in North Asia for
automated catalyst R&D; (v) a new materials company for the pilot study of battery materials
expected to be applied in various areas including electric vehicles; (vi) a wholly-owned
subsidiary of a China-based HKEx-listed biopharmaceutical company for drug discovery
collaboration worth up to RMB19.0 million; and (vii) a leading Japanese pharmaceutical
company for a drug discovery collaboration program, a substantial part of which is expected
to be recognized as our revenue in 2024. In addition, we were in the process of negotiating (i)
strategic cooperation with a global leading petrochemical conglomerate in the fields of AI and
robotics automation; and (ii) with various prospective customers for both drug and new
materials discovery solutions and intelligent automation solutions, as of the same date.
Furthermore, given (i) certain of our contracts, in particular those for our solid-state R&D
services, are typically short term with a contract performance period of less than six months;
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(ii) our demonstrated ability during the Track Record Period to secure revenue-generating
contracts throughout the course of a financial year; (iii) our high customer retention rates
during the Track Record Period; and (iv) our success in securing new contracts shortly after the
beginning of 2024 and our plan to continue to allocate resources to securing short term and
other contracts throughout 2024 and beyond, we expect we will be able to enter into more
revenue-generating contracts in the remaining period of 2024.
We will further enhance commercialization efforts for our solutions or services, and will
continue to upgrade our closed-loop integrated technology platform and our solutions
offerings. For example, we are actively exploring business and/or technology application
opportunities, including in the sectors of consumer healthcare, traditional Chinese medicine,
perovskites, agriculture, and OLED materials. In particular, for our drug discovery solutions
business, we expect to further establish at least two landmark collaborations for small molecule
drug discovery. In the meantime, as our antibody drug discovery platform and business model
are maturing and we have established a specialized business development team in late 2023
with the goal of growing our antibody drug discovery business, we expect to generate
meaningful amounts of revenue from our antibody drug discovery business from 2024 and
onward. For our intelligent automation solutions business, as we continuously invest in our wet
lab facility by building up new wet labs and increase coverage of automated robotics to
enhance our operational capacity and efficiency, we believe we can secure more solid-state
R&D and automated chemical synthesis business. See “—Our Future Development.”
According to the payment terms of our existing revenue-generating contracts as of
February 29, 2024 (“ Existing Contracts ”), which provide for monthly or quarterly payments,
upfront payments, milestone payments and contingent payments, among others, our total
contract value (excluding potential royalties under our collaboration programs) is not less than
US$280 million (equivalent to HK$2,188 million). In addition, we had contract liabilities of
RMB25.7 million as of December 31, 2023, representing advance payments from our
collaborators/customers for purchases of our solutions and/or services which have not yet been
rendered to the collaborators/customers. Based on the payment schedules as set out in our
Existing Contracts as well as our revenue pattern during the Track Record Period, we expect
that the majority of our revenue to be generated in 2024 would be attributable to contracts
awarded in 2024 rather than to contracts entered into prior to 2024, as our contracts are
generally program-based and in particular, for our solid-state R&D services, are typically short
term with a contract performance period of less than six months. Taking into account our
Existing Contracts and other contracts we expect to enter into in 2024, we believe that our
revenue in 2024 (“ 2024 Revenue ”) is expected to be largely similar to the revenue threshold
of a Commercial Company, and we expect that our revenue in 2025 would achieve such
revenue threshold, assuming that there will be at least a low level of growth in our revenue in
2025. In particular, we expect that a minority of our 2024 Revenue is to be derived from our
Existing Contracts (“ High Confidence Revenue ”), of which approximately 32.1% is expected
to be generated from our drug discovery solutions business and approximately 67.9% is
expected to be generated from our intelligent automation solutions business. We believe that
our High Confidence Revenue will be achieved, as it mostly represents upfront payments and
monthly or quarterly payments, which will be recognized by lapse of time. In addition, we
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expect that a majority of our 2024 Revenue is to be derived from both our Existing Contracts
and other contracts to be entered into in 2024 (“ Expected Revenue ”), subject to the realization
and satisfaction of all related assumptions and conditions (as further described below), of
which approximately 54.3% is expected to be generated from our drug discovery solutions
business and approximately 45.7% is expected to be generated from our intelligent automation
solutions business. Our Expected Revenue will be derived from (i) expected contracts and (ii)
milestone payments under our Existing Contracts, which will be recognized upon achieving
certain milestones, such as delivery of desired hits, leads, PCCs or the completion of toxicity
studies. We will use our best endeavours to negotiate with our existing and potential
customers/collaborators to secure new business contracts and explore new business
opportunities to achieve the revenue threshold of a Commercial Company.
Fast-growing Industry and V ast Market Opportunities
As a leader in the AI-powered drug R&D industry and as we have been strategically
focusing on material science R&D since 2023, we believe that we will benefit from the
significant market opportunities globally and in China, leveraging our technological
advantages, prominent and broad customer base, continuous efforts in business development
and commercialization, and a visionary management team. According to Frost & Sullivan, drug
and material science R&D, featured by the combination of AI and robotic automation, is
expected to flourish in 2024 and onwards. As an increasing number of global companies,
including those in the pharmaceutical and material science industries, have invested
significantly in the adoption of AI and automation technologies in their molecular discovery as
well as partnering with drug and new materials discovery solutions providers, according to the
same source, we foresee great worldwide demand of our solutions and services.
In particular, (i) the projected size of global drug R&D outsourcing service market for
drug discovery is expected to increase at a CAGR of 14.9% from US$12.3 billion in 2023 to
US$32.5 billion in 2030; (ii) the projected size of the global solid-state R&D service market
is expected to increase at a CAGR of 27.7% from US$3.8 billion in 2023 to US$20.9 billion
in 2030; (iii) the projected size of the global automated R&D lab market is expected to increase
at a CAGR of 39.6% from US$5.9 billion in 2023 to US$60.7 billion in 2030; and (iv) the
projected global material science R&D expenditure is expected to increase at a CAGR of
12.8% from US$76.3 billion in 2023 to US$177.9 billion in 2030, according to Frost &
Sullivan.
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Financial Viability
We have experienced rapid growth since our inception. During the Track Record Period,
our revenue increased significantly from RMB62.8 million in 2021 to RMB133.4 million in
2022 and further to RMB174.4 million in 2023, representing a CAGR of approximately 66.7%.
Several of the drug discovery programs developed for our customers and our drug discovery
collaboration programs have achieved remarkable progress, entering into the IND-enabling or
IND-submission stage. The substantial increase in our revenue and our rapid business growth
during the Track Record Period demonstrate our commercialization capability and business
sustainability. We believe that due to our development strategies and commercialization efforts
and plans, our revenue will continue to grow in consistency with our track record.
Based on our development strategies, commercialization plans and the above analysis, we
anticipate that we will be able to qualify as a Commercial Company by 2025. However, our
anticipation to qualify as a Commercial Company by 2025 depends on our reasonable estimate
and belief as of the Latest Practicable Date and various assumptions, many of which are beyond
our control, including but not limited to the following assumptions: (i) there will be no material
delays or obstacles to our commercialization plan and development strategies; (ii) we will be
able to deliver our solutions and services in the manner and quality anticipated; (iii) we will
be able to fulfill the contractual undertakings relating to our solutions and services and ensure
they are performed in accordance with the relevant contractual terms; (iv) our counterparties
will perform their obligations and cooperate with us in accordance with the relevant contractual
terms; (v) our counterparties can successfully develop and commercialize the drug candidates
under the relevant contracts, including completion of clinical trials, obtaining of regulatory
approvals, and manufacturing and marketing of the relevant drug candidates in a timely and
cost-efficient manner; (vi) our operations and our business relationships with major customers
and collaborators, suppliers and other business partners will not be materially affected; (vii)
there will be no regulatory regime undermining our business; (viii) there will be no material
changes in the conditions under which we operate; (ix) there will be no other material adverse
effect that would undermine our business and financial performance; (x) our business and
financial performance will be better in 2025 and our expected revenue in 2025 will be growing
at a pace similar to or higher than that during the Track Record Period; and (xi) there is no
occurrence of any event as disclosed in “Risk Factors.” See “Risk Factors—Risks Related to
the Commercialization of Our Solutions and Services” for relevant risks associated with the
commercialization of our solutions and services.
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RESEARCH AND DEVELOPMENT
As a technology-driven R&D platform, we are dedicated to continuous technological
upgrade, improvement and advancement, by either in-house R&D activities or collaboration
with our counterparties which generally are market leaders in their respective industries.
The chart below illustrates the roadmap and process to improve or defend our R&D
capabilities:
Leader of different business lines R&D scientists Development
engineers
Lab
Researchers Project manager
Whether the technology or
solution requires upgrade
END
Whether the upgraded
technology and solution are
appropriate to be launched
Solution upgrade
Feasibility analysis
Assessment, planning and
budgeting
Initial research and PoC
Experimental development
Trial operation
NO
NO
YES
Development of
technology and solutions of the upgrade technology
and solutions
Regular analysis of
progress
During the Track Record Period, we cooperated with Pfizer for the optimization of force
field parameters, and with CK Life Sciences for the development of a novel AI-powered tumor
vaccine R&D platform. For more details regarding our R&D cooperations and collaborations,
see “—Significant Cooperations and Collaborations.” We have also collaborated with various
biotechnology and pharmaceutical companies as part of our drug discovery business. For more
details regarding our drug discovery collaborations, see “—Our Drug Discovery
Solutions—Strategic Collaborations.”
Our R&D Team
Our R&D team, led by our three Co-founders, who gained postdoctoral trainings at MIT,
consisted of more than 500 scientists and technologists, as of December 31, 2023. They possess
multi-disciplinary expertise in algorithm design, physics, biology, chemistry, pharmaceutical
R&D, and automation and robotics that collectively bring insights and experience to our R&D.
Our R&D staff have exceptional backgrounds, with many holding advanced degrees and having
gained valuable experience from leading global academic institutions and well-recognized
industry participants. A majority of our R&D team have a master’s degrees or above. In
particular, as of December 31, 2023, approximately 80 members of our R&D team hold Ph.D.
degrees in various fields, including chemistry, biology, medicinal chemistry, organic chemistry,
physical chemistry, biochemistry, and computational biology. Among them, 21 individuals
have been recognized as “leading talent,” “national expert” or “overseas high-caliber
personnel” under the talent programs in China. As of December 31, 2023, we had more than
160 granted patents, approximately 39 ongoing drug discovery programs, and four R&D
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facilities with more than 10,000 sq.m. of lab space. During the Track Record Period, our R&D
expenditure increased from RMB214.4 million in 2021 to RMB359.0 million in 2022, and
further to RMB480.3 million in 2023, accounting for approximately 52.4%, 53.5% and 49.8%
of our total operating expenditure in the same years, respectively.
We also have a dedicated innovation team, the XIC team, in Beijing, China, which focuses
on fundamental innovation through AI, scientific computing and advanced experimental
technologies to continue developing the application of AI and automated experimental
technologies in life sciences and other high-value sectors such as material science (including
agritech, energy, cosmetics, and healthcare). The XIC team, led by our Co-founder Dr. Lai,
possesses robust expertise in AI, such as deep learning, data mining and multi-method
integration to define and address key issues in both the R&D process and the computational
algorithms. Dr. Lai, who holds a Ph.D. from the University of Chicago and conducted his
postdoctoral research at MIT, has extensive research experience in AI and quantum physics
applications in pharmacology. Our XIC team consisted of approximately 22 cross-disciplinary
researchers, who have on average relevant experience of approximately seven years, with
approximately 64% having a master’s degree or above, as of December 31, 2023, with diverse
expertise in, among others, computer science, chemistry, and biochemistry and molecular
biology.
Core R&D member Profile
Dr. Wen Shuhao (Ⴔ) Our executive Director and chairman of the Board,
who has over 14 years of research experience in
computational physics and quantum chemistry and
has published 36 papers with more than 2,100
citations. Dr. Wen is primarily responsible for
overseeing our overall R&D, including AI, quantum
physics-based computation, and automation
technologies. He has also contributed to our
cooperation with worldleading research institutes and
biotechnology and pharmaceutical companies. Dr.
Wen was previously awarded as one of the “Fortune’s
40 Business Elites Under 40 in China” and one of the
“Shenzhen Top Ten Outstanding Y oung
Entrepreneurs.”
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Core R&D member Profile
Dr. Ma Jian ( ৵਄) Our executive Director and Chief Executive Officer,
who has over 12 years of research experience in
physics and has published 30 papers in global leading
scientific journals, including Physics Reports,
Physical Review Letters, and Journal of Chemical
Physics. He is primarily responsible for overseeing
our overall R&D, including AI, quantum physics-
based computation, and automation technologies. Dr.
Ma was previously honored as one of the “Innovators
Under 35” by MIT Technology Review, and has been
recognized as a Shenzhen regional leading talent ( ଉ
ɛʑ) and Shenzhen overseas high-
caliber personnel ( ଉέ̹ऎ̮৷ᄴϣɛʑ).
Dr. Lai Lipeng ( ፠ɢᘄ) Our executive Director and Chief Innovation Officer,
who has over 11 years of research experience in
physics and has published multiple papers in leading
journals, including Physical Review Letters. He is
primarily responsible for overseeing our AI
development. Dr. Lai has been as a Shenzhen
overseas high-caliber personnel ( ଉέ̹ऎ̮৷ᄴϣ
ɛʑ).
Dr. Jiang Yide Alan Our executive Director and Chief Strategic Officer,
who has more than 20 years of experience in
scientific and research management, such as
developing R&D strategy and leading cross-
functional R&D external collaborations and projects.
He is primarily responsible for overseeing our drug
discovery solution business.
Dr. Zhang Peiyu ( ੵԽρ) Our Chief Scientific Officer, who has over 13 years
of research experience in physical chemistry. He is
primarily responsible for the R&D of our drug
discovery platforms.
For more details regarding our core R&D members, see “Directors and Senior
Management.”
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We place a strong emphasis on talent recruitment and retention. We recognize that talents
are key to our future success and sustainable growth. To support our business expansion, we
will continue to recruit and train top talents especially those with experience from leading
companies in the relevant industries and with expertise in the relevant fields. To achieve that
end, we will continue to foster our culture of innovation, collaboration and efficiency and
refine our organizational structure to empower our leaders and team members to take
ownership of their respective work and reward their contributions. Furthermore, we are
committed to continuously enhancing our team’s technical expertise, continuing education,
project management capabilities and service quality with a comprehensive training system,
including periodic technical training and regular sharing of industry insight to accelerate the
learning progress and improve the knowledge and skill levels of our workforce. To further
incentivize our R&D staff, we have also established an IP incentive scheme, pursuant to which
we may grant cash incentives to our employees if they file applications for or obtain certain
IP rights, receive any governmental IP awards, or help in the defense of our IP rights.
We have entered into confidentiality and invention assignment agreements, and non-
competition agreements with our R&D staff, or included confidentiality, invention assignment,
and non-competition clauses in the employment contracts with our R&D staff. For key terms
of our employment contracts with key management and technical staff, see “Directors and
Senior Management—Key Terms of Employment Contracts.” We have also entered into
confidentiality agreements or included confidentiality clauses in the relevant agreements with
our customers and collaborators. During the Track Record Period and up to the Latest
Practicable Date, we did not have any legal claims or proceedings that may have a material
adverse impact on our key R&D programs and business operations.
Our R&D Process
The diagram below illustrates the workflow of our R&D process:
Issue
identification Solution design Prototype solution
development
Rigorous testing
and optimization
Validation in
PoC studies
Deployment and
monitoring
Continuous
improvement
and iteration
Issue identification. We identify all potential issues in our R&D activities, such as the
appropriate methodology, the accuracy of our in silico tools, the optimization of our algorithms
and AI models, the adjustment of parameters of our technology platforms, the capacity of our
wet lab, the discrepancy between research plan and experimental results, and other issues in
relation to project management, data management, and team collaboration, and the evolving
industry needs. Subsequently, we conduct an initial feasibility assessment of AI-driven
solutions and design the relevant validation experiments.
Solution design. Our multi-disciplinary R&D team, including AI specialists,
pharmaceutical scientists, and wet lab technicians, work collaboratively to brainstorm potential
solutions and design a comprehensive approach that may effectively solve such problem. We
then consider the various strategies and technologies available and select the most promising
ones for further development.
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Prototype solution development. We create a prototype solution to test the selected
strategies. For example, in the DMTA cycle during our drug discovery solutions, firstly, we
typically start with spotting potential issues in the R&D process, such as the evaluation of the
structure and developability of the target, the evaluation of the affinity of the molecules, the
design and synthesis of the molecules, and the evaluation of in vitro pharmacokinetic
properties and in vivo metabolism kinetics. Secondly, we optimize the algorithms and AI
models and adjust the parameters of our in silico tools to customize for the relevant solutions.
Thirdly, we conduct wet lab experiments to verify the results generated by the in silico tools.
Lastly, we use the data generated by the wet lab to continuously optimize our in silico tools.
Our AI team develops algorithms and models, while our wet lab technicians work on the
experimental setups and procedures. We maintain a tight feedback loop between the AI and wet
lab components to ensure that the prototype solution is meaningfully functional and meets the
necessary criteria for successful application.
Rigorous testing and optimization. The prototype solution needs to undergo testing for
us to evaluate its performance and identify areas requiring improvement with computational
simulations and empirical experiments in the wet lab. Data from these tests is used to refine
the prototype, and we seek to optimize both the AI algorithms and the wet lab protocols to
achieve better results.
V alidation in PoC studies. Before a solution is ready to be deployed, it must be validated
by conducting additional tests in real-world scenarios. We typically initiate PoC studies that
closely resemble the real-world scenarios encountered in our R&D activities.
Deployment and monitoring. Once validated, the solution will be incorporated into our
R&D workflow and put into service. We monitor its performance and constantly collect data
on its impact and efficiency, such monitoring allows us to quickly identify any issues and make
the necessary adjustments to maintain its performance.
Continuous improvement and iteration. We regularly revisit our solutions, by utilizing
new data, studying feedbacks, and upgrading with technological advancements to iterate and
improve our workflows.
Our R&D Outsourcing Arrangements
We engage third party service providers to conduct certain of our R&D activities from
time to time. In line with the industry norm according to Frost & Sullivan, we generally
outsource relatively standard and administrative R&D-related activities, such as experiment
and testing procedures, IP-related filings, and research project funding applications, to third
parties so that we are able to focus our R&D resources on our core technologies, solutions and
services and improve our R&D efficiency.
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During the Track Record Period, our third party R&D service providers consisted
primarily of experimental testing service providers, CMC consultants, IP agents, and academic
institutions. In 2021, 2022 and 2023, our professional service fees under R&D expenses were
RMB34.9 million, RMB15.5 million and RMB29.2 million, respectively, which were related to
our R&D outsourcing arrangements.
INTELLECTUAL PROPERTY
We rely on unpatented trade secrets, confidential know-how, and continuing technological
innovation, to develop, strengthen, and maintain our competitive position. We also strive to
protect and enhance our proprietary technology, inventions, and improvements that are
commercially important to the growth of our business, including by seeking, maintaining, and
defending patent rights.
It is important to our future commercial success to obtain and maintain patent and other
proprietary protection for commercially important technology, inventions, and know-how
related to our business; defend and enforce our IP rights, in particular our patents, trademarks,
and copyrights; preserve the confidentiality of our trade secrets; and operate without
infringing, misappropriating, or violating the valid and enforceable patents and proprietary
rights of third parties. Our ability to stop third parties from making, using, selling, offering to
sell, or importing any technology products we develop may depend on the extent to which we
have rights under valid and enforceable patents or trade secrets that cover these activities.
The patent landscape for companies like ours is generally uncertain and can involve
complex legal, scientific, and factual issues. We cannot predict whether the patent applications
we have filed will result in issued patents in any particular jurisdiction or whether the claims
of any issued patents will provide sufficient proprietary protection from competitors.
Furthermore, we cannot guarantee the issuance of patents for any future patent applications,
nor can we ensure that any of our patents, present or future, will be effective in protecting our
software, technology, computational platform, and any product candidates we develop. In
addition, the coverage claimed in a patent application may be significantly reduced before a
patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a
result, we cannot guarantee that any technology products we develop will be protected or
remain protectable by enforceable patents. Moreover, any patents that we hold or may hold
may be challenged, circumvented or invalidated by third parties. See “Risk Factors—Risks
Related to Our Intellectual Property” for a more comprehensive description of risks related to
our IP .
Our commercial success depends, in large part, on our ability to obtain, maintain and
defend our patents and other IP portfolios. Our strategy is to file patent applications that cover
our key software and programs, AI-, calculation-, and automation-related methods, systems and
technologies, among others, that underlie our integrated technology platform and our drug
discovery programs, to secure and protect our IP rights. As of December 31, 2023, we were
granted 163 patents, including 12 in the U.S., 147 in China, two in Japan, and two in Taiwan,
and filed 312 patent applications, including 24 in the U.S., 210 in China, eight in Taiwan, four
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in Europe, and 66 under the Patent Cooperation Treaty (“ PCT”), based on which we plan to
file for applications in the U.S., China and other jurisdictions, as well as other priority PCT
applications. As of December 31, 2023, of all the 475 patents and patent applications, 472 were
internally developed and three were co-developed and co-owned under research programs with
academic institutions. Each of the co-owners has full title to such patents, and there are no
contractual tenure and material payment obligations associated with such co-owned patents.
While we believe that the specific and generic claims contained in our pending applications
provide adequate protection for various aspects of our integrated technology platform and drug
programs, third parties may nevertheless challenge such claims. Our patents are expected to
expire between 2031 and 2043, absent any adjustments or extensions.
The following table sets forth the accumulated number of our patents and patent
applications and the corresponding growth rate by geographical location for the years
indicated:
Y ear ended December 31,
2021 2022 2023
Number
Growth
rate Number
Growth
rate Number
Growth
rate
China 157 55.4 279 77.7 357 28.0
U.S. 26 73.3 32 23.1 36 12.5
Other countries 101 53.0 86 (14.9) 82 (4.7)
Total 284 (1) 56.0% 397 (2) 39.8% 475 (3) 19.6%
Notes:
(1) Ten of our patents and patent applications in 2021 are considered as material IP in relation to our
Specialist Technology Products.
(2) 17 of our patents and patent applications in 2022 are considered as material IP in relation to our
Specialist Technology Products.
(3) 17 of our patents and patent applications in 2023 are considered as material IP in relation to our
Specialist Technology Products.
During the Track Record Period and up to the Latest Practicable Date, we did not have
(i) any other material co-owned IP rights except for the three co-owned patents and other
jointly-developed IP rights under our collaboration agreements and (ii) any material
licensing-in arrangements with third parties, except for the cross-licensing arrangements under
our collaboration agreements, which do not have any contractual tenure and material payment
obligations. As of the Latest Practicable Date, we had two licensing-out arrangements with a
biotechnology company and a material science company, respectively. The patents under such
arrangements are licensed out for upfront payments, milestone payments, and/or royalties with
an indefinite term. In addition, as of December 31, 2023, there was no contract provision in
relation to residual IP rights, nor were we aware of any claim of residual IP rights by any third
parties. See “Appendix IV—Statutory and General Information—B. Further Information about
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the Business of the Company—2. Our Material Intellectual Property Rights” for the details
regarding our material granted patents and filed patent applications in connection with our
integrated technology platform and drug programs.
Prosecution is a lengthy process, during which the scope of the claims initially submitted
for examination by the U.S. Patent and Trademark Office, the China National Intellectual
Property Administration and other comparable patent authorities may be significantly narrowed
before issuance, if issued at all. We expect this may be the case with respect to some of our
pending patent applications.
The term of individual patents depends upon the legal term of the patents in the countries
in which they are obtained. In most countries in which we file, the patent term is 20 years from
the earliest date of filing a non-provisional patent application, absent any adjustments or
extensions.
In addition, in the U.S., the term of a patent covering an FDA-approved drug may, in
certain cases, be eligible for a patent term extension under the Drug Price Competition and
Patent Term Restoration Act of 1984 as compensation for the loss of patent term during the
FDA regulatory review process. The period of extension may be up to five years, but cannot
extend the remaining term of a patent beyond a total of 14 years from the date of product
approval. Only one patent among those eligible for an extension and only those claims covering
the approved drug, a method for using it, or a method for manufacturing it may be extended.
Similar provisions are available in China, Europe and in certain other jurisdictions to extend
the term of a patent that covers an approved drug. It is possible that issued U.S. or PRC patents
we may obtain in the future may be entitled to patent term extensions. If our use of product
candidates or the product candidate itself receive approvals from the FDA or the NMPA, we
intend to apply for patent term extensions, if available, to extend the term of patents that cover
the approved use or product candidate. We also intend to seek patent term extensions in any
jurisdictions where available. However, there is no guarantee that the applicable authorities,
including the FDA and the Patent Administration Department under the State Council of the
PRC, will agree with our assessment of whether such extensions should be granted, and even
if granted, the length of such extensions.
In addition to patent protection, as of December 31, 2023, we had more than 60 copyright
registrations for our proprietary software code. We also rely upon unpatented trade secrets and
confidential know-how and continuing technological innovation to develop and maintain our
competitive position. However, protecting trade secrets and confidential know-how is
challenging. We seek to protect our proprietary information, in part, using confidentiality
agreements with customers, scientific advisors, service providers, employees, and consultants,
and invention assignment agreements with our employees and selected consultants, scientific
advisors, and collaborators. These agreements may not provide meaningful protection. There
is a risk of breaches, unauthorized use, or independent development of our trade secrets or
confidential information by third parties. We may not always have sufficient remedies for such
breaches or unauthorized access to our proprietary information.
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The following table sets forth details of our material IP in relation to our Specialist
Technology Products as of December 31, 2023:
No. Intellectual Property
Name of
Registered
Proprietor
Origins and
Ownership
Specialist
Technology Product*
Importance to our
Specialist Technology
Place of
Registration
Date of
Application/
Registration Expiry Date
1 Methods and applications for
constructing polarization force fields,
methods and systems for predicting
drug crystal shapes (ٙ
ʿ
ӻ୕)
Shenzhen
Jingtai
Self-developed
Proprietary
Drug discovery
solutions/intelligent
automation solutions
(solid-state R&D
services)
Related to AI
technology used to
improve the general
force field parameters
PRC August 29,
2016
August 29,
2036
2 Atom type definition system and atom
type matching method thereof (ɿ
ج)
Shenzhen
Jingtai,
Shenzhen
Zhiyao
Self-developed
Proprietary
Drug discovery
solutions/XtalPi R&D
solutions (material
science)/intelligent
automation solutions
(solid-state R&D
services)
Related to AI
technology used to
improve the accuracy
of force field
calculation
PRC; United
States
May 4, 2018 May 4, 2038
3 Automatic conformation analysis
method for quasi-drug organic
molecules (Іਗʷ࿴
ج)
Shenzhen
Jingtai
Self-developed
Proprietary
Drug discovery
solutions/intelligent
automation solutions
(solid-state R&D
services)
Related to AI
technology used to
improve the accuracy
of molecular design
and evaluation
PRC; United
States
May 9, 2018 May 9, 2038
4 Scientific computing process
management system (೻၍
ଣӻ୕)
Shenzhen
Jingtai
Self-developed
Proprietary
Drug discovery
solutions/XtalPi R&D
solutions (material
science)/intelligent
automation solutions
(solid-state R&D
services)
Related to cloud
computing
technology used to
improve the
operational efficiency
of cloud
infrastructure
PRC; United
States
May 10, 2018 May 10, 2038
5 Computational task management and
analysis system for molecular force
field parameter generation and
method of operation thereof ( ʱɿɢ
ӻ୕
ج)
Shenzhen
Jingtai,
Shenzhen
Zhiyao
Self-developed
Proprietary
Drug discovery
solutions/intelligent
automation solutions
(solid-state R&D
services)
Related to AI
technology used to
adjust the computing
power to accelerate
the force field
construction
PRC; United
States
December 21,
2018
December 21,
2038
6 Molecular free energy calculations,
stability analysis methods, devices,
equipment and storage media ( ʱɿІ
eༀໄe
ண௪ʿπᎷʧሯ)
Shanghai
Zhiyao
Self-developed
Proprietary
Drug discovery
solutions/XtalPi R&D
solutions (material
science)
Related to AI
technology used to
accurately calculate
the free energy of
molecular crystals,
thereby increasing
operational efficiency
and reducing costs
PRC December 10,
2021
December 10,
2041
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No. Intellectual Property
Name of
Registered
Proprietor
Origins and
Ownership
Specialist
Technology Product*
Importance to our
Specialist Technology
Place of
Registration
Date of
Application/
Registration Expiry Date
7 Method for sequence design of proteins,
method for structural design of
proteins, apparatus and electronic
device (eஐͣ
eༀໄʿཥɿண௪)
Beijing Jingtai Self-developed
Proprietary
Drug discovery solutions Related to AI
technology used to
accelerate the
generation of
preferred protein
sequences
PRC February 9,
2022
February 9,
2042
8 Cyclic peptide design methods, methods
for generating complex structures,
devices and electronic equipment ( ᐑ
͛ϓ˙
eༀໄʿཥɿண௪)
Beijing Jingtai Self-developed
Proprietary
Drug discovery solutions Related to AI
technology used to
accelerate the
identification of or
generate ab initio
optimal proteins that
have higher binding
effect with target
receptor
PRC March 3, 2022 March 3, 2042
9 Grippers and gripping devices with such
grippers, mobile robots ( Ѱ˧ʿ੭Ϟ
Ѱ՟ༀໄe୅ਗዚኜɛ)
Shanghai
Zhiyao
Self-developed
Proprietary
Intelligent automation
solutions (automated
chemical synthesis
services)
Related to automation
technology used to
improve the stability
of the automation
equipment during
operation
PRC June 22, 2022 June 22, 2032
10 A powder dispensing apparatus and a
powder dispensing system ( ɓ၇४͋
ʱৣண௪ʿ४͋ʱৣӻ୕)
Shenzhen
Jingtai
Self-developed
Proprietary
Intelligent automation
solutions (automated
chemical synthesis
services)
Related to automation
technology used to
automate powder
dispensing, thereby
enhancing the
efficiency of
experiments
involving powder
samples
PRC June 29, 2022 June 29, 2032
11 Powder drums, powder drum units,
powder dispensing equipment and
powder dispensing systems ( ̋४૗e
४૗ༀໄe४͋ʱৣண௪ʿ४͋ʱৣ
ӻ୕)
Shenzhen
Jingtai
Self-developed
Proprietary
Intelligent automation
solutions (automated
chemical synthesis
services)
Related to automation
technology used for
the design of powder
drum with a simple
structure and lower
cost
PRC June 29, 2022 June 29, 2032
12 Sample Preparation Workstation and
Sample Preparation System (Ⴁ௪
Ⴁ௪ӻ୕)
Shenzhen
Jingtai
Self-developed
Proprietary
Intelligent automation
solutions (automated
chemical synthesis
services)
Related to automation
technology used to
automate sample
preparation, thereby
improving operational
efficiency and
reducing costs
PRC July 15, 2022 July 15, 2032
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No. Intellectual Property
Name of
Registered
Proprietor
Origins and
Ownership
Specialist
Technology Product*
Importance to our
Specialist Technology
Place of
Registration
Date of
Application/
Registration Expiry Date
13 Method for constructing a toxicity
prediction model and prediction
model, prediction method and
apparatus (ج
ʿༀໄ)
Beijing Jingtai Self-developed
Proprietary
Drug discovery solutions Related to AI
technology used to
improve the accuracy
of drug toxicity
prediction
PRC December 27,
2022
December 27,
2042
14 FACES Cloud Computing Resource
Scheduling Platform V1.0 (FACES ථ
̨̻V1.0)
Shenzhen
Jingtai
Self-developed
Proprietary
Drug discovery
solutions/XtalPi R&D
solutions (material
science)/intelligent
automation solutions
(solid-state R&D
services)
Related to cloud
computing
technology used to
develop our cloud
resources allocation
system, thereby
improving operational
efficiency of and
reducing cloud
computing costs for
our cloud resources
allocation system
PRC May 6, 2016 N/A
15 Free Energy Perturbation Calculator
V1.0.9 (ၑழ΁V1.0.9)
Shanghai
Zhiyao
Self-developed
Proprietary
Drug discovery
solutions/intelligent
automation solutions
(solid-state R&D
services)
Related to AI
technology used to
improve the accuracy
of free energy
perturbation
calculation
PRC January 4,
2022
N/A
16 ID4 Drug Design Platform V1.0.0 (ID4
̨̻V1.0.0)
Shanghai
Zhiyao
Self-developed
Proprietary
Drug discovery
solutions/intelligent
automation solutions
(solid-state R&D
services)
Related to AI
technology used to
integrate the various
algorithms and
operational
workflows for drug
discovery
PRC January 4,
2022
N/A
* Represents areas that we have applied our material IP to and/or that we expect to apply our material IP to
We also own numerous trademarks registered in China, the U.S. and foreign jurisdictions,
including “XtalPi” and “Ҧ.” We pursue additional trademark registrations to the extent
we believe doing so will be beneficial to our competitive position. See “Appendix
IV—Statutory and General Information—B. Further Information about the Business of the
Company—2. Our Material Intellectual Property Rights” to this prospectus for further details
regarding our IP .
During the Track Record Period and up to the Latest Practicable Date, we had not been
involved in any material proceedings in respect of IP right infringement claims against us or
initiated by us. However, there are risks if we fail to protect our IP rights in the future. For
details, see “Risk Factors—Risks Related to Our Intellectual Property.”
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COMPETITION
The global markets for drug and material science R&D and solid-state R&D are rapidly
evolving and subject to intense competition as a result of technology innovation and shifting
customer needs. Given our presence in China and globally, we face potential competition from
many different sources both locally and globally, while the solutions and applications offered
by our competitors, including both AI-powered and traditional drug discovery solutions
providers, vary in size, breadth, and scope.
Our proprietary integrated in silico and wet lab platform, technical expertise and
technology innovation provide us with significant competitive advantages over existing and
new entrants. According to Frost & Sullivan, we are one of the leaders in the adoption of
quantum physics-based computation, AI, and automation technologies in drug R&D. While we
compete competently on the basis of these factors, many emerging and established companies
have also built upon their technologies and competencies in the business areas we operate:
 For our drug discovery solutions, we face competition from many sources, including
major pharmaceutical companies, specialist biotechnology and pharmaceutical
companies, technology companies, academic institutions and government agencies,
and public and private research institutions. In particular, we face competition from
competitors engaged in AI-powered early-stage drug R&D. Some of our competitors
possess well-established capabilities in drug R&D and have long-standing
relationships with many of our existing and potential collaborators and customers,
including large biotechnology and pharmaceutical companies and academic
institutions. We also face competition from pharmaceutical companies that develop
AI-powered drug R&D solutions internally, smaller companies that offer drug
discovery solutions and services directed at more specific markets than we target, as
well as a large number of companies focused on applying AI and quantum
physics-based computation technologies to drug discovery. However, only a few
competitors possess both dry lab and wet lab capabilities, like us, who are more
capable of further accelerating the drug discovery process. In addition, according to
Frost & Sullivan, some CROs have begun to purchase standard third-party AI tools
to conduct drug R&D; however, most CROs principally focus on drug development,
such as clinical research and trials, while we focus on drug discovery, which is an
earlier stage of drug R&D.
 For our solid-state R&D, we face competition from companies providing
computational and/or experimental solid-state R&D services. This includes
specialized solid-state CROs, other large CROs, and AI-focused CROs. We also face
competition from pharmaceutical companies that develop solid-state R&D
internally. However, only a few competitors incorporate both in silico prediction and
wet lab experiment, like us, which are capable of offering more efficient solid state
R&D services. Although the current market is still dominant by the traditional
manual method providers, like specialized solid-state CROs and other large CROs,
the market share of AI-focused service providers is expected to grow due to the
advantages of AI-based solid-state R&D services in terms of higher R&D efficiency
and better quality.
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BUSINESS DEVELOPMENT AND MARKETING
Our business development and marketing team consisted of approximately 45 members
with relevant qualifications and experience in the pharmaceutical and material science
industries, as of December 31, 2023. Our business development team leads the business
development process from connecting with potential customers to the kick-off of our programs
for different business lines. Tasks include, but are not limited to, identifying potential
customers and programs, establishing and maintaining relationships with our potential and
existing biotechnology and pharmaceutical partners and research institutions, understanding
our customers’ business development objectives and challenges, assisting our R&D team in
preparing and tailoring solutions, coordinating between our customers and our R&D team, and
negotiating and consummating agreements.
Working in collaboration with our scientists, technologists and subject matter experts, our
marketing team engages with existing and prospective customers to understand their needs and
offer tailored solutions. Our marketing team creates marketing collateral and sales enablement
tools and conducts multi-channel marketing campaigns to highlight the benefits and
differentiated capabilities of our platform and establish collaborations and commercialize our
drug or new materials discovery business, solid-state R&D services and other XtalPi R&D
solutions, including by attending in-person and online events such as academic conferences
and industry exhibitions, as well as leveraging word-of-mouth marketing from our past
achievements and building up favorable industry reputation. Through these activities, we aim
to promote the competitive advantages of our technologies, solutions and services and
differentiate us from other competitors.
To support our business development and marketing efforts, we have also established a
dedicated market analysis team. This specialized team focuses on forecasting industry trends,
evaluating market prospects, and carefully selecting and evaluating potential customers. Their
expertise enables us to screen opportunities more effectively for each line of business, further
enhancing our business development and marketing efforts.
Pricing
We price our solutions and services considering a variety of factors, such as our contract
fulfillment costs, the value of our solutions or services to the customer, the scarcity of our
solutions or services in the market, the urgency and certainty of the delivery of our solutions
or services, our delivery capacity, competition in the market, market’s willingness to pay, the
overall market condition, and competitors’ pricing strategies. Taking these factors into account,
we may adopt either cost-driving pricing or target-return pricing for different solutions or
services.
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OUR CUSTOMERS
Our customers comprise (i) ordinary customers to which we provide solutions and charge
service fees, (ii) collaborators with which we jointly work on various therapeutic targets and
share economic interests, and (iii) collaborator-investees, which we invest in and provide
solutions to. For details regarding our collaborators and collaborator-investees, see “—Our
Drug Discovery Solutions—Strategic Collaborations.” During the Track Record Period, our
customers consisted primarily of China- and U.S.-based biotechnology and pharmaceutical
companies. The revenue generated from our five largest customers in 2021, 2022 and 2023 was
RMB38.8 million, RMB66.1 million and RMB63.3 million, respectively, representing
approximately 61.8%, 49.6% and 36.3% of our total revenue in the same years, respectively.
To the best knowledge of our Directors, each of our five largest customers for each year
during the Track Record Period is an Independent Third Party. In addition, to the best
knowledge of our Directors, except for being our collaborator-investees (including Signet
Group, Metis, Beijing META Biotechnology Co., Ltd. and Customer D) or their respective
affiliates, as applicable, there was no other past or present relationships (including financing,
trust or otherwise) between us and each of our five largest customers, their respective
substantial shareholders, directors or senior management, or any of their respective associates
during the Track Record Period. None of our Directors, their close associates, or any
Shareholder, which to the best knowledge of our Directors owns more than 5.0% of the total
number of issued Shares, had any interest in any of our five largest customers for each year
during the Track Record Period.
The following table sets forth details of our five largest customers for each year during
the Track Record Period.
Y ear ended December 31, 2021
Customer
Commencement of
relationship
Customer background and
principal business
Nature of
revenue
Revenue
amount
Percentage
of total
revenue
(RMB in
thousands) (%)
Signet Group * December 2019 A Shenzhen-based private pre-
clinical stage
biopharmaceutical company
with a registered capital of
RMB1.7 million, focusing on
the development of innovative
targeted cancer drugs,
established in December 2020
Drug discovery
solutions
15,094 24.0
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Customer
Commencement of
relationship
Customer background and
principal business
Nature of
revenue
Revenue
amount
Percentage
of total
revenue
(RMB in
thousands) (%)
Beijing META
Biotechnology Co., Ltd.
(ࠢ
ʮ̡)
*
June 2021 A Shenzhen-based private
innovative drug discovery
company with a registered
capital of RMB1.0 million,
focusing on autoimmune
diseases, established in 2021
Drug discovery
solutions
12,696 20.2
Shanghai Blueray
Biopharma Co., Ltd. ( ɪ
ʮ
̡)
March 2021 A Shanghai-based private
biopharmaceutical company
with a registered capital of
RMB30.0 million, focusing on
the development of first-in-
class and/or best-in-class
small molecule, established in
December 2016
Drug discovery
solutions
4,127 6.6
3D Medicines, Inc. (ࠔ
ᔼᖹ(ɪऎ)ʮ̡)
February 2021 A Shanghai-based
biopharmaceutical company
with total assets of RMB1.3
billion as of December 31,
2022, focusing on the R&D
and commercialization of
drugs for tumor
immunotherapy, established in
2014, listed on the Stock
Exchange
Drug discovery
solutions
3,686 5.9
Customer A April 2017 A New Y ork-based multinational
biopharmaceutical corporation
with total assets of US$197.2
billion as of December 31,
2022, focusing on the
development and production
of medicines and vaccines,
founded in 1849, listed on the
New Y ork Stock Exchange
Solid-state R&D
services and
other services
3,201 5.1
Total 38,804 61.8
* denotes our collaborator-investee
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Y ear ended December 31, 2022
Customer
Commencement of
relationship
Customer background and
principal business
Nature of
revenue
Revenue
amount
Percentage
of total
revenue
(RMB in
thousands) (%)
Xaicure August 2022 A Suzhou-based private
innovative biopharmaceutical
company with a registered
capital of RMB10.0 million,
focusing on the pre-clinical
and clinical stage
development of small
molecule targeted drugs, with
a research focus on oncology
therapeutic areas
Drug discovery
solutions
33,019 24.8
Customer D
* June 2021 A Shenzhen-based private
genomics-based platform with
a registered capital of
US$30.0 million, focusing on
the development of novel
medicines targeting human
RNAs, established in May
2021
Drug discovery
solutions
9,434 7.1
Customer A April 2017 A New Y ork-based multinational
biopharmaceutical corporation
with total assets of US$197.2
billion as of December 31,
2022, focusing on the
development and production
of medicines and vaccines,
founded in 1849, listed on the
New Y ork Stock Exchange
Solid-state R&D
services
9,116 6.8
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Customer
Commencement of
relationship
Customer background and
principal business
Nature of
revenue
Revenue
amount
Percentage
of total
revenue
(RMB in
thousands) (%)
Shanghai Blueray
Biopharma Co., Ltd.
(ࠢ
ʮ̡)
March 2021 A Shanghai-based private
biopharmaceutical company
with a registered capital of
RMB30.0 million, focusing on
the development of first-in-
class and/or best-in-class
small molecule, established in
December 2016
Chemical
synthesis
services and
drug discovery
solutions
9,076 6.8
Qilu Pharmaceutical Co.,
Ltd. (ʮ̡)
December 2019 A Jinan-based private
pharmaceutical company with
a registered capital of
RMB600.0 million, focusing
on the R&D, manufacturing,
sales and international trade
of both APIs and drug
products, established in
August 1992
Drug discovery
solutions
5,500 4.1
Total 66,145 49.6
* denotes our collaborator-investee
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Y ear ended December 31, 2023
Customer
Commencement of
relationship
Customer background and
principal business
Nature of
revenue
Revenue
amount
Percentage
of total
revenue
(RMB in
thousands) (%)
Customer A April 2017 A New Y ork-based multinational
biopharmaceutical corporation
with total assets of US$197.2
billion as of December 31,
2022, focusing on the
development and production
of medicines and vaccines,
founded in 1849, listed on the
New Y ork Stock Exchange
Solid-state R&D
services
21,048 12.1
Customer D
* June 2021 A Shenzhen-based private
genomics-based platform with
a registered capital of
US$30.0 million, focusing on
the development of novel
medicines targeting human
RNAs, established in May
2021
Drug discovery
solutions
15,133 8.7
Customer E March 2022 A Taiwan-based
biopharmaceutical company
with total assets of TWD4.0
billion as of December 31,
2022, focusing on the
development of therapeutic
drugs for cancer, established
in February 2003, listed on
the Taipei Exchange
Drug discovery
solutions and
chemical
synthesis
services
12,921 7.4
Customer F April 2023 A Indianapolis-based leading
global pharmaceutical
company with total assets of
US$49.5 billion as of
December 31, 2022, focusing
on the discovery,
development, manufacture,
and sale of pharmaceutical
products, founded in 1876,
listed on the New Y ork Stock
Exchange
Drug discovery
solutions
7,392 4.2
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Customer
Commencement of
relationship
Customer background and
principal business
Nature of
revenue
Revenue
amount
Percentage
of total
revenue
(RMB in
thousands) (%)
Daewoong Pharma March 2022 A Seoul-based pharmaceutical
company with total assets of
KRW1.6 trillion as of
December 31, 2022, focusing
on the development,
manufacturing and
commercialization of
pharmaceutical products,
established in 1945, listed on
the Korea Exchange
Drug discovery
solutions
6,843 3.9
Total 63,337 36.3
* denotes our collaborator-investee
OUR SUPPLIERS
During the Track Record Period, our suppliers for our main business operations consisted
primarily of R&D consumables and equipment suppliers and R&D service providers. Our
suppliers also included property owners, renovation service providers and travel management
services providers during the Track Record Period. Purchases from our five largest suppliers
in 2021, 2022 and 2023 amounted to RMB116.2 million, RMB77.1 million and RMB122.7
million, respectively, representing approximately 33.7%, 17.6% and 27.1% of our total
purchases in the same years, respectively.
To the best knowledge of our Directors, except for Tencent Cloud Computing (Beijing)
Co., Ltd., which is an associate of Image Frame Investment (HK) Limited, our substantial
shareholder, each of our five largest suppliers for each year during the Track Record Period is
an Independent Third Party. In addition, to the best knowledge of our Directors, except for
Image Frame Investment (HK) Limited being one of our Pre-IPO Investors, there was no other
past or present relationships (including financing, trust or otherwise) between us and each of
our five largest suppliers, their respective substantial shareholders, directors or senior
management, or any of their respective associates during the Track Record Period. None of our
Directors, their close associates, or any Shareholder, which to the best knowledge of our
Directors owns more than 5.0% of the total number of issued Shares, had any interest in any
of our five largest suppliers for each year during the Track Record Period.
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Below is a summary of the key terms of a typical agreement with our R&D consumables
and equipment provider:
 Products/Services . The supplier provides us with products, such as R&D
consumables and equipment, and/or services as specified in the master agreement or
purchase order.
 Term. Typically one year, or until both parties fulfill their obligations under the
agreement.
 Price . Unless both parties agree on a lower price for a particular purchase, the price
of the products (including services) shall be fixed as set forth in the agreement.
 Payment . We are required to make payments to the supplier according to the
payment schedule agreed by the parties.
 Credit Term . Our suppliers generally settle with us by wire transfer and grant to us
credit terms within 30 to 60 days. Certain suppliers also require for prepayment.
 Confidentiality . The supplier agrees to keep confidential any information in relation
to the performance of the agreement, including but not limited to any documents,
know-how and other information related to us, the agreement or the purchase order.
 Discontinue of Supply . In the event of cessation of production or supply of any
products, the supplier shall notify us immediately; we shall have the right to place
a final order for such products in such quantities as may be reasonably required, and
the supplier shall accept such order at the price agreed upon by the parties, which
shall not be higher than the applicable price set forth in the agreement.
Below is a summary of the key terms of a typical agreement with our R&D service
provider:
 Services . The supplier provides us with services such as compound testing services
as specified in the master agreement or purchase order.
 Term. Typically one year, or until both parties fulfilled their obligations under the
agreement.
 Payment . We are required to make payments to the supplier according to the
payment schedule agreed by the parties.
 Credit Term . Our suppliers generally settle with us by wire transfer and grant to us
credit terms within ten to 30 days.
 Confidentiality . We and the supplier agree to keep confidential any information in
relation to the performance of the agreement, including but not limited to the
confidential information received from the other party.
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The following table sets forth details of our five largest suppliers for each year during the
Track Record Period.
Y ear ended December 31, 2021
Supplier
Commencement of
relationship
Supplier background and
principal business
Nature of
purchase
(cash basis)
Purchase
amount
Percentage
of total
purchases
(RMB in
thousands) (%)
Guangdong Zhongke
Scientific & Technical
Co., Ltd. (ආ
ʮ̡)
May 2020 A Guangzhou-based private
professional foreign trading
company with a registered
capital of RMB50.0 million,
which is a subsidiary of
Guangdong Academy of
Sciences and controlled by
Guangdong Province,
established in October 1993
R&D equipment 46,847 13.6
Shenzhen Homyi
Technology Group
Co., Ltd. (Ҧ
ʮ̡)
February 2021 A Shenzhen-based private
company with a registered
capital of RMB101.0 million,
primarily engaged in the
provision of lab solutions,
biological purification,
electromechanical installation,
founded in January 2011
Renovation
services
26,801 7.8
Shenzhen Suno Experiment
Equipment Co., Ltd.
(ଉέ̹ᒄፕྼ᜕ண௪Ϟ
ʮ̡)
December 2020 A Shenzhen-based private lab
system equipment and
solutions provider with a
registered capital of RMB36.0
million, founded in November
2006
Renovation
services
21,794 6.3
Supplier D September 2021 A Shanghai-based private
scientific research and
technical service provider
with a registered capital of
RMB1.3 billion, founded in
October 2019
R&D equipment 11,188 3.2
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Supplier
Commencement of
relationship
Supplier background and
principal business
Nature of
purchase
(cash basis)
Purchase
amount
Percentage
of total
purchases
(RMB in
thousands) (%)
Pharmaron Beijing Co.,
Ltd. ( ੰᎲʷϓ(̏ԯ)อ
ʮ̡)
May 2019 A Beijing-based life science
R&D service company with
total assets of RMB20.5
billion as of December 31,
2022, founded in July 2004
and listed on the Stock
Exchange and the Shenzhen
Stock Exchange
Experimental
testing
services
9,579 2.8
Total 116,209 33.7
Y ear ended December 31, 2022
Supplier
Commencement of
relationship
Supplier background and
principal business
Nature of
purchase
(cash basis)
Purchase
amount
Percentage
of total
purchases
(RMB in
thousands) (%)
Shenzhen Y ukun
Technology Co., Ltd.
(ʮ
̡)
May 2021 A Shenzhen-based private new
technology company with a
registered capital of RMB2.0
million, specializing in the
development and sales of
electrical drive and motion
control technology, founded in
November 2015
R&D equipment
and raw
materials
18,064 4.1
Shanghai Zhangtou Zhigu
Technology Development
Co., Ltd. ( ɪऎੵҳ౽ԋ
ʮ̡)
November 2022 A Shanghai-based private
company with a registered
capital of RMB680.0 million,
primarily covering real estate
development and operation,
energy technology,
information and network
technology development,
technology services, transfer
and consulting, founded in
January 2022
Rental fee 17,058 3.9
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Supplier
Commencement of
relationship
Supplier background and
principal business
Nature of
purchase
(cash basis)
Purchase
amount
Percentage
of total
purchases
(RMB in
thousands) (%)
Zhuhai Huaya Machinery
Technology Co., Ltd.
(ҦϞ
ʮ̡)
March 2022 A Zhuhai-based private
professional intelligent
manufacturing solutions
provider with a registered
capital of RMB23.8 million,
founded in June 2007
Raw materials
and services
14,565 3.3
Guangdong Zhongke
Scientific & Technical
Co., Ltd. (ආ
ʮ̡)
May 2020 A Guangzhou-based private
professional foreign trading
company with a registered
capital of RMB50.0 million,
which is a subsidiary of
Guangdong Academy of
Sciences and controlled by
Guangdong Province,
established in October 1993
R&D equipment 14,265 3.3
Lab Direct (Shanghai) Life
Science Technology
Co., Ltd. (จ(ɪ
ऎ)ʮ̡)
November 2021 A Shanghai-based private lab
procurement and supply
management service provider
with a registered capital of
RMB20.0 million, established
in January 2014
R&D equipment
and raw
materials
13,170 3.0
Total 77,122 17.6
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Y ear ended December 31, 2023
Supplier
Commencement of
relationship
Supplier background and
principal business
Nature of
purchase
(cash basis)
Purchase
amount
Percentage
of total
purchases
(RMB in
thousands) (%)
Supplier E March 2023 A Wuxi-based large-scale PRC
state-owned enterprise with a
registered capital of
RMB100.0 million, primarily
engaged in clean engineering
and industrial construction
engineering, founded in 1986
Renovation
services
57,809 12.8
Shanghai Simbay Industrial
(Group) Co., Ltd. ( ɪऎ
̏ྼุ(ණྠ)ʮ̡)
April 2021 A Shanghai-based private life
science and technology
industry investment and
operation company with a
registered capital of RMB1.8
billion, focusing on the
development and operation of
industrial parks, and
investment management,
established in December 2011
Rental fee 29,062 6.4
Shanghai Zhangtou Zhigu
Technology Development
Co., Ltd. ( ɪऎੵҳ౽ԋ
ʮ̡)
November 2022 A Shanghai-based private
company with a registered
capital of RMB680.0 million,
primarily covering real estate
development and operation,
energy technology,
information and network
technology development,
technology services, transfer
and consulting, founded in
January 2022
Rental fee 15,373 3.4
Lab Direct (Shanghai) Life
Science Technology Co.,
Ltd. (จ(ɪऎ)͛
ʮ̡)
November 2021 A Shanghai-based private lab
procurement and supply
management service provider
with a registered capital of
RMB20.0 million, established
in January 2014
R&D equipment
and raw
materials
10,611 2.3
Supplier F September 2021 A Shanghai-based travel
management services
company with a registered
capital of RMB50.0 million,
established in June 2015
Travel
management
services
9,866 2.2
Total 122,721 27.1
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Overlapping of Customers and Suppliers
During the Track Record Period, some of our drug discovery solutions and automated
chemical synthesis customers were also our suppliers for R&D equipment and raw materials
as well as experimental testing services. According to Frost & Sullivan, it is common in the
industry that R&D equipment and raw materials suppliers and experimental testing services
providers in the pharmaceutical industry may also have their own R&D programs and have
demand for our drug discovery solutions and/or automated chemical synthesis services. The
number of our overlapping customers and suppliers was nil, nil and six in 2021, 2022 and 2023,
respectively. Negotiations of the terms of our sales to and purchases from these overlapping
customers and suppliers were conducted on an individual basis and the sales and purchases
were neither inter-connected nor inter-conditional with each other. Our Directors confirmed
that all of our sales to and purchases from these overlapping customers and suppliers were
conducted in the ordinary course of business under normal commercial terms and on arm’s
length basis. Our revenue from these overlapping customers and suppliers in 2021, 2022 and
2023 was nil, nil and RMB0.7 million, respectively. Our purchases amounts attributable to
these overlapping customers and suppliers in 2021, 2022 and 2023 was nil, nil and RMB8.3
million, respectively.
EMPLOYEES
As of December 31, 2023, we had 783 employees, including a total of 420 employees with
master’s or doctorate degrees, accounting for approximately 53.6% of our employees. Among
them, 753 of our employees were located in China and 30 employees were located in the U.S.
The following table sets forth a breakdown of our employees by function as of December 31,
2023.
Function
Number of
Employees
Percentage of
Total
(%)
Management 56 7.2
R&D 543 69.3
General Administration 139 17.8
Business Development and Marketing 45 5.7
Total 783 100.0
Our success depends on our ability to attract, motivate, train and retain qualified
personnel. We believe we offer our employees competitive compensation packages and an
environment that fosters career development. To recruit new talent, we employ various means
such as campus events and colleague referrals, which enables us to build and cultivate our own
pool of skilled professionals. Our initiatives for talent retention encompass executive coaching,
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employee surveys or engagement, training and development, compensation and rewards. As a
result of these efforts, we believe we have been generally successful in attracting and retaining
qualified personnel, and have established a stable core management team.
To formalize our employment relations, we enter into individual employment contracts
with our employees. These contracts cover matters such as salaries, bonuses, employee
benefits, workplace safety, confidentiality obligations, work product assignment clause and
grounds for termination. We have also entered into confidentiality and invention assignment
agreements and non-competition agreements with all of our employees, or included
confidentiality, invention assignment, and non-competition clauses in the employment
contracts of our employees. In particular, we ensure that any inventions created by our
employees during our employment are assigned to us through confidentiality and invention
assignment agreements. See “Directors and Senior Management—Key Terms of Employment
Contracts” for key terms of our employment contracts with senior management members and
other key personnel.
To maintain the quality, knowledge and skill levels of our workforce, we provide
continuing education and training programs, both internally and externally, to enhance their
technical, professional or management skills. We also conduct periodic trainings sessions to
ensure their awareness and compliance with our policies and procedures in various aspects.
Furthermore, we provide various incentives and benefits to our employees, including
competitive salaries, bonuses and incentive schemes to our employees, particularly our key
employees.
As required by PRC laws and regulations, we participate in social security schemes
organized by municipal and provincial government, including pension, medical insurance,
work-related injury insurance, unemployment insurance, maternity insurance and housing
funds. We are required under PRC laws and regulations to make contributions to employee
social security schemes at specified percentages of the salaries, bonuses and certain allowances
of our employees, up to a maximum amount specified by the local government from time to
time. We have granted, and plan to continue to grant, share-based incentive awards to our
employees in the future to incentivize their contributions to our growth and development. See
“Risk Factors—Risks Related to Our Operations—Failure to make full contributions to social
insurance and housing provident funds for our employees in accordance with the relevant PRC
laws and regulations may subject us to penalties.”
Our employees are represented by labor unions. We believe that we maintain a positive
working relationship with our employees. During the Track Record Period and up to the Latest
Practicable Date, we had not experienced any material disputes with our employees.
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INSURANCE
We maintain insurance policies that are required under PRC laws and regulations, and
based on our assessment of our operational needs and industry practice. As required by
regulations in China, we participate in various employee social security plans that are
organized by municipal and provincial governments, including pension insurance,
unemployment insurance, maternity insurance, work-related injury insurance, medical
insurance and housing funds. In addition, we have also acquired commercial insurance policies
for all employees as a supplemental employee benefit, such as term life insurance, accidental
injury insurance, critical illness insurance, medical insurance, and traffic accident insurance.
In the future, to the extent that any of the foregoing types of insurances becomes mandatory
due to changes in law or other reasons, we will acquire such insurance to ensure continued
compliance with the law. Our Directors believe that our existing insurance coverage is
sufficient for our present operations and aligns with the industry practice in the PRC.
During the Track Record Period and up to the Latest Practicable Date, we did not file any
material insurance claims, nor did we encounter any material difficulties in renewing our
insurance policies.
PROPERTIES
Owned Properties
As of the Latest Practicable Date, we did not own any real property.
Leased Properties
As of the Latest Practicable Date, we leased 17 properties in Shenzhen, Shanghai,
Beijing, Guangzhou, Suzhou, Hong Kong, and Cambridge, Massachusetts. Our headquarters is
based in Shenzhen, China, where we have our main administrative offices and laboratories
occupy a total area of approximately 11,207 sq.m. We rent approximately 15,508 sq.m. of lab
space in Shanghai, China for our R&D and lab operations expansion and business development
under lease that will expire in May 2029. We also occupy approximately 1,303 sq.m. of office
space in Beijing, China for our AI research and approximately 17 sq.m. of office space in Hong
Kong under leases that will expire in July 2024 and October 2025, respectively. Furthermore,
we have a business development and strategy office and an innovative demo lab in Cambridge,
Massachusetts, occupying a total of over 100 sq.m. of office space and lab space. Our
Cambridge office and innovative demo lab is staffed with experienced scientists in drug and
material science R&D and serves principally as our business development center under a
service agreement. As of the Latest Practicable Date, our leased properties had a total gross
floor area of approximately 37,202 sq.m., and each leased property ranges from a gross floor
area of approximately 17 sq.m. to 15,508 sq.m. The relevant lease agreements have lease
expiration dates ranging from June 2024 to May 2029.
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We believe that our leased facilities meet our present needs and we regularly assess our
space requirements. As of the Latest Practicable Date, we were not aware of any environmental
issues or other constraints that would materially impact the intended use of our facilities.
As of the Latest Practicable Date, the lessors of five of our leased properties in China had
not provided us with valid title certificates or relevant authorization documents evidencing
their rights to lease the properties, of which the lessors of three of our leased properties in
China were not the owner as stated on the title certificates of such leased properties. Moreover,
we had not entered into a supplemental lease agreement with the lessor of one of our leased
properties for expanded area and had not yet completed the renewal of lease agreements with
the lessors of three of our leased properties, as of the same date. As a result, these leases may
not be valid, and there are risks that we may not be able to continue to use such properties. In
addition, as of the Latest Practicable Date, five of our leased properties, including our lease
agreements for our Shenzhen headquarters and two office premises in Guangzhou, are subject
to prior-registered mortgages. Each of the lease agreements for our Shenzhen headquarters
provides that the lease agreement could be unilaterally terminated by either party if the
property is foreclosed by the mortgagee. If the mortgagees foreclose our leased properties with
prior-registered mortgages, we could be required to vacate the properties. Pursuant to the
applicable PRC laws and regulations, property lease contracts must be registered with the local
branch of the Ministry of Housing and Urban-Rural Development of the PRC. As of the Latest
Practicable Date, we had not obtained lease registration for 12 of the properties located on
state-owned land parcels we leased in China, primarily for the following reasons beyond our
control: (1) the registration for sub-lease requires cooperation of the original lessors and the
lessee-lessors according to the local authority, (2) the ownership certificates of certain
properties cover areas larger than those of our leased properties, and for the registration of our
leases, the property owners have to separate their properties and apply for new property
ownership certificates for the properties leased to us, and (3) some of the lessors were not
cooperative enough to provide documents necessary for the lease registration. We will take all
practicable and reasonable steps to ensure that the unregistered leases are registered if required
by competent authorities, including requiring relevant property owners to cooperate with us to
complete the lease registration under new or renewed lease agreements. Our PRC Legal
Advisor has advised us that the lack of registration of the lease contracts will not affect the
validity of the lease agreements under PRC laws. See “Risk Factors—Risks Related to Our
Operations—There are risks associated with our leased properties or lease agreements. Our use
of some leased properties could also be challenged by third parties or governmental
authorities.”
During the Track Record Period and up to the Latest Practicable Date, we did not
encounter any material difficulties in renewing lease agreements or locating new premises for
our facilities. We do not foresee any major challenges or impediments in renewing the relevant
leases upon their expiration. In some cases, our tenancy rights are subject to the mortgage loans
by our lessors’ lenders. In the event of a foreclosure, there is a possibility that we may lose our
lease. However, such situations did not occur during the Track Record Period and up to the
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Latest Practicable Date. If we need to add or relocate to new facilities, or expand existing
facilities to accommodate additional employees, we believe that suitable space will be
available to accommodate our operations.
According to section 6(2) of the Companies (Exemption of Companies and Prospectuses
from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), this
prospectus is exempted from compliance with the requirements of section 342(1)(b) of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph
34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance which requires a valuation report with respect to all our interests in land or
buildings, for the reason that, as of the date of the most recent audited consolidated balance
sheet of our Group, none of the properties leased by us had a carrying amount of 15% or more
of our consolidated total assets.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Overview
A sound environmental, social and governance (“ ESG”) management system is
imperative for us to achieve sustainable development. As a quantum physics-based, AI-
powered, and robotics-driven, innovative R&D platform, we are committed to integrating ESG
management into our daily operations, continuously saving energy, reducing emissions, and
achieving green sustainable development through scientific and technological innovations.
With a view to effectively managing and implementing our ESG-related matters, we have
established a top-down ESG management structure, where our board of Directors serves as the
highest governance body for our ESG-related matters and is responsible for reviewing our
ESG-related risks, opportunities and material issues, evaluating our ESG strategies and
objectives, as well as regularly monitoring and reviewing our ESG performance and progress
in accomplishing our ESG objectives. We have also set up an ESG working group responsible
for implementing various ESG-related matters. Our ESG working group comprises staff from
our strategy and investments department and environment, health and safety department, and
is responsible for coordinating various ESG-related communications, implementing and
achieving our ESG strategies and objectives, and continuously enhancing our ESG
performance. The ESG working group also cooperates with other relevant departments to
integrate our ESG strategies and concepts into every aspect of our operations. We have internal
ESG policies in place in accordance with the standards of Appendix C2 to the Listing Rules,
which outlines the responsibilities and authority of each working level in managing our ESG
matters as well as our approach to manage ESG-related risks and opportunities.
Identification and Assessment of ESG-related Risks
We value the communications with all stakeholders, strive to establish a normal
communication mechanism, actively receive and respond to the expectations and demands of
all stakeholders, and safeguard their interests. Our internal and external stakeholders mainly
include investors, employees, customers, suppliers, other business partners, regulatory
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authorities, communities, and the public. Given our business nature and our communications
with stakeholders, we have identified the following material ESG matters and analyzed their
potential risks and opportunities:
Material Topics Potential Risks/Opportunities
Environmental
protection
We are required to handle and dispose solid wastes generated from
our business activities properly, dispose hazardous wastes in
accordance with the relevant laws and regulations, reduce the
impact of our operational activities on the nature, and avoid
potential non-compliance arising from improper management.
Given our quantum physics-based, AI-powered, and robotics-
driven drug and material science R&D uses much fewer
consumables, supplies and energies as compared to traditional
manual method, we believe that we are advantageous in resource
conservation, energy saving and emission reduction, enabling us
and our stakeholders to develop in a greener way.
Data security and
privacy protection
In the provision of our solutions and services, we collect, store and
process a large amount of data. With the widespread cyber
threats across the world, potential cyber security incidents may
have an adverse impact on our business operations, resulting in
reputation damages, revenue loss, legal costs, or declined market
competitiveness.
To prevent us from data security and privacy issues, we have
established a set comprehensive internal policies and measures.
See “—Information Security and Privacy Protection.”
IP protection IP protection is the foundation of our technology and business
operations. To prevent potential IP infringement by us or by
third parties, we need to establish effective IP protection and
infringement investigation mechanisms to protect the rights and
interests of us and our stakeholders. See “—Intellectual
Property.”
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Material Topics Potential Risks/Opportunities
Employees’ rights and
talent development
Our success depends on our ability to attract, motivate, train and
retain qualified personnel since talents are critical for us to
develop advanced technologies, provide quality solutions and
services, and maintain market competitiveness. We endeavor to
attract, retain and promote our talents in a scientific and
effective approach, by providing competitive compensation and
benefits, coaching on career development, training regularly to
enhance their professional skills, and focusing on their
psychological status. See “—Employees.”
Occupational health
and safety
Occupational health and safety risks may expose us to reduced
productivity, operational disruptions, and claim damages for
employees’ injuries. We are committed to creating a healthy and
safe working environment for our employees and reducing the
risk of workplace accidents and exposure to hazardous
substances. We need to establish a sound occupational health
and safety management mechanism, formulate emergency
response plans for safety incidents, conduct regular emergency
drills, and provide regular safety awareness trainings to
minimize health and safety issues. See “—Employee Health and
Safety” in this section.
Business ethics and
anti-corruption
We are required to conduct business with integrity and honesty and
comply with the relevant legal and regulatory requirements and
ethical standards in each jurisdiction in which we operate.
Compliant operations help us build trust with all stakeholders
and achieve healthy and sustainable development. Defective
ethical governance mechanism and the related improper
behavior may lead to reputation damages, increased legal risks,
and declined market competitiveness.
To prevent the above ESG-related risks, we have developed corresponding risk prevention
and control mechanisms and taken relevant initiatives to minimize the impact of the potential
risks on our business and operations. As of the Latest Practicable Date, we had obtained the
ISO 27001 information security management system certifications, the ISO 9001 quality
management system certifications, and IP management system certifications. We regularly
identify and assess our ESG-related risks, set the relevant ESG-related targets to continuously
improve our ESG performance, and track our key ESG metrics with the oversight of the Board.
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Environmental Protection
We are committed to operating our business in a manner that prioritizes environmental
(including climate-related) protection and ensures a safe workplace for our employees. To
achieve this, we have implemented company-wide environmental, health and safety manuals,
policies and standard operating procedures. Our focus on environmental, health and safety
protection includes the following measures:
(i) implementation of safety guidelines with respect to employee health and safety,
environmental protection and operational safety in lab facilities, and closely monitor
internal compliance with these guidelines;
(ii) storage of hazardous wastes in special warehouses and contract with qualified third
parties for the disposal of hazardous wastes on a quarterly basis;
(iii) conducting periodic environmental evaluations on greenhouse gas and pollutants
detection and emissions, hazardous waste disposals, noise emissions, and waste
water detection and emissions to make sure all operations are in compliance with the
applicable laws and regulations; and
(iv) resource conservation policies to reduce the levels of resource consumption.
We closely monitor the below metrics in relation to the formulation and implementation
of our environmental (including climate-related) management and resource conservation
policies as appropriate:
Pollutant emission
 Greenhouse gas emissions. In 2021, 2022 and 2023, based on our best estimates,
greenhouse gas emissions were approximately 819.0 tons, 3,138.0 tons and 2,719.5 tons
in aggregate, respectively.
 Hazardous solid waste discharge. In 2021, 2022 and 2023, based on our best estimates,
hazardous solid waste discharge levels were approximately 8.8 tons, 57.5 tons and 84.2
ton in aggregate, respectively.
 Hazardous liquid waste discharge. In 2021, 2022 and 2023, based on our best estimates,
hazardous liquid waste discharge levels were 21.4 tons, 122.8 tons and 268.1 tons in
aggregate, respectively.
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As our business expands, we plan to implement policies and practices to manage the
discharge of various types of emissions, pollutants, and wastes. We have set traceable targets
for our waste discharge. We aim to reduce approximately 0.5% of our hazardous solid waste
discharge and hazardous liquid waste discharge each year before 2025, compared to the 2023
baseline. This will be achieved by actively monitoring all discharge levels, implementing
advanced equipment, and engaging professional third parties where necessary. By ensuring the
effectiveness of our environmental protection measures, we will endeavor to minimize negative
impacts on the environment. We also aim to reduce our greenhouse gas emission intensity by
12% and 25% by 2030 and 2040, respectively, compared to the 2023 baseline. We will strictly
comply with applicable general and industry-specific standards during our operations.
Resource consumption
 Electricity consumption. In 2021, 2022 and 2023, electricity consumption levels were
approximately 1,436.2 thousand kWh, 5,502.3 thousand kWh and 4,768.6 thousand kWh
in aggregate, respectively.
 Water consumption. In 2021, 2022 and 2023, water consumption levels were
approximately 5,614.2 tons, 21,509.0 tons and 31,794.0 tons in aggregate, respectively.
We are committed to expanding our business in a sustainable manner, taking into account
our forecasted growth and implementation of power-saving measures and equipment, as well
as our water-saving initiatives. We have set traceable targets for our electricity and water
consumption. We aim to reduce our electricity consumption intensity by 12% and 25% by 2030
and 2040, respectively, and reduce our water consumption intensity by 15% and 30% by 2030
and 2040, respectively, compared to the 2023 baseline.
To achieve these targets, we are committed to maximizing electricity utilization and
reducing energy consumption by leveraging advanced electric power technology. We will
gradually phase out mechanical and electrical products that have been declared obsolete by
relevant government authorities. In terms of energy consumption management, we have
established power-saving standards in our operations. We ensure that power-saving signs are
posted on switches and control boxes, and conduct manual inspections after shift to eliminate
unnecessary lighting. In addition, we strive to conserve water by regularly checking faucets to
prevent leakage, promptly reporting any damages, and promoting water conservation
awareness among employees through the use of water-saving signs in offices.
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As a high-tech company, we endeavor minimizing our negative impact on the
environment through energy-saving practices and sustainable development. We encourage our
employees to adopt sustainable practices to reduce our carbon footprint, including promoting
energy-saving measures and reducing paper wastage. As we expand our business, we will
prioritize the balance between business growth and the need of ESG to achieve sustainable
development. We will review material metrics related to resource consumption regularly to
ensure that they align with the needs of our Group. While we recognize that the identification
and prioritization of ESG issues is a dynamic and on-going process, we have established areas
of initial focus, including:
i. Reducing energy consumption density;
ii. Advocating for environmentally-conscious office practices, maximizing the use of
natural lighting, and implementing energy-efficient solutions for air conditioning;
and
iii. Strictly adhering to the lab “three waste” treatment implementation standards.
The cost of compliance with relevant environmental protection laws and regulations
incurred in 2021, 2022 and 2023, was approximately RMB0.4 million, RMB2.1 million and
RMB2.7 million, respectively.
In the future, we anticipate an increase in expenses related to environmental, social, and
climate-related issues as our business expands. However, we expect the proportion of these
expenses to decline relative to our total revenue.
Employee Health and Safety
We have adopted and maintained a series of rules, standard operating procedures, and
measures to maintain a safe and healthy working environment for our employees. We require
new employees to participate in safety training to familiarize themselves with the relevant
safety rules and procedures. We also have policies in place and have adopted relevant measures
to ensure the hygiene of our work environment and the health of our employees.
Employment Management
We attach great importance to the development of a diverse company culture and
continually implement management practices that support diversity and provide fair treatment
and employment opportunities for all employees. We have an employee handbook and a
transparent employee promotion system to protect the legal rights and interests of our
employees and reasonably plan their professional development.
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Social Responsibility
In terms of social responsibility, our public relations department is responsible for
disclosing our development and achievements, and actively communicating with the media,
universities, governments, investors, public welfare organizations and other parties. We have
carried out a number of activities in the fields of talent education and healthcare, and have
provided support and assistance to the general public, university students and patients through
diverse channels such as online platforms, research cooperation, social welfare organizations
and science courses, with a view to understanding and discovering solutions to key social
issues.
We actively participate in patient caring events in China, during which we provide care
and fun activities and spend holidays together with the patients. In addition, we aim to cultivate
a robust talent pool within the biotechnology and pharmaceutical industries. We hold scientific
seminars, provide professional guidance to potential youth, guide them to actively participate
in pharmaceutical R&D programs, and promote their interest in the industry.
During the Track Record Period and up to the Latest Practicable Date, we had complied
with the relevant environmental and occupational health and safety laws and regulations in all
material aspects and we had not experienced any incidents or complaints that would have a
material and adverse effect on our business, financial condition or results of operations.
INFORMATION SECURITY AND PRIV ACY PROTECTION
We have sole ownership of our data assets that are developed, generated and accumulated
before the commencement of any R&D programs. We also have sole ownership of the data
developed, generated or accumulated independently outside of the R&D activities during the
R&D process. If the data is developed, generated or accumulated jointly by our counterparty
and us during the R&D process in connection with the relevant contract, our counterparty and
we will typically have joint ownership of such data assets.
We collect, store and process pre-clinical dry lab and wet lab experimental data in the
PRC and the U.S. in the local servers where such data is collected. We are subject to the local
data security laws and regulations where we collect, store, and process data, and have
implemented strict data security policies and procedures to ensure that the collection, use,
storage, transmission and dissemination of data in each jurisdiction in which we operate are in
compliance with all material applicable laws and regulations. Our technical measures for data
security primarily include the encryption of sensitive data to prevent data leakage, the data
access control to prevent unauthorized access, the authentication of user identity to prevent
impersonation, the detection of network intrusion to prevent network attacks, and the backup
of data to prevent data loss. We have also established a data security management committee,
which is responsible for the coordination, supervision and inspection of our data security
related work.
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To meet the stringent data security requirements for our drug and new materials discovery
and intelligent automation solutions, we have established a comprehensive information
security management system (“ ISMS ”). Our ISMS focuses on four key aspects: cloud security,
data security, operation security, and compliance. We have implemented a self-hosted multiple
cloud management system within our ISMS, which manages different cloud computing
resources and facilitates the application of our “plan-do-check-adjust” operational protocol.
This system consistently enforces a cloud security policy across various cloud service
providers to safeguard the confidential information of our customers and collaborators, and
provides virtual secure environment that complies with their data encryption standards. As we
partner with several globally leading cloud service providers in each jurisdiction in which we
operate, we neither depended on any single cloud service provider nor encountered any service
shortage or disruption during the Track Record Period and up to the Latest Practicable Date.
Since 2019, our ISMS has obtained ISO 27001 certification from the United Kingdom
Accreditation Service and China National Accreditation Service. ISO 27001 is a recognized
and widely applied management system standard centered on information asset security and
business risk management within the field of information security. Additionally, our drug
discovery platform has received Level 3 Certification of the “National Information System
Security Level Protection” issued by the Ministry of Public Security of China.
To ensure data security, we employ internal firewalls to separate project teams and
mitigate conflicts of interest. In addition, we have implemented a terminal security
management tool to strictly control outbound data and the use of external devices, and to add
watermarks to all outbound data. We have also adopted a network access management platform
to conduct security checks on office devices that accessing the intranet, allowing only devices
that meet our security requirement to access our intranet.
Data security is upheld by three layers of protection: (i) use of security software to ensure
infrastructural security, (ii) constant auditing and monitoring of data to ensure day-to-day
operation security, and (iii) engagement with data consulting firms to ensure compliance with
applicable regulations. We have standard procedures in place to address potential unauthorized
access or data leakage incidents. At the terminal security level, our system is able to identify
terminal risks and provide traceability analysis for security risk mitigation with the assistance
of terminal data loss prevention products. We closely monitor the flow of sensitive data on our
terminals and will create alerts in a timely manner when any abnormality is detected. We also
engage third-party cybersecurity companies to conduct regular penetration tests to identify
weaknesses in our system and evaluate its security. If an issue is identified, we will take prompt
actions to adjust or upgrade our system and mitigate any potential problems that may
undermine the security of our system. We also conduct regular data security risk assessments
to identify, analyze and evaluate data security risks, and formulate corresponding risk
prevention and control measures. We plan to introduce a data loss prevention and security
operation platform to strengthen our overall information security management, and further
invest in virtual desktop infrastructure to safeguard our experimental data.
BUSINESS
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As our business operations solely focus on pre-clinical studies, we do not handle, store,
or have access to any human data. In compliance with China’s latest data security regulations,
we engaged a leading PRC law firm to conduct data reviews. During the Track Record Period
and up to the Latest Practicable Date, we had not received any claim from any third party
against us on the ground of infringement of such party’s right to data and privacy protection
as provided by any applicable laws and regulations, or subject to any fines or other penalties
due to non-compliance with data privacy and security laws or regulations.
However, we may still be subject to certain risks in relation to the heightened regulations
and market scrutiny. For additional information, see “Risk Factors—Risks Related to Our
Operations—We are subject to complex and evolving laws, regulations and governmental
policies regarding privacy, data protection and cybersecurity. Actual or alleged failure to
comply with existing or future laws and regulations related to privacy, data protection and
cybersecurity could lead to government enforcement actions, which could include civil,
administrative or criminal fines or penalties, investigation or sanction by regulatory
authorities, private litigation, other legal liabilities, and/or adverse publicity. Compliance or
failure to comply with such laws could increase the costs of our solutions and services, limit
their use or adoption, and otherwise negatively affect our operating results and business.”
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
From time to time, we may become involved in legal proceedings and claims that arise
in the ordinary course of our business activities. We cannot predict the results of litigation and
claims. See “Risk Factors—Risks Related to Our Operations—We are subject to risks relating
to disputes and legal proceedings, which could have a material adverse effect on our business,
financial condition and results of operations.”
During the Track Record Period and up to the Latest Practicable Date, there were no legal
proceedings pending or threatened against us or our Directors that could, individually or in the
aggregate, have a material adverse effect on our business, financial condition and results of
operations.
Non-Compliance
During the Track Record Period and up to the Latest Practicable Date, except as disclosed
elsewhere in this prospectus, we had not been involved in any material non-compliance
incidents that have led to fines, enforcement actions, or other penalties that would have a
material adverse effect on our business, results of operations, financial condition or reputation.
BUSINESS
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INTERNAL CONTROL AND RISK MANAGEMENT
With the growth and expansion of our operations, potential risks associated with our
business increase, see “Risk Factors” for a discussion of various risk and uncertainties that we
face. Our Directors believe that internal control procedures and risk management are crucial to
our business development and success.
In order to strengthen our internal control procedures and risk management system to
better safeguard the interests of our Shareholders, we have adopted enhanced internal control
and risk management measures as follows:
 We have formulated a conflict-of-interest management system and put in place
reporting procedures and guidelines to provide guidance to employees on how to
identify, declare and manage perceived, potential or actual conflict of interest. As a
part of this strategy, directors and members of the senior management are required
to declare to our Group any potential conflicts of interests that may result in the
accrual of a personal advantage;
 We have created anti-fraud and anti-corruption and anti-bribery guidelines and
manuals to provide guidance to our employees on ways to identify and address risks
associated with fraud and bribery that may arise in the course of business. These
guidelines also provide guidance on transactions involving sanctioned persons or
countries;
 We have environmental, safety and corporate governance (“ ESG”) guidelines in
place to mitigate the potential impact of ESG-related risks on our operations and
other stakeholders in society. As of the Latest Practicable Date, we had obtained ISO
27001 information security management system certifications and ISO 9001 quality
management system certifications, and meanwhile effectively control potential
ESG-related risks through scientific and comprehensive policies and management
systems to ensure compliance with the relevant laws and regulations in all materials
respects;
 We have implemented rules to delineate the responsibilities and authorities of
employees of different levels of seniority. These rules also prescribe limits on
employees’ authority to approve transactions, depending on the size of the
consideration and types of transaction;
 We have created guidelines on internal control, which set out the principles and
basis of internal audit work. In particular, we have established the Audit Committee,
who are responsible for supervising our internal control procedures, disclosure of
financial information and financial reporting matters. Their authority encompasses
but is not limited to overseeing the audit process, internal control procedures and
risk management system of our Company. For details of qualification and
BUSINESS
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experiences on person in charge of risk management, see “Directors and Senior
Management—Board of Directors” and “Directors and Senior Management—Board
Committees—Audit Committee;” and
 We have adopted policies to ensure compliance with the Listing Rules and other
applicable laws, rules and regulations, including but not limited to compliance in
respect of Chapter 13 (Continuing Obligation), Chapter 14 (Notifiable Transactions)
and Chapter 14A (Connected Transactions) of and Appendix D2 (Disclosure of
Financial Information) to the Listing Rules, and Part XIV A of the SFO.
Taking into consideration the adoption and implementation of the above-mentioned
internal control procedures and risk management measures, our Directors are of view that our
enhanced internal control and risk management system are adequate and effective to address
various potential risks identified in relation to our business.
LICENSES, PERMITS AND APPROV ALS
We are required to obtain permits, licenses, approvals, filings and certifications for
certain business operated by us from the relevant government authorities as required under
PRC laws and regulations. During the Track Record Period and up to the Latest Practicable
Date, we had obtained all licenses, permits, approvals, filings and certifications that are
material to our operations, and such licenses, permits, approvals, filings and certifications all
remain in full effect. Please refer to “Regulatory Overview” for more details regarding the laws
and regulations to which we are subject. During the Track Record Period and up to the Latest
Practicable Date, we had not experienced any material difficulty in renewing such licenses,
permits, approvals and certificates. To the best of our Directors’ knowledge, we currently do
not expect to encounter any material difficulty in renewing them when they expire, if
applicable, and no material unexpected or adverse changes have occurred since the date of their
respective issuance.
The following table sets forth the key licenses and permits that were material to our
business and operations as of December 31, 2023.
License/Permit Holder Grant Date
Expiration
Date
Guangdong Province pathogenic
microorganisms level II
laboratory filing completion
notice (ฆ͛
ࣣٝ)
Shenzhen
Jingtai
January 7,
2022
N/A
BUSINESS
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License/Permit Holder Grant Date
Expiration
Date
Shanghai pathogenic
microorganism laboratory
filing certificate (ࡡ
ኯᗇ)
Shanghai
Zhiyao
November 15,
2022
N/A
Beijing pathogenic
microorganism laboratory and
experimental activities filing
completion notice ( ̏ԯ̹ष
ਗ௪
ࣣٝ)
Beijing Jingtai September 4,
2023
N/A
A W ARDS AND RECOGNITIONS
As of December 31, 2023, we had received various awards, honors and recognitions,
including the following:
Y ear of Grant Award/Recognition Issuing Organization/Authority
2023 Key Highlights of World
Artificial Intelligence
Conference in 2023 (2023ޢ
ɛʈ౽ঐɽึᕄ᎜ʘᘒ)
World Artificial Intelligence
Conference (ɛʈ౽ঐɽ
ึ)
2023 2023 Super AI Leader Award
(2023٫
ᆤ)
World Artificial Intelligence
Conference (ɛʈ౽ঐɽ
ึ)
2023 Global Unicorn Index 2023
Report (2023 ϋΌଢዹԉᖕ࿮)
Hurun Research Institute (ᆗ
Ӻ৫)
2022 Top 50 China Pharmaceutical
R&D 2021 (2021ʕ਷ᔼ
೯50੶)
China Pharmaceutical Industry
Association ( Ό਷ʈਠᑌᔼᖹ
ุਠึ)
2022 Top 50 Innovative Companies in
China 2022 (2022 ʕ਷௴อɢ
Άุ50੶)
Forbes China
2022 Most Socially Impactful
Start-ups (ึᅂᚤɢ௴
ุʮ̡)
Fortune China
2022 2022 Shenzhen Top 100 Industry
Leading Enterprises (2022 ଉέ
БุჯஙΆุ100੶)
Shenzhen Industry Leaders
Enterprise Development
Promotion Association ( ଉέ̹
ආึ),
Shenzhen Economic Daily ( ଉ
έਠజ) and Duchuang client
(ᛘ௴͜˒၌)
BUSINESS
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Y ear of Grant Award/Recognition Issuing Organization/Authority
2022 2021 “Fierce 15” for
biopharmaceutical companies
Fierce Medtech
2021 High-Tech Enterprise ( ৷อҦஔ
Άุ)
Shenzhen Science and
Technology Bureau (߅
ኪҦஔ҅), Shenzhen
Municipal Finance Bureau ( ଉ
҅), and Shenzhen
Taxation Bureau, State
Taxation Administration (࢕
೼ਕᐼ҅ଉέ̹೼ਕ҅)
2021 Shenzhen Science and
Technology Awards—Patent
Award (ኪҦஔᆤ— ਖ਼
лᆤ)
Shenzhen Municipal People’s
Government (ִ݁)
2021 2021 Forbes China Enterprise
Technology 50 ( ၅̺౶ʕ਷Ά
Ҧ50੶)
Forbes China
2020 50 Smartest Companies in China
(TR50 China) 2020
MIT Technology Review
2020 China Technology Fast 50
(TF50)
Deloitte
2020 Most Innovative 50 Companies
in Biotech and Life Sciences
2020 (2020Ҧ௴อΆุ
50੶)
Fast Company
2020 China’s Most Promising
Companies ( ʕ਷௰Ոᆑɢ၇ɿ
Άุ)
Ernst & Y oung, Fudan
University ( ూ͇ɽኪ)
2020 Digital Health 150 CB Insights Research
2020 AI Top 50, Nomination for
“King of the New
Infrastructure” (ʘˮɛ
ʈ౽ঐჯਹTOP50 Άุ)
36Kr (36 ὄ)
2019 “China’s Big Health Industry
Influencers 2019” list – Top
Biopharmaceutical Drug
Innovative Companies
(2019 ϋʕ਷ɽ਄ੰପุᅂᚤ
ɢ࿮ఊ–ᔼᖹ௴อΆ
ุ)
EqualOcean ( ᄂᆄ)
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OVERVIEW
Upon the Listing, the following transactions disclosed in this section will constitute
continuing connected transactions of our Company under Chapter 14A of the Listing Rules.
FULLY EXEMPT CONTINUING CONNECTED TRANSACTIONS
From time to time, we procure from Tencent Cloud Computing (Beijing) Co. Ltd. ( ᙜৃ
ၑ(̏ԯ)ப΂ʮ̡)( “ Tencent Cloud ”) and its associates (collectively, the “ Tencent
Group ”) certain cloud services, including but not limited to system services composed of
various products and services such as computing and network, cloud virtual machine, cloud
database, cloud security, monitoring and management, domain name resolution service, video
service, big data and artificial intelligence (the “ Cloud Services ”).
For each of the three years ended December 31, 2023, the historical transaction amount
paid by us for the Cloud Services was approximately RMB2.3 million, RMB2.6 million and
RMB2.6 million, respectively. The transaction amount of the Cloud Services for each of the
two years ending December 31, 2025 is not expected to exceed RMB2.7 million.
The fees for the Cloud Services will be determined after arm’s length negotiations, taking
into account (i) the unit service fee and duration of use for each type of the Cloud Services;
(ii) the prevailing market rate of similar services; and (iii) the fees charged for historical
transactions of similar services.
Reason for the transactions
The Tencent Group is a leading provider of Internet value-added services in the PRC,
which offers a wide range of technological products and services. Tencent Cloud is a
consolidated affiliated entity of Tencent which provides information system integration
services in the PRC. Procurement of the Cloud Services from the Tencent Group will enable
us to receive quality services from a reliable source to facilitate our business development and
integrate our various operating systems.
Our Directors (including our independent non-executive Directors) consider that the
continuing connected transactions have been and will be carried out: (i) in the ordinary and
usual course of our business, (ii) on normal commercial terms; and (iii) in accordance with the
respective terms that are fair and reasonable and in the interests of our Company and our
Shareholders as a whole.
CONNECTED TRANSACTIONS
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Listing Rules implications
Tencent Cloud is a fellow subsidiary of Tencent Holdings Limited, the holding company
of Image Frame Investment (HK) Limited, which will hold 12.91% of the total number of
issued Shares upon the Listing. Accordingly, Tencent Cloud is an associate of a substantial
shareholder of our Company and thus a connected person of our Company for the purpose of
the Listing Rules. Accordingly, the transactions with Tencent Cloud will constitute continuing
connected transactions for our Company under Chapter 14A of the Listing Rules upon the
Listing.
As each of the applicable percentage ratios in respect of the Cloud Services for each of
the two years ending December 31, 2025 is expected to be less than 5% and the transaction
amount in respect of the Cloud Services for each of the two years ending December 31, 2025
is expected to be less than HK$3.0 million, the provision of the Cloud Services by Tencent
Cloud to our Group is fully exempt from the reporting, annual review, announcement, circular
and independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
CONNECTED TRANSACTIONS
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OVERVIEW
Dr. Wen, Dr. Ma and Dr. Lai are our Co-founders.
Under the WVR Structure in place as of the date of this prospectus, each of the Class A
Ordinary Shares and the Preferred Shares entitles its holder to exercise one vote at our
Company’s general meetings, and each Class B Ordinary Share entitles its holder to exercise
ten votes at our Company’s general meetings. As of the date of this prospectus, (i) Dr. Wen
(through QuantumPharm Holdings) is the beneficial owner of 6.90% of the total number of
issued Shares, comprising Class A Ordinary Shares which are entitled to 0.05% of the voting
rights at general meetings of our Company and Class B Ordinary Shares which are entitled to
30.90% of the voting rights at general meetings of our Company; (ii) Dr. Ma (through Crete
Helix) is the beneficial owner of 3.82% of the total number of issued Shares, comprising only
Class B Ordinary Shares, which are entitled to 17.34% of the voting rights at general meetings
of our Company; and (iii) Dr. Lai (through SeveningBAlpha) is the beneficial owner of 2.73%
of the total number of issued Shares, comprising only Class B Ordinary Shares which are
entitled to 12.39% of the voting rights at general meetings of our Company. Pursuant to the
powers of attorney dated July 19, 2021 executed by (i) Dr. Ma, Jian Guo Pai and Crete Helix;
and (ii) Dr. Lai, Sevening B Holdings and SeveningBAlpha (collectively, the “ Co-founder
Grantors ”), QuantumPharm Holdings is indefinitely and irrevocably authorized and appointed
to exercise all the voting rights attached to the Shares held by them at any time and from time
to time which they are entitled to under the laws of the Cayman Islands and the Memorandum
and the Articles on all matters submitted to a vote of Shareholders at a meeting of Shareholders
or through the solicitation of a written consent of Shareholders, except for any matter the
outcome of the vote on which will disproportionately, materially and adversely affect the
Co-founder Grantors, as compared to QuantumPharm Holdings or any other Shareholder.
QuantumPharm Holdings is owned as to 1% by SSBL Holdings, a company which is
wholly owned by Dr. Wen, and 99% by WSH Family Holdings, a holding vehicle wholly owned
by TMF (Cayman) Ltd. as the trustee of the WSH Family Trust (a discretionary trust
established by Dr. Wen as the settlor). Crete Helix is owned as to 1% by Jian Guo Pai, a
company which is wholly owned by Dr. Ma, and 99% by MH International, a holding vehicle
wholly owned by TMF (Cayman) Ltd. as the trustee of the MH Fund Trust (a discretionary trust
established by Dr. Ma as the settlor). SeveningBAlpha is owned as to 1% by Sevening B
Holdings, a company which is wholly owned by Dr. Lai, and 99% by LPHappy Holding, a
holding vehicle wholly owned by TMF (Cayman) Ltd. as the trustee of the LPHappy Family
Trust (a discretionary trust established by Dr. Lai as the settlor).
In light of the requirements under Rule 8.11 of the Listing Rules, by the adoption of the
Memorandum and the Articles, the WVR Structure will be unwound with effect upon the
Listing, and each Share (including each of the Class B Ordinary Shares with super-voting
rights) will be converted or re-designated to one Ordinary Share. After the re-designation, all
the issued Shares will entitle their holders to one vote per Share at each general meeting of our
Company. For further details of the Memorandum and the Articles, see “Appendix
III—Summary of the Constitution of the Company and Cayman Islands Company
RELATIONSHIP WITH OUR CO-FOUNDERS
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Law—Summary of the Constitution of the Company.” As a result, QuantumPharm Holdings,
Crete Helix and SeveningBAlpha will control 12.71% of the voting rights at general meetings
of our Company (assuming the Over-allotment Option is not exercised and no Shares will be
issued under the ESOPs).
Furthermore, QuantumPharm Roc, a company which is wholly owned by QuantumPharm
Holdings and a shareholding platform for the Pre-IPO ESOP which holds the Shares underlying
the options granted thereunder for the benefit of the grantees, holds 9.26% of the total number
of issued Shares as of the date of this prospectus. Upon the Listing, in respect of such Shares
held by QuantumPharm Roc, the Co-founders will (a) control the voting rights of (i) the Shares
underlying vested options which have been granted to the Co-founders, representing 2.20% of
the total number of issued Shares; and (ii) the Shares underlying vested options, the voting
right of which will be entrusted to one of the Co-founders or in respect of which one of the
Co-founders is entitled to give instructions, representing 2.34% of the total number of issued
Shares; and (b) will not control the voting rights of (i) the Shares underlying unvested options
held by the Co-founders, representing 2.46% of the total number of issued Shares; (ii) the
Shares underlying unvested options held by QuantumPharm Employee Benefit Trust,
representing 0.04% of the total number of issued Shares; and (iii) the Shares underlying vested
and unvested options held by other 194 grantees, representing 1.71% of the total number of
issued Shares, until, in the case of (i) and (ii), such options become vested from time to time.
Accordingly, Dr. Wen, Dr. Ma, Dr. Lai, QuantumPharm Holdings, SSBL Holdings
Limited, Crete Helix, Jian Guo Pai, SeveningBAlpha and Sevening B Holdings will continue
to control 17.25% of the voting power at general meetings of our Company and will be our
group of Shareholders with the largest voting power at our general meetings upon the Listing.
For the biographical information of the Co-founders, see “Directors and Senior
Management—Board of Directors—Executive Directors.”
INDEPENDENCE FROM OUR CO-FOUNDER GROUP
We believe that our Group is capable of carrying on our business independently from our
Co-founder Group and their respective close associates (other than our Group) after the
Listing.
Management Independence
Our Board comprises four executive Directors, one non-executive Director, and three
independent non-executive Directors. None of our Directors or members of our senior
management team other than our Co-founders holds any position in our Co-founder Group or
their respective close associates.
Our daily management and operations are carried out by a senior management team, all
of whom have substantial experience in the industry in which our Company is engaged, and
will therefore be able to make business decisions that are in the best interests of our Group.
RELATIONSHIP WITH OUR CO-FOUNDERS
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--- page 504 ---
Each of our Directors is aware of his/her fiduciary duties as a Director, which require,
among other things, that he/she acts for the benefit and in the best interests of our Company
and does not allow any conflict between his/her duties as a Director and his/her personal
interests. In the event that there is any potential conflict of interest arising out of any contract
or arrangement or any other proposal in which our Directors or any of his/her close associates
has any material interest, the interested Director(s) is required to declare the nature of such
interest before voting at the relevant Board meetings in respect of such transactions and shall
abstain from voting on (nor shall be counted in the quorum in relation to) any resolutions
approving any contract or arrangement or any other proposal in which he/she or any of his/her
close associates is materially interested in. See “Appendix III—Summary of the Constitution
of the Company and Cayman Islands Company Law—Summary of the Constitution of the
Company”.
We have appointed three independent non-executive Directors with extensive experience
in their respective areas of expertise to ensure that the decision of our Board are made after due
consideration of independent and impartial opinions and in the best interests of our Company
and our Shareholders as a whole. Matters including connected transactions are required to be
referred to our independent non-executive Directors for review and approval. In addition, we
have adopted a series of corporate governance measures to manage conflicts of interests, if any,
between our Group and our Co-founders which would support our independent management.
See “—Corporate Governance Measures” in this section.
Based on the above, our Directors are of the view that our Group is capable of managing
our business independently from our Co-founder Group and their respective close associates
following the completion of the Global Offering.
Operational Independence
Although our Co-founder Group will be the group of Shareholders with the largest voting
power at our general meeting after the Listing, we have full rights to make all decisions on and
to carry out our own business operations independently. Our Company, through our
subsidiaries, holds the relevant licenses, approvals and permits from the relevant regulatory
authorities that are material to our operations. We have sufficient capital, facilities and
employees to operate our business independently from our Co-founders and their respective
close associates. We also have independent access to our customers and suppliers and an
independent management team to operate our business.
Based on the above, our Directors are of the view that our Group is capable to operate
independently from our Co-founder Group and their respective close associates following the
completion of the Global Offering.
RELATIONSHIP WITH OUR CO-FOUNDERS
– 495 –


--- page 505 ---
Financial Independence
We have our own internal control and accounting systems, accounting and finance
department, independent treasury function for cash receipts and payment and independent
access to third party financing. As of December 31, 2023, our bank borrowings of RMB45.0
million were secured by, among others, personal guarantee provided by Dr. Wen. The personal
guarantee will be released upon the Listing. For details, See “Financial
Information—Indebtedness—Bank Borrowings” and note 29 to the Accountant’s Report set out
in Appendix I to this prospectus. As of the Latest Practicable Date, our Group did not have any
outstanding loans, advances or balances due to or from our Co-founders or their respective
close associates.
Based on the above, our Directors are of the view that our Group is capable to maintain
financial independence from our Co-founder Group and their respective close associates
following the completion of the Global Offering.
CORPORATE GOVERNANCE MEASURES
Each of our Co-founders has confirmed that it fully comprehends its obligations to act in
our Shareholders’ best interests as a whole. Our Directors believe that there are adequate
corporate governance measures in place to manage existing and potential conflicts of interest.
In order to further avoid potential conflicts of interest, we have implemented the following
measures:
(a) as part of our preparation for the Global Offering, we have amended our Articles of
Association to comply with the Listing Rules. In particular, our Articles of
Association provided that, unless otherwise provided, a Director shall not vote on
any resolution approving any contract or arrangement or any other proposal in which
such Director or any of his/her associates have a material interest nor shall such
Director be counted in the quorum present at the meeting;
(b) a Director with material interests shall make full disclosure in respect of matters that
may have conflict or potentially conflict with any of our interest and abstain from
the board meetings on matters in which such Director or his/her associates have a
material interest, unless the attendance or participation of such Director at such
meeting of the Board is specifically requested by a majority of the independent
non-executive Directors;
(c) we are committed that our Board should include a balanced composition of
executive Directors, non-executive Directors and independent non-executive
Directors. We have appointed independent non-executive Directors and we believe
our independent non-executive Directors possess sufficient experience and they are
free of any business or other relationship which could interfere in any material
manner with the exercise of their independent judgment and will be able to provide
RELATIONSHIP WITH OUR CO-FOUNDERS
– 496 –


--- page 506 ---
an impartial, external opinion to protect the interests of our public Shareholders. For
details of our independent non-executive Directors, see “Directors and Senior
Management—Board of Directors—Independent non-executive Directors;”
(d) we have appointed UOB Kay Hian (Hong Kong) Limited as our compliance advisor,
which will provide advice and guidance to us in respect of compliance with the
applicable laws and the Listing Rules including various requirements relating to
Directors’ duties and corporate governance; and
(e) as required by the Listing Rules, our independent non-executive Directors shall
review any continuing connected transactions annually and confirm in our annual
report that such transactions have been entered into in our ordinary and usual course
of business, are either on normal commercial terms or on terms no less favorable to
us than those available to or from independent third parties and on terms that are fair
and reasonable and in the interests of our Shareholders as a whole.
RELATIONSHIP WITH OUR CO-FOUNDERS
– 497 –


--- page 507 ---
AUTHORIZED AND ISSUED SHARE CAPITAL
The following is a description of the authorized and issued share capital of our Company
in issue prior to the completion of the Global Offering:
Authorized share capital:
Number of
Shares Description of Shares
Aggregate
par value
(US$)
97,132,966,842 Class A Ordinary Shares of US$0.00001 each 971,329.67
429,653,340 Class B Ordinary Shares of US$0.00001 each 4,296.53
145,221,000 Series Pre-A Preferred Shares of US$0.00001
each
1,452.21
250,001,000 Series A-1 Preferred Shares of US$0.00001 each 2,500.01
56,338,300 Series A-2 Preferred Shares of US$0.00001 each 563.38
301,810,900 Series B Preferred Shares of US$0.00001 each 3,018.11
264,664,900 Series B+ Preferred Shares of US$0.00001 each 2,646.65
29,305,077 Series B++ Preferred Shares of US$0.00001
each
293.05
768,406,598 Series C Preferred Shares of US$0.00001 each 7,684.07
621,632,043 Series D Preferred Shares of US$0.00001 each 6,216.32
100,000,000,000 Total 1,000,000
Issued share capital:
Number of
Shares Description of Shares
Aggregate
par value
(US$)
352,366,603 Class A Ordinary Shares of US$0.00001 each 3,523.67
429,653,340 Class B Ordinary Shares of US$0.00001 each 4,296.53
145,221,000 Series Pre-A Preferred Shares of US$0.00001
each
1,452.21
250,001,000 Series A-1 Preferred Shares of US$0.00001 each 2,500.01
56,338,300 Series A-2 Preferred Shares of US$0.00001 each 563.38
301,810,900 Series B Preferred Shares of US$0.00001 each 3,018.11
264,664,900 Series B+ Preferred Shares of US$0.00001 each 2,646.65
29,305,077 Series B++ Preferred Shares of US$0.00001
each
293.05
768,406,598 Series C Preferred Shares of US$0.00001 each 7,684.07
621,632,043 Series D Preferred Shares of US$0.00001 each 6,216.32
3,219,399,761 Total 32,194.00
SHARE CAPITAL
– 498 –


--- page 508 ---
The following is a description of the authorized and issued share capital of our Company
in issue immediately following the completion of the Global Offering:
Authorized share capital:
Number of
Shares Description of Shares
Aggregate
par value
(US$)
100,000,000,000 Ordinary Shares of US$0.00001 each 1,000,000
Issued share capital:
Assuming the Over-allotment Option is not exercised
Number of
Shares Description of Shares
Aggregate
par value
(US$)
3,219,399,761 Shares of US$0.00001 each in issue immediately
following the completion of the Share
Conversion
32,194.00
187,373,000 Shares of US$0.00001 each to be issued
pursuant to the Global Offering
1,873.73
3,406,772,761 Total 34,067.73
Assuming the Over-allotment Option is fully exercised
Number of
Shares Description of Shares
Aggregate
par value
(US$)
3,219,399,761 Shares of US$0.00001 each in issue immediately
following the completion of the Share
Conversion
32,194.00
187,373,000 Shares of US$0.00001 each to be issued pursuant
to the Global Offering
1,873.73
28,105,000 Shares of US$0.00001 each to be issued pursuant
to the exercise of the Over-allotment Option in
full
281.05
3,434,877,761 Total 34,348.78
SHARE CAPITAL
– 499 –


--- page 509 ---
ASSUMPTIONS
The above table assumes that (a) the Global Offering becomes unconditional and the
Offer Shares will be issued pursuant to the Global Offering; (b) our Company’s WVR structure
will be unwound and each of the Class A Shares and Class B will be re-designated to one
Ordinary Share upon the Listing; and (c) each of the Series Pre-A Preferred Shares, the Series
A-1 Preferred Shares, the Series A-2 Preferred Shares, the Series B Preferred Shares, the Series
B+ Preferred Shares, the Series B++ Preferred Shares, the Series C Preferred Shares and the
Series D Preferred Shares will be converted to one Ordinary Share upon the Listing. The above
tables also do not take into account (a) any Shares which may be issued under the ESOPs; or
(b) any Shares which may be issued or repurchased by us under the general mandates granted
to our Directors as referred to in “—General Mandate to Issue Shares” and “—General
Mandate to Repurchase Shares” below.
OUR VOTING STRUCTURE BEFORE AND AFTER THE LISTING
As of the date of this prospectus, our Company adopted a WVR Structure, under which
each Class B Ordinary Share entitled its holder to exercise ten votes at our Company’s general
meetings, and each of the Class A Ordinary Shares, the Series Pre-A Preferred Shares, the
Series A-1 Preferred Shares, the Series A-2 Preferred Shares, the Series B Preferred Shares, the
Series B+ Preferred Shares, the Series B++ Preferred Shares, the Series C Preferred Shares and
the Series D Preferred Shares entitled its holder to exercise one vote at our Company’s general
meetings.
In light of the requirements under Rule 8.11 of the Listing Rules, the Memorandum and
the Articles were duly adopted by a special resolution passed by our then Shareholders holding
at least two-thirds of votes present at the general meeting convened on May 28, 2024 and with
the written consent from the relevant Preferred Shareholders dated May 28, 2024, in
substitution for and to the exclusion of the current effective memorandum of association and
articles of association of our Company, which shall take effect upon the Listing. Under the
Memorandum and the Articles, the WVR Structure will be unwound and each Share (including
the Class B Ordinary Shares with super-voting rights) will be converted or re-designated to one
Ordinary Share, which will confer equal voting rights to its holder with effect upon the Listing.
After the re-designation, all the issued Shares will entitle their holders to one vote per Share
at a general meeting of our Company.
For further details of the Memorandum and the Articles, see “Appendix III—Summary of
the Constitution of the Company and Cayman Islands Company Law—Summary of the
Constitution of the Company.”
SHARE CAPITAL
– 500 –


--- page 510 ---
RANKING
The Offer Shares are Ordinary Shares in the share capital of our Company and will rank
equally in all respects with all Shares in issue or to be issued as set forth in the above table,
and will qualify and rank in full for all dividends or other distributions declared, made or paid
after the date of this prospectus.
CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS ARE REQUIRED
Our Company will have only one class of Shares upon the completion of the Global
Offering, namely Ordinary Shares, and each ranks pari passu with the other Shares.
Pursuant to the Cayman Companies Act and the terms of the Memorandum and the
Articles, our Company may from time to time by ordinary resolution of Shareholders (i)
increase our capital; (ii) consolidate and divide our capital into shares of larger amount; (iii)
divide our shares into several classes; (iv) subdivide our shares into shares of smaller amount;
and (v) cancel any shares which have not been taken. In addition, our Company may subject
to the provisions of the Cayman Companies Act reduce its share capital or capital redemption
reserve by our shareholders passing a special resolution. For details, see “Appendix
III—Summary of the Constitution of the Company and Cayman Islands Company
Law—Summary of the Constitution of the Company.”
GENERAL MANDATE TO ISSUE SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general unconditional mandate to allot, issue and deal with Shares (including the power to
sell or transfer any Treasury Shares, and to make an offer or agreement, or grant securities
which would or might require Shares to be allotted and issued or Treasury Share to be sold or
transferred) at any time subject to the requirement that the aggregate nominal value of the
Shares so allotted and issued or agreed conditionally or unconditionally to be allotted and
issued, shall not exceed the sum of:
(a) 20% of the number of Shares in issue immediately following completion of the
Global Offering; and
(b) the total number of Shares repurchased by us under the authority referred to in
“—General Mandate to Repurchase Shares” below.
This mandate does not cover Shares to be allotted, issued, or dealt with under a rights
issue or scrip dividend scheme or similar arrangements or a specific authority granted by our
Shareholders or upon the exercise of the Over-allotment Option.
This mandate to issue Shares will expire at the earliest of:
(i) the conclusion of the next annual general meeting of our Company unless otherwise
renewed by an ordinary resolution of our Shareholders in a general meeting, either
unconditionally or subject to conditions; or
SHARE CAPITAL
– 501 –


--- page 511 ---
(ii) the expiration of the period within which the next annual general meeting of our
Company is required by the Memorandum and the Articles or any other applicable
laws to be held; or
(iii) the date on which it is varied or revoked by an ordinary resolution of our
Shareholders at a general meeting.
For further details of this general mandate, see “Appendix IV—Statutory and General
Information—A. Further Information about Our Group—4. Resolutions of the Shareholders of
Our Company dated May 28, 2024.”
GENERAL MANDATE TO REPURCHASE SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general unconditional mandate to exercise all the powers of our Company to repurchase our
own securities of up to 10% of the total number our Shares in issue immediately following the
completion of the Global Offering (excluding the Shares which may be allotted and issued
pursuant to the exercise of the Over-allotment Option).
The repurchase mandate only relates to repurchases made on the Stock Exchange, or on
any other stock exchange which the Shares are listed (and which are recognized by the SFC and
the Stock Exchange for this purpose), and which are in accordance with all applicable laws and
regulations and the requirements of the Listing Rules. A summary of the relevant Listing Rules
is set out in “Appendix IV—Statutory and General Information—A. Further Information about
Our Group—5. Repurchase of Our Shares.”
This general mandate to repurchase Shares will expire at the earliest of:
(a) the conclusion of the next annual general meeting of our Company unless otherwise
renewed by an ordinary resolution of our Shareholders in a general meeting, either
unconditionally or subject to conditions; or
(b) the expiration of the period within which the next annual general meeting of our
Company is required by the Memorandum and the Articles or any other applicable
laws to be held; or
(c) the date on which it is varied or revoked by an ordinary resolution of our
Shareholders at a general meeting.
For further details of this general mandate, please see the section headed “Appendix IV
—Statutory and General Information—A. Further Information about Our Group—4.
Resolutions of the Shareholders of Our Company dated May 28, 2024.”
SHARE CAPITAL
– 502 –


--- page 512 ---
SHARE INCENTIVE SCHEMES
As of the Latest Practicable Date, we had one share incentive scheme subsisting, being
the Pre-IPO ESOP , and had granted options thereunder. For the purpose of the Listing, we have
adopted the Post-IPO Share Option Scheme and Post-IPO RSU Scheme, which will take effect
upon the Listing and will replace the Pre-IPO ESOP in its entirety and pursuant to which
further Shares may be issued. See “Appendix IV—Statutory and General Information—D.
Share Incentive Schemes” for further details.
SHARE CAPITAL
– 503 –


--- page 513 ---
So far as our Directors are aware, immediately following the completion of the Global
Offering (assuming the Over-allotment Option is not exercised and no Shares will be issued
under the ESOPs), the following persons will have an interest or short position in the Shares
or the underlying Shares which would fall to be disclosed to us and the Stock Exchange under
the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly,
interested in 10% or more of the issued voting shares of our Company:
Name of Shareholder Nature of Interest (1)
As of the date of
this prospectus
Immediately following
the completion of
the Global Offering
Number and
Class of Shares Shareholding
Number and
Class of Shares Shareholding
Dr. Wen Founder of trust (2) 3,195,700
Class A Ordinary
Shares
218,930,700
Class B Ordinary
Shares
6.90% 222,126,400
Ordinary Shares
6.52%
Beneficial owner (3) 81,093,362
Class A Ordinary
Shares
2.52% 81,093,362
Ordinary Shares
2.38%
Interest in controlled
corporation
298,041,143
Class A Ordinary
Shares (4)
9.26% 298,041,143
Ordinary
Shares (3)
8.75%
210,722,640
Class B Ordinary
Shares (5)
6.55% 210,722,640
Ordinary
Shares (4)
6.19%
WSH Family Holdings Interest in controlled
corporation (2)
3,195,700
Class A Ordinary
Shares
6.90% 222,126,400
Ordinary Shares
6.52%
218,930,700
Class B Ordinary
Shares
QuantumPharm Holdings Beneficial
owner (2) and (5)
3,195,700
Class A Ordinary
Shares
13.45% 432,849,040
Ordinary Shares
12.71%
429,653,340
Class B Ordinary
Shares
Interest in controlled
corporation (4)
298,041,143
Class A Ordinary
Shares
9.26% 298,041,143
Ordinary Shares
8.75%
SUBSTANTIAL SHAREHOLDERS
– 504 –


--- page 514 ---
Name of Shareholder Nature of Interest (1)
As of the date of
this prospectus
Immediately following
the completion of
the Global Offering
Number and
Class of Shares Shareholding
Number and
Class of Shares Shareholding
Dr. Ma Founder of trust (6) 122,908,500
Class B Ordinary
Shares
3.82% 122,908,500
Ordinary Shares
3.61%
Beneficial owner (7) 45,230,342
Class A Ordinary
Shares
1.40% 45,230,342
Ordinary Shares
1.33%
Interest in controlled
corporation (8)
59,103,125
Class A Ordinary
Shares
1.84% 59,103,125
Ordinary Shares
1.73%
MH International
Holdings
Interest in controlled
corporation (6)
122,908,500
Class B Ordinary
Shares
3.82% 122,908,500
Ordinary Shares
3.61%
Crete Helix Beneficial owner 122,908,500
Class B Ordinary
Shares
3.82% 122,908,500
Ordinary Shares
3.61%
Dr. Lai Founder of trust (9) 87,814,140
Class B Ordinary
Shares
2.73% 87,814,140
Ordinary Shares
2.58%
Beneficial owner (10) 32,315,661
Class A Ordinary
Shares
1.00% 32,315,661
Ordinary Shares
0.95%
LPHappy Holding Interest in controlled
corporation (9)
87,814,140
Class B Ordinary
Shares
2.73% 87,814,140
Ordinary Shares
2.58%
SeveningBAlpha Beneficial owner 87,814,140
Class B Ordinary
Shares
2.73% 87,814,140
Ordinary Shares
2.58%
TMF (Cayman) Ltd. Trustee of
trusts (2), (6) and (9)
3,195,700
Class A Ordinary
Shares
13.45% 432,849,040
Ordinary Shares
12.71%
429,653,340
Class B Ordinary
Shares
SUBSTANTIAL SHAREHOLDERS
– 505 –


--- page 515 ---
Name of Shareholder Nature of Interest (1)
As of the date of
this prospectus
Immediately following
the completion of
the Global Offering
Number and
Class of Shares Shareholding
Number and
Class of Shares Shareholding
QuantumPharm Roc Beneficial owner 298,041,143
Class A Ordinary
Shares
9.26% 298,041,143
Ordinary Shares
8.75%
Tencent Holdings Limited Interest in controlled
corporation (11)
250,001,000
Series A-1
Preferred Shares
14,084,700
Series A-2
Preferred Shares
63,380,300
Series B
Preferred Shares
63,324,366
Series C
Preferred Shares
49,076,214
Series D
Preferred Shares
13.66% 439,866,580
Ordinary Shares
12.91%
Image Frame Investment
(HK) Limited
Beneficial owner 250,001,000
Series A-1
Preferred Shares
14,084,700
Series A-2
Preferred Shares
63,380,300
Series B
Preferred Shares
63,324,366
Series C
Preferred Shares
49,076,214
Series D
Preferred Shares
13.66% 439,866,580
Ordinary Shares
12.91%
SUBSTANTIAL SHAREHOLDERS
– 506 –


--- page 516 ---
Name of Shareholder Nature of Interest (1)
As of the date of
this prospectus
Immediately following
the completion of
the Global Offering
Number and
Class of Shares Shareholding
Number and
Class of Shares Shareholding
HSG V enture VI Holdco,
Ltd.
Beneficial owner 190,140,900
Series B
Preferred Shares
13,303,438
Series C
Preferred Shares
6.32% 203,444,338
Ordinary Shares
5.97%
HongShan Capital
V enture Fund VI, L.P .
Interest in controlled
corporation (12)
190,140,900
Series B
Preferred Shares
13,303,438
Series C
Preferred Shares
6.32% 203,444,338
Ordinary Shares
5.97%
HSG V enture VI
Management, L.P .
Interest in controlled
corporation (12)
190,140,900
Series B
Preferred Shares
13,303,438
Series C
Preferred Shares
6.32% 203,444,338
Ordinary Shares
5.97%
HSG Holding Limited Interest in controlled
corporation (12)(13)
190,140,900
Series B
Preferred Shares
26,606,877
Series C
Preferred Shares
49,076,214
Series D
Preferred Shares
8.25% 265,823,991
Ordinary Shares
7.80%
SNP China Enterprises
Limited
Interest in controlled
corporation (12)(13)
190,140,900
Series B
Preferred Shares
26,606,877
Series C
Preferred Shares
49,076,214
Series D
Preferred Shares
8.25% 265,823,991
Ordinary Shares
7.80%
SUBSTANTIAL SHAREHOLDERS
– 507 –


--- page 517 ---
Name of Shareholder Nature of Interest (1)
As of the date of
this prospectus
Immediately following
the completion of
the Global Offering
Number and
Class of Shares Shareholding
Number and
Class of Shares Shareholding
Neil Nanpeng Shen Interest in controlled
corporation (12)(13)(14)
190,140,900
Series B
Preferred Shares
26,606,877
Series C
Preferred Shares
65,434,952
Series D
Preferred Shares
8.76% 282,182,729
Ordinary Shares
8.28%
China Life Chengda
(Shanghai) Healthcare
Equity Investment
Center (Limited
Partnership)
Beneficial owner 208,946,000
Series B+
Preferred Shares
26,606,877
Series C
Preferred Shares
7.32% 235,552,877
Ordinary Shares
6.91%
China Life Chengda
(Shanghai) Healthcare
Equity Investment
Management Co., Ltd.
Interest in controlled
corporation
(15)
208,946,000
Series B+
Preferred Shares
26,606,877
Series C
Preferred Shares
7.32% 235,552,877
Ordinary Shares
6.91%
China Life Insurance
(Group) Company
Interest in controlled
corporation (15)
208,946,000
Series B+
Preferred Shares
26,606,877
Series C
Preferred Shares
7.32% 235,552,877
Ordinary Shares
6.91%
China Life Insurance
Company Limited
Interest in controlled
corporation (15)
208,946,000
Series B+
Preferred Shares
26,606,877
Series C
Preferred Shares
7.32% 235,552,877
Ordinary Shares
6.91%
SUBSTANTIAL SHAREHOLDERS
– 508 –


--- page 518 ---
Name of Shareholder Nature of Interest (1)
As of the date of
this prospectus
Immediately following
the completion of
the Global Offering
Number and
Class of Shares Shareholding
Number and
Class of Shares Shareholding
5Y Capital GP Limited Interest in controlled
corporation (16)
13,717,395
Class A Ordinary
Shares
1,741,200
Series B+
Preferred Shares
22,370,288
Series B++
Preferred Shares
119,730,944
Series C
Preferred Shares
98,152,428
Series D
Preferred Shares
7.94% 255,712,255
Ordinary Shares
7.51%
Liu Qin Interest in controlled
corporation (16)
13,717,395
Class A Ordinary
Shares
1,741,200
Series B+
Preferred Shares
22,370,288
Series B++
Preferred Shares
119,730,944
Series C
Preferred Shares
98,152,428
Series D
Preferred Shares
7.94% 255,712,255
Ordinary Shares
7.51%
SUBSTANTIAL SHAREHOLDERS
– 509 –


--- page 519 ---
Name of Shareholder Nature of Interest (1)
As of the date of
this prospectus
Immediately following
the completion of
the Global Offering
Number and
Class of Shares Shareholding
Number and
Class of Shares Shareholding
Shi Jianming Interest in controlled
corporation (16)
13,717,395
Class A Ordinary
Shares
1,741,200
Series B+
Preferred Shares
22,370,288
Series B++
Preferred Shares
119,730,944
Series C
Preferred Shares
98,152,428
Series D
Preferred Shares
7.94% 255,712,255
Ordinary Shares
7.51%
Notes:
(1) All interests stated are long positions.
(2) QuantumPharm Holdings is held as to 99% by WSH Family Holdings, which is the holding vehicle of TMF
(Cayman) Ltd. TMF (Cayman) Ltd., being the trustee of the WSH Family Trust, a discretionary trust
established by Dr. Wen as settlor. Under the SFO, each of Dr. Wen, WSH Family Holdings and TMF (Cayman)
Ltd. is deemed to be interested in the 222,126,400 Ordinary Shares in which QuantumPharm Holdings is
interested.
(3) Representing 81,093,362 Class A Ordinary Shares underlying the options granted to Dr. Wen under the Pre-IPO
ESOP .
(4) QuantumPharm Roc, being the shareholding platform for the Pre-IPO ESOP which holds the Shares underlying
the options granted thereunder for the benefit of the grantees, is wholly owned by QuantumPharm Holdings.
Under the SFO, each of Dr. Wen and QuantumPharm Holdings is deemed to be interested in the 298,041,143
Ordinary Shares in which QuantumPharm Roc is interested.
(5) Pursuant to the powers of attorney dated July 19, 2021 executed by (i) Dr. Ma, Jian Guo Pai and Crete Helix;
and (ii) Dr. Lai, Sevening B Holdings and SeveningBAlpha (collectively, the “ Co-founder Grantors ”),
QuantumPharm Holdings is indefinitely and irrevocably authorized and appointed to exercise all the voting
rights attached to the Shares held by them at any time and from time to time which they are entitled to under
the laws of the Cayman Islands and the Memorandum and the Articles on all matters submitted to a vote of
Shareholders at a meeting of Shareholders or through the solicitation of a written consent of Shareholders,
except for any matter the outcome of the vote on which will disproportionately, materially and adversely affect
the Co-founder Grantors, as compared to QuantumPharm Holdings or any other Shareholder. Under the SFO,
each of Dr. Wen and QuantumPharm Holdings is deemed to be interested in the 122,908,500 Ordinary Shares
in which Crete Helix is interested and the 87,814,140 Ordinary Shares in which SeveningBAlpha is interested.
(6) Crete Helix is held as to 99% by MH International Holdings, which is the holding vehicle of TMF (Cayman)
Ltd. TMF (Cayman) Ltd., being the trustee of the MH Fund Trust, a discretionary trust established by Dr. Ma
as settlor. Under the SFO, each of Dr. Ma, MH International Holdings and TMF (Cayman) Ltd. is deemed to
be interested in the Shares in which Crete Helix is interested.
(7) Representing 45,230,342 Ordinary Shares underlying the options granted to Dr. Ma under the Pre-IPO ESOP .
SUBSTANTIAL SHAREHOLDERS
– 510 –


--- page 520 ---
(8) Representing 59,103,125 Ordinary Shares underlying the options granted under the Pre-IPO ESOP held by
QuantumPharm Employee Holdings, a holding vehicle wholly owned by the trustee of the QuantumPharm
Employee Benefit Trust for the benefit of 13 employees of our Group. In accordance with the terms of the trust
deed of the QuantumPharm Employee Benefit Trust dated June 28, 2021, Dr. Ma, being the sole member of
the advisory committee established by our Company, has the sole power to make all decisions relating to the
exercise of any voting and other rights of the properties held under the trust and may give instructions and
directions to the trustee for the execution of such decisions.
(9) SeveningBAlpha is held as to 99% by LPHappy Holding, which is the holding vehicle of TMF (Cayman) Ltd.
TMF (Cayman) Ltd., being the trustee of the LPHappy Family Trust, a discretionary trust established by Dr.
Lai as settlor. Under the SFO, each of Dr. Lai, LPHappy Holding and TMF (Cayman) Ltd. is deemed to be
interested in the Shares in which SeveningBAlpha is interested.
(10) Representing 32,315,661 Ordinary Shares underlying the options granted to Dr. Lai under the Pre-IPO ESOP .
(11) Tencent Holdings Limited is the sole member of Image Frame Investment (HK) Limited. Under the SFO,
Tencent Holdings Limited is deemed to be interested in the Shares in which Image Frame Investment (HK)
Limited is interested.
(12) HSG V enture VI Holdco, Ltd. is wholly owned by HongShan Capital V enture Fund VI, L.P ., whose general
partner is HSG V enture VI Management, L.P .. The general partner of HSG V enture VI Management, L.P . is
HSG Holding Limited, a wholly-owned subsidiary of SNP China Enterprises Limited. Neil Nanpeng Shen is
the sole shareholder of SNP China Enterprises Limited. Under the SFO, each of HongShan Capital V enture
Fund VI, L.P ., HSG V enture VI Management, L.P ., HSG Holding Limited, SNP China Enterprises Limited and
Neil Nanpeng Shen is deemed to be interested in the shares in which HSG V enture VI Holdco, Ltd. is
interested.
(13) HSG V enture VIII Holdco, Ltd. is wholly owned by HongShan Capital V enture Fund VIII, L.P ., whose general
partner is HSG V enture VIII Management, L.P . HSG Growth VI Holdco E, Ltd. is wholly owned by HongShan
Capital Growth Fund VI, L.P ., whose general partner is HSG Growth VI Management, L.P .. The general partner
of each of HSG V enture VIII Management, L.P . and HSG Growth VI Management, L.P . is HSG Holding
Limited, a wholly-owned subsidiary of SNP China Enterprises Limited. Neil Nanpeng Shen is the sole
shareholder of SNP China Enterprises Limited. Under the SFO, each of HSG Holding Limited, SNP China
Enterprises Limited and Neil Nanpeng Shen is deemed to be interested in the shares in which HSG V enture
VIII Holdco, Ltd. and HSG Growth VI Holdco E, Ltd. are interested.
(14) HCHP Holdco, Ltd. is wholly owned by HCHP Master Fund, which is managed by HCHP Management Limited
as investment manager, which is in turn wholly owned by HCHP Management Holding Limited. The majority
voting rights of HCHP Management Holding Limited are indirectly held by its non-executive director, Neil
Nanpeng Shen. Under the SFO, Neil Nanpeng Shen is deemed to be interested in the shares in which HCHP
Holdco, Ltd. is interested.
(15) The general partner of China Life Chengda (Shanghai) Healthcare Equity Investment Center (Limited
Partnership) (“China Life Chengda”) is China Life Chengda (Shanghai) Healthcare Equity Investment
Management Co., Ltd., a limited liability company indirectly owned by China Life Insurance (Group)
Company. The ultimate limited partners of China Life Chengda are China Life Insurance Company Limited,
a company listed on the Stock Exchange (stock code: 2628) and the Shanghai Stock Exchange (stock code:
601628), being its largest limited partner of with 74.94% partnership interest, and the Ministry of Finance of
the PRC. Under the SFO, each of China Life Chengda (Shanghai) Healthcare Equity Investment Management
Co., Ltd., China Life Insurance (Group) Company, China Life Insurance Company Limited is deemed to be
interested in the shares in which China Life Chengda is interested.
(16) Evolution Fund I, L.P ., Evolution Special Opportunity Fund I, L.P . and Evolution Fund I Co-investment, L.P .,
are exempted limited partnerships established under the laws of the Cayman Islands and are controlled by 5Y
Capital GP Limited, as their general partner. Each of Liu Qin and Shi Jianming is entitled to exercise or control
the exercise of one-half of the voting power of all issued shares in 5Y Capital GP Limited at its general
meeting. Under the SFO, each of 5Y Capital GP Limited, Liu Qin and Shi Jianming is deemed to be interested
in the shares in which Evolution Fund I, L.P ., Evolution Special Opportunity Fund I, L.P . and Evolution Fund
I Co-investment, L.P . are interested.
SUBSTANTIAL SHAREHOLDERS
–5 1 1–


--- page 521 ---
Except as disclosed above, our Directors are not aware of any other person who will,
immediately following the completion of the Global Offering (assuming the Over-allotment
Option is not exercised and no Shares will be issued under the ESOPs), have any interest and/or
short positions in the Shares or underlying Shares of our Company which would fall to be
disclosed to us pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who
are, directly or indirectly, interested in 10% or more of the nominal value of any class of our
share capital carrying rights to vote in all circumstances at general meetings of our Company.
SUBSTANTIAL SHAREHOLDERS
– 512 –


--- page 522 ---
THE CORNERSTONE PLACING
We have entered into cornerstone investment agreements (each a “ Cornerstone
Investment Agreement ”, and together the “ Cornerstone Investment Agreements ”) with the
cornerstone investors set out below (each a “ Cornerstone Investor ”, and together the
“Cornerstone Investors ”), pursuant to which the Cornerstone Investors have agreed to,
subject to certain conditions, subscribe at the Offer Price for such number of Offer Shares
(rounded down to the nearest whole board lot of 1,000 Shares) that may be subscribed for with
an aggregate amount of HK$337.7 million (the “ Cornerstone Placing ”). The number of Offer
Shares to be subscribed for by the Cornerstone Investors are subject to the determination of the
final Offer Price.
Assuming an Offer Price of HK$5.03, being the low-end of the indicative Offer Price
range set out in this prospectus, the total number of Offer Shares to be subscribed by the
Cornerstone Investors would be 67,134,000 Offer Shares, representing 35.83% of the Offer
Shares pursuant to the Global Offering and 1.97% of the number of issued Shares upon
completion of the Global Offering (assuming the Over-allotment Option is not exercised and
no Shares will be issued under the ESOPs).
Assuming an Offer Price of HK$5.53, being the mid-point of the indicative Offer Price
range set out in this prospectus, the total number of Offer Shares to be subscribed by the
Cornerstone Investors would be 61,065,000 Offer Shares, representing 32.59% of the Offer
Shares pursuant to the Global Offering and 1.79% of the number of issued Shares upon
completion of the Global Offering (assuming the Over-allotment Option is not exercised and
no Shares will be issued under the ESOPs).
Assuming an Offer Price of HK$6.03, being the high-end of the indicative Offer Price
range set out in this prospectus, the total number of Offer Shares to be subscribed by the
Cornerstone Investors would be 56,000,000 Offer Shares, representing 29.89% of the Offer
Shares pursuant to the Global Offering and 1.64% of the number of issued Shares upon
completion of the Global Offering (assuming the Over-allotment Option is not exercised and
no Shares will be issued under the ESOPs).
Our Company is of the view that, (i) the Cornerstone Placing will ensure a reasonable size
of solid commitment at the beginning of the marketing period of the Global Offering and will
provide confidence to the market; and (ii) by leveraging on the Cornerstone Investors’ industry
reputation and investment experience, the Cornerstone Placing will help raise the profile of our
Company and to signify that such investors have confidence in our business and prospect. Our
Company became acquainted with each of the Cornerstone Investors through our business
network or through introduction by the Underwriters.
The Cornerstone Placing will form part of the International Offering and the Cornerstone
Investors will not subscribe for any Offer Shares under the Global Offering (other than
pursuant to the Cornerstone Investment Agreements). The Offer Shares to be subscribed by the
Cornerstone Investors will carry the same rights in all respects with the fully paid Shares in
CORNERSTONE INVESTORS
– 513 –


--- page 523 ---
issue upon completion of the Global Offering and will be counted towards the public float of
the Company under Rule 8.08 of the Listing Rules and in compliance with the requirement
under Rule 8.08(3) of the Listing Rules. Immediately following the completion of the Global
Offering, (i) none of the Cornerstone Investors or their close associates will become a
substantial shareholder of our Company; (ii) none of the Cornerstone Investors or their close
associates will have any Board representation in our Company. Other than a guaranteed
allocation of the relevant Offer Shares at the final Offer Price, the Cornerstone Investors do not
have any preferential rights in the Cornerstone Investment Agreements compared with other
public Shareholders.
To the best knowledge of our Company after making reasonable enquiries, (i) each of the
Cornerstone Investors is an Independent Third Party; (ii) none of the Cornerstone Investors is
accustomed to take instructions from our Company, our Directors, chief executive of our
Company, our subsidiaries, Co-founders, substantial Shareholders, existing Shareholders or
their respective close associates in relation to the acquisition, disposal, voting, or other
disposition of Shares registered in its name or otherwise held by it; and (iii) none of the
subscription of the relevant Offer Shares by any of the Cornerstone Investors is financed by our
Company, our Directors, chief executive of our Company, Controlling Shareholders,
substantial Shareholders, existing Shareholders or any of their respective close associates.
As confirmed by each of the Cornerstone Investors, their subscription under the
Cornerstone Placing would be financed by their own internal resources. One of the Cornerstone
Investors, Biocytogen Pharmaceuticals (Beijing) Co., Ltd., is a company listed on the Main
Board of the Stock Exchange. Each of the Cornerstone Investors has confirmed that all
necessary approvals have been obtained with respect to the Cornerstone Placing and that no
specific approval from any stock exchange (if relevant) or its shareholders is required for the
relevant cornerstone investment. There are no side arrangements or agreements between our
Company and the Cornerstone Investors or any benefit, direct or indirect, conferred on the
Cornerstone Investors by virtue of or in relation to the Cornerstone Placing, other than a
guaranteed allocation of the relevant Offer Shares at the final Offer Price.
The total number of Offer Shares to be subscribed by the Cornerstone Investors pursuant
to the Cornerstone Placing may be affected by reallocation of the Offer Shares between the
International Offering and the Hong Kong Public Offering in the event of over-subscription
under the Hong Kong Public Offering. Each of the Cornerstone Investors has agreed that in the
event that the requirements under Rule 8.08(3) of the Listing Rules, which stipulates that no
more than 50% of the Shares in public hands can be beneficially owned by the three largest
public shareholders of the Company, Rule 18C.08 of the Listing Rules, which stipulates that
at least 50% of the total number of shares offered in the Global Offering (excluding any Shares
to be issued pursuant to the exercise of the Over-allotment Option) must be taken up by
independent price setting investors in the International Offering (whether as cornerstone
investors or otherwise), and Rule 18C.10 of the Listing Rules, which stipulates that a portion
of the total number of Shares listed on the Stock Exchange with a market capitalisation of at
least HK$600,000,000 are not subject to any disposal restrictions (whether under contract, the
Listing Rules, applicable laws or otherwise) at the time of the Listing, may not be complied
CORNERSTONE INVESTORS
– 514 –


--- page 524 ---
with on the Listing Date, the allocation of the number of Investor Shares to be subscribed for
by the Cornerstone Investors may be adjusted to ensure compliance with Rules 8.08(3), 18C.08
and 18C.10 of the Listing Rules. Further, if the total demand for Shares in the Hong Kong
Public Offering falls within the circumstances as set out in the section headed “Structure of the
Global Offering—The Hong Kong Public Offering—Reallocation and Clawback” in this
prospectus, the number of Offer Shares to be subscribed by each Cornerstone Investor shall be
reduced on a pro rata basis to satisfy the shortfall, after taking into account the requirements
under Appendix F1 to the Listing Rules. Details of the actual number of Offer Shares to be
allocated to the Cornerstone Investors will be disclosed in the allotment results announcement
of our Company to be published on or around June 12, 2024.
All of the Cornerstone Investors have confirmed that they have sufficient funds to settle
the investment amounts and they will pay and settle in full for the relevant Offer Shares that
they have subscribed before dealings in the Offer Shares commence on the Stock Exchange.
There will be no delayed delivery of the Offer Shares and no deferred settlement of payment
of the investment amounts for all of the Cornerstone Investors under the Cornerstone
Investment Agreements.
THE CORNERSTONE INVESTORS
The information about our Cornerstone Investors set forth below has been provided by
our Cornerstone Investors in connection with the Cornerstone Placing. Other than Biocytogen,
none of the Cornerstone Investors is a listed company or a subsidiary of a listed company.
Successful Lotus
Successful Lotus Limited (“ Successful Lotus ”) is an investment holding company
incorporated in the BVI on February 7, 2018, wholly-owned by Dr. Lee Ka-Kit, an Independent
Third Party. Dr. Lee Ka-Kit is (1) the chairman and managing director of Henderson Land
Development Company Limited (ʮ̡), a company listed on the Main Board
of the Stock Exchange (stock code: 0012); (2) the chairman of The Hong Kong and China Gas
Company Limited (ʮ̡), a company listed on the Main Board of the Stock
Exchange (stock code: 003); and (3) the chairman of Towngas Smart Energy Company Limited
(ʮ̡), a company listed on the Main Board of the Stock Exchange (stock
code: 1083).
We became acquainted with Successful Lotus through the introduction by the
Underwriters.
IntelliMed
IntelliMed One Investment Limited (“ IntelliMed ”), a company incorporated under the
laws of the BVI on April 17, 2020, is managed by its investment manager, TruMed Investment
Management Limited (ʮ̡), an Independent Third Party which is a
company incorporated under the laws of Hong Kong on August 3, 2021 and licensed by the
CORNERSTONE INVESTORS
– 515 –


--- page 525 ---
SFC to carry out type 4 (advising on securities) and type 9 (asset management) regulated
activities as defined in the SFO (CE number: BRY868). The board of directors of TruMed
Investment Management Limited comprises of Ms. Ting Wang, Ms. Weijia Jiang and Mr.
Y uchen Liu, all being Independent Third Parties. None of the shareholders of IntelliMed holds
more than 25% shareholding in IntelliMed.
Ms. Ting Wang is the founding partner and chief investment officer of TruMed Investment
Management Limited. Ms. Ting Wang is an experienced investment professional and
previously worked with renowned funds and financial institutions.
We became acquainted with IntelliMed through the introduction by the Underwriters.
Mammoth Medical Solutions
Mammoth Medical Solutions (“ Mammoth ”), a sole proprietorship established under the
laws of Brunei Darussalam on June 24, 2020, is wholly owned and managed by Mrs. Namirah
Khairunnisa Y ussof (“ Mrs. Yussof ”), an Independent Third Party, and is principally engaged
in business activities in medical and pharmaceutical industry. With a distinguished career
spanning several years in the medical industry, Mrs. Y ussof has possessed a deep understanding
of the medical related industry trends, regulatory requirements, and emerging.
We became acquainted with Mammoth Medical Solutions through the introduction by the
Underwriters.
Begonia No. 1
Begonia No. 1 LPF (ږ“() Begonia No. 1 ”), incorporated under the
laws of Hong Kong, is a private equity fund managed by Ocean Cedar Asset Management
Company Limited (ʮ̡)( “ Ocean Cedar ”) acting as its general partner and
investment manager. The sole limited partner of Begonia No. 1, holding 99.99% partnership
interest therein, is CW L YL Capital Limited, a company incorporated in the BVI on February
10, 2022, an Independent Third Party, which is wholly-owned by Ms. Wong Cheng, an
Independent Third Party. Ocean Cedar, a company incorporated under the laws of Hong Kong
on July 9, 2019, is licensed by the SFC to carry out type 4 (advising on securities) and type
9 (asset management) regulated activities as defined in the SFO (CE Number: BPB294) and
committed to cultivating and nurturing strategic emerging industries including biomedicine,
artificial intelligence, integrated circuits, new energy, and new materials through cross-border
asset management and is contracted to manage assets of over HK$1 billion as of the Latest
Practicable Date. Ocean Cedar is owned as to 53% by a wholly-owned subsidiary and a
controlled corporation of Shanghai Guosheng Capital Management Co., Ltd. ( ɪऎ਷ସ༟͉၍
ʮ̡)( “ Guosheng Capital ”), a company established in the PRC on April 8, 2018, 34%
by Mr. Liu Xin and 13% by Mr. Geng Tao, all being Independent Third Parties. With over
RMB10 billion assets under management in the PRC as of the Latest Practicable Date,
Guosheng Capital is the management institution of various large-scale private equity funds,
including the Shanghai State-owned Enterprise Reform and Development Equity Investment
CORNERSTONE INVESTORS
– 516 –


--- page 526 ---
Fund, Shanghai Relief Fund, Shanghai Guosheng Industrial Empowerment Fund, and Private
Enterprise High-Quality Development Fund, and ranked among the TOP 30 Best State-owned
Direct Investment Institutions in 2023, the Top 100 Most Influential Investment Institutions in
the PRC in 2023, and the Top 50 Influential State-owned Assets Investment Institutions in the
PRC in 2023, and is renowned as one of the best private equity investment institution in
Shanghai, the PRC.
We became acquainted with Begonia No. 1 through the introduction by the Underwriters.
Prof. Bradley L. Pentelute
Prof. Bradley Lether Pentelute (“ Prof. Pentelute ”), is an individual investor and has
extensive experience in chemistry industry. Prof. Pentelute is currently a professor of
Chemistry at Massachusetts Institute of Technology and an associate member of the broad
institute of Massachusetts Institute of Technology and Harvard University. He is the winner of
the Makineni Lectureship from the American Peptide Society, the Eli Lilly Award in Biological
Chemistry and Bristol-Myers Squibb Innovation Award. Prof. Pentelute holds a Ph.D. degree
in organic chemistry from the University of Chicago where he was part of Steve Kent’s lab. He
completed his postdoctoral research at John Collier’s lab at Harvard Medical School.
Prof. Pentelute’s research focuses on the development of new protein modification
chemistries, adaptation nature’s machines for efficient macromolecule delivery into cells,
invention of flow-based technologies for rapid biopolymer production, and discovery of
peptide binders to therapeutic protein targets.
Our Company became acquainted with Prof. Pentelute through introduction by the
Co-founders, who were acquainted with Prof. Pentelute through the networking of MIT
fellows.
Ginkgo Fund I
Ginkgo Capital Global Fund SPC—Ginkgo Capital Global Fund I SP (“ Ginkgo Fund I ”)
is a segregated portfolio of Ginkgo Capital Global Fund SPC, which is a segregated portfolio
company incorporated under the laws of the Cayman Islands with limited liability, an
Independent Third Party. The investment manager of Ginkgo Fund I, Ginkgo Capital Co.,
Limited, an Independent Third Party, is a company incorporated under the laws of Hong Kong
and is licensed by the SFC to carry out type 4 (advising on securities) and type 9 (asset
management) regulated activities (as defined in the SFO) (CE Number: BQV674). The
investment manager comprises of seasoned investment professionals with strong focus on
capital market of the PRC and provides long term and comprehensive investment services for
ultra-high-net-worth clients.
CORNERSTONE INVESTORS
– 517 –


--- page 527 ---
As of the Latest Practicable Date, to the best knowledge of the Directors, all the
participating, redeemable, non-voting shares in Ginkgo Capital Global Fund SPC attributable
to Ginkgo Capital Global Fund I SP were issued to Wealth Strategy Holding Limited, a
company incorporated under the laws of Hong Kong, an Independent Third Party, which is in
turn wholly owned by Mr. Kung Hung Ka, an Independent Third Party.
Mr. Kung is a highly reputable angel investor and entrepreneur with remarkable
contributions and substantial experience in the areas of life sciences, healthcare and grand
health as well as telecommunication industries in the PRC, including his investment in C-MER
Eye Care Holdings Limited, a company listed on the Main Board of the Stock Exchange (stock
code 3309), in December 2022. He and his family ranked 24th in Forbes’ China’s 100 Richest
2023. He is currently the chairman of the board of Vcanbio Cell & Gene Engineering Corp.,
Ltd., a company principally engaged in the preparation, detection and storage of stem cells,
with its shares listed on Shanghai Stock Exchange (stock code: 600645.SH).
We became acquainted with Ginkgo Fund I through the introduction by the Underwriters.
Biocytogen
Biocytogen Pharmaceuticals (Beijing) Co., Ltd. ( ϵෳᒄྡ(̏ԯ)ʮ̡),
a company established in the PRC on November 13, 2009 and listed on the Main Board of the
Stock Exchange (stock code: 02315) (“ Biocytogen ”), is a global biotechnology company that
drives the research and development of novel antibody-based drugs with innovative
technologies and committed to becoming a global headstream of new drugs, with a mission of
focusing on discover, develop and deliver new medicines through innovative technologies that
benefit human health. As of the Latest Practicable Date, Dr. Shen Y uelei, the chairman of
Biocytogen, and his spouse, Dr. Ni Jian, controlled 27.6% of the voting rights in the general
meeting of Biocytogen. There has been no other shareholder which controls more voting rights
in Biocytogen.
We became acquainted with Biocytogen through our business network, Biocytogen
supplied biological test kits to our Company in 2024.
FaaS Capital Longevity Limited
FaaS Capital Longevity Limited (“ FaaS Capital ”), a company incorporated under the
laws of the BVI on September 20, 2023, is wholly owned by Mr. Xu Weifeng, an Independent
Third Party, and is principally engaged in investment businesses. Mr. Xu Weifeng is the chief
executive officer of FaaS Capital with over 18 years of investment experiences involving
artificial intelligence, big data, new energy and other industries.
We became acquainted with FaaS Capital through our business network.
CORNERSTONE INVESTORS
– 518 –


--- page 528 ---
The table below sets forth details of the Cornerstone Placing:
Based on the Offer Price of HK$5.03 (being the low-end of the indicative Offer Price range)
Assuming the Over-allotment Option
is not exercised
Assuming the Over-allotment Option
is exercised in full
Cornerstone
Investor
Total
investment
amount
Number
of Offer
Shares to be
subscribed (1)(2)
% of total
number of
International
Offer Shares
% of total
number of
Offer Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
% of total
number of
International
Offer
Shares
% of total
number of
Offer
Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
(million)
Successful Lotus (4) HK$40.0 7,952,000 4.47% 4.24% 0.23% 3.88% 3.69% 0.23%
IntelliMed (4) US$3.491 5,422,000 3.05% 2.89% 0.16% 2.65% 2.52% 0.16%
Mammoth (5) US$8.0 12,300,000 6.91% 6.56% 0.36% 6.01% 5.71% 0.36%
Begonia No. 1 (5) US$12.0 18,450,000 10.36% 9.85% 0.54% 9.01% 8.56% 0.54%
Prof. Pentelute (5) US$1.0 1,537,000 0.86% 0.82% 0.05% 0.75% 0.71% 0.04%
Ginkgo Fund I (5) US$10.0 15,375,000 8.64% 8.21% 0.45% 7.51% 7.14% 0.45%
Biocytogen (5) RMB10.0 2,122,000 1.19% 1.13% 0.06% 1.04% 0.98% 0.06%
FaaS Capital (4) HK$20.0 3,976,000 2.23% 2.12% 0.12% 1.94% 1.85% 0.16%
Total HK$337.7 67,134,000 37.71% 35.83% 1.97% 32.80% 31.16% 1.95%
Based on the Offer Price of HK$5.53 (being the mid-point of the indicative Offer Price
range)
Assuming the Over-allotment Option
is not exercised
Assuming the Over-allotment Option
is exercised in full
Cornerstone
Investor
Total
investment
amount
Number
of Offer
Shares to be
subscribed (1)(2)
% of total
number of
International
Offer Shares
% of total
number of
Offer Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
% of total
number of
International
Offer
Shares
% of total
number of
Offer
Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
(million)
Successful Lotus (4) HK$40.0 7,233,000 4.06% 3.86% 0.21% 3.53% 3.36% 0.21%
IntelliMed (4) US$3.491 4,932,000 2.77% 2.63% 0.14% 2.41% 2.29% 0.14%
Mammoth (5) US$8.0 11,188,000 6.29% 5.97% 0.33% 5.47% 5.19% 0.33%
CORNERSTONE INVESTORS
– 519 –


--- page 529 ---
Assuming the Over-allotment Option
is not exercised
Assuming the Over-allotment Option
is exercised in full
Cornerstone
Investor
Total
investment
amount
Number
of Offer
Shares to be
subscribed (1)(2)
% of total
number of
International
Offer Shares
% of total
number of
Offer Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
% of total
number of
International
Offer
Shares
% of total
number of
Offer
Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
(million)
Begonia No. 1 (5) US$12.0 16,782,000 9.43% 8.96% 0.49% 8.20% 7.79% 0.49%
Prof. Pentelute (5) US$1.0 1,398,000 0.79% 0.75% 0.04% 0.68% 0.65% 0.04%
Ginkgo Fund I (5) US$10.0 13,985,000 7.86% 7.46% 0.41% 6.83% 6.49% 0.41%
Biocytogen (5) RMB10.0 1,931,000 1.08% 1.03% 0.06% 0.94% 0.90% 0.06%
FaaS Capital (4) HK$20.0 3,616,000 2.03% 1.93% 0.11% 1.77% 1.68% 0.11%
Total HK$337.7 61,065,000 34.31% 32.59% 1.79% 29.83% 28.34% 1.78%
Based on the Offer Price of HK$6.03 (being the high-end of the indicative Offer Price range)
Assuming the Over-allotment Option
is not exercised
Assuming the Over-allotment Option
is exercised in full
Cornerstone
Investor
Total
investment
amount
Number
of Offer
Shares to be
subscribed (1)(2)
% of total
number of
International
Offer Shares
% of total
number of
Offer Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
% of total
number of
International
Offer
Shares
% of total
number of
Offer
Shares
% of total
number of
issued Shares
upon
completion of
the Global
Offering (3)
(million)
Successful Lotus (4) HK$40.0 6,633,000 3.73% 3.54% 0.19% 3.24% 3.08% 0.19%
IntelliMed (4) US$3.491 4,523,000 2.54% 2.41% 0.13% 2.21% 2.10% 0.13%
Mammoth (5) US$8.0 10,260,000 5.76% 5.48% 0.30% 5.01% 4.76% 0.30%
Begonia No. 1 (5) US$12.0 15,391,000 8.65% 8.21% 0.45% 7.52% 7.14% 0.45%
Prof. Pentelute (5) US$1.0 1,282,000 0.72% 0.68% 0.04% 0.63% 0.59% 0.04%
Ginkgo Fund I (5) US$10.0 12,825,000 7.20% 6.84% 0.38% 6.27% 5.95% 0.37%
Biocytogen (5) RMB10.0 1,770,000 0.99% 0.94% 0.05% 0.86% 0.82% 0.05%
FaaS Capital (4) HK$20.0 3,316,000 1.86% 1.77% 0.10% 1.62% 1.54% 0.10%
Total HK$337.7 56,000,000 31.46% 29.89% 1.64% 27.36% 25.99% 1.63%
CORNERSTONE INVESTORS
– 520 –


--- page 530 ---
Notes:
(1) Calculated based on the exchange rate set out in the section headed “Information about this Prospectus and the
Global Offering—Exchange Rate Conversion” in this prospectus for illustrative purpose. The actual number
of Offer Shares to be subscribed may change due to the exchange rate to be used as prescribed in the relevant
Cornerstone Investment Agreements.
(2) Subject to rounding down to the nearest whole board lot of 1,000 Shares.
(3) Assuming no Shares will be issued under the ESOPs.
(4) The total investment amount exclusive of brokerage, SFC transaction levy, Stock Exchange trading fee and
AFRC transaction levy.
(5) The total investment amount inclusive of brokerage, SFC transaction levy, Stock Exchange trading fee and
AFRC transaction levy.
CLOSING CONDITIONS
The obligation of the Cornerstone Investors to acquire the Offer Shares under the
Cornerstone Investment Agreements is subject to, among other things, the following closing
conditions:
(a) the Underwriting Agreements being entered into and having become effective and
unconditional (in accordance with their respective original terms or as subsequently
waived or varied by agreement of the parties thereto) by no later than the time and
date as specified in the Underwriting Agreements, and neither the Underwriting
Agreements having been terminated;
(b) the Offer Price having been agreed upon between our Company and the Overall
Coordinators (for themselves and on behalf of the Underwriters);
(c) the Listing Committee of the Stock Exchange having granted the approval for the
listing of, and permission to deal in, the Shares (including the Shares under the
Cornerstone Placing as well as other applicable waivers and consents) and such
approval, permission, waivers or consents having not been revoked prior to the
commencement of dealings in the Shares on the Stock Exchange;
(d) no laws shall have been enacted or promulgated by any governmental authority
which prohibits the consummation of the transactions contemplated in the Global
Offering or the Cornerstone Investment Agreements, and there shall be no orders or
injunctions from a court of competent jurisdiction in effect precluding or prohibiting
consummation of such transactions; and
CORNERSTONE INVESTORS
– 521 –


--- page 531 ---
(e) the respective representations, warranties, undertakings, confirmations and
acknowledgements of the Cornerstone Investors under their respective Cornerstone
Investment Agreements are (as of the date of the Cornerstone Investment
Agreements) and will be (as of the date of closing of the Cornerstone Investment
Agreements) accurate and true in all respects and not misleading and that there is no
material breach of the Cornerstone Investment Agreements on the part of the
Cornerstone Investors.
RESTRICTIONS ON THE CORNERSTONE INVESTORS
Each of the Cornerstone Investors has agreed that without the prior written consent of
each of the Company, the Sponsor-OC, the relevant Overall Coordinator and the Sole Sponsor,
it will not, whether directly or indirectly, at any time during the period of six months from the
Listing Date (the “ Lock-up Period ”), (i) dispose of, in any way, any of the Offer Shares it has
subscribed for or any interest in any company or entity holding any of such Offer Shares
pursuant to the relevant Cornerstone Investment Agreements; (ii) agree, enter into an
agreement or publicly announce an intention to enter into such transaction described above;
(iii) allow itself to undergo a change of control (as defined in the Takeovers Code) at the level
of its ultimate beneficial owner; or (iv) enter into any transactions directly or indirectly with
the same economic effect as any aforesaid transaction, save for certain limited circumstances,
such as transfers to any of its wholly-owned subsidiaries which will be bound by the same
obligations of such Cornerstone Investor, including the Lock-up Period restriction.
CORNERSTONE INVESTORS
– 522 –


--- page 532 ---
BOARD OF DIRECTORS
Our Board consists of eight Directors, of whom four are executive Directors, one is a
non-executive Director and three are independent non-executive Directors. Our Board is
responsible for, and has general powers for, the management and conduct of our business. The
table below sets out certain information in respect of the members of the Board.
The table below sets out certain information in respect of our Directors:
Name Age
Position(s) in
our Group
Date of
joining our
Group
Date of
appointment
as Director Key responsibilities
Relationship
with other
Directors or
senior
management
Dr. Wen Shuhao
(Ⴔ)
42 Executive Director
and chairman of
our Board
September 11,
2015
April 28,
2017 (re-
designated
as executive
Director on
November
27, 2023)
Overseeing our
overall global
business
management and
our strategies in the
capital markets
None
Dr. Ma Jian
(৵਄)
39 Executive Director
and Chief
Executive
Officer
September 11,
2015
April 28,
2017 (re-
designated
as executive
Director on
November
27, 2023)
Overseeing our
overall operation
and management
None
Dr. Lai Lipeng
(፠ɢᘄ)
41 Executive Director
and Chief
Innovation
Officer
September 11,
2015
April 28,
2017 (re-
designated
as executive
Director on
November
27, 2023)
Overseeing our
artificial
intelligence
development
None
Dr. Jiang Yide
Alan
60 Executive Director
and Chief
Strategic Officer
January 1,
2016
November 17,
2017 (re-
designated
as executive
Director on
November
27, 2023)
Overseeing our
strategic
development
including
identification of
growth
opportunities,
strategic planning
and execution
None
DIRECTORS AND SENIOR MANAGEMENT
– 523 –


--- page 533 ---
Name Age
Position(s) in
our Group
Date of
joining our
Group
Date of
appointment
as Director Key responsibilities
Relationship
with other
Directors or
senior
management
Dr. Gu Cuiping
(ᚥၯറ)
44 Non-executive
Director
September 5,
2018
September 5,
2018
(redesignated
as non-
executive
Director on
November
27, 2023)
Providing professional
advice, opinion, and
guidance to our
Board
None
Mr. Law Cheuk
Kin Stephen
(ᖯՙ਺)
61 Independent
non-executive
Director
May 28, 2024 May 28, 2024 Providing independent
judgment on
strategy, policy,
performance,
accountability,
internal control and
corporate
governance
None
Ms. Chan Wing
Ki ( ௓጑೘)
40 Independent
non-executive
Director
May 28, 2024 May 28, 2024 Providing independent
judgment on
strategy, policy,
performance,
accountability,
internal control and
corporate
governance
None
Mr. Chow Ming
Sang (୍)
51 Independent
non-executive
Director
May 28, 2024 May 28, 2024 Providing independent
judgment on
strategy, policy,
performance,
accountability,
internal control and
corporate
governance
None
DIRECTORS AND SENIOR MANAGEMENT
– 524 –


--- page 534 ---
Executive Directors
Dr. Wen Shuhao (Ⴔ), aged 42, was appointed as our Director on April 28, 2017 and
re-designated as our executive Director and chairman of the Board on November 27, 2023. He
is primarily responsible for overseeing our overall global business management and our
strategies in the capital markets. Dr. Wen has also contributed to our cooperation with
world-leading research institutes and biotechnology and pharmaceutical companies.
Prior to founding our Group, from February 2010 to April 2013, Dr. Wen worked as a
postdoctoral research scholar at the University of California at Riverside. He worked as a
postdoctoral associate at the Massachusetts Institute of Technology from April 2013 to
February 2015.
Dr. Wen obtained his bachelor’s degree in electronic science and technology from Dalian
University of Technology in the PRC in June 2004. Dr. Wen obtained his master’s degree in
physical chemistry from the University of Science and Technology of China in the PRC in June
2005. Dr. Wen obtained his Ph.D. degree in physical chemistry from Dalian Institute of
Chemical Physics, Chinese Academy of Sciences in the PRC in January 2010. Dr. Wen is a
published quantum physicist with over 14 years of research experiences in the field of
computational physics and quantum chemistry and has published 36 papers with more than
2,100 citations. In 2020, Dr. Wen was awarded as one of “Fortune’s 40 Business Elites Under
40 in China.” In April 2023, Dr. Wen was award as one of the “Shenzhen Top Ten Outstanding
Y oung Entrepreneurs.”
Dr. Ma Jian ( ৵਄), aged 39 , was appointed as our Director on April 28, 2017 and
re-designated as our executive Director and Chief Executive Officer on November 27, 2023.
He is primarily responsible for overseeing our overall operation and management.
Prior to founding our Group, Dr. Ma completed his postdoctoral research at the
Massachusetts Institute of Technology in June 2014.
Dr. Ma obtained his bachelor’s and Ph.D. degree in physics from Zhejiang University ( ए
Ϫɽኪ) in the PRC in June 2007 and June 2012, respectively. Dr. Ma has published 30 papers
in international leading scientific journals, including Physics Reports, Physical Review and
Journal of Chemical Physics. Dr. Ma was honored as “Innovators Under 35” by MIT
Technology Review in 2019. Dr. Ma is also recognized as a Shenzhen regional leading talent
(ɛʑ) and Shenzhen overseas high-caliber personnel ( ଉέ̹ऎ̮৷ᄴϣɛ
ʑ).
Dr. Lai Lipeng ( ፠ɢᘄ), aged 41 , was appointed as our Director on April 28, 2017 and
re-designated as our executive Director and Chief Innovation Officer on November 27, 2023.
He is primarily responsible for overseeing our artificial intelligence development.
DIRECTORS AND SENIOR MANAGEMENT
– 525 –


--- page 535 ---
Prior to founding our Group, from April 2012 to August 2012, he served as a software
developer at Epic Systems Corporation. From September 2012 to September 2014, Dr. Lai
served as a postdoctoral associate at the Singapore University of Technology and Design-
Massachusetts Institute of Technology (SUTD-MIT) Graduate Fellows Program.
Dr. Lai obtained his bachelor’s double degree in physics and mathematics from Peking
University in the PRC in July 2006. Dr. Lai obtained his master’s and Ph.D. degree in physics
from the University of Chicago in December 2007 and March 2012, respectively. Dr. Lai has
published multiple papers in leading journals, including Physical Review Letters , and is
recognized as a Shenzhen overseas high-caliber personnel ( ଉέ̹ऎ̮৷ᄴϣɛʑ).
Dr. Jiang Yide Alan , aged 60, was appointed as our Director on November 17, 2017 and
re-designated as our executive Director and Chief Strategic Officer on November 27, 2023. He
is primarily responsible for overseeing our strategic development including identification of
growth opportunities, strategic planning and execution.
Dr. Jiang has over 20 years of experience in scientific and research management. From
July 2001 to July 2016, Dr. Jiang worked at Sanofi-Genzyme R&D Center with his last position
held as the director of Asia R&D Strategy, where he was responsible for the development of
Genzyme Asia/China R&D strategy and led cross-functional R&D external collaborations and
projects in Asia. Dr. Jiang was a key member of the Translational Medicine team and focused
on strategic implementation of pharmacogenomics and biomarker in early clinical
development.
Dr. Jiang obtained his bachelor’s degree in medicine from Shanghai Medical College,
Fudan University (formerly known as Shanghai Medical University) in the PRC in July 1987.
He obtained his Ph.D. degree in molecular biology from University of Tennessee in the United
States in June 1999. He completed his post-doctoral research in hematology and oncology at
Brigham & Women’s Hospital, Harvard Medical School in the United States in June 2001.
Non-executive Directors
Dr. Gu Cuiping ( ᚥၯറ), aged 44, was appointed as our Director on September 5, 2018
and re-designated as our non-executive Director on November 27, 2023. She is primarily
responsible for providing professional advice, opinion, and guidance to our Board.
Dr. Gu currently serves as the managing director of HongShan Capital and focuses on
healthcare investment. Prior to joining HongShan Capital in July 2012, Dr. Gu worked at
OrbiMed Asia with her last position held as an associate from April 2010 to July 2012, where
she focused on healthcare and life sciences investments in Asia. Dr. Gu subsequently served as
a project manager at Eli Lilly & Company in Shanghai, where she was responsible for R&D
projects, collaboration and partnership. From April 2007 to May 2009, Dr. Gu worked at
Shanghai Genomics, Inc. with her last position held as an associate director for development
planning.
DIRECTORS AND SENIOR MANAGEMENT
– 526 –


--- page 536 ---
Dr. Gu obtained her bachelor of science degree with double majors in biotechnology and
English from Shanghai Jiao Tong University in the PRC in July 2002 and Ph.D. degree in
biochemistry and molecular biology from Shanghai Jiao Tong University in the PRC in April
2007.
Independent Non-executive Directors
Mr. Law Cheuk Kin Stephen ( ᖯՙ਺), aged 61, was appointed as our independent
non-executive Director on May 28, 2024. He is responsible for providing independent
judgment on strategy, policy, performance, accountability, internal control and corporate
governance.
Mr. Law worked at Wheelock Pacific Limited, a subsidiary of Wheelock and Company
Limited (ʮ̡), a company formerly listed on the Stock Exchange (stock code:
0020) from February 1995 to July 1997, i-CABLE Communications Limited, a company listed
on the Stock Exchange (stock code: 1097) from July 1997 to 2000, Morningside Technologies
Inc., part of the Morningside Group ( ોጳ௴ҳණྠ) from 2000 to 2006, and TPG Growth
Capital (Asia) Limited from July 2006 to September 2012, where he last served as a managing
director. Mr. Law served as the chief financial officer of Guoco Group Limited ( ਷खණྠϞ
ʮ̡), a company listed on the Stock Exchange (stock code: 0053) from October 2012 to
June 2013, the finance director of MTR Corporation Ltd., a company listed on the Stock
Exchange (stock code: 0066) from July 2013 to July 2016, an adjunct professor of the Hong
Kong Polytechnic University from 2015 to 2017, an independent non-executive director of
AAG Energy Holdings Limited (ʮ̡), a company listed on the Stock
Exchange (stock code: 2686) from July 2016 to September 2018, and an independent
non-executive director of Stealth BioTherapeutics Inc., a company listed on NASDAQ (ticker
symbol: MITO) from June 2018 to July 2019. He has been the managing director and a
responsible officer of ZhongYi Investment Managers Limited since January 2021.
Mr. Law obtained his bachelor’s degree in civil engineering from the University of
Birmingham in the United Kingdom in July 1984 and master’s degree in business
administration from the University of Hull in the United Kingdom in July 1996. Mr. Law is the
vice president and a council member of the Hong Kong Institute of Certified Public
Accountants (HKICPA). Mr. Law is also a member of the Institute of Chartered Accountants
in England and Wales and an expert accounting consultant appointed by the Ministry of
Finance of the PRC. Mr. Law has accounting qualifications in Hong Kong and the United
Kingdom. Mr. Law was appointed as the Justice of the Peace by the Government of the Hong
Kong Special Administrative Region in July 2022 and he was appointed as a CPPCC National
Committee Member in January 2023.
DIRECTORS AND SENIOR MANAGEMENT
– 527 –


--- page 537 ---
Mr. Law is currently or has served as a director of the following listed companies during
the three years immediately preceding the date of this prospectus:
Period of
service Name of company Principal business
Place of listing
and stock code Position
May 17, 2018 –
present
China Everbright
Limited
Investment activities and
provision of financial
services
The Stock Exchange
(stock code: 165)
Independent
non-executive
director
November 1,
2018 to
August 25,
2022
Bank of Guizhou
Co., Ltd.
Provision of corporate
and personal deposits,
loans and advances,
settlement, financial
market business and
other banking services
The Stock Exchange
(stock code:
6199)
Independent
non-executive
director
February 15,
2019 – present
Somerley Capital
Holdings Limited
Provision of corporate
finance advisory
services and asset
management services
The Stock Exchange
(stock code:
8439)
Independent
non-executive
director
March 8, 2021 –
present
CSPC
Pharmaceutical
Group Limited
Manufacture and sale of
pharmaceutical
products
The Stock Exchange
(stock code:
1093)
Independent
non-executive
director
June 29, 2020 –
present
China Galaxy
Securities
Co., Ltd.
Securities and futures
brokerage, institutional
sales and investment
research, proprietary
trading and other
securities trading
services, margin
financing and
securities lending,
asset management and
wealth management,
and equity investment
management
The Stock Exchange
(stock code:
6881)
Independent
non-executive
director
July 8, 2021 –
present
Keymed
Biosciences Inc.
Research and
development of
pharmaceutical
products
The Stock Exchange
(stock code:
2162)
Independent
non-executive
director
DIRECTORS AND SENIOR MANAGEMENT
– 528 –


--- page 538 ---
Ms. Chan Wing Ki ( ௓጑೘), aged 40, was appointed as our independent non-executive
Director on May 28, 2024. She is responsible for providing independent judgment on strategy,
policy, performance, accountability, internal control and corporate governance.
Ms. Chan has over 10 years of legal and corporate governance experience. From
September 2008 to September 2011, Ms. Chan worked at Allen & Overy with her last position
as an associate. From October 2011 to June 2016, she worked at Davis Polk & Wardwell as an
associate. Ms. Chan worked at King & Wood Mallesons as a managing associate from January
2017 to May 2017, and worked at Latham & Watkins as an associate from July 2017 to April
2018. From May 2018 to April 2021, she worked for Xiaomi Corporation, a company listed on
the Stock Exchange (stock code: 1810), with her last position as the head of legal and finance
and joint company secretary. From May 2021 to June 2021, she worked at Kuaishou
Technology as a senior director of the company secretary department. From June 2021 to
September 2022, she worked at ECARX Holdings Inc., a company listed on Nasdaq (ticker
symbol: ECX), as the secretary to the board. Since October 2022, she has been serving as the
group general counsel and company secretary of China Gas Holdings Limited, a company
listed on the Stock Exchange (stock code: 384).
Ms. Chan obtained her bachelor’s degree in business administration (law) and a
bachelor’s degree in law from The University of Hong Kong in 2006 and 2007, respectively.
Ms. Chan was admitted as a solicitor of Hong Kong by the High Court of Hong Kong in
January 2011, and as an attorney of the State of New Y ork, United States, in January 2019.
Mr. Chow Ming Sang (୍), aged 51, was appointed as our independent non-
executive Director on May 28, 2024. He is responsible for providing independent judgment on
strategy, policy, performance, accountability, internal control and corporate governance.
Mr. Chow has over 28 years of experience in accounting, corporate financial management
and corporate governance. From January 2007 to September 2018, he served as an advisory
partner of Ernst & Y oung (China) Advisory Limited ( τ͑(ʕ਷)ʮ̡), where he
was primarily responsible for managing the risk advisory sub-service line’s strategic growth
and development in various regions of the PRC. From September 2018 to June 2019, he served
as the general manager of risk & control department of Tahoe Group, Beijing Branch ( इͫණ
ʮ̡̏ԯʱʮ̡), a property developer in the PRC, whose shares are listed on the
Shenzhen Stock Exchange (stock code: 000732), where he was primarily responsible for risk
management of the company. Since July 2019, Mr. Chow has been serving as a director and the
general manager of Beijing Xinshi Anye Management Consulting Co., Ltd. (ྼτุ၍
ʮ̡), a consulting firm in the PRC, where he has been primarily responsible for
strategic planning and the overall management of the company.
From 2014 to 2016, Mr. Chow was the Committee Member of The Internal Controls
General Standards Committee of The Ministry of Finance (PRC) (௅ʫ௅છՓᅺ๟։
ࡰ.)
DIRECTORS AND SENIOR MANAGEMENT
– 529 –


--- page 539 ---
Mr. Chow obtained his bachelor’s degree in accounting from the Hong Kong University
of Science and Technology in Hong Kong in November 1995. He has been a Certified Internal
Auditor since November, 2003 and received the Certification of Fund Practice Qualification
from the Asset Management Association of China in April, 2019. He is currently a fellow
member of the Hong Kong Institute of Certified Public Accountants and the Association of
Chartered Certified Accountants.
Mr. Chow is currently or has served as a director of the following listed companies during
the three years immediately preceding the date of this prospectus:
Period of service Name of company Principal business
Place of listing
and stock code Position
June 21, 2019 –
present
Teamway
International
Group Holdings
Limited
Packaging products
and structural
components, property
investment, filtration
media and
equipment, and
rosewood home
furniture businesses
The Stock Exchange
(stock code:
1239)
Independent
non-executive
director
December 1, 2020
– August 31,
2022
China Rundong
Auto Group
Limited
automobile dealer The Stock Exchange
(stock code:
1365, delisted on
October 26, 2022)
Independent
non-executive
director
July 1, 2021 –
present
China Modern
Dairy Holdings
Ltd.
Production and sales of
milk, trading,
production and sales
of feeds
The Stock Exchange
(stock code:
1117)
Independent
non-executive
director
March 14, 2022 –
present
Redco Healthy
Living Company
Limited
Provision of property
management services
in the PRC
The Stock Exchange
(stock code:
2370)
Independent
non-executive
director
December 21,
2023 – present
Muyuan Foods Co.,
Ltd. (ٰۜ࠮ࡡى
ʮ̡)
Pig farming business Shenzhen Stock
Exchange (stock
code: 002714)
Independent
director
March 1, 2024 –
present
China Maple Leaf
Educational
Systems Limited
International school
operator
The Stock Exchange
(stock code:
1317)
Independent
non-executive
director
DIRECTORS AND SENIOR MANAGEMENT
– 530 –


--- page 540 ---
Each of the independent non-executive Directors has confirmed to our Company (i)
his/her independence as regards each of the factors referred to in Rule 3.13(1) to (8) of the
Listing Rules; (ii) that he/she has no past or present financial or other interest in the business
of our Group or any connection with any core connected person of our Company, if any; and
(iii) that there are no other factors that may affect the his/her independence at the time of
his/her appointment.
Save as disclosed above, none of our Directors have held any other directorships in listed
companies during the three years immediately preceding the date of this prospectus.
Each of the Directors has respectively obtained legal advice as regards the requirements
under the Listing Rules that are applicable to him/her as a director of a listed issuer and the
possible consequences of making a false declaration or giving false information to the Stock
Exchange on November 27, 2023 and May 23, 2024 and confirmed that he/she understood his
obligations as a director of a listed issuer.
Save as disclosed above, to the best of the knowledge, information and belief of our
Directors having made all reasonable enquiries, there was no information relating to our
Directors that is required to be disclosed pursuant to paragraphs (b) to (v) of Rule 13.51(2) of
the Listing Rules or any other matters concerning any Director that needs to be brought to the
attention of our Shareholders as of the Latest Practicable Date.
SENIOR MANAGEMENT
Our executive Directors and our senior management members are responsible for the
day-to-day operations and management of our business. For the biography of Dr. Wen, Dr. Ma,
Dr. Lai and Dr. Jiang, see “—Board of Directors—Executive Directors” above, the table below
sets out certain information in respect of the senior management of the Group.
Name Age
Existing
position in our
Group
Date of
joining
our Group
Date of
appointment
as senior
management Key responsibilities
Dr. Zhang Peiyu
(ੵԽρ)
41 Chief Scientific
Officer
September
2015
September
2015
Overseeing our scientific
research operations
Mr. Tam Man Hong
(ᗈ˖ੰ)
47 Chief Financial
Officer
December
2020
December
2020
Overseeing our fundraising and
corporate finance
transactions, investor
relations, financial reporting,
legal and compliance, IPs,
strategic formulation and
business development
DIRECTORS AND SENIOR MANAGEMENT
– 531 –


--- page 541 ---
Dr. Zhang Peiyu ( ੵԽρ), aged 41, is our Chief Scientific Officer and is primarily
responsible for overseeing our scientific research operations.
Prior to joining our Group in September 2015, Dr. Zhang was appointed as an associate
researcher in July 2013 at Dalian Institute of Chemical Physics, Chinese Academy of Sciences.
Dr. Zhang obtained his bachelor’s degree in electronic science from Dalian University of
Technology in the PRC in July 2004. He obtained his Ph.D. degree in physical chemistry from
Dalian Institute of Chemical Physics, Chinese Academy of Sciences in the PRC in January
2011.
Mr. Tam Man Hong ( ᗈ˖ੰ), aged 47, is our Chief Financial Officer and is primarily
responsible for overseeing our fundraising and corporate finance transactions, investor
relations, financial reporting, legal and compliance, IPs, strategic formulation and business
development.
Mr. Tam has extensive management experience in finance and banking across the
Asia-Pacific region. Prior to joining our Company, from August 2007 to September 2011, Mr.
Tam served as director at UBS AG Hong Kong Branch. From December 2011 to November
2015, Mr. Tam served at Jefferies Hong Kong Limited, with his last position held as managing
director. From February 2016 to January 2017, Mr. Tam served at Guosen Securities (HK)
Financial Holdings Co., Ltd, with his last position held as managing director. From February
2017 to May 2018, he served at BOSC International Company Limited, with his last position
held as managing director. He served at UBS AG Hong Kong Branch from June 2018 to July
2020, with his last position held as managing director. Mr. Tam also served as Chief Financial
Officer of HUY A Bioscience International, LLC from October 2020 to November 2020.
Mr. Tam obtained his bachelor’s degree in commerce from the University of Auckland in
New Zealand in December 1997. He obtained his master’s degree in sustainability leadership
from University of Cambridge in England in July 2020. He was certified as a CFA
charterholder by the CFA Institute (formerly the Association for Investment Management and
Research) in September 2002. He was admitted as a fellow of CPA Australia in February 2016
and a member of the Hong Kong Institute of Certified Public Accountants in January 2003,
respectively.
JOINT COMPANY SECRETARIES
Mr. Tam Man Hong ( ᗈ˖ੰ) was appointed as one of our joint company secretaries on
November 27, 2023. For details of his background, see “—Senior Management” above.
Ms. Chan Sau Ling (ޛ)was appointed as one of our joint company secretaries on
February 14, 2024. Ms. Chan is a director of corporate services of Tricor Services Limited, a
global professional services provider specializing in integrated business, corporate and
DIRECTORS AND SENIOR MANAGEMENT
– 532 –


--- page 542 ---
investor services. Ms. Chan has over 25 years of experience in the corporate secretarial field.
She has been providing professional corporate services to Hong Kong listed companies as well
as multinational, private and offshore companies.
Ms. Chan is currently the company secretary or joint company secretary of a few listed
companies on the Stock Exchange. Ms. Chan is a Chartered Secretary, a Chartered Governance
Professional and a Fellow of both The Hong Kong Chartered Governance Institute and The
Chartered Governance Institute in the United Kingdom.
BOARD COMMITTEES
We have established the following committees on our Board: an audit committee, a
remuneration committee and a nomination committee. The committees operate in accordance
with the terms of reference established by our Board.
Audit Committee
Our Company has established an audit committee with written terms of reference in
compliance with Rule 3.21 of the Listing Rules and paragraphs D.3.3 and D.3.7 of Part 2 of
the Corporate Governance Code. The audit committee consists of Mr. Law Cheuk Kin Stephen,
Ms. Chan Wing Ki and Mr. Chow Ming Sang. Mr. Law Cheuk Kin Stephen is the chairman of
the audit committee.
The primary duties of the audit committee are to (i) review and supervise our financial
reporting process and internal control system of our Group, risk management and internal
audit; (ii) provide advice and comments to our Board in respect of financial risk, risk
management and internal control matters; and (iii) perform other duties and responsibilities as
may be assigned by the Board.
Remuneration Committee
Our Company has established a remuneration committee with written terms of reference
in compliance with Rule 3.25 of the Listing Rules and code provision E.1.2 of Part 2 of the
Corporate Governance Code. The remuneration committee consists of Mr. Law Cheuk Kin
Stephen, Dr. Ma Jian and Mr. Chow Ming Sang, with Mr. Law Cheuk Kin Stephen as the
chairman.
The primary duties of the remuneration committee include, but are not limited to, the
following: (i) making recommendations to our Board on our policy and structure for all
remuneration of Directors and senior management and on the establishment of a formal and
transparent procedure for developing policy on such remuneration; (ii) determining the specific
remuneration packages of all Directors and senior management; (iii) reviewing and approving
performance-based remuneration by reference to corporate goals and objectives resolved by
our Board from time to time; and (iv) reviewing and approving matters relating to share
schemes of our Company.
DIRECTORS AND SENIOR MANAGEMENT
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Nomination Committee
Our Company has established a nomination committee with written terms of reference in
compliance with 3.27A of the Listing Rules and code provision of B.3.1 of Part 2 of the
Corporate Governance Code. The nomination committee consists of Dr. Wen Shuhao, Mr. Law
Cheuk Kin Stephen and Ms. Chan Wing Ki with Dr. Wen Shuhao as the chairman.
The primary duties of the nomination committee are to (i) review the structure, size and
composition of our Board on a regular basis and make recommendations to the Board regarding
any proposed changes to the composition of our Board; (ii) identity, select or making
recommendations to our Board on the selection of individuals nominated for directorship, and
ensure the diversity of our Board members; (iii) perform review on the contributions made by
our Directors (including our independent non-executive Directors) and the sufficiency of time
devoted to perform their duties; (iv) assess the independence of our independent non-executive
Directors; and (v) make recommendations to our Board on relevant matters relating to the
appointment, re-appointment and removal of our Directors and succession planning for our
Directors (in particular the chairman of our Board and the chief executive).
BOARD DIVERSITY POLICY
In order to enhance the effectiveness of the Board and to maintain the high standard of
corporate governance, we have adopted the board diversity policy which sets out our objectives
and approach to achieve and maintain diversity of the Board. Pursuant to the board diversity
policy, we seek to achieve board diversity through the consideration of a number of factors
when selecting the candidates to the Board, including but not limited to gender, skills, age,
professional experience, knowledge, cultural, education background and length of service. The
ultimate decision of the appointment will be based on merit and the contribution which the
selected candidates will bring to the Board.
The Board comprises eight members, including four executive Directors, one non-
executive Director and three independent non-executive Directors. Our Directors have a
balanced mix of knowledge, skills, perspectives and experience, including overall management
and strategic development, business, science, investment, accounting and consulting. They
obtained professional and academic qualifications including holding doctoral degrees in
pharmaceutical and other areas, as well as accounting qualifications. Furthermore, the Board
possesses members spanning a wide range of ages, from 38 years old to 60 years old. Taking
into account our existing business model and specific needs as well as the different background
of our Directors, the composition of the Board satisfies our board diversity policy, and the
Board and the nomination committee of our Company will assess the Board composition
regularly.
DIRECTORS AND SENIOR MANAGEMENT
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We will continue to take steps to promote gender diversity at the Board of our Company.
After the Listing, we will strive to achieve gender balance of the Board through certain
measures to be implemented by our nomination committee in accordance with our board
diversity policy. One of our Directors is female upon the Listing. To further ensure gender
diversity of our Board in a long run, our Group will also identify and select several female
individuals with a diverse range of skills, experience and knowledge in different fields from
time to time, and maintain a list of such female individuals who possess qualities to become
our Board members, which will be reviewed by our nomination committee periodically in order
to develop a pipeline of potential successors to our Board to promote gender diversity of our
Board.
Our nomination committee is responsible for reviewing the diversity of the Board. After
Listing, our nomination committee will continue to monitor and evaluate the implementation
of the board diversity policy from time to time to ensure its continued effectiveness and we will
disclose in our corporate governance report about the implementation of the board diversity
policy, including any measurable objectives set for implementing the board diversity policy
and the progress on achieving these objectives on an annual basis. We will also continue to take
steps to promote gender diversity at all levels of our Company, including but without limitation
at the Board and senior management levels.
COMPLIANCE ADVISOR
We have appointed UOB Kay Hian (Hong Kong) Limited as our compliance advisor
pursuant to Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, our
compliance advisor will advise our Company in the following circumstances:
 before the publication of any regulatory announcement, circular or financial report;
 where a transaction, which might be a notifiable or connected transaction, is
contemplated including share issues and share repurchases;
 where our Company proposes to use the proceeds from the Global Offering in a
manner different from that detailed in this prospectus or where our business
activities, developments or results deviate from any forecast, estimate, or other
information in this prospectus; and
 where the Stock Exchange makes an inquiry of our Company regarding unusual
movements in the price or trading volume of our Shares.
The term of the appointment shall commence on the Listing Date and end on the date on
which our Company distribute our annual report in respect of our financial results for the first
full financial year commencing after the Listing Date.
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COMPENSATION OF DIRECTORS
Our Directors receive compensation from our Group in the form of fees, salaries, bonuses,
allowances and benefits in kind, discretionary bonuses, retirement scheme contributions and
equity-settled share-based payment.
The aggregate amount of remuneration which was paid to our Directors for each of the
three years ended December 31, 2023 was RMB27.9 million, RMB46.3 million and RMB70.8
million, respectively. Save as disclosed above, no other amounts have been paid or are payable
by any member of our Group to our Directors for each of the three years ended December 31,
2023. It is estimated that remuneration and benefits in kind (excluding any possible payment
of discretionary bonus and the amount of share-based compensation) of more than RMB12.5
million in aggregate will be paid and granted to our Directors by us in respect of the year
ending December 31, 2024 under arrangements in force at the date of this prospectus.
The aggregate amount of remuneration which were paid by our Group to our five highest
paid individuals (including both employees and Directors) in respect of each of the three years
ended December 31, 2023 was RMB34.3 million, RMB53.7 million and RMB93.3 million,
respectively.
During the Track Record Period, (i) no remuneration was paid to our Directors or the five
highest paid individuals as an inducement to join, or upon joining our Group, (ii) no
compensation was paid to, or receivable by, our Directors or past Directors or the five highest
paid individuals for the loss of office as director of any member of our Group or any other
office in connection with the management of the affairs of any member of our Group, and (iii)
none of our Directors waived any emoluments.
Our Board will review and determine the remuneration and compensation package of our
Directors and senior management and will, following the Listing, receive recommendation
from the remuneration committee which will take into account salaries paid by comparable
companies, time commitment and responsibilities of our Directors and performance of our
Group.
INTERESTS OF DIRECTORS AND SENIOR MANAGEMENT
See “Appendix IV—Statutory and General Information—C. Further Information about
Directors and Substantial Shareholders” and “Appendix IV—Statutory and General
Information—D. Share Incentive Schemes” for details of the interests of our Directors and
senior management.
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KEY TERMS OF EMPLOYMENT CONTRACTS
We normally enter into employment contracts, confidentiality and IP protection
agreements and non-competition agreements with our senior management members and other
key personnel. Below sets forth the key terms of the employment contracts we enter into with
our senior management and other key personnel.
Confidentiality
The employee shall, during the course of employment with the Group and thereafter, keep
in confidence all technical, operational information or trade secrets belonging to our Company
or other third parties to whom the Group owes confidentiality obligations. Without the Group’s
prior consent, the employee shall not leak, disclose, publish, announce, issue, teach, transfer
or otherwise make available to any third party (including employees who are not privy to such
trade secrets) any such trade secrets of the Group or the aforementioned third parties in any
manner and shall not utilize such trade secret beyond his or her scope of work.
Ownership of intellectual work products
The employee acknowledges and agrees that the Group shall own all intellectual work
products he or she (i) produces during the course of employment with the Group for the
purposes of undertaking their duties and responsibilities and (ii) produces using the Group’s
resources.
Non-competition
Non-competition obligation during employment term. During the term of his/her
employment with our Company, unless with the Group’s prior consent, the employee shall not
engage in any business that competes with or is similar to that of the Group’s business.
If the Group requires the employee to undertake non-competition obligation following
termination of employment relationship, it shall notify the employee in writing before
termination of employment relationship and the employee shall not serve in any capacity at any
company engaged in a business that competes with or is similar to that of the Group’s business
within a period not exceeding two years after termination of the employment relationship.
Compensation for breach of covenants
If the employee breaches the obligations under the confidentiality, IP and non-
competition agreement, our Group shall be entitled to recover from the employee any losses
incurred and any profits earned by the employee as a result of the breaches.
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SHARE INCENTIVE SCHEMES
As of the Latest Practicable Date, we had one share incentive scheme subsisting, being
the Pre-IPO ESOP , and had granted options thereunder. For the purpose of the Listing, we have
adopted the Post-IPO Share Option Scheme and Post-IPO RSU Scheme, which will take effect
upon the Listing and will replace the Pre-IPO ESOP in its entirety. The principal terms of the
ESOPs are summarized in “Appendix IV—Statutory and General Information—D. Share
Incentive Schemes.”
CORPORATE GOVERNANCE
Our Company aims to achieve high standards of corporate governance which are crucial
to the development and safeguard the interests of our Shareholders. To accomplish this, our
Company expects to comply with the Corporate Governance Code and the associated Listing
Rules after the Listing.
DIRECTORS AND SENIOR MANAGEMENT
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Y ou should read the following discussion and analysis in conjunction with our
consolidated financial statements together with the accompanying notes as set forth in
the Accountant’s Report in Appendix I to this prospectus. Our consolidated financial
statements have been prepared in accordance with IFRS, which may differ in certain
aspects from generally accepted accounting principles in other jurisdictions. Y ou
should read the entire Accountant’s Report and not merely rely on the information
contained in this section.
The following discussion and analysis contains forward-looking statements that
reflect our current views with respect to future events and financial performance.
These statements are based on our assumptions and analysis in light of our experience
and perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the
circumstances. However, whether actual outcomes and developments will meet our
expectations and predictions depends on a number of risks and uncertainties, many of
which we cannot control or foresee. In evaluating our business, you should carefully
consider all of the information provided in this prospectus, including the sections
headed “Risk Factors” and “Business.”
OVERVIEW
We are a quantum physics-based, AI-powered, and robotics-driven, innovative R&D
platform. We adopt a combination of quantum physics-based first-principles calculation, AI,
high performance cloud computing, and scalable and standardized robotic automation to
provide drug and material science R&D solutions and services to global and domestic
companies in the pharmaceutical and material science (including agritech, energy and new
chemicals, and cosmetics) industries and beyond. During the Track Record Period, we derived
revenue from drug discovery solutions and intelligent automation solutions.
Drug discovery solutions. We principally provide drug discovery solutions to
biotechnology and pharmaceutical companies in exchange for service fees as we deliver
research results to our customers. We also expect to receive additional royalties, milestone or
contingent payments if our collaboration programs reach particular milestones or events
contemplated in the respective contracts in the future, such as successful commercialization in
particular regions. In addition, we offered drug discovery solutions in exchange for equity
interests in counterparties and recorded revenue from such non-cash transactions in 2021.
Intelligent automation solutions. Our intelligent automation solutions primarily consist of
solid-state R&D services and automated chemical synthesis services. We generate revenue
from intelligent automation solutions in the form of service fees.
FINANCIAL INFORMATION
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Our revenue achieved rapid growth during the Track Record Period. In 2021, 2022 and
2023, our revenue amounted to RMB62.8 million, RMB133.4 million and RMB174.4 million,
respectively, representing a CAGR of 66.7% from 2021 to 2023. During the Track Record
Period, our revenue from drug discovery solutions and intelligent automation solutions
increased at a CAGR of 49.3% and 92.3%, respectively.
Due to the significant amounts of our fair value loss of CRPS and other financial
liabilities, and to a lesser extent, due to our R&D expenses, general and administrative
expenses, contract fulfillment costs, and selling and marketing expenses incurred during the
Track Record Period, we recorded net losses of RMB2,137.3 million, RMB1,438.6 million and
RMB1,906.3 million in 2021, 2022 and 2023, respectively. We recorded fair value loss of
CRPS and other financial liabilities throughout the Track Record Period as the valuation of our
Company increased, while our R&D expenses, general and administrative expenses, contract
fulfillment costs, and selling and marketing expenses increased as our business grew. Our
adjusted net loss, which is a non-IFRS measure after excluding (i) share-based compensation
expenses, (ii) changes in fair value of CRPS and other financial liabilities issued to investors
and (iii) listing expenses, was RMB271.0 million, RMB437.4 million and RMB522.2 million,
respectively, for 2021, 2022 and 2023.
In the future, we aim to maintain business sustainability and achieve profitability through:
(i) enriching and expanding our solutions and services, (ii) expanding customer base, enabling
cross-selling and diversifying revenue sources, and (iii) enhancing our operational efficiency
and attaining economies of scale.
MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations have been, and are expected to continue to be, materially
affected by a number of factors, including the following:
The Evolving Markets We Compete in
We compete in the evolving markets of new technologies, including AI, quantum
physics-based computation, and automation, which have experienced rapid growth in recent
years. According to Frost & Sullivan, the size of the global drug R&D outsourcing services
market, the global solid-state R&D services market, the global automated R&D lab market, and
the global material science R&D expenditure, increased at a CAGR of 11.3%, 21.4%, 23.6%
and 13.5% from 2018 to 2022, respectively; and is expected to further increase at a CAGR of
13.3%, 27.7%, 39.6% and 12.8% from 2023 to 2030, respectively. We believe that by
leveraging our leading position and advanced technologies in the quantum physics-based,
AI-powered and robotics-driven drug discovery and intelligent automation solutions, we are
well-positioned to capture the tremendous market opportunities, and we expect our results of
operations and financial performance to further improve and our market share to further
increase going forward. For a detailed discussion on the growth drivers of the relevant markets,
see “Industry Overview.”
FINANCIAL INFORMATION
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Our Ability to Innovate Our Technologies
We operate in industries that are subject to rapid technological advancements. Continual
innovations of our technologies are crucial for us to satisfy our customers’ and collaborators’
evolving needs and to remain competitive in the markets in which we operate. Therefore, we
have to continually upgrade, enhance, and innovate our existing technologies and solutions,
and develop new features and functionalities of our technologies and solutions to enhance their
utility.
During the Track Record Period, we initiated various technological advancements and
upgrades. For example, we have developed our AI-powered intelligent robotic wet lab to
accelerate wet lab process and enhance experimental quality. We have established a joint
venture, which launched the UpChemist.AI platform to expand our business in material science
R&D, such as biomaterials, new energy and chemical materials, leveraging our strong quantum
physics-based computation and intelligent automation capabilities. Furthermore, we have
developed and applied our ProteinGPT technology in multiple macromolecular drug and new
materials design and discovery programs.
We have invested, and will continue devoting significant resources in R&D to deliver
quality customer experience. Our R&D expenses amounted to RMB212.6 million, RMB359.0
million and RMB480.7 million in 2021, 2022 and 2023, respectively, accounting for
approximately 338.5%, 269.2% and 275.6% of our revenue in the corresponding years. Going
forward, we plan to continue investing in R&D to further enhance and innovate our
technologies and support the long-term growth of our business, which may affect our
profitability and operating cash flow in the short-term.
Our Ability to Retain Our Existing Customers and Expand Our Customer Base
The number, quality and diversity of our customers (including our collaborators and
collaborator-investees to which we provide solutions) are crucial to our results of operations
and continued growth. In recent times, an increasing number of biotechnology and
pharmaceutical companies and institutions have sought out our solutions and services to speed
up and improve their success rates of their R&D processes, with 75, 120 and 187 customers in
2021, 2022 and 2023, respectively, and we estimate that the number of our customers will
further grow in the future. Our diverse customer base ranges from start-ups to global
biotechnology and pharmaceutical companies, and we have also established relationships with
customers in material science sector. Due to our advanced R&D capabilities and distinct value
proposition to our customers and collaborators, many of them are our repeat customers and
engage us for either bundled transactions or long-term collaborations. Our customer retention
rate was approximately 67.5%, 51.4% and 64.9%, respectively, in 2021, 2022 and 2023.
FINANCIAL INFORMATION
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We attract new customers and collaborators primarily through word-of-mouth marketing
from our past achievements, favorable reputation build-up within the industries in which we
operate, and marketing activities, such as by attending academic seminars, workshops, industry
exhibitions, or conferences. We believe that our reputable and loyal customer and collaborator
base demonstrates strong support and demand for our solutions and services and helps to
strengthen our brand and reputation, thereby attracting more customers for our solutions or
services, and more collaborators to collaborate with us. Our selling and marketing expenses
were RMB27.4 million, RMB40.4 million and RMB62.5 million in 2021, 2022 and 2023,
representing approximately 43.7%, 30.3% and 35.8% of our revenue in the respective year.
Going forward, we believe our success will continue to largely depend on our ability to retain
and further expand our customer and collaborator base through offering quality and diversified
services to our customers and collaborators in a speedy, scalable, and novel way with high
success rates.
Our Ability to Succeed in Other High-Value Industries
Our financial condition and growth prospects could be affected by our ability to succeed
in other high-value industries in the future. Leveraging our proprietary in-house technologies
and expertise, we have been exploring entry into other high-value sectors which rely on
advanced technologies, such as material science (including agritech, energy and new
chemicals, and cosmetics) and automation, to capture the market opportunities as well as to
diversify our service offerings and revenue streams. For example, we have formed a joint
venture with Zhongke Guosheng (Hangzhou) Technology Co., Ltd. and successfully developed
a new type of furan-based bio-based surfactant that is verified to be able to replace the
generally used petroleum-based surfactants within merely four months. We intend to continue
investing significantly in R&D efforts related to these high-value industries, which may lead
to changes in our financial performance.
General Conditions Affecting the Industries in which We Operate
Our results of operations are affected by general conditions that typically affect the
markets we compete in, primarily including:
 global demand for AI-powered and robotics-driven drug discovery and intelligent
automation solutions;
 the overall economic conditions especially in China and the U.S.;
 competition in the markets for drug and new materials R&D;
 the advancement in technologies relating to drug and new materials R&D; and
 government regulations, policies and initiatives affecting our business and
operations, particularly in China and the U.S.
FINANCIAL INFORMATION
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Any change in any of these general industry conditions may have a material impact on the
demand for our services and solutions, and materially affect our results of operations.
BASIS OF PREPARATION
We were incorporated in the Cayman Islands on April 28, 2017 as an exempted company
with limited liabilities, following which we implemented a series of corporate restructurings
for the purpose of the reorganization and our Company became the holding company of our
current business. See “History, Development and Corporate Structure” for details regarding the
reorganization. As the reorganization only involved inserting new holding companies at the top
of an existing company and has not resulted in any change of economic substances, the
historical financial information has been presented as a continuation of the existing company
as if the reorganization had been in place at the beginning of Track Record Period.
Our Group initially carried out our operations via Shenzhen Jingtai and its subsidiaries in
China. We obtained a controlling financial interest over Shenzhen Jingtai by entering into the
Former Contractual Arrangements with Shenzhen Jingtai and its registered shareholders. The
Former Contractual Arrangements included exclusive business cooperation agreement,
exclusive call option agreement, voting rights proxy agreements, and equity interest pledge
agreement, which enabled our Group to exercise power over Shenzhen Jingtai, received
variable returns from its involvement in Shenzhen Jingtai and had the ability to affect those
returns through its power over Shenzhen Jingtai. Our management concluded that Shenzhen
Jingtai was a controlled structured entity, of which we were the ultimate primary beneficiary.
The Former Contractual Arrangements were terminated on July 12, 2021 through our
acquisition of the entire equity interest in Shenzhen Jingtai from its registered shareholders.
The aforesaid equity transfer does not have any impact on the consolidated financial statements
of our Group as the effect of the equity transfer resulted in Shenzhen Jingtai and its subsidiaries
changing from being a consolidated structured entity and subsidiaries of a consolidated
structured entity into being directly-owned consolidated subsidiaries of the Company. This
equity transfer had not changed our economic ownership in the above entities. For details, see
“History, Development and Corporate Structure—Former Contractual Arrangements.”
Our historical financial information has been prepared in accordance with IFRS issued by
the International Accounting Standards Board. The historical financial information has been
prepared on a historical cost basis, except for certain financial assets and financial liabilities,
which are measured at fair value. All effective standards, amendments to standards and
interpretation, mandatory for any financial year during the Track Record Period, are
consistently applied to our Group for the Track Record Period.
As at December 31, 2023, we were in a net liability position of approximately RMB7.2
billion as we were still in the early stages of developing our services and solutions, and our
technological platform and that our CRPS were being recorded as financial liabilities and
measured at their fair values of RMB10.8 billion. These CRPS were not contractually
redeemable within the 12 months subsequent to the end of the Track Record Period.
FINANCIAL INFORMATION
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In preparing the historical financial information, our Directors have taken into account a
projected cash flow covering a period of not less than 12 months from December 31, 2023 and
financial resources as at December 31, 2023, and concluded that we will have sufficient
working capital to finance our operations and to meet our financial obligations for not less than
12 months from December 31, 2023. Consequently, our historical financial information has
been prepared on a going concern basis, which contemplates the realization of assets and
settlement of liabilities in the normal course of business.
MATERIAL ACCOUNTING POLICY INFORMATION AND ESTIMATES
We have identified various accounting policies that are material to the preparation of our
financial information, and the understanding of our financial condition and results of
operations. See Note 2 to the Accountant’s Report in Appendix I to this prospectus for details
regarding our accounting policies.
The preparation of our historical financial information in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires our management to exercise its
judgment in the process of applying the our accounting policies. The areas involving a higher
degree of judgment or complexity, or areas where assumptions and estimates are significant to
the historical financial information are disclosed in Note 4 to the Accountant’s Report in
Appendix I to this prospectus.
The following paragraphs discuss, among others, our critical accounting policies,
estimates and judgments applied in preparing our financial information:
Revenue recognition
We provide (i) drug discovery solutions, and (ii) intelligent automation solutions,
primarily comprising solid-state R&D services and automated chemical synthesis services.
Revenue is measured at the fair value of the consideration received or receivable for the
services in the ordinary course of our activities and is recorded net of value-added tax. Revenue
is shown net of discounts and after eliminating sales between companies within our Group.
For the revenue from drug discovery solutions and solid-state R&D services, depending
on the terms of services to be delivered, we generally recognize the relevant revenue when we
transfer control of the relevant research results to a customer.
However, there are certain special customized drug discovery solutions of which we are
required to timely deliver the discovery progress and results, revenue recognition of these
services is based on the input method. This method measures our efforts or inputs towards
fulfilling a performance obligation relative to the total expected inputs.
FINANCIAL INFORMATION
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For the revenue from automated chemical synthesis services, we generally recognize our
revenue over time as the customer simultaneously receives and consumes the services we
provide during the performance of such services, as such services are provided on the full
time-equivalent (“FTE”) basis, under which we provide our customers with a project team of
employees dedicated to the chemical synthesis with automated and AI platform for a specific
period of time and charge the customer at a fixed rate per employee.
We account for revenue from contracts with customers and collaborators, which includes
the identification and assessment of the services we provide pursuant to a contract to evaluate
the disparate obligations thereunder. Contracts with customers may include multiple
obligations which are separately identifiable with standalone selling prices of the services
being provided to the customers. Services offered to different customers varies according to
customers’ needs. The transaction price generally includes fixed fees due at contract inception
as well as fixed fees payable when different services have been performed.
We generally determine standalone selling prices for each distinct obligation identified
based on the prices charged to customers. If the standalone selling price is not directly
observable, it is estimated using the formula of expected cost plus a margin or adjusted market
assessment approach, depending on the availability of observable information, and we also
consider our pricing policies and market practice in making pricing decisions. Assumptions and
estimations have been made in estimating the relative standalone selling price of each distinct
obligation, and changes in judgments on these assumptions and estimates may affect the
revenue recognition.
When either party to a contract has performed its obligations thereunder, we present the
contract in the consolidated balance sheets as contract costs or contract liabilities. Contract
costs represent our right to consideration in exchange for services that we have transferred to
a customer. A receivable is recorded when we have an unconditional right to consideration. A
right to consideration is unconditional if only the passage of time is required before payment
of that consideration is due. Contract liabilities represent the cash collected upfront from
customers for our provision of services when the underlying services have not yet been
rendered to the customers. Contract liabilities are recognized as revenue when the underlying
services have been rendered to the customers.
Non-cash transactions
In addition, we have engaged in certain revenue-generating transactions, in which we
offer services in exchange for non-cash consideration in the form of equity interests in the
counterparties. We recognize revenue when we transfer control of the relevant research results
to the counterparties, and relevant equity interests are recorded in investments accounted for
using the equity method and financial assets at fair value through profit or loss (“ FVTPL ”)
when we obtain legal titles or relevant risks and rewards of such equity interests.
FINANCIAL INFORMATION
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Any non-cash consideration received from a customer must be accounted for when
determining the overall transaction price, and non-cash consideration is measured at fair value.
In situations where we cannot reasonably estimate the fair value of the non-cash consideration,
we measure the consideration indirectly by reference to the stand-alone selling price of the
goods or services promised to the customer (or class of customer) in exchange for the
consideration.
We measure the non-cash consideration at contract inception date at fair value based on
related fair value of the equity interests received from the counterparties.
For the years ended December 31, 2021, 2022 and 2023, we recognized revenue from
transactions from which we receive non-cash consideration of RMB14.8 million, nil and nil,
respectively.
Contract costs/Contract fulfillment costs
Costs to fulfill a contract are capitalized when incurred, recorded as “contract costs” on
our consolidated balance sheet, if the costs (i) relate directly to an existing contract or to a
specifically identifiable anticipated contract; (ii) generate or enhance resources that will be
used to provide goods or services in the future; and (iii) are expected to be recovered. Costs
that relate directly to an existing contract or to a specifically identifiable anticipated contract
may include direct labor, direct materials, costs that are explicitly chargeable to the customer
and other costs that are incurred only because we have entered into the contract. Capitalized
costs might relate to an entire contract, or could relate only to specific performance obligations
within a contract.
The asset recognized from capitalizing the costs to obtain or fulfill a contract is amortized
on a systematic basis consistent with the pattern of the transfer of the goods or services to
which the asset relates, i.e. contract costs will be recognized as “contract fulfillment costs” on
our consolidated statement of profit or loss when the relevant revenue is recognized.
Impairment loss are recognized to the extent that the carrying amount of an asset, being
contract costs in this case, exceeds the remaining amount of consideration that we expects to
receive, less the costs that relate directly to providing those goods or services that have not
been recognized as expenses.
CRPS
CRPS issued by us are redeemable at the option of the holders upon occurrence of certain
events. These instruments can also be converted into Ordinary Shares at any time at the option
of the holders, or automatically upon occurrence of an initial public offering of our Company,
see Note 32 in Appendix I to this prospectus for details.
FINANCIAL INFORMATION
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We designated the CRPS as financial liabilities at FVTPL. They are initially recognized
at fair value. Any directly attributable transaction costs are recognized in profit or loss.
Fair value changes relating to market risk are recognized through profit or loss, while the
component of fair value changes relating to our own credit risk is recognized through other
comprehensive income. Amounts recorded in other comprehensive income related to credit risk
are not subject to recycling in profit or loss, but are transferred to accumulated losses when
realized.
During the Track Record Period, CRPS are classified as non-current liabilities unless the
holders of the relevant CRPS can demand us to redeem the CRPS in cash within 12 months
after the end of the reporting period.
Investment and other financial assets
Classification
We classify our financial assets as the following measurement categories:
 those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss), and
 those to be measured at amortized cost.
The classification depends on our business model for managing the financial assets and
the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss
or other comprehensive income. For investments in equity instruments that are not held for
trading, this will depend on whether we have made an irrevocable election at the time of initial
recognition to account for the equity investment at fair value through other comprehensive
income.
We reclassify debt investments when and only when our business model for managing
those assets changes.
Recognition and derecognition
Regular way purchases and sales of financial assets are recognized on trade-date, being
the date on which we commit to purchase or sell the asset. Financial assets are derecognized
when the rights to receive cash flows from the financial assets have expired or have been
transferred and we have transferred substantially all the risks and rewards of ownership.
FINANCIAL INFORMATION
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Measurements
At initial recognition, we measure a financial asset at its fair value plus, in the case of a
financial asset not at FVTPL, transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in
profit or loss.
Financial assets with embedded derivatives are considered in their entirety when
determining whether their cash flows are solely payment of principal and interest.
(i) Debt instruments
Subsequent measurement of debt instruments depends on our business model for
managing the asset and the cash flow characteristics of the asset. There are three measurements
categories into which we classify our debt instruments:
 Amortized cost: Assets that are held for collection of contractual cash flows where
those cash flows represent solely payments of principal and interest are measured at
amortized cost. Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss arising on
derecognition is recognized directly in profit or loss and presented in “other
gains/(losses), net” together with foreign exchange gains and losses. Impairment
losses are presented as separate line item in the consolidated statements of profit or
loss.
 Fair value through other comprehensive income (“ FVOCI ”): Assets that are held for
collection of contractual cash flows and for selling the financial assets, where the
assets’ cash flows represent solely payments of principal and interest, are measured
at FVOCI. Movements in the carrying amount are taken through other
comprehensive income (“ OCI”), except for the recognition of impairment gains or
losses, interest income and foreign exchange gains and losses which are recognized
in profit or loss. When the financial asset is derecognized, the cumulative gain or
loss previously recognized in OCI is reclassified from equity to profit or loss and
recognized in “other gains/(losses), net.” Interest income from these financial assets
is included in finance income using the effective interest rate method. Foreign
exchange gains or losses are presented in “other gains/(losses), net” and impairment
expenses are presented as separate line item in the consolidated statements of
comprehensive (loss)/income.
 FVTPL: Assets that do not meet the criteria for amortized cost or financial assets at
FVOCI are measured at FVTPL. A gain or loss on a debt investment that is
subsequently measured at FVTPL is recognized in profit or loss and presented net
within “other gains/(losses), net” in the period in which it arises.
FINANCIAL INFORMATION
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--- page 558 ---
(ii) Equity instruments
We subsequently measure all equity instruments at fair value. Where our management has
elected to present fair value gains and losses on equity instruments in OCI, there is no
subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognized
in profit or loss as “other income” when our right to receive payments is established.
Changes in the fair value of financial assets at FVTPL are recognized in “other
gains/(losses), net” in the consolidated statements of profit or loss as applicable. Impairment
losses (and reversal of impairment losses) on equity investments measured at FVOCI are not
reported separately from other changes in fair value.
Fair value estimation
Our financial instruments carried at fair value at each balance sheet date are measured by
level of the inputs to valuation techniques used to measure fair value. Such inputs are
categorized into three levels within a fair value hierarchy as follows:
 Level 1: The fair value of financial instruments traded in active markets (such as
publicly traded derivatives, and equity securities) is based on quoted market prices
at the end of the reporting period. The quoted market price used for financial assets
held by us is the current bid price. These instruments are included in level 1.
 Level 2: The fair value of financial instruments that are not traded in an active
market (for example, over-the-counter derivatives) is determined using valuation
techniques which maximize the use of observable market data and rely as little as
possible on entity-specific estimates. If all significant inputs required to evaluate the
fair value of an instrument are observable, the instrument is included in level 2.
 Level 3: If one or more of the significant inputs is not based on observable market
data, the instrument is included in level 3. This is the case for unlisted equity
securities.
Share-based payments
We have an equity-settled share-based compensation plan (i.e. share option scheme),
under which we grant equity instruments of the Company as consideration for services received
from employees. The value of the share options granted is measured at the grant date based on
the fair value of equity instruments and is recognized as employee benefit expenses over the
vesting period, which is the period over which all of the specified vesting conditions are to be
satisfied, with a corresponding increase in equity as “equity-settled share-based compensation
reserve.”
FINANCIAL INFORMATION
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At the end of each reporting period, our Group revises its estimates of the number of
options that are expected to vest based on the non-market vesting and service conditions. It
recognizes the impact of the revision to original estimates, if any, in profit or loss, with a
corresponding adjustment to equity.
The total amount to be expensed is determined by reference to the fair value of the options
granted:
 including any market performance conditions (e.g. the entity’s share price),
 excluding the impact of any service and non-market performance vesting conditions
(e.g. profitability and remaining as an employee of the entity over a specified time
period), and
 including the impact of any non-vesting conditions (e.g. the requirement for
employees to save or hold shares for a specific period of time).
DESCRIPTION OF SELECTED ITEMS FROM CONSOLIDATED STATEMENTS OF
PROFIT OR LOSS
The following table sets forth a summary of our consolidated statements of profit or loss,
with line items in absolute amounts and as a percentage of our revenue for the years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000
%o f
revenue RMB’000
%o f
revenue RMB’000
%o f
revenue
Revenue 62,799 100.0 133,353 100.0 174,420 100.0
R&D expenses (212,603) (338.5) (358,952) (269.2) (480,664) (275.6)
General and administrative expenses (137,035) (218.2) (204,401) (153.3) (295,986) (169.7)
Contract fulfillment costs (30,014) (47.8) (67,266) (50.4) (126,178) (72.3)
Selling and marketing expenses (27,413) (43.7) (40,427) (30.3) (62,482) (35.8)
Impairment losses on financial assets (673) (1.1) (874) (0.7) (217) (0.1)
Other income 8,625 13.7 21,367 16.0 27,513 15.8
Other gains/(losses), net 36,882 58.7 (8,114) (6.1) 41,282 23.7
Operating loss (299,432) (476.8) (525,314) (393.9) (722,312) (414.1)
Finance income 14,055 22.4 50,478 37.9 102,693 58.9
Finance expenses (3,575) (5.7) (5,746) (4.3) (9,575) (5.5)
Finance income, net 10,480 16.7 44,732 33.5 93,118 53.4------- ------- ------- ------- ------- -------
FINANCIAL INFORMATION
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--- page 560 ---
Y ear ended December 31,
2021 2022 2023
RMB’000
%o f
revenue RMB’000
%o f
revenue RMB’000
%o f
revenue
Changes in fair value of CRPS and other
financial liabilities (1,843,883) (2,936.2) (957,799) (718.2) (1,275,165) (731.1)
Share of net losses of investments
accounted for using equity method (4,497) (7.2) (236) (0.2) (1,964) (1.1)
Loss before income tax (2,137,332) (3,403.4) (1,438,617) (1,078.8) (1,906,323) (1,092.9)
Income tax expense ––––––
Loss for the year (2,137,332) (3,403.4) (1,438,617) (1,078.8) (1,906,323) (1,092.9)
NON-IFRS MEASURE
In evaluating our business, we consider and use adjusted net loss, a non-IFRS financial
measure, to supplement the review and assessment of our operating performance. We believe
such non-IFRS measure facilitates comparisons of our operating performance from period to
period by eliminating the potential impact of certain items. We believe that the measure
provides useful information to investors in understanding and evaluating our consolidated
results of operations in the same manner as they help our management. The use of the
non-IFRS measure has limitations as an analytical tool, and you should not consider them in
isolation from, as a substitute for analysis of, or superior to, our results of operations or
financial conditions as reported under IFRS. In addition, the non-IFRS financial measure may
be defined differently from similar terms used by other companies, and may not be comparable
to other similarly titled measures used by other companies.
We define adjusted net loss (non-IFRS measure) as net loss adjusted by adding back
(i) changes in fair value of CRPS and other financial liabilities, (ii) share-based compensation
expenses and (iii) listing expenses. Share-based compensation expenses mainly represent
expenses incurred in connection with our Pre-IPO ESOP . In addition, our other financial
liabilities, being our Series C Warrants issued in 2020, were converted into CRPSs in 2021.
Upon completion of Listing, all of our CRPS will be automatically converted into Ordinary
Shares and we do not anticipate recording further gains or losses related to valuation changes
in these instruments after the Listing. These two reconciling items are non-cash items. Listing
expenses are expenses related to the Global Offering.
FINANCIAL INFORMATION
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The following table sets forth our adjusted net loss (non-IFRS measure) for the years
indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Net loss for the year (2,137,332) (1,438,617) (1,906,323)
Add:
Changes in fair value of CRPS and other
financial liabilities 1,843,883 957,799 1,275,165
Share-based compensation expenses 22,482 43,384 88,426
Listing expenses – – 20,575
Adjusted net loss
(non-IFRS measure) (270,967) (437,434) (522,157)
Revenue
Revenue by business lines
During the Track Record Period, we generated revenue from (i) drug discovery solutions and
(ii) intelligent automation solutions. We provide either standalone solutions or services or a
combination of our solutions or services, depending on our customers’ needs. For our drug
discovery solutions, we typically charge our customers under transaction-based model in
accordance with our agreed-upon pricing and payment terms. For our solid state R&D services, we
typically charge our customers under transaction-based model, or through a master service
agreement which allows our customers to place work orders for services as and when needed. For
our automated chemical synthesis services, we typically charge our customers under subscription-
based model, which allows our customers to place work orders during the subscription term and
make monthly or quarterly payment based on the full-time equivalent rates specified in the relevant
subscription agreement. The table below sets forth a breakdown of our revenue by business lines
in absolute amounts and as a percentage of our revenue for the years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Drug discovery solutions 39,346 62.7 87,666 65.7 87,728 50.3
Intelligent automation solutions 23,453 37.3 45,687 34.3 86,692 49.7
Total 62,799 100.0 133,353 100.0 174,420 100.0
FINANCIAL INFORMATION
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--- page 562 ---
Revenue from our drug discovery solutions
Our drug discovery solutions span the drug discovery and research process, providing
modular drug discovery solutions to or collaborating with a diverse range of biotechnology and
pharmaceutical companies as well as academic institutions for novel drug discovery endeavors.
We charged service fees for our drug discovery solutions and generally recognized
revenue as we delivered research results to our customers during the Track Record Period. We
recorded revenue from non-cash transactions in 2021. We also expect to receive additional
royalties, milestone or contingent payments if our collaboration programs successfully reach
particular milestones or events contemplated in the respective contracts.
During the Track Record Period, substantially all of our revenue from drug discovery
solutions were generated from our small molecule discovery solutions. We started recording
revenue from our antibody discovery solutions in 2022, amounting to RMB10.3 million in the
Track Record Period (i.e. in 2022 and 2023), representing approximately 5.9% of our revenue
from drug discovery solutions in 2022 and 2023, accumulatively.
Revenue from our intelligent automation solutions
Our intelligent automation solutions primarily consist of (i) solid-state R&D services and
(ii) automated chemical synthesis services.
Our solid-state R&D services encompass computational services, wet lab experimental
services and integrated solutions which is a combination of both. Our computational services
include CSP morphology prediction, as well as screenings performed on conformer and carrier
for crystallization. Our wet lab experimental services encompass many aspects of solid-state
R&D, such as crystallization process development and crystal structure determination, among
others. We charged service fees for our solid-state R&D services and recognized revenue as we
delivered research results to our customers during the Track Record Period.
Our automated chemical synthesis services apply automation technology to enable faster
and more accurate production of chemical compounds. We began providing automated
chemical synthesis services in 2021, for which we generally charged our customers service fees
on a monthly basis, and to a lesser extent, on a quarterly basis, and recognized revenue over
time as the customers simultaneously received and consumed our services during the
performance of such services during the Track Record Period.
FINANCIAL INFORMATION
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--- page 563 ---
The table below sets forth a breakdown of our revenue generated from our provision of
intelligent automation solutions by service type for the years indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Solid-state R&D services 23,296 27,756 42,184
Automated chemical synthesis services 55 17,931 43,715
Others
(1) 102 – 793
Total 23,453 45,687 86,692
Note:
(1) Income from other services pursuant to customers’ requests, including lease income in 2021, and income
primarily from the provision of automation solutions in 2023, such as the set-up of an automated wet
lab for a biomaterials company. Our automation solutions, as part of our XtalPi R&D Solutions, were
launched in 2023.
The table below sets forth a breakdown of the number of revenue-generating programs,
which is a major factor driving our revenue growth during the Track Record Period:
Y ear ended December 31,
2021 2022 2023
Drug discovery solutions 18 47 81
Intelligent automation solutions
Solid-state R&D services 166 198 283
Automated chemical synthesis
services 1 48 137
Others 1 – 3
Subtotal 168 246 423
Total 186 293 504
We believe the quality of our services, which has been improved as we continuously
innovated our technologies, as well as our increased marketing efforts during the Track Record
Period, contributed to our enlarged customer base and increased number of our revenue-
generating programs, which in turn led to the increase of our revenue. See “Discussion of
Results of Operations” for details.
FINANCIAL INFORMATION
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--- page 564 ---
We provide either standalone solutions or services or a combination of our solutions or
services, depending on our customers’ needs. The average revenue of programs, calculated by
dividing revenue by the respective number of revenue-generating programs in the respective
year, of standalone solutions is usually lower than one-stop solutions principally owing to the
difference in the service scope. We recorded average revenue of programs under the drug
discovery solutions of RMB2.2 million, RMB1.9 million and RMB1.1 million in 2021, 2022
and 2023, respectively, primarily because we were engaged in more standalone modular drug
discovery solutions in 2022 and 2023 as one of our strategies to further expand our drug
discovery solutions business.
We recorded average revenue of programs under the intelligent automation solutions of
RMB139.6 thousand, RMB185.7 thousand and RMB205.0 thousand in 2021, 2022 and 2023,
respectively. The increase was primarily driven by the increase of average revenue of programs
under our automated chemical synthesis services in combination with the increase of
contribution by such services to our total revenue from less than 0.1% in 2021 to 25.1% in 2023
as it gradually ramped up in 2022 and 2023, while the average revenue of programs derived
from one of our major customers of solid-state R&D services increased in 2023 as compared
with 2022.
Revenue by geographical locations
The following table sets forth a breakdown of our revenue by geographical location of our
customers (including collaborators and collaborator-investees), based on their billing
addresses, in absolute amounts and as a percentage of our revenue for the years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
China 45,769 72.9 101,404 76.0 108,451 62.1
U.S. 13,525 21.5 25,817 19.4 52,245 30.0
Other regions
(1) 3,505 5.6 6,132 4.6 13,724 7.9
Total 62,799 100.0 133,353 100.0 174,420 100.0
Note:
(1) Other regions included primarily European countries, South Korea and Japan.
FINANCIAL INFORMATION
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--- page 565 ---
During 2021 and 2022, a majority of our revenue was generated from China as a result
of our business development efforts to capture the opportunities brought upon by the market
growth in China. In particular, our business development and marketing team based in China
had been expanded during 2021 and 2022. We have also established business relationships with
customers which are biotechnology and pharmaceutical companies based in the U.S., Europe
and other countries and regions, especially during 2023. As a result, our revenue generated
from the U.S. as a percentage of our total revenue has substantially increased from 19.4% in
2022 to 30.0% in 2023. We will actively seek possibilities to expand our operations and
business in the U.S. and Europe going forward. See “Business—Commercialization and
Business Sustainability” for more details.
R&D Expenses
During the Track Record Period, our R&D expenses were incurred for our R&D activities
primarily in China in connection with our proprietary AI platform development and automation
technologies. R&D expenses primarily consisted of (i) employee benefit expenses (including
share-based compensation expenses) of R&D staff, (ii) depreciation and amortization
expenses, (iii) sample fees, (iv) network and IT expenses, and (v) professional service fees. Our
R&D expenses increased significantly during the Track Record Period, reflecting our vast
investments in and commitment to R&D efforts to advance our integrated technology platform.
We did not capitalize R&D expenses during the Track Record Period.
The table below sets forth a breakdown of R&D expenses, in absolute amounts and as a
percentage of our total R&D expenses for the years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Employee benefit expenses 112,563 52.9 209,706 58.5 273,971 57.0
Depreciation and amortization expenses 13,979 6.7 52,786 14.7 90,385 18.8
Sample fees 10,839 5.1 43,592 12.1 37,860 7.9
Network and IT expenses 26,248 12.3 23,244 6.5 18,308 3.8
Professional service fees 34,862 16.4 15,476 4.3 29,214 6.1
Others
(1) 14,112 6.6 14,148 3.9 30,926 6.4
Total 212,603 100.0 358,952 100.0 480,664 100.0
Note:
(1) Others mainly include office and utilities expenses used for our R&D activities.
FINANCIAL INFORMATION
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--- page 566 ---
Employee benefit expenses primarily comprised wages, salaries and bonuses, pensions
costs and housing benefits and share-based compensation expenses. The increase in employee
benefits expenses during the Track Record Period was primarily attributable to the increase in
the annual average number of R&D staff to further enhance our technological capabilities to
support more R&D activities.
Depreciation and amortization expenses primarily comprised (i) depreciation of property,
plant and equipment, including lab equipment and leasehold improvements to our R&D
facilities, (ii) depreciation of right-of-use assets in connection with our R&D facilities, and (iii)
amortization in relation to the system software licenses which are classified as intangible assets
used for our R&D activities. The increase in depreciation and amortization expenses was
mainly attributable to our newly constructed lab facilities and purchase of additional lab
equipment in view of our increasing R&D activities.
Sample fees primarily comprised costs of consumable materials and reagents for
conducting experiments for our R&D programs. The increase in sample fees from 2021 to 2022
was primarily attributable to our increased R&D activities for AI platform development and
automation technologies. The decrease in sample fees from 2022 to 2023 was due to the
decrease in the consumables.
Network and IT expenses primarily comprised service fees paid for cloud service,
information system service, software and network construction used for our R&D activities.
The gradual decrease of our network and IT expenses was primarily contributed by our
continuous efforts to increase the computing efficiency by, among others, streamlining cloud
resources and optimizing our computing algorithms. Furthermore, we also secured more
competitive prices with our cloud resources vendors during the Track Record Period.
Professional service fees primarily included experimental testing fees, as we may engage
third party institutions to conduct experiments and testing of materials to facilitate the R&D
process when and where it is more efficient in terms of time and cost than running tests by our
own R&D department.
General and Administrative Expenses
Our general and administrative expenses primarily consisted of (i) employee benefit
expenses (including share-based compensation expenses) of our management and
administrative personnel, (ii) professional service fees, (iii) office and utilities expenses, (iv)
depreciation and amortization expenses, and (v) listing expenses.
FINANCIAL INFORMATION
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The table below sets out a breakdown of our general and administrative expenses, both
in absolute amounts and as a percentage of our general and administrative expenses for the
years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Employee benefit expenses 73,635 53.7 132,990 65.1 190,677 64.4
Professional service fees 35,865 26.2 21,240 10.4 12,028 4.1
Office and utilities expenses 13,281 9.7 21,464 10.5 20,341 6.9
Depreciation and amortization expenses 8,619 6.3 15,071 7.4 30,205 10.1
Listing expenses –––– 20,575 7.0
Others
(1) 5,635 4.1 13,636 6.6 22,160 7.5
Total 137,035 100.0 204,401 100.0 295,986 100.0
Note:
(1) Others mainly include network and IT expenses and travel expenses.
The increase in employee benefit expenses for our management and administrative
personnel was primarily attributable to the increase in (i) the annual average number of
administrative staff to support our business expansion, and (ii) share-based compensation
expenses primarily attributable to an increase in the number of management and administrative
personnel satisfying the vesting conditions.
Professional service fees primarily consisted of consulting fees, accounting service fees
and legal fees. Office and utilities expenses primarily consisted of general office expenses,
rental and utilities expenses, and property management fees. Depreciation and amortization
expenses primarily consisted of (i) depreciation of property, plant and equipment, including
computer and office equipment as well as leasehold improvements to our offices, (ii)
depreciation of right-of-use assets in connection with our leased offices, and (iii) amortization
of intangible assets in relation to software licenses purchased for daily office use. Listing
expenses represent our expenses incurred relating to the proposed Listing.
Contract Fulfillment Costs
Our contract fulfillment costs represent the direct expenses incurred in relation to the
fulfillment of our obligations under contracts with our customers. Our contract fulfillment
costs primarily consist of (i) employee benefit expenses, (ii) network and IT expenses, (iii)
sample fees, and (iv) professional service fees.
FINANCIAL INFORMATION
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--- page 568 ---
The following table sets forth a breakdown of contract fulfillment costs by nature in
absolute amounts and as a percentage of our contract fulfillment costs for the years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Employee benefits expenses 18,206 60.7 47,856 71.1 85,446 67.7
Network and IT expenses 6,775 22.6 9,825 14.6 11,896 9.4
Sample fees 2,595 8.6 7,167 10.7 18,604 14.7
Professional service fees 1,223 4.1 2,024 3.0 9,247 7.3
Others 1,215 4.0 394 0.6 985 0.9
Total 30,014 100.0 67,266 100.0 126,178 100.0
Employee benefit expenses primarily comprised wages, salaries and bonuses and
pensions costs and housing benefits for our employees. Employee benefits expenses increased
during the Track Record Period due to our business expansion and revenue increase.
Network and IT expenses primarily consisted of service fees paid for cloud computing
service and information system service for the fulfillment of our obligations under contracts.
Network and IT expenses increased throughout the Track Record Period, primarily in line with
the increase in the research results delivered.
Sample fees mainly included costs of consumable materials and reagents for conducting
experiments for the fulfillment of our obligations under contracts. Sample fees increased during
the Track Record Period, primarily attributable to the increase in consumable materials and
reagents required for experiments, in line with the increase in the research results delivered.
Professional service fees primarily included experimental testing fees incurred for the
fulfillment of our obligations under contracts. Professional service fees increased during the
Track Record Period, primarily due to the increase in experimental testing services we
purchased for the fulfillment of our obligations under contracts.
As we recognize contract fulfillment costs at the time when we recognize revenue under
a certain transaction, our contract fulfillment costs generally increased as our revenue
increased during the Track Record Period, while we may from time to time observe changes
in the proportion of such costs to revenue for commercial reasons such as (i) securing
agreements with prominent customers, (ii) delivering research results in more challenging and
complicated projects that will contribute to the enhancement of our technology platform, (iii)
commencing the offer of services in new areas where cost efficiencies cannot yet be realized,
and (iv) entering into transactions which we may incur relatively more substantial costs in the
early stage and receive larger amount of milestone payments later.
FINANCIAL INFORMATION
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--- page 569 ---
Selling and Marketing Expenses
Our selling and marketing expenses primarily consisted of (i) employee benefit expenses,
(ii) marketing expenses, and (iii) office and utilities expenses for the business development and
marketing department. The table below sets forth a breakdown of our selling and marketing
expenses, both in absolute amounts and as a percentage of our selling and marketing expenses
for the years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Employee benefit expenses 19,809 72.3 30,023 74.3 41,108 65.8
Marketing expenses 5,936 21.7 7,547 18.7 17,246 27.6
Office and utilities expenses 641 2.3 713 1.8 2,263 3.6
Others
(1) 1,027 3.7 2,144 5.2 1,865 3.0
Total 27,413 100.0 40,427 100.0 62,482 100.0
Note:
(1) Others mainly include depreciation and amortization expenses.
Our employee benefit expenses increased throughout the Track Record Period, primarily
due to the increase in the annual average number of business development and marketing staff
due to our increased marketing efforts to support our business expansion and diversification.
Marketing expenses primarily comprised business promotion fees related to our
marketing activities such as organizing and attending exhibitions, industry seminars and
conferences and travel expenses. Our marketing expenses increased throughout the Track
Record Period primarily due to our increased marketing efforts and business development
activities, in line with our business expansion and diversification.
Impairment Losses on Financial Assets
Our impairment losses on financial assets represented provisions of impairment of trade
receivables and other receivables based on credit risk and expected credit loss rate. During the
Track Record Period, we recorded impairment losses on financial assets of RMB0.7 million,
RMB0.9 million and RMB0.2 million in 2021, 2022 and 2023, respectively. See Note 3.1(b)
to the Accountant’s Report in Appendix I to this prospectus for details regarding our credit risk
and assessment of credit loss allowance.
FINANCIAL INFORMATION
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--- page 570 ---
Other Income
Our other income consisted of government grants, which amounted to RMB8.6 million,
RMB21.4 million and RMB27.5 million in 2021, 2022 and 2023, respectively.
Government grants primarily comprised financial subsidies from local government
authorities in the PRC to support high-tech companies and recognize our contribution to
society. Our government grants during the Track Record Period were primarily non-recurring
in nature. We were only able to recognize the grants as other income when certain conditions
were fulfilled. The conditions mainly included development and investment status of the
enterprise, revenue growth and talent acquisition.
Other Gains/(Losses), Net
Our other gains/(losses), net primarily consisted of (i) net foreign exchange gains or
losses, (ii) gains or losses on derivative financial instruments, (iii) net fair value changes on
financial assets at FVTPL, (iv) gain on a transfer of investment in an associate to financial
assets measured at FVTPL, and (v) gain on termination lease. The following table sets forth a
breakdown in absolute amounts and as a percentage of our total other gains/(losses), net for the
years indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Net foreign exchange
gains/(losses) 9,426 25.6 5,911 (72.8) (40,368) (97.8)
Gains/(losses) on derivative
financial instruments 19,026 51.6 (5,159) 63.6 4,232 10.2
Net fair value changes on
financial assets at FVTPL 10,360 28.1 (9,623) 118.6 (4,375) (10.6)
Gain on a transfer of
investment in an associate to
financial assets measured at
FVTPL – – – – 70,249 170.2
Gain on termination lease – – – – 13,686 33.2
Others (1,930) (5.3) 757 (9.4) (2,142) (5.2)
Total 36,882 100.0 (8,114) 100.0 41,282 100.0
FINANCIAL INFORMATION
– 561 –


--- page 571 ---
We recorded net foreign exchange gains of RMB9.4 million in 2021, RMB5.9 million in
2022 and net foreign exchange losses of RMB40.4 million in 2023. The net foreign exchange
gains or losses were primarily due to the volatility of the exchange rate, when there were
commercial transactions denominated in a currency that is not the functional currency of the
respective entity of our Group, primarily with respect to RMB vis-à-vis USD.
As we generated revenue from other parts of the world in addition to China, we purchased
forward exchange contracts to hedge our foreign exchange risk in 2021. We recorded changes
in fair value of derivative financial instruments including forward exchange contracts and cross
currency swaps during the Track Record Period due to the changes in the relevant foreign
exchange rates specified in the derivative financial instruments.
We recorded net fair value changes on financial assets at FVTPL of RMB10.4 million in
2021, RMB9.6 million in 2022 and RMB4.4 million in 2023. Financial assets at FVTPL
represented our investments in listed and unlisted entities, a convertible debt and wealth
management products. The net changes in fair value of financial assets at FVTPL represented
the net changes in total valuation of the investments.
During the years ended December 31, 2021 and 2022, we accounted for one of our
investees as an investment in an associate as we had significant influence over the entity from
the board representation. As of December 31, 2022, the carrying amount of this investment in
an associate was nil, as our cumulated share of losses recognized under the equity method had
already exceeded our initial investment cost.
The investee raised a new round of financing in which we did not subscribe any new
shares, and due to the dilution in our interest in this investee, we no longer retained our board
representation in November 2023. Consequently, our investment in this associate, with a
carrying amount of nil, was derecognized and transferred to investment in financial assets at
fair value through profit or loss, measured at its fair value of RMB70,249,000 upon the
transfer. Accordingly, a gain on the transfer of the investment in an associate to financial assets
at fair value through profit or loss of RMB70,249,000 was recognized as other gains/(losses),
net. See Note 19 to the Accountants’ Report in Appendix I to this prospectus for details.
The basis of the valuation is fair value, which is defined under IFRS 13 as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (i.e. an exit price). The fair value of the
investment at of the date of transfer was determined by an independent valuer. The valuation
was conducted using equity allocation model with the back-solve approach, with reference to
the latest financing round of the investee near the valuation date (being December 31, 2023),
being the financing in 2023 as mentioned above.
FINANCIAL INFORMATION
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--- page 572 ---
The relevant investee is a biotechnology company incorporated in 2020, that uses
advanced technologies such as AI, machine learning and quantum simulation to enable the
innovative delivery material design, drug candidate selection and formulation, and nucleic acid
delivery design. We entered into the collaboration arrangement with this investee primarily
considering the synergy in terms of technologies. See “Business—Our Drug Discovery
Solutions—Strategic Collaborations” for the commercial rationale of our investment in
collaborators.
We recorded gains on lease termination relating to a leased property in Shanghai in 2023.
Finance Income, Net
The following table sets forth a breakdown of our finance income, net for the years
indicated:
Y ear ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Finance income
Interest income from
bank deposits 14,055 134.1 50,478 112.8 102,693 110.3
Finance expenses
Interest expenses on lease
liabilities (1,885) (18.0) (4,347) (9.7) (8,030) (8.6)
Interest expenses on bank
borrowings (1,690) (16.1) (1,399) (3.1) (1,545) (1.7)
(3,575) (34.1) (5,746) (12.8) (9,575) (10.3)
Finance income, net 10,480 100.0 44,732 100.0 93,118 100.0
Our finance income primarily consisted of interest income from bank deposits placed with
reputable commercial banks in the PRC. Our finance expenses primarily consisted of interest
expenses on bank borrowings and lease payments.
Share of Net Losses of Investments Accounted for Using Equity Method
Share of net losses of investment accounted for using equity method relates to our
investments in unlisted entities. Our investments cover various sectors, including oncology,
AI-based peptide drug discovery, de novo generation of antibodies, and AI-powered new
materials discovery, among others, which develops complementary technologies to ours and
are compatible with our strategic position. See “Business—Our Drug Discovery
FINANCIAL INFORMATION
– 563 –


--- page 573 ---
Solutions—Strategic Collaborations” for details regarding our collaborations and investments.
We have established and implemented capital and investment policies to minimize our
investment risks. See “—Liquidity and Capital Resources” for details of our internal policies.
For details relating to our investments, see “Risk Factors—We may never realize returns on our
investment of resources and cash in our collaborators and other investee companies.
Fluctuation of the operational results of our invested companies and the fair value of our
investments may adversely affect our financial position.”
We account for our equity investments over which we have significant influence but do
not own a majority equity interest or otherwise control using the equity method. We recognized
share of net losses of investments accounted for using equity method of RMB4.5 million,
RMB0.2 million and RMB2.0 million in 2021, 2022 and 2023, respectively. The increases in
share of net losses of investments were primarily due to the loss-making performance of our
investee companies, which are still in their early R&D stage. See Note 19 to the Accountant’s
Report in Appendix I to this prospectus for details regarding our investments in associates.
Changes in Fair Value of CRPS and Other Financial Liabilities
We issued CRPS to investors in our multiple rounds of equity or equity-linked financings
before and during the Track Record Period. On September 28, 2020, we also issued warrants
to the Series C Warrantholders, which could be converted into our Series C Preferred Shares.
Our liabilities under such warrants were recorded as “other financial liabilities” on our
consolidated balance sheet. On June 18, 2021, we issued an aggregate of 71,838,567 Series C
Preferred Shares to the Series C Warrantholders (or their affiliates) in connection with their
exercise of the warrants to purchase Series C Preferred Shares.
We recorded changes in fair value of CRPS and other financial liabilities of RMB1,843.9
million, RMB957.8 million and RMB1,275.2 million in 2021, 2022 and 2023, respectively,
primarily due to the increased valuation of our Company.
Income Tax Expense
Our Group did not record any income tax expense during the Track Record Period. We are
subject to income tax on an entity basis on profits arising in or derived from the jurisdictions
in which members of our Group are domiciled and operate. Our principal applicable taxes and
tax rates are as follows:
Cayman Islands
Our Company and subsidiaries were incorporated in the Cayman Islands as exempted
companies with limited liability under the Companies Act of the Cayman Islands and are not
subject to the Cayman Islands income tax pursuant to the laws of the Cayman Islands as of the
date hereof.
FINANCIAL INFORMATION
– 564 –


--- page 574 ---
Hong Kong
Our subsidiaries in Hong Kong are subject to Hong Kong profit tax at a rate of 16.5%
during the Track Record Period.
United States
Our subsidiaries in the United States are subject to Federal Tax at a rate of 21% and State
Tax at a rate of 8.00% during the Track Record Period.
PRC
Under the EIT Law and Implementation Regulation of the EIT Law, the income tax rate
of our PRC subsidiaries is 25% during the Track Record Period. Shenzhen Jingtai and Beijing
Jingtai were qualified as high and new technology enterprises (“ HNTEs ”) and enjoyed a
preferential income tax rate of 15% during the Track Record Period. Our certain subsidiaries
in the PRC have been granted certain tax concessions for small scale entities by tax authorities
in the PRC and enjoy reduced tax rates. See Note 10 to the Accountant’s Report in Appendix
I to this prospectus for details regarding the applicable taxes and tax rates.
Currency Translation Differences
In 2021, we recorded currency translation differences of RMB60.8 million recognized in
other comprehensive income. In 2022 and 2023, we recorded RMB456.8 million and RMB93.4
million, respectively, in other comprehensive loss. We recorded such currency translation
differences due to the fluctuations of exchange rate between the functional currency of our
Company as well as some of our subsidiaries, being USD in general, and the presentation
currency of our audited accounts, being RMB. Such currency translation differences are purely
mathematical and non-operational in nature.
DISCUSSION OF RESULTS OF OPERATIONS
Y ear Ended December 31, 2023 Compared to Y ear Ended December 31, 2022
Revenue
Our revenue increased by 30.8% from RMB133.4 million in 2022 to RMB174.4 million
in 2023.
Drug discovery solutions . Our revenue generated from our provision of drug discovery
solutions remained relatively stable, being RMB87.7 million in 2023 and 2022, while the
number of relevant revenue-generating programs increased from 47 in 2022 to 81 in 2023,
primarily because (i) we entered into several major contracts with relatively longer terms of
delivery as agreed with the customers, and the revenue we recognized thereunder in 2023
according to our accounting policies only represented a small portion of the total value of such
FINANCIAL INFORMATION
– 565 –


--- page 575 ---
contracts, and (ii) we were engaged in more standalone modular drug discovery solutions in
2023, which has relatively lower average revenue of programs than our one-stop solutions, as
one of our strategies to further expand our drug discovery solutions business.
Intelligent automation solutions . Our revenue generated from intelligent automation
solutions increased by 89.8% from RMB45.7 million in 2022 to RMB86.7 million in 2023,
primarily due to (i) the increase of the number of our customers for our intelligent automation
solutions from 87 in 2022 to 145 in 2023, (ii) the increase in the number of revenue-generating
programs for our intelligent automation solutions from 246 in 2022 to 423 in 2023, and (iii)
the increase in the average revenue of programs, primarily because the average revenue of
programs derived from one of our major customers of solid-state R&D services increased in
2023 as compared with 2022.
Revenue generated from solid-state R&D services increased by 52.0% from RMB27.8
million in 2022 to RMB42.2 million in 2023, primarily due to (i) the increase in the number
of customers, from 62 in 2022 to 88 in 2023, (ii) the increase of number of revenue-generating
programs from 198 in 2022 to 283 in 2023, and (iii) the increased fulfillment of our obligations
under existing and new contracts.
Revenue generated from automated chemical synthesis services increased by 143.8%
from RMB17.9 million in 2022 to RMB43.7 million in 2023, primarily attributable to (i) the
increase in the number of customers for our automated chemical synthesis services customers
from 25 in 2022 to 54 in 2023, and (ii) the increase of the number of revenue-generating
programs for our automated chemical synthesis services from 48 in 2022 to 137 in 2023.
R&D Expenses
Our R&D expenses increased by 33.9% from RMB359.0 million in 2022 to RMB480.7
million in 2023, primarily due to (i) an increase of RMB64.3 million in employee benefit
expenses for our R&D staff, primarily attributable to an increase in the annual average number
of our employees to support our R&D activities, in line with our continuous investment in
R&D and (ii) an increase of RMB37.6 million in depreciation and amortization expenses, as
a result of the increase in purchases of lab equipment used for our growing R&D activities.
General and Administrative Expenses
Our general and administrative expenses increased by 44.8% from RMB204.4 million in
2022 to RMB296.0 million in 2023, primarily due to (i) an increase of RMB57.7 million of
employee benefit expenses for our administrative staff primarily as a result of the increase in
the share-based compensation incurred relating to the options we granted to our administrative
staff under our Pre-IPO ESOP , (ii) an increase of RMB20.6 million in listing expenses for our
proposed Listing and (iii) an increase of RMB15.1 million of depreciation and amortization
expenses due to our increased leased properties in Shanghai.
FINANCIAL INFORMATION
– 566 –


--- page 576 ---
Contract Fulfillment Costs
Our contract fulfillment costs increased significantly by 87.6% from RMB67.3 million in
2022 to RMB126.2 million in 2023. This increase was primarily due to (i) an increase of
RMB37.6 million in employee benefit expenses mainly attributable to the increases in the
annual average number of our employees to support the fulfillment of our obligations under
new contracts as we were engaged in certain complicated research programs requiring more
manpower, (ii) an increase of RMB11.4 million in sample fee due to the increasing purchase
of consumable materials and reagents required for experiments, and (iii) an increase of
RMB7.2 million in professional service expenses mainly attributable to the increase in external
experimental testing fees as a result of the increase in our obligations to fulfill under contracts.
The increase of our contract fulfillment costs outpaced our revenue growth in 2023 as
compared to 2022, primarily because in 2023, we adopted a more aggressive pricing policy for
certain early-staged services to attract new customers while economies of scale had not yet
been achieved.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 54.6% from RMB40.4 million in 2022
to RMB62.5 million in 2023, primarily due to (i) an increase of RMB11.0 million in employee
benefit expenses due to the increase of the annual average number of our business development
and marketing staff, (ii) an increase of RMB9.7 million in marketing expenses, RMB6.6
million of which were expenses incurred for marketing events such as conferences, forums and
the design and production for the relevant marketing materials, and RMB2.9 million were
traveling expenses, and (iii) an increase of RMB1.6 million in office and utilities expenses, all
of which reflected our business development and marketing efforts to attract new customers,
build our brand awareness, and support our business expansion.
Impairment Losses on Financial Assets
We recorded impairment losses on financial assets of RMB0.2 million in 2023, as
compared to RMB0.9 million in 2022. The balance of our trade receivables as of December 31,
2023 was only slightly higher than that as of December 31, 2022, while the credit loss rate of
customers remained relatively stable in 2022 and 2023, so we recorded a smaller amount of
impairment loss on trade receivables in 2023 as compared with in 2022.
Other Income
Our other income increased from RMB21.4 million in 2022 to RMB27.5 million in 2023,
primarily due to an increase in government grants.
FINANCIAL INFORMATION
– 567 –


--- page 577 ---
Other Gains/(Losses), Net
We recorded other gains of RMB41.3 million in 2023, as compared to other losses of
RMB8.1 million in 2022, primarily due to (i) a gain on a transfer of investment in an associate
to financial assets measured at FVTPL of RMB70.2 million relating to the de-recognition and
transfer of our investment in an associate with carrying amount of nil to our investment in
financial assets at FVTPL at a fair value of RMB70.2 million as we no longer retained our
board representation in this investee in 2023, and (ii) gain on a lease termination of RMB13.7
million relating to a leased property in Shanghai, partially offset by our net foreign exchange
losses of RMB40.4 million due to the volatility of the exchange rate between RMB and USD.
Finance Income, Net
Our finance income increased by 103.4% from RMB50.5 million in 2022 to RMB102.7
million in 2023, primarily due to the increased interest income from bank deposits in U.S.
dollars as a result of the increase in term deposits interest due to the U.S. interest rate hike
policy as well as an increase in our term deposits in 2023 as compared to 2022.
Our finance expenses increased by 66.6% from RMB5.7 million in 2022 to RMB9.6
million in 2023, primarily due to an increase in interest expenses on lease liabilities in relation
to a new lease agreement.
Share of Net Losses of Investments Accounted for Using Equity Method
Our share of net loss of investments accounted for using equity method increased from
RMB0.2 million in 2022 to RMB2.0 million in 2023, primarily due to the loss-making
performance of our associates, which were mainly start-up biotech companies in the early R&D
stage.
Changes in Fair V alue of CRPS and Other Financial Liabilities
We recorded negative RMB957.8 million from changes in fair value of CRPS and other
financial liabilities in 2022, and negative RMB1,275.2 million in 2023, primarily due to
changes in the valuation of our Company.
Loss for the Y ear
As the result of the abovementioned factors, our net loss increased from RMB1,438.6
million in 2022 to RMB1,906.3 million in 2023.
FINANCIAL INFORMATION
– 568 –


--- page 578 ---
Y ear Ended December 31, 2022 Compared to Y ear Ended December 31, 2021
Revenue
Our revenue increased significantly by 112.3% from RMB62.8 million in 2021 to
RMB133.4 million in 2022.
Drug discovery solutions . Our revenue generated from drug discovery solutions increased
significantly by 122.8% from RMB39.3 million in 2021 to RMB87.7 million in 2022, primarily
due to (i) the increase in the number of our customers for our drug discovery solutions from
17 in 2021 to 33 in 2022, and (ii) the increase in the number of revenue-generating programs
for our drug discovery solutions from 18 in 2021 to 47 in 2022.
Intelligent automation solutions . Our revenue generated from the provision of intelligent
automation solutions increased significantly by 94.8% from RMB23.5 million in 2021 to
RMB45.7 million in 2022, primarily due to (i) the increase of the number of our customers for
our intelligent automation solutions from 58 in 2021 to 87 in 2022 and (ii) the increase of the
number of revenue-generating programs for our intelligent automation solutions from 168 in
2021 to 246 in 2022.
Revenue generated from the provision of solid-state R&D services increased by 19.1%
from RMB23.3 million in 2021 to RMB27.8 million in 2022, primarily due to (i) the increase
in the number of customers from 56 in 2021 to 62 in 2022, and (ii) the increase of the number
of revenue-generating programs from 166 in 2021 to 198 in 2022.
Revenue generated from the provision of automated chemical synthesis services increased
from RMB0.06 million in 2021 to RMB17.9 million in 2022, because our revenue from such
services was recognized starting from December 2021. The number of our customers under
automated chemical synthesis services increased from one in 2021 to 25 in 2022. The number
of revenue-generating programs under automated chemical synthesis services increased from
one in 2021 to 48 in 2022.
R&D Expenses
Our R&D expenses increased significantly by 68.8% from RMB212.6 million in 2021 to
RMB359.0 million in 2022, primarily due to (i) an increase of RMB97.1 million in employee
benefit expenses for R&D staff, as a result of the expansion of our R&D team, (ii) an increase
of RMB38.8 million in depreciation and amortization expenses primarily relating to the
leasehold improvements, purchase of lab equipment for our new labs and offices in Shenzhen,
and (iii) an increase of RMB32.8 million in sample fees, as a result of the increased
procurement of consumable materials and reagents used in our R&D programs. These increases
were partially offset by a decrease of RMB19.4 million in professional service fees, primarily
due to an increase in our capability to conduct experimental testing in-house by recruiting more
technicians and engineers.
FINANCIAL INFORMATION
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--- page 579 ---
General and Administrative Expenses
Our general and administrative expenses increased by 49.2% from RMB137.0 million in
2021 to RMB204.4 million in 2022, primarily due to an increase of RMB59.4 million in
employee benefit expenses, primarily due to (i) the increase in the annual average number of
our administrative staff to support the growth in the scale of our business, and (ii) the increase
of our share-based compensation incurred relating to the options we granted to our
administrative staff under our Pre-IPO ESOP .
Contract Fulfillment Costs
Our contract fulfillment costs increased significantly by 124.1% from RMB30.0 million
in 2021 to RMB67.3 million in 2022. This increase was primarily due to (i) an increase of
RMB29.7 million in employee benefit expenses mainly attributable to the increase in the
annual average number of our employees to support the fulfillment of our obligations under
new contracts, (ii) an increase of RMB4.6 million in sample fees due to the increasing purchase
of consumable materials and reagents required for experiments, and (iii) an increase of
RMB3.1 million in network and IT expenses in relation to cloud computing services for our
business operations.
The increase of our contract fulfillment costs outpaced our revenue growth in 2022 as
compared to 2021, primarily because we launched new types of services in 2022, for which we
had adopted a more aggressive pricing policy to attract new customers while economies of
scale had not yet been achieved.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 47.5% from RMB27.4 million in 2021
to RMB40.4 million in 2022, primarily due to (i) an increase of RMB10.2 million in employee
benefit expenses due to the increase of the annual average number of our business development
and marketing staff, and (ii) an increase of RMB1.6 million in marketing expenses, primarily
due to the expenses incurred for marketing events such as conferences, forums and the design
and production for relevant marketing materials, offset by the decrease of consulting service
fees.
Impairment Losses on Financial Assets
We recorded impairment losses on financial assets of RMB0.9 million in 2022, as
compared to RMB0.7 million in 2021, primarily due to the increase in our trade receivables in
line with our revenue growth.
FINANCIAL INFORMATION
– 570 –


--- page 580 ---
Other Income
Our other income increased by 147.7% from RMB8.6 million in 2021 to RMB21.4
million in 2022, due to an increase in government grants including financial subsidies to
support high-tech companies.
Other Gains/(Losses), Net
We recorded other losses of RMB8.1 million in 2022, as compared to other gains of
RMB36.9 million in 2021, primarily due to (i) losses on derivative financial instruments of
RMB5.2 million, and (ii) net fair value changes on financial assets at FVTPL of RMB9.6
million due to the decrease in valuation of financial assets at FVTPL, partially offset by foreign
exchange gains incurred of RMB5.9 million during this period.
Finance Income, Net
Our finance income increased significantly by 259.1% from RMB14.1 million in 2021 to
RMB50.5 million in 2022, primarily due to the interest income generated from bank deposits
we placed in order to better utilize the proceeds from our equity financing.
Our finance expenses increased by 60.7% from RMB3.6 million in 2021 to RMB5.7
million in 2022 due to the increase in interest expenses on lease payments.
Share of Net Losses of Investments Accounted for Using Equity Method
Our share of net losses of investments accounted for using equity method investments
decreased from RMB4.5 million in 2021 to RMB0.2 million in 2022, primarily due to the
decreased loss recorded by our associates which were still in the early R&D stage in 2022 as
compared to 2021.
Changes in Fair V alue of CRPS and Other Financial Liabilities
We recorded negative RMB1,843.9 million from changes in fair value of CRPS and other
financial liabilities in 2021, and negative RMB957.8 million in 2022, primarily due to the
changes in valuation of our Company.
Loss for the Y ear
As the result of the abovementioned factors, our net loss decreased significantly from
RMB2,137.3 million in 2021 to RMB1,438.6 million in 2022.
FINANCIAL INFORMATION
– 571 –


--- page 581 ---
LIQUIDITY AND CAPITAL RESOURCES
During the Track Record Period, we financed our capital expenditure and working capital
requirements primarily through capital contributions from our shareholders and cash inflows
from our business operations. In the future, we expect to generate more net cash from our
operating activities through sales of our drug discovery and intelligent automation solutions,
improving cost control and operating efficiency and accelerating the turnover of trade
receivables by tightening our credit policy.
With respect to cash management, we aim to optimize liquidity to secure a stable return
for Shareholders in a risk-averse manner. Specifically, we have policies in place to monitor and
manage the settlement of trade receivables. When determining the credit term of a customer,
we consider a number of factors, including its cash flow conditions and creditworthiness. To
monitor the settlement of our trade receivables and avoid credit losses, we conduct annual
review of each customer’s financial performance, which is primarily based on the amount and
aging of the trade receivables due from such customer in the respective period.
We also have established capital and investment policies, such as capital management
policy (ܓto monitor and manage our settlement activities and financing
activities, and control the risks relating to bank deposits and/or the purchase of financial
instruments. Before making an investment, our finance department typically reviews the terms
of the relevant bank deposits and/or financial instruments and prudently considers all
information available and applies various applicable valuation in determining whether to place
the bank deposits and/or purchase the relevant financial instruments. Our management team
reviews the analysis on the details of the proposals from the finance department and consults
with our accountants when necessary. We place bank deposits and/or purchase financial
instruments only when we have spare cash in addition to sufficient cash for our operations and
our unused time deposits exceed a certain amount and when such investment is in compliance
with the applicable laws and the Listing Rules and in the best interest of the Company.
Liquidity is also a major factor when we make an investment. We conduct periodic evaluation
on the fair value of the financial assets we hold. Such evaluation generally comprises the fair
value measurement assessment, profitability and risk condition of the relevant investments.
Our finance employees are required to report the evaluation results to our chief financial
officer in a timely manner.
We intend to continue relying on cash flows from operations and those from financing
activities including net proceeds from the Global Offering. As of December 31, 2021, 2022 and
2023, we had cash and cash equivalents, current portion of term deposits, current portion of
financial assets at FVTPL and restricted cash of RMB3,841.7 million, RMB3,473.7 million and
RMB2,827.8 million, respectively.
FINANCIAL INFORMATION
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--- page 582 ---
Cash Flows
The following table sets forth a summary of our consolidated statements of cash flows for
the years indicated:
Y ears ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Net loss (2,137,332) (1,438,617) (1,906,323)
Operating loss before movements in
working capital (273,475) (406,697) (554,099)
Working capital changes 19,729 (22,407) (13,465)
Net cash used in operating activities (253,746) (429,104) (567,564)
Net cash (used in)/
generated from investing activities (70,466) (2,757,786) 735,583
Net cash generated from/(used in)
financing activities 2,476,013 57,988 (25,886)
Net increase/(decrease) in cash and
cash equivalents 2,151,801 (3,128,902) 142,133
Cash and cash equivalents at beginning
of the year 1,430,913 3,523,647 574,219
Effects of exchange rate changes on
cash and cash equivalents (59,067) 179,474 (5,591)
Cash and cash equivalents at end
of the year 3,523,647 574,219 710,761
Net cash used in operating activities
Our net cash used in operating activities was RMB567.6 million in 2023, which was
primarily attributable to our loss before income tax of RMB1,906.3 million, as adjusted by (i)
non-cash and non-operating items, which primarily comprised changes in fair value of CRPS
and other financial liabilities of RMB1,275.2 million, finance income of RMB102.7 million,
depreciation of property and equipment of RMB70.8 million, net fair value changes on FVTPL
of RMB1.4 million and share-based compensation expenses of RMB88.4 million, and (ii)
changes in working capital, which primarily comprised (a) an increase in deferred government
grants of RMB24.8 million because we received government grants as subsidies to our
purchase of property, plant and equipment, which were recognized in profit or loss on a
FINANCIAL INFORMATION
– 573 –


--- page 583 ---
straight-line basis over the expected useful lives of the related assets, (b) cash inflow in trade
and other payables of RMB8.3 million primarily due to an increase in the accrued listing
expenses of RMB5.4 million, and (c) an increase in contract liabilities of RMB10.1 million
because a large amount of upfront payments were yet to be recognized as revenue in 2023.
Our net cash used in operating activities was RMB429.1 million in 2022, which was
primarily attributable to our loss before income tax of RMB1,438.6 million, as adjusted by (i)
non-cash and non-operating items, which primarily comprised changes in fair value of CRPS
and other financial liabilities of RMB957.8 million, finance income of RMB50.5 million,
depreciation of property and equipment of RMB48.0 million and share-based compensation
expenses of RMB43.4 million, and (ii) changes in working capital, which primarily comprised
(a) an increase in trade and other receivables of RMB24.9 million due to revenue growth, (b)
an increase in trade and other payables of RMB26.8 million due to increasing procurement of
lab equipment and consumables to support the growth of our drug discovery solutions business,
and (c) an increase in contract costs of RMB16.2 million.
Our net cash used in operating activities was RMB253.7 million in 2021, which was
primarily attributable to our loss before income tax of RMB2,137.3 million, as adjusted by (i)
non-cash and non-operating items, which primarily comprised changes in fair value of CRPS
and other financial liabilities of RMB1,843.9 million, share-based compensation expenses of
RMB22.5 million and finance income of RMB14.1 million, and (ii) changes in working capital,
which primarily comprised (a) an increase in trade and other receivables of RMB44.6 million
primarily due to the increase in revenue, (b) a decrease in restricted cash of RMB32.5 million
in relation to the release of payment restrictions on our bank account, (c) an increase in trade
and other payables of RMB47.6 million due to increasing procurement of tools and
consumables used in our growing drug discovery solutions business, and (d) an increase in
contract costs of RMB15.7 million.
We plan to improve our net operating cash outflow position as of the end of the Track
Record Period primarily by taking measures to further drive revenue growth. For instance, we
will actively conduct marketing and business development activities in China and overseas, to
engage new customers based on our existing premium customer base. Furthermore, we plan to
maintain and thrive to improve our customer retention rate and increase upselling to our
existing customers by continuing delivery of satisfactory research results and quality services.
We believe the growing customer base and increased purchase per customer will boost sales
and generate more cash inflow. In addition, to better manage our working capital, we will also
continue to implement our credit risk management measures, including (a) performing credit
history check to minimize our credit and collection risk; (b) setting baseline collection target
to ensure our trade receivable recovery is benchmarked and monitored as a way to stabilize our
operational cash inflow; (c) performing regular reconciliation with our customers and
follow-up with them on overdue trade receivables and closely monitoring the collection status
of our trade receivables and actively following up with our customers for settlement; and (d)
negotiating better payment and credit terms with our suppliers as we continue to scale our
business and increase our procurement from such suppliers.
FINANCIAL INFORMATION
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Net cash (used in)/generated from investing activities
Our net cash generated from investing activities was RMB735.6 million in 2023, which
was primarily due to (i) proceeds from maturity of term deposits of RMB4,067.7 million, and
(ii) proceeds from disposal of financial assets at FVTPL of RMB2,298.2 million, partially
offset by (i) placement of term deposits of RMB2,764.6 million, (ii) increases in our
investments in financial assets at FVTPL of RMB2,872.0 million, and (iii) purchase of
property, plant and equipment of RMB123.8 million.
Our net cash used in investing activities was RMB2,757.8 million in 2022, which was
primarily due to (i) placement of term deposits of RMB8,302.2 million, (ii) increases in our
investments in financial assets at FVTPL of RMB2,376.4 million, and (iii) purchase of
property, plant and equipment of RMB193.4 million, partially offset by (i) proceeds from
maturity of term deposits of RMB6,183.4 million and (ii) proceeds from disposal of financial
assets at FVTPL of RMB1,911.8 million in relation to the redemption of our wealth
management products at maturity.
Our net cash used in investing activities was RMB70.5 million in 2021, which was
primarily due to (i) placement of term deposits of RMB779.4 million, (ii) purchase of property,
plant and equipment of RMB160.6 million in relation to our lab equipment, leasehold
improvements as well as construction in progress for our operational premises in Shenzhen,
and (iii) increases in our investments in financial assets at FVTPL of RMB85.9 million in
relation to our investments in collaborators, partially offset by the proceeds from maturity of
term deposits of RMB945.7 million.
Net cash generated from/(used in) financing activities
In 2023, our net cash used in financing activities was RMB25.9 million, which was
primarily due to payments of lease liabilities of RMB48.3 million and repayment of short-term
bank borrowings of RMB36.0 million, partially offset by proceeds from bank borrowings of
RMB60.0 million.
In 2022, our net cash generated from financing activities was RMB58.0 million, which
was primarily due to (i) capital injection from non-controlling interest of RMB68.2 million in
connection with the equity financing of one of our subsidiaries in August 2022. See note 18 to
the Accountant’s Report in Appendix I to this prospectus for details; and (ii) proceeds from
bank borrowings of RMB25.0 million, partially offset by (i) repayment of short-term bank
borrowings of RMB22.3 million, and (ii) payments of lease liabilities of RMB11.3 million.
In 2021, our net cash generated from financing activities was RMB2,476.0 million, which
was primarily due to proceeds from our issuance of CRPS of RMB2,480.1 million and proceeds
from bank borrowings of RMB20.0 million, partially offset by repayment of short-term bank
borrowings of RMB16.2 million.
FINANCIAL INFORMATION
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Cash operating costs
The following table sets forth key information relating to our cash operating costs for the
years indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Workforce employment (1) 170,567 356,425 498,534
R&D costs (2) 78,277 98,403 111,258
Direct service and production costs,
including materials (3) 26,075 33,909 43,443
Service/solution marketing (4) 7,208 9,794 19,436
Non-income taxes and other charges 700 786 1,978
Total 282,827 499,317 674,648
Notes:
(1) Cash operating costs relating to workforce employment represent the sum of employee benefit expenses
under R&D expenses, general and administrative expenses, contract fulfillment costs and selling and
marketing expenses (excluding share-based compensation which is non-cash in nature), adjusted for
changes in working capital relating to employee benefit expenses as of previous and current year end
under the above operating expenses.
(2) R&D costs under cash operating costs represent R&D expenses (excluding employee benefit expenses
and non-cash items under R&D expenses) adjusted for changes in working capital relating to R&D
activities as of previous and current year end.
(3) Cash operating costs relating to direct service and production costs, including materials represent
contract fulfillment costs (excluding employee benefit expenses and non-cash items under contract
fulfillment costs) adjusted for changes in working capital relating to contract fulfillment as of previous
and current year end.
(4) Cash operating costs relating to service/solution marketing represent selling and marketing expenses
(excluding employee benefit expenses and non-cash items under selling and marketing expenses)
adjusted for changes in working capital relating to sales and marketing activities as of previous and
current year end.
FINANCIAL INFORMATION
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--- page 586 ---
DESCRIPTION OF CERTAIN ITEMS OF CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
NET CURRENT ASSETS
The following table sets forth our net current assets of the consolidated statements of
financial position as of the respective dates indicated:
As of December 31,
As of
April 30,
2021 2022 2023 2024
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
(unaudited)
Current assets
Contract costs 17,051 33,280 37,891 56,285
Trade receivables 30,717 37,936 38,506 44,731
Prepayments, deposits and
other receivables 30,090 51,734 41,147 47,089
Financial assets at FVTPL – 356,361 863,368 1,011,941
Restricted cash 12,751 5,432 2,337 528
Term deposits 305,308 2,537,703 1,251,353 1,216,114
Cash and cash equivalents 3,523,647 574,219 710,761 322,380
Total current assets 3,919,564 3,596,665 2,945,363 2,699,068
Current liabilities
Trade payables 10,573 13,979 13,654 10,311
Other payables and accruals 98,077 104,250 131,289 74,813
Short term bank borrowings 22,280 36,000 60,000 45,000
Derivative financial
instruments 811 2,531 560 –
Deferred government grants 1,959 1,118 7,433 5,438
Contract liabilities 9,871 15,519 25,658 26,854
Lease liabilities 17,297 24,248 58,782 19,825
CRPS – – – 10,816,083
Total current liabilities 160,868 197,645 297,376 10,998,324
Net current
assets/(liabilities) 3,758,696 3,399,020 2,647,987 (8,299,256)
FINANCIAL INFORMATION
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--- page 587 ---
We had net current liabilities of RMB8,299.3 million as of April 30, 2024 primarily
because our CRPS which were classified as non-current liabilities during the Track Record
Period were reclassified as our current liabilities. Nevertheless, as the CRPS will automatically
convert into ordinary Shares upon the Listing, our net current liabilities position will turn into
net current assets position as a result.
We had net current assets decreased by RMB751.0 million from RMB3,399.0 million as
of December 31, 2022 to RMB2,648.0 million as of December 31, 2023. Our total current
assets decreased by RMB651.3 million primarily due to a decrease of RMB645.9 million in the
sum of cash and cash equivalents, restricted cash, current portion of financial assets at FVTPL
and term deposits as we utilized such capital in our business operations. Our total current
liabilities increased by RMB99.7 million primarily due to (i) an increase in other payables and
accruals of RMB27.0 million due to (a) an increase of RMB19.6 million for investment
payables, (b) an increase of RMB5.4 million accrued listing expense for the proposed Listing,
and (c) an increase of RMB4.2 million in accrued salaries and staff benefits, (ii) an increase
in short-term borrowings of RMB24.0 million, (iii) an increase in contract liabilities of
RMB10.1 million and (iv) an increase in lease liabilities of RMB34.5 million.
We had net current assets decrease of RMB359.7 million from RMB3,758.7 million as of
December 31, 2021 to RMB3,399.0 million as of December 31, 2022. Our total current assets
decreased by RMB322.9 million primarily due to a decrease of RMB2,949.4 million in cash
and cash equivalents, partially offset by (i) an increase of RMB2,232.4 million in term deposit,
(ii) an increase of RMB356.4 million in financial assets at FVTPL, as a result of our increased
investment in wealth management products, (iii) an increase of RMB21.6 million in
prepayments, deposits and other receivables, and (iv) an increase of RMB16.2 million in
contract costs in relation to the research activities performed but yet to meet the agreed
milestone payment conditions or delivered as stipulated in the contract, in line with our
business growth. Our total current liabilities increased by RMB36.8 million primarily due to
(i) an increase in short-term bank borrowings of RMB13.7 million for working capital purpose,
(ii) an increase in lease liabilities of RMB7.0 million, (iii) an increase in other payables and
accruals of RMB6.2 million, as a result of the increases in our employee benefit payables due
to an increase in the number of our staff, and (iv) an increase in contract liabilities of RMB5.6
million. The increase in prepayments, deposits and other receivables was primarily due to (i)
an increase of RMB9.5 million in prepayments for our leased office, and (ii) an increase of
RMB7.5 million in value-added tax recoverables as a result of deductible value-added input tax
in excess of the value-added output tax due to our increase in purchase of R&D equipment.
Contract Costs
Our contract costs increased from RMB17.1 million as of December 31, 2021 to
RMB33.3 million as of December 31, 2022 and further to RMB37.9 million as of December
31, 2023, mainly due to an increase in research activities performed by our Group for our
customers ahead of the agreed milestone payment conditions as stipulated in the respective
contracts.
FINANCIAL INFORMATION
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--- page 588 ---
As of April 30, 2024, RMB10.4 million or approximately 27.4% of our contract costs as
of December 31, 2023, had been subsequently expensed.
Trade Receivables
Our trade receivables primarily represent amounts due from customers for our solutions
or services provided in the ordinary course of business. The credit period given to our drug
discovery customers and collaborators ranged generally from 30 to 60 days from the date of
invoice. The following table sets forth our trade receivables, net of credit loss allowance, as
of the dates indicated:
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Trade receivables 31,615 39,708 40,326
Less: Credit loss allowance (898) (1,772) (1,820)
30,717 37,936 38,506
Our trade receivables increased from RMB30.7 million as of December 31, 2021 to
RMB37.9 million as of December 31, 2022 and slightly increased to RMB38.5 million as of
December 31, 2023, in line with our overall revenue growth in all business lines, particularly
our growing drug discovery solutions business.
The following table sets forth an aging analysis of our trade receivables as of the dates
indicated, based on the invoice date.
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
0 to 90 days 31,487 33,584 32,017
91 to 180 days 128 – 5,307
181 to 365 days – 5,406 1,916
Over one year – 718 1,086
31,615 39,708 40,326
FINANCIAL INFORMATION
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--- page 589 ---
We adopted the IFRS 9 simplified approach to measure expected credit losses which uses
a lifetime expected loss allowance for all trade receivables. We closely review the trade
receivables balance and any overdue balances on an ongoing basis and assess the collectability
of overdue balances, taking into account the financial position, past experience and other
relevant factors. We normally performed impairment assessment based on credit risk and
expected credit loss rate, considering our customers’ strong capacity to meet the contractual
cash flow obligation in the near term and the low historical default risk.
Our trade receivables due over 180 days and over one year as of December 31, 2022 and
December 31, 2023 were related to our transactions with certain long-term customers. Taking
into account the customers’ historical credit record and financial performance, while we had
been actively communicating with them for the trade receivables collection, we did not observe
significant risk regarding the recoverability of such amounts and did not make specific loss
provision.
As of April 30, 2024, RMB19.5 million or approximately 50.6% of our trade receivables
as of December 31, 2023 had been subsequently settled.
The table below sets forth the turnover days of our trade receivables for the years
indicated:
Y ear ended December 31,
2021 2022 2023
Trade receivables turnover days (1) 121.8 94.0 80.0
Note:
(1) Trade receivables turnover days for a period equals the average opening and closing trade receivables
balance divided by revenue for the relevant period and multiplied by the number of days in the relevant
period, being 365 days.
The trade receivables turnover days indicate the average time required for us to collect
cash payments. Our trade receivables turnover days decreased from 121.8 days in 2021 to 94.0
days in 2022, and further to 80.0 days in 2023, primarily because we adopted tighter trade
receivable collection policies to collect our cash payments more quickly, in order to reduce our
credit risk.
FINANCIAL INFORMATION
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--- page 590 ---
Prepayments, Deposits and Other Receivables
The following table sets forth our prepayments, deposits and other receivables as of the
dates indicated:
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Non-current
Prepayment for equipment 16,053 13,893 24,916
Current
Prepayments 5,043 14,533 9,298
Deposits 8,785 14,248 12,094
V alue-added tax recoverables 15,858 23,326 19,705
Others 3,007 2,027 219
32,693 54,134 41,316
Less: loss allowance (2,603) (2,400) (169)
30,090 51,734 41,147
Prepayment for equipment represents prepayment primarily for R&D equipment.
Prepayment for equipment decreased from RMB16.1 million as of December 31, 2021 to
RMB13.9 million as of December 31, 2022, primarily because certain R&D equipment went
through inspection and acceptance procedure and the relevant prepayment was transferred to
lab equipment under property, plan and equipment. Our prepayment for equipment increased
from RMB13.9 million as of December 31, 2022 to RMB24.9 million as of December 31, 2023,
primarily due to our purchases of additional R&D equipment to upgrade and innovate our
technologies.
Prepayments represent amounts we prepaid primarily for our operating activities as
prepayments for leased properties, experimental fees, purchase of materials and promotional
fees. Our prepayments increased from RMB5.0 million as of December 31, 2021 to RMB14.5
million as of December 31, 2022, primarily due to (i) an increase in prepayments for our leased
properties in Shenzhen and Beijing and (ii) an increase in prepaid experimental fees to support
our operations. Our prepayments decreased from RMB14.5 million as of December 31, 2022
to RMB9.3 million as of December 31, 2023, primarily because the prepayments for our leased
properties were utilized to settle lease liabilities in 2023.
FINANCIAL INFORMATION
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--- page 591 ---
Deposits represent rental deposit. Our deposits increased from RMB8.8 million as of
December 31, 2021 to RMB14.2 million as of December 31, 2022, primarily due to our newly
leased office in Shenzhen and standardized and automated wet lab in Shanghai. Our deposits
decreased from RMB14.2 million as of December 31, 2022 to RMB12.1 million as of
December 31, 2023, primarily due to the termination of our lease of an office in Shanghai, as
we decided to relocate relevant operation activities to another venue in Shanghai, in 2023.
V alue-added tax recoverable represents deductible value-added input tax in excess of the
value-added output tax, which can be deductible or recoverable in the future. Our value-added
tax recoverable increased from RMB15.9 million as of December 31, 2021 to RMB23.3 million
as of December 31, 2022, primarily due to our incremental purchases of R&D equipment. Our
value-added tax recoverable decreased from RMB23.3 million as of December 31, 2022 to
RMB19.7 million as of December 31, 2023, primarily due to the receipt of value-added tax credit
refunds in December 2023. As of April 30, 2024, RMB5.5 million, or approximately 27.9% of
our value-added tax recoverable as of December 31, 2023, had been subsequently utilized.
Financial Assets at FVTPL
The following table sets forth our financial assets at FVTPL as of the dates indicated:
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Investments in financial assets at fair
value through profit or loss
included in non-current assets:
A listed entity – 69,814 40,267
Unlisted entities
(1) 170,258 211,465 316,161
Convertible debts (2) – 3,250 67,595
170,258 284,529 424,023
Investments in financial assets at fair
value through profit or loss
included in current assets:
Wealth management products – 356,361 863,368
Notes:
(1) Represents our equity interests in six, eight and eight unlisted entities in 2021, 2022 and 2023,
respectively. We made investments in such entities from 2018 to 2023. Our investment amount in each
of the unlisted entities ranges from approximately RMB3 million to approximately RMB69 million, and
our shareholding percentage ranges from approximately 4% to approximately 35%.
(2) Please see Note 3.3 and Note 20 to the Accountant’s Report in Appendix I to this prospectus for details.
FINANCIAL INFORMATION
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--- page 592 ---
The non-current portion of our financial assets at FVTPL represent our long-term equity
investments, which increased from RMB170.3 million as of December 31, 2021 to RMB284.5
million as of December 31, 2022, further to RMB424.0 million as of December 31, 2023,
primarily due to our continuous equity investments and convertible bond investments in
biotechnology start-ups and a general increase in the valuation of our investees.
We have established an investment management system to enhance our internal control
mechanism, including setting up the strategy and investment committee and adopting the
strategy and investment committee charter. In accordance with the strategy and investment
committee charter, the strategy and investment committee is reporting to our Board and directly
managed by chairman of the Board. The duties of such committee include but not limited to
(i) reviewing, evaluating and approving investments and escalating the investment proposals to
our Board when such investments reach certain investment amount thresholds, (ii) reviewing
and approving investment planning strategies, (iii) reviewing and approving material post-
investment management matters and (iv) establishing and promoting a scientific and efficient
investment management mechanism. Subject to the strategy and investment committee charter,
the strategy and investment committee shall discharge its duties by means of meetings and
mails and shall hold meetings as necessary. The strategy and investment committee currently
consists of our three Co-founders. For details of our Co-founders, see “Directors and Senior
Management—Board of Directors—Executive Directors.” We have also formed certain
investment strategies when assessing whether to make such investments. For details of our
investment strategies, see “Business—Our Drug Discovery Solutions—Strategic
Collaborations.”
We have entered into a number of collaborations with biotechnology and pharmaceutical
companies and academic institutions under which our collaborators pursue research in a
number of therapeutic areas, such as oncology, neurology, respirology, and inflammatory
diseases. We expect to receive royalties, milestone or contingent payments if such
collaboration programs reach milestones or events specified in the respective contracts. In the
collaborations, we are responsible for the design, synthesis and assessment of candidate
molecules against the pre-determined targets. The collaborators conduct supplementary assays
for the synthesized compounds and share the results with us. If the need arises, we will further
optimize on the molecules and the collaborators will run further tests until a set of satisfactory
compounds are generated. For more details regarding our strategic collaborations, acquisitions
and investments, see “Business—Our Drug Discovery Solutions—Strategic Collaborations.”
See Note 3.3 to the Accountant’s Report in Appendix I to this prospectus for details regarding
our fair value measurement.
Our investment in a listed entity represents our investment in a global biotechnology
company that drives the R&D of novel antibody-based drugs and revenue-generating
pre-clinical research services listed on the Main Board of the Stock Exchange. We purchased
3,046,000 shares at its offer price of HK$25.22 during its global offering in 2022.
FINANCIAL INFORMATION
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--- page 593 ---
We may also acquire equity interests in unlisted entities which we consider to have
potential first-in-class or best-in-class pipelines or cutting-edge technologies, from which we
expect to establish an ecosystem within which we and our investees can achieve synergies in
a wide array of aspects, including resources, technologies and expertise. Please see
“Business—Our Drug Discovery Solutions—Strategic Collaborations” for details of our
representative investees. As of the Latest Practicable Date, we generally had two types of
arrangements with respect to our investments in collaborators: (i) more often, we make equity
investments in selected collaborators which develop complementary technologies to ours and
who we consider are compatible with our strategic position, to whom we may also provide our
services and receive service fees; and (ii) in some cases, we offer our solutions in exchange for
equity interests in our collaborators, which are recorded as non-cash transactions. The terms of
collaborations and investments are negotiated at arm’s length.
The current portion of our financial assets at FVTPL represent wealth management
products issued by reputable PRC commercial banks, being structured deposits with terms not
exceeding six months. We believe we can make better use of our idle funds and increase our
revenue by making appropriate investments in short-term wealth management products, under
the premise of not interfering with our normal business activities or capital expenditures. We
use alternative pricing sources and models utilizing market observable inputs to estimate the
fair value, and we classify the valuation techniques that use these inputs as Level 3 of fair value
measurement. The current portion of our financial assets at FVTPL was nil, RMB356.4 million
and RMB863.4 million as of December 31, 2021, 2022 and 2023, respectively.
The investment in such financial assets after the Listing will be conducted subject to the
compliance with Chapter 14 of the Listing Rules.
Trade Payables
Our trade payables primarily represent outstanding amounts due to our suppliers for
purchases of raw materials, consumables, third party experimental and renovation services. We
generally settle with our suppliers within 30 to 180 days from the date of invoice. The
following table sets forth our trade payables as of the dates indicated:
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Trade payables 10,573 13,979 13,654
Our trade payables increased from RMB10.6 million as of December 31, 2021 to
RMB14.0 million as of December 31, 2022, generally in line with our revenue growth across
all business lines. Our trade payables decreased from RMB14.0 million as of December 31,
2022 to RMB13.7 million as of December 31, 2023, primarily due to an increase in the settled
trade payables.
FINANCIAL INFORMATION
– 584 –


--- page 594 ---
The following table sets forth the aging analysis of our trade payables, based on the
invoice dates, as of the dates indicated:
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
0 to 90 days 10,573 13,979 11,683
90 to 180 days – – 1,971
10,573 13,979 13,654
As of April 30, 2024, RMB12.0 million, or approximately 87.9% of our trade payables as
of December 31, 2023, had been subsequently settled.
Other Payables and Accruals
Our other payables and accruals primarily included (i) investment payables; (ii) accrual
for salaries and staff benefits; (iii) accrual for acquiring property, plant and equipment; (iv)
other tax payables; and (v) rental payable. The following table sets forth our other payables and
accruals as of the dates indicated:
As of December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
Non-Current
Investment payables 280 8,638 –
Current
Accrued salaries and staff benefits 48,589 69,354 73,596
Accrual for acquiring property, plant
and equipment 22,649 19,281 18,622
Accrued listing expense – – 5,382
Investment payables 13,876 – 19,561
Other tax payables 2,488 4,481 4,265
Rental payables 62 554 515
Others
(1) 10,413 10,580 9,348
Total 98,077 104,250 131,289
Note:
(1) Other primarily included professional fees payables.
FINANCIAL INFORMATION
– 585 –


--- page 595 ---
Accrued salaries and staff benefits represent salaries and welfare payables to our
employees. Our accrued salaries and staff benefits increased from RMB48.6 million as of
December 31, 2021 to RMB69.4 million as of December 31, 2022, primarily due to the
increases in the number our employees and their average compensation level, in line with our
business expansion and the market trend. Our accrued salaries and staff benefits slightly
increased from RMB69.4 million as of December 31, 2022 to RMB73.6 million as of December
31, 2023 due to the accrued employee compensation.
Accrual for acquiring property, plant and equipment mainly represent payables for
purchasing lab equipment, computer and office equipment, leasehold improvements and
construction in process. Our accrual for acquiring property, plant and equipment decreased
from RMB22.6 million as of December 31, 2021 to RMB19.3 million as of December 31, 2022,
primarily due to an increase in settled payables. Our accrual for acquiring property, plant and
equipment decreased from RMB19.3 million as of December 31, 2022 to RMB18.6 million as
of December 31, 2023, primarily due to settlement of such accruals.
We recorded accrued listing expense of RMB5.4 million as of December 31, 2023 relating
to our expenses incurred for the proposed Listing.
Investment payables represents our equity investment in investees that have not been
settled. The non-current portion of our investment payables increased from RMB0.3 million as
of December 31, 2021 to RMB8.6 million as of December 31, 2022 primarily due to an increase
in our investments. The non-current portion of our investment payables was nil as of December
31, 2023 due to the settled payment for an equity investment in 2023. The current portion of
our investment payable was RMB13.9 million, nil and RMB19.6 million as of December 31,
2021, 2022 and 2023, respectively.
Other tax payables represent employer payroll tax payables to the relevant government
tax authorities. Our other tax payables increased from RMB2.5 million as of December 31,
2021 to RMB4.5 million as of December 31, 2022, in line with our increased employee benefit
expenses. Our other tax payables remained relatively stable at RMB4.5 million as of December
31, 2022 and RMB4.3 million as of December 31, 2023.
Rental payable represents rental expenses payable to our lessors. Our rental payable
increased from RMB62,000 as of December 31, 2021 to RMB0.6 million as of December 31,
2022, primarily due to the payables for utilities expenses and property management fees for our
operational premises in Shenzhen and Shanghai in 2023. Our rental payable decreased from
RMB0.6 million as of December 31, 2022 to RMB0.5 million as of December 31, 2023 due to
the increase in settled rental payable in 2023.
Others remained relatively stable at RMB10.4 million as of December 31, 2021,
RMB10.6 million as of December 31, 2022 and RMB9.3 million as of December 31, 2023.
FINANCIAL INFORMATION
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--- page 596 ---
Deferred Government Grants
Our deferred government grants represent the government grants that we received but yet
to be recognized until we complied with all the prerequisite conditions. Our deferred
government grants remained relatively stable at RMB32.6 million and RMB30.7 million as of
December 31, 2021 and 2022, respectively, and increased to RMB39.5 million as of December
31, 2023 primarily because we received government grants in 2023 for some of which the
prerequisite conditions had not been met.
Contract Liabilities
Our contract liabilities represent advance payments from our customers for purchases of
our services which have not yet been rendered to the customers and hence have not been
recognized as revenue. We normally request 50% advance payment for purchases of our
solid-state R&D services, while the advance payment percentage for drug discovery solutions
and automated chemical synthesis services is determined by the complexity of the program and
negotiation with the relevant contract counterparties. The contract liabilities are recognized as
revenue when the underlying services have been rendered to the customers.
Our contract liabilities increased from RMB9.9 million as of December 31, 2021 to
RMB15.5 million as of December 31, 2022, due to the increase in services yet to be delivered
that was driven by our rapid expansion of all business lines. Our contract liabilities increased
from RMB15.5 million as of December 31, 2022 to RMB25.7 million as of December 31, 2023,
primarily because we received a larger amount of upfront payments through negotiations of
contracts especially for our drug discovery solutions in 2023, a majority of which were yet to
be recognized as revenue since we had not delivered corresponding research results as of
December 31, 2023.
As of April 30, 2024, RMB6.9 million, or approximately 27.0% of our contract liabilities
as of December 31, 2023, had been subsequently recognized as revenue.
FINANCIAL INFORMATION
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INDEBTEDNESS
Our indebtedness consisted of (i) bank borrowings, (ii) lease liabilities, and (iii) CRPS.
The following table sets forth our indebtedness as of the dates indicated:
As of December 31,
As of
April 30,
2021 2022 2023 2024
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
(unaudited)
Current
Short-term bank borrowings 22,280 36,000 60,000 45,000
Current portion of lease liabilities 17,297 24,248 58,782 19,825
CRPS – – – 10,816,083
Subtotal 39,577 60,248 118,782 10,880,908
Non-current
Long-term bank borrowings 11,000 – – –
Non-current portion of lease
liabilities 81,669 69,206 137,183 70,350
CRPS 7,701,279 9,320,782 10,780,342 –
Subtotal 7,793,948 9,389,988 10,917,525 70,350
Total 7,833,525 9,450,236 11,036,307 10,951,258
Save as disclosed in the table above, we did not have any material mortgages, charges,
debentures, loan capital, debt securities, loans, bank overdrafts or other similar indebtedness,
finance leases or hire purchase commitments, liabilities under acceptances (other than normal
trade bills), acceptance credits, which are either guaranteed, unguaranteed, secured or
unsecured, or guarantees or other contingent liabilities as of April 30, 2024 and up to the Latest
Practicable Date.
Bank Borrowings
Our bank borrowings during the Track Record Period were denominated in Renminbi and
were used to finance our working capital requirements. Our total outstanding borrowings
increased from RMB33.3 million as of December 31, 2021 to RMB36.0 million and RMB60.0
million as of December 31, 2022 and December 31, 2023 as we optimized our working capital
structure. Our total outstanding borrowings decreased from RMB60.0 million as of December
FINANCIAL INFORMATION
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--- page 598 ---
31, 2023 to RMB45.0 million as of April 30, 2024 due to the repayment of due bank loans of
RMB15.0 million. As of December 31, 2021, 2022 and 2023 and April 30, 2024, the weighted
average interest rate of our bank borrowings was approximately 5.2%, 4.2%, 3.0% and 2.9%,
respectively. Our Directors confirm that we did not experience any difficulty in obtaining bank
borrowings or default in payment of bank borrowings during the Track Record Period and up
to the Latest Practicable Date.
Our bank borrowing agreements contain standard terms, conditions and covenants that are
customary for commercial bank loans. Our Directors confirm that as of the Latest Practicable
Date, there was no material covenant on any of our outstanding debt and there was no breach
of any material covenant during the Track Record Period and up to the Latest Practicable Date.
Our Directors further confirm that our Group did not experience any difficulty in obtaining
bank loans and other borrowings, default in payment of bank loans and other borrowings or
breach of covenants during the Track Record Period and up to the Latest Practicable Date.
We had bank borrowings of RMB33.3 million, RMB36.0 million and RMB60.0 million
as of December 31, 2021, 2022 and 2023, respectively, all of which were guaranteed. Please
see below the details of guarantees which are also set out under Note 29 to the Accountant’s
Report in Appendix I to this prospectus:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Secured by:
Guaranteed by Dr. Wen – 10,000 30,000
Guaranteed by Dr. Wen and Shenzhen
Zhiyao 13,280 – –
Guaranteed by Dr. Wen and Shenzhen
Jingtai – 15,000 5,500
Guaranteed by Dr. Wen, Shenzhen
Zhiyao and Shenzhen Jingtai 20,000 11,000 –
Guaranteed by Shenzhen Jingtai – – 15,000
Guaranteed by Dr. Wen, Shenzhen
Jingtai and a patent right of Beijing
Jingtai (Note) – – 9,500
33,280 36,000 60,000
Note: The carrying amount of the patent right of Beijing Jingtai was nil as at December 31, 2023.
FINANCIAL INFORMATION
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The guarantees provided by related parties, being those provided by Dr. Wen, will be
released upon the Listing. Other guarantees are provided by Shenzhen Jingtai and Shenzhen
Zhiyao which are our subsidiaries. The patent right that is used as a collateral to one of our
loans is one of our algorithm patents used in certain of our drug discovery solutions. We do not
consider the pledge of such patent right would have any material adverse impact on our overall
operations. We had fully repaid the relevant loan of RMB9.5 million which matured on
March 29, 2024. We had fully repaid the bank loan of RMB5.5 million guaranteed by Dr. Wen
and Shenzhen Jingtai as mentioned above as of April 30, 2024.
As of April 30, 2024, we had unutilized credit facilities of RMB505.0 million. We do not
anticipate any changes to the availability of bank financing to finance our operations in the
future, although we cannot assure you that we will be able to access bank financing on
favorable terms or at all.
Lease liabilities
Lease liabilities represent the present value of outstanding lease payments under our lease
agreements for office premises and standardized and automated wet lab. Our leases of
properties generally have lease terms of three to ten years. Our lease liabilities slightly
decreased from RMB99.0 million as of December 31, 2021 to RMB93.5 million as of
December 31, 2022, primarily due to lease payments made by our Group. Our lease liabilities
significantly increased to RMB196.0 million as of December 31, 2023, primarily due to the
increased leased property in Shanghai in 2023. Our lease liabilities significantly decreased to
RMB90.2 million as of April 30, 2024, primarily due to lease payments made by our Group.
CRPS
Our Company completed several rounds of financing by issuing CRPS before and during
the Track Record Period. See “History, Development and Corporate Structure—Pre-IPO
Investments” for details regarding the identity and background of the Pre-IPO Investors, and the
principal terms of the Pre-IPO Investments. We have used the discounted cash flow method to
determine the underlying share value of our Company and adopted equity allocation model to
determine the fair value of the CRPS at the end of each Track Record Period. Such valuation
techniques are certified by an independent third party valuer before being implemented for
valuation to ensure that outputs reflect market conditions. See Note 32 to the Accountant’s Report
in Appendix I to this prospectus for details regarding the determination of fair value of CRPS.
As of December 31, 2021, 2022 and 2023 and April 30, 2024, we had liabilities in relation
to CRPS of RMB7,701.3 million, RMB9,320.8 million, RMB10,780.3 million and
RMB10,816.1 million, respectively, reflecting our increasing valuation. All the CRPS which
were accounted for as liabilities will be converted into Ordinary Shares immediately prior to
the completion of the Listing, and such liabilities would be derecognized and accounted as an
increase in equity upon the Listing. We expect that our net liabilities position will turn into a
net assets position upon the Listing.
Our Directors have confirmed that there was no material change in the indebtedness
statement of our Group since April 30, 2024 and up to the Latest Practicable Date.
FINANCIAL INFORMATION
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CONTINGENT LIABILITIES
During the Track Record Period, we did not have material contingent liabilities that were
expected to materially and adversely affect our financial condition or results of operations. Our
Directors confirm that there has been no material change in our contingent liabilities since
December 31, 2023 to the date of this prospectus.
KEY FINANCIAL RATIOS
The following table sets forth certain of our key financial ratios as of the dates or for the
years indicated:
Y ear ended December 31,
2021 2022 2023
Revenue growth rate (1) 76.2% 112.3% 30.8%
As of December 31,
2021 2022 2023
Current ratio (2) 24.4 18.2 9.9
Cash ratio (3) 23.9 17.6 9.5
Notes:
(1) Revenue growth rate is calculated by dividing revenue growth for the relevant period by revenue for the
previous period and multiplied by 100%.
(2) Current ratio is calculated by dividing total current assets by total current liabilities as of the year end.
(3) Cash ratio is calculated by dividing the sum of cash and cash equivalents, term deposits, restricted cash,
and current portion of financial assets at FVTPL by total current liabilities as of the year end.
Revenue Growth Rate
See “—Discussion of Results of Operations” for a discussion of the factors affecting our
revenue growth rate during the respective periods.
Current Ratio
Our current ratio decreased from 24.4 as of December 31, 2021 to 18.2 as of December 31,
2022, primarily due to a decrease in current assets and an increase in current liabilities. The
decrease in our current assets in 2022 was primarily because we made investments in property,
plant and equipment and financial assets at FVTPL including equity interests in a listed company
and several unlisted companies as well as a convertible debt. The increase in our current liabilities
was primarily due to an increase in our short-term bank borrowings and lease liabilities.
FINANCIAL INFORMATION
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Our current ratio decreased from 18.2 as of December 31, 2022 to 9.9 as of December 31,
2023, primarily due to a decrease in current assets and an increase in current liabilities. The
decrease in our current assets in 2023 was primarily because we utilized such capital in our
business operations. The increase in our current liabilities was primarily due to an increase in
our other payables and accruals.
Cash Ratio
Our cash ratio decreased from 23.9 as of December 31, 2021 to 17.6 as of December 31,
2022, primarily due to an increase in our current liabilities, primarily due to increases in our
short-term bank borrowings and lease liabilities.
Our cash ratio decreased from 17.6 as of December 31, 2022 to 9.5 as of December 31,
2023, primarily due to the decrease of the sum of cash and cash equivalents, term deposits,
restricted cash, and current portion of financial assets at FVTPL as we utilized such capital in
our business operations, and increase of current liabilities primarily contributed by the increase
in our other payables and accruals.
R&D EXPENDITURE AND TOTAL OPERATING EXPENDITURE
During the Track Record Period, our R&D expenditure primarily consisted of R&D
expenses adjusted by adding back intangible assets acquired from third parties and capitalized
and deducting amortization expenses for capitalized intangible assets included in R&D
expenditure. The table below sets forth our annual and total R&D expenditure for the years
indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
R&D expenses 212,603 358,952 480,664
Adjustments:
Add: Intangible assets acquired from
third parties and capitalized 2,567 3,027 4,263
Less: Amortization expenses of
capitalized intangible assets included
in R&D expenditure (738) (3,018) (4,593)
Annual R&D expenditure 214,432 358,961 480,334
Total R&D expenditure for the three
financial years prior to Listing 1,053,727
FINANCIAL INFORMATION
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The table below sets forth our annual and total operating expenditure for the years
indicated:
Y ear ended December 31,
2021 2022 2023
(RMB’000) (RMB’000) (RMB’000)
R&D expenses 212,603 358,952 480,664
General and administrative expenses 137,035 204,401 295,986
Contract fulfillment costs 30,014 67,266 126,178
Selling and marketing expenses 27,413 40,427 62,482
Adjustments:
Add: Intangible assets acquired from
third parties and capitalized 2,567 3,027 4,263
Less: Amortization expenses of
capitalized intangible assets included
in R&D expenditure (738) (3,018) (4,593)
Annual total operating expenditure 408,894 671,055 964,980
Total operating expenditure for the
three financial years prior to
Listing 2,044,929
The table below sets forth our annual R&D expenditure ratio and total R&D expenditure
ratio for the years indicated:
Y ear ended December 31,
2021 2022 2023
Annual R&D expenditure ratio (1) 52.4% 53.5% 49.8%
Total R&D expenditure ratio (2) 51.5%
Notes:
(1) Calculated by dividing annual R&D expenditure by annual total operating expenditure.
(2) Calculated by dividing total R&D expenditure for the three financial years prior to Listing by total
operating expenditure for the three financial years prior to Listing.
FINANCIAL INFORMATION
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CAPITAL EXPENDITURES AND COMMITMENTS
Capital Expenditures
We regularly incur capital expenditures to expand our operations and upgrade our
facilities. Our capital expenditures during the Track Record Period primarily consisted of
expenditures on property, plant and equipment, and intangible assets. In 2021, 2022 and 2023,
we incurred capital expenditures of RMB185.8 million, RMB195.4 million and RMB130.0
million, respectively.
Historically, we have funded our capital expenditures mainly through cash generated from
our operations, equity financing, capital injections and bank borrowings. We intend to fund our
planned capital expenditures through cash generated from operations, bank borrowings and net
proceeds from the Global Offering. For details, see “Future Plans and Use of Proceeds.”
Our actual capital expenditures may differ from the amounts set forth above due to
various factors, including our future cash flows, results of operations and financial condition,
economic conditions in the PRC, the availability of financing on terms acceptable to us and
changes in the regulatory environment in the PRC. In addition, we may incur additional capital
expenditures from time to time as we pursue new opportunities to expand our business.
Capital Commitments
Our capital commitments represented capital expenditure in respect of short-term lease
commitment. As of December 31, 2021, 2022 and 2023, we had capital commitments related
to capital expenditure in respect of the leasehold improvements of RMB0.6 million, RMB7.4
million and RMB4.2 million, respectively. The significant increase in our capital commitments
from 2021 to 2022 was mainly due to the increasing lease payments related to our office
premises and laboratories. The decrease in our capital commitments from 2022 to 2023 was due
to the decrease in our short-term lease commitment.
RELATED PARTY TRANSACTIONS
During the Track Record Period, we entered into transactions with our related parties
from time to time. These transactions primarily include (i) revenue from an associate, mainly
including the provision of intelligent automation solutions, (ii) procurement of cloud
computing services from a company controlled by one of our shareholders, (iii) amounts
receivable from the related parties for our services provided, (iv) trade payables to the related
party for our procurement of service, and (v) amount payables of unpaid capital to an associate.
See Note 39 to the Accountant’s Report in Appendix I to this prospectus for details regarding
our related party transactions.
FINANCIAL INFORMATION
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It is the view of our Directors that our transactions with related parties during the Track
Record Period were conducted on an arm’s length basis and with normal commercial terms.
Our Directors are also of the view that our related party transactions during the Track Record
Period would not distort our historical results or make our historical results not reflective of
our future performance.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet
commitment or like arrangements.
FINANCIAL RISKS DISCLOSURE
Market Risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognized assets
and liabilities are denominated in a currency that is not our entities’ functional currency. Our
functional currency is USD. Our primary subsidiaries were incorporated in the PRC and these
subsidiaries considered RMB as their functional currency.
We manage our foreign exchange risk by performing regular reviews of our net foreign
exchange exposures and may enter into certain forward foreign exchange contracts, when
necessary, to manage our exposure against U.S. dollar and to mitigate the impact on exchange
rate fluctuations. During the Track Record Period, we had entered into certain forward foreign
currency contracts. For further details, see Note 3.1(a)(i) to the Accountant’s Report in
Appendix I to this prospectus.
Cash flow and fair value interest rate risk
Our income and operating cash flows are substantially independent of changes in market
interest rates and we have no significant interest-bearing assets except for cash and cash
equivalents, term deposits and borrowings from bank. The details of our cash and cash
equivalents, term deposits and borrowings from bank have been disclosed in Note 26, Note 25
and Note 29 to the Accountant’s Report in Appendix I to this prospectus, respectively.
Price risk
We are exposed to price risk in respect of our investments in wealth management products
and equity designated as financial assets at FVTPL. We are generally not exposed to
commodity price risk. See Note 3.3 to the Accountant’s Report in Appendix I to this prospectus
for details regarding the sensitivity analysis of our investments in wealth management
products.
FINANCIAL INFORMATION
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Credit Risk
Credit risk mainly arises from cash and cash equivalent, restricted cash, term deposits, as
well as credit exposures on amounts receivables and other receivables. The carrying amount of
each class of these financial assets represents our maximum exposure to credit risk in relation
to the corresponding class of financial assets. For further details, see Note 3.1(b) to the
Accountant’s Report in Appendix I to this prospectus. For further details on our credit risk,
please see “Risk Factors—Risks Related to Our Financial Prospects and Need for Additional
Capital—We may be exposed to credit risk associated with our trade receivables.”
Liquidity Risk
We aim to maintain sufficient cash and cash equivalents. Due to the dynamic nature of our
underlying business, we maintain flexibility in funding by maintaining adequate cash and cash
equivalents.
Cash flow forecasting is performed by our management. Our management monitors
rolling forecasts of our liquidity requirements to ensure we have sufficient cash to meet our
operational needs as well as our liabilities to other parties. For further details, see Note 3.1(c)
to the Accountant’s Report in Appendix I to this prospectus.
DIVIDENDS
As we are a holding company incorporated under the laws of the Cayman Islands, the
payment and amount of any future dividends will be subject to our constitutional documents
and the Cayman Companies Act, pursuant to which a company may declare and pay a dividend
out of either profits or share premium account. Any dividends we pay will be determined at the
recommendation of our Board at its absolute discretion, taking into account factors including
our actual and expected results of operations, cash flow and financial position, general business
conditions and business strategies, expected working capital requirements and future expansion
plans, legal, regulatory and other contractual restrictions, and other factors that our Board
deems to be appropriate. Our Shareholders may approve, in a general meeting, any declaration
of dividends, which must not exceed the amount recommended by our Board. No dividend has
been proposed, paid or declared by our Company during and after the Track Record Period.
Currently, we do not have a formal dividend policy or a fixed dividend payout ratio and we do
not have a plan to set up such policy.
As we are a holding company, our ability to declare and pay dividends will also depend
on the availability of dividends received from our PRC subsidiaries. PRC laws require that
dividends be paid only out of the net profit calculated according to the PRC accounting
principles, which differ in many aspects from generally accepted accounting principles in other
jurisdictions, including IFRS. PRC laws also require foreign invested enterprises to set aside
part of their net profit as statutory reserves, which are not available for distribution as cash
dividends. Distributions from our subsidiaries may also be restricted if they incur debt or losses
or in accordance with any restrictive covenants in bank credit facilities or other agreements that
we or our subsidiaries may enter into in the future.
FINANCIAL INFORMATION
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WORKING CAPITAL SUFFICIENCY
Our Directors are of the opinion that, taking into account the estimated net proceeds from
the Global Offering and other financial resources available to us, including cash flow from
operating activities, cash and cash equivalents, term deposits, restricted cash, the current
portion of financial assets at FVTPL, and bank borrowings, we have sufficient working capital
to cover 125% of our costs, including R&D expenses, selling and marketing expenses, general
and administrative expenses and other operating costs, for the next 12 months from the date of
this prospectus. In addition, we have entered into two strategic collaboration agreements with
reputable financial institutions, including two commercial banks in China. Our collaboration
partners will provide financial services and support to us for our business operations and
expansion. In particular, each of the two commercial banks intends to grant us banking
facilities of up to RMB5 billion, which we believe will further strengthen our working capital
sufficiency.
Our cash burn rate refers to the average monthly aggregate amount of (i) net cash used
in operating activities, (ii) capital expenditures, and (iii) lease payment. Our historical monthly
average cash burn rate was RMB37.1 million, RMB53.0 million and RMB62.2 million in 2021,
2022 and 2023, respectively. We had cash and cash equivalents, current portion of term
deposits, current portion of financial assets at FVTPL and restricted cash of RMB2,827.8
million in aggregate as of December 31, 2023. We estimate that we will receive net proceeds
of approximately HK$941.4 million after deducting the listing expenses payable by us in the
Global Offering, assuming no Over-allotment Option is exercised and assuming an Offer Price
of HK$5.53 per Offer Share, being the mid-point of the indicative Offer Price in this
prospectus.
In the foreseeable future, we expect to benefit from our enhanced automation capabilities
and become less reliant on manpower in our service delivery and R&D activities. As a result
of our continuous R&D efforts in the past few years, our technology platform is capable of
delivering results across different business lines, and is expected to facilitate the development
of different categories of solutions including those in new industries or sectors, based on which
we do not expect to incur substantial R&D expenses to build up capabilities for new solutions
from scratch. With our technology platform backed by big data and automated robotic wet lab
featuring cost efficiency and standardized scalability, we expect to observe a decrease of
marginal cost as our business scale continues to ramp up. Therefore, it is estimated that our
commercialization plan will be primarily driven by a strong revenue growth based on the
current business model with operating expenses under control.
On such basis, we assume that the average cash burn rate going forward will be similar
to the cash burn rate level in the year ended December 31, 2023 for the sake of prudence
although the cash burn rate is subject to change due to various factors including but not limited
to the business development, industry trend and customers’ requirement, and we estimate that
our cash and cash equivalents, current portion of term deposits, current portion of financial
assets at FVTPL and restricted cash as of December 31, 2023 will be able to maintain our
financial viability for approximately 45.5 months or, if we take into account 10% of the
FINANCIAL INFORMATION
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--- page 607 ---
estimated net proceeds from the Global Offering (namely, the portion allocated for our working
capital and other general purposes), approximately 46.9 months or, if we take into account
100% of the estimated net proceeds (based on the mid-point of the indicative Offer Price) from
the Global Offering, for approximately 59.3 months. Our Directors and our management will
continue to monitor our working capital, cash flows, and our business development status.
We have no immediate plan for future financing after the Listing for purpose of our
commercialization plan as disclosed in this prospectus taking into account our available cash,
proceeds from the Global Offering and based on our cash burn rate. However, with the
continuing expansion of our business and development of our solutions or services, or if we
discover suitable targets for acquisition or business collaboration, we could not exclude the
possibility to require further funding through public or private equity offerings, debt financing
and other sources. We will comply with applicable laws and regulations, including
requirements under the Listing Rules, when we proceed with such financings.
DISTRIBUTABLE RESERVES
As of December 31, 2023, our Company did not have any distributable reserves.
SUBSEQUENT EVENTS
In January 2024, we provided a convertible loan of RMB20 million to a target company,
which is an independent third party company which is principally engaged in business of
customized material for agriculture purpose. The convertible loan carried a simple interest rate
of 8% per annum and will mature at the earlier of (i) three years from the payment date of the
loan, or (ii) the occurrence of a breach of the agreement clause. We reserve the right to convert
all of the outstanding principal under the loan into 14% ordinary shares of the target company,
on a fully diluted and converted basis.
In March 2024, we granted 14,527,004 share options under our Pre-IPO ESOP to certain
employees. These share options will be vested no later than four years at the exercise price
ranges from US$0.18 to US$0.53.
In March and May 2024, we purchased a wealth management product from a financial
institution and fund in aggregate of US$55 million which were accounted as financial assets
at FVTPL.
LISTING EXPENSES
Based on the mid-point of the indicative Offer Price of HK$5.53 per Share, the total
estimated listing expenses in relation to the Global Offering are RMB86.6 million (HK$95.1
million), assuming the Over-allotment Option is not exercised, which constitute approximately
9.2% of the gross proceeds. Our total estimated listing expenses consist of (i) underwriting-
related expenses of RMB37.7 million (HK$41.4 million), and (ii) non-underwriting-related
expenses of RMB48.9 million (HK$53.7 million), including (a) fees payable to our legal
FINANCIAL INFORMATION
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--- page 608 ---
advisors and Reporting Accountant of RMB26.6 million (HK$29.3 million) and (b) other fees
and expenses, including fees payable to the sponsor and the fees of other professional parties
such as financial printers, industry consultant, background search agent and share registrar, of
RMB22.2 million (HK$24.4 million). During the Track Record Period, RMB20.6 million
(HK$22.6 million) had been recognized as expenses in our consolidated statements of profit or
loss. Subsequent to the Track Record Period, RMB25.2 million (HK$27.7 million) is expected
to be recognized as expenses in our consolidated statements of profit or loss, and RMB40.7
million (HK$44.8 million) is expected to be accounted for as a deduction from equity upon the
Listing. The listing expenses above are the latest practicable estimate for reference only, and
the actual amount may differ from this estimate.
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS
For the unaudited pro forma statement of adjusted net tangible assets of our Group
prepared in accordance with Rule 4.29 of the Listing Rules for illustrating the effect of the
Global Offering on the consolidated net tangible assets of our Group attributable to the owners
of the Company as at December 31, 2023 as if the Global Offering were completed on
December 31, 2023, please refer to Appendix II to this prospectus.
NO MATERIAL ADVERSE CHANGE
Our Directors have confirmed that there has been no material adverse change in our
financial or trading position or prospects since December 31, 2023, being the end date of our
latest audited financial statements, up to the date of this prospectus, and there had been no
event since December 31, 2023 up to the date of this prospectus that would materially affect
the information shown in the Accountant’s Report in Appendix I to this prospectus.
DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors confirm that, as of the Latest Practicable Date, there were no circumstances
that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing
Rules.
FINANCIAL INFORMATION
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FUTURE PLANS
See “Business—Our Growth Strategies” for a detailed description of our future plans.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$941.1 million, assuming an Offer Price of HK$5.53 per Offer Share (being the mid-point
of the Offer Price range stated in this prospectus), after deducting the underwriting
commissions and estimated expenses paid or payable by us in connection with the Global
Offering and assuming that the Over-allotment Option is not exercised.
In line with our strategies, we intend to apply the net proceeds from the Global Offering,
in the next five years, for the following purposes and in the amounts set forth below:
 approximately 75.0% of the net proceeds, or HK$705.8 million, will be used to
continuously enhance our R&D capabilities and solutions provision, including:
(1) approximately 40.0% of the net proceeds, or HK$376.4 million, to be used in
upgrading and optimizing our quantum physics-based closed-loop integrated
technology platform. Quantum physics computing capabilities are the
foundation of our technology platform, and we plan to further upgrade
quantum physics-based computing technology, using quantum physics
capabilities to provide efficient and accurate exploration and development of
key chemical spaces of novel drugs and materials, further solve problems such
as the structure and activity of targets and compounds, so as to improve
laboratory automation capabilities, and further expand our data lake with
various AI data cleaning and characterization technologies. We will also
continue to invest in generative AI technologies (such as LLM and
ProteinGPT) to build vertical models in the biomedical field with parameters
above 50 billion to facilitate the solution of R&D problems of various large
and small molecules, and combine AI capabilities with automation capabilities
to further improve efficiency and productivity. We will also continue to
develop Large Model in the field of chemistry, and train Large Model based on
our AI algorithms and automated platforms to generate high-quality data for
new molecule discovery, R&D and substance search. For details, please see
“Business—Our Technologies and Closed-loop Integrated Technology
Platform.”
To achieve the plans above, we plan to build a team of technical talents,
laboratory construction, data collection facilities, and computing
infrastructure.
FUTURE PLANS AND USE OF PROCEEDS
– 600 –


--- page 610 ---
We plan to recruit automation-related talents including mechanical engineers,
electronic engineers, architects, software development engineers, quality
managers and other R&D personnel in the next five years, to enrich and
supplement the current core technical team. Subject to any potential changes in
our recruiting demands and strategies, we plan to recruit about ten to 20 talents
each year in the first three years, and about ten talents in total in the following
two years. Mechanical engineers, electronic engineers and other R&D
personnel can continuously upgrade, optimize and improve the automation
equipment in current operation according to the evolution of the business, so
as to match the increasingly rich needs and use scenarios, so it is expected that
candidates can have rich work experience in the fields of machinery,
electronics or robotics, be familiar with the working principle of robots, and
can be aligned for application and expansion. Architects, software
development engineers, and other R&D personnel can continuously optimize
and upgrade our large-scale scheduling platform according to their needs, and
continuously optimize the scheduling algorithm and resource utilization to
improve the efficiency and system stability of the overall experiment. We
expect quality managers to have deep experience in the fields of
pharmaceuticals and medical devices, and to join the project in the design stage
to give professional advice and direction to improve the overall quality and
stability of products.
We also plan to recruit compound talents with experience in quantum physics,
AI algorithms, LLM, ProteinGPT, chemistry, pharmaceuticals and other related
vertical fields to enhance or expand the capabilities of our technology
platform, including but not limited to (1) the continuous optimization of key
computing technology platforms for drug discovery, including ID4Gibbs and
ID4Idea, and (2) the continuous optimization and expansion of key computing
technology platforms for chemical synthesis. Subject to any potential changes
in our recruiting demands and strategies, we plan to recruit about three talents
each year in average in the next five years. Qualified candidates are expected
to normally possess a master’s degree or above, and have extensive experience
or the ability to compete in the industry in the following areas, including but
not limited to (i) experience or ability to recognize and deconstruct key
problems in vertical fields, (ii) experience or ability to integrate quantum
physics and related algorithms to formulate industrially feasible solutions, and
to implement solutions for new problems or new fields and verify application
effects, and (iii) experience or ability to combine automation, digitalization,
and intelligent computing technologies to promote the construction of
integrated platforms.
FUTURE PLANS AND USE OF PROCEEDS
– 601 –


--- page 611 ---
We expect to allocate approximately 10.0% of the net proceeds or HK$94.1
million in this regard. We will adopt a selective and prudent hiring strategy to
ensure cost efficiency. Leveraging our own talent pool established through our
historical recruitment events, as well as our connections and reputation in the
industry, we are confident about the availability of talents we are looking for
in the future.
In addition, we plan to build about 20 to 30 automated workstations, eight to
12 centrifuges and other ancillary equipment each year to further increase our
R&D capacity and capabilities, which can help us to establish a complete
experimental area every year to match the growing business needs and the
application of new technology capabilities, including high-throughput parallel
reaction and feeding, high-throughput rapid detection and screening platform,
medium and low pressure post-processing platform, high-pressure post-
processing platform and other technical capabilities. These devices can help us
build a larger-scale business experiment foundation, improve the operational
throughput, simplify the proportion of manual links, improve the overall
operation efficiency and reduce operating costs. We expect to allocate
approximately 10.0% of the net proceeds or HK$94.1 million in this regard;
In order to support the intelligent computing and development of the above
plans, we need to build an intelligent computing center with sufficient
computing power. In addition to maintaining the current purchase of cloud
computing services from reputable cloud service providers, considering the
current shortage of high-end computing power in cloud computing, we will
also build our own super intelligent computing center to build intelligent
computing resources that can be completely controlled by ourselves, which is
equivalent to a computing power scale of about 200P (a computer system of 1P ,
being 1petaFLOPS, is capable of performing one quadrillion floating-point
operations per second), to ensure the research and development of Large
Model-related technologies. In addition, we will further upgrade and improve
the intelligent computing resource allocation system empowered by artificial
intelligence and machine learning technology, and combine the resource pool
distribution and scheduling of local intelligent computing centers and clouds to
further improve resource utilization, reduce computing costs, and enhance the
reliability and flexibility of computing infrastructure. We expect to allocate
approximately 20.0% of the net proceeds or HK$188.2 million in this regard;
(2) approximately 27.0% of the net proceeds, or HK$254.1 million, will be used
to enhance our ability to develop solutions in the biotechnology,
pharmaceutical, materials science (including agritech, energy and new
chemicals, and cosmetics). With our proprietary in-house technologies and
expertise in the drug discovery and intelligent automation solutions, we can
expand the diverse product needs of other different industries. For additional
information, please see in “Business—Our Growth Strategies.”
FUTURE PLANS AND USE OF PROCEEDS
– 602 –


--- page 612 ---
To achieve the plans above, and subject to any potential changes in our recruiting
demands and strategies, we plan to recruit five professionals in the
biotechnology and pharmaceutical sectors in the next five years. Qualified
candidates are expected to be high-level professionals with solid academic and
industry backgrounds, master’s degree or above in relevant fields, and extensive
industry work experience. We will generally consider candidates with the
following capabilities, including but not limited to: (i) those with experience in
molecular biology, biochemistry, or cell biology and familiar with drug
screening, (ii) those with experience in disease biology and research in tumor,
neurological, immunological, or metabolic related diseases, and (iii) those with
experience in protein expression and cryo-EM structural elucidation.
In the field of materials science, we plan to gradually build a team that can
fully operate and support the R&D and delivery of materials in the next five
years. Subject to any potential changes in our recruiting demands and
strategies, we expect to recruit about 30 related technical talents in total in the
first two years, and about five talents in total in the following three years. The
team includes material property researchers, material testing engineers,
process engineers, etc. Qualified candidates are expected to be high-level
professionals with solid academic and industry backgrounds, master’s degree
or above in related fields, and extensive industry work experience. We will
usually consider candidates with the following capabilities, including but not
limited to: (i) more than ten years of working experience in the field of new
energy or chemical industry, and can quickly give possible solution ideas
according to customer needs; (ii) have the ability to design, execute and
analyze experiments in relevant directions, and can participate in the
verification and validation of the details in the protocol.
We expect to allocate approximately 15.0% of the net proceeds or HK$141.2
million in recruitment. We will adopt a selective and prudent hiring strategy to
ensure cost efficiency. Leveraging our own talent pool established through our
historical recruitment events, as well as our connections and reputation in the
industry, we are confident about the availability of talents we are looking for
in the future.
In addition, we plan to purchase about two to three protein chromatography
purifiers, cryo-EM accessories, one to two flow cytometers, one to two mass
spectrometers, three to five microplate readers and other instruments per year
in the next five years to improve our capabilities in drug prediction and
experimental testing. Since the material field is a new business direction, and
the Company’s main business does not involve production, we plan to
complete the inspection and testing part of the work by entrusting a third party
in the development process of the solution for the material direction. We expect
to allocate approximately 12.0% of the net proceeds or HK$112.9 million in
this regard; and
FUTURE PLANS AND USE OF PROCEEDS
– 603 –


--- page 613 ---
(3) approximately 8.0% of the net proceeds, or HK$75.3 million, will be used for
the lease of properties for and improvements of our R&D centers in Shanghai
and Shenzhen to further enhance R&D capabilities, attract local professionals
and contribute to local GDP and employment. We estimate the leased
properties in Shanghai and Shenzhen for our labs and office space to reach a
total construction area of approximately 5,000 square meters. Under the
management of our local headquarters, these R&D centers will work with our
headquarters and jointly carry out R&D activities to support our expanding
R&D activities.
We launched an integrated AI dry lab plus robotic wet lab in Shanghai
Zhangjiang in 2023. In addition to conducting R&D for our global operations,
this new Shanghai site enables us to service customers located in the Y angtze
River Delta region including Shanghai, Hangzhou, Suzhou and Nanjing.
We plan to continue upgrading our existing R&D facilities in Shanghai and
Shenzhen. These upgrades include expanding the scale of our robotic lab and
moving our antibody discovery team into the new Shanghai Zhangjiang site by
the end of 2024.
Given our strategic location in Shenzhen Hetao, we have received delegations
from numerous provincial level and city level governments across China
(including other cities in the Greater Bay Area) to visit our Shenzhen and
Shanghai R&D centers, some of which are exploring replicating our R&D
centers locally.
While we continue to survey all potential commercial viable options for
leasing properties and laboratory facilities in Asia, especially in Hong Kong,
we had no immediate plans to set up additional R&D centers outside of
Shenzhen and Shanghai as of the date of this prospectus. We believe our R&D
centers in Shenzhen and Shanghai are sufficient to support our business
operations and commercial growth of our business in the near future, while we
do not exclude the possibilities to expand existing R&D centers or set up new
R&D centers in other locations when and where appropriate and to the best
interest of the Group and the shareholders of the Company.
FUTURE PLANS AND USE OF PROCEEDS
– 604 –


--- page 614 ---
 approximately 15.0% of the net proceeds, or HK$141.2 million, will be used to
improve our commercialization capability in and beyond China, including:
(1) approximately 8.0% of the net proceeds, or HK$75.3 million, to be
used in expanding our business development and marketing team with a focus
on development of relationship with potential customers that are famous
pharmaceutical/CRO/CDMO companies in China and overseas countries or
regions, especially in the U.S. We expect such candidates to be business
development and marketing talents with knowledge in the industry and at least
two years of business development and marketing experience with our
potential target customer group. We aim to expand our sales and service
network in domestic and foreign regions, and improve our customer service
quality to maintain and deepen existing customer relationships; and
(2) approximately 7.0% of the net proceeds, or HK$65.9 million, to be used in
business development activities overseas in addition to the recruitment of
business development and marketing staff as mentioned above. For instance,
we plan to lease properties in Hong Kong and/or other regions, especially the
U.S. and Europe, as local offices to support local business development and
marketing activities. We also expect to launch promotion campaigns and
participate in exhibitions and forums overseas to further enhance our brand
awareness worldwide;
In addition to the continued business development in China, an integral part of
our global business strategy is to actively explore expansion opportunities in
the U.S., Europe, East Asia (especially Hong Kong), Southeast Asia and the
Middle East. Please refer to “Business—Our Growth Strategies—Expand our
global footprint” for detailed examples and foreseeable expansion benchmarks.
From geographic perspectives, we expect to allocate a majority of the above
net proceeds to the business expansion in the U.S. and Europe, one third to East
and Southeast Asia and the rest to the Middle East.
 approximately 10.0% of the net proceeds, or HK$94.1 million, will be used for
working capital and general corporate purposes.
In the event that the Offer Price is set at the high-end or low-end of the proposed Offer
Price range and the Over-allotment Option is not exercised, the net proceeds to be received by
us will be increased or decreased by approximately HK$89.9 million, respectively. To the
extent our net proceeds are either more or less than expected, we will adjust our allocation of
the net proceeds for the above purposes on a pro rata basis.
FUTURE PLANS AND USE OF PROCEEDS
– 605 –


--- page 615 ---
If the Over-allotment Option is fully exercised, we will receive additional net proceeds
of approximately HK$155.4 million (assuming an Offer Price of HK$5.53 per Offer Share,
being the mid-point of the Offer Price range stated in this prospectus). In the event that the
Over-allotment Option is exercised, we intend to apply the additional net proceeds to the above
purposes on a pro rata basis.
To the extent that our proceeds are not sufficient to fund the purposes set out above, we
intend to fund the balance through a variety of means, including cash generated from
operations, bank loans and other borrowings.
If any part of our plan does not proceed as planned for reasons such as changes in
government policies that would render any of our plans not viable, or the occurrence of force
majeure events, our Directors will carefully evaluate the situation and may reallocate the net
proceeds from the Global Offering. We will issue an appropriate announcement if there is any
material change to the above proposed use of proceeds.
To the extent that the net proceeds of the Global Offering are not immediately used for
the purposes described above, and to the extent permitted by the relevant laws and regulations,
we intend to deposit the proceeds in short-term interest-bearing accounts at licensed
commercial banks and/or other authorised financial institutions (as defined under SFO or
applicable laws and regulations in the other jurisdictions).
FUTURE PLANS AND USE OF PROCEEDS
– 606 –


--- page 616 ---
HONG KONG UNDERWRITERS
CLSA Limited
China International Capital Corporation Hong Kong Securities Limited
Jefferies Hong Kong Limited
Deutsche Bank AG, Hong Kong Branch
CMB International Capital Limited
SPDB International Capital Limited
Guosen Securities (HK) Capital Company Limited
Fosun International Securities Limited
ABCI Securities Company Limited
BOCI Asia Limited
CCB International Capital Limited
ICBC International Securities Limited
Futu Securities International (Hong Kong) Limited
Livermore Holdings Limited
TradeGo Markets Limited
HONG KONG UNDERWRITING ARRANGEMENTS
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, our Company is offering initially
9,369,000 Hong Kong Offer Shares (subject to adjustment) for subscription by the public in
Hong Kong at the Offer Price on and subject to the terms and conditions of this prospectus.
Subject to (a) the Stock Exchange granting approval for the listing of, and permission to
deal in, the Shares in issue and to be issued pursuant to the Global Offering (including any
additional Shares which may be issued pursuant to the exercise of the Over-allotment Option
UNDERWRITING
– 607 –


--- page 617 ---
and the Shares which may be issued under the ESOPs) as mentioned in this prospectus and (b)
to certain other conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong
Underwriters have severally agreed to subscribe or procure subscriptions for their respective
applicable proportions of the Hong Kong Offer Shares now being offered but which are not
taken up under the Hong Kong Public Offering on the terms and conditions set out in this
prospectus and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on and subject to the
International Underwriting Agreement having been signed and becoming unconditional and not
having been terminated in accordance with its terms.
Grounds for Termination
The Sole Sponsor and the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters) shall be entitled by notice (in writing) to our Company to terminate the
Hong Kong Underwriting Agreement with immediate effect if prior to 8:00 a.m. on the Listing
Date:
(a) there shall develop, occur, exist or come into effect:
(i) any local, national, regional or international event or circumstance in the
nature of force majeure (including any acts of government, declaration of a
national, regional or international emergency or war, calamity, crisis, epidemic
and pandemic (including Severe Acute Respiratory Syndrome (SARS),
Coronavirus Disease 2019 (COVID-19), H1N1 and H5N1 and such
related/mutated forms and the escalation, mutation or aggravation of such
diseases), or interruption or delay in transportation, outbreak, escalation,
mutation or aggravation of disease economic sanctions, labour disputes,
strikes, lock-outs, fire, explosion, flooding, earthquake, volcanic eruption,
civil commotion, riots, public disorder, acts of war, outbreak or escalation of
hostilities (whether or not war is declared), acts of God or acts of terrorism
(whether or not responsibility has been claimed)) in or affecting Hong Kong,
the PRC, the Cayman Islands, the British Virgin Islands, the United States, the
United Kingdom, the European Union or any other jurisdiction relevant to our
Group or the Global Offering (collectively, the “ Relevant Jurisdictions ”); or
UNDERWRITING
– 608 –


--- page 618 ---
(ii) any change, or any development involving a prospective change, or any event
or circumstance or series of events resulting or likely to result in any change
or development involving a prospective change, in any local, national, regional
or international financial, economic, political, military, industrial, legal, fiscal,
regulatory, currency, credit or market conditions, exchange control or any
monetary or trading settlement system (including conditions in the stock and
bond markets, money and foreign exchange markets, the interbank markets and
credit markets) in or directly or indirectly affecting any Relevant Jurisdictions;
or
(iii) any moratorium, suspension or restriction (including any imposition of or
requirement for any minimum or maximum price limit or price range) in or on
trading in securities generally on the Stock Exchange, the Shanghai Stock
Exchange, the Shenzhen Stock Exchange, the New Y ork Stock Exchange, the
NASDAQ Global Market; or
(iv) any general moratorium on commercial banking activities in Hong Kong
(imposed by the Financial Secretary or the Hong Kong Monetary Authority or
other competent authority), the PRC, New Y ork (imposed at Federal or New
Y ork State level or other competent authority), London, the European Union or
any other Relevant Jurisdiction, or any disruption in commercial banking or
foreign exchange trading or securities settlement or clearance services,
procedures or matters in any Relevant Jurisdiction; or
(v) any new law, or any change or any development involving a prospective
change or any event or circumstance likely to result in a change or a
development involving a prospective change in (or in the interpretation or
application by any court or other competent authority of) existing laws, in each
case, in or affecting any of the Relevant Jurisdictions; or
(vi) the imposition of sanctions, in whatever form, directly or indirectly, under any
sanction laws or regulations, or the withdrawal of trading privileges which
existed on the date of the Hong Kong Underwriting Agreement in, Hong Kong,
the PRC or any other Relevant Jurisdiction; or
(vii) a change or development involving a prospective change in or affecting taxes
or exchange control, currency exchange rates or foreign investment regulations
(including a material devaluation of the Hong Kong dollar or the Renminbi
against any foreign currencies and a change in the system under which the
value of the Hong Kong currency is linked to that of the currency of the United
States), or the implementation of any exchange control, in any of the Relevant
Jurisdictions; or
(viii) any litigation or claim of any third party being threatened or instigated against
any member of our Group or any Director; or
UNDERWRITING
– 609 –


--- page 619 ---
(ix) the chairman of the Board or any Director vacating his or her office; or
(x) any Director or a member of our Company’s senior management as named in
the prospectus being charged with an indictable offense or prohibited by
operation of law or otherwise disqualified from taking part in the management
or taking directorship of a company or the commencement by any applicable
government, political, regulatory body of any action against any Director or
senior management in his or her capacity as such or an announcement by any
governmental, political regulatory body that it intends to take any such action;
or
(xi) a contravention by any member of our Group or any Director of the Listing
Rules or applicable laws; or
(xii) an authority or a political body or organisation in any Relevant Jurisdiction
(including, in particular, the CSRC and its local branches and representative
offices) commencing any investigation or other action, or announcing an
intention to investigate or take other action, against any member of our Group
or any Director; or
(xiii) the issue or requirement to issue by our Company of any supplement or
amendment to the prospectus (or to any other documents issued or used in
connection with the contemplated offer and sale of the Shares) pursuant to the
Companies Ordinance or the Companies (Winding Up and Miscellaneous
Provisions) Ordinance or the Listing Rules or any requirement or request of the
Stock Exchange and/or the SFC; or
(xiv) any change or development involving a prospective change in, or a
materialization of any of the risks set out in the section headed “Risk Factors”
of the prospectus; or
(xv) any order or petition for the winding up or liquidation of any member of our
Group or any composition or arrangement made by any member of our Group
with its creditors or a scheme of arrangement entered into by any member of
our Group or any resolution for the winding-up of any member of our Group
or the appointment of a provisional liquidator, receiver or manager over all or
part of the material assets or undertaking of our Group as a whole or anything
analogous thereto occurring in respect of our Group; or
(xvi) a valid demand by any creditor for repayment or payment of any indebtedness
of any member of our Group or in respect of which any member of our Group
is liable prior to its stated maturity;
UNDERWRITING
– 610 –


--- page 620 ---
which, individually or in the aggregate, in the sole and absolute opinion of the Sole
Sponsor and the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters) (1) has or will have or is likely to have a material adverse effect
on the assets, liabilities, business, general affairs, management, prospects,
shareholders’ equity, profits, losses, results of operations, position or condition,
financial or otherwise, or performance of our Group as a whole; or (2) has or will
have or is likely to have a material adverse effect on the success of the Global
Offering or the level of applications under the Hong Kong Public Offering or the
level of interest under the International Offering; or (3) makes or will make or is
likely to make it inadvisable or inexpedient or impracticable or incapable for any
part of the Hong Kong Public Offering or the Global Offering, or the delivery of the
Offer Shares, to be performed or implemented or to proceed or to market the Global
Offering in the manner contemplated by the prospectus; or (4) has or will have or
is likely to have the effect of making any part of the Hong Kong Underwriting
Agreement (including underwriting of the Hong Kong Public Offering and/or the
Global Offering) impracticable or incapable of performance in accordance with its
terms or preventing or delaying the processing of applications and/or payments
pursuant to the Global Offering or pursuant to the underwriting thereof; or
(b) there has come to the notice of the Sole Sponsor and the Overall Coordinators:
(i) that any statement contained in any of the Offering Documents (as defined in
the Hong Kong Underwriting Agreement) and the CSRC Filing (as defined in
the Hong Kong Underwriting Agreement) and/or in any notices,
announcements, advertisements, communications or other documents issued or
used by or on behalf of our Company in connection with the Hong Kong Public
Offering and the Global Offering (collectively, the “ Offer Related
Documents ”) (including any supplement or amendment thereto) was, when it
was issued, or has become, untrue, inaccurate, incorrect in any material respect
or misleading (except for the logos, names and addresses of the Sole Sponsor,
the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters in the
Hong Kong Public Offering Documents (as defined in the Hong Kong
Underwriting Agreement)) or that any forecast, estimate, expression of
opinion, intention or expectation contained in any of the Offer Related
Documents (including any supplement or amendment thereto) is not fair and
honest made on reasonable grounds or, where appropriate, and based on
reasonable assumptions with reference to the facts and circumstances then
subsisting; or
(ii) that any matter has arisen or has been discovered which would, had it arisen
or been discovered immediately before the date of the prospectus, constitute a
material omission from, or material misstatement in, any of the Offer Related
Documents (including any supplement or amendment thereto); or
UNDERWRITING
–6 1 1–


--- page 621 ---
(iii) any material breach of any of the obligations imposed upon any party to the
Hong Kong Underwriting Agreement or the International Underwriting
Agreement (other than upon any of the Sole Sponsor, the Sponsor-OC, the
Overall Coordinators, the Joint Global Coordinators, the Hong Kong
Underwriters or the International Underwriters); or
(iv) any event, act or omission which gives or is likely to give rise to any material
liability of any of the Indemnifying Parties (as defined in the Hong Kong
Underwriting Agreement) pursuant to the provisions of the Hong Kong
Underwriting Agreement; or
(v) any Material Adverse Change (as defined in the Hong Kong Underwriting
Agreement); or
(vi) any breach of, or any event or matter or arising or has be discovered, or
circumstance rendering untrue, inaccurate, incorrect, incomplete or misleading
in any respect, any of the representations, warranties and undertakings given
by our Company and our Co-founder Group in the Hong Kong Underwriting
Agreement or the International Underwriting Agreement, as applicable; or
(vii) a prohibition on our Company for whatever reason from offering, allotting,
issuing or selling any of the Shares (including the Option Shares (as defined in
the Hong Kong Underwriting Agreement)) pursuant to the terms of the Global
Offering; or
(viii) that approval by the Listing Committee of the Stock Exchange of the listing of,
and permission to deal in, the Shares to be issued or sold (including any
additional Shares that may be issued or sold pursuant to the exercise of the
Over-allotment Option) under the Global Offering is refused or not granted,
other than subject to customary conditions, on or before the Listing Date, or if
granted, the approval is subsequently withdrawn, qualified (other than by
customary conditions), or withheld; or
(ix) our Company withdraws any of the Offer Related Documents or the Global
Offering; or
(x) any expert (other than the Sole Sponsor) whose consent is required for the
issue of the prospectus with the inclusion of its reports, letters, opinions and
references to its name in the form and context in which it appears has
withdrawn its consent to being named in the prospectus or to the issue of any
of the Hong Kong Public Offering Documents; or
(xi) any non-compliance of the prospectus, the CSRC Filings or any other
documents used in connection with the contemplated subscription and sale of
the Offer Shares or any aspect of the Global Offering with any applicable laws
UNDERWRITING
– 612 –


--- page 622 ---
(including, without limitation, the Listing Rules, the Companies Ordinance, the
Companies (Winding Up and Miscellaneous Provisions) Ordinance, and the
CSRC Rules (as defined in the Hong Kong Underwriting Agreement)); or
(xii) that a material portion of the orders placed or confirmed in the bookbuilding
process have been withdrawn, terminated or cancelled; or
(xiii) that any portion of the investment commitments made by the cornerstone
investors under agreements signed with such cornerstone investors have been
withdrawn, terminated or cancelled, which would render it inadvisable or
impracticable or incapable to proceed with the Global Offering.
UNDERTAKINGS TO THE STOCK EXCHANGE PURSUANT TO THE LISTING
RULES
Undertakings by our Company
Pursuant to Rule 10.08 of the Listing Rules, we have undertaken to the Stock Exchange
that no further Shares or securities convertible into equity securities of our Company
(including warrants or other convertible securities) (whether or not of a class already listed)
may be issued or sold or transferred out of treasury or form the subject of any agreement to
such an issue, or sale or transfer out of treasury by our Company within six months from the
Listing Date (whether or not such issue of Shares or securities of our Company, or sale or
transfer of shares out of treasury will be completed within six months from the Listing Date),
except (a) pursuant to the Global Offering and the exercise of the Over-allotment Option; or
(b) under any of the circumstances provided under Rule 10.08 of the Listing Rules.
Undertakings by our Co-founder Group
Pursuant to Rule 18C.14(1) of the Listing Rules, our Co-founder Group have undertaken
to the Stock Exchange and our Company that except for the transfer of Shares held by
QuantumPharm Roc for the purpose of settlement pursuant to the exercise of vested options
granted under the Pre-IPO ESOP or as permitted under the Listing Rules, they will not, and will
procure that the relevant registered holder(s) (if any) will not in the period commencing on the
date by reference to which disclosure of their respective shareholdings in our Company is made
in this prospectus and ending on the date which is 24 months from the Listing Date, (or such
earlier date as provided under Note 2 of Rule 18C.23 of the Listing Rules) dispose of, nor enter
into any agreement to dispose of or otherwise create any options, rights, interests or
encumbrances in respect of any Shares in respect of which our Co-founder Group are shown
in this prospectus to be the beneficial owners the (“ Co-founder Group Locked-up
Securities ”); provided that the above restriction shall not prevent them from (a) disposing of
any interest in the Co-founder Group Locked-up Securities in the circumstances provided
under Rule 18C.15 of the Listing Rules; and (b) using the Co-founder Group Locked-up
Securities (including a charge or a pledge) in favor of an authorized institution (as defined in
the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) for a bona fide commercial
loan.
UNDERWRITING
– 613 –


--- page 623 ---
Our Co-founder Group have further undertaken to the Stock Exchange and our Company
respectively that within the period commencing from the date by reference to which disclosure
of their shareholdings in our Company is made in this prospectus and ending on the date which
is 24 months from the Listing Date (or such earlier date as provided under Note 2 of Rule
18C.23 of the Listing Rules), they will immediately inform our Company and the Stock
Exchange in writing of:
(i) any pledge(s) or charge(s) of any Co-founder Group Locked-up Securities in favor
of an authorized institution (as defined in the Banking Ordinance (Chapter 155 of
the Laws of Hong Kong)) for a bona fide commercial loan as permitted under the
Listing Rules, and the number of such Shares or securities of our Company so
pledged or charged; and
(ii) any indication(s) received by him or it, either verbal or written, from the pledgee or
chargee that any of the pledged or charged Co-founder Group Locked-up Securities
so pledged or charged under (i) above will be disposed of.
We will also inform the Stock Exchange as soon as we have been informed of the above
matters (if any) by our Co-founder Group and disclose such matters by way of an
announcement in accordance with Rule 2.07C of the Listing Rules as soon as possible after
being so informed by our Co-founder Group.
Undertakings by the Key Persons
Pursuant to Rule 18C.14(1) of the Listing Rules, the key persons of our Company (the
“Key Persons”), comprising (a) Dr. Jiang Yide Alan, our executive Director; (b) Dr. Zhang
Peiyu (our Chief Scientific Officer) and (c) Mr. Tam Man Hong (our Chief Financial Officer),
members of our senior management, have undertaken to each of the Stock Exchange and our
Company that, except for the transfer of Shares held by QuantumPharm Roc for the purpose
of settlement pursuant to the exercise of vested options granted under the Pre-IPO ESOP or as
permitted under the Listing Rules, each of them will not, and will procure that the relevant
registered holder(s) will not in the period commencing on the date by reference to which
disclosure of their shareholdings in our Company is made in this prospectus and ending on the
date which is 24 months from the Listing Date (or such earlier date as provided under Note 2
of Rule 18C.23 of the Listing Rules), dispose of, nor enter into any agreement to dispose of
or otherwise create any options, rights, interests or encumbrances in respect of any Shares in
respect of which any of them is shown in this prospectus to be the beneficial owners; provided
that the above restriction shall not prevent them from (i) using such securities of our Company
beneficially owned by them as security (including a charge or a pledge) in favor of an
authorized institution (as defined in the Banking Ordinance (Chapter 155 of the laws of Hong
Kong) for a bona fide commercial loan, or (ii) disposing any interest in such securities of our
Company in the circumstances provided under Rule 18C.15 of the Listing Rules.
UNDERWRITING
– 614 –


--- page 624 ---
In accordance with Note 2 to Rule 18C.14 of the Listing Rules, our Key Persons have
undertaken to the Stock Exchange and our Company that, within the period commencing on the
date of this prospectus and ending on the date which is 24 months from the Listing Date (or
such earlier date as provided under Note 2 of Rule 18C.23 of the Listing Rules), they will:
(i) when they pledge or charge any Shares in respect of which they are shown in this prospectus
to be the beneficial owners in favor of an authorized institution (as defined in the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong)), immediately inform our Company of
such pledge or charge together with the number of the Shares so pledged or charged; and
(ii) when they receive indications, either verbal or written, from the pledgee or chargee that any
of the pledged or charged Locked-up Securities so pledged or charged under paragraph
(i) above will be disposed of, immediately inform our Company of such indications.
Undertakings by our Undertaking Providers
Pursuant to Rule 18C.14(2) of the Listing Rules, our Undertaking Providers have
undertaken to the Stock Exchange and our Company that, except as permitted under the Listing
Rules, they will not, and will procure that the relevant registered holder(s) will not in the
period commencing on the date by reference to which disclosure of their respective
shareholdings in our Company is made in this prospectus and ending on the date which is 12
months from the Listing Date (or such earlier date as provided under Note 2 of Rule 18C.23
of the Listing Rules), dispose of, nor enter into any agreement to dispose of or otherwise create
any options, rights, interests or encumbrances in respect of any Shares in respect of which our
Undertaking Providers are shown in this prospectus to be the beneficial owners; provided that
the above restriction shall not prevent them from (i) using such securities of our Company
beneficially owned by them as security (including a charge or a pledge) in favor of an
authorized institution (as defined in the Banking Ordinance (Chapter 155 of the laws of Hong
Kong) for a bona fide commercial loan, or (ii) disposing any interest in such securities of our
Company in the circumstances provided under Rule 18C.15 of the Listing Rules.
In accordance with Note 2 to Rule 18C.14 of the Listing Rules, our Undertaking Providers
have undertaken to the Stock Exchange and our Company that, within the period commencing
on the date of this prospectus and ending on the date which is 12 months from the Listing Date
(or such earlier date as provided under Note 2 of Rule 18C.23 of the Listing Rules), they will:
(i) when they pledge or charge any Shares in respect of which they are shown in this prospectus
to be the beneficial owners in favor of an authorized institution (as defined in the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong)), immediately inform our Company of
such pledge or charge together with the number of the Shares so pledged or charged; and
(ii) when they receive indications, either verbal or written, from the pledgee or chargee that any
of the pledged or charged Locked-up Securities so pledged or charged under paragraph
(i) above will be disposed of, immediately inform our Company of such indications.
We will also inform the Stock Exchange as soon as we have been informed of the above
matters (if any) by the Key Persons and our Undertaking Providers and disclose such matters
by way of an announcement in accordance with Rule 2.07C of the Listing Rules as soon as
possible after being so informed by the Key Persons and our Undertaking Providers.
UNDERWRITING
– 615 –


--- page 625 ---
UNDERTAKINGS PURSUANT TO THE HONG KONG UNDERWRITING
AGREEMENT
Undertaking by our Company
Except for the offer and sale of the Offer Shares pursuant to the Global Offering
(including pursuant to the Over-allotment Option), the grant, vesting and exercise of awards
under the ESOPs and otherwise pursuant to the Listing Rules, during the period commencing
on the date of the Hong Kong Underwriting Agreement and ending on, and including, the date
that is six months after the Listing Date (the “ First Six-Month Period ”), our Company hereby
undertakes to each of the Sole Sponsor, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries and the Hong Kong Underwriters not to, without the prior written consent of the
Sole Sponsor and the Sponsor-OC (for itself and on behalf of the Hong Kong Underwriters) and
unless in compliance with the requirements of the Listing Rules:
(a) offer, allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract
or agree to allot, issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or
sell any option, warrant, contract or right to subscribe for or purchase, grant or
purchase any option, warrant, contract or right to allot, issue or sell, or otherwise
transfer or dispose of or create an Encumbrance (as defined in the Hong Kong
Underwriting Agreement) over, or agree to transfer or dispose of or create an
Encumbrance over, either directly or indirectly, conditionally or unconditionally,
any Shares or other equity securities of our Company, or any interest in any of the
foregoing (including any securities convertible into or exchangeable or exercisable
for or that represent the right to receive, or any warrants or other rights to purchase,
any Shares), or deposit any Shares or other equity securities of our Company with
a depositary in connection with the issue of depositary receipts; or
(b) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Shares or other equity
securities of our Company, or any interest in any of the foregoing (including any
securities convertible into or exchangeable or exercisable for or that represent the
right to receive, or any warrants or other rights to purchase any Shares); or
(c) enter into any transaction with the same economic effect as any transaction specified
in (a) or (b) above; or
(d) offer to or agree to or announce any intention to effect any transaction specified in
(a), (b) or (c) above,
UNDERWRITING
– 616 –


--- page 626 ---
in each case, whether any of the transactions specified in paragraphs (a), (b) or (c) above is to
be settled by delivery of Shares or other securities of our Company, or in cash or otherwise
(whether or not the issue of such Shares or other shares or securities will be completed within
the First Six-Month Period).
In the event that, during the period of six months commencing on the date on which the
First Six-Month Period expires (the “ Second Six-Month Period ”), our Company enters into
any of the transactions specified in paragraphs (a), (b) or (c) above or offers to or agrees to or
announces any intention to effect any such transaction, our Company shall take all reasonable
steps to ensure that it will not create a disorderly or false market in the Shares or any other
securities of our Company. Each of our Co-founder Group undertakes to each of the Sole
Sponsor, the Sponsor-OC, the Overall Coordinators, the Joint Global Coordinators, the Joint
Lead Managers, the Joint Bookrunners, the Capital Market Intermediaries and the Hong Kong
Underwriters to procure our Company to comply with the undertakings herein.
Undertaking by our Co-founder Group
Each of our Co-founder Group hereby undertakes to each of the Sole Sponsor, the Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Capital Market Intermediaries and the Hong Kong Underwriters not to, without the prior
written consent of the Sole Sponsor and the Sponsor-OC (for itself and on behalf of the Hong
Kong Underwriters) and unless in compliance with the requirements of the Listing Rules,
except pursuant to the Stock Borrowing Agreement and the grant, vesting and exercise of
awards under the ESOPs, at any time during the period commencing on the date of the Hong
Kong Underwriting Agreement and ending on, and including, the date that is 24 months after
the Listing Date (the “ 24-Month Period ”), that he/it will not, and will procure that the relevant
registered holder(s), any nominee or trustee holding on trust for him/it and the companies
controlled by him/it will not:
(a) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate,
lend, grant or sell any option, warrant, contract or right to purchase, grant or
purchase any option, warrant, contract or right to sell or otherwise transfer or
dispose of or create an Encumbrance over, either directly or indirectly, conditionally
or unconditionally, any Shares or other securities of our Company or any interest
therein (including, but not limited to, any securities that are convertible into or
exchangeable or exercisable for, or that represent the right to receive, or any
warrants or other rights to purchase, any Shares or other equity securities of our
Company) beneficially owned by him or it as of the Listing Date (the “ Co-founder
Group Locked-up Securities ”) or deposit any Shares or other equity securities of
our Company with a depositary in connection with the issue of depositary receipts;
UNDERWRITING
– 617 –


--- page 627 ---
(b) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Co-founder Group
Locked-up Securities;
(c) enter into any transaction with the same economic effect as any transaction specified
in (a) or (b) above; or
(d) offer to or agree to or announce or publicly disclose any intention to effect any
transaction described in (a), (b) or (c) above,
in each case, whether any of the transactions specified in paragraphs (a), (b) or (c) above
is to be settled by delivery of Shares or other equity securities of our Company, in cash
or otherwise (whether or not the issue of such Shares or other equity securities will be
completed within the 24-Month Period);
provided that, upon the notification by the Stock Exchange confirming that our Company
will no longer be regarded as a Pre-Commercial Company (as defined in Chapter 18C of
the Listing Rules), the 24-Month Period will expire on the later of: (1) the date that is 12
months after the Listing Date; and (2) the date falling on the 30th day after the
announcement on the removal of designation as a Pre-Commercial Company as required
under Rule 18C.24 of the Listing Rules.
Until the expiry of the 24-Month Period, in the event that our Co-founder Group or the
relevant registered holder(s) enters into any such transactions specified in paragraphs (a), (b)
or (c) above or offers to or agrees to or contracts to, or publicly announces an intention to enter
into any such transactions, they will take all reasonable steps to ensure that they will not create
a disorderly or false market in the securities of our Company; provided that this undertaking
(i) does not apply to additional securities of our Company acquired by our Co-founder Group
after the Listing; (ii) does not prevent our Co-founder Group from disposing of any interest of
the Co-founder Group Locked-up Securities in the circumstances provided under Rule 18C.15
of the Listing Rules; and (iii) does not prevent our Co-founder Group from using securities of
the Co-founder Group Locked-up Securities as a security (including a charge or a pledge in
favour of an authorised institution (as defined in the Banking Ordinance (Chapter 155 of the
Laws of Hong Kong) for a bona fide commercial loan. At any time after the date of the Hong
Kong Underwriting Agreement up to and including the date falling 24 months after the Listing
Date, our Co-founder Group will and will procure that the relevant registered holder(s) will (a)
if and when they or it pledges or charges any Co-founder Group Locked-up Securities,
immediately inform our Company, the Sole Sponsor and the Sponsor-OC in writing of such
pledge or charge together with the number of Co-founder Group Locked-up Securities so
pledged or charged; and (b) if and when our Co-founder Group or the relevant registered
holder(s) receive indications, either verbal or written, from any pledgee or chargee that any of
the pledged or charged Co-founder Group Locked-up Securities will be disposed of,
immediately inform our Company, the Sole Sponsor and the Sponsor-OC in writing of such
indications.
UNDERWRITING
– 618 –


--- page 628 ---
Our Company hereby undertakes to the Overall Coordinators, the Sole Sponsor and the
Hong Kong Underwriters that upon receiving such information in writing from any of our
Co-founder Group, it will, as soon as practicable and if required pursuant to the Listing Rules,
notify the Stock Exchange and make a public disclosure in relation to such information by way
of an announcement.
UNDERTAKINGS BY THE OTHER PRE-IPO INVESTORS
In addition to the respective undertakings by our Co-founder Group, the Undertaking
Providers as disclosed in this section, each of the remaining Pre-IPO Investor agrees that it will
not during the period of six months commencing on the Listing Date (i) lend, offer, hedge, sell,
make any short sale of, loan, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any Shares or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic consequences
of ownership of such Shares, whether any such transaction described in (i) or (ii) above is to
be settled by delivery Shares or other securities, in cash or otherwise, subject to certain
exceptions.
Notwithstanding the foregoing, subject to the applicable laws and the Listing Rules, the
aforesaid transfer restrictions shall not apply to (a) pledge and hypothecation, whether direct
or indirect, of any Shares; (b) Shares or other securities of the Company acquired by such
Pre-IPO Investor or any of its affiliates in open market transactions after the completion of the
Global Offering; (c) transfer of the Shares to any nominee for the purposes of the
dematerialization of the Shares and holding such locked-up Shares in CCASS under the name
of such Pre-IPO Investor and (d) transfer of any Shares to any entity, which directly or
indirectly, through one or more intermediaries, controls or is controlled by, or is under common
control with such Pre-IPO Investor, provided, however, that in any such case, it shall be a
condition to the transfer that the transferee shall agree to be bound by similar transfer
restrictions.
INTERNATIONAL OFFERING
International Underwriting Agreement
In connection with the International Offering, it is expected that we will enter into the
International Underwriting Agreement with, among others, the Overall Coordinators and the
International Underwriters. Under the International Underwriting Agreement, the International
Underwriters, subject to certain conditions set out therein, will agree severally to purchase, or
procure subscribers or purchasers for, the International Offer Shares being offered pursuant to
the International Offering. Please refer to the paragraph headed “Structure of the Global
Offering—The International Offering” in this prospectus.
UNDERWRITING
– 619 –


--- page 629 ---
We expect to grant the Over-allotment Option to the International Underwriters,
exercisable by the Overall Coordinators (on behalf of the International Underwriters), on or
before Sunday, July 7, 2024, being the 30th day from the last day for lodging applications
under the Hong Kong Public Offering, to require us to allot and issue, up to an aggregate of
28,105,000 Shares, representing in aggregate approximately 15% of Offer Shares initially
available under the Global Offering at the Offer Price to cover over-allocations, if any, in the
International Offering. Please refer to the paragraph headed “Structure of the Global
Offering—The International Offering—Over-allotment Option” in this prospectus.
COMMISSIONS AND EXPENSES
Based on the maximum Offer Price, the Underwriters and the Capital Market
Intermediaries will receive an underwriting commission equal to (i) approximately 3.91% of
the aggregate Offer Price of all the Offer Shares (assuming that the Over-allotment Option is
not exercised) or (ii) approximately 3.55% of the aggregate Offer Price of all the Offer Shares
(assuming that the Over-allotment Option is fully exercised) (the “ Fixed Fees ”), and our
Company may, at our sole and absolute discretion, pay to one or more Underwriters or Capital
Market Intermediaries an incentive fee up to 0.45% of the aggregate Offer Price of all the Offer
Shares (the “ Discretionary Fees ”). Assuming the Discretionary Fees are paid in full, the ratio
of Fixed Fees and Discretionary Fees payable to all Underwriters and the CMIs is therefore
approximately (i) 98:2 (based on the maximum Offer Price and assuming that the Over-
allotment Option is not exercised) or (ii) 89:11 (based on the maximum Offer Price and
assuming that the Over-allotment Option is fully exercised). For unsubscribed Hong Kong
Offer Shares reallocated to the International Offering, we will pay an underwriting commission
at the rate applicable to the International Offering and such commission will be paid to the
relevant International Underwriters and not the Hong Kong Underwriters.
The aggregate commissions and fees, together with the listing fees, SFC transaction levy,
the Stock Exchange trading fee and AFRC transaction levy, legal and other professional fees,
printing and other expenses payable by us relating to the Global Offering are estimated to
amount to approximately HK$95.1 million in total (based on the Offer Price of HK$5.53 per
Offer Share which is the mid-point of the Offer Price range and assuming the Over-allotment
Option is not exercised).
HONG KONG UNDERWRITERS’ INTERESTS IN OUR COMPANY
As of the Latest Practicable Date,
 certain interest in the Company is indirectly held by the CITIC Group Corporation
Ltd. (ʮ̡) and its subsidiaries as set out in the section headed
“Underwriting—Sole Sponsor’s Independence”. CLSA Limited, one of the Hong
Kong Underwriters, is ultimately held by CITIC Group Corporation Ltd.;
 approximately 0.64% and 0.60% of the total number of issued Shares was held by
CICC Biomedical Fund L.P . (઼ᅃ(ژ)ᔼᖹ௴ุҳ༟ΥྫΆุ(ࠢ
Υྫ) (formerly known as઼ᅃ(ژ)ΥྫΆุ(Ϟ
UNDERWRITING
– 620 –


--- page 630 ---
Υྫ)) (“ CICC Biomedical Fund ”) and CICC Qizhi (Shanghai) Private Equity
Investment Center L.P . (“ CICC Qizhi ”), respectively. The general partner of CICC
Biomedical Fund is CICC Capital Management Co., Ltd. and the general partner of
CICC Qizhi is CICC Private Equity Investment Management Co., Ltd. (ٰ
ʮ̡). Each of (i) CICC Capital Management Co., Ltd., (ii) CICC
Private Equity Investment Management Co., Ltd. and (iii) China International
Capital Corporation Hong Kong Securities Limited, one of the Hong Kong
Underwriters, is a wholly-owned subsidiary of China International Capital
Corporation Limited, a company listed on the Stock Exchange (stock code: 3908)
and the Shanghai Stock Exchange (stock code: 601995); and
 approximately 0.09% and 0.82% of the total number of issued Shares was held by
Nanjing Zhaoyin Gongying Equity Investment Partnership (Limited Partnership) (ی
ᛆҳ༟ΥྫΆุ(Υྫ)) (“ Nanjing Zhaoyin Gongying ”) and
Shanghai Y uji Technology LLP respectively. The general partner of Nanjing Zhaoyin
Gongying is Jiangsu Zhaoyin Industrial Fund Management Co., Ltd. and the general
partner of Shanghai Y uji Technology LLP is Shenzhen CMB Telecom Equity
Investment Fund Management Co., Ltd. (ʮ
̡). Each of (i) Jiangsu Zhaoyin Industrial Fund Management Co., Ltd., (ii)
Shenzhen CMB Telecom Equity Investment Fund Management Co., Ltd. and (iii)
CMB International Capital Limited, one of the Hong Kong Underwriters, is
ultimately controlled by CMB International Capital Corporation Limited (ვ਷ყ
ʮ̡), an indirect wholly-owned subsidiary of China Merchants Bank Co.,
Ltd. whose shares are listed on the Stock Exchange (stock code: 3968) and Shanghai
Stock Exchange (stock code: 600036).
Save for its obligations under the Hong Kong Underwriting Agreement and save as
otherwise disclosed in this prospectus, as of the Latest Practicable Date, none of the Hong
Kong Underwriters has any shareholding in any member of our Group or any right or option
(whether legally enforceable or not) to purchase or subscribe for or to nominate persons to
purchase or subscribe for securities in any member of our Group.
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the Shares as a result of fulfilling their
obligations under the Hong Kong Underwriting Agreement and/or the International
Underwriting Agreement.
SOLE SPONSOR’S INDEPENDENCE
As of the Latest Practicable Date,
 approximately 0.41% of the total number of issued Shares was held by Pluto
Connection Limited, an indirectly wholly-owned subsidiary of CITIC Securities
Company Limited (ʮ̡), a joint stock limited company
established in the PRC with limited liability, the H shares and A shares of which are
listed on the Stock Exchange (stock code: 6030) and the Shanghai Stock Exchange
UNDERWRITING
– 621 –


--- page 631 ---
(stock code: 600030). CITIC Securities (Hong Kong) Limited, the Sole Sponsor is
an indirect wholly-owned subsidiary of CITIC Securities Company Limited. Pluto
Connection Limited is regarded as a member of the sponsor group of the Sole
Sponsor as defined under the Listing Rules.
 approximately 0.08% of the total number of issued Shares was held by CITIC
(Shenzhen) V enture Capital Equity Investment Fund Partnership (Limited
Partnership) (ڦ(ଉέ)ΥྫΆุ(Υྫ)) (“ CITIC
Venture Capital ”). CITIC Group Corporation Ltd. (ʮ̡), the
holding company of the Sole Sponsor, indirectly holds 40% interest in CITIC
(Shenzhen) Innovation Equity Investment Management Co., Ltd. (ڦ(ଉέ)ٰ
ʮ̡), the general partner of CITIC V enture Capital.
Notwithstanding the aforesaid, (i) none of the Sole Sponsor, its directors or its directors’
close associates collectively holds and will, immediately following the completion of the
Global Offering, hold, directly or indirectly, more than 5% of the number of issued Shares of
the Company; and (ii) the Sole Sponsor, having conducted its own assessment taking into
consideration the independence criteria applicable to sponsors as set out in Rule 3A.07 of the
Listing Rules, considers itself to be independent under Rule 3A.07 of the Listing Rules.
ACTIVITIES BY SYNDICATE MEMBERS
The Hong Kong Underwriters and the International Underwriters (together, the
“Syndicate Members ”) and their affiliates may each individually undertake a variety of
activities (as further described below) which do not form part of the underwriting or stabilizing
process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their various business activities, the Syndicate Members and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers. Such investment and
trading activities may involve or relate to assets, securities and/or instruments our Company
and/or persons and entities with relationships with our Company and may also include swaps
and other financial instruments entered into for hedging purposes in connection with our
Group’s loans and other debt.
In relation to the Shares, the activities of the Syndicate Members and their affiliates could
include acting as agent for buyers and sellers of the Shares, entering into transactions with
those buyers and sellers in a principal capacity, including as a lender to initial purchasers of
the Shares (which financing may be secured by the Shares) in the Global Offering, proprietary
trading in the Shares, and entering into over the counter or listed derivative transactions or
listed or unlisted securities transactions (including issuing securities such as derivative
UNDERWRITING
– 622 –


--- page 632 ---
warrants listed on a stock exchange) which have as their underlying assets, assets including the
Shares. Such transactions may be carried out as bilateral agreements or trades with selected
counterparties. Those activities may require hedging activity by those entities involving,
directly or indirectly, the buying and selling of the Shares, which may have a negative impact
on the trading price of the Shares. All such activities could occur in Hong Kong and elsewhere
in the world and may result in the Syndicate Members and their affiliates holding long and/or
short positions in the Shares, in baskets of securities or indices including the Shares, in units
of funds that may purchase the Shares, or in derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities
having the Shares as their underlying securities, whether on the Stock Exchange or on any
other stock exchange, the relevant rules of the exchange may require the issuer of those
securities (or one of its affiliates or agents) to act as a market maker or liquidity provider in
the security, and this will also result in hedging activity in the Shares in most cases.
All such activities may occur both during and after the end of the stabilizing period
described in the section headed “Structure of the Global Offering” in this prospectus. Such
activities may affect the market price or value of the Shares, the liquidity or trading volume
in the Shares and the volatility of the price of the Shares, and the extent to which this occurs
from day to day cannot be estimated.
It should be noted that when engaging in any of these activities, the Syndicate Members
will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager or any person acting for
it) must not, in connection with the distribution of the Offer Shares, effect any
transactions (including issuing or entering into any option or other derivative
transactions relating to the Offer Shares) whether in the open market or otherwise,
with a view to stabilizing or maintaining the market price of any of the Offer Shares
at levels other than those which might otherwise prevail in the open market; and
(b) the Syndicate Members must comply with all applicable laws and regulations,
including the market misconduct provisions of the SFO, including the provisions
prohibiting insider dealing, false trading, price rigging and stock market
manipulation.
Certain of the Syndicate Members or their respective affiliates have provided from time
to time, and expect to provide in the future, investment banking, derivative and other services
to our Company and its affiliates for which such Syndicate Members or their respective
affiliates have received or will receive customary fees and commissions.
UNDERWRITING
– 623 –


--- page 633 ---
THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part
of the Global Offering. CLSA Limited, China International Capital Corporation Hong Kong
Securities Limited, Jefferies Hong Kong Limited, Deutsche Bank AG, Hong Kong Branch and
CMB International Capital Limited are the Overall Coordinators of the Global Offering.
The listing of the Shares on the Stock Exchange is sponsored by the Sole Sponsor. The
Sole Sponsor has made an application on behalf of our Company to the Stock Exchange for the
listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this
prospectus.
The Global Offering consists of (subject to reallocation and the Over-allotment Option):
(i) the Hong Kong Public Offering of 9,369,000 Shares (subject to reallocation as
mentioned below) in Hong Kong as described in the paragraph headed “The Hong
Kong Public Offering” in this section; and
(ii) the International Offering of 178,004,000 Shares (subject to reallocation and
Over-allotment Option as mentioned below) in the United States to QIBs in reliance
on Rule 144A or another available exemption from the registration requirements of
the U.S. Securities Act, and outside the United States in offshore transactions in
reliance on Regulation S.
The Offer Shares will represent approximately 5.5% of the total issued share capital of
our Company immediately after completion of the Global Offering without taking into account
the exercise of the Over-allotment Option or any Shares that may be issued under the ESOPs.
If the Over-allotment Option is exercised in full and no Shares will be issued under the ESOPs,
the Offer Shares will represent approximately 6.3% of the total issued share capital
immediately after completion of the Global Offering and the exercise of the Over-allotment
Option as set out in the paragraph headed “The International Offering—Over-allotment
Option” in this section.
Investors may either:
(i) apply for Hong Kong Offer Shares under the Hong Kong Public Offering; or
(ii) apply for or indicate an interest, if qualified to do so, for International Offer Shares
under the International Offering,
but may not do both.
The Hong Kong Public Offering is open to members of the public in Hong Kong as well
as to institutional and professional investors in Hong Kong. The International Offering will
involve selective marketing of the International Offer Shares to QIBs in the United States in
reliance on Rule 144A or another available exemption from the registration requirements of the
U.S. Securities Act, as well as to institutional and professional investors and other investors
expected to have a sizable demand for the International Offer Shares in Hong Kong and other
STRUCTURE OF THE GLOBAL OFFERING
– 624 –


--- page 634 ---
jurisdictions outside the United States in offshore transactions in reliance on Regulation S. The
International Underwriters and the Joint Bookrunners are soliciting from prospective investors’
indications of interest in acquiring the International Offer Shares. Prospective investors will be
required to specify the number of International Offer Shares under the International Offering
they would be prepared to acquire either at different prices or at a particular price.
The number of Hong Kong Offer Shares and International Offer Shares to be offered
under the Hong Kong Public Offering and the International Offering respectively may be
subject to reallocation as described in the paragraph headed “The Hong Kong Public
Offering—Reallocation and Clawback” in this section.
THE HONG KONG PUBLIC OFFERING
Number of Shares Initially Offered
Subject to reallocation as mentioned below, our Company is initially offering 9,369,000
Shares at the Offer Price under the Hong Kong Public Offering for subscription by the public
in Hong Kong, representing approximately 5% of the 187,373,000 Shares initially available
under the Global Offering. Subject to reallocation as mentioned below, the number of Shares
initially offered under the Hong Kong Public Offering will represent approximately 0.28% of
our total issued share capital immediately after completion of the Global Offering, assuming
that the Over-allotment Option is not exercised and no Shares will be issued under the ESOPs.
In Hong Kong, individual retail investors are expected to apply for the Hong Kong Offer
Shares through the Hong Kong Public Offering and individual retail investors, including
individual investors in Hong Kong applying through banks and other institutions, seeking
International Offer Shares will not be allotted International Offer Shares in the International
Offering.
The Overall Coordinators (for themselves and on behalf of the Underwriters and the
CMIs) and the Sole Sponsor may require any investor who has been offered Shares under the
International Offering, and who has made an application under the Hong Kong Public Offering
to provide sufficient information to the Overall Coordinators and the Sole Sponsor so as to
allow them to identify the relevant applications under the Hong Kong Public Offering and to
ensure that it is excluded from any application for the Hong Kong Offer Shares.
Completion of the Hong Kong Public Offering is subject to the conditions set out in the
paragraph headed “Conditions of the Global Offering” in this section.
STRUCTURE OF THE GLOBAL OFFERING
– 625 –


--- page 635 ---
Allocation
For allocation purposes only, the 9,369,000 Shares initially being offered for subscription
under the Hong Kong Public Offering (after taking into account any reallocation in the number
of Offer Shares allocated between the Hong Kong Public Offering and the International
Offering) will be divided equally (with any odd lots being allocated to pool A) into two pools:
Pool A and Pool B, both of which are available on an equitable basis to successful applicants.
All valid applications that have been received for the Hong Kong Offer Shares with a total
subscription amount (excluding brokerage, SFC transaction levy, the Stock Exchange trading
fee and AFRC transaction levy) of HK$5 million or below will fall into Pool A and all valid
applications that have been received for the Hong Kong Offer Shares with a total subscription
amount (excluding brokerage, SFC transaction levy, Stock Exchange trading fee and AFRC
transaction levy) of over HK$5 million and up to the total value of Pool B, will fall into Pool
B.
Applicants should be aware that applications in Pool A and Pool B are likely to receive
different allocation ratios. If the Hong Kong Offer Shares in one pool (but not both pools) are
under-subscribed, the surplus Hong Kong Offer Shares will be transferred to the other pool to
satisfy demand in that other pool and be allocated accordingly. Applicants can only receive an
allocation of Hong Kong Offer Shares from either Pool A or Pool B but not from both pools
and only apply for Hong Kong Offer Shares in either Pool A or Pool B. When there is
over-subscription, allocation of Hong Kong Offer Shares to investors under the Hong Kong
Public Offering, both in relation to Pool A and Pool B, will be based on the level of valid
applications received under the Hong Kong Public Offering. The basis of allocation in each
pool may vary, depending on the number of Hong Kong Offer Shares validly applied for by
each applicant. The allocation of Hong Kong Offer Shares could, where appropriate, consist of
balloting, which would mean that some applicants may receive a higher allocation than others
who have applied for the same number of Hong Kong Offer Shares and those applicants who
are not successful in the ballot may not receive any Hong Kong Offer Shares.
Reallocation and Clawback
The allocation of Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation. Paragraph 4.2 of Practice Note 18 (as modified
by Rule 18C.09) of the Listing Rules requires a clawback mechanism to be put in place which
would have the effect of increasing the number of Offer Shares under the Hong Kong Public
Offering to a certain percentage of the total number of Offer Shares offered under the Global
Offering if the International Offer Shares are fully subscribed or oversubscribed and certain
prescribed total demand levels under the Hong Kong Public Offering are reached.
If the number of Shares validly applied for in the Hong Kong Public Offering represents
(i) 10 times or more but less than 50 times, and (ii) 50 times or more, of the number of Hong
Kong Offer Shares available under the Hong Kong Public Offering, the total number of Hong
Kong Offer Shares available under the Hong Kong Public Offering will be increased to
18,738,000 (in the case of (i)) and 37,475,000 Shares (in the case of (ii)), respectively,
STRUCTURE OF THE GLOBAL OFFERING
– 626 –


--- page 636 ---
representing approximately 10% and approximately 20% of the total number of Offer Shares
initially available under the Global Offering, respectively (assuming the Over-allotment Option
is not exercised and no Shares will be issued under the ESOPs).
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering
will be allocated between pool A and pool B and the number of Offer Shares allocated to the
International Offering will be correspondingly reduced in such manner as the Overall
Coordinators deem appropriate.
In addition to any mandatory reallocation required as described above, the Offer Shares
to be offered in the Hong Kong Public Offering and the Offer Shares to be offered in the
International Offering may, in certain circumstances, be reallocated between these offerings at
the discretion of the Overall Coordinators. The Overall Coordinators may, at their sole
discretion, reallocate Offer Shares initially allocated for the International Offering to the Hong
Kong Public Offering to satisfy valid applications under the Hong Kong Public Offering. In
particular, if (i) the International Offering is not fully subscribed and the Hong Kong Public
Offering is fully subscribed or oversubscribed (irrespective of the number of times); or (ii) the
International Offering is fully subscribed or oversubscribed and the Hong Kong Public
Offering is fully subscribed or oversubscribed with the number of Offer Shares validly applied
for in the Hong Kong Public Offering representing less than 10 times of the number of Shares
initially available for subscription under the Hong Kong Public Offering, the Overall
Coordinators have the authority to reallocate International Offer Shares originally in the
International Offering to the Hong Kong Public Offering in such number as they deem
appropriate, provided that in accordance with Chapter 4.14 of the HKEX Guide issued by the
Stock Exchange, (i) the total number of Offer Shares available under the Hong Kong Public
Offering following such reallocation should not be more than 18,738,000 Shares (representing
approximately 10% of the Offer Shares); and (ii) the final Offer Price should be fixed at the
bottom end of the indicative Offer Price range (i.e., HK$5.03 per Offer Share).
If the Hong Kong Public Offering is not fully subscribed for, the Overall Coordinators
have the authority to reallocate all or any unsubscribed Hong Kong Offer Shares to the
International Offering, in such proportions as the Overall Coordinators deem appropriate.
Details of any reallocation of Offer Shares between the Hong Kong Public Offering and
the International Offering will be disclosed in the results announcement of the Global Offering
expected to be published on Wednesday, June 12, 2024.
Applications
Each applicant under the Hong Kong Public Offering will also be required to give an
undertaking and confirmation in the application submitted by him or her that he or she and any
person(s) for whose benefit he or she is making the application have not applied for or taken
up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any
STRUCTURE OF THE GLOBAL OFFERING
– 627 –


--- page 637 ---
Offer Shares under the International Offering, and such applicant’s application will be rejected
if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or
it has been or will be placed or allocated Offer Shares under the International Offering.
Multiple or suspected multiple applications and any application for more than 4,684,000
Hong Kong Offer Shares (representing approximately 50% of the 9,369,000 Shares initially
comprised in the Hong Kong Public Offering) will be rejected.
The listing of the Offer Shares on the Stock Exchange is sponsored by the Sole Sponsor.
Applicants under the Hong Kong Public Offering may be required to pay, on application
(subject to application channels), the maximum Offer Price of HK$6.03 per Share in addition
to any brokerage, SFC transaction levy, Stock Exchange trading fee and AFRC transaction levy
payable on each Offer Share. If the Offer Price, as finally determined in the manner described
in the paragraph headed “Pricing of the Global Offering” in this section, is less than the
maximum Offer Price of HK$6.03 per Offer Share, appropriate refund payments (including the
brokerage, SFC transaction levy, Stock Exchange trading fee and AFRC transaction levy
attributable to the surplus application monies) will be made to successful applications (subject
to application channels), without interest. Further details are set out in the section headed
“How to Apply for Hong Kong Offer Shares” in this prospectus.
References in this prospectus to applications, application monies or the procedure for
application relate solely to the Hong Kong Public Offering.
THE INTERNATIONAL OFFERING
Number of International Offer Shares Offered
The number of International Offer Shares to be initially offered by us for subscription
under the International Offering will consist of an initial offering of 178,004,000 Offer Shares,
representing approximately 95% of the Offer Shares under the Global Offering. Subject to any
reallocation of Offer Shares between the International Offering and the Hong Kong Public
Offering, the International Offer Shares will represent approximately 5.23% of our total issued
share capital immediately after completion of the Global Offering, assuming that the
Over-allotment Option is not exercised and no Shares will be issued under the ESOPs.
Allocation
Pursuant to the International Offering, the International Underwriters will conditionally
place the International Offer Shares with QIBs in the United States in reliance on Rule 144A
or another available exemption from the registration requirements under the U.S. Securities
Act, as well as with institutional and professional investors and other investors expected to
have a sizable demand for the Shares in Hong Kong and other jurisdictions outside the United
States in reliance on Regulation S. The International Offering is subject to the Hong Kong
Public Offering being unconditional.
STRUCTURE OF THE GLOBAL OFFERING
– 628 –


--- page 638 ---
Allocation of the International Offer Shares pursuant to the International Offering will be
determined by the Overall Coordinators and will be based on a number of factors including the
level and timing of demand, total size of the relevant investor’s invested assets or equity assets
in the relevant sector and whether or not it is expected that the relevant investor is likely to buy
further, and/or hold or sell Offer Shares after the Listing. Such allocation may be made to
professional, institutional and corporate investors and is intended to result in a distribution of
our Offer Shares on a basis which would lead to the establishment of a solid shareholder base
to the benefit of our Company and our Shareholders as a whole.
The Overall Coordinators (on behalf of the Underwriters and the CMIs) may require any
investor who has been offered Offer Shares under the International Offering and who has made
an application under the Hong Kong Public Offering to provide sufficient information to the
Overall Coordinators so as to allow they to identify the relevant applications under the Hong
Kong Public Offering and to ensure that they are excluded from any allocation of Offer Shares
under the Hong Kong Public Offering.
Reallocation and Clawback
The total number of International Offer Shares to be transferred pursuant to the
International Offering may change as a result of the clawback arrangement described in the
paragraph headed “—The Hong Kong Public Offering—Reallocation and Clawback” in this
section, exercise of the Over-allotment Option in whole or in part and/or reallocation of all or
any unsubscribed Hong Kong Offer Shares to the International Offering.
Over-allotment Option
In connection with the Global Offering, our Company is expected to grant the
Over-allotment Option to the International Underwriters, exercisable by the Overall
Coordinators at their sole and absolute discretion on behalf of the International Underwriters
for up to 30 days after the last day for lodging applications under the Hong Kong Public
Offering. Pursuant to the Over-allotment Option, the Overall Coordinators will have the right
to require our Company to allot and issue, at the Offer Price, up to an aggregate of additional
28,105,000 Shares representing in aggregate approximately 15% of the number of the Offer
Shares initially available under the Global Offering to cover over-allocations in the
International Offering, if any. An announcement will be made in the event that the
Over-allotment Option is exercised.
If the Over-allotment Option is exercised in full, the additional International Offer Shares
to be issued pursuant thereto will represent approximately 0.8% of the issued share capital of
our Company immediately after the completion of the Global Offering.
STRUCTURE OF THE GLOBAL OFFERING
– 629 –


--- page 639 ---
Stabilization
Stabilization is a practice used by underwriters in some markets to facilitate the
distribution of securities. To stabilize, the Underwriters may bid for, or purchase, the new
securities in the secondary market, during a specified period of time, to retard and, if possible,
prevent any decline in the market price of the securities below the Offer Price. In Hong Kong
and certain other jurisdictions, an activity aimed at reducing the market price is prohibited and
the price at which stabilization is effected is not permitted to exceed the Offer Price.
In connection with the Global Offering, the Stabilizing Manager, its affiliates or any
person acting for it, on behalf of the Underwriters, may, to the extent permitted by applicable
laws of Hong Kong or elsewhere, over-allocate or effect short sales or any other stabilizing
transactions with a view to stabilizing or maintaining the market price of the Shares at a level
higher than that which might otherwise prevail in the open market for a limited period after the
last day for the lodging of applications under the Hong Kong Public Offering. Any market
purchases of Shares will be effected in compliance with all applicable laws and regulatory
requirements. However, there is no obligation on the Stabilizing Manager or any person acting
for it to conduct any such stabilizing activity, which if commenced, will be done at the absolute
discretion of the Stabilizing Manager and may be discontinued at any time. Any such
stabilizing activity is required to be brought to an end on the 30th day after the last day for the
lodging of applications under the Hong Kong Public Offering. The number of Shares that may
be over-allocated will not exceed the number of Shares that may be issued and/or sold under
the Over-allotment Option, namely 28,105,000 Shares, which is approximately 15% of the
Offer Shares initially available under the Global Offering.
Stabilizing action will be entered into in accordance with the laws, rules and regulations
in place in Hong Kong on stabilization and stabilization action permitted in Hong Kong
pursuant to the Securities and Futures (Price Stabilizing) Rules (Chapter 571W of the Laws of
Hong Kong) under SFO includes: (i) over-allocation for the purpose of preventing or
minimizing any reduction in the market price of the Shares; (ii) selling or agreeing to sell the
Shares so as to establish a short position in them for the purpose of preventing or minimizing
any reduction in the market price of the Shares; (iii) purchasing or subscribing for, or agreeing
to purchase or subscribe for, the Shares pursuant to the Over-allotment Option in order to close
out any position established under (i) or (ii) above; (iv) purchasing, or agreeing to purchase,
any of the Shares for the sole purpose of preventing or minimizing any reduction in the market
price of the Shares; (v) selling or agreeing to sell any Shares in order to liquidate any position
held as a result of those purchases; and (vi) offering or attempting to do anything described in
(ii), (iii), (iv) or (v).
Specifically, prospective applicants for and investors in the Offer Shares should note that:
 the Stabilizing Manager, or any person acting for it, may, in connection with the
stabilizing action, maintain a long position in the Shares;
STRUCTURE OF THE GLOBAL OFFERING
– 630 –


--- page 640 ---
 there is no certainty regarding the extent to which and the time period for which the
Stabilizing Manager, or any person acting for it, will maintain such a position;
 liquidation of any such long position by the Stabilizing Manager may have an
adverse impact on the market price of the Shares;
 no stabilizing action can be taken to support the price of the Shares for longer than
the stabilizing period which will begin on the Listing Date following announcement
of the Offer Price, and is expected to expire on the 30th day after the last date for
lodging applications under the Hong Kong Public Offering. After this date, when no
further stabilizing action may be taken, demand for the Shares, and therefore the
price of the Shares, could fall;
 the price of the Shares cannot be assured to stay at or above the Offer Price either
during or after the stabilizing period by the taking of any stabilizing action; and
 stabilizing bids may be made or transactions effected in the course of the stabilizing
action at any price at or below the Offer Price, which means that stabilizing bids
may be made or transactions effected at a price below the price paid by applicants
for, or investors in, the Shares.
Our Company will procure that a public announcement in compliance with the Securities
and Futures (Price Stabilizing) Rules will be made within seven days of the expiration of the
stabilizing period.
Over-Allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilizing Manager or any person acting for it may cover such over-allocations by exercising
the Over-allotment Option in full or in part, making purchases in the secondary market at prices
that do not exceed the Offer Price or by any combination of these means.
STOCK BORROWING AGREEMENT
In order to facilitate the settlement of over-allocations, if any, in connection with the
Global Offering, the Stabilizing Manager, its affiliates, or any person acting for it may choose
to borrow up to 28,105,000 Shares (being the maximum number of Shares which may be issued
upon exercise of the Over-allotment Option) from QuantumPharm Holdings pursuant to a
Stock Borrowing Agreement, or acquire Shares from other sources, including the exercising of
the Over-allotment Option. The Stock Borrowing Agreement is expected to be entered into
between the Stabilizing Manager and QuantumPharm Holdings on or about the Price
Determination Date. Such stock borrowing arrangement under the Stock Borrowing
Agreement, if entered into, will not be subject to the restrictions of Rule 18C.14(1) of the
Listing Rules provided that the requirements set out in Note 2 to Rule 18C.14 of the Listing
Rules are complied with.
STRUCTURE OF THE GLOBAL OFFERING
– 631 –


--- page 641 ---
Such stock borrowing arrangement must be for the sole purpose of covering any short
position prior to the exercise of the Over-allotment Option. The same number of Shares as that
borrowed must be returned to QuantumPharm Holdings or its respective nominees on or before
the third Business Day following the earlier of (i) the last day on which the Over-allotment
Option may be exercised, and (ii) the day on which the Over-allotment Option is exercised in
full.
The stock borrowing arrangement under the Stock Borrowing Agreement will be effected
in compliance with all applicable laws, listing rules and regulatory requirements.
No payment will be made to QuantumPharm Holdings by the Stabilizing Manager or its
authorized agents in relation to such stock borrowing arrangement.
PRICING OF THE GLOBAL OFFERING
The Offer Price is expected to be fixed by agreement between the Overall Coordinators
(for themselves and on behalf of the Underwriters and the CMIs) and our Company on the Price
Determination Date, when market demand for the Offer Shares will be determined. The Price
Determination Date is expected to be on or around Tuesday, June 11, 2024 and in no event later
than 12:00 noon on Tuesday, June 11, 2024.
The Offer Price will be not more than HK$6.03 per Offer Share and is currently expected
not to be less than HK$5.03 per Offer Share unless otherwise announced, as further explained
below. Applicants under the Hong Kong Public Offering may be required to pay, on application
(subject to application channels), the maximum Offer Price of HK$6.03 for each Hong Kong
Offer Share together with brokerage of 1.0%, Stock Exchange trading fee of 0.00565%, SFC
transaction levy of 0.0027% and AFRC transaction levy of 0.00015%. Prospective investors
should be aware that the Offer Price to be determined on the Price Determination Date
may be, but is not expected to be, lower than the indicative price range stated in this
prospectus .
The International Underwriters will be soliciting from prospective investors indications
of interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Shares under the International
Offering they would be prepared to acquire either at different prices or at a particular price.
This process, known as “book-building” is expected to continue up to, and to cease on or about,
the last day for lodging applications under the Hong Kong Public Offering.
The Overall Coordinators (for themselves and on behalf of the Underwriters and the
CMIs) may, where they deem appropriate, based on the level of interest expressed by
prospective investors during the book-building process in respect of the International Offering,
and with the consent of the Company, reduce the number of Offer Shares offered under the
Global Offering and/or the Offer Price range as stated in this prospectus at any time on or prior
to the morning of the last day for lodging applications under the Hong Kong Public Offering.
In such a case, we will, as soon as practicable following the decision to make such reduction,
STRUCTURE OF THE GLOBAL OFFERING
– 632 –


--- page 642 ---
and in any event not later than the morning of the last day for lodging applications under the
Hong Kong Public Offering, cause to be published on the websites of the Company and the
Stock Exchange at www.xtalpi.com and www.hkexnews.hk , respectively, an announcement,
cancel the Global Offering and relaunch the Global Offering at the revised number of Offer
Shares and/or the revised Offer Price range and the requirements under Rule 11.13 of the
Listing Rules (which include the issue of a supplemental prospectus or a new prospectus (as
appropriate)). Upon issue of such announcement or supplemental prospectus (as appropriate),
the number of Offer Shares offered in the Global Offering and/or the revised Offer Price range
will be final and conclusive, and the Offer Price, if agreed upon by the Overall Coordinators
(for themselves and on behalf of the Underwriters and the CMIs) and the Company, will be
fixed within such revised Offer Price range. The Global Offering must first be canceled and
subsequently relaunched on FINI pursuant to the supplemental prospectus.
Before submitting applications for the Hong Kong Offer Shares, applicants should have
regard to the possibility that any announcement or supplemental prospectus or new prospectus
(as appropriate) of a reduction in the number of Offer Shares and/or the Offer Price range may
not be made until the day which is the last day for lodging applications under the Hong Kong
Public Offering. In the absence of any such announcement or cancellation and relaunch of
offer, the number of Offer Shares will not be reduced and/or the Offer Price, if agreed upon by
the Overall Coordinators (for themselves and on behalf of the Underwriters and the CMIs) and
the Company, will under no circumstances be set outside the Offer Price range as stated in this
prospectus.
The Hong Kong Offer Shares and the International Offer Shares may, in certain
circumstances, be reallocated as between the Hong Kong Public Offering and International
Offering at the discretion of the Overall Coordinators and the Sole Sponsor.
The final Offer Price, the level of applications in the Hong Kong Public Offering, the
level of indications of interest in the International Offering, the basis of allocations of the Hong
Kong Offer Shares and the results of applications in the Hong Kong Public Offering are
expected to be announced on Wednesday, June 12, 2024 through a variety of channels
described in the paragraph headed “How to Apply for Hong Kong Offer Shares—B. Publication
of Results” in this prospectus.
UNDERWRITING ARRANGEMENTS
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms of the Hong Kong Underwriting Agreement, subject to agreement on the Offer
Price between the Overall Coordinators (for themselves and on behalf of the Underwriters and
the CMIs) and us on the Price Determination Date.
STRUCTURE OF THE GLOBAL OFFERING
– 633 –


--- page 643 ---
We expect that our Company will, on or about Tuesday, June 11, 2024, enter into the
International Underwriting Agreement relating to the International Offering. Underwriting
arrangements, the Hong Kong Underwriting Agreement and the International Underwriting
Agreement are summarized in the section headed “Underwriting” in this prospectus.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for the Offer Shares will be conditional on, inter alia :
 the Stock Exchange granting approval for the listing of, and permission to deal in,
the Shares in issue and to be issued pursuant to the Global Offering (including
pursuant to the exercise of the Over-allotment Option) as mentioned in this
prospectus on the Main Board of the Stock Exchange and such listing and
permission not subsequently having been revoked prior to the commencement of
dealings in the Shares on the Stock Exchange;
 the Offer Price having been agreed between the Overall Coordinators (for
themselves and on behalf of the Underwriters and the CMIs) and our Company;
 the execution and delivery of the International Underwriting Agreement on or
around the Price Determination Date;
 our Company having submitted to HKSCC all requisite documents to enable the
Offer Shares to be admitted to trade on the Stock Exchange; and
 the obligations of the Underwriters under the respective Underwriting Agreements
becoming and remaining unconditional (unless and to the extent such conditions are
validly waived on or before such dates and times) and not having been terminated
in accordance with the terms of the respective agreements,
in each case on or before the dates and times specified in the respective Underwriting
Agreements (unless and to the extent such conditions are validly waived on or before such
dates and times) and in any event not later than the date which is 30 days after the date
of this prospectus.
If for any reason, the Offer Price is not agreed by 12:00 noon on Tuesday, June 11, 2024
between us and the Overall Coordinators (for themselves and on behalf of the Underwriters and
the CMIs), the Global Offering will not proceed and will lapse.
If the above conditions are not fulfilled or waived prior to the times and dates specified,
the Global Offering will lapse and the Stock Exchange will be notified immediately. We will
cause a notice of the lapse of the Hong Kong Public Offering to be published by us on the
websites of our Company at www.xtalpi.com , and the Stock Exchange at www.hkexnews.hk ,
respectively on the next day following such lapse. In such event, all application monies will
be returned, without interest, on the terms set out in the section headed “How to Apply for
STRUCTURE OF THE GLOBAL OFFERING
– 634 –


--- page 644 ---
Hong Kong Offer Shares” in this prospectus. In the meantime, the application monies will be
held in separate bank account(s) with our Company’s receiving banker(s) or other bank(s) in
Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)
(as amended).
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, amongst other things, the other becoming unconditional and not
having been terminated in accordance with its terms.
Share certificates for the Offer Shares are expected to be issued on Wednesday, June 12,
2024 but will only become valid evidence of title at 8:00 a.m. on the date of commencement
of the dealings in our Shares, which is expected to be on Thursday, June 13, 2024, provided
that (i) the Global Offering has become unconditional in all respects at or before that time and
(ii) neither of the Underwriting Agreements has been terminated in accordance with its terms.
Investors who trade Shares prior to the receipt of Share certificates or prior to the Share
certificates bearing valid evidence of title do so entirely at their own risk.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00
a.m. in Hong Kong on Thursday, June 13, 2024, it is expected that dealings in Shares on the
Stock Exchange will commence on Thursday, June 13, 2024. Shares will be traded in board lots
of 1,000 each and the stock code will be 2228.
STRUCTURE OF THE GLOBAL OFFERING
– 635 –


--- page 645 ---
IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering and below are the procedures for application. We will not provide any printed
copies of this prospectus for use by the public.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing Information”
section, and our website at www.xtalpi.com .
The contents of this prospectus are identical to the prospectus as registered with the
Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who Can Apply
Y ou can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you
are applying for:
 are 18 years of age or older;
 are outside the United States; and
 have a Hong Kong address (for the HK eIPO White Form service only) .
Unless permitted by the Listing Rules and the Guide for New Listing Applicants issued
by the Stock Exchange, or a waiver and/or consent has been granted by the Stock Exchange to
us, you cannot apply for any Hong Kong Offer Shares if you:
 are an existing Shareholder or close associates; or
 are a Director or any of his/her close associates.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 636 –


--- page 646 ---
2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Tuesday, June 4,
2024 and end at 12:00 noon on Friday, June 7, 2024.
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application Channel Platform Target Investors Application Time
HK eIPO White
Form service
IPO App (which can be downloaded
by searching “ IPO App ” in App
Store or Google Play or
downloaded at
www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp )
or www.hkeipo.hk
Investors who would like to
receive a physical Share
certificate. Hong Kong
Offer Shares successfully
applied for will be allotted
and issued in your own
name.
From 9:00 a.m. on
Tuesday, June 4,
2024 to 11:30
a.m. on Friday,
June 7, 2024.
The latest time
for completing
full payment of
application
monies will be
12:00 noon on
Friday, June 7,
2024.
HKSCC EIPO
channel
Y our broker or custodian who is a
HKSCC Participant will submit an
EIPO application on your behalf
through HKSCC’s FINI system in
accordance with your instruction
Investors who would not like
to receive a physical Share
certificate. Hong Kong
Offer Shares successfully
applied for will be allotted
and issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated HKSCC
Participant’s stock account.
Contact your
broker or
custodian for
the earliest and
latest time for
giving such
instructions, as
this may vary
by broker or
custodian.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 637 –


--- page 647 ---
The HK eIPO White Form service and the HKSCC EIPO channel are facilities subject
to capacity limitations and potential service interruptions and you are advised not to wait until
the last day of the application period to apply for Hong Kong Offer Shares.
For those applying through the HK eIPO White Form service, once you complete
payment in respect of any application instructions given by you or for your benefit through the
HK eIPO White Form service to make an application for Hong Kong Offer Shares, an actual
application shall be deemed to have been made. If you are a person for whose benefit the
electronic application instructions are given, you shall be deemed to have declared that only
one set of electronic application instructions has been given for your benefit. If you are an
agent for another person, you shall be deemed to have declared that you have only given one
set of electronic application instructions for the benefit of the person for whom you are an
agent and that you are duly authorized to give those instructions as an agent.
For the avoidance of doubt, giving an application instruction under the HK eIPO White
Form service more than once and obtaining different payment reference numbers without
effecting full payment in respect of a particular reference number will not constitute an actual
application.
If you apply through the HK eIPO White Form service, you are deemed to have
authorized the HK eIPO White Form Service Provider to apply on the terms and conditions
in this prospectus, as supplemented and amended by the terms and conditions of the HK eIPO
White Form service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on your
behalf through the HKSCC EIPO Channel, you (and, if you are joint applicants, each of you
jointly and severally) are deemed to have instructed and authorized HKSCC to cause HKSCC
Nominees (acting as nominee for the relevant HKSCC Participants) to apply for Hong Kong
Offer Shares on your behalf and to do on your behalf all the things stated in this prospectus
and any supplement to it.
For those applying through HKSCC EIPO channel, an actual application will be deemed
to have been made for any application instructions given by you or for your benefit to HKSCC
(in which case an application will be made by HKSCC Nominees on your behalf) provided such
application instruction has not been withdrawn or otherwise invalidated before the closing time
of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken by
HKSCC or HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or for any
breach of the terms and conditions of this prospectus.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 638 –


--- page 648 ---
3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual or Joint Applicants For Corporate Applicants
 Full name(s) 2 as shown on your
identity document
 Identity document’s issuing country
or jurisdiction
 Identity document type, with order
of priority:
i. HKID card; or
ii. National identification
document; or
iii. Passport; and
 Identity document number
 Full name(s)
2 as shown on your
identity document
 Identity document’s issuing country
or jurisdiction
 Identity document type, with order
of priority:
i. LEI registration document; or
ii. Certificate of incorporation; or
iii. Business registration
certificate; or
iv. Other equivalent document; and
 Identity document number
Notes:
1. If you are applying through the HK eIPO White Form service, you are required to provide a valid
e-mail address, a contact telephone number and a Hong Kong address. Y ou are also required to declare
that the identity information provided by you follows the requirements as described in Note 2 below. In
particular, where you cannot provide a HKID number, you must confirm that you do not hold a HKID
card. The number of joint applicants may not exceed four. If you are a firm, the applicant must be in
the individual members’ names.
2. The applicant’s full name as shown on their identity document must be used. If an applicant’s identity
document contains both an English and Chinese name, both English and Chinese names must be used.
Otherwise, either English or Chinese names will be accepted. The order of priority of the applicant’s
identity document type must be strictly followed and where an individual applicant has a valid HKID
card, the HKID number must be used when making an application to subscribe for Shares in a public
offer. Similarly for corporate applicants, a LEI number must be used if an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data (“ CID”) of the trustee, as set out above, will
be required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID
of the asset management company or the individual fund, as appropriate, which has opened a trading
account with the broker will be required, as above.
4. The maximum number of joint applicants on FINI is capped at 4 in accordance with market practice.
Such is subject to change, if the Company’s Articles of Association and applicable company law
prescribe a lower cap.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 639 –


--- page 649 ---
5. If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity
document), the identity document’s issuing country or jurisdiction, the identity document type; and (ii)
the identity document number, for each of the beneficial owners or, in the case(s) of joint beneficial
owners, for each joint beneficial owner. If you do not include this information, the application will be
treated as being made for your benefit.
6. If you are applying as an unlisted company and (i) the principal business of that company is dealing in
securities; and (ii) you exercise statutory control over that company, then the application will be treated
as being for your benefit and you should provide the required information in your application as stated
above.
“Unlisted company” means a company with no equity securities listed on the Stock Exchange or any
other stock exchange.
“Statutory control” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part of it which
carries no right to participate beyond a specified amount in a distribution of either profits or
capital).
For those applying through HKSCC EIPO channel, and making an application under a
power of attorney, we and the Overall Coordinators, as our agents, have discretion to consider
whether to accept it on any conditions we think fit, including evidence of the attorney’s
authority.
Failing to provide any required information may result in your application being rejected.
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size : 1,000 Shares
Permitted number of
Hong Kong Offer
Shares for
application and
amount payable
on application/
successful
allotment
: Hong Kong Offer Shares are available for application in
specified board lot sizes only. Please refer to the amount
payable associated with each specified board lot size in
the table below.
The maximum Offer Price is HK$6.03 per Offer Share.
If you are applying through the HKSCC EIPO channel,
you are required to pre-fund your application based on
the amount specified by your broker or custodian, as
determined based on the applicable laws and regulations
in Hong Kong.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 640 –


--- page 650 ---
By instructing your broker or custodian to apply for the
Hong Kong Offer Shares on your behalf through the
HKSCC EIPO Channel, you (and, if you are joint
applicants, each of you jointly and severally) are deemed
to have instructed and authorized HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant
HKSCC Participants) to arrange payment of the final
Offer Price, brokerage, SFC transaction levy, the Stock
Exchange trading fee and the AFRC transaction levy by
debiting the relevant nominee bank account at the
Designated Bank for your broker or custodian.
If you are applying through the HK eIPO White Form
service, you may refer to the table below for the amount
payable for the number of Shares you have selected. Y ou
must pay the respective amount payable on application
in full upon application for Hong Kong Offer Shares.
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
1,000 6,090.81 20,000 121,816.25 100,000 609,081.25 2,000,000 12,181,625.10
2,000 12,181.63 25,000 152,270.32 200,000 1,218,162.51 2,500,000 15,227,031.38
3,000 18,272.44 30,000 182,724.37 300,000 1,827,243.76 3,000,000 18,272,437.66
4,000 24,363.25 35,000 213,178.44 400,000 2,436,325.02 3,500,000 21,317,843.93
5,000 30,454.06 40,000 243,632.50 500,000 3,045,406.28 4,000,000 24,363,250.20
6,000 36,544.87 45,000 274,086.57 600,000 3,654,487.54 4,684,000
(1) 28,529,365.99
7,000 42,635.68 50,000 304,540.62 700,000 4,263,568.79
8,000 48,726.50 60,000 365,448.75 800,000 4,872,650.05
9,000 54,817.32 70,000 426,356.88 900,000 5,481,731.30
10,000 60,908.13 80,000 487,265.00 1,000,000 6,090,812.56
15,000 91,362.19 90,000 548,173.12 1,500,000 9,136,218.83
(1) Maximum number of Hong Kong Offer Shares you may apply for, representing approximately 50% of
the Hong Kong Offer Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) or to the HK eIPO White Form Service Provider (for
applications made through the application channel of the HK eIPO White Form Service Provider)
while the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy will be
paid to the SFC, the Stock Exchange and the AFRC, respectively.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 651 ---
5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own
benefit, except where you are a nominee and provide the information of the underlying investor
in your application as required under the paragraph headed “—A. Application for Hong Kong
Offer Shares—3. Information Required to Apply” in this section. If you are suspected of
submitting or cause to submit more than one application, all of your applications will be
rejected.
Multiple applications made either through (i) the HK eIPO White Form service, (ii)
HKSCC EIPO channel, or (iii) both channels concurrently are prohibited and will be rejected.
If you have made an application through the HK eIPO White Form service or HKSCC EIPO
channel, you or the person(s) for whose benefit you have made the application shall not apply
further for any Offer Shares in the Global Offering.
The Hong Kong Share Registrar would record all applications into its system and identify
suspected multiple applications with identical names, identification document numbers and
reference numbers according to the Best Practice Note on Treatment of Multiple/Suspected
Multiple Applications (“ Best Practice Note ”) issued by the Federation of Share Registrars
Limited.
Since applications are subject to personal information collection statements,
identification document numbers displayed are redacted.
6. Terms and Conditions of an Application
By applying for Hong Kong Offer Shares through the HK eIPO White Form service or
HKSCC EIPO channel, you (or as the case may be, HKSCC Nominees will do the following
things on your behalf):
(i) undertake to execute all relevant documents and instruct and authorize us and/or
the Overall Coordinators, as our agents, to execute any documents for you and to do
on your behalf all things necessary to register any Hong Kong Offer Shares allocated
to you in your name or in the name of HKSCC Nominees as required by the Articles
of Association, and (if you are applying through the HKSCC EIPO channel) to
deposit the allotted Hong Kong Offer Shares directly into CCASS for the credit of
your designated HKSCC Participant’s stock account on your behalf;
(ii) confirm that you have read and understand the terms and conditions and application
procedures set out in this prospectus, the IPO App and the designated website of the
HK eIPO White Form service (or as the case may be, the agreement you entered
into with your broker or custodian), and agree to be bound by them;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 642 –


--- page 652 ---
(iii) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the participant agreement between your broker or
custodian and HKSCC and observe the General Rules of HKSCC and the HKSCC
Operational Procedures for giving application instructions to apply for Hong Kong
Offer Shares;
(iv) confirm that you are aware of the restrictions on offers and sales of shares set out
in this prospectus and they do not apply to you, or the person(s) for whose benefit
you have made the application;
(v) confirm that you have read this prospectus and any supplement to it and have relied
only on the information and representations contained therein in making your
application (or as the case may be, causing your application to be made) and will not
rely on any other information or representations;
(vi) agree that the Company, the Sole Sponsor, the Overall Coordinators, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Underwriters, the Capital Market Intermediaries, any of their or the Company’s
respective directors, officers, employees, partners, agents, advisers and any other
parties involved in the Global Offering (the “ Relevant Persons ”), the Hong Kong
Share Registrar and HKSCC will not be liable for any information and
representations not in this prospectus and any supplement to it;
(vii) agree to disclose the details of your application and your personal data and any other
personal data which may be required about you and the person(s) for whose benefit
you have made the application to us, the Relevant Persons, the Hong Kong Share
Registrar, HKSCC, HKSCC Nominees, the Stock Exchange, the SFC and any other
statutory regulatory or governmental bodies or otherwise as required by laws, rules
or regulations, for the purposes under the paragraph headed “—G. Personal Data—3.
Purposes and 4. Transfer of personal data” in this section;
(viii) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent misrepresentation;
(ix) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or HKSCC
Nominees on your behalf cannot be revoked once it is accepted, which will be
evidenced by the notification of the result of the ballot by the Hong Kong Share
Registrar by way of publication of the results at the time and in the manner as
specified in the paragraph headed “—B. Publication of Results” in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed “—C.
Circumstances In Which Y ou Will Not Be Allocated Hong Kong Offer Shares” in
this section;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 643 –


--- page 653 ---
(xi) agree that your application or HKSCC Nominees’ application, any acceptance of it
and the resulting contract will be governed by and construed in accordance with the
laws of Hong Kong;
(xii) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association and laws of any
place outside Hong Kong that apply to your application and that neither we nor the
Relevant Persons will breach any law inside and/or outside Hong Kong as a result
of the acceptance of your offer to purchase, or any action arising from your rights
and obligations under the terms and conditions contained in this prospectus;
(xiii) confirm that (a) your application or HKSCC Nominees’ application on your behalf
is not financed directly or indirectly by the Company, any of the directors, chief
executives, substantial Shareholder(s) or existing shareholder(s) of the Company or
any of its subsidiaries or any of their respective close associates; and (b) you are not
accustomed or will not be accustomed to taking instructions from the Company, any
of the directors, chief executives, substantial shareholder(s) or existing
shareholder(s) of the Company or any of its subsidiaries or any of their respective
close associates in relation to the acquisition, disposal, voting or other disposition
of the Shares registered in your name or otherwise held by you;
(xiv) warrant that the information you have provided is true and accurate;
(xv) confirm that you understand that we and the Overall Coordinators will rely on your
declarations and representations in deciding whether or not to allocate any Hong
Kong Offer Shares to you and that you may be prosecuted for making a false
declaration;
(xvi) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated
to you under the application;
(xvii) declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
(xviii) (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving electronic application
instructions to HKSCC directly or indirectly or through the application channel of
the HK eIPO White Form Service Provider or by any one as your agent or by any
other person; and
(xix) (if you are making the application as an agent for the benefit of another person)
warrant that (1) no other application has been or will be made by you as agent for
or for the benefit of that person or by that person or by any other person as agent
for that person by giving electronic application instructions to HKSCC or to the
HK eIPO White Form Service Provider and (2) you have due authority to give
electronic application instructions on behalf of that other person as its agent.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 644 –


--- page 654 ---
B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Hong Kong Offer Shares
through:
Platform Date/Time
Applying through the HK eIPO White Form service or HKSCC EIPO channel:
Website From the “IPO Results” function
in the IPO App or at
www.hkeipo.hk/IPOResult
(or www.tricor.com.hk/ipo/result )
with a “search by ID” function
The full list of (i) wholly or
partially successful applicants using
the HK eIPO White Form service
and HKSCC EIPO channel, and
(ii) the number of Hong Kong Offer
Shares conditionally allotted to
them, among other things,
will be displayed at
www.hkeipo.hk/IPOResult or
www.tricor.com.hk/ipo/result .
24 hours, from 11:00
p.m. on Wednesday,
June 12, 2024 to 12:00
midnight on Tuesday,
June 18, 2024 (Hong
Kong time)
The Stock Exchange’s website at
www.hkexnews.hk and our website
at www.xtalpi.com which will
provide links to the above
mentioned websites of the
Hong Kong Share Registrar.
No later than 11:00 p.m.
on Wednesday,
June 12, 2024
(Hong Kong time)
Telephone +852 3691 8488 — the allocation
results telephone enquiry line
provided by the Hong Kong Share
Registrar
between 9:00 a.m. and
6:00 p.m., from
Thursday, June 13,
2024 to Tuesday, June
18, 2024 (Hong Kong
time) on a Business
Day
For those applying through HKSCC EIPO channel, you may also check with your broker
or custodian from 6:00 p.m. on Tuesday, June 11, 2024 (Hong Kong time).
HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m. on
Tuesday, June 11, 2024 (Hong Kong time) on a 24-hour basis and should report any
discrepancies on allotments to HKSCC as soon as practicable.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 655 ---
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications of
interest in the Global Offering, the level of applications in the Hong Kong Public Offering and
the basis of allocations of Hong Kong Offer Shares on the Stock Exchange’s website at
www.hkexnews.hk and our website at www.xtalpi.com by no later than 11:00 p.m. on
Wednesday, June 12, 2024 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
Y ou should note the following situations in which Hong Kong Offer Shares will not be
allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinators, the Hong Kong Share Registrar and their respective agents
and nominees have full discretion to reject or accept any application, or to accept only part of
any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not
grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
4. If:
 you make multiple applications or suspected multiple applications. Y ou may refer to
the paragraph headed “—A. Application for Hong Kong Offer Shares—5. Multiple
Applications Prohibited” in this section on what constitutes multiple applications;
 your application instruction is incomplete;
 your payment (or confirmation of funds, as the case may be) is not made correctly;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 646 –


--- page 656 ---
 the Underwriting Agreements do not become unconditional or are terminated;
 we or the Overall Coordinators believe that by accepting your application, it or we
would violate applicable securities or other laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
Designated Bank before balloting. After balloting of Hong Kong Offer Shares, the Receiving
Banks will collect the portion of these funds required to settle each HKSCC Participant’s actual
Hong Kong Offer Share allotment from their Designated Bank.
There is a risk of money settlement failure. In the extreme event of money settlement
failure by a HKSCC Participant (or its Designated Bank), who is acting on your behalf in
settling payment for your allotted shares, HKSCC will contact the defaulting HKSCC
Participant and its Designated Bank to determine the cause of failure and request such
defaulting HKSCC Participant to rectify or procure to rectify the failure.
However, if it is determined that such settlement obligation cannot be met, the affected
Hong Kong Offer Shares will be reallocated to the Global Offering. Hong Kong Offer Shares
applied for by you through the broker or custodian may be affected to the extent of the
settlement failure. In the extreme case, you will not be allocated any Hong Kong Offer Shares
due to the money settlement failure by such HKSCC Participant. None of us, the Relevant
Persons, the Hong Kong Share Registrar and HKSCC is or will be liable if Hong Kong Offer
Shares are not allocated to you due to the money settlement failure.
D. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
Y ou will receive one Share certificate for all Hong Kong Offer Shares allotted to you
under the Hong Kong Public Offering (except pursuant to applications made through the
HKSCC EIPO channel where the Share certificates will be deposited into CCASS as described
below).
No temporary document of title will be issued in respect of the Shares. No receipt will
be issued for sums paid on application.
Share certificates will only become valid at 8:00 a.m. on Thursday, June 13, 2024 (Hong
Kong time), provided that the Global Offering has become unconditional and the right of
termination described in the section headed “Underwriting” has not been exercised. Investors
who trade Shares prior to the receipt of Share certificates or the Share certificates becoming
valid do so entirely at their own risk.
The right is reserved to retain any Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 657 ---
The following sets out the relevant procedures and time:
HK eIPO White Form service HKSCC EIPO channel
Despatch/collection of Share certificate 1
For application
of 1,000,000
Hong Kong
Offer Shares or
more
Collection in person at
the Hong Kong Share Registrar,
Tricor Investor Services Limited,
at 17/F, Far East Finance Centre,
16 Harcourt Road,
Hong Kong
Time : from 9:00 a.m. to 1:00 p.m.
on Thursday, June 13, 2024
(Hong Kong time)
If you are an individual, you must
not authorize any other person to
collect for you. If you are a
corporate applicant, your
authorized representative must
bear a letter of authorization from
your corporation stamped with
your corporation’s chop.
Both individuals and authorized
representatives must produce, at
the time of collection, evidence
of identity acceptable to the Hong
Kong Share Registrar.
Note : If you do not collect your
Share certificate(s) personally
within the time above, it/they will
be sent to the address specified in
your application instructions by
ordinary post at your own risk
Share certificate(s) will
be issued in the name
of HKSCC Nominees,
deposited into CCASS
and credited to your
designated HKSCC
Participant’s stock
account
No action by you is
required
1 Except in the event of any Severe Weather Signals (defined below) in force in Hong Kong in the
morning on Wednesday, June 12, 2024 rendering it impossible for the relevant Share certificates to be
dispatched to HKSCC in a timely manner, the Company shall procure the Hong Kong Share Registrar
to arrange for delivery of the supporting documents and Share certificates in accordance with the
contingency arrangements as agreed between them. Y ou may refer to “—E. Severe Weather
Arrangements” in this section.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 658 ---
HK eIPO White Form
service HKSCC EIPO channel
For application of less
than 1,000,000 Hong
Kong Offer Shares
Y our Share certificate(s) will
be sent to the address
specified in your application
instructions by ordinary post
on Wednesday, June 12,
2024 at your own risk
Refund mechanism for surplus application monies paid by you
Date Thursday, June 13, 2024 Subject to the
arrangement between
you and your broker or
custodian
Responsible party Hong Kong Share Registrar Y our broker or custodian
Application monies
paid through single
bank account
HK eIPO White Form e-Auto
Refund payment instructions
to your designated bank
account
Y our broker or custodian
will arrange refund to
your designated bank
account subject to the
arrangement between
you and it
Application monies
paid through
multiple bank
accounts
Refund cheque(s) will be
despatched to the address as
specified in your application
instructions by ordinary post
at your own risk
E. SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Friday, June 7, 2024 if, there is:
 a tropical cyclone warning signal number 8 or above;
 a “black” rainstorm warning; and/or
 Extreme Conditions,
(collectively, “ Severe Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, June 7, 2024.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 649 –


--- page 659 ---
Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon on
the next Business Day which does not have Severe Weather Signals in force at any time
between 9:00 a.m. and 12:00 noon.
Prospective investors should be aware that a postponement of the opening/closing of the
application lists may result in a delay in the listing date. Should there be any changes to the
dates mentioned in the section headed “Expected Timetable” in this prospectus, an
announcement will be made and published on the Stock Exchange’s website at
www.hkexnews.hk and our website at www.xtalpi.com of the revised timetable.
If a Severe Weather Signal is hoisted on Wednesday, June 12, 2024, the Hong Kong Share
Registrar will make appropriate arrangements for the delivery of the Share certificates to the
CCASS Depository’s service counter so that they would be available for trading on Thursday,
June 13, 2024.
If a Severe Weather Signal is hoisted on Wednesday, June 12, 2024, for application of less
than 1,000,000 Offer Shares, the physical Share certificate(s) will be despatched by ordinary
post when the post office re-opens after the Severe Weather Signal is lowered or canceled (e.g.
in the afternoon of Wednesday, June 12, 2024 or on Thursday, June 13, 2024).
If a Severe Weather Signal is hoisted on Thursday, June 13, 2024, for application of
1,000,000 Offer Shares or more, the physical Share certificate(s) will be available for
collection in person at the Hong Kong Share Registrar’s office after the Severe Weather Signal
is lowered or canceled (e.g. in the afternoon of Thursday, June 13, 2024 or on Friday, June 14,
2024).
Prospective investors should be aware that if they choose to receive physical Share
certificates issued in their own name, there may be a delay in receiving the Share
certificates.
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the
Stock Exchange and we comply with the stock admission requirements of HKSCC, the Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the date of commencement of dealings in the Shares or any other date
HKSCC chooses. Settlement of transactions between Exchange Participants is required to take
place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 650 –


--- page 660 ---
Y ou should seek the advice of your broker or other professional advisor for details of the
settlement arrangement as such arrangements may affect your rights and interests.
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by the Company, the Hong Kong Share Registrar, the receiving banks and
the Relevant Persons about you in the same way as it applies to personal data about applicants
other than HKSCC Nominees. This personal data may include client identifier(s) and your
identification information. By giving application instructions to HKSCC, you acknowledge
that you have read, understood and agree to all of the terms of the Personal Information
Collection Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder of,
Hong Kong Offer Shares, of the policies and practices of the Company and the Hong Kong
Share Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
2. Reasons for the collection of your personal data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure
that personal data supplied to the Company or its agents and the Hong Kong Share Registrar
is accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong
Kong Offer Shares into or out of their names or in procuring the services of the Hong Kong
Share Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Hong Kong Offer Shares being rejected, or in the delay or the inability of the
Company or the Hong Kong Share Registrar to effect transfers or otherwise render their
services. It may also prevent or delay registration or transfers of Hong Kong Offer Shares
which you have successfully applied for and/or the despatch of Share certificate(s) to which
you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform the
Company and the Hong Kong Share Registrar immediately of any inaccuracies in the personal
data supplied.
3. Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means) for
the following purposes:
 processing your application and refund cheque and e-Auto Refund payment
instruction(s), where applicable, verification of compliance with the terms and
application procedures set out in this prospectus and announcing results of
allocation of Hong Kong Offer Shares;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 651 –


--- page 661 ---
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
 registering new issues or transfers into or out of the names of the holders of the
Shares including, where applicable, HKSCC Nominees;
 maintaining or updating the register of members of the Company;
 verifying identities of applicants for and holders of the Shares and identifying any
duplicate applications for the Shares;
 facilitating Hong Kong Offer Shares balloting;
 establishing benefit entitlements of holders of the Shares, such as dividends, rights
issues, bonus issues, etc.;
 distributing communications from the Company and its subsidiaries;
 compiling statistical information and profiles of the holder of the Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable the
Company and the Hong Kong Share Registrar to discharge their obligations to
applicants and holders of the Shares and/or regulators and/or any other purposes to
which applicants and holders of the Shares may from time to time agree.
4. Transfer of personal data
Personal data held by the Company and the Hong Kong Share Registrar relating to the
applicants for and holders of Hong Kong Offer Shares will be kept confidential but the
Company and the Hong Kong Share Registrar may, to the extent necessary for achieving any
of the above purposes, disclose, obtain or transfer (whether within or outside Hong Kong) the
personal data to, from or with any of the following:
 the Company’s appointed agents such as financial advisers, receiving banks and
overseas principal share registrar;
 HKSCC or HKSCC Nominees, who will use the personal data and may transfer the
personal data to the Hong Kong Share Registrar, in each case for the purposes of
providing its services or facilities or performing its functions in accordance with its
rules or procedures and operating FINI and CCASS (including where applicants for
the Hong Kong Offer Shares request a deposit into CCASS);
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 652 –


--- page 662 ---
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the
Hong Kong Share Registrar in connection with their respective business operation;
 the Stock Exchange, the SFC and any other statutory regulatory or governmental
bodies or otherwise as required by laws, rules or regulations, including for the
purpose of the Stock Exchange’s administration of the Listing Rules and the SFC’s
performance of its statutory functions; and
 any persons or institutions with which the holders of Hong Kong Offer Shares have
or propose to have dealings, such as their bankers, solicitors, accountants or brokers
etc.
5. Retention of personal data
The Company and the Hong Kong Share Registrar will keep the personal data of the
applicants and holders of Hong Kong Offer Shares for as long as necessary to fulfill the
purposes for which the personal data were collected. Personal data which is no longer required
will be destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance
(Chapter 486 of the Laws of Hong Kong).
6. Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether
the Company or the Hong Kong Share Registrar hold their personal data, to obtain a copy of
that data, and to correct any data that is inaccurate. The Company and the Hong Kong Share
Registrar have the right to charge a reasonable fee for the processing of such requests. All
requests for access to data or correction of data should be addressed to the Company and the
Hong Kong Share Registrar, at their registered address disclosed in the section headed
“Corporate Information” in this prospectus or as notified from time to time, for the attention
of the company secretary, or the Hong Kong Share Registrar for the attention of the privacy
compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 653 –


--- page 663 ---
The following is the text of a report set out on pages I-1 to I-3, received from the
Company’ s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants,
Hong Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed
to the directors of the Company and to the Sole Sponsor pursuant to the requirements of HKSIR
200, Accountants’ Reports on Historical Financial Information in Investment Circulars issued
by the Hong Kong Institute of Certified Public Accountants.
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF QUANTUMPHARM INC. AND CITIC SECURITIES (HONG KONG)
LIMITED
Introduction
We report on the historical financial information of QuantumPharm Inc. (the “Company”)
and its subsidiaries (together, the “Group”) set out on pages I-4 to I-76, which comprises the
consolidated balance sheets as at December 31, 2021, 2022 and 2023, the balance sheets of the
Company as at December 31, 2021, 2022 and 2023, and the consolidated statements of profit
or loss, the consolidated statements of comprehensive income, the consolidated statements of
changes in equity and the consolidated statements of cash flows for each of the years ended
December 31, 2021, 2022 and 2023 (the “Track Record Period”) and material accounting
policy information and other explanatory information (together, the “Historical Financial
Information”). The Historical Financial Information set out on pages I-4 to I-76 forms an
integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated June 4, 2024 (the “Prospectus”) in connection with the initial listing of shares
of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation sets out
in Note 2.1 to the Historical Financial Information, and for such internal control as the
directors determine is necessary to enable the preparation of Historical Financial Information
that is free from material misstatement, whether due to fraud or error.
APPENDIX I ACCOUNTANT’S REPORT
– I-1 –


--- page 664 ---
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200, Accountants’ Reports on Historical
Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards
and plan and perform our work to obtain reasonable assurance about whether the Historical
Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountant’s judgment, including the assessment of risks of material misstatement of
the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountant considers internal control relevant to the entity’s
preparation of Historical Financial Information that gives a true and fair view in accordance
with the basis of preparation sets out in Note 2.1 to the Historical Financial Information in
order to design procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. Our work also
included evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of
the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountant’s report, a true and fair view of the financial position of the Company as at
December 31, 2021, 2022 and 2023 and the consolidated financial position of the Group as at
December 31, 2021, 2022 and 2023 and of its consolidated financial performance and its
consolidated cash flows for the Track Record Period in accordance with the basis of
preparation sets out in Note 2.1 to the Historical Financial Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Up
and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
APPENDIX I ACCOUNTANT’S REPORT
– I-2 –


--- page 665 ---
Dividends
We refer to Note 14 to the Historical Financial Information which states that no dividends
have been paid by the Company in respect of the Track Record Period.
No statutory financial statements for the Company
No statutory financial statements have been prepared for the Company since its date of
incorporation.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
June 4, 2024
APPENDIX I ACCOUNTANT’S REPORT
– I-3 –


--- page 666 ---
I HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountant’s report.
The financial statements of the Group for the Track Record Period, on which the
Historical Financial Information is based, were audited by PricewaterhouseCoopers in
accordance with International Standards on Auditing issued by the International Auditing and
Assurance Standards Board (the “Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“RMB”) and all values
are rounded to the nearest thousand (“RMB’000”) except when otherwise indicated.
APPENDIX I ACCOUNTANT’S REPORT
– I-4 –


--- page 667 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
Y ear ended December 31,
2021 2022 2023
Note RMB’000 RMB’000 RMB’000
Revenues 5 62,799 133,353 174,420
Research and development expenses 6 (212,603) (358,952) (480,664)
General and administrative expenses 6 (137,035) (204,401) (295,986)
Contract fulfillment costs 6 (30,014) (67,266) (126,178)
Selling and marketing expenses 6 (27,413) (40,427) (62,482)
Impairment losses on financial assets 3.1(b) (673) (874) (217)
Other income 7 8,625 21,367 27,513
Other gains/(losses), net 8 36,882 (8,114) 41,282
Operating loss (299,432) (525,314) (722,312)----------- ----------- -----------
Finance income 14,055 50,478 102,693
Finance expenses (3,575) (5,746) (9,575)
Finance income, net 9 10,480 44,732 93,118----------- ----------- -----------
Changes in fair value of convertible
redeemable preferred shares and other
financial liabilities 32 (1,843,883) (957,799) (1,275,165)
Share of net losses of investments
accounted for using equity method 19 (4,497) (236) (1,964)-----------
----------- -----------
Loss before income tax (2,137,332) (1,438,617) (1,906,323)
Income tax expense 10 –––
Loss for the year (2,137,332) (1,438,617) (1,906,323)
Loss for the year attributable to:
Equity holders of the Company (2,137,288) (1,438,507) (1,914,384)
Non-controlling interests (44) (110) 8,061
(2,137,332) (1,438,617) (1,906,323)
Loss per share for loss attributable to
equity holders of the Company
(expressed in RMB per share) 11
Basic loss per share (4.43) (2.97) (3.96)
Diluted loss per share (4.43) (2.97) (3.96)
APPENDIX I ACCOUNTANT’S REPORT
– I-5 –


--- page 668 ---
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Y ear ended December 31,
2021 2022 2023
Note RMB’000 RMB’000 RMB’000
Loss for the year (2,137,332) (1,438,617) (1,906,323) ----------- ----------- -----------
Other comprehensive income/(loss)
Items that will not be reclassified to profit
or loss
– Changes in fair value of convertible
redeemable preferred shares due to own
credit risk (45,150) 80,500 (20,111)
– Currency translation differences 49,479 (315,047) (77,949)
Items that may be subsequently reclassified
to profit or loss
– Currency translation differences 11,310 (141,715) (15,492)
Other comprehensive income/(loss) for the
year, net of tax 15,639 (376,262) (113,552) -----------
----------- -----------
Total comprehensive loss for the year,
net of tax (2,121,693) (1,814,879) (2,019,875)
Total comprehensive loss for the year
attributable to:
Equity holders of the Company (2,121,510) (1,815,538) (2,028,164)
Non-controlling interest (183) 659 8,289
(2,121,693) (1,814,879) (2,019,875)
APPENDIX I ACCOUNTANT’S REPORT
– I-6 –


--- page 669 ---
CONSOLIDATED BALANCE SHEETS
As at December 31,
2021 2022 2023
Note RMB’000 RMB’000 RMB’000
Assets
Non-current assets
Property, plant and equipment 15 176,929 317,640 369,887
Right-of-use assets 16 93,636 77,989 189,250
Intangible assets 17 5,118 6,684 7,869
Investments accounted for using the
equity method 19 213 18,706 23,841
Financial assets at fair value through
profit or loss 20 170,258 284,529 424,023
Prepayments 23 16,053 13,893 24,916
Term deposits 25 – – 20,552
462,207 719,441 1,060,338----------- ----------- -----------
Current assets
Contract costs 5(a) 17,051 33,280 37,891
Trade receivables 22 30,717 37,936 38,506
Prepayments, deposits and other
receivables 23 30,090 51,734 41,147
Financial assets at fair value through
profit or loss 20 – 356,361 863,368
Restricted cash 24 12,751 5,432 2,337
Term deposits 25 305,308 2,537,703 1,251,353
Cash and cash equivalents 26 3,523,647 574,219 710,761
3,919,564 3,596,665 2,945,363-----------
----------- -----------
Total assets 4,381,771 4,316,106 4,005,701
Equity
Equity attributable to equity holders
of the Company
Share capital 33 50 50 50
Other reserves 34 74,618 (201,756) (227,110)
Accumulated losses (3,684,024) (5,125,965) (7,040,349)
(3,609,356) (5,327,671) (7,267,409)
Non-controlling interests 5,388 17,878 26,167
Total deficits (3,603,968) (5,309,793) (7,241,242)
APPENDIX I ACCOUNTANT’S REPORT
– I-7 –


--- page 670 ---
As at December 31,
2021 2022 2023
Note RMB’000 RMB’000 RMB’000
Liabilities
Non-current liabilities
Long term bank borrowings 29 11,000 – –
Lease liabilities 16 81,669 69,206 137,183
Convertible redeemable preferred
shares 32(a) 7,701,279 9,320,782 10,780,342
Deferred government grants 30 30,643 29,628 32,042
Other payables and accruals 28 280 8,638 –
7,824,871 9,428,254 10,949,567----------- ----------- -----------
Current liabilities
Trade payables 27 10,573 13,979 13,654
Other payables and accruals 28 98,077 104,250 131,289
Short term bank borrowings 29 22,280 36,000 60,000
Derivative financial instruments 31 811 2,531 560
Deferred government grants 30 1,959 1,118 7,433
Contract liabilities 5(b) 9,871 15,519 25,658
Lease liabilities 16 17,297 24,248 58,782
160,868 197,645 297,376-----------
----------- -----------
Total liabilities 7,985,739 9,625,899 11,246,943
Total deficits and liabilities 4,381,771 4,316,106 4,005,701
APPENDIX I ACCOUNTANT’S REPORT
– I-8 –


--- page 671 ---
BALANCE SHEETS OF THE COMPANY
As at December 31,
2021 2022 2023
Note RMB’000 RMB’000 RMB’000
Assets
Non-current assets
Investment in subsidiaries 18(a) 4,150,022 5,055,757 5,205,453
Investment in an associate 19 5,445 – –
Financial assets at fair value through
profit or loss 20 31,245 85,136 120,195
4,186,712 5,140,893 5,325,648----------- ----------- -----------
Current assets
Prepayments, deposits and other
receivables 23 – 45 2,007
Cash and cash equivalents 26 492,362 2,018 252
492,362 2,063 2,259-----------
----------- -----------
Total assets 4,679,074 5,142,956 5,327,907
Equity
Share capital 33 50 50 50
Other reserves 34 53,563 (137,600) (147,234)
Accumulated losses (3,095,070) (4,049,992) (5,314,887)
Total deficits (3,041,457) (4,187,542) (5,462,071)
Liabilities
Non-current liabilities
Convertible redeemable preferred
shares 32(a) 7,701,279 9,320,782 10,780,342
Other payables and accruals 28 – 8,358 –
7,701,279 9,329,140 10,780,342----------- ----------- -----------
Current liabilities
Other payables and accruals 28 19,252 1,358 9,636
19,252 1,358 9,636-----------
----------- -----------
Total liabilities 7,720,531 9,330,498 10,789,978
Total deficits and liabilities 4,679,074 5,142,956 5,327,907
APPENDIX I ACCOUNTANT’S REPORT
– I-9 –


--- page 672 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share
capital
Other
reserves
Accumulated
losses
Equity
attributable
to equity
holders
of the
Company
Non-
controlling
interests
Total
equity/
(deficits)
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2021 44 36,364 (1,546,736) (1,510,328) 5,571 (1,504,757)------- ------- -------- ------- -- ----- -------
Loss for the year – – (2,137,288) (2,137,288) (44) (2,137,332)
Other comprehensive income/(loss):
Changes in fair value of convertible
redeemable preferred shares due to
own credit risk 34 – (45,150) – (45,150) – (45,150)
Currency translation differences 34 – 60,928 – 60,928 (139) 60,789
Total comprehensive income/(loss) for
the year – 15,778 (2,137,288) (2,121,510) (183) (2,121,693)------- ------- -------- ------- -- ----- -------
Transactions with equity holders
Issuance of ordinary shares 6 (6) ––––
Equity-settled share-based compensation 35 – 22,482 – 22,482 – 22,482------- ------- -------- ------- -- ----- -------
Total transactions with equity holders 6 22,476 – 22,482 – 22,482-------
------- -------- ------- ------- -------
Balance at December 31, 2021 50 74,618 (3,684,024) (3,609,356) 5,388 (3,603,968)
APPENDIX I ACCOUNTANT’S REPORT
– I-10 –


--- page 673 ---
Share
capital
Other
reserves
Accumulated
losses
Equity
attributable
to equity
holders
of the
Company
Non-
controlling
interests
Total
equity/
(deficits)
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2022 50 74,618 (3,684,024) (3,609,356) 5,388 (3,603,968)------- ------- -------- ------- -- ----- -------
Loss for the year – – (1,438,507) (1,438,507) (110) (1,438,617)
Other comprehensive income/(loss):
Changes in fair value of convertible
redeemable preferred shares due to
own credit risk 34 – 80,500 – 80,500 – 80,500
Currency translation differences 34 – (457,531) – (457,531) 769 (456,762)
Total comprehensive (loss)/income for
the year – (377,031) (1,438,507) (1,815,538) 659 (1,814,879)------- ------- -------- ------- -- ----- -------
Transactions with equity holders
Capital injection by non-controlling
interests – 57,273 – 57,273 10,935 68,208
Acquisition of non-controlling interests – – (3,434) (3,434) 896 (2,538)
Equity-settled share-based compensation 35 – 43,384 – 43,384 – 43,384
Total transactions with equity holders – 100,657 (3,434) 97,223 11,831 109,054-------
------- -------- ------- ------- -------
Balance at December 31, 2022 50 (201,756) (5,125,965) (5,327,671) 17,878 (5,309,793)
APPENDIX I ACCOUNTANT’S REPORT
– I-11 –


--- page 674 ---
Share
capital
Other
reserves
Accumulated
losses
Equity
attributable
to equity
holders
of the
Company
Non-
controlling
interests
Total
equity/
(deficits)
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2023 50 (201,756) (5,125,965) (5,327,671) 17,878 (5,309,793)------- ------- -------- ------- -- ----- -------
Loss for the year – – (1,914,384) (1,914,384) 8,061 (1,906,323)
Other comprehensive income/(loss):
Changes in fair value of convertible
redeemable preferred shares due to
own credit risk 34 – (20,111) – (20,111) – (20,111)
Currency translation differences 34 – (93,669) – (93,669) 228 (93,441)
Total comprehensive (loss)/income for
the year – (113,780) (1,914,384) (2,028,164) 8,289 (2,019,875)------- ------- -------- ------- -- ----- -------
Transactions with equity holders
Equity-settled share-based compensation 35 – 88,426 – 88,426 – 88,426
Total transactions with equity holders – 88,426 – 88,426 – 88,426-------
------- -------- ------- ------- -------
Balance at December 31, 2023 50 (227,110) (7,040,349) (7,267,409) 26,167 (7,241,242)
APPENDIX I ACCOUNTANT’S REPORT
– I-12 –


--- page 675 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y ear ended December 31,
2021 2022 2023
Note RMB’000 RMB’000 RMB’000
Cash flows from operating activities
Net cash used in operating activities 36(a) (253,746) (429,104) (567,564)----------- ----------- -----------
Cash flows from investing activities
Interest received from term deposits 16,784 22,849 102,122
Purchase of property, plant and equipment (160,578) (193,416) (123,792)
Proceeds from disposals of property, plant
and equipment 3,878 1,492 84
Purchase of intangible assets (3,100) (5,314) (6,844)
Proceeds from disposals of intangible assets – 120 –
Additions of investments accounted for
using equity method 19 (13) (19,220) (2,000)
Additions of investments in financial assets
at fair value through profit or loss 20 (85,900) (2,376,415) (2,871,961)
Proceeds from disposal of financial assets
at fair value through profit or loss – 1,911,754 2,298,231
Placement of term deposits (779,396) (8,302,216) (2,764,609)
Proceeds from maturity of term deposits 945,731 6,183,441 4,067,707
Changes in restricted cash balances (12,672) 7,319 3,095
Proceeds from government grants 4,800 11,820 33,550
Net cash (used in)/generated from
investing activities (70,466) (2,757,786) 735,583----------- ----------- -----------
Cash flows from financing activities
Interest paid for borrowing (1,682) (1,613) (1,554)
Payments of lease liabilities (6,200) (11,327) (48,332)
Proceeds from bank borrowings 20,000 25,000 60,000
Repayment of short-term bank borrowings (16,200) (22,280) (36,000)
Capital injection from non-controlling
interest – 68,208 –
Proceeds from issuance of ordinary shares 6 – –
Proceeds from issuance of convertible
redeemable preferred shares 2,480,089 – –
Net cash generated from/(used in)
financing activities 2,476,013 57,988 (25,886)-----------
----------- -----------
Net increase/(decrease) in cash and cash
equivalents 2,151,801 (3,128,902) 142,133
Cash and cash equivalents at beginning of
the year 26 1,430,913 3,523,647 574,219
Effects of exchange rate changes on cash
and cash equivalents (59,067) 179,474 (5,591)
Cash and cash equivalents at
end of the year 26 3,523,647 574,219 710,761
APPENDIX I ACCOUNTANT’S REPORT
– I-13 –


--- page 676 ---
II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 GENERAL INFORMATION AND HISTORY OF THE GROUP
1.1 General information
QuantumPharm Inc. (the “Company”) was incorporated in the Cayman Islands on April 28, 2017 as an
exempted company with limited liabilities. The address of its registered office is Maples Corporate Services Limited
at PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.
The Company is an investment holding company. The Company and its subsidiaries, including the former
structured entity as mentioned below (collectively, the “Group”), are principally engaged in the provision of drug
discovery solutions and intelligent automation solutions.
This Historical Financial Information is presented in thousands of unit of Renminbi (RMB’000), unless
otherwise stated.
1.2 History of the Group
Prior to July 12, 2021, the Group mainly operates its business in the Mainland of the People’s Republic of
China (the “PRC”) through certain PRC domestic companies, including Shenzhen Jingtai Technology Co., Ltd.
(“Shenzhen Jingtai”), a limited liability company established in the PRC and its subsidiaries (together, “Shenzhen
Jingtai Group”), whose equity interests were held by certain management members of the Group and early investors
(“Nominee Shareholders”). The Company obtained controlling financial interest over Shenzhen Jingtai Group since
November 2017 by entering into a series of contractual arrangements with Shenzhen Jingtai and its Nominee
Shareholders. These contractual agreements (“Contractual Agreements”) include Exclusive Business Cooperation
Agreement, Exclusive Call Option Agreement, V oting Rights Proxy Agreements, and Equity Interest Pledge
Agreement, which enable the Group to exercise power over Shenzhen Jingtai, receive variable returns from its
involvement in Shenzhen Jingtai and have the ability to affect those returns through its power over Shenzhen Jingtai.
Therefore, management concluded that the Group controls Shenzhen Jingtai and regards Shenzhen Jingtai as a
controlled structured entity, of which the Company is the ultimate primary beneficiary. As such, the Group
consolidated the financial results of Shenzhen Jingtai Group.
In 2021, QuantumPharm Limited, a wholly owned subsidiary of the Company, acquired the entire equity
interest in Shenzhen Jingtai from its Nominee Shareholders. The equity transfer was completed on July 12, 2021, and
the Exclusive Business Cooperation Agreement, V oting Rights Proxy Agreement, Equity Interest Pledge Agreement
and Exclusive Call Option Agreement were terminated accordingly (“Restructuring Transaction”). The equity transfer
of the Restructuring Transaction does not have any impact on the consolidated financial statements of the Group as
the effect of the equity transfer resulted in Shenzhen Jingtai Group changing from being consolidated structured
entity and the structured entity’s subsidiaries into being directly-owned consolidated subsidiaries of the Company.
This change had no change in economic ownership.
Details of the Group’s subsidiaries for the Track Record Period and as at the date of this report are disclosed
in Note 18.
2 SUMMARY OF ACCOUNTING POLICY INFORMATION
The principal accounting policies applied in the preparation of the Historical Financial Information are set out
below. These policies have been consistently applied throughout the Track Record Period, unless otherwise stated.
2.1 Basis of preparation
The Historical Financial Information of the Group have been prepared in accordance with IFRS Accounting
Standards issued by the International Accounting Standards Board (“IASB”). The Historical Financial Information
has been prepared on a historical cost basis, except for certain financial assets and financial liabilities, which are
measured at fair value.
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The preparation of the Historical Financial Information in conformity with IFRS Accounting Standards
requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note
4.
All effective standards, amendments to standards and interpretation mandatory for any financial year during
the Track Record Period are consistently applied to the Group for the Track Record Period.
As at December 31, 2023, the Group had a net liability of approximately RMB7.2 billion as the Group is still
in the early stages of developing its services, solutions and technological platform and the Group’s convertible
redeemable preferred shares were being recorded as financial liabilities and measured at their fair values of RMB10.8
billion. These convertible redeemable preferred shares were not contractually redeemable within the 12 months from
December 31, 2023 and will be automatically converted into ordinary shares of the Company upon the completion
of qualified initial public offerings.
In preparing this Historical Financial Information, the directors have taken into account the projected cash flow
covering a period of not less than 12 months from December 31, 2023 and available financial resources during the
projection period, and concluded that the Group will have sufficient working capital to finance its operations and to
meet its financial obligations for not less than twelve months from December 31, 2023. Consequently, the Historical
Financial Information has been prepared on a going concern basis, which contemplates the realisation of assets and
settlement of liabilities in the normal course of business.
Amendments to standards not yet adopted
Amendments to standards that have been issued but are not yet effective and not been early adopted by
the Group during the Track Record Period are as follows:
Effective for
accounting
periods beginning
on or after
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback January 1, 2024
Amendments to IAS 1 Non-current Liabilities with Covenants January 1, 2024
Amendments to IAS 1 Classification of Liabilities as Current
or Non-current
January 1, 2024
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements January 1, 2024
Amendments to IAS 21 Lack of Exchangeability January 1, 2025
Amendments to IFRS 10 and IAS 28 Sale or contribution of assets between
an investor and its associate or joint
venture
To be determined
The Company’s directors have performed an assessment on these amendments to standards and have concluded
on a preliminary basis that the adoption of these amendments to standards is not expected to have a significant impact
on the Group’s financial performance and position, except for Amendments to IAS 1 where the convertible
redeemable preferred shares of the Company, which are convertible by the holders at any time, will be reclassified
to current liabilities upon adoption of Amendments to IAS 1.
2.2 Summary of material accounting policies
2.2.1 Principles of consolidation and equity accounting
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The
Group controls an entity where the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are deconsolidated from the date that control ceases.
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Inter-company transactions, balances and unrealised gains on transactions between group
companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of profit or loss, statement of comprehensive income, statement of changes in
equity and balance sheet respectively.
(b) Subsidiaries controlled through Contractual Arrangements
Prior to July 12, 2021, the Group operates its business operations within these areas in the PRC
through a series of contractual arrangements entered into among the Company, its wholly-owned
subsidiaries, and certain domestic entities (“Structured entities”) that legally owned by certain
management members (“Registered Shareholders”) authorised by the Group (collectively, the
“Contractual Arrangements”).
The Contractual Arrangements include Cooperation Agreements and Operation Agreements,
Exclusive Purchases Option Agreement, Equity Pledge Agreements, Shareholders’ V oting Rights Trust
Agreements and Powers of Attorney, which enable the Group to:
 govern the financial and operating policies of the Structured entities;
 receive substantially all of the economic interest returns generated by the Structured
entities in consideration for the technical support, consulting and other services provided
exclusively by the WFOE, at the WFOE’s discretion;
 obtain an irrevocable and exclusive right to purchase part or all of the equity interests in
the Structured entities at any time and from time to time, at the minimum consideration
permitted by the relevant law in China at the time of transfer, and any residual interests in
the Structured Entities shall be remitted to the Group immediately. In addition, the equity
holders are not allowed to sell, assign, transfer, or otherwise disposed of or create
encumbrance over their interests in any of the Structured Entities directly or indirectly
without prior written consent of the WFOEs;
 obtain a pledge over all of the Controlled Structured Entities equity interests from its
respective Registered Shareholders as collateral for all of the Controlled Structured
Entities’ payments due to the Group to secure performance of entities’ obligation under the
Contractual Arrangements;
 exercise equity holder voting rights of the Structured entities; and
 exercise effective financial and operational control over of Structured Entities.
Accordingly, the Group has rights to control these entities and they are accounted for as entities
controlled by the Group.
(c) Associates
Associates are all entities over which the Group has significant influence but not control or joint
control. This is generally the case where the Group holds between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity method of accounting (see (d) below), after
initially being recognised at cost.
(d) Equity accounting
Under the equity method of accounting, the investments are initially recognised at cost and
adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee
in profit or loss, and the Group’s share of movements in other comprehensive income of the investee
in other comprehensive income. Dividends received or receivable from equity-accounted investments
are recognised as a reduction in the carrying amount of the investment.
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Where the Group’s share of losses in an equity-accounted investment equals or exceeds its
interest in the entity, including any other unsecured long-term receivables, the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its equity-accounted investments are eliminated
to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
equity-accounted investees have been changed where necessary to ensure consistency with the policies
adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with
the policy described in Note 2.2.5.
(e) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control
as transactions with equity owners of the Group. A change in ownership interest results in an adjustment
between the carrying amounts of the controlling and non-controlling interests to reflect their relative
interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling
interests and any consideration paid or received is recognised in a separate reserve within equity
attributable to owners of the Group.
When the Group ceases to consolidate or equity account for an investment because of a loss of
control, joint control or significant influence, any retained interest in the entity is remeasured to its fair
value, with the change in carrying amount recognised in profit or loss. This fair value becomes the initial
carrying amount for the purposes of subsequently accounting for the retained interest as an associate,
joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive
income in respect of that entity are accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are reclassified to profit or loss.
If the ownership interest in a joint venture or an associate is reduced but joint control or
significant influence is retained, only a proportionate share of the amounts previously recognised in
other comprehensive income are reclassified to profit or loss where appropriate.
2.2.2 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial information of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional currency”).
The functional currency of the Company and certain of its overseas subsidiaries is United States Dollars
(“US$”). The functional currency of the Group’s PRC subsidiaries is RMB. The Historical Financial
Information is presented in RMB, which is the Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign
currencies at year-end exchange rates are generally recognised in profit or loss.
Foreign exchange gains and losses are presented in the consolidated statement of profit or loss
on a net basis within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Translation differences on assets and
liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation
differences on non-monetary assets and liabilities such as equities held at fair value through profit or
loss are recognised in profit or loss as part of the fair value gain or loss, and translation differences on
non-monetary assets such as equities classified as at fair value through other comprehensive income are
recognised in other comprehensive income.
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(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a
hyper-inflationary economy) that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at
the date of that balance sheet;
(ii) income and expenses for each statement of comprehensive loss are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which case income and expenses
are translated at the rate on the dates of the transactions); and
(iii) all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in
foreign operations are taken to other comprehensive income. When a foreign operation is sold or any
borrowings forming part of the net investment are repaid, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.
2.2.3 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and
accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the
acquisition of the items. Construction in progress mainly represents leasehold improvements and lab
equipment under construction, which is stated at actual construction cost less accumulated impairment losses.
Construction in progress is transferred to appropriate categories of property and equipment upon the
completion of their respective construction and depreciated over their respective estimated useful lives.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. The carrying amount of any component accounted
for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit
or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their costs, net of their residual
values over their estimated useful lives or, in the case of leasehold improvements, the shorter lease term, as
follows:
Computer and office equipment 3 to 5 years
Lab equipment 5 or 10 years
Leasehold improvements shorter of estimated useful lives and remaining lease
terms
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (Note 2.2.5).
The gains or losses on disposals of property, plant and equipment is the difference between the net sales
proceeds and the carrying amount of the relevant assets and are recognised in profit or loss.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 681 ---
2.2.4 Intangible assets
(a) System software licenses
Acquired system software licenses are capitalised on the basis of the costs incurred to acquire and
bring to use the specific software. These costs are amortised using straight-line method over their
estimated useful lives of three to ten years.
(b) Research and development
Costs incurred on development projects are capitalised as intangible assets when recognition
criteria are met, including:
 it is technically feasible to complete the intangible asset so that it will be available for use;
 management intends to complete the intangible asset and use or sell it;
 there is an ability to use or sell the intangible asset;
 it can be demonstrated how the intangible asset will generate probable future economic
benefits;
 adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset are available; and
 the expenditure attributable to the intangible asset during its development can be reliably
measured.
Directly attributable costs that are capitalised as part of the intangible asset include employee
costs and an appropriate portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point at
which the asset is ready for use.
Research expenditure and development expenditure that do not meet the criteria above are
recognised as an expense as incurred. Development costs previously recognised as an expense are not
recognised as an asset in a subsequent period.
There were no development costs meeting these criteria and capitalised as intangible assets as of
December 31, 2021, 2022 and 2023.
2.2.5 Impairment of non-financial assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable. An impairment loss is recognised for the amounts by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment
at the end of each reporting period.
2.2.6 Investment and other financial assets
(a) Classification
The Group classifies its financial assets in the following measurement categories:
 those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss), and
 those to be measured at amortised cost.
APPENDIX I ACCOUNTANT’S REPORT
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The classification depends on the Group’s business model for managing the financial assets and
the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other
comprehensive income. For investments in equity instruments that are not held for trading, this will
depend on whether the Group has made an irrevocable election at the time of initial recognition to
account for the equity investment at fair value through other comprehensive income.
The Group reclassifies debt investments when and only when its business model for managing
those assets changes.
(b) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, being the date
on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the
rights to receive cash flows from the financial assets have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership.
(c) Measurements
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of
a financial asset not at fair value through profit or loss, transaction costs that are directly attributable
to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Group classifies its debt instruments:
 Amortised cost: Assets that are held for collection of contractual cash flows where those
cash flows represent solely payments of principal and interest are measured at amortised
cost. Interest income from these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on derecognition is recognised
directly in profit or loss and presented in “other gains/(losses), net” together with foreign
exchange gains and losses. Impairment losses are presented as separate line item in the
consolidated statements of profit or loss.
 Fair value through other comprehensive income (“FVOCI”): Assets that are held for
collection of contractual cash flows and for selling the financial assets, where the assets’
cash flows represent solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through OCI, except for the recognition of
impairment gains or losses, interest income and foreign exchange gains and losses which
are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in other comprehensive income (“OCI”) is reclassified
from equity to profit or loss and recognised in “other gains/(losses), net”. Interest income
from these financial assets is included in finance income using the effective interest rate
method. Foreign exchange gains and losses are presented in “other gains, net” and
impairment expenses are presented as separate line item in the consolidated statements of
comprehensive (loss)/income.
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 Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or
financial assets at fair value through other comprehensive income are measured at fair
value through profit or loss. A gain or loss on a debt investment that is subsequently
measured at fair value through profit or loss is recognised in profit or loss and presented
net within “other gains/(losses), net” in the period in which it arises.
Equity instruments
The Group subsequently measures all equity instruments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity instruments in other
comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or
loss following the derecognition of the investment. Dividends from such investments continue to be
recognised in profit or loss as “other income” when the Group’s right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss (“FVTPL”) are
recognised in “other (loss)/gains, net” in the consolidated statements of profit or loss as applicable.
Impairment losses (and reversal of impairment losses) on equity investments measured at fair value
through other comprehensive income are not reported separately from other changes in fair value.
(d) Impairment
The Group assesses on a forward looking basis the expected credit losses associated with its debt
instruments carried at amortised cost. The impairment methodology applied depends on whether there
has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which
requires expected lifetime losses to be recognised from initial recognition of the receivables.
For other financial assets, it is measured as either 12-month expected credit losses or lifetime
expected credit loss, depending on whether there has been a significant increase in credit risk since
initial recognition. If a significant increase in credit risk of a receivable has occurred since initial
recognition, then impairment is measured as lifetime expected credit losses.
2.2.7 Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date a derivative contract
is entered into and are subsequently remeasured to their fair value at the end of each reporting year. Changes
in fair value of derivative financial instruments are recognised in profit or loss.
2.2.8 Contract fulfillment costs/contract costs
Costs to fulfill a contract are capitalised if the costs relate directly to an existing contract or to a
specifically identifiable anticipated contract; generate or enhance resources that will be used to provide goods
or services in the future; and are expected to be recovered. Costs that relate directly to an existing contract or
to a specifically identifiable anticipated contract may include direct labor, direct materials, costs that are
explicitly chargeable to the customer and other costs that are incurred only because the Group entered into the
contract.
The asset recognised from capitalising the costs to obtain or fulfill a contract is amortised on a
systematic basis consistent with the pattern of the transfer of the goods or services to which the asset relates.
Capitalised costs might relate to an entire contract, or could relate only to specific performance obligations
within a contract. Impairment loss are recognised to the extent that the carrying amount of an asset exceeds
the remaining amount of consideration that the entity expects to receive, less the costs that relate directly to
providing those goods or services that have not been recognised as expenses.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 684 ---
2.2.9 Trade receivables
Trade receivables are amounts due from customers for the sale of goods or services performed in the
ordinary course of business. If collection of trade receivables is expected in one year or less (or any in the
normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented
as non-current assets.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless
they contain significant financing components, when they are recognised at fair value. The Group holds the
trade receivables with the objective to collect the contractual cash flows and therefore measures them
subsequently at amortised cost using the effective interest method. See Note 3.1(b) for further information
about the Group’s accounting for trade receivables and a description of the Group’s impairment policies.
2.2.10 Cash and cash equivalents
In the consolidated statements of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
2.2.11 Convertible redeemable preferred shares
Convertible redeemable preferred shares (“CRPS”) issued by the Company are redeemable at the option
of the holder upon occurrence of certain events. These instruments can also be converted into ordinary shares
of the Company at any time at the option of the holders, or automatically upon occurrence of an initial public
offering (the “IPO”) of the Company, see Note 32 for details.
The Group designated the CRPS as financial liabilities at fair value through profit or loss. They are
initially recognised at fair value. Any directly attributable transaction costs are recognised in profit or loss. Fair
value changes relating to market risk are recognised in profit or loss, the component of fair value changes
relating to the Company’s own credit risk is recognised in other comprehensive income. Amounts recorded in
other comprehensive income related to credit risk are not subject to recycling in profit or loss, but are
transferred to accumulated losses when realised.
The CRPS were classified as non-current liabilities unless the holders of the relevant CRPS can demand
the Company to redeem the CRPS in cash within 12 months after the end of the reporting period.
2.2.12 Borrowings and borrowing costs
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest
method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is
discharged, canceled or expired. The difference between the carrying amount of a financial liability that has
been extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.
General and specific borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalised during the period of time that is required to complete and
prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial
period of time to get ready for their intended use or sale.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 685 ---
2.2.13 Employee benefits
(a) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave
that are expected to be settled wholly within 12 months after the end of the period in which the
employees render the related service are recognised in respect of employees’ services up to the end of
the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
The liabilities are presented as current employee benefit obligations in the consolidated balance sheets.
(b) Pension obligations
Full-time employees in the PRC are covered by various government-sponsored defined
contribution pension plans under which the employees are entitled to a monthly pension based on certain
formulas. The relevant government agencies are responsible for the pension liability to these retired
employees. The Group contributes on a monthly basis to these pension plans. Under these plans, the
Group has no further payment obligation for post-retirement benefits beyond the contributions made.
Contributions to these plans are expensed as incurred and contributions paid to the defined-contribution
pension plans for an employee are not available to reduce the Group’s future obligations to such defined
contribution pension plans even if the employee leaves.
(c) Housing funds, medical insurances and other social insurances
Employees of the Group in the PRC are entitled to participate in various government supervised
housing funds, medical insurances and other social insurance plan. The Group contributes on a monthly
basis to these funds based on certain percentages of the salaries of the employees, subject to certain
ceiling. The Group’s liability in respect of these funds is limited to the contributions payable in each
year. Contributions to the housing funds, medical insurances and other social insurances are expensed
as incurred.
(d) Bonus entitlements
The expected cost of bonus payments is recognised as a liability when the Group has a present
legal or constructive obligation as a result of services rendered by employees and a reliable estimate of
the obligation can be made. Liabilities of bonus plan are expected to be settled within 12 months and
are measured at the amounts expected to be paid when they are settled.
(e) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal
retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The
Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no
longer withdraw the offer of those benefits; and (b) when the Group recognises costs for a restructuring
that is within the scope of IAS 37 and involves the payment of terminations benefits. In the case of an
offer made to encourage voluntary redundancy, the termination benefits are measured based on the
number of employees expected to accept the offer.
2.2.14 Share-based payments
The Group operates an equity-settled share-based compensation plan (i.e. share option scheme), under
which the Group receives services from employees, as consideration for equity instruments of the Company.
Share options granted to the grantees of the Group are measured at the grant date based on the fair value of
equity instruments and are recognised as an employee benefit expenses over the vesting period, which is the
period over which all of the specified vesting conditions are to be satisfied, with a corresponding increase in
equity as “equity-settled share-based compensation reserve”.
At the end of each reporting period, the Group revises its estimates of the number of options that are
expected to vest based on the non-market vesting and service conditions. It recognises the impact of the
revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 686 ---
The total amount to be expensed is determined by reference to the fair value of the options granted:
 including any market performance conditions (e.g. the entity’s share price),
 excluding the impact of any service and non-market performance vesting conditions (e.g.
profitability and remaining as an employee of the entity over a specified time period), and
 including the impact of any non-vesting conditions (e.g. the requirement for employees to save
or hold shares for a specific period of time).
2.2.15 Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that
the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the consolidated statements of profit
or loss over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current
liabilities as deferred government grants and are credited to profit or loss on a straight-line basis over the
expected lives of the related assets.
2.2.16 Revenue recognition
The Group provides (a) drug discovery solutions and (b) intelligence automation solutions to customers.
(a) Revenue from drug discovery solutions
The drug discovery solutions generally cover developmental stages from early hit generation to
investigational new drugs (“IND”) enabling studies for the initiation of Phase I clinical trials. The Group
customises generation of millions of hit molecules for a given target and utilises multi-dimensional
screening to optimise drug properties to ensure novelty and patentability of molecules, narrowing down
to a list of dozens of compounds from thousands of compounds.
(b) Revenue from intelligent automation solutions
The intelligent experimental automation solutions include solid-state R&D services and
automated chemical synthesis services and others.
(i) Solid-state R&D services
The solid-state R&D services include high-precision computational services and wet lab
experimental services. The computational services include crystal structure prediction (“CSP”),
morphology prediction, as well as screenings performed on conformers and carriers for
crystallisation. The experimental services encompass critical aspects of crystallisation process
development and crystal structure determination.
(ii) Automated chemical synthesis services and others
The application of automated chemical synthesis services can shorten the time required to
synthesize new molecules, enable efficient discovery of molecules with desired properties,
provide insights of chemical reactions for large-scale production, and reduce human errors.
Automated chemical synthesis services is provided on full time-equivalent (“FTE”) basis, the
Group provides its customer with a project team of employees dedicated to the chemical synthesis
with automated and AI platform for a specific period of time and charges the customer at a fixed
rate per employee. The Group also provides various other services to customers mainly includes
provision of artificial experimental services.
Revenue is measured at the fair value of the consideration received or receivable for the services in the
ordinary course of the Group’s activities and is recorded net of value-added tax (“V A T”). Revenue is shown,
net of discounts and after eliminating sales between the Group companies.
APPENDIX I ACCOUNTANT’S REPORT
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For the revenue from drug discovery solutions and solid-state R&D services, depending on the terms of
services to be delivered, the Group generally recognises the relevant revenue at point in time when it transfers
control of the relevant research results to a customer, being when the relevant research results are delivered
to the customer, the customer has full discretion over the results, and there is no unfulfilled obligation that
could affect the customer’s acceptance of the results.
However, there are certain special customised drug discovery solutions of which the Group is required
to timely deliver the discovery progress and results, revenue recognition of these services is over time based
on the input method. This method measures the Group’s efforts or inputs towards fulfilling a performance
obligation relative to the total expected inputs.
For the revenue from automated chemical synthesis services under FTE model, the Group generally
recognises its revenue over time as the customer simultaneously receives and consumes the services when the
Group performs its promised obligation of such services. For the artificial experimental services, the Group
recognise the revenue at point in time when the Group transfer the control of services result to a customers.
The Group accounts for revenue from contracts with customers, which includes the identification and
assessment of the services promised within a contract to evaluate which promises are distinct from each other.
Contracts with customers may include multiple performance obligations which are separately identifiable with
standalone selling prices of the services being provided to the customers. Services offered to different
customers varies according to customers’ needs. The transaction price generally includes fixed fees due at
contract inception as well as fixed fees payable at end of different services performed.
The Group generally determines standalone-selling prices for each individual distinct performance
obligation identified based on the prices charged to customers. If the standalone selling price is not directly
observable, it is estimated using expected cost plus a margin or adjusted market assessment approach,
depending on the availability of observable information, and considering the Group’s pricing policies and
market practices in making pricing decisions. Assumptions and estimations have been made in estimating the
relative stand-alone selling price of each distinct performance obligation, and changes in judgments on these
assumptions and estimates may affect the revenue recognition.
When either party to a contract has performed, the Group presents the contract in the consolidated
balance sheets as a contract asset or a contract liability, depending on the relationship between the entity’s
performance and the customer’s payment. A contract asset is the Group’s right to consideration in exchange
for services that the Group has transferred to a customer. A receivable is recorded when the Group has an
unconditional right to consideration. A right to consideration is unconditional if only the passage of time is
required before payment of that consideration is due.
Contract liabilities represent the cash collected upfront from the customers for purchase of services
while the underlying services have not yet been rendered to the customers. The contract liabilities are
recognised as revenues when the underlying services have been rendered to the customers.
(c) Non-cash transactions
In addition, the Group has been engaged in certain revenue transactions, in which the Group
offers services in exchange of non-cash consideration in term of equity interests of the counterparties.
The Group recognises revenue when it provides the services to the counterparties.
Any non-cash consideration received from a customer needs to be included when determining the
transaction price. Non-cash consideration is measured at fair value. If the Group cannot reasonably
estimate the fair value of the non-cash consideration, the Group measure the consideration indirectly by
reference to the stand-alone selling price of the goods or services promised to the customer (or class of
customer) in exchange for the consideration.
The Group measures the non-cash consideration at contract inception date at fair value based on
related fair value of the equity interests received or receivable the counterparties.
For the years ended December 31, 2021, 2022 and 2023, the Group recognised RMB14,819,000,
nil and nil, respectively revenue from non-cash transactions.
APPENDIX I ACCOUNTANT’S REPORT
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2.2.17 Leases
The Group mainly leases offices as lessee. Lease terms are negotiated on an individual basis and contain
various terms and conditions.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased
asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost.
The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a straight-line basis.
Lease payments to be made under reasonably certain extension options are also included in the
measurement of the liability.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities
include the net present value of the following lease payments:
 fixed payments (including in-substance fixed payments), less any lease incentives receivable;
 variable lease payment that are based on an index or a rate, initially measured using the index or
rate as at the commencement date.
Right-of-use assets are measured at cost comprising the following:
 the amount of the initial measurement of lease liabilities;
 any lease payments made at or before the commencement date less any lease incentives received;
 any initial direct costs; and
 restoration costs.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be
readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate
is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security
and conditions.
To determine the incremental borrowing rate, the Group:
 where possible, uses recent third-party financing received by the individual lessee as a starting
point, adjusted to reflect changes in financing conditions since third party financing was received;
 uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases
held by the Group, which does not have recent third party financing; and
 makes adjustments specific to the lease, e.g., term, country, currency and security.
Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit
or loss. Short-term leases are leases with a lease term of 12 months or less without a purchase option.
APPENDIX I ACCOUNTANT’S REPORT
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2.2.18 Current and deferred income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in assets and liabilities
attributable to temporary differences and to unused tax losses.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the places where the Group operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation
authority will accept an uncertain tax treatment. The Group measures its tax balances either based on
the most likely amount or the expected value, depending on which method provides a better prediction
of the resolution of the uncertainty.
(b) Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the Historical
Financial Information. However, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial
recognition of an asset or a liability in a transaction other than a business combination that at the time
of the transaction, affects neither accounting nor taxable profit or loss and does not give rise to equal
taxable and deductible temporary differences. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by the end of the reporting period and are
expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the
carrying amount and tax bases of investments in foreign operations where the Company is able to
control the timing of the reversal of the temporary differences and it is probable that the differences will
not reverse in the foreseeable future.
(c) Offsetting
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset
current tax assets and liabilities and where the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right
to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised
in other comprehensive income or directly in equity, respectively.
2.3 Summary of other accounting policies
2.3.1 Separate financial statements
Investments in subsidiaries and associate are accounted for at cost less impairment. Cost also includes
direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the
basis of dividend received and receivable.
Impairment testing of the investments in subsidiaries and associate is required upon receiving dividends
from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period
the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds
the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.
APPENDIX I ACCOUNTANT’S REPORT
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2.3.2 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker (the “CODM”), who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as the
Co-founders that make strategic decisions.
The Group has principally engaged in the business relating to drug discovery solutions (including
one-stop drug discovery solutions and automated chemical synthesis services) and intelligent automation
services.
The CODM reviews the consolidated result of operations when making decisions about allocating
resources and assess performance of the Group as a whole. The CODM assesses the performance of the
operating segments mainly based on revenue of each operating segment. Thus, segment result would present
revenues for each segment only, which is in line with the CODM’s performance review. For the purpose of
internal reporting and management’s operation review, the CODM considered that the Group’s business are
operated and managed as one single segment and no separate segment information was presented for the Track
Record Period.
2.3.3 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheets
when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on
a net basis or realise the asset and settle the liability simultaneously.
2.3.4 Restricted cash
Cash that restricted from withdrawal, use or pledged as security is reported separately on the face of the
consolidated balance sheets, and is not included in the total cash and cash equivalents in the consolidated
statements of cash flows. The Group’s restricted cash mainly represents security deposits held in designated
bank accounts as security deposits for derivative financial instruments.
2.3.5 Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net
of tax, from the proceeds.
Convertible redeemable preferred shares are classified as liabilities, see Note 2.2.11.
2.3.6 Provisions
Provisions for legal claims and service warranties are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that an outflow of resources will be required
to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future
operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required
to settle the present obligation at the end of the reporting period. The discount rate used to determine the
present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability. The increase in the provision due to the passage of time is recognised as interest
expense.
APPENDIX I ACCOUNTANT’S REPORT
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2.3.7 Loss per share
(a) Basic loss per share
Basic loss per share is calculated by dividing:
 The loss attributable to equity holders of the Company, excluding any costs of servicing
equity other than ordinary shares.
 By the weighted average number of ordinary shares outstanding during the financial
period, adjusted for bonus elements in ordinary shares issued during the period and
excluding treasury shares.
(b) Diluted loss per share
Diluted loss per share adjusts the figures used in the determination of basic loss per share to take
into account:
 The after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and
 The weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
2.3.8 Interest income
Interest income from FVTPL is included in “other gains/(losses), net”.
Interest income is presented as finance income where it is earned from financial assets that are held for
cash management purposes. Any other interest income from term deposits is included in finance income.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of a
financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired
financial assets, the effective interest rate is applied to the net carrying amount of the financial asset (after
deduction of the loss allowance).
3 FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks, primarily the market risk (including foreign
exchange risk, cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk. The Group’s
overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised assets and
liabilities are denominated in a currency that is not the Group entities’ functional currency. The
Company’s functional currency is US$. The Company’s primary subsidiaries were incorporated in the
PRC and these subsidiaries considered RMB as their functional currency.
The Group manages its foreign exchange risk by performing regular reviews of the Group’s net
foreign exchange exposures and may enter into certain forward foreign exchange contracts, when
necessary, to manage its exposure against US$ and to mitigate the impact on exchange rate fluctuations.
During the Track Record Period, the Group had entered into certain forward foreign currency contracts,
details of which are further presented in Note 31.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 692 ---
As at December 31, 2021, 2022 and 2023, the carrying amounts of the Group’s foreign currency
denominated monetary assets presented in RMB are as follows:
Functional
currency
Foreign
currency
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
US$ RMB 3,475 196,550 47,273
RMB US$ 186,010 69,106 13,131
The Group is primarily exposed to changes in RMB/US$ exchange rates in its subsidiaries whose
functional currency is RMB or US$. If RMB had strengthened/weakened by 5% against US$ with all
other variables held constant, the post-tax loss would have been RMB6,838,000 higher/lower,
RMB5,172,000 lower/higher and RMB1,481,000 lower/higher, for the years 2021, 2022 and 2023,
respectively.
(ii) Cash flow and fair value interest rate risk
The Group’s income and operating cash flows are substantially independent of changes in market
interest rates and the Group has no significant interest-bearing assets and liabilities except for cash and
cash equivalents, term-deposits and borrowings from bank, and details of which have been disclosed in
Note 26, Note 25 and Note 29, respectively.
The Group’s cash and cash equivalents, term-deposits and borrowings were carried at fixed rates
and expose the Group to fair value interest rate risk, therefore the changes in market interest rates will
not result in any impact to the Group’s income and operating cash flows.
(iii) Price risk
The Group’s exposure to price risk arises from investments held by the Group and classified in
the balance sheets at FVTPL, including equity that designated as FVTPL. The Group is generally not
exposed to commodity price risk. The sensitivity analysis of these investments have been disclosed in
Note 3.3.
(b) Credit risk
Credit risk mainly arises from cash and cash equivalent, restricted cash, term deposits, as well as credit
exposures on trade receivables and other receivables and deposits.
(i) Risk management
Credit risk is managed on a group basis. Cash and cash equivalent, restricted cash, term deposits
and wealth management products are mainly placed with reputable financial institutions in the PRC,
which management considers being of high credit quality. For trade and other receivables, the Group
assesses the credit quality of the receivables by taking account of various factors, including past
operational and financial performance and other factors.
(ii) Impairment of financial assets
The Group has following types of financial assets that are subject to the expected credit loss
model:
 Trade receivables
 Term deposits
 Cash and cash equivalent
 Restricted cash
 Other receivables and deposits
APPENDIX I ACCOUNTANT’S REPORT
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--- page 693 ---
Trade receivables
As at December 31, 2021, 2022 and 2023, trade receivables were mainly due from customers. The
credit quality of these counterparties are assessed on a regular basis, which takes into account their
financial position, past experience and other factors.
The Group applies the IFRS 9 simplified approach to measure expected credit losses which uses
a lifetime expected loss allowance for all trade receivables.
Management considers the nature of business of its customers, the default rates given by external
research over the expected lives of the debtors, repayment and default histories of different customers
or industries to assess the credit risk characteristics and the likelihood of loss allowance of its
customers. The Group uses probability of default (PD), exposure at default (EAD) and loss given default
(LGD) to measure the credit risk and expected credit loss rates for its customers.
The historical loss rates are also adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of the customers to settle the receivables.
On that basis, the credit loss allowance as at December 31, 2021, 2022 and 2023 was determined
as follows for trade receivables:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Provision on collective basis
Expected credit loss rate 2.84% 4.46% 4.51%
Gross carrying amount (RMB’000) 31,615 39,708 40,326
Credit loss allowance (RMB’000) (898) (1,772) (1,820)
Impairment losses on trade receivables are presented as credit loss allowance within operating
loss. Subsequent recoveries of amounts previously written off are credited against the same line item.
Movements on the Group’s credit loss allowance for trade receivables are as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Loss allowance
At beginning of the year 225 898 1,772
Increase in loss allowance recognised in the
consolidated statements of profit or loss 673 874 48
At end of the year 898 1,772 1,820
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators
that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to
engage in a repayment plan with the Group, and a failure to make contractual payment.
(iii) Other financial assets at amortised cost
Credit risk also arises from term deposits, cash and cash equivalents and restricted cash, as well
as credit exposures on other receivables. The carrying amount of each class of these financial assets
represents the Group’s maximum exposure to credit risk in relation to the corresponding class of
financial assets.
APPENDIX I ACCOUNTANT’S REPORT
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Other receivables and deposits mainly include deposits, loans to third parties and receivables
from issue of convertible redeemable preferred shares. The management of the Group makes periodic
collective assessments as well as individual assessment on the recoverability of other receivables based
on historical settlement records and past experiences. The Group measures credit risk using probability
of default, exposure at default and loss given default. This is similar to the approach used for the
purposes of measuring expected credit loss under IFRS 9.
For impairment on other receivables and deposits, it is measured as either 12-month expected
credit losses or lifetime expected credit loss, depending on whether there has been significant increase
in credit risk since initial recognition. Other financial assets that are not credit-impaired on initial
recognition are classified in ‘Stage 1’ and the expected credit losses are measured as 12-month expected
credit losses. If a significant increase in credit risk of other financial asset has occurred since initial
recognition, the financial asset is moved to ‘Stage 2’ but is not yet deemed to be credit-impaired. The
expected credit losses are measured as lifetime expected credit loss. If any financial asset is
credit-impaired, it is then moved to ‘Stage 3’ and the expected credit loss is measured as lifetime
expected credit loss. Management makes periodic collective assessments as well as individual
assessment on these financial assets based on historical settlement records and past experience. As at
December 31, 2021, 2022 and 2023, the recoverability of an amount due from an associate, which is in
significant financial difficulty, of RMB2,400,000 was uncertain and full impairment provision was
made. Such provision was written off during the year ended December 31, 2023 as the relevant payment
was over due for more than 3 years. The managements believed that there was no material credit risk
in the remaining balances of other receivables and deposits and the expected credit loss is close to zero.
On that basis, movements on the Group’s credit loss allowance for other receivables are as
follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Loss allowance
At beginning of the year 2,603 2,603 2,400
Increase in loss allowance recognised in the
consolidated statements of profit or loss – – 169
Written off as uncollectible – (203) (2,400)
At end of the year 2,603 2,400 169
Other receivables and deposits are written off when there is no reasonable expectation of
recovery.
(c) Liquidity risk
The Group aims to maintain sufficient cash and cash equivalents. Due to the dynamic nature of the
underlying business, the Group’s finance department maintains flexibility in funding by maintaining adequate
cash and cash equivalents.
Cash flow forecasting is performed by the finance department of the Group. The finance department of
the Group monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to
meet operational needs as well as the liabilities to other parties.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the
remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are
the contractual undiscounted cash flows. The financial liabilities at fair value through profit or loss are
managed on a fair value basis rather than by maturing dates and not included in the following table.
Details of convertible redeemable preferred shares at fair value through profit or loss are presented in
Note 32.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 695 ---
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over
5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2021
Trade payables 10,573 – – – 10,573
Other payables and
accruals (excluding
non-financial liabilities) 47,000 280 – – 47,280
Borrowings 23,453 11,217 – – 34,670
Lease liabilities 21,362 16,053 31,192 50,556 119,163
Derivative financial
instruments 81 1––– 8 1 1
103,199 27,550 31,192 50,556 212,497
As at December 31, 2022
Trade payables 13,979 – – – 13,979
Other payables and
accruals (excluding
non-financial liabilities) 30,415 8,638 – – 39,053
Borrowings 36,848 – – – 36,848
Lease liabilities 27,697 11,326 30,364 40,221 109,608
Derivative financial
instruments 2,53 1––– 2,531
111,470 19,964 30,364 40,221 202,019
As at December 31, 2023
Trade payables 13,654 – – – 13,654
Other payables and
accruals (excluding
non-financial liabilities) 53,428 – – – 53,428
Borrowings 61,085 – – – 61,085
Lease liabilities 65,468 35,419 103,288 12,520 216,695
Derivative financial
instruments 56 0––– 5 6 0
194,195 35,419 103,288 12,520 345,422
3.2 Capital risk management
The Group’s objectives on managing capital are to safeguard the Group’s ability to continue as a going concern
and support the sustainable growth of the Group in order to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to enhance shareholders’ value in the long term. The Group
monitors capital (including share capital, share premium and preferred shares on an as-if-converted basis) by
regularly reviewing the capital structure. As part of this review, the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
As at December 31, 2021, 2022 and 2023, the directors of the Company consider that the capital risk of the
Group is minimal as the Group’s capital structure is mainly financed by ordinary and preferred shares with net cash
during the Track Record Period.
APPENDIX I ACCOUNTANT’S REPORT
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3.3 Fair value estimation
The Group’s financial instruments carried at fair value at each reporting date are measured by level of the
inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a fair
value hierarchy as follows:
 Level 1: The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and equity securities) is based on quoted market prices at the end of the reporting period.
The quoted market price used for financial assets held by the Group is the current bid price. These
instruments are included in level 1.
 Level 2: The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques which maximise the use of
observable market data and rely as little as possible on entity-specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is included in level 2.
 Level 3: If one or more of the significant inputs is not based on observable market data, the instrument
is included in level 3. This is the case for unlisted equity securities.
The following table presents the Group’s financial assets and financial liabilities that are measured at fair value
at December 31, 2021, 2022 and 2023:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
At December 31, 2021
Financial assets
Financial assets at fair value through
profit or loss
– Investment in the unlisted entities – – 170,258 170,258
Financial liabilities
Financial liabilities at fair value
through profit or loss
– Derivative financial instruments – 811 – 811
– Convertible redeemable preferred
shares – – 7,701,279 7,701,279
– 811 7,701,279 7,702,090
At December 31, 2022
Financial assets
Financial assets at fair value through
profit or loss
– Investment in the unlisted entities – – 211,465 211,465
– Investment in a listed entity 69,814 – – 69,814
– Wealth management products – – 356,361 356,361
– Investment in a convertible debt – – 3,250 3,250
69,814 – 571,076 640,890
APPENDIX I ACCOUNTANT’S REPORT
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--- page 697 ---
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial liabilities
Financial liabilities at fair value
through profit or loss
– Derivative financial instruments – 2,531 – 2,531
– Convertible redeemable preferred
shares – – 9,320,782 9,320,782
– 2,531 9,320,782 9,323,313
At December 31, 2023
Financial assets
Financial assets at fair value through
profit or loss
– Investment in the unlisted entities – – 316,161 316,161
– Investment in a listed entity 40,267 – – 40,267
– Wealth management products – – 863,368 863,368
– Investment in convertible debts – – 67,595 67,595
40,267 – 1,247,124 1,287,391
Financial liabilities
Financial liabilities at fair value
through profit or loss
– Derivative financial instruments – 560 – 560
– Convertible redeemable preferred
shares – – 10,780,342 10,780,342
– 560 10,780,342 10,780,902
Details of convertible redeemable preferred shares and other financial liabilities are disclosed in Note 32.
There were no transfers between level 1, 2 and 3 of fair value hierarchy classifications during the Track Record
Period.
(a) Financial instruments in Level 1 and Level 2
The fair value of financial instruments traded in active markets is based on quoted market prices at the
consolidated statement of financial position date. A market is regarded as active if quoted prices are readily
and regularly available from an exchange, dealer, broker, industry group, price services or regulatory agency,
and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The
quoted market price used for financial assets held by the Group is the current bid price. These instruments are
included in level 1. Instruments included in level 1 comprised investments in listed instruments classified as
financial assets at FVTPL.
The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable
market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in level 2. Instruments included in level 2
comprised derivative financial instruments.
APPENDIX I ACCOUNTANT’S REPORT
– I-35 –


--- page 698 ---
(b) Financial instruments in Level 3
If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.
Specific valuation techniques used to value financial instruments include:
 the use of quoted market prices or dealer quotes for similar instruments,
 discounted cash flow analysis, and
 observable and unobservable inputs, including discount rate, risk-free interest rate, discount for
lack of marketability (“DLOM”), and expected volatility, etc.
Level 3 instruments of the Group’s assets and liabilities include investments in unlisted entities, wealth
management products, convertible debt, other financial liabilities and convertible redeemable preferred shares
at fair value through profit or loss.
The following table presents the changes in level 3 items including investments in unlisted companies,
investments in wealth management products and investment in convertible debt at fair value through profit or
loss for the Track Record Period:
Investments
in unlisted
companies at
fair value
through profit
or loss
Investments
in wealth
management
products at
fair value
through profit
or loss
Investment in
convertible
debt at fair
value through
profit or loss
RMB’000 RMB’000 RMB’000
At January 1, 2021 63,065 – –
Additions 99,289 – –
Change in fair value through profit or loss 10,360 – –
Currency translation differences (2,456) – –
At December 31, 2021 and
January 1, 2022 170,258 – –
Additions 31,645 2,273,473 3,250
Disposals – (1,911,754) –
Change in fair value through profit or loss (5,166) (5,389) –
Currency translation differences 14,728 31 –
At December 31, 2022 and
January 1, 2023 211,465 356,361 3,250
Additions 31,791 2,781,650 63,744
Disposals (11,537) (2,279,405) –
Transfer from investment in an associate
(Note 19) 70,249 – –
Change in fair value through profit or loss 10,340 9,173 598
Currency translation differences 3,853 (4,411) 3
At December 31, 2023 316,161 863,368 67,595
APPENDIX I ACCOUNTANT’S REPORT
– I-36 –


--- page 699 ---
Description
Fair value at
Unobservable inputs
Range of inputs Relationship of
unobservable inputs to
fair value
As at December 31, As at December 31,
2021 2022 2023 2021 2022 2023
RMB’000 RMB’000 RMB’000
Unlisted equity
securities (i)
49,643 57,728 151,237 Risk-free rate 1.22%-2.49% 1.45%-2.49% 1.45%-2.39% The higher the risk-free
rate, the lower the fair
value.
Expected volatility 67%-75% 67%-75% 66%-75% Depends on rights and
restrictions of shares
held by the Group.
A series of Unlisted
preferred shares and
ordinary shares
120,615 153,737 164,924 Latest transaction
price
N/A N/A N/A The higher the recent
transaction price, the
higher the fair value.
A series of Convertible
bonds (ii)
– 3,250 67,595 Latest transaction
price
N/A N/A N/A The higher the recent
transaction price, the
higher the fair value.
Wealth management
products
– 356,361 863,368 Expected rate of
return
N/A 1.30%-3.05% 2.35%-5.71% The higher the expected
rate of return, the
higher the fair value.
Notes:
(i) Increase in the balance as of December 31, 2023 included a transfer from investment in an associate measured at fair value of RMB70,249,000 upon tra nsfer during the
year (Note 19).
(ii) Increase in the balance as of December 31, 2023 was mainly due to the new investment made during the year (Note 20).
APPENDIX I ACCOUNTANT’S REPORT
– I-37 –


--- page 700 ---
Investments in unlisted equity securities as stated above are measured at fair value, including the
investment in an investee reclassified from investments in associates to financial assets at fair value through
profit or loss, measured at fair value of RMB70,249,000 during the year ended December 31, 2023, using
certain valuation techniques, with the assistant of external valuer, to determine their fair value. As these
investees are still at early development stage without generated predicable cash flows and have multiple
classes of equity, the Group adopted Back-solve Approach to determine the fair value of each investee at a
whole based on the valuation of their respective recent round of financing considered conducted on arm’s
length bases. Thereafter, the Group further adopted Equity Allocation Method to determine the fair value of
the instrument held by the Group. The key valuation assumptions used to determine the fair value included
risk-free rate, expected volatility, as well as expected probability of initial public offering, liquidation or
redemption. Changes in fair value of investments in unlisted entities were recorded in “Other gains/(losses),
net”.
The Group performed sensitivity test on risk-free interest rate and volatility, if the risk-free interest rate
had increased/decreased by 10% with all other variables held constant, the estimated fair value for the years
ended December 31, 2021, 2022 and 2023 would have been approximately RMB73,000 lower/higher,
RMB135,000 lower/higher and RMB143,000 lower/higher, respectively.
If the volatility had increased/decreased by 10% with all other variables held constant, the estimated fair
value for the years ended December 31, 2021, 2022 and 2023 would have been approximately RMB1,456,000
lower/higher, RMB1,771,000 lower/higher and RMB1,773,000 lower/higher, respectively.
Investments in wealth management products are measured at fair value through profit or loss. If the fair
value had increased/decreased by 1%, the loss before income tax for the years ended December 31, 2021, 2022
and 2023 would have been approximately nil, RMB3,564,000 lower/higher and RMB8,634,000 lower/higher,
respectively.
Details of the movements and significant observable inputs used in convertible redeemable preferred
shares and other financial liabilities are set out in Note 32.
(c) Financial instruments at amortised cost
The carrying amounts of the Group’s other financial assets measured at amortised costs, including term
deposits, cash and cash equivalents, restricted cash, trade receivables, other receivables and deposits and the
Group’s financial liabilities, including trade payables, other payables and accruals, approximate their fair
values due to their short maturities.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of Historical Financial Information requires the use of accounting estimates which, by
definition, will seldom equal the actual results. Management also needs to exercise judgment in applying the group’s
accounting policies.
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of
items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong.
Detailed information about each of these estimates and judgments is included in other notes together with information
about the basis of calculation for each affected line item in the financial statements. In addition, this note also
explains where there have been actual adjustments this year as a result of an error and of changes to previous
estimates.
(a) Impairment assessment of non-financial assets
Non-financial assets, mainly including property, plant and equipment, right-of-use assets, intangible assets and
investments accounted for using equity method, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts have been
determined based on value-in-use calculations or fair value less costs to disposal. These calculations require the use
of judgments and estimates.
Management judgment is required in the area of asset impairment particularly in assessing: (i) whether an
event has occurred that may indicate that the related asset values may not be recoverable; (ii) whether the carrying
value of an asset can be supported by the recoverable amount, being the higher of fair value less costs to sell and
net present value of future cash flows which are estimated based upon the continued use of the asset in the business;
(iii) the selection of the most appropriate valuation technique, e.g. the market approach, the income approach, as well
as a combination of approaches, including the adjusted net asset method; and (iv) the appropriate key assumptions
to be applied in preparing cash flow projections including whether these cash flow projections are discounted using
an appropriate rate. Changing the assumptions selected by management in assessing impairment, including the
discount rates or the growth rate assumptions in the cash flow projections, could materially affect the net present
value used in the impairment test and as a result affect the Group’s financial condition and results of operations. If
there is a significant adverse change in the projected performance and resulting future cash flow projections, it may
be necessary to take an impairment charge to the consolidated statements of profit or loss.
APPENDIX I ACCOUNTANT’S REPORT
– I-38 –


--- page 701 ---
(b) Fair value measurement of financial assets and liabilities at fair value through profit or loss
As disclosed in Note 2.2.6, Note 2.2.7, Note 2.2.11, the Group recognised the financial assets and liabilities
at fair value at recognition date as well as at each subsequent recording date. The fair value of financial instruments
that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to
select methods and make assumptions that are mainly based on market conditions existing at the end of each reporting
period. Changes in these assumptions and estimates could materially affect the respective fair value of these financial
instruments.
(c) Current and deferred income taxes
The Group is subject to income taxes in the PRC and other jurisdictions. Judgment is required in determining
the provision for income taxes in each of these jurisdictions. There are transactions and calculations during the
ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such differences will impact the income tax
and deferred income tax provisions in the period in which such determination is made.
Deferred tax assets relating to certain temporary differences and tax losses are recognised when management
considers it is probable that future taxable profits will be available against which the temporary differences or tax
losses can be utilised. Deferred tax liabilities relating to temporary differences between the carrying amount and tax
bases of investments in foreign operations are not recognised where the Company is able to control the timing of the
reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
When the expectation is different from the original estimate, such differences will impact the recognition of deferred
tax assets/liabilities and taxation charges in the period in which such estimate is changed.
(d) Share-based compensation arrangements
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is estimated using a model which requires
the determination of the appropriate inputs. In addition, the Group has to estimate the expected yearly percentage of
grantees that will stay within the Group at the end of vesting periods of the options in order to determine the amount
of share-based compensation expenses charged to the consolidated statement of profit or loss. The assumptions and
models used for estimating the fair value of share-based payment transactions are disclosed in Note 35.
The Group estimate the expected forfeiture rate at the end of vesting periods (“Forfeiture Rate”) of the share
options granted in order to determine the amount of share-based payment expenses charged to profit or loss. The
Forfeiture Rate of the share options of the Group to grantees were assessed to be ranging from 8.3% to 15.0% during
the Track Record Period.
(e) Contractual arrangements
As disclosed in Note 1, the Group exercises control over certain Structured Entities and has the right to
recognise and receive substantially all the economic benefits from them through the Contractual Arrangements prior
to July 21, 2021. The Directors consider that the Group controls these Structured Entities notwithstanding that it does
not have direct or indirect legal ownership in equity of these entities as the Group has power over the financial and
operating policies of these entities and receives substantially all the economic interest returns generated from the
business activities of these entities through these Contractual Arrangements. Accordingly, all these Structured
Entities are accounted for as controlled structured entities and their financial statements have also been consolidated
by the Company throughout the period before July 12, 2021.
Nevertheless, the Contractual Arrangements may not be as effective as direct legal ownership in providing the
Group with direct control over the Structured entities. Uncertainties presented by the PRC legal system could impede
the Group’s beneficiary rights of the results, assets and liabilities of the Structured entities. Significant judgment is
involved in determining whether the Group is able to control these entities through these Contractual Arrangements.
The Directors of the Company, after taking into account of the advice from its external legal advisors, consider that
the Contractual Arrangements entered into by the Group are in compliance with the relevant PRC laws and
regulations and are therefore legally binding and enforceable.
APPENDIX I ACCOUNTANT’S REPORT
– I-39 –


--- page 702 ---
5 REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue disaggregated by revenue source as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Drug discovery solutions 39,346 87,666 87,728
Intelligent automation solutions 23,453 45,687 86,692
62,799 133,353 174,420
Timing of revenue recognition:
A point in time 62,799 116,906 130,760
Over time – 16,447 43,660
62,799 133,353 174,420
Revenue disaggregated by geography, based on the billing address of the customers is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
PRC 45,769 101,404 108,451
United States 13,525 25,817 52,245
Other regions 3,505 6,132 13,724
62,799 133,353 174,420
Revenue from external customers contributing over 10% to the total revenue of the Group during the Track
Record Periods is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Customer A N/A* 33,019 N/A*
Customer B 15,094 N/A* N/A*
Customer C 12,696 N/A* N/A*
Customer D N/A* N/A* 21,048
* Less than 10% of the total revenue of the Group in the respective year.
APPENDIX I ACCOUNTANT’S REPORT
– I-40 –


--- page 703 ---
(a) Contracts costs recognised from costs to fulfill contracts
The balance represents the costs recognised to fulfill several research and development service contracts. The
movement of the balance is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
At beginning of the year 1,365 17,051 33,280
Costs incurred to fulfill contracts 29,309 61,731 89,777
Amortisation as contract fulfillment costs (13,623) (45,502) (85,166)
At end of the year 17,051 33,280 37,891
(b) Contract liabilities related to contracts with customers
Contract liabilities have increased due to the negotiation of larger prepayments and an increase in numbers of
contract signed.
During the Track Record Period, revenue recognised in relation to contract liabilities that was included in the
contract liabilities at the beginning of the year is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Revenue recognised that was included in the
contract liabilities at beginning of the year 4,838 9,871 13,041
The unsatisfied performance obligations arising from the contract with customers, mainly fixed-price
contracts, is as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Within one year 9,871 15,519 25,658
6 EXPENSE BY NATURE
Expenses included in research and development expenses, general and administrative expenses, contract
fulfillment costs and selling and marketing expenses are analysed as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Employee benefit expenses (Note 12) 224,213 420,575 591,202
Network and cloud service expenses 33,808 38,708 37,279
Short-term rental and utilities 7,180 5,379 13,695
Office expense 13,098 13,596 8,262
Sample material costs 14,493 51,948 58,379
Professional service fees 66,126 34,433 50,489
Listing expenses – – 20,575
Auditor’s remuneration 5,823 4,306 2,380
Depreciation of property, plant and equipment
(Note 15) 12,396 47,974 70,812
Depreciation of right-of-use assets (Note 16) 9,657 17,365 45,232
Property management fees 7,227 15,271 25,217
Amortisation of intangible assets (Note 17) 1,080 3,706 5,678
Others 11,964 17,785 36,110
407,065 671,046 965,310
APPENDIX I ACCOUNTANT’S REPORT
– I-41 –


--- page 704 ---
7 OTHER INCOME
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Government grants 8,625 21,367 27,513
The Group received certain financial subsidies from local government authorities with certain specified
conditions.
8 OTHER GAINS/(LOSSES), NET
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Net foreign exchange gains/(losses) 9,426 5,911 (40,368)
Gains/(losses) on derivative financial instruments 19,026 (5,159) 4,232
Net fair value changes on financial assets
measured at FVTPL (Note 20) 10,360 (9,623) (4,375)
Gain on a transfer of investment in an associate
to financial assets measured at FVTPL
(Note 19) – – 70,249
Gains on termination of lease (a) – – 13,686
Others (1,930) 757 (2,142)
36,882 (8,114) 41,282
(a) During the year ended December 31, 2023, the Group recognised an one-off gain of RMB13,686,000
from the termination of lease contracts due to the lessor’s failure to deliver the agreed-upon renovation
of the Lab, resulting in mutual termination of the lease contract.
9 FINANCE INCOME, NET
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Finance income
– Interest income from bank deposits 14,055 50,478 102,693------------ ------------ ------------
Finance expenses
– Interest expenses on lease liabilities (1,885) (4,347) (8,030)
– Interest expenses on bank borrowings (1,690) (1,399) (1,545)
(3,575) (5,746) (9,575)------------
------------ ------------
Finance income, net 10,480 44,732 93,118
APPENDIX I ACCOUNTANT’S REPORT
– I-42 –


--- page 705 ---
10 INCOME TAX EXPENSE
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Current income tax – – –
Deferred income tax – – –
–––
The Group’s principal applicable taxes and tax rates are as follows:
Cayman Islands
The Company and subsidiaries were incorporated in the Cayman Islands as exempted companies with limited
liability under the Companies Act of the Cayman Islands and are not subject to the Cayman Islands income tax
pursuant to the current laws of the Cayman Islands.
Hong Kong
The subsidiaries in Hong Kong are subject to Hong Kong profit tax at a rate of 16.5% during the Track Record
Periods.
United States
The subsidiaries in the United States are subject to Federal Tax at a rate of 21% and State Tax at a rate of 8.00%
during the Track Record Period.
PRC
The Group’s subsidiaries established in the PRC are generally subject to Corporate Income Tax (“CIT”) at a
rate of 25% on the estimated assessable profit in accordance with relevant PRC income tax laws, subject to
preferential tax treatments available to certain qualified enterprises during the Track Record Periods.
Shenzhen Jingtai and Beijing Jingtai were approved as “High and New Technology Enterprise” and entitled to
a preferential income tax rate of 15% during the Track Record Period. Certain subsidiaries of the Group in the PRC
have been granted certain tax concessions for small scale entities by tax authorities in the PRC and enjoy reduced
tax rates.
APPENDIX I ACCOUNTANT’S REPORT
– I-43 –


--- page 706 ---
The reconciliation between the Group’s income tax expenses and the amount which is calculated based on the
statutory income tax rate of 25% in the PRC is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Loss before income tax (2,137,332) (1,438,617) (1,906,323)
Tax calculated at tax rate of 25% (534,333) (359,654) (476,581)
Effect of different tax rates applicable to different
companies within the Group 460,593 253,586 318,745
Effect of preferential income tax rate of subsidiaries 20,465 18,643 49,049
Super deduction for research and development
expenses (18,314) (40,184) (61,196)
Income not subject to tax (6,188) (6,786) (30,130)
Items not deductible for tax purposes 9,979 28,842 23,600
Temporary differences for which no deferred assets
were recognised 1,144 2,275 4,428
Tax losses for which no deferred tax assets was
recognised 66,654 105,982 172,085
Utilization of tax losses – (2,704) –
–––
The Group only recognises deferred tax assets for cumulative tax losses if it is probable that future taxable
amounts will be available to utilise those tax losses. Management will continue to assess the recognition of deferred
tax assets in future reporting periods.
As at December 31, 2021, 2022 and 2023, the Group had unrecognised tax losses to be carried forward against
future taxable income amounted to RMB789,189,000, RMB1,345,414,000 and RMB2,580,566,000 respectively.
These unrecognised tax losses will mainly expire within 5 to 10 years. As at December 31, 2021, 2022 and 2023, the
potential deferred tax assets in respect of the above unrecognised tax losses amounted to RMB136,877,000,
RMB240,152,000 and RMB463,196,000, respectively.
11 LOSS PER SHARE
(a) Basic loss per share
Basic loss per share for the Track Record Period are calculated by dividing the loss attributable to equity
holders of the Company by the weighted average number of ordinary shares in issue during the respective year.
Y ear ended December 31,
2021 2022 2023
Loss attributable to equity holders of the
Company (RMB’000) 2,137,288 1,438,507 1,914,384
Weighted average number of ordinary shares
in issue (thousand shares) 482,272 483,979 483,979
Basic loss per share (expressed in RMB
per share) (4.43) (2.97) (3.96)
APPENDIX I ACCOUNTANT’S REPORT
– I-44 –


--- page 707 ---
(b) Diluted loss per share
During the Track Record Period, the Company’s dilutive potential ordinary shares included CRPS and other
financial liabilities (Note 32) and share options (Note 35).
Diluted loss per share presented is the same as the basic loss per share as the inclusion of the potential ordinary
shares in the calculation of dilutive loss per share would be anti-dilutive.
12 EMPLOYEE BENEFIT EXPENSES
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Wages, salaries and bonuses 163,075 303,454 371,265
Pensions costs and housing benefits 26,356 59,948 82,628
Share-based compensation expenses (Note 35) 22,482 43,384 88,426
Other employee benefits and costs (Note) 19,290 21,152 52,011
231,203 427,938 594,330
Less: employee benefit expenses capitalised as
cost to fulfill revenue contracts (6,990) (7,363) (3,128)
224,213 420,575 591,202
Note: Employment rightsizing expenses included in other employee benefits and costs have been charged to
general and administrative expenses of the consolidated statements of profit or loss.
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Charged to:
Research and development expenses 112,563 209,706 273,971
General and administrative expenses 73,635 132,990 190,677
Contract fulfillment costs 18,206 47,856 85,446
Selling and marketing expenses 19,809 30,023 41,108
224,213 420,575 591,202
Pensions costs, housing benefits and other employee benefits
As stipulated by rules and regulations in the PRC, the Group contributes to state-sponsored retirement schemes
for its employees in the PRC. The Group’s employees make monthly contributions to the schemes certain percentage
of the relevant income (comprising wages, salaries, allowances and bonus, and subject to maximum caps), while the
Group also contributes certain percentage of such relevant income, subject to certain ceiling and has no further
obligations for the actual payment of post-retirement benefits beyond the contributions. The state-sponsored
retirement schemes are responsible for the entire post-retirement benefit obligations payable to the retired employees.
APPENDIX I ACCOUNTANT’S REPORT
– I-45 –


--- page 708 ---
(a) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group for the years ended December 31,
2021, 2022 and 2023 including three directors in each year, whose emoluments are reflected in the analysis
shown in Note 13. The emoluments paid and payables to the remaining individuals during the Track Record
Period are as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Wages, salaries and bonuses 6,331 7,123 5,832
Pensions costs and housing benefits 195 237 151
Share-based compensation expenses 2,304 6,151 17,443
8,830 13,511 23,426
The remunerations of the highest paid non-director individuals during the Track Record Period fell
within the following bands:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Emolument band (in HK$)
HKD3,500,001 to HKD4,000,000 1 – –
HKD5,000,001 to HKD5,500,000 – 1 –
HKD6,000,001 to HKD6,500,000 1 – –
HKD7,500,001 to HKD8,000,000 – – 1
HKD10,000,001 to HKD10,500,000 – 1 –
HKD17,500,001 to HKD18,000,000 – – 1
222
During the Track Record Period, no emoluments have been paid to the five highest paid individuals of
the Group as an inducement to join or upon joining the Group or as compensation for loss of office.
13 DIRECTORS’ EMOLUMENTS
The emoluments of each director during the Track Record Period are as follows:
Director’s
fee Salaries
Discretionary
bonuses
Pension
costs – defined
contribution
plans
Share-based
compensation
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Y ear ended December 31, 2021
Directors
Dr. Wen Shuhao (Note (i)) – 2,791 1,311 115 7,063 11,280
Dr. MA Jian (Note (ii)) – 1,793 694 88 5,262 7,837
Dr. LAI Lipeng – 1,775 694 88 3,759 6,316
Dr. JIANG Yide Alan – 1,613 500 374 8 2,495
Ms. GU Cuiping – – – – – –
Mr. HUANG Xiaolu – – – – – –
Mr. XIAO Hongda – – – – – –
Mr. LIU Qin – – – – – –
Ms. XU Juan (Note (iii)) –– – – – –
Ms. SHU Wanting – – – – – –
– 7,972 3,199 665 16,092 27,928
APPENDIX I ACCOUNTANT’S REPORT
– I-46 –


--- page 709 ---
Director’s
fee Salaries
Discretionary
bonuses
Pension
costs – defined
contribution
plans
Share-based
compensation
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Y ear ended December 31, 2022
Directors
Dr. Wen Shuhao (Note (i)) – 3,044 989 123 12,612 16,768
Dr. MA Jian (Note (ii)) – 2,518 989 123 9,396 13,026
Dr. LAI Lipeng – 2,686 889 120 6,713 10,408
Dr. JIANG Yide Alan – 1,854 433 425 8 2,720
Mr. HUANG Xiaolu (Note (iv)) – 1,416 758 64 – 2,238
Ms. GU Cuiping – – – – – –
Mr. XIAO Hongda (Note (v)) –– – – – –
Mr. LIU Qin – – – – – –
Ms. SHU Wanting – – – – – –
Mr. HAO Rui (Note (vi)) –– – – – –
Mr. LIU Y ang (Note (vii)(ix)) – 817 239 50 70 1,176
Mr. LU Hai (Note (viii)) –– – – – –
– 12,335 4,297 905 28,799 46,336
Y ear ended December 31, 2023
Directors
Dr. Wen Shuhao (Note (i)) – 2,979 502 129 36,573 40,183
Dr. MA Jian (Note (ii)) – 4,050 502 121 11,258 15,931
Dr. LAI Lipeng – 3,959 502 126 8,042 12,629
Dr. JIANG Yide Alan – 1,864 107 109 7 2,087
Mr. HUANG Xiaolu (Note (iv)) –– – – – –
Ms. GU Cuiping – – – – – –
Mr. LIU Qin (Note (x)) –– – – – –
Ms. SHU Wanting (Note (x)) –– – – – –
Mr. HAO Rui (Note (vi)(x)) –– – – – –
Mr. LIU Y ang (Note (vii)(ix)) –– – – – –
Mr. LU Hai (Note (viii)(x)) –– – – – –
– 12,852 1,613 485 55,880 70,830
Notes:
(i) Chairman of the Board.
(ii) Chief Executive Officer of the Group.
(iii) Resigned since July 2021.
(iv) Resigned since April 2022.
(v) Resigned since March 2022.
(vi) Appointed as director since March 2022.
(vii) Appointed as director since April 2022.
(viii) Appointed as director since October 2022.
(ix) Resigned since October 2022.
(x) Resigned since November 2023.
APPENDIX I ACCOUNTANT’S REPORT
– I-47 –


--- page 710 ---
There was no remuneration for loss of office received by the directors during the Track Record Period.
There was no arrangement under which a director has waived or agreed to waive any remuneration during the
Track Record Period.
There were no remunerations paid to or receivable by directors in respect of accepting office as Directors
during the Track Record Period.
Directors’ retirement and termination benefits
None of the directors received or will receive any retirement and termination benefits during the Track Record
Period.
Consideration provided to third parties for making available directors’ services
During the Track Record Period, no consideration was provided to or receivable by any third parties for making
available directors’ services.
Information about loans, quasi-loans and other dealings in favour of directors, controlled bodies corporate by
and connected entities with such directors
There is no other loans, quasi-loans and other dealing arrangements in favour of the directors, or controlled
bodies corporate by and connected entities with such directors subsisted at the end of each of the years ended
December 31, 2021, 2022 and 2023 or at any time during the Track Record Period.
Directors’ material interests in transactions, arrangements or contracts
Saved as disclosed in Note 35(v), no significant transactions, arrangements and contracts in relation to the
Group’s business to which the Company was a party and in which a director of the Company had a material interest,
whether directly or indirectly, subsisted at the end of each of the years ended December 31, 2021, 2022 and 2023 or
at any time during the Track Record Period.
14 DIVIDENDS
No dividends have been paid or declared by the Company during each of the years ended December 31, 2021,
2022 and 2023.
15 PROPERTY, PLANT AND EQUIPMENT
Computer
and office
equipment
Leasehold
improvements
Lab
equipment
Construction
In Progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2021
Cost 3,699 2,919 8,918 1,005 16,541
Accumulated depreciation (1,728) (1,873) (3,402) – (7,003)
Net book amount 1,971 1,046 5,516 1,005 9,538
Y ear ended December 31, 2021
Opening net book amount 1,971 1,046 5,516 1,005 9,538
Additions 6,681 2,375 54,877 118,734 182,667
Disposals (487) – (2,413) – (2,900)
Transfer – 64,308 3,254 (67,562) –
Depreciation charge (Note 6) (1,391) (7,288) (3,717) – (12,396)
Currency translation differences 20 – – – 20
Closing net book amount 6,794 60,441 57,517 52,177 176,929
APPENDIX I ACCOUNTANT’S REPORT
– I-48 –


--- page 711 ---
Computer
and office
equipment
Leasehold
improvements
Lab
equipment
Construction
In Progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At December 31, 2021
Cost 9,596 69,602 63,639 52,177 195,014
Accumulated depreciation (2,802) (9,161) (6,122) – (18,085)
Net book amount 6,794 60,441 57,517 52,177 176,929
Y ear ended December 31, 2022
Opening net book amount 6,794 60,441 57,517 52,177 176,929
Additions 2,159 1,608 25,094 161,187 190,048
Disposals (538) – (836) – (1,374)
Transfer 4,496 6,328 81,656 (92,480) –
Depreciation charge (Note 6) (3,335) (25,382) (19,257) – (47,974)
Currency translation differences 11 – – – 11
Closing net book amount 9,587 42,995 144,174 120,884 317,640
At December 31, 2022
Cost 15,010 77,538 167,549 120,884 380,981
Accumulated depreciation (5,423) (34,543) (23,375) – (63,341)
Net book amount 9,587 42,995 144,174 120,884 317,640
Y ear ended December 31, 2023
Opening net book amount 9,587 42,995 144,174 120,884 317,640
Additions 227 5,550 4,335 113,021 123,133
Disposals (30) – (48) – (78)
Transfer 5,671 58,773 71,364 (135,808) –
Depreciation charge (Note 6) (4,769) (27,479) (38,564) – (70,812)
Currency translation differences 4 – – – 4
Closing net book amount 10,690 79,839 181,261 98,097 369,887
At December 31, 2023
Cost 20,522 141,861 240,853 98,097 501,333
Accumulated depreciation (9,832) (62,022) (59,592) – (131,446)
Net book amount 10,690 79,839 181,261 98,097 369,887
APPENDIX I ACCOUNTANT’S REPORT
– I-49 –


--- page 712 ---
During the Track Record Period, depreciation of property, plant and equipment has been charged to the
consolidated statements of profit or loss as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Research and development expenses 7,965 37,320 64,838
General and administrative expenses 4,388 10,173 5,387
Selling and marketing expenses 43 481 587
12,396 47,974 70,812
16 LEASES
Right-of-use assets of the Group represent the leased offices and labs buildings:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Right-of-use assets
Offices and Lab buildings 93,636 77,989 189,250
Lease liabilities
Current 17,297 24,248 58,782
Non-current 81,669 69,206 137,183
98,966 93,454 195,965
During the Track Record Period, depreciation of right-of-use assets has been charged to the consolidated
statements of profit or loss as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Research and development expenses 5,276 12,448 20,954
General and administrative expenses 4,161 4,437 23,855
Selling and marketing expenses 220 480 423
9,657 17,365 45,232
The Group obtains rights to control the use of offices and labs building for a period of time through lease
arrangements. Lease arrangements are negotiated on an individual basis and contain a wide range of different terms
and conditions including lease payments and lease terms ranging from 3 to 10 years.
The total cash outflow for leases was RMB13,744,000, RMB14,893,000, RMB58,110,000 for the years ended
December 31, 2021, 2022 and 2023, respectively.
APPENDIX I ACCOUNTANT’S REPORT
– I-50 –


--- page 713 ---
17 INTANGIBLE ASSETS
The Group’s intangible assets represent the system software licenses purchased:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
At beginning of the year
Cost 4,525 7,609 12,918
Accumulated amortisation (1,412) (2,491) (6,234)
3,113 5,118 6,684
Y ear ended December 31,
Opening net book amount 3,113 5,118 6,684
Additions 3,100 5,314 6,844
Disposal – (120) –
Amortisation charge
(Note 6) (1,080) (3,706) (5,678)
Exchange differences (15) 78 19
Closing net book amount 5,118 6,684 7,869
At end of the year
Cost 7,609 12,918 21,172
Accumulated amortisation (2,491) (6,234) (13,303)
5,118 6,684 7,869
During the Track Record Period, amortisation of intangible assets has been charged to the consolidated
statements of profit or loss as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Research and development expenses 738 3,018 4,593
General and administrative expenses 70 461 963
Selling and marketing expenses 272 227 122
1,080 3,706 5,678
APPENDIX I ACCOUNTANT’S REPORT
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--- page 714 ---
18 SUBSIDIARIES
(a) Subsidiaries of the Company
The Group’s principal subsidiaries (including structured entities) during the Track Record Period are set out below. Unless otherwise stated, they have share capital consisting
solely of ordinary shares that are held directly by the Group, and the proportion of ownership interest held equals the voting rights held by the Group. The place of incorporation or
registration is also their principal place of business.
Name of entity
Date of
incorporation
Place of
incorporation Principal activities
Particulars
of issued/
Registered/
paid-in capital
Effective interest held
Note
As of December 31,
2021 2022 2023
Directly held:
XtalPi Inc. February 10,
2016
United States Provision of pharmaceutical
solid-state R&D, drug
discovery service and
other services
US$10 100% 100% 100% (i)
QuantumPharm Limited May 19, 2017 Hong Kong Investment holdings US$1,289 100% 100% 100% (ii)
XtalPi Investment Inc. December 30,
2021
Cayman Islands Investment holdings US$21,160,387 100% 87.69% 87.69% (i)
XTALPI PTE. LTD January 12,
2023
Singapore Dormant Singapore Dollar
(“SGD”)
4,000,000
N/A N/A 100% (i)
Indirectly held:
Shenzhen Jingtai September 11,
2015
PRC Provision of pharmaceutical
solid-state R&D, drug
discovery service and
other services
US$200,000,000 100% 100% 100% (iii),
(iv)
Beijing Jingtai Technology Co., Ltd.
(“Beijing Jintai”)
March 14, 2016 PRC Provision of drug discovery
service and other services
RMB200,000,000 100% 100% 100% (v),
(vi)
Shenzhen Zhiyao Technology Co., Ltd.
(“Shenzhen Zhiyao”)
July 5, 2017 PRC Investment holdings US$25,000,000 100% 100% 100% (vii)
Shanghai Zhiyao Technology Co., Ltd. December 2,
2019
PRC Provision of pharmaceutical
solid-state R&D, drug
discovery service and
other services
RMB300,000,000 100% 100% 100% (viii)
XtalPi Investment Limited January 4, 2022 Hong Kong Investment holdings – N/A 87.69% 87.69% (ii)
NeoGeode Inc. March 10, 2023 Cayman Islands Developing tumour
immunotherapy drugs for
multiple cancer types
US$1,800,000 N/A N/A 65% (i)
APPENDIX I ACCOUNTANT’S REPORT
– I-52 –


--- page 715 ---
Notes:
(i) No audited financial statements were issued for these subsidiaries as it is not required to issue audited financial
statements under the local statutory requirements of their respective places of incorporation.
(ii) The statutory financial statements for the years ended December 31, 2021 and 2022, were audited by WOS
CPA Limited. No audited financial statements was issued for the year ended December 31, 2023.
(iii) The financial statements for the years ended December 31, 2021 and 2022 were audited by Shenzhen Mingshen
Certified Public Accountants (General Partnership). No audited financial statements was issued for the year
ended December 31, 2023.
(iv) Prior to July 12, 2021, the Company did not have direct or indirect legal ownership in equity of Shenzhen
Jingtai. Nevertheless, under certain Contractual Arrangements entered into with Shenzhen Jingtai and its
registered owners, the Company and its other legally owned subsidiaries had rights to exercise power over the
Company, receive variable returns from its involvement in Shenzhen Jingtai, and had the ability to affect those
returns through its power over Shenzhen Jingtai. As a result, it was presented as structured entity of the Group
as at December 31, 2020. On July 12, 2021, a wholly owned subsidiary of the Company acquired the entire
interest in Shenzhen Jingtai from its Nominee Shareholders. This change had no change in economic
ownership.
(v) The financial statements for the year ended December 31, 2021, were audited by Beijing Dongshen Dingli
International Certified Public Accountants Co., Ltd. and the financial statements for the year ended December
31, 2022 were audited by Beijing Dongshen Certified Public Accountants (Special General Partnership). No
audited financial statements was issued for the year ended December 31, 2023.
(vi) Formerly known as Beijing JingPai Technology Co., Ltd.
(vii) The financial statements for the years ended December 31, 2021 and 2022, were audited by Shenzhen
Mingshen Certified Public Accountants (General Partnership). No audited financial statements was issued for
the year ended December 31, 2023.
(viii) The financial statements for the year ended December 31, 2021 were audited by Daxin Certified Public
Accountants (Special General Partnership) and the financial statements for the year ended December 31, 2022
were audited by Beijing Dongshen Certified Public Accountants (Special General Partnership). No audited
financial statements was issued for the year ended December 31, 2023.
(b) Material non-controlling interests
On August 12, 2022, XtalPi Investment Inc., a subsidiary of the Company, entered into a share purchase
agreement with certain individual third parties (“Non-controlling shareholders”) for issuance of 10,000,000 Series A
Preferred Shares at an aggregate cash consideration of US$10 million (equivalent to approximately RMB68.2
million), which accounted for 12.31% of XtalPi Investment Inc.’s interest. Based on the relevant terms of the share
purchase agreement, the preferred shares subscribed by the Non-controlling shareholders are accounted for as equity
and this transaction is accounted for as transaction with non-controlling interest with a gain of approximately
RMB57.3 million recognized in the equity directly (Note 34).
Set out below is summarised financial information of XtalPi Investment Inc., a subsidiary with non-controlling
interest that are considered material to the Group. The amounts disclosed are before inter-company eliminations.
As at December 31,
2022 2023
RMB’000 RMB’000
Summarised balance sheets
Non-current assets 18,706 308,947
Current assets 260,390 36,199
Current liabilities (194,484) (83,707)
Net assets 84,612 261,439
Balance of non-controlling interest 10,416 32,183
APPENDIX I ACCOUNTANT’S REPORT
– I-53 –


--- page 716 ---
As at December 31,
2022 2023
RMB’000 RMB’000
Summarised statements of profit or loss and
comprehensive income
(Loss)/Profit for the year (2,328) 118,688
Other comprehensive (loss)/income (1,888) 1,293
Total comprehensive (loss)/income (4,216) 119,981
Attributable to non-controlling interest (519) 14,770
Summarised statements of cash flows
Cash flows from operating activities (1,013) (15,347)
Cash flows from investing activities (150,435) 4,261
Cash flows from financing activities 157,973 843
Net increase/(decrease) in cash and cash equivalents 6,525 (10,243)
19 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Movements of the Group’s investments in associates that accounted for using the equity method is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
At beginning of the year 4,356 213 18,706
Additions 400 18,733 6,886
Share of results (4,497) (236) (1,964)
Currency translation differences (46) (4) 213
At end of the year 213 18,706 23,841
In November 2023, the Group no longer retained its board representation of an associate, therefore the Group’s
investment in this associate with carrying amount of nil was derecognised and transferred to investment in financial
assets at fair value through profit or loss measured at fair value of RMB70,249,000 upon the transfer. Accordingly,
a gain on transfer of investment in an associate to financial assets measured at FVTPL was recognised as other
gains/(losses), net (Note 8).
As at December 31, 2021, 2022 and 2023, none of the associates of the Group is considered as material.
Individually immaterial associates
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Aggregate carrying amount of individually
immaterial associates 213 18,706 23,841
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Aggregate amounts of the Group’s share of:
Loss from continuing operations 4,497 236 1,964
APPENDIX I ACCOUNTANT’S REPORT
– I-54 –


--- page 717 ---
20 FINANCIAL ASSETS AT FAIR V ALUE THROUGH PROFIT OR LOSS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Group
Investments in financial assets at
fair value through profit or loss
included in non-current assets:
A listed entity – 69,814 40,267
Unlisted entities 170,258 211,465 316,161
Convertible debts (a) – 3,250 67,595
170,258 284,529 424,023
Investments in financial assets at fair value
through profit or loss included in current
assets:
Wealth management products – 356,361 863,368
Company
Investments in financial assets at
fair value through profit or loss
included in non-current assets:
A listed entity – 69,814 40,267
Unlisted entities 31,245 15,322 79,928
31,245 85,136 120,195
Movements in the Group’s financial assets measured at fair value through profit or loss during the Track
Record Period are disclosed in Note 3.3.
(a) On September 25, 2023, the Group entered into a convertible loan agreement with an independent third
party company which is principally engaged in business of AI platform for new RNA target
identification and small molecule drug discovery. Pursuant to this agreement, the Group agreed to
provide a convertible loan with principal amount of up to US$10 million (equivalent to approximately
RMB71.8 million) at a simple interest rate of 8% per annum and that the Group shall have the right to
convert all of the principal outstanding under the loan into certain number of preferred shares of the
investee subject to certain conditions. The loan shall mature at the earlier of (i) 18 months from the due
date of the loan and (ii) the closing date of the conversion of all of the principal outstanding under the
loan. As at December 31, 2023, US$9 million (equivalent to approximately RMB63.7 million) had been
drawn down by the investee.
21 DEFERRED INCOME TAX
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
The deferred tax asset comprises temporary
differences attributable to:
Lease liabilities 22,018 18,811 46,948
Set-off of deferred tax liabilities in relation to
right-of-use assets (22,018) (18,811) (46,948)
Net deferred tax assets – – –
APPENDIX I ACCOUNTANT’S REPORT
– I-55 –


--- page 718 ---
The movement in deferred tax assets and liabilities in relation to lease liabilities and right-of-use assets are
as follows:
Deferred tax
assets
Deferred tax
liabilities Total
RMB’000 RMB’000 RMB’000
As at January 1, 2021 921 (921) –
Credited/(charged) to profit or loss 21,097 (21,097) –
As at December 31, 2021 and January 1, 2022 22,018 (22,018) –
(Charged)/credited to profit or loss (3,207) 3,207 –
As at December 31, 2022 and January 1, 2023 18,811 (18,811) –
Credited/(charged) to profit or loss 28,137 (28,137) –
As at December 31, 2023 46,948 (46,948) –
22 TRADE RECEIV ABLES
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Trade receivables 31,615 39,708 40,326
Loss: credit loss allowance (898) (1,772) (1,820)
30,717 37,936 38,506
The credit period granted to the Group’s customers is usually 30-60 days. As at December 31, 2021, 2022 and
2023, the aging analysis of trade receivables based on invoice dates is as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
0 to 90 days 31,487 33,584 32,017
91 to 180 days 128 – 5,307
181 to 365 days – 5,406 1,916
Over 1 year – 718 1,086
31,615 39,708 40,326
The carrying amounts of trade receivables approximate their fair values and are denominated in the following
currencies:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
RMB 28,642 31,274 20,663
US$ 2,973 8,434 19,663
31,615 39,708 40,326
APPENDIX I ACCOUNTANT’S REPORT
– I-56 –


--- page 719 ---
23 PREPAYMENTS, DEPOSITS AND OTHER RECEIV ABLES
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Group
Non-current
Prepayment for equipment 16,053 13,893 24,916
Current
Prepayments 5,043 14,533 9,298
Deposits 8,785 14,248 12,094
V alue-added tax recoverables 15,858 23,326 19,705
Others 3,007 2,027 219
32,693 54,134 41,316
Less: loss allowance (2,603) (2,400) (169)
30,090 51,734 41,147
Company
Prepayments – 45 2,007
– 45 2,007
The carrying amounts of deposits and other receivables approximate their fair values and are mainly dominated
in RMB. The recoverability was assessed with reference to the credit status of the recipients and, as there is no
significant increase in credit risk since initial recognition, the 12-month expected credit loss is considered minimal.
24 RESTRICTED CASH
As at December 31, 2021, 2022 and 2023, all the restricted deposits were denominated in US$ and held in
designated bank accounts mainly as security deposits for derivative financial instruments.
25 TERM DEPOSITS WITH INITIAL TERMS OF OVER THREE MONTHS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Included in non-current assets:
RMB term deposits – – 20,552 ------------ ------------ ------------
Included in current assets:
US$ term deposits 300,308 2,357,105 1,093,990
RMB term deposits 5,000 180,598 157,363
305,308 2,537,703 1,251,353------------
------------ ------------
305,308 2,537,703 1,271,905
APPENDIX I ACCOUNTANT’S REPORT
– I-57 –


--- page 720 ---
The weighted average effective interest rate on the Group’s term deposits with initial terms of over three
months as at December 31, 2021, 2022 and 2023 was 0.99%, 3.83% and 5.22% per annum, respectively.
26 CASH AND CASH EQUIV ALENTS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Group
Cash at banks 3,268,619 532,431 615,060
Term deposits with initial terms of within three
months 255,028 41,788 95,701
3,523,647 574,219 710,761
Denominated in:
US$ 3,361,463 153,296 397,006
RMB 162,046 420,767 311,097
HKD 138 156 2,658
3,523,647 574,219 710,761
Company
Cash at banks 492,362 2,018 252
Cash at banks earns interest at floating rates based on daily bank deposit rates. The weighted average effective
interest rate on bank deposits of the Group with initial within three months as at December 31, 2021, 2022 and 2023
was 0.30%, 3.09% and 3.71% per annum, respectively.
Cash and cash equivalents of the Company were mainly denominated in US$ as at December 31, 2021, 2022
and 2023.
The conversion of the RMB denominated balances maintained in the PRC into foreign currencies is subject to
the rules and regulations of foreign exchange control promulgated by the PRC government.
27 TRADE PAYABLES
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Trade payables 10,573 13,979 13,654
Trade payables were mainly denominated in RMB as at December 31, 2021, 2022 and 2023. The credit periods
granted by suppliers generally range from 30 to 180 days. The aging analysis of trade payables, based on invoice date,
is as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
0 to 90 days 10,573 13,979 11,683
90 to 180 days – – 1,971
10,573 13,979 13,654
APPENDIX I ACCOUNTANT’S REPORT
– I-58 –


--- page 721 ---
28 OTHER PAYABLES AND ACCRUALS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Non-Current
Investment payables 280 8,638 –
Current
Accrued salaries and staff benefits 48,589 69,354 73,596
Accrual for acquiring property,
plant, and equipment 22,649 19,281 18,622
Accrued listing expenses – – 5,382
Investment payables 13,876 – 19,561
Other tax payables 2,488 4,481 4,265
Rental payables 62 554 515
Others 10,413 10,580 9,348
98,077 104,250 131,289
The carrying amounts of other payables and accruals of the Group are mainly denominated in RMB.
The carrying amounts of other payables and accruals of the Company comprised mainly investment payables
and are mainly denominated in US$.
29 BANK BORROWINGS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Included in non-current liabilities:
Bank borrowings 11,000 – – ------------ ------------ ------------
Included in current liabilities:
Bank borrowings 22,280 36,000 60,000 ------------ ------------ ------------
33,280 36,000 60,000
All of the Group’s bank borrowings are denominated in RMB. The fair values of the Group’s bank borrowings
approximate their carrying amounts.
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Weighted average interest rate 5.18% 4.17% 3.03%
APPENDIX I ACCOUNTANT’S REPORT
– I-59 –


--- page 722 ---
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Secured by:
Guaranteed by Dr. Wen Shuhao – 10,000 30,000
Guaranteed by Dr. Wen Shuhao and
Shenzhen Zhiyao 13,280 – –
Guaranteed by Dr. Wen Shuhao and
Shenzhen Jingtai – 15,000 5,500
Guaranteed by Dr. Wen Shuhao,
Shenzhen Zhiyao and Shenzhen Jingtai 20,000 11,000 –
Guaranteed by Shenzhen Jingtai – – 15,000
Guaranteed by Dr. Wen Shuhao, Shenzhen Jingtai
and a patent right of Beijing Jingtai (Note) – – 9,500
33,280 36,000 60,000
Note: The carrying amount of the patent right of Beijing Jingtai was nil as at December 31, 2023.
These guarantees provided by Dr. Wen Shuhao will be released upon or prior to the Listing through either
mutual agreement with the banks or upon settlement of the related bank borrowings in full according to the repayment
terms.
30 DEFERRED GOVERNMENT GRANTS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Deferred government grants 32,602 30,746 39,475
Less: Amounts include under current liabilities (1,959) (1,118) (7,433)
Amounts include under non-current liabilities 30,643 29,628 32,042
The government grants were mainly received from the local government as subsidies to the Group’s purchase
of property, plant and equipment. They were recognised in profit or loss on a straight-line basis over the expected
useful lives of the related assets.
31 DERIV ATIVE FINANCIAL INSTRUMENTS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Fair value of derivatives not under hedge
accounting:
Forward foreign exchange contracts 811 – –
Cross currency swaps – 2,531 560
811 2,531 560
As of December 31, 2021, 2022 and 2023, the maturities of the derivative financial instruments are all within
one year.
APPENDIX I ACCOUNTANT’S REPORT
– I-60 –


--- page 723 ---
32 CONVERTIBLE REDEEMABLE PREFERRED SHARES AND OTHER FINANCIAL LIABILITIES
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Convertible redeemable preferred shares
(“CRPS”) 7,701,279 9,320,782 10,780,342
Since the date of incorporation and during the Track Record Period, the Company has completed several
rounds of financing by issuing convertible redeemable preferred shares to investors.
The details of the issuance are set out in the table below:
Date of issuance
Number of
shares
Subscription
price per share Total consideration
US$’000 RMB’000
Preferred shares
Series pre-A September 23, 2015 145,221,000 RMB0.0138 – 2,000
Series A-1 November 26, 2015 250,001,000 RMB0.0979 – 24,470
Series A-2 June 16, 2016,
July 2016 and
September 15, 2017
56,338,300 US$0.018933 1,069 7,436
Series B September 16, 2017 301,810,900 US$0.047333 14,286 96,318
Series B+ September 5, 2018 208,946,000 US$0.143577 30,000 199,014
Series B+ October 26, 2018 55,718,900 US$0.143577 8,000 53,070
Series B++ August 9, 2019 29,305,077 US$0.223511 6,550 45,158
Series C September 28, 2020 696,568,031 US$0.3758427 261,800 1,790,424
Series C June 18, 2021 71,838,567 US$0.3758427 27,000 184,650
Series D August 5, 2021 621,632,043 US$0.6112941 380,000 2,458,258
(a) Convertible redeemable preferred shares
The key terms of convertible redeemable preferred shares are summarised as follows:
(i) Liquidation preference
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, all assets and funds of the Company legally available for distribution to the shareholders (after
satisfaction of all claims that may be preferred by applicable law) shall be distributed to the shareholders as
follows: except for series C and series D preference shares holders, the holder of each series of convertible
redeemable preferred shares shall be entitled to receive, on parity with each other, an amount equal to 100%
of the each series preferred shares issue price, plus a simple annual return of 8% calculating from the date the
Company received the respective applicable issue price to the actual payment date of the settlement, plus all
declared but unpaid dividends on such respective series preferred shares (collectively, the “Series preference
Amount”). For series C preference shares holders, the amount to be received would be the higher of 125% of
the series C issue price plus all declared but unpaid dividends on such series C preferred shares and the Series
preference Amount as defined above. For series D preference shares holders, the amount to be received would
be the higher of 125% of the series D issue price plus all declared but unpaid dividends on such series D
preferred shares and the Series preference Amount as defined above.
APPENDIX I ACCOUNTANT’S REPORT
– I-61 –


--- page 724 ---
If the assets and funds available for distribution are insufficient to permit the payment to the holders of
the preference shares, the liquidation preference amount will be paid to the holders of preferred shares and
ordinary shares in the following order: (1) Series D; (2) Series C; (3) Series B++; (4) Series B+; (5) Series B;
(6) Series A-2; (7) Series A-1; (8) Series pre-A and (9) all shareholders (including ordinary shareholders). After
distributing or paying in full the liquidation preference amount to all of the holders of preferred shares and
ordinary shares, the remaining assets of the Company available for distribution to members, if any, shall be
distributed to the holders of the preferred shares and ordinary shares on a pro rata basis, based on the number
of ordinary shares then held by each holder on an as-converted basis.
(ii) Dividend rights
(a) subject to (ii)(b) below, no dividend or distribution, whether in cash, in property, or in any other
equity securities of the Company, shall be declared, paid, set aside or made with respect to the
ordinary shares at any time unless all accrued but unpaid dividends on the convertible redeemable
preferred shares have been paid in full.
(b) If a dividend or other distribution is declared, paid or set aside, subject to (ii)(a) above, it shall
be distributed rateably among all shareholder according to the relative number of shares held by
such shareholder on an as-converted basis. No dividends shall be distributed to any shareholder
unless and until such distribution has been approved unanimously by the board of directors.
(iii) Conversion feature
The convertible redeemable preferred shares shall be converted into Class A Ordinary Shares at the
option of the holders any time, or automatically be converted into Class A Ordinary Shares at the then-effective
applicable conversion price, without the payment of any additional consideration, upon the earlier of (i) the
qualified IPO; or (ii) the date specified by written consent of agreement of the holders representing at least
51% of each series preferred shares.
The conversion ratio, which shall initially be determined based on the issue price of the convertible
redeemable preferred shares, shall be adjusted from time to time for (i) share split and combinations, (ii)
Ordinary Class A Shares dividends and distributions, (iii) reorganisations, mergers, consolidations,
reclassifications, exchanges and substitutions, and (iv) dilutive insurance.
(iv) Redemption feature
At any time after the earlier of the occurrence of the following event: (i) the Company fails to complete
the qualified IPO upon the third anniversary of the date of the Series D Closing Date, and which was modified
to March 31, 2025 in November 2023, and further extended to June 30, 2025 by the holders of preferred shares
on May 28, 2024; (ii) adverse change in the regulatory environment that will cause the arrangement under the
control documents in valid or unenforceable; (iii) any material breach of the transaction documents by any
group company or the wilful fraud on the part of founders or founder vehicles which cause the material breach
of the transaction documents, or the material violation of applicable law by any group company; (iv) the State
Administration of Foreign Exchange of the PRC (“SAFE”) refrains the domestic company from receiving
overseas funds, directly or indirectly, from the Company, which has a material adverse effect on the Company’s
principal business; or (v) any preferred shareholder requests the Company to redeem all or part of the
outstanding preferred shares because of the aforementioned events, an holder of any other series preferred
shares may give a written notice by hand or letter mail or courier service to the Company at its principal
executive offices at any time requesting redemption of all or part of the outstanding series preferred shares held
by such initiating series holders, in which case the Company shall promptly pay to the initiating series holders
and other holders who elect to participate in such redemption for each redeeming preferred share at an amount
equivalent to the series issue price with a 8% per annum simple return rate calculating from the date the
Company received the series issue price pursuant to the purchase agreements to the series redemption price
payment date, deducting any paid dividend on each redeeming preferred share, plus any declared but unpaid
dividends on each redeeming preferred share or pro rata for a partial year for each year such series preferred
share was outstanding but in any event within ninety days of the date of the redemption notice (collectively,
the “Series Redemption Price”).
APPENDIX I ACCOUNTANT’S REPORT
– I-62 –


--- page 725 ---
Specially, for each redeeming series C preferred shares, the redemption price is equal to the higher of
125% of the Series C Issue Price plus any declared but unpaid dividends on each Redeeming C Preferred Share
or pro rata for a partial year for each year such series C preferred share was outstanding but in any event within
ninety (90) days of the date of the series C redemption notice or the Series Redemption Price as defined as
above. For each redeeming series D preferred shares, the redemption price is equal to the higher of 125% of
the Series D Issue Price plus any declared but unpaid dividends on each Redeeming D Preferred Share or pro
rata for a partial year for each year such series D preferred share was outstanding but in any event within ninety
(90) days of the date of the series D redemption notice or the Series Redemption Price as defined as above.
The movements of the CRPS during the Track Record Period are set out as below:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
At beginning of the year 3,308,549 7,701,279 9,320,782
Issuance during the year 2,726,556 – –
Change in fair value through profit or loss 1,760,235 957,799 1,275,165
Change in fair value through other
comprehensive income 45,150 (80,500) 20,111
Currency translation differences (139,211) 742,204 164,284
At end of the year 7,701,279 9,320,782 10,780,342
The Group has used the discounted cash flow method to determine the underlying share value of the Company
and adopted equity allocation model to determine the fair value of the CRPS at the end of each reporting period.
Key valuation assumptions used to determine the fair value of CRPS are as follows:
Y ear ended December 31,
2021 2022 2023
Discount rate 16% 17% 15%
Risk-free interest rate 1.6% 4.5% 4.6%
Discount for lack of control (“DLOC”) 10% 10% 10%
V olatility 50.9% 75% 65%
Discount rate (post-tax) was estimated by weighted average cost of capital as of each valuation date. In
determining the discount rate, the Group considers various factors including the discount rates adopted by other
companies which ranged from 12% to 18% and determined its discount rate at a higher end of the range. The Group
estimated the risk-free interest rate based on the yield of various government bonds with maturity close to the initial
public offering timing as of valuation date. V olatility was estimated based on annualised standard deviation of daily
stock price return of comparable companies for a period from the respective valuation date and with similar span as
time to expiration.
Changes in fair value of preferred shares were recorded in “Changes in fair value of convertible redeemable
preferred shares and other financial liabilities”. And the fair value changes in the convertible redeemable preferred
shares that are attributable to changes of own credit risk of this liability are recorded in other comprehensive income.
APPENDIX I ACCOUNTANT’S REPORT
– I-63 –


--- page 726 ---
The Company performed sensitivity test to changes in unobservable inputs in determining the fair value of the
CRPS. The changes in unobservable inputs including discount rate, risk-free interest rate and volatility will result in
a significantly higher or lower fair value measurement. The increase in the fair value of the CRPS would increase
the loss of fair value changes in the consolidated statements of profit or loss. When performing the sensitivity test,
management applied an increase or decrease to each unobservable input, which represents management’s assessment
of reasonably possible change to these unobservable inputs. If the Company’s key valuation assumptions used to
determine the fair value of the CRPS had increased/decreased by 10% with all other variables held constant, the
estimated fair value changes from carrying amount are listed in below table (assuming the change of key factor would
not have significant impact on fair value changes attributable to credit risk):
Discount rate
Risk-free
interest rate Volatility
RMB’000 RMB’000 RMB’000
As at December 31, 2021
Increase 10% (1,561,199) (550) (350,456)
Decrease 10% 2,145,820 552 3,053
As at December 31, 2022
Increase 10% (1,450,530) (2,450) (13,678)
Decrease 10% 1,941,570 2,461 12,389
As at December 31, 2023
Increase 10% (1,595,683) (2,658) (5,803)
Decrease 10% 2,128,179 2,670 3,647
(b) Other financial liabilities
The other financial liabilities represent the warrant liabilities issued by the Group. On September 28, 2020, the
Company issued warrants to certain investors for a right to subscribe for its Series C CRPS. On June 18, 2021, the
holders of warrants obtained all necessary approvals from the PRC authority and issued a form of notices of exercise
to the Company to exercise their right to subscribe Series C CRPS pursuant to the term of such warrants and the
Company issued 71,838,567 Series C preferred shares, valued at an aggregate conversion consideration of
RMB184.65 million. The entire transaction was completed on June 18, 2021 upon then the warrant liabilities were
extinguished.
The warrants do not qualify for hedging accounting and the changes in fair values are recognised in profit or
loss.
The movements of the warrants are set out as below:
RMB’000
At January 1, 2021 190,679
Change in fair value through profit or loss 83,648
Currency translation differences (1,760)
Exercise of warrants (272,567)
At December 31, 2021, January 1, 2022, December 31, 2022,
January 1, 2023 and December 31, 2023 –
APPENDIX I ACCOUNTANT’S REPORT
– I-64 –


--- page 727 ---
33 SHARE CAPITAL
Authorised:
Number of
Class A
ordinary
shares
Number of
Class B
ordinary
shares
Total number
of ordinary
shares
Nominal
value of
ordinary
shares
Number of
Preferred
Shares
Nominal
value of
Preferred
Shares
Total number
of Shares
Total
nominal
value of
Shares
At January 1, 2021 2,754,598,885 429,653,340 3,184,252,225 31,843 1,815,747,775 18,157 5,000,000,000 50,000
Issuance/(cancellation)
of:
Class A ordinary shares (621,632,043) – (621,632,043) (6,216) – – (621,632,043) (6,216)
Series D preferred shares – – – – 621,632,043 6,216 621,632,043 6,216
At December 31, 2021,
January 1, 2022,
December 31, 2022,
January 1, 2023 and
December 31, 2023 2,132,966,842 429,653,340 2,562,620,182 25,627 2,437,379,818 24,373 5,000,000,000 50,000
Issued:
Number of
Class A
ordinary
shares
Number of
Class B
ordinary
shares
Total number
of ordinary
shares
Nominal
value of
ordinary
shares
’000 ’000 ’000 RMB’000
At January 1, 2021 249,256,760 429,653,340 678,910,100 44
Issuance of:
Class A ordinary shares 103,109,843 – 103,109,843 6
At December 31, 2021,
January 1, 2022, December 31,
2022, January 1, 2023 and
December 31, 2023 352,366,603 429,653,340 782,019,943 50
Issued and fully paid:
At January 1, 2021 249,256,760 429,653,340 678,910,100 44
Issuance of:
Class A ordinary shares (Note (ii)) 99,914,143 – 99,914,143 6
Exercise of share options (Note (iii)) 3,195,700 – 3,195,700 –*
At December 31, 2021,
January 1, 2022, December 31,
2022, January 1, 2023 and
December 31, 2023 352,366,603 429,653,340 782,019,943 50
* the amount is less than RMB1,000
APPENDIX I ACCOUNTANT’S REPORT
– I-65 –


--- page 728 ---
(i) The Company adopted a dual voting structure on its shares and the Company’s ordinary shares were
divided into Class A and Class B ordinary shares, accordingly. Holders of Class A ordinary shares and
Class B ordinary shares have the same rights, except for voting rights. Holders of Class A ordinary
shares are entitled to one vote per share in all shareholders’ meetings, while holders of Class B ordinary
shares are entitled to ten votes per share.
(ii) In August 2019 and August 2021, the Company issued 198,127,000 and 99,914,143 Class A ordinary
shares, respectively, to QuantumPharm Roc Holdings Limited for nominal consideration for the purpose
of holding Class A ordinary shares underlying share awards to be granted from time to time under the
2021 Plan (Note 35).
These shares were carried at their nominal amounts and recorded as treasury shares. These ordinary
shares are not included in the number of outstanding shares of the Company.
(iii) In July 2021, 3,195,700 Class A ordinary shares were issued to QuantumPharm Holdings Limited upon
exercise of share options.
(iv) Upon the completion of the initial listing of the Company’s shares, the Company’s dual class of ordinary
share structure will be unwound and each of the Class A ordinary share and Class B ordinary share will
be re-designated to one ordinary share.
34 OTHER RESERVES
Group
Share
premium
Treasury
shares
Exchange
reserves
Share-based
payment
reserves Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2021 4,591 (13) 42,457 – (10,671) 36,364
Issuance of ordinary shares – (6) – – – (6)
Equity-settled share-based
compensation – – – 22,482 – 22,482
Changes in fair value of
convertible redeemable
preferred shares due to
own credit risk – – – – (45,150) (45,150)
Currency translation
difference – – 60,928 – – 60,928
As at December 31, 2021 4,591 (19) 103,385 22,482 (55,821) 74,618
Equity-settled share-based
compensation – – – 43,384 – 43,384
Changes in fair value of
convertible redeemable
preferred shares due to
own credit risk – – – – 80,500 80,500
Transaction with non-
controlling interest
(Note 18) – – – – 57,273 57,273
Currency translation
difference – – (457,531) – – (457,531)
As at December 31, 2022 4,591 (19) (354,146) 65,866 81,952 (201,756)
Equity-settled share-based
compensation – – – 88,426 – 88,426
Changes in fair value of
convertible redeemable
preferred shares due to
own credit risk – – – – (20,111) (20,111)
Currency translation
difference – – (93,669) – – (93,669)
As at December 31, 2023 4,591 (19) (447,815) 154,292 61,841 (227,110)
APPENDIX I ACCOUNTANT’S REPORT
– I-66 –


--- page 729 ---
Company
Share
premium
Treasury
shares
Exchange
reserves
Share-based
payment
reserves Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2021 4,591 (13) 32,845 – (10,671) 26,752
Issuance of ordinary shares – (6) – – – (6)
Equity-settled share-based
compensation – – – 22,482 – 22,482
Changes in fair value of
convertible redeemable
preferred shares due to
own credit risk – – – – (45,150) (45,150)
Currency translation
difference – – 49,485 – – 49,485
As at December 31, 2021 4,591 (19) 82,330 22,482 (55,821) 53,563
Equity-settled share-based
compensation – – – 43,384 – 43,384
Changes in fair value of
convertible redeemable
preferred shares due to
own credit risk – – – – 80,500 80,500
Currency translation
difference – – (315,047) – – (315,047)
As at December 31, 2022 4,591 (19) (232,717) 65,866 24,679 (137,600)
Equity-settled share-based
compensation – – – 88,426 – 88,426
Changes in fair value of
convertible redeemable
preferred shares due to
own credit risk – – – – (20,111) (20,111)
Currency translation
difference – – (77,949) – – (77,949)
As at December 31, 2023 4,591 (19) (310,666) 154,292 4,568 (147,234)
35 SHARE-BASED PAYMENTS
Employee Share Option Plan
The Group grants share options of the Company to its employees from time to time in order to provide them
with long-term incentives under its effective share incentive scheme. On November 17, 2017, the Company adopted
an employee share option plan (the “2017 ESOP”) and as of January 1, 2020, 3,195,700 vested options remained
outstanding which is currently exercisable. These vested options under 2017 ESOP were exercised in 2021.
On August 9, 2019, the Company adopted QuantumPharm Inc. Share Option Plan (the “2019 Share Option
Plan”) to replace 2017 ESOP . At the 2021 shareholders meeting, the Group’s 2021 Omnibus Incentive Plan (the “2021
Share Option Plan”) was approved by shareholders to amend and restate the 2019 Share Option Plan, the unvested
awards previously under 2019 Share Option Plan will be completely replaced by the 2021 Share Option Plan without
any modification.
APPENDIX I ACCOUNTANT’S REPORT
– I-67 –


--- page 730 ---
According to the 2021 Share Option Plan, 198,127,000 Class A ordinary shares have been reserved to any
qualified participants. Under the 2021 Share Option plan, participants are granted options which only be vested at
the later of the Company’s completion of IPO or when the grantee completed certain services periods or specific
performance target. Participation in the plan is at the board’s discretion and no individual has a contractual right to
participate in the plan or to receive any guaranteed benefits. The exercise price of options is based on fix price in
the agreement with employees.
In August 2021, the Company issued 99,914,143 additional Class A ordinary shares to QuantumPharm Roc
Holdings Limited for nominal consideration for the purpose of holding Class A ordinary shares underlying share
awards to be granted from time to time under the 2021 Share Option Plan, which are issued but deemed to be not
outstanding for the sole participants under the 2021 Share Option Plan. As a result, 298,041,143 Class A ordinary
shares have been reserved to be issued to any qualified participants (excluding the vested options stated above).
The exercise price of options is based on a fixed price in the agreement with employees. The term of the Option
shall expire at close of the principal stock market or exchange on which the Shares are quoted or traded on the tenth
(10th) anniversary of the Grant Date, unless terminated earlier in accordance herewith. In no event may any portion
of the Option be exercised after it has expired.
(i) Movements in share options
Set out below are summaries of options granted under the plan:
Number of options
2017 ESOP
(vested option)
2021 Share
Option Plan
(unvested
option)
Weighted
average
exercise price
per share
option
US$
Outstanding as at January 1, 2021 3,195,700 89,218,849 0.02
Granted during the year – 100,381,532 0.24
Exercised during the year (Note 33 (iv)) (3,195,700) – –*
Forfeited during the year – (580,000) (0.14)
Outstanding as at December 31, 2021 – 189,020,381 0.14
V ested and exercisable at December 31,
2021 – – –
APPENDIX I ACCOUNTANT’S REPORT
– I-68 –


--- page 731 ---
Number of options
2017 ESOP
(vested option)
2021 Share
Option Plan
(unvested
option)
Weighted
average
exercise price
per share
option
US$
Outstanding as at January 1, 2022 – 189,020,381 0.14
Granted during the year – 19,611,004 0.31
Forfeited during the year – (1,940,000) (0.08)
Outstanding as at December 31, 2022 – 206,691,385 0.15
V ested and exercisable at December 31,
2022 – – –
Outstanding as at January 1, 2023 – 206,691,385 0.15
Granted during the year – 98,873,759 0.25
Forfeited during the year – (8,010,000) (0.17)
Outstanding as at December 31, 2023 – 297,555,144 0.16
V ested and exercisable at December 31,
2023 – – –
* The amount is less than US$0.01.
APPENDIX I ACCOUNTANT’S REPORT
– I-69 –


--- page 732 ---
(ii) Outstanding share options
Share options under 2021 Share Option Plan outstanding at the end of the year have the following expiry date and exercise prices:
Grant date Expiry date Exercise price Vesting year 2021 2022 2023
US$
October 1, 2015 October 1, 2025 0.00001 4 years from grant date 22,837,200 22,837,200 22,837,200
October 1, 2015 July 14, 2031
(Note (v))
0.00082 4 years from grant date 10,000,000 10,000,000 10,000,000
November 26, 2015 November 26, 2025 0.00032 4 years from grant date 1,550,000 1,550,000 1,550,000
March 1, 2016 March 1, 2026 0.00032 4 years from grant date 1,500,000 1,500,000 1,500,000
March 1, 2016 March 1, 2026 0.00150 4 years from grant date 8,000,000 8,000,000 8,000,000
March 1, 2016 March 1, 2026 0.00284 4 years from grant date 200,000 200,000 200,000
February 1, 2017 February 1, 2027 0.00150 4 years from grant date 7,000,000 7,000,000 7,000,000
February 1, 2017 February 1, 2027 0.00284 4 years from grant date 1,570,000 1,290,000 1,190,000
February 1, 2017 February 1, 2027 0.01733 4 years from grant date 80,000 80,000 80,000
March 1, 2017 March 1, 2027 0.00150 4 years from grant date 5,000,000 5,000,000 5,000,000
June 1, 2017 June 1, 2027 0.00284 4 years from grant date 2,500,000 2,500,000 2,500,000
September 16, 2017 September 16, 2027 0.00284 4 years from grant date 3,945,000 3,945,000 3,375,000
September 16, 2017 September 16, 2027 0.02160 4 years from grant date 700,000 700,000 700,000
August 1, 2018 August 1, 2028 0.00284 4 years from grant date 3,000,000 3,000,000 3,000,000
August 1, 2018 August 1, 2028 0.00710 4 years from grant date 4,130,000 4,130,000 2,850,000
August 1, 2018 August 1, 2028 0.07352 4 years from grant date 670,000 670,000 670,000
March 1, 2019 March 1, 2029 0.00710 4 years from grant date 2,590,000 2,590,000 2,560,000
March 1, 2019 March 1, 2029 0.09421 4 years from grant date 6,024,500 5,224,500 4,224,500
September 3, 2019 September 3, 2029 0.00284 4 years from grant date 1,000,000 1,000,000 1,000,000
September 3, 2019 September 3, 2029 0.02872 4 years from grant date 2,660,000 2,270,000 1,790,000
September 3, 2019 September 3, 2029 0.14303 4 years from grant date 250,000 250,000 –
September 3, 2019 September 3, 2029 0.26309 4 years from grant date 532,149 532,149 532,149
September 3, 2019 September 3, 2029 0.06705 4 years from grant date 120,000 – –
March 1, 2020 March 1, 2030 0.06705 4 years from grant date 1,250,000 1,130,000 1,030,000
March 1, 2020 March 1, 2030 0.17441 4 years from grant date 1,000,000 1,000,000 900,000
September 28, 2020 September 28, 2030 0.18792 4 years from grant date 930,000 930,000 560,000
January 1, 2021 January 1, 2031 0.00284 4 years from grant date 2,600,000 2,600,000 2,600,000
January 1, 2021 January 1, 2031 0.18792 4 years from grant date 12,060,000 12,030,000 12,030,000
January 1, 2021 January 1, 2031 0.27533 4 years from grant date 100,000 100,000 –
April 15, 2021 April 15, 2031 0.00284 4 years from grant date 2,665,925 2,665,925 2,665,925
April 15, 2021 April 15, 2031 0.18792 4 years from grant date 39,172,019 38,972,019 38,092,019
April 15, 2021 April 15, 2031
(Note (v))
0.18792 4 years from grant date 38,183,588 38,183,588 38,183,588
April 15, 2021 April 15, 2031 0.33876 4 years from grant date 4,800,000 4,800,000 3,400,000
APPENDIX I ACCOUNTANT’S REPORT
– I-70 –


--- page 733 ---
Grant date Expiry date Exercise price Vesting year 2021 2022 2023
US$
October 1, 2021 October 1, 2031 0.18792 4 years from grant date 350,000 350,000 350,000
November 26, 2021 November 26, 2031 0.30565 4 years from grant date 50,000 50,000 50,000
January 1, 2022 January 1, 2032 0.30565 4 years from grant date – 2,100,000 2,100,000
January 11, 2022 January 11, 2032 0.18792 4 years from grant date – 300,000 300,000
January 14, 2022 January 14, 2032 0.30565 4 years from grant date – 100,000 –
March 31, 2022 March 31, 2032 0.18792 4 years from grant date – 100,000 100,000
March 31, 2022 March 31, 2032 0.30565 4 years from grant date – 170,000 90,000
June 30, 2022 June 30, 2032 0.30565 4 years from grant date – 291,004 291,004
June 30, 2022 June 30, 2032 0.52234 4 years from grant date – 480,000 130,000
September 30, 2022 September 30, 2032 0.30565 4 years from grant date – 2,820,000 2,200,000
December 31, 2022 December 31, 2032 0.30565 4 years from grant date – 13,250,000 13,200,000
March 31, 2023 March 31, 2033 0.30565 4 years from grant date – – 570,000
June 30, 2023 June 30, 2033 0.30565 4 years from grant date – – 270,000
September 30, 2023 September 30, 2033 0.30565 4 years from grant date – – 3,200,000
September 30, 2023 September 30, 2033 0.18792 4 years from grant date – – 8,770,000
September 30, 2023 September 30, 2033 0.18792 3 years from grant date – – 80,000
September 30, 2023 September 30, 2033 0.48000 4 years from grant date – – 1,960,000
November 24, 2023 November 24, 2033 0.48000 4 years from grant date – – 100,000
November 24, 2023 November 24, 2033 0.30565 4 years from grant date – – 70,000
November 24, 2023 November 24, 2033 0.24678 4 years from grant date – – 83,703,759
189,020,381 206,691,385 297,555,144
Weighted average remaining contractual life of options outstanding at end of year 7.30 6.63 6.99
The options may exercise of any time after the IPO of the Company provided the options have vested and subject to the term of the share option agreement.
The Group estimate the expected forfeiture rate at the end of vesting periods (“Forfeiture Rate”) of the share options granted in order to determine th e amount of
share-based payment expenses charged to profit or loss. The Forfeiture Rate of the share options of the Group to grantees were assessed to be ranging fr om 8.3% to 15.0% during
the Track Record Period.
APPENDIX I ACCOUNTANT’S REPORT
– I-71 –


--- page 734 ---
(iii) Fair value of options
The directors of the Company have used the binomial model to determine the fair value of the options
as at the respective grant dates, which is to be expensed over the relevant vesting period.
Other than the exercise price mentioned above, significant judgment on parameter such as risk free rate,
dividend yield and expected volatility, are required to be made by the directors in applying the binomial model,
which are summarised as below:
Y ear ended December 31,
2021 2022 2023
Fair value per share (in US$) 0.1165-0.3361 0.2438-0.3797 0.3719-0.4725
Exercise price (in US$) 0.0028-0.3388 0.01-0.5223 0.1879-0.4800
Risk-free interest rate 1.62%-2.25% 1.16%-3.88% 3.84%-4.57%
Expected Life 10 years 10 years 10 years
Expected volatility 33% 33%-73% 73%-74%
Dividend yield – – –
(iv) Expenses arising from share-based payment transactions
During the years ended December 31, 2021, 2022 and 2023, share-based payment expenses of
RMB22,482,000, RMB43,384,000 and RMB88,426,000 were recognised respectively.
(v) Modification of ESOP terms
In November 2023, the Group modified several terms including, exercise period and exercise prices of
the share options that were previously granted to certain directors under the 2021 share option plan. The
incremental fair value arising from the modification of RMB20,272,000 was recognised as expense
immediately and the remaining was recognised as an expense over the period from the date of modification
to the end of the remaining vesting period.
36 NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Cash generated from operation
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Loss before income tax (2,137,332) (1,438,617) (1,906,323)
Adjustments for:
– Depreciation of property and equipment 12,396 47,974 70,812
– Amortisation of intangible assets 1,080 3,706 5,678
– Amortisation of right-of-use assets 9,657 17,365 45,232
– Gain on disposals of property, plant and equipment (978) (118) –
– Gain on a lease modification – – (13,686)
– Gain on a transfer of investment in an associate to financial
assets measured at FVTPL – – (70,249)
– Net fair value changes on FVTPL (9,927) 11,343 1,415
– Changes in fair value of convertible redeemable preferred
shares and other financial liabilities 1,843,883 957,799 1,275,165
– Net impairment losses on financial assets 673 874 217
– Share-based compensation expenses 22,482 43,384 88,426
– Share of loss in equity method investments 4,497 236 1,964
– Foreign exchange (gains)/losses (9,426) (5,911) 40,368
– Finance income (14,055) (50,478) (102,693)
– Finance expenses 3,575 5,746 9,575
Changes in working capital:
– Trade and other receivables (44,590) (24,937) (2,503)
– Trade and other payables 47,622 26,787 8,331
– Contract costs (15,686) (16,229) (4,611)
– Contract liabilities 5,033 5,648 10,139
– Restricted cash 32,548 – –
– Deferred governments grant (5,198) (13,676) (24,821)
Cash used in operations (253,746) (429,104) (567,564)
APPENDIX I ACCOUNTANT’S REPORT
– I-72 –


--- page 735 ---
(b) Net debt reconciliation
As at December 31, 2021, 2022 and 2023, the net debt of the Group is as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Cash and cash equivalents 3,523,647 574,219 710,761
Term deposits 305,308 2,537,703 1,271,905
Borrowings (33,274) (35,780) (59,771)
Lease liabilities (98,966) (93,454) (195,965)
Convertible redeemable preferred shares (7,701,279) (9,320,782) (10,780,342)
Net debt (4,004,564) (6,338,094) (9,053,412)
An analysis of the movements in net debt during the Track Record Period is as follows:
Cash and
cash
equivalents Borrowings
Lease
liabilities
Convertible
redeemable
preferred
shares
Other
financial
liabilities Net debt
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2021 1,430,913 (29,466) (6,130) (3,308,549) (190,679) (2,103,911)
Addition of right-of-use
assets – – (97,151) – – (97,151)
Cash flows 2,156,075 (3,800) 4,315 (2,453,989) – (297,399)
Effect on exchange
difference (63,341) – – 139,211 1,760 77,630
Change in fair value
through profit or loss – – – (1,760,235) (83,648) (1,843,883)
Change in fair value
through other
comprehensive income – – – (45,150) – (45,150)
Exercise of warrants – – – (272,567) 272,567 –
Interest expense – (1,690) (1,885) – – (3,575)
Interest payments – 1,682 1,885 – – 3,567
As at December 31, 2021 3,523,647 (33,274) (98,966) (7,701,279) – (4,309,872)
APPENDIX I ACCOUNTANT’S REPORT
– I-73 –


--- page 736 ---
Cash and
cash
equivalents Borrowings
Lease
liabilities
Convertible
redeemable
preferred
shares Net debt
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2021 3,523,647 (33,274) (98,966) (7,701,279) (4,309,872)
Addition of right-of-use assets – – (1,718) – (1,718)
Cash flows (3,128,902) (2,720) 7,230 – (3,124,392)
Effect on exchange difference 179,474 – – (742,204) (562,730)
Change in fair value through
profit or loss – – – (957,799) (957,799)
Change in fair value through
other comprehensive income – – – 80,500 80,500
Interest expense – (1,399) (4,097) – (5,496)
Interest payments – 1,613 4,097 – 5,710
As at December 31, 2022 574,219 (35,780) (93,454) (9,320,782) (8,875,797)
Addition of right-of-use assets – – (217,621) – (217,621)
Disposal of right-of-use assets – – 74,808 – 74,808
Cash flows 136,275 (24,000) 40,302 – 152,577
Effect on exchange difference 267 – – (164,284) (164,017)
Change in fair value through
profit or loss – – – (1,275,165) (1,275,165)
Change in fair value through
other comprehensive income – – – (20,111) (20,111)
Interest expense – (1,545) (8,030) – (9,575)
Interest payments – 1,554 8,030 – 9,584
As at December 31, 2023 710,761 (59,771) (195,965) (10,780,342) (10,325,317)
37 FINANCIAL INSTRUMENTS BY CATEGORY
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Financial assets
Measured at amortised cost
Trade receivables (Note 22) 30,717 37,936 38,506
Prepayments, deposit and other
receivables (Note 23) 9,189 13,875 12,144
Restricted cash (Note 24) 12,751 5,432 2,337
Term deposit (Note 25) 305,308 2,537,703 1,271,905
Cash and cash equivalents (Note 26) 3,523,647 574,219 710,761
3,881,612 3,169,165 2,035,653------------ ------------ ------------
Measured at fair value
Financial assets at fair value through
profit or loss (Note 20) 170,258 640,890 1,287,391------------
------------ ------------
4,051,870 3,810,055 3,323,044
APPENDIX I ACCOUNTANT’S REPORT
– I-74 –


--- page 737 ---
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Financial liabilities
Measured at amortised cost
Trade payables (Note 27) 10,573 13,979 13,654
Other payables and accruals (Note 28) 47,280 39,053 57,579
Lease liabilities (Note 16) 98,966 93,454 195,965
Short term bank borrowing (Note 29) 22,280 36,000 60,000
Long term bank borrowing (Note 29) 11,000 – –
190,099 182,486 327,198------------ ------------ ------------
Measured at fair value
Derivative financial instruments (Note 31) 811 2,531 560
Convertible redeemable preferred shares
(Note 32) 7,701,279 9,320,782 10,780,342
7,702,090 9,323,313 10,780,902------------
------------ ------------
7,892,189 9,505,799 11,108,100
38 CAPITAL COMMITMENTS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Contracted but not recognised:
Short-term lease commitment 631 7,419 4,198
39 RELATED-PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party
or exercise significant influence over the other party in making financial and operational decisions. Parties are also
considered to be related if they are subjected to common control. Members of key management and their close family
members of the Group are also considered as related parties.
The following significant transactions were carried out between the Group and its related parties during the
Track Record Period. In the opinion of the directors of the Company, the related party transactions were carried out
in the normal course of business and at terms negotiated between the Group and the respective related parties.
(a) Transactions with related parties
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Revenue from services provided for associates 2,607 578 2,357
Services purchased from a shareholder
(continuing transaction) 2,302 2,555 2,569
Revenue from services provided and services purchased were based on terms mutually agreed with related
parties and in the ordinary course of business.
APPENDIX I ACCOUNTANT’S REPORT
– I-75 –


--- page 738 ---
(b) Balances with related parties
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Trade nature:
Amounts receivable from associates – 363 395
Trade nature:
Trade payable due to a shareholder 78 445 95
Non-trade nature:
Investment payable due to associates 400 – 5,048
The above balances with related parties are unsecured, interest-free and are repayable on demand.
Note: The investment payable to associates as at December 31, 2023 are due for settlement according to the
terms and conditions set out in the related investment agreements which are mainly related to research
and development progress of the research and development project of the investees. Management does
not expect the payable to be due for settlement prior to the Listing.
(c) Key management personnel compensation
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Wages, salaries and bonuses 36,141 50,683 51,599
Pensions costs, housing benefits and other
employee benefits 2,217 2,672 2,900
Share-based compensation expenses 21,149 42,005 90,287
59,507 95,360 144,786
40 CONTINGENT LIABILITIES
As at December 31, 2021, 2022 and 2023, there were no material contingent liabilities to the Group.
41 EVENTS OCCURRING AFTER THE REPORTING PERIOD
In January 2024, the Group provided a convertible loan of RMB20 million to a target company, which is an
independent third party company which is principally engaged in business of customised material for agricultural
purpose. The convertible loan carried a simple interest rate of 8% per annum and will mature at the earlier of (i) three
years from the due date of the loan, or (ii) the occurrence of a breach of the agreement clause. The Group reserves
the right to convert all of the outstanding principal under the loan into 14% ordinary shares of the target company,
on a fully diluted and converted basis.
In March 2024, the Group granted 14,527,004 share options under 2021 Share Option Plan to certain
employees of the Group. These share options will be vested no longer than four years with the exercise price ranges
from US$0.18 to US$0.53.
In March and May 2024, the Group has purchased a wealth management product from a financial institution
and fund in aggregate of US$55 million, which were accounted as financial assets at fair value through profit or loss.
III SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of the
companies now comprising the Group in respect of any period subsequent to December 31,
2023 and up to the date of this report.
APPENDIX I ACCOUNTANT’S REPORT
– I-76 –


--- page 739 ---
The information set forth in this Appendix does not form part of the Accountant’ s Report
from the reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong
Kong, as set forth in Appendix I to this prospectus, and is included herein for illustrative
purpose only. The unaudited pro forma financial information should be read in conjunction
with the section headed “Financial Information” in this prospectus and the Accountant’ s
Report set forth in Appendix I to this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE
ASSETS
The following unaudited pro forma statement of adjusted net tangible assets of the Group
prepared in accordance with Rule 4.29 of the Listing Rules is for illustrative purposes only and
is set out below to illustrate the effect of the Global Offering on the net tangible assets of the
Group attributable to the equity holders of the Company as of December 31, 2023 as if the
Global Offering had taken place on December 31, 2023, assuming the Over-allotment Option
is not exercised.
The unaudited pro forma statement of adjusted net tangible assets has been prepared for
illustrative purposes only, and because of its hypothetical nature, it may not give a true picture
of the consolidated net tangible assets of the Group as at December 31, 2023 or at any future
dates following the Global Offering. It is prepared based on the consolidated net liabilities of
the Group as at December 31, 2023 as set out in the Accountant’s Report of the Group, the text
of which is set out in Appendix I to this prospectus, and adjusted as described below. The
unaudited pro forma statement of adjusted net tangible assets does not form part of the
Accountant’s Report.
Audited
consolidated
net tangible
liabilities
attributable
to equity
holders of the
Company as
at December 31,
2023 (1)
Estimated
impact
upon the
conversion of
Convertible
redeemable
preferred
shares (2)
Estimated
net proceeds
from the
Global
Offering (3)
Unaudited
pro forma
adjusted
net tangible
assets
attributable
to equity
holders of the
Company as
at December 31,
2023
Unaudited pro forma
adjusted net tangible assets
per Share (4), (5)
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price
of HK$5.03 per Share (7,275,278) 10,780,342 795,558 4,300,622 1.38 1.52
Based on an Offer Price
of HK$6.03 per Share (7,275,278) 10,780,342 959,323 4,464,387 1.44 1.58
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 740 ---
Notes:
(1) The audited consolidated net tangible liabilities attributable to equity holders of the Company as at
December 31, 2023 is extracted from the Accountant’s Report as set out in Appendix I to this prospectus,
which is based on the audited consolidated net liabilities of the Group attributable to equity holders of
the Company as at December 31, 2023 of approximately RMB7,267,409,000 with an adjustment for the
intangible assets attributable to equity holders of the Company as at December 31, 2023 of
RMB7,869,000.
(2) Upon the completion of the Global Offering, all the convertible redeemable preferred shares will be
automatically converted into ordinary shares of the Company. The convertible redeemable preferred
shares which were accounted for as liabilities will be re-designated from liabilities to equity upon
conversion. Accordingly, for the purpose of the unaudited pro forma financial information, the
unaudited pro forma adjusted consolidated net tangible assets attributable to equity holders of the
Company will be increased by RMB10,780,342,000, being the carrying amounts of the convertible
redeemable preferred shares as at December 31, 2023.
(3) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$5.03
per Share and HK$6.03 per Share, respectively, after deduction of the underwriting fees and other
related expenses payable by the Company (excluding the listing expense that have been charged to profit
or loss during the Track Record Period) and takes no account of any shares which may be issued
pursuant to the exercise of the Over-allotment Option, any Shares which may be issued under the
Pre-IPO Share Incentive Plan or any Shares that may be issued or repurchased by the Company under
the general mandate to issue Shares and general mandate to repurchase Shares as described in the section
headed “Share Capital” in this prospectus.
(4) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the
adjustments referred to in the preceding paragraphs and on the basis that 3,108,731,618 Shares were in
issue (being 3,406,772,761 Shares in issue assuming that the Global Offering and the conversion of the
convertible redeemable preferred shares to ordinary shares had been completed on December 31, 2023
but take no account of any shares which may fall to be issued upon the exercise of the Over-allotment
Option, any Shares which may be issued under the Pre-IPO Share Incentive Plan or any Shares which
may be issued or repurchased by the Company under the general mandate to issue Shares and general
mandate to repurchase Shares as described in the section headed “Share Capital” in this prospectus less
298,041,143 treasury shares owned by the Company as at December 31, 2023).
(5) For the purpose of this unaudited pro forma adjusted net tangible assets per Share, the amounts stated
in Renminbi are converted into Hong Kong dollars at the rate of RMB0.9105 to HK$1.00. No
representation is made that Renminbi has been, could have been or may be converted to Hong Kong
dollars, or vice versa, at that rate.
(6) Except as disclosed above, no adjustment has been made to reflect any trading result or other transaction
of the Group entered into subsequent to December 31, 2023.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 741 ---
The following is the text of a report received from PricewaterhouseCoopers, Certified
Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of QuantumPharm Inc.
We have completed our assurance engagement to report on the compilation of unaudited
pro forma financial information of QuantumPharm Inc. (the “Company”) and its subsidiaries
(collectively the “Group”) by the directors of the Company (the “Directors”) for illustrative
purposes only. The unaudited pro forma financial information consists of the unaudited pro
forma statement of adjusted consolidated net tangible assets of the Group as at December 31,
2023, and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages
II-1 to II-2 of the Company’s prospectus dated June 4, 2024, in connection with the proposed
initial public offering of the shares of the Company (the “Prospectus”). The applicable criteria
on the basis of which the Directors have compiled the Unaudited Pro Forma Financial
Information are described on pages II-1 to II-2 of the Prospectus.
The Unaudited Pro Forma Financial Information has been compiled by the Directors to
illustrate the impact of the proposed initial public offering on the Group’s financial position as
at December 31, 2023 as if the proposed initial public offering had taken place at December 31,
2023. As part of this process, information about the Group’s financial position has been
extracted by the Directors from the Group’s financial information for the year ended
December 31, 2023, on which an accountant’s report has been published.
Directors’ Responsibility for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the Unaudited Pro Forma Financial
Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to
Accounting Guideline 7, Preparation of Pro Forma Financial Information for Inclusion in
Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”).
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 742 ---
Our firm applies Hong Kong Standard on Quality Management (HKSQM) 1, Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements, issued by the HKICPA, which requires the firm
to design, implement and operate a system of quality management including policies or
procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to
you. We do not accept any responsibility for any reports previously given by us on any
financial information used in the compilation of the Unaudited Pro Forma Financial
Information beyond that owed to those to whom those reports were addressed by us at the dates
of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus , issued by the HKICPA. This standard requires
that the reporting accountant plans and performs procedures to obtain reasonable assurance
about whether the Directors have compiled the Unaudited Pro Forma Financial Information in
accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the
HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Unaudited Pro
Forma Financial Information, nor have we, in the course of this engagement, performed an
audit or review of the financial information used in compiling the Unaudited Pro Forma
Financial Information.
The purpose of unaudited pro forma financial information included in a prospectus is
solely to illustrate the impact of a significant event or transaction on unadjusted financial
information of the entity as if the event had occurred or the transaction had been undertaken
at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any
assurance that the actual outcome of the proposed initial public offering at December 31, 2023
would have been as presented.
A reasonable assurance engagement to report on whether the unaudited pro forma
financial information has been properly compiled on the basis of the applicable criteria
involves performing procedures to assess whether the applicable criteria used by the directors
in the compilation of the unaudited pro forma financial information provide a reasonable basis
for presenting the significant effects directly attributable to the event or transaction, and to
obtain sufficient appropriate evidence about whether:
 The related pro forma adjustments give appropriate effect to those criteria; and
 The unaudited pro forma financial information reflects the proper application of
those adjustments to the unadjusted financial information.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 743 ---
The procedures selected depend on the reporting accountant’s judgment, having regard to
the reporting accountant’s understanding of the nature of the company, the event or transaction
in respect of which the unaudited pro forma financial information has been compiled, and other
relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro
forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our work has not been carried out in accordance with auditing standards or other
standards and practices generally accepted in the United States of America or auditing
standards of the Public Company Accounting Oversight Board (United States) or standards and
practices of any professional body in any other overseas jurisdiction and accordingly should
not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion:
(a) the Unaudited Pro Forma Financial Information has been properly compiled by the
Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma
Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing
Rules.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, June 4, 2024
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 744 ---
SUMMARY OF THE CONSTITUTION OF THE COMPANY
1 Memorandum of Association
The Memorandum of Association of the Company was conditionally adopted on May 28,
2024 and states, inter alia, that the liability of the members of the Company is limited, that the
objects for which the Company is established are unrestricted and the Company shall have full
power and authority to carry out any object not prohibited by the Companies Act or any other
law of the Cayman Islands.
The Memorandum of Association is on display on the websites of the Stock Exchange and
the Company as specified in Appendix V in the section headed “Documents on display”.
2 Articles of Association
The Articles of Association of the Company were conditionally adopted on May 28, 2024
and include provisions to the following effect:
2.1 Directors
(a) Power to allot and issue Shares
Subject to the provisions in the Memorandum of Association (and to any
direction that may be given by the Company in general meeting) and without
prejudice to any rights attached to any existing shares, the Directors may allot, issue,
grant options over or otherwise dispose of shares with or without preferred, deferred
or other rights or restrictions, whether in regard to dividend or other distribution,
voting, return of capital or otherwise and to such persons, at such times and on such
other terms as the Directors think proper.
(b) Power to dispose of the assets of the Company or any subsidiary
Subject to the provisions of the Companies Act, the Memorandum and Articles
of Association and to any directions given by special resolution, the business of the
Company shall be managed by the Directors who may exercise all the powers of the
Company. No alteration of the Memorandum and Articles of Association and no such
direction shall invalidate any prior act of the Directors which would have been valid
if that alteration had not been made or that direction had not been given.
(c) Compensation or payment for loss of office
There are no provisions in the Articles of Association relating to compensation
or payment for loss of office of a Director.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN ISLANDS COMPANY LA W
– III-1 –


--- page 745 ---
(d) Loans to Directors
There are no provisions in the Articles of Association relating to making of
loans to Directors.
(e) Financial assistance to purchase Shares
There are no provisions in the Articles of Association relating to the giving of
financial assistance by the Company to purchase shares in the Company or its
subsidiaries.
(f) Disclosure of interest in contracts with the Company or any of its subsidiaries
No person shall be disqualified from the office of Director or alternate Director
or prevented by such office from contracting with the Company, either as vendor,
purchaser or otherwise, nor shall any such contract or any contract or transaction
entered into by or on behalf of the Company in which any Director or alternate
Director shall be in any way interested be or be liable to be avoided, nor shall any
Director or alternate Director so contracting or being so interested be liable to
account to the Company for any profit realised by or arising in connection with any
such contract or transaction by reason of such Director or alternate Director holding
office or of the fiduciary relationship thereby established, provided that the nature
of the interest of any Director or any alternate Director in any such contract or
transaction shall be disclosed by them at or prior to its consideration and any vote
thereon.
A Director shall not be entitled to vote on (nor shall the Director be counted
in the quorum in relation to) any resolution of the Directors in respect of any
contract or arrangement or any other proposal in which the Director or any of his
close associates has any material interest, and if he shall do so his vote shall not be
counted (nor shall he be counted in the quorum for the resolution), but this
prohibition shall not apply to any of the following matters, namely:
(i) the giving to such Director or any of his close associates of any security
or indemnity in respect of money lent or obligations incurred or
undertaken by him or any of them at the request of or for the benefit of
the Company or any of its subsidiaries;
(ii) the giving of any security or indemnity to a third party in respect of a debt
or obligation of the Company or any of its subsidiaries for which the
Director or any of his close associates has himself/themselves assumed
responsibility in whole or in part and whether alone or jointly under a
guarantee or indemnity or by the giving of security;
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN ISLANDS COMPANY LA W
– III-2 –


--- page 746 ---
(iii) any proposal concerning an offer of shares, debentures or other securities
of or by the Company or any other company which the Company may
promote or be interested in for subscription or purchase where the
Director or any of his close associates is/are or is/are to be interested as
a participant in the underwriting or sub-underwriting of the offer;
(iv) any proposal or arrangement concerning the benefit of employees of the
Company or any of its subsidiaries including:
(A) the adoption, modification or operation of any employees’ share
scheme or any share incentive scheme or share option scheme under
which the Director or any of his close associates may benefit; or
(B) the adoption, modification or operation of a pension fund or
retirement, death or disability benefits scheme which relates to the
Director, his close associates and employees of the Company or any
of its subsidiaries and does not provide in respect of any Director or
any of his close associates, as such any privilege or advantage not
generally accorded to the class of persons to which such scheme or
fund relates; and
(v) any contract or arrangement in which the Director or any of his close
associates is/are interested in the same manner as other holders of shares
or debentures or other securities of the Company by virtue only of their
interest in shares or debentures or other securities of the Company.
(g) Remuneration
The remuneration to be paid to the Directors, if any, shall be such remuneration
as the Directors shall determine. The Directors shall also be entitled to be paid all
travelling, hotel and other expenses properly incurred by them in connection with
their attendance at meetings of Directors or committees of Directors, or general
meetings of the Company, or separate meetings of the holders of any class of shares
or debentures of the Company, or otherwise in connection with the business of the
Company or the discharge of their duties as a Director, or to receive a fixed
allowance in respect thereof as may be determined by the Directors, or a
combination partly of one such method and partly the other.
The Directors may approve additional remuneration to any Director for any
services which in the opinion of the Directors go beyond that Director’s ordinary
routine work as a Director. Any fees paid to a Director who is also counsel, attorney
or solicitor to the Company, or otherwise serves it in a professional capacity shall
be in addition to their remuneration as a Director.
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(h) Retirement, appointment and removal
The Company may by ordinary resolution appoint any person to be a Director,
either to fill a vacancy or as an additional Director.
The Company may by ordinary resolution remove any Director (including a
managing or other executive Director) before the expiration of such Director’s term
of office, notwithstanding anything in the Articles of Association or in any
agreement between the Company and such Director, and may by ordinary resolution
elect another person in their stead. Nothing shall be taken as depriving a Director so
removed of compensation or damages payable to such Director in respect of the
termination of his appointment as Director or of any other appointment or office as
a result of the termination of his appointment as Director.
The Directors may appoint any person to be a Director, either to fill a vacancy
or as an additional Director provided that the appointment does not cause the
number of Directors to exceed any number fixed by or in accordance with the
Articles of Association as the maximum number of Directors. Any Director so
appointed shall hold office only until the first annual general meeting of the
Company after such Director’s appointment and shall then be eligible for re-election
at that meeting.
There is no shareholding qualification for Directors nor is there any specified
age limit for Directors.
The office of a Director shall be vacated if:
(i) the Director gives notice in writing to the Company that he resigns the
office of Director;
(ii) the Director is absent (for the avoidance of doubt, without being
represented by proxy or an alternate Director appointed by him) for a
continuous period of 12 months without special leave of absence from the
Directors, and the Directors pass a resolution that he has by reason of
such absence vacated office;
(iii) the Director dies, becomes bankrupt or makes any arrangement or
composition with his creditors generally;
(iv) the Director is found to be or becomes of unsound mind; or
(v) the Director is removed from office by notice in writing served upon such
Director signed by not less than three-fourths in number (or, if that is not
a round number, the nearest lower round number) of the Directors then in
office (including such Director).
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At every annual general meeting of the Company one-third of the Directors for
the time being, or, if their number is not three or a multiple of three, then the number
nearest to, but not less than, one-third, shall retire from office by rotation, provided
that every Director (including those appointed for a specific term) shall be subject
to retirement by rotation at least once every three years. A retiring Director shall
retain office until the close of the meeting at which he retires and shall be eligible
for re-election at such meeting. The Company at any annual general meeting at
which any Directors retire may fill the vacated office by electing a like number of
persons to be Directors.
(i) Borrowing powers
The Directors may exercise all the powers of the Company to borrow money
and to mortgage or charge its undertaking, property and assets (present and future)
and uncalled capital or any part thereof and to issue debentures, debenture stock,
mortgages, bonds and other such securities whether outright or as security for any
debt, liability or obligation of the Company or of any third party.
2.2 Alteration to constitutional documents
No alteration or amendment to the Memorandum or Articles of Association may be
made except by special resolution.
2.3 V ariation of rights of existing shares or classes of shares
If at any time the share capital of the Company is divided into different classes of
shares, all or any of the rights attached to any class for the time being issued (unless
otherwise provided by the terms of issue of the shares of that class) may, whether or not
the Company is being wound up, be varied only with the consent in writing of the holders
of not less than three-fourths of the voting rights of the issued shares of that class, or with
the approval of a resolution passed by a majority of not less than three-fourths of the votes
cast at a separate meeting of the holders of the shares of that class. To any such meeting
all the provisions of the Articles of Association relating to general meetings shall apply
mutatis mutandis , except that the necessary quorum shall be one or more persons holding
or representing by proxy or duly authorised representative at least one-third of the voting
rights of the issued shares of that class.
The rights conferred upon the holders of shares of any class shall not, unless
otherwise expressly provided in the rights attaching to or the terms of issue of the shares
of that class, be deemed to be varied by the creation or issue of further shares ranking pari
passu therewith.
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2.4 Alteration of capital
The Company may by ordinary resolution:
(a) increase its share capital by such sum as the ordinary resolution shall prescribe
and with such rights, priorities and privileges annexed thereto, as the Company
in general meeting may determine;
(b) consolidate and divide all or any of its share capital into shares of larger
amount than its existing shares. On any consolidation of fully paid shares and
division into shares of larger amount, the Directors may settle any difficulty
which may arise as they think expedient and in particular (but without
prejudice to the generality of the foregoing) may as between the holders of
shares to be consolidated determine which particular shares are to be
consolidated into each consolidated share, and if it shall happen that any
person shall become entitled to fractions of a consolidated share or shares, such
fractions may be sold by some person appointed by the Directors for that
purpose and the person so appointed may transfer the shares so sold to the
purchasers thereof and the validity of such transfer shall not be questioned, and
so that the net proceeds of such sale (after deduction of the expenses of such
sale) may either be distributed among the persons who would otherwise be
entitled to a fraction or fractions of a consolidated share or shares rateably in
accordance with their rights and interests or may be paid to the Company for
the Company’s benefit;
(c) by subdivision of its existing shares or any of them divide the whole or any part
of its share capital into shares of smaller amount than is fixed by the
Memorandum of Association or into shares without par value; and
(d) cancel any shares that at the date of the passing of the ordinary resolution have
not been taken or agreed to be taken by any person and diminish the amount
of its share capital by the amount of the shares so canceled.
The Company may by special resolution reduce its share capital or any capital
redemption reserve fund, subject to the provisions of the Companies Act.
2.5 Special resolution—majority required
A “special resolution” is defined in the Articles of Association to have the same
meaning as in the Companies Act, for which purpose, the requisite majority shall be not
less than three-fourths of the votes of such members of the Company as, being entitled
to do so, vote in person or, in the case of corporations, by their duly authorised
representatives or, where proxies are allowed, by proxy at a general meeting of which
notice specifying the intention to propose the resolution as a special resolution has been
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duly given and includes a special resolution approved in writing by all of the members
of the Company entitled to vote at a general meeting of the Company in one or more
instruments each signed by one or more of such members, and the effective date of the
special resolution so adopted shall be the date on which the instrument or the last of such
instruments (if more than one) is executed.
In contrast, an “ordinary resolution” is defined in the Articles of Association to mean
a resolution passed by a simple majority of the votes of such members of the Company
as, being entitled to do so, vote in person or, in the case of corporations, by their duly
authorised representatives or, where proxies are allowed, by proxy at a general meeting
held in accordance with the Articles of Association and includes an ordinary resolution
approved in writing by all the members of the Company aforesaid.
2.6 V oting rights
Subject to any rights or restrictions attached to any shares, at any general meeting
every member of the Company present in person (or, in the case of a member being a
corporation, by its duly authorised representative) or by proxy shall have (a) the right to
speak; (b) one vote on a show of hands; and (c) one vote for every share of which he is
the holder on a poll.
Where any member is, under the Listing Rules, required to abstain from voting on
any particular resolution or restricted to voting only for or only against any particular
resolution, any votes cast by or on behalf of such member in contravention of such
requirement or restriction shall not be counted.
In the case of joint holders the vote of the senior holder who tenders a vote, whether
in person or by proxy (or in the case of a corporation or other non-natural person, by its
duly authorised representative or proxy) shall be accepted to the exclusion of the votes
of the other joint holders, and seniority shall be determined by the order in which the
names of the holders stand in the register of members of the Company.
A member of unsound mind, or in respect of whom an order has been made by any
court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll,
by their committee, receiver, curator bonis, or other person on such member’s behalf
appointed by that court, and any such committee, receiver, curator bonis or other person
may vote by proxy.
No person shall be counted in a quorum or be entitled to vote at any general meeting
unless he is registered as a member on the record date for such meeting, nor unless all
calls or other monies then payable by him in respect of shares have been paid.
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At any general meeting a resolution put to the vote of the meeting shall be decided
by way of a poll save that the chairperson of the meeting may allow a resolution which
relates purely to a procedural or administrative matter as prescribed under the Listing
Rules to be voted on by a show of hands.
Any corporation or other non-natural person which is a member of the Company
may in accordance with its constitutional documents, or in the absence of such provision
by resolution of its directors or other governing body, authorise such person as it thinks
fit to act as its representative at any meeting of the Company or of any class of members,
and the person so authorised shall be entitled to exercise the same powers as the
corporation could exercise if it were an individual member.
If a recognised clearing house (or its nominee(s)) is a member of the Company it
may authorise such person or persons as it thinks fit to act as its representative(s) at any
general meeting of the Company or at any general meeting of any class of members of the
Company, provided that, if more than one person is so authorised, the authorisation shall
specify the number and class of shares in respect of which each such person is so
authorised. A person authorised pursuant to this provision shall be entitled to exercise the
same rights and powers on behalf of the recognised clearing house (or its nominee(s))
which that person represents as that recognised clearing house (or its nominee(s)) could
exercise as if such person were an individual member of the Company holding the number
and class of shares specified in such authorisation, including the right to speak and, where
a show of hands is allowed, the right to vote individually on a show of hands.
2.7 Annual general meetings and extraordinary general meetings
The Company shall hold a general meeting as its annual general meeting for each
financial year within six months (or such other period as may be permitted by the Listing
Rules or the Stock Exchange) after the end of such financial year. An annual general
meeting shall be specified as such in the notices calling it.
The Directors may call general meetings, and they shall on a members’ requisition
forthwith proceed to convene an extraordinary general meeting of the Company. A
members’ requisition is a requisition of one or more members holding at the date of
deposit of the requisition not less than 10% of the voting rights, on a one vote per share
basis, of the issued shares which as at that date carry the right to vote at general meetings
of the Company. The members’ requisition must state the objects and the resolutions to
be added to the agenda of the meeting and must be signed by the requisitionists and
deposited at the principal office of the Company in Hong Kong or, in the event the
Company ceases to have such a principal office, the registered office of the Company, and
may consist of several documents in like form each signed by one or more requisitionists.
If there are no Directors as at the date of the deposit of the members’ requisition or if the
Directors do not within 21 days from the date of the deposit of the members’ requisition
duly proceed to convene a general meeting to be held within a further 21 days, the
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requisitionists, or any of them representing more than one-half of the total voting rights
of all the requisitionists, may themselves convene a general meeting, but any meeting so
convened shall be held no later than the day which falls three months after the expiration
of the said 21 day period. A general meeting convened by requisitionists shall be
convened in the same manner as nearly as possible as that in which general meetings are
to be convened by Directors.
2.8 Accounts and audit
The Directors shall cause proper books of account to be kept with respect to all sums
of money received and expended by the Company and the matters in respect of which the
receipt or expenditure takes place, all sales and purchases of goods by the Company and
the assets and liabilities of the Company. Such books of account must be retained for a
minimum period of five years from the date on which they are prepared. Proper books
shall not be deemed to be kept if there are not kept such books of account as are necessary
to give a true and fair view of the state of the Company’s affairs and to explain its
transactions.
The Directors shall determine whether and to what extent and at what times and
places and under what conditions or regulations the accounts and books of the Company
or any of them shall be open to the inspection of members of the Company not being
Directors, and no member (not being a Director) shall have any right of inspecting any
account or book or document of the Company except as conferred by the Companies Act
or authorised by the Directors or by the Company in general meeting.
The Directors shall cause to be prepared and to be laid before the Company at every
annual general meeting a profit and loss account for the period since the preceding
account, together with a balance sheet as at the date to which the profit and loss account
is made up, a Directors’ report with respect to the profit or loss of the Company for the
period covered by the profit and loss account and the state of the Company’s affairs as
at the end of such period, an auditors’ report on such accounts and such other reports and
accounts as may be required by law.
2.9 Auditors
The Company shall at every annual general meeting by ordinary resolution appoint
an auditor or auditors of the Company who shall hold office until the next annual general
meeting. The Company may by ordinary resolution remove an auditor before the
expiration of his period of office. No person may be appointed as an auditor of the
Company unless such person is independent of the Company. The remuneration of the
auditors shall be fixed by the Company at the annual general meeting at which they are
appointed by ordinary resolution, or in the manner specified in such resolution.
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2.10 Notice of meetings and business to be conducted thereat
An annual general meeting shall be called by not less than 21 days’ notice and any
extraordinary general meeting shall be called by not less than 14 days’ notice, which shall
be exclusive of the day on which it is served or deemed to be served and of the day for
which it is given. The notice convening an annual general meeting shall specify the
meeting as such, and the notice convening a meeting to pass a special resolution shall
specify the intention to propose the resolution as a special resolution. Every notice shall
specify the place, the day and the hour of the meeting, particulars of the resolutions and
the general nature of the business to be conducted at the meeting. Notwithstanding the
foregoing, a general meeting of the Company shall, whether or not the notice specified
has been given and whether or not the provisions of the Articles of Association regarding
general meetings have been complied with, be deemed to have been duly convened if it
is so agreed:
(a) in the case of an annual general meeting, by all members of the Company
entitled to attend and vote at the meeting; and
(b) in the case of an extraordinary general meeting, by a majority in number of the
members having a right to attend and vote at the meeting, together holding not
less than 95% in par value of the shares giving that right.
If, after the notice of a general meeting has been sent but before the meeting is held,
or after the adjournment of a general meeting but before the adjourned meeting is held
(whether or not notice of the adjourned meeting is required), the Directors, in their
absolute discretion, consider that it is impractical or unreasonable for any reason to hold
a general meeting on the date or at the time and place specified in the notice calling such
meeting, they may change or postpone the meeting to another date, time and place.
The Directors also have the power to provide in every notice calling a general
meeting that in the event of a gale warning or a black rainstorm warning is in force at any
time on the day of the general meeting (unless such warning is canceled at least a
minimum period of time prior to the general meeting as the Directors may specify in the
relevant notice), the meeting shall be postponed without further notice to be reconvened
on a later date.
Where a general meeting is postponed:
(a) the Company shall endeavour to cause a notice of such postponement, which
shall set out the reason for the postponement in accordance with the Listing
Rules, to be placed on the Company’s website and published on the Stock
Exchange’s website as soon as practicable, provided that failure to place or
publish such notice shall not affect the automatic postponement of a general
meeting due to a gale warning or black rainstorm warning being in force on the
day of the general meeting;
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(b) the Directors shall fix the date, time and place for the reconvened meeting and
at least seven clear days’ notice shall be given for the reconvened meeting; and
such notice shall specify the date, time and place at which the postponed
meeting will be reconvened and the date and time by which proxies shall be
submitted in order to be valid at such reconvened meeting (provided that any
proxy submitted for the original meeting shall continue to be valid for the
reconvened meeting unless revoked or replaced by a new proxy); and
(c) only the business set out in the notice of the original meeting shall be
transacted at the reconvened meeting, and notice given for the reconvened
meeting does not need to specify the business to be transacted at the
reconvened meeting, nor shall any accompanying documents be required to be
recirculated. Where any new business is to be transacted at such reconvened
meeting, the Company shall give a fresh notice for such reconvened meeting
in accordance with the Articles of Association.
2.11 Transfer of shares
Transfers of shares may be effected by an instrument of transfer, which shall be in
writing and in any standard form of transfer as prescribed by the Stock Exchange or such
other form as the Directors may approve. The instrument of transfer shall be executed by
or on behalf of the transferor and, unless the Directors otherwise determine, the
transferee, and the transferor shall be deemed to remain the holder of the share until the
name of the transferee is entered in the register of members of the Company.
The Directors may decline to register any transfer of any share which is not fully
paid up or on which the Company has a lien. The Directors may also decline to register
any transfer of any shares unless:
(a) the instrument of transfer is lodged with the Company accompanied by the
certificate for the shares to which it relates (which shall upon the registration
of the transfer be canceled) and such other evidence as the Directors may
reasonably require to show the right of the transferor to make the transfer;
(b) the instrument of transfer is in respect of only one class of shares;
(c) the instrument of transfer is properly stamped (in circumstances where
stamping is required);
(d) in the case of a transfer to joint holders, the number of joint holders to whom
the share is to be transferred does not exceed four;
(e) the shares concerned are free of any lien in favour of the Company; and
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(f) a fee of such amount not exceeding the maximum amount as the Stock
Exchange may from time to time determine to be payable (or such lesser sum
as the Directors may from time to time require) is paid to the Company in
respect thereof.
If the Directors refuse to register a transfer of any share they shall notify the
transferor and the transferee within two months of such refusal.
The registration of transfers shall be suspended during such periods as the register
of members of the Company is closed. The Directors may, on at least 10 business days’
notice (or on at least 6 business days’ notice in the case of a rights issue) being given by
advertisement published on the Stock Exchange’s website, or, subject to the Listing
Rules, in the manner in which notices may be served by the Company by electronic means
as provided in the Articles of Association or by advertisement published in the
newspapers, close the register of members at such times and for such periods as the
Directors may from time to time determine, provided that the register of members shall
not be closed for more than 30 days in any year (or such longer period as the members
of the Company may by ordinary resolution determine, provided that such period shall not
be extended beyond 60 days in any year).
2.12 Power of the Company to purchase its own shares
Subject to the provisions of the Companies Act, the Company may purchase its own
shares provided that (a) the manner of purchase has first been authorised by the members
of the Company by ordinary resolution, and (b) any such purchase shall only be made in
accordance with any relevant code, rules or regulations issued by the Stock Exchange or
the Securities and Futures Commission of Hong Kong from time to time in force.
2.13 Power of any subsidiary of the Company to own shares
There are no provisions in the Articles of Association relating to the ownership of
shares by a subsidiary.
2.14 Dividends and other methods of distribution
Subject to the Companies Act and the Articles of Association, the Company may by
ordinary resolution resolve to pay dividends and other distributions on shares in issue and
authorise payment of the dividends or other distributions out of the funds of the Company
lawfully available therefor, provided no dividends shall exceed the amount recommended
by the Directors. No dividend or other distribution shall be paid except out of the realised
or unreleased profits of the Company, out of the share premium account or as otherwise
permitted by law.
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The Directors may from time to time pay to the members of the Company such
interim dividends as appear to the Directors to be justified by the profits of the Company.
The Directors may in addition from time to time declare and pay special dividends on
shares of such amounts and on such dates as they think fit.
Except as otherwise provided by the rights attached to any shares, all dividends and
other distributions shall be paid according to the amounts paid up on the shares that a
member holds during any portion or portions of the period in respect of which the
dividend is paid. For this purpose no amount paid up on a share in advance of calls shall
be treated as paid up on the share.
The Directors may deduct from any dividends or other distribution payable to any
member of the Company all sums of money (if any) then payable by the member to the
Company on account of calls or otherwise. The Directors may retain any dividends or
other monies payable on or in respect of a share upon which the Company has a lien, and
may apply the same in or towards satisfaction of the debts, liabilities or engagements in
respect of which the lien exists.
No dividend shall carry interest against the Company. Except as otherwise provided
by the rights attached to any shares, dividends and other distributions may be paid in any
currency.
Whenever the Directors or the Company in general meeting have resolved that a
dividend be paid or declared on the share capital of the Company, the Directors may
further resolve: (a) that such dividend be satisfied wholly or in part in the form of an
allotment of shares credited as fully paid up on the basis that the shares so allotted are
to be of the same class as the class already held by the allottee, provided that the members
of the Company entitled thereto will be entitled to elect to receive such dividend (or part
thereof) in cash in lieu of such allotment; or (b) that the members of the Company entitled
to such dividend will be entitled to elect to receive an allotment of shares credited as fully
paid up in lieu of the whole or such part of the dividend as the Directors may think fit
on the basis that the shares so allotted are to be of the same class as the class already held
by the allottee. The Company may upon the recommendation of the Directors by ordinary
resolution resolve in respect of any one particular dividend of the Company that
notwithstanding the foregoing a dividend may be satisfied wholly in the form of an
allotment of shares credited as fully paid without offering any right to members of the
Company to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other monies payable in cash in respect of shares may be
paid by wire transfer to the holder or by cheque or warrant sent through the post directed
to the registered address of the holder or, in the case of joint holders, to the registered
address of the holder who is first named on the register of members of the Company or
to such person and to such address as the holder or joint holders may in writing direct.
Every such cheque or warrant shall be made payable to the order of the person to whom
it is sent. Any one of two or more joint holders may give effectual receipts for any
dividends, other distributions, bonuses, or other monies payable in respect of the shares
held by them as joint holders.
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Any dividend or other distribution which remains unclaimed after a period of six
years from the date on which such dividend or distribution becomes payable shall be
forfeited and shall revert to the Company.
The Directors, with the sanction of the members of the Company by ordinary
resolution, may resolve that any dividend or other distribution be paid wholly or partly
by the distribution of specific assets, and in particular (but without limitation) by the
distribution of shares, debentures, or securities of any other company or in any one or
more of such ways, and where any difficulty arises in regard to such distribution, the
Directors may settle it as they think expedient, and in particular may disregard fractional
entitlements, round the same up or down or provide that the same shall accrue to the
benefit of the Company, and may fix the value for distribution of such specific assets or
any part thereof and may determine that cash payments shall be made to any members of
the Company upon the basis of the value so fixed in order to adjust the rights of all
members, and may vest any such specific assets in trustees as may seem expedient to the
Directors.
2.15 Proxies
A member of the Company entitled to attend and vote at a general meeting of the
Company shall be entitled to appoint another person who must be an individual as his
proxy to attend and vote instead of him and a proxy so appointed shall have the same right
as the member to speak at the meeting. V otes may be given either personally or by proxy.
A proxy need not be a member of the Company. A member may appoint any number of
proxies to attend in his stead at any one general meeting or at any one class meeting.
The instrument appointing a proxy shall be in writing and shall be executed under
the hand of the appointor or of his attorney duly authorised in writing, or, if the appointor
is a corporation or other non-natural person, under the hand of its duly authorised
representative.
The Directors shall, in the notice convening any meeting or adjourned meeting, or
in an instrument of proxy sent out by the Company, specify the manner (including by
electronic means) by which the instrument appointing a proxy shall be deposited and the
place and the time (being not later than the time appointed for the commencement of the
meeting or adjourned meeting to which the proxy relates) at which the instrument
appointing a proxy shall be deposited.
The instrument appointing a proxy may be in any usual or common form (or such
other form as the Directors may approve) and may be expressed to be for a particular
meeting or any adjournment thereof or generally until revoked.
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2.16 Calls on shares and forfeiture of shares
Subject to the terms of the allotment and issue of any shares, the Directors may
make calls upon the members of the Company in respect of any monies unpaid on their
shares (whether in respect of par value or premium), and each member of the Company
shall (subject to receiving at least 14 clear days’ notice specifying the times or times of
payment) pay to the Company at the time or times so specified the amount called on his
shares. A call may be revoked or postponed, in whole or in part, as the Directors may
determine. A call may be required to be paid by instalments. A person upon whom a call
is made shall remain liable for calls made upon him, notwithstanding the subsequent
transfer of the shares in respect of which the call was made.
A call shall be deemed to have been made at the time when the resolution of the
Directors authorising the call was passed. The joint holders of a share shall be jointly and
severally liable to pay all calls and instalments due in respect of such share.
If a call remains unpaid after it has become due and payable, the person from whom
it is due shall pay interest on the amount unpaid from the day it became due and payable
until it is paid at such rate as the Directors may determine (and in addition all expenses
that have been incurred by the Company by reason of such non-payment), but the
Directors may waive payment of the interest or expenses wholly or in part.
If any call or instalment of a call remains unpaid after it has become due and
payable, the Directors may give to the person from whom it is due not less than 14 clear
days’ notice requiring payment of the amount unpaid together with any interest which
may have accrued and any expenses incurred by the Company by reason of such
non-payment. The notice shall specify where payment is to be made and shall state if the
notice is not complied with the shares in respect of which the call was made will be liable
to be forfeited.
If such notice is not complied with, any share in respect of which it was given may,
before the payment required by the notice has been made, be forfeited by a resolution of
the Directors. Such forfeiture shall include all dividends, other distributions or other
monies payable in respect of the forfeited shares and not paid before the forfeiture.
A forfeited share may be sold, re-allotted or otherwise disposed of on such terms and
in such manner as the Directors think fit.
A person any of whose shares have been forfeited shall cease to be a member of the
Company in respect of the forfeited shares and shall surrender to the Company for
cancellation the certificate for the shares forfeited and shall remain liable to pay to the
Company all monies which at the date of forfeiture were payable by him to the Company
in respect of the shares, together with interest at such rate as the Directors may determine,
but that person’s liability shall cease if and when the Company shall have received
payment in full of all monies due and payable by them in respect of those shares.
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2.17 Inspection of register of members
The Company shall maintain or cause to be maintained the register of members of
the Company in accordance with the Companies Act. The Directors may, on giving 10
business days’ notice (or 6 business days’ notice in the case of a rights issue) by
advertisement published on the Stock Exchange’s website or, subject to the Listing Rules,
in the manner in which notices may be served by the Company by electronic means as
provided in the Articles of Association or by advertisement published in the newspapers,
close the register of members at such times and for such periods as the Directors may
determine, either generally or in respect of any class of shares, provided that the register
shall not be closed for more than 30 days in any year (or such longer period as the
members of the Company may by ordinary resolution determine, provided that such
period shall not be extended beyond 60 days in any year).
Except when the register is closed, the register of members shall during business
hours be kept open for inspection by any member of the Company without charge.
2.18 Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present.
Two members of the Company present in person or by proxy, or if a corporation or other
non-natural person by its duly authorised representative or proxy, shall be a quorum
unless the Company has only one member entitled to vote at such general meeting in
which case the quorum shall be that one member present in person or by proxy, or in the
case of a corporation or other non-natural person by its duly authorised representative or
proxy.
The quorum for a separate general meeting of the holders of a separate class of
shares of the Company is described in paragraph 2.3 above.
2.19 Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles of Association concerning the rights of
minority shareholders in relation to fraud or oppression.
2.20 Procedure on liquidation
Subject to the Companies Act, the Company may by special resolution resolve that
the Company be wound up voluntarily.
Subject to the rights attaching to any shares, in a winding up:
(a) if the assets available for distribution amongst the members of the Company
shall be insufficient to repay the whole of the Company’s paid-up capital, such
assets shall be distributed so that, as nearly as may be, the losses shall be borne
by the members of the Company in proportion to the capital paid up, or which
ought to have been paid up, on the shares held by them at the commencement
of the winding up;
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(b) if the assets available for distribution amongst the members of the Company
shall be more than sufficient to repay the whole of the Company’s paid up
capital at the commencement of the winding up, the surplus shall be distributed
amongst the members of the Company in proportion to the capital paid up on
the shares held by them at the commencement of the winding up.
If the Company shall be wound up, the liquidator may with the approval of a special
resolution of the Company and any other approval required by the Companies Act, divide
amongst the members of the Company in kind the whole or any part of the assets of the
Company (whether such assets shall consist of property of the same kind or not) and may,
for that purpose, value any assets and determine how the division shall be carried out as
between the members or different classes of members of the Company. The liquidator
may, with the like approval, vest the whole or any part of such assets in trustees upon such
trusts for the benefit of the members of the Company as the liquidator, with the like
approval, shall think fit, but so that no member of the Company shall be compelled to
accept any assets, shares or other securities in respect of which there is a liability.
2.21 Untraceable members
The Company shall be entitled to sell any shares of a member of the Company or
the shares to which a person is entitled by virtue of transmission on death or bankruptcy
or operation of law if: (a) all cheques or warrants, not being less than three in number,
for any sums payable in cash to the holder of such shares have remained uncashed for a
period of 12 years; (b) the Company has not during that time or before the expiry of the
three month period referred to in (d) below received any indication of the whereabouts or
existence of the member; (c) during the 12-year period, at least three dividends in respect
of the shares in question have become payable and no dividend during that period has
been claimed by the member; and (d) upon expiry of the 12-year period, the Company has
caused an advertisement to be published in the newspapers or, subject to the Listing
Rules, by electronic communication in the manner in which notices may be served by the
Company by electronic means as provided in the Articles of Association, giving notice of
its intention to sell such shares and a period of three months has elapsed since such
advertisement and the Stock Exchange has been notified of such intention. The net
proceeds of any such sale shall belong to the Company and upon receipt by the Company
of such net proceeds it shall become indebted to the former member for an amount equal
to such net proceeds.
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SUMMARY OF CAYMAN ISLANDS COMPANY LA W AND TAXATION
1 Introduction
The Companies Act is derived, to a large extent, from the older Companies Acts of
England, although there are significant differences between the Companies Act and the current
Companies Act of England. Set out below is a summary of certain provisions of the Companies
Act, although this does not purport to contain all applicable qualifications and exceptions or
to be a complete review of all matters of corporate law and taxation which may differ from
equivalent provisions in jurisdictions with which interested parties may be more familiar.
2 Incorporation
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 28 April 2017 under the Companies Act. As such, its operations must be
conducted mainly outside the Cayman Islands. The Company is required to file an annual
return each year with the Registrar of Companies of the Cayman Islands and pay a fee which
is based on the size of its authorised share capital.
3 Share Capital
The Companies Act permits a company to issue ordinary shares, preference shares,
redeemable shares or any combination thereof.
The Companies Act provides that where a company issues shares at a premium, whether
for cash or otherwise, a sum equal to the aggregate amount of the value of the premia on those
shares shall be transferred to an account called the “share premium account”. At the option of
a company, these provisions may not apply to premia on shares of that company allotted
pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any
other company and issued at a premium. The Companies Act provides that the share premium
account may be applied by a company, subject to the provisions, if any, of its memorandum and
articles of association, in such manner as the company may from time to time determine
including, but without limitation:
(a) paying distributions or dividends to members;
(b) paying up unissued shares of the company to be issued to members as fully paid
bonus shares;
(c) in the redemption and repurchase of shares (subject to the provisions of section 37
of the Companies Act);
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(d) writing-off the preliminary expenses of the company;
(e) writing-off the expenses of, or the commission paid or discount allowed on, any
issue of shares or debentures of the company; and
(f) providing for the premium payable on redemption or purchase of any shares or
debentures of the company.
No distribution or dividend may be paid to members out of the share premium account
unless immediately following the date on which the distribution or dividend is proposed to be
paid the company will be able to pay its debts as they fall due in the ordinary course of
business.
The Companies Act provides that, subject to confirmation by the Grand Court of the
Cayman Islands, a company limited by shares or a company limited by guarantee and having
a share capital may, if so authorised by its articles of association, by special resolution reduce
its share capital in any way.
Subject to the detailed provisions of the Companies Act, a company limited by shares or
a company limited by guarantee and having a share capital may, if so authorised by its articles
of association, issue shares which are to be redeemed or are liable to be redeemed at the option
of the company or a shareholder. In addition, such a company may, if authorised to do so by
its articles of association, purchase its own shares, including any redeemable shares. The
manner of such a purchase must be authorised either by the articles of association or by an
ordinary resolution of the company. The articles of association may provide that the manner of
purchase may be determined by the directors of the company. At no time may a company
redeem or purchase its shares unless they are fully paid. A company may not redeem or
purchase any of its shares if, as a result of the redemption or purchase, there would no longer
be any member of the company holding shares. A payment out of capital by a company for the
redemption or purchase of its own shares is not lawful unless immediately following the date
on which the payment is proposed to be made, the company shall be able to pay its debts as
they fall due in the ordinary course of business.
There is no statutory restriction in the Cayman Islands on the provision of financial
assistance by a company for the purchase of, or subscription for, its own or its holding
company’s shares. Accordingly, a company may provide financial assistance if the directors of
the company consider, in discharging their duties of care and to act in good faith, for a proper
purpose and in the interests of the company, that such assistance can properly be given. Such
assistance should be on an arm’s-length basis.
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4 Dividends and Distributions
With the exception of section 34 of the Companies Act, there are no statutory provisions
relating to the payment of dividends. Based upon English case law which is likely to be
persuasive in the Cayman Islands in this area, dividends may be paid only out of profits. In
addition, section 34 of the Companies Act permits, subject to a solvency test and the
provisions, if any, of the company’s memorandum and articles of association, the payment of
dividends and distributions out of the share premium account (see paragraph 3 above for
details).
5 Shareholders’ Suits
The Cayman Islands courts can be expected to follow English case law precedents. The
rule in Foss v. Harbottle (and the exceptions thereto which permit a minority shareholder to
commence a class action against or derivative actions in the name of the company to challenge
(a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud
against the minority where the wrongdoers are themselves in control of the company, and (c)
an action which requires a resolution with a qualified (or special) majority which has not been
obtained) has been applied and followed by the courts in the Cayman Islands.
6 Protection of Minorities
In the case of a company (not being a bank) having a share capital divided into shares,
the Grand Court of the Cayman Islands may, on the application of members holding not less
than one-fifth of the shares of the company in issue, appoint an inspector to examine into the
affairs of the company and to report thereon in such manner as the Grand Court shall direct.
Any shareholder of a company may petition the Grand Court of the Cayman Islands which
may make a winding up order if the court is of the opinion that it is just and equitable that the
company should be wound up.
Claims against a company by its shareholders must, as a general rule, be based on the
general laws of contract or tort applicable in the Cayman Islands or their individual rights as
shareholders as established by the company’s memorandum and articles of association.
The English common law rule that the majority will not be permitted to commit a fraud
on the minority has been applied and followed by the courts of the Cayman Islands.
7 Disposal of Assets
The Companies Act contains no specific restrictions on the powers of directors to dispose
of assets of a company. As a matter of general law, in the exercise of those powers, the directors
must discharge their duties of care and to act in good faith, for a proper purpose and in the
interests of the company.
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8 Accounting and Auditing Requirements
The Companies Act requires that a company shall cause to be kept proper books of
account with respect to:
(a) all sums of money received and expended by the company and the matters in respect
of which the receipt and expenditure takes place;
(b) all sales and purchases of goods by the company; and
(c) the assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books
as are necessary to give a true and fair view of the state of the company’s affairs and to explain
its transactions.
9 Register of Members
An exempted company may, subject to the provisions of its articles of association,
maintain its principal register of members and any branch registers at such locations, whether
within or without the Cayman Islands, as its directors may from time to time think fit. There
is no requirement under the Companies Act for an exempted company to make any returns of
members to the Registrar of Companies of the Cayman Islands. The names and addresses of the
members are, accordingly, not a matter of public record and are not available for public
inspection.
10 Inspection of Books and Records
Members of a company will have no general right under the Companies Act to inspect or
obtain copies of the register of members or corporate records of the company. They will,
however, have such rights as may be set out in the company’s articles of association.
11 Special Resolutions
The Companies Act provides that a resolution is a special resolution when it has been
passed by a majority of at least two-thirds of such members as, being entitled to do so, vote
in person or, where proxies are allowed, by proxy at a general meeting of which notice
specifying the intention to propose the resolution as a special resolution has been duly given,
except that a company may in its articles of association specify that the required majority shall
be a number greater than two-thirds, and may additionally so provide that such majority (being
not less than two-thirds) may differ as between matters required to be approved by a special
resolution. Written resolutions signed by all the members entitled to vote for the time being of
the company may take effect as special resolutions if this is authorised by the articles of
association of the company.
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12 Subsidiary Owning Shares in Parent
The Companies Act does not prohibit a Cayman Islands company acquiring and holding
shares in its parent company provided its objects so permit. The directors of any subsidiary
making such acquisition must discharge their duties of care and to act in good faith, for a
proper purpose and in the interests of the subsidiary.
13 Mergers and Consolidations
The Companies Act permits mergers and consolidations between Cayman Islands
companies and between Cayman Islands companies and non-Cayman Islands companies. For
these purposes, (a) “merger” means the merging of two or more constituent companies and the
vesting of their undertaking, property and liabilities in one of such companies as the surviving
company, and (b) “consolidation” means the combination of two or more constituent
companies into a consolidated company and the vesting of the undertaking, property and
liabilities of such companies to the consolidated company. In order to effect such a merger or
consolidation, the directors of each constituent company must approve a written plan of merger
or consolidation, which must then be authorised by (a) a special resolution of each constituent
company and (b) such other authorisation, if any, as may be specified in such constituent
company’s articles of association. The written plan of merger or consolidation must be filed
with the Registrar of Companies of the Cayman Islands together with a declaration as to the
solvency of the consolidated or surviving company, a list of the assets and liabilities of each
constituent company and an undertaking that a copy of the certificate of merger or
consolidation will be given to the members and creditors of each constituent company and that
notification of the merger or consolidation will be published in the Cayman Islands Gazette.
Dissenting shareholders have the right to be paid the fair value of their shares (which, if not
agreed between the parties, will be determined by the Cayman Islands court) if they follow the
required procedures, subject to certain exceptions. Court approval is not required for a merger
or consolidation which is effected in compliance with these statutory procedures.
14 Reconstructions
There are statutory provisions which facilitate reconstructions and amalgamations
approved by (a) 75% in value of shareholders, or (b) a majority in number representing 75%
in value of creditors, depending on the circumstances, as are present at a meeting called for
such purpose and thereafter sanctioned by the Grand Court of the Cayman Islands. Whilst a
dissenting shareholder would have the right to express to the Grand Court his view that the
transaction for which approval is sought would not provide the shareholders with a fair value
for their shares, the Grand Court is unlikely to disapprove the transaction on that ground alone
in the absence of evidence of fraud or bad faith on behalf of management and if the transaction
were approved and consummated the dissenting shareholder would have no rights comparable
to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined
value of his shares) ordinarily available, for example, to dissenting shareholders of United
States corporations.
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15 Take-overs
Where an offer is made by a company for the shares of another company and, within four
months of the offer, the holders of not less than 90% of the shares which are the subject of the
offer accept, the offeror may at any time within two months after the expiration of the said four
months, by notice require the dissenting shareholders to transfer their shares on the terms of
the offer. A dissenting shareholder may apply to the Grand Court of the Cayman Islands within
one month of the notice objecting to the transfer. The burden is on the dissenting shareholder
to show that the Grand Court should exercise its discretion, which it will be unlikely to do
unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders
of the shares who have accepted the offer as a means of unfairly forcing out minority
shareholders.
16 Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of association
may provide for indemnification of officers and directors, except to the extent any such
provision may be held by the Cayman Islands courts to be contrary to public policy (e.g. for
purporting to provide indemnification against the consequences of committing a crime).
17 Restructuring
A company may present a petition to the Grand Court of the Cayman Islands for the
appointment of a restructuring officer on the grounds that the company:
(a) is or is likely to become unable to pay its debts; and
(b) intends to present a compromise or arrangement to its creditors (or classes thereof)
either pursuant to the Companies Act, the law of a foreign country or by way of a
consensual restructuring.
The Grand Court may, among other things, make an order appointing a restructuring
officer upon hearing of such petition, with such powers and to carry out such functions as the
court may order. At any time (i) after the presentation of a petition for the appointment of a
restructuring officer but before an order for the appointment of a restructuring officer has been
made, and (ii) when an order for the appointment of a restructuring officer is made, until such
order has been discharged, no suit, action or other proceedings (other than criminal
proceedings) shall be proceeded with or commenced against the company, no resolution to
wind up the company shall be passed, and no winding up petition may be presented against the
company, except with the leave of the court. However, notwithstanding the presentation of a
petition for the appointment of a restructuring officer or the appointment of a restructuring
officer, a creditor who has security over the whole or part of the assets of the company is
entitled to enforce the security without the leave of the court and without reference to the
restructuring officer appointed.
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18 Liquidation
A company may be placed in liquidation compulsorily by an order of the court, or
voluntarily (a) by a special resolution of its members if the company is solvent, or (b) by an
ordinary resolution of its members if the company is insolvent. The liquidator’s duties are to
collect the assets of the company (including the amount (if any) due from the contributories
(shareholders)), settle the list of creditors and discharge the company’s liability to them,
rateably if insufficient assets exist to discharge the liabilities in full, and to settle the list of
contributories and divide the surplus assets (if any) amongst them in accordance with the rights
attaching to the shares.
19 Stamp Duty on Transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands.
20 Taxation
Pursuant to section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, the
Company may obtain an undertaking from the Financial Secretary of the Cayman Islands:
(a) that no law which is enacted in the Cayman Islands imposing any tax to be levied
on profits, income, gains or appreciations shall apply to the Company or its
operations; and
(b) in addition, that no tax to be levied on profits, income, gains or appreciations or
which is in the nature of estate duty or inheritance tax shall be payable:
(i) on or in respect of the shares, debentures or other obligations of the Company;
or
(ii) by way of the withholding in whole or in part of any relevant payment as
defined in section 6(3) of the Tax Concessions Act (As Revised).
The Cayman Islands currently levy no taxes on individuals or corporations based upon
profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax
or estate duty. There are no other taxes likely to be material to the Company levied by the
Government of the Cayman Islands save certain stamp duties which may be applicable, from
time to time, on certain instruments executed in or brought within the jurisdiction of the
Cayman Islands. The Cayman Islands are not party to any double tax treaties that are applicable
to any payments made by or to the Company.
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21 Exchange Control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
22 General
Maples and Calder (Hong Kong) LLP , the Company’s legal advisers on Cayman Islands
law, have sent to the Company a letter of advice summarising aspects of Cayman Islands
company law. This letter, together with a copy of the Companies Act, is on display on the
websites as referred to in the section headed “Documents on display” in Appendix V . Any
person wishing to have a detailed summary of Cayman Islands company law or advice on the
differences between it and the laws of any jurisdiction with which he/she is more familiar is
recommended to seek independent legal advice.
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A. FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation of Our Company
We were incorporated in the Cayman Islands on April 28, 2017 under the Companies Act
as an exempted company with limited liability. Accordingly, our corporate structure and
Articles of Association are subject to the relevant laws of the Cayman Islands. A summary of
our Articles of Association is set out in “Appendix III—Summary of the Constitution of the
Company and Cayman Islands Company Law—Summary of the Constitution of the Company.”
Our registered place of business in Hong Kong is 5/F, Manulife Place, 348 Kwun Tong
Road, Kowloon, Hong Kong. We were registered as a non-Hong Kong company under Part 16
of the Companies Ordinance on December 13, 2023. Ms. Chan Sau Ling of 5/F, Manulife
Place, 348 Kwun Tong Road, Kowloon, Hong Kong has been appointed as our authorized
representative for the acceptance of service of process and notices in Hong Kong.
2. Changes in the Share Capital of Our Company
As at the date of our incorporation, our authorized share capital was US$50,000, divided
into 500,000,000 shares of US$0.0001 each.
The following alterations in the share capital of our Company have taken place within the
two years immediately preceding the date of this prospectus:
Pursuant to the resolutions passed by our Shareholders on May 28, 2024, the authorized
share capital of our Company was increased to US$1,000,000 divided into (i) 97,132,966,842
Class A Ordinary Shares; (ii) 429,653,340 Class B Ordinary Shares; (iii) 145,221,000 Series
Pre-A Preferred Shares; (iv) 250,001,000 Series A-1 Preferred Shares; (v) 56,338,300 Series
A-2 Preferred Shares; (vi) 301,810,900 Series B Preferred Shares; (vii) 264,664,900 Series B+
Preferred Shares; (viii) 29,305,077 Series B++ Preferred Shares; (ix) 768,406,598 Series C
Preferred Shares; and (x) 621,632,043 Series D Preferred Shares, by the creation of an
additional 95,000,000,000 Class A Ordinary Shares, ranking pari passu in all respects with the
existing Class A Ordinary Shares in issue.
Save as disclosed above, in “History, Development and Corporate Structure” and “—4.
Resolutions of the Shareholders of our Company dated May 28, 2024” below, there has been
no alteration in the share capital of our Company within the two years immediately preceding
the date of this prospectus.
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3. Changes in the Share Capital of Our Subsidiaries
Our Company’s subsidiaries are set out in the Accountants’ Report, the text of which is
set out in Appendix I. The following alterations in the share capital of our subsidiaries have
taken place within the two years immediately preceding the date of this prospectus:
(a) Cayman Islands
XtalPi Investment
On August 12, 2022, the authorized share capital of XtalPi Investment was
re-designated and re-classified as US$50,000 divided into 500,000,000 shares of
US$0.0001 each, consisting of 418,700,000 ordinary shares, and 81,300,000 series
A preferred shares ; and (ii) our Company surrendered 10,000 issued ordinary shares
of XtalPi Investment with no consideration and the surrendered shares were
subsequently canceled by XtalPi Investment.
On the same date, XtalPi Investment issued (a) an aggregate of 10,000,000
series A preferred shares to 5Y Capital Evolution Fund II, L.P ., 5Y Capital Evolution
Fund II Co-Investment, L.P ., Hero Grand Management Limited and Y ael Evergreen
Fund SPC—Y ael Evergreen SP I at a total consideration of US$10,000,000 and (b)
71,300,000 series A preferred shares to our Company at a consideration that we
transferred our equity interests in certain portfolio companies to XtalPi Investment
or its subsidiaries.
NeoGeode Inc.
On March 6, 2023, NeoGeode Inc. issued 969,229 ordinary shares to Jean Jing
Zhao.
On June 12, 2023, the authorized share capital of NeoGeode Inc. was
re-designated and re-classified as US$50,000 divided into 500,000,000 shares of
US$0.0001 each, consisting of 498,200,000 ordinary shares and 1,800,000 series
seed preferred shares of US$0.0001 each. On the same day, NeoGeode Inc. issued
1,800,000 series seed preferred shares to Xtalpi Investment Inc. at a consideration
of US$1.8 million.
(b) PRC
Shenzhen Zhiyao
On April 25, 2023, the registered capital of Shenzhen Zhiyao reduced from
US$200.0 million to US$25.0 million.
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4. Resolutions of the Shareholders of our Company dated May 28, 2024
Pursuant to the resolutions passed by our Shareholders on May 28, 2024, it was resolved,
among others, that:
(a) the authorized share capital of our Company was increased from US$50,000 divided
into 5,000,000,000 Shares having a par value of US$0.00001 each to US$1,000,000
divided into 100,000,000,000 Shares having a par value of US$0.00001 each divided
into (i) 97,132,966,842 Class A Ordinary Shares, with par value of US$0.00001
each; (ii) 429,653,340 Class B Ordinary Shares, with par value of US$0.00001 each;
(iii) 145,221,000 Series Pre-A Preferred Shares, with par value of US$0.00001 each;
(iv) 250,001,000 Series A-1 Preferred Shares, with par value of US$0.00001 each;
(v) 56,338,300 Series A-2 Preferred Shares, with par value of US$0.00001 each; (vi)
301,810,900 Series B Preferred Shares, with par value of US$0.00001 each; (vii)
264,664,900 Series B+ Preferred Shares, with par value of US$0.00001 each; (viii)
29,305,077 Series B++ Preferred Shares, with par value of US$0.00001 each; and
(ix) 768,406,598 Series C Preferred Shares, with par value of US$0.00001 each; (x)
621,632,043 Series D Preferred Shares, by the creation of an additional
95,000,000,000 Class A ordinary shares, with par value of US$0.00001 each,
ranking pari passu in all respects with the existing Class A Ordinary Shares with
immediate effect;
(b) conditional on (1) the Stock Exchange granting the listing of, and permission to deal
in, the Shares in issue and to be issued as mentioned in this prospectus (including
the Shares which may be issued under the ESOPs) and such approval and permission
not subsequently having been revoked prior to the commencement of dealing in the
Shares on the Stock Exchange; (2) the Offer Price having been determined; (3) the
obligations of the Underwriters under the Underwriting Agreements becoming
unconditional and not being terminated in accordance with the terms of the
Underwriting Agreements or otherwise, in each case on or before such dates as may
be specified in the Underwriting Agreements; and (4) the Underwriting Agreements
having been duly executed by the Underwriters and our Company:
(i) the Global Offering was approved and our Directors were authorized to allot
and issue the Offer Shares pursuant to the Global Offering;
(ii) the grant of the Over-allotment Option was approved and our Directors were
authorized to allot and issue the Shares upon the exercise of the Over-allotment
Option;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3–


--- page 772 ---
(iii) the re-designation of the share capital of our Company be and was approved,
and all of the Shares in the share capital of the Company, which comprised
Class A Ordinary Shares, Class B Ordinary Shares, Series Pre-A Preferred
Shares, Series A-1 Preferred Shares, Series A-2 Preferred Shares, Series B
Preferred Shares, Series B+ Preferred Shares, Series B++ Preferred Shares,
Series C Preferred Shares and Series D Preferred Shares, whether issued or
unissued, would be re-classified and/or converted on a one-for-one basis as
Ordinary Shares, the authorized share capital of the Company would be
US$1,000,000 divided into 100,000,000,000 Ordinary Shares, with par value
of US$0.00001 each, ranking pari passu in all respects with each other;
(iv) the Memorandum and Articles be and were approved and adopted with effect
upon the Listing;
(v) the rules of the Post-IPO Share Option Scheme, the principal terms and
conditions of which are set out in “—D. Share Incentive Schemes—2.
Post-IPO Share Option Scheme,” were approved and adopted and our Directors
were authorized, at their absolute discretion, to grant options thereunder and to
allot, issue and deal with Shares (including the power to transfer any Treasury
Shares) pursuant to the exercise of options granted under the Post-IPO Share
Option Scheme;
(vi) the rules of the Post-IPO RSU Scheme, the principal terms and conditions of
which are set out in “—D. Share Incentive Schemes—3. Post-IPO RSU
Scheme,” were approved and adopted and our Directors were authorized, at
their absolute discretion, to grant RSUs thereunder and to allot, issue and deal
with Shares (including the power to transfer any Treasury Shares) pursuant to
the grant, vesting and exercise of RSUs under the Post-IPO RSU Scheme;
(vii) the termination of the Pre-IPO ESOP be and was approved and confirmed,
provided that any awards granted thereunder that are outstanding shall remain
in force according to the terms of the Pre-IPO ESOP and the applicable award
agreement;
(viii) a general unconditional mandate was given to our Directors to allot, issue and
deal with (including the power to sell or transfer any Treasury Shares, and to
make an offer or agreement, or grant securities which would or might require
Shares to be allotted and issued or Treasury Shares to be sold or transferred),
otherwise than pursuant to a rights issue or pursuant to any scrip dividend
schemes or similar arrangements providing for the allotment and issue of
Shares in lieu of the whole or part of a dividend on Shares in accordance with
the Articles or pursuant to a specific authority granted by the Shareholders in
general meeting, Shares not exceeding the aggregate of 20% of the number of
issued Shares immediately following the completion of the Global Offering
(but taking no account of any Shares which may be issued pursuant to the
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4–


--- page 773 ---
exercise of the Over-allotment Option or under the ESOPs), such mandate to
remain in effect until the conclusion of the next annual general meeting of our
Company, or the expiration of the period within which the next annual general
meeting of our Company is required by the Articles or any applicable laws to
be held, or until revoked or varied by an ordinary resolution of the
Shareholders in general meeting, whichever occurs first;
(ix) a general unconditional mandate was given to our Directors authorizing them
to exercise all powers of our Company to repurchase on the Stock Exchange or
on any other approved stock exchange on which the securities of our Company
may be listed and which is recognized by the SFC and the Stock Exchange for
this purpose such number of Shares as will represent up to 10% of the number
of issued Shares immediately following the completion of the Global Offering
(but taking no account of any Shares which may be issued pursuant to the
exercise of the Over-allotment Option or awards under the ESOPs), such
mandate to remain in effect until the conclusion of the next annual general
meeting of our Company, or the expiration of the period within which the next
annual general meeting of our Company is required by the Articles or any
applicable laws to be held, or until revoked or varied by an ordinary resolution
of the Shareholders in general meeting, whichever occurs first; and
(x) the general unconditional mandate mentioned in paragraph (viii) above was
extended by the addition to the number of Shares which may be allotted, issued
or dealt with, or agreed conditionally or unconditionally to be allotted, issued
or dealt with, by our Directors pursuant to such general mandate of an amount
representing the total number of issued Shares repurchased by our Company
pursuant to the mandate to repurchase Shares referred to in paragraph (ix)
above.
5. Repurchase of our Shares
This section sets out information required by the Stock Exchange to be included in this
prospectus concerning the repurchase by us of our own Shares.
(a) Provisions of the Listing Rules
The Listing Rules permit companies with a primary listing on the Stock Exchange
to purchase their shares on the Stock Exchange subject to certain restrictions.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 5–


--- page 774 ---
(i) Shareholders’ approval
The Listing Rules provide that all proposed repurchases of shares (which must
be fully paid in the case of shares) by a company with a primary listing on the Stock
Exchange must be approved in advance by an ordinary resolution of its shareholders
in general meeting, either by way of general mandate or by specific approval of a
particular transaction.
Note: Pursuant to the resolutions passed at duly convened general meeting of our Shareholders on
May 28, 2024, a general unconditional mandate (the “ Repurchase Mandate ”) was granted to our
Directors authorizing them to exercise all powers of our Company to repurchase such number of
Shares on the Stock Exchange or on any other approved stock exchange on which the securities
of our Company may be listed and which is recognized by the SFC and the Stock Exchange for
this purpose representing up to 10% of the total number of issued Shares following the
completion of the Global Offering (but taking no account of any Shares which may be issued
pursuant to the exercise of the Over-allotment Option or under the ESOPs), at any time until the
conclusion of the next annual general meeting of our Company, or the expiration of the period
within which the next annual general meeting of our Company is required by an applicable law
or the Articles to be held or when such mandate is revoked or varied by an ordinary resolution
of our Shareholders in general meeting, whichever is the earliest.
(ii) Source of funds
Repurchases must be funded out of funds legally available for the purpose in
accordance with the Memorandum, the Articles, the Listing Rules and the Cayman
Companies Act. A listed company may not repurchase its own shares on the Stock
Exchange for a consideration other than cash or for settlement otherwise than in
accordance with the trading rules of the Stock Exchange from time to time.
(iii) Core connected persons
The Listing Rules prohibit our Company from knowingly repurchasing the
Shares on the Stock Exchange from a “core connected person”, which includes a
director, chief executive or substantial shareholder of our Company or any of the
subsidiaries or a close associate of any of them and a core connected person shall
not knowingly sell Shares to our Company.
(b) Reasons for repurchases
Our Directors believe that it is in the best interests of our Company and our
Shareholders as a whole for our Directors to have a general authority from our
Shareholders to enable our Company to repurchase Shares on the Stock Exchange. Such
a repurchase may, depending on the market conditions and funding arrangements at the
time, lead to an enhancement of our Company’s net asset value per Share and/or earnings
per Share and will only be made when our Directors believe that such a repurchase will
benefit our Company and our Shareholders.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 6–


--- page 775 ---
(c) Funding of repurchases
In repurchasing Shares, our Company may only apply funds legally available for
such purpose in accordance with our Articles, the Listing Rules and the applicable laws
of the Cayman Islands.
It is presently proposed that any repurchase of Shares will be made out of the profits
of our Company, the share premium amount of our Company or the proceeds of a fresh
issue of Shares made for the purpose of the repurchase and, in the case of any premium
payable on the purchase over the par value of the Shares to be repurchased must be
provided for, out of either or both of the profits of our Company or from sums standing
to the credit of the share premium account of our Company or, subject to the Cayman
Companies Act, out of capital. Subject to the Cayman Companies Act, a repurchase of
Shares may also be paid out of capital.
On the basis of the current financial position of our Group as disclosed in this
prospectus and taking into account the current working capital position of our Company,
our Directors consider that, if the Repurchase Mandate were to be exercised in full, it
might not have a material adverse effect on the working capital and/or the gearing
position of our Group as compared to the position disclosed in this prospectus. However,
our Directors do not propose to exercise the Repurchase Mandate to such an extent as
would, in the circumstances, have a material adverse effect on the working capital
requirements of the Company or the gearing levels of our Group which in the opinion of
our Directors are from time to time appropriate for our Group.
(d) Share capital
The exercise in full of the Repurchase Mandate, on the basis of 3,406,772,761
Shares in issue immediately after the Listing (but not taking into account of any Shares
which may be issued pursuant to the exercise of the Over-allotment Option or under the
ESOPs), would result in up to 340,677,276 Shares being repurchased by our Company
during the period until:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general meeting of
our Company is required by the Articles or any applicable law to be held; or
(iii) the date on which the Repurchase Mandate is revoked or varied by an ordinary
resolution of our Shareholders in general meeting, whichever occurs first.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 7–


--- page 776 ---
(e) General
None of our Directors nor, to the best of their knowledge having made all reasonable
enquiries, any of their close associates, has any present intention if the Repurchase
Mandate is exercised to sell any Share(s) to our Company or our subsidiaries.
Our Directors, so far as the same may be applicable, will exercise the Repurchase
Mandate in accordance with the Listing Rules, the Articles and the applicable laws of the
Cayman Islands in force and as amended from time to time. Neither the explanatory
statement contained herein nor the proposed share repurchase has any unusual features.
Our Company may cancel any Shares we repurchased and/or hold them as Treasury
Shares subject to, among others, market conditions and our capital management needs at
the relevant time of the repurchases, which may change due to evolving circumstances.
If as a result of a repurchase of Shares pursuant to the Repurchase Mandate, a
Shareholder’s proportionate interest in the voting rights of our Company increases, such
increase will be treated as an acquisition for the purposes of the Takeovers Code.
Accordingly, a Shareholder or a group of Shareholders acting in concert (within the
meaning of the Takeovers Code), depending on the level of increase of the Shareholders’
(or Shareholders’) interest, could obtain or consolidate control of our Company and may
become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers
Code as a result of any such increase. Save as disclosed above, our Directors are not
aware of any consequence that would arise under the Takeovers Code as a result of a
repurchase pursuant to the Repurchase Mandate.
If the Repurchase Mandate is fully exercised immediately following completion of
the Global Offering (but not taking into account any Shares which may be issued pursuant
to the exercise of the Over-allotment Option or under the ESOPs), the total number of
Shares which will be repurchased pursuant to the Repurchase Mandate will be
340,677,276 Shares, being 10% of the total number of Shares based on the aforesaid
assumptions. Any repurchase of Shares which results in the number of Shares held by the
public being reduced to less than the prescribed percentage of our Shares then in issue
could only be implemented with the approval of the Stock Exchange to waive the Listing
Rules requirements regarding the public float under Rule 8.08 of the Listing Rules.
However, our Directors have no present intention to exercise the Repurchase Mandate to
such an extent that, in the circumstances, there is insufficient public float as prescribed
under the Listing Rules.
No core connected person of our Company has notified our Group that he/she/it has
a present intention to sell Shares to our Company, or has undertaken not to do so, if the
Repurchase Mandate is exercised.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 8–


--- page 777 ---
B. FURTHER INFORMATION ABOUT THE BUSINESS OF THE COMPANY
1. Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of
business) were entered into by our Group within the two years preceding the date of this
prospectus and are or may be material:
(a) the amendment agreement dated May 28, 2024, entered into among our Company,
QuantumPharm Limited, Shenzhen Zhiyao Technology Co., Ltd. (ҦϞ
ʮ̡), Shenzhen Jingtai Technology Co., Ltd. (ʮ̡), Shenzhen
Rentai Pharmaceutical Technology Co., Ltd. (ʮ̡), Beijing
Jingtai Technology Co., Ltd. (ʮ̡), Shanghai Zhiyao
Technology Co., Ltd. (ʮ̡), Jingtai Zhiyao Technology
(Shanghai) Co., Ltd. ( ౺इ౽ᖹҦஔ(ɪऎ)ʮ̡), XtalPi Inc., QuantumPharm
Roc Holdings Limited, Dr. Wen, Dr. Ma, Dr. Lai, QuantumPharm Holdings Limited,
SSBL Holdings Limited, Crete Helix Ltd., Jian Guo Pai Ltd., SeveningBAlpha
Limited, Sevening B Holdings Limited, Image Frame Investment (HK) Limited,
HSG V enture VI Holdco, Ltd., HSG Growth VI Holdco E, Ltd., HSG V enture VIII
Holdco, Ltd., HCHP Holdco, Ltd., Evolution Fund I Co-investment, L.P ., Evolution
Fund I, L.P ., Evolution Special Opportunity Fund I, L.P ., China Life Chengda
(Shanghai) Healthcare Industry Equity Investment Center (Limited Partnership) ( ਷
ྪϓ༺(ɪऎ)ᛆҳ༟ʕː(Υྫ)), Beijing PICC Health & Pension
Industry Investment Fund (Limited Partnership) (ږ
(Υྫ)), Fangyuan Growth SPC – PCJ Healthcare Fund SP , Fangyuan J Fund,
Sixth Dimension Investment Limited, The Musketeers Capital Limited, IMO
Opportunity Fund V , L.L.C., IMO Global Growth Fund SPC – IMO Opportunity
Fund V SP , IMO Global Growth Fund SPC – IMO Opportunity Fund I SP , IMO
Global Growth Fund SPC – IMO Opportunity Fund II SP , FLAMING CAPITAL
LIMITED, BRAINPOWER ELECTRONIC TECHNOLOGY LIMITED, Aqua Elite
Capital Limited, FreeS Fund LP , Artisan China Post-V enture Holdings Limited,
Epiphron Capital Holdings Limited, Sky9 MVP XtalPi, L.P ., TPFG Crystal Limited,
Harvest International Premium V alue (Secondary Market) Fund SPC on behalf of
Harvest Great Bay Investment SP , Neumann Capital, Cassini Partners, L.P ., FA VOR
STAR LIMITED, Neumann Galaxy Limited, Google LLC, Mirae Asset New
Economy Fund L.P ., Mirae Asset Growth Xtalpi Investment Company Limited,
Oceanpine Investment Fund II LP , Pluto Connection Limited, Astrend Opportunity
III Alpha Limited and Y ael Capital Partners I L.P ., pursuant to which the parties have
agreed to waive the observance of certain provisions and to amend and restate the
sixth amended and restated shareholders agreement dated November 27, 2023;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 9–


--- page 778 ---
(b) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, Successful Lotus Limited, CITIC Securities (Hong Kong) Limited, CLSA
Limited and CMB International Capital Limited, pursuant to which Successful Lotus
Limited agreed to subscribe for such number of Offer Shares (rounded down to the
nearest whole board lot) which may be subscribed for in the aggregate amount of
HK$40,000,000 (excluding brokerage and levies) at the Offer Price;
(c) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, IntelliMed One Investment Limited, CITIC Securities (Hong Kong)
Limited and CLSA Limited, pursuant to which IntelliMed One Investment Limited
agreed to subscribe for such number of Offer Shares (rounded down to the nearest
whole board lot) which may be subscribed for in the aggregate amount of Hong
Kong dollars equivalent of US$3.491 million (excluding brokerage and levies) at the
Offer Price;
(d) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, Mammoth Medical Solutions, CITIC Securities (Hong Kong) Limited and
CLSA Limited, pursuant to which Mammoth Medical Solutions agreed to subscribe
for such number of Offer Shares (rounded down to the nearest whole board lot)
which may be subscribed for in the aggregate amount of Hong Kong dollars
equivalent of US$8,000,000 (including brokerage and levies) at the Offer Price;
(e) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, Begonia No. 1 LPF (ږCITIC Securities (Hong
Kong) Limited (ᗇՎ(ಥ)ʮ̡), CLSA Limited (ʮ̡)
and SPDB International Capital Limited (ʮ̡), pursuant to
which Begonia No. 1 LPF (ږagreed to subscribe for such
number of Offer Shares (rounded down to the nearest whole board lot) which may
be subscribed for in the aggregate amount of Hong Kong dollars equivalent of
US$12,000,000 (including brokerage and levies) at the Offer Price;
(f) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, Bradley Lether Pentelute, CITIC Securities (Hong Kong) Limited, CLSA
Limited and Jefferies Hong Kong Limited, pursuant to which Bradley Lether
Pentelute agreed to subscribe for such number of Offer Shares (rounded down to the
nearest whole board lot) which may be subscribed for in the aggregate amount of
Hong Kong dollars equivalent of US$1,000,000 (including brokerage and levies) at
the Offer Price;
(g) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, Ginkgo Capital Global Fund SPC–Ginkgo Capital Global Fund I SP ,
CITIC Securities (Hong Kong) Limited (ᗇՎ(ಥ)ʮ̡) and CLSA
Limited (ʮ̡), pursuant to which Ginkgo Capital Global Fund
SPC–Ginkgo Capital Global Fund I SP agreed to subscribe for such number of Offer
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –


--- page 779 ---
Shares (rounded down to the nearest whole board lot) which may be subscribed for
in the aggregate amount of Hong Kong dollars equivalent of US$10,000,000
(including brokerage and levies) at the Offer Price;
(h) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, Biocytogen Pharmaceuticals (Beijing) Co., Ltd. ( ϵෳᒄྡ(̏ԯ)߅
ʮ̡), CITIC Securities (Hong Kong) Limited (ᗇՎ(ಥ)ʮ
̡), CLSA Limited (ʮ̡) and CMB International Capital
Limited (ʮ̡), pursuant to which Biocytogen Pharmaceuticals
(Beijing) Co., Ltd. ( ϵෳᒄྡ(̏ԯ)ʮ̡) agreed to subscribe for
such number of Offer Shares (rounded down to the nearest whole board lot) which
may be subscribed for in the aggregate amount of Hong Kong dollars equivalent of
RMB10,000,000 (including brokerage and levies) at the Offer Price;
(i) a cornerstone investment agreement dated June 1, 2024 entered into between our
Company, FaaS Capital Longevity Limited, CITIC Securities (Hong Kong) Limited
(ᗇՎ(ಥ)ʮ̡) and CLSA Limited (ʮ̡), pursuant to
which FaaS Capital Longevity Limited agreed to subscribe for such number of Offer
Shares (rounded down to the nearest whole board lot) which may be subscribed for
in the aggregate amount of HK$20,000,000 (excluding brokerage and levies) at the
Offer Price;
(j) the Hong Kong Underwriting Agreement.
2. Our Material Intellectual Property Rights
(a) Trademarks
As of the Latest Practicable Date, our Group was the registered proprietor of the
following trademarks which, in the opinion of our Directors, are or may be material to our
business:
No. Trademark
Registration
Number Class
Name of
Registered
Proprietor
Place of
Registration
Date of
Registration Expiry Date
1
19372269 9 Shenzhen
Jingtai
PRC April 28, 2017 April 27, 2027
2
 19372436 42 Shenzhen
Jingtai
PRC April 28, 2017 April 27, 2027
3
 20754761 9 Shenzhen
Jingtai
PRC September 14,
2017
September 13,
2027
4
 20755695 42 Shenzhen
Jingtai
PRC September 14,
2017
September 13,
2027
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 1–


--- page 780 ---
No. Trademark
Registration
Number Class
Name of
Registered
Proprietor
Place of
Registration
Date of
Registration Expiry Date
5 XTALPI 5286240 42 Shenzhen
Jingtai
United States September 12,
2017
September 12,
2027
6
5286241 42 Shenzhen
Jingtai
United States September 12,
2017
September 12,
2027
7
 58443388 9 Shenzhen
Jingtai
PRC January 28,
2022
January 27,
2032
8
 58450952 42 Shenzhen
Jingtai
PRC January 28,
2022
January 27,
2032
9
 58458989 42 Shenzhen
Jingtai
PRC September 14,
2022
September 13,
2032
10
 02227869 9 Shenzhen
Jingtai
Taiwan June 16, 2022 June 15, 2032
11
 02233715 42 Shenzhen
Jingtai
Taiwan July 1, 2022 June 30, 2032
12
 02227870 9 Shenzhen
Jingtai
Taiwan June 16, 2022 June 15, 2032
13
 02233716 42 Shenzhen
Jingtai
Taiwan July 1, 2022 June 30, 2032
14
 305799502 5, 7, 9, 42 Shenzhen
Jingtai
Hong Kong April 11, 2022 April 10, 2032
15 XtalPi 018600042 5, 7, 9, 42 Shenzhen
Jingtai
European
Union
February 24,
2022
November 11,
2031
16
 018600044 5, 7, 9, 42 Shenzhen
Jingtai
European
Union
February 24,
2022
November 11,
2031
17 XtalPi UK00003720807 5, 7, 9, 42 Shenzhen
Jingtai
United
Kingdom
February 4,
2022
November 11,
2031
18
 UK00003720815 5, 7, 9, 42 Shenzhen
Jingtai
United
Kingdom
February 4,
2022
November 11,
2031
19
 63737110 42 Shenzhen
Jingtai
PRC December 28,
2022
December 27,
2032
20
 64304292 42 Shanghai
Zhiyao
PRC October 21,
2022
October 20,
2032
21
 66453153 42 Shanghai
Zhiyao
PRC January 28,
2023
January 27,
2033
22
 67374093 42 Shenzhen
Jingtai
PRC May 14, 2023 May 13, 2033
23.
 68639453 42 Shanghai
Zhiyao
PRC June 7, 2023 June 6, 2033
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –


--- page 781 ---
No. Trademark
Registration
Number Class
Name of
Registered
Proprietor
Place of
Registration
Date of
Registration Expiry Date
24.
68639412 42 Shanghai
Zhiyao
PRC June 7, 2023 June 6, 2033
25.
 306290857 7, 9, 42 Shenzhen
Jingtai
Hong Kong July 10, 2023 July 9, 2033
26.
 69083334 9 Shenzhen
Jingtai
PRC August 7, 2023 August 6, 2033
27.
 69079232 42 Shenzhen
Jingtai
PRC September 7,
2023
September 6,
2033
28.
 69074964 9 Shenzhen
Jingtai
PRC October 7,
2023
October 6,
2033
29.
 69077888A 42 Shenzhen
Jingtai
PRC October 7,
2023
October 6,
2033
30.
 69076428 9 Shenzhen
Jingtai
PRC November 7,
2023
November 6,
2033
31.
 305799511 5, 7, 9, 42 Shenzhen
Jingtai
Hong Kong November 11,
2023
November 10,
2031
32.
 69086108 42 Shenzhen
Jingtai
PRC December 7,
2023
December 6,
2033
33.
 7280140 7, 9 Shenzhen
Jingtai
United States January 16,
2024
January 16,
2034
34.
 73111413 9 Shenzhen
Jingtai
PRC January 28,
2024
January 27,
2034
35.
 73113147 42 Shenzhen
Jingtai
PRC January 28,
2024
January 27,
2034
36. XtalPi 7295227 7, 9 Shenzhen
Jingtai
United States January 30,
2024
January 29,
2034
37.
 73105006A 42 Shenzhen
Jingtai
PRC February 14,
2024
February 13,
2034
38.
 73104943 7 Shenzhen
Jingtai
PRC March 28,
2024
March 27,
2034
39.
 73123544 9 Shenzhen
Jingtai
PRC April 7, 2024 April 6, 2034
40.
 73107476 7 Shenzhen
Jingtai
PRC April 28, 2024 April 27, 2034
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –


--- page 782 ---
As of the Latest Practicable Date, we had applied for the registration of the following
trademarks which, in the opinion of our Directors, are or may be material to our business:
No. Trademark
Application
Number Class
Name of
Applicant
Place of
Application
Date of
Application
1.
 69077888 42 Shenzhen
Jingtai
PRC January 3, 2023
2.
 97838863 42 Shenzhen
Jingtai
United States March 14, 2023
3.
 97838879 42 Shenzhen
Jingtai
United States March 14, 2023
4.
 73121204 9 Shenzhen
Jingtai
PRC July 27, 2023
5.
 73105006 42 Shenzhen
Jingtai
PRC July 27, 2023
6.
 73113417 9 Shenzhen
Jingtai
PRC July 27, 2023
7.
 75174354 42 Shanghai
Jingtai
PRC November 14,
2023
8.
 98282666 42 Shanghai
Jingtai
United States November 22,
2023
9.
 75174354A 42 Shanghai
Jingtai
PRC November 14,
2023
10.
 40202404648S 9 Shanghai
Jingtai
Singapore March 5, 2024
11.
 40202404649T 42 Shanghai
Jingtai
Singapore March 5, 2024
12.
 306491674 9, 42 Shanghai
Jingtai
Hong Kong March 6, 2024
13. XTALPI 40202405851X 7, 9, 42 Shenzhen
Jingtai
Singapore March 21, 2024
14.
 40202405852V 7, 9, 42 Shenzhen
Jingtai
Singapore March 21, 2024
15.
 98466467 7, 9, 42 Shenzhen
Jingtai
United States March 25, 2024
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –


--- page 783 ---
(b) Patents
As of the Latest Practicable Date, our Group was the registered proprietor of the
following patents which, in the opinion of our Directors, are or may be material to our
business:
No. Patent
Registration
Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Application Expiry Date
1 Methods and applications for
constructing polarization
force fields, methods and
systems for predicting
drug crystal shapes (ܔ
ʿᏐ͜e
ʿӻ
୕)
ZL201610752376.7 Shenzhen Jingtai PRC August 29,
2016
August 29,
2036
2 Atom type definition system
and atom type matching
method thereof (ۨ
ʸ
ج)
ZL201810420888.2 Shenzhen Jingtai,
Shenzhen
Zhiyao
PRC May 4, 2018 May 4, 2038
3 Drug crystal structure
landscape analysis system
and landscape analysis
method thereof (౺᜗
ӻ୕ʿՉΌ
ج)
ZL201810437497.1 Shenzhen Jingtai PRC May 9, 2018 May 9, 2038
4 Automatic conformation
analysis method for quasi-
drug organic molecules ( ᗳ
Іਗʷ࿴൥
ج)
ZL201810437477.4 Shenzhen Jingtai PRC May 9, 2018 May 9, 2038
5 Scientific computing process
management system (ኪ
೻၍ଣӻ୕)
ZL201810444674.9 Shenzhen Jingtai PRC May 10, 2018 May 10, 2038
6 An automatic and efficient
DFTB repulsive potential
fitting method ( ɓ၇Іਗ৷
ࣖDFTBج)
ZL201810450409.1 Shenzhen Jingtai PRC May 11, 2018 May 11, 2038
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –


--- page 784 ---
No. Patent
Registration
Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Application Expiry Date
7 A method for determining
the association relationship
between a drug and a drug
target (ձᖹ
ج)
ZL201811382264.2 Beijing Jingtai PRC November 20,
2018
November 20,
2038
8 Computational task
management and analysis
system for molecular force
field parameter generation
and method of operation
thereof ( ʱɿɢఙਞᅰ͛ϓ
ӻ୕
ج)
ZL201811572009.4 Shenzhen Jingtai,
Shenzhen
Zhiyao
PRC December 21,
2018
December 21,
2038
9 Automated method for
generating the full set of
stereoisomers of organic
molecules (ͭ
᜗ମ࿴ΌණІਗʷ͛ϓ˙
ج)
ZL201811589905.1 Shenzhen Jingtai PRC December 25,
2018
December 25,
2038
10 Atom type definition system
and atom type matching
method thereof (ۨ
ʸ
ج)
US11093685B2 Shenzhen Jingtai United States May 4, 2018 May 4, 2038
11 Drug crystal structure
landscape analysis system
and landscape analysis
method thereof (౺᜗
ӻ୕ʿՉΌ
ج)
US11562806B2 Shenzhen Jingtai United States May 9, 2018 May 9, 2038
12 Automatic conformation
analysis method for quasi-
drug organic molecules ( ᗳ
Іਗʷ࿴൥
ج)
US11443834B2 Shenzhen Jingtai United States May 9, 2018 May 9, 2038
13 Scientific computing process
management system (ኪ
೻၍ଣӻ୕)
US10817532B2 Shenzhen Jingtai United States May 10, 2018 May 10, 2038
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –


--- page 785 ---
No. Patent
Registration
Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Application Expiry Date
14 Method for automatically
and efficiently fitting
repulsive potentials
through DFTB ( ɓ၇Іਗ
ࣖDFTB ર͆ැᏝΥ˙
ج)
US10978177B2 Shenzhen Jingtai United States May 11, 2018 May 11, 2038
15 Method for automatically
generating universal set of
stereoisomers of organic
molecule (ͭ᜗
ج)
US11562809B2 Shenzhen Jingtai United States December 25,
2018
December 25,
2038
16 Computing task management
and analysis system for
molecular force field
parameter building and
operation method thereof
(ၑ
ӻ୕ʿՉ༶
ج)
US11609807B2 Shenzhen Jingtai United States December 21,
2018
December 21,
2038
17 High-efficiency Monte Carlo
molecular simulation
method for calculating
water/benzene liquid phase
interfacial tension by
means of improved Ewald
sum ( ஷཀEwald sumࠇٙ
ၑ˥/ٙ
Monte Carloج)
ZL201910988374.1 Shenzhen Jingtai PRC October 17,
2019
October 17,
2039
18 Drug research and
development software
repository and software
package management
system (ࢫࡑ
ʿՉழ΁၍ଣӻ୕)
US11609758B2 Shenzhen Jingtai United States December 31,
2019
December 31,
2039
19 Drug research and
development software
repository and software
package management
system (ࢫࡑ
ʿՉழ΁၍ଣӻ୕)
JP7138295B2 Shenzhen Jingtai Japan December 31,
2019
December 31,
2039
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –


--- page 786 ---
No. Patent
Registration
Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Application Expiry Date
20 A method, apparatus and
computational device for
the prediction of
potentially active
molecules (׌ݺ
eༀໄձ
ၑண௪)
ZL202010124320.3 Beijing Jingtai PRC February 27,
2020
February 27,
2040
21 Molecular sequence
generation method and
apparatus, and computing
equipment ( ɓ၇ʱɿҏΐ
ၑ
ண௪)
ZL202010124314.8 Beijing Jingtai PRC February 27,
2020
February 27,
2040
22 Potential energy surface
scanning method and
system for molecular
conformational space
analysis (٤
ج
ʿӻ୕)
ZL202010153174.7 Shenzhen Jingtai PRC March 6, 2020 March 6, 2040
23 Potential energy surface
scanning method and
system for molecular
conformational space
analysis (٤
ج
ʿӻ୕)
JP7116442B2 Shenzhen Jingtai Japan March 6, 2020 March 6, 2040
24 Functional peptide
recommendation method
and device and computing
equipment ( ɓ၇̌ঐ㹻પ
ၑண௪)
ZL202110080336.3 Beijing Jingtai PRC January 21,
2021
January 21,
2041
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-18 –


--- page 787 ---
No. Patent
Registration
Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Application Expiry Date
25 Method for processing and
recognizing ring
isomerization of organic
molecules, method and
apparatus for obtaining the
conformation of a sample
of organic molecules ( Ϟዚ
ʿ
eᐏ੻Ϟዚʱɿ
ʿༀໄ)
ZL202111468255.7 Shanghai Zhiyao PRC December 3,
2021
December 3,
2041
26 Molecular free energy
calculations, stability
analysis methods, devices,
equipment and storage
media (ၑe
eༀໄe
ண௪ʿπᎷʧሯ)
ZL202111506789.4 Shanghai Zhiyao PRC December 10,
2021
December 10,
2041
27 Methods, apparatus and
electronic devices for
handling molecular
docking (ஈଣ
eༀໄʿཥɿண௪)
ZL202111590799.0 Shanghai Zhiyao PRC December 23,
2021
December 23,
2041
28 Inhibitor prediction method
of protein kinase, model
construction method and
apparatus thereof ( ஐͣዧ
eᅼ
ʿՉༀໄ)
ZL202210003673.7 Beijing Jingtai PRC January 5,
2022
January 5,
2042
29 Method for sequence design
of proteins, method for
structural design of
proteins, apparatus and
electronic device ( ஐͣሯ
eஐͣሯ
eༀໄʿ
ཥɿண௪)
ZL202210120554.X Beijing Jingtai PRC February 9,
2022
February 9,
2042
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-19 –


--- page 788 ---
No. Patent
Registration
Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Application Expiry Date
30 Cyclic peptide design
methods, methods for
generating complex
structures, devices and
electronic equipment ( ᐑ㹻
ٙ
eༀໄʿཥɿண
௪)
ZL202210203337.7 Beijing Jingtai PRC March 3, 2022 March 3, 2042
31 Grippers and gripping
devices with such grippers,
mobile robots ( Ѱ˧ʿ੭Ϟ
Ѱ՟ༀໄe୅ਗ
ዚኜɛ)
ZL202221575344.1 Shanghai Zhiyao PRC June 22, 2022 June 22, 2032
32 A powder dispensing
apparatus and a powder
dispensing system ( ɓ၇४
͋ʱৣண௪ʿ४͋ʱৣӻ
୕)
ZL202221667048.4 Shenzhen Jingtai PRC June 29, 2022 June 29, 2032
33 Powder drums, powder drum
units, powder dispensing
equipment and powder
dispensing systems ( ̋४
૗e४૗ༀໄe४͋ʱৣ
ண௪ʿ४͋ʱৣӻ୕)
ZL202221671231.1 Shenzhen Jingtai PRC June 29, 2022 June 29, 2032
34 Sample Preparation
Workstation and Sample
Preparation System (ۜ
Ⴁ௪ӻ
୕)
ZL202221841216.7 Shenzhen Jingtai PRC July 15, 2022 July 15, 2032
35 Method for constructing a
toxicity prediction model
and prediction model,
prediction method and
apparatus (ٙۨ
eཫ
ʿༀໄ)
ZL202211682054.1 Beijing Jingtai PRC December 27,
2022
December 27,
2042
36 Powder barrels and powder
dispensing equipment
(४૗ձ४͋ʱৣண௪)
ZL202320520162.2 Shenzhen Jingtai PRC March 10,
2023
March 10,
2033
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-20 –


--- page 789 ---
No. Patent
Registration
Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Application Expiry Date
37 Powder sampling equipment
and experimental system
(̋ᅵண௪ʿྼ᜕ӻ୕)
ZL202321401716.3 Shenzhen Jingtai PRC June 2, 2023 June 2, 2033
38 Sample processing system
(ஈଣӻ୕)
ZL202321475735.0 Shenzhen Jingtai PRC June 9, 2023 June 9, 2033
39 Monte Carlo molecular
simulation method for
efficient calculation of the
interfacial tension of
water/benzene liquid phase
by improving Ewald sum
(ஷཀҷආEwald sum৷
ၑ˥/ੵɢ
ٙMonte Carlo ʱɿᗳˢ˙
ج)
US11853663B2 Shenzhen Jingtai United States October 17,
2019
February 27,
2041
40 Drug research and
development software
repository and software
package management
system (ࢫࡑ
ʿՉழ΁̍ༀ၍ଣӻ୕)
ZL201911412212.X Shenzhen Jingtai PRC December 31,
2019
December 31,
2039
41 Potential energy surface
scanning method and
system for molecular
conformation space
analysis (٤
ج
ʿӻ୕)
US11894108B2 Shenzhen Jingtai United States March 6, 2020 July 18, 2041
42 Method, device and
equipment for predicting
PBPK model for small
molecule attribute
prediction (ʃʱɿ᙮
ٙPBPKཫ಻
eༀໄʿண௪)
ZL202311140328.9 Beijing Jingtai PRC September 6,
2023
September 6,
2043
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-21 –


--- page 790 ---
(c) Copyrights
As of the Latest Practicable Date, we was the registered proprietor of the following
copyrights which, in the opinion of our Directors, are or may be material to our business:
No. Copyright Registration Number
Name of
Registered
Proprietor
Place of
Registration
Date of
Registration
1 FACES Cloud Computing Resource
Scheduling Platform V1.0 (FACES
̨̻V1.0)
2016SR096169 Shenzhen
Jingtai
PRC May 6, 2016
2 FACES Cloud Platform Monitoring
System V3.0 (FACES ථ္̨̻છӻ
୕V3.0)
2017SR716780 Shenzhen
Jingtai
PRC December 21,
2017
3 XtalForce Universal Force Field
Computing Platform V1.1
(XtalForceၑ̨̻V1.1)
2019SR0105785 Shenzhen
Jingtai
PRC January 29,
2019
4 Molecular generation/
IOV1.0 ( ʱɿ͛ϓ/
IOV1.0)
2019SR0990241 Beijing
Jingtai
PRC September 25,
2019
5 Hexagram Small Molecule
Pharmacophore Screening Software
V1.0 (Hexagramྠྡጜ
፯ழ΁V1.0)
2021SR1772999 Beijing
Jingtai
PRC November 17,
2021
6 Free Energy Perturbation Calculator
V1.0.9 (ၑழ΁
V1.0.9)
2022SR0000013 Shanghai
Zhiyao
PRC January 4, 2022
7 ID4 Drug Design Platform V1.0.0
(ID4̨̻V1.0.0)
2022SR0008796 Shanghai
Zhiyao
PRC January 4, 2022
8 New Drug Development Process
Data Management Information
System V1.0 (၍
ӻ୕V1.0)
2022SR0493962 Shenzhen
Jingtai
PRC April 20, 2022
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-22 –


--- page 791 ---
(d) Domain Names
As of the Latest Practicable Date, we owned the following domain names which, in
the opinion of our Directors, are or may be material to our business:
No. Domain name Registrant
Date of
registration Expiry date
1 aiphis.com Shenzhen Jingtai August 9, 2017 August 9, 2024 (1)
2 jingtaikeji.com Shenzhen Jingtai August 26, 2017 August 26, 2024 (1)
3 xtalpi.xyz Shenzhen Jingtai August 9, 2017 August 9, 2024 (1)
4 xtalpi.com Shenzhen Jingtai July 13, 2014 July 13, 2024 (1)
5 renova.net.cn Beijing Jingtai March 12, 2019 March 12, 2026
6 nitrogen.fun Beijing Jingtai March 12, 2019 March 13, 2026
7 ailuxbio.com XtalPi US January 8, 2024 January 8, 2025
Note:
1. Our Company intends to review the domain names before their expiry and does not expect
impediment for their renewals
C. FURTHER INFORMATION ABOUT DIRECTORS AND SUBSTANTIAL
SHAREHOLDERS
1. Disclosure of Interests
(a) Interests and short positions of the Directors and chief executive of the Company
in the Shares, underlying Shares and debentures of our Company and its
associated corporations
The following table sets out the interests and short positions of the Directors and
chief executive of the Company immediately following completion of the Global Offering
(assuming the Over-allotment Option is not exercised and no Shares will be issued under
the ESOPs) in the Shares, underlying Shares or debentures of our Company or any of our
associated corporations (within the meaning of Part XV of the SFO) which will have to
be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the
SFO (including interests and short positions in which they are taken or deemed to have
under such provisions of the SFO), or which will be required, pursuant to section 352 of
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-23 –


--- page 792 ---
the SFO, to be entered in the register referred to therein, or which will be required to be
notified to us and the Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers set out in Appendix C3 to the Listing Rules,
once the Shares are listed:
Immediately following
the completion of
the Global Offering
Name of Director/
Chief Executive
Capacity/
nature of interest
(1)
Number and
Class of Shares Shareholding
Dr. Wen Beneficial owner (2) 81,093,362
Ordinary Shares
2.38%
Founder of trust (3) 222,126,400
Ordinary Shares
6.52%
Interest in controlled
corporation
508,763,783
Ordinary
Shares (4), (5)
14.93%
Dr. Ma Beneficial owner (6) 45,230,342
Ordinary Shares
1.33%
Founder of trust (7) 122,908,500
Ordinary Shares
3.61%
Interest in controlled
corporation (8)
59,103,125
Ordinary Shares
1.73%
Dr. Lai Beneficial owner (9) 32,315,661
Ordinary Shares
0.95%
Founder of trust (10) 87,814,140
Ordinary Shares
2.58%
Dr. Jiang Yide Alan Founder of trust (11) 3,800,000
Ordinary Shares
0.11%
Beneficiary of
trust (12)
3,800,000
Ordinary Shares
0.11%
Interest in controlled
corporation (13)
2,400,000
Ordinary Shares
0.07%
Notes:
(1) All interests stated are long positions.
(2) Representing 81,093,362 Ordinary Shares underlying the options granted to Dr. Wen under the
Pre-IPO ESOP .
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-24 –


--- page 793 ---
(3) QuantumPharm Holdings is held as to 99% by WSH Family Holdings, which is the holding
vehicle of TMF (Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the WSH Family Trust, a
discretionary trust established by Dr. Wen as settlor. Under the SFO, each of Dr. Wen, WSH
Family Holdings and TMF (Cayman) Ltd. is deemed to be interested in the 222,126,400 Ordinary
Shares in which QuantumPharm Holdings is interested.
(4) QuantumPharm Roc, the shareholding platform for the Pre-IPO ESOP which holds the Shares
underlying the options granted thereunder for the benefit of the grantees, is wholly owned by
QuantumPharm Holdings. Under the SFO, each of Dr. Wen and QuantumPharm Holdings is
deemed to be interested in the 298,041,143 Ordinary Shares in which QuantumPharm Roc is
interested.
(5) Pursuant to the powers of attorney executed by (i) Dr. Ma and Crete Helix; and (ii) Dr. Lai and
SeveningBAlpha in favor of Dr. Wen and QuantumPharm Holdings, QuantumPharm Holdings is
authorized to exercise all the voting rights attached to the Shares held by Crete Helix and
SeveningBAlpha. Under the SFO, each of Dr. Wen and QuantumPharm Holdings is deemed to be
interested in the 122,908,500 Ordinary Shares in which Crete Helix is interested and the
87,814,140 Ordinary Shares in which SeveningBAlpha is interested.
(6) Representing 45,230,342 Ordinary Shares underlying the options granted to Dr. Ma under the
Pre-IPO ESOP .
(7) Crete Helix is held as to 99% by MH International Holdings, which is the holding vehicle of TMF
(Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the MH Fund Trust, a discretionary trust
established by Dr. Ma as settlor. Under the SFO, each of Dr. Ma, MH International Holdings and
TMF (Cayman) Ltd. is deemed to be interested in the Shares in which Crete Helix is interested.
(8) Representing 59,103,125 Ordinary Shares underlying the options granted under the Pre-IPO
ESOP held by QuantumPharm Employee Holdings, a holding vehicle wholly owned by the trustee
of the QuantumPharm Employee Benefit Trust for the benefit of 13 employees of our Group. In
accordance with the terms of the trust deed of the QuantumPharm Employee Benefit Trust dated
June 28, 2021, Dr. Ma, being the sole member of the advisory committee established by our
Company, has the sole power to make all decisions relating to the exercise of any voting and other
rights of the properties held under the trust and to give instructions and directions to the trustee
for the execution of such decisions.
(9) Representing 32,315,661 Ordinary Shares underlying the options granted to Dr. Lai under the
Pre-IPO ESOP .
(10) SeveningBAlpha is held as to 99% by LPHappy Holding, which is the holding vehicle of TMF
(Cayman) Ltd. TMF (Cayman) Ltd. is the trustee of the LPHappy Family Trust, a discretionary
trust established by Dr. Ma as settlor. Under the SFO, each of Dr. Lai, LPHappy Holding and TMF
(Cayman) Ltd. is deemed to be interested in the Shares in which SeveningBAlpha is interested.
(11) Representing 3,800,000 Ordinary Shares underlying the options granted under the Pre-IPO ESOP
which are held by a spousal lifetime access trust established by Dr. Jiang for the benefit of his
spouse. Under the SFO, Dr. Jiang is deemed to be interested in the Shares in which the aforesaid
trust is interested.
(12) Representing 3,800,000 Ordinary Shares underlying the options granted under the Pre-IPO ESOP
which are held by a spousal lifetime access trust established by the spouse of Dr. Jiang for the
benefit of Dr. Jiang. Under the SFO, Dr. Jiang is deemed to be interested in the Shares in which
the aforesaid trust is interested.
(13) Representing 2,400,000 Ordinary Shares underlying the options granted under the Pre-IPO ESOP
which are held by ASJX Envision LLC. ASJX Envision LLC is held as to 40% by a revocable
trust established by Dr. Jiang, 40% by a revocable trust established by the spouse of Dr. Jiang and
20% by a family trust established by them. Under the SFO, Dr. Jiang is deemed to be interested
in the Shares in which ASJX Envision LLC is interested.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-25 –


--- page 794 ---
(b) Interests of the substantial shareholders in the Shares
Save as disclosed in “Substantial Shareholders,” immediately following the
completion of the Global Offering (assuming the Over-allotment Option is not exercised
and no Shares will be issued under the ESOPs), our Directors are not aware of any other
person (not being a Director or chief executive of our Company) who will have an interest
or short position in the Shares or the underlying Shares which would fall to be disclosed
to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the
SFO, or who is, directly or indirectly, interested in 10% or more of the issued voting
shares of our Company.
(c) Interests of the substantial shareholders of other members of our Group
So far as our Directors are aware, as at the Latest Practicable Date, the following
person (other than our Directors or chief executive of our Company) was, directly or
indirectly, interested in 10% or more of the nominal value of any class of share capital
carrying rights to vote in all circumstances at general meetings of any other members of
our Group.
Name of members of our Group
Name of
Shareholder(s)
Approximate
percentage of
shareholding
NeoGeode Inc. Jean Jing ZHAO 35%
2. Particulars of Directors’ Service Contracts and Letters of Appointment
Each of our executive Directors has entered into a service agreement with our Company
for a term of three years commencing from the Listing Date, which may be terminated by not
less than three months’ notice in writing served by either party on the other. Under the terms
the service agreement, each of our executive Directors will be entitled to a fixed director’s fee
for his service as executive Director and may be entitled to a gratuity payment calculated with
reference to his then annual remuneration at our Group upon the end of his directorship.
Each of our non-executive Director and independent non-executive Directors has entered
into a letter of appointment with our Company for a term of three years commencing from the
Listing Date, which may be terminated by not less than three months’ notice in writing served
by either party on the other. Each of our independent non-executive Directors will be entitled
to a fixed director’s fee under the terms of the letter of appointment.
3. Remuneration of Directors
The aggregate amount of remuneration which was paid to our Directors for the three years
ended December 31, 2023 was RMB27.9 million, RMB46.3 million and RMB70.8 million,
respectively.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-26 –


--- page 795 ---
The aggregate amount of remuneration which were paid by our Group to our five highest
paid individual (including both employees and Directors) for the three years ended
December 31, 2023 was RMB34.3 million, RMB53.7 million and RMB93.3 million,
respectively.
None of our Directors or any past directors of any member of our Group has been paid
any sum of money for the three years ended December 31, 2023 as (a) an inducement to join
or upon joining our Company; or (b) for loss of office as a director of any member of our Group
or of any other office in connection with the management of the affairs of any member of our
Group.
There has been no arrangement under which a Director has waived or agreed to waive any
emoluments for the three years ended December 31, 2023.
It is estimated that remuneration and benefits in kind (excluding any possible payment of
discretionary bonus and the amount of share-based compensation) of no more than RMB12.5
million in aggregate will be paid and granted to our Directors by us in respect of the year
ending December 31, 2024 under arrangements in force at the date of this prospectus.
4. Disclaimers
(a) Save as disclosed in “—C. Further information about Directors and Substantial
Shareholders—1. Disclosure of Interests,” none of our Directors or chief executives
of our Company has any interest or short position in our shares, underlying shares
or debentures of our Company or any of its associated corporation (within the
meaning of the SFO) which will have to be notified to our Company and the Stock
Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or which will be
required, pursuant to section 352 of the SFO, to be entered in the register referred
to therein, or which will be required to be notified to our Company and the Stock
Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers set out in Appendix C3 to the Listing Rules once our Shares are listed.
(b) None of our Directors or experts referred to in “—E. Other Information—8.
Qualifications of Experts” has any direct or indirect interest in the promotion of our
Company, or in any assets which have within the two years immediately preceding
the date of this prospectus been acquired or disposed of by or leased to any member
of our Group, or are proposed to be acquired or disposed of by or leased to any
member of our Group.
(c) None of our Directors is materially interested in any contract or arrangement
subsisting at the date of this prospectus which is significant in relation to the
business of our Group taken as a whole.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-27 –


--- page 796 ---
(d) None of our Directors has any existing or proposed service contracts with any
member of our Group (excluding contracts expiring or determinable by the employer
within one year without payment of compensation (other than statutory
compensation)).
(e) Save as disclosed in “—C. Further information about Directors and Substantial
Shareholders—1. Disclosure of Interests”, taking no account of Shares which may
be taken up under the Global Offering, none of our Directors knows of any person
(not being a Director or chief executive of our Company) who will, immediately
following completion of the Global Offering, have an interest or short position in
our Shares or underlying Shares of our Company which would fall to be disclosed
to our Company under the provisions of Divisions 2 and 3 of Part XV of SFO or be
interested, directly or indirectly, in 10% or more of the issued voting shares of any
member of our Group.
(f) None of the experts referred to in “—E. Other Information—8. Qualifications of
Experts” has any shareholding in any member of our Group or the right (whether
legally enforceable or not) to subscribe for or to nominate persons to subscribe for
securities in any member of our Group.
(g) Save as disclosed in “Business—Our Customers” and “Business—Our Suppliers,”
so far as is known to our Directors as of the Latest Practicable Date, none of our
Directors, their respective close associates or any Shareholder, which to the best
knowledge of our Directors owns more than 5% of the total number of issued Shares,
has any interests in the five largest customers or the five largest suppliers of our
Group for each year/period during the Track Record Period.
D. SHARE INCENTIVE SCHEMES
1. Pre-IPO ESOP
The following is a summary of the principal terms of the Pre-IPO ESOP as adopted by the
Shareholders on July 14, 2021 and amended on August 5, 2021. No further awards will be
granted under the Pre-IPO ESOP after the Listing and the terms of the Pre-IPO ESOP are not
subject to the provisions of Chapter 17 of the Listing Rules.
(a) Purpose
The purpose of the Pre-IPO ESOP is to motivate and reward employees and other
individuals to perform at the highest level and contribute significantly to the success of
our Group, thereby furthering the best interests of our Company and the Shareholders.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-28 –


--- page 797 ---
(b) Eligibility
Any individuals (including officers) employed on a full-time basis by our Group,
any non-employee directors of our Company and our subsidiaries, any individuals
(including advisors) who are providing services to our Group, or any individuals who
devote substantially all of their time and efforts to the business, management and
operation of our Group are participants eligible to receive awards under the Pre-IPO
ESOP , to the extent that an offer or receipt of an award is permitted by applicable law,
stock market or exchange rules and regulations or accounting or tax rules and regulations.
Holders of equity compensation awards granted by a company that is acquired by
our Group (or whose business is acquired by our Group) or with which our Group
combines are also eligible for grants of awards under the Pre-IPO ESOP in assumption of,
or in substitution for, an outstanding award previously granted by that company or
business.
A participant who is a non-employee director of our Company or our subsidiary may
not receive compensation for any calendar year in excess of US$750,000 in the aggregate,
including cash payments and awards under the Pre-IPO ESOP .
(c) Administration
The Pre-IPO ESOP is administered by the a committee authorized by the Board (the
“Committee ”), which has the full discretion and authority to:
(i) select the participants and determine the types of awards that they are to
receive;
(ii) determine the number of Shares that are to be subject to the awards and the
terms and conditions of the awards, including the price (if any) to be paid for
the awards and the vesting conditions (if applicable) of such awards, and
prescribe the form of each award agreement;
(iii) determine whether, to what extent, under what circumstances and by which
methods the awards may be settled, exercised or deferred;
(iv) cancel, modify or waive our rights with respect to, or modify, discontinue,
suspend or terminate any or all outstanding awards, subject to any required
consents;
(v) construe and interpret the terms of the Pre-IPO ESOP and any agreements
relating to the Pre-IPO ESOP;
(vi) correct any defect, supply any omission and reconcile any inconsistency in the
Pre-IPO ESOP or any award;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-29 –


--- page 798 ---
(vii) accelerate or extend the vesting or exercisability or extend the term of any or
all outstanding awards subject to any required consent;
(viii) subject to the other provisions of the Pre-IPO ESOP , amend the terms and
conditions of one or more outstanding awards (including repricing the exercise
or base price of any outstanding option or share appreciation right without
shareholder approval) and authorize the termination, conversion, substitution
or succession of the awards;
(ix) establish, amend, suspend or waive such rules and regulations and appoint such
agents, trustees, brokers, depositories and advisors and determine such terms
of their engagement as it shall deem appropriate for the proper administration
of the Pre-IPO ESOP and due compliance with applicable law, stock market or
exchange rules and regulations or accounting or tax rules and regulations;
(x) make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Pre-IPO ESOP and
due compliance with applicable law, stock market or exchange rules and
regulations or accounting or tax rules and regulations; and
(xi) grant awards to any person wholly owned by the trust established by the trust
deed to hold such awards solely for the benefit of the participants.
(d) Number of shares available for awards
The maximum number of our Class A Ordinary Shares available for grant under the
Pre-IPO ESOP shall not exceed in the aggregate 318,392,443 Shares, which shall not be
reduced by the Shares underlying substitute awards and Shares remaining available for
grant under a plan of an acquired company or of a company with which our Group
combines.
In the event that the Committee determines that, as a result of any dividend or other
distribution (other than an ordinary dividend or distribution), recapitalization, stock split,
reverse stock split, reorganization, merger, amalgamation, consolidation, separation,
rights offering, split-up, spin-off, combination, repurchase or exchange of Shares or other
securities of our Company, issuance of warrants or other rights to acquire Shares or other
securities of our Company, issuance of Shares pursuant to the anti-dilution provisions of
securities of our Company, or other similar corporate transaction or event affecting the
Shares, or of changes in applicable laws, regulations or accounting principles, an
adjustment is necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Pre-IPO ESOP , then the
Committee shall, subject to the rules of the Pre-IPO ESOP and applicable law, adjust
equitably so as to ensure no undue enrichment or harm (including by payment of cash),
among other things, the number and type of Shares (or other securities) which are
available for grant under the Pre-IPO ESOP or subject to outstanding awards.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-30 –


--- page 799 ---
(e) Term
The Pre-IPO ESOP is effective on the date it has been adopted by the Board and
approved by the Shareholders and will expire on, and no award may be granted pursuant
to the Pre-IPO ESOP , after the 10-year anniversary of the effective date. Any awards that
are outstanding on the 10-year anniversary of the effective date shall remain in force
according to the terms of the Pre-IPO ESOP and the applicable award agreement.
(f) Options
All awards which have been granted under the Pre-IPO ESOP are in the form of
options representing the right to purchase Shares held by QuantumPharm Roc.
(i) Exercise price
The exercise price per Share under an option shall be determined by the
Committee at the time of grant.
Subject to the terms of the Pre-IPO ESOP and applicable law, the Committee,
from time to time and in its sole discretion, may provide for (1) the amendment of
any outstanding option to adjust the exercise price of the option, (2) the cancellation,
exchange, or surrender of an outstanding option in exchange for cash or other types
of awards (for the purpose of repricing the option or otherwise), or (3) the
cancellation, exchange, or surrender of an outstanding option in exchange for an
option with an exercise price that is less than the exercise price of the original
option.
(ii) Time and conditions of exercise
The term of each option shall be fixed by the Committee but shall not exceed
10 years from the date of grant of such option. The Committee shall determine the
time or times at which an option becomes vested and exercisable in whole or in part.
(iii) Payment
The Committee shall determine the methods by which, and the forms in which
payment of the exercise price with respect thereto may be made or deemed to have
been made, including cash, Shares, other awards, other property, net settlement
(including broker-assisted cashless exercise) or any combination thereof, having a
fair market value on the exercise date equal to the relevant exercise price.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-31 –


--- page 800 ---
(iv) Rights of grantee
An option will not convey to a participant the right to any Shares or the rights
and privileges of a shareholder with respect to the Shares subject to such option,
such as the right to vote or the right to receive dividends, unless and until and to the
extent a Share is issued to such participant upon exercise of such option.
(g) Effects of termination of employment or service
The Committee may provide, by rule or regulation or in any applicable award
agreement, or may determine in any individual case, the circumstances in which, and the
extent to which, an award may be exercised, settled, vested, paid or forfeited in the event
of a participant’s termination of service prior to the end of a performance period or
vesting, exercise or settlement of such award.
(h) Limits on transfers
Except as may be permitted by the Committee or as specifically provided in an
award agreement and subject to compliance with applicable securities laws, (i) no award
and no right under any award shall be assignable, alienable, saleable, pledgeable or
transferable by a participant other than by will or pursuant to the terms of the Pre-IPO
ESOP and (ii) during a participant’s lifetime, each award, and each right under any award,
shall be exercisable only by such participant or, if permissible under applicable law, by
such participant’s guardian or legal representative.
(i) Adjustments
The number and type of Shares available under the Pre-IPO ESOP and any
outstanding awards, as well as the exercise or purchase prices of awards, will be subject
to equitable adjustment in the event of certain reorganizations, mergers, combinations,
recapitalizations, share splits, share dividends or other similar events that change the
number or kind of shares outstanding, and extraordinary dividends or distributions of
property to the Shareholders.
(j) Amendment, termination and suspension
Except to the extent prohibited by applicable law and unless otherwise expressly
provided in an award agreement or in the Pre-IPO ESOP , the Board may amend, alter,
suspend, discontinue or terminate the Pre-IPO ESOP or any portion thereof at any time,
provided that no such amendment, alteration, suspension, discontinuation or termination
shall be made without (i) Shareholders’ approval if such approval is required by
applicable law or the rules of the stock market or exchange, if any, on which the Shares
are principally quoted or traded or (ii) subject to the terms of the Pre-IPO ESOP , the
consent of the affected participant, if such action would materially adversely affect the
rights of such participant under any outstanding award, except (1) to the extent any such
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-32 –


--- page 801 ---
amendment, alteration, suspension, discontinuance or termination is made to cause the
Pre-IPO ESOP to comply with applicable law, stock market or exchange rules and
regulations or accounting or tax rules and regulations or (2) to impose any “clawback” or
recoupment provisions on any awards (including any amounts or benefits arising from
such awards) in accordance with the terms of the Pre-IPO ESOP .
Notwithstanding anything to the contrary in the Pre-IPO ESOP , the Committee may
amend the Pre-IPO ESOP , or create sub-plans, in such manner as may be necessary or
desirable to enable the Pre-IPO ESOP to achieve its stated purposes in any jurisdiction in
a tax-efficient manner and in compliance with local rules and regulations.
(k) Cancellation or “clawback” of awards
The Committee may specify in an award agreement that a participant’s rights,
payments and benefits with respect to an award shall be subject to reduction, cancellation,
forfeiture or recoupment upon the occurrence of certain specified events, in addition to
any otherwise applicable vesting or performance conditions of an award.
(l) Outstanding awards
None of the grantees were required to pay any consideration for the grant of the
awards. No further awards will be granted pursuant to the Pre-IPO ESOP , being the only
subsisting share incentive scheme of our Company as of the Latest Practicable Date, after
the Listing.
As of the Latest Practicable Date, all of the awards granted under the Pre-IPO ESOP
were in the form of share options. A total of 318,392,443 options had been granted to
eligible participants under the Pre-IPO ESOP , of which 20,351,300 options had been
exercised and was settled with the issuance of 20,351,300 Class A Ordinary Shares.
Accordingly, as of the Latest Practicable Date, our Company had outstanding options held
by a total of 208 grantees to purchase an aggregate of 298,041,143 Shares, such
298,041,143 outstanding options represented options to purchase 168,639,365 Shares
held by four Directors; options to purchase 34,837,200 Shares held by two members of
our senior management; options to purchase 532,149 Shares held by two consultants;
options to purchase 1,780,000 Shares held by seven ex-employees of our Group; and
options to purchase 92,252,429 which belonged to 193 other employees (who are not
Directors, members of senior management, consultants or ex-employees of our Group).
TMF Trust (HK) Limited has been appointed to act as the trustee of the QuantumPharm
Employee Benefit Trust, being a discretionary trust established for the purposes of
managing and administering 59,103,125 outstanding options granted to 12 of such other
employees of our Group and Dr. Zhang Peiyu, a member of our senior management. All
such outstanding 59,103,125 outstanding options are held by QuantumPharm Employee
Holdings, a holding vehicle wholly owned by TMF Trust (HK) Limited. Save for our
Co-founders and Dr. Jiang Yide Alan who are our executive Directors, none of the option
grantees is our connected person.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-33 –


--- page 802 ---
All of the 298,041,143 Shares underlying the outstanding options (including those
vested and unvested), representing 8.75% of the total number of issued Shares
immediately after the completion of the Global Offering (assuming the Over-allotment
Option is not exercised and no Shares will be issued under the ESOPs), have been issued
by our Company, the last of which took place in August 2021, and are held by
QuantumPharm Roc, a company which is wholly owned by QuantumPharm Holdings and
a shareholding platform for the Pre-IPO ESOP which holds such Shares for the benefit of
the grantees. In the case of the options held under the QuantumPharm Employee Benefit
Trust, the underlying Shares will be transferred by QuantumPharm Roc to QuantumPharm
Employee Holdings as and when the relevant options are exercised by QuantumPharm
Employee Benefit Trust for the benefit of the 13 employees who are its beneficiaries. In
the case of options held by other individual grantees, the underlying Shares will be
transferred by QuantumPharm Roc to the relevant grantees (or their nominees) as and
when the relevant options are exercised. There will be no dilutive effect on the
shareholdings immediately following completion of the Global Offering and no impact on
the earnings per Share upon the exercise of any such outstanding options.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-34 –


--- page 803 ---
Details of the outstanding options granted under the Pre-IPO ESOP to our Directors and
senior management are set out below:
Name of
grantee
Position within
our Group Address Grant date
Exercise price
per Share Vesting status
(1)
Exercise
period
Number of
Shares
underlying the
outstanding
options as of
the Latest
Practicable
Date
Shareholding
immediately
upon the
completion of
the Global
Offering
(2)
Dr. Wen Executive Director
and chairman of
our Board
Room 17D, Unit A,
Block 4, Dachong
City Garden, Nanshan
District, Shenzhen,
Guangdong, PRC
April 15,
2021
US$0.18792135 66.67% had been vested
as of the Latest
Practicable Date, the
remaining 33.33% will
become fully vested and
exercisable upon the
Listing
(3)
April 15, 2021
– April 14,
2031
38,183,588 1.12%
November 24,
2023
US$0.2467842 50% will be vested after
24 months commencing
from the Listing Date,
25% will be vested after
36 months commencing
from the Listing Date
and 25% will be vested
after 48 months
commencing from the
Listing Date
November 24,
2023 –
November 23,
2033
42,909,774 1.26%
Dr. Ma Executive Director
and Chief
Executive
Officer
Room 3511, Unit B,
Block 6, Shenye
Midtown, Futian
District, Shenzhen,
Guangdong, PRC
April 15,
2021
US$0.18792135 66.67% had been vested
as of the Latest
Practicable Date, the
remaining 33.33% will
become fully vested and
exercisable upon the
Listing
(3)
April 15, 2021
– April 14,
2031
21,436,379 0.63%
November 24,
2023
US$0.2467842 50% will be vested after
24 months commencing
from the Listing Date,
25% will be vested after
36 months commencing
from the Listing Date
and 25% will be vested
after 48 months
commencing from the
Listing Date
November 24,
2023 –
November 23,
2033
23,793,963 0.70%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-35 –


--- page 804 ---
Name of
grantee
Position within
our Group Address Grant date
Exercise price
per Share Vesting status (1)
Exercise
period
Number of
Shares
underlying the
outstanding
options as of
the Latest
Practicable
Date
Shareholding
immediately
upon the
completion of
the Global
Offering
(2)
Dr. Lai Executive Director
and Chief
Innovation
Officer
Room 1302, Unit 3,
Building 1, Y ard 21
Baiwanzhuang Street,
Xicheng District,
Beijing, PRC
April 15,
2021
US$0.18792135 66.67% had been vested
as of the Latest
Practicable Date, the
remaining 33.33% will
become fully vested and
exercisable upon the
Listing
(3)
April 15, 2021
– April 14,
2031
15,315,639 0.45%
November 24,
2023
US$0.2467842 50% will be vested after
24 months commencing
from the Listing Date,
25% will be vested after
36 months commencing
from the Listing Date
and 25% will be vested
after 48 months
commencing from the
Listing Date
November 24,
2023 –
November 23,
2033
17,000,022 0.50%
Dr. Jiang
Yide
Alan
Executive Director
and Chief
Strategic
Officer
83 Bird Street,
Needham,
Massachusetts, USA
October 1,
2015
US$0.0008 Fully vested as of the
Latest Practicable Date
October 1,
2015 –
July 14,
2031
10,000,000
(4) 0.29%
Dr. Zhang
Peiyu
Chief Scientific
Officer
Room 110, No. 1, Xin 8
Lane, Dalang Street,
Longhua District,
Shenzhen,
Guangdong, PRC
October 1,
2015
US$0.00001 Fully vested as of the
Latest Practicable Date
October 1,
2015 –
September 30,
2025
22,837,200
(5) 0.67%
Mr. Tam
Man
Hong
Chief Financial
Officer
Flat B, 4/F, Ho King
View, 2 Braemar Hill
Road, North Point,
Hong Kong
January 1,
2021
US$0.18792135 75% had been vested as of
the Latest Practicable
Date, the remaining
25% will become fully
vested and exercisable
upon the Listing
(3)
January 1,
2021 –
December 31,
2030
12,000,000
(4) 0.35%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-36 –


--- page 805 ---
Notes:
(1) Notwithstanding the vesting schedule set forth in the respective award agreements in respect of the options,
the grantees acknowledge and agree that they shall not exercise the options, even if such options are vested,
before our Company completes the Global Offering.
(2) Assuming the Over-allotment Option is not exercised and no Shares will be issued under the ESOPs.
(3) Pursuant to the vesting acceleration agreements entered into between our Company and the grantees, the
unvested share options will become fully vested and exercisable upon the Listing.
(4) Pursuant to the powers of attorney granted by Mr. Tam Man Hong and Dr. Jiang Yide Alan in favor of Dr. Wen
on May 28, 2024, respectively, Dr. Wen is unconditionally, indefinitely and irrevocably authorized and
appointed to exercise all the voting rights attached to: (i) the Shares underlying the vested outstanding options
owned by them; and (ii) the Shares transferred or issued to them upon the exercise of the vested outstanding
options, except for any matter the outcome of the vote on which will disproportionately, materially and
adversely affect the grantors, as compared to Dr. Wen or any other Shareholder. The powers of attorney shall
be valid from the Listing Date for an indefinite term. Accordingly, the voting rights of the Shares underlying
the vested outstanding options will be entrusted to Dr. Wen upon the Listing.
(5) Representing the Shares held by QuantumPharm Roc underlying options held by QuantumPharm Employee
Holdings, a holding vehicle wholly owned by TMF Trust (HK) Limited as trustee of the QuantumPharm
Employee Benefit Trust for the benefit of, among others, Dr. Zhang Peiyu. In accordance with the terms of the
trust deed of the QuantumPharm Employee Benefit Trust dated June 28, 2021, Dr. Ma, being the sole member
of the advisory committee established by our Company, has the sole power to make all decisions relating to
the exercise of any voting and other rights of the properties held under the trust and to give instructions and
directions to the trustee for the execution of such decisions.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-37 –


--- page 806 ---
Details of the outstanding options granted under the Pre-IPO ESOP to the three grantees
(who are not Directors, members of senior management, consultants or ex-employees of our
Group) who have been granted 5,000,000 options or more as of the Latest Practicable Date are
set out below:
Name of
grantee
Position within
our Group Address Grant date Exercise price Vesting status
(1)
Exercise
period
Number of
Shares
underlying the
outstanding
options as of
the Latest
Practicable
Date
Shareholding
immediately
upon the
completion of
the Global
Offering
(2)
Liu Y ang
(ᄎජ)
Chief Technology
Officer of
automation
innovation
business
department
Room D601,
Building 1, A
Southern District, Liu
Xian Ju, Xili,
Nanshan District,
Shenzhen,
Guangdong, PRC
March 1,
2016
US$0.00150 Fully vested as of the
Latest Practicable Date
March 1,
2016 –
February 28,
2026
8,000,000
(3) 0.23%
Shi
Xuekun
(௛տ)
Chief Operational
Officer
Room 17D,
Building B,
Run Da Y uan Ting,
Longhua District,
Shenzhen,
Guangdong, PRC
February 1,
2017
US$0.00150 Fully vested as of the
Latest Practicable Date
February 1,
2017 –
January 31,
2027
7,000,000
(3) 0.21%
Y ang
Mingjun
(ڲ׼)
Head of
computational
R&D
department
No. 6, Tongfa Road,
Nanshan District,
Shenzhen,
Guangdong, PRC
March 1,
2017
US$0.00150 Fully vested as of the
Latest Practicable Date
March 1,
2017 –
February 28,
2027
5,000,000
(3) 0.15%
Notes:
(1) Notwithstanding the vesting schedule set forth in the respective award agreements in respect of the options,
the participants acknowledge and agree that they shall not exercise the options, even if such options are vested,
before our Company completes the Global Offering.
(2) Assuming the Over-allotment Option is not exercised and no Shares will be issued under the ESOPs.
(3) Representing the Shares held by QuantumPharm Roc underlying options held by QuantumPharm Employee
Holdings, a holding vehicle wholly owned by TMF Trust (HK) Limited as trustee of the QuantumPharm
Employee Benefit Trust for the benefit of 13 employees of our Group. In accordance with the terms of the trust
deed of the QuantumPharm Employee Benefit Trust dated June 28, 2021, Dr. Ma, being the sole member of
the advisory committee established by our Company, has the sole power to make all decisions relating to the
exercise of any voting and other rights of the properties held under the trust and to give instructions and
directions to the trustee for the execution of such decisions.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-38 –


--- page 807 ---
Details of the outstanding options granted under the Pre-IPO ESOP to two consultants are
set out below:
Name of
grantee Address Grant date
Exercise
price Vesting status
(1)
Exercise
period
Number of
Shares
underlying the
outstanding
options as of
the Latest
Practicable
Date
Shareholding
immediately
upon the
completion of
the Global
Offering
(2)
Huaweilang
Dai(3)
1580 Beacon Street,
Waban, MA 02468,
USA
September 3,
2019
US$0.26309 Fully vested as of the
Latest Practicable
Date
September 3,
2019 –
September 2,
2029
53,215 0.002%
Stephen
Kennedy
Smith
(3)
Kennedy Enterprises,
330 Madison Avenue,
New Y ork, NY10017,
USA
September 3,
2019
US$0.26309 Fully vested as of the
Latest Practicable
Date
September 3,
2019 –
September 2,
2029
478,934 0.01%
Notes:
(1) Notwithstanding the vesting schedule set forth in the respective award agreements in respect of the options,
the participants acknowledge and agree that they shall not exercise the options, even if such options are vested,
before our Company completes the Global Offering.
(2) Assuming the Over-allotment Option is not exercised and no Shares will be issued under the ESOPs.
(3) Huaweilang Dai and Stephen Kennedy Smith were one of the advisory board members of XtalPi US. They were
responsible for providing professional advice, opinion and guidance to our technology developments and
applications in the pharmaceutical and materials design industry and market, making recommendations and
referrals on scientific researchers and industry leaders and promoting our scientific exchanges and
collaborations in pharmaceutical innovation within China and the United States.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-39 –


--- page 808 ---
The table below sets forth the information on the options granted to grantees who
are ex-employees of our Group and other employees (who are not Directors, members of
senior management, consultants or ex-employees of our Group) under the Pre-IPO ESOP
as of the Latest Practicable Date. As of the date of this prospectus, seven grantees who
are ex-employees of our Group, and other 190 employees (who are not Directors,
members of senior management, consultants, ex-employee of our Group) held an
aggregate of 74,032,429 options.
Range of Shares
underlying the
options granted
Total
number of
grantees Grant date Exercise price
Vesting
period
(1)(2)
Exercise
period
Number of Shares
underlying the
outstanding options
as of the Latest
Practicable Date
Shareholding
immediately upon
the completion of
the Global
Offering
(3)
1 to 499,999 167 November 26, 2015 to
March 1, 2024
US$0.00032458
to US$0.527
A; B; C; D Note (4) 22,852,004 0.67%
500,000 to 999,999 19 February 1, 2017 to
March 1, 2024
US$0.00283995
to US$0.462
A; B; C Note (4) 7,400,000 0.22%
1,000,000 to
4,999,999
11 November 26, 2015 to
March 1, 2024
US$0.00032458
to US$0.527
A; B; C Note (4) 43,780,425 1.29%
Notes:
(1) Notwithstanding the vesting schedule set forth in the respective award agreements in respect of the options,
the grantees acknowledge and agree that they shall not exercise the options, even if such options are vested,
before our Company completes the Global Offering.
(2) Please refer to different categories of vesting schedules below:
Category Vesting schedule
A Four equal tranches with the vesting date on the first, second, third and fourth anniversary date
of the grant date.
B 50% will be vested at the second anniversary of the grant date, 25% will be vested at the third
anniversary of the grant date, and 25% will be vested at the fourth anniversary of the grant date.
C 25% is vested immediately on the grant date, and the remaining 75% will be vested in three
equal tranches with the vesting date on the first, second and third anniversary date of the grant
date.
D 50% is vested immediately on the grant date, and the remaining 50% will be vested in two equal
tranches with vesting date on the first and second anniversary date of the grant date.
(3) Assuming the Over-allotment Option is not exercised and no Shares will be issued under the ESOPs.
(4) The terms of options shall be within 10 years from the date of grant.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-40 –


--- page 809 ---
We have applied to (i) the Stock Exchange for a waiver from strict compliance with the
requirements under Rule 17.02(1)(b) of the Listing Rules and paragraph 27 of Appendix D1A
to the Listing Rules and (ii) the SFC for an exemption from strict compliance with paragraph
10(d) of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance pursuant to section 342A of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance. For details, see “Waivers from Strict Compliance with
the Listing Rules and Exemption from Strict Compliance with the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.”
2. Post-IPO Share Option Scheme
The following is a summary of the principal terms of the Post-IPO Share Option Scheme
conditionally adopted by our Company pursuant to the resolutions of our then Shareholders
passed on May 28, 2024.
(a) Purpose of the Post-IPO Share Option Scheme
The Post-IPO Share Option Scheme is a share incentive scheme prepared in
accordance with Chapter 17 of the Listing Rules and is established to recognize and
acknowledge the contributions that the eligible participants of the Post-IPO Share Option
Scheme set out in paragraph (b) below had or may have made to our Group. The Post-IPO
Share Option Scheme will provide the eligible participants an opportunity to have a
personal stake in our Company with the view to achieving the following objectives:
(i) motivate the eligible participants to optimize their performance efficiency for
the benefit of our Group; and
(ii) attract and retain or otherwise maintain an on-going business relationship with
the eligible participants whose contributions are or will be beneficial to the
long-term growth of our Group.
(b) Eligible participants of the Post-IPO Share Option Scheme
Our Board may, at its discretion, offer to grant an option to any director and
employee of our Company or any of our subsidiaries (including persons who are granted
options under the Post-IPO Share Option Scheme as an inducement to enter into
employment contracts with our Company and/or any of our subsidiaries but excluding the
Co-founders) to subscribe for such number of new Shares as our Board may determine at
an exercise price determined in accordance with paragraph (f) below.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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(c) Acceptance of an offer of options
An option shall be deemed to have been granted and accepted by the grantee and to
have taken effect when the duplicate offer document constituting acceptance of the option
duly signed by the grantee, together with a remittance in favor of our Company of
HK$1.00 by way of consideration for the grant thereof, is received by our Company on
or before the relevant acceptance date. Such remittance or payment shall in no
circumstances be refundable. Any offer to grant an option to subscribe for Shares may be
accepted in respect of less than the number of Shares for which it is offered provided that
it is accepted in respect of a board lot for dealing in Shares on the Stock Exchange or an
integral multiple thereof and such number is clearly stated in the duplicate offer document
constituting acceptance of the option. To the extent that the offer to grant an option is not
accepted by any prescribed acceptance date, it shall be deemed to have been irrevocably
declined.
Subject to paragraphs (l), (m), (n), (o) and (p), an option shall be exercised in whole
or in part and, other than where it is exercised to the full extent outstanding, shall be
exercised in integral multiples of such number of Shares as shall represent one board lot
for dealing in Shares on the Stock Exchange for the time being, by the grantee by giving
notice in writing to our Company stating that the option is thereby exercised and the
number of Shares in respect of which it is exercised. Each such notice must be
accompanied by a remittance or payment for the full amount of the exercise price for our
Shares in respect of which the notice is given. Within 21 days after receipt of the notice
and the remittance and, where appropriate, receipt of the certificate by the auditors to our
Company or the approved independent financial advisor as the case may be pursuant to
paragraph (r), our Company shall allot and issue the relevant number of Shares to the
grantee credited as fully paid and issue to the grantee certificates in respect of our Shares
so allotted.
The vesting period of any options shall not be less than 12 months. Options may be
subject to a shorter vesting period under any of the following circumstances:
(a) where the options are granted in assumption of, or in substitution or exchange
for, an award previously granted, or the right or obligation to make a future
award, in all cases by a company acquired by our Company or any of our
subsidiary or with which our Company or any of our subsidiary combines;
(b) where the Shares to be issued upon the exercise of such options are subject to
a minimum holding period of not less than 12 months and are delivered to an
eligible participant under his/her compensation arrangements with our
Company, including Shares delivered to a non-employee director in respect of
such non-employee director’s annual retainer;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 811 ---
(c) where the options are sign-on or make-whole grants to new eligible
participants;
(d) where the options are subject to performance-based vesting conditions;
(e) where the options are granted in batches for administrative or compliance
reasons;
(f) where the options shall vest evenly over a period of 12 months or more;
(g) where the options are subject to a total vesting and holding period of more than
12 months; or
(h) in cases of retirement, separation, retention arrangements, death, disability or
a change in control of our Company, our Board may accelerate the vesting of
the options at its sole discretion.
(d) Number of Shares available for grant
The maximum number of Shares in respect of which options and awards may be
granted under the Post-IPO Share Option Scheme and any other share schemes of our
Company must not in aggregate exceed 6% of the total number of Shares in issue
immediately following the completion of the Global Offering (without taking into account
the Shares which may be issued upon the exercise of the Over-allotment Option) (the
“Scheme Limit ”), being 204,406,365 Shares. Our Company may either issue new Shares
or transfer Treasury Shares to the relevant grantee to satisfy the awards upon exercise of
the options granted under the Post-IPO Share Option Scheme. As of the date on which any
proposed grant of options is offered in writing to an eligible participant (which must be
a Business Day) under the Post-IPO Share Option Scheme, the available number of Shares
in respect of which options may be granted is the Scheme Limit less the aggregate of the
following:
(i) the number of Shares which would be issued (including Treasury Shares which
would be transferred) upon the exercise in full of the options under the
Post-IPO Share Option Scheme or any other share schemes of our Company or
pursuant to any awards granted under any other share schemes of our Company
but not canceled or exercised;
(ii) the number of Shares which have been issued (including Treasury Shares
which have been transferred) upon the exercise of any options under the
Post-IPO Share Option Scheme or under any other share schemes of our
Company or pursuant to any awards granted under any other share schemes of
our Company; and
(iii) the number of those Shares which were the subject of options or awards which
had been granted and accepted under the Post-IPO Share Option Scheme or any
other share schemes of our Company but subsequently canceled.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 812 ---
Subject to the approval of our Shareholders in general meeting in compliance with
Rules 17.03C(1) and 17.03C(2) of the Listing Rules and/or such other requirements
prescribed under the Listing Rules from time to time, our Board may refresh the Scheme
Limit from time to time to 10% of the number of Shares in issue (excluding Treasury
Shares) (the “ New Scheme Limit ”) as of the date of the approval by our Shareholders in
general meeting (the “ New Approval Date ”). Any refreshment within any three-year
period from the date of our Shareholders’ approval for the last refreshment (or the
adoption of the Post-IPO Share Option Scheme) must be approved by our Shareholders
subject to the following provisions:
(i) any Controlling Shareholders and their associates (or if there is no Controlling
Shareholder, Directors (excluding independent non-executive Directors) and
the chief executive of our Company and their respective associates) abstaining
from voting in favor of the relevant resolution at the general meeting of our
Company; and
(ii) our Company must comply with the requirements under Rules 13.39(6) and
(7), 13.40, 13.41 and 13.42 of the Listing Rules,
and thereafter, as of the date on which any proposed grant of options is made under the
Post-IPO Share Option Scheme, the available number of Shares in respect of which
options may be granted is the New Scheme Limit less the aggregate of the following:
(A) the number of Shares which would be issued (including Treasury Shares which
would be transferred) upon the exercise in full of the options under the
Post-IPO Share Option Scheme or any other share schemes of our Company or
pursuant to any awards granted under any other share schemes of our Company
granted on or after the New Approval Date but not canceled or exercised;
(B) the number of Shares which have been issued (including Treasury Shares
which have been transferred) upon the exercise of any options under the
Post-IPO Share Option Scheme or any other share schemes of our Company or
pursuant to any awards granted under any other share schemes of our Company
granted on or after the New Approval Date; and
(C) the number of those Shares which were the subject of options or awards which
had been granted on or after the New Approval Date and accepted under the
Post-IPO Share Option Scheme or any other share schemes of our Company
but subsequently canceled.
Subject to the approval of our Shareholders in general meeting in compliance with
Rule 17.03C(3) of the Listing Rules and/or such other requirements as prescribed under
the Listing Rules from time to time, our Board may grant options exceeding the Scheme
Limit to eligible participants specifically identified by our Board.
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--- page 813 ---
The Scheme Limit shall be adjusted, in such manner as the auditors of our Company
or an approved independent financial advisor shall certify to be appropriate, fair and
reasonable in the event of any alteration in the capital structure of our Company in
accordance with paragraph (r) below whether by way of capitalization issue, rights issue,
sub-division or consolidation of shares or reduction of the share capital of our Company.
(e) Maximum number of options to any one individual
Our Board shall, subject to and in accordance with the provisions of the Post-IPO
Share Option Scheme and the Listing Rules, be entitled to but shall not be bound, at any
time on any Business Day during the Post-IPO Share Option Scheme Period (as defined
in paragraph (j) below) offer to grant an option to any eligible participant whom our
Board may in its absolute discretion select and subject to such conditions (including,
without limitation, the vesting period and/or any performance targets as assessed in
accordance with the performance measures set out in paragraph (k) below during a
specified performance period which must be achieved before an option can be exercised)
as it may think fit.
If our Board determines to offer options under the Post-IPO Share Option Scheme
to an eligible participant which, when aggregated with any Shares issued or to be issued
in respect of all options or awards granted to that person (excluding any options or awards
lapsed in accordance with the terms of the relevant schemes) under the Post-IPO Share
Option Scheme and the other share schemes of our Company in any 12-month period up
to and including the date of such offer, exceed 1% of the number of Shares in issue
(excluding Treasury Shares) on the Offer Date:
(i) the grant shall be subject to (a) the issue of a circular by our Company to our
Shareholders which shall comply with Rules 17.03D and 17.06 of the Listing
Rules and/or such other requirements as prescribed under the Listing Rules
from time to time; and (b) the approval of our Shareholders in general meeting
and/or such other requirements prescribed under the Listing Rules from time to
time with such participant and his/her close associates (or his/her associates if
the eligible participant is a connected person) abstaining from voting; and
(ii) unless provided otherwise in the Listing Rules, the date of the Board meeting
at which our Board resolves to grant the proposed options to such participant
shall be taken as the date of grant for the purpose of calculating the
subscription price of our Shares.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 814 ---
Our Board shall forward to such participant an offer document in such form as our
Board may from time to time determine (or, alternatively, documents accompanying the
offer document which state), among others:
(A) the eligible participant’s name, address and occupation;
(B) the date on which the grant of options is made;
(C) the date upon which an offer for an option must be accepted;
(D) the date upon which an option is deemed to be granted and accepted in
accordance with paragraph (c) above;
(E) the number of Shares in respect of which the option is offered;
(F) the subscription price and the manner of payment of such price for our Shares
on and in consequence of the exercise of the option;
(G) the date of expiry of the option as may be determined by our Board;
(H) the method of acceptance of the option which shall, unless our Board otherwise
determines, be as set out in paragraph (c) above; and
(I) such other terms and conditions (including, without limitation, the vesting
period and/or any performance targets as assessed in accordance with the
performance measures set out in paragraph (k) below during a specified
performance period which must be achieved before the option can be
exercised) relating to the offer of the option which in the opinion of our Board
are fair and reasonable but not being inconsistent with the Post-IPO Share
Option Scheme and the Listing Rules.
(f) Price of Shares
Subject to any adjustments made as described in paragraph (r) below, the
subscription price of a Share in respect of any particular option granted under the
Post-IPO Share Option Scheme shall be such price as our Board in its absolute discretion
shall determine, save that such price must be at least the higher of:
(i) the closing price of our Shares as stated in the Stock Exchange’s daily
quotations sheet on the date of grant, which must be a business day; and
(ii) the average closing price of our Shares as stated in the Stock Exchange’s daily
quotations sheets for the five Business Days immediately preceding the date on
which the grant of options is made.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 815 ---
(g) Granting options to a director, chief executive or substantial shareholder of our
Company or any of their respective associates
Any grant of options to a director, chief executive or substantial shareholder (as
defined in the Listing Rules) of our Company or any of their respective associates (as
defined in the Listing Rules) is required to be approved by the independent non-executive
Directors (excluding any independent non-executive Director who is the grantee of the
options).
If our Board proposes to grant options to a substantial shareholder or any
independent non-executive Director or their respective associates (as defined in the
Listing Rules) which will result in the number of Shares issued and to be issued in respect
of all options and awards granted to such person under the Post-IPO Share Option Scheme
or other share schemes of our Company (excluding any options and awards lapsed in
accordance with the terms of such schemes) in the 12-month period up to and including
the date on which the grant is made representing in aggregate over 0.1%, or such other
percentage as may be from time to time provided under the Listing Rules, of our Shares
in issue (excluding Treasury Shares) on such date on which the grant is made, such further
grant of options will be subject to, in addition to the abovementioned approval of the
independent non-executive Directors, the approval of our Shareholders in general meeting
in accordance with Rule 17.04(4) of the Listing Rules and/or such other requirements
prescribed under the Listing Rules from time to time. Our Company must also send a
circular to our Shareholders, which shall contain the following information:
(i) the details of the number and terms (including the information required under
Rules 17.03(5) to 17.03(10) and Rule 17.03(19) of the Listing Rules) of the
options to be granted to each selected participant, which must be fixed before
our Shareholders’ meeting, and the date on which the grant is made. For the
purpose of calculating the exercise price of the options to be granted under
Rule 17.03E of the Listing Rules, the date of the Board meeting at which our
Board proposes to grant the proposed options to such participant is to be taken
as the date of grant;
(ii) the views of the independent non-executive Directors (excluding any
independent non-executive Director who is the grantee of the options) as to
whether the terms of the grant are fair and reasonable and whether such grant
is in the interests of our Company and our Shareholders as a whole, and their
recommendation to the independent Shareholders as to voting;
(iii) the information required under Rule 17.02(2)(c) of the Listing Rules; and
(iv) the information required under Rule 2.17 of the Listing Rules.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 816 ---
(h) Restrictions on the time of grant of options
A grant of options shall not be made after inside information has come to the
knowledge of our Company until it has announced such inside information pursuant to the
requirements of the Listing Rules and Part XIV A of the SFO. In particular, no options may
be granted during the period commencing 30 days immediately preceding the earlier of:
(i) the date of the Board meeting (as such date is first notified to the Stock
Exchange in accordance with the Listing Rules) for the approval of our annual
results or our results for half-year, quarterly or any other interim period
(whether or not required under the Listing Rules); and
(ii) the deadline for our Company to publish an announcement of our annual
results or our results for half-year, quarterly or any other interim period
(whether or not required under the Listing Rules),
and ending on the date of actual publication of the results for such year, half-year,
quarterly or interim period (as the case may be) and where an option is granted to a
Director, no options shall be granted:
(A) during the period of 60 days immediately preceding the publication date of our
annual results or, if shorter, the period from the end of the relevant financial
year up to the publication date of the results; and
(B) during the period of 30 days immediately preceding the publication date of our
quarterly results (if any) and half-year results or, if shorter, the period from the
end of the relevant quarterly or half-year period up to the publication date of
the results.
(i) Rights are personal to grantee
Save for a transfer to a vehicle (such as a trust or a private company) for the benefit
of the grantee and any family members of such grantee (including for estate planning or
tax planning purposes) that would continue to meet the purpose of the Post-IPO Share
Option Scheme and comply with other requirements of the Listing Rules, in which case
a waiver must be obtained from the Stock Exchange, an option and offer to grant an
option is personal to the grantee and shall not be transferrable or assignable. No grantee
shall in any way sell, transfer, charge, mortgage, encumber or create any interest (legal
or beneficial) in favor of any third party over or in relation to any option held by him/her
or any offer relating to the grant of an option made to him/her or attempt so to do (save
that the grantee may nominate a nominee in whose name our Shares issued pursuant to
the Post-IPO Share Option Scheme may be registered). Any breach of the foregoing shall
entitle our Company to cancel any outstanding options or any part thereof granted to such
grantee.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 817 ---
(j) Time of exercise of option and duration of the Post-IPO Share Option Scheme
An option may be exercised in accordance with the terms of the Post-IPO Share
Option Scheme at any time after the date upon which the option is deemed to be granted
and accepted and prior to the expiry of five years from that date. The period during which
an option may be exercised will be determined by our Board in its absolute discretion,
save that no option may be exercised more than five years after it has been granted. No
option may be granted more than five years after the Listing Date. Subject to earlier
termination by our Company in general meeting or by our Board, the Post-IPO Share
Option Scheme shall be valid and effective for a period of five years from the Listing
Date (the “ Post-IPO Share Option Scheme Period ”).
(k) Performance target
A grantee may be required to achieve any performance targets as our Board may then
specify in the grant before any options granted under the Post-IPO Share Option Scheme
can be exercised. The performance targets shall be assessed in accordance with any one
or more of the following corporate-wide or subsidiary, division, operating unit, line of
business, project, geographical or individual performance measures during a specified
performance period: cash flow; earnings; earnings per share; market value added or
economic value added; profits; return on assets; return on equity; return on investment;
sales; revenue; share price; total shareholders’ return; customer satisfaction metrics; and
such other goals as our Board may determine from time to time. Each goal may be
expressed on an absolute and/or relative basis, may be based on or otherwise employ
comparisons based on internal targets, the past performance of our Company and/or the
past or current performance of other companies, and in the case of earnings-based
measures, may use or employ comparisons relating to capital, shareholders’ equity and/or
shares outstanding, investments or to assets or net assets. Our Board may, in its sole
discretion, amend or adjust the performance measures and establish any special rules and
conditions to which the performance measures shall be subject at any time.
(l) Rights on ceasing employment or death
If the grantee of an option ceases to be an employee of our Company or any of our
subsidiaries:
(i) by any reason other than death, ill-health, injury, disability or termination of
his/her employment on the grounds specified in paragraph (m) below, the
grantee may exercise the option up to the entitlement of the grantee as of the
date of cessation (to the extent not already exercised) within a period of one
month from such cessation, which date shall be the last actual working day
with our Company or the relevant subsidiary whether salary is paid in lieu of
notice or not; or
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 818 ---
(ii) by reason of death, ill-health, injury or disability, his/her personal
representative(s) may exercise the option within a period of 12 months from
the date of cessation of being an eligible participant or death to exercise the
option in full (to the extent not already exercised), failing which it will lapse.
(m) Rights on dismissal
If the grantee of an option ceases to be an employee of our Company or any of our
subsidiaries on the grounds that he/she has been guilty of serious misconduct, or in
relation to an employee of our Group (if so determined by our Board) on any other ground
on which an employee would be entitled to terminate his/her employment at common law
or pursuant to any applicable laws or under the grantee’s service contract with our Group,
or has been convicted of any criminal offense involving his/her integrity or honesty,
his/her option will lapse and not be exercisable after the date of termination of his/her
employment.
(n) Rights on takeover
If a general offer is made to all of our Shareholders (or all such Shareholders other
than the offeror and/or any person controlled by the offeror and/or any person acting in
concert with the offeror (as defined in the Takeovers Code)) and such offer becomes or
is declared unconditional during the option period of the relevant option, the grantee of
an option shall be entitled to exercise the option in full (to the extent not already
exercised) at any time within 14 days after the date on which the offer becomes or is
declared unconditional.
(o) Rights on winding-up
In the event a notice is given by our Company to our members to convene a general
meeting for the purposes of considering, and if thought fit, approving a resolution to
voluntarily wind up our Company, our Company shall forthwith give notice thereof to all
grantees and thereupon, each grantee (or his/her legal personal representative(s)) shall be
entitled to exercise all or any of his/her options (to the extent not already exercised) at
any time not later than two business days prior to the proposed general meeting of our
Company referred to above by giving notice in writing to our Company, accompanied by
a remittance or payment for the full amount of the aggregate subscription price for our
Shares in respect of which the notice is given, whereupon our Company shall as soon as
possible and, in any event, no later than the business day immediately prior to the date
of the proposed general meeting, allot the relevant Shares to the grantee credited as fully
paid and register the grantee as holder thereof.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 819 ---
(p) Rights on compromise or arrangement between our Company and our members or
creditors
If a compromise or arrangement between our Company and our members or
creditors is proposed for the purposes of a scheme for the reconstruction of our Company
or its amalgamation with any other company or companies, our Company shall give notice
to all the grantees of the options on the same day as it gives notice of the meeting to its
members or creditors summoning the meeting to consider such a scheme or arrangement
and any grantee may by notice in writing to our Company accompanied by a remittance
or payment for the full amount of the aggregate subscription price for our Shares in
respect of which the notice is given (such notice to be received by our Company not later
than two business days prior to the proposed meeting), exercise the option to its full
extent or to the extent specified in the notice and our Company shall as soon as possible
and in any event no later than the Business Day immediately prior to the date of the
proposed meeting, issue such number of Shares to the grantee which falls to be issued on
such exercise of the option credited as fully paid and register the grantee as holder
thereof.
With effect from the date of such meeting, the rights of all grantees to exercise their
respective options shall forthwith be suspended. Upon such compromise or arrangement
becoming effective, all options shall, to the extent that they have not been exercised, lapse
and determine. If for any reason such compromise or arrangement does not become
effective and is terminated or lapses, the rights of grantees to exercise their respective
options shall with effect from such termination be restored in full but only upon the extent
not already exercised and shall become exercisable as if such compromise or arrangement
had not been proposed by our Company.
(q) Ranking of Shares
Our Shares to be issued upon the exercise of an option will not carry voting,
dividend or other rights until completion of the registration of the grantee (or any other
person nominated by the grantee) as the holder thereof. Subject to the aforesaid, Shares
to be issued upon the exercise of options, subject to the provisions of the Articles of
Association, will carry the same right in all respects and shall have the same voting,
dividend, transfer and other rights, including those arising on liquidation as attached to
the other fully-paid Shares in issue on the date of issue and rights in respect of any
dividend or other distributions paid or made on or after the date of issue. For the
avoidance of doubt, Shares issued upon the exercise of an option shall not be entitled to
any rights attaching to Shares by reference to a record date preceding the date of issuance.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 820 ---
(r) Effect of alterations to capital
In the event of any alteration in the capital structure of our Company whilst any
option may become or remains exercisable, whether by way of capitalization issue, rights
issue, consolidation, sub-division or reduction of share capital of our Company, or
otherwise howsoever, such corresponding alterations (if any) shall be made in the number
of Shares subject to any outstanding options and/or the subscription price per Share of
each outstanding option as the auditors of our Company or an approved independent
financial advisor shall at the request of our Company or any grantee, certify in writing
either generally or as regards any particular grantee to be in their opinion fair and
reasonable, provided that any such alterations shall be made on the basis that a grantee
shall have the same proportion of the equity capital of our Company (as interpreted in
accordance with the supplementary guidance on Rule 17.03(13) and the Note immediately
after the rule attached to the Frequently Asked Question No. 072-2020 issued by the Stock
Exchange on November 6, 2020 and any further guidance and interpretation of the Listing
Rules issued by the Stock Exchange from time to time and/or such other requirement
prescribed under the Listing Rules from time to time), rounded to the nearest whole
Share, as that to which he/she was entitled to subscribe had he/she exercised all the
options held by him/her immediately before such adjustments and the aggregate exercise
price payable by a grantee on the full exercise of any option shall remain as nearly as
possible the same as (but shall not be greater than) it was before such event and that no
such alterations shall be made if the effect of such alterations would be to enable a Share
to be issued at less than its nominal value. The issue of securities as consideration in a
transaction is not to be regarded as a circumstance requiring any such alterations. The
capacity of the auditors of our Company or the approved independent financial advisor,
as the case may be, in this paragraph is that of experts and not arbitrators and their
certificate shall, in absence of manifest error, be final and conclusive and binding on our
Company and the grantees.
(s) Expiry of option
An option shall lapse automatically and not be exercisable (to the extent not already
exercised) on the earliest of:
(i) the date of expiry of the option as may be determined by our Board;
(ii) the expiry of any of the periods referred to in paragraphs (l), (m), (n), (o) or
(p) above;
(iii) the date on which the scheme of arrangement of our Company referred to in
paragraph (p) above becomes effective;
(iv) subject to paragraph (o) above, the date of commencement of the winding-up
of our Company;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 821 ---
(v) the date on which the grantee ceases to be an eligible participant by reason of
such grantee’s resignation from the employment with our Company or any of
our subsidiaries or the termination of his/her employment or contract on any
one or more of the grounds that he/she has been guilty of serious misconduct,
or has been convicted of any criminal offense involving his/her integrity or
honesty, or in relation to an employee of our Group (if so determined by our
Board), or has been insolvent, bankrupt or has made compositions with his
creditors generally or any other ground as determined by our Board that would
warrant the termination of his/her employment at common law or pursuant to
any applicable laws or under the grantee’s service contract with our Group. A
resolution of our Board or the board of our relevant subsidiary to the effect that
the employment of a grantee has or has not been terminated on one or more of
the grounds specified in this paragraph shall be conclusive; or
(vi) the date on which our Board shall exercise our Company’s right to cancel the
option at any time after the grantee commits a breach of paragraph (i) above
or the options are canceled in accordance with paragraph (u) below.
Save as provided above in this paragraph (s), no options or shares issued upon the
exercise of any options under the Post-IPO Share Option Scheme are subject to any
clawback mechanism.
(t) Alteration of the Post-IPO Share Option Scheme
The Post-IPO Share Option Scheme may be altered in any respect by resolution of
our Board except that:
(i) any change to the terms of options granted to a grantee must be approved by
our Board, the Remuneration Committee, the independent non-executive
Directors and/or our Shareholders (as the case may be) if the initial grant of the
options was approved by our Board, the Remuneration Committee, the
independent non-executive Directors and/or our Shareholders (as the case may
be) (except any changes which take effect automatically under the terms of the
Post-IPO Share Option Scheme); and
(ii) any alterations to the terms and conditions of the Post-IPO Share Option
Scheme which are of a material nature or any alterations to the provisions
relating to the matters set out in Rule 17.03 of the Listing Rules to the
advantage of the eligible participants or any change to the authority of the
Directors or the administrators of the Post-IPO Share Option Scheme to alter
the terms of the Post-IPO Share Option Scheme must be approved by our
Shareholders in general meeting.
The amended terms of the Post-IPO Share Option Scheme shall still comply with
Chapter 17 of the Listing Rules.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-53 –


--- page 822 ---
(u) Cancelation of options
Subject to paragraph (i) above, any cancelation of options granted but not exercised
must be approved by the grantees of the relevant options in writing. For the avoidance of
doubt, such approval is not required in the event any option is canceled pursuant to
paragraph (m) above.
(v) Termination of the Post-IPO Share Option Scheme
Our Company may by resolution in general meeting or our Board at any time
terminate the Post-IPO Share Option Scheme and in such event no further option shall be
offered but the provisions of the Post-IPO Share Option Scheme shall remain in force to
the extent necessary to give effect to the exercise of any option granted prior thereto or
otherwise as may be required in accordance with the provisions of the Post-IPO Share
Option Scheme. Options granted prior to such termination but not yet exercised at the
time of termination shall continue to be valid and exercisable in accordance with the
Post-IPO Share Option Scheme.
(w) Administration of our Board
The Post-IPO Share Option Scheme shall be subject to the administration of our
Board whose decision as to all matters arising in relation to the Post-IPO Share Option
Scheme or its interpretation or effect (save as otherwise provided herein) shall be final
and binding on all parties.
(x) Conditions of the Post-IPO Share Option Scheme
The Post-IPO Share Option Scheme shall take effect subject to and is conditional on:
(i) the passing of the necessary resolutions by our Shareholders to approve and
adopt the rules of the Post-IPO Share Option Scheme;
(ii) the Stock Exchange granting the approval for the listing of, and permission to
deal in, our Shares which may fall to be issued pursuant to the exercise of
options to be granted under the Post-IPO Share Option Scheme;
(iii) the obligations of the Underwriters under the Underwriting Agreements
becoming unconditional (including, if relevant, as a result of the waiver(s) of
any such condition(s)) by the Sole Sponsor and the Overall Coordinators (for
themselves and on behalf of the Underwriters) and not being terminated in
accordance with the terms of the Underwriting Agreements or otherwise; and
(iv) the commencement of dealings in our Shares on the Stock Exchange.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-54 –


--- page 823 ---
If the conditions in this paragraph (x) are not satisfied within twelve calendar
months from the adoption date:
(A) the Post-IPO Share Option Scheme shall forthwith determine;
(B) any award granted or agreed to be granted pursuant to the Post-IPO Share
Option Scheme and any offer of such a grant shall be of no effect; and
(C) no person shall be entitled to any rights or benefits or be under any obligations
under or in respect of the Post-IPO Share Option Scheme or any award granted
thereunder.
(y) Disclosure in annual and interim reports
Our Company will disclose details of the Post-IPO Share Option Scheme in our
annual reports and interim reports including the number of options, the date on which the
offer of any grant is made, exercise price, exercise period, vesting period and other
information as prescribed under the Listing Rules from time to time during the financial
year/period in the annual/interim reports in accordance with the Listing Rules in force
from time to time.
(z) Present status of the Post-IPO Share Option Scheme
As of the Latest Practicable Date, no option had been granted or agreed to be granted
under the Post-IPO Share Option Scheme.
3. Post-IPO RSU Scheme
The following is a summary of the principal terms of the Post-IPO RSU Scheme
conditionally adopted by our Company pursuant to the resolutions of our then Shareholders
passed on May 28, 2024.
(a) Purpose of the Post-IPO RSU Scheme
The Post-IPO RSU Scheme is a share incentive scheme prepared in accordance with
Chapter 17 of the Listing Rules and is established to recognize and acknowledge their
contributions or potential contributions to our Group. The Post-IPO RSU Scheme will
provide the eligible participants an opportunity to have a personal stake in our Company
with the view to achieving the following objectives:
(i) motivate the eligible participants to optimize their performance efficiency for
the benefit of our Group; and
(ii) attract and retain or otherwise maintain an on-going business relationship with
the eligible participants whose contributions are or will be beneficial to the
long-term growth of our Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 824 ---
(b) Eligibility
The eligible participants under the Post-IPO RSU Scheme includes any director and
employee of our Company or any of our subsidiaries (including persons who are granted
awards under the Post-IPO RSU Scheme as an inducement to enter into employment
contracts with our Company or any of our subsidiaries but excluding the Co-founders).
(c) Administration
The Post-IPO RSU Scheme shall be subject to the administration of our Board and
the decision of our Board shall be final and binding on all parties. Our Board shall have
the right to (i) interpret and construe the provisions of the Post-IPO RSU Scheme,
(ii) determine the persons who will be granted an award of RSUs under the Post-IPO RSU
Scheme, the terms on which awards are granted and when the awards granted pursuant to
the Post-IPO RSU Scheme may vest, (iii) make such appropriate and equitable
adjustments to the terms of the awards granted under the Post-IPO RSU Scheme as it
deems necessary, (iv) appoint one or more professionals and contractors which are
Independent Third Parties to assist in the administration of the Post-IPO RSU Scheme and
delegate such powers and/or functions relating to the administration of the Post-IPO RSU
Scheme as our Board deems appropriate, and (v) make such other decisions or
determinations as it shall deem appropriate in the administration of the Post-IPO RSU
Scheme.
(d) Grant of awards and acceptance of a grant of awards
On and subject to the terms of the Post-IPO RSU Scheme and the terms and
conditions that our Board imposes pursuant to paragraph (c) above, our Board shall be
entitled at any time during the life of the Post-IPO RSU Scheme to grant an award to any
eligible participant, as our Board may in its absolute discretion determine. Awards may
be granted on such terms and conditions (e.g. by linking the vesting of their awards to the
attainment of performance targets as assessed in accordance with the performance
measures set out in paragraph (l) below during a specified performance period) as our
Board may determine, provided such terms and conditions shall not be inconsistent with
any other terms and conditions of the Post-IPO RSU Scheme.
A grant shall be made to an eligible participant by any notice in such form as our
Board may from time to time determine. The participant to whom a grant is made shall
undertake to hold the award on the terms on which it is granted and be bound by the
provisions of the Post-IPO RSU Scheme. Such award shall remain open for acceptance by
the participant for a period to be determined by our Board, provided that no such grant
shall be open for acceptance after the lapse of the Post-IPO RSU Scheme Period (as
defined in paragraph (k) below) or after the Post-IPO RSU Scheme has been terminated
in accordance with the provisions thereof. To the extent that the award is not accepted
within the period determined by our Board, it will be deemed to have been irrevocably
declined and shall immediately lapse.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-56 –


--- page 825 ---
The notice of grant shall, among other things, address the following matters:
(i) the eligible participant’s name, address and occupation;
(ii) the date on which the grant of an award is made to an eligible participant, being
the date of the notice of grant;
(iii) the manner of acceptance of the award(s) specified in the notice of grant;
(iv) the last date for acceptance by the eligible participant;
(v) the number of Shares underlying the award(s);
(vi) the vesting schedule and vesting condition (if any); and
(vii) such other terms and conditions (including, without limitation, any
performance targets as assessed in accordance with the performance measures
set out in paragraph (l) below during a specified performance period which
must be achieved before the award can be exercised) relating to the offer of
grant of the award which in the opinion of our Board are fair and reasonable
but not being inconsistent with the Post-IPO RSU Scheme and the Listing
Rules.
If the eligible participant accepts the offer of grant of the award(s), he/she is
required to sign the acceptance notice attached in the notice of grant and return it to our
Company within the period specified and in a manner prescribed in the notice of grant.
Upon the receipt from the eligible participant of a duly executed acceptance notice, the
award(s) is granted to such eligible participant, who becomes a grantee in the Post-IPO
RSU Scheme.
No grant shall be made to, nor shall any grant be capable of acceptance by, any
eligible participant at a time when the eligible participant would or might be prohibited
from dealing in the Shares by any applicable rules, regulations or laws.
(e) Maximum number of options to any one individual
If our Board determines to grant awards to an eligible participant which, when
aggregated with any Shares issued or to be issued in respect of all options or awards
granted to that person (excluding any options or awards lapsed in accordance with the
terms of the relevant schemes) under the Post-IPO RSU Scheme and the other share
schemes of our Company in any 12-month period up to and including the date of grant,
exceed 1% of the number of Shares in issue (excluding Treasury Shares) on the date of
such grant, that grant shall be subject to (i) the issue of a circular by our Company to the
Shareholders which shall comply with Rules 17.03D and 17.06 of the Listing Rules and/or
such other requirements as prescribed under the Listing Rules from time to time; and (ii)
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-57 –


--- page 826 ---
the approval of the Shareholders in general meeting and/or such other requirements
prescribed under the Listing Rules from time to time with such participant and his/her
close associates (or his/her associates if the eligible participant is a connected person)
abstaining from voting.
(f) V esting
Our Board has the sole discretion to determine the vesting schedule and vesting
conditions (if any) for any grant of award(s) to any grantee, which may also be adjusted
and re-determined by our Board from time to time.
The vesting period for any awards shall not be less than 12 months. Awards may be
subject to a shorter vesting period under any of the following circumstances:
(i) where the awards are granted in assumption of, or in substitution or exchange
for, an award previously granted, or the right or obligation to make a future
award, in all cases by a company acquired by our Group or with which our
Group combines;
(ii) where the Shares to be issued upon the vesting of such awards are subject to
a minimum holding period of not less than 12 months and are delivered to an
eligible participant under his/her compensation arrangements with our
Company, including Shares delivered to a non-employee Director in respect of
such non-employee Director’s annual retainer;
(iii) where the awards are sign-on or make-whole grants to new eligible
participants;
(iv) where the awards are subject to performance-based vesting conditions;
(v) where the awards are granted in batches for administrative or compliance
reasons;
(vi) where the awards shall vest evenly over a period of 12 months or more;
(vii) where the awards are subject to a total vesting and holding period of more than
12 months; or
(viii) in cases of retirement, separation, retention arrangements, death, disability or
a change in control of our Company, our Board may accelerate the vesting of
the awards at its sole discretion.
Upon fulfillment or waiver of the vesting period and vesting conditions (if any)
applicable to each of the grantees, a vesting notice will be sent to notify the grantee by
our Board by way of e-mail confirming (a) the extent to which the vesting period and
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-58 –


--- page 827 ---
vesting conditions (if any) have been fulfilled or waived and, (b) the number of Shares
(and, if so clearly specified in the notice of grant by our Board in its entire discretion, the
cash or non-cash income, dividends or distributions and/or the sale proceeds of non-cash
and non-scrip distributions in respect of these Shares) the grantee will receive.
The grantee may be required to execute or fulfill certain documents, after awards are
vested, as required by our Board (which may include, without limitation, a certification
to our Company that he has complied with all the terms and conditions set out in the
Post-IPO RSU Scheme and the notice of grant).
If the vesting conditions are not satisfied and no waiver of such condition is granted,
the award shall be canceled according to conditions as determined by our Board in its
absolute discretion.
In the event that the grantee fails to execute the required documents (if any) within
fourteen (14) days after receiving the vesting notice, the vested award(s) will lapse.
Upon receipt of the required documents within the specified time, our Board may
decide at its absolute discretion to:
(A) direct and procure the RSU Trustee (as defined in paragraph (k) below) to,
within a reasonable time, transfer the Shares underlying the awards (and, if
applicable, the cash or non-cash income, dividends or distributions and/or the
sale proceeds of non-cash and non-scrip distributions in respect of those
Shares) to the grantee which our Company has allotted and issued new Shares,
fully paid-up, or transferred Treasury Shares to the RSU Trustee or which the
RSU Trustee has either acquired by purchasing existing Shares or by receiving
existing Shares from any Shareholder, subject to the grantee paying all tax,
stamp duty, levies and charges applicable to such transfer to the RSU Trustee
or as the RSU Trustee directs; or
(B) pay, or direct and procure the RSU Trustee to, within a reasonable time, pay,
to the grantee in cash an amount which represents the value of the Shares
underlying the awards (and, if applicable, the cash or non-cash income,
dividends or distributions and/or the sale proceeds of non-cash and non-scrip
distributions in respect of those Shares) and after deduction or withholding of
any tax, levies, stamp duty and other charges applicable to the entitlement of
the grantee and the sale of any Shares to fund such payment and in relation
thereto the grantees shall be responsible for conducting all necessary filings,
registration or other administrative proceedings as required by applicable laws,
rules or regulations, including but not limited to foreign exchange registration,
for their awards.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-59 –


--- page 828 ---
Notwithstanding the foregoing, if any relevant parties of the Post-IPO RSU Scheme
would or might be prohibited from dealing in the Shares by the Listing Rules or by any
other applicable laws, regulations or rules within the period specified above, the date on
which the relevant Shares shall be allotted and issued or transferred (as the case may be)
to the grantee shall occur as soon as possible after the date when such dealing is permitted
by the Listing Rules or by any other applicable laws, regulations or rules.
The grantee shall be solely liable to pay all taxes and other levies that may be
assessed or assessable on any payments made by our Company hereunder and all
payments required to be made hereunder by our Company shall be subject to the
deduction or withholding of such amounts as our Board may reasonably determine is
necessary or desirable by reason of any liability to tax or obligation to account for tax or
loss of any relief from tax that may fall on our Group in respect of, or by reason of such
delivery of Shares underlying an award, and the grantee agrees to indemnify and keep our
Company (for itself and as for our subsidiaries) indemnified in respect of any such
liability, obligation or loss and accepts any claim in respect of such indemnity may be
satisfied by set-off against any sums due from our Group to such grantee from time to
time.
Rights on general offer by way of voluntary offer , takeover or otherwise
In the event a general offer by way of voluntary offer, takeover or otherwise
(other than by way of scheme of arrangement pursuant to “Rights on general offer
by way of scheme of arrangement” below) is made to all the Shareholders (or all
such Shareholders other than the offeror and/or any person controlled by the offeror
and/or any person acting in association or concert with the offeror) and such offer
becomes or is declared unconditional prior to the vesting date of any award, our
Board shall, prior to the offer becoming or being declared unconditional, determine
at its absolute discretion whether such award shall vest and the period within which
such award shall vest. If our Board determines that such award shall vest, it shall
notify the grantee that the award shall vest and the period within which such award
shall vest.
Rights on general offer by way of scheme of arrangement
In the event a general offer for Shares by way of scheme of arrangement is
made to all the Shareholders and has been approved by the necessary number of
shareholders at the requisite meetings prior to the vesting of any award, our Board
shall, prior to such meetings, determine at its absolute discretion whether such
award shall vest and the period within such award shall vest. If our Board
determines that such award shall vest, it shall notify the grantee that the award shall
vest and the period within which such award shall vest.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-60 –


--- page 829 ---
Rights on compromise or arrangement between our Company and our members or
creditors
In the event of a compromise or arrangement, other than a scheme of
arrangement contemplated in “Rights on general offer by way of scheme of
arrangement” above, between our Company and our members and/or creditors being
proposed in connection with a scheme for the reconstruction or amalgamation of our
Company, our Board shall determine at its discretion whether such award shall vest,
and the period when such award shall vest. If our Board determines that such award
shall vest, it shall notify the grantee that the RSU shall vest and the period within
which such award shall vest.
Rights on winding-up
In the event a notice is given by our Company to the Shareholders to convene
a Shareholders’ meeting for the purpose of considering and, if thought fit, approving
a resolution to voluntarily wind up our Company prior to the vesting date of any
award, our Board shall determine at its discretion whether such award shall vest, and
the period when such award shall vest and in the latter case, the unvested awards
must be vested and effected as soon as possible. If our Board determines that such
award shall vest, it shall notify the grantee that the award shall vest and the period
within which such award shall vest.
The Shares to be issued upon the vesting of awards granted pursuant to the
Post-IPO RSU Scheme shall be subject to all the provisions of the Memorandum and
the Articles for the time being in force and shall rank pari passu in all respects with
the existing fully paid Shares in issue on the date on which those Shares are issued.
Once the name of a eligible participant has been recorded in the register of members
of our Company, such participant shall be entitled to participate in all dividends or
other distributions of our Company.
(g) Number of Shares available for grant
No award shall be granted pursuant to the Post-IPO RSU Scheme if as a result of
such grant (assumed accepted), the aggregate number of Shares (being in a board lot or
an integral multiple thereof) underlying all grants made pursuant to the Post-IPO RSU
Scheme and any other share schemes of our Company (excluding the awards and the
awards that have lapsed or been canceled in accordance with the rules of the Post-IPO
RSU Scheme and other share schemes of our Company) will exceed the Scheme Limit,
i.e. 6% of the total number of Shares in issue immediately following the completion of
the Global Offering (without taking into account the shares which may be issued pursuant
to the exercise of the Over-allotment Option), being 204,406,365 Shares. Our Company
may seek to refresh the Scheme Limit in accordance with the Listing Rules. See “D. Share
Incentive Schemes—2. Post-IPO Share Option Scheme—(d) Number of Shares available
for grant” for details of refreshment of the Scheme Limit.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-61 –


--- page 830 ---
(h) Granting awards to a director, chief executive or substantial shareholder of our
Company or any of their respective associates
Subject to provisions of the Post-IPO RSU Scheme, if our Board determines to offer
to grant awards to a director, chief executive or substantial shareholder of our Company
or any of their respective associates, such grant shall be subject to the approval by the
independent non-executive Directors (and in the event that our Board offers to grant
awards to an independent non-executive Director, the vote of such independent
non-executive Director shall not be counted for the purposes of approving such grant).
If our Board determines to offer to grant awards to a Director (other than an
independent non-executive Director) or chief executive of our Company (or any of their
respective associates) and that grant would result in the number of Shares issued and to
be issued in respect of all awards granted to such person under the Post-IPO RSU Scheme
and the other share schemes (excluding any awards lapsed in accordance with the terms
of such schemes) in the 12-month period up to and including the date on which the grant
is made representing in aggregate over 0.1%, or such other percentage as may be from
time to time provided under the Listing Rules, of the Shares in issue (excluding Treasury
Shares) on the date on which the grant is made, such further grant shall be subject to, in
addition to the approval of the independent non-executive Directors as referred to under
this paragraph (h), the approval of the Shareholders in general meeting in accordance with
Rule 17.04(4) of the Listing Rules and/or such other requirements prescribed under the
Listing Rules from time to time.
If our Board determines to offer to grant awards to a substantial Shareholder or an
independent non-executive Director of our Company (or any of their respective
associates) and that grant would result in the number of Shares issued and to be issued
in respect of all options and awards granted to such person under the Post-IPO RSU
Scheme and the other share schemes (excluding any options and awards lapsed in
accordance with the terms of such schemes) in the 12-month period up to and including
the date on which the grant is made representing in aggregate over 0.1%, or such other
percentage as may be from time to time provided under the Listing Rules, of the Shares
in issue (excluding Treasury Shares) on the date on which the grant is made, such further
grant shall be subject to, in addition to the approval of the independent non-executive
Directors as referred to under this paragraph (h), the approval of the Shareholders in
general meeting in accordance with Rule 17.04(4) of the Listing Rules and/or such other
requirements prescribed under the Listing Rules from time to time.
In the circumstances described in this paragraph (h) which require the approval of
the Shareholders in general meeting, our Company must send a circular to the
Shareholders, which shall comply with Rule 17.04(5) of the Listing Rules and/or such
other requirements as prescribed under the Listing Rules from time to time.
Our Board may not grant any awards to any eligible participants in any of the
following circumstances:
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-62 –


--- page 831 ---
(i) the requisite approvals for that grant from any applicable regulatory authorities
have not been obtained;
(ii) the securities laws or regulations require that a prospectus or other offering
documents be issued in respect of the grant of the awards or in respect of the
Post-IPO RSU Scheme, unless our Board determines otherwise;
(iii) where granting the award would result in a breach by our Group or any of the
directors of any applicable securities laws, rules or regulations;
(iv) but for the relevant waivers from the Stock Exchange or approval of
Shareholders, where such grant of award would result in a breach of the limits
as prescribed in the Post-IPO RSU Scheme, or minimum public float
requirement as required under the Listing Rules, or would otherwise cause our
Company to issue Shares in excess of the permitted amount approved by the
Shareholders; or
(v) where an award is to be satisfied by way of issue of new Shares to the RSU
Trustee, in any circumstances that cause the total Shares issued or allotted to
connected persons (as defined under the Listing Rules) to be in excess of the
amount approved by the Shareholders;
and any such grant so made shall be null and void to the extent (and only to the extent)
that it falls within the circumstances above.
(i) Restrictions on the time of grant of awards
For so long as the Shares are listed on the Stock Exchange, our Board shall not grant
any award after inside information has come to the knowledge of our Company until it
has announced such inside information pursuant to the requirements of the Listing Rules
and the Inside Information Provisions of Part XIV A of the SFO. In particular, no award
shall be granted during the period commencing 30 days immediately preceding the earlier
of:
(i) the date of our Board meeting (as such date is first notified to the Stock
Exchange in accordance with the Listing Rules) for the approval of our annual
results or our Company’s results for half-year, quarterly or any other interim
period (whether or not required under the Listing Rules); and
(ii) the deadline for our Company to publish an announcement of our annual
results or our Company’s results for half-year, quarterly or any other interim
period (whether or not required under the Listing Rules),
and ending on the date of actual publication of the results for such year, half year,
quarterly or interim period (as the case may be).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-63 –


--- page 832 ---
Where the grant of awards is to a Director, no award shall be granted to the
Directors: (i) during the period of 60 days immediately preceding the publication date of
the annual results or, if shorter, the period from the end of the relevant financial year up
to the publication date of the results; and (ii) during the period of 30 days immediately
preceding the publication date of the quarterly results (if any) and half-year results or, if
shorter, the period from the end of the relevant quarterly or half-year period up to the
publication date of the results.
(j) Rights are personal to grantee and transferability
Save for a transfer to a vehicle (such as a trust or a private company) for the benefit
of the grantee and any family members of such grantee (including for estate planning or
tax planning purposes) that would continue to meet the purpose of the Post-IPO RSU
Scheme and comply with other requirements of the Listing Rules, in which case a waiver
must be obtained from the Stock Exchange, an award and an offer to grant an award shall
be personal to the grantee and shall not be transferable or assignable. No grantee shall in
any way sell, transfer, charge, mortgage, encumber or create any interest (legal or
beneficial) in favor of any third party over or in relation to any award held by him/her or
any offer relating to the grant of an award made to him/her or attempt to do so (save that
the grantee may nominate a nominee in whose name the Shares issued pursuant to the
Post-IPO RSU Scheme may be registered). Any breach of the foregoing shall entitle our
Company to cancel any unvested awards or any part thereof granted to such grantee.
Subject to this paragraph (j), an award shall be personal to the grantee and shall not
be assignable or transferable by the grantee provided that following the grantee’s death,
awards may be transferred by will or by the laws of testacy and distribution within a
period of 12 months (or such longer period as our Board may determine) from the date
of death to exercise the awards in full (to the extent not already exercised). The terms of
the Post-IPO RSU Scheme and the notice of grant shall be binding upon the executors,
administrators, heirs, successors and assigns of the grantee.
(k) Duration and administration of the Post-IPO RSU Scheme
Subject to paragraph (q) below and fulfillment of conditions in paragraph (r) below,
the Post-IPO RSU Scheme shall be valid and effective for the period of five (5) years
commencing on the Listing Date (the “ Post-IPO RSU Scheme Period ”), after which
period no further awards will be granted, but the provisions of the Post-IPO RSU Scheme
shall in all other respects remain in full force and effect to the extent necessary to give
effect to the awards granted prior thereto or otherwise as may be required in accordance
with the provisions of the Post-IPO RSU Scheme and the awards that are granted during
the Post-IPO RSU Scheme Period shall continue to be exercisable in accordance with the
Post-IPO RSU Scheme.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-64 –


--- page 833 ---
Our Company has appointed TMF Trust (HK) Limited (the “ RSU Trustee ”) to assist
with the administration and vesting of the awards granted pursuant to the Post-IPO RSU
Scheme and to hold Shares underlying the awards as applicable. Our Company may (i)
issue Shares or transfer Treasury Shares to the RSU Trustee which will be used to satisfy
the awards upon exercise and/or (ii) direct and procure the RSU Trustee to receive
existing Shares from any Shareholder or purchase existing Shares (through on-market
transactions on Stock Exchange in accordance with the Listing Rules and any other
applicable laws and regulations) at the prevailing market price to satisfy the awards upon
exercise. Our Company shall procure that sufficient funds are provided to the RSU
Trustee by whatever means as our Board may in its absolute discretion determine to
enable the RSU Trustee to satisfy its obligations in connection with the administration of
the Post-IPO RSU Scheme.
No instructions may be given by a grantee to the RSU Trustee in respect of the award
or any other property which the RSU Trustee holds on trust and the RSU Trustee shall not
follow instructions given by a grantee to the RSU Trustee in respect of the award or any
other property which the RSU Trustee holds on trust.
Neither any grantee nor the RSU Trustee may exercise any voting rights in respect
of any Shares underlying the awards that have not yet vested. The RSU Trustee holding
Shares underlying the unvested awards, whether directly or indirectly, shall abstain from
voting on matters that require Shareholders’ approval under the Listing Rules, unless
otherwise required by law to vote in accordance with the beneficial owner’s direction and
such direction is given.
(l) Performance target
A grantee may be required to achieve any performance targets as our Board may then
specify in the grant before any options granted under the Post-IPO RSU Scheme can be
exercised. The performance targets shall be assessed in accordance with any one or more
of the following corporate-wide or subsidiary, division, operating unit, line of business,
project, geographical or individual performance measures during a specified performance
period: cash flow; earnings; earnings per share; market value added or economic value
added; profits; return on assets; return on equity; return on investment; sales; revenue;
share price; total shareholders’ return; customer satisfaction metrics; and such other goals
as our Board may determine from time to time. Each goal may be expressed on an
absolute and/or relative basis, may be based on or otherwise employ comparisons based
on internal targets, the past performance of our Company and/or the past or current
performance of other companies, and in the case of earnings-based measures, may use or
employ comparisons relating to capital, shareholders’ equity and/or shares outstanding,
investments or to assets or net assets. Our Board may, in its sole discretion, amend or
adjust the performance measures and establish any special rules and conditions to which
the performance measures shall be subject at any time.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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(m) Ranking of Shares
The awards do not carry any right to vote at general meetings of our Company. No
grantee shall enjoy any of the rights of a Shareholder by virtue of the grant of an award
pursuant to the Post-IPO RSU Scheme, unless and until such Shares underlying the award
are actually issued or transferred (as the case may be) to the grantee upon the vesting of
the award and the grantee’s name has been entered in the register of members of our
Company as holder of such Shares. Unless otherwise specified by our Board in its entire
discretion in the notice of grant, the grantees do not have any rights to any cash or
non-cash income, dividends or distributions and/or the sale proceeds of non-cash and
non-scrip distributions from any Shares underlying an award.
(n) Effect of alterations to capital
In the event of an alteration in the capital structure of our Company whilst any
award has not vested by way of capitalization of profits or reserves, bonus issue, rights
issue, open offer, subdivision or consolidation of Shares, reduction of the share capital of
our Company or otherwise howsoever in accordance with legal requirements and
requirements of the Stock Exchange (other than an issue of Shares as consideration in
respect of a transaction to which our Group is a party or in connection with any share
option, restricted share or other equity incentive schemes of our Group or in the event of
any distribution of our Company’s capital assets to the Shareholders on a pro rata basis
(whether in cash or in specie) (other than dividends paid out of the net profits attributable
to the Shareholders for each financial year of our Company), such corresponding
alterations (if any) shall be made to the number or nominal amount of Shares subject to
the award so far as unvested as the auditors or an approved independent financial advisor
shall certify in writing, either generally or as regard any particular grantee, to have in
their opinion, fairly and reasonably satisfied the requirement that such adjustments give
a grantee the same proportion (or rights in respect of the same proportion) of the share
capital of our Company (excluding Treasury Shares) as that to which that grantee was
previously entitled, but that no such adjustments be made to the extent that a Share would
be issued at less than its nominal value. The capacity of the auditors or the approved
independent financial advisor in this paragraph (n) is that of experts and not of arbitrators
and their certification shall, in absence of manifest error, be final and binding on our
Company and the grantees. The costs of the auditors or the approved independent
financial advisor shall be borne by our Company.
(o) Lapse and cancellation
An unvested award shall be lapsed and canceled automatically upon the earliest of:
(i) the date of the termination of grantee’s employment or service by our Group
for cause or by reasons that the relevant subsidiary with which the grantee is
employed ceased to be a subsidiary of our Group; or
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(ii) the date on which the offer (or, as the case may be, revised offer) referred to
in “Rights on general offer by way of scheme of arrangement” of paragraph (f)
closes above; or
(iii) the record date for determining entitlements under the scheme of arrangement
referred to in “Rights on compromise or arrangement between our Company
and our members or creditors” of paragraph (f) above; or
(iv) the date of the commencement of the winding-up of our Company; or
(v) the date on which the grantee commits a breach of paragraph (j); or
(vi) the date on which it is no longer possible to satisfy any outstanding conditions
to vesting.
Our Board shall have the right to determine what constitutes cause, whether the
grantee’s employment has been terminated for cause, the effective date of such
termination and whether someone is a Competitor, and such determination by our Board
shall be final and conclusive. For the purpose of the Post-IPO RSU Scheme,
“Competitor ” means any governmental unit, corporation, partnership, joint venture,
trust, individual proprietorship, firm or other enterprise that carries on activities for
profit, and shall be deemed to include any affiliates of the aforementioned, that is engaged
in or in about to become engaged in any activity of any nature that competes with a
product, process, technique, procedure, device or service of our Group.
If the grantee’s employment or service with our Group is terminated for any reason
other than for cause (including by reason of resignation, retirement, death, disability or
non-renewal of the employment or service agreement upon its expiration for any reason
other than for cause), our Board shall determine at its absolute discretion and shall notify
the grantee whether any unvested award granted to such grantee shall vest and the period
within which such award shall vest. If our Board determines that such award or any part
thereof shall not vest, such award shall be canceled automatically with effect from the
date on which the grantee’s employment or service is terminated.
Subject to the Companies Act, the grantee shall return the Shares that he/she has
obtained as a result of the vesting of awards granted pursuant to the Post-IPO RSU
Scheme to the RSU Trustee, and shall not be entitled to sell, transfer or deal with the
Shares underlying the awards granted pursuant to the Post-IPO RSU Scheme, following
the occurrence of one of more of the following events:
(i) the grantee’s employment or service is terminated by our Company or any of
our subsidiaries for cause or any of the subsidiaries ceased to be a subsidiary
of our Group; or
(ii) the grantee either:
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(A) becomes an officer, director, employee, consultant, advisor, partner of or
stockholder or other proprietor owning more than 5% interest in any
Competitor; or
(B) knowingly performs any act that may confer a competitive benefit or
advantage upon any Competitor,
at any time before or within 12 months after the grantee’s employment is terminated by
our Company or any of our subsidiaries for any reason.
If the grantee sells, transfers or deals with the Shares in breach of this paragraph, the
grantee shall pay our Company the proceeds or consideration obtained as a result of such
breach upon demand by our Company.
Our Board may at any time cancel any unvested awards granted to a grantee subject
to consent by the grantee. Where our Company cancels unvested awards and makes a
grant of new awards to the same grantee, such grant may only be made with available
awards to the extent not yet granted (excluding the canceled awards) within the limits
prescribed by paragraph (g) above.
Notwithstanding the aforesaid in this paragraph (o), in each case, our Board may in
its absolute discretion decide that any award shall not be canceled or determine subject
to such conditions or limitations as our Board may decide.
(p) Alteration of the Post-IPO RSU Scheme
The Post-IPO RSU Scheme shall be subject to the administration of our Board in
accordance with the Scheme Rules. The terms and conditions of the Post-IPO RSU
Scheme and the regulations for the administration and operation of the Post-IPO RSU
Scheme (provided that the same are not inconsistent with the Post-IPO RSU Scheme and
the Listing Rules) may be altered in any respect by resolution of our Board except that:
(a) any change to the terms of awards granted to a grantee must be approved by
our Board, the Remuneration Committee, the independent non-executive
Directors and/or the Shareholders (as the case may be) if the initial grant of the
awards was approved by our Board, the Remuneration Committee, the
independent non-executive Directors and/or the Shareholders (as the case may
be) (except any changes which take effect automatically under the terms of the
Post-IPO RSU Scheme); and
(b) any alterations to the terms and conditions of the Post-IPO RSU Scheme which
are of a material nature or any alterations to the provisions relating to the
matters set out in Rule 17.03 of the Listing Rules to the advantage of the
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eligible participants or any change to the authority of the directors or the
administrators of the Post-IPO RSU Scheme to alter the terms of the Post-IPO
RSU Scheme must be approved by the Shareholders in general meeting,
provided that the amended terms of the Post-IPO RSU Scheme or the awards shall remain
in compliance with Chapter 17 of the Listing Rules and no alteration shall operate to
affect adversely the terms of issue of any awards granted or agreed to be granted prior to
such alteration or to reduce the proportion of the equity capital to which any person was
entitled pursuant to such award prior to such alteration except with:
(a) the consent in writing of grantees holding in aggregate unvested awards which
if exercised in full on the date immediately preceding that on which such
consent is obtained would entitle them to the issue of two-thirds in nominal
value of all Shares which would fall to be issued upon the exercise of all
unvested awards on that date; or
(b) the sanction of a resolution passed at a meeting of the grantees (being only
those grantees holding awards, all or any part of which is unvested as of the
time of the meeting at which the resolution is proposed) duly convened and
held and carried by a majority consisting of not less than two-thirds of the
votes cast upon a show of hands or if a poll is duly demanded, by a majority
consisting of not less than two-thirds of the votes cast on a poll.
Written notice of any alterations made in accordance with this paragraph (p) shall
be given to all grantees.
In respect of any meeting of grantees referred to in this paragraph (p), all the
provisions of the Articles as to general meetings of our Company shall mutatis mutandis
apply as though the unvested awards were a class of shares forming part of the capital of
our Company except that:
(a) not less than seven days’ notice of such meeting shall be given;
(b) a quorum at any such meeting shall be two grantees present in person or by
proxy and holding unvested awards entitling them to the issue of one-tenth in
nominal value of all Shares which would fall to be issued upon the exercise of
all unvested awards unless there is only one grantee holding all unvested
awards, in which case the quorum shall be one grantee;
(c) every grantee present in person or by proxy at any such meeting shall be
entitled on a show of hands to one vote, and on a poll, to one vote for each
Share to which he/she would be entitled upon exercise in full of his/her
unvested awards;
(d) any grantee present in person or by proxy may demand a poll; and
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(e) if any such meeting is adjourned for want of a quorum, such adjournment shall
be to such date and time, not being less than seven or more than fourteen days
thereafter, and to such place as may be appointed by the chairman of the
meeting. At any adjourned meeting those grantees who are then present in
person or by proxy shall form a quorum and at least seven days’ notice of any
adjourned meeting shall be given in the same manner as for an original meeting
and such notice shall state that those grantees who are then present in person
or by proxy shall form a quorum.
Our Board may delegate the authority to administer the Post-IPO RSU Scheme to
such committee or person(s) as it may see fit.
Our Board’s determinations under the Post-IPO RSU Scheme need not be uniform
and may be made by it selectively with respect to persons who receive, or are eligible to
receive, awards under it. If a Director is an eligible participant he/she may,
notwithstanding his/her own interest and subject to the Articles, vote on any Board
resolution concerning the Post-IPO RSU Scheme (other than his/her own participation in
it), and may retain awards under it.
(q) Termination
Our Company by ordinary resolution in general meeting or our Board may at any
time terminate the operation of the Post-IPO RSU Scheme and in such event no further
awards will be offered but in all other respects the provisions of the Post-IPO RSU
Scheme shall remain in full force and effect in respect of awards which are granted during
the life of the Post-IPO RSU Scheme and which remain unvested immediately prior to the
termination of the operation of the Post-IPO RSU Scheme.
Upon (a) the expiry of the Post-IPO RSU Scheme Period, or (b) the Post-IPO RSU
Scheme is terminated before the expiry of the Post-IPO RSU Scheme Period pursuant to
this paragraph (q), whichever is earlier, any Shares underlying the lapsed or unvested
awards held on trust by the RSU Trustee will be sold in the market, following which the
RSU Trustee will remit all cash and net proceeds of such sale (after making appropriate
deduction in respect of all reasonable costs and expenses) to our Company.
(r) Conditions of the Post-IPO RSU Scheme
The Post-IPO RSU Scheme shall take effect subject to and is conditional upon:
(i) the passing of the necessary resolutions by our Shareholders to approve and
adopt the rules of the Post-IPO RSU Scheme;
(ii) the Stock Exchange granting the approval for the listing of, and permission to
deal in, the Shares which may fall to be issued pursuant to the granting, vesting
or exercise of the awards to be granted under the Post-IPO RSU Scheme;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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(iii) the obligations of the Underwriters under the Underwriting Agreements
becoming unconditional (including, if relevant, as a result of the waiver(s) of
any such condition(s) by the Sole Sponsor and the Overall Coordinators (for
themselves and on behalf of the Underwriters)) and not being terminated in
accordance with the terms of the Underwriting Agreements or otherwise; and
(iv) the commencement of dealings in the Shares on the Stock Exchange.
If the conditions in this paragraph (r) are not satisfied within twelve calendar months
from the adoption date:
(A) the Post-IPO RSU Scheme shall forthwith determine;
(B) any award granted or agreed to be granted pursuant to the Post-IPO RSU
Scheme and any offer of such a grant shall be of no effect; and
(C) no person shall be entitled to any rights or benefits or be under any obligations
under or in respect of the Post-IPO RSU Scheme or any award granted
thereunder.
(s) Disclosure in annual and interim reports
Our Company will disclose details of the Post-IPO RSU Scheme in our annual
reports and interim reports including the information as prescribed under the Listing
Rules from time to time during the financial year/period in the annual/interim reports in
accordance with the Listing Rules in force from time to time.
(t) Present status of the Post-IPO RSU Scheme
As of the Latest Practicable Date, no award had been granted or agreed to be granted
under the Post-IPO RSU Scheme.
An application has been made to the Stock Exchange for the approval of the listing of,
and permission to deal in, the Shares which may be issued under the Post-IPO Share Option
Scheme and the Post-IPO RSU Scheme.
E. OTHER INFORMATION
1. Estate Duty
Our Directors confirmed that no material liability for estate duty is likely to fall on our
Company or any of our subsidiaries.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 840 ---
2. Litigation
During the Track Record Period and as at the Latest Practicable Date, there were no
litigation or arbitration proceedings pending or threatened against any member of our Group,
which would have a material adverse effect on our business, financial position or result of
operations.
3. Sole Sponsor
As of the Latest Practicable Date,
 approximately 0.41% of the total number of issued Shares was held by Pluto
Connection Limited, an indirectly wholly-owned subsidiary of CITIC Securities
Company Limited (ʮ̡), a joint stock limited company
established in the PRC with limited liability, the H shares and A shares of which are
listed on the Stock Exchange (stock code: 6030) and the Shanghai Stock Exchange
(stock code: 600030). CITIC Securities (Hong Kong) Limited, the Sole Sponsor is
an indirect wholly-owned subsidiary of CITIC Securities Company Limited. Pluto
Connection Limited is regarded as a member of the sponsor group of the Sole
Sponsor as defined under the Listing Rules.
 approximately 0.08% of the total number of issued Shares was held by CITIC
(Shenzhen) V enture Capital Equity Investment Fund Partnership (Limited
Partnership) (ڦ(ଉέ)ΥྫΆุ(Υྫ)) (“ CITIC
Venture Capital ”). CITIC Group Corporation Ltd. (ʮ̡), the
holding company of the Sole Sponsor, indirectly holds 40% interest in CITIC
(Shenzhen) Innovation Equity Investment Management Co., Ltd. (ڦ(ଉέ)ٰ
ʮ̡), the general partner of CITIC V enture Capital.
Notwithstanding the aforesaid, (i) none of the Sole Sponsor, its directors or its directors’
close associates collectively holds and will, immediately following the completion of the
Global Offering, hold, directly or indirectly, more than 5% of the number of issued Shares of
the Company; and (ii) the Sole Sponsor, having conducted its own assessment taking into
consideration the independence criteria applicable to sponsors as set out in Rule 3A.07 of the
Listing Rules, considers itself to be independent under Rule 3A.07 of the Listing Rules.
The Sole Sponsor will receive an aggregate fee of US$1.0 million for acting as the
sponsor for the Listing.
The Sole Sponsor has made an application on our Company’s behalf to the Stock
Exchange for the approval of the listing of, and permission to deal in, all the Shares in issue
and to be issued as mentioned in this prospectus. All necessary arrangements have been made
for the Shares to be admitted into CCASS.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 841 ---
4. Preliminary expenses
Our Company did not incur any material preliminary expense in relation to the
incorporation of our Company.
5. No material adverse change
Saved as disclosed in “Summary—Recent Development—No Material Adverse Change,”
our Directors confirm that there has been no material adverse change in our Group’s financial
or trading position since December 31, 2023 (being the date on which the latest audited
consolidated financial information of our Group was prepared) and up to the date of this
prospectus.
6. Promoter
Our Company has no promoter. Within the two years immediately preceding the date of
this prospectus, no cash, securities or other benefit has been paid, allotted or given nor are any
proposed to be paid, allotted or given to any promoters in connection with the Global Offering
and the related transactions described in this prospectus.
7. Taxation of holders of Shares
(a) Hong Kong
The sale, purchase and transfer of Shares registered with our Company’s Hong Kong
branch share register will be to Hong Kong stamp duty. The ad valorem rate charged on
each of the purchaser and seller as at the date of this prospectus is 0.1% of the
consideration or, if higher, the fair value of the Shares being sold or transferred. In
addition, a fixed duty of HK$5 is charged on each instrument of transfer (if required).
Profits from dealings in the Shares arising in or derived from Hong Kong may also be
subject to Hong Kong profits tax.
(b) Cayman Islands
The Cayman Islands currently levies no taxes on individuals or corporations based
upon profits, income, gains or appreciation and there is no taxation in the nature of
inheritance tax or estate duty. There are no other taxes likely to be material to us levied
by the government of the Cayman Islands except for stamp duties which may be
applicable on instruments executed in, or brought within the jurisdiction of the Cayman
Islands. In addition, the Cayman Islands does not impose withholding tax on dividend
payments.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 842 ---
(c) Consultation with professional advisers
Intending holders of the Shares are recommended to consult their professional
advisers if they are in doubt as to the taxation implications of holding or disposing of or
dealing in the Shares. It is emphasized that none of our Company, our Directors or the
other parties involved in the Global Offering can accept responsibility for any tax effect
on, or liabilities of, holders of Shares resulting from their holding or disposal of or
dealing in Shares or exercise of any rights attaching to them.
8. Qualifications of experts
The following are the qualifications of the experts who have given opinions or advice
which are contained in this prospectus:
Name Qualifications
CITIC Securities (Hong Kong) Limited Licensed corporation to conduct Type 4
(advising on securities) and Type 6
(advising on corporate finance) regulated
activities under the SFO
PricewaterhouseCoopers Certified Public Accountants under
Professional Accountants Ordinance
(Chapter 50 of the laws of Hong Kong) and
Registered Public Interest Entity Auditor
under Accounting and Financial Reporting
Council Ordinance (Chapter 588 of the
Laws of Hong Kong)
Fangda Partners Legal advisers as to PRC laws
Maples and Calder (Hong Kong) LLP Cayman Islands legal advisers
Frost & Sullivan Industry consultant
9. Consents of experts
Each of the experts named in “—E. Other Information—8. Qualifications of experts” has
given and has not withdrawn its written consent to the issue of this prospectus with the
inclusion of its reports, letters, opinions, summaries of opinions and/or references to its names
included herein in the form and context in which they respectively appear.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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10. Interests of experts in our Company
Save as disclosed in “Underwriting” and “—E. Other Information—3. Sole Sponsor,”
none of the persons named in “—E. Other Information—8. Qualifications of experts” is
interested beneficially or otherwise in any Shares or shares of any member of our Group or has
any right or option (whether legally enforceable or not) to subscribe for or nominate persons
to subscribe for any shares or securities in any member of our Group.
11. Binding effect
This prospectus shall have the effect, in an application is made in pursuance of it, of
rendering all persons concerned bound by all of the provisions (other than the penal provisions)
of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance so far as applicable.
12. Miscellaneous
(a) Within the two years immediately preceding the date of this prospectus:
(i) save as disclosed in “History, Development and Corporate Structure,” no share
or loan capital of our Company or any of our subsidiaries has been issued or
agreed to be issued fully or partly paid either for cash or for a consideration
other than cash;
(ii) save as disclosed in “History, Development and Corporate Structure,” no share
or loan capital of our Company or any of our subsidiaries is under option or is
agreed conditionally or unconditionally to be put under option;
(iii) save as disclosed in “Underwriting,” no commissions, discounts, brokerages or
other special terms have been granted in connection with the issue or sale of
any capital of our Company or any of our subsidiaries; and
(iv) save as disclosed in “Underwriting,” no commission has been paid or payable
for subscribing, agreeing to subscribe or procuring subscription or agreeing to
procure subscription for any shares in our Company or any of our subsidiaries;
(b) no founder, management or deferred Shares nor any debenture in our Company or
any of our subsidiaries have been issued or agreed to be issued;
(c) there has not been any interruption in the business of our Group which may have or
has had a significant effect on the financial position of our Group in the 12 months
preceding the date of this prospectus;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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(d) the principal register of members of our Company will be maintained in the Cayman
Islands by Maples Fund Services (Cayman) Limited and a branch register of
members of our Company will be maintained in Hong Kong by Tricor Investor
Services Limited. Unless our Directors otherwise agree, all transfer and other
documents of title of Shares must be lodged for registration with and registered by
our Company’s share registrar in Hong Kong and may not be lodged in the Cayman
Islands. All necessary arrangements have been made to enable the Shares to be
admitted to CCASS;
(e) no company within our Group is presently listed on any stock exchange or traded on
any trading system;
(f) our Company has no outstanding convertible debt securities or debentures; and
(g) there is no restriction affecting the remittance of profits or repatriation of capital
into Hong Kong and from outside Hong Kong.
13. Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being
published separately, in reliance upon the exemption provided under section 4 of the
Companies (Exemption of Companies and Prospectuses from Compliance with Provisions)
Notice (Chapter 32L of the Laws of Hong Kong). In case of any discrepancies between the
English language version and Chinese language version of this prospectus, the English
language version shall prevail.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to a copy of this prospectus and delivered to the Registrar of
Companies in Hong Kong for registration were
(a) a copy of each of the material contracts referred to in the section headed “Appendix
IV—Statutory and General Information–B. Further Information about the Business
of the Company—1. Summary of Material Contracts;” and
(b) the written consents referred to in the section headed “Appendix IV—Statutory and
General Information—E. Other Information—9. Consents of Experts.”
DOCUMENTS ON DISPLAY
Copies of the following documents will be on display on the website of the Stock
Exchange at www.hkexnews.hk and our website at www.xtalpi.com during a period of 14 days
from the date of this prospectus:
(a) the Memorandum and Articles of Association;
(b) the Accountant’s Report for the years ended December 31, 2021, 2022 and 2023
from PricewaterhouseCoopers, the text of which is set out in Appendix I to this
prospectus;
(c) the report from PricewaterhouseCoopers in respect of the unaudited pro forma
financial information, the text of which is set out in Appendix II to this prospectus;
(d) the audited consolidated financial statements of our Group for the years ended
December 31, 2021, 2022 and 2023;
(e) the legal opinion issued by Fangda Partners, our legal advisers as to PRC law in
respect of our Group’s business operations and property interests in the PRC;
(f) the letter of advice from Maples and Calder (Hong Kong) LLP , our legal advisers as
to Cayman Islands law, summarizing certain aspects of the Companies Act referred
to “Appendix III—Summary of the Constitution of the Company and Cayman
Islands Company Law—Summary of Cayman Islands Company Law and Taxation;”
(g) the industry report issued by Frost & Sullivan (Beijing) Inc. Shanghai Branch Co.;
(h) the Companies Act;
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND DOCUMENTS ON DISPLAY
–V - 1–


--- page 846 ---
(i) the material contracts referred to in the section headed “Appendix IV—Statutory
and General Information—B. Further Information about the Business of the
Company—1. Summary of Material Contracts;”
(j) the service agreements and letters of appointment entered into between our
Company and each of our Directors referred to in “Appendix IV—Statutory and
General Information—C. Further Information about Directors and Substantial
Shareholders—2. Particulars of Directors’ Service Contracts and Letters of
Appointment;”
(k) the written consents referred to in “Appendix IV—Statutory and General
Information—E. Other Information—9. Consents of Experts;”
(l) the terms of the Pre-IPO ESOP;
(m) the terms of the Post-IPO Share Option Scheme; and
(n) the terms of the Post-IPO RSU Scheme.
DOCUMENT A V AILABLE FOR INSPECTION
A copy of the full list of all the grantees under the Pre-IPO ESOP , containing all the
details as required under Rule 17.02(1)(b) of and paragraph 27 of Appendix D1A to the Listing
Rules and paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, will be available for inspection at the office of Sidley
Austin at 39/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong during
normal business hours up to and including the date which is 14 days from the date of this
prospectus.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND DOCUMENTS ON DISPLAY
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XtalPi_PPTUS Cover
Cover Size: 210 x 280 mm / Open Size: 460 x 280 mm / Spine: 40 mm
